AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE, INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4833 52-2050589
DELAWARE 4833 33-0776962
------------------------ ------------------------ ------------------------
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
650 TOWN CENTER DRIVE, SUITE 850
COSTA MESA, CA 92626
(714) 445-5791
----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
THOMAS ALLEN
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
650 TOWN CENTER DRIVE, SUITE 850
COSTA MESA, CA 92626
(714) 445-5791
------------------------------------------------------------------------------
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
EMANUEL FAUST, JR., ESQ.
DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP
2101 L STREET, N.W.
WASHINGTON, DC 20037
(202) 785-9700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
------------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statementv
for the same offering. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) OFFERING PRICE(2) PRICE(2) REGISTERED FEE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12% Senior Secured Discount
Notes due 2005....................... $40,000,425 100% $40,000,425 $12,121
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Gross proceeds from the initial issuance of the Senior Secured Discount
Notes.
(2) Estimated pursuant to Rule 457(f) solely for the purpose of calculating the
registration fee.
------------------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 14, 1997
PROSPECTUS
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE, INC.
OFFER TO EXCHANGE
12% SENIOR SECURED DISCOUNT NOTES
DUE 2005, SERIES A
FOR
12% SENIOR SECURED DISCOUNT NOTES
DUE 2005, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON 1998,
UNLESS EXTENDED
------------------------
ACME Intermediate Holdings, LLC, a Delaware limited liability company (the
'Company'), and ACME Intermediate Finance, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company ('ACME Finance' and, together with the
Company, the 'Issuers'), hereby offer to exchange their 12% Senior Secured
Discount Notes Due 2005, Series B (the 'Exchange Notes'), which have been
registered under the Securities Act of 1933, as amended (the 'Securities Act'),
pursuant to a Registration Statement of which this Prospectus is a part, for a
like principal amount of their 12% Senior Secured Discount Notes Due 2005,
Series A (the 'Original Notes'), of which $71,634,000 aggregate principal amount
at maturity is outstanding on the date hereof, upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (which together constitute the 'Exchange Offer'). The form and terms
of the Exchange Notes will be the same as the form and terms of the Original
Notes except that (i) the Exchange Notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof and (ii)
the holders of the Exchange Notes will not be entitled to certain rights of the
holders of Original Notes under the Registration Rights Agreement (as defined
herein), which rights will terminate upon the consummation of the Exchange
Offer. The Exchange Notes will evidence the same debt as the Original Notes and
will be entitled to the benefits of an indenture dated as of September 30, 1997,
governing the Original Notes and the Exchange Notes (the 'Indenture') among the
Issuers and Wilmington Trust Company, as trustee (the 'Trustee'). The Indenture
provides for the issuance of both the Exchange Notes and the Original Notes. The
Exchange Notes and the Original Notes are sometimes referred to herein
collectively as the 'Notes.' While the Issuers are jointly and severally liable
for the obligations under the Notes, ACME Finance has only nominal assets, does
not conduct any operations and was formed solely to act as a co-issuer of the
Notes. The Notes are non-recourse to any parent entity of the Issuers (other
than the Company) and their equity holders.
Cash interest on the Exchange Notes will accrue at a rate of 12% per annum
on the principal amount at maturity of the Exchange Notes through and including
the maturity date, and will be payable semi-annually on March 31 and September
30 of each year, commencing March 31, 2003. Cash interest on the Exchange Notes
will not accrue or be payable prior to September 30, 2002. The Original Notes
were issued at a substantial discount to their principal amount at maturity, and
the holders of the Exchange Notes will be required to include the accretion of
the original issue discount as gross income on a constant yield to maturity
basis in advance of receipt of the cash payments to which such income is
attributable. See 'Certain Federal Income Tax Considerations.'
(continued on next page)
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH HOLDERS OF ORIGINAL NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND PROSPECTIVE PURCHASERS OF EXCHANGE NOTES SHOULD CONSIDER IN CONNECTION
WITH SUCH INVESTMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997
<PAGE>
(continued from cover)
The Exchange Notes are redeemable at any time and from time to time at the
option of the Issuers, in whole or in part, on or after September 30, 2001, at
the redemption prices set forth herein (expressed as a percentage of the
Accreted Value (as defined herein) thereof) plus accrued and unpaid interest, if
any, to the date of redemption. In addition, on or prior to September 30, 2000,
the Issuers may redeem, at their option, up to 35% of the aggregate principal
amount at maturity of the Notes with the net proceeds of one or more Public
Equity Offerings (as defined herein) at 112% of the Accreted Value thereof, as
long as at least 65% of the aggregate principal amount at maturity of the Notes
originally issued remains outstanding after each such redemption and that any
such redemption occurs within 90 days of the closing of any such Public Equity
Offering. Upon a Change of Control (as defined herein), the Issuers will be
required to offer to repurchase the Exchange Notes at a purchase price equal to
(i) 101% of the Accreted Value thereof, if the purchase date is on or prior to
September 30, 2002, or (ii) 101% of the principal amount at maturity thereof,
plus accrued and unpaid interest thereon, if any, to the repurchase date, if
such date is after September 30, 2002.
The Exchange Notes are senior secured obligations of the Issuers and will
rank pari passu in right of payment to senior obligations of the Issuers and
senior in right of payment to any current or future subordinated obligations of
the Issuers. The Exchange Notes are secured by a first priority lien on all of
the outstanding membership units of ACME Television, LLC and all of the Capital
Stock (as defined) of each Subsidiary (as defined) of the Company directly owned
by the Company. The Exchange Notes are effectively subordinated in right of
payment to all existing and future indebtedness and other liabilities (including
trade payables) of Subsidiaries of the Company. After giving pro forma effect to
the Knoxville Acquisition and Pending Acquisitions (as defined) as of September
30, 1997, such Subsidiaries would have had approximately $198.9 million of total
liabilities, including approximately $167.2 million of indebtedness outstanding.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Issuers contained in the Registration Rights Agreement, dated
as of September 30, 1997 (the 'Registration Rights Agreement'), among the
Issuers and CIBC Wood Gundy Securities Corp., as the initial purchaser (the
'Initial Purchaser') of the Original Notes.
The Issuers will accept for exchange any and all validly tendered Original
Notes on or prior to 5:00 p.m., New York City time, on , 1998
unless the Issuers, in their sole discretion, have extended the period of time
for which the Exchange Offer is open (the 'Expiration Date'). Tenders of
Original Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of Original Notes being tendered for exchange pursuant
to the Exchange Offer. The Original Notes may be tendered only in integral
multiples of $1,000. The Issuers expressly reserve the right to terminate or
amend the Exchange Offer and not to accept for exchange any Original Notes not
theretofore accepted for exchange upon the occurrence of any of the conditions
specified under 'The Exchange Offer--Certain Conditions to the Exchange Offer.'
If any such termination or amendment occurs, the Issuers will give oral or
written notice to the holders of the Original Notes as promptly as practicable.
In the event the Issuers do not accept for exchange any Original Notes, the
Issuers will promptly return such Original Notes to the holders thereof.
The Original Notes were originally issued and sold on September 24, 1997 in
a transaction not registered under the Securities Act in reliance upon the
exemption provided in Rule 144A and Regulation S of the Securities Act (the
'Offering'). Accordingly, the Original Notes may not be reoffered, resold or
otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. The Issuers are making this Exchange Offer
based upon interpretations by the staff (the 'Staff') of the Securities and
Exchange Commission (the 'Commission') as set forth in no-action letters issued
to third parties. However, the Issuers have not sought their own no-action
letter and there can be no assurance that the Staff would make a similar
determination with respect to the Exchange Offer.
Based on these no-action letters, the Issuers believe that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Original Notes
may be offered for resale, resold and otherwise transferred by holders thereof
(other than any such holder which is an 'affiliate' of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the
i
<PAGE>
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes. Each broker-dealer that
receives the Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it acquired the Original Notes as a result of
market-making activities or other trading activities and that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Issuers
have agreed that, for a period not to exceed 180 days after the consummation of
the Exchange Offer, they will make this Prospectus available for use in
connection with any such resale. See 'Plan of Distribution.' Any holder that
cannot rely upon or does not satisfy the requirements set forth in such
interpretations by the Staff must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a resale
transaction.
Any Original Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the rights and preferences and
will be subject to the limitations applicable thereto under the Indenture.
Following consummation of the Exchange Offer, the holders of Original Notes will
continue to be subject to the existing restrictions on transfer thereof and the
Issuers will have no further obligation to such holders to provide for the
registration under the Securities Act of the Original Notes except under certain
limited circumstances. To the extent Original Notes are tendered and accepted in
the Exchange Offer, the liquidity of any trading market for untendered and
tendered but unaccepted Original Notes could be adversely affected.
Prior to this Exchange Offer, there has been no public market for the
Original Notes or the Exchange Notes. The Issuers do not intend to list the
Exchange Notes on any securities exchange or to seek approval for quotation
through any automated quotation system. There can be no assurance that an active
market for the Exchange Notes will develop. To the extent that a market for the
Exchange Notes does develop, the market value of the Exchange Notes will depend
on many factors including prevailing interest rates, the Company's operating
results and the markets for similar securities. See 'Risk Factors--Lack of
Public Market for the Exchange Notes; Restrictions on Resale of the Original
Notes.'
The Issuers will not receive any proceeds from this Exchange Offer. The
Issuers have agreed to pay all reasonable expenses incident to this Exchange
Offer (excluding the fees of counsel to the Initial Purchaser) and will
indemnify the Initial Purchaser against certain liabilities, including
liabilities under the Securities Act. No dealer-manager is being used in
connection with this Exchange Offer.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain statements and information that are
'forward-looking statements' within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended (the
'Exchange Act'). When used in this Prospectus, the words 'intend,' 'estimate,'
'expect,' 'anticipate,' 'believe' and similar expressions are intended to
identify forward-looking statements. Those statements include, among other
things, the discussions of the Company's business strategy and expectations
concerning the Company's market position, future operations, margins,
profitability, liquidity and capital resources, as well as statements concerning
the integration of the Pending Acquisitions and achievement of cost savings and
other synergies in connection therewith. Investors in the Exchange Notes offered
hereby are cautioned that reliance on any forward-looking statement involves
risks and uncertainties, and that although the Issuers believe that the
assumptions on which the forward-looking statements contained herein are based
are reasonable, any of those assumptions could prove to be inaccurate, and, as a
result, the forward-looking statements based on those assumptions also could be
incorrect. The uncertainties in this regard include, but are not limited to,
those identified in the risk factors discussed herein. See 'Risk Factors.' In
light of these and other uncertainties, the inclusion of a forward-looking
statement herein should not be regarded as a representation by the Issuers that
the Issuers' plans and objectives will be achieved. The Issuers undertake no
obligation to release the results of any revisions to these forward-looking
statements that may be made to reflect future events or circumstances.
ii
<PAGE>
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
Unless otherwise indicated, information set forth herein as to designated
market area, rank, demographic statistics and projected growth, revenue, station
audience and revenue share and number of commercial broadcasters is as reported
by BIA Publications, Inc. ('BIA') in its Investing in Television 1997 (2nd
Edition) (the 'BIA Market Report, 1997') and its BIA Research Television
Analyzer as of June 26, 1997. Unless otherwise indicated, station audience share
and ratings estimates reflect such data from sign-on to sign-off for the four
preceding sweep periods indicated as reflected in the Nielsen Media Research DMA
ratings books for the period indicated. Set forth below are certain terms
commonly used in the broadcast television industry that are used throughout this
Prospectus. Unless the context otherwise requires, such terms shall have the
respective meanings set forth below.
<TABLE>
<S> <C>
Audience share............................ The percentage of total households using television tuned to a
particular station during the time period being measured.
ABC....................................... American Broadcasting Company.
Broadcast cash flow....................... EBITDA plus corporate expenses. Although broadcast cash flow is not
calculated in accordance with GAAP, it is widely used in the
broadcast industry as a measure of a broadcasting company's
performance. Broadcast cash flow should not be considered in
isolation from or as a substitute for net income, cash flows from
operating activities and other income or cash flow statement data
prepared in accordance with GAAP, or as a measure of profitability or
liquidity.
Broadcast season.......................... The approximately 35 week period for each network, commencing with
its launch of new programming and premiere episodes of returning
programming, generally beginning in September, and ending with
completion of the May sweep period of the following calendar year.
Cable penetration......................... The number of households within a DMA which are cable subscribers
divided by the number of households which have access to cable.
CBS....................................... CBS, Inc.
Commercial broadcasters................... Stations competing for national, regional and local spot advertising.
Commercial broadcasters do not include low power and public stations,
home shopping stations and stations devoted primarily to religious
broadcasting.
Communications Act........................ Communications Act of 1934, as amended.
DMA or market............................. Designated Market Area. There are 211 DMAs in the United States with
each county in the continental United States assigned uniquely to one
DMA. Ranking of DMAs is based upon Nielsen Media Research estimates
of the number of television households.
EBITDA.................................... Operating income (loss), plus depreciation, amortization and other
noncash charges, including amortization of programming rights, minus
programming payments. Although EBITDA is not calculated in accordance
with GAAP, it is widely used as a measure of a company's ability to
service and/or incur debt. EBITDA should not be considered in
isolation from or as a substitute for net income, cash flows from
operations and other income or cash flow data prepared in accordance
with GAAP, or as a measure of profitability or liquidity.
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Fox....................................... Fox Broadcasting Company.
FCC....................................... Federal Communications Commission.
LMA....................................... Local marketing agreement, time brokerage agreement or similar
arrangement between a broadcaster and a station licensee pursuant to
which the broadcaster provides programming to, sells advertising time
for and funds operating expenses for the applicable station, manages
certain station activities, and retains the advertising revenues of
such station, in exchange for fees paid to the licensee.
NBC....................................... National Broadcasting Co., Inc.
Prime time................................ Monday through Saturday 8:00 PM to 11:00 PM (EST) and Sunday 7:00 PM
to 11:00 PM (EST).
Rating point.............................. A rating point represents one percent of all television households in
a certain DMA, as measured by A.C. Nielsen Company.
Revenue share............................. The percentage received by a station of the total television
advertising revenues available to commercial broadcasters in the
applicable DMA.
Share point............................... A share point represents one percent of all television households in
a certain DMA using at least one television set at the time of
measurement by A.C. Nielsen Company.
Sweep period.............................. Each of the approximately four week periods in February, May, July
and November used by commercial broadcasters and advertisers to
establish advertising rates based on the broadcaster's ratings for
such periods.
Syndicated programming.................... Programming purchased from production studios to be broadcast during
non-network time periods. Syndicated programming includes both
original programming and previously broadcasted programming.
Telecom Act............................... The Telecommunications Act of 1996.
Television advertising revenue............ Total time sales, including network compensation, national/regional,
local and political advertising for the market and period indicated.
The WB Network............................ The WB Television Network.
UPN....................................... United Paramount Network.
</TABLE>
iv
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements
and notes hereto included elsewhere in this Prospectus. Unless otherwise
indicated, the information set forth in this Prospectus gives effect to the
Transactions (as defined). See 'The Transactions.' Unless otherwise indicated,
references to the Company refer to ACME Intermediate Holdings, LLC and its
subsidiaries. The Company is a holding company and all of its operations are
conducted through ACME Television, LLC, a Delaware limited liability company and
wholly owned subsidiary of the Company ('ACME Television'), and its
subsidiaries. See 'Certain Definitions and Market and Industry Data' on page iii
of this Prospectus for a description of the sources of demographic, market and
industry data included in this Prospectus.
THE COMPANY
The Company was formed to own or operate broadcast television stations in
growing medium-sized markets ranked between 20 and 75. The Company intends to
affiliate each of its broadcast television stations with The WB Network. The
Company owns, or has entered into agreements to acquire or construct and
operate, television stations in five markets which broadcast in DMAs which cover
in the aggregate 3.9% of the U.S. population. The Company's stations are as
follows:
<TABLE>
<CAPTION>
TOTAL 1996
COMMENCE/ COMMERCIAL MARKET
DMA STATION- LAUNCH BROADCASTERS CABLE REVENUE
MARKET RANK CHANNEL DATE IN MARKET PENETRATION (IN MILLIONS)
- --------------------------------------- --- -------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
St. Louis, MO.......................... 21 KPLR-11 On-Air 5 53% $ 200.8
Portland, OR........................... 24 KWBP-32 On-Air 6 63 156.4
Salt Lake City, UT..................... 36 KZAR-16 Mar '98 6 56 135.0
Albuquerque, NM........................ 48 KAUO-19 Sept '98 6 60 82.5
Knoxville, TN.......................... 60 WBXX-20 On-Air 5 68 60.6
</TABLE>
The Company's strategy is to selectively acquire either underperforming
stations or construction permits for new stations and operate its stations as
affiliates of The WB Network. The Company seeks to improve operating results,
maximize revenues and EBITDA and increase value through the following
strategies:
Target Growing Medium-Sized Markets. The Company seeks to acquire and
construct stations in markets with estimated television advertising
revenues of $40 million to $225 million and where its stations can operate
as one of five or six commercial broadcasters. The Company believes that
medium-sized markets are generally less competitive than larger markets
because of the limited number of commercial broadcasters in medium-sized
markets. As a result, the Company believes that operating television
stations in less competitive markets offers greater opportunities to build
and maintain audience share and generate revenues. The Company targets
markets with diversified economies and favorable projections of population
and television advertising revenue growth. The Company's five stations will
operate in markets with an aggregate projected annual population growth
rate through the year 2000 of 1.4%, compared to the projected annual
national population growth rate of 0.8%. The Company's five stations will
operate in markets with an aggregate projected annual television
advertising revenue growth rate through the year 2000 of 5.8% compared to
the projected annual national television advertising growth rate of 5.6%.
The WB Network Affiliation. The Company expects its stations to
benefit from their affiliation with The WB Network. The WB Network has
shown continued ratings growth since its inception. For example, the 24
stations in large and medium-sized markets that became affiliates of The WB
Network at its inception have on average experienced a prime time household
ratings increase of 63% from May 1995 to May 1997 on nights with The WB
Network programming. In addition, these stations experienced an average
prime time ratings increase of 53% among 18-34 year olds over the same
period. Management believes that the increase in popularity of The WB
Network programming results in greater advertising revenues and enhanced
cash flow for network affiliates. The Company has entered into network
affiliation agreements for Station KWBP and Station WBXX, will assume and
extend an existing affiliation agreement for Station
1
<PAGE>
KPLR and has obtained commitments from The WB Network for an affiliation
agreement covering each of its other stations. See 'Business--Affiliation
Agreements.'
Selectively Purchase Syndicated Programming. The major production
studios currently supply syndicated programming sufficient to fill
programming requirements for seven broadcast stations in a market. The
Company's stations are one of five or six commercial broadcast stations in
their respective markets. The Company believes that the limited number of
commercial broadcast stations, combined with the ability to centrally
purchase programming for five stations, will allow the Company to acquire
syndicated programming at attractive prices. The Company's Portland and
Knoxville stations have already obtained broadcast rights for syndicated
programming that will premiere during the next three broadcast seasons at
prices which the Company believes are attractive. These programs include
Friends, Full House, M*A*S*H, Star Trek: The Next Generation and The Drew
Carey Show.
Emphasis on Sales. The Company's management has hired, and intends to
continue to hire, station general managers with significant experience in
advertising sales who will be directly involved in station sales and
marketing. The Company believes that by centralizing administrative
functions, each station's general manager will be able to devote a greater
effort to local sales and marketing activities. In addition, the Company
intends to establish a commission-based compensation system for sales
personnel that will include significant incentives for the origination of
new accounts in addition to expanding current relationships.
Creating a Strong Group Identity. The Company intends to establish a
highly professional on-air appearance and identity for each of its
stations. The Company's graphics, animation and music for station imaging
will be created by a centralized corporate graphics department and will
target each station's demographic audience. The Company intends to hire
experienced personnel at the corporate level for these and similar services
that would not otherwise be available at a cost-efficient rate to its
stations on an individual basis.
Centralized Systems and Controls. Management plans to centralize the
Company's scheduling, purchasing, national sales and certain accounting
functions within the corporate office. The Company believes that this will
afford each of the station's general managers more time to focus on local
sales and marketing. Management believes that by centralizing purchasing,
the Company will be able to negotiate lower costs for equipment and
services. For example, the Company has solicited and received proposals for
a group national sales representative agreement at significantly lower
rates than would have been available to its stations on an individual
station basis. In addition, the Company has already purchased syndicated
programming on a multiple station basis and negotiated capital lease
facilities for its stations as a group on terms it considers attractive.
THE WB NETWORK
The WB Network was created by affiliates of Time Warner, Inc. ('Time
Warner'), Tribune Broadcasting ('Tribune') and Jamie Kellner as a new television
broadcast network. The WB Network was formed to provide an alternative to the
prime time and children's programming offered by the other networks. The WB
Network's focus is to provide quality programming to teens, young adults and
families with small children. The WB Network utilizes (i) the strength of Time
Warner, through its Warner Brothers division, as a leading producer of prime
time programming and Saturday morning cartoons, (ii) the network distribution
capabilities of the cable system holdings of Time Warner and the television
station holdings of Tribune, and (iii) the experience of the members of The WB
Network management team, many of whom worked with Mr. Kellner during the launch
of Fox in 1986.
Since the launch of the network on January 11, 1995, The WB Network has
increased its on-air programming from two hours of prime time programming one
night per week to nine hours of prime time programming four nights per week and
19 hours of children's programming announced for the 1997-1998 season. The WB
Network has announced plans to provide one additional evening of prime time
programming each season until every night is programmed. As of May 1997, it is
estimated that The WB Network programming is available to approximately 86% of
all television households in the United States.
2
<PAGE>
STATION OVERVIEW
On June 17, 1997, ACME Parent (as defined) acquired Station KWBP, which
serves the Portland, Oregon DMA (the 'Portland Acquisition'), for approximately
$18.7 million in cash and $4.4 million of membership units in ACME Parent. On
October 7, 1997, the Company acquired Station WBXX, which serves the Knoxville,
Tennessee DMA (the 'Knoxville Acquisition') for $13.2 million in cash. The
Company has entered into an acquisition agreement dated July 29, 1997 to acquire
Station KPLR, St. Louis, Missouri (the 'St. Louis Acquisition') for an aggregate
purchase price of approximately $146.0 million and has entered into a time
brokerage agreement with respect to Station KPLR (the 'St. Louis LMA'). The
Company has also entered into agreements to construct and acquire new stations
in the Salt Lake City, Utah and Albuquerque, New Mexico markets for an aggregate
purchase price of $14.0 million, plus approximately $8.5 million in construction
costs. See 'The Transactions.'
KPLR-11: ST. LOUIS, MO
Station KPLR operates in the St. Louis market, which is the 21st largest
DMA in the U.S. The St. Louis DMA is projected to have annual television
advertising revenue and population growth of approximately 5.4% and 0.5%,
respectively, through the year 2000. Station KPLR commenced broadcasting in 1959
and has been affiliated with The WB Network since the network's launch in 1995.
The station currently competes against four other commercial broadcasters and
captured approximately 16% of the market's television advertising revenues for
the 1996 calendar year. For the May 1997 sweep period, Station KPLR ranked third
in terms of audience ratings in its market and, among all domestic broadcast
stations affiliated with The WB Network, UPN or operated as an independent
station, was the number one ranked station in the U.S. on the basis of ratings
and audience share. Station KPLR's non-network programming emphasizes both
programs of local appeal, such as St. Louis Cardinals baseball and a 9:00 p.m.
newscast, and quality syndicated programs, such as Cheers, Full House, Living
Single, Martin and Seinfeld.
KWBP-32: PORTLAND, OR
Station KWBP operates in the Portland market, which is the 24th largest DMA
in the U.S. The Portland DMA is projected to have annual television advertising
revenue and population growth of approximately 5.9% and 1.8%, respectively,
through the year 2000. Station KWBP competes against five other commercial
broadcasters. Management anticipates completing the construction of a new
transmission facility to improve the station's signal and upgrading its studio
facility in November 1997. Station KWBP has been affiliated with The WB Network
since the network's launch in 1995. The station's syndicated programming and
future broadcast rights include Cops, Full House, Hawaii Five-O, Mama's Family,
Star Trek: The Next Generation, The Drew Carey Show and Xena--Warrior Princess.
KZAR-16: SALT LAKE CITY, UT
Station KZAR will operate in the Salt Lake City market, which is the 36th
largest DMA in the U.S. The Salt Lake City DMA is projected to have annual
television advertising revenue and population growth of approximately 6.2% and
1.9%, respectively, through the year 2000. The Salt Lake City market has a
relatively young demographic population, with over 37% of the population under
the age of eighteen, compared to the national average of 26%. Station KZAR will
compete against five other commercial broadcasters. Management anticipates
completing construction of the station and commencing broadcasting in March of
1998.
KAUO-19: ALBUQUERQUE-SANTA FE, NM
Station KAUO will operate in the Albuquerque market, which is the 48th
largest DMA in the U.S. The Albuquerque DMA is projected to have annual revenue
and population growth of approximately 5.8% and 1.6%, respectively, through the
year 2000. The Albuquerque market has a relatively young demographic population,
with approximately 30% of the population under the age of eighteen. Station KAUO
will compete against five other commercial broadcasters. Management anticipates
completing construction of the station and commencing broadcasting in September
of 1998.
3
<PAGE>
WBXX-20: KNOXVILLE, TN
Station WBXX operates in the Knoxville market, which is the 60th largest
DMA in the U.S. The Knoxville DMA is projected to have annual television
advertising revenue and population growth of approximately 6.1% and 1.4%,
respectively, through the year 2000. Station WBXX will compete against four
other commercial broadcasters. The acquisition and construction of the station
were completed and broadcasting commenced in October of 1997. The station has
purchased syndicated programming and future broadcast rights to several
syndicated programs including Cheers, Friends, Full House, M*A*S*H, Star Trek:
The Next Generation and The Drew Carey Show.
MANAGEMENT AND INVESTORS
The Company's senior management team has extensive experience in the
television industry. Jamie Kellner, the Company's Chairman and Chief Executive
Officer, was formerly the President of Fox and has over 28 years of industry
experience. Mr. Kellner is also currently the Chief Executive Officer of The WB
Network. Doug Gealy, President and Chief Operating Officer, has over 15 years of
experience in television operations and sales. Previously, Mr. Gealy served as
an Executive Vice President for Benedek Broadcasting, overseeing eight
television stations, and has also been General Manager for stations owned by NBC
and Outlet Communications. Tom Allen, Executive Vice President and Chief
Financial Officer, has over eleven years of experience in the media industry,
including seven years as Senior Vice PresidentFinance and Administration of Fox.
While at Fox, Mr. Allen oversaw the financial, administrative and operating
performance of the network. In addition to the senior management team, the
Company has hired and plans to hire general managers with extensive sales
experience to operate each station.
The Company is 92% owned directly or indirectly by ACME Television
Holdings, LLC ('ACME Parent'). The remaining 8% of the Company is owned by
purchasers of the Units (as defined). The principal investors in ACME Parent are
investment funds affiliated with Alta Communications, Inc., BancBoston Ventures
Inc., CEA Capital Partners and The TCW Group, Inc. (collectively the
'Institutional Investors'). The Institutional Investors have extensive
experience in successfully investing in the broadcast television industry and
other broadcast and media industries. In addition, as partial consideration upon
the closing of the acquisition of their respective stations by the Company, two
of the prior owners of the Company's stations will receive in the aggregate
approximately $10.4 million of membership units in ACME Parent. See 'The
Transactions' and 'Security Ownership of Certain Beneficial Owners and Executive
Officers.'
4
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Issuers............................... ACME Intermediate Holdings, LLC and ACME Intermediate Finance, Inc.
The Exchange Offer........................ The Issuers are offering to exchange their Exchange Notes, which have
been registered under the Securities Act, for any and all of their
outstanding Original Notes. The Original Notes may be exchanged for
Exchange Notes only in multiples of $1,000 principal amount. The
Issuers will issue the Exchange Notes on or promptly after the
Expiration Date. The form and terms of the Exchange Notes will be the
same as the form and terms of the Original Notes except that (i) the
Exchange Notes will be registered under the Securities Act, and,
therefore, will not bear legends restricting the transfer thereof and
(ii) the holders of the Exchange Notes will not be entitled to
certain rights of the holders of the Original Notes under the
Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence
the same debt as the Original Notes and both series of Notes will be
entitled to the benefits of the Indenture and treated as a single
class of debt securities. The Issuers will keep the Exchange Offer
open for not less than 30 days or longer if required by applicable
law, after the date of notice of the Exchange Offer is mailed to
holders of the Original Notes. See 'The Exchange Offer--Terms of the
Exchange Offer.'
Based upon interpretations by the Staff of the Commission set forth
in no-action letters issued to third parties, the Issuers believe
that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Original Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other than any such
holder which is an 'affiliate' of the Issuers within the meaning of
Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities
Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder is not engaged in,
and does not intend to engage in, and has no arrangement or
understanding with any person to participate in the distribution of
such Exchange Notes. Each broker-dealer that receives the Exchange
Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Original Notes as a result of
market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of such Exchange
Notes. The Issuers have agreed that, for a period not to exceed 180
days after the consummation of the Exchange Offer, they will make
this Prospectus available, for use in connection with any such
resale, to any such broker-dealer and other persons, if any, with
similar prospectus delivery requirements. See 'Plan of Distribution.'
In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Notes may not be offered
or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification
is available and complied with. The Issuers have agreed, pursuant to
the Registration Rights Agreement and subject to certain specified
limitations therein, to register or qualify the Exchange Notes for
offer or sale
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5
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<TABLE>
<S> <C>
under the securities or blue sky laws of such jurisdictions as any
holder of the Exchange Notes reasonably requests in writing.
Expiration Date........................... The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless extended in which case the term
'Expiration Date' shall mean the latest date and time to which the
Exchange Offer is so extended.
Conditions to the Exchange Offer.......... The Exchange Offer is subject to certain customary conditions, which
may be waived by the Issuers in whole or in part and from time to
time in their sole discretion. See 'The Exchange Offer-- Certain
Conditions to the Exchange Offer.' The Issuers reserve the right to
terminate or amend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such condition. The
Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Original Notes being tendered for exchange.
Procedures for Tendering the Original
Notes................................... Each registered holder of Original Notes (a 'Registered Holder')
wishing to tender such Original Notes in the Exchange Offer must
complete, sign and date the Letter of Transmittal, or facsimile
thereof, in accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of Transmittal, or
such facsimile, together with any other required documentation, to
the Exchange Agent at the address set forth herein. Each Registered
Holder whose Original Notes are held through The Depository Trust
Company ('DTC') and wishes to participate in the Exchange Offer may
do so through DTC's Automated Tender Offer Program ('ATOP') by which
each tendering participant will agree to be bound by the Letter of
Transmittal. Any Original Notes not accepted for exchange for any
reason will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or
termination of the Exchange Offer. See 'The Exchange
Offer--Procedures for Tendering Original Notes.'
Special Procedures for Beneficial
Owners.................................. Any beneficial owner whose Original Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender such Original Notes should contact such
registered holder promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on its own behalf, such beneficial owner must, prior
to completing and executing the Letter of Transmittal and delivering
its Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such owner's name or obtain a
properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time and may
not be able to be completed prior to the Expiration Date. See 'The
Exchange Offer--Procedures for Tendering Original Notes.'
Guaranteed Delivery Procedures............ Holders of Original Notes who wish to tender their Original Notes and
(i) whose Original Notes are not immediately available, (ii) who
cannot deliver their Original Notes, the Letter of Transmittal or any
other required documents to the Exchange Agent (as defined) prior to
the Expiration Date or (iii) who cannot complete the procedure
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
for book-entry transfer on a timely basis, may effect a tender of
their Original Notes according to the guaranteed delivery procedures
set forth in 'The Exchange Offer--Guaranteed Delivery Procedures.'
Withdrawal Rights......................... Tenders of Original Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date. For a withdrawal to
be effective, (i) a written notice of withdrawal must be received by
the Exchange Agent (as defined) at its address set forth herein or
(ii) holders must comply with the appropriate procedures of DTC's
ATOP System. See 'The Exchange Offer-- Withdrawal Rights.'
Acceptance of Original Notes and Delivery
of Exchange Notes....................... Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Issuers will accept
for exchange any and all Original Notes validly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the Expiration Date. See
'The Exchange Offer--Terms of the Exchange Offer.'
Consequences of Failure to
Exchange................................ Upon consummation of this Exchange Offer, the holders of the Original
Notes will have no further registration or other rights under the
Registration Rights Agreement, except under certain limited
circumstances. Holders of Original Notes who do not exchange their
Original Notes for the Exchange Notes pursuant to the Exchange Offer
will continue to be subject to the restrictions on transfer of such
Original Notes as set forth in the Indenture. In general, Original
Notes that are not exchanged pursuant to the Exchange Offer may not
be offered or sold except pursuant to a registration statement filed
under the Securities Act or an exemption from registration thereunder
and in compliance with applicable state securities laws. See 'The
Exchange Offer--Consequences of Failure to Exchange.'
Certain Tax Considerations................ The exchange of Original Notes for Exchange Notes by tendering
holders will not be a taxable event for federal income tax purposes,
and such holders should not recognize any taxable gain or loss or any
interest income as a result of such exchange.
Use of Proceeds........................... The Issuers will not receive any proceeds from the exchange of Notes
pursuant to the Exchange Offer.
Registration Rights Agreement............. Pursuant to the Registration Rights Agreement, the Issuers agreed (i)
to use their reasonable best efforts to file, within 45 days after
the date of the original issuance of the Original Notes, a
registration statement (the 'Exchange Offer Registration Statement')
and (ii) to use their reasonable best efforts to cause the Exchange
Offer Registration Statement to be declared effective under the
Securities Act within 150 days after the date of the original
issuance of the Original Notes (the 'Issue Date'). The Exchange Offer
is intended to satisfy the rights of holders of Original Notes under
the Registration Rights Agreement, which rights terminate upon
consummation of the Exchange Offer.
Shelf Registration Statement.............. In the event that, based upon applicable interpretations of the
Securities Act by the Staff of the Commission, the Issuers conclude
</TABLE>
7
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<TABLE>
<S> <C>
that they cannot effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days of the
Issue Date, or if a holder of the Original Notes is not permitted to
participate in the Exchange Offer or does not receive freely tradable
Exchange Notes pursuant to the Exchange Offer or, under certain
circumstances, if the Initial Purchaser or the holder of a majority
in aggregate principal amount at maturity of Notes so request, the
Issuers will use their reasonable best efforts to cause to become
effective a registration statement (the 'Shelf Registration
Statement') with respect to the resale of the Original Notes and use
their best efforts to keep such Shelf Registration Statement
continuously effective until two years after the Issue Date.
Exchange Agent............................ Wilmington Trust Company is the exchange agent for the Exchange Offer
(the 'Exchange Agent'). The address and telephone number of the
Exchange Agent are set forth in the 'The Exchange Offer-- Exchange
Agent.'
EXCHANGE NOTES
Maturity Date............................. September 30, 2005.
Original Issue Discount of Original
Notes................................... A holder of Exchange Notes will be required to include the accretion
of the original issue discount at which the Original Notes were
issued as gross income for U.S. federal income tax purposes prior to
the receipt of the cash payments to which such income is
attributable. See 'Certain U.S. Federal Income Tax Considerations
Relating to the Notes--U.S. Holders--Original Issue Discount on the
Original Notes.'
Interest.................................. Cash interest will not accrue or be payable on the Exchange Notes
prior to September 30, 2002. Thereafter, cash interest on the
Exchange Notes will accrue at a rate of 12% per annum on the
principal amount at maturity of the Exchange Notes through and
including the maturity date, and will be payable semiannually on
March 31 and September 30 of each year, commencing March 31, 2003.
Optional Redemption....................... The Exchange Notes are redeemable at any time and from time to time
at the option of the Issuers, in whole or in part, on or after
September 30, 2001, at the redemption prices set forth herein
(expressed as a percentage of the Accreted Value thereof) plus
accrued and unpaid interest, if any, to the date of redemption. In
addition, on or prior to September 30, 2000, the Issuers may redeem,
at their option, up to 35% of the aggregate principal amount at
maturity of the Notes with the net proceeds of one or more Public
Equity Offerings (as defined) at 112% of the Accreted Value thereof,
as long as at least 65% of the aggregate principal amount at maturity
of the Notes originally issued remains outstanding after each such
redemption and that such redemption occurs within 90 days of any such
Public Equity Offering. See 'Description of the Notes--Optional
Redemption.'
Change of Control......................... Upon a Change of Control (as defined), the Issuers will be required
to offer to repurchase the Exchange Notes at a purchase price equal
to (i) 101% of the Accreted Value thereof, if the purchase date is on
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8
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<S> <C>
or prior to September 30, 2002, or (ii) 101% of the principal amount
at maturity thereof, plus accrued and unpaid interest thereon, if
any, to the purchase date, if such date is after September 30, 2002.
See 'Risk Factors--Inability to Satisfy a Change of Control Offer'
and 'Description of the Notes--Change of Control Offer.'
Security.................................. The Exchange Notes are secured by a first priority lien on all of the
outstanding membership units of ACME Television and all of the
Capital Stock of each Subsidiary of the Company directly owned by the
Company.
Ranking................................... The Exchange Notes are senior secured obligations of the Issuers and
rank pari passu in right of payment to senior obligations of the
Issuers and senior in right of payment to any current or future
subordinated obligations of the Issuers. The Exchange Notes are
effectively subordinated in right of payment to all existing and
future indebtedness and other liabilities, including trade payables,
of Subsidiaries of the Company. After giving pro forma effect to the
Knoxville Acquisition and Pending Acquisitions as of September 30,
1997, such Subsidiaries would have had approximately $198.9 million
of indebtedness outstanding. The Indenture will permit the Issuers
and their Subsidiaries to incur additional indebtedness (subject to
certain limitations). See 'Description of the Notes.'
Non-Recourse to Equity Holders............ The Exchange Notes are non-recourse to any parent entity or equity
holders of the Issuers (other than the Company).
Restrictive Covenants..................... The Indenture contains certain restrictive covenants with respect to
the Issuers and their Subsidiaries, including limitations on (a) the
sale of assets, including the equity interests of the Subsidiaries,
(b) asset swaps, (c) the payment of Restricted Payments (as defined),
(d) the incurrence of indebtedness and issuance of certain preferred
securities by the Issuers or the Subsidiaries, (e) the issuance of
Equity Interests (as defined) by a Subsidiary, (f) the payment of
dividends on, and the purchase, redemption or retirement of, the
equity interests or subordinated indebtedness of the Issuers, (g)
certain transactions with affiliates, (h) liens, certain
sale-leaseback transactions and the conduct of business and (i)
certain consolidations and mergers. All of these limitations and
prohibitions, however, are subject to a number of important
qualifications. See 'Description of the Notes--Certain Covenants.'
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SUMMARY UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following summary financial data reflect the results of operations of
Channel 32, Incorporated (Predecessor), the prior owner of Station KWBP, for the
years ended June 30, 1995 and 1996 and the period from July 1, 1996 to June 17,
1997, the Company for the nine months ended from September 30, 1997 and Koplar
Communications, Inc. ('Koplar Communications'), the owner of Station KPLR, for
each of the five fiscal years ended December 31, 1992, 1993, 1994, 1995 and 1996
and the nine-month periods ended September 30, 1996 and 1997. The historical
information for Channel 32 for the period from July 1, 1996 to June 17, 1997 and
for Koplar Communications the nine-month periods ended September 30, 1996 and
1997 is unaudited. The capital structure and accounting basis of Koplar
Communications subsequent to its acquisition by the Company will differ from its
historical capital structure and accounting basis.
The following unaudited pro forma consolidated statement of operations data
of the Company for fiscal year 1996 and for the nine months ended September 30,
1997 give effect to the Transactions as if such events had occurred at the
beginning of the periods presented. The following unaudited pro forma
consolidated balance sheet data at September 30, 1997 reflect the consummation
of the Knoxville Acquisition and Pending Acquisitions as if such events had
occurred on that date. The pro forma financial information may not be indicative
of the results that actually would have occurred if the transactions and
adjustments described in the accompanying notes had occurred on the dates
assumed and do not project the Company's financial position or results of
operations at any future date. See 'Pro Forma Consolidated Financial
Information.'
<TABLE>
<CAPTION>
HISTORICAL
THE COMPANY
HISTORICAL--CHANNEL 32 ------------- PRO FORMA
(PREDECESSOR) NINE MONTHS THE COMPANY
--------------------------------- ENDED ------------
PERIOD FROM SEPTEMBER 30, YEAR
1995 1996 JULY 1, 1997 ENDED
------- ------- 1996 ------------- DECEMBER 31,
TO JUNE 17, 1996
1997 ------------
----------- (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(1).............................. $ 288 $ 2,729 $ 1,306 $ 2,155 $ 30,462
Programming expenses......................... 623 3,274 1,304 1,096 14,425
Selling, general and administrative
expenses................................... 273 1,462 1,061 3,173 10,115
Depreciation and amortization................ 235 542 346 551 10,964
------- ------- ----------- ------ ------------
Operating income (loss)...................... (843) (2,549) (1,405) (2,665) (5,042)
Interest expense............................. (200) (3,252) (2,222) (573) (20,712)
Income (loss) before discontinued operations
and
extraordinary items........................ (1,043) (6,015) (3,637) (3,238) (26,501)
Net (loss)................................... (1,043) (6,015) (3,637) (3,238) (26,501)
OTHER DATA:
EBITDA(2).................................... $ (608) $(2,007) $(1,059) $(2,225) $ 8,047
EBITDA margin(3)............................. (211.1)% (73.5)% (81.1)% (103.2)% 26.4%
Capital expenditures......................... $ 979 $ 998 $ 356 $ 2,963 $ --
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1997
------------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(1).............................. $ 23,502
Programming expenses......................... 9,554
Selling, general and administrative
expenses................................... 8,044
Depreciation and amortization................ 8,006
-------
Operating income (loss)...................... (2,102)
Interest expense............................. (15,065)
Income (loss) before discontinued operations
and
extraordinary items........................ (17,495)
Net (loss)................................... (17,495)
OTHER DATA:
EBITDA(2).................................... $ 5,280
EBITDA margin(3)............................. 22.5%
Capital expenditures......................... $ --
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL--KOPLAR
HISTORICAL--KOPLAR COMMUNICATIONS COMMUNICATIONS
--------------------------------------------------- ----------
YEARS ENDED DECEMBER 31, NINE
---------------------------------------------------
1992 1993 1994 1995 1996 MONTHS
------- ------- ------- ------- ------- ENDED
SEPTEMBER
30,
----------
1996
----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(1).................................... $39,128 $41,500 $33,146 $27,528 $27,260 $ 19,751
Programming expenses............................... 22,532 19,592 13,581 9,503 11,365 9,413
Selling, general and administrative expenses....... 17,587 17,614 12,113 11,632 11,318 7,914
Depreciation and amortization...................... 1,321 1,367 1,085 791 702 518
------- ------- ------- ------- ------- ----------
Operating income (loss)............................ (2,312) 2,927 6,367 5,602 3,875 1,906
Interest expense................................... (6,462) (9,402) (5,777) (2,842) (2,155) (1,522)
Income (loss) before discontinued operations and
extraordinary items.............................. (9,246) (6,967) 10,295 1,916 559 (530)
Net income (loss).................................. (9,246) (6,967) 58,691 1,916 (800) (530)
OTHER DATA:
EBITDA(2).......................................... $ 3,228 $ 5,487 $ 5,071 $ 6,581 $ 5,922 $ (73)
EBITDA margin(3)................................... 8.2% 13.2% 15.3% 23.9% 21.7% (0.4)%
<CAPTION>
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(1).................................... $21,347
Programming expenses............................... 8,458
Selling, general and administrative expenses....... 13,722
Depreciation and amortization...................... 490
-----------
Operating income (loss)............................ (1,323)
Interest expense................................... (1,117)
Income (loss) before discontinued operations and
extraordinary items.............................. (2,722)
Net income (loss).................................. (2,722)
OTHER DATA:
EBITDA(2).......................................... $(1,346)
EBITDA margin(3)................................... (6.3)%
</TABLE>
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<S> <C> <C> <C> <C> <C> <C>
Capital expenditures............................... $ 565 $ 482 $ 839 $ 1,013 $ 687 $ 580
<CAPTION>
Capital expenditures............................... $ 246
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
THE COMPANY THE COMPANY
------------------------ ------------------------
AS OF SEPTEMBER 30, 1997 AS OF SEPTEMBER 30, 1997
------------------------ ------------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................. $ 27,211 $ 6,001
Working capital........................................................ 28,496 10,299
Total assets........................................................... 226,896 251,330
Total debt(4).......................................................... 167,226 167,226
Members' capital....................................................... 48,125 54,125
</TABLE>
- ------------------
(1) Net revenues is defined as total revenues less agency commissions. Net
revenues for Koplar Communications include approximately $14.3 million,
$15.4 million and $7.1 million for the years ended December 31, 1992, 1993
and 1994, respectively, relating to the operations of Station KRBK which was
sold on June 29, 1994.
(2) EBITDA is defined as operating income (loss), plus depreciation,
amortization and other noncash charges, including amortization of
programming rights, minus programming payments. Although EBITDA is not
caluclated in accordance with GAAP, it is widely used as a measure of a
company's ability to service and/or incur debt. EBITDA should not be
considered in isolation from or as a substitute for net income, cash flows
from operations and other income or cash flow data prepared in accordance
with GAAP, or as a measure of profitability or liquidity.
(3) EBITDA expressed as a percentage of net revenues.
(4) Total debt includes the current portion of capital lease obligations and
excludes programming rights payable.
11
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RISK FACTORS
Holders of Original Notes and prospective purchasers of Exchange Notes
should consider carefully the following factors as well as the other information
and data included in this Prospectus prior to participating in the Exchange
Offer or making an investment in the Exchange Notes.
LEVERAGE AND DEBT SERVICE; REFINANCING REQUIRED
The Company incurred significant debt in connection with the Offering. As
of September 30, 1997, after giving pro forma effect to the Knoxville
Acquisition and the Pending Acqusitions, the Company would have had outstanding
consolidated indebtedness of approximately $167.2 million. The Company's highly
leveraged financial position poses substantial risks to holders of the Exchange
Notes, including the risks that: (i) a substantial portion of the Company's cash
flow from operations will be required to be dedicated to servicing its
indebtedness; (ii) the Company's highly leveraged position may impede its
ability to obtain financing in the future for working capital, capital
expenditures and general corporate purposes, including acquisitions; and (iii)
the Company's highly leveraged financial position may make it more vulnerable to
economic downturns and may limit its ability to withstand competitive pressures.
The Company believes that, based on its current level of operations after giving
effect to the Transactions, it will have sufficient capital to carry on its
business and will be able to make the scheduled interest payments on the
Exchange Notes and meet its other obligations and commitments. However, there
can be no assurance that the future cash flow of the Company will be sufficient
to do so. If the Company is unable to generate sufficient cash flow from
operations in the future to make scheduled interest payments on the Exchange
Notes and to meet its other obligations and commitments, the Company will be
required to adopt one or more alternatives, such as refinancing or restructuring
its indebtedness, selling material assets or operations or seeking to raise
additional debt or equity capital. Furthermore, the Company believes it will be
necessary to refinance the Exchange Notes at or prior to the scheduled maturity
date in 2005. There can be no assurance that any of these actions could be
effected on a timely basis or on satisfactory terms or that these actions would
enable the Company to continue to satisfy its capital requirements. See
'Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources,' and 'Description of the Notes.'
LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES; HOLDING COMPANY STRUCTURE
The Company is a holding company which has no significant assets other than
its investments in its direct and indirect subsidiaries, and therefore, its
ability to make payments with respect to the Exchange Notes is dependent upon
the receipt of dividends or debt service in respect of intercompany indebtedness
from its direct and indirect subsidiaries. Future acquisitions (including
certain of the Pending Acquisitions) will be made through present or future
subsidiaries of the Company.
The Revolving Credit Facility prohibits, and the Indenture governing the
Television Notes (the 'ACME Television Indenture') significantly restricts, the
distribution of funds by ACME Television and the other Subsidiaries of the
Company to the Company. See 'Description of Certain Indebtedness' and
'Description of the Television Notes.' There can be no assurance that the
agreements governing indebtedness of the Company's Subsidiaries will permit such
Subsidiaries to distribute funds to the Company in amounts sufficient to pay the
Accreted Value or principal or interest on the Exchange Notes when the same
becomes due (whether at maturity, upon acceleration or otherwise). The Exchange
Notes are effectively subordinated in right of payment to all existing and
future claims of creditors of Subsidiaries of the Company, including the lenders
under the Revolving Credit Facility and Capital Lease Facilities (as defined),
the holders of the Television Notes and trade creditors. After giving pro forma
effect to the Knoxville Acquisition and the Pending Acquisitions as of September
30, 1997, the Subsidiaries of the Company would have had approximately $198.9
million of total liabilities, including $167.2 million of indebtedness.
ABSENCE OF OPERATING HISTORY
Although the Company's management team has extensive experience in the
television industry, the Company has limited operating history. As of the date
hereof, the Company has acquired three television stations and has entered into
definitive agreements to construct two additional stations. There can be no
assurance that the Company will be able to successfully implement its business
plan, which will depend upon, among other things,
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the Company's ability to (i) consummate the Pending Acquisitions (and the
construction and upgrades relating thereto) on a timely basis and on the terms
and cost bases currently contemplated and (ii) successfully operate and manage
the acquired businesses. In addition, the various stations have no consolidated
operating history. Prospective investors, therefore, have limited historical
financial information about the Company upon which to base an evaluation of its
performance and an investment in the Exchange Notes. There can be no assurance
that the Company will be successful in integrating such operations or that such
integration will not divert management resources which in a start-up venture are
more limited, cause temporary disruptions, or otherwise have an adverse effect
on the Company which may be material. See 'Business--The Company.'
RISKS RELATED TO ACQUISITIONS
Consummation of each of the Pending Acquisitions is subject to certain
conditions beyond the Company's control. Such conditions include, among other
things (i) prior approval by the FCC of the assignments or transfers of control
of permits or licenses issued by the FCC, (ii) expiration of any applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the 'HSR Act') and (iii) maintenance of normal broadcast transmission and
operations in the ordinary course until closing. Accordingly, there can be no
assurance as to whether or when any of the Pending Acquisitions will be
consummated or whether they will be consummated on the terms described herein.
There can also be no assurance that the Company will be successful in its plans
to obtain The WB Network affiliation for all of its acquired stations, swap
certain stations or increase the signal strength of certain stations. In the
event that the Pending Acquisitions are not consummated in certain
circumstances, the Company may forfeit escrow deposits in the aggregate amount
of approximately $100,000 and otherwise be subject to claims for breach of such
agreements. See 'Business--The WB Network' and 'Business--The Stations and
Market Overviews.'
The Company intends to continue to pursue the acquisition of additional
television stations. Acquisition of television stations is subject to prior FCC
approval and applicable law which limits the number and location of broadcasting
properties that any one person or entity (including its affiliates) may own. The
market to purchase television stations is highly competitive, and many potential
acquirors may have greater resources than the Company available to effect such
acquisitions. Accordingly, there can be no assurance that the Company will be
able to make future acquisitions at prices acceptable to the Company. In
addition, rapidly growing businesses frequently experience unforeseen expenses
and delays in completing acquisitions, as well as difficulties and complications
in integrating the acquired operations without disruption in the overall
operations. As a result, acquisitions could materially adversely affect the
Company's operating results in the short term as a result of several factors,
including increased capital requirements. In addition, there can be no assurance
that the Company will have the financial resources necessary to acquire
additional stations. See '--Leverage and Debt Service; Refinancing Required.'
In connection with the Salt Lake City and Albuquerque Acquisitions, the
Company intends to undertake significant upgrading or construction of
transmission and studio facilities. Such construction activities are subject to
risks of unforeseen engineering, environmental or geological problems, weather
interference and unanticipated cost increases. Such problems, or difficulties in
obtaining any required permits, approvals or regulatory authorizations, could
delay completion of such facilities and the commencement of broadcasting at the
affected station. Although management believes that it has experience in
overseeing station facilities construction and is capable of managing such
risks, there can be no assurance that it will be able to effectively do so.
Pending receipt of FCC approval of the transfer of voting control of the
company holding the FCC licenses and other assets of Station KPLR, an amount
equal to the cash portion of the purchase for the St. Louis Acquisition ($143.0
million paid at consummation of the closing of the St. Louis LMA subject to
reduction for the amount of long term debt and notes payable of Koplar
Communications ($16.2 million as of September 30, 1997) and subject to certain
other adjustments) was deposited into escrow by the Company pursuant to an
escrow agreement (the 'Escrow Agreement') and the Company entered into the St.
Louis LMA. Pursuant to the Escrow Agreement, the sellers of Station KPLR will
have the right to receive the escrowed funds on January 2, 1998, in exchange for
deposit into the escrow account of all of the outstanding capital stock of
Koplar Communications, together with such other documents and instruments as the
Company may reasonably request in order to transfer such capital stock to the
Company and otherwise consummate the transaction upon receipt of the required
FCC approval. In the event such approval is not obtained by September 28, 1998,
the sellers will be required to
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cooperate with the Company, at the Company's request and expense, to effect a
disposition of Station KPLR to a third party, and all proceeds of such
disposition (less the sellers' expenses and the $3.0 million of fees that would
have been payable to Edward J. Koplar pursuant to his management agreement with
the Company) will be payable to the Company. There can be no assurance that, if
FCC approval is not obtained by September 28, 1998, the Company will be able to
effect a disposition of Station KPLR at net proceeds to the Company equal to or
greater than the $146.0 million aggregate purchase consideration to be paid to
the sellers of Station KPLR.
FCC regulations require that LMAs expressly permit station licensees to
retain full management and control of the station, including programming and
personnel. There can be no assurance that early termination or unanticipated
preemptions by a licensee of all or a significant portion of the scheduled
programming for the St. Louis LMA will not occur, or that the licensee will not
otherwise interfere with the Company's intended plan of operations for such
station, including the implementation of cost savings assumed in the Pro Forma
Financial Statements (as defined).
DEPENDENCE ON KEY PERSONNEL
The Company's success is largely dependent on the continued services of its
senior management team, including, in particular, Messrs. Kellner, Gealy and
Allen. Although the Company believes it can adequately replace key employees in
an orderly fashion should the need arise, there can be no assurance that the
loss of such key personnel would not have a material adverse effect on the
Company. The Company's success will also be dependent in part on its ability to
recruit and retain quality general managers for its stations and other corporate
office personnel.
CERTAIN POTENTIAL CONFLICTS AND VOTING CONTROL
Full authority for the management of ACME Parent resides in its executive
officers and the Board of Advisors of ACME Parent, which initially consists of
Messrs. Kellner, Gealy and Allen. The Company is controlled by its members
acting by majority vote, with such majority initially held by ACME Parent. ACME
Parent has entered into a consulting agreement with Mr. Kellner and employment
contracts with Messrs. Gealy and Allen, which include non-competition covenants.
However, Mr. Kellner's agreement provides that he may perform services for other
businesses unaffiliated with the Company which, in certain limited
circumstances, may be competitive with the Company. Mr. Kellner is also an owner
and chief executive officer of The WB Network. Upon consummation of the Salt
Lake City Acquisition and the St. Louis Acquisition, Messrs. Roberts and Koplar,
respectively, are expected to join the Board of Advisors of ACME Parent. Mr.
Roberts owns a broadcast station in the St. Louis DMA which will compete with
Station KPLR. See 'Certain Relationships and Related Transactions.' In addition,
the Institutional Investors, voting as a group, have consent rights with respect
to certain actions by the Company. Certain members of the Board of Advisors and
certain of the Institutional Investors have, or in the future may have,
interests in other broadcast television companies or other related investments.
There can be no assurance that the activities of such persons will not compete
with those of the Company, or give rise to conflicts of interest between such
persons and the Company.
The Company LLC Agreement provides for management of the business and
affairs of the Company by its members, acting by majority vote, or by any single
member holding more than 50% of the Company's outstanding membership units (the
'Majority Member'). Following the Offering and for the foreseeable future, ACME
Parent will be the Majority Member, and as such will have exclusive control of
the management of the business and affairs of the Company.
DEPENDENCE ON THE WB NETWORK AFFILIATION
The Company anticipates that all of the Company's television stations will
be affiliates of The WB Network, which for the 1997-1998 broadcast season has
announced that it will provide such stations with 9 hours of prime time
programming, and 19 hours of childrens' programming per week, in return for
advertising rights during such programming. Accordingly, the Company's success
is largely dependent on the continued relationship of its stations with The WB
Network and on The WB Network's continued success as a broadcast network.
Although the Company believes that its relationship with The WB Network is
excellent, there can be no assurance that The WB Network will renew any
affiliation agreement as to all or any of the Company's stations. In addition,
The WB Network may fail to renew the affiliation agreement as to any station in
the event it desires to change its
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affiliate in the applicable market. Finally, there can be no assurance that The
WB Network programming will continue to generate improved ratings or that The WB
Network will continue to provide programming, marketing and other support to its
affiliates on the same basis as currently provided. See 'Business--Affiliation
Agreements.'
COMPETITION; IMPACT OF NEW TECHNOLOGIES; POTENTIAL COST OF SPECTRUM
The broadcast television industry is highly competitive, and the Company's
success will depend in large part on its ability to successfully compete with
other broadcast television stations and other media for viewers and advertising
revenues. The Company's stations will compete for both viewers and revenues with
network-affiliated and independent broadcast stations, cable television, home
satellite delivery, home video, direct broadcast satellite ('DBS') television
systems and video delivery systems utilizing telephone lines. Many of the
Company's competitors may have greater resources than the Company.
Advances in technology may increase competition for viewers and advertisers
and further fractionalize the video industries, which include broadcast
television. Video compression techniques currently under development are
expected to reduce the bandwidth required for television signal transmission.
Such techniques, and other technological developments, may be available to other
video delivery systems and thus present the potential for providing expanded
programming to targeted audiences. Reductions in the cost of creating additional
channel capacity could lower entry barriers for new channels and encourage the
development of specialized niche programming. The ability to reach narrowly
defined, highly targeted audiences is expected to significantly affect the
competition for advertising revenues. In addition, future competition in the
television industry may include the provision of interactive video and data
services capable of providing two-way interaction with commercial video
programming, together with information and data services, that may be delivered
by commercial television stations, cable television, DBS and other video
delivery systems. Management cannot predict the effect that these or other
technological changes will have on the broadcast television industry or the
Company's future results of operations.
In recent years, the FCC has adopted policies providing for authorization
of new technologies and a more favorable operating environment for certain
existing technologies that have the potential to provide additional competition
for television stations. Further advances in technology could facilitate the
entry of additional competitors and encourage the development of increasingly
specialized 'niche' programming. In particular, the Company may be affected by
the development and regulation of digital television ('DTV'). FCC policies could
require that the Company convert any and all stations it owns from an analog
transmission capability to a digital transmission capability. The transition may
have to occur by 2006 or earlier. Although the Company is unable to reasonably
project the costs or benefits associated with DTV at this time, DTV will require
significant new capital investments in DTV broadcasting capacity, and no
assurance can be given that the Company will have adequate financial resources
to make such capital investments. In addition, certain members of Congress from
time to time have offered and continue to offer various proposals that would
require a public auction for the spectrum necessary to effect the transition to
DTV. If enacted into law, those proposals could require broadcasters to make a
substantial investment in order to obtain the spectrum for DTV. See 'Business--
Competition.'
RESTRICTIONS IMPOSED BY CERTAIN AGREEMENTS
The Investment and Loan Agreement (the 'Investment Agreement'), dated June
17, 1997, as amended, among ACME Parent and certain of the Institutional
Investors, and the Limited Liability Company Agreement, dated June 17, 1997, as
amended, among ACME Parent and certain of the Institutional Investors (the 'LLC
Agreement'), each contains various covenants which restrict the ability of the
Company and its subsidiaries to, among other things, incur indebtedness for
borrowed money or liens, sell a material portion of its assets, merge or acquire
additional businesses, make loans to or investments in others, enter into
sale-leaseback transactions, amend its organizational documents, change its
accounting policies, engage in affiliate transactions, declare or pay dividends
or sell or issue capital stock. These restrictions will significantly limit the
ability of the Company to take various actions without the consent of the
holders of the requisite percentage of the applicable outstanding securities of
ACME Parent. Such agreements also provide that on June 30, 2002 or upon the
occurrence of certain events, including Jamie Kellner's ceasing to serve as
Chairman and Chief Executive Officer of the Company or as a senior executive
officer of The WB Network, or the cessation of operations by The WB
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Network, the Institutional Investors shall have the right to exercise voting
control of ACME Parent (subject to applicable FCC approvals), and to dispose of
the Company or cause the sale of all or substantially all of its assets. See
'The Transactions' and 'Description of ACME Parent.' In addition, in connection
with the St. Louis Acquisition, the Company has agreed that for a period of five
years from the date of closing, the disposition of Station KPLR by the Company
to certain specified persons will, in certain circumstances (excluding creditors
of the Company exercising any rights under any financing agreement or related
agreement or instrument), require the prior approval of Edward J. Koplar.
REGULATORY MATTERS
The Company's operations are subject to extensive and changing regulation
on an ongoing basis by the FCC, which enforces the Communications Act. The prior
approval of the FCC is required for the issuance, renewal and assignment of
station permits and licenses and the transfer of control of station permits and
licensees. There can be no assurance that the FCC will approve each of the
Pending Acquisitions or any future acquisitions that require an assignment or
transfer of control of an FCC license to the Company. In addition, the FCC
permits and licenses held by the Company are subject to renewal from time to
time. The license for Station KPLR St. Louis, Missouri will expire on February
1, 1998 and a renewal application therefor was filed with the FCC on September
30, 1997 by the licensee, Koplar Television Communications L.L.C. and was
approved by the FCC on October 24, 1997. Although in substantially all cases
such licenses are renewed by the FCC, there can be no assurance that the license
for Station KPLR or any other television licenses for stations owned or to be
owned by the Company will be renewed. Even if a license is renewed, the FCC
could impose burdensome conditions or restrictions on such renewal. The
non-renewal or renewal with conditions of one or more of the Company's
television broadcast licenses could have a material adverse effect on the
Company.
Congress and the FCC currently have under consideration and may in the
future adopt new laws or modifications to existing laws, regulations and
policies regarding a wide variety of matters, including station ownership
attribution rules and station ownership limitations, which could directly or
indirectly adversely affect the ownership and operation of the Company's
broadcast properties, as well as the Company's business strategies. In addition,
courts could render decisions in cases to which the Company is not a party but
which ultimately could affect applicable law and thereby adversely affect the
Company.
Recent and prospective actions by the Congress, the FCC and the courts will
likely accelerate the trend toward vertical integration in the media and home
entertainment industries and cause the Company to face significant competition
in the future. Such measures could include the elimination or modification of
certain restrictions on television station ownership, the removal or
modification of restrictions on the participation by regional telephone
operating companies in cable television and other direct-to-home video
technologies, and the elimination or modification of restrictions on the
offering of multiple network services by the existing major television networks.
The Company is unable to predict whether other potential changes in the
regulatory environment could restrict or curtail the ability of the Company to
acquire, operate and dispose of stations in the future or, in general, to
compete with other operators of television station and other media properties.
See 'Business--Regulations.'
INDUSTRY AND ECONOMIC CONDITIONS; SEASONALITY
The profitability of the Company's television stations is subject to
various factors that influence the television broadcasting industry as a whole.
The Company's television stations may be affected by changes in audience tastes,
priorities of advertisers, new laws and governmental regulations and policies,
changes in broadcast technical requirements, technological changes, proposals to
eliminate the tax deductibility of expenses incurred by advertisers and changes
in the willingness of financial institutions and other lenders to finance
television station acquisitions and operations. The Company cannot predict
which, if any, of these or other factors might have a significant impact on the
television broadcasting industry in the future, nor can it predict what impact,
if any, the occurrence of these or other events might have on the Company's
operations. Generally, advertising tends to decline during economic recession or
downturn. Consequently, the Company's broadcasting revenue is likely to be
adversely affected by a recession or downturn in the United States economy or
other events or circumstances that adversely affect advertising activity. In
addition, the Company's operating results in individual geographic markets could
be adversely affected by local regional economic downturns. Seasonal revenue
fluctuations are common in the television broadcasting industry and are due
primarily to fluctuations in
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advertising expenditures by local and national advertisers. The Company's first
fiscal quarter ending in March is expected to produce the lowest revenue for the
year.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture, the Revolving Credit Facility and the ACME Television
Indenture impose or will impose restrictions that, among other things, limit the
amount of additional indebtedness that may be incurred by the Issuers and/or
their Subsidiaries and impose limitations on, among other things, investments,
loans and other payments, certain transactions with affiliates and certain
mergers and acquisitions. The Revolving Credit Facility also will require ACME
Television and its subsidiaries to maintain specified financial ratios and meet
certain financial tests. In addition, it will be an event of default under the
Revolving Credit Facility if the St. Louis Acquisition is not completed within
nine months of the Issue Date. The ability of the Issuers and/or their
Subsidiaries to comply with such covenants and restrictions can be affected by
events beyond their control, and there can be no assurance that the Issuers
and/or their Subsidiaries will achieve operating results that would permit
compliance with such provisions. The breach of any of the provisions of the
Revolving Credit Facility would, under certain circumstances, result in defaults
thereunder, permitting the lenders under the Revolving Credit Facility to
accelerate the indebtedness under the Revolving Credit Facility. If ACME
Television were unable to pay the amounts due in respect of the Revolving Credit
Facility, the lenders thereunder could foreclose upon the assets pledged to
secure such payment. Any of such events would adversely affect the Issuers'
ability to service the Exchange Notes. See 'Description of Certain
Indebtedness--Revolving Credit Facility.'
INABILITY TO SATISFY A CHANGE OF CONTROL OFFER
The Indenture provides that, upon the occurrence of a Change of Control,
the holders of the Exchange Notes will have the right to require the Company to
repurchase the Exchange Notes at a purchase price equal to (i) 101% of the
Accreted Value thereof, if the purchase date is on or prior to September 30,
2002, or (ii) 101% of the principal amount at maturity thereof, plus accrued and
unpaid interest thereon, if any, to the purchase date, if such date is after
September 30, 2002. If a Change of Control were to occur, due to the highly
leveraged nature of the Company, the Company might not have the financial
resources to repay all of its obligations under any indebtedness, including
indebtedness under the Revolving Credit Facility and Television Notes, that
would become payable upon the occurrence of such Change of Control. The
Company's failure to make a required repurchase of the Exchange Notes in the
event of a Change of Control would create an Event of Default under the Exchange
Notes. See '--Leverage and Debt Service; Refinancing Required' and 'Description
of the Notes-- Change of Control Offer.'
LIMITATION ON SECURITY FOR THE NOTES
The Exchange Notes are secured by a first priority lien on membership units
of ACME Television and all of the Capital Stock of each Subsidiary of the
Company directly owned by the Company. See 'Description of the Notes--Security.'
There is no existing public market for such securities, and even if such
securities could be sold, there can be no assurance that the proceeds from the
sale of such securities would be sufficient to satisfy the amounts due on the
Exchange Notes in the event of a default. Absent an acceleration of the Exchange
Notes, the Pledgors (as defined) will be able to vote, as they determine in
their sole discretion, such securities. In the event of a bankruptcy or
liquidation of a Pledgor, the security interest in the Collateral (as defined)
may be of no value to holders of Exchange Notes because holders of such
securities would, in the event of a bankruptcy or liquidation of a subsidiary,
be entitled only to the assets which remained after all liabilities of such
Subsidiary of the Company have been paid in full. The lien on the Collateral in
favor of the Noteholders is subject to release under certain circumstances. See
'Description of the Notes--Security.'
The right of the Trustee to dispose of the Collateral upon the occurrence
of an event of default under the Indenture is likely to be significantly
impaired by applicable bankruptcy laws if a bankruptcy proceeding were to be
commenced by or against a Pledgor prior to such disposition. Under Federal
bankruptcy laws, secured creditors, such as the Trustee and the Noteholders, are
prohibited from foreclosing upon collateral held by a debtor in a bankruptcy
case, or from disposing of collateral repossessed from such a debtor, without
bankruptcy court approval. Moreover, applicable Federal bankruptcy laws
generally permit a debtor to continue to retain and to use collateral, including
capital stock, even if the debtor is in default under the applicable debt
instruments, provided that the secured creditor is given 'adequate protection.'
The interpretation of the term 'adequate
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protection' may vary according to circumstances, but it is intended in general
to protect the value of the secured creditor's interest in collateral. Because
the term 'adequate protection' is subject to varying interpretation and because
of the broad discretionary powers of a bankruptcy court, it is impossible to
predict (i) if payments under the Exchange Notes would be made following
commencement of and during a bankruptcy case, (ii) whether or when the Trustee
could foreclose upon or sell any Collateral securing the Exchange Notes, or
(iii) whether or to what extent Noteholders would be compensated for any delay
in payment or loss of value of Collateral securing the Exchange Notes under the
doctrine of 'adequate protection.' Furthermore, in the event a bankruptcy court
were to determine that the value of the Collateral securing the Exchange Notes
was not sufficient to repay all amounts due on the Exchange Notes, the
Noteholders would become holders of 'undersecured claims.' Applicable Federal
bankruptcy laws do not permit the payment and/or accrual of interest, costs and
attorneys' fees for 'undersecured claims' during a debtor's bankruptcy case.
The disposition of Capital Stock of any Subsidiary held as Collateral will
also be subject to the prior approval of the FCC to the extent such disposition
constitutes a transfer of control of a license or permit issued by the FCC,
including the licenses and permits held or to be acquired by the Company's
subsidiaries with respect to the Stations. In determining whether to approve a
change in control, the FCC considers, among other things, the financial and
legal qualifications of the prospective acquiror, including compliance with FCC
restrictions on foreign ownership and control, rules limiting the common
ownership of certain attributable interests in broadcast, cable and newspaper
properties and the character qualifications of the prospective acquiror and
persons holding attributable interests in it. There can be no assurance that the
FCC would grant such approval with respect to any particular prospective
acquiror or that such approval, if granted, would not be subject to a
significant delay. See 'Business--Regulation.'
ORIGINAL ISSUE DISCOUNT
The Original Notes were issued with original issue discount. Holders of the
Exchange Notes will be required to include the accretion of the original issue
discount of the Original Notes in gross income for U.S. federal income tax
purposes in advance of receipt of the cash payments to which such income is
attributable. See 'Certain U.S. Federal Income Tax Considerations Relating to
the Notes--Original Issue Discount on the Original Notes' for a more detailed
discussion of the U.S. federal income tax consequences to holders of the
Exchange Notes of the purchase, ownership and disposition of the Exchange Notes.
If a bankruptcy case is commenced by or against the Company under the United
States Bankruptcy Code, the claim of a holder of Exchange Notes with respect to
the principal amount thereof may be limited to an amount equal to the sum of (i)
the purchase price, and (ii) that portion of the original issue discount which
has been amortized as of any such bankruptcy filing.
LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES; RESTRICTIONS ON RESALE OF THE
ORIGINAL NOTES
There is no existing trading market for the Exchange Notes, and there can
be no assurance regarding the future development of a market for the Exchange
Notes or the ability of holders to sell their Exchange Notes, or the price at
which such holders may be able to sell their Exchange Notes. If such a market
were to develop, the Exchange Notes could trade at prices that may be lower than
the initial offering price of the Original Notes or the Accreted Value of the
Exchange Notes depending on many factors, including prevailing interest rates,
the Company's operating results and the markets for similar securities. The
Initial Purchaser has advised the Issuers that it currently intends to make a
market in the Exchange Notes. The Initial Purchaser is not obligated to do so,
however, and any market-making with respect to the Exchange Notes may be
discontinued at any time without notice. Therefore, there can be no assurance as
to the liquidity of any trading market for the Exchange Notes or that an active
public market for the Exchange Notes will develop. The Issuers do not intend to
apply for listing or quotation of the Exchange Notes on any securities exchange
or stock market. The Original Notes have not been registered under the
Securities Act or any state securities law and, unless exchanged for Exchange
Notes pursuant to the Exchange Offer, may not be offered or sold except pursuant
to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities law. The
Issuers do not intend to apply for listing or quotation of the Original Notes on
any securities exchange or stock market. The Original Notes are eligible for
trading in the Private Offerings, Resale and Trading through Automated Linkages
(PORTAL) market of the National Association of Securities Dealers, Inc.
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CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
The Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Original Notes desiring to tender such Original
Notes in exchange for the Exchange Notes should allow sufficient time to ensure
timely delivery. Although the Issuers intend to notify holders of defects or
irregularities with respect to tenders of Original Notes, neither the Issuers,
the Exchange Agent nor any other person shall incur any liability for failure to
give such notification.
Holders of the Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes, as set forth in the legend
thereon, as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Upon consummation of this Exchange Offer, the Issuers will
have no further obligation to provide for the registration under the Securities
Act of the Original Notes except under certain limited circumstances. In
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Original Notes, where such
Original Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. To the extent
Original Notes are tendered and accepted in the Exchange Offer, the trading
market, if any, for the Original Notes not so tendered could be adversely
affected. See 'The Exchange Offer--Consequences of Failure to Exchange.'
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SPECIAL NOTE REGARDING PROJECTED FINANCIAL DATA
In connection with the offering and sale by the Initial Purchaser of the
Original Notes pursuant to Rule 144A under the Securities Act, the Issuers
prepared an Offering Memorandum (the 'Offering Memorandum') that was distributed
to prospective investors, including persons that presently may be holders of the
Original Notes. The Offering Memorandum contained certain forecasts of financial
information for the years ending December 31, 1998 through 2002 (the
'Forecasts') that are not included or incorporated by reference in this
Prospectus. The Forecasts have not been and are not expected to be made public
and the Issuers do not intend to update or otherwise revise the Forecasts to
reflect events or circumstances after the date of the Forecasts or reflect the
occurrence of unanticipated events. As with all projected financial information,
the Forecasts are subject to numerous uncertainties, many of which are beyond
the control of the Issuers, and contain assumptions that may not be attainable.
The Forecasts and actual results will vary and those variations may be material.
The Exchange Offer is being made only pursuant to this Prospectus, and no holder
of Original Notes shall rely upon any of the information set forth in the
Offering Memorandum in determining whether to participate in the Exchange Offer.
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THE TRANSACTIONS
The Company is a Delaware limited liability company, and 92% of its
membership interests are owned directly or indirectly by ACME Parent and 8% are
owned directly or indirectly by the purchasers of the Units (as defined). See
'Security Ownership of Certain Beneficial Owners and Executive Officers.' The
Company was formed on August 15, 1997. On such date, ACME Parent contributed its
investment in Station KWBP and certain other net assets to the Company, which
the Company immediately contributed to ACME Television and its subsidiaries (the
'Contribution').
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(1) Includes $6.0 million of membership units to be issued upon the consummation
of the Salt Lake City Acquisition.
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THE ACQUISITIONS
ACME Parent completed the Portland Acquisition on June 17, 1997 for $18.7
million in cash and $4.4 million of membership units in ACME Parent. Certain of
the Institutional Investors, management, and the other members of ACME Parent
contributed or invested the cash portion of the Portland Acquisition. The
Company completed the Knoxville Acquisition on October 7, 1997 for $13.2 million
in cash. ACME Parent or its subsidiaries have also entered into agreements to
acquire three additional television stations (these three stations collectively
are referred to as the 'Pending Acquisitions' and together with the Portland
Acquisition and the Knoxville Acquisition, the 'Acquisitions'). On August 15,
1997, ACME Parent consummated the Portland Contribution by contributing ACME
Television of Oregon, LLC ('ACME Oregon'), ACME Television of Tennessee, LLC
('ACME Tennessee'), and other net assets to the Company, which the Company
immediately contributed to ACME Television and its subsidiaries. See 'Financial
Statements--ACME Intermediate.' The Company intends to consummate the Pending
Acquisitions as soon as practicable. However, there can be no assurance that all
or any of the Pending Acquisitions will be consummated. The following table sets
forth certain information with respect to the Acquisitions (dollars in
millions):
<TABLE>
<CAPTION>
ESTIMATED
PURCHASE CAPITAL TOTAL
STATION MARKET PRIMARY SELLER/OWNER PRICE EXPENDITURES COSTS(2)
- -------------- ---------------------- -------------------------------------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
KPLR-11 St. Louis, MO Koplar Communications, Inc. $146.0 $ 0.8 $146.8
KWBP-32 Portland, OR Channel 32, Incorporated 23.1 2.0 25.1
KZAR-16 Salt Lake City, UT Roberts Broadcasting of Salt Lake 14.0 4.5 18.5
City, L.L.C.
KAUO-19 Albuquerque, NM Minority Broadcasters of Santa Fe, -- 4.0 4.0
Inc.(1)
WBXX-20 Knoxville, TN Crossville TV Limited Partnership 13.2 4.5 17.7
-------- ------ --------
$196.3 $ 15.8 $212.1
-------- ------ --------
-------- ------ --------
</TABLE>
- ------------------
(1) The purchase price for this Acquisition is $10,000.
(2) Excludes estimated transaction costs of $3.0 million associated with the
Pending Acquisitions.
The St. Louis Acquisition
ACME Parent has entered into a definitive agreement with Koplar
Communications and its stockholders pursuant to which the Company or a
subsidiary formed for the purpose will acquire for $146.0 million all of the
outstanding capital stock of Koplar Communications, which owns the licensee of
Station KPLR, Channel 11, which is licensed to broadcast in the St. Louis
market. The acquisition of voting control of Koplar Communications by the
Company is subject to approval by the FCC. The $146.0 million acquisition cost
is comprised of the following: (i) $143.0 million of cash, paid at closing of
the St. Louis LMA on September 30, 1997 subject to reduction for the amount of
long-term debt and notes payable of Koplar Communications ($16.2 million as of
September 30, 1997) and certain other adjustments and (ii) $3.0 million of
consulting fees relating to a management agreement to be entered into between
the Company and Mr. Koplar. See 'Management-- Executive Compensation.' Pending
receipt of FCC approval, the Company entered into the St. Louis LMA to operate
Station KPLR for a 10-year term with an option for the Company to renew the St.
Louis LMA for an additional 10-year term. During the LMA period, the Company
will retain all revenues generated by the station, bear the operating expenses
of the station and have the right to provide programming for the station subject
to Koplar Communications' ultimate authority for station programming and the
station's existing programming commitments.
The Portland Acquisition and Contribution
On June 17, 1997, ACME Parent acquired for approximately $23.1 million
substantially all of the assets of Channel 32, Incorporated relating to Station
KWBP, Channel 32, which is licensed to broadcast in the Portland market. For the
period from January 1, 1997 to the closing of the acquisition, ACME Parent
operated Station
21
<PAGE>
KWBP pursuant to an LMA. The Company anticipates completion of the construction
of a new transmission facility to improve the station's signal and upgrade of
its studio facility, which is expected to cost $2.0 million, by November 1997.
On August 15, 1997, ACME Parent consummated the Portland Contribution by
contributing to the Company, which the Company immediately contributed to ACME
Television and its subsidiaries net assets with a book value of $23.9 million as
of June 30, 1997.
The Salt Lake City Acquisition
ACME Parent has entered into and contributed to ACME Television definitive
agreements to acquire for $14.0 million all of the ownership interest in Roberts
Broadcasting of Salt Lake City, L.L.C. ('Roberts Broadcasting'), which holds a
construction permit from the FCC for Station KZAR, Channel 16, which is licensed
to broadcast in the Salt Lake City market. The acquisition of Roberts
Broadcasting is subject to approval by the FCC. The $14.0 million acquisition
price will be paid as follows: (i) the Company will acquire 49% of the
outstanding equity interests of Roberts Broadcasting in exchange for $6.0
million in membership units of ACME Parent, (ii) the Company will acquire for
$3.0 million an option to acquire the remaining 51% of the outstanding equity
interests of Roberts Broadcasting and (iii) subject to completion of
construction and receipt of all required FCC approvals, the Company will
exercise its option to acquire the remaining interest in Roberts Broadcasting
for a price equal to the lesser of $5.0 million or the fair market value of such
controlling interest which will be offset by the repayment of a $4.0 million
loan to the sellers of Roberts Broadcasting to be made by ACME Parent. Pending
exercise of the option, the Company and Roberts Broadcasting will enter into a
management agreement, pursuant to which the Company will construct and acquire
programming for the station. The Company expects the construction costs to be
approximately $4.5 million. The Company anticipates that the station will
commence on-air broadcast operations by March 1998.
The Albuquerque Acquisition
The Company has entered into definitive agreements with Minority
Broadcasters of Santa Fe, Inc. ('Minority Broadcasters') to acquire the right to
construct Station KAUO, which is licensed to broadcast in the Albuquerque-Santa
Fe market (the 'Albuquerque Acquisition'). The purchase price for the
Albuquerque Acquisition will be the lesser of $10,000 or the amount approved by
the FCC as having been legitimately expended on KAUO by Minority Broadcasters.
The acquisition of the construction permit for Station KAUO is subject to
approval by the FCC. Pending this approval, the Company and Minority
Broadcasters have entered into a management agreement, pursuant to which the
Company will construct and acquire programming for the station at the Company's
expense. The Company expects the construction costs to be approximately $4.0
million. The Company anticipates that the station will commence on-air broadcast
operations by September 1998. A commercial broadcast television station in this
market currently holds a secondary affiliation agreement with The WB Network,
which management believes will be terminated once Station KAUO commences
broadcasting.
The Knoxville Acquisition
On October 7, 1997, the Company acquired for $13.2 million in cash, all of
the partnership interests of Crossville TV Limited Partnership ('Crossville
Limited'), the licensee of Station WINT, Channel 20, which is licensed to
broadcast in the Knoxville market, and completed the construction of new
transmission facilities and its studio facilities. The construction and upgrade
costs were approximately $4.5 million. Upon consummation of this acquisition,
the Company changed the station's call letters from WINT to WBXX.
22
<PAGE>
THE FINANCINGS
The Company entered into a number of financing arrangements (collectively,
the 'Financings' and, together with the Acquisitions, the 'Transactions'). The
following table sets forth certain financing arrangements for ACME Parent and
its subsidiaries pursuant to the Transactions (dollars in thousands):
<TABLE>
<S> <C>
ACME PARENT:
Convertible Debentures................................................................... $ 20,000
Membership Units(1)...................................................................... 35,400
THE COMPANY:
Offering................................................................................. 40,000
ACME TELEVISION:
Capital Lease Facilities................................................................. 0
Revolving Credit Facility................................................................ 3,500
Television Notes Offering................................................................ 127,370
--------
ACME Parent consolidated total financings............................................. $226,270
--------
--------
</TABLE>
- ------------------
(1) Includes $6.0 million of membership units to be issued upon the consummation
of the Salt Lake City Acquisition.
ACME Parent Equity Contribution
On the Issue Date, ACME Parent issued Convertible Debentures and membership
units for aggregate gross proceeds of approximately $22.5 million, the net
proceeds of which were contributed to the Company, which the Company immediately
contributed to ACME Television and its subsidiaries (the 'Parent Equity
Contribution').
Units Offering
On September 24, 1997, the Issuers sold 71,634 Units (the 'Units')
consisting of $71,634,000 aggregate principal amount at maturity of the Issuers'
12% Senior Secured Discount Notes due 2005 ($40.0 million aggregate initial
Accreted Value (as defined)) and 71,634 Membership Units of the Company (the
'Membership Units'). The Notes and the Membership Units were separately
transferable, subject to various transfer restrictions, immediately after their
issuance and are not tradeable as a Unit after their issuance. The gross
proceeds to the Company of approximately $40.0 million were received on
September 30, 1997, which the Company immediately contributed to ACME Television
and its subsidiaries.
Television Notes Offering
On September 24, 1997, ACME Television sold (the 'Television Notes
Offering') $175.0 million in aggregate principal amount at maturity of 10 7/8%
Senior Discount Notes due 2004 (the 'Television Notes'). The gross proceeds from
the Television Notes Offering of $127.4 million were received on September 30,
1997. The net proceeds from the Television Notes Offering together with the
proceeds of the other Financings and cash on hand were used to consummate the
St. Louis LMA and the Knoxville Acquisition and will be used to consummate the
Pending Acquisitions. ACME Television is currently offering to exchange its
Series B Television Notes (the 'Television Exchange Notes'), which have been
registered under the Securities Act, for a like principal amount of its Series A
Television Notes (the 'Television Original Notes'), sold on the Issue Date,
pursuant to the conditions set forth in the registration statement filed by ACME
Television (the 'Television Exchange Offer Registration Statement').
The Company intends to temporarily invest the net remaining proceeds of the
Offering and the Television Notes Offering in short-term, investment grade
securities prior to the consummation of the Pending Acquisitions. If any of the
Pending Acquisitions are not consummated, the Company intends to use the net
proceeds designated for any such acquisition (and related expenditures) for
working capital, capital expenditures, general corporate purposes, and to
finance future acquisitions.
23
<PAGE>
Revolving Credit Facility
In addition to the Parent Equity Contribution, the Television Notes
Offering and the proceeds of the Offering, ACME Television intends to enter into
an amended and restated $40.0 million revolving credit facility (the 'Revolving
Credit Facility') among ACME Television, as borrower, each of its subsidiaries,
as guarantors, Canadian Imperial Bank of Commerce, New York Agency ('CIBC'), and
the several lenders named therein, the proceeds of which will be used to fund
future acquisitions and for working capital and general corporate purposes. As
of September 30, 1997, the Revolving Credit Facility bore interest of a rate of
8.6875%.
Capital Lease Facilities
ACME Television intends to enter into capital lease facilities aggregating
$20.0 million in availability (the 'Capital Lease Facilities'). The Capital
Lease Facilities will be used to finance substantially all of the expected
capital expenditures for the construction or upgrade of the Company's stations.
USE OF PROCEEDS
The Issuers will not receive any cash proceeds from the issuance of the
Exchange Notes. In consideration for issuing the Exchange Notes as contemplated
in this Prospectus, the Issuers will receive in exchange Original Notes in like
principal amount, which will be cancelled and as such will not result in any
increase in indebtedness of the Company.
24
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of September 30, 1997:
<TABLE>
<S> <C>
Cash...................................................................................... $ 27,211
---------
---------
Revolving Credit Facility(1).............................................................. $ 3,500
Capital lease obligations outstanding (including current portion)(1)...................... 706
Television Notes(1)....................................................................... 127,370
Original Notes (2)........................................................................ 35,650
---------
Total debt.............................................................................. 167,226
Members' capital.......................................................................... 48,125
---------
Total capitalization.................................................................... $215,351
---------
---------
</TABLE>
- ------------------
(1) These obligations are direct obligations of the Company's subsidiaries and,
as such, constitute claims against such subsidiaries prior to the Company's
equity interest therein.
(2) Represents the initial Accreted Value of $40.0 million of the Notes less the
allocation of $4.35 million to the Membership Units.
25
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statements (the
'Pro Forma Financial Statements') are based on the financial statements of the
Company, Koplar Communications and Channel 32, Incorporated ('Channel 32')
included elsewhere in this Prospectus, adjusted to give effect to the Knoxville
Acquisition and the Pending Acquisitions. The unaudited pro forma consolidated
statements of operations give effect to the Transactions as if they had occurred
as of the beginning of the periods shown, and the unaudited pro forma
consolidated balance sheet gives effect to the Knoxville Acquisition and the
Pending Acquisitions as if they had occurred as of September 30, 1997. The pro
forma data are based upon available information and certain assumptions that
management believes are reasonable. The Pro Forma Financial Statements do not
purport to represent what the Company's result of operations or financial
condition would actually have been had the transactions occurred on such dates
or to project the Company's results of operations or financial condition for any
future period or date. The Pro Forma Financial Statements should be read in
conjunction with the financial statements of the Company and the historical
financial statements of Koplar Communications and Channel 32, the prior owners
of Station KPLR and Station KWBP, respectively, included elsewhere in this
Prospectus, and 'Management's Discussion and Analysis of Results of Operations
and Financial Condition.'
The Knoxville Acquisition and the Pending Acquisitions will be accounted
for using the purchase method of accounting. After each acquisition, the total
consideration of such acquisition will be allocated to the tangible and
intangible assets acquired and liabilities assumed based upon their respective
estimated fair values. The allocation of the aggregate total consideration
included in the Pro Forma Financial Statements is preliminary as the Company
believes further refinement is impractical at this time. However, the Company
does not expect that the final allocation of the total consideration will
materially differ from the preliminary allocations set forth herein.
26
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
----------------------------- PRO FORMA PRO FORMA
ACME KOPLAR ----------- -----------
INTERMEDIATE COMMUNICATIONS ADJUSTMENTS THE COMPANY
------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents.............................. $ 27,211 $ -- $ (21,210)(1) $ 6,001
Accounts receivable, net............................... 405 7,281 -- 7,686
Due from parent........................................ 14,830 -- -- 14,830
Current portion of programming rights.................. 581 4,889 -- 5,470
Prepaid expenses and other current assets.............. 201 513 -- 714
------------ -------------- ----------- -----------
Total current assets......................... 43,228 12,683 (21,210) 34,701
Property and equipment, net............................ 4,177 2,394 -- 6,571
Programming rights, net of current portion............. 590 4,097 -- 4,687
Deposit................................................ 143,016 -- (143,000)(1) 16
Other assets........................................... 13,315 3,148 (3,000)(1) 10,880
(2,583)(2)
Broadcast licenses and other intangibles............... 22,570 -- 171,905(1) 194,475
------------ -------------- ----------- -----------
Total assets................................. $226,896 $ 22,322 $ 2,112 $ 251,330
------------ -------------- ----------- -----------
------------ -------------- ----------- -----------
LIABILITIES AND MEMBERS' CAPITAL/SHAREHOLDERS' DEFICIT
Accounts payable and accrued liabilities............... $ 10,072 $ 9,289 $ 1,000(1) $ 14,653
(5,708)(2)
Current portion of programming rights payable.......... 876 5,089 -- 5,965
Current portion of note payable-programmer............. -- 400 (400)(2) --
Note payable to bank................................... 3,500 -- -- 3,500
Current portion of capital lease obligations........... 284 -- -- 284
------------ -------------- ----------- -----------
Total current liabilities.................... 14,732 14,778 (5,108) 24,402
Programming rights payable, net of current portion..... 597 4,542 -- 5,139
Obligations under lease, net of current portion........ 422 -- -- 422
Note payable-programmer................................ -- 3,455 (3,455)(2) --
Other long-term liabilities............................ -- 2,222 2,000(1) 4,222
Senior secured discount notes.......................... 35,650 -- -- 35,650
Senior discount notes.................................. 127,370 -- -- 127,370
Other long-term debt................................... -- 12,381 (12,381)(2) --
------------ -------------- ----------- -----------
Total liabilities............................ 178,771 37,378 (18,944) 197,205
Members' capital/shareholders' equity.................. 51,363 46 6,000(1) 57,363
(46)(3)
Accumulated deficit.................................... (3,238) (15,102) 15,102(3) (3,238)
------------ -------------- ----------- -----------
Total members' capital/shareholders'
deficit.................................... 48,125 (15,056) 21,056 54,125
------------ -------------- ----------- -----------
Liabilities and members' capital/shareholders'
deficit.............................................. $226,896 $ 22,322 $ 2,112 $ 251,330
------------ -------------- ----------- -----------
------------ -------------- ----------- -----------
</TABLE>
(See notes on the following page)
27
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(1) Reflects the allocation of the purchase prices for the Knoxville Acquisition
and the Pending Acquisitions as follows (dollars in thousands):
<TABLE>
<CAPTION>
KZAR AND ESTIMATED
KPLR WINT KAUO COSTS TOTAL
-------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Consideration:
Cash...................................... $ 0 $13,200 $ 8,010 $ 0 $ 21,210
Deposits.................................. 143,000 -- -- -- 143,000
ACME Parent Membership Units.............. -- -- 6,000 -- 6,000
Prepaid acquisition costs................. -- -- -- 3,000 3,000
Consulting payments under management
agreement ($1.0 million current and
$2.0 million long-term)................ 3,000 -- -- -- 3,000
-------- ------- -------- --------- --------
Total................................ 146,000 13,200 14,010 3,000 176,210
Less:
Fair value of net tangible assets
acquired............................... 4,305 -- -- -- 4,305
-------- ------- -------- --------- --------
Broadcast licenses........................ $141,695 $13,200 $14,010 $ 3,000 $171,905
-------- ------- -------- --------- --------
-------- ------- -------- --------- --------
</TABLE>
(2) Adjustments to record the estimated fair value of net tangible assets
acquired in the St. Louis Acquisition as follows (dollars in thousands):
<TABLE>
<S> <C>
Book value of net assets acquired........................................ $(15,056)
Other assets not acquired................................................ (2,583)
Note payable-programmer not assumed:
Current portion........................................................ 400
Long-term portion...................................................... 3,455
Other long-term note not assumed......................................... 12,381
Accrued liabilities:
Accrued liabilities not assumed........................................ 5,900
Working capital purchase price adjustment.............................. (192)
--------
Fair value of net assets acquired........................................ $ 4,305
--------
--------
</TABLE>
(3) Elimination of Station KPLR historical shareholders' deficit.
28
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(1) Reflects the following pro forma financing transactions: (i) contribution of
$21.7 million by ACME Parent (net of $800,000 of estimated fees and
expenses) in exchange for membership units, (ii) issuance of $40.0 million
gross proceeds of Units (excluding estimated issuance costs of $1.8 million)
consisting of Notes and 8% membership interest in the Company (approximately
$35.7 million and $4.3 million of the gross proceeds were allocated to the
Notes and Membership Units, respectively), (iii) issuance of $127.4 million
gross proceeds of the Television Notes (before deducting estimated offering
expenses of $5.8 million), (iv) purchase of $15.8 million of property and
equipment in exchange for $2.2 million capital lease obligations under the
Capital Lease Facilities and $13.6 million of cash and (v) payment of
$600,000 of bank fees and $100,000 of fees related to the capital leases.
(2) Reflects the allocation of the purchase prices for the Knoxville Acquisition
and the Pending Acquisitions as follows (dollars in thousands):
<TABLE>
<CAPTION>
KZAR AND ESTIMATED
KLPR WBXX KAUO COSTS TOTAL
-------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Consideration:
Cash........................................ $143,000 $13,200 $ 8,010 $ 3,000 $167,210
ACME Parent Membership Units................ -- -- 6,000 -- 6,000
Consulting payments under management
agreement ($1.0 million current and $2.0
million long-term)........................ 3,000 -- -- -- 3,000
-------- ------- -------- --------- --------
Total..................................... 146,000 13,200 14,010 3,000 $176,210
Less:
Fair value of net tangible assets
acquired.................................. 4,787 0 0 0 0
Broadcast licenses.......................... 141,213 13,200 14,010 3,000 171,423
-------- ------- -------- --------- --------
Balance................................... $ 0 $ 0 $ 0 $ 0 $ 0
-------- ------- -------- --------- --------
-------- ------- -------- --------- --------
</TABLE>
(3) Adjustments to record the estimated fair value of net tangible assets
acquired in the St. Louis Acquisition as follows (dollars in thousands):
<TABLE>
<S> <C>
Book value of net assets acquired.................................................... $(11,231)
Other assets not acquired............................................................ (1,512)
Note payable-programmer not assumed:
Current portion.................................................................... 400
Long-term portion.................................................................. 3,555
Other long-term note not assumed..................................................... 13,388
Adjustment to deferred income taxes.................................................. 1,940
Working capital purchase price adjustment............................................ (1,753)
--------
Fair value of net assets acquired.................................................... $ 4,787
--------
--------
</TABLE>
(4) Elimination of Station KPLR historical shareholders' deficit.
(5) Represents the net assets contributed to the Company by ACME Parent on
August 15, 1997 which the Company immediately contributed to ACME Television
and its subsidiaries.
29
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL(1)
------------------------- PRO FORMA PRO FORMA
CHANNEL KOPLAR ----------- -----------
32 COMMUNICATIONS ADJUSTMENTS THE COMPANY
------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues................................................................ $ 3,202 $ 27,260 $ -- $ 30,462
Operating expenses:
Programming........................................................... 3,060 11,365 -- 14,425
Selling, general and administrative................................... 1,497 11,318 (2,700)(4) 10,115
Depreciation and amortization......................................... 557 702 9,705(5) 10,964
------- -------------- ----------- -----------
Total operating expenses........................................... 5,114 23,385 7,005 35,504
------- -------------- ----------- -----------
Operating income (loss)................................................. (1,912) 3,875 (7,005) (5,042)
Interest expense........................................................ (3,330) (2,155) (20,712)(2) (20,712)
5,485(3)
Other, net.............................................................. (491) (699) 443(6) (747)
------- -------------- ----------- -----------
Income (loss) before income taxes and extraordinary item................ (5,733) 1,021 (21,789) (26,501)
Income tax (expense) benefit............................................ -- (462) 462(7) --
------- -------------- ----------- -----------
Net income (loss) before extraordinary item............................. $(5,733) $ 559 $ (21,327) $ (26,501)
------- -------------- ----------- -----------
------- -------------- ----------- -----------
OTHER DATA:
EBITDA(8)(9).......................................................... $ (575) $ 5,922 $ 2,700(4) $ 8,047
------- -------------- ----------- -----------
------- -------------- ----------- -----------
</TABLE>
- ------------------
(1) The Company was not formed as of December 31, 1996. Accordingly, historical
results have not been presented. The unaudited consolidated statement of
operations for Station KWBP includes the six months ended June 30, 1996 and
the six months ended December 31, 1996.
(2) Reflects (i) interest expense (10.875% per annum) and amortization of
issuance costs (estimated to be $5.8 million amortized over 7 years) on the
Television Notes, (ii) interest expense (12.0% per annum) and amortization
of discount and issuance costs (estimated to be $5.9 million including $4.3
million of the estimated gross proceeds from the sale of Units allocated to
Membership Units over 8 years) on the Notes, and (iii) issuance costs on the
capital lease obligations and bank fees (estimated to be $700,000 amortized
over 5 years).
(3) Reflects adjustment to eliminate historical interest expense.
(4) Reflects the (i) decrease in payroll and payroll related costs of selling,
general and administrative personnel due to termination of employees or
reduction in levels of compensation and (ii) elimination of certain
marketing programs as follows (dollars in thousands):
<TABLE>
<S> <C>
Adjustments to selling, general and administrative expenses:
Reductions of senior executive compensation....................................................... $ 1,750
Reductions of sales force......................................................................... 300
Discontinued marketing programs................................................................... 400
Other reductions.................................................................................. 250
---------
$ 2,700
---------
---------
</TABLE>
(5) Reflects the amortization of $194.1 million of broadcast licenses, relating
to the Acquisitions, over a 20 year period.
(6) Reflects the adjustment to eliminate the reserve recorded by Koplar
Communications on a note receivable from a related party. This note
receivable will not be acquired by the Company.
(7) Reflects adjustment to income tax expense.
(8) EBITDA is defined as operating income (loss), plus depreciation,
amortization and other noncash charges, including amortization of
programming rights, minus programming payments. Although EBITDA is not
calculated in accordance with GAAP, it is widely used as a measure of a
Company's ability to service and/or incur debt. EBITDA should not be
considered in isolation from or as a substitute for net income, cash flows
from operations and other income or cash flow data prepared in accordance
with GAAP, or as a measure of profitability or liquidity.
(9) Pro Forma EBITDA has not been adjusted to reflect the elimination of
payments of certain program obligations relating to programs where Station
KPLR's rights have expired or which are not currently being utilized by
Station KPLR or to reflect the impact of other potential adjustments to the
value of programming rights.
30
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------ PRO FORMA PRO FORMA
ACME KOPLAR ----------- -----------
INTERMEDIATE COMMUNICATIONS ADJUSTMENTS THE COMPANY
------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues.............................................. $ 2,155 $ 21,347 $ -- $ 23,502
Operating expenses:
Programming......................................... 1,096 8,458 -- 9,554
Selling, general and administrative................. 3,173 13,722 (8,851)(3) 8,044
Depreciation and amortization....................... 551 490 6,965(4) 8,006
------------ -------------- ----------- -----------
Total operating expenses....................... 4,820 22,670 (1,886) 25,604
------------ -------------- ----------- -----------
Operating income (loss)............................... (2,665) (1,323) 1,886 (2,102)
Interest expense, net................................. (573) (1,117) (15,065)(1) (15,065)
1,690(2)
Other, net............................................ -- (1,313) 985(5) (328)
------------ -------------- ----------- -----------
Income (loss) before income taxes................... (3,238) (3,753) (10,504) (17,495)
Income taxes (expense) benefit........................ 1,031 (1,031)(6)
------------ -------------- ----------- -----------
Net income (loss)..................................... $ (3,238) $ (2,722) $ (11,535) $ (17,495)
------------ -------------- ----------- -----------
------------ -------------- ----------- -----------
OTHER DATA:
EBITDA(7)(8)........................................ $ (2,225) $ (1,346) $ 8,851(3) $ 5,280
------------ -------------- ----------- -----------
------------ -------------- ----------- -----------
</TABLE>
- ------------------
(1) Reflects (i) interest expense (10.875% per annum) and amortization of
issuance costs (estimated to be $5.8 million amortized over 7 years) on the
Television Notes, (ii) interest expense (12.0% per annum) and amortization
of discount and issuance costs (estimated to be $5.9 million including $4.3
million of the estimated gross proceeds from the sale of Units allocated to
Membership Units over 8 years) on the Notes, and (iii) issuance costs on the
capital lease obligations and bank fees (estimated to be $700,000 amortized
over 5 years).
(2) Reflects adjustment to eliminate historical interest expense.
(3) Entry records (i) decrease in payroll and payroll related costs of selling,
general and administrative personnel due to termination of employees or
reductions in levels of compensation and (ii) elimination of certain
marketing programs as follows (dollars in thousands):
<TABLE>
<S> <C>
Adjustments to selling, general and administrative expenses:
Reductions of senior executive compensation.......................................... $7,138
Reductions of sales force............................................................ 1225
Discontinued marketing programs...................................................... 300
Other reductions..................................................................... 188
-------
$8,851
-------
-------
</TABLE>
(4) Reflects amortization of broadcast licenses as follows: (i) $22.7 million of
Station KWBP broadcast licenses rights for the period from January 1, 1997
to June 16, 1997 (acquisition date) using a 20 year estimated life, and (ii)
$171.9 million broadcast licenses relating to the Knoxville Acquisition and
the Pending Acquisitions, amortized over an estimated life of 20 years.
(5) Reflects adjustment to eliminate the reserve recorded by Koplar
Communications on a note receivable from a related party. The note
receivable from related party will not be assumed by the Company.
(6) Reflects adjustment to income tax expense.
(7) EBITDA is defined as operating income (loss), plus depreciation,
amortization and other noncash charges, including amortization of
programming rights, minus programming payments. Although EBITDA is not
calculated in accordance with GAAP, it is widely used as a measure of a
company's ability to service and/or incur debt. EBITDA should not be
considered in isolation from or as a substitute for net income, cash flows
from operations and other income or cash flow data prepared in accordance
with GAAP, or as a measure of profitability or liquidity.
(8) Pro forma EBITDA has not been adjusted to reflect the elimination of
payments of certain program obligations on programs where Station KPLR's
rights have expired or which are not currently being utilized by Station
KPLR or to reflect the impact of other potential adjustment to the value of
programming rights.
31
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables contain selected historical consolidated financial
information with respect to ACME Intermediate, Koplar Communications and Channel
32. The selected historical financial data of ACME Intermediate set forth below
as of September 30, 1997 and for the nine months ended September 30, 1997 have
been derived from the audited financial statements of ACME Intermediate included
elsewhere in this Offering Memorandum which have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. The selected historical
financial data set forth below with respect to Koplar Communications as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 are derived from the audited financial statements included
elsewhere herein. The selected financial data set forth below for Koplar
Communications as of December 31, 1994, 1993 and 1992 and for each of the two
years in the period ended December 31, 1993 are derived from financial
statements not included elsewhere herein. The selected historical financial data
of Channel 32, for the period from December 16, 1993 (inception) to June 30,
1994, for each of the years in the two-year period ended June 30, 1996 are
derived from the financial statements of Channel 32, included elsewhere in this
Offering Memorandum, which have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The selected historical financial data
of Channel 32 for the period from July 1, 1996 to June 17, 1997 are derived from
the unaudited financial statements of Channel 32, included elsewhere herein. The
selected historical financial data should be read in conjunction with
'Management's Discussion and Analysis of Results of Operations and Financial
Condition' and the financial statements of ACME Television, Koplar
Communications, and Channel 32 included elsewhere in this Offering Memorandum.
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACME INTERMEDIATE NINE MONTHS ENDED
SEPTEMBER 30,
STATEMENT OF OPERATIONS DATA: 1997
-----------------
<S> <C>
Revenues....................................................................................... $ 2,155
Operating expenses:
Programming.................................................................................. 1,096
Selling, general and administrative.......................................................... 3,173
Depreciation and amortization................................................................ 551
--------
Total operating expenses................................................................ 4,820
--------
Operating loss.......................................................................... (2,665)
--------
Interest expense............................................................................... (573)
--------
Loss before income taxes................................................................ (3,238)
Income taxes................................................................................... --
--------
Net loss................................................................................ $(3,238)
--------
--------
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
BALANCE SHEET DATA: 1997
-------------
<S> <C>
Cash and cash equivalents.......................................................................... $ 27,211
Working capital.................................................................................... 28,496
Total assets....................................................................................... 226,896
Total debt(1)...................................................................................... 167,226
Members' capital................................................................................... 48,125
</TABLE>
- ------------------
(1) Total debt includes the current portion of capital lease obligations and
excludes programming rights payable.
32
<PAGE>
KOPLAR COMMUNICATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues(1).............................. $39,128 $41,500 $33,146 $27,528 $27,260 $19,751 $21,347
------- ------- ------- ------- ------- -------- ---------
Operating expenses:
Programming............................ 22,532 19,592 13,581 9,503 11,365 9,413 8,458
Selling, general and administrative.... 17,587 17,614 12,113 11,632 11,318 7,914 13,722
Depreciation and amortization.......... 1,321 1,367 1,085 791 702 518 490
------- ------- ------- ------- ------- -------- ---------
Total operating expenses............ 41,440 38,573 26,779 21,926 23,385 17,845 22,670
------- ------- ------- ------- ------- -------- ---------
Operating income (loss)............. (2,312) 2,927 6,367 5,602 3,875 1,906 (1,323)
------- ------- ------- ------- ------- -------- ---------
Other income (expense):
Interest expense....................... (6,462) (9,402) (5,777) (2,842) (2,155) (1,522 ) (1,117)
Other, net............................. (472) (492) (2,059) (321) (699) (489 ) (1,313)
Other non-recurring gains(2)........... -- -- 15,036 -- -- -- --
------- ------- ------- ------- ------- -------- ---------
Other income (expense).............. (6,934) (9,894) 7,200 (3,163) (2,854) (2,011 ) (2,430)
------- ------- ------- ------- ------- -------- ---------
Income (loss) before income taxes,
discontinued operations and
extraordinary items............... (9,246) (6,967) 13,567 2,439 1,021 (105 ) (3,753)
Income tax provision (benefit)........... -- -- 3,272 523 462 425 (1,031)
------- ------- ------- ------- ------- -------- ---------
Income (loss) before discontinued
operations and extraordinary
items............................. (9,246) (6,967) 10,295 1,916 559 (530 ) (2,722)
Discontinued operations(3)............... -- -- 1,262 -- --
------- ------- ------- ------- ------- -------- ---------
Income (loss) before extraordinary
items............................. (9,246) (6,967) 11,557 1,916 559 (530 ) (2,722)
Extraordinary items, net of income
taxes(4)............................... -- -- 47,134 (1,359) -- --
------- ------- ------- ------- ------- -------- ---------
Net income (loss)...................... $(9,246) $(6,967) $58,691 $ 1,916 $ (800) $ (530 ) $(2,722)
------- ------- ------- ------- ------- -------- ---------
------- ------- ------- ------- ------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 1,464 $ 1,902 $ 80 $ 244 $ 23 $ --
Working capital................................ (83,628) (88,216) 115 (1,709) 3,799 (2,095)
Total assets................................... 49,898 46,538 29,443 29,559 23,313 22,322
Long-term debt and obligations under capital
leases(5).................................... 36,089 35,422 15,561 15,282 13,650 12,381
Stockholders' equity (deficit)................. (60,679) (67,646) (12,339) (11,534) (12,334) (15,056)
</TABLE>
- ------------------
(1) Revenues include approximately $14.3 million, $15.4 million and $7.1 million
for the years ended December 31, 1992, 1993 and 1994, respectively, relating
to the operations of Station KRBK which was sold on June 29, 1994.
(2) Other non-recurring gains are comprised of a gain of $11.4 million on the
sale of a broadcasting facility and $3.6 million realization under a tax
sharing agreement.
(3) Discontinued operations are comprised of income from the operations of
divested subsidiaries.
(4) Extraordinary items for the year ended December 31, 1994 are comprised of:
(i) a $21.5 million gain on forgiveness of programming obligations, (ii) a
$24.8 million gain on forgiveness of senior debt, and (iii) an $800,000 gain
on forgiveness of other obligations. The extraordinary item for the year
ended December 31, 1996 is comprised of $1.4 million loss on early
extinguishment of debt.
(5) Includes the principal balances of the Company's senior notes, revolving
loan agreement and capital lease agreements.
33
<PAGE>
CHANNEL 32
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED YEAR ENDED PERIOD FROM
DECEMBER 31, 1993 JUNE 30, JUNE 30, JULY 1, 1996
(INCEPTION) 1995 1996 TO JUNE 17,
TO JUNE 30, ------------- ------------- 1997
1994 --------------
----------------- (PREDECESSOR) (SUCCESSOR)
(SUCCESSOR)
(PREDECESSOR) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Revenues.......................................... $ -- $ 288 $ 2,729 $ 1,306
Operating expenses:
Programming..................................... 6 623 3,274 1,304
Selling, general and administrative............. 11 273 1,462 1,061
Depreciation and amortization..................... -- 235 542 346
----- ------------- ------------- --------------
Total operating expenses..................... 17 1,131 5,278 2,711
----- ------------- ------------- --------------
Operating income............................. (17) (843) (2,549) (1,405)
----- ------------- ------------- --------------
Other income (expense):
Interest expense.................................. (5) (200) (3,252) (2,222)
Interest income................................... -- -- 45 --
Write-off due to parent........................... -- -- (189) --
Other, net........................................ -- -- (70) (10)
----- ------------- ------------- --------------
Other income (expense)....................... (5) (200) (3,466) (2,232)
----- ------------- ------------- --------------
Loss before income taxes..................... (22) (1,043) (6,015) (3,637)
Income taxes...................................... -- -- -- --
----- ------------- ------------- --------------
Net loss..................................... $ (22) $(1,043) $(6,015) $ (3,637)
----- ------------- ------------- --------------
----- ------------- ------------- --------------
</TABLE>
- ------------------
(1) Effective July 1, 1995, Peregrine Communications, Ltd. acquired Channel 32,
Incorporated. As a result of the acquisition, the financial information for
the periods after the acquisition ('Successor') is presented on a different
cost basis than for periods prior to the acquisition ('Predecessor') and,
therefore, is not comparable.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The following discussion relating to Koplar Communications is based upon
the historical financial statements included elsewhere herein of Koplar
Communications for the years ended December 31, 1994, 1995 and 1996 and for the
nine months ended September 30, 1996 and 1997. The following discussion relating
to Channel 32 is based upon the historical financial statements of Channel 32
for the period from December 16, 1993 (inception) to June 30, 1994, the years
ended June 30, 1995 and 1996 and the period from July 1, 1996 to June 17, 1997.
The results of operations of ACME Television for the nine months ended September
30, 1997 include the operations of Station KWBP, which ACME Parent acquired on
June 17, 1997 and operated by it pursuant to an LMA from January 1, 1997 to the
date of acquisition.
The Company's revenues are primarily derived from the sale of broadcast
advertising time to national, regional and local advertisers and advertising
time exchanged for goods and services. All revenues are stated net of any agency
and national sales representative commissions. Revenues for Channel 32 include
the value associated with barter agreements in which broadcast time is exchanged
for programming rights. Revenue and expenses for Koplar Communications do not
include barter transactions.
The Company's station operating expenses consist of programming expenses;
marketing and selling costs, including commissions paid to the Company's sales
staff and ratings/research data costs; technical and similar operations costs;
and general and administrative expenses. Programming expenses typically include
amortization of long-term program rights.
The Company expects to have net losses primarily as the result of non-cash
charges attributable to the amortization of intangibles acquired and interest
expense incurred in connection with the purchase of each station.
EBITDA is defined as operating income (loss), plus depreciation,
amortization and other non-cash charges, including amortization of programming
rights, minus programming payments. Although EBITDA is not calculated in
accordance with GAAP, it is widely used as a measure of a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation from or
as a substitute for net income, cash flows from operations and other income or
cash flow data prepared in accordance with GAAP, or as a measure of
profitability or liquidity.
KOPLAR COMMUNICATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------- --------------------------------
STATEMENT OF OPERATIONS DATA: 1994 1995 1996 1996 1997
----- ----- ----- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenue............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Programming............................. 41.0 34.5 41.7 47.7 39.6
Selling, general and administrative..... 36.5 42.3 41.5 40.0 64.3
Depreciation and amortization........... 3.3 2.9 2.6 2.6 2.3
----- ----- ----- ------ ------
Operating income (loss)................. 19.2 20.9 14.2 9.7 (6.2)
Interest expense........................ 17.4 10.3 7.9 7.7 5.2
EBITDA.................................. 15.3 23.9 21.7 (0.4%) (6.3%)
</TABLE>
35
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Koplar Communications' net revenues for the nine months ended September 30,
1997 were $21.3 million as compared to $19.8 million for the nine months ended
September 30, 1996, representing a 8.1% increase. This increase was a result of
slightly higher total market revenues and improved Station KPLR ratings during
the 1997 period as compared to the corresponding prior period.
Koplar Communications' programming expenses for the nine months ended
September 30, 1997 were $8.5 million, as compared to $9.4 million for the
corresponding period of the prior year, representing a 10.0% decrease. This
decrease was primarily attributable to a non-recurring adjustment to the
carrying value of certain programming rights in the amount of $1.5 million
during the 1996 period. Amortization of programming rights was $3.6 million and
payments on programming obligations were $4.2 million for the nine months ended
September 30, 1997 compared to amortization of programming rights, including an
adjustment to the carrying value of programming rights, of $5.5 million and
payments of programming obligations of $4.1 million for the prior period.
Koplar Communications' selling, general & administrative expenses for the
nine months ended September 30, 1997 were $13.7 million as compared to $7.9
million for the corresponding period of the prior year, representing a 73.4%
increase. This increase related primarily to non-recurring senior executive
compensation relating to the transactions with ACME Television during 1997.
Depreciation and amortization for the nine months ended September 30, 1997
was $490,000, as compared to $518,000 for the corresponding period of the prior
year.
Interest expense for the nine months ended September 30, 1997 was $1.1
million as compared to $1.5 million for the corresponding period of the prior
year, representing a 27.0% decrease. This decrease was due to the July 1996
refinancing of Koplar Communications' bank debt (revolver and term loan) which
resulted in a reduction in the interest rate applicable to borrowings from
approximately 12% to prime plus 0.75% (9% at December 31, 1996).
Other, net expenses increased to $1.3 million for the nine months ended
September 30, 1997 from $489,000 for the nine months ended September 30, 1996.
This increase of $824,000 is due primarily to a $985,000 provision in 1997 to
reduce the carrying value of a note receivable from ISW, Inc., a company
affiliated with Koplar Communications' majority shareholder.
Income tax benefit for the nine months ended September 30, 1997 was $1.0
million and represented approximately 27.5% of pre-tax income compared to a tax
expense of $425,000 for the corresponding period of the prior year.
EBITDA for the nine months ended September 30, 1997 was ($1.3) million,
as compared to $73,000 for the corresponding period of the prior year.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Koplar Communications' net revenues for the year ended December 31, 1996
were $27.3 million as compared to $27.5 million for the year ended December 31,
1995, representing a 1.0% decrease. Station KPLR experienced a decrease in spot
advertising and other revenue of $900,000 offset by an increase of $700,000
attributable to advertising sales during broadcasts of St. Louis Cardinals
baseball.
Koplar Communications' programming expenses in 1996 were $11.4 million as
compared to $9.5 million during the prior year, representing a 19.6% increase.
This increase was primarily the result of a non-recurring adjustment in the
carrying value of certain programming rights in the amount of $1.5 million
during the 1996 period. Amortization of programming rights, including an
adjustment to the carrying value of programming rights, was $6.9 million and
payments on programming obligations were $5.5 million for the year ended
December 31, 1996 compared to amortization of programming rights of $5.4 million
and payments of programming obligations of $5.2 million for the prior year.
36
<PAGE>
Koplar Communications' selling, general & administrative expenses in 1996
were $11.3 million as compared to $11.6 million for the prior year, representing
a 2.7% decrease.
Depreciation and amortization in 1996 was $702,000 as compared to $791,000
for the prior year. This decrease was related to certain assets becoming fully
depreciated in early 1996.
Interest expense in 1996 was $2.2 million as compared to $2.8 million for
the prior year. This reduction in interest expense was primarily the result of
the refinancing of the Koplar Communications' bank debt at lower interest rates,
which occurred in July 1996.
Other, net expenses in 1996 were $699,000 as compared to $321,000 for the
prior year. This increase primarily relates to provisions in 1996 to reduce the
carrying value of a note receivable from an affiliated company.
Income tax expense in 1996 was $462,000, representing 45.2% of pre-tax
income as compared to $523,000 for 1995, which represented 21.4% of the period's
pre-tax income. The higher effective tax rate incurred in 1996 relates primarily
to the non-deductibility of certain travel and entertainment expenses. The lower
effective tax rate for 1995 relates to the reversal of valuation allowances
attributable to certain of Koplar Communications' deferred tax assets utilized
by it during the period.
As a result of the debt refinancing discussed above, unamortized deferred
financing costs were written off, resulting in a loss or early extinguishment of
debt of $1.4 million, net of taxes of $868,000.
EBITDA for the year ended December 31, 1996 was $5.9 million as compared to
$6.6 million for the corresponding period of the prior year, representing a
10.0% decrease. This decrease is mainly attributable to slight decreases in net
revenues and increases in programming payments during 1996 as compared to 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues in 1995 were $27.5 million compared to revenues in the prior year
of $33.1 million. This decrease in revenues of $5.6 million was primarily
related to the sale of Station KPLR's independent television Station KRBK in
Sacramento, California in June 1994. Station KRBK had contributed $7.1 million
of revenue during 1994. Net of the effects of the sale of Station KRBK, overall
revenue of Koplar Communications increased $1.5 million due primarily to an
increase in Koplar Communications' share of national spot revenue.
Programming expenses for Station KPLR were $9.5 million in 1995 as compared
to $13.6 million during 1994. This $4.1 million decrease primarily relates to
1994 programming expenses of $3.9 million at Station KRBK. Amortization of
programming rights was $5.4 million and payments on programming obligations were
$5.2 million for the year ended December 31, 1995 compared to amortization of
programming rights of $7.3 million and payments of programming obligations of
$9.7 million for the prior year.
Selling, general and administrative expenses during 1995 were $11.6 million
compared to $12.1 million during 1994. This $481,000 decrease primarily relates
to 1994 selling, general and administrative expenses at Station KRBK of $2.6
million offset by approximately $2.1 million in increased expenses at Koplar
Communications relating to expansions in general staffing levels and increased
promotional spending.
Depreciation and amortization expenses were $791,000 in 1995 as compared to
$1.1 million in 1994. This decrease of approximately $400,000 was attributable
to the sale of Station KRBK in June 1994.
Interest expense decreased to $2.8 million in 1995 from $5.8 million in
1994. This reduction of $3.0 million was due to lower borrowings during the 1995
period resulting from the sale of Station KRBK in June 1994, and restructuring
of Koplar Communications' debt obligations during 1994.
Other, net expenses were $321,000 in 1995 as compared to $2.1 million in
1994. This decrease of $1.8 million relates primarily to non-recurring legal,
consulting and other expenses incurred in 1994 in connection with Koplar
Communications' restructuring.
Koplar Communications' tax expense during 1995 was $523,000, representing
21.4% of pre-tax income as compared to an expense of $3.3 million, representing
24.1% of pre-tax income in 1994.
37
<PAGE>
During 1994, Koplar Communications recorded several non-recurring
transactions in connection with Koplar Communications' restructuring including
the gain on the sale of Station KRBK ($11.4 million), the realization of amounts
due under a tax sharing agreement ($3.6 million) and the forgiveness of various
debt, programming and other obligations ($47.1 million, in the aggregate). In
addition, the Company recorded approximately $1.3 million of income from the
operations of Koplar Properties, Inc. and World Events Productions, Ltd. which
were discontinued during 1994.
Koplar Communications' EBITDA was $6.6 million in 1995 as compared to $5.1
million during 1994. This increase of $1.5 million relates primarily to losses
sustained by Station KRBK which was sold in June 1994.
CHANNEL 32
PERIOD FROM JULY 1, 1996 TO JUNE 17, 1997 COMPARED TO THE YEAR ENDED JUNE 30,
1996
Net revenues for the period from July 1, 1996 to June 17, 1997 were $1.3
million, as compared to $2.7 million for year ended June 30, 1996 which
represented a decrease of 51.9%. Channel 32 entered into a LMA with the Company
effective January 1, 1997. Accordingly, there were no significant revenues
subsequent to December 31, 1996.
Programming and production expenses for the period from July 1, 1996 to
June 17, 1997 were $1.3 million, as compared to $3.3 million for the year ended
June 30, 1996, representing a decrease of 60.6%. The decrease in programming
expenses relate primarily to the LMA effective January 1, 1997 and a write-off
of impaired program rights amounting to approximately $780,000 in the prior
period.
Selling, general and administrative expenses for the period from July 1,
1996 to June 17, 1997 were $1.1 million as compared to $1.5 million for the year
ended June 30, 1996, representing a 26.7% decrease. The decrease relating to the
LMA was partially offset by an increase in staffing. In addition, there were
certain outside consulting expenses during the 1996 period, which were not
incurred during the 1997 period.
Depreciation and amortization for the period from July 1, 1996 to June 17,
1997 was $346,000, as compared to $542,000 for the year ended June 30, 1996,
representing a decrease of 36.2%. This resulted primarily from the acceleration
of depreciation and amortization on certain property and equipment in the prior
year.
Interest expense for the period from July 1, 1996 to June 17, 1997 was $2.2
million, as compared to $3.3 million for the year ended June 30, 1996. The
decrease was primarily attributable to the amortization of a significant portion
of the $3.0 million of interest due on the original due date of one of Channel
32's notes payable during the nine months ended March 31, 1996, partially offset
by amortization of extension fees in the 1997 period.
There was no interest income during the period from July 1, 1996 to June
17, 1997 compared to $29,000 for the year ended June 30, 1996.
During the year ended June 30, 1996, approximately $189,000 due from
Channel 32's parent was written off.
Other expenses, net for the period from July 1, 1996 to June 17, 1997 were
$10,000, as compared to $70,000 for the year ended June 30, 1996. This decrease
was primarily related to the loss on sale or disposal of certain equipment of
approximately $55,000 during the 1996 period.
EBITDA for the period from July 1, 1996 to June 17, 1997 was ($1,059,000)
as compared to ($2,007,000) for the year ended June 30, 1996.
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
Effective July 1, 1995, Peregrine Communications, Ltd acquired Channel 32.
As a result of this acquisition, the financial information for the periods after
the acquisition ('Successor') is presented on a different cost basis than for
periods prior to the acquisition ('Predecessor') and, therefore, may not be
comparable.
38
<PAGE>
Net revenues for the year ended June 30, 1996 ('fiscal 1996') were $2.7
million, as compared to $288,000 for the year ended June 30, 1995 ('fiscal
1995') in 1995. Channel 32 began broadcasting in January 1995 as an affiliate of
The WB Network. Accordingly, the revenues for fiscal 1995 include only
approximately five months of operating results in a start up period compared to
a full year for fiscal 1996.
Programming and production expenses for fiscal 1996 were $3.3 million, as
compared to $623,000 for fiscal 1995. This increase reflects a write-off of
impaired programming of approximately $780,000 and a full year impact of
increased costs relating to improved quality of programming in fiscal 1996.
Selling, general and administrative expenses for fiscal 1996 were $1.5
million, as compared to $273,000 for fiscal 1995. This increase resulted from an
increase in activity associated with the start-up of the station's broadcasting
activities.
Depreciation and amortization expenses for fiscal 1996 were $542,000, as
compared to $235,000 for fiscal 1995. The increase relates to the amortization
of intangible assets resulting from Channel 32's acquisition by Peregrine
Communications, Ltd. and a full year's depreciation and amortization of property
and equipment primarily relating to broadcasting activities.
Interest expense for fiscal 1996 was $3.3 million, as compared to $200,000
for fiscal 1995. Channel 32 issued a note payable in November 1995. Accordingly,
this note was outstanding for nearly eight months during fiscal 1996. In
addition, a significant portion of the $3.0 million additional interest payment
relating to the debt agreement was accrued during fiscal 1996.
Interest income was $45,000 for fiscal 1996 and there was no interest
income for fiscal 1995.
During fiscal 1996, approximately $189,000 due from Station KWBP's parent
was written off.
Other expenses, net for fiscal 1996 were $70,000 and there were no such
expenses in fiscal 1995. This increase relates primarily to the loss of sale or
disposal of certain equipment amounting to approximately $55,000.
EBITDA for fiscal 1996 was ($1.2 million) as compared to ($608,000) for
fiscal 1995.
YEAR ENDED JUNE 30, 1995 COMPARED TO THE PERIOD FROM DECEMBER 16, 1993
(INCEPTION) TO JUNE 30, 1994
Channel 32 began broadcasting in January 1995. Accordingly, the twelve
months ended June 30, 1995 include only five full months of broadcast
operations. For the period from Channel 32's inception (December 1993) through
June 30, 1994, there were only minimal organizational and start up costs.
Accordingly, there is no meaningful comparison of the results of operations
between the two periods.
RESULTS OF OPERATIONS--ACME INTERMEDIATE
During the nine months ended September 30, 1997, the Company generated $2.1
million in revenues, primarily relating to revenues generated pursuant to the
local marketing agreement to operate Station KWBP and revenues generated
subsequent to the acquisition on June 17, 1997.
Programming expenses of $1.1 million and selling, general and
administrative expenses of $3.2 million primarily related to ACME Parent's LMA
with respect to Station KWBP, expenses incurred subsequent to the acquisition on
June 17, 1997 and to modest start-up costs for Station WBXX. Selling, general
and administrative expenses also included corporate overhead allocated from ACME
Parent to ACME Television.
Depreciation and amortization expenses of $551,000 relate primarily to the
depreciation and amortization of fixed assets and amortization of broadcasting
licenses subsequent to the acquisition of Station KWBP on June 17, 1997.
Interest expense of $573,000 relates primarily to interest payments assumed
in conjunction with the LMA relating to Station KWBP and also includes interest
on capital leases and on bank credit facilities.
39
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1997 the Company received gross proceeds of $40.0 million
from the sale of 71,634 Units. ACME Television, LLC also received gross proceeds
from the Offering aggregating $127.4 million on September 30, 1997, and
concurrently placed $143 million in escrow in connection with the St. Louis
Acquisition. As of September 30, 1997, the Company's cash on hand approximated
$27.2 million.
The Company's primary sources of liquidity in addition to its current cash
on hand will be available borrowings under the Revolving Credit Facility and the
Capital Lease Facilities, which are expected to be utilized to fund the Pending
Acquisitions, fund construction and upgrades to the stations acquired and
provide working capital.
The Company is highly leveraged. As of September 30, 1997, the Company has
indebtedness of $167.2 million (including the current portion of capital lease
obligations, excluding programming rights payable). The ability of the Company
to service its indebtedness will depend upon future operating performance, which
is subject to the success of the Company's business strategy, prevailing
economic conditions, regulatory matters, levels of interest rates and financial,
business and other factors, many of which are beyond the Company's control. See
'Risk Factors--Leverage and Debt Service; Refinancing Required,' '--Limitation
on Access to Cash Flow of Subsidiaries; Holding Company Structure.'
The Revolving Credit Facility will provide for a five year, senior secured
revolving credit facility with available borrowings (subject to certain
borrowing conditions) of $40.0 million. The Revolving Credit Facility is
intended to be used for general corporate purposes and to fund future
acquisitions. Borrowings under the Revolving Credit Facility are subject to,
among other things, maintenance of minimum operating cash flow, a ratio of
EBITDA to cash interest expense and a maximum amount of senior debt to EBITDA
and total debt to EBITDA. See 'Description of Indebtedness--Revolving Credit
Facility.'
The Intermediate Notes were issued on September 30, 1997 pursuant to an
indenture between ACME Intermediate and Wilmington Trust Company, which contains
certain restrictions on the ability of the Company and its subsidiaries, as
direct and indirect subsidiaries of ACME Intermediate, to take certain actions
or engage in certain types of transactions. The net proceeds of the Intermediate
Notes were used to fund the Intermediate Equity Contribution.
The Company believes that it has adequate resources to complete the Pending
Acquisitions, meet its working capital, maintenance and capital expenditure and
debt service obligations for the foreseeable future. The Company believes that
working capital of the Offering, together with available borrowings under the
Revolving Credit Facility and the Capital Lease Facilities, net proceeds of the
Parent Equity Contribution and the Intermediate Equity Contribution and future
financings, gives and will continue to give the Company the ability to fund
acquisitions and other capital requirements in the future. However, there can be
no assurance that the future cash flows of the Company will be sufficient to
meet all of the Company's obligations and commitments. See 'Risk
Factors--Leverage and Debt Service; Refinancing Required.'
The Company's ability to incur additional indebtedness is limited under the
terms of the Indenture, the Revolving Credit Facility, the LLC Agreement, the
Investment Agreement and the indenture relating to the Intermediate Notes. These
limitations take the form of consent requirements and/or certain leverage ratios
and are dependent upon certain measures of operating profitability. In addition,
under the terms of the Revolving Credit Facility, the LLC Agreement and the
Investment Agreement, capital expenditures and acquisitions that do not meet
certain criteria will require the consent of certain parties to such agreements.
CAPITAL EXPENDITURES
The Company expects to spend in the aggregate $18.4 million over the next
two years, of which $15.8 million would be used to fund estimated construction
and upgrade costs at the Company's stations, and $2.6 million would be used as
maintenance capital expenditures. See 'The Transactions--Acquisitions.' The
Company believes that maintenance capital expenditures will be approximately
$1.3 million in each of the next
40
<PAGE>
several years. There can be no assurance that the Company's capital expenditure
plans will not change in the future.
OTHER
The Company's revenues vary throughout the year. As is typical in the
broadcast television industry, the Company's first quarter generally produces
the lowest revenues for the year, and the fourth quarter generally produces the
highest revenues for the year. The Company's operating results in any period may
be affected by the incurrence of advertising and promotion expenses that do not
necessarily produce commensurate revenues in the short-term until the impact of
such advertising and promotion is realized in future periods.
IMPACT OF INFLATION
The Company believes that inflation will not have a material impact on its
results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not believe that any of the recent accounting
pronouncements will have a material impact on the Company's financial
statements.
41
<PAGE>
BUSINESS
THE COMPANY
The Company owns all of the outstanding membership units of ACME Television
which was formed to own or operate broadcast television stations in growing
medium-sized markets ranked between 20 and 75. The Company intends to affiliate
each of its broadcast television stations with The WB Network. The Company owns,
or has entered into agreements to acquire or construct and operate, television
stations in five markets which broadcast in DMAs which cover in the aggregate
3.9% of the U.S. population.
The Company's strategy is to selectively acquire either underperforming
stations or construction permits for stations and operate its stations as
affiliates of The WB Network. The Company seeks to improve operating results,
maximize revenue and EBITDA and increase value through the following strategies:
Target Growing Medium-Sized Markets. The Company seeks to acquire and
construct stations in markets with estimated television advertising revenues of
$40 million to $225 million and where its stations can operate as one of five or
six commercial broadcasters. The Company believes that medium-sized markets are
generally less competitive than larger markets because of the limited number of
commercial broadcasters in medium-sized markets. As a result, the Company
believes that operating television stations in less competitive markets offers
greater opportunities to build and maintain audience share and generate
revenues. The Company targets markets with diversified economies and favorable
projections of population and television advertising revenue growth. The
Company's five stations will operate in markets with an aggregate projected
annual population growth rate through the year 2000 of 1.4%, compared to the
projected annual national population growth rate of 0.8%. The Company's five
stations will operate in markets with an aggregate projected annual television
advertising revenue growth rate through the year 2000 of 5.8% compared to the
projected annual national television advertising growth rate of 5.6%.
The WB Network Affiliation. The Company expects its stations to benefit
from their affiliation with The WB Network. The WB Network has shown continued
ratings growth since its inception. For example, the 24 stations in large and
medium-sized markets that became affiliates of The WB Network at its inception
have on average experienced a prime time household ratings increase of 63% from
May 1995 to May 1997 on nights with The WB Network programming. In addition,
these stations experienced an average prime time ratings increase of 53% among
18-34 year olds over the same period. Management believes that the increase in
popularity of The WB Network programming results in greater advertising revenues
and enhanced cash flow for network affiliates. The Company has entered into
network affiliation agreements for Station KWBP and Station WBXX, will assume
and extend an existing affiliation agreement for Station KPLR and has obtained
commitments from The WB Network for an affiliation agreement covering each of
its other stations. See 'Business--Affiliation Agreements.'
Selectively Purchase Syndicated Programming. The major production studios
currently supply syndicated programming sufficient to fill programming
requirements for seven broadcast stations in a market. The Company's stations
are one of five or six commercial broadcast stations in their respective
markets. The Company believes that the limited number of commercial broadcast
stations, combined with the ability to centrally purchase programming for five
stations, will allow the Company to acquire syndicated programming at attractive
prices. The Company's Portland and Knoxville stations have already obtained
broadcast rights for syndicated programming that will premiere during the next
three broadcast seasons at prices which the Company believes are attractive.
These programs include Friends, Full House, M*A*S*H, Star Trek: The Next
Generation and The Drew Carey Show.
Emphasis on Sales. The Company's management has hired, and intends to
continue to hire, station general managers with significant experience in
advertising sales who will be directly involved in station sales and marketing.
The Company believes that by centralizing administrative functions, each
station's general manager will be able to devote a greater effort to local sales
and marketing activities. In addition, the Company intends to establish a
commission-based compensation system for sales personnel that will include
significant incentives for the origination of new accounts in addition to
expanding current relationships.
42
<PAGE>
Creating a Strong Group Identity. The Company intends to establish a
highly professional on-air appearance and identity for each of its stations. The
Company's graphics, animation and music for station imaging will be created by a
centralized corporate graphics department and will target each station's
demographic audience. The Company intends to hire experienced personnel at the
corporate level for these and similar services that would not otherwise be
available at a cost-efficient rate to its stations on an individual basis.
Centralized Systems and Controls. Management plans to centralize the
Company's scheduling, purchasing, national sales and certain accounting
functions within the corporate office. The Company believes that this will
afford each of the station's general managers more time to focus on local sales
and marketing. Management believes that by centralizing purchasing, the Company
will be able to negotiate lower costs for equipment and services. For example,
the Company has solicited and received proposals for a group national sales
representative agreement at significantly lower rates than would have been
available to its stations on an individual station basis. In addition, the
Company has already purchased syndicated programming on a multiple station basis
and negotiated capital lease facilities for its stations as a group on terms it
considers attractive.
THE WB NETWORK
Overview. The WB Network was created by Time Warner, Tribune and Jamie
Kellner as a new television broadcast network. The WB Network was formed to
provide an alternative to the prime time and children's programming offered by
the other networks. The WB Network's focus is to provide quality programming to
teens, young adults and families with small children. The WB Network utilizes
(i) the strength of Time Warner, through its Warner Brothers division, as a
leading producer of prime time programming and Saturday morning cartoons, (ii)
the network distribution capabilities of the cable system holdings of Time
Warner and the television station holdings of Tribune, and (iii) the experience
of the members of The WB Network management team, many of whom worked with Mr.
Kellner during the launch of Fox in 1986.
Since the launch of the network on January 11, 1995, The WB Network has
increased its on-air programming from two hours of prime time programming one
night per week to nine hours of prime time programming four nights per week and
19 hours of children's programming announced for the 1997-1998 season. The WB
Network has announced plans to provide one additional evening of prime time
programming each season until every night is programmed. As of May 1997, it is
estimated that The WB Network programming is available to approximately 86% of
all television households in the United States.
The WB Network and its affiliates benefit significantly from the Warner
Brothers brand, which is among the most recognized company brands in the world.
Warner Brothers, which owns 66.5% of The WB Network, is a leading producer of
prime time network television shows. In addition to its popular prime time
programming, Warner Brothers is a leading producer of animated programming. Many
of Warner Brothers' animated programs feature popular Looney Toons characters
such as Bugs Bunny, Daffy Duck, Tazmanian Devil, Tweety Bird, Sylvester, Road
Runner and Wile E. Coyote. More recently, Warner Brothers has produced such
shows as Batman: The Animated Series, Animaniacs, Pinky and the Brain, Superman
and Men In Black. The Company believes that Warner Brothers television animation
has played an integral part in the popularity of The WB Network's programming
among children and teenagers.
The WB Network senior management team is headed by Jamie Kellner, who
serves as Chief Executive Officer. Mr. Kellner previously served as President of
Fox from its inception in 1986 to 1993. Many of the same people who served under
Mr. Kellner at Fox currently comprise the senior management at The WB Network,
including: Garth Ancier (Entertainment President), Susanne Daniels (Executive
Vice President of Programming), Bob Bibb and Lew Goldstein (Executive Vice
Presidents of Marketing), Jed Petrick (Senior Vice President of Sales) and Brad
Turell (Senior Vice President of Publicity).
Distribution. The WB Network has increased its coverage of households in
the United States from 77% at network launch in early 1995 to 86% as of May
1997. The WB Network has a three-tiered distribution strategy designed to
increase its coverage of domestic households towards the goal of 100%: (i) DMAs
ranked 1-20 will be served primarily by affiliate stations owned by Tribune;
(ii) DMAs ranked 21-100 will be served primarily by affiliate stations owned by
major middle market broadcasters such as the Company; and (iii) DMAs ranked
101-211 will be served by WeB, a joint venture designed to provide The WB
Network programming on local cable systems in smaller DMAs.
43
<PAGE>
In July 1997, Sinclair Broadcast Group ('Sinclair') announced its intention
to switch the affiliation of its stations in five markets from UPN to The WB
Network and its intention to renew the existing affiliate agreements for three
other Sinclair stations that are currently affiliated with The WB Network for an
additional ten years.
Strategy and Programming. The WB Network's strategy is to provide quality
programming suitable for children, teens, young adults, and families with small
children during the 'family hour' from 8:00-9:00 PM. 100% of The WB Network's
programming during the 8:00-9:00 PM (EST) time slot has been recognized by the
Parent's Television Council as 'family-friendly,' as compared to 43% for ABC,
50% for CBS, and 0% for Fox, NBC, and UPN. After 9:00 PM, The WB Network offers
programming which is more suitable for adults. In addition, The WB Network
utilizes Warner Brothers television animation to provide cartoons for The WB
Network's Saturday morning and weekday animated children's block, branded as
Kids' WB! For the May 1997 sweep period, Kids' WB! Saturday morning programming
was the third highest ranked children's programming after Fox and ABC. The
following table sets forth certain programs which The WB Network is currently
broadcasting or has announced plans to broadcast:
<TABLE>
<CAPTION>
PRIMETIME: CARTOONS:
- --------------------------------------- ---------------------------------------
<S> <C>
7th Heaven Animaniacs
Buffy the Vampire Slayer Batman Adventures
Dawson's Creek Bugs 'N' Daffy
Jamie Foxx Calamity Jane
Nick Freno Captain Planet
Parent Hood Men in Black
Alright Already Pinky & The Brain
Sister, Sister The New Daffy Duck Show
Smart Guy The New Superman
Steve Harvey Show The Sylvester & Tweety Mysteries
The Tom Show Tiny Toon Adventures
Three Umptee-3
Wayans Brothers
</TABLE>
THE STATIONS AND MARKET OVERVIEWS
KPLR-11: ST. LOUIS, MO
Station KPLR-11 operates as The WB Network affiliate in the St. Louis,
Missouri market, which represents the 21st largest DMA in the U.S. The St. Louis
DMA has approximately 1.1 million television households, a total population of
3.0 million, and an estimated average household income of $40,861 per year. The
Company estimates that the total television advertising market in St. Louis in
1996 was $200.8 million, a 5.5% increase over 1995. Approximately 53% of the
households in the St. Louis market are cable television subscribers. The St.
Louis DMA has five commercial television stations. The Fox, CBS, NBC and The WB
Network affiliates are VHF stations, and the ABC affiliate is a UHF station.
The following table outlines summary information regarding the commercial
television stations in the St. Louis DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ------------------------------------------------------- ------- ------- ----------- --------
<S> <C> <C> <C> <C>
ACME Television........................................ KPLR 11 WB 12%
Fox Television......................................... KTVI 2 Fox 10
Belo Corp.............................................. KMOV 4 CBS 20
Gannett Co., Inc....................................... KSDK 5 NBC 23
Sinclair Broadcast Group............................... KDNL 30 ABC 10
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
44
<PAGE>
The following table sets forth market revenue and share information for the
St. Louis DMA and Station KPLR (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Television advertising revenues................................ $175,200 $190,400 $200,800
Revenue growth................................................. 10.2% 8.7% 5.5%
Gross station revenue.......................................... $ 29,845 $ 31,740 $ 31,870
Station gross revenue growth................................... (2.5% 6.3% 0.4%
Station revenue share.......................................... 17.0% 16.7% 15.9%
</TABLE>
Station KPLR was constructed in 1959 and is subject to an affiliation
agreement with The WB Network. Station KPLR is a VHF station with one of the
three strongest signals in the market. In addition to network programming,
Station KPLR currently broadcasts a local news program at 9:00 PM, owns the
rights to broadcast St. Louis Cardinals baseball through 1999, and offers
syndicated programming such as Cheers, Full House, Living Single, Martin and
Seinfeld. During the May 1997 sweep period, Station KPLR was ranked as first
among independent and UPN and The WB Network affiliate broadcast stations in the
U.S.
KWBP-32: PORTLAND, OR
Station KWBP-32 operates as The WB Network affiliate in the Portland,
Oregon market, which represents the 24th largest DMA in the U.S. The Portland
DMA has approximately 1.0 million television households, a total population of
2.5 million, and an estimated average household income of $38,223 per year. The
Company estimates that the total television advertising market in Portland in
1996 was $156.4 million, a 7% increase over 1995. Approximately 63% of the
households in the Portland market are cable television subscribers. The Portland
DMA has six commercial television stations. The ABC, CBS, NBC and UPN affiliates
are VHF stations, and the Fox and The WB Network affiliates are UHF stations.
The following table outlines summary information regarding the commercial
television stations in the Portland DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ------------------------------------------------------- ------- ------- ----------- --------
<S> <C> <C> <C> <C>
ACME Television........................................ KWBP 32 WB 2%
Fisher Broadcasting.................................... KATU 2 ABC 17
Lee Enterprises, Inc................................... KOIN 6 CBS 14
Belo Corp.............................................. KGW 8 NBC 18
BHC Communications..................................... KPTV 12 UPN 10
Meredith Corp.......................................... KPDX 49 Fox 9
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
The following table sets forth market revenue and share information for the
Portland DMA and Station KWBP (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(1)
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Television advertising revenues................................ $139,800 $146,100 $156,400
Revenue growth................................................. 16.0% 4.5% 7.0%
Gross station revenue(2)....................................... NA $ 307 $ 1,682
Station gross revenue growth................................... NA NA 447.9%
Station revenue share.......................................... NA 0.2% 1.1%
</TABLE>
- ------------------
(1) Station KWBP commenced commercial broadcasting in January 1995.
(2) Station KWBP has historically used a fiscal year end of June 30. Gross
revenues are therefore shown for the twelve month period ending June 30,
1995 and 1996 and exclude barter revenues.
45
<PAGE>
KZAR-16: SALT LAKE CITY, UT
Station KZAR-16, upon its construction, will operate as The WB Network
affiliate in the Salt Lake City, Utah market, which represents the 36th largest
DMA in the U.S. The Salt Lake City DMA has approximately 671,000 television
households, a total population of 2.1 million, and an estimated average
household income of $38,927 per year. The Salt Lake City market has a relatively
young demographic population, with over 37% of the population under the age of
eighteen (according to the National Association of Television Broadcasters in
its 1997 Television Market-By-Market Review ('NAB')) compared to the national
average of 26% (according to the 1990 Bureau of the Census Report). The Company
estimates that the total television advertising market in Salt Lake City in 1996
was $135.0 million, a 9.2% increase over 1995. Approximately 56% of the
households in the Salt Lake City market are cable television subscribers. The
Salt Lake City DMA has six commercial television stations. The ABC, CBS, and NBC
affiliates are VHF stations, and the Fox and UPN affiliates are UHF stations.
Station KZAR, The WB Network affiliate, will also be a UHF station.
The following table outlines summary information regarding the commercial
television stations in the Salt Lake City DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ----------------------------------------------------- ------- ------- ----------- ----------
<S> <C> <C> <C> <C>
ACME Television...................................... KZAR 16 WB not on air
CBS Station Group.................................... KUTV 2 CBS 13%
United Television.................................... KTVX 4 ABC 16
Bonneville International Corp........................ KSL 5 NBC 18
Fox Television....................................... KSTU 13 Fox 12
Larry K. Miller Broadcasting......................... KJZZ 14 UPN 10
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
The following table sets forth market revenue information for the Salt Lake
City DMA (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Television advertising revenues................................ $116,500 $123,600 $135,000
Revenue growth................................................. 18.6% 6.1% 9.2%
</TABLE>
Station KZAR will commence broadcasting upon completion of its
construction, which the Company estimates will occur in March 1998. Management
believes that there exists sufficient popular syndicated programming in the
market available for the station to acquire at attractive prices.
KAUO-19: ALBUQUERQUE/SANTA FE, NM
Station KAUO-19, upon its construction, will operate as The WB Network
affiliate in the Albuquerque/Santa Fe, New Mexico market, which represents the
48th largest DMA in the U.S. The Albuquerque/Santa Fe, DMA has approximately
565,000 television households, a total population of 1.6 million, and an
estimated average household income of $34,614 per year. The Albuquerque/Santa Fe
market has a relatively young demographic population, with approximately 30% of
the population under the age of eighteen (according to NAB). The Company
estimates that the total television advertising market in Albuquerque/Santa Fe
in 1996 was $82.5 million, a 4.6% increase over 1995. Approximately 60% of the
households in the Albuquerque/Santa Fe market are cable television subscribers.
The Albuquerque/Santa Fe DMA has six commercial television stations. The ABC,
CBS, NBC and Fox affiliates are VHF stations, and the UPN affiliate is a UHF
station. Station KAUO, The WB Network affiliate, will also be a UHF station.
46
<PAGE>
The following table outlines summary information regarding the commercial
television stations in the Albuquerque DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ----------------------------------------------------- ------- ------- ----------- ----------
<S> <C> <C> <C> <C>
ACME Television...................................... KAUO 19 WB not on air
Belo Corp............................................ KASA 2 Fox 7%
Hubbard Broadcasting Inc............................. KOB 4 NBC 18
Pulitzer Broadcasting Inc............................ KOAT 7 ABC 19
Lee Enterprises Inc.................................. KRQE 13 CBS 15
Ramar Communications Inc............................. KASY 50 UPN --
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
The following table sets forth market revenue information for the
Albuquerque/Santa Fe DMA (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Television advertising revenues................................ $ 75,300 $ 78,900 $ 82,500
Revenue growth................................................. 27.6% 4.8% 4.6%
</TABLE>
The station will commence broadcasting upon completion of the construction,
which the Company estimates will occur in September 1998. Management believes
that there exists sufficient popular syndicated programming in the market
available for the station to acquire at attractive prices. A commercial
broadcast station in this market currently holds a secondary affiliation
agreement with The WB Network, which management believes will be terminated once
Station KAUO commences broadcasting.
WBXX-20: KNOXVILLE, TN
Station WBXX-20 operates as The WB Network affiliate in the Knoxville,
Tennessee market, which represents the 60th largest DMA in the U.S. The
Knoxville DMA has approximately 456,000 television households, a total
population of 1.2 million, and an estimated average household income of $33,774
per year. The Company estimates that the total television advertising market in
Knoxville in 1996 was $60.6 million, a 11.8% increase over 1995. Approximately
68% of the households in the Knoxville market are cable television subscribers.
The Knoxville DMA has five commercial television stations. The ABC, CBS, and NBC
affiliates are VHF stations, and the Fox and The WB Network affiliates are UHF
stations.
The following table outlines summary information regarding the commercial
television stations in the Knoxville DMA:
<TABLE>
<CAPTION>
CALL AUDIENCE
OWNER LETTERS CHANNEL AFFILIATION SHARE(1)
- ----------------------------------------------------- ------- ------- ----------- ----------
<S> <C> <C> <C> <C>
ACME Television...................................... WBXX 20 WB --
Young Broadcasting Inc............................... WATE 6 ABC 15%
Gray Communications.................................. WLVT 8 CBS 12
Gannett Co. Inc...................................... WBIR 10 NBC 23
Raycom Media......................................... WTNZ 43 Fox 5
</TABLE>
- ------------------
(1) Represents average audience share from Monday to Sunday in May 1997.
47
<PAGE>
The following table sets forth market revenue information for the Knoxville
DMA (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Television advertising revenues................................ $ 54,700 $ 54,200 $ 60,600
Revenue growth................................................. 16.9% (0.1)% 11.8%
</TABLE>
The station re-commenced broadcasting upon the installation of new
transmission facilities, which were completed in October 1997. The station
recently purchased new syndicated programming and rights to future syndicated
programs such as Cheers, Friends, Full House, M*A*S*H, Star Trek: The Next
Generation and The Drew Carey Show. The Company changed the call letters of this
station from WINT to WBXX upon its acquisition by the Company.
AFFILIATION AGREEMENTS
Station KWBP, Station KPLR and Station WBXX have each entered into station
affiliation agreements (the 'KWBP Affiliation Agreement' the 'KPLR Affiliation
Agreement' and the 'WBXX Affiliation Agreement', respectively, and collectively,
the 'Affiliation Agreements') with The WB Network which provide each station the
exclusive right to broadcast The WB Network programming in its DMA.
Under the Affiliation Agreements, The WB Network has retained the right to
program and sell 75% of the advertising time available during the prime time
schedule with the remaining 25% available for sale by the stations, provided
that in the case of the KPLR Affiliation Agreement, the station has the right to
preempt The WB Network programming for St. Louis Cardinals baseball, St. Louis
Blues hockey and University of Missouri basketball broadcasts. The WB Network
retains approximately 50% of the advertising time available during children's
programs and late fringe programs (if and when included in the network's
schedule), with the balance allocated to the applicable station.
In addition to the advertising time reserved for sale by The WB Network,
each station is also required to pay annual compensation to The WB Network
according to formulas designed to result in the payment, to The WB Network of
amounts equal to 25% of the 'added-value' to the station from its affiliation
with The WB Network, as determined by the average station ratings among adults
18-49 during prime time programming provided by The WB Network and the number of
prime time programming hours provided by The WB Network. Pursuant to the
Affiliation Agreements, the Company participates in cooperative marketing with
The WB Network whereby the network reimburses up to 50% of certain approved
advertising expenditures by a station to promote network programming. The
Affiliation Agreements also contain a clause entitling the applicable station to
the benefits of any more favorable terms agreed to by The WB Network with any
affiliate except for superstation WGN during the term of the Affiliation
Agreements, and any subsequent modifications thereto.
The Company has obtained a conditional commitment from The WB Network to
extend the existing Affiliation Agreements to five year terms. The Affiliation
Agreements are subject to termination (i) by The WB Network, upon sixty days
notice, in the event The WB Network ceases operations or is substantially
restructured, (ii) upon the occurrence and continuation for four consecutive
weeks of certain force majeure events causing a failure to provide programs by
The WB Network or a failure to broadcast such programs by the station, (iii)
upon assignment of the applicable station's FCC license without consent to such
assignment by The WB Network; or (iv) upon a material change in the station's
transmitter location, power, frequency or programming format.
The Company has obtained commitments from The WB Network to enter into
affiliation agreements with the Company's remaining stations upon their
acquisition by the Company, on substantially the same terms and conditions as
Stations WBXX, KPLR and KWBP's affiliation agreements with The WB Network, and,
in the case of Station KPLR, to extend the existing agreement to a seven-year
term. Upon completion of the St. Louis Acquisition, the Company intends to enter
into an overriding group affiliation agreement with The WB Network covering all
of its stations.
48
<PAGE>
INDUSTRY OVERVIEW
Commercial television broadcasting began in the United States on a regular
basis in the 1940s over a portion of the broadcast spectrum commonly known as
the VHF Band (very high frequency broadcast channels numbered 2 through 13
('VHF')). Television channels were later assigned by the FCC under an additional
broadcast spectrum commonly known as the UHF Band (ultra-high frequency
broadcast channels numbered 14 through 83 ('UHF'); channels 70 through 83 have
been reassigned to non-broadcast services). Currently there are a limited number
of channels available for broadcasting in any one DMA, and the license to
operate a broadcast station is granted by the FCC.
Although UHF and VHF stations compete in the same market, UHF stations have
historically suffered a competitive disadvantage, as: (i) UHF signals are more
subject to obstructions such as terrain than VHF signals and (ii) VHF stations
are able to provide higher quality signals to a wider area. Over time, the
disadvantage of UHF stations has gradually declined through: (i) UHF stations'
carriage on local cable systems, (ii) improvement in television receivers, (iii)
improvement in television transmitters, and (iv) increased availability of
quality programming.
All television stations throughout the United States are grouped into
approximately 211 generally recognized DMAs which are ranked in size according
to the estimated number of television households. Each DMA is determined as an
exclusive geographic area consisting of all counties in which the home-market
commercial stations receive the greatest percentage of total viewing hours.
A majority of the commercial television stations in the United States are
affiliated with NBC, CBS, or ABC (the 'Major Networks'). Each Major Network
provides the majority of its affiliates' programming each day without charge in
exchange for a substantial majority of the available advertising time in the
programs supplied. Each Major Network sells this advertising time and retains
the revenue. The affiliate receives compensation from the Major Network and
retains the revenue from advertising time sold in and between network programs
and in programming the affiliate produces or purchases from non-network sources.
Stations which are not affiliated with one of the Major Networks were
previously considered independent stations. Independent stations generally
broadcast syndicated programming, which is acquired by the station for cash or
occasionally barter. The acquisition of syndicated programming generally grants
the acquiring station exclusive rights to broadcast a program in the market for
a specified period of time or a number of episodes agreed upon between the
independent station and the syndicator of the programming. Types of syndicated
programming include feature films, popular television series previously shown on
network television and current television series produced for direct
distribution to television stations. Through barter and cash-plus-barter
arrangements, a national syndicated program distributor typically retains a
portion of the available advertising time for programming it supplies, in
exchange for reduced fees to the station for such programming.
Fox, UPN and The WB Network have each established an affiliation with some
of the formerly independent stations. However, the amount of programming per
week supplied to the affiliates by these networks is significantly less than
that of the Major Networks, and as a result, these stations retain a
significantly higher portion of the available inventory of broadcast time for
their own use than Major Network affiliates.
Television stations derive their revenues primarily from the sale of
national, regional and local advertising. All network-affiliated stations,
including those affiliated with Fox, UPN and The WB Network, are required to
carry spot advertising sold by their networks. This reduces the amount of
advertising available for sale directly by the network-affiliated stations.
Advertisers wishing to reach a national audience usually purchase time
directly from the Major Networks, Fox, UPN and The WB Network, or advertise
nationwide on an ad hoc basis. National advertisers who wish to reach a
particular region or local audience buy advertising time directly from local
stations through national advertising sales representative firms. Additionally,
local businesses purchase advertising time directly from the station's local
sales staff. Advertising rates are based upon factors which include the size of
the DMA in which the station operates, a program's popularity among the viewers
that an advertiser wishes to attract, the number of advertisers competing for
the available time, demographic characteristics of the DMA served by the
station, the availability of alternative advertising media in the DMA,
aggressive and knowledgeable sales forces and the development of projects,
features and marketing programs that tie advertiser messages to programming.
Because
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broadcast television stations rely on advertising revenues, declines in
advertising budgets, particularly in recessionary periods, may adversely affect
the broadcast business.
COMPETITION
Broadcast television stations compete for advertising revenues primarily
with other broadcast television stations and, to a lesser extent, with radio
stations and cable system operators serving the same market. Major Network
programming generally achieves higher household audience levels than those of
Fox, UPN and The WB Network and other syndicated programming aired by
independent stations. This is attributable to a number of factors, including the
Major Networks' efforts to reach a broader audience, generally better signal
carriage when broadcasting over VHF channels versus UHF channels and the greater
amount of network programming being broadcast weekly. However, greater amounts
of advertising time are available for sale during Fox, UPN and The WB Network
programming and non-network syndicated programming, and as a result, the Company
believes that the Company's programming will achieve a share of television
market advertising revenues greater than its share of the market's audience.
Broadcast television stations compete with other television stations in
their DMAs for the acquisition of programming. Generally, cable systems do not
compete with local stations for programming, but various national cable networks
do from time to time acquire programming that could have been offered to local
television stations. Public broadcasting stations generally compete with
commercial broadcasters for viewers, but do not compete for advertising
revenues. Historically, the cost of programming had increased because of an
increase in the number of independent stations and a shortage of quality
programming. However, over the past five years, program prices have stabilized
or declined as a result of recent increases in the supply of programming.
Currently programming studios produce enough programming to fill the broadcast
time on seven commercial stations.
REGULATION
Federal Regulation of Television Broadcasting. Television broadcasting is
subject to the jurisdiction of the FCC under the Communications Act. The
Communications Act prohibits the operation of television broadcasting stations
except under a license issued by the FCC. The Communications Act empowers the
FCC, among other things, to issue, revoke and modify broadcasting licenses,
determine the locations of stations, regulate the equipment used by stations,
adopt regulations to carry out the provisions of the Communications Act and
impose penalties for violation of such regulations. The Communications Act
provides penalties for violation of such regulations. The Communications Act
prohibits the assignment of a license or the transfer of control of a licensee
without prior approval of the FCC. On February 8, 1996, the President signed
into law the Telecom Act, which substantially amended the Communications Act.
Set forth below is a general description of some of the principal areas of FCC
regulation of the broadcast television industry.
License Grant and Renewal. A party must obtain a construction permit from
the FCC in order to build a new television station. Once a station is
constructed, the permittee will receive a license which must be renewed by the
FCC at the end of each license term. On January 24, 1997, pursuant to the
Telecom Act, the FCC increased the terms of such licenses and their renewal to
eight years. The Telecom Act directs the FCC to grant renewal of a broadcast
license if it finds that the station has served the public interest,
convenience, and necessity and that there have been no serious violations (or
other violations which would constitute a 'pattern of abuse') by the licensee of
the Communications Act or FCC rules and policies. If the FCC finds that a
licensee has failed to meet these standards, and there are no sufficient
mitigating factors, the FCC may deny renewal or condition renewal appropriately,
including renewing for less than a full term. Any other party with standing may
petition the FCC to deny a broadcaster's application for renewal. However, only
if the FCC issues an order denying renewal will the FCC accept and consider
applications from other parties for a construction permit for a new station to
operate on the channel subject to such denial. The FCC may not consider any such
applicant in making determinations concerning the grant or denial of the
licensee's renewal application.
Some of the Pending Acquisitions involve the Company's acquisition of
construction permits for stations not yet constructed. After each station is
built, the Company will apply for a license to 'cover', or replace, the
construction permit. The Company is not aware of any facts or circumstances that
would prevent the issuance or
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renewal of the licenses for the stations being acquired. The Communications Act
provides that licenses continue in effect until the FCC disposes of the renewal
application.
Local Marketing Agreements. The Company has or intends to enter into LMAs
from time to time in connection with certain of the Pending Acquisitions, and
contemplates utilizing LMAs in connection with future acquisitions. By using
LMAs, the Company gains the ability to provide programming and other services to
a station proposed to be acquired pending receipt of all applicable FCC
approvals with respect to the actual transfer of control or assignment of the
applicable station license.
FCC rules and policies generally require that the Company's LMAs permit the
station licensee to retain ultimate control of the applicable station, including
programming, and there can be no assurance that the Company will be able to air
all of its scheduled programming on stations with which it has an LMA, or that
in such event, the Company will receive the anticipated revenue from the sale of
advertising for such programming. In addition, LMA's sometimes require that
existing programming contracts of the licensee be honored. Accordingly, there
can be no assurance that early termination of an LMA or unanticipated
preemptions by a licensee of all or a significant portion of the Company's
scheduled programming for a station subject to an LMA will not occur.
Termination of an LMA or material preemptions of programming thereunder could
adversely affect the Company.
Multiple- and Cross-Ownership Restrictions. Current FCC regulations and
policies impose significant restrictions on certain positional and ownership
interests in broadcast companies and other media. The officers, directors and
certain equity owners of a broadcast company are deemed to have 'attributable
interests' in the broadcast company. In the case of a corporation, ownership is
generally attributed to officers, directors and equity holders who own 5% or
more of the company's outstanding voting stock. Institutional investors,
including mutual funds, insurance companies and banks acting in a fiduciary
capacity, may own up to 10% of the outstanding voting stock without being
subject to attribution, provided that such equity holders exercise no control
over the management or policies of the broadcasting company. Limited liability
companies are generally treated as limited partnership for purposes of the FCC
rules. These rules do not attribute limited partnership interests as long as the
partnership certifies that the limited partners are insulated from management in
accordance with the FCC's established criteria; if the certification is properly
made, only the general partner (or managing member) of the partnership is deemed
to have an attributable interest.
Under current FCC rules governing multiple ownership of broadcast stations,
a license to operate a television station will not be granted (unless
established waiver standards are met) to any party (or parties under common
control) that has an attributable interest in another television station with an
overlapping service contour (the 'Duopoly Rule'). FCC regulations also prohibit
one owner from having attributable interests in television broadcast stations
that reach in the aggregate more than 35% of the nation's television households.
For purposes of this calculation, stations in the UHF band (channels 14-69) are
attributed with only 50% of the households attributed to stations in the VHF
band (channels 2-13). The rules further prohibit (with certain qualifications)
the holder of an attributable interest in a television station from also having
an attributable interest in a radio station, daily newspaper or cable television
system serving a community located within the relevant coverage area of that
television station. Separately, the FCC's 'cross-interest' policy may, in
certain circumstances, prohibit the common ownership of an attributable interest
in one media outlet and a non-attributable equity interest in another media
outlet in the same market. In pending rulemaking proceedings, the FCC is
considering, among other possible changes, (i) the modification of its
attribution rules and the 'cross-interest' policy, (ii) the relaxation of the
Duopoly Rule and (iii) specific rules regarding ownership attribution to govern
television LMAs comparable to those currently in force with respect to radio
LMAs.
Review of 'Must-Carry' Rules. FCC regulations implementing the Cable
Television Consumer Protection and Competition Act of 1992 (the '1992 Cable
Act') require each television broadcaster to elect, at three year intervals
beginning October 1, 1993, to either (i) require carriage of its signal by cable
systems in the station's market ('must-carry') or (ii) negotiate the terms on
which such broadcast station would permit transmission of its signal by the
cable systems within its market ('retransmission consent'). The United States
Supreme Court upheld the must-carry rules in a 1997 decision.
Digital Television Services. The FCC has adopted rules for implementing
digital television ('DTV') service in the United States. Implementation of DTV
will improve the technical quality of television signals and
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will provide broadcasters the flexibility to offer new services, including
high-definition television ('HDTV') and data broadcasting.
The FCC has established service rules and adopted a Table of Allotments for
digital television. The Table provides all eligible broadcasters a second
broadcast channel to each full-power television station for DTV operation.
Stations will be permitted to phase in their DTV operations over a period of
years following the adoption of a final table of allotments, after which they
will be required to surrender their non-DTV channel. Affiliates of the top four
networks in the top ten markets must be on the air with a digital signal by May
1, 1999. Affiliates of the top four networks in the next twenty largest markets
must be on the air with a digital signal by November 1, 1999. The FCC has set a
target of 2006 as the end-date of analog broadcasts. Meanwhile, Congress has
from time to time considered proposals that would require incumbent broadcasters
to bid at auction for the additional spectrum required to effect a transition to
DTV, or, alternatively, would assign DTV spectrum to incumbent broadcasters and
require the early surrender of their non-DTV channel for sale by public auction.
The Telecom Act and the FCC's rules impose certain conditions on the FCC's
implementation of DTV service. Among other requirements, the FCC must (i) limit
the initial eligibility for such licenses to existing television broadcast
licensees or permittees; (ii) allow DTV licensees to offer ancillary and
supplementary services; (iii) charge appropriate fees to broadcasters that
supply ancillary and supplementary services for which such broadcasters derive
certain nonadvertising revenues; and (iv) recover at an unspecified time either
the DTV license or the original license (the 'NTSC' license) held by the
broadcaster.
There are details regarding how interference levels will be calculated that
the FCC has not yet ruled on. Conversion to DTV operations could reduce a
station's geographical coverage area after such rules are adopted if the
interference standards are changed. Equipment and other costs associated with
the DTV transition, including the necessity of temporary dual-mode operations,
will impose some near-term financial costs on television stations providing the
service. The potential also exists for new sources of revenue to be derived from
DTV. The Company cannot predict the overall effect the transition to DTV might
have on the Company's business.
Other Pending FCC Proceedings. In 1995, the FCC issued notices of proposed
rulemaking proposing to modify or eliminate most of its remaining rules
governing the broadcast network-affiliate relationship. The network-affiliate
rules were originally intended to limit networks' ability to control programming
aired by affiliates or to set station advertising rates and to reduce barriers
to entry by new networks. These proceedings are pending. The dual network rule,
which generally prevents a single entity from owning more than one broadcast
television network, is among the rules under consideration in these proceedings.
However, the Telecom Act substantially relaxed the dual network rule by
providing that an entity may own more than one television network; however, no
two national television networks in existence on February 8, 1996 may merge or
be acquired by the same party. The Company is unable to predict how or when the
FCC proceedings will be resolved or how those proceedings or the relaxation of
the dual network rule may affect the Company's business.
Pursuant to a Congressional directive contained in the Telecom Act, the FCC
has commenced a proceeding to devise rules and an implementation schedule for
universal closed captioning of video programming.
The FCC continues to enforce strictly its regulations concerning
broadcasters' equal employment obligations, 'indecent' programming, political
advertising, environmental concerns, technical operating matters and antenna
tower maintenance. The FCC also has made clear its intent to enforce equal
employment opportunity guidelines and recruitment efforts and record-keeping
requirements by imposing monetary forfeitures, periodic reporting conditions and
short-term license renewals.
There are additional FCC regulations as well as policies, and regulations
and policies of other federal agencies, affecting the business and operations of
broadcast stations. Proposals for additional or revised rules are considered by
federal regulatory agencies and Congress from time to time. It is not possible
to predict the resolution of these issues or other issues discussed above,
although their outcome could, over a period of time, affect, either adversely or
favorably, the broadcasting industry generally or the Company specifically.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act, the Telecom Act or other Congressional
acts or of the regulations and policies of the FCC thereunder. Reference is made
to the Communications Act, the Telecom Act, other Congressional acts, such
regulations and policies, and the public notices promulgated by the FCC for
further information.
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EMPLOYEES
At August 29, 1997, the Company had 43 employees, none of which were
subject to collective bargaining agreements and Koplar Communications employed
at Station KPLR approximately 108 employees, 32 of which were subject to
collective bargaining agreements. The Company believes that its relationships
with its employees are good.
PROPERTIES AND FACILITIES
Set forth below is certain information with respect to the Company's
existing and planned studio and other leased facilities. All of the Company's
leased studio, office and tower facilities are or are anticipated to be leased
pursuant to long-term leases that management believes to be adequate.
Information as to tower height reflects the height above average terrain (HAAT)
as reported in the BIA Market Report, 1997.
<TABLE>
<CAPTION>
LOCATION--USE APPROXIMATE SIZE OWNERSHIP
- --------------------------------------------------------------------------------- ---------------- ---------
<S> <C> <C>
St. Louis, MO
Studio and office facilities(1)................................................ 36,000 sq. ft. Owned
Tower.......................................................................... 1,011 ft. Owned
Beaverton, OR
Studio and office facilities................................................... 15,255 sq. ft. Leased
Tower.......................................................................... 1,785 ft. Leased
Knoxville, TN
Studio and office facilities................................................... 8,000 sq. ft. Leased
Tower.......................................................................... 2,795 ft. Leased
Provo, UT
Studio and office facilities................................................... 8,000 sq. ft. Leased
Tower.......................................................................... 2,308 ft. Leased
</TABLE>
- ------------------
(1) Excludes 30,000 square feet of apartment space located above the studio and
office facilities.
In connection with the Albuquerque Acquisition, the Company is currently in
the process of securing leases for studio and office facilities and transmission
facilities. See 'Risk Factors--Risks Related to Acquisitions.' Management
believes that its facilities are adequate for the conduct of its business
presently and for the foreseeable future.
The principal executive offices of the Company and its subsidiaries is 650
Town Center Drive, Suite 850, Costa Mesa, CA, 92626, (714) 445-5791.
LEGAL PROCEEDINGS
The Company expects its operating subsidiaries to be parties to various
legal proceedings from time to time in the course of their business activities.
The Company maintains comprehensive general liability and other insurance which
it believes to be adequate for the purpose. The Company does not know of any
pending legal proceedings involving it or any of the stations to be acquired
which would have a material adverse affect on its financial condition or results
of operations.
The Company's FCC applications for the Salt Lake City, the Albuquerque and
the St. Louis Acquisitions were filed with the FCC on September 19, 1997,
October 8, 1997 and September 30, 1997, respectively.
The Company's FCC application for the Salt Lake City Acquisition was
approved by the FCC on October 20, 1997 and will become final once the approval
is no longer subject to review which will occur 40 days after public notice is
given by the FCC provided that no successful third party objection or FCC
rescission occurs during that time. The renewal application for the license for
Station KPLR was filed by the licensee, Koplar Television Communications L.L.C.,
on September 30, 1997 and the FCC granted approval on October 24, 1997.
The Company has been advised that a third party has filed an application to
register 'ACME Television' as a service mark under federal law and has claimed
common law rights in such service mark that predate its use by the Company. The
Company is presently considering the alternatives available to it, which include
the filing of a notice of opposition to registration of the service mark for
such third party, negotiations with such third party to acquire its interest in
the mark or agree to simultaneous use of the mark by each party in connection
with its business, or ceasing to use 'ACME Television' as a mark. The Company
cannot at this time predict the outcome of such alternatives, and there can be
no assurance that the Company will be able to continue to use 'ACME Television'
as a service mark.
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MANAGEMENT
Full authority for the management of ACME Parent resides in its executive
officers and the Board of Advisors of ACME Parent. The Company is managed by its
Majority Member, ACME Parent, who has exclusive control of the management of the
business and affairs of the Company. Messrs. Kellner, Gealy and Allen each hold
the same executive offices of the Company, ACME Television and ACME Parent. Set
forth below is certain information with respect to the members of the Board of
Advisors of ACME Parent and the current and proposed senior management of the
Company. All ages are set forth as of June 30, 1997. In addition to the current
and proposed members of the Board of Advisors, there will be two additional
board members appointed no later than December 17, 1997. See 'Description of
ACME Parent--LLC Agreement.'
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS/BOARD MEMBERS
Jamie Kellner.......................... 50 Chairman of the Board, Chief Executive Officer and
Member of the Board of Advisors
Douglas Gealy.......................... 37 President, Chief Operating Officer and Member of the
Board of Advisors
Thomas Allen........................... 44 Executive Vice President, Chief Financial Officer and
Member of the Board of Advisors
PROPOSED BOARD MEMBERS
Edward J. Koplar....................... 54 Chief Executive Officer of ACME St. Louis, Inc. and
Member of the Board of Advisors(1)
Michael V. Roberts..................... 48 Member of the Board of Advisors(2)
GENERAL MANAGERS
Lewis F. Cosby, III.................... 47 General Manager of Station WINT
Stephen W. Dant........................ 48 General Manager of Station KWBP
John J. Greenwood...................... 35 General Manager of Station KAUO
William A. Lanesey..................... 37 General Sales Manager of Station KPLR
</TABLE>
- ------------------
(1) Mr. Koplar is expected to hold these offices upon consummation of the St.
Louis Acquisition.
(2) Mr. Roberts is expected to hold this office upon consummation of the Salt
Lake City Acquisition.
Jamie Kellner--Mr. Kellner is a founder of ACME Parent and serves as its
Chairman, Chief Executive Officer and is a member of its Board of Advisors,
which has exclusive authority to manage its business and affairs. Mr. Kellner is
also a founder, chief executive officer and partner of The WB Television Network
since January 1993. Previously, Mr. Kellner was President of the Fox
Broadcasting Company for over five years. He currently serves on the board of
directors of SMART TV, LLC and NELVANA LTD.
Douglas Gealy--Mr. Gealy is also a founder of ACME Parent and serves as its
President and Chief Operating Officer and a member of the Board of Advisors.
Since June of 1996, Mr. Gealy has been involved in development activities with
respect to ACME Parent. Prior to founding ACME Parent, Mr. Gealy served for one
year as Executive Vice President of a group of eight broadcast television
stations owned by Benedek Broadcasting. Previously, Mr. Gealy was a Vice
President and General Manager of Station WCMH and its LMA WWHO, in Columbus,
Ohio, and following the acquisition of these stations by NBC, served as
President and General Manager of these stations.
Thomas Allen--Mr. Allen is a founder, member of the Board of Advisors,
Executive Vice President and the Chief Financial Officer of ACME Parent. Since
June of 1996, Mr. Allen has been involved in development activities with respect
to the Company. Previously, Mr. Allen was the Chief Operating Officer and Chief
Financial Officer for Virgin Interactive Entertainment, from August 1993 to May
1996. Prior to that, Mr. Allen served as the Chief Financial Officer of the Fox
Broadcasting Company for approximately seven years.
Edward J. Koplar--Mr. Koplar will become a member of the Board of Advisors
of ACME Parent and the Chief Executive Officer of ACME St. Louis, Inc. upon
completion of the St. Louis Acquisition. Since 1979, Mr. Koplar has been the
President for Koplar Communications and its predecessor for Station KPLR,
Channel 11, St. Louis Missouri.
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Michael V. Roberts--Mr. Roberts will become a member of the Board of
Advisors pending a waiver by the FCC related to a station in which Mr. Roberts
has an attributable interest in the St. Louis DMA. Mr. Roberts is co-founder of
Roberts Broadcasting which owns several television stations in medium-sized
markets in the U.S. and has served as its Chairman and Chief Executive Officer
since 1989. Mr. Roberts is also the founder of companies active in commercial
real estate development, construction program management and corporate
management consulting. He currently serves on the board of directors of Home
Shopping Network.
Lewis F. Cosby, III--Mr. Cosby joined the Company in August 1997 as the
general manager of Station WINT in Knoxville. From 1988 to 1996, Mr. Cosby was a
partner and general manager of the CBS affiliate in Knoxville. Mr. Cosby has 25
years of experience in the broadcasting industry.
Stephen W. Dant--Mr. Dant has been managing Station KWBP in Portland since
June of 1997. Prior to joining the Company, Mr. Dant acted as a Vice
President--General Manager for Citadel Communications, where he managed the ABC
affiliate in Lincoln, NE. Before Citadel Communications, Mr. Dant managed
stations in medium-sized markets for Davis-Goldfarb Company from 1993 to 1995
and Gateway Communications from 1988 to 1993. Mr. Dant has over 20 years of
experience in the broadcasting industry.
John J. Greenwood--Mr. Greenwood joined the Company in August 1997 to
assist in developing the Company's stations in Knoxville and Salt Lake City. Mr.
Greenwood will ultimately be the general manager for Station KAUO in
Albuquerque. Prior to joining the Company, since 1994, Mr. Greenwood acted as
the general sales manager and general manager for the Fox affiliate in
Montgomery, AL for Woods Communication Corporation. From 1991 to 1994, Mr.
Greenwood worked for Scripps Howard Broadcasting Co. as a sales manager for the
CBS affiliate in Cincinnati, OH.
William A. Lanesey--Mr. Lanesey will join Station KPLR as general sales
manager in September 1997. He has over 14 years of broadcasting sales
experience. Most recently, Mr. Lanesey acted as Vice President of Sales for the
NBC affiliate in Columbus, Ohio from 1991 to 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
COMPENSATION
------------
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- -------------------------------------
OTHER RESTRICTED SECURITIES PAYOUTS
ANNUAL STOCK UNDERLYING LTIP
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($) ($) $ ($) (#) (#)(4)
- ----------------------------- ------- -------- ----- ------------ ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jamie Kellner,
Chief Executive
Officer(1)................. 1997(2) (3) -- -- -- -- 40.0 --
Douglas Gealy,
Chief Operating
Officer(1)................. 1997(2) 250,000 -- -- -- -- 30.0 --
Thomas Allen,
Chief Financial
Officer(1)................. 1997(2) 133,900 105,000 -- -- -- 30.0 --
</TABLE>
- ------------------
(1) Each of Messrs. Kellner, Gealy and Allen commenced employment with the
Company on June 17, 1997. Mr. Gealy received compensation retroactive to
January 1, 1997.
(2) This table reflects the amount of compensation to be received by the end of
the only completed fiscal year of the Company.
(3) The Consulting Agreement with Mr. Kellner does not provide for annual
compensation; however, the Compensation Committee of ACME Parent has the
discretion to pay Mr. Kellner such compensation pursuant thereto in the
future as it deems appropriate.
(4) This column contains the number of Management Carry Units of ACME Parent
owned by Messrs. Kellner, Gealy and Allen. Ownership of these units entitles
them to certain distribution rights upon achievement of certain returns by
non-management investors and are subject to forfeiture or repurchase by ACME
Parent in the event of the termination of each individual's employment by
ACME Parent under certain specified circumstances. The Management Carry
Units vest over a five-year period, subject to acceleration upon the
occurrence of certain events, such as an initial public offering, a change
in control or a sale of ACME Parent. The dollar value of payouts as a result
of ownership of these units cannot presently be determined.
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EXECUTIVE COMPENSATION
ACME Parent has entered into a six-year consulting agreement (the
'Consulting Agreement') with Jamie Kellner, and six-year employment agreements
(the 'Employment Agreements') with each of Messrs. Gealy and Allen, in each case
subject to reduction to five-year terms upon the consummation of an initial
public offering of common stock of a successor to ACME Parent (an 'ACME IPO').
The Employment Agreements provide for an initial base salary of $250,000 each
for Messrs. Allen and Gealy, subject to minimum annual adjustments for increases
in the CPI. The Consulting Agreement does not provide for an initial base fee;
however, the Compensation Committee has the discretion to pay Mr. Kellner such
compensation pursuant thereto in the future as it deems appropriate. Messrs.
Gealy and Allen are required to devote their full business time and attention to
the business of ACME Parent and its subsidiaries. In addition, Messrs. Gealy and
Allen have each agreed that during their respective engagement periods, each
will make available to the Company video broadcast or distribution opportunities
that could deliver The WB Network programming for DMA markets 20 to 100. Mr.
Kellner is not required to devote any minimum time to the performance of his
consulting duties or to make available to ACME Parent all video broadcast or
distribution opportunities of which he may be aware. In connection with their
engagement by ACME Parent, Messrs. Kellner, Gealy and Allen have each agreed
that during such engagement and for a period of three years (subject to certain
exceptions) thereafter, he will not engage in activities competitive with those
of the Company in any DMA in which the Company operates.
In connection with the St. Louis Acquisition, ACME Parent will enter into a
management agreement with Edward J. Koplar (the 'Management Agreement'). The
Management Agreement will have a term of three years, subject to automatic
renewal for successive one year terms unless either party provides notice of
termination. The Management Agreement provides for an annual fee of $1,000,000.
Mr. Koplar is required to devote a sufficient amount of time, as determined in
his reasonable judgment, necessary to manage and operate Station KPLR. Under the
Management Agreement, Mr. Koplar has the right to voluntarily terminate his
services provided thereunder and be paid any remaining consulting fees that
would be payable for the remaining term of the Management Agreement at the
effective date of such termination. In addition, if Mr. Koplar terminates the
Management Agreement for cause, he is entitled to (i) the balance of the
consulting fee which would have been payable to him through the remaining
portion of the term of the Management Agreement, had such termination not
occurred; and (ii) a maximum of $4,000,000, which amount decreases in $1,000,000
increments on each anniversary of the effective date of the Management
Agreement. In addition, ACME Parent has agreed to grant Koplar Interactive
Systems International, L.L.C. ('KISI'), an entity controlled by Mr. Koplar, the
right to encode the broadcast signals of any other television stations it owns
or operates with KISI's interactive technology.
LONG-TERM INCENTIVE PLAN
The Company intends to adopt and maintain a long-term incentive
compensation plan in which all general managers of Company stations will be
eligible to participate. It is presently contemplated that such plan will be
structured to provide incentive compensation to general managers based on the
performance of their particular stations and the Company's stations as a whole.
The ultimate terms and conditions of such plan will be determined by the
Company, subject to the approval of ACME Parent and the Institutional Investors.
The Company anticipates that it will adopt a similar plan for certain officers
who were not founders of ACME Parent.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's stations have or will enter into affiliation agreements with
The WB Network and related marketing arrangements. Jamie Kellner is an owner and
the chief executive officer of The WB Network. See 'Business--Affiliation
Agreements.'
In connection with the St. Louis Acquisition, the Company entered into the
St. Louis LMA with Koplar Communications. Edward J. Koplar is the controlling
stockholder, chief executive officer and chief operating officer of Koplar
Communications. See 'The Transactions--The Acquisitions--The St. Louis
Acquisition.' In addition, the Company intends to enter into the Management
Agreement with Mr. Koplar, and grant to an affiliate of Mr. Koplar the right to
encode the broadcast signals of Station KPLR and other television stations the
Company owns or operates with such entity's interactive technology. See
'Management--Executive Compensation.' The Company has also granted to Mr. Koplar
approval rights with respect to certain dispositions of Station KPLR by the
Company for a period of five years.
In connection with the Salt Lake City Acquisition, the Company intends to
enter into long-term agreements to lease studio facilities and transmission
tower space for Station KZAR from an affiliate of Michael V. Roberts upon terms
to be agreed upon prior to the closing of the Offering.
In connection with the Salt Lake City Acquisition, the Company will
reimburse the sellers of Roberts Broadcasting for up to $1.0 million of
development expenses incurred with respect to Station KZAR.
In connection with the Portland Acquisition, the Company entered into an
LMA with Channel 32, Incorporated for Station KWBP.
The owner of the seller of Station KAUO is a member of the immediate family
of Mr. Roberts and Steven C. Roberts.
Pursuant to an agreement among Koplar Communications, an affiliate of
Roberts Broadcasting, Mr. Roberts and Steven C. Roberts, the affiliate of
Roberts Broadcasting cannot (i) transfer its license for Station WHSL, East St.
Louis, Illinois, (ii) commit any programming time of the station for commercial
programming or advertising or (iii) enter into an LMA with respect to such
station until June 1, 1998. Upon the written consent of the affiliate of Roberts
Broadcasting, Mr. Roberts and Steven C. Roberts, these restrictions can be
extended for an additional two year term. In the event that the current
affiliation agreement for this station is terminated, the substitute format must
be substantially similar to the current home shopping network format or, in the
alternative, an infomercial format. The annual payment from Koplar
Communications for these agreements was $200,000 during the first three years
and will be $300,000 during the additional two year term.
In connection with the transactions contemplated by the LLC Agreement, the
Investment Agreement and the Acquisitions, ACME Parent and the Company have paid
or agreed to pay an aggregate of approximately $3.5 million in financial
advisory fees to CEA, Inc. CEA ACME, Inc., and CEA Capital Partners USA, L.P.
are affiliates of CEA Inc.
Immediately prior to the closing of the Offering, The TCW Group, Inc.
exchanged its right to receive a portion of the Membership Units offered in the
Offering for (i) a convertible debenture of ACME Subsidiary Holdings IV, LLC
('Holdings IV'), a subsidiary of ACME Parent, which is convertible into such
Membership Units of the Company, and (ii) preferred membership units of Holdings
IV.
Pursuant to the definitive agreements with respect to the Acquisitions, the
Company has made customary representations and warranties to the sellers and
agreed to indemnify such sellers for breach of such representations and
warranties. The holders of ACME Parent's Seller Units or their affiliates are
beneficiaries of such indemnification.
The Company believes that the terms of each of the foregoing transactions
are or were at least as favorable to the Company or its affiliates as those that
could be obtained from an unaffiliated party.
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<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND EXECUTIVE OFFICERS
Full authority for the management of ACME Parent resides in its executive
officers and the Board of Advisors of ACME Parent. The Company is managed by its
Majority Member, ACME Parent, who has exclusive control of the management of the
business and affairs of the Company. Messrs. Kellner, Gealy and Allen each hold
the same executive offices of the Company, ACME Television and ACME Parent.
Accordingly, the following table sets forth certain information regarding the
beneficial ownership of the Company's membership units after giving effect to
the Transactions by (i) certain holders or groups of related holders who,
individually or as a group, are the beneficial owners of 5% or more of the fully
diluted equity interests of the Company, (ii) the executive officers and the
Majority Member (as defined) of the Company and (iii) the executive officers and
the Majority Member of the Company as a group. The Company LLC Agreement
authorizes the issuance of 895,425 Common Units, 71,364 of which are issuable
upon the consummation of the Offering. The Percentage of Beneficial Ownership
column set forth below reflects ownership percentages based upon capital
contributions. Pursuant to the Company LLC Agreement, distributions are made on
a pro rata basis as determined by the ratio of a member's membership units to
the aggregate membership units of all members.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF BENEFICIAL
NAME(1) TYPE OF INTEREST UNITS OWNERSHIP
- --------------------------------------------------------------- ---------------- ---------- -------------
<S> <C> <C> <C>
ACME Television Holdings, LLC.................................. Common Units 823,791 92.0
Executive Officers and Majority Member:
ACME Television Holdings, LLC.................................. Common Units 823,791 92.0
Jamie Kellner(2) .............................................. Common Units 823,791 92.0
1545 East Valley Road
Montecito, CA 93108
Douglas Gealy(2) .............................................. Common Units 823,791 92.0
890 Bluespring Lane
Frontenac, MO 63131
Thomas Allen(2) ............................................... Common Units 823,791 92.0
650 Town Center Dr., Suite 850
Costa Mesa, CA 92626
Majority Member and executive officers Common Units 823,791 92.0
as a group (4 persons).......................................
</TABLE>
- ------------------
(1) Except as otherwise noted below, the persons named in the table have sole
voting power and investment power with respect to all units set forth in the
table.
(2) Messrs. Kellner, Gealy and Allen are each executive officers of the Company,
ACME Television and ACME Parent and members of the Board of Advisors of ACME
Parent. Currently, Messrs. Kellner, Gealy and Allen are the beneficial
owners of the only outstanding voting membership units of ACME Parent and,
therefore, may be deemed to be beneficial owners of the membership units of
the Company held by ACME Parent.
The following table sets forth certain information regarding the beneficial
ownership of ACME Parent's membership units and Convertible Debentures after
giving effect to the Transactions by (i) certain holders or groups of related
holders who, individually or as a group, are the beneficial owners of 5% or more
of the fully diluted equity interests of ACME Parent, (ii) the executive
officers and members of the Board of Advisors of ACME Parent and (iii) the
executive officers and members of the Board of Advisors of ACME Parent as a
group. The LLC Agreement of ACME Parent authorizes the issuance of 50,000
Investor Units, 20,000 of which are issuable upon conversion of the Convertible
Debentures (at a conversion rate equal to $1,000 of principal amount per
Investor Unit), 20,000 Seller Units, 600 Management Capital Units, 942.5 Class A
Founder Units, 533.33 Class B Founder Units, 100 Management Carry Units and 100
Terminated Management Units. The Percentage of Beneficial Ownership column set
forth below reflects ownership percentages determined assuming conversion of the
Convertible Debentures and is based upon capital contributions (or, in the case
of the Convertible Debentures, amounts to be deemed to be capital contributions
upon conversion).
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<PAGE>
Pursuant to the LLC Agreement, distributions are made in respect of the
various classes of such membership units in accordance with certain priority
distributions and ownership percentages as set forth therein, and vary among the
respective classes of membership units based upon the extent to which holders of
designated classes of such membership units have achieved specified cumulative
distributions. Currently, Messrs. Kellner, Gealy and Allen are the beneficial
owners of the only outstanding voting membership units of ACME Parent. See
'Description of ACME Parent--LLC Agreement.'
<TABLE>
<CAPTION>
PERCENTAGE OF
BENEFICIAL
NUMBER OF OWNERSHIP
UNITS OR ON AN AS
PRINCIPAL CONVERTED
AMOUNTS OF FULLY-DILUTED
NAME(1) TYPE OF INTEREST DEBENTURES BASIS
- ----------------------------------------------- ------------------------ ------------- -------------
<S> <C> <C> <C>
BancBoston Ventures Inc........................ Investor Units 8,491.7 19.5
Class B Founder Units 133.3 0.3
Convertible Debentures $ 1,000,000.0 2.3
Channel 32, Incorporated....................... Seller Units 4,400.0 10.1
ACME Capital Partners(2)(4).................... Class A Founder Units 942.5 2.2
Alta ACME, Inc.(3)(5)(6)....................... Class B Founder Units 133.3 0.3
CEA ACME, Inc.(4).............................. Class B Founder Units 133.3 0.3
Alta Communications VI, L.P.(5)(6)............. Convertible Debentures $ 6,960,315.1 16.0
Alta-Comm S by S, LLC(5)(6).................... Convertible Debentures $ 158,434.9 0.4
Alta Subordinated Debt Partners III, Convertible Debentures $ 2,372,916.7 5.4
L.P.(6) .......................................
CEA Capital Partners USA, L.P.................. Convertible Debentures $ 9,491,666.7 21.8
TCW Shared Opportunity Fund II, L.P.(7)........ Investor Units 1,590.9 3.6
Class B Founder Units 33.3 0.1
TCW Leveraged Income Trust, L.P.(7)............ Convertible Debentures $ 4,772,636.7 11.0
LINC ACME, Corporation(7)...................... Class B Founder Units 100.0 0.2
CIBC Wood Gundy Securities Corp.(8)............ Investor Units 4,593.8 10.5
Steven C. Roberts.............................. Seller Units 3,000.0 6.9
NAMED EXECUTIVE OFFICERS AND BOARD MEMBERS:
Jamie Kellner(9) .............................. Management Capital Units 290.0 0.7
1545 East Valley Road Management Carry Units 40.0 --
Montecito, CA 93108
Douglas Gealy(9) .............................. Management Capital Units 160.0 0.3
890 Bluespring Lane Management Carry Units 30.0 --
Frontenac, MO 63131
Thomas Allen(9) ............................... Management Capital Units 150.0 0.3
650 Town Center Dr., Suite 850 Management Carry Units 30.0 --
Costa Mesa, CA 92626
Michael V. Roberts ............................ Seller Units 3,000.0 6.9
1408 North Kingshighway
Suite 300
St. Louis, MO 63113
All members of the Board of Advisors and named
executive officers as a group (4 persons)...... Management Capital Units 600.0 1.4
Management Carry Units 100.0 --
Seller Units 3,000.0 6.9
</TABLE>
(Footnotes on next page)
59
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Except as otherwise noted below, the persons named in the table have sole
voting power and investment power with respect to all units or convertible
debentures set forth in the table.
(2) Certain general partners of ACME Capital Partners may be deemed to have or
share voting or investment power with respect to the membership units held
by ACME Capital Partners. The general partners of ACME Capital Partners
disclaim beneficial ownership with respect to such membership units except
to the extent of their proportionate pecuniary interests therein.
(3) Alta Communications VI, L.P., Alta Subordinated Debt Partners III, L.P. and
Alta--Comm S by S, LLC own all of the shares of Alta ACME, Inc. and
therefore each of these entities may be deemed to have or share voting or
investment power with respect to the membership units held by Alta ACME,
Inc. Alta Communications VI, L.P. owns approximately 73.3% of the shares of
Alta ACME, Inc. and therefore may be deemed to control Alta ACME, Inc. The
principals of Alta Communications VI, L.P., Alta Subordinated Debt Partners
III, L.P. and Alta Comm S by S, LLC disclaim beneficial ownership of all
such membership interests and shares of common stock of Alta ACME, Inc.
except to the extent of their proportionate pecuniary interests therein.
(4) CEA Capital Partners USA, L.P. owns all of the shares of CEA ACME, Inc. and
therefore may be deemed to have or share voting or investment power with
respect to the membership units held by CEA ACME, Inc. The principals of CEA
Capital Partners USA, L.P. disclaim beneficial ownership of all such
membership units and shares of common stock in CEA ACME, Inc. except to the
extent of their proportionate pecuniary interests therein. J. Patrick
Michael, Jr. owns a controlling interest in the general partner of CEA
Capital Partners USA, L.P. and therefore may be deemed to beneficially own
the Convertible Debentures and membership units held by CEA Capital Partners
USA, L.P. Mr. Michael disclaims beneficial ownership of all such Convertible
Debentures and membership units of CEA Capital Partners USA, L.P. except to
the extent of his proportionate pecuniary interests therein.
(5) Alta Communications VI, L.P. and Alta Comm S by S, LLC are part of an
affiliated group of investment funds referred to collectively as the Alta
Communications Funds. The general partner of Alta Communications VI, L.P. is
Alta Communications VI Management Partners, L.P. Alta Communications VI
Management Partners, L.P. exercises sole voting and investment power with
respect to all of the convertible debentures held of record by Alta
Communications VI, L.P. Alta Communications, Inc. provides investment
advisory services to each of the funds comprising the Alta Communications
Funds. Certain of the principals of Alta Communications, Inc. are partners
of Alta Communications VI Management Partners, L.P. and Alta Comm S by S,
LLC and as such may be deemed to have or share voting or investment power
with respect to the convertible debentures held by Alta Communications VI,
L.P. and Alta Comm S by S, LLC. The principals of Alta Communications, Inc.
disclaim beneficial ownership of all such convertible debentures and shares
of common stock in Alta ACME, Inc. except to the extent of the proportionate
pecuniary interests therein. In addition, certain principals of Alta
Communications, Inc. are affiliated with Burr, Egan, Deleage & Co.
(6) The general partner of Alta Subordinated Debt Partners III, L.P. ('ASDP') is
Alta Subordinated Debt Management III, L.P. Alta Subordinated Debt
Management III, L.P. exercises sole voting and investment power with respect
to all of the securities held of record by ASDP. Burr, Egan, Deleage & Co.,
directly or indirectly, provides investment advisory services to ASDP.
Certain of the principals of Burr, Egan, Deleage & Co. are partners in Alta
Subordinated Debt Management III, L.P. and, as such, may be deemed to have
or share voting or investment power with respect to the securities held by
ASDP. The principals of Burr, Egan, Deleage & Co. disclaim beneficial
ownership of all of such securities except to the extent of their
proportionate pecuniary interests therein. In addition, certain principals
of Burr, Egan, Deleage & Co. are affiliated with Alta Communications, Inc.
(7) TCW Shared Opportunity Fund II, L.P., TCW Leveraged Income Trust, L.P. and
LINC ACME, Corporation are subsidiaries of The TCW Group, Inc.
(8) CIBC Wood Gundy Securities Corp. was the Initial Purchaser in the Offering.
(9) Messrs. Kellner, Gealy and Allen are each executive officers of the Company,
ACME Intermediate and ACME Parent and members of the Board of Advisors of
ACME Parent. The Management Carry Units owned by Messrs. Kellner, Gealy and
Allen entitle them to certain distribution rights upon achievement of
certain returns by non-management investors and are subject to forfeiture or
repurchase by ACME Parent in the event of the termination of each
individual's employment by ACME Parent under certain specified
circumstances.
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<PAGE>
DESCRIPTION OF ACME PARENT
LLC AGREEMENT
The Limited Liability Company Agreement dated June 17, 1997 of ACME
Television Holdings, LLC, as amended, (the 'LLC Agreement') provides for the
admission of various persons as members of ACME Parent (the 'Members'), and sets
forth the relative interests, rights and obligations of the Members. Each Member
has such economic interest in the distributions, allocations of profits and
losses and other relative rights, duties and powers as set forth in the LLC
Agreement.
The LLC Agreement authorizes the issuance of 50,000 Investor Units, each of
which represents a capital contribution of $1,000 per unit and a preferential
return amount of $1,000 per unit (the 'Investor Units'), 20,000 Seller Units,
each of which represents a capital contribution of $1,000 per unit and a
preferential return amount of $1,000 per unit (the 'Seller Units'), 600
Management Capital Units, each of which represents a capital contribution of
$1,000 per unit and a preferential return amount of $2,000 per unit (the
'Management Capital Units'), 942.5 Class A Founder Units, each of which
represents a capital contribution of $1,000 per unit and a preferential return
amount of $1,500 per unit (the 'Class A Founder Units'), and 533.33 Class B
Founder Units, each of which represents a capital contribution of $1,000 per
unit and a preferential return amount of $1,500 per unit (the 'Class B Founder
Units' together with the Class A Founder Units, the Management Capital Units,
the Seller Units, and the Investor Units, the 'Non-Carry Units'). In addition,
the LLC Agreement authorizes the issuance of 100 Management Carry Units (the
'Management Carry Units'), each representing an initial capital contribution of
$1.00, and 100 Terminated Management Units (the 'Terminated Management Units').
The Management Carry Units, all of which are issued to Messrs. Kellner, Gealy
and Allen, are subject to repurchase, forfeiture and exchange for Terminated
Management Units as set forth in the LLC Agreement. The Management Carry Units
vest over a five-year period, subject to acceleration upon the occurrence of
certain events, such as an initial public offering, a change in control or a
sale of ACME Parent. Terminated Management Units may be issued to holders of
Management Carry Units upon their termination of employment with ACME Parent.
Each outstanding membership unit is entitled to its pro rata share of all
profits and losses of ACME Parent and to participate in distributions made by
ACME Parent from time to time. The LLC Agreement provides that, prior to any
distributions to Management Carry Units, the holders of Non-Carry Units are
entitled to a priority return of their capital contributions ($1,000 per
membership unit), plus varying preferential returns thereon (the 'Priority
Capital Distributions'). After the holders of Non-Carry Units have received
their Priority Capital Distributions, the holders of Non-Carry Units and
Management Carry Units share any residual distributions with the holders of the
Management Carry Units being entitled to receive up to fifty percent (50%) of
any such residual distributions. If any Terminated Management Units are issued
in exchange for Management Carry Units, the holders of Terminated Management
Units will be entitled to participate in distributions after all of the Priority
Distributions have been made.
The membership units include various rights and limitations with respect to
transferability as set forth in the LLC Agreement. In addition, Investor Units
are subject to redemption at any time at the option of the holders of a majority
of interest of the Investor Units after June 30, 2008 or upon any acceleration
or pre-payment of the Convertible Debentures. Each of the other membership
units, except for the Management Carry Units, are subject to redemption at the
option of the holders of a majority in interest of the applicable class of
membership units at any time upon the acceleration or pre-payment of the
Convertible Debentures.
The LLC Agreement vests full and exclusive control of the management of the
business and affairs of ACME Parent in a three member Board of Advisors (the
'Board'), provided that the Board is required to obtain the prior written
consent of the holders of at least 60% in interest of the Class B Founder Units
for any of the following actions: (i) redemption of membership units, (ii)
issuance of additional membership units, (iii) change in number of authorized
membership units, (iv) payment or declaration of any dividend or distribution,
(v) authorization of any merger or consolidation of ACME Parent or any of its
subsidiaries, (vi) authorization of the reorganization, sale or sale of material
assets of ACME Parent or any of its Subsidiaries, (vii) authorization of any
reclassification or recapitalization of the outstanding membership units, (viii)
engagement by ACME Parent or its subsidiaries in any business other than the
business now conducted or contemplated, (ix) alteration, modification or
amendment of the LLC Agreement or the Investment Agreement and (x) application
or consent to appointment of a receiver, trustee, custodian or liquidator;
admission in writing by ACME Parent of the inability to pay debts; general
assignment for benefit of creditors; and any action to take advantage of
61
<PAGE>
bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
liquidation laws; provided that any of the actions in clause (x) above shall
require the prior written consent of members holding all of the Class B Founder
Units and a majority in interest of each class of the Class A Founder Units and
the Management Capital Units, voting separately. The size of the Board will
increase to at least five members no later than December 17, 1997 upon election
of two additional individuals by the holders of a majority of the Management
Carry Units, subject to the approval of the holders of a majority in interest of
the Management Carry Units and at least 60% in interest of the Class B Founder
Units. In addition, the Company anticipates that Messrs. Koplar and Roberts will
become members of the Board of Advisors upon consummation of the St. Louis
Acquisition and the Salt Lake City Acquisition, respectively.
Messrs. Kellner, Gealy and Allen are the initial members of the Board and
their successors will be appointed by the holders of the Management Carry Units
so long as none of the following events has occurred: (i) June 30, 2002, (ii)
the thirtieth day after Jamie Kellner shall have ceased to act as Chairman and
Chief Executive Officer of ACME Parent or be employed by The WB Network in a
senior management capacity, (iii) the earlier of (A) the one-hundred and
twentieth (120th) day after a clear and unequivocal announcement by Time Warner
or The WB Network of the cessation of operations of The WB Network or (B) the
thirtieth (30th) day after cessation of operation of The WB Network, (iv) the
thirtieth (30th) day after the date Time Warner ceases to own at least
thirty-five percent (35%) of the outstanding equity interests of The WB Network,
(v) the holders of any indebtedness in aggregate amount of $5,000,000 take any
action to accelerate any of the Indebtedness outstanding or foreclose on
collateral pledged in connection therewith or (vi) ACME Parent breaches certain
terms and conditions of the LLC Agreement or the Investment Agreement. If any
one of the aforementioned events occurs and ACME Parent has not consummated an
initial public offering, the holders of a majority in interest of the Class B
Founder Units shall be entitled to remove all members of the existing Board of
Advisors and to elect six members of a reconstituted Board of Advisors made up
of seven members and the holders of a majority in interest of the Management
Capital Units shall be entitled to elect the remaining member of the
reconstituted Board of Advisors. So long as any one of the aforementioned events
has not occurred that has not been waived in writing, Messrs. Kellner, Gealy,
Allen and Koplar will be entitled to two votes on each matter to be voted on at
any meeting of the Board and each other member of the Board will be entitled to
one vote, and all actions to be taken by the Board will be by vote or written
consent of a majority of the votes cast by Board members.
The LLC Agreement also provides for indemnification of the Board of
Advisors, any Affiliate of the members of the Board of Advisors and each person
serving as an officer, employee or other agent of the ACME Parent, including
persons serving at the request of ACME Parent as directors, managers, officers,
employees, agents or trustees of another organization in which ACME Parent has
any interest as a shareholder, creditor or otherwise, with respect to
liabilities incurred acting on behalf of ACME Parent, subject to limitations
imposed thereon by applicable law.
So long as ACME Parent has not consummated an initial public offering, ACME
Parent will have a compensation committee (the 'Compensation Committee')
consisting of five (5) members, three (3) of which shall be appointed by holders
of a majority in interest of the Class B Founder Units, one (1) of which shall
be, so long as he is an officer of ACME Parent, Jamie Kellner, and one (1) of
which shall be an unaffiliated member of the Board of Advisors. Any actions by
the Compensation Committee shall require the affirmative vote of three (3) of
the five (5) members of the Compensation Committee. The Compensation Committee
has the exclusive power and authority to determine annually the appropriate
annual compensation for each of the officers of ACME Parent. Except for Mr.
Kellner, the members of the Compensation Committee have not yet been named.
INVESTMENT AGREEMENT
Pursuant to the Investment Agreement, certain of the Institutional
Investors agreed to purchase $40.0 million in the aggregate of Investor Units
and Convertible Debentures of ACME Parent. The Investment Agreement also
provides that the holders of the Investor Units and Convertible Debentures,
voting together as a class, have the right to consent to certain transactions by
ACME Parent and its subsidiaries, including incurring indebtedness for borrowed
money (other than the Notes and the Revolving Credit Facility), acquisitions of
additional stations or licenses, amendments to its organizational documents and
the making of distributions in respect of its membership units.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Set forth below are descriptions of certain indebtedness, to be incurred by
ACME Television and its subsidiaries in connection with the Pending
Acquisitions. Such indebtedness constitutes direct obligations of ACME
Television and its subsidiaries, and, as such constitute claims against such
entities prior to the Company's equity interest therein.
REVOLVING CREDIT FACILITY
On August 15, 1997, ACME Television entered into a two-year, senior secured
revolving credit facility with $22.5 million of available borrowings.
ACME Television intends to supersede this revolving credit facility in its
entirety by an amended and restated revolving credit facility (the 'Revolving
Credit Facility') with Canadian Imperial Bank of Commerce, New York agency, as
agent, and the several lenders party thereto. The Revolving Credit Facility is
expected to be a five-year senior secured revolving credit facility with $40.0
million of available borrowings. Proceeds of borrowings under the Revolving
Credit Facility may be used for capital expenditures, working capital,
acquisitions (with the prior approval of the lenders) and general corporate
purposes. All subsidiaries of ACME Television and any future subsidiaries (other
than ACME Finance Corporation) will be guarantors (the 'Bank Guarantors') of the
Revolving Credit Facility, which is collateralized by a security interest in all
assets of and stock of the Bank Guarantors. Borrowings under the Revolving
Credit Facility are anticipated to bear interest, payable quarterly, at LIBOR or
the prime rate (as selected by ACME Television) plus spreads over such rates
that vary with ACME Television's ratio of total debt to EBITDA.
The Revolving Credit Facility is expected to require prepayments and
concurrent reductions of the commitment from asset sales or other transactions
outside the ordinary course of business (subject to provisions permitting the
proceeds of certain sales to be used to make approved acquisitions within stated
time periods without reducing the commitments of the lenders) and will contain
covenants limiting the amounts of indebtedness that ACME Television may incur,
requiring the maintenance of minimum operating cash flow, a ratio of EBITDA to
cash interest expense and the maintenance of a maximum amount of senior debt to
EBITDA and total debt to EBITDA and limiting capital expenditures and other
restricted payments without the express consent of the lenders. The Revolving
Credit Facility will also contain other customary covenants, representations,
warranties, indemnities, conditions precedent to closing and borrowing, and
events of default.
All indebtedness of ACME Television to any affiliate is expressly
subordinated to the repayment of all amounts owed in respect of the Revolving
Credit Facility.
CAPITAL LEASE FACILITIES
ACME Television intends to enter into a five-year capital lease facility
with General Electric Capital Corporation (the 'GECC Capital Lease Facility')
providing for up to $12.5 million of financing to purchase television station
tower, antenna and production equipment. The GECC Capital Lease Facility will be
amortized by sixty equal monthly payments and will contain prepayment penalties
of 5%, 4%, 3% and 2% during the first, second, third and fourth years,
respectively, after its execution date.
ACME Television intends to enter into a second capital lease facility on
terms substantially similar to the GECC Capital Lease Facility with NationsBank
(together with the GECC Capital Lease Facility, the 'Capital Lease Facilities')
providing for up to $7.5 million of financing at such time as such financing is
required pursuant to the Company's capital expenditure plan.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Original Notes were sold by the Issuers to the Initial Purchaser
pursuant to the Purchase Agreement. The Initial Purchaser subsequently resold
the Original Notes (i) to 'qualified institutional buyers' (as defined in Rule
144A under the Securities Act) in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A, (ii) to a
limited number of institutional 'accredited investors' (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that prior to the purchase
of any securities, executed and delivered a signed letter to the Initial
Purchaser containing certain representations and agreements and (iii) outside
the United States in compliance with Regulation S under the Securities Act.
As a condition to the Purchase Agreement, the Issuers entered into the
Registration Rights Agreement pursuant to which the Issuers agreed at their
expense, for the benefit of the holders of the Original Notes, to (i) use their
reasonable best efforts to file, within 45 days after the date of the original
issuance of the Original Notes, a registration statement (the 'Exchange Offer
Registration Statement') with the Commission with respect to a registered offer
to exchange the Original Notes for the Exchange Notes, which have terms
identical in all material respects to the Original Notes, (except that the
Exchange Notes do not contain terms with respect to transfer restrictions) and
(ii) use their reasonable best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 150 days
after the Issue Date. Upon the Exchange Offer Registration Statement being
declared effective, the Issuers will offer the Exchange Notes in exchange for
surrender of the Original Notes. The Issuers will keep the Exchange Offer open
for not less than 30 days (or longer if required by applicable law) after the
date notice of the Exchange Offer is mailed to the holders of the Original
Notes. For each Original Note surrendered to the Issuers pursuant to the
Exchange Offer, the holder of such Original Note will receive an Exchange Note
having a principal amount at maturity equal to that of the surrendered Original
Note, which shall be cancelled. Under existing interpretations by the Staff, the
Exchange Notes would in general be freely transferable after the Exchange Offer
without further registration under the Securities Act.
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an 'affiliate' (as defined
in Rule 405 of the Securities Act) of the Issuers, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Original Notes and (iii) it
is acquiring the Original Notes in the ordinary course of its business (a Holder
unable to make the foregoing representations is referred to as a 'Restricted
Holder'). A Restricted Holder will not be able to participate in the Exchange
Offer and may only sell its Original Notes pursuant to a registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K under the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Each broker-dealer (other than a Restricted Holder) that receives Exchange
Notes for its own account pursuant to the Exchange Offer (a 'Participating
Broker-Dealer') is required to acknowledge in the Letter of Transmittal that it
acquired the Original Notes as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection with the
resale of such Exchange Notes. Based upon interpretations by the Staff of the
Commission, the Issuers believe that Exchange Notes issued pursuant to the
Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer upon
compliance with the prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act. The Issuers have
agreed that, for a period of 180 days following consummation of the Exchange
Offer, they will make this Prospectus available, for use in connection with any
such resale, to any Participating Broker-Dealer and other persons, if any, with
similar prospectus delivery requirements. The Issuers believe that during such
period of time, delivery of this Prospectus, as it may be amended or
supplemented, will satisfy the prospectus delivery requirements of a
Participating Broker-Dealer engaged in market-making or other trading
activities. Any Participating Broker-Dealer that resells Exchange Notes may be
deemed to be an 'underwriter' within the meaning of the Securities Act and must
deliver a prospectus in connection with such resales of Exchange Notes. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an 'underwriter' within the meaning of the Securities Act. See
'Plan of Distribution.' In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the Exchange
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Notes may not be offered or sold unless they have been registered or such
securities laws have been complied with. The Issuers have agreed, pursuant to
the Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the Exchange Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the Exchange
Notes may request in writing.
Based upon interpretations by the Staff of the Commission, the Issuers
believe that Exchange Notes issued pursuant to the Exchange Offer may be offered
for resale, resold, and otherwise transferred by a Holder thereof (other than a
Restricted Holder or a Participating Broker-Dealer) without compliance with the
registration and prospectus delivery requirements of the Securities Act.
In the event that (a) the Exchange Offer Registration Statement is not
filed with the Commission on or prior to the 45th day following the Issue Date
or an initial Shelf Registration Statement is not filed within 30 days following
delivery of a Shelf Notice prior to the filing date, (b) the Exchange Offer
Registration has not been declared effective on or prior to the 150th day
following the Issue Date, (c) the Exchange Offer is not consummated on or prior
to the 180th day following the Issue Date, (d) a Shelf Registration Statement is
not declared effective on or prior to the 180th day following the Issue Date, or
(e) the Exchange Offer Registration Statement ceases to be effective at any time
prior to the time that the Exchange Offer is consummated, the Issuers shall pay
as liquidated damages to each holder of the Original Notes an amount (the
'Damage Amount') equal to 0.50% per annum of the average Accreted Value of the
Original Notes during the first 90 days during which any such default exists,
and the Damage Amount will be increased by an additional 0.25% per annum of the
average Accreted Value of the Original Notes for each 90-day period that any
such Damage Amount continues to accrue; provided that in no event shall the rate
at which the Damage Amount accrues be more than 2%. Upon (w) the filing of the
applicable Registration Statement in the case of clause (a) above, (x) the
effectiveness of the Exchange Offer Registration Statement in the case of clause
(b) above or resumption of effectiveness in the case of clause (e) above, (y)
the consummation of the Exchange Offer in the case of clause (c) above or (z)
the effectiveness of a Shelf Registration Statement in the case of clause (d)
above, the Damage Amount will cease to accrue from the date of such filing,
effectiveness or consummation, as the case may be.
If applicable, in the event that the Shelf Registration Statement ceases to
be effective prior to the second anniversary of the Issue Date for a period in
excess of 45 days whether or not consecutive, in any given year, then, in
addition to any liquidated damages pursuant to the foregoing paragraph, the
Issuers shall pay as additional liquidated damages to each holder of Original
Notes an amount equal to 0.50% per annum of the average Accreted Value of the
Original Notes during the first 90 days following such 46th day in the
applicable year such Shelf Registration Statement ceases to be effective. Such
additional liquidated damages will increase by an additional 0.25% per annum of
the average Accreted Value for each additional 90 days that such Shelf
Registration Statement is not effective, subject to the same aggregate maximum
increase in liquidated damages of 2.0% referred to above. Upon the filing of the
Exchange Offer Registration Statement, the effectiveness of the Exchange Offer
Registration Statement, or the consummation of the Exchange Offer, as the case
may be, liquidated damages on the Original Notes will be reduced to the extent
that such liquidated damages related to the failure of any such event to have
occurred. Upon the effectiveness of a Shelf Registration Statement, the
liquidated damages on the Original Notes shall cease unless and until started
again as described above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Original
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Original Notes or whose Original Notes were tendered but unaccepted
will not have any further registration rights and such Original Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for such Original Notes could be adversely affected.
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TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Original
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on the Expiration Date. The Issuers will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of Original Notes
accepted in the Exchange Offer. Holders may tender some or all of their Original
Notes pursuant to the Exchange Offer. However, Original Notes may be tendered
only in integral multiples of $1,000.
The Issuers will keep the Exchange Offer open for not less than 30 days or
longer if required by applicable law, after the date notice of the Exchange
Offer is mailed to holders of the Original Notes.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Original Notes except (i) the Exchange Notes will be registered
under the Securities Act and hence will not bear legends restricting the
transfer thereof and (ii) the holders of the Exchange Notes will not be entitled
to certain rights of the holders of the Original Notes under the Registration
Rights Agreement, which rights will terminate upon the consummation of the
Exchange Offer. The Exchange Notes will evidence the same debt as the Original
Notes. The Exchange Notes will be issued under and entitled to the benefits of
the Indenture, which also authorized the issuance of the Original Notes, such
that both series will be treated as a single class of debt securities under the
Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange.
As of the date of this Prospectus, $71,634,000 aggregate principal amount
at maturity of the Original Notes are outstanding. This Prospectus, together
with the Letter of Transmittal, is being sent to all registered holders of
Original Notes. There will be no fixed record date for determining registered
holders of Original Notes entitled to participate in the Exchange Offer.
Holders do not have any appraisal or dissenters' rights under the law or
under the Indenture in connection with the Exchange Offer. The Issuers intend to
conduct the Exchange Offer in accordance with the provisions of the Registration
Rights Agreement and the applicable requirements of the Exchange Act, and the
rules and regulations of the Commission thereunder.
Original Notes which are not tendered for exchange in the Exchange Offer
will remain outstanding and will be entitled to the rights and benefits such
holders have under the Indenture and, in certain limited circumstances, the
Registration Rights Agreement.
The Exchange Agent will act as agent for the tendering holders for the
purposes of receiving the Exchange Notes from the Issuers. The Issuers expressly
reserve the right to amend or terminate the Exchange Offer, and not to accept
for exchange any Original Notes not theretofore accepted for exchange, upon the
occurrence of any of the conditions specified below under '--Certain Conditions
to the Exchange Offer.'
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Original Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Original Notes pursuant to the Exchange Offer. The Issuer will pay all
reasonable expenses, other than certain applicable taxes described below, in
connection with the Exchange Offer. See '--Fees and Expenses.'
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term 'Expiration Date' shall mean 5:00 p.m., New York City time on
, 1998, unless the Issuers, in their sole discretion, extend the
Exchange Offer, in which case the term 'Expiration Date' shall mean the latest
date and time to which the Exchange Offer is extended.
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In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Original Notes an announcement thereof, each prior to 5:00 p.m., New
York City time, on the prior business day before the then Expiration Date.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting for exchange any Original Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under
'--Certain Conditions to the Exchange Offer' shall not have been satisfied, by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of Original Notes. If the Exchange Offer is amended in a
manner determined by the Issuers to constitute a material change, the Issuers
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders, and the Issuers will extend the
Exchange Offer, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such period.
ORIGINAL ISSUE DISCOUNT OF ORIGINAL NOTES
A holder of Exchange Notes will be required to include the accretion of the
original issue discount at which the Original Notes were issued as gross income
for U.S. federal income tax purposes prior to the receipt of the cash payments
to which such income is attributable. See 'Certain U.S. Federal Income Tax
Considerations Relating to the Notes--U.S. Holders--Original Issue Discount on
the Original Notes.'
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Issuers will not
be required to accept for exchange, or exchange any Exchange Notes for, any
Original Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of any Original Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Issuers, might materially impair
the ability of the Issuers to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Issuers, or
any material adverse development has occurred in any existing action or
proceeding with respect to the Issuers or any of their subsidiaries;
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Issuers or any of their
subsidiaries has occurred which, in the reasonable judgment of the Issuers,
might materially impair the ability of the Issuers to proceed with the
Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Issuers;
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the reasonable judgment of the Issuers, might materially
impair the ability of the Issuers to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Issuers;
(d) there shall have occurred (i) any general suspension of trading
in, or general limitation on prices for securities on the New York Stock
Exchange, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by any
governmental agency or authority that adversely affects the extension of
credit to the Issuers or (iii) a commencement of war, armed hostilities or
other similar international calamity directly or indirectly involving the
United States; or, in the case any of the foregoing exists at the time of
commencement of the Exchange Offer, a material acceleration or worsening
thereof; or
(e) any governmental approval has not been obtained, which approval
the Issuers shall, in their reasonable judgment, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Issuers expressly reserve the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Original Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Original Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Issuers. Any Original
Notes not accepted for exchange for any reason will be returned without expense
to the tendering
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holder thereof as promptly as practicable after the expiration or termination of
the Exchange Offer. The Issuers expressly reserve the right to amend or
terminate the Exchange Offer, and not to accept for exchange any Original Notes
not theretofore accepted for exchange, upon the occurrence of any of the
conditions of the Exchange Offer specified above under '--Certain Conditions to
the Exchange Offer.' The Issuers will give oral or written notice of any
extension, amendment, non-acceptance or termination to the holders of the
Original Notes as promptly as practicable, such notice in the case of any
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by the Issuers regardless of the circumstances giving rise to any such
condition or may be waived by the Issuers in whole or in part at any time and
from time to time in their sole discretion. The failure by the Issuers at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Issuers will not accept for exchange any Original Notes
tendered, and no Exchange Notes will be issued in exchange for any such Original
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Exchange Offer Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939 (the 'TIA').
PROCEDURES FOR TENDERING ORIGINAL NOTES
Only a holder of Original Notes may tender such Original Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof, have the signature
thereon guaranteed, and mail or otherwise deliver such Letter of Transmittal, or
such facsimile, to the Exchange Agent prior to 5:00 p.m., New York City time, on
the Expiration Date or, in the alternative, comply with DTC's ATOP procedures
described below in '--Book-Entry Transfer; ATOP.' In addition, either (i)
Original Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of book-entry transfer (a 'Book-Entry
Confirmation') of such Original Notes, if such procedure is available, into the
Exchange Agent's account at DTC (the 'Book-Entry Transfer Facility') pursuant to
the procedure for book-entry transfer described below or properly transmitted
Agent's Message (as defined) must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal and other required documents must be received by the Exchange Agent
at the address set forth below under '--Exchange Agent' prior to 5:00 p.m., New
York City time, on the Expiration Date. The Letter of Transmittal must be
completed, signed and delivered even if tender instructions are being
transmitted through DTC's ATOP procedures.
Holders of Original Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP, for which
the transaction will be eligible. DTC participants that are accepting the
Exchange Offer must transmit their acceptances to DTC, which will verify the
acceptance and execute a book-entry delivery to the Exchange Agent's account at
DTC. DTC will then send an Agent's Message to the Exchange Agent for its
acceptance. Each DTC participant transmitting an acceptance of the Exchange
Offer through the ATOP procedures will be deemed to have agreed to be bound by
the terms of this Letter of Transmittal. Nevertheless, in order for such
acceptance to constitute a valid tender of the DTC participant's Original Notes,
such participant must complete and sign a Letter of Transmittal and deliver it
to the Exchange Agent before the Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Issuers in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF ORIGINAL NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO THE ISSUERS. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS,
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TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender such Original Notes should contact the registered holder promptly and
instruct such registered holder of Original Notes to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering its Original Notes, either make appropriate
arrangements to register ownership of the Original Notes in such owner's name or
obtain a properly completed bond power from the registered holder of Original
Notes. The transfer of registered ownership may take considerable time and may
not be able to be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Original Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled 'Special Issuance
Instructions' or 'Special Delivery Instructions' on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an 'eligible guarantor institution' within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an 'Eligible Institution').
If the Letter of Transmittal is signed by a person other than the
registered holder of any Original Notes listed therein, such Original Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Original
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Original Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Issuers, provide evidence satisfactory to the Issuers of their authority to so
act which must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Original Notes and withdrawal of tendered
Original Notes will be determined by the Issuers in their sole discretion, which
determination will be final and binding. The Issuers reserve the absolute right
to reject any and all Original Notes not properly tendered or any Original Notes
the Issuers' acceptance of which would, in the opinion of counsel for the
Issuers, be unlawful. The Issuers also reserve the right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
Issuers' interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within such time as the
Issuers shall determine. Although the Issuers intend to notify holders of
defects or irregularities with respect to tenders of Original Notes, neither the
Issuers, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Original Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Original Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holder, unless
otherwise provided in the Letter of Transmittal, as soon as practicable after
the expiration or termination of the Exchange Offer.
In all cases, issuance of Exchange Notes for Original Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of Original Notes or a timely Book-Entry
Confirmation of such Original Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Original Notes are
not accepted for exchange for any reason set forth in the terms and conditions
of the Exchange Offer or if Original Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Original Notes will be returned without expense to the tendering
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holder thereof (or, in the case of Original Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
non-exchanged Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER; ATOP
The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Original Notes at DTC for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in DTC may make book-entry delivery of the Original Notes by causing
DTC to transfer such Original Notes into the Exchange Agent's account with
respect to the Original Notes in accordance with DTC's procedures for such
transfer. Although delivery of the Original Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, a Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's ATOP to tender.
Accordingly, participants in DTC's ATOP may, in lieu of physically completing
and signing the Letter of Transmittal and delivering it to the Exchange Agent,
electronically transmit their acceptance of the Exchange Offer by causing DTC to
transfer the Original Notes to the Exchange Agent in accordance with the DTC's
ATOP procedures for transfer. The DTC will then send an Agent's Message to the
Exchange Agent.
The term 'Agent's Message' means a message transmitted by DTC, received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which states
that DTC has received an express acknowledgment from a participant in DTC's ATOP
that is tendering Original Notes which are the subject of such book entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal (or, in the case of an Agent's Message
relating to guaranteed delivery, that such participant has received and agrees
to be bound by the applicable Notice of Guaranteed Delivery), and that the
agreement may be enforced against such participant.
Each DTC participant transmitting an acceptance of the Exchange Offer
through the ATOP Procedures will be deemed to have agreed to be bound by the
terms of the Letter of Transmittal. Nevertheless, in order for such acceptance
to constitute a valid tender of the DTC participant's Original Notes, such
participant must complete and sign a Letter of Transmittal and deliver it to the
Exchange Agent before the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available or (ii) who cannot deliver their Original
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date or (iii) who cannot complete the procedure
for book-entry transfer on a timely basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Original Notes and the principal amount of Original Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
three (3) New York Stock Exchange trading days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof) together with the Original
Notes or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
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(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), or properly transmitted Agent's Message as well as all
tendered Original Notes in proper form for transfer or a Book-Entry
Confirmation, as the case may be, and all other documents required by the
Letter of Transmittal, are received by the Exchange Agent within three (3)
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
For a withdrawal to be effective, (i) a written notice of withdrawal must
be received by the Exchange Agent at one of the addresses set forth below under
'--Exchange Agent' or (ii) holders must comply with the appropriate procedures
of DTC's ATOP system. Any such notice of withdrawal must specify the name of the
person having tendered the Original Notes to be withdrawn, identify the Original
Notes to be withdrawn (including the principal amount of such Original Notes),
and (where certificates for Original Notes have been transmitted) specify the
name in which such Original Notes were registered, if different from that of the
withdrawing holder. If certificates for Original Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Original Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Original Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Issuers, whose determination shall be final and binding on all parties. Any
Original Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Original Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Original Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Original Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Original Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Original Notes may be retendered by following
one of the procedures described under '--Procedures for Tendering' above at any
time on or prior to the Expiration Date.
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EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent of the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
<TABLE>
<S> <C>
BY REGISTERED OR BY HAND:
BY CERTIFIED MAIL OR
OVERNIGHT COURIER: Wilmington Trust Company
c/o Harris Trust Company of
Wilmington Trust Company New York,
Corporate Trust Administration as Agent
1100 North Market Street 88 Pine Street
Wilmington, Delaware 19890-0001 19th Flour
Wall Street Plaza
New York, New York 10005
BY FACSIMILE:
Wilmington Trust Company
Corporate Trust Administration
Facsimile: (302) 651-1079
Confirm by Telephone: (302)
651-8869
Attn. Jill Rylee
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES; INDEMNIFICATION
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Issuers and its affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include registration fees, fees and
expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, and related fees and expenses but exclude the fees of counsel to
the Initial Purchaser.
The Issuers have agreed to indemnify the Initial Purchaser against certain
liabilities, including liabilities under the Securities Act. In addition, the
Issuers have agreed to indemnify each Participating Broker-Dealer selling
Exchange Notes during the period of 180 days after the consummation of the
Exchange Offer, the officers and directors of each such broker-dealer, and each
person, if any, who controls any such broker-dealer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities including reasonable
legal fees and expenses caused by, arising out of or based upon any untrue
statement or alleged untrue statement of or any omission or alleged omission to
state therein a material fact contained in the Exchange Offer Registration
Statement or this Prospectus, subject to certain restrictions.
TRANSFER TAXES
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Original Notes pursuant to the Exchange Offer. If, however, certificates
representing Original Notes for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be issued in the name of, any person
other than the
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registered holder of Original Notes tendered, or if tendered Notes are
registered in the name of any person other
than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Original Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
Holders who tender their Original Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Issuers to register Exchange Notes in the name of, or request that
Original Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes, as reflected in the Issuers' accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer and the unamortized expenses
related to the issuance of the Original Notes will be amortized over the term of
the Notes.
REGULATORY APPROVALS
The Issuers do not believe that the receipt of any material federal or
state regulatory approvals will be necessary in connection with the Exchange
Offer, other than the effectiveness of the Exchange Offer Registration Statement
under the Securities Act.
OTHER
Participation in the Exchange Offer is voluntary and holders of Original
Notes should carefully consider whether to accept the terms and conditions
thereof. Holders of the Original Notes are urged to consult their financial and
tax advisors in making their own decision on what action to take with respect to
the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes, as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. To the
extent Original Notes are tendered and accepted in the Exchange Offer, the
trading market, if any, for the Original Notes not so tendered could be
adversely affected. Upon consummation of this Exchange Offer, the Issuers have
no further obligations to provide for the registration under the Securities Act
of the Original Notes except under certain limited circumstances. These
circumstances involve Exchange Notes provided to the Initial Purchaser for those
Original Notes having the status of an unsold allotment in the initial
distribution and Exchange Notes held by Participating Broker-Dealers. Based on
interpretations by the Staff, Exchange Notes issued pursuant to the Exchange
Offer may be offered for resale, resold or otherwise transferred by holders
thereof (other than any such holder which is an 'affiliate' of the Issuers
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer. Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See 'Plan of Distribution.'
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DESCRIPTION OF THE TELEVISION NOTES
As used in this 'Description of the Television Notes' section, the 'Notes'
refers to the 10 7/8% Senior Discount Notes due 2004 of ACME Television, LLC and
ACME Finance Corporation. The Television Original Notes were issued, and the
Television Exchange Notes will be issued, under an Indenture, dated as of
September 30, 1997 (as used in this 'Description of the Television Notes'
section, the 'Indenture'), by and among the Issuers and Wilmington Trust
Company, as trustee (as used in this 'Description of the Television Notes'
section, the 'Trustee'). The form and terms of the Television Exchange Notes
will be the same as the form and terms of the Television Original Notes except
that (i) the Television Exchange Notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof and (ii)
the holders of the Television Exchange Notes will not be entitled to certain
rights of holders of Television Original Notes as set forth in the Television
Exchange Offer Registration Statement, which rights terminate upon consummation
of the Television Exchange Offer. The Television Exchange Notes and Television
Original Notes are referred to herein collectively as the 'Notes.' The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
'TIA'), as in effect on the date of the Indenture. The Notes are subject to all
such terms, and holders of the Notes are referred to the Indenture and the TIA
for a statement of them. The following is a summary of the material terms and
provisions of the Notes. This summary does not purport to be a complete
description of the Notes and is subject to the detailed provisions of, and
qualified in its entirety by reference to, the Notes and the Indenture
(including the definitions contained therein). A copy of the Indenture and Form
of Notes are filed as exhibits to the Television Exchange Offer Registration
Statement. As used in this 'Description of the Television Notes' section, the
'Company' refers to ACME Television, LLC, but not its Subsidiaries; and the
'Issuers' refer to the Company and ACME Finance Corporation. Definitions
relating to certain capitalized terms are set forth under '--Certain
Definitions.' Capitalized terms that are used but not otherwise defined herein
have the meanings ascribed to them in the Indenture and such definitions are
incorporated herein by reference.
GENERAL
The Notes are joint and several obligations of the Issuers. The Notes are
limited to $175.0 million aggregate principal amount at maturity. The Notes are
general senior unsecured obligations of the Issuers, ranking pari passu in right
of payment to all future unsubordinated indebtedness of the Issuers and senior
in right of payment to any subordinated indebtedness of the Issuers. The
Television Original Notes were issued at a substantial discount to their
aggregate principal amount at maturity such that the gross proceeds from the
issuance of the Television Original Notes were approximately $127.4 million.
Based on the issue price thereof, the yield to maturity of the Notes is 10 7/8%
per annum (computed on a semi-annual bond equivalent basis).
The Notes are guaranteed, on a senior unsecured basis, as to payment of
principal, premium, if any, and interest, jointly and severally by the
Guarantors.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on September 30, 2004. Cash interest will not accrue
or be payable on the Notes prior to September 30, 2000. Thereafter, cash
interest on the Notes will accrue at the rate of 10 7/8% per annum and will be
payable semi-annually on each March 31 and September 30, commencing March 31,
2001, to the holders of record of Notes at the close of business on the March 15
and September 15 immediately preceding such interest payment date. Cash interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from September 30, 2000. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
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OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Issuers, in whole at any
time or in part from time to time, on or after September 30, 2001 at the
following redemption prices (expressed as percentages of the principal amount of
maturity thereof), together, in each case, with accrued and unpaid interest, if
any, to the redemption date, if redeemed during the twelve-month period
beginning on September 30 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------ ----------
<S> <C>
2001.................................................................... 105.438%
2002.................................................................... 102.719%
2003 and thereafter..................................................... 100.000%
</TABLE>
In addition, the Issuers may redeem in the aggregate up to 35% of the
aggregate principal amount at maturity of Notes at any time and from time to
time prior to September 30, 2000 at a redemption price equal to 110.875% of the
Accreted Value thereof, out of the Net Proceeds of one or more Public Equity
Offerings; provided that not less than 65% of the aggregate principal amount at
maturity of Notes is outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 90 days following the
closing of any such Public Equity Offering; provided that if the Public Equity
Offering shall be Common Stock of the Parent the proceeds of such Public Equity
Offering must be contributed to the Company as common equity.
In the event of a redemption of fewer than all of the Notes, the Trustee
shall select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, or while such Notes are listed,
or if such Notes are not then listed on a national securities exchange, on a pro
rata basis, by lot or in such other manner as the Trustee shall deem fair and
equitable. The Notes will be redeemable in whole or in part upon not less than
30 nor more than 60 days' prior written notice, mailed by first class mail to a
holder's last address as it shall appear on the register maintained by the
Registrar of the Notes. On and after any redemption date, Accreted Value will
cease to accrete or interest will cease to accrue, as the case may be, on the
Notes or portions thereof called for redemption unless the Issuers shall fail to
redeem any such Note.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Additional Indebtedness
The Issuers will not, and will not permit any of their Subsidiaries to,
directly or indirectly, incur (as defined) any Indebtedness (including Acquired
Indebtedness); provided that if no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the incurrence of
such Indebtedness, the Issuers may incur Indebtedness (and the Company and its
Subsidiaries may incur Acquired Indebtedness) if after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Issuers' Consolidated Leverage Ratio is less than 7.0 to 1. The
accretion of original issue discount (and any accruals of interest) on the Notes
shall not be deemed an incurrence of Indebtedness for purposes of this covenant.
Notwithstanding the foregoing, the Issuers and their Subsidiaries may incur
Permitted Indebtedness; provided that the Issuers will not incur any Permitted
Indebtedness that ranks junior in right of payment to the Notes that has a
maturity or mandatory sinking fund payment prior to the maturity of the Notes.
The Issuers will not, and will not permit any of their Subsidiaries to,
incur any Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated in right of payment to any other
Indebtedness of the Issuers or any of their Subsidiaries unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate in right of payment to the Notes
or the Guarantee of such Subsidiary, as the case may be, pursuant to
subordination provisions that are substantively identical to the subordination
provisions of such Indebtedness (or such agreement) that are most favorable to
the holders of any other Indebtedness of the Company or such Subsidiary, as the
case may be.
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Limitation on Restricted Payments
The Issuers will not make, and will not permit any of their Subsidiaries
to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Issuers could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under '--Limitation on Additional
Indebtedness' above; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 100% of the Issuer's Cumulative EBITDA minus
1.4 times the Company's Cumulative Consolidated Interest Expense, (2) 100%
of the aggregate Net Proceeds received by the Company from the issue or
sale after the Issue Date of Capital Stock (other than Disqualified Capital
Stock or Capital Stock of the Company issued to any Subsidiary of the
Company) of the Company or any Indebtedness or other securities of the
Company convertible into or exercisable or exchangeable for Capital Stock
(other than Disqualified Capital Stock) of the Company which has been so
converted, exercised or exchanged, as the case may be, and (3) without
duplication of any amounts included in clause (c)(2) above, 100% of the
aggregate Net Proceeds received by the Company from any equity contribution
from a holder of the Company's Capital Stock, excluding, in the case of
clauses (c)(2) and (3), any Net Proceeds from a Public Equity Offering to
the extent used to redeem the Notes. For purposes of determining under this
clause (c) the amount expended for Restricted Payments, cash distributed
shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) the repurchase, redemption or other acquisition or retirement of
any shares of Capital Stock of the Company or Indebtedness subordinated to the
Notes by conversion into, or by or in exchange for, shares of Capital Stock of
the Company (other than Disqualified Capital Stock), or out of the Net Proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of other shares of Capital Stock of the Company (other than Disqualified Capital
Stock), (iii) the redemption or retirement of Indebtedness of the Company
subordinated to the Notes in exchange for, by conversion into, or out of the Net
Proceeds of, a substantially concurrent sale or incurrence of Indebtedness of
the Company (other than any Indebtedness owed to a Subsidiary) that is
contractually subordinated in right of payment to the Notes to at least the same
extent as the Indebtedness being redeemed or retired, (iv) the retirement of any
shares of Disqualified Capital Stock of the Company by conversion into, or by
exchange for, shares of Disqualified Capital Stock of the Company, or out of the
Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of
the Company) of other shares of Disqualified Capital Stock of the Company, (v)
Permitted Tax Distributions and (vi) the forfeit of a deposit that was a
Permitted Investment under clause (viii) of the definition of 'Permitted
Investment' at the time such deposit was made; provided that in calculating the
aggregate amount of Restricted Payments made subsequent to the Issue Date for
purposes of clause (c) of the immediately preceding paragraph, amounts expended
pursuant to clauses (i), (ii) and (vi) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the Issuers shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant described above were computed, which calculations may
be based upon the Issuers' latest available financial statements, and that no
Default or Event of Default has occurred and is continuing and no Default or
Event of Default will occur immediately after giving effect to any such
Restricted Payments.
Limitation on Liens
The Issuers will not, and will not permit any of their Subsidiaries to,
create, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind (other than Permitted Liens) upon any property or asset of the
Issuers or any of their Subsidiaries or any shares of Capital Stock or
Indebtedness of any Subsidiary (other
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than Indebtedness of a Guarantor pledged to secure other Indebtedness incurred
in accordance with the Indenture) of the Issuers which owns property or assets,
now owned or hereafter acquired, unless (i) if such Lien secures Indebtedness
which is pari passu with the Notes or the Guarantee of a Guarantor, then the
Notes or such Guarantee, as the case may be, are secured on an equal and ratable
basis with the obligations so secured until such time as such obligation is no
longer secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes or the Guarantee of a Guarantor, any such Lien shall
be subordinated to a Lien securing the Notes or such Guarantee, as the case may
be, to the same extent as such Indebtedness is subordinated to the Notes.
Limitation on Investments
The Issuers will not, and will not permit any of their Subsidiaries to,
make any Investment other than (i) a Permitted Investment or (ii) an Investment
that is made as a Restricted Payment in compliance with the 'Limitation on
Restricted Payments' covenant, after the Issue Date.
Limitation on Transactions with Affiliates
The Issuers will not, and will not permit any of their Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate (each an
'Affiliate Transaction') or extend, renew, waive or otherwise modify the terms
of any Affiliate Transaction entered into prior to the Issue Date unless (i)
such Affiliate Transaction is between or among the Issuers and their Wholly
Owned Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair and
reasonable to the Issuers or such Subsidiary, as the case may be, and the terms
of such Affiliate Transaction are at least as favorable as the terms which could
be obtained by the Issuers or such Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $1 million which is not permitted under
clause (i) above, the Issuers must obtain a resolution of the Board of Directors
of the Issuers certifying that such Affiliate Transaction complies with clause
(ii) above. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $5 million which is not permitted under
clause (i) above, the Issuers must obtain a favorable written opinion as to the
fairness of such transaction or transactions, as the case may be, from an
Independent Financial Advisor.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under '--Limitation on Restricted
Payments' above, or (ii) reasonable fees, compensation and equity incentives in
the form of Capital Stock (other than Disqualified Capital Stock) paid to and
indemnity provided on behalf of, officers, directors or employees of the Issuers
or any Subsidiary of the Issuers as determined in good faith by the Company's
Board of Directors or senior management or (iii) any agreement as in effect as
of the Issue Date or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) in any replacement
agreement thereto so long as any such amendment or replacement agreement is not
more disadvantageous to the holders in any material respect than the original
agreement as in effect on the Issue Date or (iv) any affiliation agreements with
the WB Television Network.
Limitation on Creation of Subsidiaries
The Issuers shall not create or acquire, nor permit any of their
Subsidiaries to create or acquire, any Subsidiary other than a Subsidiary that
is acquired or created in connection with the acquisition by the Company of a
media related business or asset; provided, however, that each Subsidiary
acquired or created shall at the time it has either assets or stockholder's
equity in excess of $5,000 have evidenced its Guarantee with such documentation
satisfactory in form and substance to the Trustee relating thereto as the
Trustee shall require, including, without limitation, a supplement or amendment
to the Indenture and opinions of counsel as to the enforceability of such
Guarantee, pursuant to which such Subsidiary shall become a Guarantor. See
'--General' and '--Guarantees.'
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Limitation on Certain Asset Sales
The Issuers will not, and will not permit any of their Subsidiaries to,
consummate an Asset Sale unless (i) the Issuers or such applicable Subsidiary,
as the case may be, receives consideration at the time of such sale or other
disposition at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by the Board of Directors of
the Company, and evidenced by a board resolution); (ii) not less than 80% of the
consideration received by the Company or such applicable Subsidiary, as the case
may be, is in the form of cash or Cash Equivalents other than in the case where
the Company is undertaking a Permitted Asset Swap; and (iii) the Asset Sale
Proceeds received by the Company or such Subsidiary are applied (a) first, to
the extent the Company or any such Subsidiary, as the case may be, elects, or is
required, to prepay, repay or purchase indebtedness under the Senior Credit
Facility within 180 days following the receipt of the Asset Sale Proceeds from
any Asset Sale; provided that any such repayment shall result in a permanent
reduction of the commitments thereunder in an amount equal to the principal
amount so repaid; (b) second, to the extent of the balance of Asset Sale
Proceeds after application as described above, to the extent the Company elects,
to an investment in assets (including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or property of
another Person) used or useful in businesses similar or ancillary to the
business of the Company or any such Subsidiary as conducted on the Issue Date;
provided that (1) such investment occurs or the Company or any such Subsidiary
enters into contractual commitments to make such investment, subject only to
customary conditions (other than the obtaining of financing), within 180 days
following receipt of such Asset Sale Proceeds and (2) Asset Sale Proceeds so
contractually committed are so applied within 270 days following the receipt of
such Asset Sale Proceeds; and (c) third, if on such 180th day in the case of
clauses (iii)(a) and (iii)(b)(1) or on such 270th day in the case of clause
(iii)(b)(2) with respect to any Asset Sale, the Available Asset Sale Proceeds
exceed $5 million, the Company shall apply an amount equal to such Available
Asset Sale Proceeds to an offer to repurchase the Notes, at a purchase price in
cash equal to 100% of the Accreted Value thereof plus accrued and unpaid
interest, if any, to the purchase date (an 'Excess Proceeds Offer'). If an
Excess Proceeds Offer is not fully subscribed, the Company may retain the
portion of the Available Asset Sale Proceeds not required to repurchase Notes.
If the Issuers are required to make an Excess Proceeds Offer, the Issuers
shall mail, within 30 days following the date specified in clause (iii)(c)
above, a notice to the holders stating, among other things: (1) that such
holders have the right to require the Issuers to apply the Available Asset Sale
Proceeds to repurchase such Notes at a purchase price in cash equal to (x) 100%
of the Accreted Value thereof, if the applicable purchase date is on or prior to
September 30, 2000, or (y) 100% of the principal amount at maturity thereof,
plus accrued and unpaid interest, if any, to the purchase date, if the purchase
date is after September 30, 2000; (2) the purchase date, which shall be no
earlier than 30 days and not later than 45 days from the date such notice is
mailed; (3) the instructions that each holder must follow in order to have such
Notes purchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the purchase of such Notes.
In the event of the transfer of substantially all of the property and
assets of the Issuers and their Subsidiaries as an entirety to a Person in a
transaction permitted under '--Merger, Consolidation or Sale of Assets' below,
the successor Person shall be deemed to have sold the properties and assets of
the Issuers and their Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale.
The Issuers shall comply with the requirements of Rule 14e-1 under the
Exchange Act and other securities laws and regulations thereunder to the extent
such laws and regulations are applicable in connection with the repurchase of
Notes pursuant to an Excess Proceeds Offer. To the extent that the provisions of
any securities laws or regulations conflict with the 'Asset Sale' provisions of
the Indenture, the Issuers shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
'Asset Sale' provisions of the Indenture by virtue thereof.
Limitation on Preferred Stock of Subsidiaries
The Issuers will not permit any of their Subsidiaries to issue any
Preferred Stock (except Preferred Stock issued to the Company or a Wholly Owned
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Subsidiary of the Company) to hold any such Preferred Stock unless
the Company or such Subsidiary would be entitled to incur or assume Indebtedness
under '--Limitation on Additional
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Indebtedness' above (other than Permitted Indebtedness) in the aggregate
principal amount equal to the aggregate liquidation value of the Preferred Stock
to be issued.
Limitation on Capital Stock of Subsidiaries
The Issuers will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Subsidiary of the Company or (ii) permit any
of its direct Subsidiaries to issue any Capital Stock other than to the Issuers
or a Wholly Owned Subsidiary of the Issuers. The foregoing restrictions shall
not apply to either (x) an Asset Sale made in compliance with '--Limitation on
Certain Asset Sales' above or the issuance of Preferred Stock in compliance with
'--Limitation on Preferred Stock of Subsidiaries' above or (y) a Permitted Lien.
In no event will the Company sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of Finance or will Finance sell any Capital Stock.
Limitation on Sale and Lease-Back Transactions
The Issuers will not, and will not permit any of their Subsidiaries to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined in good faith by the Board of
Directors of the Company and evidenced by a board resolution and (ii) the
Issuers could incur the Attributable Indebtedness in respect of such Sale and
Lease-Back Transaction in compliance with '--Limitation on Additional
Indebtedness' above.
Limitation on Conduct of Business
The Issuers and their Subsidiaries will not engage in any businesses which
are not the same, similar or related to the businesses in which the Company and
its Subsidiaries are engaged on the Issue Date.
Limitation on Conduct of Business of ACME Finance Corporation
ACME Finance Corporation ('Finance') will not own any operating assets or
other properties or conduct any business other than to serve as an Issuer and an
obligor on the Notes.
Payments for Consent
The Issuers will not, and will not permit any of their Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, the Issuers shall be obligated
to make an offer to purchase (the 'Change of Control Offer') each holder's
outstanding Notes at a purchase price (the 'Change of Control Purchase Price')
equal to (x) 101% of the Accreted Value thereof, if the Change of Control
Payment Date (as defined) is on or prior to September 30, 2000, or (y) 101% of
the principal amount at maturity, plus accrued and unpaid interest, if any, to
the Change of Control Payment Date, if the Change of Control Payment Date is
after September 30, 2000, in each case in accordance with the procedures set
forth below.
Within 20 days of the occurrence of a Change of Control, the Issuers shall
(i) cause a notice of the Change of Control Offer to be sent at least once to
the Dow Jones News Service or similar business news service in the United States
and (ii) send by first-class mail, postage prepaid, to the Trustee and to each
holder of the Notes, at the address appearing in the register maintained by the
Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment;
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(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 30 days nor later than 45 days from
the date such notice is mailed (the 'Change of Control Payment Date'));
(3) that any Note not tendered will continue to accrete Accreted Value
or accrue interest, as the case may be;
(4) that, unless the Issuers default in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrete Accreted Value or accrue
interest, as the case may be, after the Change of Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount at maturity to the unpurchased
principal amount at maturity of the Notes surrendered;
(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Issuers. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
the Issuers shall execute and issue, and the Trustee shall promptly authenticate
and mail to such holder, a new Note equal in principal amount at maturity to any
unpurchased portion of the Notes surrendered; provided that each such new Note
shall be issued in an original principal amount in denominations of $1,000
principal amount at maturity and integral multiples thereof.
The Indenture will provide that, (A) if either Issuer or any Subsidiary
thereof has issued any outstanding (i) indebtedness that is subordinated in
right of payment to the Notes or (ii) Preferred Stock, and such Issuer or such
Subsidiary is required to make a change of control Offer or to make a
distribution with respect to such subordinated indebtedness or Preferred Stock
in the event of a change of control, the Issuers shall not consummate any such
offer or distribution with respect to such subordinated indebtedness or
Preferred Stock until such time as the Issuers shall have paid the Change of
Control Purchase Price in full to the holders of Notes that have accepted the
Issuers' Change of Control Offer and shall otherwise have consummated the Change
of Control Offer made to holders of the Notes and (B) the Issuers will not issue
Indebtedness that is subordinated in right of payment to the Notes or Preferred
Stock with change of control provisions requiring the payment of such
Indebtedness or Preferred Stock prior to the payment of the Notes in the event
of a Change in Control under the Indenture.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the 'Change
of Control' provisions of the Indenture, the Issuers shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached their obligations under the 'Change of Control' provisions of the
Indenture by virtue thereof.
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MERGER, CONSOLIDATION OR SALE OF ASSETS
Neither of the Issuers will consolidate with, merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless (in the case of the
Company): (i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or to which the properties and assets of the Company are sold,
assigned, transferred, leased, conveyed or otherwise disposed of shall be a
corporation or a limited liability company organized and existing under the laws
of the United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company under the Indenture and the Notes and the obligations thereunder shall
remain in full force and effect; provided, that at any time the Company or its
successor is a limited liability company, there shall be a co-issuer of the
Notes that is a corporation; (ii) immediately before and immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the Consolidated Net
Worth of the Company or the surviving entity as the case may be is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions; and (iv) immediately after giving effect
to such transaction on a pro forma basis the Company or such Person could incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under '--Certain Covenants--Limitation on Additional Indebtedness' above.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
No Guarantor (other than a Guarantor whose Guarantee is to be released in
accordance with the terms of the Indenture as provided under '--Guarantees')
shall consolidate or merge with or into any other Person unless (i) the Person
surviving such merger (if other than the Guarantors) is a corporation or limited
liability company organized and existing under the laws of the United States or
any State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of such Guarantor under the
Indenture and such Guarantee and the obligations thereunder shall remain in full
force and effect; (ii) immediately before and immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction on a
pro forma basis, the Consolidated Net Worth of the Company is at least equal to
the Consolidated Net Worth of the Company immediately before such transaction.
GUARANTEES
The Notes are guaranteed (each, a 'Guarantee') on a senior basis by the
Guarantors. All payments pursuant to the Guarantees by the Guarantors are senior
in right of payment to the prior payment in full of all subordinated
indebtedness of the Guarantor, to the same extent and in the same manner that
all payments pursuant to the Notes are senior in right of payment to the prior
payment in full of all subordinated indebtedness of the Issuers.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of such Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Guarantor.
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A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under 'Limitation on Certain Asset Sales,' or the Guarantor
merges with or into or consolidates with, or transfers all or substantially all
of its assets to, the Company or another Guarantor in a transaction in
compliance with 'Merger, Consolidation or Sale of Assets,' and such Guarantor
has delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent herein provided for relating to such
transaction have been complied with.
EVENTS OF DEFAULT
The following events are defined in the Indenture as 'Events of Default':
(i) default in payment of any Accreted Value, principal of, or
premium, if any, on the Notes whether at maturity, upon redemption or
otherwise;
(ii) default for 30 days in payment of any interest on the Notes;
(iii) default by the Issuers or any Subsidiary of the Company in the
observance or performance of any other covenant in the Notes or the
Indenture for 30 days after written notice from the Trustee or the holders
of not less than 25% in aggregate principal amount at maturity of the Notes
then outstanding (except in the case of a default with respect to the
'Change of Control' or 'Merger, Consolidation or Sale of Assets' covenant
which shall constitute an Event of Default with such notice requirement but
without such passage of time requirement);
(iv) failure to pay when due principal, interest or premium in an
aggregate amount of $5 million or more with respect to any Indebtedness of
the Issuers or any Subsidiary thereof, or the acceleration of any such
Indebtedness aggregating $5 million or more which default shall not be
cured, waived or postponed pursuant to an agreement with the holders of
such Indebtedness within 60 days after written notice as provided in the
Indenture, or such acceleration shall not be rescinded or annulled within
20 days after written notice as provided in the Indenture;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5 million shall be rendered against
the Issuers or any Subsidiary thereof, and shall not be discharged for any
period of 60 consecutive days during which a stay of enforcement shall not
be in effect; and
(vi) certain events involving bankruptcy, insolvency or reorganization
of the Issuers or any Subsidiary thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of Accreted Value or principal or
premium, if any, or interest on the Notes) if the Trustee considers it to be in
the best interest of the holders of the Notes to do so.
The Indenture provides that if an Event of Default (other than an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization with respect to either of the Issuers) shall have occurred and be
continuing, then the Trustee or the holders of not less than 25% in aggregate
principal amount at maturity of the Notes then outstanding may declare the Notes
to be immediately due and payable in an amount equal to the Accreted Value of
the Notes, premium, if any, plus accrued and unpaid interest, if any, to the
date of acceleration and the same shall become immediately due and payable;
provided, however, that after such acceleration but before a judgment or decree
based on acceleration is obtained by the Trustee, the holders of a majority in
aggregate principal amount at maturity of outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if (i) all Events of Default,
other than nonpayment of Accreted Value, principal, premium, if any, or interest
that has become due solely because of the acceleration, have been cured or
waived as provided in the Indenture, (ii) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iii) if the Issuers have paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (iv) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the above Events of
Default, the Trustee shall have received an officers' certificate and an opinion
of counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization shall occur, the Accreted Value or
principal and all premium
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and interest with respect to all of the Notes shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the holders of the Notes.
The holders of a majority in principal amount at maturity of the Notes then
outstanding shall have the right to waive any existing default or Event of
Default and its consequences or compliance with any provision of the Indenture
or the Notes and to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, subject to certain
limitations provided for in the Indenture and under the TIA.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount at
maturity of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as Trustee, and
unless the Trustee shall not have received from the holders of a majority in
aggregate principal amount at maturity of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 30 days. Notwithstanding the foregoing, such limitations do
not apply to a suit instituted on such Note on or after the respective due dates
expressed in such Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides the Issuers may elect either (a) to defease and be
discharged from any and all of its obligations with respect to the Notes (except
for the obligations to register the transfer or exchange of such Notes, to
replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain an
office or agency in respect of the Notes and to hold monies for payment in
trust) ('defeasance') or (b) to be released from its obligations with respect to
the Notes under certain covenants contained in the Indenture ('covenant
defeasance') upon the deposit with the Trustee (or other qualifying trustee), in
trust for such purpose, of money and/or non-callable U.S. government obligations
which through the payment of Accreted Value and interest in accordance with
their terms will provide money, in an amount sufficient to pay the Accreted
Value of, premium, if any, and interest on the Notes, on the scheduled due dates
therefor or on a selected date of redemption in accordance with the terms of the
Indenture. Such a trust may only be established if, among other things, (i) the
Issuers have delivered to the Trustee an opinion of counsel (as specified in the
Indenture) (A) to the effect that neither the trust nor the Trustee will be
required to register as an investment company under the Investment Company Act
of 1940, as amended, and (B) describing either a private ruling concerning the
Notes or a published ruling of the Internal Revenue Service, to the effect that
holders of the Notes or persons in their positions will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount and in the same manner and at the same times, as would have been the case
if such deposit, defeasance and discharge had not occurred, (ii) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit or insofar as Events of Default from bankruptcy, insolvency or
reorganization events are concerned, at any time in the period ending on the
91st day after the date of deposit; (iii) such defeasance or covenant defeasance
shall not result in a breach or violation of, or constitute a default under the
Indenture or any other material agreement or instrument to which the Issuers or
any of their Subsidiaries is a party or by which the Issuers or any of their
Subsidiaries is bound; (iv) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuers with
the intent of preferring the holders of the Notes over any other creditors of
the Issuers or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Issuers or others; (v) the Issuers shall have
delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent provided for or relating to the
defeasance or the covenant defeasance have been complied with; (vi) the Issuers
shall have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and (vii) certain other customary
conditions precedent are satisfied.
MODIFICATION OF INDENTURE
From time to time, the Issuers and the Trustee may, without the consent of
holders of the Notes, amend or supplement the Indenture for certain specified
purposes, including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
holder. The Indenture contains provisions permitting the Issuers and the
Trustee, with the consent of holders of at least a majority in principal amount
at maturity of the outstanding Notes, to modify or supplement the Indenture,
except that no such modification shall, without the
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consent of each holder affected thereby, (i) reduce the amount of Notes whose
holders must consent to an amendment, supplement, or waiver to the Indenture,
(ii) reduce the rate of or change the time for payment of interest, including
defaulted interest, on any Note, (iii) reduce the Accreted Value of or premium
on or change the stated maturity of any Note or change the date on which any
Notes may be subject to redemption or repurchase or reduce the redemption or
repurchase price therefor, (iv) make any Note payable in money other than that
stated in the Note or change the place of payment from New York, New York, (v)
waive a default on the payment of the Accreted Value of, interest on, or
redemption payment with respect to any Note, (vi) make any change in provisions
of the Indenture protecting the right of each holder of Notes to receive payment
of Accreted Value of and interest on such Note on or after the due date thereof
or to bring suit to enforce such payment, or permitting holders of a majority in
principal amount at maturity of Notes to waive Defaults or Events of Default; or
(vii) modify or change any provision of the Indenture or the related definitions
affecting the ranking of the Notes or any Guarantee in a manner which adversely
affects the holders of Notes.
REPORTS TO HOLDERS
So long as the Issuers are subject to the periodic reporting requirements
of the Exchange Act, they will continue to furnish the information required
thereby to the Commission and to the holders of the Notes. The Indenture
provides that even if the Issuers are entitled under the Exchange Act not to
furnish such information to the Commission or to the holders of the Notes, they
will nonetheless continue to furnish such information to the Commission and
holders of the Notes.
COMPLIANCE CERTIFICATE
The Issuers will deliver to the Trustee on or before 90 days after the end
of the Issuers' fiscal year and on or before 45 days after the end of each the
first, second and third fiscal quarters in each year an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
has occurred. If they do, the certificate will describe the Default or Event of
Default, its status and the intended method of cure, if any.
THE TRUSTEE
The Trustee under the Indenture is the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the continuance
of an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
is not required to transfer or exchange any Note selected for redemption and,
further, is not required to transfer or exchange any Note for a period of 15
days before selection of the Notes to be redeemed.
The Notes will be issued in a transaction exempt from registration under
the Act and will be subject to the restrictions on transfer described in 'Notice
to Investors.'
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
'Accreted Value' means, as of any date prior to September 30, 2000, an
amount per $1,000 principal amount at maturity of Notes that is equal to the sum
of (a) $727.83 and (b) the portion of the excess of the principal amount at
maturity of each Note over $727.83 which shall have been amortized on a daily
basis and compounded semiannually on each March 31, and September 30 at the rate
of 10 7/8% per annum from the Issue Date through the date of determination
computed on the basis of a 360-day year of twelve 30-day months; and, as of any
date on or after September 30, 2000, the Accreted Value of each Note shall mean
the aggregate principal amount at maturity of such Note.
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'Acquired Indebtedness' means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary or is merged into or consolidated with any
other Person or which is assumed in connection with the acquisition of assets
from such Person and, in each case, not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Subsidiary
or such merger, consolidation or acquisition.
'Adjusted Net Assets' of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities under the Guarantee, of such Guarantor at such date
and (y) the present fair salable value of the assets of such Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
such Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities and after giving effect to any collection from any
Subsidiary of such Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding Indebtedness in respect of the Guarantee, as
they become absolute and matured.
'Affiliate' means, with respect to any specific Person, any other Person
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, 'control' (including, with correlative meanings,
the terms 'controlling,' 'controlled by,' and 'under common control with'), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that, for purposes of the covenant described under
'--Certain Covenants--Limitation on Transactions with Affiliates' beneficial
ownership of at least 10% of the voting securities of a Person, either directly
or indirectly, shall be deemed to be control.
'Asset Acquisition' means (a) an Investment by the Issuers or any
Subsidiary of the Issuers in any other Person pursuant to which such Person
shall become a Subsidiary of the Issuers or any Subsidiary of the Issuers, or
shall be merged with or into the Issuers or any Subsidiary of the Issuers or (b)
the acquisition by the Issuers or any Subsidiary of the Issuers of the assets of
any Person (other than a Subsidiary of the Issuers) which constitute all or
substantially all of the assets of such Person or comprise any division or line
of business of such Person or any other properties or assets of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
'Asset Sale' means any direct or indirect sale, issuance, conveyance,
assignment, transfer, lease or other disposition (including any Sale and
Lease-Back Transaction), other than to the Company or any of its Wholly Owned
Subsidiaries, in any single transaction or series of related transactions of (a)
any Capital Stock of or other equity interest in any Subsidiary of the Company
or (b) any other property or assets of the Company or of any Subsidiary thereof;
provided that Asset Sales shall not include (i) a transaction or series of
related transactions for which the Company or its Subsidiaries receive aggregate
consideration of less than $500,000 and (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under '--Merger, Consolidation or Sale of Assets.'
'Asset Sale Proceeds' means, with respect to any Asset Sale, (i) cash
received by the Issuers or any Subsidiary of the Issuers from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Subsidiary of the Issuers as a result of such Asset Sale, (d) repayment
of Indebtedness that is required to be repaid in connection with such Asset Sale
and (e) deduction of appropriate amounts to be provided by the Issuers or a
Subsidiary of the Issuers as a reserve, in accordance with GAAP, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by the Issuers or a Subsidiary after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other noncash consideration received by the
Issuers or any Subsidiary of the Issuers from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or noncash
consideration into cash.
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'Attributable Indebtedness' in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the greater of (i) the fair value of the
property subject to such arrangement and (ii) the present value of the notes
(discounted at the rate borne by the Notes, compounded semi-annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale and Lease-Back Transaction (including any period
for which such lease has been extended).
'Available Asset Sale Proceeds' means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clauses (iii)(a) or (iii)(b), and which have not yet been the
basis for an Excess Proceeds Offer in accordance with clause (iii)(c) of the
first paragraph of '--Certain Covenants--Limitation on Certain Asset Sales'.
'Board of Directors' means (i) in the case of a Person that is a
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body or any authorized committee thereof responsible for the
management of the business and affairs of such Person.
'Capital Stock' means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership or limited liability company
interests or any other participation, right or other interest in the nature of
an equity interest in such Person including, without limitation, Common Stock
and Preferred Stock of such Person, or any option, warrant or other security
convertible into any of the foregoing.
'Capitalized Lease Obligations' means with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
'Cash Equivalents' means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ('S&P') or Moody's
Investors Service, Inc. ('Moody's'); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
A 'Change of Control' means the occurrence of any of the following: (i) the
adoption of a plan relating to the liquidation or dissolution of Holdings or the
Company or Holdings shall cease to be the managing member of the Company, (ii)
prior to the consummation of an Initial Public Offering, the Permitted Holders
cease to be the beneficial owners (as defined under Rule 13d-3 or any successor
rule or regulation promulgated under the Exchange Act) of at least a majority of
the total voting power of the Common Stock entitled to elect the Board of
Directors of Holdings, (iii) prior to the consummation of an Initial Public
Offering, the Permitted Holders shall cease collectively to control at least a
majority of the voting power of the Board of Directors of Holdings and (iv) in
connection with or after an Initial Public Offering, any Person (including a
Person's Affiliates and associates), other than a Permitted Holder, becomes the
beneficial owner of more than 20% of the total voting power of the Common Stock
of Holdings or the Company, and the Permitted Holders beneficially own, in the
aggregate, less than 30% of the total voting power of Holdings or the Company,
as the case may be.
'Common Stock' of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate
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in the selection of the governing body, partners, managers or others that will
control the management and policies of such Person.
'Consolidated Interest Expense' means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption 'interest expense' or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to, (i) Redeemable Dividends, whether paid or
accrued, on Subsidiary Preferred Stock, (ii) imputed interest included in
Capitalized Lease Obligations, (iii) all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, (iv) the net costs associated with Interest Rate Agreements and other
hedging obligations, (v) amortization of other financing fees and expenses, (vi)
the interest portion of any deferred payment obligation, (vii) amortization of
discount or premium, if any, and (viii) all other non-cash interest expense
(other than interest amortized to cost of sales)) plus, without duplication, all
net capitalized interest for such period and all interest incurred or paid under
any guarantee of Indebtedness (including a guarantee of principal, interest or
any combination thereof) of any Person, plus the amount of all dividends or
distributions paid on Disqualified Capital Stock (other than dividends paid or
payable in shares of Capital Stock of the Company).
'Consolidated Leverage Ratio' means, with respect to any Person, the ratio
of (i) the sum of the aggregate outstanding amount of Indebtedness of such
Person and its Subsidiaries as of the date of calculation (the 'Transaction
Date') on a consolidated basis determined in accordance with GAAP to (ii) such
Person's EBITDA for the four full fiscal quarters (the 'Four Quarter Period')
ending on or prior to the date of determination for which financial statements
are available. For purposes of this definition, 'EBITDA' shall be calculated
after giving effect on a pro forma basis to (i) the incurrence or repayment of
any Indebtedness of such Person or any of its Subsidiaries (and the application
of the proceeds thereof) giving rise to the need to make such calculation and
any incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including any
Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also including
any EBITDA (provided that such EBITDA shall be included only to the extent
includable pursuant to the definition of 'Consolidated Net Income') attributable
to the assets which are the subject of the Asset Acquisition or Asset Sale
during the Four Quarter Period) occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition (including
the incurrence, assumption or liability for any such Acquired Indebtedness)
occurred on the first day of the Four Quarter Period; provided that if any such
Asset Acquisition relates to the acquisition of a television broadcast station
which is not an affiliate of a Network and which had a negative Net Income for
the Four Quarter Period, it may be assumed, for purposes of such pro forma
calculation, that the Net Income of such station for such period was zero. If
such Person or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary
of such Person had directly incurred or otherwise assumed such guaranteed
Indebtedness.
'Consolidated Net Income' means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the 'other Person') in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the Net Income of such other Person to
be consolidated into the Net Income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions shall be excluded to the extent of such restriction or limitation,
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net gain (but not loss) resulting from an Asset Sale by the
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Person in question or any of its Subsidiaries other than in the ordinary course
of business shall be excluded, (d) extraordinary gains and losses shall be
excluded, (e) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued) shall be excluded, and (f) in
the case of a successor to the referent Person by consolidation or merger or as
a transferee of the referent Person's assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets shall be
excluded.
'Consolidated Net Worth' means with respect to any Person at any date, the
consolidated stockholders' equity or members' capital of such Person less the
amount of such stockholders' equity or members' capital attributable to
Disqualified Capital Stock of such Person and its subsidiaries, as determined in
accordance with GAAP.
'Cumulative Consolidated Interest Expense' means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense from
October 1, 1997 to the end of the Company's most recently ended full fiscal
quarter prior to such date, taken as a single accounting period.
'Cumulative EBITDA' means, with respect to any Person, as of any date of
determination, EBITDA from October 1, 1997 to the end of the Company's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
'Disqualified Capital Stock' means any Capital Stock of a Person or a
Subsidiary thereof which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Notes, for cash or securities constituting Indebtedness.
Without limitation of the foregoing, Disqualified Capital Stock shall be deemed
to include any Preferred Stock of a Person or a Subsidiary of such Person, with
respect to either of which, under the terms of such Preferred Stock, by
agreement or otherwise, such Person or Subsidiary is obligated to pay current
dividends or distributions in cash during the period prior to the maturity date
of the Notes; provided, however, that (i) Preferred Stock of a Person or any
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of such Person or Subsidiary which provisions have
substantially the same effect as the provisions of the Indenture described under
'Change of Control,' shall not be deemed to be Disqualified Capital Stock solely
by virtue of such provisions; and (ii) Capital Stock of any limited liability
company or other pass through entity for federal income tax purposes shall not
be deemed to be Disqualified Capital Stock solely by virtue of the fact that its
holders are entitled to Permitted Tax Distributions.
'EBITDA' means, with respect to any Person and its Subsidiaries, for any
period, an amount equal to (a) the sum of (i) Consolidated Net Income for such
period, plus (ii) the provision for taxes for such period based on income or
profits to the extent such income or profits were included in computing
Consolidated Net Income and any provision for taxes utilized in computing net
loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such
period (but only including Redeemable Dividends in the calculation of such
Consolidated Interest Expense to the extent that such Redeemable Dividends have
not been excluded in the calculation of Consolidated Net Income), plus (iv)
depreciation for such period on a consolidated basis, plus (v) amortization of
intangibles and television programming obligations (net of cash payments with
respect to television programming obligations) for such period on a consolidated
basis, plus (vi) any other non-cash items reducing Consolidated Net Income for
such period, minus (b) all non-cash items increasing Consolidated Net Income for
such period, all for such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP; provided, however, that, for
purposes of calculating EBITDA during any fiscal quarter, cash income from a
particular Investment of such Person shall be included only (x) if cash income
has been received by such Person with respect to such Investment during each of
the previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Cash Equivalents.
'Exchange Act' means the Securities Exchange Act of 1934, as amended and
the rules and regulations of the Commission promulgated thereunder.
'fair market value' means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of
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whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a resolution of the Board
of Directors of the Company delivered to the Trustee.
'GAAP' means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
'incur' means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
'incurrence,' 'incurred,' 'incurrable,' and 'incurring' shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
'Indebtedness' means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations of such Person, (ii) obligations secured by a lien
to which the property or assets owned or held by such Person is subject, whether
or not the obligation or obligations secured thereby shall have been assumed,
(iii) guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), (iv) all obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (v) Disqualified Capital Stock of such Person or any Subsidiary
thereof, and (vi) obligations of any such Person under any currency agreement or
any Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such currency agreement or Interest Rate Agreement obligations would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; provided that
(i) the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and (ii) Indebtedness shall not
include any liability for federal, state, local or other taxes. Notwithstanding
any other provision of the foregoing definition, (i) any trade payable arising
from the purchase of goods or materials or for services obtained and (ii)
television programming obligations entered into in the ordinary course of
business shall not be deemed to be 'Indebtedness' of the Company or any of its
Subsidiaries for purposes of this definition. Furthermore, guarantees of (or
obligations with respect to letters of credit supporting) Indebtedness otherwise
included in the determination of such amount shall not also be included.
'Independent Financial Advisor' means an investment banking firm of
national reputation in the United States (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
'Initial Public Offering' means an underwritten public offering of Common
Stock of the Company or a Parent registered under the Securities Act (other than
a public offering registered on Form S-8 under the Securities Act) that results
in net proceeds of at least $25.0 million to the Company or such Parent, as the
case may be.
'Interest Rate Agreement' means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
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'Investments' means, with respect of any Person, directly or indirectly,
any advance, account receivable (other than an account receivable arising in the
ordinary course of business of such Person), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any Capital Stock,
bonds, notes, debentures, partnership or joint venture interests or other
securities of, the acquisition, by purchase or otherwise, of all or
substantially all of the business or assets or stock or other evidence of
beneficial ownership of, any Person or the making of any investment in any
Person. Investments shall exclude (i) extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices of such Person and
(ii) the repurchase of securities of any Person by such Person. For the purposes
of the 'Limitation on Restricted Payments' covenant, the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Issuers or any of their Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce the
amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If the
Issuers or any Subsidiary of the Issuers sells or otherwise disposes of any
Common Stock of any direct or indirect Subsidiary of the Issuers such that,
after giving effect to any such sale or disposition, the Issuers no longer own,
directly or indirectly, greater than 50% of the outstanding Common Stock of such
Subsidiary, the Issuers shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Subsidiary not sold or disposed of.
'Issue Date' means the date the Television Original Notes were first issued
by the Issuers and authenticated by the Trustee under the Indenture.
'Lien' means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
'Net Income' means, with respect to any Person, for any period, the net
income (loss) of such Person determined in accordance with GAAP.
'Net Proceeds' means (a) in the case of any sale of Capital Stock by or
equity contribution to any Person, the aggregate net proceeds received by such
Person, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market value thereof, as determined in good faith by the Board of
Directors of such Person, at the time of receipt) and (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind for or into shares of Capital Stock of the Issuers which is not
Disqualified Capital Stock, the net book value of such outstanding securities on
the date of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder to such Person upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holders, e.g., on account of fractional shares and less all expenses
incurred by such Person in connection therewith).
'Network' means (i) each of the American Broadcasting Company, CBS, Inc.,
Fox Broadcasting Company, National Broadcasting Co., Inc., The WB Television
Network, United Paramount Network and (ii) any successor Person of a Person
identified in clause (i) of this definition.
'Officers' Certificate' means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person that shall comply
with applicable provisions of the Indenture.
'Parent' means any Person which owns all or substantially all of the Common
Stock of the Company.
'Permitted Asset Swap' means any transfer of properties or assets by the
Company or any of its Subsidiaries in which 90% of the consideration received by
the transferor consists of properties or assets (other than cash) that will be
used in the business of the transferor; provided, that (i) the aggregate fair
market value (as
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determined in good faith by the Board of Directors of Holdings) of the property
or assets being transferred by the Company or such Subsidiary is not greater
than the aggregate fair market value (as determined in good faith by the Board
of Directors) of the property or assets received by the Company or such
Subsidiary in such exchange and (ii) the aggregate fair market value (as
determined in good faith by the Board of Directors) of all property or assets
transferred by the Company and any of its Subsidiaries in connection with
exchanges in any period of twelve consecutive months shall not exceed 15% of the
total assets of the Company on the last day of the preceding fiscal year.
'Permitted Holders' means (i) BancBoston Capital, (ii) Alta Communications,
Inc., Alta Communications, VI L.P., Alta-Comm S by S, LLC, Alta Subordinated
Debt Partners III, L.P. (iii) CEA Capital Partners, CEA Capital Partners USA,
L.P. (iv) Trust Company of the West, (v) any Person controlled or managed by a
Person identified in clauses (i)-(iv) of this definition, (vi) Jamie Kellner,
(vii) Douglas Gealy, (viii) Thomas Allen, (ix) ACME Parent and (x) any
partnership, corporation or other entity all of the partners, shareholders,
members or owners of which are any one or more of the foregoing.
'Permitted Indebtedness' means:
(i) Indebtedness of the Company or any Subsidiary of the Company
arising under or in connection with the Senior Credit Facility in an
aggregate principal amount not to exceed $40 million outstanding at any
time;
(ii) Indebtedness under the Notes;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date;
(iv) Indebtedness of the Company to any Wholly Owned Subsidiary and
Indebtedness of any Wholly Owned Subsidiary to the Company or another
Wholly Owned Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebtedness and Capitalized Lease Obligations do not in the
aggregate exceed $20 million;
(vi) Interest Rate Agreements;
(vii) Refinancing Indebtedness;
(viii) additional Indebtedness of the Company and its Subsidiaries not
to exceed $5 million in aggregate principal amount at any one time
outstanding;
(ix) fidelity and surety bonds incurred in the ordinary course of
business; and
(x) any guarantee by a Guarantor of Indebtedness of the Company
Incurred in accordance with the Indenture.
'Permitted Investments' means Investments made on or after the Issue Date
consisting of
(i) Investments by the Company, or by a Subsidiary thereof, in the
Company or a Subsidiary of the Company;
(ii) Investments by the Company, or by a Subsidiary thereof, in a
Person, if as a result of such Investment (a) such Person becomes a
Subsidiary of the Company or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) reasonable and customary loans made to employees in connection
with their relocation or for travel expenses or advances not to exceed $1
million in the aggregate at any one time outstanding;
(v) an Investment that is made by the Company or a Subsidiary thereof
in the form of any Capital Stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Company or such Subsidiary solely as partial consideration for
the consummation of an
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Asset Sale that is otherwise permitted under '--Certain
Covenants--Limitation on Certain Asset Sales' above;
(vi) Interest Rate Agreements entered into in the ordinary course of
the Company's or its Subsidiaries business;
(vii) options to purchase television broadcast station licenses and
related assets (or Capital Stock of Persons owning such assets) having an
exercise price of any amount not in excess of $100,000 entered into in
connection with the execution of local marketing agreements and Investments
pursuant to local marketing agreements to operate television broadcast
stations which are combined with such an option;
(viii) deposits made pursuant to legally binding agreements to
acquire, or pursuant to local marketing agreements with options to acquire,
broadcast television station licenses and related assets (or Capital Stock
of Persons owning such assets), in an amount not to exceed 10% of the
purchase price; provided that the station to be acquired will be owned by
the Company or a Subsidiary upon consummation of the contemplated
acquisition and provided, further, that deposits made under this clause
shall cease to be treated as Permitted Investments upon forfeit of such
deposit for any reason; and
(ix) additional Investments not to exceed $1 million at any one time
outstanding.
'Permitted Liens' means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or a Subsidiary of the Company, as
the case may be, shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(g) Liens securing Purchase Money Indebtedness of the Company or any
Subsidiary; provided, however, that (i) the Purchase Money Indebtedness
shall not be secured by any property or assets of the Company or any
Subsidiary of the Company other than the property and assets so acquired
and (ii) the Lien securing such Indebtedness shall be created within 90
days of such acquisition;
(h) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(i) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Subsidiaries, including rights of offset and set-off;
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(j) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(k) Liens securing Indebtedness under the Senior Credit Facility;
(l) Liens securing Acquired Indebtedness incurred in accordance with
the covenant described under '--Certain Covenants--Limitation on Incurrence
of Additional Indebtedness;' provided that (i) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence
of such Acquired Indebtedness by the Company or a Subsidiary of the Company
and (ii) such Liens do not extend to or cover any property or assets of the
Company or of any of its Subsidiaries other than the property or assets
that secured the Acquired Indebtedness prior to the time such Indebtedness
became Acquired Indebtedness of the Company or a Subsidiary of the Company
and are no more favorable to the lienholders than those securing the
Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness
by the Company or a Subsidiary of the Company.
'Permitted Tax Distributions' means, subject to the limitations set forth
in clause (v) of the second paragraph under 'Certain Covenants--Limitation on
Restricted Payments,' distributions by the Company to ACME Intermediate
Holdings, LLC ('ACME Intermediate') from time to time in an amount approximately
equal to the income tax liability (or interest or penalties thereon) of the
members of ACME Intermediate and ACME Television Holdings, LLC ('ACME Parent')
resulting from (i) the taxable income of the Company (after taking into account
all of the Company's prior tax losses, to the extent such losses have not
previously been deemed to reduce the taxable income of the Company), based on
the approximate highest combined tax rate that applies to any one of such
members; and (ii) any audit of such member (or the Company or ACME Parent) with
respect to a prior taxable year and paid or payable by such member during the
most recent taxable year, as and to the extent that such amounts are
attributable to the member being allocated more taxable income than was
previously reported to such member as a result of any position taken by the
Company or by ACME Parent in determining and reporting its taxable income for
the year in question.
'Person' means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government (including any agency or political subdivision
thereof).
'Preferred Stock' means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
'Property' of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
'Public Equity Offering' means a public offering by the Company or any
Parent of shares of its Common Stock (however designated and whether voting or
non-voting) and any and all rights, warrants or options to acquire such Common
Stock.
'Purchase Money Indebtedness' means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
'Redeemable Dividend' means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
'Refinancing Indebtedness' means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company outstanding on the Issue Date or other
Indebtedness permitted to be incurred by the Company pursuant to the first
paragraph of the covenant described under 'Certain Covenants--Limitation on
Additional Indebtedness' or by the Company or its Subsidiaries pursuant to
clause (ii) of the definition of 'Permitted
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Indebtedness,' but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes to at least the same extent as the Indebtedness being
refunded, refinanced or extended, if at all, (ii) the Refinancing Indebtedness
is scheduled to mature either (a) no earlier than the Indebtedness being
refunded, refinanced or extended, or (b) after the maturity date of the Notes,
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Notes has a weighted average life
to maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the weighted average life to maturity of the portion of the
Indebtedness being refunded, refinanced or extended that is scheduled to mature
on or prior to the maturity date of the Notes, (iv) such Refinancing
Indebtedness is in an aggregate principal amount that is equal to or less than
the sum of (a) the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended, (b) the amount of accrued
and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly Owned Subsidiary of the Company.
'Restricted Payment' means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Subsidiary of the Company or any payment made to the direct
or indirect holders (in their capacities as such) of Capital Stock of the
Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Capital
Stock) or in options, warrants or other rights to purchase such Capital Stock
(other than Disqualified Capital Stock), and (y) in the case of Subsidiaries of
the Company, dividends or distributions payable to the Company or to a Wholly
Owned Subsidiary of the Company), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company or any
of its Subsidiaries (other than Capital Stock owned by the Company or a Wholly
Owned Subsidiary of the Company, excluding Disqualified Capital Stock) or any
option, warrants or other rights to purchase such Capital Stock, (iii) the
making of any principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, of any
Indebtedness which is subordinated in right of payment to the Notes (other than
subordinated Indebtedness acquired in anticipation of satisfying a scheduled
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition), (iv) the making of any
Investment or guarantee of any Investment in any Person other than a Permitted
Investment, and (v) forgiveness of any Indebtedness of an Affiliate of the
Company to the Company or a Subsidiary of the Company. For purposes of
determining the amount expended for Restricted Payments, cash distributed or
invested shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
'Sale and Lease-Back Transaction' means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
'Senior Credit Facility' means the Credit Agreement to be entered into,
between the Company, the lenders party thereto in their capacities as lenders
thereunder and Canadian Imperial Bank of Commerce, New York Agency, as agent,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the 'Limitation on Additional
Indebtedness' covenant) or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
'Subsidiary' of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any
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contingency) to vote in the election of directors, officers or trustees thereof
is held by such first-named Person or any of its Subsidiaries; or (ii) in the
case of a partnership, joint venture, association or other business entity, with
respect to which such first-named Person or any of its Subsidiaries has the
power to direct or cause the direction of the management and policies of such
entity by contract or otherwise or if in accordance with GAAP such entity is
consolidated with the first-named Person for financial statement purposes.
'Wholly Owned Subsidiary' means any Subsidiary, all of the outstanding
voting securities (other than directors' qualifying shares) of which are owned,
directly or indirectly, by the Company.
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DESCRIPTION OF THE NOTES
The Original Notes were issued, and the Exchange Notes will be issued,
under an Indenture, dated as of September 30, 1997 (the 'Indenture'), by and
among the Issuers and Wilmington Trust Company, as trustee (the 'Trustee'). The
form and terms of the Exchange Notes will be the same as the form and terms of
the Original Notes except that (i) the Exchange Notes will be registered under
the Securities Act and hence will not bear legends restricting the transfer
thereof and (ii) the holders of the Exchange Notes will not be entitled to
certain rights of holders of Original Notes under the Registration Rights
Agreement, which rights terminate upon consummation of the Exchange Offer. The
Exchange Notes and Original Notes are referred to herein collectively as the
'Notes.' The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the 'TIA'), as in effect on the date of the Indenture. The Notes are
subject to all such terms, and holders of the Notes are referred to the
Indenture and the TIA for a statement of them. The following is a summary of the
material terms and provisions of the Notes. This summary does not purport to be
a complete description of the Notes and is subject to the detailed provisions
of, and qualified in its entirety by reference to, the Notes and the Indenture
(including the definitions contained therein). A copy of the Indenture and Form
of Notes are filed as exhibits to the Exchange Offer Registration Statement of
which this Prospectus is a part. As used in this 'Description of the Notes,' the
'Company' refers to ACME Intermediate Holdings, LLC, but not its Subsidiaries.
Definitions relating to certain capitalized terms are set forth under '--Certain
Definitions.' Capitalized terms that are used but not otherwise defined herein
have the meanings ascribed to them in the Indenture and such definitions are
incorporated herein by reference.
GENERAL
The Notes are joint and several obligations of the Issuers. The Notes are
limited to $71,634,000 aggregate principal amount at maturity. The Notes are
senior secured obligations of the Issuers, pari passu in right of payment to
senior obligations of the Issuers and senior in right of payment to any current
or future subordinated obligations of the Issuers. The Original Notes were
issued at a substantial discount to their aggregate principal amount at
maturity.
SECURITY
Pursuant to a pledge agreement (the 'Pledge Agreement') among the Company,
ACME Subsidiary Holdings II, LLC ('Subsidiary Holdings') and the Trustee, (i)
the Company and Subsidiary Holdings (together, the 'Pledgors') pledged to the
Trustee for the benefit of the holders of the Notes all the membership units in
ACME Television owned by them on the Issue Date or so acquired by them
thereafter, and (ii) the Company pledged all Capital Stock of ACME Television,
ACME Finance, Inc. and Subsidiary Holdings owned by it on the Issue Date or so
acquired by it thereafter and all of the Capital Stock of any other Subsidiary
of the Company acquired by the Company after the Issue Date. Such pledges secure
the payment and performance when due of all of the obligations of the Issuers
under the Indenture and the Notes. As of the Issue Date, the only Subsidiaries
of the Company whose Capital Stock is directly owned by the Company are ACME
Television, ACME Finance, Inc. and Subsidiary Holdings.
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions in the Indenture, the Pledgors will be
entitled to receive all cash distributions made upon or with respect to the
collateral pledged by it and to exercise any voting and other consensual rights
pertaining to the collateral pledged by it. Upon the occurrence and during the
continuance of an Event of Default, (a) all rights of the Pledgors to exercise
such voting or other consensual rights will cease, and, subject to receipt of
any required approvals from the FCC, all such rights will become vested in the
Trustee, which shall have the sole right to exercise such voting and other
consensual rights, and (b) all rights of the Pledgors to receive all
distributions made upon or with respect to the pledged collateral will cease and
such distributions shall be paid to the Trustee which shall thereupon have the
sole right to receive and hold such distributions as pledged collateral.
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Upon the occurrence and during the continuance of an Event of Default, the
Trustee shall foreclose upon the pledged collateral in accordance with
instructions received from holders of a majority of the aggregate principal
amount at maturity of outstanding Notes, or in the absence of such instructions,
in such manner as the Trustee deems appropriate, in each case, as provided in
the Indenture. All funds received by the Trustee upon any foreclosure shall be
distributed by the Trustee in accordance with the provisions of the Indenture.
Upon the full and final payment and performance of all obligations of the
Issuers under the Indenture and the Notes, the pledged collateral shall be
released.
The rights of the Trustee to foreclose upon and dispose of the pledged
collateral is likely to be significantly impaired by applicable bankruptcy law
if a bankruptcy proceeding were to be commenced by or against the Company or
Pledgor prior to the Trustee's having disposed of the pledged collateral. Under
Title XI of the United States Code (the 'Bankruptcy Code'), a secured creditor
such as the Trustee is prohibited from disposing of security upon foreclosure in
a bankruptcy case, even though the debtor is in default under the applicable
debt instruments, without bankruptcy court approval. Moreover, in general, the
Bankruptcy Code prohibits the bankruptcy court from giving such approval if the
secured creditor is given 'adequate protection.' The meaning of the term
'adequate protection' may vary according to circumstances, but it is intended in
general to protect the value of the secured creditor's interest in the
collateral and may include cash payments or the granting of additional security,
if and at such times as the court in its discretion determines, for any
diminution in the value of the collateral as a result of the stay of disposition
during the pendency of the bankruptcy case. In view of the lack of a precise
definition of the term 'adequate protection' and the broad discretionary powers
of a bankruptcy court, it is impossible to predict how long payments under the
Notes could be delayed following commencement of a bankruptcy case, whether or
when the Trustee could dispose of the pledged collateral or whether or to what
extent holders of the Notes would be compensated for any delay in payment or
loss of value of the pledged collateral through the requirement of 'adequate
protection.'
The Indenture and the Pledge Agreement provide that the Capital Stock of
ACME Television and any other Subsidiary whose Capital Stock is pledged as
Collateral will be released from the Lien of the Indenture and the Pledge
Agreement in the event all of the Capital Stock of such Subsidiary of the
Company owned by the Company and its Subsidiaries is sold by the Company and/or
one or more of its Subsidiaries or to a Person who is not an Affiliate of the
Company and the sale complies with the provisions set forth below under
'--Certain Covenants--Limitation on Certain Asset Sales.'
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on September 30, 2005. Cash interest will not accrue
or be payable on the Notes prior to September 30, 2002. Thereafter, cash
interest on the Notes will accrue at the rate of 12% per annum and will be
payable semiannually on each March 31 and September 30, commencing March 31,
2003, to the holders of record of Notes at the close of business on the March 15
and September 15 immediately preceding such interest payment date. Cash interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from September 30, 2002. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
As discussed under 'Exchange Offer--Registration Rights,' pursuant to the
Registration Rights Agreement, the Issuers have agreed, at their expense, for
the benefit of the holders of the Original Notes, either (i) to effect a
registered Exchange Offer under the Securities Act to exchange the Original
Notes for Exchange Notes, which will have terms identical in all material
respects to the Original Notes (except that the Exchange Notes will not contain
terms with respect to transfer restrictions) or (ii) in the event that any
changes in law or applicable interpretations of the staff of the Commission do
not permit the Issuers to effect the Exchange Offer, or if for any other reason
the Exchange Offer is not consummated with 180 days of the Issue Date, or under
certain other circumstances, to register the Original Notes for resale under the
Securities Act through a shelf registration statement (a 'Shelf Registration
Statement'). In the event that either (a) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 45th day following
the Issue Date, (b) the Exchange Offer Registration Statement has not been
declared effective on or prior to the 150th day following the Issue Date, (c)
the Exchange Offer is not consummated on or prior to the 180th day following the
Issue Date or (d) a Shelf Registration Statement is not declared effective on or
prior to the 180th day following the Issue Date, the Issuers shall pay as
liquidated damages to each holder of the Original Notes an amount (the
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'Damage Amount') equal to 0.50% per annum of the average Accreted Value of the
Original Notes for the first 90 days during which any such default exists, and
the Damage Amount will be increased by an additional 0.25% per annum of the
average Accreted Value of the Original Notes for each 90-day period that any
such liquidated damages continue to accrue; provided that in no event shall the
Damage Amount be increased by more than 2.0%. Upon (w) the filing of the
Exchange Offer Registration Statement in the case of clause (a) above, (x) the
effectiveness of the Exchange Offer Registration Statement in the case of clause
(b) above, (y) the consummation of the Exchange Offer in the case of clause (c)
above or (z) the effectiveness of a Shelf Registration Statement in the case of
clause (d) above, the Damage Amount will cease to accrue from the date of such
filing, effectiveness or consummation, as the case may be. Any Damage Amounts
will be payable in cash. See 'Exchange Offer-- Registration Rights.'
Original Notes that remain outstanding after the consummation of the
Exchange Offer and Exchange Notes issued in connection with the Exchange Offer
will be treated as a single class of securities under the Indenture.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Issuers, in whole at any
time or in part from time to time, on or after September 30, 2001 at the
following redemption prices (expressed as percentages of the Accreted Value
thereof on the applicable redemption date), together, in each case, with accrued
and unpaid interest, if any, to the redemption date, if redeemed during the
twelve-month period beginning on September 30 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------- ----------
<S> <C>
2001......................................................... 106.000%
2002......................................................... 103.000%
2003 and thereafter.......................................... 100.000%
</TABLE>
In addition, the Issuers may redeem in the aggregate up to 35% of the
aggregate principal amount at maturity of Notes at any time and from time to
time prior to September 30, 2000 at a redemption price equal to 112.0% of the
Accreted Value thereof, out of the Net Proceeds of one or more Public Equity
Offerings; provided that 65% of the aggregate principal amount at maturity of
the Notes originally issued remains outstanding immediately after the occurrence
of any such redemption and that any such redemption occurs within 90 days
following the closing of any such Public Equity Offering.
In the event of a redemption of fewer than all of the Notes, the Trustee
shall select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which such Notes are listed,
or if such Notes are not then listed on a national securities exchange, on a pro
rata basis, by lot or in such other manner as the Trustee shall deem fair and
equitable. The Notes will be redeemable in whole or in part upon not less than
30 nor more than 60 days' prior written notice, mailed by first class mail to a
holder's last address as it shall appear on the register maintained by the
Registrar of the Notes. On and after any redemption date, Accreted Value will
cease to accrete and interest will cease to accrue on the Notes or portions
thereof called for redemption unless the Issuers shall fail to redeem any such
Note.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Additional Indebtedness
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, incur (as defined) any Indebtedness (including Acquired
Indebtedness); provided that if no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the incurrence of
such Indebtedness, the Company and its Subsidiaries may incur Indebtedness
(including Acquired Indebtedness) if after giving effect to the incurrence of
such Indebtedness and the receipt and application of the proceeds thereof, the
Company's Consolidated Leverage Ratio is less than 7.0 to 1. The accretion of
original issue discount and accrual of interest on the Notes and the Subsidiary
Senior Discount Notes shall not be deemed an incurrence of Indebtedness for
purposes of this covenant.
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Notwithstanding the foregoing, the Company and its Subsidiaries may incur
Permitted Indebtedness; provided that the Company will not incur any Permitted
Indebtedness that ranks junior in right of payment to the Notes that has a
maturity or mandatory sinking fund payment prior to the maturity of the Notes.
The Issuers will not incur any Indebtedness which by its terms (or by the
terms of any agreement governing such Indebtedness) is subordinated in right of
payment to any other Indebtedness of the Issuers unless such Indebtedness is
also by its terms (or by the terms of any agreement governing such Indebtedness)
made expressly subordinate in right of payment to the Notes pursuant to
subordination provisions that are substantively identical to the subordination
provisions of such Indebtedness (or such agreement) that are most favorable to
the holders of any other Indebtedness of the Issuers.
Limitation on Restricted Payments
The Issuers will not make, and will not permit any of their Subsidiaries
to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Issuers could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under '--Limitation on Additional
Indebtedness' above; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 100% of the Company's Cumulative EBITDA
minus 1.4 times the Company's Cumulative Consolidated Interest Expense, (2)
100% of the aggregate Net Proceeds received by the Company from the issue
or sale after the Issue Date of Capital Stock (other than Disqualified
Capital Stock or Capital Stock of the Company issued to any Subsidiary of
the Company) of the Company or any Indebtedness or other securities of the
Company convertible into or exercisable or exchangeable for Capital Stock
(other than Disqualified Capital Stock) of the Company which has been so
converted, exercised or exchanged, as the case may be, and (3) without
duplication of any amounts included in clause (c)(2) above, 100% of the
aggregate Net Proceeds received by the Company from any equity contribution
from a holder of the Company's Capital Stock, excluding, in the case of
clauses (c)(2) and (3), any Net Proceeds from a Public Equity Offering to
the extent used to redeem the Notes. For purposes of determining under this
clause (c) the amount expended for Restricted Payments, cash distributed
shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) the repurchase, redemption or other acquisition or retirement of
any shares of Capital Stock of the Company or Indebtedness subordinated to the
Notes by conversion into, or by or in exchange for, shares of Capital Stock of
the Company (other than Disqualified Capital Stock), or out of the Net Proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of other shares of Capital Stock of the Company (other than Disqualified Capital
Stock), (iii) the redemption or retirement of Indebtedness of the Company
subordinated to the Notes in exchange for, by conversion into, or out of the Net
Proceeds of, a substantially concurrent sale or incurrence of Indebtedness of
the Company (other than any Indebtedness owed to a Subsidiary) that is
contractually subordinated in right of payment to the Notes to at least the same
extent as the Indebtedness being redeemed or retired, (iv) the retirement of any
shares of Disqualified Capital Stock of the Company by conversion into, or by
exchange for, shares of Disqualified Capital Stock of the Company, or out of the
Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of
the Company) of other shares of Disqualified Capital Stock of the Company, (v)
Permitted Tax Distributions and (vi) the forfeit of a deposit that was a
Permitted Investment under clause (viii) of the definition of Permitted
Investments at the time such deposit was made; provided that in calculating the
aggregate amount of Restricted Payments made subsequent to the Issue Date for
purposes of clause (c) of the immediately preceding paragraph, amounts expended
pursuant to clauses (i), (ii) and (vi) shall be included in such calculation.
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Not later than the date of making any Restricted Payment, the Issuers shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant described above were computed, which calculations may
be based upon the Issuers' latest available financial statements, and that no
Default or Event of Default has occurred and is continuing and no Default or
Event of Default will occur immediately after giving effect to any such
Restricted Payments.
Limitation on Liens
The Issuers will not create, incur or otherwise cause or suffer to exist or
become effective any Liens of any kind (a) (other than Permitted Liens) upon any
property or asset of the Issuers unless (i) if such Lien secures Indebtedness
which is pari passu with the Notes, then the Notes are secured on an equal and
ratable basis with the obligations so secured until such time as such obligation
is no longer secured by a Lien or (ii) if such Lien secures Indebtedness which
is subordinated to the Notes, any such Lien shall be subordinated to the Lien
granted to the holders of the Notes to the same extent as such Indebtedness is
subordinated to the Notes and (b) on any of the Collateral (other than Liens
created by the Pledge Agreement).
Limitation on Investments
The Issuers will not, and will not permit any of their Subsidiaries to,
make any Investment other than (i) a Permitted Investment or (ii) an Investment
that is made as a Restricted Payment in compliance with the Limitation on
Restricted Payments' covenant, after the Issue Date.
Limitation on Transactions with Affiliates
The Issuers will not, and will not permit any of their Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate (each an
'Affiliate Transaction') or extend, renew, waive or otherwise modify the terms
of any Affiliate Transaction entered into prior to the Issue Date unless (i)
such Affiliate Transaction is between or among the Issuers and their Wholly
Owned Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair and
reasonable to the Issuers or such Subsidiary, as the case may be, and the terms
of such Affiliate Transaction are at least as favorable as the terms which could
be obtained by the Issuers or such Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $1 million which is not permitted under
clause (i) above, the Issuers must obtain a resolution of the Board of Directors
of the Issuers certifying that such Affiliate Transaction complies with clause
(ii) above. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $5 million which is not permitted under
clause (i) above, the Issuers must obtain a favorable written opinion as to the
fairness of such transaction or transactions, as the case may be, from an
Independent Financial Advisor.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under '--Limitation on Restricted
Payments' above, or (ii) reasonable fees, compensation and equity incentives in
the form of Capital Stock (other than Disqualified Capital Stock) paid to and
indemnity provided on behalf of, officers, directors or employees of the Issuers
or any Subsidiary of the Issuers as determined in good faith by the Issuers'
Board of Directors or senior management, (iii) any agreement as in effect as of
the Issue Date or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) in any replacement agreement
thereto so long as any such amendment or replacement agreement is not more
disadvantageous to the holders in any material respect than the original
agreement as in effect on the Issue Date; or (iv) any affiliation agreements
with the WB Television Network.
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Limitation on Creation of Subsidiaries
The Company will not create or acquire any direct Subsidiary other than a
Subsidiary the Capital Stock of which is, to the extent owned by the Company,
pledged to the Trustee as set forth under '--Security.'
Limitation on Certain Asset Sales
The Issuers will not, and will not permit any of their Subsidiaries to,
consummate an Asset Sale unless (i) the Issuers or such applicable Subsidiary,
as the case may be, receives consideration at the time of such sale or other
disposition at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by the Board of Directors of
the Company, and evidenced by a board resolution); (ii) not less than 80% of the
consideration received by the Company or such applicable Subsidiary, as the case
may be, is in the form of cash or Cash Equivalents other than in the case where
the Company is undertaking a Permitted Asset Swap; and (iii) the Asset Sale
Proceeds received by the Company or such Subsidiary are applied (a) first, to
the extent the Company or any such Subsidiary, as the case may be, elects, or is
required, to prepay, repay or purchase indebtedness under the Senior Credit
Facility, the Subsidiary Senior Discount Notes and/or any other Indebtedness of
a Subsidiary of the Company incurred in compliance with the Indenture within 180
days following the receipt of the Asset Sale Proceeds from any Asset Sale;
provided that any such repayment shall result in a permanent reduction of the
commitments thereunder in an amount equal to the principal amount so repaid; (b)
second, to the extent of the balance of Asset Sale Proceeds after application as
described above, to the extent the Company elects, to an investment in assets
(including Capital Stock or other securities purchased in connection with the
acquisition of Capital Stock or property of another Person) used or useful in
businesses similar or ancillary to the business of the Company or any such
Subsidiary as conducted on the Issue Date; provided that (1) such investment
occurs or the Company or any such Subsidiary enters into contractual commitments
to make such investment, subject only to customary conditions (other than the
obtaining of financing), within 180 days following receipt of such Asset Sale
Proceeds and (2) Asset Sale Proceeds so contractually committed are so applied
within 270 days following the receipt of such Asset Sale Proceeds; and (c)
third, if on such 180th day in the case of clauses (iii)(a) and (iii)(b)(1) or
on such 270th day in the case of clause (iii)(b)(2) with respect to any Asset
Sale, the Available Asset Sale Proceeds exceed $5 million, the Company shall
apply an amount equal to such Available Asset Sale Proceeds to an offer to
repurchase the Notes, at a purchase price in cash equal to 100% of the Accreted
Value thereof plus accrued and unpaid interest, if any, to the purchase date (an
'Excess Proceeds Offer'). If an Excess Proceeds Offer is not fully subscribed,
the Company may retain the portion of the Available Asset Sale Proceeds not
required to repurchase Notes.
If the Issuers are required to make an Excess Proceeds Offer, the Issuers
shall mail, within 30 days following the date specified in clause (iii)(c)
above, a notice to the holders stating, among other things: (1) that such
holders have the right to require the Issuers to apply the Available Asset Sale
Proceeds to repurchase such Notes at a purchase price in cash equal to (x) 100%
of the Accreted Value thereof, if the applicable purchase date is on or prior to
September 30, 2002, or (y) 100% of the principal amount at maturity thereof,
plus accrued and unpaid interest, if any, to the purchase date, if the purchase
date is after September 30, 2002; (2) the purchase date, which shall be no
earlier than 30 days and not later than 45 days from the date such notice is
mailed; (3) the instructions that each holder must follow in order to have such
Notes purchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the purchase of such Notes.
In the event of the transfer of substantially all of the property and
assets of the Issuers and their Subsidiaries as an entirety to a Person in a
transaction permitted under '--Merger, Consolidation or Sale of Assets' below,
the successor Person shall be deemed to have sold the properties and assets of
the Company and its Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale.
The Issuers shall comply with the requirements of Rule 14e-1 under the
Exchange Act and other securities laws and regulations thereunder to the extent
such laws and regulations are applicable in connection with the repurchase of
Notes pursuant to an Excess Proceeds Offer. To the extent that the provisions of
any securities laws or regulations conflict with the 'Asset Sale' provisions of
the Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
'Asset Sale' provisions of the Indenture by virtue thereof.
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Limitation on Preferred Stock of Subsidiaries
The Issuers will not permit any of its Subsidiaries to issue any Preferred
Stock (except Preferred Stock issued to the Company or a Wholly Owned Subsidiary
of the Company) or permit any Person (other than the Company or a Wholly Owned
Subsidiary of the Company) to hold any such Preferred Stock unless the Company
or such Subsidiary would be entitled to incur or assume Indebtedness under
'--Limitation on Additional Indebtedness' above (other than Permitted
Indebtedness) in the aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Limitation on Capital Stock of Subsidiaries
The Issuers will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Subsidiary of the Company or (ii) permit any
of its direct Subsidiaries to issue any Capital Stock, other than to the Issuers
or a Wholly Owned Subsidiary of the Issuers. The foregoing restrictions shall
not apply to (x) an Asset Sale made in compliance with '--Limitation on Certain
Asset Sales' above or the issuance of Preferred Stock in compliance with
'--Limitation on Preferred Stock of Subsidiaries' above, (y) Liens securing the
Notes or (z) a Permitted Lien. In no event will the Company sell, pledge,
hypothecate or otherwise convey or dispose of any Capital Stock of Finance
(other than pursuant to the Pledge Agreement) or will Finance sell any Capital
Stock.
Limitation on Sale and Lease-Back Transactions
The Issuers will not, and will not permit any of their Subsidiaries to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined in good faith by the Board of
Directors of the Company and evidenced by a board resolution and (ii) the
Issuers could incur the Attributable Indebtedness in respect of such Sale and
Lease-Back Transaction in compliance with '--Limitation on Additional
Indebtedness' above.
Limitation on Conduct of Business
The Issuers and their Subsidiaries will not engage in any businesses which
are not the same, similar or related to the businesses in which the Company and
its Subsidiaries are engaged on the Issue Date.
Limitation on Conduct of Business of ACME Intermediate Finance, Inc.
ACME Intermediate Finance, Inc. ('Finance') will not own any operating
assets or other properties or conduct any business other than to serve as an
Issuer and an obligor on the Notes.
Impairment of Security Interest
The Indenture provides that the Issuers shall not, and not permit any of
their Subsidiaries to, take or omit to take any action which action or omission
would impair the security interest in favor of the Trustee, on behalf of itself
and the holders of the Notes with respect to the Collateral required to be
pledged under the Indenture, and the Issuers will not create, otherwise incur or
suffer to exist, in favor of any Person (other than the Trustee on behalf of
itself and the holders of the Notes) any interest whatsoever in the Collateral.
Payments for Consent
The Issuers will not, and will not permit any of their Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture, the Pledge Agreement or the Notes unless such consideration is
offered to be paid or agreed to be paid to all holders of the Notes which so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, the Issuers shall be obligated
to make an offer to purchase (the 'Change of Control Offer') each holder's
outstanding Notes at a purchase price (the 'Change of Control Purchase Price')
equal to (x) 101% of the Accreted Value thereof, if the Change of Control
Payment Date (as defined) is on or prior to September 30, 2002, or (y) 101% of
the principal amount at maturity thereof, plus accrued and unpaid interest, if
any, to the Change of Control Payment Date, if the Change of Control Payment
Date is after September 30, 2002, in each case in accordance with the procedures
set forth below.
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Within 20 days of the occurrence of a Change of Control, the Issuers shall
(i) cause a notice of the Change of Control Offer to be sent at least once to
the Dow Jones News Service or similar business news service in the United States
and (ii) send by first-class mail, postage prepaid, to the Trustee and to each
holder of the Notes, at the address appearing in the register maintained by the
Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 30 days nor later than 45 days from
the date such notice is mailed (the 'Change of Control Payment Date'));
(3) that any Note not tendered will continue to accrete Accreted Value
or accrue interest, as the case may be;
(4) that, unless the Issuers default in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrete Accreted Value or accrue
interest, as the case may be, after the Change of Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount at maturity to the unpurchased
principal amount at maturity of the Notes surrendered;
(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Issuers. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
the Issuers shall execute and issue, and the Trustee shall promptly authenticate
and mail to such holder, a new Note equal in principal amount at maturity to any
unpurchased portion of the Notes surrendered; provided that each such new Note
shall be issued in an original principal amount at maturity in denominations of
$1,000 and integral multiples thereof.
The Indenture requires that if the Senior Credit Facility is in effect
and/or any Subsidiary Senior Discount Notes are outstanding, or any amounts are
owing thereunder or in respect thereof, at the time of the occurrence of a
Change of Control, prior to the mailing of the notice to holders described in
the second preceding paragraph, but in any event within 20 days following any
Change of Control, the Issuers, on a joint and several basis, covenant to (i)
repay in full all obligations and terminate all commitments under or in respect
of the Senior Credit Facility and/or the Subsidiary Senior Discount Notes, as
the case may be, or offer to repay in full all obligations and terminate all
commitments under or in respect of the Senior Credit Facility and/or the
Subsidiary Senior Discount Notes, as the case may be, and repay the Indebtedness
owed to each such lender and holder who has accepted such offer or (ii) obtain
the requisite consents under the Senior Credit Facility and/or the Subsidiary
Senior Discount Notes to permit the repurchase of the Notes as described above.
The Issuers must first comply with the covenant described in the preceding
sentence before it shall be required to purchase Notes in the event of a Change
of Control; provided that the Issuers' failure to comply with the covenant
described in the preceding
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sentence constitutes an Event of Default described in clause (iii) under
'--Events of Default' below if not cured within 30 days after the notice
required by such clause. As a result of the foregoing, a holder of the Notes may
not be able to compel the Issuers to purchase the Notes unless the Company and
ACME Television are able at the time to refinance all of the obligations under
or in respect of the Senior Credit Facility and/or the Subsidiary Senior
Discount Notes or obtain requisite consents under the Senior Credit Facility
and/or the Subsidiary Senior Discount Notes. Failure by the Issuers to make a
Change of Control Offer when required by the Indenture constitutes a default
under the Indenture, and if not cured within 30 days after notice, constitutes
an Event of Default.
The Indenture further provides that, (A) if either Issuer has issued any
outstanding (i) indebtedness that is subordinated in right of payment to the
Notes or (ii) Preferred Stock, and the Issuers are required to make a change of
control offer or to make a distribution with respect to such subordinated
indebtedness or Preferred Stock in the event of a Change of Control, the Issuers
shall not consummate any such offer or distribution with respect to such
subordinated indebtedness or Preferred Stock until such time as the Issuers
shall have paid the Change of Control Purchase Price in full to the holders of
Notes that have accepted the Issuers' Change of Control Offer and shall
otherwise have consummated the Change of Control Offer made to holders of the
Notes and (B) the Issuers will not issue Indebtedness that is subordinated in
right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change in Control under the
Indenture.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the 'Change
of Control' provisions of the Indenture, the Issuers shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached their obligations under the 'Change of Control' provisions of the
Indenture by virtue thereof.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Neither of the Issuers will consolidate with, merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless (in the case of the
Company): (i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or to which the properties and assets of the Company are sold,
assigned, transferred, leased, conveyed or otherwise disposed of shall be a
corporation or a limited liability company organized and existing under the laws
of the United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company under the Indenture and the Notes and the obligations thereunder shall
remain in full force and effect; provided, that at any time the Company or its
successor is a limited liability company, there shall be a co-issuer of the
Notes that is a corporation; (ii) immediately before and immediately after
giving effect to such transaction, no Default or Event of Default shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the Consolidated Net
Worth of the Company or the surviving entity, as the case may be, is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions; and (iv) immediately after giving effect
to such transaction on a pro forma basis, the Company or such Person could incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under '--Certain Covenants--Limitation on Additional Indebtedness' above.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
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Company the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
EVENTS OF DEFAULT
The following events are defined in the Indenture as 'Events of Default':
(i) default in payment of any Accreted Value, principal of, or
premium, if any, on the Notes whether at maturity, upon redemption or
otherwise;
(ii) default for 30 days in payment of any interest on the Notes;
(iii) default by the Issuers or any Subsidiary of the Company in the
observance or performance of any other covenant in the Notes or the
Indenture for 30 days after written notice from the Trustee or the holders
of not less than 25% in aggregate principal amount at maturity of the Notes
then outstanding (except in the case of a default with respect to the
'Change of Control' or 'Merger, Consolidation or Sale of Assets' covenant
which shall constitute an Event of Default with such notice requirement but
without such passage of time requirement);
(iv) failure to pay when due principal, interest or premium in an
aggregate amount of $5 million or more with respect to any Indebtedness of
the Issuers or any Subsidiary thereof, or the acceleration of any such
Indebtedness aggregating $5 million or more which default shall not be
cured, waived or postponed pursuant to an agreement with the holders of
such Indebtedness within 60 days after written notice as provided in the
Indenture, or such acceleration shall not be rescinded or annulled within
20 days after written notice as provided in the Indenture;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5 million shall be rendered against
the Issuers or any Subsidiary thereof, and shall not be discharged for any
period of 60 consecutive days during which a stay of enforcement shall not
be in effect;
(vi) certain events involving bankruptcy, insolvency or reorganization
of the Issuers or any Subsidiary thereof; and
(vii) breach by a Pledgor of any representation or warranty set forth
in the Pledge Agreement, or default by a Pledgor in the performance of any
covenant set forth in the Pledge Agreement, or repudiation by a Pledgor of
any of its obligations under the Pledge Agreement or the unenforceability
of the Pledge Agreement against a Pledgor for any reason which, in any case
or in the aggregate, results in a material impairment of the rights
intended to be afforded thereby.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if any,
or interest on the Notes) if the Trustee considers it to be in the best interest
of the holders of the Notes to do so.
The Indenture provides that if an Event of Default (other than an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization with respect to either of the Issuers) shall have occurred and be
continuing, then the Trustee or the holders of not less than 25% in aggregate
principal amount at maturity of the Notes then outstanding may declare the Notes
to be immediately due and payable in an amount equal to the Accreted Value of
the Notes, premium, if any, plus accrued and unpaid interest, if any, to the
date of acceleration and (i) the same shall become immediately due and payable
or (ii) if there are any amounts outstanding under the Senior Credit Facility
and or the Subsidiary Senior Discount Notes, shall become immediately due and
payable upon the first to occur of an acceleration under the Senior Credit
Facility or 5 business days after receipt by the Company and the representative
under the Senior Credit Facility and/or the Trustee in respect of the Subsidiary
Senior Discount Notes of a notice of acceleration by the Trustee hereunder;
provided, however, that after such acceleration but before a judgment or decree
based on acceleration is obtained by the Trustee, the holders of a majority in
aggregate principal amount at maturity of outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if (i) all Events of Default,
other than nonpayment of Accreted Value premium, if any, or interest that has
become due solely because of the acceleration, have been cured or waived as
provided in the Indenture, (ii) to the extent the payment of such interest is
lawful, interest on overdue installments
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of interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iii) if the Issuers have paid the
Trustee its reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (iv) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the above Events of
Default, the Trustee shall have received an officers' certificate and an opinion
of counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization shall occur, the Accreted Value or
principal and all premium and interest with respect to all of the Notes shall be
due and payable immediately without any declaration or other act on the part of
the Trustee or the holders of the Notes.
The holders of a majority in principal amount at maturity of the Notes then
outstanding shall have the right to waive any existing default or Event of
Default and its consequences or compliance with any provision of the Indenture
or the Notes and to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, subject to certain
limitations provided for in the Indenture and under the TIA.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount at
maturity of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as Trustee, and
unless the Trustee shall not have received from the holders of a majority in
aggregate principal amount at maturity of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 30 days. Notwithstanding the foregoing, such limitations do
not apply to a suit instituted on such Note on or after the respective due dates
expressed in such Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides the Issuers may elect either (a) to defease and be
discharged from any and all of their obligations with respect to the Notes
(except for the obligations to register the transfer or exchange of such Notes,
to replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain
an office or agency in respect of the Notes and to hold monies for payment in
trust) ('defeasance') or (b) to be released from their obligations with respect
to the Notes under certain covenants contained in the Indenture ('covenant
defeasance') upon the deposit with the Trustee (or other qualifying trustee), in
trust for such purpose, of money and/or non-callable U.S. government obligations
which through the payment of Accreted Value and interest in accordance with
their terms will provide money, in an amount sufficient to pay the Accreted
Value of, premium, if any, and interest on the Notes, on the scheduled due dates
therefor or on a selected date of redemption in accordance with the terms of the
Indenture. Such a trust may only be established if, among other things, (i) the
Issuers have delivered to the Trustee an opinion of counsel (as specified in the
Indenture) (A) to the effect that neither the trust nor the Trustee will be
required to register as an investment company under the Investment Company Act
of 1940, as amended, and (B) describing either a private ruling concerning the
Notes or a published ruling of the Internal Revenue Service, to the effect that
holders of the Notes or persons in their positions will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount and in the same manner and at the same times, as would have been the case
if such deposit, defeasance and discharge had not occurred, (ii) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit or insofar as Events of Default from bankruptcy, insolvency or
reorganization events are concerned, at any time in the period ending on the
91st day after the date of deposit; (iii) such defeasance or covenant defeasance
shall not result in a breach or violation of, or constitute a default under the
Indenture or any other material agreement or instrument to which the Issuers or
any of their Subsidiaries is a party or by which the Issuers or any or their
Subsidiaries is bound; (iv) the Issuers shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuers with
the intent of preferring the holders of the Notes over any other creditors of
the Issuers or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Company or others; (v) the Issuers shall have
delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent provided for or relating to the
defeasance or the covenant defeasance have been complied with; (vi) the Issuers
shall have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be
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subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; and (vii) certain other
customary conditions precedent are satisfied.
MODIFICATION OF INDENTURE
From time to time, the Issuers and the Trustee may, without the consent of
holders of the Notes, amend or supplement the Indenture for certain specified
purposes, including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
holder. The Indenture contains provisions permitting the Issuers and the
Trustee, with the consent of holders of at least a majority in principal amount
at maturity of the outstanding Notes, to modify or supplement the Indenture,
except that no such modification shall, without the consent of each holder
affected thereby, (i) reduce the amount of Notes whose holders must consent to
an amendment, supplement, or waiver to the Indenture, (ii) reduce the rate of or
change the time for payment of interest, including defaulted interest, on any
Note, (iii) reduce the Accreted Value of or premium on or change the stated
maturity of any Note or change the date on which any Notes may be subject to
redemption or repurchase or reduce the redemption or repurchase price therefor,
(iv) make any Note payable in money other than that stated in the Note or change
the place of payment from New York, New York, (v) waive a default on the payment
of the Accreted Value of, interest on, or redemption payment with respect to any
Note, (vi) make any change in provisions of the Indenture protecting the right
of each holder of Notes to receive payment of Accreted Value of and interest on
such Note on or after the due date thereof or to bring suit to enforce such
payment, or permitting holders of a majority in principal amount at maturity of
Notes to waive Defaults or Events of Default; (vii) modify or change any
provision of the Indenture or the related definitions affecting the ranking of
the Notes in a manner which adversely affects the holders of Notes; or (viii)
release any Collateral, except in compliance with the terms of the Indenture.
REPORTS TO HOLDERS
So long as the Issuers are subject to the periodic reporting requirements
of the Exchange Act, they will continue to furnish the information required
thereby to the Commission and to the holders of the Notes. The Indenture
provides that even if the Issuers are entitled under the Exchange Act not to
furnish such information to the Commission or to the holders of the Notes, they
will nonetheless continue to furnish such information to the Commission and
holders of the Notes.
COMPLIANCE CERTIFICATE
The Issuers will deliver to the Trustee on or before 90 days after the end
of the Issuers' fiscal year and on or before 45 days after the end of each the
first, second and third fiscal quarters in each year an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
has occurred. If they do, the certificate will describe the Default or Event of
Default, its status and the intended method of cure, if any.
THE TRUSTEE
The Trustee under the Indenture is the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the continuance
of an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
is not required to transfer or exchange any Note selected for redemption and,
further, is not required to transfer or exchange any Note for a period of 15
days before selection of the Notes to be redeemed.
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The Notes will be issued in a transaction exempt from registration under
the Act and will be subject to the restrictions on transfer described in 'Notice
to Investors.'
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
'Accreted Value' means, as of any date prior to September 30, 2002, an
amount per $1,000 principal amount at maturity of Notes that is equal to the sum
of (a) $558.40 and (b) the portion of the excess of the principal amount at
maturity of each Note over $558.40 which shall have been amortized on a daily
basis and compounded semiannually on each March 31 and September 30 at the rate
of 12% per annum from the Issue Date through the date of determination computed
on the basis of a 360-day year of twelve 30-day months; and, as of any date on
or after September 30, 2002, the Accreted Value of each Note shall mean the
aggregate principal amount at maturity of such Note.
'Acquired Indebtedness' means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary or is merged into or consolidated with any
other Person or which is assumed in connection with the acquisition of assets
from such Person and, in each case, not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Subsidiary
or such merger, consolidation or acquisition.
'Affiliate' means, with respect to any specific Person, any other Person
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, 'control' (including, with correlative meanings,
the terms 'controlling,' 'controlled by,' and 'under common control with'), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that, for purposes of the covenant described under
'--Certain Covenants--Limitation on Transactions with Affiliates' beneficial
ownership of at least 10% of the voting securities of a Person, either directly
or indirectly, shall be deemed to be control.
'Asset Acquisition' means (a) an Investment by the Issuers or any
Subsidiary of the Issuers in any other Person pursuant to which such Person
shall become a Subsidiary of the Issuers or any Subsidiary of the Issuers, or
shall be merged with or into the Company or any Subsidiary of the Company or (b)
the acquisition by the Issuers or any Subsidiary of the Issuers of the assets of
any Person (other than a Subsidiary of the Issuers) which constitute all or
substantially all of the assets of such Person or comprise any division or line
of business of such Person or any other properties or assets of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
'Asset Sale' means any direct or indirect sale, issuance, conveyance,
assignment, transfer, lease or other disposition (including any Sale and
Lease-Back Transaction), other than to the Company or any of its Wholly Owned
Subsidiaries, in any single transaction or series of related transactions of (a)
any Capital Stock of or other equity interest in any Subsidiary of the Company
or (b) any other property or assets of the Company or of any Subsidiary thereof;
provided that Asset Sales shall not include (i) a transaction or series of
related transactions for which the Company or its Subsidiaries receive aggregate
consideration of less than $500,000 and (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company as permitted under '--Merger, Consolidation or Sale of Assets.'
'Asset Sale Proceeds' means, with respect to any Asset Sale, (i) cash
received by the Issuers or any Subsidiary of the Issuers from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Subsidiary of the Issuers as a result of such Asset Sale, (d) repayment
of Indebtedness that is required to be
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repaid in connection with such Asset Sale and (e) deduction of appropriate
amounts to be provided by the Issuers or a Subsidiary of the Issuers as a
reserve, in accordance with GAAP, against any liabilities associated with the
assets sold or disposed of in such Asset Sale and retained by the Issuers or a
Restricted Subsidiary after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and
other noncash consideration received by the Issuers or any Subsidiary of the
Issuers from such Asset Sale or other disposition upon the liquidation or
conversion of such notes or noncash consideration into cash.
'Attributable Indebtedness' in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the greater of (i) the fair value of the
property subject to such arrangement and (ii) the present value of the notes
(discounted at the rate borne by the Notes, compounded semi-annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale and Lease-Back Transaction (including any period
for which such lease has been extended).
'Available Asset Sale Proceeds' means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clauses (iii)(a) or (iii)(b), and which have not yet been the
basis for an Excess Proceeds Offer in accordance with clause (iii)(c) of the
first paragraph of '--Certain Covenants--Limitation on Certain Asset Sales'.
'Board of Directors' means (i) in the case of a Person that is a
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body or any authorized committee thereof responsible for the
management of the business and affairs of such Person.
'Capital Stock' means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership or limited liability company
interests or any other participation, right or other interest in the nature of
an equity interest in such Person including, without limitation, Common Stock
and Preferred Stock of such Person, or any option, warrant or other security
convertible into any of the foregoing.
'Capitalized Lease Obligations' means with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
'Cash Equivalents' means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ('S&P') or Moody's
Investors Service, Inc. ('Moody's'); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
A 'Change of Control' means the occurrence of any of the following: (i) the
adoption of a plan relating to the liquidation or dissolution of Holdings or the
Company, (ii) prior to the consummation of an Initial Public Offering, the
Permitted Holders cease to be the beneficial owners (as defined under Rule 13d-3
or any successor rule or regulation promulgated under the Exchange Act) of at
least a majority of the total voting power of the Common Stock entitled to elect
the Board of Directors of Holdings, (iii) prior to the consummation of an
Initial
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Public Offering, the Permitted Holders shall cease collectively to control at
least a majority of the voting power of the Board of Directors of Holdings, and
(iv) in connection with or after an Initial Public Offering, any Person
(including a Person's Affiliates and associates), other than a Permitted Holder,
becomes the beneficial owner of more than 20% of the total voting power of the
Common Stock of Holdings or the Company, and the Permitted Holders beneficially
own, in the aggregate, less than 30% of the total voting power of Holdings or
the Company, as the case may be.
'Collateral' means the property of the Pledgors pledged to secure the
payment of the Notes pursuant to the Pledge Agreement.
'Common Stock' of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
'Consolidated Interest Expense' means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption 'interest expense' or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to, (i) Redeemable Dividends, whether paid or
accrued, on Subsidiary Preferred Stock, (ii) imputed interest included in
Capitalized Lease Obligations, (iii) all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, (iv) the net costs associated with Interest Rate Agreements and other
hedging obligations, (v) amortization of other financing fees and expenses, (vi)
the interest portion of any deferred payment obligation, (vii) amortization of
discount or premium, if any, and (viii) all other non-cash interest expense
(other than interest amortized to cost of sales)) plus, without duplication, all
net capitalized interest for such period and all interest incurred or paid under
any guarantee of Indebtedness (including a guarantee of principal, interest or
any combination thereof) of any Person, plus the amount of all dividends or
distributions paid on Disqualified Capital Stock (other than dividends paid or
payable in shares of Capital Stock of the Company); provided that no such
expense relating to the Notes shall be included in the definition of
Consolidated Interest Expense.
'Consolidated Leverage Ratio' means, with respect to any Person, the ratio
of (i) the sum of the aggregate outstanding amount of Indebtedness of such
Person and its Subsidiaries as of the date of calculation (the 'Transaction
Date') on a consolidated basis determined in accordance with GAAP (provided that
the Notes shall not be considered to be outstanding Indebtedness for purposes of
the Consolidated Leverage Ratio) to (ii) such Person's EBITDA for the four full
fiscal quarters (the 'Four Quarter Period') ending on or prior to the date of
determination for which financial statements are available. For purposes of this
definition, 'EBITDA' shall be calculated after giving effect on a pro forma
basis to (i) the incurrence or repayment of any Indebtedness of such Person or
any of its Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Subsidiaries (including any Person who becomes a Subsidiary
as a result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness and also including any EBITDA (provided that
such EBITDA shall be included only to the extent includable pursuant to the
definition of 'Consolidated Net Income') attributable to the assets which are
the subject of the Asset Acquisition or Asset Sale during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction Date,
as if such Asset Sale or Asset Acquisition (including the incurrence, assumption
or liability for any such Acquired Indebtedness) occurred on the first day of
the Four Quarter Period; provided that if any such Asset Acquisition relates to
the acquisition of a television broadcast station which is not an affiliate of a
Network and which had a negative Net Income for the Four Quarter Period, it may
be assumed, for purposes of such pro forma calculation, that the Net Income of
such station for such period was zero. If such Person or any of its Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person,
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the preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Subsidiary of such Person had directly
incurred or otherwise assumed such guaranteed Indebtedness.
'Consolidated Net Income' means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the 'other Person') in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the Net Income of such other Person to
be consolidated into the Net Income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) for purposes
of calculating Consolidated Net Income in calculating EBITDA (x) for purposes of
determining whether the Company (but not any of its Subsidiaries) is able to
incur Indebtedness pursuant to the first paragraph under '--Certain
Covenants--Limitation on Additional Indebtedness' and (y) for purposes of
determining whether a Restricted Payment identified in clauses (i), (ii), (iii)
and (v) of the definition of Restricted Payment can be made pursuant to
'--Certain Covenants--Limitation on Restricted Payments,' the Net Income of any
Subsidiary of the Person in question that is subject to any restriction or
limitation on the payment of dividends or the making of other distributions
shall be excluded to the extent of such restriction or limitation, (c)(i) the
Net Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition and (ii) any net gain (but not
loss) resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be excluded,
(d) extraordinary gains and losses shall be excluded, (e) income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued) shall be excluded, and (f) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation prior
to such consolidation, merger or transfer of assets shall be excluded.
'Consolidated Net Worth' means with respect to any Person at any date, the
consolidated stockholders' equity or Members' Capital of such Person less the
amount of such stockholders' equity attributable to Disqualified Capital Stock
of such Person and its subsidiaries, as determined in accordance with GAAP.
'Cumulative Consolidated Interest Expense' means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense from
October 1, 1997 to the end of the Company's most recently ended full fiscal
quarter prior to such date, taken as a single accounting period.
'Cumulative EBITDA' means, with respect to any Person, as of any date of
determination, EBITDA from October 1, 1997 to the end of the Company's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
'Disqualified Capital Stock' means any Capital Stock of a Person or a
Subsidiary thereof which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Notes, for cash or securities constituting Indebtedness.
Without limitation of the foregoing, Disqualified Capital Stock shall be deemed
to include any Preferred Stock of a Person or a Subsidiary of such Person, with
respect to either of which, under the terms of such Preferred Stock, by
agreement or otherwise, such Person or Subsidiary is obligated to pay current
dividends or distributions in cash during the period prior to the maturity date
of the Notes; provided, however, that (i) Preferred Stock of a Person or any
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of such Person or Subsidiary which provisions have
substantially the same effect as the provisions of the Indenture described under
'Change of Control,' shall not be deemed to be Disqualified Capital Stock solely
by virtue of such provisions and (ii) Capital Stock of any limited liability
company or other pass through entity for federal income tax purposes shall not
be deemed to be Disqualified Capital Stock solely by virtue of the fact that its
holders are entitled to Permitted Tax Distributions.
'EBITDA' means, with respect to any Person and its Subsidiaries, for any
period, an amount equal to (a) the sum of (i) Consolidated Net Income for such
period, plus (ii) the provision for taxes for such period based on income or
profits to the extent such income or profits were included in computing
Consolidated Net Income and any provision for taxes utilized in computing net
loss under clause (i) hereof, plus (iii) Consolidated Interest
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Expense for such period (but only including Redeemable Dividends in the
calculation of such Consolidated Interest Expense to the extent that such
Redeemable Dividends have not been excluded in the calculation of Consolidated
Net Income), plus (iv) depreciation for such period on a consolidated basis,
plus (v) amortization of intangibles and television programming obligations (net
of cash payments with respect to television programming obligations) for such
period on a consolidated basis, plus (vi) any other non-cash items reducing
Consolidated Net Income for such period, minus (b) all non-cash items increasing
Consolidated Net Income for such period, all for such Person and its
Subsidiaries determined on a consolidated basis in accordance with GAAP;
provided, however, that, for purposes of calculating EBITDA during any fiscal
quarter, cash income from a particular Investment of such Person shall be
included only (x) if cash income has been received by such Person with respect
to such Investment during each of the previous four fiscal quarters, or (y) if
the cash income derived from such Investment is attributable to Cash
Equivalents.
'Exchange Act' means the Securities Exchange Act of 1934, as amended and
the rules and regulations of the Commission promulgated thereunder.
'fair market value' means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a resolution of the Board of
Directors of the Company delivered to the Trustee.
'GAAP' means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
'Holdings' means ACME Television Holdings, LLC, a Delaware limited
liability company.
'incur' means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
'incurrence,' 'incurred,' 'incurrable,' and 'incurring' shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
'Indebtedness' means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations of such Person, (ii) obligations secured by a lien
to which the property or assets owned or held by such Person is subject, whether
or not the obligation or obligations secured thereby shall have been assumed,
(iii) guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), (iv) all obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (v) Disqualified Capital Stock of such Person or any Subsidiary
thereof, and (vi) obligations of any such Person under any currency agreement or
any Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such currency agreement or Interest Rate Agreement obligations would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; providedthat
(i) the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and (ii) Indebtedness shall not
include any liability for federal, state, local or other taxes. Notwithstanding
any other provision of the foregoing definition, (i) any trade
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payable arising from the purchase of goods or materials or for services obtained
and (ii) television programming obligations entered into in the ordinary course
of business shall not be deemed to be 'Indebtedness' of the Company or any of
its Subsidiaries for purposes of this definition. Furthermore, guarantees of (or
obligations with respect to letters of credit supporting) Indebtedness otherwise
included in the determination of such amount shall not also be included.
'Independent Financial Advisor' means an investment banking firm of
national reputation in the United States (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
'Initial Public Offering' means an underwritten public offering of Common
Stock of the Company or a Parent registered under the Securities Act (other than
a public offering registered on Form S-8 under the Securities Act) that results
in net proceeds of at least $25.0 million to the Company or such Parent, as the
case may be.
'Interest Rate Agreement' means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
'Investments' means, with respect of any Person, directly or indirectly,
any advance, account receivable (other than an account receivable arising in the
ordinary course of business of such Person), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any Capital Stock,
bonds, notes, debentures, partnership or joint venture interests or other
securities of, the acquisition, by purchase or otherwise, of all or
substantially all of the business or assets or stock or other evidence of
beneficial ownership of, any Person or the making of any investment in any
Person. Investments shall exclude (i) extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices of such Person and
(ii) the repurchase of securities of any Person by such Person. For the purposes
of the 'Limitation on Restricted Payments' covenant, the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Issuers or any of their Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce the
amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If the
Issuers or any Subsidiary of the Issuers sells or otherwise disposes of any
Common Stock of any direct or indirect Subsidiary of the Issuers such that,
after giving effect to any such sale or disposition, the Issuers no longer own,
directly or indirectly, greater than 50% of the outstanding Common Stock of such
Subsidiary, the Issuers shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Subsidiary not sold or disposed of.
'Issue Date' means the date the Original Notes were first issued by the
Issuers and authenticated by the Trustee under the Indenture.
'Lien' means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
'Net Income' means, with respect to any Person, for any period, the net
income (loss) of such Person determined in accordance with GAAP.
'Net Proceeds' means (a) in the case of any sale of Capital Stock by or
equity contribution to any Person, the aggregate net proceeds received by such
Person, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market value thereof, as determined in good faith by the Board of
Directors of such Person, at the time of receipt) and
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(b) in the case of any exchange, exercise, conversion or surrender of
outstanding securities of any kind for or into shares of Capital Stock of the
Issuers which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to such
Person upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less all
expenses incurred by such Person in connection therewith).
'Network' means (i) each of the American Broadcasting Company, CBS, Inc.,
Fox Broadcasting Company, National Broadcasting Co., Inc., The WB Television
Network, United Paramount Network and (ii) any successor Person of a Person
identified in clause (i) of this definition.
'Officers' Certificate' means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person that shall comply
with applicable provisions of the Indenture.
'Parent' means any Person which owns all or substantially all of the Common
Stock of the Company.
'Permitted Asset Swap' means any transfer of properties or assets by the
Company or any of its Subsidiaries in which 90% of the consideration received by
the transferor consists of properties or assets (other than cash) that will be
used in the business of the transferor; provided, that (i) the aggregate fair
market value (as determined in good faith by the Board of Directors of Holdings)
of the property or assets being transferred by the Company or such Subsidiary is
not greater than the aggregate fair market value (as determined in good faith by
the Board of Directors) of the property or assets received by the Company or
such Subsidiary in such exchange and (ii) the aggregate fair market value (as
determined in good faith by the Board of Directors) of all property or assets
transferred by the Company and any of its Subsidiaries in connection with
exchanges in any period of twelve consecutive months shall not exceed 15% of the
total assets of the Company on the last day of the preceding fiscal year.
'Permitted Holders' means (i) BancBoston Capital, (ii) Alta Communications,
Inc., Alta Communications, VI L.P., Alta-Comm S by S, LLC, Alta Subordinated
Debt Partners III, L.P. (iii) CEA Capital Partners, CEA Capital Parners USA,
L.P. (iv) Trust Company of the West, (v) any Person controlled or managed by a
Person identified in clauses (i)-(iv) of this definition, (vi) Jamie Kellner,
(vii) Douglas Gealy, (viii) Thomas Allen, (ix) ACME Parent and (x) any
partnership, corporation or other entity all of the partners, shareholders,
members or owners of which are any one or more of the foregoing.
'Permitted Indebtedness' means:
(i) Indebtedness of the Company or any Subsidiary of the Company
arising under or in connection with the Senior Credit Facility in an
aggregate principal amount not to exceed $40 million outstanding at any
time;
(ii) Indebtedness under the Subsidiary Senior Discount Notes;
(iii) Indebtedness under the Notes;
(iv) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date;
(v) Indebtedness of the Company to any Wholly Owned Subsidiary and
Indebtedness of any Wholly Owned Subsidiary to the Company or another
Wholly Owned Subsidiary;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebtedness and Capitalized Lease Obligations do not in the
aggregate exceed $20 million;
(vii) Interest Rate Agreements;
(viii) Refinancing Indebtedness;
(ix) fidelity and surety bonds incurred in the ordinary course of
business; and
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(x) additional Indebtedness of the Company and its Subsidiaries not to
exceed $5 million in aggregate principal amount at any one time
outstanding.
'Permitted Investments' means Investments made on or after the Issue Date
consisting of:
(i) Investments by the Company, or by a Subsidiary thereof, in the
Company or a Subsidiary of the Company;
(ii) Investments by the Company, or by a Subsidiary thereof, in a
Person, if as a result of such Investment (a) such Person becomes a
Subsidiary of the Company or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) reasonable and customary loans made to employees in connection
with their relocation or for travel expenses or advances not to exceed $1
million in the aggregate at any one time outstanding;
(v) an Investment that is made by the Company or a Subsidiary thereof
in the form of any Capital Stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Company or such Subsidiary solely as partial consideration for
the consummation of an Asset Sale that is otherwise permitted under
'--Certain Covenants--Limitation on Certain Asset Sales' above;
(vi) Interest Rate Agreements entered into in the ordinary course of
the Company's or its Subsidiaries business;
(vii) options to purchase television broadcast station licenses and
related assets (or Capital Stock of Persons owning such assets) having an
exercise price of any amount not in excess of $100,000 entered into in
connection with the execution of local marketing agreements and Investments
pursuant to local marketing agreements to operate television broadcast
stations which are combined with such an option;
(viii) deposits made pursuant to legally binding agreements to
acquire, or pursuant to local marketing agreements with options to acquire
broadcast television station licenses and related assets (or Capital Stock
of Persons owning such assets), in an amount not to exceed 10% of the
purchase price; provided that the station to be acquired will be owned by
the Company or a Subsidiary upon consummation of the contemplated
acquisition and provided, further, that deposits made under this clause
shall cease to be treated as Permitted Investments upon forfeit of such
deposit for any reason; and
(ix) additional Investments not to exceed $1 million at any one time
outstanding.
'Permitted Liens' means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Issuers shall have set aside on their books
such reserves as may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(c) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default;
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(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Issuers;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(g) Liens securing Purchase Money Indebtedness of the Issuers;
provided, however, that (i) the Purchase Money Indebtedness shall not be
secured by any property or assets of the Issuers other than the property
and assets so acquired and (ii) the Lien securing such Indebtedness shall
be created within 90 days of such acquisition;
(h) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(i) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the
Issuers, including rights of offset and set-off;
(j) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture; and
(k) Liens securing Acquired Indebtedness incurred in accordance with
the covenant described under '--Certain Covenants--Limitation on Incurrence
of Additional Indebtedness;' provided that (i) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by an Issuer and were not granted in connection with,
or in anticipation of, the incurrence of such Acquired Indebtedness by an
Issuer and (ii) such Liens do not extend to or cover any property or assets
of an Issuer other than the property or assets that secured the Acquired
Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of an Issuer and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by an Issuer.
'Permitted Tax Distributions' means, subject to the limitations set forth
in clause (v) of the second paragraph under 'Certain Covenants--Limitation on
Restricted Payments,' distributions by the Company to Holdings and the other
holders of Membership Units from time to time in an amount approximately equal
to the income tax liability for interest or penalties thereon of such holders
and the members of Holdings resulting from (i) the taxable income of the Company
(after taking into account all of the Company's prior tax losses, to the extent
such losses have not previously been deemed to reduce the taxable income of the
Company), based on the approximate highest combined tax rate that applies to any
one of such holders or such members; and (ii) any audit of such member (or the
Company or Holdings) with respect to a prior taxable year and paid or payable by
such member during the most recent taxable year, as and to the extent that such
amounts are attributable to the member being allocated more taxable income than
was previously reported to such member as a result of any position taken by the
Company or by Holdings in determining and reporting its taxable income for the
year in question.
'Person' means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government (including any agency or political subdivision
thereof).
'Preferred Stock' means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
'Property' of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
'Public Equity Offering' means a public offering by the Company or any
Parent of shares of its Common Stock (however designated and whether voting or
non-voting) and any and all rights, warrants or options to acquire such Common
Stock.
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'Purchase Money Indebtedness' means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
'Redeemable Dividend' means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
'Refinancing Indebtedness' means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company or its Subsidiaries outstanding on the
Issue Date or other Indebtedness permitted to be incurred by the Company or its
Subsidiaries pursuant to the first paragraph of the covenant described under
'Certain Covenants--Limitation on Additional Indebtedness' or by the Company or
its Subsidiaries pursuant to clause (iii) of the definition of 'Permitted
Indebtedness,' but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes to at least the same extent as the Indebtedness being
refunded, refinanced or extended, if at all, (ii) the Refinancing Indebtedness
is scheduled to mature either (a) no earlier than the Indebtedness being
refunded, refinanced or extended, or (b) after the maturity date of the Notes,
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Notes has a weighted average life
to maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the weighted average life to maturity of the portion of the
Indebtedness being refunded, refinanced or extended that is scheduled to mature
on or prior to the maturity date of the Notes, (iv) such Refinancing
Indebtedness is in an aggregate principal amount that is equal to or less than
the sum of (a) the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended, (b) the amount of accrued
and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly Owned Subsidiary of the Company.
'Restricted Payment' means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Subsidiary of the Company or any payment made to the direct
or indirect holders (in their capacities as such) of Capital Stock of the
Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Capital
Stock) or in options, warrants or other rights to purchase such Capital Stock
(other than Disqualified Capital Stock), (y) in the case of Subsidiaries of the
Company, dividends or distributions payable to the Company or to a Wholly Owned
Subsidiary of the Company), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company or any of its
Subsidiaries (other than Capital Stock owned by the Company or a Wholly Owned
Subsidiary of the Company, excluding Disqualified Capital Stock) or any option,
warrants or other rights to purchase such Capital Stock, (iii) the making of any
principal payment on, or the purchase, defeasance, repurchase, redemption or
other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Indebtedness which
is subordinated in right of payment to the Notes (other than subordinated
Indebtedness acquired in anticipation of satisfying a scheduled sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition), (iv) the making of any Investment or guarantee
of any Investment in any Person other than a Permitted Investment, and (v)
forgiveness of any Indebtedness of an Affiliate of the Company to the Company or
a Subsidiary of the Company. For purposes of determining the amount expended for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other than cash shall be valued at its fair market
value.
'Sale and Lease-Back Transaction' means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
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'Senior Credit Facility' means the Credit Agreement to be entered into
between the Company, the lenders party thereto in their capacities as lenders
thereunder and Canadian Imperial Bank of Commerce, New York Agency, as agent,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the 'Limitation on Additional
Indebtedness' covenant) or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
'Subsidiary' of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of its
Subsidiaries; or (ii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
'Subsidiary Senior Discount Notes' means the 10 7/8% Senior Discount Notes
due 2004 of ACME Television, LLC.
'Wholly Owned Subsidiary' means any Subsidiary, all of the outstanding
voting securities (other than directors' qualifying shares) of which are owned,
directly or indirectly, by the Company.
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BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will initially be issued only in certificated form
('Certificated Notes'). However, the Exchange Notes are expected, after the
inital issuance thereof, to be eligible to be deposited with, or on behalf of,
The Depository Trust Company ('DTC') in the form of global certificates (the
'Global Notes') and registered in the name of a nominee of DTC.
The Global Notes. The Issuers expect that, pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, the principal amount of Exchange
Notes of the individual beneficial interest represented by such Global Note to
the respective accounts for persons who have accounts with DTC and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of persons who have accounts with
DTC ('Participants')) and the records of Participants (with respect to interests
of persons other than Participants). Ownership of beneficial interests in the
Global Notes will be limited to Participants or persons who hold interests
through Participants.
So long as DTC or its nominee is the registered owner or holder of any of
the Global Notes, DTC or such nominee, as the case may be, will be considered
the sole owner of the Exchange Notes represented by the Global Notes for all
purposes under the Indenture. No beneficial owner of an interest in the Global
Notes will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture.
Payments on the Global Notes will be made to DTC or its nominee, as the
case may be, as the registered owner thereof. None of the Issuers or the Trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Note or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Issuers expect that DTC or its nominee, upon receipt of any payment in
respect of a Global Note, will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the applicable
Global Note as shown on the records of DTC or its nominee. The Issuers also
expect that payments by Participants to owners of beneficial interests in Global
Notes held through such Participants will be governed by standing instructions
and customary practice, as is now the case with Original Notes held for the
accounts of customers registered in the names of nominees for such customers.
Such payments will be the responsibility of such Participants.
Transfers between Participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Note for any reason,
including to sell Exchange Notes to persons in states which required physical
delivery of Certificated Notes, or to pledge such securities, such holder must
transfer its interest in the Global Note in accordance with the normal
procedures of DTC.
DTC has advised the Issuers that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
Participants to whose account the DTC interests in the Global Notes are credited
and only in respect of such portion of the Exchange Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
for Exchange Notes in certificated form, which it will distribute to its
Participants.
DTC has advised the Issuers as follows: DTC is a limited purpose trust
company organized under laws of the State of New York, a member of the Federal
Reserve System, a 'clearing corporation' within the meaning of the Uniform
Commercial Code and a 'clearing agency' registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
Participants and facilitate the clearance and settlement of securities
transactions between Participants through electronic book entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
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Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Notes among Participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Issuers or any other person will have any
responsibility for the performance by DTC or its Participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Notes. If DTC is at any time unwilling or unable to continue
as a depositary for the Global Notes and a successor depositary is not appointed
by the Issuers within 90 days, Certificated Notes will be issued in exchange for
the Global Notes.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE NOTES
The following is a discussion of certain material U.S. federal income tax
consequences of the Exchange Offer and the acquisition, ownership and
disposition of the Notes. This discussion is for general information purposes
only and does not consider all aspects of U.S. federal income taxation that may
be relevant to the purchase, ownership and disposition of the Notes by a
prospective investor in light of such investor's personal circumstances. This
discussion does not address the U.S. federal income tax consequences of the
acquisition, ownership and disposition of Notes not held as capital assets
within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as
amended (the 'Code'), or the U.S. federal income tax consequences to investors
subject to special treatment under the U.S. federal income tax laws, such as
dealers in securities or foreign currency, tax-exempt entities, financial
institutions, insurance companies, persons that hold the Notes or as part of a
'straddle,' 'hedge,' 'conversion transaction' or other integrated investment,
persons that have a 'functional currency' other than the U.S. dollar, and
investors in pass-through entities. In addition, this discussion does not
describe any U.S. federal alternative minimum tax consequences, and does not
describe any tax consequences arising under U.S. federal gift and estate or
other U.S. federal tax laws (except to the limited extent set forth below under
'Non-U.S. Holders') or under the tax laws of any state, local or foreign
jurisdiction.
This discussion is based upon the Code, existing regulations thereunder,
and current administrative rulings and court decisions. All of the foregoing are
subject to change, possibly on a retroactive basis, and any such change could
affect the continuing validity of this discussion.
Persons considering the Exchange Offer or the purchase of Notes should
consult their own tax advisors concerning the application of U.S. federal
income, estate and other tax laws, as well as the laws of any state, local or
foreign taxing jurisdiction, to their particular situations.
U.S. HOLDERS OF THE NOTES
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a Note that is (i) a citizen or resident
(as defined in Section 7701(b)(I) of the Code) of the United States, (ii) a
corporation organized under the laws of the United States or any political
subdivision thereof or therein, (iii) an estate the income of which is subject
to U.S. federal income tax regardless of the source, or (iv) a trust if a court
within the United States is able to exercise primary supervision over the
trust's administration and one or more United States persons have the authority
to control all its substantial decisions or, if the trust was treated as a U.S.
person on August 19, 1996, the trust elects to continue to be treated as a U.S.
person under regulations to be issued (a 'U.S. Holder'). Certain U.S. federal
income tax consequences relevant to a holder other than a U.S. Holder are
discussed separately below.
DEBT CHARACTERIZATION OF THE NOTES
The Company and each holder will agree to treat the Notes as indebtedness
for federal income tax purposes, and the following discussion assumes that such
treatment is correct. If the Notes were not respected as debt, they likely would
be treated as equity ownership interests in the Company. In such event, the
Company would not be entitled to claim a deduction for interest payable on the
Notes. As a result, the Company's after-tax cash flow and, consequently, its
ability to make payments with respect to the Notes could be reduced.
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ORIGINAL ISSUE DISCOUNT ON THE ORIGINAL NOTES
The Original Notes were issued with original issue discount ('OID'), and
U.S. Holders of the Notes (including cash basis holders) will be required to
include such OID in income as interest income on a constant yield to maturity
method basis, generally in advance of the receipt of the cash payments to which
such income is attributable and generally in increasing amounts until September
30, 2002.
The total amount of OID with respect to a Note will be equal to the excess
of the 'stated redemption price at maturity' of the corresponding Original Note
over the 'issue price' of such Note. The 'stated redemption price at maturity'
of a Note will be equal to the sum of all payments (other than payments of
Penalty Interest, described below), whether denominated as interest or
principal, required to be made on such Note other than payments of 'qualified
stated interest.' Because interest is not payable on the Notes until March 31,
2003, none of the interest payments will be payments of qualified stated
interest and all such payments will be included in the stated redemption price
at maturity. The 'issue price' of a Note is the first price to the public (not
including bond houses, brokers, or similar persons or organizations acting in
the capacity of underwriters or wholesalers) at which a substantial portion of
the Original Notes were initially sold.
The amount of OID required to be included in a U.S. Holder's income for any
taxable year (regardless of whether the holder uses the cash or accrual method
of accounting) is the sum of the daily portions of OID with respect to the Notes
for each day during the taxable year or portion of the taxable year in which the
holder holds such Note. The daily portion is determined by allocating to each
day in any 'accrual period' a pro rata portion of the OID allocable to that
accrual period. Accrual periods with respect to a Note may be of any length
selected by the holder and may vary in length over the term of the Note as long
as (i) no accrual period is longer than one year and (ii) each scheduled payment
of interest or principal on the Note occurs on either the first or final day of
an accrual period. The amount of OID allocable to each accrual period will be
equal to the product of the adjusted issue price of the Note at the beginning of
an accrual period and the yield to maturity of such Note (determined on the
basis of a compounding assumption that reflects the length of the accrual
period). The adjusted issue price of a Note at the beginning of an accrual
period will be equal to the original issue price of the corresponding Original
Note increased by all previously accrued OID (disregarding any reduction on
account of acquisition premium, described below) and reduced by the amount of
all previous cash payments (other than payments of Penalty Interest, described
below) on the Note. The yield to maturity is that interest rate, expressed as a
constant annual interest rate, that when used in computing the present value of
all payments of principal and interest (other than payments of Penalty Interest,
described below) to be paid in connection with the Notes produces an amount
equal to the issue price of the corresponding Original Notes.
The Notes may be determined to be subject to the rules under the Code
regarding 'applicable high yield discount obligations' ('AHYDO') because their
yield to maturity exceeds the relevant applicable Federal ('AFR') rate by more
than five percentage points. Under Section 163(e) and 163(i) of the Code, a C
corporation that is an issuer of debt obligations subject to the AHYDO rules may
not deduct any portion of OID on the obligations until such portion is actually
paid. A debt obligation is generally subject to the AHYDO rules if (i) its
maturity date is more than five years from the date of issue, (ii) its yield to
maturity equals or exceeds the sum of the AFR plus five percentage points and
(iii) it has 'significant OID.' A debt obligation will have significant OID for
this purpose if, as of the close of any accrual period ending more than five
years after issuance, the total amount of income includable by a holder with
respect to the debt instrument exceeds the sum of (i) the total amount of
'interest' paid under the obligation before the close of such accrual period and
(ii) the product of the issue price of the debt instrument and its yield to
maturity. In addition, if the yield to maturity on an AHYDO obligation exceeds
the sum of the AFR plus six percentage points, a portion of the OID, equal to
the product of the total OID times the ratio of (a) the excess of the yield to
maturity over the sum of the AFR plus six percentage points to (b) the yield to
maturity, will not be deductible by the issuer and will be treated for some
purposes as dividends to the holders of the obligations (to the extent that such
amounts would have been treated as dividends to the holders if they had been
distributions with respect to the issuer's stock). Amounts treated as dividends
will be nondeductible by the issuer, and may qualify for the dividends received
deduction for corporate U.S. Holders, but will be treated as OID and not as
dividends for withholding tax purposes. It is unclear whether the AHYDO rules
would apply to an issuer that is a limited liability company, such as the
Company, and whether or how the dividend recharacterization rule would be
applied. The Issuers intend to take the position that the Notes are not subject
to the AHYDO rules because for tax purposes the Issuer is a partnership that is
not subject to such rules.
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The Issuers will provide certain information to the IRS, and will furnish
annually to record holders of the Notes information with respect to OID accruing
during the calendar year. Because this information will be based upon the
adjusted issue price of the Note as if the holder were the original holder of
the instrument who purchased it at the original price, holders who purchase the
Notes for an amount other than the original issue price will be required to
determine for themselves the amount of OID.
ACQUISITION OR BOND PREMIUM AND MARKET DISCOUNT
A U.S. Holder who purchases a Note for an amount that is greater than its
adjusted issue price but equal to or less than the sum of all amounts payable on
the Note as of the purchase date will be considered to have purchased such Note
at an 'acquisition premium.' The amount of OID that such holder must include in
its gross income with respect to such Note for any taxable year is generally
reduced by the portion of such acquisition premium properly allocable to such
year.
A U.S. Holder who purchases a Note at a cost in excess of its principal
amount will be considered to have purchased the Note at a premium, and may make
an election, applicable to all Notes held by such holder, to amortize such
premium, using a constant yield method, over the remaining term of the Note (or,
if a smaller amortization allowance would result, by computing such allowance
with reference to the amount payable on an earlier call date, and by amortizing
such allowance over the shorter period to such call date).
If a U.S. Holder purchases, subsequent to its original issuance, a Note for
an amount that is less than its 'revised issue price' as of the purchase date,
the amount of the difference generally will be treated as 'market discount,'
unless such difference is less than a specified de minimis amount. The Code
provides that the revised issue price of a Note equals its issue price plus the
amount of OID includable in the income of all holders for periods prior to the
purchase date (disregarding any deduction for acquisition premium) reduced by
the amount of all prior cash payments (other than payments of Penalty Interest
described below) on the Notes. Subject to a de minimis exception, a U.S. Holder
will be required to treat any gain recognized on the sale, exchange, redemption,
retirement or other disposition of the Notes as ordinary income to the extent of
the accrued market discount that has not previously been included in income. In
addition, a U.S. Holder may be required to defer, until the maturity date of the
Note or its earlier disposition in a taxable transaction, the deduction of all
or a portion of the interest expense on any indebtedness incurred or continued
to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the holder
elects to accrue market discount on a constant interest method. A U.S. Holder of
a Note may elect to include market discount in income currently as it accrues
(under either the ratable or constant interest method). This election to include
currently, once made, applies to all market discount obligations acquired in or
after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS. If a U.S. Holder of Notes makes such an
election, the foregoing rules with respect to the recognition of ordinary income
on sales and other dispositions of such instruments, and with respect to the
deferral of interest deductions on debt incurred or maintained to purchase or
carry such debt instruments, would not apply.
ELECTION TO TREAT ALL INTEREST AS OID
A U.S. Holder of a Note may elect, subject to certain limitations, to
include all interest that accrues on the Note in gross income on a
constant-yield basis. For purposes of this election, interest includes stated
interest, OID, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium or acquisition premium.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the holder's
basis in the Note immediately after its acquisition, the issue date of the Note
will be the date of its acquisition by the holder, and no payments on the Note
will be treated as payments of qualified stated interest. The election will
generally apply only to the Note with respect to which it is made and may not be
revoked without the consent of the IRS.
If the election to apply the constant-yield method to all interest on a
Note is made with respect to a Note on which there is market discount, the
electing holder will be treated as having made the election described above
122
<PAGE>
under 'Premium and Market Discount' to include market discount in income
currently over the life of all debt instruments held or thereafter acquired by
such holder.
EXCHANGE NOTES
Neither an exchange of Original Notes for Exchange Notes nor the filing of
a registration statement with respect to the resale of the Notes should be a
taxable event to holders of Original Notes, and holders should not recognize any
taxable gain or loss or any interest income as a result of such an exchange or
such a filing. The Issuers are obligated to pay additional interest ('Penalty
Interest') to the holder under certain circumstances described under 'Exchange
Offer--Purpose and Effect of the Exchange Offer.' Any such payments should be
treated for tax purposes as interest, taxable to holders as such payments become
fixed and payable.
SALE, EXCHANGE AND RETIREMENT OF NOTES
A holder's adjusted tax basis in a Note will, in general, equal the
holder's cost for the Note, increased by any amounts included in income as OID,
market discount or de minimis market discount which the holder has previously
elected to accrue in gross income on an annual basis and reduced by any
amortized premium which the holder has previously elected to offset against
interest on the Notes and any cash payments (other than payments of Penalty
Interest) in respect of the Note. Upon the sale, exchange, redemption,
retirement or other disposition of a Note, a holder generally will recognize
gain or loss equal to the difference between the amount realized on such sale,
exchange, redemption or retirement and the holder's tax basis in the Note.
Except as described above regarding market discount, gain or loss recognized by
a holder on the sale, exchange, redemption or retirement of a Note will be
capital gain or loss and will, in the case of individuals, be long-term capital
gain or loss subject to a maximum rate of 20% if the Note had been held for more
than eighteen months at the time of such disposition. An individual will be
taxed on his or her net capital gain at a rate of 28% for property held for 18
months or less but more than one year. Special rules (and generally lower
maximum rates) apply for individuals in lower tax brackets.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments of
principal, the proceeds of a sale before maturity, and the accrual and payment
of OID on a Note with respect to non-corporate holders. 'Backup withholding' at
a rate of 31% will apply to such payments if the holder fails to provide an
accurate taxpayer identification number, to report all interest and dividends
required to be shown on its Federal income tax returns, or otherwise establish
an exemption. Backup withholding tax is not an additional tax and may be
credited against a U.S. Holder's regular U.S. Federal income tax liability.
NON-U.S. HOLDERS OF THE NOTES
The following discussion is limited to certain U.S. federal income and
estate tax consequences relevant to a holder of a Note that is not a U.S. Holder
(a 'Non-U.S. Holder').
This discussion does not deal with all aspects of U.S. federal income and
estate taxation that may be relevant to the purchase, ownership or disposition
of the Notes by any particular Non-U.S. Holder in light of such Holder's
personal circumstances, including holding the Notes through a partnership.
Final regulations dealing with withholding tax on income paid to foreign
persons and related matters (the 'New Withholding Regulations') were issued by
the Treasury Department on October 6, 1997. The New Withholding Regulations will
generally be effective for payments made after December 31, 1998, subject to
certain transition rules. Prospective Non-U.S. Holders are strongly urged to
consult their own tax advisors with respect to the New Withholding Regulations.
For purposes of the following discussion, interest and gain on the sale,
exchange or other disposition of the Note will be considered 'U.S. trade or
business income' if such income or gain is (i) effectively connected with the
conduct of a U.S. trade or business and (ii) in the case of a qualified resident
of a country having an applicable income tax treaty with the United States
containing a permanent establishment provision, attributable to a U.S. permanent
establishment (or to a fixed base) in the United States.
123
<PAGE>
STATED INTEREST
Generally, any interest and OID, if any, paid to a Non-U.S. Holder of a
Note that is not U.S. trade or business income will not be subject to U.S.
federal income tax if the interest qualifies as 'portfolio interest.' Interest
and OID on the Notes will qualify as portfolio interest if (i) the Non-U.S.
Holder does not actually or constructively own 10% or more of the total voting
power of all voting stock of the Company and is not a 'controlled foreign
corporation' with respect to which the Company is a 'related person' within the
meaning of Section 881(c)(3)(C) of the Code, (ii) the Non-U.S. Holder is not a
bank for purposes of Section 881(c)(3)(A) of the Code, and (iii) the beneficial
owner, under penalties of perjury, certifies that the beneficial owner is not a
U.S. person and such certificate provides the beneficial owner's name and
address.
The gross amount of payments to a Non-U.S. Holder of interest and OID, if
any, that do not qualify for the portfolio interest exception and that are not
U.S. trade or business income will be subject to U.S. withholding tax at the
rate of 30%, unless a U.S. income tax treaty applies to reduce or eliminate
withholding. U.S. trade or business income will be taxed at regular U.S. federal
income tax rates rather than the 30% gross withholding tax rate and, if the
Non-U.S. Holder is a foreign corporation, may be subject to a branch profits
profits,' as adjusted for certain items, unless it qualifies for a lower rate
under an applicable treaty. To claim the benefit of a tax treaty or to claim
exemption from withholding because the income is U.S. trade or business income,
the Non-U.S. Holder must provide a properly executed Form 1001 or 4224 (or such
successor forms as the IRS designates), as applicable, prior to payment of
interest. These forms must be periodically updated.
As described above, OID, if any, accruing on the Notes will be subject to
U.S. withholding tax only if (i) it is not U.S. trade or business income and
(ii) it does not qualify for the portfolio interest exception. In such an
instance, while U.S. tax will be imposed against OID on the Notes prior to
payment, such tax will only be withheld from stated interest payments on the
Notes. However, such additional withholding may result in U.S. withholding tax
on stated interest payments exceeding 30%.
SALE, EXCHANGE OR REDEMPTION OF NOTES
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange or
redemption of a Note generally will not be subject to U.S. federal income tax,
unless (i) such gain is U.S. trade or business income, (ii) subject to certain
exceptions, the Non-U.S. Holder is an individual who holds the Note as a capital
asset and is present in the United States for 183 days or more in the taxable
year of the disposition or (iii) the Non-U.S. Holder is subject to certain
provisions applicable to certain U.S. expatriated persons.
FEDERAL ESTATE TAX
Notes held (or treated as held) by an individual who is a Non-U.S. Holder
at the time of his or her death will not be subject to U.S. federal estate tax,
provided that any interest on the Notes would have qualified as portfolio
interest if received by such individual at the time of his or her death.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the IRS and to each Non-U.S. Holder any
interest and OID, if any, that is subject to U.S. withholding tax or that is
exempt from withholding pursuant to a tax treaty or the portfolio interest
exception. Copies of these information returns may also be made available under
the provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non-U.S. Holder resides.
The regulations provide that backup withholding and information reporting
will not apply to payments of principal on the Notes by the Company to a
Non-U.S. Holder, if the Holder certifies as to its non-U.S. status under
penalties of perjury or otherwise establishes an exemption (provided that
neither the Company nor its paying agent has actual knowledge that the Holder is
a U.S. Holder or that the conditions of any other exemption are not, in fact,
satisfied).
The payment of the proceeds from the disposition of Notes to or through the
United States office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner certifies
as to its non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. Holder or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a Note
to or
124
<PAGE>
through a non-U.S. office of a non-U.S. broker that is not a 'U.S. related
person' will not be subject to information reporting or backup withholding. (For
this purpose, a 'U.S. related person' is (i) a 'controlled foreign corporation'
for U.S. federal income tax purposes or (ii) a foreign person 50% or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the payment (or for such part of the period
that the broker has been in existence) is derived from activities that are
effectively connected with the conduct of a U.S. trade or business.)
In the case of the payment of proceeds from the disposition of Notes to or
through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, the regulations require information reporting on the payment
unless the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is a U.S. person or a U.S. related person (absent actual knowledge that the
payee is a U.S. Holder).
The New Withholding Regulations will alter the foregoing rules in certain
respects and generally will apply to any payments (including original issue
discount) in respect of a Note or proceeds from the sale of a Note that are made
after December 31, 1998. Among other things, such regulations expand the number
of foreign intermediaries that are potentially subject to information reporting
and address certain documentary evidence requirements relating to exemption from
the general backup withholding requirements. Non-U.S. Holders of the Notes
should consult their tax advisors concerning the possible application of the
final regulations to amounts of original issue discount that they are required
to include in income as well as the possible application of such regulations to
any payments made on or with respect to the Notes.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
125
<PAGE>
PLAN OF DISTRIBUTION
Each holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (i) it is not an 'affiliate' (as defined
in Rule 405 of the Securities Act) of the Issuers, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Exchange Notes and (iii) it
is acquiring the Exchange Notes in the ordinary course of its business (a Holder
unable to make the foregoing representations is referred to as a 'Restricted
Holder'). A Restricted Holder will not be able to participate in the Exchange
Offer and may only sell its Original Notes pursuant to a registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K under the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Each broker-dealer (other than a Restricted Holder) that receives Exchange
Notes for its own account pursuant to the Exchange Offer (a 'Participating
Broker-Dealer') is required to acknowledge in the Letter of Transmittal that it
acquired the Original Notes as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection with the
resale of such Exchange Notes. Based upon interpretations by the staff of the
Commission, the Issuers believe that Exchange Notes issued pursuant to the
Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer upon
compliance with the prospectus delivery requirements, but without compliance
with the registration requirements, of the Securities Act. The Issuers have
agreed that, for a period of 180 days following consummation of the Exchange
Offer, they will make this Prospectus available, for use in connection with any
such resale, to any Participating Broker-Dealer and other persons, if any, with
similar prospectus delivery requirements. During this period the Issuers shall
use their best efforts to keep the Exchange Offer Registration Statement
effective and to amend and supplement this Prospectus, in order to permit such
Prospectus to be delivered by all persons subject to the prospectus delivery
requirements. The Issuers believe that during such period of time, delivery of
this Prospectus, as it may be amended or supplemented, will satisfy the
prospectus delivery requirements of a Participating Broker-Dealer engaged in
market-making or other trading activities.
Based upon interpretations by the Staff, the Issuers believe that Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold,
and otherwise transferred by a holder thereof (other than a Restricted Holder or
a Participating Broker-Dealer) without compliance with the registration and
prospectus delivery requirements of the Securities Act.
The Issuers will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by Participating Broker-Dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells Exchange
Notes may be deemed to be an 'underwriter' within the meaning of the Securities
Act and must deliver a prospectus in connection with such resales of Exchange
Notes. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an 'underwriter' within the meaning of the
Securities Act.
The Issuers have agreed to pay all expenses incidental to the Exchange
Offer other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
EXPERTS
The consolidated balance sheets of Station KPLR as of December 31, 1996 and
1995 and the consolidated statements of operations, shareholders' deficit and
cash flows for each of the three years in the period ended December 31, 1996,
included in this Prospectus, have been included herein in reliance on the report
of Coopers &
126
<PAGE>
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing. The financial statements of ACME
Intermediate Holdings, LLC as of September 30, 1997, and for the nine months
ended September 30, 1997 have been included herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements of Channel 32, Incorporated for the period from
December 16, 1993 (inception) to June 30, 1994, each of the years in the two
year period ended June 30, 1996 and the period from July 1, 1996 to June 17,
1997 have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
VALIDITY OF EXCHANGE NOTES
The validity of the Exchange Notes will be passed upon for the Company by
Dickstein Shapiro Morin & Oshinsky LLP, 2101 L Street, N.W., Washington, D.C.
20037, counsel to the Company.
AVAILABLE INFORMATION
The Issuers have filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form S-4 (the 'Exchange Offer
Registration Statement') under the Securities Act with respect to the Exchange
Offer. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings contained in the
Exchange Offer Registration Statement. For further information with respect to
the Issuers and this Exchange Offer, reference is made to the Exchange Offer
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof.
Statements contained in this Prospectus as to the contents of any contract
or document filed as an exhibit to the Exchange Offer Registration Statement are
not necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Exchange Offer Registration
Statement, each such statement being qualified by such reference.
Copies of the Exchange Offer Registration Statement and all exhibits and
schedules thereto may be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at Seven World Trade
Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials also can be obtained from the
Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
As a result of the Exchange Offer, the Issuers will become subject to the
informational requirements of the Securities and Exchange Act of 1934, as
amended (the 'Exchange Act'). In accordance therewith, the Company will file
certain reports and information with the Commission. The Issuers have also
agreed that, whether or not they are required to do so by the Commission, they
will furnish to the holders of the Notes and file with the Commission (unless
the Commission will not accept such a filing) (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Issuers were required to file such
forms, and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Issuers were required to file such reports.
The Issuers have also agreed that, if they are not subject to the
information requirements of Sections 13 or 15(d) of the Exchange Act at any time
while the Notes constitute 'restricted securities' within the meaning of the
Securities Act, they will furnish to holders and beneficial owners of the Notes
and to prospective purchasers designated by such holders the information
required to be delivered pursuant to Rule 144(d)(4) under the Securities Act to
permit compliance with Rule 144A in connection with resales of the Notes.
127
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ACME INTERMEDIATE HOLDINGS, LLC
Report of KPMG Peat Marwick LLP............................................................................ F-2
Consolidated Balance Sheet as of September 30, 1997........................................................ F-3
Consolidated Statement of Operations and Members' Capital for the nine months ended September 30, 1997..... F-4
Consolidated Statement of Cash Flows for the nine months ended September 30, 1997.......................... F-5
Notes to Consolidated Financial Statements................................................................. F-6
KOPLAR COMMUNICATIONS, INC.
Report of Coopers & Lybrand L.L.P.......................................................................... F-12
Consolidated Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997 (unaudited)............ F-13
Consolidated Statement of Operations for the years ended December 31, 1994, 1995 and 1996, and the nine
months ended September 30, 1996 (unaudited) and 1997 (unaudited)......................................... F-14
Consolidated Statement of Shareholders' Deficit for the years ended December 31, 1994, 1995 and 1996 and
the nine months ended September 30, 1997 (unaudited)..................................................... F-15
Consolidated Statement of Cash Flows for the years ended December 31, 1994, 1995 and 1996, and the nine
months ended September 30, 1996 (unaudited) and 1997 (unaudited)......................................... F-16
Notes to Consolidated Financial Statements................................................................. F-17
CHANNEL 32, INCORPORATED
Report of KPMG Peat Marwick LLP............................................................................ F-30
Statement of Operations for the period from December 16, 1993 (inception) to June 30, 1994, and the years
ended June 30, 1995 and 1996, and the period from July 1, 1996 to June 17, 1997 (unaudited).............. F-31
Statement of cash flows for the period from December 16, 1993 (inception) to June 30, 1994, and the years
ended June 30, 1995 and 1996, and the period from July 1, 1996 to June 17, 1997 (unaudited).............. F-32
Notes to Financial Statements.............................................................................. F-33
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Members
ACME Intermediate Holdings, LLC:
We have audited the accompanying consolidated balance sheet of ACME Intermediate
Holdings, LLC and subsidiaries as of September 30, 1997, and the related
consolidated statements of operations and members' capital and cash flows for
the nine month period ended September 30, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ACME Intermediate
Holdings, LLC and subsidiaries as of September 30, 1997 and the results of their
operations and their cash flows for the nine month period ended September 30,
1997, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Los Angeles, California
November 12, 1997
F-2
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1997
--------
<S> <C>
Current assets:
Cash and cash equivalents........................................................................... $ 27,211
Accounts receivable, less allowance for doubtful accounts of $39.................................... 405
Due from affiliates................................................................................. 14,830
Current portion of programming rights............................................................... 581
Prepaid expenses and other current assets........................................................... 201
--------
Total current assets........................................................................... 43,228
--------
Property and equipment, net........................................................................... 4,177
Programming rights, net of current portion............................................................ 590
Note receivable....................................................................................... 1,811
Broadcast licenses, net of accumulated amortization of $335........................................... 22,570
Deposits.............................................................................................. 143,016
Other assets.......................................................................................... 11,504
--------
$226,896
--------
--------
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Accounts payable.................................................................................... $ 2,296
Accrued expenses.................................................................................... 7,776
Current portion of programming rights payable....................................................... 876
Notes payable to bank............................................................................... 3,500
Current portion of obligations under lease.......................................................... 284
--------
Total current liabilities...................................................................... 14,732
Programming rights payable, net of current portion.................................................... 597
Obligations under lease, net of current portion....................................................... 422
Senior Subordinated secured notes..................................................................... 35,650
Senior discount notes................................................................................. 127,370
--------
Total liabilities.............................................................................. 178,771
--------
Members' capital...................................................................................... 48,125
--------
$226,896
--------
--------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND MEMBERS' CAPITAL
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997
-------
<S> <C>
Broadcast revenues..................................................................................... $ 2,155
-------
Operating expenses:
Programming.......................................................................................... 1,096
Selling, general and administrative.................................................................. 3,173
Depreciation and amortization........................................................................ 551
-------
Total operating expenses..................................................................... 4,820
Operating loss............................................................................... (2,665)
Interest expense, net................................................................................ (573)
-------
Net loss..................................................................................... (3,238)
Parent's contribution................................................................................ 47,201
Unit offering, net................................................................................... 4,162
-------
Members' capital at September 30, 1997....................................................... $48,125
-------
-------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Cash flows from operating activities:
Net loss........................................................................................... $ (3,238)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................................... 551
Changes in assets and liabilities:
Increase in accounts receivable, net.......................................................... (405)
Increase in programming rights................................................................ (102)
Increase in prepaid expenses and other current assets......................................... (201)
Increase in notes receivable.................................................................. (1,811)
Increase in accounts payable.................................................................. 2,296
Increase in accrued expenses.................................................................. 7,776
Decrease in programming rights payable........................................................ (150)
---------
Net cash used in operating activities...................................................... 4,716
---------
Cash flows from investing activities--
Deposit relating to acquisition agreements......................................................... (143,016)
Purchase of property and equipment................................................................. (2,963)
---------
Net cash used in investing activities......................................................... (145,979)
---------
Cash flows from financing activities:
Contribution from parent........................................................................... 9,296
Increase in other assets........................................................................... (11,504)
Notes payable to bank.............................................................................. 3,500
Issuance of units.................................................................................. 4,162
Issuance of Senior Secured Notes................................................................... 35,650
Issuance of Senior Discount Notes.................................................................. 127,370
---------
Net cash provided from financing activities................................................... 168,474
---------
Net increase (decrease) in cash............................................................ 27,211
Cash at beginning of period.......................................................................... --
---------
Cash at end of period................................................................................ $ 27,211
---------
---------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest........................................................................................ $ 540
Income taxes.................................................................................... --
---------
---------
Non cash transactions: Contribution of net assets of ACME Television of Oregon, LLC from parent
in exchange for membership units............................................................... $ 23,075
Due form affiliates in exchange for membership units............................................ $ 14,830
---------
---------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES CONSOLIDATED TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(1) DESCRIPTION OF BUSINESS AND FORMATION
ACME Indermediate Holdings, LLC (the Company) 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 net assets. This contribution of $25,455,000,
was made in exchange for membership units in the Company and was treated as a
transaction between entities under common control, similar to a pooling of
interests. Accordingly, the transaction was recorded at historical cost and the
Company has reflected the result of operations of the entities contributed for
the period presented. In addition, on September 30, 1997, ACME Parent made an
additional contribution of $21,746,000 in exchange for membership units in the
Company.
ACME Television, LLC's subsidiaries (hereinafter referred to in this
paragraph collectively as 'Subsidiary Guarantors') are fully, unconditionally,
and jointly and severally liable for the Company's senior discount notes
referred to in note 6. The Subsidiary Guarantors are wholly owned and constitute
all of the Company's direct and indirect subsidiaries. The Company has not
included separate financial statements of the aforementioned subsidiaries
because (i) the Company and ACME Television, LLC have no independent operations,
and (ii) the separate financial statements and other disclosures concerning such
subsidiaries are not deemed material to investors.
ACME Parent owns, directly and indirectly, 92% of the outstanding members
units of the Company. The Company owns, directly or indirectly, 100% of the
outstanding members units of ACME Television, LLC.
ACME Oregon was formed on March 5, 1997 to acquire Station KWBP, serving
Portland, Oregon from Channel 32, Incorporated. Prior to the acquisition of
Station KWBP (June 17, 1997), ACME Oregon operated the station and financed its
losses, effective January 1, 1997 pursuant to a Local Marketing Agreement with
the Channel 32, Incorporated. The acquisition was completed on June 17, 1997
(see note 3). ACME Tennessee was formed on April 17, 1997 to acquire Station
WINT, serving Knoxville, Tennessee. This acquisition was completed on October 7,
1997 (See Note 4). The financial statements do reflect start-up expenses
associated with WINT incurred during the quarter ended September 30, 1997.
On July 25, 1997 the Company formed ACME Television Licenses of Missouri,
Inc. (ACME Missouri) for the purpose of acquiring Station KPLR and on October
31, 1997 adopted limited liability company agreements for ACME Television of
Utah, LLC (ACME Utah) and ACME Television of New Mexico, LLC (ACME New Mexico)
for the purpose of acquiring Stations KZAR and KAOU, respectively. These
acquisitions did not occur on or prior to September 30, 1997.
F-6
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company's
subsidiaries. All significant intercompany transactions have been eliminated.
Revenue Recognition
Revenue from the sale of airtime related to advertising and contracted time
is recognized at the time of broadcast.
Cash and Cash Equivalents
For purposes of reporting the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Programming Rights
Programming rights represent costs incurred for the right to broadcast
certain features and syndicated television programs. Programming rights are
stated at the lower of amortized cost or estimated realizable value. The cost of
such programming\ rights and the corresponding liability are recorded when the
initial program becomes available for broadcast under the contract. Programming
rights are amortized over the life of the contract on a straight line basis
related to the usage of the program. The portion of the cost estimated to be
amortized within one year and after one year are reflected in the balance sheets
as current and noncurrent assets, respectively. The payments under these
contracts that are due within one year and after one year are similarly
classified as current and noncurrent liabilities.
Commitments for programming rights that have been executed, but which have
not been recorded in the accompanying financial statements, as the underlying
programming is not yet available for broadcast, were approximately $1,375,000 as
of September 30, 1997.
Property and Equipment
Property and equipment are stated at cost. The cost of maintenance is
expensed.
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the respective assets. The principal lives
used in determining depreciation rates of various assets are as follows:
<TABLE>
<S> <C>
Broadcasting and other equipment................................................. 3-15 years
Furniture and fixtures........................................................... 5-7 years
Vehicles......................................................................... 5 years
Equipment under capital leases................................................... 5-15 years
</TABLE>
Barter and Trade Transactions
Revenue and expenses associated with barter agreements in which broadcast
time is exchanged for programming rights are recorded at the average rate of the
airtime exchanged. Trade transactions, which represent the exchange of
advertising time for goods or services, are recorded at the estimated fair value
of the products or services received. Barter and trade revenue is recognized
when advertisements are broadcast. Merchandise or services received from airtime
trade sales are charged to expense or capitalized when used or received.
F-7
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Carrying Value of Long-Lived Assets
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of.' The carrying value of long-lived assets
(tangible and intangible) is reviewed if the facts and circumstances suggest
that they may be impaired. For purposes of this review, assets are grouped at
the operating company level which is the lowest level for which there are
identifiable cash flows. If this review indicates that an asset's carrying value
will not be recoverable, as determined based on future expected, undiscounted
cash flows, the carrying value is reduced to fair market value.
Income Taxes
The Company is a limited liability company, therefore, no income taxes have
been provided for its operations. Any liability or benefit from the income or
loss is the responsibility of the individual members.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. These estimates include the allowance for doubtful accounts
net realizable value of programming rights and the evaluation of intangible
assets. Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of accounts receivable and cash.
The Company believes that concentrations of credit risk with respect to accounts
receivable, which are unsecured, are limited due to the Company's ongoing
relationship with its clients. The Company provides its estimate of
uncollectible accounts. The Company has not experienced significant losses
relating to accounts receivable.
(3) ACQUISITION
On June 17, 1997, ACME Parent acquired substantially all of the assets and
assumed certain liabilities of Channel 32, Incorporated, relating to the
operations of Station KWBP, in exchange for $18,675,000 in cash and $4,400,000
of membership units in ACME Parent. The acquisition was accounted for using the
purchase method. The excess of the purchase price over the fair value of net
assets acquired of approximately $22,767,000, has been recorded as broadcast
licenses and is being amortized over a period of 20 years.
In addition, the results of station KWBP were recorded by the Company
beginning January 1, 1997 pursuant to a Local Marketing Agreement whereby ACME
Oregon effectively operated the station and funded the stations' losses during
the period from January 1, 1997 to June 17, 1997 (the acquisition date). The
unaudited pro forma financial information reflects the net revenue and net loss
assuming the transaction occurred on January 1, 1997. This unaudited pro forma
financial information does not necessarily reflect the results of operations
that would have occurred had the acquisition occurred on January 1, 1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997
-----------------
<S> <C>
Net Revenues.............................................................. $ 2,155,000
Net Loss.................................................................. $(3,754,000)
</TABLE>
F-8
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(4) SUBSEQUENT AND PENDING ACQUISITIONS
On October 7, 1997, ACME Television, LLC acquired Crossville Limited
Partnership, the owners of Station WINT in exchange for $13,200,000 in cash.
On July 29, 1997, ACME Missouri entered into a stock purchase agreement to
acquire Koplar Communications, Inc. (KCI). On September 30, 1997, ACME Missouri
placed $143 million into an escrow account, classified as a deposit or the
accompanying consolidated balance sheet, in connection with this acquisition,
entered into a long-term LMA with Station KPLR and filed a requisition
applications with the FCC for the transfer of the Station's license to ACME
Missouri. The LMA will terminate upon completion of the sale, which is expected
to occur during the first half of 1998. Under the terms of the escrow agreement,
the sellers can elect to withdraw the escrow funds, less certain obligations of
the sellers' to be paid out of escrow, on January 2, 1998 or thereafter. Upon
doing so, the sellers must simultaneously transfer control of KCI's stock into a
separate trust account for the benefit of ACME Missouri.
Pursuant to the LMA entered into on September 30, 1997 relating to Station
KPLR, the Company will retain all revenues generated by the station, bear all
operating expenses of the station and have the right to program the station
subject to KCI's ultimate authority for programming and the station's existing
programming commitments.
On August 22, 1997, ACME Utah and ACME New Mexico entered into separate
agreements with related sellers to acquire Stations KZAR and KAOU, respectively.
These agreements call for an aggregate purchase price of $14 million for the two
stations, of which $8 million will be paid in cash and $6 million in membership
interests in ACME parent.
(5) DUE FROM AFFILIATE
The Company had $14,876,000 due from ACME Parent as of September 30, 1997.
Subsequent to September 30, 1997, ACME Parent repaid the Company's notes payable
to bank of $3,500,000 and repaid substantially all of the remaining balance to
the Company. Accordingly, the Company has recorded the due from affiliate as a
current asset.
(6) SENIOR DISCOUNT NOTES
On September 30, 1997, the Company issued Senior Discount Notes (Notes)
with a face value of $175 million and received $127,370,000 in gross proceeds
from such issuance. These Notes provide for semi-annual cash interest payments
at an annual rate of 10.875% beginning in the fourth year with the first
interest payment due on March 31, 2001. The Notes are subordinated to the
Company's bank revolver (see Note 7) and to the Company's capital equipment
finance facilities. The Notes mature on September 30, 2004 and may not be
prepaid without penalty.
Costs associated with the issuance of these notes, including the
underwriters fees and related professional fees are included in long-term other
assets and will be amortized over the term of the notes.
(7) UNIT OFFERING
On September 30, 1997, the Company issued 71,634 Units (the Unit Offering)
consisting of 71,634 membership units (representing 8% of the Company's
outstanding membership equity) and $71,634,000 (par value at maturity) in 12%
Senior Secured Discount Notes (Notes). Cash interest on the Notes is payable
semi-annually in arrears, commencing with the six-month period ending March 31,
2003 and the notes mature on September 30, 2005. The net proceeds from the Unit
Offering, after the deduction of underwriter fees and other related offering
costs, were $38.3 million and were received by the Company on September 30,
1997. The Company has allocated approximately $3.5 million of such net proceeds
to the membership units, $35.6 million
F-9
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(7) BANK REVOLVER--(CONTINUED)
to the discounted note payable and $1.5 million to prepaid financing costs--the
latter which is being amortized over the eight year term of the notes. The
Senior Notes contain certain convenants and restrictions including restrictions
on future indebtedness and restricted payments, as defined, and limitations on
liens, investments, transactions with affiliates and certain assets sales. ACME
Television was in compliance with all such convenants and restictions at
September 30, 1997.
(8) BANK REVOLVER
On August 15, 1997, the Company entered into a $22.5 million revolving
credit facility (the Loan Agreement) with Canadian Imperial Bank Corporation
(CIBC), of which $3.5 million was drawn and outstanding as of September 30,
1997. Under the terms of the Loan Agreement, advances bear interest at either
the alternative base rate or the adjusted LIBOR rate, as defined in the Loan
Agreement.
On October 6, 1997, the ACME Parent paid off the outstanding principle and
accrued interest under the Loan Agreement on behalf of the Company.
(9) COMMITMENTS AND CONTINGENCIES
Obligations under Leases
The Company is obligated under noncancelable operating leases for office
space and its transmission site. Future minimum lease payments as of September
30, 1997 under noncancelable operating leases with initial or remaining terms of
one year or more are as follows:
<TABLE>
<S> <C>
Three months ended December 31, 1997............................................ $ 73,000
Year ending December 31:
1998.......................................................................... 295,000
1999.......................................................................... 296,000
2000.......................................................................... 298,000
2001.......................................................................... 301,000
2002.......................................................................... 306,000
Thereafter.................................................................... 2,317,000
----------
$3,886,000
----------
----------
</TABLE>
Total rental expense under operating leases for the nine months ended
September 30, 1997 was approximately $83,200.
F-10
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(8) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Programming Rights Payable
Maturities on the Company's programming rights payables (including
commitments not recognized in the accompanying financial statements due to the
lack of current availability for broadcast) for each of the next five years are
as follows:
<TABLE>
<S> <C>
Three months ended December 31, 1997............................................ $ 187,000
Year ending December 31:
1998.......................................................................... 833,000
1999.......................................................................... 687,000
2000.......................................................................... 471,000
2001.......................................................................... 315,000
Thereafter.................................................................... 355,000
----------
Total.................................................................... $2,848,000
----------
----------
</TABLE>
F-11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Koplar Communications, Inc.:
We have audited the accompanying consolidated balance sheets of Koplar
Communications, Inc. and Subsidiary as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' deficit and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Koplar
Communications, Inc. and Subsidiary as of December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
March 28, 1997, except for
Note 19, as to which the date is
September 30, 1997.
F-12
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------ -------------
1995 1996 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................................... $ 244 $ 23 $ --
Receivables, less allowance for doubtful accounts of $180 and $213 at December 31, 1995
and 1996, and $252 at September 30, 1997, respectively.............................. 7,192 6,549 7,281
Current portion of programming rights.................................................. 5,000 4,700 4,889
Prepaid expenses and other current assets.............................................. 1,382 757 171
Income tax receivable.................................................................. -- 173 --
Deferred income taxes.................................................................. 330 342 342
------- ------- -------------
Total current assets................................................................ 14,148 12,544 12,683
Property and equipment, net.............................................................. 2,653 2,638 2,394
Programming rights less current portion.................................................. 9,362 6,232 4,097
Deferred financing costs................................................................. 2,607 287 239
Other assets............................................................................. 789 1,612 2,909
------- ------- -------------
Total assets........................................................................ $29,559 $23,313 $22,322
------- ------- -------------
------- ------- -------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Note payable--revolver................................................................. $ 4,130 $ -- $ --
Current portion of long-term debt and obligations under capital leases................. 1,221 -- --
Current portion of programming obligations............................................. 5,500 5,300 5,089
Current portion of note payable--programmer............................................ 1,180 400 400
Accounts payable and accrued expenses.................................................. 2,055 1,494 2,552
Cash overdraft......................................................................... -- 1,244 532
Accrued interest....................................................................... 976 112 110
Income taxes payable................................................................... 600 -- --
Other liabilities...................................................................... 195 195 6,095
------- ------- -------------
Total current liabilities........................................................... 15,857 8,745 14,989
Long-term obligations:
Long-term debt and obligations under capital leases, less current portion.............. 9,931 13,650 12,381
Programming obligations, less current portion.......................................... 8,932 7,047 4,542
Notes payable--officer/shareholder..................................................... 1,168 -- --
Note payable--programmer, less current portion......................................... 2,412 3,755 3,455
Deferred income taxes.................................................................. 2,101 1,940 1,940
Other liabilities...................................................................... 692 510 282
------- ------- -------------
Total liabilities................................................................... 41,093 35,647 37,378
------- ------- -------------
Commitments
Shareholders' deficit:
Class A preferred voting stock; $110 par value. Authorized 5,000 shares; issued and
outstanding 863 shares ($1,100 per share liquidation value)......................... 95 95 95
Common nonvoting stock; $1 par value. Authorized 25,000 shares; issued and outstanding
21,206 shares....................................................................... 21 21 21
Paid-in capital........................................................................ 1,041 1,041 1,041
Note receivable--officer/shareholder................................................... (1,111) (1,111) (1,111)
Accumulated deficit.................................................................... (11,580) (12,380) (15,102)
------- ------- -------------
Net shareholders' deficit........................................................... (11,534) (12,334) (15,056)
------- ------- -------------
Total liabilities and shareholders' deficit......................................... $29,559 $23,313 $22,322
------- ------- -------------
------- ------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-13
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
----------------------------- ----------------------------
1994 1995 1996 1996 1997
------- ------- ------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues........................................... $33,146 $27,528 $27,260 $ 19,751 $ 21,347
Operating expenses:
Programming...................................... 13,581 9,503 11,365 9,413 8,458
Selling, general and administrative.............. 12,113 11,632 11,318 7,914 13,722
Depreciation and amortization.................... 1,085 791 702 518 490
------- ------- ------- ------------ ------------
Total operating expenses................. 26,779 21,926 23,385 17,845 22,670
------- ------- ------- ------------ ------------
Operating income......................... 6,367 5,602 3,875 1,906 (1,323)
------- ------- ------- ------------ ------------
Other income (expense):
Interest expense................................. (5,777) (2,842) (2,155) (1,522) (1,117)
Gain on sale of broadcasting subsidiary.......... 11,440 -- -- -- --
Realization of amount due under Tax Sharing
Agreement..................................... 3,596 -- -- -- --
Other, net....................................... (2,059) (321) (699) (489) (1,313)
------- ------- ------- ------------ ------------
Other income (expense)........................... 7,200 (3,163) (2,854) (2,011) (2,430)
------- ------- ------- ------------ ------------
Income (loss) before income taxes, discontinued
operations and extraordinary items............... 13,567 2,439 1,021 (105) (3,753)
Provision (benefit) for income taxes............... 3,272 523 462 425 (1,031)
------- ------- ------- ------------ ------------
Income (loss) before discontinued
operations and extraordinary items..... 10,295 1,916 559 (530) (2,722)
Discontinued operations--income from operations of
divested subsidiaries............................ 1,262 -- -- -- --
------- ------- ------- ------------ ------------
Income (loss) before extraordinary
items.................................. 11,557 1,916 559 (530) (2,722)
Extraordinary items:
Gain on forgiveness of programming obligations,
including interest............................ 21,525 -- -- -- --
Gain on forgiveness of senior debt, including
interest...................................... 24,775 -- -- -- --
Gain on forgiveness of other obligations......... 834 -- -- -- --
Loss on early extinguishment of debt, net of
taxes of $868................................. -- -- (1,359) -- --
------- ------- ------- ------------ ------------
Net income (loss)........................ $58,691 $ 1,916 $ (800) $ (530) $ (2,722)
------- ------- ------- ------------ ------------
------- ------- ------- ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND NINE MONTHS ENDED SEPTEMBER 30,
1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
CLASS A COMMON RECEIVABLE
PREFERRED NONVOTING PAID-IN OFFICER/ ACCUMULATED
VOTING STOCK STOCK CAPITAL SHAREHOLDER DEFICIT TOTAL
------------ --------- ------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994................ $ -- $70 $ -- $ -- $ (67,716) $(67,646)
Merger of Koplar Enterprises, Inc....... 95 (49) -- -- (4,471) (4,425)
--- --- ------- ----------- ----------- --------
Balance after merger.................... 95 21 -- -- (72,187) (72,071)
Spin-off of World Events Productions,
Ltd. to shareholder................... -- -- 1,041 -- -- 1,041
Sale of Koplar Properties, Inc. to
shareholder........................... -- -- -- (1,111) -- (1,111)
Net income......................... -- -- -- -- 58,691 58,691
--- --- ------- ----------- ----------- --------
Balance, December 31, 1994.............. 95 21 1,041 (1,111) (13,496) (13,450)
Net income......................... -- -- -- -- 1,916 1,916
--- --- ------- ----------- ----------- --------
Balance, December 31, 1995.............. 95 21 1,041 (1,111) (11,580) (11,534)
Net loss........................... -- -- -- -- (800) (800)
--- --- ------- ----------- ----------- --------
Balance, December 31, 1996.............. 95 21 1,041 (1,111) (12,380) (12,334)
Net (loss) (unaudited)............. -- -- -- -- (2,722) (2,722)
--- --- ------- ----------- ----------- --------
Balance, September 30, 1997
(unaudited)........................... $ 95 $21 $ 1,041 $(1,111) $ (15,102) $(15,056)
--- --- ------- ----------- ----------- --------
--- --- ------- ----------- ----------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
-------------------------------- ------------------------------
1994 1995 1996 1996 1997
-------- -------- -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ 58,691 $ 1,916 $ (800) $(3,566) $(2,722)
-------- -------- -------- ------------- -------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Realization of amount due under Tax Sharing
Agreement........................................ (3,596) -- -- -- --
-------- -------- -------- ------------- -------------
Deferred income taxes.............................. 2,271 (500) (173) -- --
Amortization of programming rights................. 7,333 5,418 5,360 4,006 3,554
Adjustment to carrying value of programming
rights........................................... -- -- 1,500 1,500 --
Amortization of intangible assets.................... 26 -- -- -- --
Amortization of deferred financing costs............. 384 798 411 396 48
Loss on early extinguishment of debt................. -- -- 2,227 2,227 --
Redemption premium on long-term debt................. (2,365) -- -- -- --
Depreciation......................................... 1,085 791 702 518 490
Gain on sale of broadcasting subsidiary.............. (11,440) -- -- -- --
Change in net assets and liabilities of divested
subsidiaries....................................... (1,262) -- -- -- --
Gain on forgiveness of programming obligations,
including interest................................. (21,525) -- -- -- --
Gain on forgiveness of senior debt, including
interest........................................... (24,775) -- -- -- --
Gain on forgiveness of other obligations............. (834) -- -- -- --
Changes in assets and liabilities:
Receivables........................................ 377 (1,100) 643 1,603 (732)
Prepaid expenses and other current assets.......... 468 (11) (142) (109) 118
Other assets....................................... 175 (37) 44 (25) (729)
Accounts payable and accrued expenses.............. (2,771) 649 (561) (104) 1,058
Accrued interest................................... 3,520 350 (301) (43) (2)
Income taxes receivable/payable.................... 400 200 (773) (128) 173
Other long-term liabilities........................ (3,137) (203) (182) (169) 5,592
-------- -------- -------- ------------- -------------
Total adjustments................................ (55,666) 6,355 8,755 9,672 9,570
-------- -------- -------- ------------- -------------
Net cash provided by operating activities........ 3,025 8,271 7,955 6,106 6,848
-------- -------- -------- ------------- -------------
Cash flows from investing activities:
Purchase of property and equipment..................... (839) (1,013) (687) (580) (246)
Investment in affiliate................................ -- (250) (100) (100) (100)
Deposit for PCS auction................................ -- (1,235) -- -- --
Proceeds from sale of broadcast subsidiary............. 14,656 -- -- -- --
-------- -------- -------- ------------- -------------
Net cash provided by (used in) investing
activities....................................... 13,817 (2,498) (787) (680) (346)
-------- -------- -------- ------------- -------------
Cash flows from financing activities:
Repayment of notes payable--officer/shareholder........ -- -- (1,168) (1,168) --
Payment on other debt and obligations under capital
leases............................................... (895) (124) (21) (18) (300)
Payment on programming obligations..................... (9,740) (5,230) (5,515) (4,067) (4,244)
Cash overdraft......................................... -- -- 1,244 720 (712)
Repayment of long-term debt............................ (20,000) (2,619) (11,640) (10,848) (1,269)
Proceeds from long-term debt........................... 14,000 -- 14,159 14,159 --
Proceeds from (payment on) revolver, net............... 1,766 2,364 (4,130) (4,130) --
Cash paid to shareholder upon divestiture of
subsidiaries......................................... (82) -- -- -- --
Payment on deferred financing costs.................... (3,789) -- (318) (318) --
-------- -------- -------- ------------- -------------
Net cash used in financing activities.............. (18,740) (5,609) (7,389) (5,670) (6,525)
-------- -------- -------- ------------- -------------
Net increase (decrease) in cash.................... (1,898) 164 (221) (244) (23)
Cash, beginning of period................................ 1,978 80 244 244 23
-------- -------- -------- ------------- -------------
Cash, end of period...................................... $ 80 $ 244 $ 23 $ -- $ --
-------- -------- -------- ------------- -------------
-------- -------- -------- ------------- -------------
Interest paid............................................ $ 1,873 $ 1,725 $ 1,575 $ 1,009 $ 1,055
-------- -------- -------- ------------- -------------
-------- -------- -------- ------------- -------------
Income taxes paid........................................ $ 1,730 $ 601 $ 120 120 --
-------- -------- -------- ------------- -------------
-------- -------- -------- ------------- -------------
Noncash transactions:
New programming rights purchased under installment
obligations.......................................... $ 3,909 $ 5,685 $ 3,430 $ 2,044 $ 3,334
-------- -------- -------- ------------- -------------
-------- -------- -------- ------------- -------------
Sale of KP to shareholder.............................. $ 1,111 -- -- -- --
-------- -------- -------- ------------- -------------
-------- -------- -------- ------------- -------------
Spin-off of WEP to shareholder......................... $ 1,041 -- -- -- --
-------- -------- -------- ------------- -------------
-------- -------- -------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(1) ORGANIZATION
The Company operates an independent television station in St. Louis,
Missouri (KPLR-TV) and until June 29, 1994, also operated an independent
television station in Sacramento, California (KRBK-TV). The broadcasting license
of KPLR-TV is owned by Koplar Television Co., L.L.C., a 99.9%-owned subsidiary
of Koplar Communications, Inc.
Beginning in late 1990, the television industry and, in particular, the St.
Louis television market experienced a severe decline in advertising revenues
which, coupled with a continuing rise in fixed, long-term programming costs and
sports broadcast rights fees, caused the Company to experience significant cash
flow difficulties. As a result, the Company had been in payment default on its
senior notes with its long-term lenders beginning May 16, 1991. On October 11,
1991, the lenders issued notices of acceleration to the Company of all unpaid
principal, amounting to $35,000,000, plus accrued interest. During 1991, the
Company, because of its cash flow difficulties, also began to delay programming
payments to program distributors, and was consequently in default of these
agreements based on the stated payment terms of the program contracts.
On November 16, 1993, Bankers Trust Company purchased the senior notes from
the long-term lenders. Also, during 1993, management executed an agreement with
Pappas Telecasting Companies (Pappas) to sell substantially all of the assets of
Koplar Communications of California, Inc. (KRBK-TV). In addition, the Company
entered into agreements with Pappas whereby, concurrent with the closing of the
sale, Pappas would extend a loan to the Company and provide management services
to the Company under a management services agreement for a period of seven
years. The agreements with Pappas did not prohibit the Company from seeking and
obtaining alternative sources of financing prior to the closing, in which case
the lending and management agreements could be terminated for a specified fee.
During 1994, the Company completed a refinancing with Foothill Capital
Corporation and the sale of KRBK-TV to Pappas, along with a series of related
restructuring transactions. The proceeds of the refinancing were used, along
with the proceeds from the sale of KRBK-TV, to redeem the Bankers Trust senior
notes, pay the termination fee associated with the management services
agreement, provide up-front payments related to the restructuring of the
Company's programming obligations and pay various other fees and liabilities.
In addition, during 1994, a corporate restructuring of the Company and
related entities was completed whereby Koplar Enterprises, Inc., formerly the
parent of Koplar Communications, Inc. (KCI), was merged into KCI, World Events
Productions, Ltd., a subsidiary of KCI, was spun off to a shareholder, and
Koplar Properties, Inc., a subsidiary of KCI, was sold to a shareholder.
The aforementioned transactions are more fully described in the
accompanying footnotes.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates. In management's opinion, all adjustments necessary for a fair
presentation are reflected in the interim periods presented. All adjustments are
of a normal recurring nature.
F-17
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The following is a summary of the significant accounting policies followed
in the preparation of these financial statements:
Basis of Consolidation
The consolidated financial statements include the accounts of Koplar
Communications, Inc. and subsidiary. Accordingly, all references herein to
Koplar Communications, Inc. include the consolidated results of its subsidiary.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Interim Financial Information
The consolidated financial statements as of September 30, 1997 and for the
nine months ended September 30, 1996 and 1997 are unaudited but reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the accompanying
consolidated financial position and results of operations and cash flows.
Operating results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1997.
Cash and Credit Concentrations
The Company maintains several cash accounts, including a lockbox account,
in one financial institution. The cash balances in these accounts may at times
exceed insured limits. The majority of the Company's receivables are due from
local and national advertising agencies and are not collateralized.
The Company had a negative cash balance in its account of approximately
$1,244,000 at December 31, 1996 and $532,000 at September 30, 1997,
respectively. These amounts are included in current liabilities as a cash
overdraft.
Property and Equipment
Property and equipment are recorded at cost. Depreciation expense is
computed using the straight-line method over the estimated useful lives of the
related assets. The accelerated cost recovery system (ACRS) and modified
accelerated cost recovery system (MACRS) are used for income tax purposes.
Renewals and betterments are capitalized to the related asset accounts, while
repair and maintenance costs, which do not improve or extend the lives of the
respective assets, are charged to operations.
When assets are retired or otherwise disposed of, the assets and related
accumulated depreciation are eliminated from the accounts and any resulting gain
or loss is recorded in operations.
Programming Rights
Programming rights are recorded at cost when the program is available to
the Company for broadcasting. Agreements define the lives of the rights and the
number of showings. The cost of programming rights is charged against earnings
either on the straight-line basis over the term of the agreement or per play for
certain syndicated contracts based on the number of plays specified in the
contract.
Programming rights and related obligations are recorded at cost without
recognition of any imputed interest charges.
F-18
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Programming rights representing the cost of rights of programs available
for broadcasting at the end of each period and which management expects to be
broadcast in the succeeding fiscal year are shown as a current asset.
The Company assesses the valuation of its programming rights on an ongoing
basis by evaluating the unamortized rights and future programming rights
commitments and comparing the anticipated future number of plays and related
revenue potential with the related unamortized cost. When unamortized cost
exceeds the undiscounted estimated future revenue, the Company will recognize an
adjustment to the related carrying value. During 1996, the Company recorded an
adjustment to the carrying value of certain programming rights of $1,500,000.
Deferred Financing Costs
Financing costs incurred in connection with obtaining financing are
deferred and amortized on a straight-line basis over the term of the borrowings.
Amortization of deferred financing costs, included in interest expense, totaled
approximately $384,000, $798,000 and $411,000, for the years ended December 31,
1994, 1995 and 1996, respectively. In addition, the Company expensed
approximately $2,227,000 of deferred financing costs during 1996 as a result of
the Company's refinancing of its long-term debt (see note 6). Accordingly, the
expense related to this transaction has been reflected as an extraordinary item
in the consolidated statements of operations.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of temporary differences between the tax basis of assets and liabilities
and their financial reporting amounts at each year-end based on enacted tax laws
and statutory tax rates applicable to the periods in which the temporary
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
Interest Rate Hedge Agreements
The Company enters into interest rate hedge agreements which involve the
exchange of fixed- and floating-rate interest payments periodically over the
life of the agreement without the exchange of the underlying principal amounts.
The differential to be paid or received is accrued as interest rates change and
recognized over the life of the agreements as an adjustment to interest expense.
Revenue Recognition
Revenues from advertisements are recognized as the commercials are
broadcast.
Barter Revenues
Barter transactions in which the Company accepts products or services in
exchange for commercial air time are recorded at the estimated fair values of
the products or services received. Barter revenues are recognized when
commercials are broadcast. The assets or services received in exchange for
broadcast time are recorded when received or used. Certain of the Company's
programming agreements involve the exchange of advertising time for programming.
The Company does not record revenues and cost of revenues related to these
arrangements, which have no impact on earnings. The Company estimates that
revenues and costs associated with these agreements were approximately
$2,696,000, $2,124,000 and $2,612,000 for 1994, 1995 and 1996, respectively.
F-19
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(3) PREPAID EXPENSES AND OTHER CURRENT ASSETS
In 1995, the Company placed a refundable deposit of $1,235,000 with the FCC
in order to bid on the regional rights for a new technology, personal
communications system. This product is expected to replace cell phones, beepers
and other portable communications technology. The Company was the successful
bidder on a number of PCS licenses. During 1996, $468,000 of the initial deposit
was returned to the Company. Approximately $767,000 remains on deposit, which is
included in other long-term assets, with the FCC for the obtained licenses.
In fourth quarter 1996, another round of PCS bidding was opened by the FCC.
The Company has a deposit of $467,500 with the FCC which is included in prepaid
expenses and other current assets. The auction was concluded and the deposit was
returned in the first quarter of 1997.
(4) PROPERTY AND EQUIPMENT
A summary of property and equipment at December 31, 1995 and 1996 is as
follows (dollars in thousands):
<TABLE>
<CAPTION>
ESTIMATED
1995 1996 USEFUL LIVES
------ ------- ---------------
<S> <C> <C> <C>
Land.............................................................. $ 464 $ 464 --
Buildings and improvements........................................ 1,822 1,780 15 to 40 years
Equipment, furniture and fixtures................................. 6,854 6,463 3 to 15 years
------ -------
9,140 8,707
Less accumulated depreciation..................................... (6,487) (6,069)
------ -------
$2,653 $ 2,638
------ -------
------ -------
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was approximately $1,085,000, $791,000 and $702,000, respectively.
(5) NOTE PAYABLE--REVOLVER
The note payable--revolver was repaid in July 1996 as part of a debt
refinancing with Nations Bank. Outstanding checks of $1,179,229, which cleared
against the revolver, are reflected in the note payable--revolver balance at
December 31, 1995.
(6) LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES
The Company's long-term debt and obligations under capital leases at
December 31, 1995 and 1996 consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Long-term debt...................................... $11,131 $13,650
Obligations under capital leases.................... 21 --
------- -------
11,152 13,650
Less current portion................................ (1,221) --
------- -------
$ 9,931 $13,650
------- -------
------- -------
</TABLE>
F-20
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(6) LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES--(CONTINUED)
At December 31, 1995, the Company's long-term debt consisted of a revolving
loan and a term loan to Foothill Capital Corporation. The Company used
$3,000,000 of the term loan proceeds to pay a commitment fee to Foothill for
entering into the financing arrangement. Such arrangement required the payment
of interest monthly at 12%.
On July 10, 1996, the Company refinanced the existing debt maintained by
Foothill with Boatmen's. The Company received a revolving commitment from
Nations Bank of $19,000,000 (the Loan Agreement), of which $14,266,000 was drawn
from the commitment to satisfy certain existing obligations and refinancing
costs. The maximum amount available under the revolving loan commitment is as
follows for the periods outlined:
<TABLE>
<S> <C>
July 10, 1996--June 30, 1997............................... $ 19,000,000
July 1, 1997--June 30, 1998................................ 18,000,000
July 1, 1998--June 30, 1999................................ 17,000,000
July 1, 1999--June 30, 2000................................ 15,500,000
July 1, 2000--June 30, 2001................................ 14,000,000
</TABLE>
At December 31, 1996, the Company had borrowed $13,650,000 against the
revolving commitment agreement. Under the terms of the Loan Agreement, the
Company shall repay the loan and all unpaid interest thereon on July 1, 2001.
The loan bears interest at either the alternative base rate or the adjusted
LIBOR rate, as defined in the Loan Agreement.
In order to minimize interest rate risk, the Company entered into a
five-year interest rate swap for $5,000,000 of the borrowings, which locked in
an interest rate of approximately 10%. The Company also entered into a
three-year interest rate swap for $2,000,000 of the borrowings, which locked in
an interest rate of approximately 10%. In addition, the Company entered into a
30-day interest rate swap for $5,000,000 of the outstanding borrowings, which
locked in an interest rate of approximately 8.87% at December 31, 1996. The
remaining borrowings accrue interest at the prime interest rate plus 1/4-- 3/4%
per annum based on certain criteria. Interest is payable monthly. In addition,
the Company will pay quarterly a commitment fee of .5% per annum of the unused
portion of the revolving commitment to Nations Bank. Amounts outstanding under
the Loan Agreement are collateralized by substantially all assets of the
Company.
Based upon the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value of long-term
debt approximates carrying value.
The Loan Agreement includes various restrictive covenants including
requirements that the Company maintain a specified minimum fixed charge
coverage, maximum funded debt to operating cash flow ratio and maximum funded
obligations ratio. In addition, the agreement places limitations on the amount
of capital expenditures and the amount of capital leases.
The assets and related obligations under capital leases have been recorded
at amounts equal to the present value of future minimum lease payments. Assets
held under capital leases as of December 31, 1995 are included in equipment at a
cost of approximately $114,000, less accumulated depreciation of approximately
$90,000. There is no remaining lease obligation at December 31, 1996.
On June 29, 1994, utilizing the proceeds from the sale of KRBK and
refinancing of the Company's debt with Foothill, the Company redeemed its senior
notes by making a payment to Bankers Trust Company of $20,000,000 plus a
redemption premium of $3,750,000, net of interest paid through the redemption
date of $1,385,000. Upon redemption of the senior notes, all remaining liability
for principal and interest under the senior notes was forgiven. Accordingly, the
Company has recorded a gain on forgiveness of senior debt and
F-21
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(6) LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES--(CONTINUED)
accrued interest in the amount of $24,775,000, which is reflected as an
extraordinary item in the 1994 Consolidated Statement of Operations.
(7) PROGRAMMING OBLIGATIONS
Programming obligations are generally classified as current or noncurrent
liabilities according to the payment terms of the various contracts.
During previous years, the Company was in technical default on its
programming obligations and subsequently reached restructuring agreements with
all of its program distributors in 1994. Under the restructuring agreements, all
prior defaults under the original programming agreements were waived by the
program distributors. The Company received partial forgiveness on outstanding
programming obligations, and all accrued interest on delinquent payments was
also forgiven. The total gain on forgiveness of programming obligations and
accrued interest was $21,525,000 and is reflected as an extraordinary item in
the 1994 Consolidated Statement of Operations. Several of the restructuring
agreements contain provisions under which the Company may be held liable for an
amount greater than the restructured liability amount that is currently recorded
at December 31, 1996. The Company may also be held secondarily liable for
certain of a formerly-owned subsidiary's programming obligations in the event of
that subsidiary's default on the restructured obligations in the future. Also,
certain agreements state that the entire programming obligations amount prior to
restructuring (including accrued interest) becomes payable upon default of the
restructured terms going forward. Additionally, several agreements contain
cross-default provisions whereby default by one company (the Company or KRBK)
causes the other to be in default of their restructured obligations.
At December 31, 1996, future minimum payments based on contractual
agreements are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR,
- ---------------------------------------------------------------
<S> <C>
1997........................................................... $ 5,300
1998........................................................... 4,176
1999........................................................... 2,688
2000........................................................... 183
---------
$ 12,347
---------
---------
</TABLE>
(8) NOTE PAYABLE--PROGRAMMER
Note payable--programmer represents an additional amount owed to Warner
Brothers ('WB') in connection with the restructuring of certain programming
obligations in 1994 (see note 7). The Company entered into a Stock Purchase,
Option and Repurchase Agreement with WB, under which the Company has an
obligation in the amount of $3,692,000 to WB in addition to the liability
currently recorded as programming obligations.
Under this agreement, the Company issued a promissory note for $3,092,000
to WB (payable in even installments over 36 months, plus interest at 1% over the
prime rate per annum, payments to begin upon notification by WB to the Company),
and also transferred to WB stock in an entity which is partially owned by the
shareholder of the Company (see note 17). However, the agreement gives the
programmer a 'Put Right' under which the stock may be transferred by WB to the
Company at any time until either June 28, 1997 or the exercise of the First
Option (see below), at which time $600,000 is payable within thirty days. In
1995, $100,000 was paid on the Put Right. At December 31, 1995, the remaining
liability was $3,592,000.
F-22
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(8) NOTE PAYABLE--PROGRAMMER--(CONTINUED)
The Company replaced the note payable--programmer with a restructured
agreement on December 31, 1996. The previous note payable and the related
accrued interest were replaced with Note A and Note B. Note A is in the amount
of $2,000,000 and at December 31, 1996, $1,900,000 is outstanding. Interest
accrues at prime plus 1/2%. Principal of $100,000 plus accrued interest to date
are payable quarterly until the note is satisfied. There is no accrued interest
at December 31, 1996.
Note B is an option note for $2,250,000. At December 31, 1996, $2,250,000
was outstanding on Note B. The programmer has an option which can be called
between January 1, 2000 and December 31, 2001. If called, WB would receive 12%
of a related entity's stock instead of cash payments on the $2,250,000
promissory note. The Company has a 'Put Right' which can be exercised between
January 1, 1997 and December 31, 2001. If put, WB would receive 12% of the
related entity's stock instead of cash payments on the $2,250,000 promissory
note. Interest accrues at prime. There is no accrued interest at December 31,
1996.
(9) NOTE RECEIVABLE--SHAREHOLDER
One June 1, 1994, the Company divested Koplar Properties, Inc. and
Subsidiary (KP) to a shareholder of the Company. KP is primarily engaged in the
renting and operating of commercial and residential real estate in the St. Louis
area.
The common stock of KP was sold to the shareholder of the Company in
exchange for a nonrecourse promissory note receivable in an amount equal to the
appraised value of the purchased stock. The amount of this promissory note
receivable was determined based on an independent market value appraisal of the
common stock of KP. The gain on the sale of KP, amounting to $291,000 has been
deferred. The promissory note bears interest at an applicable Federal rate and
is payable in five equal annual installments beginning June 1997. The note
receivable has been classified as a contra-equity account, net of the deferred
gain, for financial statement reporting purposes.
(10) COMMITMENTS
In conjunction with obtaining new programming and other related
considerations the Company has commitments amounting to approximately $5,394,000
for future programming rights and other considerations as of December 31, 1996.
The aggregate payments for these commitments over the next five years are
as follows (in thousands):
<TABLE>
<S> <C>
1997............................................................. $ 281
1998............................................................. 1,323
1999............................................................. 1,772
2000............................................................. 1,316
2001............................................................. 702
------
$5,394
------
------
</TABLE>
In January 1995, the Company entered into an Affiliation Agreement with WB
Communications (Warner Brothers) under which KPLR-TV became an affiliate of the
WB Network. The term of this agreement is for five years and is noncancelable by
the Company. Under this agreement, Warner Brothers provides programming to
KPLR-TV in exchange for a specified number of advertising spots during this
programming which are to be retained and sold by Warner Brothers. With the
launch of the WB Network on January 11, 1995, KPLR-TV is
F-23
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(10) COMMITMENTS--(CONTINUED)
required to broadcast the network programming during one specified prime-time
evening in each week. Throughout the five-year term of the agreement, the
network broadcast requirements of the agreement increase until the network
programming is broadcast seven nights per week, plus a specified number of
weekday morning, afternoon and late night timeframes.
Under the Affiliation Agreement, the Company is required to make an annual
payment to Warner Brothers if the ratings and revenues in prime time broadcasts
of WB Network programming for the current year exceed ratings and revenues
achieved by the Company in the preceding year. No such payments were payable to
Warner Brothers for the years ended December 31, 1995 and 1996.
The Company has an operating lease for certain equipment that calls for
annual payments of approximately $42,000 for a remaining period of thirteen
years. Total rent expense under operating leases for the years ended December
31, 1994, 1995 and 1996 was approximately $100,000, $116,000 and $123,000,
respectively.
(11) NOTES PAYABLE--OFFICER/SHAREHOLDER
Indebtedness to the shareholder of the Company consists of a promissory
note payable for $1,023,000 and debentures payable for $145,000, totaling
$1,168,000 at December 31, 1995. Unpaid interest on these notes is included in
accrued interest at December 31, 1995. The notes and interest were repaid in
July 1996 when the Company refinanced its Foothill debt with Nations Bank (see
note 6).
(12) INCOME TAXES
The provisions for income taxes on continuing operations for the years
ended December 31 consists of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ----- -----
<S> <C> <C> <C>
Current:
Federal.................................................................... $ 361 $ 876 $ 552
State...................................................................... 640 147 83
Deferred:
Federal.................................................................... 1,980 (436) (150)
State...................................................................... 291 (64) (23)
------ ----- -----
Provision for income taxes.............................................. $3,272 $ 523 $ 462
------ ----- -----
------ ----- -----
</TABLE>
F-24
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(12) INCOME TAXES--(CONTINUED)
The difference between the actual tax provision and the amounts obtained by
applying the statutory U.S. Federal income tax rate of 34% to income before
income taxes, discontinued operations and extraordinary items for the years
ended December 31 is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------ ------
<S> <C> <C> <C>
Income before income taxes, discontinued operations, and extraordinary
items................................................................... $13,567 $2,439 $1,021
------- ------ ------
------- ------ ------
Tax provision computed at statutory rate.................................. $ 4,613 $ 829 $ 347
Increases (reductions) in taxes due to:
State income taxes (net of Federal tax benefit)......................... 614 55 40
Increase (decrease) in valuation allowance.............................. (2,301) 0 0
Other................................................................... 346 (361) 75
------- ------ ------
Actual tax provision...................................................... $ 3,272 $ 523 $ 462
------- ------ ------
------- ------ ------
</TABLE>
In 1994, a valuation allowance related to deferred income tax assets of
approximately $15,441,000 was reversed due primarily to the gains on forgiveness
of debt and discontinued operations. There was no valuation allowance at
December 31, 1994, 1995 and 1996. As a result of the reversal of the valuation
allowance and the exclusion from taxable income of a significant portion of the
gain on forgiveness of obligations, no tax effect has been presented related to
1994 extraordinary items and discontinued operations as the amounts are not
material.
Pursuant to an agreement (Tax Sharing Agreement) entered into by the
Company and Four Seasons Group, Inc. (Four Seasons), a former subsidiary of the
Company which was spun off in 1989, the Company had a claim against Four Seasons
for 50% of all tax deficiencies arising during the periods prior to the
spin-off. During 1994, Koplar Enterprises, Inc. (KE), formerly the parent of
Koplar Communications, Inc., executed an agreement with Four Seasons whereby
Four Seasons acquired a portion of a promissory note payable by KE (the Note),
issued in connection with a prior redemption of certain shares of KE's preferred
stock. Four Seasons exchanged such acquired portion of the Note for the amount
owing by Four Seasons pursuant to the Tax Sharing Agreement, thereby satisfying
KE's obligation to pay such portion of the Note to Four Seasons, and satisfying
Four Seasons' obligation to KE under the Tax Sharing Agreement. KE had not
recorded a benefit related to the Tax Sharing Agreement in prior years since it
was not realizable until payment of the tax obligation by KE and payment by Four
Seasons of certain of its obligations arising from the agreement. During 1994,
the Company has reflected income related to the realization of the amount due
under the Tax Sharing Agreement of approximately $3,596,000.
F-25
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(12) INCOME TAXES--(CONTINUED)
The tax effect of temporary differences between the tax basis of assets and
liabilities and their corresponding amounts for financial statement reporting
purposes at the tax rates expected to be in effect when such differences reverse
are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Current deferred income tax asset:
Allowance for doubtful accounts.................................................... $ (71) (83)
Accrued vacation payable........................................................... (64) (64)
Bonus payable...................................................................... (195) (195)
Noncurrent deferred income tax liability:
Book over tax basis of fixed assets................................................ 76 22
Book over tax basis of programming rights.......................................... 2,025 1,918
------ ------
Net deferred income tax liability.................................................. $1,771 1,598
------ ------
------ ------
</TABLE>
During 1996, the Internal Revenue Service (IRS) initiated an audit of the
Company's 1994 Federal income tax returns. Because the IRS has not made a final
determination of any Federal tax liabilities, no estimate of any resulting
liability can be made. In the opinion of management, the proposed adjustments,
if any, from the IRS will not have a material effect on the consolidated
financial position of the Company.
(13) 401(K) PLAN
Substantially all employees are eligible to participate in a 401(k) Plan
sponsored by the Company. The Company may match a specified percentage of an
employee's contribution up to a defined limit at its discretion. The amount
charged to expense by the Company for the years ended December 31, 1994, 1995
and 1996 was approximately $74,000, $62,000 and $55,000, respectively.
(14) INVESTMENT IN AFFILIATE
In 1995, the Company entered into an agreement with another television
station in St. Louis which provides that the Company make annual payments of
$200,000 to the owners of the station (the Owners) for three years, in return
for programming and other considerations over a three-year period. The agreement
may be extended by the Owners for an additional two years. Under a separate
agreement, the Company has agreed to make up to $3,500,000 in capital
contributions to a limited liability company owned by the Company and the
owners, formed to acquire television stations and invest in other communications
opportunities, as approved by the Company. No such additional contributions have
been made.
(15) MERGER WITH KOPLAR ENTERPRISES, INC.
On June 21, 1994, a plan of merger was adopted whereby KE was merged into
Koplar Communications, Inc. The merger was consummated on June 30, 1994. In
connection with the merger, 862.875 shares of KE Class A Preferred Voting Stock,
par value $110 and 21,206.25 shares of KE Common Nonvoting Stock, par value $1,
were canceled and identical amounts of Class A Preferred Voting and Common
Nonvoting Stock were issued by the Company to the existing shareholders of KE.
F-26
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(15) MERGER WITH KOPLAR ENTERPRISES, INC.--(CONTINUED)
The Class A Preferred Voting Stock provides for full voting rights on a
one-vote-per-share basis and noncumulative annual dividends of $121 per share
only if, as and when declared by the Board of Directors. The stock is redeemable
at the Company's option at $1,100 per share and has a liquidation value of
$1,100 per share.
(16) DIVESTITURE OF SUBSIDIARIES--DISCONTINUED OPERATIONS
On June 1, 1994, the Company divested two of its subsidiaries, World Events
Productions, Ltd. (WEP) and Koplar Properties, Inc. and Subsidiary (KP). WEP is
primarily engaged in the business of international production and marketing of
television programming, and KP is primarily engaged in the renting and operating
of commercial and residential real estate in the St. Louis area. Both entities
were divested to the shareholder of the Company.
The common stock of WEP was distributed to the Shareholder of the Company
in a tax-free spin-off transaction. The shareholder's deficit of WEP at the date
of divesture was recorded as an increase to additional paid-in capital for the
year ended December 31, 1994, reflecting the fact that WEP's liabilities
exceeded its assets at the time of divestiture.
The common stock of KP was sold to the shareholder of the Company in
exchange for a nonrecourse promissory note receivable as described in Note 9.
Condensed financial information of World Events Productions, Ltd. and
Koplar Properties, Inc. at June 1, 1994 (the date of divestiture) and for the
five months then ended is as follows (in thousands):
<TABLE>
<CAPTION>
WEP KP
------- ------
<S> <C> <C>
Current assets...................................................................... $ 207 293
Noncurrent assets................................................................... 351 2,912
------- ------
$ 558 3,205
------- ------
------- ------
Current liabilities................................................................. $ 1,421 1,717
Noncurrent liabilities.............................................................. 178 377
Shareholder's equity (deficit)...................................................... (1,041) 1,111
------- ------
$ 558 3,205
------- ------
------- ------
Revenues............................................................................ $ 613 491
------- ------
------- ------
Operating income.................................................................... $ 334 94
Interest and other.................................................................. -- 834
------- ------
Income from operations of divested subsidiaries..................................... $ 334 928
------- ------
------- ------
</TABLE>
The net income of these entities in 1994 through date of divestiture is
recorded as income from operations of divested subsidiaries in the 1994
Consolidated Statement of Operations.
(17) RELATED PARTY TRANSACTIONS
During previous years, the Company advanced funds under a loan agreement to
ISW, Inc. (ISW), a company which is partially owned by the shareholder of the
Company. The amount of the loans receivable and accrued interest amounted to
approximately $3,480,000 at December 31, 1993. Prior to 1994, WEP determined
collection of the loan and accrued interest was questionable and established an
allowance for the entire amount. In 1996, the
F-27
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(17) RELATED PARTY TRANSACTIONS--(CONTINUED)
Company advanced $443,210 to ISW. This amount was included in a loan receivable
balance which is fully reserved.
In 1994, prior to its divestiture, WEP transferred these loans and accrued
interest to the Company. Pursuant to a Debt Conversion Agreement dated June 29,
1994, approximately $600,000 of the total receivable was converted by the
Company into ISW common stock. This common stock was then transferred by the
Company to a program distributor pursuant to a programming restructuring
agreement, as described in Note 8. At December 31, 1995 and 1996, the remaining
balance of loans and interest receivable by the Company from ISW is
approximately $2,808,000 and $3,251,000 with a corresponding allowance.
The Company was charged approximately $70,000, $139,200 and $139,200 in
1994, 1995 and 1996, respectively, in rent and parking charges by KP.
(18) SALE OF BROADCAST SUBSIDIARY--KRBK-TV
On November 11, 1993, the Company had entered into an agreement with Pappas
Telecasting Companies (Pappas) to sell substantially all of the assets and
assign specified liabilities of KRBK-TV to Pappas for $22,000,000 plus certain
working capital adjustments as defined in the agreement, payable in cash at
closing. The agreement and transaction was contingent upon successful
restructuring of the programming obligations, among other things. As part of the
arrangement with Pappas, the Company and Pappas had entered into a management
services agreement, as well as a lending agreement which would have been
effective at the time of closing of the sale of KRBK-TV. The Company was seeking
alternative financing at the time these agreements with Pappas were completed.
During 1994, the Company completed restructuring agreements with its
program distributors, as discussed in Note 7. The sale of the assets and
liabilities of KRBK-TV to Pappas took place on June 29, 1994, for a net sale
price of $22,356,000.
Concurrent with the sale transaction, the Company obtained alternative
financing to the proposed Pappas lending agreement, as discussed in Notes 5 and
6. Upon closing of this alternative financing, the lending agreement and
management services agreement were terminated by the Company. As required under
the management services agreement, a total of $7,000,000 plus liquidated damages
and expenses of $700,000 was owed to Pappas, which was applied against the
purchase price for KRBK-TV resulting in net proceeds of $14,656,000.
F-28
<PAGE>
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
(18) SALE OF BROADCAST SUBSIDIARY--KRBK-TV--(CONTINUED)
The assets and liabilities of KRBK-TV that were sold to Pappas on June 29,
1994 are reflected below (in thousands):
<TABLE>
<S> <C>
Assets:
Accounts receivable........................................................................ $ 3,224
Prepaid expenses and deposits.............................................................. 163
Programming rights......................................................................... 8,011
Property, plant and equipment.............................................................. 11,149
Accumulated depreciation................................................................... (7,283)
FCC license................................................................................ 1,481
-------
Total assets sold....................................................................... $16,745
-------
-------
Liabilities:
Accounts payable and accrued expenses...................................................... $ 1,211
Capital leases payable..................................................................... 133
Programming obligations.................................................................... 12,185
-------
Total liabilities transferred or assigned............................................... $13,529
-------
-------
</TABLE>
The following summarizes the revenues and expenses included in the 1994
Consolidated Statement of Operations (in thousands):
<TABLE>
<S> <C>
Revenues...................................................................................... $ 7,108
Programming costs............................................................................. (3,986)
Selling, general and administrative........................................................... (2,974)
Other, net.................................................................................... (1,153)
-------
Net loss.................................................................................... $(1,005)
-------
-------
</TABLE>
The Company recorded a gain on the sale of these assets and liabilities in
the amount of $11,440,000, which has been reflected in the accompanying 1994
Consolidated Statement of Operations.
(19) SALE OF COMPANY
On July 29, 1997, the shareholders of the Company (Owners) agreed to sell
all of their shares of the Company's common and preferred stock to ACME
Television Holdings, LLC (ACME) for $146,000,000. On September 30, 1997,
pursuant to the stock purchase agreement between ACME and the Owners, ACME
placed $143,000,000 into an escrow account and ACME and the Owners filed with
the FCC a request to transfer the Company's broadcast license. The Company has
also entered into a local marketing agreement with ACME under the terms of which
ACME receives the economic benefit of the Company's earnings, effective October
1, 1997.
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Channel 32, Incorporated:
We have audited the accompanying statements of operations and cash flows of
Channel 32, Incorporated (a wholly owned subsidiary of Peregrine Communications,
Ltd. effective as of July 1, 1995) for the period from December 16, 1993
(inception) to June 30, 1994 (Predecessor) and the years ended June 30, 1995
(Predecessor) and 1996 (Successor). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of Channel 32, Incorporated's operations
and its cash flows for the period from December 16, 1993 (inception) to June 30,
1994 (Predecessor) and the years ended June 30, 1995 (Predecessor) and 1996
(Successor) in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Los Angeles, California
November 13, 1997
F-30
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, JUNE 30, JULY 1, 1996
1995 1996 TO JUNE 17, 1997
------------- ----------- ----------------
PERIOD FROM
DECEMBER 16, (PREDECESSOR) (SUCCESSOR) (SUCCESSOR)
1993 (INCEPTION) (UNAUDITED)
TO JUNE 30, 1994
----------------
(PREDECESSOR)
Broadcast revenues, net.......................... $ -- $ 288,178 $ 2,728,857 $ 1,305,886
<S> <C> <C> <C> <C>
---------------- ------------- ----------- ----------------
Operating expenses:
Programming and production..................... 6,676 622,688 3,273,608 1,303,808
Selling, general and administrative............ 10,950 273,422 1,462,360 1,060,497
Depreciation and amortization.................. -- 234,498 541,878 346,469
---------------- ------------- ----------- ----------------
Total operating expenses............... 17,626 1,130,608 5,277,846 2,710,774
---------------- ------------- ----------- ----------------
Operating loss......................... (17,626) (842,430) (2,548,989) (1,404,888)
---------------- ------------- ----------- ----------------
Other income (expense):
Interest expense............................... (4,691) (200,112) (3,252,202) (2,221,688)
Interest income................................ -- -- 44,821 --
Write-off of due from parent................... -- -- (188,586) --
Other expenses, net............................ -- -- (70,254) (10,181)
---------------- ------------- ----------- ----------------
Other expense, net..................... (4,691) (200,112) (3,466,221) (2,231,869)
Loss before income taxes......................... (22,317) (1,042,542) (6,015,210) (3,636,757)
Income taxes..................................... -- -- -- --
---------------- ------------- ----------- ----------------
Net loss............................... $(22,317) $ (1,042,542) $(6,015,210) $ (3,636,757)
---------------- ------------- ----------- ----------------
---------------- ------------- ----------- ----------------
</TABLE>
See accompanying notes to financial statements
F-31
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 30, JUNE 30, JULY 1, 1997
------------- ----------- TO JUNE 17, 1997
1995 1996 ----------------
PERIOD FROM ------------- -----------
DECEMBER 16, (SUCCESSOR)
1993 (INCEPTION) (PREDECESSOR) (SUCCESSOR) (UNAUDITED)
TO JUNE 30, 1994
----------------
(PREDECESSOR)
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net loss............................................ $(22,317) $(1,042,542) $(6,015,210) $ (3,636,757)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... -- 288,083 951,377 1,322,513
Changes in assets and liabilities:
(Increase) decrease in programming rights....... -- (122,500) (401,559) (380,400)
(Increase) decrease in accounts receivable,
net.......................................... -- (59,470) (167,353) 23,242
Increase (decrease) in due from related party... -- -- 14,700 (692,301)
(Increase) decrease in other assets............. (3,494) (5,000) (82,646) (357,606)
Increase (decrease) in due to related party..... 63,887 (63,887)
Increase (decrease) in accounts payable......... -- 252,704 (56,523) 651,014
Increase (decrease) in accrued expenses......... 4,691 179,117 184,414 182,932
Increase (decrease) in programming rights
payable...................................... -- 97,437 249,377 308,612
---------------- ------------- ----------- ----------------
Net cash used in operating activities........ (21,120) (412,171) (5,259,536) (2,642,638)
---------------- ------------- ----------- ----------------
Cash flows from investing activities:
Acquisition of property and equipment............... (138,297) (978,711) (998,429) (355,717)
Disposal of property and equipment.................. -- -- 236,910 --
Increase in broadcast licenses...................... -- (243,785) (315,000) --
---------------- ------------- ----------- ----------------
Net cash used in investing activities........ (138,297) (1,222,496) (1,076,519) (355,717)
---------------- ------------- ----------- ----------------
Cash flows from financing activities:
Proceeds from borrowings............................ 159,417 1,793,519 8,038,056 3,110,138
Payment of borrowings............................... -- (159,417) (1,793,519) (2,635)
Payments of obligations under capital lease......... -- -- -- (10,217)
Proceeds from issuance of common stock.............. -- 1,600 100,108 --
---------------- ------------- ----------- ----------------
Net cash provided by financing activities.... 159,417 1,635,702 6,344,645 3,097,286
---------------- ------------- ----------- ----------------
Net increase in cash......................... -- 1,035 8,590 98,931
Cash at beginning of year............................. -- -- 1,035 9,625
---------------- ------------- ----------- ----------------
Cash at end of year................................... $ -- $ 1,035 $ 9,625 $ 108,556
---------------- ------------- ----------- ----------------
---------------- ------------- ----------- ----------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.......................................... $ -- $ 51,845 $ 732,582 $ 370,095
Income taxes...................................... $ -- $ -- $ -- $ --
---------------- ------------- ----------- ----------------
---------------- ------------- ----------- ----------------
Noncash transactions:
Acquisition of property and equipment in exchange
for capital lease obligations..................... $ -- $ 650,000 $ 185,000 $ --
---------------- ------------- ----------- ----------------
---------------- ------------- ----------- ----------------
</TABLE>
See accompanying notes to financial statements.
F-32
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND FORMATION
Channel 32, Incorporated was incorporated under the laws of the state of
Oregon on December 16, 1993. Channel 32, Incorporated (the Company) owns and
operates KWBP-TV Channel 32, a television station (and The WB Network affiliate)
in Portland, Oregon. The Company is a wholly owned subsidiary of Peregrine
Communications, Ltd. (Peregrine) subsequent to Peregrine's acquisition of the
Company effective July 1, 1995.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Effective July 1, 1995, Peregrine acquired Channel 32, Incorporated, for
approximately $350,000. The Company paid $315,000 of this amount on behalf of
Peregrine. The acquisition was accounted for using the purchase method of
accounting. The Company has applied push-down accounting reflecting the full
acquisition cost and resulting equity in the accompanying financial statements
subsequent to the acquisition date. As a result of the acquisition, the
financial information for periods after the acquisition (Successor) is presented
on a different cost basis than for the periods prior to the acquisition
(Predecessor) and, therefore, is not comparable. The purchase price has been
allocated to the net assets of the Company based on their estimated fair market
value at the acquisition date. The balance of the purchase price after
allocation to identifiable net assets of approximately $1,400,000 was allocated
to broadcast licenses.
The financial statements are presented as if the acquisition occurred on
July 1, 1995, rather than the actual purchase dates which occurred between March
and November 1995. The impact of recording the purchase as of July 1, 1995,
instead of the actual acquisition dates, is not material to the accompanying
financial statements
Local Marketing Agreement
Effective January 1, 1997, the operations of KWBP-TV were transferred to
ACME Television of Oregon, LLC pursuant to a Local Marketing Agreement (LMA).
Accordingly, the Company's financial statements subsequent to December 31, 1996
only include the Company's net activity pursuant to such LMA.
Revenue Recognition
Revenue related to the sale of airtime related to advertising and
contracted time is recognized at the time of broadcast.
Cash and Cash Equivalents
For purposes of reporting the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Programming Rights
Programming rights represent costs incurred for the right to broadcast
certain features and syndicated television programs. Programming rights are
stated at the lower of amortized cost or estimated realizable value. The cost of
such programming rights and the corresponding liability are recorded when the
initial program becomes available for broadcast under the contract. Programming
rights are amortized over the life of the contract on an accelerated basis
related to the usage of the program. Programming rights expected to be amortized
during the next fiscal year are classified as current in the balance sheets. The
payments under these contracts that are due within one year and after one year
are reflected in the balance sheets as current and noncurrent liabilities,
respectively.
F-33
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Commitments for programming rights that have been executed, but which have
not been recorded in the accompanying financial statements, as the underlying
programming is not available for broadcast, were approximately $0, $222,249 and
$262,500 as of June 30, 1995, 1996 and March 31, 1997, respectively.
Property and Equipment
Property and equipment are stated at cost. The cost of maintenance is
expensed.
Depreciation and amortization is computed using the straight-line method
over the estimated useful lives of the respective assets. The principal lives
used in determining depreciation and amortization rates of various assets are as
follows:
<TABLE>
<S> <C>
Buildings.................................................... 39 years
Broadcasting equipment....................................... 5-15 years
Furniture and fixtures....................................... 5-7 years
Vehicles..................................................... 5 years
Equipment under capital leases............................... 5-15 years
</TABLE>
Barter Transactions
Revenue and expenses associated with barter agreements in which broadcast
time is exchanged for programming rights are recorded at the average rate of the
airtime exchanged. Barter transactions, which represent the exchange of
advertising time for goods or services, are recorded at the estimated fair value
of the products or services received. Barter revenue is recognized when
advertisements are broadcast. Merchandise or services received from airtime
trade sales are charged to expense or capitalized when used or received.
Revenues and expenses include approximately $1,267,600 of barter
transaction for the year ended June 30, 1996. The Company did not record
revenues and expenses associated with barter transactions for the year ended
June 30, 1995. The Company does not believe the omission of such barter
transactions for the year ended June 30, 1995 is material to the Financial
Statements taken as a whole.
Carrying Value of Long-Lived Assets
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of.' The carrying value of long-lived assets
(tangible and intangible) is reviewed if the facts and circumstances suggest
that they may be impaired. If this review indicates that an asset's carrying
value will not be recoverable, as determined based on future expected
undiscounted cash flows, the carrying value is reduced to fair market value.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. Under SFAS
No. 109 deferred income taxes are recognized for tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between financial statement carrying amounts and the tax basis of
existing assets and liabilities.
F-34
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of accounts receivable. The
Company believes that concentrations of credit risk with respect to accounts
receivable, which are unsecured, are limited due to the Company's ongoing
relationship with its clients. The Company provides for its estimate of
uncollectible accounts on a periodic basis. The Company has not experienced
significant losses relating to accounts receivable. For periods ended June 30,
1994, 1995, 1996 and March 31, 1997 and 1996 no customer accounted for more than
10% of revenues.
(3) INTANGIBLE ASSETS
Intangible assets are stated at cost, less accumulated amortization, and
are comprised of broadcast licenses. Broadcast licenses are being amortized on a
straight-line basis over 15 years. The amount of amortization related to
broadcast licenses was approximately $0, $11,000, $97,567, and $93,000 for the
periods ended June 30, 1994, 1995 and 1996 and June 17, 1997, respectively.
(4) STOCKHOLDERS' EQUITY
At June 30, 1995, the Company had 2,000 shares of authorized common stock
with 1,000 shares issued to its 4 original shareholders and an option to
purchase 818 shares representing 45% of the Company, with an exercise price of
$452,000 held by Peregrine (Peregrine Option).
In November 1995, the shareholders approved an increase in the number of
authorized shares to 4,000 shares of common stock. The Company sold 250 shares
of common stock for $100,000 to Aspen TV, LLC and sold an option for $108 to
purchase 51% of the outstanding common stock, or 791 shares, for an exercise
price of $150,000. This option is automatically cancelled and the Company will
be obligated to repurchase the stock sold to Aspen TV, LLC for the sale price
plus interest upon the Company's timely repayment of its debt obligation to
Aspen TV, LLC. The Peregrine Option was cancelled at this time.
(5) RELATED PARTY TRANSACTIONS
Due (to) from related party represent temporary advances in the form of
expenses paid by or on behalf of the Company by Peregrine. The following is a
summary of these amounts:
<TABLE>
<CAPTION>
JUNE 30,
------------------- MARCH 31,
1995 1996 1997
------- -------- ---------
<S> <C> <C> <C>
Due from related party--Peregrine.................................... $14,700 $ -- $ --
Due from related party--ACME Television of Oregon.................... -- -- 692,301
Due to related party--Peregrine...................................... -- (63,887) --
------- -------- ---------
Total.............................................................. $14,700 $(63,887) $ 692,301
------- -------- ---------
------- -------- ---------
</TABLE>
F-35
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)
(5) RELATED PARTY TRANSACTIONS--(CONTINUED)
Due from related party, ACME Television of Oregon, LLC relates to the
balance due to the Company pursuant to the LMA agreement effective January 1,
1997.
(6) INCOME TAXES
The Company did not record any tax benefit during the period from December
16, 1993 (inception) to June 30, 1994, the years ended June 30, 1995 and 1996
and the nine months ended March 31, 1996 and 1997.
The provision for income taxes differs from the amount computed by applying
the Federal statutory income tax rate of 34% to income before income taxes as
shown below:
<TABLE>
<CAPTION>
1994 1995 1996
------- --------- -----------
<S> <C> <C> <C>
Computed 'expected' income tax benefit............................ $(8,000) $(355,000) $(2,100,000)
Increase in valuation allowance................................... 8,000 355,000 2,100,000
------- --------- -----------
Income tax expense (benefit).................................... $ -- $ -- $ --
------- --------- -----------
------- --------- -----------
</TABLE>
Deferred income tax assets and liabilities result from temporary
differences. Temporary differences are differences in the recognition of income
and expenses for income tax and financial reporting purposes that will result in
taxable or deductible amounts in future years. At June 30, 1996 and March 31,
1997, the net deferred income tax assets, related primarily to net operating
loss carryforwards, were approximately $1,158,000 and $6,117,000, respectively.
In 1995, the Company experienced an ownership change as defined in Section 382
of the Internal Revenue Code. This change in ownership restricts the utilization
of the Company's net operating loss (NOL) carryforwards to offset future taxable
income. NOL carryforwards arising subsequent to the change in control are not
subject to the limitation. The amount of NOL carryforwards subject to the
limitation is approximately $1,000,000 with an annual limitation of $75,000. The
carryforwards available at June 30, 1996 expire in 2011.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this
assessment. At June 30, 1995, 1996 and March 31, 1997, based on the level of
historical taxable income and projections for future taxable losses over the
periods in which the level of deferred tax assets are deductible, management
believes that it is not more likely than not that the Company will not realize
the benefits of these deductible differences.
(7) SALE
On June 17, 1997, ACME Television Holdings, LLC (ACME) acquired certain of
the Company's assets, including the broadcast license of KWBP-TV and assumed
certain liabilities, including all of the Company's programming commitments and
the Company's equipment leases, in exchange for $18,675,000 in cash and
$4,400,000 in ACME Parent membership interests.
In addition, pursuant to a local marketing agreement, ACME effectively
operated the station and funded the losses from January 1, 1997 through June 17,
1997 (the acquisition date). Accordingly, there were no operating revenues or
expenses incurred by the Company subsequent to January 1, 1997.
F-36
<PAGE>
CHANNEL 32, INCORPORATED (NOTE 1)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
(7) RELATED PARTY TRANSACTIONS
Due (to) from related party represent temporary advances in the form of
expenses paid by or on behalf of the Company by Peregrine. The following is a
summary of these amounts:
<TABLE>
<CAPTION>
JUNE 30,
------------------- MARCH 31,
1995 1996 1997
------- -------- ---------
<S> <C> <C> <C>
Due from related party--Peregrine.................................... $14,700 $ -- $ --
Due from related party--ACME Television of Oregon.................... -- -- 692,301
Due to related party--Peregrine...................................... -- (63,877) --
------- -------- ---------
Total.............................................................. $14,700 $(63,877) $ 692,301
------- -------- ---------
------- -------- ---------
</TABLE>
Due from related party, ACME Television of Oregon, LLC relates to the
balance due to the Company pursuant to the LMA agreement effective January 1,
1997.
(8) INCOME TAXES
The Company did not record any tax benefit during the period from December
16, 1993 (inception) to June 30, 1994, the years ended June 30, 1995 and 1996
and the nine months ended March 31, 1996 and 1997.
The provision for income taxes differs from the amount computed by applying
the Federal statutory income tax rate of 34% to income before income taxes as
shown below:
<TABLE>
<CAPTION>
1994 1995 1996
------- --------- -----------
<S> <C> <C> <C>
Computed 'expected' income tax benefit............................ $(8,000) $(355,000) $(2,100,000)
Increase in valuation allowance................................... 8,000 355,000 2,100,000
------- --------- -----------
Income tax expense (benefit).................................... $ -- $ -- $ --
------- --------- -----------
------- --------- -----------
</TABLE>
Deferred income tax assets and liabilities result from temporary
differences. Temporary differences are differences in the recognition of income
and expenses for income tax and financial reporting purposes that will result in
taxable or deductible amounts in future years. At June 30, 1996 and March 31,
1997, the net deferred income tax assets, related primarily to net operating
loss carryforwards, were approximately $1,158,000 and $6,117,000, respectively.
In 1995, the Company experienced an ownership change as defined in Section 382
of the Internal Revenue Code. This change in ownership restricts the utilization
of the Company's net operating loss (NOL) carryforwards to offset future taxable
income. NOL carryforwards arising subsequent to the change in control are not
subject to the limitation. The amount of NOL carryforwards subject to the
limitation is approximately $1,000,000 with an annual limitation of $75,000. The
carryforwards available at June 30, 1996 expire in 2011.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this
assessment. At June 30, 1995, 1996 and March 31, 1997, based on the level of
historical taxable income and projections for future taxable losses over the
periods in which the level of deferred tax assets are deductible, management
believes that it is not more likely than not that the Company will not realize
the benefits of these deductible differences.
(9) SUBSEQUENT EVENT
On June 17, 1997, ACME Television Holdings, LLC (ACME Parent) acquired
certain assets and assumed certain liabilities of Channel 32 Incorporated,
including the broadcast license of KWBP-TV in exchange for $18,675,000 in cash
and $4,400,000 in ACME Parent membership interests.
In addition, the operations of Channel 32 Incorporated were recorded by
ACME Television, Oregon (a subsidiary of ACME Parent) effective January 1, 1997
pursuant to a local marketing agreement whereby ACME effectively operated the
station and funded the losses from January 1, 1997 through June 17, 1997 (the
acquisition date).
F-37
<PAGE>
================================================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Definitions and Market and Industry Data......... iii
Prospectus Summary....................................... 1
Risk Factors............................................. 11
Projected Financial Data................................. 19
The Transactions......................................... 20
Use of Proceeds.......................................... 25
Capitalization........................................... 25
Unauditied Pro Forma Consolidated Financial
Information............................................ 26
Selected Historical Consolidated Financial Data.......... 31
Management's Discussion and Analysis of Results of
Operations and Financial Condition..................... 34
Business................................................. 41
Management............................................... 53
Certain Relationships and Related Transactions........... 56
Security Ownership of Certain Beneficial Owners and
Executive Officers..................................... 57
Description of ACME Parent............................... 60
Description of Certain Indebtedness...................... 62
Exchange Offer........................................... 63
Description of the Television Notes...................... 72
Description of the Notes................................. 94
Book-Entry; Delivery and Form............................ 117
Certain U.S. Federal Income Tax Considerations Relating
to the Notes........................................... 118
Plan of Distribution..................................... 124
Experts.................................................. 125
Validity of Exchange Notes............................... 125
Available Information.................................... 125
Index to Financial Statements............................ F-1
</TABLE>
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
ACME INTERMEDIATE HOLDINGS, LLC
ACME FINANCE, INC.
OFFER TO EXCHANGE
12% SENIOR SECURED DISCOUNT NOTES
DUE 2005, SERIES A
FOR
12% SENIOR SECURED DISCOUNT NOTES
DUE 2005, SERIES B
----------------
PROSPECTUS
----------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
WILMINGTON TRUST COMPANY
BY FACSIMILE:
(302) 651-1079
CONFIRMATION BY TELEPHONE:
(302) 651-8869
BY HAND:
88 PINE STREET
19TH FLOOR
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
C/O HARRIS TRUST COMPANY OF NEW YORK,
AS AGENT
BY REGISTERED OR BY CERTIFIED
MAIL OR BY OVERNIGHT COURIER:
1100 NORTH MARKET STREET
WILMINGTON, DELAWARE 19890
ATTENTION: CORPORATE TRUST ADMINISTRATION
, 1997
================================================================================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Capitalized terms used but not defined in Part II have the meanings
ascribed to them in the Prospectus contained in this Registration Statement.
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ACME Intermediate Holdings, LLC (the 'Company') is a limited liability
company organized under the laws of the State of Delaware. Section 18-108 of the
Delaware Limited Liability Company Act provides that, subject to such standards
and restrictions, if any, as are set forth in its limited liability company
agreement, a limited liability company may, and shall have the power to,
indemnify and hold harmless any member or manager or other person from and
against any and all claims and demands whatsoever.
Article VII of the Company's Limited Liability Company Agreement (the 'LLC
Agreement') provides, among other things, that the Company shall indemnify each
Indemnified Party from and against any and all Losses in any way related to or
arising out of the LLC Agreement, the business of the Company or the action or
inaction of such person hereunder (including, without limitation, the actions or
inactions of the Indemnified Parties upon dissolution of the Company), which may
be imposed on, incurred by or asserted at any time against any such Indemnified
Party, except that no indemnification shall be provided for any Indemnified
Party regarding any matter as to which it shall be finally determined that such
Indemnified Party did not act in good faith and in the reasonable belief that
its action was in the best interests of the Company, or with respect to a
criminal matter, that it had reasonable cause to believe that its conduct was
unlawful. The LLC Agreement defines 'Indemnified Parties' as members of the
Company, any affiliate of the members and each person serving as an officer,
employee or other agent of the Company (including persons who serve at the
Company's request as directors, managers, officers, employees, agents or
trustees of another organization in which the Company has any interest as a
shareholder, creditor or otherwise) and their respective successors and assigns.
The LLC Agreement defines 'Losses' as liabilities, judgments, obligations,
losses, damages, taxes and interest and penalties thereon (other than (i) income
taxes due on income allocated to membership units of the Company; and (ii) taxes
based on fees, compensation or commissions received by an Indemnified Party in
connection with the administration of the Company or the Company's property),
claims, actions, suits or other proceedings (whether civil or criminal, pending
or threatened, before any court of administrative or legislative body, and as
the same are accrued, in which an Indemnified Party may be or may have been
involved as a party or otherwise or with which he or she may be or may have been
threatened, while in office or thereafter), costs, expenses and disbursements
(including, without limitation, legal and accounting fees and expenses) of any
kind and nature whatsoever.
The indemnification provided by the LLC Agreement shall inure to the
benefit of the heirs and personal representatives of the Indemnified Parties.
The determination of whether the Company is authorized to indemnify any
Indemnified Party hereunder and any award of indemnification shall be made in
each instance by its members; provided, however, that as to any matter disposed
of by a compromise payment, pursuant to a consent decree or otherwise, no
indemnification, either for said payment or for any other Losses, shall be
provided unless there has been obtained an opinion in writing of legal counsel
to the effect that the person subject to indemnification hereunder appears to
have acted in good faith and that such indemnification would not protect such
person against any liability to the Company or its members to which he, she or
it would otherwise be subject by reason of gross negligence, willful malfeasance
or fraud in the conduct of his, her or its office or actions not taken in good
faith by such person. Notwithstanding such provisions, if any Indemnified Party
has been wholly successful on the merits in the defense of any action, suit or
proceeding in which it was involved by reason of its position with the Company
or as a result of serving in such capacity, such Indemnified Party shall be
indemnified by the Company against all Losses incurred by such Indemnified Party
in connection therewith. According to the LLC Agreement, the Company shall have
power to purchase and maintain insurance on behalf of any Indemnified Party
against any liability or cost incurred by such Person in any such capacity or
arising out of its status as such, whether or not the Company would have power
to indemnify against such liability or cost.
ACME Intermediate Finance, Inc. (the 'Corporation') is a Delaware
corporation. Section 145 of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may indemnify any
II-1
<PAGE>
persons who were, are or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his conduct was illegal. A Delaware corporation may indemnify
any persons who are, were or are threatened to be made, a party to any
threatened, pending or completed action or suit by or in the right of the
corporation by reasons of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests, provided that no indemnification is
permitted without judicial approval if the officer, director, employee or agent
is adjudged to be liable to the corporation. Where an officer, director,
employee or agent is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director has actually and reasonably incurred.
The Certificate of Incorporation of the Corporation provides that no
director shall be personally liable to the Corporation or its stockholders for
monetary damages for any breach of fiduciary duty by such director as a director
except that a director shall be liable to the extent provided by applicable law
(i) for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the Delaware General Corporation Law or (iv) for any transaction from
which the director derived an improper personal benefit.
Article VIII of the Bylaws of the Corporation provides that the Corporation
shall indemnify and hold harmless each director and officer of the Corporation,
and each person serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, to the fullest extent permitted by the laws of
Delaware, as from time to time in effect the same exists or may hereafter be
amended, against all expense, liability and loss reasonably incurred or suffered
in connection therewith. The Corporation may, by action of its Board of
Directors, indemnify employees or agents of the Corporation with the same scope
and effect. The indemnification obligations set forth in Article VIII shall
inure to the benefit of heirs, executors and administrators of those entitled to
indemnification provided that such proceeding was authorized by the board of
directors. The Board of Directors may also provide any other rights of indemnity
which it may deem appropriate.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnity him under Section 145. The
Corporation's bylaws provide for the maintenance of insurance under the
circumstances described in Section 145.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrants pursuant to the foregoing provisions, the registrants have been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<C> <C> <S>
3.1 -- Certificate of Formation of ACME Intermediate Holdings, LLC
3.2 -- Limited Liability Company Agreement of ACME Intermediate Holdings, LLC
3.3 -- Articles of Incorporation of ACME Intermediate Finance, Inc.
3.4 -- Bylaws of ACME Intermediate Finance, Inc.
4.1 -- Indenture, dated September 30, 1997, by and among ACME Television, LLC and ACME Finance
Corporation, as Issuers, the Guarantors named therein, and Wilmington Trust Company
4.2 -- Indenture, dated September 30, 1997, by and among ACME Intermediate Holdings, LLC and ACME
Intermediate Finance, Inc., as Issuers and Wilmington Trust Company, as Trustee.
4.3 -- Form of Securities (included in Exhibit 4.2)
5.1 -- Opinion of Dickstein Shapiro Morin & Oshinsky, LLP regarding the legality of the securities being
registered
10.1 -- Stock Purchase Agreement, dated July 29, 1997, by and among ACME Television Holdings, LLC, Koplar
Communications, Inc. and the shareholders of Koplar Communications, Inc.
10.2 -- Escrow Agreement, dated September 8, 1997, by and among ACME Television Holdings, LLC, ACME
Television Licenses of Missouri, Inc., Koplar Communications, Inc. the shareholders of Koplar
Communications, Inc. and NationsBank, N.A.
10.3 -- Time Brokerage Agreement for KPLR-TV, dated September 8, 1997, by and among ACME Television
Licenses of Missouri, Inc., ACME Television Holdings, LLC, Koplar Communications Television, LLC
and Koplar Communications, Inc.
10.4 -- Membership Contribution Agreement, dated August 22, 1997, by and among ACME Television Holdings,
LLC, Roberts Broadcasting of Salt Lake City, LLC, Michael V. Roberts and Steven C. Roberts
10.5 -- Asset Purchase Agreement, dated August 22, 1997, by and between ACME Television Licenses of New
Mexico, LLC and Minority Broadcasters of Santa Fe, Inc.
10.6 -- Purchase Agreement, dated May 28, 1997, by and among ACME Television Licenses of Tennessee, LLC,
ACME Television of Tennessee, LLC, Crossville TV Limited Partnership and the Seller named therein
10.7 -- Asset Purchase Agreement, dated January 31, 1997, by and between NewCo of Oregon, Inc. and Channel
32 Incorporated
10.8 -- Amendment, dated April 25, 1997, to Asset Purchase Agreement, by and between ACME Television
Holdings of Oregon, LLC and Channel 32 Incorporated
10.9 -- Amendment, dated June 2, 1997, to Asset Purchase Agreement, by and between ACME Television
Holdings of Oregon, LLC and Channel 32 Incorporated
10.10 -- Management Agreement, dated February 6, 1997, by and between NewCo of Oregon, Inc. and Channel 32
Incorporated
10.11 -- Amendment, dated June 17, 1997, to Management Agreement by and between NewCo of Oregon, Inc. and
Channel 32 Incorporated
10.12 -- Noncompetition Agreement, dated June 17, 1997, by and among ACME Television Holdings of Oregon,
LLC, Peregrine Communications, Ltd., Peregrine Holdings, Ltd., and Channel 32 Incorporated
10.13 -- Management Agreement, dated August 22, 1997, by and between Roberts Broadcasting of Salt Lake
City, LLC and ACME Television of Utah, LLC
10.14 -- Management Agreement, dated August 22, 1997, by and between Minority Broadcasters of Santa Fe,
Inc. and ACME Television of New Mexico, LLC
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
10.15 -- Escrow Agreement, dated May 28, 1997, by and among Acme Television Licenses of Tennessee, LLC,
Acme Television of Tennessee, LLC, Crossville TV Limited Partnership, the Sellers names therein
and NationsBank, N.A., as escrow agent
<C> <C> <S>
*10.16 -- Station Affiliation Agreement, dated August 18, 1997, by and between ACME Holdings of Knoxville,
LLC and The WB Television Network Partners, L.P.
*10.17 -- Station Affiliation Agreement, dated September 24, 1997, by and between ACME Holdings of St.
Louis, LLC and The WB Television Network Partners, L.P.
10.18 -- Station Affiliation Agreement, dated June 10, 1997, by and between ACME Holdings of Oregon, LLC
and The WB Television Network Partners, L.P.
10.19 -- Letter dated August 21, 1997, to ACME Television Holdings from The WB Television Network
10.20 -- Employment Agreement, dated June 17, 1997, by and between ACME Television Holdings, LLC and
Douglas E. Gealy
10.21 -- Employment Agreement, dated June 17, 1997, by and between ACME Television Holdings, LLC and Tom
Allen
10.22 -- Consulting Agreement, dated June 17, 1997, by and between ACME Television Holdings, LLC and Jamie
Kellner
10.23 -- Commercial Building Lease, dated June 17, 1997, by and between Peregrine Communications, Ltd. and
ACME Television Holdings of Oregon, LLC
10.24 -- Amended and Restated Lease Agreement, dated July 1, 1996, by and between KKSN, Inc. and Channel 32
Incorporated
10.25 -- Lease Agreement, dated July 14, 1997, by and between Richardson V. Turner and ACME Television of
Tennessee, LLC
10.26 -- Agreement of Lease, dated March 20, 1997, by and between Don D. Collins d/b/a Tennessee Valley
Communications and Crossville TV Limited Partnership
10.27 -- First Modification, dated May 23, 1997, to Agreement of Lease by and between Don D. Collins d/b/a
Tennessee Valley Communications and Crossville TV Limited Partnership
*10.28 -- Studio Lease Agreement by and between Roberts Broadcasting of Salt Lake City, LLC and ACME
Television Holdings, LLC
*10.29 -- Tower Lease Agreement by and between Roberts Broadcasting of Salt Lake City, LLC and ACME
Television Holdings, LLC
10.30 -- Commercial Lease, dated January 1, 1994, by and between Koplar Properties Inc. and Koplar
Communications, Inc.
10.31 -- Agreement of Lease, dated May 16, 1986, by and between CBS Inc. and Koplar Communications Inc.
10.32 -- Amendment, dated September 2, 1986, to Agreement of Lease by and between Viacom Broadcasting of
Missouri Inc., as successor-in-interest to CBS Inc. and Koplar Communications Inc.
10.33 -- Agreement, dated June 1, 1995, by and among Koplar Communications, Inc., Roberts Broadcasting
Company, Michael V. Roberts and Steven C. Roberts
*10.34 -- First Amended and Restated Credit Agreement by and among ACME Television, LLC, the Lenders named
therein and Canadian Imperial Bank of Commerce, New York Agency, as agent for the Lenders
10.35 -- Registration Rights Agreement, dated September 30, 1997, by and among ACME Intermediate Holdings,
LLC, ACME Intermediate Finance, Inc. and CIBC Wood Gundy Securities Corp., as Initial Purchaser
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
10.36 -- Membership Unitholders Agreement, dated September 30, 1997, by and among ACME Intermediate
Holdings, LLC, ACME Intermediate Finance, Inc. and CIBC Wood Gundy Securities Corp., as Initial
Purchaser
<C> <C> <S>
10.37 -- Purchase Agreement, dated September 24, 1997, by and among ACME Intermediate Holdings, LLC, ACME
Intermediate Finance, Inc. and CIBC Wood Gundy Securities Corp., as Initial Purchaser
10.38 -- Securities Pledge Agreement, dated September 30, 1997, by and between ACME Intermediate Holdings,
LLC and ACME Intermediate Finance, Inc., as Pledgers, and Wilmington Trust Company, as Trustee
21.1 -- Subsidiaries of Registrants
23.1 -- Consent of Dickstein Shapiro Morin & Oshinsky LLP (included in Exhibit 5.1)
23.2 -- Consent of KPMG Peat Marwick LLP regarding ACME Television, LLC
23.3 -- Consent of Coopers & Lybrand L.L.P.
23.4 -- Consent of KPMG Peat Marwick LLP regarding Channel 32, Incorporated
24.1 -- Power of attorney from Thomas Allen
24.2 -- Power of attorney from Douglas Gealy
24.3 -- Power of attorney from Jamie Kellner
25.1 -- Statement of Eligibility of Wilmington Trust Company
27.1 -- Financial Data Schedule
99.1 -- Form of Letter of Transmittal for Tender of Series A 12% Senior Secured Discount Notes due 2005 in
exchange for Series B Senior Secured Discount Notes due 2005
99.2 -- Form of Notice of Guaranteed Delivery for Tender of Series A 12% Senior Secured Discount Notes due
2005 in exchange for Series B Senior Secured Discount Notes due 2005
99.3 -- Letter to Brokers for Tender of Series A 12% Senior Secured Discount Notes due 2005 in exchange
for Series B Senior Secured Discount Notes due 2005
99.4 -- Letter to Clients for Tender of Series A 12% Senior Secured Discount Notes due 2005 in exchange
for Series B Senior Secured Discount Notes due 2005
99.5 -- Instruction to Registered Holder and/or Book Entry Transfer Participant from Beneficial Owner for
Tender of Series A 12% Senior Secured Discount Notes due 2005 in exchange for Series B Senior
Secured Discount Notes due 2005
99.6 -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
99.7 -- Consent to be appointed member of Board of Advisors from Edward J. Koplar
99.8 -- Consent to be appointed member of Board of Advisors from Michael V. Roberts
</TABLE>
* to be filed by amendment
(b) Financial Statement Schedules:
None.
II-5
<PAGE>
ITEM 22. UNDERTAKINGS.
Each undersigned registrant hereby undertakes:
(1) Each undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form;
(2) Each registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof;
(3) Each undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request; and
(4) Each undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF NOVEMBER 14, 1997.
ACME INTERMEDIATE HOLDINGS, LLC
By: /s/ Thomas Allen
-----------------------------
Thomas Allen
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------- ------------------------------------------- ------------------
<C> <S> <C>
* Chairman and Chief Executive Officer November 14, 1997
- -------------------------------------------
Jamie Kellner
* President and Chief Operating Officer November 14, 1997
- -------------------------------------------
Douglas Gealy
/s/ Thomas Allen Executive Vice President and Chief November 14, 1997
- ------------------------------------------- Financial Officer
Thomas Allen
/s/ Thomas Allen Majority Member November 14, 1997
- -------------------------------------------
ACME TELEVISION HOLDINGS, LLC
By: Thomas Allen
Title: Executive Vice President and Chief
Financial Officer
*By: /s/ Thomas Allen
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COSTA MESA,
STATE OF CALIFORNIA, AS OF NOVEMBER 14, 1997.
ACME INTERMEDIATE FINANCE, INC.
By: /s/ Thomas Allen
-------------------------------
Thomas Allen
Executive Vice President, Chief
Financial Officer
and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- ------------------
<C> <S> <C>
* Chairman of the Board and Chief Executive November 14, 1997
- ------------------------------------------ Officer
Jamie Kellner
* President, Chief Operating Officer, November 14, 1997
- ------------------------------------------ Secretary and Director
Douglas Gealy
/s/ Thomas Allen Executive Vice President, Chief Financial November 14, 1997
- ------------------------------------------ Officer and Director
Thomas Allen
*By: /s/ Thomas Allen
-----------------------------------
Thomas Allen
Attorney-in-Fact
</TABLE>
II-8
CERTIFICATE OF FORMATION
OF
ACME INTERMEDIATE HOLDINGS, LLC
A LIMITED LIABILITY COMPANY
FIRST: The name of the limited liability company is:
ACME INTERMEDIATE HOLDINGS, LLC
SECOND: Its registered office in the State of Delaware is to be located at
1013 Centre Road, in the City of Wilmington, County of New Castle, 19805, and
its registered agent at such address is CORPORATION SERVICE COMPANY.
IN WITNESS WHEREOF, the undersigned, being the individual forming the
Company, has executed, signed and acknowledged this Certificate of Formation
this eighth day of August, A.D. 1997.
/s/Jonathan P. Levi
- ------------------------
Authorized Person
Jonathan P. Levi
ACME INTERMEDIATE HOLDINGS, LLC
a Delaware limited liability company
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
Dated September 24, 1997
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C> <C>
PAGE
ARTICLE I - DEFINED TERMS 1
ARTICLE II - ORGANIZATION AND POWERS 5
2.01 Organization 5
2.02 Purposes and Powers 5
2.03 Principal Place of Business 6
2.04 Qualification in Other Jurisdictions 6
2.05 Fiscal Year 6
ARTICLE III - MEMBERS 6
3.01 Membership Units 6
3.02 Issuance of Membership Units; Admission of New Members 7
3.03 Certificated Common Units 7
3.04 Voting Rights 10
3.05 Restrictions 10
3.06 Limitation on Liability of Members 11
3.07 Authority 11
3.08 Withdrawals; Termination 11
3.09 No Appraisal Rights 12
3.10 Compliance with Securities Laws and Other Laws and Obligations 12
3.11 Member Insulation 12
ARTICLE IV - MANAGEMENT 13
4.01 Management 13
4.02 Reliance by Third Parties 14
4.03 Officers 14
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND
ALLOCATIONS AND DISTRIBUTIONS 15
5.01 Capital Contributions 15
5.02 Capital Accounts and Allocations 15
5.03 Distributions 16
5.04 Distributions Upon Dissolution 17
5.05 Distribution Upon Withdrawal 18
5.06 Tax Matters Partner 18
ARTICLE VI - TRANSFERS OF INTERESTS 19
6.01 Restrictions on Transfers 19
6.02 Substitute Members 20
6.03 Allocation of Distributions Between Assignor and Assignee 20
<PAGE>
ARTICLE VII - INDEMNIFICATION 20
7.01 Right to Indemnification 20
7.02 Award of Indemnification 21
7.03 Successful Defense 21
7.04 Advance Payments 22
7.05 Insurance 22
7.06 Heirs and Personal Representatives 22
7.07 Non-Exclusivity 22
7.08 Amendment 22
ARTICLE VIII - CONFLICTS OF INTEREST 22
8.01 Transactions with Interested Persons; Conflicts 22
8.02 Business Opportunities 23
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND TERMINATION 23
9.01 No Dissolution 23
9.02 Events Causing Dissolution 23
9.03 Notice of Dissolution 24
9.04 Liquidation 24
9.05 Certificate of Cancellation 24
ARTICLE XI - GENERAL PROVISIONS 24
10.01 Offset 24
10.02 Notices 25
10.03 Entire Agreement 25
10.04 Amendment or Modification; Terms 25
10.05 Binding Effect 25
10.06 Governing Law; Severability 25
10.07 Further Assurances 25
10.08 Waiver of Certain Rights 26
10.09 Third-Party Beneficiaries 26
10.10 Failure to Pursue Remedies 26
10.11 Cumulative Remedies 26
10.12 Notice of Members of Provisions of this Agreement 26
10.13 Interpretation 26
10.14 Counterparts 27
Schedule A - Membership Units
Exhibit A - Form of Common Unit
Annex A - Form of Private Placement Legend
</TABLE>
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC
Amended and Restated
LIMITED LIABILITY COMPANY AGREEMENT
This Amended and Restated Limited Liability Company Agreement is made as of
September 24, 1997 by and among ACME Intermediate Holdings, LLC (the "Company")
and each of the Members listed on Schedule A hereto, and those Persons who
become Members of the Company in accordance with the provisions hereof and whose
names are set forth as such in the record books of the Company.
WHEREAS, the Company has been formed as a limited liability company under
the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, ss. 18.101 ET
SEQ. (as am time tO time, the "Act"), by filing a Certificate of Formation of
the Company with the office of the Secretary of State of the State of Delaware
on August 8, 1997;
WHEREAS, certain of the Members are parties to the Limited Liability
Company Agreement dated as of the date hereof (the "Initial Agreement"); and
WHEREAS, the Members desire to amend and restate the Initial Agreement set
out fully their respective rights, obligations and duties regarding the Company
and its assets and liabilities as set forth herein.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Members hereby
agree as follows:
ARTICLE I - DEFINED TERMS
Unless the context otherwise requires, the terms defined in this Article I
shall, for the purposes of this Agreement, have the meanings herein specified
(each such meaning to be equally applicable to both the singular and plural
forms of the respective terms so defined). Defined terms which are not defined
in this Article I or elsewhere in this Agreement shall have the meaning ascribed
to them in the Investment Agreement.
"Affiliate" shall mean, with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by or is under common control
with, the specified Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
<PAGE>
"Agreement" shall mean this Amended and Restated Limited Liability Company
Agreement, as amended, modified, supplemented or restated from time to time.
"Bankruptcy" means, with respect to a Person, that either (i) an
involuntary petition under any bankruptcy or insolvency or other debtor relief
law or under the reorganization provisions of any such law has been filed with
respect to such Person or a receiver of or for the property of such Person has
been appointed without the acquiescence of such Person, which petition or
appointment remains undischarged or unstayed for an aggregate period of sixty
(60) days (whether or not consecutive) or (ii) a voluntary petition under any
bankruptcy or insolvency or other debtor relief law or under the reorganization
provisions of any such law has been filed by such Person, a voluntary assignment
of such Person's property for the benefit of creditors has been made, a written
admission by such Person of its inability to pay its debts as they mature has
been made, a receiver of or for the property of such Person has been appointed
with the acquiescence of such Person or such Person has done any similar act of
like import.
"Capital Contribution" shall mean with respect to any Initial Member
the amount set forth opposite its name on SCHEDULE A and with respect to any New
Member the amount set forth opposite its name on SCHEDULE A, as amended.
"Certificate" shall mean the Certificate of Formation and any and
all amendments thereto and restatements thereof filed on behalf of the Company
with the Secretary of State of the State of Delaware pursuant to the Act.
"Common Members" shall mean those persons listed on SCHEDULE A
hereto as Common Members.
"Common Units" shall mean those Membership Units designated as
Common Units, as described in Section 3.01 hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Distribution Percentage" shall mean a percentage determined for
each holder of Common Units by dividing the aggregate Common Units of such
holder by the aggregate Common Units of all holders of Common Units entitled to
distributions at the time of such determination.
"FCC" means the Federal Communications Commission.
2
<PAGE>
"Indemnified Parties" shall mean the Members , any Affiliate of the
Members and each Person serving as an Officer, employee or other agent of the
Company (including Persons who serve at the Company's request as directors,
managers, officers, employees, agents or trustees of another organization in
which the Company has any interest as a shareholder, creditor or otherwise) and
their respective successors and assigns.
"Initial Capital Contribution" shall mean with respect to any
Initial Member the amount set forth opposite its name on SCHEDULE A.
"Initial Members" shall mean those Persons listed on SCHEDULE A
hereto as Initial Members.
"Investment Company Act" means the Investment Company Act of 1940,
as amended from time to time, together with any successor statute, and the rules
and regulations promulgated thereunder.
"Losses" shall mean all liabilities, judgments, obligations, losses,
damages, taxes and interest and penalties thereon (other than (i) income taxes
due on income allocated to Membership Units; and (ii) taxes based on fees,
compensation or commissions received by an Indemnified Party in connection with
the administration of the Company or the Company's property), claims, actions,
suits or other proceedings (whether civil or criminal, pending or threatened,
before any-court or administrative or legislative body, and as the same are
accrued, in which an Indemnified Party may be or may have been involved as a
party or otherwise or with which he or she may be or may have been threatened,
while in office or thereafter), costs, expenses and disbursements (including,
without limitation, legal and accounting fees and expenses) of any kind and
nature whatsoever.
"Member" shall mean the Initial Members and any Person admitted as a
Member in accordance with the terms of this Agreement and named as a Member in
the record books of the Company, and includes any Person admitted pursuant to
the provisions of this Agreement when acting in his, her or its capacity as a
Member of the Company, and "Members" shall mean two (2) or more of such Persons
when acting in their capacities as Members of the Company.
"New Member" shall mean any Member who is not an Initial Member.
"Person" shall mean an individual, corporation, association,
partnership (general or limited), joint venture, trust, unincorporated
organization, limited liability company, any other entity or organization of any
kind or a government or any department, agency, authority, instrumentality or
political subdivision thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, together with any successor statute, and the rules and
regulations promulgated thereunder.
3
<PAGE>
"Subscription Agreement" shall mean a subscription agreement for the
purchase of a Membership Unit in the Company, in a form acceptable to the
Members or the Majority Members, as applicable.
"Tax Rate" means, for any taxable year of a Member, the sum of the
Federal Rate and the State Rate, with (a) the "Federal Rate" defined to mean the
highest effective federal income tax rate applicable to any individual for such
year and (b) the "State Rate" defined as the product of (i) the highest
effective state income tax rate applicable to an individual Member for such year
multiplied by (ii) a percentage equal to the difference between one hundred
percent (100%) and the Federal Rate.
"Taxable Income" and "Taxable Loss" mean, for any taxable year, the
taxable income or loss attributable to such Member's distributive share of
taxable income or loss of the Company, as determined for federal income tax
purposes; provided that in making such determination all separately stated items
of income, gain, loss and deduction (other than tax-exempt income) shall be
included; and provided further, that in calculating Taxable Income and Taxable
Loss, items of income, gain, loss and deduction attributable to the sale or
exchange of all or substantially all of the assets of the Company shall be
excluded from such calculation.
"Transfer" shall mean any sale, assignment, transfer, exchange,
charge, pledge, gift, hypothecation, conveyance or encumbrance (such meaning to
be equally applicable to verb forms of such term).
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
The following terms shall have the meanings set forth in the
indicated Sections hereof:
DEFINED TERM SECTION NUMBER
"Act" Preamble
"Capital Account" 5.02
"Certificate Register" 3.03(f)
"Company" Preamble
"Consolidated Group Securities" 3.04(a)
"Holdings" 5.03(a)
"Liquidating Trustee" 9.03
"Majority Member" 4.01(b)
"Membership Unit" 3.01
"Private Placement Legend" 3.03(c)
"Senior Executive Offices" 4.06
"Tax Distributions" 5.03
"Tax Matters Partner" 5.06
4
<PAGE>
ARTICLE II - ORGANIZATION AND POWERS
2.01 ORGANIZATION. The name of the Company is ACME Intermediate
Holdings, LLC. The Company has been formed by the filing of its Certificate with
the Delaware Secretary of State pursuant to the Act. The Certificate may be
restated or amended by the Members or the Majority Member, as applicable, from
time to time in accordance with the Act and subject to the terms of this
Agreement. The Company shall deliver a copy of the Certificate and any amendment
thereto to any Member who so requests.
2.02 PURPOSES AND POWERS. The principal business activity and
purposes of the Company shall initially be to acquire, develop, own and operate
television broadcast stations and to conduct any business related thereto or
useful in connection therewith. However, the business and purposes of the
Company shall not be limited to its initial principal business activity, and the
Company shall, subject to the terms of this Agreement, have authority to engage
in any other lawful business, purpose or activity permitted by the Act. Except
as otherwise provided in this Agreement, the Company, and the Members or the
Majority Member acting on behalf of the Company in accordance with this
Agreement, shall possess and may exercise all of the powers and privileges
granted by the Act or which may be exercised by any Person, together with any
powers incidental thereto, so far as such powers or privileges are necessary,
appropriate, proper, advisable, incidental or convenient to the conduct,
promotion or attainment of the business purposes or activities of the Company,
including without limitation the following powers:
(a) to conduct its business and operations in any state, territory
or possession of the United States or in any foreign country or jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own,
hold, improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and other
financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make and modify contracts, including contracts of insurance,
incur liabilities and give guaranties, whether or not such guaranties are in
furtherance of the business and purposes of the Company, including without
limitation, guaranties of obligations of other Persons who are interested in the
Company or in whom the Company has an interest;
5
<PAGE>
(e) to employ and terminate Officers, employees, agents and other
Persons, to organize committees of the Company, to delegate to such Persons
and/or committees such power and authority, the performance of such duties and
the execution of such instruments in the name of the Company, to fix the
compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to form and maintain subsidiaries and to merge with, or
consolidate into, another Delaware limited liability company or other business
entity (as defined in Section 18-209 of the Act); and
(g) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the Company, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the Company or any of
its assets.
2.03 PRINCIPAL PLACE OF BUSINESS. The principal office and place of
business of the Company shall initially be Suite 850, 650 Town Center Drive,
Costa Mesa, California 92626. The Members or the Majority Member, as applicable,
may change the principal office or place of business of the Company at any time
and may cause the Company to establish other offices or places of business in
various jurisdictions and appoint agents for service of process in such
jurisdictions.
2.04 QUALIFICATION IN OTHER JURISDICTIONS. The Members or the
Majority Member, as applicable, shall cause the Company to be qualified or
registered under applicable laws of any jurisdiction in which the Company
transacts business and shall be authorized to execute, deliver and file any
certificates and documents necessary to effect such qualification or
registration.
2.05 FISCAL YEAR. The fiscal year of the Company shall end on
December 31 of each year.
ARTICLE III - MEMBERS
3.01 MEMBERSHIP UNITS. The Members shall have no rights or powers in
respect of the Company (including, without limitation, any rights in respect of
allocations of profit and loss or distributions) other than the rights conferred
by this Agreement represented by issued and outstanding units of membership
interest (the "Membership Units"), which shall be deemed to be personal property
giving only the rights provided in this Agreement and which shall consist of one
class ("Common Units"), which shall have rights and privileges, including voting
rights as expressly set forth in this Agreement. Every Member by virtue of
having become a Member shall be held to have expressly assented and agreed to
the terms hereof and to have become a party hereto. Ownership of a
6
<PAGE>
Membership Unit shall not entitle a Member to any title in or to the whole or
any part of the property of the Company or right to call for a partition or
division of the same or for an accounting. The Initial Members of the Company,
their addresses, and the respective classes and denominations of Membership
Units held by them shall be as set forth on SCHEDULE A hereto, and said schedule
shall be amended from time to time by the Members or the Majority Member, as
applicable, in accordance with the terms hereof to reflect the withdrawal of
Members or the admission of additional Members pursuant to this Agreement.
The Company hereby authorizes for issuance 895,425 Common Units. As
of the date hereof, the Company shall have issued 823,791 Common Units to the
Initial Members as set forth on SCHEDULE A hereto.
3.02 ISSUANCE OF MEMBERSHIP UNITS; ADMISSION OF NEW MEMBERS.
(a) The Company is not authorized to offer and sell, or cause to be
offered and sold, additional Membership Units or to admit additional Persons as
Members except with the approval of the Members holding more than fifty percent
(50%) in interest of the Common Units.
(b) The Members or the Majority Member, as applicable, may establish
eligibility requirements for admission of a subscriber as a New Member after the
date hereof and may refuse to admit any subscriber that fails to satisfy such
eligibility requirements. The Members or the Majority Member, as applicable,
shall have the responsibility for determining whether a person or entity is
eligible for admission as a New Member. Each Person who first subscribes for a
Membership Unit in the Company after the date hereof shall be admitted as a New
Member of the Company at the time (i) such Person executes a Subscription
Agreement agreeing to be bound by the provisions hereof, (ii) the Members or the
Majority Member, as applicable, at their sole discretion, accept such
Subscription Agreement on behalf of the Company and (iii) the subscriber makes
the Capital Contribution(s) required pursuant to the terms of this Agreement and
its Subscription Agreement. None of the existing Members shall have any
preemptive or similar right to subscribe to the issuance of new Membership Units
in the Company, and each of the Members acknowledges that its membership
interest is subject to adjustment (downward and upward) in the event of the
admission of New Members to the Company pursuant hereto or the withdrawal of any
Member from the Company.
3.03 CERTIFICATED COMMON UNITS
(a) All Common Units at any time and from time to time
outstanding shall be evidenced by certificates in the form attached as EXHIBIT A
hereto (a "Unit Certificate") and shall bear the following legend: "These Common
Units are subject to repurchase pursuant to the terms and conditions of the
Membership Unitholders Agreement, dated September 30, 1997, by and among the
Company, ACME Television
7
<PAGE>
Holdings, LLC and CIBC Wood Gundy Securities Corp. and subject to the
restrictions which prohibit the transfer of Common Units pursuant to the terms
and conditions of the Amended and Restated Limited Liability Company Agreement,
dated September 24, 1997, by and among the Company and its Members." Each Member
by accepting a Unit Certificate representing Common Units or other indicia of
ownership thereof shall be deemed to have expressly assented and agreed to, and
shall be bound by, this Agreement and the terms and conditions of the Membership
Unitholders Agreement.
(b) REGISTRATION OF TRANSFERS OR EXCHANGES. When Unit
Certificates are presented to the Company with a request from the holder: (i) to
register the transfer of the certificates; or (ii) to exchange such certificates
for certificates of other denominations representing an aggregate equal number
of Common Units, the Company shall register the transfer or make the exchange as
requested if the requirements under this Agreement as set forth in this Section
3.03 and Section 6.01 for such transactions and transfers are met; provided,
however, that the certificates presented or surrendered by a holder for
registration of transfer or exchange: (i) shall be duly endorsed or accompanied
by a written instruction of transfer or exchange in form satisfaction to the
Company duly executed by such holder or by his attorney, duly authorized in
writing; and (ii) shall be accompanied by such certifications and opinions as
may be required by the Company pursuant to Section 6.01, and the following
additional information and documents, as applicable:
1. if such Common Units are being delivered to the
Company by a holder for registration in the name of such holder, without
transfer, a certification from such holder to that effect; or
2. if such Common Units are being transferred in
reliance on an exemption from the registration requirements of the Securities
Act, a certification from the transferor to that effect and an opinion of
counsel reasonably satisfactory to the Company, to the effect that such transfer
is in compliance with the Securities Act.
(c) Upon the registration of transfer, exchange or
replacement of Unit Certificates not bearing the legend set forth in the first
paragraph of ANNEX A attached hereto (the "Private Placement Legend"), the
Company shall deliver Unit Certificates that do not bear the Private Placement
Legend. Upon the registration of transfer, exchange or replacement of Unit
Certificates bearing the Private Placement Legend, the Company shall deliver
Unit Certificates that bear the Private Placement Legend unless, and the Company
is hereby authorized to deliver Unit Certificates without the Private Placement
Legend (except for any part of the legend that relates to contractual
restrictions and the restrictions set forth in the second paragraph of Section
3.03(b) above) if (i) there is delivered to the Company an opinion of counsel
reasonably satisfactory to the Company to the effect that neither such legend
nor the related restrictions on transfer set forth in such legend or Section
6.01 of this Agreement are required in order to maintain compliance with the
provisions of the Securities Act or (ii) the Common Units to be transferred or
exchanged
8
<PAGE>
represented by such Unit Certificates are being transferred or exchanged
pursuant to an effective registration statement under the Securities Act. Unit
Certificates shall also bear appropriate legends with respect to the
restrictions on transfer set forth in Section 6.01. Notwithstanding the
foregoing, the terms and conditions set forth in Section 6.01 of this Agreement
restrict the transfer of Membership Units.
(d) All Unit Certificates issued upon any registration,
transfer or exchange of Unit Certificates shall be entitled to the same benefits
under this Agreement as the Unit Certificates surrendered upon the registration
of transfer or exchange. Prior to due presentment for registration of transfer
of any Common Units, the Company may deem and treat the person in whose name any
Common Units are registered as the absolute owner of such Common Units, and the
Company shall not be required to recognize any equitable or other claim to or
interest in such certificate, or be affected by notice to the contrary.
(e) Other than following the applicable terms and
requirements of this Agreement, the Company shall have no additional duty to
monitor compliance with federal, state or other securities laws.
(f) The Company will keep at its offices a register (the
"Certificate Register"). Each Unit Certificate issued by the Company shall be
numbered and shall be registered in the Certificate Register as it is issued and
transferred, together with the name and address of the holder thereof.
(g) Any Transfer made in violation of this Agreement by a
Member of any of its Affiliates shall be deemed null and void and shall not be
recorded as a transfer upon the transfer books of the Company. Each Unit
Certificate held by a holder and each of its Affiliates shall contain a
conspicuous notation indicating that the transfer of the Common Units evidenced
thereby is subject to the terms and restrictions of this Agreement, and each of
the Members hereby consents to the placement of such legend on the certificate
or certificates representing the Common Units beneficially owned by such party.
(h) Subject to compliance with Sections 3.03 and 6.01 and the
terms and conditions of this Agreement, any Unit Certificate and all rights
hereunder are transferable in whole or in part, without charge to the Members,
upon surrender of such Unit Certificate in accordance with this Section 3.03, at
the office of the Company. Upon any partial transfer, the Company shall, at the
Member's expense, issue and deliver to the Member a new Unit Certificate of like
tenor, in the name of the Member, with respect to the Common Units which were
not so transferred.
9
<PAGE>
(i) On receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Unit Certificate and, in the case of any such loss, theft or destruction of any
Unit Certificate, on delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company or, in the case of any such mutilation, on
surrender of such Unit Certificate to the Company and cancellation thereof, the
Company, at the Member's expense, shall execute and deliver, in lieu thereof, a
new Unit Certificate of like tenor.
3.04 VOTING RIGHTS. Except as otherwise provided in this Agreement, no
Member or holder of a Membership Unit shall have the right to amend or terminate
this Agreement.
3.05 RESTRICTIONS. Notwithstanding anything in this Agreement to the
contrary, the following matters shall require the prior written consent of
holders of more than fifty percent (50%) in interest of the Common Units:
(a) the redemption, purchase or other acquisition for value (or
payment into or set aside for a sinking fund for such purpose) of any Membership
Unit, or other type of equity interest of the Company or any of its
Subsidiaries, or security convertible into or exchangeable or exercisable for
such Membership Units or equity interests (which are hereinafter reflected to as
"Consolidated Group Securities");
(b) the authorization or issuance (or the incurrence of any
obligation to authorize or issue) of any additional Membership Units or other
Consolidated Group Securities;
(c) the increase or decrease of the total number of authorized
Membership Units or other Consolidated Group Securities;
(d) the payment or declaration of any dividend or distribution
(other than Tax Distributions pursuant to Section 5.03) with respect to any
Membership Units or other Consolidated Group Securities;
(e) the authorization of any merger or consolidation of the Company
or any of its Subsidiaries with or into any other entity (except for mergers
among wholly-owned Subsidiaries);
(f) the authorization of the reorganization or sale of the Company
or any of its Subsidiaries or the sale of any material assets of the Company or
any of its Subsidiaries;
(g) the authorization of any reclassification or recapitalization
of the outstanding Membership Units of the Company or any other Consolidated
Group Securities;
10
<PAGE>
(h) engagement by the Company or any of its Subsidiaries in any
business other than the business now conducted or contemplated by the Company or
a business or businesses similar thereto or reasonably compatible therewith;
(i) the alteration, modification or amendment of this Agreement; or
(j) the application by the Company for or consent by it to the
appointment of a receiver, trustee, custodian or liquidator of it or any of its
property, (ii) the admission in writing by the Company of its inability to pay
its debts as they mature, (iii) the making by the Company of a general
assignment for the benefit of creditors, or (iv) the filing by the Company of a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with creditors, or any other action by the
Company to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation laws or statutes, or an answer
from the Company admitting the material allegations of a petition filed against
it in any proceeding under any such law.
3.06 LIMITATION ON LIABILITY OF MEMBERS. Except as otherwise
provided in the Act, no Member of the Company shall be obligated personally for
any debt, obligation or liability of the Company or of any other Member or
otherwise have any personal recourse hereunder, whether arising in contract,
tort or otherwise, solely by reason of being a Member. Except as expressly set
forth in this Agreement, no Member shall have any fiduciary or other duty to
another Member with respect to the business and affairs of the Company, and no
Member shall be liable to the Company or any other Member for acting in good
faith reliance upon the provisions of this Agreement. No Member shall have any
responsibility to restore any negative balance in its Capital Account or to
contribute to or in respect of the liabilities or obligations of the Company or
return distributions made by the Company except as required by this Agreement,
the Act or other applicable law; provided, however, that Members are responsible
for their failure to make required Capital Contributions in accordance with
Section 5.01.
3.07 AUTHORITY. Except as otherwise expressly provided herein, in
all matters relating to or arising out of the conduct or the operation of the
Company, the decision of the Members (acting by vote of holders of more than
fifty percent (50%) in interest of the Common Units) or the Majority Member, as
applicable, shall be the decision of the Company. The Company may employ one or
more Persons from time to time, and such Persons, in their capacity as Officers
or employees of the Company, may take part in the control and management of the
business of the Company to the extent such authority and power to act for or on
behalf of the Company has been delegated to them by the Members or the Majority
Member, as applicable.
3.08 WITHDRAWALS; TERMINATION. No Member shall have any right to
resign or withdraw from the Company without the consent of the Members or the
Majority Member, as applicable, or to receive any distribution on its Membership
Units or the repayment of its Capital Contributions except as provided in
Article V hereof.
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3.09 NO APPRAISAL RIGHTS. No Member shall have any right to have
its interest in the Company appraised and paid out under the circumstances
provided in Section 18-210 of the Act or any other circumstances.
3.10 COMPLIANCE WITH SECURITIES LAWS AND OTHER LAWS AND OBLIGATIONS.
Each Member hereby represents and warrants to the Company and acknowledges that
(a) it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the Company
and making an informed investment decision with respect thereto, (b) it is able
to bear the economic and financial risk of an investment in the Company for an
indefinite period of time and understands that it has no right to withdraw and
have its interest repurchased by the Company, (c) it is acquiring an interest in
the Company for investment only and not with a view to, or for resale in
connection with, any distribution to the public or public offering thereof, and
(d) it understands that the interests in the Company have not been registered
under the securities laws of any jurisdiction and cannot be disposed of unless
they are subsequently registered and/or qualified under applicable securities
laws or pursuant to valid exemptions from such registration/qualification
requirements and the provisions of this Agreement have been complied with.
3.11 MEMBER INSULATION.
(a) For so long as, and only during periods from time to time in
which the Company shall directly or indirectly hold (or otherwise be attributed
with) an ownership or other interest in a Media Enterprise that is "attributed"
to the Company under the FCC rules relating to the particular FCC service in
which the Media Enterprise operates, no provision of this Agreement shall be
construed to permit any Member (other than an Excluded Member), or any person or
entity that is a director, officer, partner, employee, or 5% or greater
shareholder or other owner of a Member (an "INSULATED MEMBER AFFILIATE"), to do
any of the following:
(i) act as an employee of the Company if such Members or
Member Affiliate's functions, directly or indirectly,
relate to such Media Enterprise;
(ii) serve, in any material capacity, as an independent
contractor or agent of the Company with respect to such
Media Enterprise;
(iii) communicate with the Media Enterprise on matters
pertaining to the day-to-day operations of such
Media Enterprise;
(iv) vote to admit any additional Member to the Company;
(v) vote to amend or modify this section of the LLC Agreement;
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(vi) perform any services for the Company materially
relating to such Media Enterprise, with the exception of
making loans to, or acting as a surety for, such Media
Enterprise or the Company; or
(vii) become actively involved in the management or operation
of such Media Enterprise.
(b) Notwithstanding any other provision of this LLC Agreement to the
contrary, a Member that would otherwise be subject to the restrictions set forth
in Section 3.11(a) may elect to the treated as an Excluded Member for purposes
of this Section 3.11 by giving notice thereof in writing to the other Members.
For purposes of this Section 3.11, (i) "Media Enterprise" shall mean
any Person that, directly or indirectly, owns, controls, or operates a broadcast
radio or television station, cable or wireless cable television system, daily
newspaper or any communications facility operated pursuant to a license granted
by the FCC, and (ii) "Excluded Member" shall mean any Member that is an
Affiliate of the Majority Member.
ARTICLE IV - MANAGEMENT
4.01 MANAGEMENT.
(a) Except as provided in Section 4.01(b) hereof, the Company shall
be managed by the Members. No action may be taken by any Member to bind the
Company without the prior consent of Members holding more than fifty percent
(50%) in interest of the Common Units.
(b) If any Member shall own more than fifty percent (50%) in
interest of the Common Units of the Company (the "Majority Member"), management
and control of the business of the Company shall be vested exclusively in the
Majority Member for so long as such Member holds more than fifty percent (50%)
in interest of the Common Units, and such Majority Member shall have exclusive
power and authority, in the name of and on behalf of the Company, to perform all
acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the Company.
The Majority Member shall, subject to all applicable provisions of
this Agreement, be authorized in the name and on behalf of the Company: (i) to
enter into, execute, amend, supplement, acknowledge and deliver any and all
contracts, agreements, leases or other instruments for the operation of the
Company's business; and (ii) in general to do all things and execute all
documents determined by it to be necessary or appropriate to conduct the
business of the Company as more fully set forth in Section 2.02 hereof or as
provided by law, or to protect and preserve the Company's assets. The Majority
Member may delegate any or all of the foregoing powers. The Majority Member is
an agent of the
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Company for the purpose of the Company's business. Any action taken by the
Majority Member, and the signature of the Majority Member on any agreement,
contract, instrument or other document on behalf of the Company, shall be
sufficient to bind the Company and shall conclusively evidence the authority of
the Majority Member and the Company with respect thereto.
(c) The Members acting pursuant to Section 4.01(a) or the Majority
Member, as applicable, shall be the "manager" (within the meaning of the Act) of
the Company, and each shall have the benefits and protections accorded
"managers" under the Act. The Members acting pursuant to Section 4.01(a) or the
Majority Member shall devote such time to the business and affairs of the
Company as is reasonably necessary for the performance of their duties, but
shall not be required to devote full time to the performance of such duties and
may delegate their responsibilities as provided in this Agreement. The Majority
Member shall not be personally liable to the Company or to its other Members for
breach of any duty that does not involve: (i) a breach of the duty of loyalty to
the Company or its other Members; (ii) an act or omission not in good faith or
which involves intentional misconduct or a knowing violation of law; or (iii) a
transaction from which the Majority Member derived an improper personal benefit.
4.02 RELIANCE BY THIRD PARTIES. Any person dealing with the Company
or any Member may rely upon a certificate signed by the Majority Member or any
Officer as to (i) the identity of any other Member; (ii) any factual matters
relevant to the affairs of the Company; (iii) the persons who are authorized to
execute and deliver any document on behalf of the Company; or (iv) any action
taken or omitted by the Company, or any Member.
4.03 OFFICERS. The Members or the Majority Member, as applicable,
may designate employees of the Company as officers of the Company (the
"Officers") as they deem necessary or desirable to carry on the business of the
Company and the Members or the Majority Member, as applicable, may delegate to
such Officers such power and authority as the Members or the Majority Member, as
applicable, deem advisable. Any Officer may hold two or more offices of the
Company. The initial Officers of the Company shall be Jamie Kellner (Chairman
and Chief Executive Officer), Douglas Gealy (President and Chief Operating
Officer) and Thomas Allen (Executive Vice President and Chief Financial
Officer). New offices may be created and filled by the Members or the Majority
Member, as applicable. Each Officer shall hold office until his or her successor
is designated by the Members or the Majority Member, as applicable, or until his
or her earlier death, resignation or removal. Any Officer may resign at any time
upon written notice to the Members or the Majority Member, as applicable. Any
Officer may be removed by the Members or the Majority Member, as applicable,
(acting by majority vote of the Members or the Majority Member, as applicable,
other than the Officer being considered for removal, as applicable) with or
without cause at any time. A vacancy in any office occurring because of death,
resignation, removal or otherwise, may, but need not, be
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filled by the Members or the Majority Member, as applicable. The Officers are
not "managers" (within the meaning of the Act) of the Company.
ARTICLE V - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND ALLOCATIONS
AND DISTRIBUTIONS
5.01 CAPITAL CONTRIBUTIONS. The Initial Members have made as of the
date hereof the Capital Contribution to the Company specified on SCHEDULE A
attached hereto. Each New Member shall make the Capital Contribution to the
Company specified in such Member's Subscription Agreement as of the date of
admission of such New Member as a Member of the Company. Except as approved by
the Members or the Majority Member, as applicable, or as set forth on SCHEDULE A
or in a Member's Subscription Agreement, no Member shall be entitled or required
to make any Capital Contribution or loan or advance to the Company; PROVIDED,
HOWEVER, that the Company may, subject to the other terms of this Agreement,
borrow from its Members as well as from banks or other lending institutions to
finance its working capital or the acquisition of assets upon such terms and
conditions as shall be approved by the Members or the Majority Member, as
applicable, and any such loans by Members shall not be considered Capital
Contributions or reflected in their Capital Accounts. The agreed value of all
non-cash Capital Contributions made by Members shall be set forth on SCHEDULE A
or in such Member's Subscription Agreement. No Member shall be entitled to any
interest or compensation with respect to its Capital Contributions or any
services rendered on behalf of the Company except as specifically provided in
this Agreement. No Member shall have any liability for the repayment of the
Capital Contributions of any other Member and shall look only to the assets to
the Company for return of its Capital Contributions.
5.02 CAPITAL ACCOUNTS AND ALLOCATIONS.
(a) CAPITAL ACCOUNTS. A separate capital account (a "Capital
Account") shall be established and maintained for each Member, which shall
initially be equal to the Capital Contribution of such Member as set forth on
SCHEDULE A hereto. Such Capital Accounts shall be maintained in accordance with
Section 1.704-1(b)(2)(iv) of the Treasury Regulations, and this Section 5.02
shall be interpreted and applied in a manner consistent with said Section of the
Treasury Regulations. The Capital Accounts shall be maintained for the sole
purpose of allocating items of income, gain, loss and deduction among the
Members and shall have no effect on the amount of any distributions to any
Members in liquidation or otherwise. The amount of all distributions to Members
shall be determined pursuant to Sections 5.03, 5.04 and 5.05.
(b) ALLOCATION OF PROFITS AND LOSSES. All items of income, gain,
loss and deduction as determined for book purposes shall be allocated among the
Members and credited or debited to their respective Capital Accounts in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), so as to ensure
to the maximum extent possible
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(i) that such allocations satisfy the economic effect equivalence test of
Treasury Regulations Section 1.704-1(b)(2)(ii)(i) (as provided hereinafter) and
(ii) that all allocations of items that cannot have economic effect (including
credits and nonrecourse deductions) are allocated to the Members in proportion
to their membership interests unless otherwise required by Code Section 704(b)
and the Treasury Regulations promulgated thereunder. To the extent possible,
items that can have economic effect shall be allocated in such a manner that the
balance of each Member's Capital Account at the end of any fiscal year
(increased by such Member's "share of partnership minimum gain" as defined in
Treasury Regulations Section 1.704-2) would be positive to the extent of the
amount of cash that such Member would receive (or would be negative to the
extent of the amount of cash that such Member should be required to contribute
to the Company) if the Company sold all of its property for an amount of cash
equal to the book value (as determined pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)) of such property (reduced, but not below zero, by the amount
of nonrecourse debt to which such property is subject) and all of the cash of
the Company remaining after payment of all liabilities (other than nonrecourse
liabilities) of the Company were distributed in liquidation immediately
following the end of such fiscal year in accordance with Section 5.03. Except to
the extent otherwise required by the Code, the "traditional method" provided for
in Treasury Regulations Section 1.704-3(b) shall apply to all tax allocations
governed by Code Section 704(c) and all "reverse Section 704(c) allocations."
(c) OTHER ALLOCATIONS. The Members or the Majority Member, as
applicable, may adjust the Capital Accounts of its Members to reflect
reevaluations of the Company property whenever the adjustment would be permitted
under Treasury Regulations Section 1.704-1(b)(2)(iv)(f). In the event that the
Capital Accounts of the Members are so adjusted, (i) the Capital Accounts of the
Members shall be adjusted in accordance with Treasury Regulations Section
1.704l(b)(2)(iv)(g) for allocations of depreciation, depletion, amortization and
gain or loss, as computed for book purposes, with respect to such property and
(ii) the Members' distributive shares of depreciation, depletion, amortization
and gain or loss, as computed for tax purposes, with respect to such property
shall be determined so as to take account of the variation between the adjusted
tax basis and book value of such property in the same manner as under Section
704(c) of the Code. In the event that Code Section 704(c) applies to Company
property, the Capital Accounts of the Members shall be adjusted in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for allocations of
depreciation, depletion, amortization and gain and loss, as computed for book
purposes, with respect to such property. In applying clause (ii) of the second
preceding sentence and all of the preceding sentence, the provisions of Code
Section 704(b) shall apply.
5.03 DISTRIBUTIONS. Subject to (i) the terms of the Act, (ii) any
agreements of the Company or any of its Affiliates has with respect to
indebtedness for money borrowed to which the Company may from time to time be
subject, and (iii) except in the case of distributions pursuant to subsection
(a) below, the prior written consent of holders of a
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majority in interest of the Common Units, all funds of the Company which are
available for distribution (as determined by the Members or the Majority Member,
as applicable, in their discretion) shall be distributed as follows:
(a) FIRST, within one hundred and twenty (120) days after the end of
each taxable year during which ACME Television Holdings, LLC ("Holdings") shall
have any direct or indirect ownership interest in the Company, there shall be
distributed to each Member an amount equal to the product of (i) the Tax Rate
and (ii) the difference between (x) the amount of such Member's Taxable Income
with respect to such taxable year and (y) the cumulative amount of such Member's
Taxable Loss, if any, from all prior taxable years, but only to the extent such
Taxable Loss on a cumulative basis exceeds Taxable Income for all prior taxable
years on a cumulative basis (the "Tax Distributions"); PROVIDED HOWEVER, that
such distribution shall in all events be sufficient to allow Holdings to make
the distributions required under Section 5.03(a) of the Limited Liability
Company Agreement of Holdings; and
(b) SECOND, pro rata to all Members in accordance with their
respective Distribution Percentages.
5.04 DISTRIBUTIONS UPON DISSOLUTION. Proceeds from a sale of all or
substantially all of the assets of the Company and amounts available upon
dissolution, after payment of, or adequate provision for, the debts and
obligations of the Company, including the expenses of its liquidation and
dissolution, shall be distributed and applied in the following priorities:
(a) FIRST, to fund reserves as deemed reasonably necessary by the
Members or the Majority Member, as applicable, or the Liquidating Trustee for
any contingent, conditional or unmatured liabilities or other obligations of the
Company, which such reserves (i) may be paid to a bank (or other third-party),
to be held in escrow for the purpose of paying any such contingent, conditional
or unmatured liabilities or other obligations, and (ii) shall at the expiration
of such period(s) as the Members or the Majority Member, as applicable, or
Liquidating Trustee may reasonably deem advisable, shall be distributed to the
Members in accordance with Section 5.03; and
(b) SECOND, in accordance with Section 5.03.
If any assets of the Company are to be distributed in kind in
connection with such liquidation, such assets shall be distributed on the basis
of their fair market value net of any liabilities encumbering such assets and,
to the greatest extent possible, shall be distributed pro-rata in accordance
with the total amounts to be distributed to each Member.
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5.05 DISTRIBUTION UPON WITHDRAWAL. No Member shall be entitled to
any distribution or payment with respect to its Membership Units upon the
resignation or withdrawal of such Member.
5.06 TAX MATTERS PARTNER. ACME Television Holdings, LLC is hereby
designated as the initial "Tax Matters Partner" of the Company for purposes of
Section 6231(a)(7) of the Code, and such Tax Matters Partner shall have the
power to manage and control, on behalf of the Company, any administrative
proceeding at the Company level with the Internal Revenue Service relating to
the determination of any item of Company income, gain, loss, deduction or credit
for federal income tax purposes. The Members or the Majority Member, as
applicable, may at any time hereafter designate a new Tax Matters Partner;
PROVIDED, HOWEVER, that only a Member may be designated as the Tax Matters
Partner of the Company.
(a) PARTNERSHIP STATUS. The Company will elect to be treated as a
partnership for purposes of federal and state income tax, and each Member
covenants that it will make no election, declaration or statement on or in any
tax return, tax filing, or any book or record maintained by it which is
inconsistent with or detrimental to the Company's ongoing maintenance of
partnership tax status.
(b) INCOME TAX COMPLIANCE. The Tax Matters Partner shall prepare or
cause to be prepared and filed on behalf of the Company, when and as required by
applicable law, all federal, state and local income tax information returns or
requests for extensions thereof. Not less than thirty (30) days prior to the due
date (including extensions) for any return (but not later than August 15 of each
year), the Tax Matters Partner shall submit to each Member a copy of the return
as proposed for review and a schedule showing the Member's allocable share of
the Company's tax attributes ("Tax Attributes") sufficient to allow such Member
to include such Tax Attributes in its federal income tax return. Each Member
shall provide to the Tax Matters Partner, when and as requested, all information
concerning the affairs of such Member as may be reasonably required to permit
the filing of such returns.
(c) TAX ELECTIONS. The Tax Matters Partner shall make the following
tax elections on behalf of the Company:
(i) Unless required to adopt a different taxable year pursuant to
Section 706(b) of the Code, adopt the calendar year as the annual accounting
period;
(ii) Adopt the accrual method of accounting;
(iii) Deduct interest expense and taxes attributable to the
construction or installation of real and personal property improvements to the
fullest extent permitted by the Code;
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(iv) Compute the allowance for depreciation under the most
accelerated tax depreciation method and using the shortest life and lowest
salvage value authorized by applicable law, consistent with the election
provided for in the following clause, with respect to all depreciable assets;
(v) If allowed by the Code, and to the maximum extent
allowable, elect to take available investment tax credit on the full basis of
each asset; and
(vi) Make such other elections as the Tax Matters Partner shall
have been directed in writing by the Members or the Majority Member, as
applicable, to make. The requirement to make any of the elections set forth
above is predicated upon the assumption that current federal income tax law will
continue in force. If any legislative change is made in the Code or any other
tax statutes or by the IRS in regulations and other pronouncements or by the
courts in case law affecting any of such elections so as to materially alter the
economic result of the required election, the Tax Matters Partner shall make
such election in respect of the item so affected as directed by the Members or
the Majority Member, as applicable; provided, however, that such election shall
be made in a manner consistent with the best interests of the Members as a
group.
(d) CODE SECTION 754 ELECTION. In connection with any transfer or
assignment of any Membership Units, or any distribution with respect to which a
Member recognizes gain under Code section 731(a), the Members or the Majority
Member, as applicable, shall, upon the written request of any Member, cause the
Company to file an election under Code section 754 and the Treasury Regulations
thereunder to adjust the basis of the Company assets under Code Section 734(b)
or 743(b) and a corresponding election under the applicable sections of state
and local law.
ARTICLE VI - TRANSFERS OF INTERESTS
6.01 RESTRICTIONS ON TRANSFERS. Other than the Transfer of
Membership Units held by ACME Subsidiary Holdings IV, LLC ("Holdings IV") in
exchange for Preferred Units of Holdings IV in accordance with the Limited
Liability Company Agreement of Holdings IV, no Membership Units of the Company
may be Transferred, nor may any Member offer to Transfer, and no Transfer by a
Member shall be binding upon the Company or any Member unless such Transfer
complies with the provisions of this Article VI and the Company receives an
executed copy of the documents effecting such Transfer.
No Transfer shall be permitted if such Transfer would (i) violate
the registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the Company to become subject to regulation
as an "investment company" under the Investment Company Act, and the rules and
regulations promulgated thereunder, (iii) result in the termination of any
material contract to which the Company is a party and which is material, or (iv)
result in the treatment of the Company as an association taxable as a
corporation or as a "publicly traded partnership" for federal income tax
purposes. The Company may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel.
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These restrictions on Transfer of the Membership Units will cease to
be in effect upon the effectiveness of a registration statement under the
Securities Act with respect to the Membership Units pursuant to the terms and
conditions of the Membership Unitholders Agreement, dated September 30, 1997,
among the Company, Holdings and CIBC Wood Gundy Securities Corp.
(the "Membership Unitholders Agreement").
6.02 SUBSTITUTE MEMBERS. If a Transferee of Membership Units does
not become (and until any such Transferee becomes) a substitute Member in
accordance with the provisions of Section 6.01 hereof, such Person shall not be
entitled to exercise or receive any of the rights, powers or benefits of a
Member other than the right to receive distributions which the assigning Member
has Transferred to such Person. The Company shall admit as a substitute Member
any Person that acquires Membership Units by Transfer from any Member pursuant
to Section 6.01 hereof, but only upon the receipt of an executed instrument
satisfactory to the Company whereby such assignee becomes a party to this
Agreement as a Member.
6.03 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND ASSIGNEE. Upon
the Transfer of Membership Units pursuant to this Article and unless the
assignor and assignee otherwise agree and so direct the Company in a written
statement signed by both the assignor and assignee (a) distributions pursuant to
Article V shall be made to the Person owning such Membership Units at the date
of distribution and (b) the assignee shall succeed to a pro-rata (based on the
percentage of such assignor's Membership Units Transferred) portion of the
assignor's Capital Account with respect to such Membership Units.
Any Membership Units Transferred shall remain subject to the
provisions of this Agreement and the transferee shall have entered into an
enforceable written agreement providing that all Membership Units so Transferred
shall continue to be subject to all provisions of this Agreement as if such
Membership Units were still held by the transferring Member, and provided
further that such permitted transferee shall not be permitted to make any
further Transfer without complying with the provisions of this Agreement.
Anything to the contrary in this Agreement notwithstanding, transferees
permitted hereunder shall take any Membership Units so Transferred subject to
all obligations under this Agreement as if such Membership Units were still held
by the transferring Member whether or not they so expressly agree.
ARTICLE VII - INDEMNIFICATION
7.01 RIGHT TO INDEMNIFICATION. Except as limited by law and subject
to the provisions of this Article, the Company shall indemnify each Indemnified
Party from and against any and all Losses in any way related to or arising out
of this Agreement, the business of the Company or the action or inaction of such
Person hereunder (including, without limitation, the actions or inactions of the
Members and the other Indemnified
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Parties pursuant to Article IX hereof upon dissolution of the Company), which
may be imposed on, incurred by or asserted at any time against any such
Indemnified Party, except that no indemnification shall be provided for any
Indemnified Party regarding any matter as to which it shall be finally
determined that such Indemnified Party did not act in good faith and in the
reasonable belief that its action was in the best interests of the Company, or
with respect to a criminal matter, that it had reasonable cause to believe that
its conduct was unlawful. Subject to the foregoing limitations, such
indemnification may be provided by the Company with respect to Losses in
connection with which it is claimed that such Indemnified Party received an
improper personal benefit by reason of its position, regardless of whether the
claim arises out of the Indemnified Party's service in such capacity, except for
matters as to which it is finally determined that an improper personal benefit
was received by such Indemnified Party. The indemnification contained in this
Article VII shall survive termination of this Agreement.
7.02 AWARD OF INDEMNIFICATION. The determination of whether the
Company is authorized to indemnify any Indemnified Party hereunder and any award
of indemnification shall be made in each. instance by the Members; provided,
however, that as to any matter disposed of by a compromise payment, pursuant to
a consent decree or otherwise, no indemnification, either for said payment or
for any other Losses, shall be provided unless there has been obtained an
opinion in writing of legal counsel to the effect that the Person subject to
indemnification hereunder appears to have acted in good faith and that such
indemnification would not protect such Person against any liability to the
Company or the Members to which he, she or it would otherwise be subject by
reason of gross negligence, willful malfeasance or fraud in the conduct of his,
her or its office or actions not taken in good faith by such Person. The Company
shall be obliged to pay indemnification applied for by any Indemnified Party
unless there is an adverse determination (as provided above) within forty-five
(45) days after the application. If indemnification is denied, the applicant may
seek an independent determination of its right to indemnification by a court,
and in such event, the Company shall have the burden of proving that the
applicant was ineligible for indemnification under this Article. Notwithstanding
the foregoing, in the case of a proceeding by or in the right of the Company
which an Indemnified Party is adjudged liable to the Company, indemnification
hereunder shall be provided only upon a determination by a court having
jurisdiction that in view of all the circumstances of the case, the Indemnified
Party is fairly and reasonably entitled to indemnification for such Losses as
the court shall deem proper.
7.03 SUCCESSFUL DEFENSE. Notwithstanding any contrary provisions of
this Article, if any Indemnified Party has been wholly successful on the merits
in the defense of any action, suit or proceeding in which it was involved by
reason of its position with the Company or as a result of serving in such
capacity (including termination of investigative or other proceedings without a
finding of fault on the part of such Indemnified Party), such Indemnified Party
shall be indemnified by the Company against all Losses incurred by such
Indemnified Party in connection therewith.
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7.04 ADVANCE PAYMENTS. Except as limited by law, Losses incurred by
an Indemnified Party in defending any action, suit or proceeding, including a
proceeding by or in the right of the Company, shall be paid by the Company to
such Indemnified Party in advance of final disposition of the proceeding upon
receipt of its written undertaking to repay such amount if such Indemnified
Party is determined pursuant to this Article VII or adjudicated to be ineligible
for indemnification, which undertaking shall be an unlimited general obligation
but need not be secured and may be accepted without regard to the financial
ability of such Indemnified Party to make repayment; provided, however, that no
such advance payment of issues shall be made if it is determined pursuant to
Section 7.02 of this Article on the basis of the circumstances known at the time
(without further investigation) that such Indemnified Party is ineligible for
indemnification.
7.05 INSURANCE. The Company shall have power to purchase and
maintain insurance on behalf of any Indemnified Party against any liability or
cost incurred by such Person in any such capacity or arising out of its status
as such, whether or not the Company would have power to indemnify against such
liability or cost.
7.06 HEIRS AND PERSONAL REPRESENTATIVES. The indemnification
provided by this Article shall inure to the benefit of the heirs and personal
representatives of the Indemnified Parties.
7.07 NON-EXCLUSIVITY. The provisions of this Article shall not be
construed to limit the power of the Company to indemnify the Members, Officers,
employees or agents to the fullest extent permitted by law or to enter into
specific agreements, commitments or arrangements for indemnification permitted
by law. The absence of any express provision for indemnification herein shall
not limit any right of indemnification existing independently of this Article.
7.08 AMENDMENT. The provisions of this Article may be amended or
repealed in accordance with Section 10.05; PROVIDED, HOWEVER, that no amendment
or repeal of such provisions that adversely affects the rights of the Members
under this Article with respect to acts or omissions occurring at any time prior
to such amendment or repeal, shall apply to any Member without such Member's
consent.
ARTICLE VIII - CONFLICTS OF INTEREST
8.01 TRANSACTIONS WITH INTERESTED PERSONS; CONFLICTS.
(a) Unless entered into in bad faith, no contract or transaction
between the Company and one or more of its Members or any other Indemnified
Party, or between the Company and any other Person in which one or more of its
Members or any other Indemnified Party has a financial interest or is a
director, manager or officer, shall be voidable solely for this reason if such
contract or transaction is fair and reasonable to the
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Company; and no Member or other Indemnified Party interested in such contract or
transaction, because of such interest, shall be liable to the Company or to any
other Person or organization for any loss or expense incurred by reason of such
contract or transaction or shall be accountable for any gain or profit realized
from such contract or transaction.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Company, its Members and/or
the other Indemnified Parties or (ii) whenever this Agreement provides that any
such Person shall act in a manner that is, or provide terms that are, fair and
reasonable to the Company or any Member, such Person shall resolve such conflict
of interest, taking such action or providing such terms, considering in each
case the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or acceptable industry practices, and
any applicable generally acceptable accounting practices or principles. In the
absence of bad faith by the Member or other Indemnified Party, as the case may
be, the resolution, action or term so made, taken or provided by such Person
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of such Person at law or in
equity or otherwise.
8.02 BUSINESS OPPORTUNITIES. Members may engage in or possess an
interest in other business ventures of any nature, and neither the Company nor
any other Member shall have any rights by virtue of this Agreement in or to any
such venture or the income or profits derived therefrom, and the pursuit of any
such venture, even if competitive with the activities of the Company, shall not
be deemed improper or wrongful. No Member shall be obligated to present any
particular investment or business opportunity to the Company even if such
opportunity is of a nature which could be taken by the Company.
ARTICLE IX - DISSOLUTION, LIQUIDATION, AND TERMINATION
9.01 NO DISSOLUTION. The Company shall not be dissolved by the
admission of additional Members, the withdrawal of a Member or the written
consent of all Members, but shall continue to exist in perpetuity, except in
accordance with the terms of this Agreement. Upon the death, retirement,
resignation, expulsion, Bankruptcy or dissolution of any Member the Company
shall not dissolve and its affairs shall not be wound up except as set forth in
Section 9.02 below.
9.02 EVENTS CAUSING DISSOLUTION. The Company shall be dissolved and
its affairs wound up upon the occurrence of any of the following events:
(a) if a Majority Member shall be acting as a Manager under Section
6.02 hereof, the Bankruptcy, dissolution, death, retirement, or resignation of
the Majority Member; unless the Company is continued upon the written consent of
a majority of the
23
<PAGE>
remaining Members, such consent to be given within ninety (90) days following
the occurrence of such event;
(b) if there shall be no Majority Member acting as a Manager under
Section 6.02 hereof, the Bankruptcy, dissolution, death, retirement, or
resignation of any Member; unless the Company is continued upon the written
consent of a majority of the remaining Members, such consent to be given within
ninety (90) days following the occurrence of such event;
(c) the entry of a decree of judicial dissolution under Section
18-802 of the Act.
9.03 NOTICE OF DISSOLUTION. Upon the dissolution of the Company, the
Member or the other Person or Persons (the "Liquidating Trustee") appointed by
the Members or the Majority Member, as applicable, to carry out the winding up
of the Company, shall promptly notify the Members of such dissolution.
9.04 LIQUIDATION. Upon dissolution of the Company, the Liquidating
Trustee shall proceed diligently to liquidate the Company and wind up its
affairs and to make final distributions as provided in Section 5.04 hereof and
in the Act. The costs of dissolution and liquidation shall be borne as an
expense of the Company. Until final distribution, the Liquidating Trustee shall
continue to operate the Company properties with all of the power and authority
of the Members or the Majority Member, as applicable. As promptly as possible
after dissolution and again after final liquidation, the Liquidating Trustee
shall cause an accounting to be made by a firm of independent public accountants
of the Company's assets, liabilities and operations.
9.05 CERTIFICATE OF CANCELLATION. On completion of the distribution
of Company assets as provided herein, the Company shall be terminated, and the
Members or the Majority Member, as applicable, (or such other Person or Persons
as the Act may require or permit) shall file a Certificate of Cancellation with
the Secretary of State of the State of Delaware under the Act, cancel any other
filings made pursuant to Sections 2.01, 2.02 and 2.04, and take such other
actions as may be necessary to terminate the existence of the Company.
ARTICLE X - GENERAL PROVISIONS
10.01 OFFSET. Whenever the Company is to pay any sum to any Member,
any amounts that Member owes the Company may be deducted from that sum before
payment. All amounts so deducted shall nevertheless be treated as distributions
for purposes of Sections 5.03, 5.04 and 5.05 hereof.
24
<PAGE>
10.02 NOTICES. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or permitted to be
given under this Agreement must be in writing and shall be given either by
registered or certified mail, addressed to the recipient, with return receipt
requested, or by delivering the writing to the recipient in Person, by courier,
or by facsimile transmission; and a notice, request, or consent given under this
Agreement is effective upon receipt or three days after the date mailed,
whichever is sooner. All notices, requests, and consents to be given to a Member
must be sent to or delivered at the addresses given for that Member on SCHEDULE
A, or such other address as that Member may specify by written notice to the
other Members and the Company. Any notice, request, or consent to be given to
the Company must be given to the Members or the Majority Member, as applicable,
at the address of the principal office of Company specified in Section 2.03.
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
10.03 ENTIRE AGREEMENT. This Agreement, together with each Member's
Subscription Agreement, constitutes the entire agreement of the Members relating
to the Company and supersedes all prior contracts or agreements with respect to
the Company, whether oral or written.
10.04 AMENDMENT OR MODIFICATION; TERMS. This Agreement, including
any Schedule hereto, may be amended from time to time, in whole or in part, by
an instrument in writing signed in accordance with Section 3.04 hereof. Copies
of each such amendment shall be delivered to each Member at least thirty (30)
days prior to the effective date of such amendment; PROVIDED, HOWEVER, in the
case of any amendment that the Members or the Majority Member, as applicable,
determines is necessary or appropriate to prevent the Company from being treated
as a publicly traded partnership taxed as a corporation under section 7704 of
the Code, the amendment shall be effective on the date provided in the
instrument containing the terms of such amendment. Nothing contained in this
Agreement shall permit the amendment of this Agreement to impair the exemption
from personal liability of the officers, employees and agents of the Company or
Members or to permit assessments upon the Members.
10.05 BINDING EFFECT. Subject to the restrictions on Transfers set
forth in this Agreement, this Agreement is binding on and inures to the benefit
of the parties and their respective heirs, legal representatives, successors and
assigns.
10.06 GOVERNING LAW; SEVERABILITY. This Agreement is governed by and
shall be construed in accordance with the law of the State of Delaware,
exclusive of its conflict-of-laws principles. In the event of a direct conflict
between the provisions of this Agreement and any provision of the Certificate,
or any mandatory provision of the Act, the applicable provision of the
Certificate or the Act shall control. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
25
<PAGE>
unenforceable to any extent, the remainder of this Agreement and the application
of that provision shall be enforced to the fullest extent permitted by law.
10.07 FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions, as requested by the Members or the Majority
Member, as applicable.
10.08 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives any
right it may have to maintain any action for dissolution of the Company or for
partition of the property of the Company.
10.09 THIRD-PARTY BENEFICIARIES. Except with respect to the Lenders,
who are expressly intended to be third-party beneficiaries of this Agreement,
there shall be no third-party beneficiaries of this Agreement.
10.10 FAILURE TO PURSUE REMEDIES. The failure of any party to seek
redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of any original
violation.
10.11 CUMULATIVE REMEDIES. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other right the parties may
have by law, statute, ordinance or otherwise.
10.12 NOTICE TO MEMBERS OF PROVISIONS OF THIS AGREEMENT. By
executing this Agreement, each Member acknowledges that such Member has actual
notice of (a) all of the provisions of this Agreement, including, without
limitation, the restrictions on the Transfer of Membership Units set forth in
Articles III and VI, and (b) all of the provisions of the Certificate. Each
Member hereby agrees that this Agreement constitutes adequate notice of all such
provisions, and each Member hereby waives any requirement that any further
notice thereunder be given.
10.13 INTERPRETATION. For the purposes of this Agreement, terms not
defined in this Agreement shall be defined as provided in the Act; and all
nouns, pronouns and verbs used in this Agreement shall be construed as
masculine, feminine, neuter, singular, or plural, whichever shall be applicable.
Titles or captions of Articles and Sections contained in this Agreement are
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement or the intent of any
provision hereof.
26
<PAGE>
10.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document, and all counterparts shall be construed together and shall constitute
the same instrument.
[END OF TEXT]
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed this Agreement under
seal as of the date set forth above.
ACME INTERMEDIATE HOLDINGS, LLC
By /s/Douglas E. Gealy
--------------------------------
Name: Douglas E. Gealy
Title: President and Chief Operating
Officer
ACME TELEVISION HOLDINGS, LLC
By /s/Douglas E. Gealy
--------------------------------
Name: Douglas E. Gealy
Title: President and Chief Operating
Officer
ACME SUBSIDIARY HOLDINGS, LLC
By /s/Douglas E. Gealy
--------------------------------
Name: Douglas E. Gealy
Title: President and Chief Operating
Officer
ACME SUBSIDIARY HOLDINGS IV, LLC
By /s/Douglas E. Gealy
--------------------------------
Name: Douglas E. Gealy
Title: President and Chief Operating
Officer
27
<PAGE>
ACME INTERMEDIATE HOLDINGS, LLC
<TABLE>
Schedule A
<S> <C> <C>
MEMBER NO. OF UNITS CAPITAL CONTRIBUTION
ACME Television Holdings, LLC 819,313.875 $55,090,496.82
ACME Subsidiary Holdings, LLC 4,477.125 $ 309,503.18
ACME Subsidiary Holdings IV, LLC 18,132.0 $ 1,101,093.75
</TABLE>
<PAGE>
EXHIBIT A
[FORM OF COMMON UNIT]
[APPLICABLE LEGENDS]
Certificate No. ____ Number of Common Units: _________
Certificate Evidencing Common Units
of
ACME Intermediate Holdings, LLC
ACME Intermediate Holdings, LLC, a limited liability company formed under
the laws of the State of Delaware (the "Company"), hereby certifies that
[HOLDER] (the "Holder") is the registered owner of [ __________________] Common
Units. The designation, rights, privileges, restrictions and preferences and
other terms and provisions of the Common Units represented hereby are set forth
in all respects in the Amended and Restated Limited Liability Company Agreement
of the Company, dated as of September 24, 1997 (as the same may be amended,
supplemented or modified in accordance with its terms, the "LLC Agreement").
Capitalized terms used herein but not defined shall have the meaning given them
in the LLC Agreement. The Company will provide a copy of the LLC Agreement to
the Holder without charge upon written request to the Company at its principal
place of business.
Upon receipt of this certificate, the Holder shall be admitted to the
Company as a Member and shall be bound by the LLC Agreement and shall be
entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Company has executed this certificate this ___ day
of -------.
ACME Intermediate Holdings, LLC
By: _______________________________
Name:
Title: Manager
<PAGE>
ANNEX A
FORM OF PRIVATE PLACEMENT LEGEND
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERRED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO REGULATION S,
(2) AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO
A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALE TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, (E) TO
AN INSTITUTIONAL ACCREDITED INVESTOR THAT IS
<PAGE>
ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (3) AGREES THAT IT SHALL BE BOUND, TO THE EXTENT
APPLICABLE, BY THE TERMS OF THE AMENDED AND RESTATED LIMITED LIABILITY
COMPANY AGREEMENT DATED AS OF SEPTEMBER 24, 1997, (4) AGREES THAT IT
SHALL BE BOUND, TO THE EXTENT APPLICABLE, BY THE TERMS OF THE
MEMBERSHIP UNITHOLDERS AGREEMENT DATED AS OF SEPTEMBER 30, 1997 AND
(5) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
CERTIFICATE OF INCORPORATION
OF
ACME INTERMEDIATE FINANCE, INC.
FIRST: The name of the Corporation shall be "Acme Intermediate Finance,
Inc."
SECOND: Its registered office in the State of Delaware is to be located at
1013 Centre Road, in the City of Wilmington, County of New Castle, Delaware
19805. Its registered agent at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful acts or
activities for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one thousand (1,000), designated as common stock, and
the par value of each such share of common stock is one cent ($0.01), amounting
in the aggregate of ten dollars ($10.00).
FIFTH: The name of the incorporator is Jonathan P. Levi and his mailing
address is 2101 L Street, N.W., Washington, D.C. 20037.
SIXTH: The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
<PAGE>
SEVENTH:No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article SEVENTH
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, does make this certificate this
eighteenth day of September, 1997.
/s/Jonathan P. Levi
- -------------------------
Jonathan P. Levi
Incorporator
ACME INTERMEDIATE FINANCE, INC.
BY-LAWS
Article I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
Article II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place as may be fixed from time to time by the
board of directors or at such other places either within or without the State of
Delaware as shall be designated from time to time by the board of directors and
stated in the notice of the meeting.
Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held at such date and time as shall be designated from time to
time by the board of directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before the date of
the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at
<PAGE>
the place where the meeting is to be held. The list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and may
be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chairman of the board or the president and
shall be called by the chairman of the board or the president or secretary at
the request in writing of a majority of the board of directors, or at the
request in writing of stockholders owning a majority in amount of the entire
capital stock of the corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten nor more than sixty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
2
<PAGE>
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Article III
DIRECTORS
Section 1. The number of directors of the corporation shall be not
less than two (2) nor more than eleven (11), the exact number of directors to be
determined from time to time by resolution adopted by a majority of the entire
board. The directors shall be elected at the annual meeting of the stockholders,
except as provided in Section 2 of this Section, and each director elected shall
hold office until his successor is elected and qualified. Directors need not be
stockholders. Any director may resign at any time upon written notice to the
corporation.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and each of the directors so chosen shall hold office until
the next annual election for the term for which he is elected and until his
successor is duly elected and qualified or until his earlier resignation or
removal. No decrease in the board shall shorten the term of any incumbent
director. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
3
<PAGE>
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these by-laws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors shall be held immediately following the annual meeting of the
stockholders, unless otherwise determined by the board of directors or the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
chairman of the board or the president, and the chairman of the board or the
president or the secretary shall call a special meeting upon the written request
of two directors unless the board consists of only one director; in which case
special meetings shall be called by the chairman of the board or the president
or secretary on the written request of the sole director. If given personally,
by telephone or by telegram, the notice shall be given at least two days prior
to the meeting. Notice may be given by mail if it is mailed at least three days
before the meeting.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
4
<PAGE>
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
5
<PAGE>
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors and/or a
stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by-laws, any director or the entire board of directors may be
removed, with or without cause, at any time by the holders of a majority of
shares then entitled to vote at an election of directors, and the vacancy in the
board of directors caused by such removal may be filled by the stockholders at
the time of such removal.
Article IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Article V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors as soon as practicable after each annual meeting of
stockholders and shall be a
6
<PAGE>
president, a secretary and a treasurer. Any number of offices may be held by the
same person, unless the certificate of incorporation or these by-laws otherwise
provide.
Section 2. The board of directors may appoint such other officers
and agents as it shall deem necessary, including a chairman of the board, a vice
chairman of the board, one or more vice presidents and one or more assistant
secretaries and assistant treasurers, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 3. The salaries of all officers and agents of the
corporation shall be fixed by or under the direction of the board of directors.
Section 4. The officers of the corporation shall hold office at the
pleasure of the board of directors. Each officer shall hold his office until his
successor is elected and qualified or until his earlier resignation or removal.
Any officer may resign at any time upon written notice to the corporation. Any
officer elected or appointed by the board of directors may be removed at any
time by the affirmative vote of a majority of the board of directors. Any
vacancy occurring in any office of the corporation by death, resignation,
removal or otherwise shall be filled by the board of directors.
THE CHAIRMAN OF THE BOARD
Section 5. The chairman of the board shall be a member of the board
and shall preside at its meetings and at all meetings of stockholders. The
chairman of the board shall exercise such other powers and perform such other
duties as may from time to time be assigned to him by the board or prescribed by
the by-laws.
THE PRESIDENT
Section 6. The president shall, subject to the direction and under
the supervision of the board, be the principal executive officer of the
corporation and shall have general charge of the business and affairs of the
corporation and shall keep the board fully advised. At the direction of the
board, he shall have power in the name of the corporation and on its behalf to
execute any instruments in writing. He shall employ and discharge employees and
agents of the corporation, except such as shall hold their offices by
appointment of the board, but he may delegate these powers to other officers as
to employees under their immediate supervision. He shall have such powers and
perform such duties as generally pertain to the office of president, as well as
such further powers and duties as may be prescribed by the board.
7
<PAGE>
THE VICE-PRESIDENTS
Section 7. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 8. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 9. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURER
Section 10. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 11. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render
8
<PAGE>
to the president and the board of directors, at its regular meetings, or when
the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation.
Section 12. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 13. The assistant treasurer, or if there be more than one,
the assistant treasurer in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the treasurer or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
Article VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by,
the chairman or vice-chairman of the board of directors, or the president or a
vice-president and the treasurer, or the secretary or an assistant secretary of
the corporation, certifying the number of shares owned by him in the
corporation.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
9
<PAGE>
discretion and as a condition precedent to issuance thereof, require the owner
of such lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
10
<PAGE>
Article VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
EXECUTION OF DOCUMENTS
Section 3. Unless otherwise authorized by the board of directors,
all contracts, leases, deeds, deeds of trust, mortgages, powers of attorney to
transfer stock and for other purposes, and all other documents requiring the
seal of the corporation shall be executed for and on behalf of the corporation
by the president or any vice president and the corporate seal shall be affixed
and attested by the secretary or an assistant secretary, or the treasurer or an
assistant treasurer.
ANNUAL STATEMENT
Section 4. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
FISCAL YEAR
Section 5 The fiscal year of the corporation shall be the one year
period ending on September 30 of each calendar year or as may otherwise be fixed
by resolution of the board of directors.
11
<PAGE>
SEAL
Section 6 The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Article VIII
INDEMNIFICATION
Section 1. Each person who was or is made a party or is threatened
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the corporation to the fullest extent
permitted by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such indemnitee in connection
therewith. Such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, except as provided in subparagraph (b) hereof, the corporation shall
indemnify any such indemnitee seeking indemnification in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the board of directors of the
corporation. The right to indemnification conferred in this Article VIII shall
be a contract right and shall include the right to be paid by the corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition (an "expense advancement"); provided, however, that, if the Delaware
General Corporation Law so requires, the payment of such expenses incurred by an
indemnitee in his or her capacity as a director or officer of the corporation
(and not in any other capacity in which service was or is rendered by such
indemnitee while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made upon delivery to the corporation of an undertaking, by
or on behalf of such indemnitee, to repay all amounts so advanced if it
12
<PAGE>
shall ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified
under this Article VIII or otherwise; and provided, further, that no expense
advancement shall be paid by the corporation if independent legal counsel shall
advise the board of directors in a written opinion that based upon the facts
known to such counsel at the time, (i) the indemnitee acted in bad faith or
deliberately breached his or her duty to the corporation or its stockholders,
and (ii) as a result of such conduct by the indemnitee, it is more likely than
not that it will ultimately be determined that such indemnitee has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify such indemnitee. The
corporation may, by action of its board of directors, provide indemnification to
employees and agents of the corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
(b) If a claim under subparagraph (a) of this Article VIII is not
paid in full by the corporation within 30 days after a written claim has been
received by the corporation, the indemnitee may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
corporation to recover an expense advancement, the indemnitee shall also be
entitled to be paid the expense of prosecuting or defending such suit. It shall
be a defense to any such action that the indemnitee has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the corporation. Neither the failure of the
corporation (including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the indemnitee is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
indemnitee has not met the applicable standard of conduct; provided, however,
that a determination by the board of directors denying an expense advancement
based upon the written opinion of independent legal counsel as provided for in
subparagraph (a) above shall be a complete defense to any action seeking an
expense advancement, but such determination shall not be a defense or create a
presumption that the indemnitee is not entitled to be indemnified hereunder upon
the final disposition of the proceeding.
(c) The right to indemnification and the payment of expense incurred
in defending a proceeding in advance of its final disposition conferred in this
Article VIII shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of the Restated Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
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<PAGE>
(d) The corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss under the Delaware General
Corporation Law.
Article IX
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate or
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
- --------------------------------------------------------------------------------
ACME TELEVISION, LLC
and
ACME FINANCE CORPORATION,
as Issuers,
The GUARANTORS Named Herein
AND
WILMINGTON TRUST COMPANY,
as Trustee
`
-----------------
INDENTURE
Dated as of September 30, 1997
----------------
$175,000,000 Principal Amount at Maturity
10-7/8% Senior Discount Notes due 2004, Series A
10-7/8% Senior Discount Notes due 2004, Series B
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
SECTION SECTION
310 (a)(1)................................................. 7.10
(a)(2)................................................. 7.10
(a)(3)................................................. N.A.
(a)(4)................................................. N.A.
(a)(5)................................................. 7.08; 7.10
(b).................................................... 7.08; 7.10;
12.02
(c).................................................... N.A.
311 (a).................................................... 7.11
(b).................................................... 7.11
(c).................................................... N.A.
312 (a).................................................... 2.05
(b).................................................... 12.03
(c).................................................... 12.03
313 (a).................................................... 7.06
(b)(1)................................................. 7.06
(b)(2)................................................. 7.06
(c).................................................... 7.06; 12.02
(d).................................................... 7.06
314 (a).................................................... 4.08; 4.10;
12.02
(b).................................................... N.A.
(c)(1)................................................. 7.02; 12.04;
12.05
(c)(2)................................................. 7.02; 12.04;
12.05
(c)(3)................................................. N.A.
(d).................................................... N.A.
(e).................................................... 12.05
(f).................................................... N.A.
315 (a).................................................... 7.01(b); 7.02
(b).................................................... 7.05; 12.02
(c).................................................... 7.01
(d).................................................... 6.05; 7.01(c);
7.02
(e).................................................... 6.11
316 (a)(last sentence)..................................... 2.09
(a)(1)(A).............................................. 6.05
(a)(1)(B).............................................. 6.04
(a)(2)................................................. 9.02
(b).................................................... 6.07
317 (a)(1)................................................. 6.08
(a)(2)................................................. 6.09
(b).................................................... 2.04
318 (a).................................................... 12.01
(c).................................................... 12.01
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions...............................................1
SECTION 1.02. Incorporation by Reference of TIA........................25
SECTION 1.03. Rules of Construction....................................26
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating..........................................27
SECTION 2.02. Execution and Authentication.............................28
SECTION 2.03. Registrar and Paying Agent...............................29
SECTION 2.04. Paying Agent To Hold Assets in Trust.....................29
SECTION 2.05. Securityholder Lists.....................................29
SECTION 2.06. Transfer and Exchange....................................30
SECTION 2.07. Replacement Securities...................................30
SECTION 2.08. Outstanding Securities...................................31
SECTION 2.09. Treasury Securities......................................31
SECTION 2.10. Temporary Securities.....................................32
SECTION 2.11. Cancellation.............................................32
SECTION 2.12. Defaulted Interest.......................................32
SECTION 2.13. CUSIP Number.............................................33
SECTION 2.14. Deposit of Moneys........................................33
SECTION 2.15. Book-Entry Provisions for Global Securities..............33
SECTION 2.16. Registration of Transfers and Exchanges..................34
SECTION 2.17. Designation..............................................40
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.......................................41
SECTION 3.02. Selection of Securities To Be Redeemed...................41
SECTION 3.03. Notice of Redemption.....................................42
SECTION 3.04. Effect of Notice of Redemption...........................43
SECTION 3.05. Deposit of Redemption Price..............................43
SECTION 3.06. Securities Redeemed in Part..............................43
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities....................................44
SECTION 4.02. Maintenance of Office or Agency..........................44
SECTION 4.03. Limitation on Restricted Payments........................44
SECTION 4.04. Limitation on Incurrence of Additional
Indebtedness...........................................46
SECTION 4.05. Corporate Existence......................................47
SECTION 4.06. Payment of Taxes and Other Claims........................47
SECTION 4.07. Maintenance of Properties and Insurance..................48
SECTION 4.08. Compliance Certificate; Notice of Default................48
SECTION 4.09. Compliance with Laws.....................................49
SECTION 4.10. Commission Reports.......................................49
SECTION 4.11. Waiver of Stay, Extension or Usury Laws..................50
SECTION 4.12. Limitation on Transactions with Affiliates...............50
SECTION 4.13. Limitation on Investments................................51
SECTION 4.14. Limitation on Capital Stock of Subsidiaries..............51
SECTION 4.15. Limitation on Liens......................................52
SECTION 4.16. Change of Control........................................52
SECTION 4.17. Limitation on Asset Sales................................55
SECTION 4.18. Limitation on Preferred Stock of Subsidiaries............58
SECTION 4.19. Limitation on Sale and Lease-Back Transactions...........58
SECTION 4.20. Limitation on Conduct of Business........................58
SECTION 4.21. Limitation on Creation of Subsidiaries...................58
SECTION 4.22. Limitation on Conduct of Business of Finance.............59
SECTION 4.23. Payments for Consent.....................................59
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets...............59
SECTION 5.02. Successor Corporation Substituted........................61
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................61
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<PAGE>
SECTION 6.02. Acceleration.............................................63
SECTION 6.03. Other Remedies...........................................64
SECTION 6.04. Waiver of Past Defaults..................................64
SECTION 6.05. Control by Majority......................................64
SECTION 6.06. Limitation on Suits......................................65
SECTION 6.07. Rights of Holders To Receive Payment.....................65
SECTION 6.08. Collection Suit by Trustee...............................65
SECTION 6.09. Trustee May File Proofs of Claim.........................66
SECTION 6.10. Priorities...............................................66
SECTION 6.11. Undertaking for Costs....................................67
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee........................................67
SECTION 7.02. Rights of Trustee........................................69
SECTION 7.03. Individual Rights of Trustee.............................69
SECTION 7.04. Trustee's Disclaimer.....................................70
SECTION 7.05. Notice of Default........................................70
SECTION 7.06. Reports by Trustee to Holders............................70
SECTION 7.07. Compensation and Indemnity...............................71
SECTION 7.08. Replacement of Trustee...................................72
SECTION 7.09. Successor Trustee by Merger, Etc.........................73
SECTION 7.10. Eligibility; Disqualification............................73
SECTION 7.11. Preferential Collection of Claims Against
Company................................................74
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance.................74
SECTION 8.02. Satisfaction and Discharge...............................78
SECTION 8.03. Survival of Certain Obligations..........................78
SECTION 8.04. Acknowledgment of Discharge by Trustee...................79
SECTION 8.05. Application of Trust Assets..............................79
SECTION 8.06. Repayment to the Issuers or the Guarantors;
Unclaimed Money........................................79
SECTION 8.07. Reinstatement............................................80
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders...............................80
SECTION 9.02. With Consent of Holders..................................81
SECTION 9.03. Compliance with TIA......................................83
SECTION 9.04. Revocation and Effect of Consents........................83
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<PAGE>
SECTION 9.05. Notation on or Exchange of Securities....................84
SECTION 9.06. Trustee To Sign Amendments, Etc..........................84
ARTICLE TEN
[INTENTIONALLY OMITTED]
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee..................................84
SECTION 11.02. Severability.............................................86
SECTION 11.03. Limitation of Guarantor's Liability......................86
SECTION 11.04. Guarantors May Consolidate, etc., on Certain
Terms..................................................86
SECTION 11.05. Contribution.............................................87
SECTION 11.06. Waiver of Subrogation....................................87
SECTION 11.07. Execution of Guarantee...................................88
SECTION 11.08. Waiver of Stay, Extension or Usury Laws..................88
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls............................................89
SECTION 12.02. Notices.................................................89
SECTION 12.03. Communications by Holders with Other Holders............90
SECTION 12.04. Certificate and Opinion as to Conditions
Precedent.............................................90
SECTION 12.05. Statements Required in Certificate or Opinion...........91
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar...............91
SECTION 12.07. Legal Holidays..........................................91
SECTION 12.08. Governing Law...........................................91
SECTION 12.09. No Adverse Interpretation of Other Agreements...........92
SECTION 12.10. No Recourse Against Others..............................92
SECTION 12.11. Successors..............................................92
SECTION 12.12. Duplicate Originals.....................................92
SECTION 12.13. Severability............................................92
Signatures..................................................................97
Exhibit A - Form of Series A Security
Exhibit B - Form of Series B Security
-iv-
<PAGE>
Exhibit C - Form of Legend for Global Securities
Exhibit D - Transfer Certificate
Exhibit E - Transferee Certificate for Institutional
Accredited Investors
Exhibit F - Form of Transferee Certificate for
Regulation S Transfers
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
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INDENTURE dated as of September 30, 1997 among ACME TELEVISION, LLC,
a Delaware limited liability company (the "COMPANY"), and ACME FINANCE
CORPORATION, a Delaware corporation ("FINANCE" and, together with the Company,
jointly and severally, the "ISSUERS"), as Issuers, ACME TELEVISION LICENSES OF
MISSOURI, INC., ACME TELEVISION HOLDINGS OF OREGON, LLC, ACME TELEVISION
HOLDINGS OF TENNESSEE, LLC, ACME TELEVISION HOLDINGS OF UTAH, LLC, ACME
TELEVISION HOLDINGS OF NEW MEXICO, LLC, ACME TELEVISION LICENSES OF OREGON, LLC,
ACME TELEVISION LICENSES OF TENNESSEE, LLC, ACME TELEVISION LICENSES OF NEW
MEXICO, LLC, ACME TELEVISION OF OREGON, LLC, ACME TELEVISION OF TENNESSEE, LLC
and ACME SUBSIDIARY HOLDINGS III, LLC, as Guarantors, and WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as Trustee (the "TRUSTEE").
The Issuers have duly authorized the creation of an issue of 10-7/8%
Senior Discount Notes due 2004, Series A, and 10-7/8% Senior Discount Notes due
2004, Series B, to be issued in exchange for the 10-7/8% Senior Notes due 2004,
Series A, pursuant to the Registration Rights Agreement and, to provide
therefor, the Issuers and the Guarantors have duly authorized the execution and
delivery of this Indenture. All things necessary to make the Securities, when
duly issued and executed by the Issuers and authenticated and delivered
hereunder, and the Guarantees the valid and binding obligations of the Issuers
and the Guarantors, respectively, and to make this Indenture a valid and binding
agreement of the Issuers and each of the Guarantors, have been done.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCRETED VALUE" means, as of any date prior to September 30, 2000,
an amount per $1,000 principal amount at maturity of Securities that is equal to
the sum of (a) $727.83 and (b) the portion of the excess of the principal amount
at maturity of each Security over $727.83 which shall have been amortized on a
daily basis and compounded semiannually on each March 31 and September 30 at the
rate of 10-7/8% per annum from the Issue Date through the date of determination
computed on
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the basis of a 360-day year of twelve 30-day months; and, as of any date on or
after September 30, 2000, the Accreted Value of each Security shall mean the
aggregate principal amount at maturity of such Security.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at
the time such Person becomes a Subsidiary or is merged into or consolidated with
any other Person or which is assumed in connection with the acquisition of
assets from such Person and, in each case, not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Subsidiary or such merger, consolidation or acquisition.
"ADJUSTED NET ASSETS" of a Guarantor at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities), but excluding liabilities under the Guarantee, of such
Guarantor at such date and (y) the present fair salable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities and after giving effect to any collection
from any Subsidiary of such Guarantor in respect of the obligations of such
Subsidiary under the Guarantee), excluding Indebtedness in respect of the
Guarantee, as they become absolute and matured.
"AFFILIATE" means, with respect to any specific Person, any other
Person that directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. For
the purposes of this definition, "CONTROL" (including, with correlative
meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that, for purposes of Section 4.12, beneficial
ownership of at least 10% of the voting securities of a Person, either directly
or indirectly, shall be deemed to be control.
"AFFILIATE TRANSACTION" has the meaning set forth in Section 4.12.
"AGENT" means the Registrar or any Paying Agent.
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"ASSET ACQUISITION" means (a) an Investment by the Issuers or any
Subsidiary of the Issuers in any other Person pursuant to which such Person
shall become a Subsidiary of the Issuers or any Subsidiary of the Issuers, or
shall be merged with or into the Issuers or any Subsidiary of the Issuers, or
(b) the acquisition by the Issuers or any Subsidiary of the Issuers of the
assets of any Person (other than a Subsidiary of the Issuers) which constitute
all or substantially all of the assets of such Person or comprise any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, assignment, transfer, lease or other disposition (including any Sale
and Lease-Back Transaction), other than to the Company or any of its Wholly
Owned Subsidiaries, in any single transaction or series of related transactions
of (a) any Capital Stock of or other equity interest in any Subsidiary of the
Company or (b) any other property or assets of the Company or of any Subsidiary
thereof; provided that Asset Sales shall not include (i) a transaction or series
of related transactions for which the Company or its Subsidiaries receive
aggregate consideration of less than $500,000 and (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under Article Five.
"ASSET SALE PROCEEDS" means, with respect to any Asset Sale, (i)
cash received by the Issuers or any Subsidiary of the Issuers from such Asset
Sale (including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Subsidiary of the Issuers as a result of such Asset Sale, (d) repayment
of Indebtedness that is required to be repaid in connection with such Asset Sale
and (e) deduction of appropriate amounts to be provided by the Issuers or a
Subsidiary of the Issuers as a reserve, in accordance with GAAP, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by the Issuers or a Subsidiary after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other non-cash consideration received by the
Issuers or any Subsidiary of the
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Issuers from such Asset Sale or other disposition upon the liquidation or
conversion of such notes or non-cash consideration into cash.
"ATTRIBUTABLE INDEBTEDNESS" in respect of a Sale and Lease-Back
Transaction means, as at the time of determination, the greater of (i) the fair
value of the property subject to such arrangement and (ii) the present value of
the notes (discounted at the rate borne by the Securities, compounded
semi-annually) of the total obligations of the lessee for rental payments during
the remaining term of the lease included in such Sale and Lease-Back Transaction
(including any period for which such lease has been extended).
"AVAILABLE ASSET SALE PROCEEDS" means, with respect to any Asset
Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not been
applied in accordance with clause (iii)(a) or (iii)(b), and that have not yet
been the basis for an Excess Proceeds Offer in accordance with clause (iii)(c),
of the first paragraph of Section 4.17.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means (i) in the case of a Person that is a
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body or any authorized committee thereof responsible for the
management of the business and affairs of such Person.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY" means any day other than a Saturday, Sunday or any
other day on which banking institutions in the City of New York or Wilmington,
Delaware are required or authorized by law or other governmental action to be
closed.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated and
whether or not voting) of corporate stock, partnership or limited liability
company interests or any other participation, right or other interest in the
na-
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ture of an equity interest in such Person including, without limitation, Common
Stock and Preferred Stock of such Person, or any option, warrant or other
security convertible into any of the foregoing.
"CAPITALIZED LEASE OBLIGATIONS" means with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
A "CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the adoption of a plan relating to the liquidation or dissolution of
Holdings or the Company or Holdings shall cease to be the managing member of the
Company, (ii) prior to the consummation of an Initial Public Offering, the
Permitted Holders cease to be the beneficial owners (as defined under Rule 13d-3
or any successor rule or regulation promulgated under the Exchange Act) of at
least a majority of the to-
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tal voting power of the Common Stock entitled to elect the Board of Directors of
Holdings, (iii) prior to the consummation of an Initial Public Offering, the
Permitted Holders shall cease collectively to control at least a majority of the
voting power of the Board of Directors of Holdings and (iv) in connection with
or after an Initial Public Offering, any Person (including a Person's Affiliates
and associates), other than a Permitted Holder, becomes the beneficial owner of
more than 20% of the total voting power of the Common Stock of Holdings or the
Company, and the Permitted Holders beneficially own, in the aggregate, less than
30% of the total voting power of Holdings or the Company, as the case may be.
"CHANGE OF CONTROL DATE" has the meaning set forth in Section 4.16.
"CHANGE OF CONTROL OFFER" has the meaning set forth in Section 4.16.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning set forth in
Section 4.16.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person,
for any period, the aggregate amount of interest which, in conformity with GAAP,
would be set forth opposite the caption "interest expense" or any like caption
on an income statement for such Person and its Subsidiaries on a consolidated
basis (including, but not limited to, (i) Redeemable Dividends, whether paid or
accrued, on Subsidiary Preferred Stock, (ii) imputed interest included in
Capitalized Lease Obligations, (iii) all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, (iv) the net costs associated with Interest Rate Agreements and other
hedging obligations, (v) amortization of other financing fees and expenses, (vi)
the interest portion
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of any deferred payment obligation, (vii) amortization of discount or premium,
if any, and (viii) all other non-cash interest expense (other than interest
amortized to cost of sales)) plus, without duplication, all net capitalized
interest for such period and all interest incurred or paid under any guarantee
of Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person, plus the amount of all dividends or distributions paid
on Disqualified Capital Stock (other than dividends paid or payable in shares of
Capital Stock of the Company).
"CONSOLIDATED LEVERAGE RATIO" means, with respect to any Person, the
ratio of (i) the sum of the aggregate outstanding amount of Indebtedness of such
Person and its Subsidiaries as of the date of calculation (the "TRANSACTION
DATE") on a consolidated basis determined in accordance with GAAP to (ii) such
Person's EBITDA for the four full fiscal quarters (the "FOUR QUARTER PERIOD")
ending on or prior to the date of determination for which financial statements
are available. For purposes of this definition, "EBITDA" shall be calculated
after giving effect on a pro forma basis to (i) the incurrence or repayment of
any Indebtedness of such Person or any of its Subsidiaries (and the application
of the proceeds thereof) giving rise to the need to make such calculation and
any incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including any
Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also including
any EBITDA (provided that such EBITDA shall be included only to the extent
includable pursuant to the definition of "Consolidated Net Income") attributable
to the assets which are the subject of the Asset Acquisition or Asset Sale
during the Four Quarter Period) occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition (including
the incurrence, assumption or liability for any such Acquired Indebtedness)
occurred on the first day of the Four Quarter Period; PROVIDED
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that if any such Asset Acquisition relates to the acquisition of a television
broadcast station which is not an affiliate of a Network and which had a
negative Net Income for the Four Quarter Period, it may be assumed, for purposes
of such pro forma calculation, that the Net Income of such station for such
period was zero. If such Person or any of its Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Subsidiary of such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the "OTHER PERSON") in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the Net Income of such other Person to
be consolidated into the Net Income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions shall be excluded to the extent of such restriction or limitation,
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net gain (but not loss) resulting from an Asset Sale by the Person in question
or any of its Subsidiaries other than in the ordinary course of business shall
be excluded, (d) extraordinary gains and losses shall be excluded, (e) income or
loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued) shall be excluded, and (f) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation prior
to such consolidation, merger or transfer of assets shall be excluded.
"CONSOLIDATED NET WORTH" means with respect to any Person at any
date, the consolidated stockholders' equity or members' capital of such Person
less the amount of such stockholders' equity or members' capital attributable to
Disqualified Capital Stock of such Person and its subsidiaries, as determined in
accordance with GAAP.
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"COVENANT DEFEASANCE" has the meaning set forth in Section 8.01.
"CUMULATIVE CONSOLIDATED INTEREST EXPENSE" means, with respect to
any Person, as of any date of determination, Consolidated Interest Expense from
October 1, 1997 to the end of the Company's most recently ended full fiscal
quarter prior to such date, taken as a single accounting period.
"CUMULATIVE EBITDA" means, with respect to any Person, as of any
date of determination, EBITDA from October 1, 1997 to the end of such Person's
most recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEPOSITORY" means, with respect to the Securities issued in the
form of one or more Global Securities, The Depository Trust Company or another
Person designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of a Person or
a Subsidiary thereof which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Securities, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include any Preferred Stock of a Person or a Subsidiary of
such Person, with respect to either of which, under the terms of such Preferred
Stock, by agreement or otherwise, such Person or Subsidiary is obligated to pay
current dividends or distributions in cash during the period prior to the
maturity date of the Securities; provided, however, that (i) Preferred Stock of
a Person or any Subsidiary thereof that is issued with the benefit of provisions
requiring a change of control offer to be made for such Preferred Stock in the
event of a change of control of such Person or Subsidiary which provisions have
sub-
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tantially the same effect as the provisions of Section 4.16 shall not be deemed
to be Disqualified Capital Stock solely by virtue of such provisions; and (ii)
Capital Stock of any limited liability company or other pass-through entity for
federal income tax purposes shall not be deemed to be Disqualified Capital Stock
solely by virtue of the fact that its holders are entitled to Permitted Tax
Distributions.
"EBITDA" means, with respect to any Person and its Subsidiaries, for
any period, an amount equal to (a) the sum of (i) Consolidated Net Income for
such period, plus (ii) the provision for taxes for such period based on income
or profits to the extent such income or profits were included in computing
Consolidated Net Income and any provision for taxes utilized in computing net
loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such
period (but only including Redeemable Dividends in the calculation of such
Consolidated Interest Expense to the extent that such Redeemable Dividends have
not been excluded in the calculation of Consolidated Net Income), plus (iv)
depreciation for such period on a consolidated basis, plus (v) amortization of
intangibles and television programming obligations (net of cash payments with
respect to television programming obligations) for such period on a consolidated
basis, plus (vi) any other non-cash items reducing Consolidated Net Income for
such period, minus (b) all non-cash items increasing Consolidated Net Income for
such period, all for such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP; provided, however, that, for
purposes of calculating EBITDA during any fiscal quarter, cash income from a
particular Investment of such Person shall be included only (x) if cash income
has been received by such Person with respect to such Investment during each of
the previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Cash Equivalents.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"FAIR MARKET VALUE" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evi-
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enced by a Board Resolution of the Company delivered to the Trustee.
"FINAL MATURITY DATE" means September 30, 2004.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
"GLOBAL SECURITY" means a security evidencing all or a portion of
the Securities issued to the Depository or its nominee in accordance with
Section 2.01 and bearing the legend set forth in EXHIBIT C.
"GUARANTEE" has the meaning set forth in Section 11.01.
"GUARANTOR" means (a) each of the Company's Subsidiaries as of the
Issue Date and (b) each of the Company's Subsidiaries that in the future
executes a supplemental indenture in which such Subsidiary agrees to be bound by
the terms of this Indenture as a Guarantor; PROVIDED that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its Guarantee is released in accordance with the terms of this
Indenture.
"HOLDINGS" means ACME Television Holdings, LLC, a Delaware limited
liability company.
"INCUR" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "INCURRENCE," "INCURRED," "INCURRABLE" and "INCURRING" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"INDEBTEDNESS" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding,
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secured or unsecured, contingent or otherwise, which is for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), or evidenced by bonds, notes, debentures
or similar instruments or representing the balance deferred and unpaid of the
purchase price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included (i) any Capitalized Lease Obligations of such Person,
(ii) obligations secured by a lien to which the property or assets owned or held
by such Person are subject, whether or not the obligation or obligations secured
thereby shall have been assumed, (iii) guarantees of items of other Persons
which would be included within this definition for such other Persons (whether
or not such items would appear upon the balance sheet of the guarantor), (iv)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (v) Disqualified Capital
Stock of such Person or any Subsidiary thereof, and (vi) obligations of any such
Person under any currency agreement or any Interest Rate Agreement applicable to
any of the foregoing (if and to the extent such currency agreement or Interest
Rate Agreement obligations would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP). The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation; provided that (i) the amount outstanding at any time of
any Indebtedness issued with original issue discount is the principal amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with GAAP
and (ii) Indebtedness shall not include any liability for federal, state, local
or other taxes. Notwithstanding any other provision of the foregoing definition,
(i) any trade payable arising from the purchase of goods or materials or for
services obtained and (ii) television programming obligations entered into in
the ordinary course of business shall not be deemed to be "Indebtedness" of the
Company or any of its Subsidiaries for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall not
also be included.
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"INDENTURE" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"INDEPENDENT FINANCIAL ADVISOR" means an investment banking firm of
national reputation in the United States (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"INITIAL PUBLIC OFFERING" means an underwritten public offering of
Common Stock of the Company or a Parent registered under the Securities Act
(other than a public offering registered on Form S-8 under the Securities Act)
that results in net proceeds of at least $25.0 million to the Company or such
Parent, as the case may be.
"INITIAL PURCHASERS" means CIBC Wood Gundy Securities Corp. and
Merrill Lynch & Co.
"INSTITUTIONAL ACCREDITED INVESTOR" or "ACCREDITED INVESTOR" means
an institution that is an "accredited investor" as that term is defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act.
"INTEREST PAYMENT DATE" means the stated maturity of an installment
of interest on the Securities.
"INTEREST RATE AGREEMENT" means, with respect to any Person, any
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement designed to protect the party indicated
therein against fluctuations in interest rates.
"INVESTMENTS" means, with respect of any Person, directly or
indirectly, any advance, account receivable (other than an account receivable
arising in the ordinary course of business of such Person), loan or capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others or otherwise), the
purchase of any Capital Stock, bonds, notes, debentures, partnership or joint
venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude (i) extensions of trade
credit on commercially reasonable terms in ac-
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cordance with normal trade practices of such Person and (ii) the repurchase of
securities of any Person by such Person. For the purposes of Section 4.03, the
amount of any Investment shall be the original cost of such Investment plus the
cost of all additional Investments by the Issuers or any of their Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the
payment of dividends or distributions in connection with such Investment or any
other amounts received in respect of such Investment; provided that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Issuers or any Subsidiary of the Issuers sells or otherwise
disposes of any Common Stock of any direct or indirect Subsidiary of the Issuers
such that, after giving effect to any such sale or disposition, the Issuers no
longer own, directly or indirectly, greater than 50% of the outstanding Common
Stock of such Subsidiary, the Issuers shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Common Stock of such Subsidiary not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the Securities
under this Indenture.
"LEGAL DEFEASANCE" has the meaning set forth in Section 8.01.
"LIEN" means, with respect to any property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"NET INCOME" means, with respect to any Person, for any period, the
net income (loss) of such Person determined in accordance with GAAP.
"NET PROCEEDS" means (a) in the case of any sale of Capital Stock by
or equity contribution to any Person, the aggregate net proceeds received by
such Person, after payment of expenses, commissions and the like incurred in
connection
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therewith, whether such proceeds are in cash or in property (valued at the fair
market value thereof, as determined in good faith by the Board of Directors of
such Person, at the time of receipt) and (b) in the case of any exchange,
exercise, conversion or surrender of outstanding securities of any kind for or
into shares of Capital Stock of the Issuers which is not Disqualified Capital
Stock, the net book value of such outstanding securities on the date of such
exchange, exercise, conversion or surrender (plus any additional amount required
to be paid by the holder to such Person upon such exchange, exercise, conversion
or surrender, less any and all payments made to the holders, e.g., on account of
fractional shares and less all expenses incurred by such Person in connection
therewith).
"NETWORK" means (i) each of the American Broadcasting Company, CBS,
Inc., Fox Broadcasting Company, National Broadcasting Co., Inc., The WB
Television Network, United Paramount Network and (ii) any successor Person of a
Person identified in clause (i) of this definition.
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"OFFICER" means, with respect to any Person (other than the
Trustee), the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Controller, or the
Secretary of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed by two
Officers of each Issuer.
"OPINION OF COUNSEL" means a written opinion from legal counsel, who
may be counsel for the Company, which opinion and counsel are reasonably
acceptable to the Trustee.
"PARENT" means any Person which owns all or substantially all of
the Common Stock of the Company.
"PARTICIPANTS" has the meaning set forth in Section 2.15.
"PAYING AGENT" has the meaning set forth in Section 2.03.
"PERMITTED ASSET SWAP" means any transfer of properties or assets by
the Company or any of its Subsidiaries in
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which 90% of the consideration received by the transferor consists of properties
or assets (other than cash) that will be used in the business of the transferor;
provided, that (i) the aggregate fair market value (as determined in good faith
by the Board of Directors of Holdings) of the property or assets being
transferred by the Company or such Subsidiary is not greater than the aggregate
fair market value (as determined in good faith by the Board of Directors) of the
property or assets received by the Company or such Subsidiary in such exchange
and (ii) the aggregate fair market value (as determined in good faith by the
Board of Directors) of all property or assets transferred by the Company and any
of its Subsidiaries in connection with exchanges in any period of twelve
consecutive months shall not exceed 15% of the total assets of the Company on
the last day of the preceding fiscal year.
"PERMITTED HOLDERS" means (i) BancBoston Capital, (ii) Alta
Communications, Inc., ALTA COMMUNICATIONS, VI L.P., ALTA-COMM S BY S, LLC, ALTA
SUBORDINATED DEBT PARTNERS III, L.P. (iii) CEA Capital Partners, CEA CAPITAL
PARTNERS USA, L.P. (iv) Trust Company of the West, (v) any Person controlled OR
MANAGED by a Person identified in clauses (i)-(iv) of this definition, (vi)
Jamie Kellner, (vii) Douglas Gealy, (viii) Thomas Allen, (ix) ACME Parent and
(x) any partnership, corporation or other entity all of the partners,
shareholders, members or owners of which are any one or more of the foregoing.
"PERMITTED INDEBTEDNESS" means:
(i) Indebtedness of the Company or any Subsidiary of the Company
arising under or in connection with the Senior Credit Facility in an
aggregate principal amount not to exceed $40 million outstanding at any
time;
(ii) Indebtedness under the Securities and the Guarantees;
(iii) Indebtedness not covered by any other clause of this
definition which is outstanding on the Issue Date;
(iv) Indebtedness of the Company to any Wholly Owned Subsidiary
and Indebtedness of any Wholly Owned Subsidiary to the Company or another
Wholly Owned Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebted-
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ness and Capitalized Lease Obligations do not in the aggregate exceed $20
million;
(vi) Interest Rate Agreements;
(vii) Refinancing Indebtedness;
(viii) additional Indebtedness of the Company and its Subsidiaries
not to exceed $5 million in aggregate principal amount at any one time
outstanding;
(ix) fidelity and surety bonds incurred in the ordinary course
of business; and
(x) any Guarantee by a Guarantor of Indebtedness of the Company
incurred in accordance with this Indenture.
"PERMITTED INVESTMENTS" means Investments made on or after the
Issue Date consisting of
(i) Investments by the Company, or by a Subsidiary thereof,
in the Company or a Subsidiary of the Company;
(ii) Investments by the Company, or by a Subsidiary thereof, in a
Person, if as a result of such Investment (a) such Person becomes a
Subsidiary of the Company or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) reasonable and customary loans made to employees in
connection with their relocation or for travel expenses or advances not to
exceed $1 million in the aggregate at any one time outstanding;
(v) an Investment that is made by the Company or a Subsidiary
thereof in the form of any Capital Stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are issued
by a third party to the Company or such Subsidiary solely as partial
consideration for the consummation of an Asset Sale that is otherwise
permitted under Section 4.17;
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(vi) Interest Rate Agreements entered into in the ordinary
course of the Company's or its Subsidiaries' business;
(vii) options to purchase television broadcast station licenses and
related assets (or Capital Stock of Persons owning such assets) having an
exercise price of any amount not in excess of $100,000 entered into in
connection with the execution of local marketing agreements and
Investments pursuant to local marketing agreements to operate television
broadcast stations which are combined with such an option;
(viii) deposits made pursuant to legally binding agreements to
acquire, or pursuant to local marketing agreements with options to
acquire, television broadcast television station licenses and related
assets (or Capital Stock of Persons owning such assets), in an amount not
to exceed 10% of the purchase price; provided that the station to be
acquired will be owned by the Company or a Restricted Subsidiary upon
consummation of the contemplated acquisition and provided, further, that
deposits made under this clause shall cease to be treated as Permitted
Investments upon forfeit of such deposit for any reason; and
(ix) additional Investments not to exceed $1 million at any
one time outstanding.
"PERMITTED LIENS" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Company or a Subsidiary of the Company, as
the case may be, shall have set aside on its books such reserves as may be
required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit is-
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sued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which are not leased property subject to such Capitalized Lease
Obligation;
(g) Liens securing Purchase Money Indebtedness of the Company or any
Subsidiary; provided, however, that (i) the Purchase Money Indebtedness
shall not be secured by any property or assets of the Company or any
Subsidiary of the Company other than the property and assets so acquired
and (ii) the Lien securing such Indebtedness shall be created within 90
days of such acquisition;
(h) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(i) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Subsidiaries, including rights of offset and
set-off;
(j) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(k) Liens securing Indebtedness under the Senior Credit
Facility;
(l) Liens securing Acquired Indebtedness incurred in accordance with
Section 4.04; provided that (i) such Liens
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secured such Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a Subsidiary of
the Company and were not granted in connection with, or in anticipation
of, the incurrence of such Acquired Indebtedness by the Company or a
Subsidiary of the Company and (ii) such Liens do not extend to or cover
any property or assets of the Company or of any of its Subsidiaries other
than the property or assets that secured the Acquired Indebtedness prior
to the time such Indebtedness became Acquired Indebtedness of the Company
or a Subsidiary of the Company and are no more favorable to the
lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Subsidiary of
the Company.
"PERMITTED TAX DISTRIBUTIONS" means, subject to the limitations set
forth in clause (v) of the second paragraph of Section 4.03, distributions by
the Company to ACME Intermediate Holdings, LLC ("ACME INTERMEDIATE") from time
to time in an amount approximately equal to the income tax liability (or
interest or penalties thereon) of the members of ACME Intermediate and Holdings
resulting from (i) the taxable income of the Company (after taking into account
all of the Company's prior tax losses, to the extent such losses have not
previously been deemed to reduce the taxable income of the Company), based on
the approximate highest combined tax rate that applies to any one of such
members; and (ii) any audit of such member (or the Company or Holdings) with
respect to a prior taxable year and paid or payable by such member during the
most recent taxable year, as and to the extent that such amounts are
attributable to the member being allocated more taxable income than was
previously reported to such member as a result of any position taken by the
Company or by Holdings in determining and reporting its taxable income for the
year in question.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
"PHYSICAL SECURITIES" has the meaning set forth in Section 2.01.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquida-
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tion proceeds of such Person over the holders of other Capital Stock issued by
such Person.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on
the Securities in the form set forth on Exhibit A.
"PROPERTY" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"PUBLIC EQUITY OFFERING" means a public offering by the Company or
any Parent of shares of its Common Stock (however designated and whether voting
or non-voting) and any and all rights, warrants or options to acquire such
Common Stock.
"PURCHASE AGREEMENT" means the purchase agreement dated as of
September 24, 1997 by and among the Issuers, the Guarantors and the Initial
Purchasers.
"PURCHASE MONEY INDEBTEDNESS" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"RECORD DATE" means the applicable Record Date specified in the
Securities.
"REDEEMABLE DIVIDEND" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Securities.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the price fixed for such redemp-
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tion, payable in immediately available funds, pursuant to this Indenture and the
Securities.
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company outstanding on the Issue
Date or other Indebtedness permitted to be incurred by the Company pursuant to
the first paragraph of Section 4.04 or by the Company or its Subsidiaries
pursuant to clause (ii) of the definition of "Permitted Indebtedness", but only
to the extent that (i) the Refinancing Indebtedness is subordinated to the
Securities to at least the same extent as the Indebtedness being refunded,
refinanced or extended, if at all, (ii) the Refinancing Indebtedness is
scheduled to mature either (a) no earlier than the Indebtedness being refunded,
refinanced or extended, or (b) after the maturity date of the Securities, (iii)
the portion, if any, of the Refinancing Indebtedness that is scheduled to mature
on or prior to the maturity date of the Securities has a weighted average life
to maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the weighted average life to maturity of the portion of the
Indebtedness being refunded, refinanced or extended that is scheduled to mature
on or prior to the maturity date of the Securities, (iv) such Refinancing
Indebtedness is in an aggregate principal amount that is equal to or less than
the sum of (a) the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended, (b) the amount of accrued
and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly Owned Subsidiary of the Company.
"REGISTERED EXCHANGE OFFER" means the offer to exchange the Series B
Securities for all of the outstanding Series A Securities in accordance with the
Registration Rights Agreement.
"REGISTRAR" has the meaning set forth in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of the Issue Date among the Issuers, the Guarantors and the
Initial Purchasers.
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"REGULATION S" means Regulation S under the Securities Act.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee,
any officer in the Corporate Trust Office of the Trustee including any vice
president, assistant vice president, assistant secretary, treasurer, assistant
treasurer, or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"RESTRICTED PAYMENT" means any of the following: (i) the declaration
or payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any Subsidiary of the Company or any payment made to the
direct or indirect holders (in their capacities as such) of Capital Stock of the
Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Capital
Stock) or in options, warrants or other rights to purchase such Capital Stock
(other than Disqualified Capital Stock), and (y) in the case of Subsidiaries of
the Company, dividends or distributions payable to the Company or to a Wholly
Owned Subsidiary of the Company), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company or any
of its Subsidiaries (other than Capital Stock owned by the Company or a Wholly
Owned Subsidiary of the Company, excluding Disqualified Capital Stock) or any
option, warrants or other rights to purchase such Capital Stock, (iii) the
making of any principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, of any
Indebtedness which is subordinated in right of payment to the Securities (other
than subordinated Indebtedness acquired in anticipation of satisfying a
scheduled sinking fund obligation, principal installment or final maturity, in
each case due within one year of the date of acquisition), (iv) the making of
any Investment or guarantee of any Investment in any Person other than a
Permitted Investment, and (v) forgiveness of any Indebtedness of an Affiliate of
the Company to the Company or a Subsidiary of the Company. For purposes of
determining the amount expended for Restricted Payments, cash distributed or
invested shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
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"RESTRICTED SECURITY" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; PROVIDED that the Trustee shall be entitled to request
and conclusively rely upon an Opinion of Counsel with respect to whether any
Security is a Restricted Security.
"RULE 144A" means Rule 144A under the Securities Act.
"SALE AND LEASE-BACK TRANSACTION" means any arrangement with any
Person providing for the leasing by the Company or any Subsidiary of the Company
of any real or tangible personal property, which property has been or is to be
sold or transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing.
"SECURITIES" means the Series A Securities and the Series B
Securities treated as a single class of securities, as amended or supplemented
from time to time in accordance with the terms of this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any successor statute or statutes thereto.
"SECURITYHOLDER" or "HOLDER" means the Person whose name a Security
is registered on the Registrar's books.
"SENIOR CREDIT FACILITY" means the Credit Agreement to be entered
into between the Company, the lenders party thereto in their capacities as
lenders thereunder and Canadian Imperial Bank of Commerce, New York Agency, as
agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by the
"Limitation on Additional Indebtedness" covenant) or adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"SERIES A SECURITIES" means the 10-7/8% Senior Discount Notes due
2004, Series A, of the Issuers issued pursuant to this Indenture and sold
pursuant to the Purchase Agreement.
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"SERIES B SECURITIES" means the 10-7/8% Senior Discount Notes due
2004, Series B, of the Issuers to be issued in exchange for the Series A
Securities pursuant to the Registered Exchange Offer and the Registration Rights
Agreement.
"SUBSIDIARY" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"TIA" means the Trust Indenture act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. GOVERNMENT OBLIGATIONS" shall have the meaning set forth in
Section 8.01.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"WHOLLY OWNED SUBSIDIARY" means any Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a
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part of, this Indenture. The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuers, any
Guarantor or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Series A Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of EXHIBIT A hereto,
which is hereby incorporated in and expressly made a part of this Indenture. The
Series B Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of EXHIBIT B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements (including notations relating to the
Guarantees) required by law, stock exchange rule or usage. The Issuers shall
approve the form of the Securities and any notation, legend or endorsement
(including notations relating to the Guarantees) on them; the Issuers shall
furnish any such legends, additions or endorsements to the Trustee in writing.
Each Security shall be dated the date of its authentication and shall show the
date of its issuance.
Securities initially offered and sold by the Initial Purchasers (i)
to Qualified Institutional Buyers in reliance on Rule 144A, (ii) to Accredited
Investors or (iii) in offshore transactions in reliance on Regulation S shall,
unless the applicable Holder requests Securities in the form of Certificated
Securities in registered form ("PHYSICAL SECURITIES") which shall be in
substantially the form set forth in EXHIBIT A), each to be issued initially in
the form of one or more permanent Global Securities in registered form,
substantially in the form set forth in EXHIBIT A, deposited with the Trustee, as
custodian for the Depository, and shall bear the legend set forth on EXHIBIT C.
One or more separate Global Securities shall be issued to represent Securities
held by (i) Qualified Institutional Buyers (a "QIB GLOBAL SECURITY"), (ii)
Accredited Investors (an "ACCREDITED INVESTOR GLOBAL SECURITY") and (iii)
Persons acquiring Securities in offshore transactions in reliance on Regulation
S (a "REGULATION S GLOBAL SECURITY"). The Issuers shall cause the QIB Global
Securities, Accredited Investor Global Securities and Regulation S Global
Securities to have separate CUSIP numbers. The aggregate principal amount of any
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided.
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SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers, or an Officer and an Assistant Secretary, of each
Issuer shall sign, or one Officer of each Issuer shall sign and one Officer or
an Assistant Secretary (each of whom shall, in each case, have been duly
authorized by all requisite corporate actions) of each Issuer shall attest to,
the Securities for the Issuers by manual or facsimile signature.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless. Each
Guarantor shall execute a Guarantee in the manner set forth in Section 11.07.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Series A Securities for original
issue in the aggregate principal amount at maturity not to exceed $175,000,000
and (ii) Series B Securities from time to time only in exchange for a like
principal amount at maturity of Series A Securities, in each case upon a written
order of the Issuers in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Securities to be authenticated, the
series of Securities and the date on which the Securities are to be
authenticated. The aggregate principal amount at maturity of Securities
outstanding at any time may not exceed $175,000,000 except as provided in
Section 2.07. Upon receipt of a written order of the Issuers in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in substitution
for Securities originally issued to reflect any name change of an Issuer.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuers to authenticate Securities. Unless otherwise provided
in the appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Issuers and Affiliates of the Issuers.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 principal amount at maturity and any integral
multiple thereof.
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SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("REGISTRAR"), (b)
Securities may be presented or surrendered for payment ("PAYING AGENT") and (c)
notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Issuers, upon notice to the Trustee, may have and one
or more additional Paying Agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. Each Issuer initially
appoints the agent of the Trustee identified in Section 4.02 as Registrar and
Paying Agent until such time as the Trustee has resigned or a successor has been
appointed. Neither the Issuers nor any Affiliate of the Issuers may act as
Paying Agent.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Issuers shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, or interest on, the Securities, and shall notify the Trustee of
any Default by the Issuers in making any such payment. The Issuers at any time
may require a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Issuers to the Paying Agent, the
Paying Agent shall have no further liability for such assets.
SECTION 2.05. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Issuers shall furnish to the
Trustee before each Record Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
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SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when Securities
are presented to the Registrar with a request to register the transfer of such
Securities or to exchange such Securities for an equal principal amount at
maturity of Securities of other authorized denominations of the same series, the
Registrar shall register the transfer or make the exchange as requested if its
requirements for such transaction are met; PROVIDED, HOWEVER, that the
Securities surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Issuers and the Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing. To permit registrations of transfers and exchanges,
the Issuers shall execute and the Trustee shall authenticate Securities at the
Registrar's written request. No service charge shall be made for any
registration of transfer or exchange, but the Issuers may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or other
governmental charge payable upon exchanges or transfers pursuant to Section
2.02, 2.10, 3.06, 3.07, 4.16, 4.17 or 9.05). The Registrar shall not be required
to register the transfer of or exchange of any Security (i) during a period
beginning at the opening of business 15 days before the mailing of a notice of
redemption of Securities and ending at the close of business on the day of such
mailing and (ii) selected for redemption in whole or in part pursuant to Article
Three, except the unredeemed portion of any Security being redeemed in part.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Depository
(or its agent), and that ownership of a beneficial interest in a Global Security
shall be required to be reflected in a book entry.
SECTION 2.07. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements are met. Each such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment of
both the Issuers and the Trustee, to protect the Issuers, the Trustee and any
Agent from any loss which any of them may suffer if a Security is replaced. The
Issuers may
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charge such Holder for its reasonable out-of-pocket expenses in replacing a
Security, including reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the
Issuers.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those cancelled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding because
either Issuer or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a BONA FIDE purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or the Final Maturity Date the Paying Agent
holds U.S. Legal Tender sufficient to pay all of the Accreted Value or principal
and interest due on the Securities payable on that date, then on and after that
date such Securities cease to be outstanding and Accreted Value ceases to
accrete and interest on them ceases to accrue, as the case may be.
SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount
at maturity of Securities have concurred in any direction, waiver or consent,
Securities owned by an Issuer, the Guarantors or any of their respective
Affiliates shall be disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that the Trustee knows are so owned shall be
disregarded.
The Trustee may require an Officers' Certificate listing Securities
owned by the Issuers, the Guarantors or their respective Affiliates.
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SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Issuers consider
appropriate for temporary Securities. Without unreasonable delay, the Issuers
shall prepare and the Trustee shall authenticate upon receipt of a written order
of the Company pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and shall dispose of all Securities surrendered
for transfer, exchange, payment or cancellation (subject to the registration
requirements of the Exchange Act) and shall deliver a certificate of destruction
to the Issuer. Subject to Section 2.07, the Issuers may not issue new Securities
to replace Securities that they have paid or delivered to the Trustee for
cancellation. If an Issuer or any Guarantor shall acquire any of the Securities,
such acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuers default in a payment of Accreted Value, principal or
interest on the Securities, they shall pay interest in cash on overdue Accreted
Value and principal and on overdue installments of interest (without regard to
any applicable grace periods) at the rate shown on the Security on each interest
payment date (to the holders of record of the applicable preceding Record Date).
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SECTION 2.13. CUSIP NUMBER.
The Issuers in issuing the Securities will use a "CUSIP" numbers and
the Trustee shall use the CUSIP numbers in notices of redemption or exchange as
a convenience to Holders; PROVIDED that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP numbers
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m. New York City time on each Interest Payment Date
and the Final Maturity Date, the Issuers shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or Final Maturity Date, as the case may
be, in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date or Final Maturity Date, as the case may
be. The Issuers shall deliver an Officer's Certificate to the Trustee no later
than 3 business days prior to any payment date when Damage Amounts (as defined
in the Registration Rights Agreement) are payable. Such certificate shall state
the dollar amount payable per $1,000 aggregate principal amount at maturity of
the Securities.
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in EXHIBIT C.
Members of, or participants in, the Depository ("PARTICIPANTS")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository, or the Trustee as its custodian, or
under any Global Security, and the Depository may be treated by the Issuers, the
Trustee and any agent of the Issuers or the Trustee as the absolute owner of any
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Issuers, the Trustee or any agent of the
Issuers or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depository or impair, as between the
Depository and Participants, the operation
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of customary practices governing the exercise of the rights of a holder of any
Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Issuers that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Issuers within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Issuers shall execute, and the Trustee shall upon written
instructions from the Issuers authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(b) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Securities.
SECTION 2.16. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF PHYSICAL SECURITIES. When Physical
Securities are presented to the Registrar with a request:
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(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal number of
Physical Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Indenture as set forth in this Section 2.16 for such
transactions are met; PROVIDED, HOWEVER, that the Physical Securities presented
or surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing; and
(II) in the case of Physical Securities the offer and sale of which
have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the sole discretion of the Issuers, by
the following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the Registrar
by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that
effect (substantially in the form of EXHIBIT D hereto); or
(B) if such Physical Security is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A, a
certification to that effect (substantially in the form of
EXHIBIT D hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification
to that effect (substantially in the form of EXHIBIT D hereto)
and a Transferee Certificate for Institutional Accredited
Investors substantially in the form of EXHIBIT E hereto; or
(D) if such Physical Security is being transferred in reliance
on Regulation S, delivery of a certification to that effect
(substantially in the form of EXHIBIT D hereto) and a
Transferee Cer-
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tificate for Regulation S Transfers substantially in the form
of EXHIBIT F hereto and an Opinion of Counsel reasonably
satisfactory to the Issuers to the effect that such transfer
is in compliance with the Securities Act; or
(E) if such Physical Security is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification
to that effect (substantially in the form of EXHIBIT D hereto)
and an Opinion of Counsel reasonably satisfactory to the
Issuers to the effect that such transfer is in compliance with
the Securities Act; or
(F) if such Physical Security is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially
in the form of EXHIBIT D hereto) and an Opinion of Counsel
reasonably acceptable to the Issuers to the effect that such
transfer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A PHYSICAL SECURITY FOR A BENEFICIAL
INTEREST IN A GLOBAL SECURITY. A Physical Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of a
Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(A) certification, substantially in the form of EXHIBIT D hereto,
that such Physical Security is being transferred (I) to a
Qualified Institutional Buyer, (II) to an Accredited Investor
or (III) in an offshore transaction in reliance on Regulation
S; and
(B) written instructions directing the Registrar or co-Registrar
to make, or to direct the Depository to make, an endorsement
on the applicable Global Security to reflect an increase in
the aggregate amount of the Securities represented by the
Global Security,
then the Registrar shall cancel such Physical Security and cause, or direct the
Depository to cause, in accordance with
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the standing instructions and procedures existing between the Depository and the
Registrar or co-Registrar, the principal amount at maturity of Securities
represented by the applicable Global Security to be increased accordingly. If no
Global Security representing Securities held by Qualified Institutional Buyers,
Accredited Investors or Persons acquiring Securities in offshore transactions in
reliance on Regulation S, as the case may be, is then outstanding, the Issuers
shall issue and the Trustee shall, upon written instructions from the Issuers in
accordance with Section 2.02, authenticate such a Global Security in the
appropriate principal amount. The Issuers shall take such other actions as may
be necessary to establish a Global Security.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
thought the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt by the Registrar of written instructions, or such other
instruction as is customary for the Depository, from the Depository or its
nominee, requesting the registration of transfer of an interest in a QIB Global
Security, an Accredited Investor Global Security or Regulation S Global
Security, as the case may be, to another type of Global Security, together with
the applicable Global Securities (or, if the applicable type of Global Security
required to represent the interest as requested to be transferred is not then
outstanding, only the Global Security representing the interest being
transferred), the Registrar shall cancel such Global Securities (or Global
Security) and the Issuers shall issue and the Trustee shall, upon written
instructions from the Issuers in accordance with Section 2.02, authenticate new
Global Securities of the types so cancelled (or the type so cancelled and
applicable type required to represent the interest as requested to be
transferred) reflecting the applicable increase and decrease of the principal
amount at maturity of Securities represented by such types of Global Securities,
giving effect to such transfer. If the applicable type of Global Security
required to represent the interest as requested to be transferred is not
outstanding at the time of such request, the Issuers shall issue and the Trustee
shall, upon written instructions from the Issuers in accordance with Section
2.02, authenticate a new Global Security of such type in principal amount at
maturity equal to the principal amount at maturity of the interest requested to
be transferred.
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(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
PHYSICAL SECURITY.
(i) Any Person having a beneficial interest in a Global Security may
upon request exchange such beneficial interest for a Physical Security.
Upon receipt by the Registrar of written instructions, or such other form
of instructions as is customary for the Depository, from the Depository or
its nominee on behalf of any Person having a beneficial interest in a
Global Security and upon receipt by the Trustee of a written order or such
other form of instructions as is customary for the Depository or the
Person designated by the Depository as having such a beneficial interest
containing registration instructions and, in the case of any such transfer
or exchange of a beneficial interest in Securities the offer and sale of
which have not been registered under the Securities Act, the following
additional information and documents:
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the
beneficial owner, a certification from such Person to
that effect (substantially in the form of EXHIBIT D
hereto); or
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule
l44A, a certification to that effect (substantially in
the form of EXHIBIT D hereto); or
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form
of EXHIBIT D hereto) and a Certificate for Institutional
Accredited Investors substantially in the form of
EXHIBIT E hereto; or
(D) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification
to that effect (substantially in the form of EXHIBIT
D hereto) and a Transferee Certificate for Regulation
S Transfers Substantially in the form of EXHIBIT F
hereto and an Opinion of Counsel reasonably
satisfactory to the Is-
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suers to the effect that such transfer is in compliance
with the Securities Act; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery
of a certification to that effect (substantially in the
form of EXHIBIT D hereto) and an Opinion of Counsel
reasonably satisfactory to the Issuers to the effect
that such transfer is in compliance with the Securities
Act; or
(F) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (substantially in the form of EXHIBIT D
hereto) and an Opinion of Counsel reasonably
satisfactory to the Issuers to the effect that such
transfer is in compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with
the standing instructions and procedures existing between the
Depository and the Registrar or co-Registrar, the aggregate
principal amount at maturity of the applicable Global Security to be
reduced and, following such reduction, the Issuers will execute and,
upon receipt of an authentication order in the form of an Officers'
Certificate in accordance with Section 2.02, the Trustee will
authenticate and deliver to the transferee a Physical Security.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(d) shall be registered in
such names and in such authorized denominations as the Depository,
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Registrar or co-Registrar in writing. The
Registrar or co-Registrar shall deliver such Physical Securities to the
Persons in whose names such Physical Securities are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee
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of the Depository or by the Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless, and the Trustee is hereby authorized by an
Officers' Certificate of the Issuers to deliver Securities without the Private
Placement Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Issuers and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act. Upon the effectiveness of a Registration Statement
covering the Securities or a change in the status of a Registration Statement
covering the Securities, the Issuers shall deliver an Officers' Certificate to
the Trustee notifying the Trustee of such change and instructing the Trustee of
the appropriate action to be taken in connection with such change.
(g) GENERAL. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16 as
required by law. The Issuers shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
SECTION 2.17. DESIGNATION.
The Indebtedness evidenced by the Securities and the Guarantees is
hereby irrevocably designated as "senior indebtedness" or such other term
denoting seniority for the purposes of any future Indebtedness of the Issuers or
a Guarantor which the Issuers or a Guarantor makes subordinate to any senior
indebtedness or such other term denoting seniority.
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ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Issuers elect to redeem Securities pursuant to Paragraph 5 or
Paragraph 6 of the Securities, they shall notify the Trustee in writing of the
Redemption Date, the Redemption Price and the principal amount at maturity of
Securities to be redeemed. The Issuers shall give notice of redemption to the
Paying Agent and Trustee at least 45 days but not more than 60 days before the
Redemption Date (unless a shorter notice shall be agreed to by the Trustee in
writing), together with an Officers' Certificate stating that such redemption
will comply with the conditions contained herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
In the event that less than all of the Securities are to be redeemed
at any time, selection of such Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a PRO RATA basis, by lot
(and in such manner as complies with applicable legal requirements) or by such
method as the Trustee shall deem fair and appropriate; PROVIDED, however, that
no Securities of a principal amount at maturity of $1,000 or less shall be
redeemed in part; and PROVIDED, FURTHER, that if a partial redemption is made
with the proceeds of a Public Equity Offering, selection of the Securities or
portions thereof for redemption shall be made by the Trustee only on a PRO RATA
basis or on as nearly a PRO RATA basis as is practicable (subject to the
procedures of the Depository), unless such method is otherwise prohibited.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Issuers
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount at maturity
thereof to be redeemed. Securities in denominations of $1,000 principal amount
at maturity or less may be redeemed only in whole. The Trustee may select for
redemption portions (equal to $1,000 principal amount at maturity or any
integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000 principal amount at maturity. Provisions of
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this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Issuers shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed at its registered
address. At the Issuers' request made at least 45 days before the Redemption
Date, the Trustee shall give the notice of redemption in the Issuers' name and
at the Issuers' expense. Each notice for redemption shall identify the
Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if
any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(5) that, unless the Issuers default in making the redemption
payment, principal of Securities called for redemption ceases to accrete
or interest on Securities called for redemption ceases to accrue, as the
case may be, on and after the Redemption Date, and the only remaining
right of the Holders of such Securities is to receive payment of the
Redemption Price, plus accrued and unpaid interest, if any, upon surrender
to the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount at maturity of such Security to be redeemed and that,
after the Redemption Date, and upon surrender of such Security, a new
Security or Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount at maturity of
Securities to be redeemed and the aggregate principal amount at maturity
of
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Securities to be outstanding after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the
Securities are to be redeemed; and
(9) that no representation is made as to correctness or accuracy of
the CUSIP number, if any, listed on such notice or printed on the
Security.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Securities called for redemption shall be paid at
the Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the close
of business on the relevant Record Dates.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before 10:00 a.m. New York Time on the Redemption Date, the
Issuers shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price of plus accrued interest, if any, on all Securities to be
redeemed on that date.
If the Issuers comply with the preceding paragraph, then, unless the
Issuers default in the payment of such Redemption Price plus accrued interest,
if any, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part only,
the Trustee shall upon written instruction from the Issuers authenticate for the
Holder a new Security or Securities in a principal amount at maturity equal to
the unredeemed portion of the Security surrendered.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Issuers, jointly and severally, will pay the Accreted Value or
principal of and interest on the Securities in the manner provided in the
Securities. An installment of Accreted Value or principal of or interest on the
Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent holds on that date U.S. Legal Tender designated for and sufficient
to pay the installment.
The Issuers, jointly and severally, will pay, to the extent such
payments are lawful, interest in cash on overdue Accreted Value or principal and
it shall pay interest on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the rate borne by the
Securities. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
Each of the Issuers will maintain in the Borough of Manhattan, The
City of New York, the office or agency required under Section 2.03 (which may be
an office or agency of the Trustee) where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Issuers in respect of the Securities and this Indenture may be served. The
Issuers shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Issuers
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 12.02. The Issuers hereby initially designate the office of
Wilmington Trust Company, c/o Harris Trust Company of New York, 88 Pine Street,
19th Floor, Wall Street Plaza, New York, New York 10005, as their office or
agency in the Borough of Manhattan, The City of New York.
SECTION 4.03. LIMITATION ON RESTRICTED PAYMENTS.
The Issuers will not make, and will not permit any of their
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
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(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Issuers could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 4.04; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 100% of the Company's Cumulative EBITDA
minus 1.4 times the Company's Cumulative Consolidated Interest Expense,
(2) 100% of the aggregate Net Proceeds received by the Company from the
issue or sale after the Issue Date of Capital Stock (other than
Disqualified Capital Stock or Capital Stock of the Company issued to any
Subsidiary of the Company) of the Company or any Indebtedness or other
securities of the Company convertible into or exercisable or exchangeable
for Capital Stock (other than Disqualified Capital Stock) of the Company
which has been so converted, exercised or exchanged, as the case may be,
and (3) without duplication of any amounts included in clause (c)(2)
above, 100% of the aggregate Net Proceeds received by the Company from any
equity contribution from a holder of the Company's Capital Stock,
excluding, in the case of clauses (c)(2) and (3), any Net Proceeds from a
Public Equity Offering to the extent used to redeem the Securities. For
purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount
thereof and property other than cash shall be valued at its fair market
value.
The provisions of this covenant shall not prohibit (i) the payment
of any distribution within 60 days after the date of declaration thereof, if at
such date of declaration such payment would comply with the provisions of this
Indenture, (ii) the repurchase, redemption or other acquisition or retirement of
any shares of Capital Stock of the Company or Indebtedness subordinated to the
Securities by conversion into, or by or in exchange for, shares of Capital Stock
of the Company (other than Disqualified Capital Stock), or out of the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other than
Disqualified Capital Stock), (iii) the redemption or retirement of Indebtedness
of the Company subordinated to the Securities in exchange for, by conversion
into, or out of the Net Proceeds of, a substantially concurrent sale
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or incurrence of Indebtedness of the Company (other than any Indebtedness owed
to a Subsidiary) that is contractually subordinated in right of payment to the
Securities to at least the same extent as the Indebtedness being redeemed or
retired, (iv) the retirement of any shares of Disqualified Capital Stock of the
Company by conversion into, or by exchange for, shares of Disqualified Capital
Stock of the Company, or out of the Net Proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of other shares of Disqualified
Capital Stock of the Company, (v) Permitted Tax Distributions and (vi) the
forfeit of a deposit that was a Permitted Investment under clause (viii) of the
definition of "Permitted Investment" at the time such deposit was made; provided
that in calculating the aggregate amount of Restricted Payments made subsequent
to the Issue Date for purposes of clause (c) of the immediately preceding
paragraph, amounts expended pursuant to clauses (i), (ii) and (vi) shall be
included in such calculation.
Not later than the date of making any Restricted Payment, the
Issuers shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant described above were computed, which
calculations may be based upon the Issuers' latest available financial
statements, and that no Default or Event of Default has occurred and is
continuing and no Default or Event of Default will occur immediately after
giving effect to any such Restricted Payments.
SECTION 4.04. Limitation on Incurrence of
ADDITIONAL INDEBTEDNESS.
The Issuers will not, and will not permit any of their Subsidiaries
to, directly or indirectly, incur (as defined) any Indebtedness (including
Acquired Indebtedness); PROVIDED that if no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness, the Issuers may incur Indebtedness (and the
Company and its Subsidiaries may incur Acquired Indebtedness) if after giving
effect to the incurrence of such Indebtedness and the receipt and application of
the proceeds thereof, the Issuers' Consolidated Leverage Ratio is less than 7.0
to 1. The accretion of original issue discount (and any accruals of interest) on
the Securities shall not be deemed an incurrence of Indebtedness for purposes of
this covenant.
Notwithstanding the foregoing, the Issuers and their Subsidiaries
may incur Permitted Indebtedness; PROVIDED that
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the Issuers will not incur any Permitted Indebtedness that ranks junior in right
of payment to the Securities that has a maturity or mandatory sinking fund
payment prior to the maturity of the Securities.
The Issuers will not, and will not permit any of their Subsidiaries
to, incur any Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated in right of payment to any other
Indebtedness of the Issuers or any of their Subsidiaries unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate in right of payment to the
Securities or the Guarantee of such Subsidiary, as the case may be, pursuant to
subordination provisions that are substantively identical to the subordination
provisions of such Indebtedness (or such agreement) that are most favorable to
the holders of any other Indebtedness of the Company or such Subsidiary, as the
case may be.
SECTION 4.05. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Company shall do
or cause to be done all things necessary to preserve and keep in full force and
effect its existence as a limited liability company or corporation and the
limited liability company, corporate, partnership or other existence of each of
its Subsidiaries in accordance with the respective organizational documents of
each such Subsidiary and the rights (charter and statutory) and material
franchises of the Company and each of its Subsidiaries; PROVIDED, HOWEVER, that
the Company shall not be required to preserve any such right or franchise, or
the corporate existence of any such Subsidiary, if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and each of its Subsidiaries, taken
as a whole, and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders.
SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or any of its Subsidiaries or
upon the income, profits or property of it or any of its Subsidiaries and (b)
all lawful claims for labor, materials and supplies which, in each case, if
unpaid, might by law become a material liability or Lien upon the property of it
or any of its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be
required to
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pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which appropriate provision has
been made.
SECTION 4.07. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall cause all material properties owned by or
leased by it or any of its Subsidiaries used or useful to the conduct of its
business or the business of any of its Subsidiaries to be improved or maintained
and kept in normal condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its judgment may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section 4.07 shall prevent the Company or any of its
Subsidiaries from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors of the Company or any such Subsidiary
concerned, or of an officer (or other agent employed by the Company or of any of
its Subsidiaries) of the Company or any of its Subsidiaries having managerial
responsibility for any such property, desirable in the conduct of the business
of the Company or any such Subsidiary, and if such discontinuance or disposal is
not adverse in any material respect to the Holders.
(b) The Company shall maintain, and shall cause its Subsidiaries to
maintain, insurance with responsible carriers against such risks and in such
amounts, and with such deductibles, retentions, self-insured amounts and
co-insurance provisions, as are customarily carried by similar businesses of
similar size, including property and casualty loss, workers' compensation and
interruption of business insurance.
SECTION 4.08. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Issuers shall deliver to the Trustee, within 90 days after
the close of each fiscal year and 45 days after the close of each of its first
three fiscal quarters an Officers' Certificate stating that a review of the
activities of the Company has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed and
fulfilled its obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of his knowledge the
Issuers during such preceding fiscal year or fiscal quarter, as the
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case may be, have kept, observed, performed and fulfilled each and every such
covenant and no Default or Event of Default occurred during such year or
quarter, as the case may be, and at the date of such certificate there is no
Default or Event of Default that has occurred and is continuing or, if such
signers do know of such Default or Event of Default, the certificate shall
describe its status with particularity. The Officers' Certificate shall also
notify the Trustee should the Company elect to change the manner in which it
fixes its fiscal year end.
(b) The Issuers shall deliver to the Trustee, forthwith upon
becoming aware of any Default or Event of Default in the performance of any
covenant, agreement or condition contained in this Indenture, an Officers'
Certificate specifying the Default or Event of Default and describing its status
with particularity.
SECTION 4.09. COMPLIANCE WITH LAWS.
The Company will comply, and will cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States, all states and municipalities thereof, and of
any governmental department, commission, board, regulatory authority, bureau,
agency and instrumentality of the foregoing, in respect of the conduct of their
respective businesses and the ownership of their respective properties, except
for such noncompliances as would not in the aggregate have a material adverse
effect on the financial condition or results of operations of the Company and
its Subsidiaries taken as a whole.
SECTION 4.10. COMMISSION REPORTS.
(a) The Issuers will file with the Commission all information,
documents and reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act, whether or not the Issuers are subject
to such filing requirements so long as the Commission will accept such filings.
The Issuers will file with the Trustee within 15 days after it files them with
the Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Issuers file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Upon
qualification of this Indenture under the TIA, the Issuers shall also comply
with the provisions of TIA ss. 314(a).
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(b) Regardless of whether the Issuers are required to furnish such
reports to its stockholders pursuant to the Exchange Act, the Issuers shall
cause their consolidated financial statements, comparable to that which would
have been required to appear in annual or quarterly reports, to be delivered to
the Trustee and the Holders. The Issuers will also make such reports available
to prospective purchasers of the Securities, securities analysts and
broker-dealers upon their request.
(c) For so long as any of the Securities remain outstanding, the
Issuers will make available to any prospective purchaser of the Securities or
beneficial owner of the Securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act during any
period when the Company is not subject to Section 13 or 15(d) under the Exchange
Act.
SECTION 4.11. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Issuers covenant (to the extent that they may lawfully do so)
that they will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Issuers from paying
all or any portion of the Accreted Value or principal of and/or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture, and (to the extent that they may lawfully do so) the Issuers hereby
expressly waive all benefit or advantage of any such law, and covenant that they
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 4.12. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Issuers will not, and will not permit any of their Subsidiaries
to, directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with any Affiliate
(each, an "AFFILIATE TRANSACTION") or extend, renew, waive or otherwise modify
the terms of any Affiliate Transaction entered into prior to the Issue Date
unless (i) such Affiliate Transaction is between or among the Issuers and their
Wholly Owned Subsidiaries; or (ii) the terms of such Affiliate Transaction are
fair and reasonable to the Issuers or such Sub-
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sidiary, as the case may be, and the terms of such Affiliate Transaction are at
least as favorable as the terms which could be obtained by the Issuers or such
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. In any Affiliate Transaction
(or any series of related Affiliate Transactions which are similar or part of a
common plan) involving an amount or having a fair market value in excess of $1
million which is not permitted under clause (i) above, the Issuers must obtain a
resolution of the Board of Directors of the Issuers certifying that such
Affiliate Transaction complies with clause (ii) above. In any Affiliate
Transaction (or any series of related Affiliate Transactions which are similar
or part of a common plan) involving an amount or having a fair market value in
excess of $5 million which is not permitted under clause (i) above, the Issuers
must obtain a favorable written opinion as to the fairness of such transaction
or transactions, as the case may be, from an Independent Financial Advisor.
The foregoing provisions will not apply to (i) any Restricted
Payment that is not prohibited by the provisions of Section 4.03, or (ii)
reasonable fees, compensation and equity incentives in the form of Capital Stock
(other than Disqualified Capital Stock) paid to and indemnity provided on behalf
of, officers, directors or employees of the Issuers or any Subsidiary of the
Issuers as determined in good faith by the Company's Board of Directors or
senior management or (iii) any agreement as in effect as of the Issue Date or
any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so long
as any such amendment or replacement agreement is not more disadvantageous to
the holders in any material respect than the original agreement as in effect on
the Issue Date or (iv) any affiliation agreements with the WB Television
Network.
SECTION 4.13. LIMITATION ON INVESTMENTS.
The Issuers will not, and will not permit any of their Subsidiaries
to, make any Investment other than (i) a Permitted Investment or (ii) an
Investment that is made as a Restricted Payment in compliance with Section 4.03
after the Issue Date.
SECTION 4.14. LIMITATION ON CAPITAL STOCK OF SUBSIDIARIES.
The Issuers will not (i) sell, pledge, hypothecate or otherwise
convey or dispose of any Capital Stock of a Subsidi-
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ary of the Company or (ii) permit any of its direct Subsidiaries to issue any
Capital Stock other than to the Issuers or a Wholly Owned Subsidiary of the
Issuers. The foregoing restrictions shall not apply to either (x) an Asset Sale
made in compliance with Section 4.17 or the issuance of Preferred Stock in
compliance with Section 4.18 or (y) a Permitted Lien. In no event will the
Company sell, pledge, hypothecate or otherwise convey or dispose of any Capital
Stock of Finance or will Finance sell any Capital Stock.
SECTION 4.15. LIMITATION ON LIENS.
The Issuers will not, and will not permit any of their Subsidiaries
to, create, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind (other than Permitted Liens) upon any property or asset of the
Issuers or any of their Subsidiaries or any shares of Capital Stock or
Indebtedness of any Subsidiary (other than Indebtedness of a Guarantor pledged
to secure other Indebtedness incurred in accordance with this Indenture) of the
Issuers which owns property or assets, now owned or hereafter acquired, unless
(i) if such Lien secures Indebtedness which is pari passu with the Securities or
the Guarantee of a Guarantor, then the Securities or such Guarantee, as the case
may be, are secured on an equal and ratable basis with the obligations so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness which is subordinated to the Securities
or the Guarantee of a Guarantor, any such Lien shall be subordinated to a Lien
securing the Securities or such Guarantee, as the case may be, to the same
extent as such Indebtedness is subordinated to the Securities.
SECTION 4.16. CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, the Issuers shall be
obligated to make an offer to purchase (the "CHANGE OF CONTROL OFFER") each
Holder's outstanding Securities at a purchase price (the "CHANGE OF CONTROL
PURCHASE PRICE") equal to (x) 101% of the Accreted Value thereof, if the Change
of Control Payment Date (as defined) is on or prior to September 30, 2000, or
(y) 101% of the principal amount at maturity, plus accrued and unpaid interest,
if any, to the Change of Control Payment Date, if the Change of Control Payment
Date is after September 30, 2000, in each case in accordance with the procedures
set forth below.
Within 20 days of the occurrence of a Change of Control, the Issuers
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News
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Service or similar business news service in the United States and (ii) send by
first-class mail, postage prepaid, to the Trustee and to each Holder of the
Securities, at the address appearing in the register maintained by the Registrar
of the Securities, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Securities tendered will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 days nor later than 45
days from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT
DATE"));
(3) that any Security not tendered will continue to accrete
Accreted Value or accrue interest, as the case may be;
(4) that, unless the Issuers default in the payment of the Change of
Control Purchase Price, any Securities accepted for payment pursuant to
the Change of Control Offer shall cease to accrete Accreted Value or
accrue interest, as the case may be, after the Change of Control Payment
Date;
(5) that Holders accepting the offer to have their Securities
purchased pursuant to a Change of Control Offer will be required to
surrender the Securities to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day preceding
the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Securities delivered for
purchase, and a statement that such Holder is withdrawing his or her
election to have such Securities purchased;
(7) that Holders whose Securities are being purchased only in part
will be issued new Securities equal in principal amount at maturity to the
unpurchased portion principal amount at maturity of the Securities
surrendered;
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(8) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment Securities or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Securities or portions thereof
so tendered and (iii) deliver or cause to be delivered to the Trustee Securities
so accepted together with an Officers' Certificate stating the Securities or
portions thereof tendered to the Issuers. The Paying Agent shall promptly mail
to each holder of Securities so accepted payment in an amount equal to the
purchase price for such Securities, and the Issuers shall execute and issue, and
the Trustee shall promptly authenticate and mail to such holder, a new Security
equal in principal amount at maturity to any unpurchased portion of the
Securities surrendered; PROVIDED that each such new Security shall be issued in
an original principal amount in denominations of $1,000 principal amount at
maturity and integral multiples thereof.
If either Issuer or any Subsidiary thereof has issued any
outstanding (i) Indebtedness that is subordinated in right of payment to the
Securities or (ii) Preferred Stock, and such Issuer or such Subsidiary is
required to make a change of control offer or to make a distribution with
respect to such subordinated Indebtedness or Preferred Stock in the event of a
Change of Control, the Issuers shall not consummate any such offer or
distribution with respect to such subordinated Indebtedness or Preferred Stock
until such time as the Issuers shall have paid the Change of Control Purchase
Price in full to the Holders of Securities that have accepted the Issuers'
Change of Control Offer and shall otherwise have consummated the Change of
Control Offer made to Holders of the Securities and the Issuers will not issue
Indebtedness that is subordinated in right of payment to the Securities or
Preferred Stock with change of control provisions requiring the payment of such
Indebtedness or Preferred Stock prior to the payment of the Securities in the
event of a Change in Control under this Indenture.
The Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with
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the provisions of this Indenture, the Issuers shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under this Indenture by virtue thereof.
SECTION 4.17. LIMITATION ON ASSET SALES.
The Issuers will not, and will not permit any of their Subsidiaries
to, consummate an Asset Sale unless (i) the Issuers or such applicable
Subsidiary, as the case may be, receives consideration at the time of such sale
or other disposition at least equal to the fair market value of the assets sold
or otherwise disposed of (as determined in good faith by the Board of Directors
of the Company, and evidenced by a board resolution); (ii) not less than 80% of
the consideration received by the Company or such applicable Subsidiary, as the
case may be, is in the form of cash or Cash Equivalents other than in the case
where the Company is undertaking a Permitted Asset Swap; and (iii) the Asset
Sale Proceeds received by the Company or such Subsidiary are applied (a) first,
to the extent the Company or any such Subsidiary, as the case may be, elects, or
is required, to prepay, repay or purchase indebtedness under the Senior Credit
Facility within 180 days following the receipt of the Asset Sale Proceeds from
any Asset Sale; PROVIDED that any such repayment shall result in a permanent
reduction of the commitments thereunder in an amount equal to the principal
amount so repaid; (b) second, to the extent of the balance of Asset Sale
Proceeds after application as described above, to the extent the Company elects,
to an investment in assets (including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or property of
another Person) used or useful in businesses similar or ancillary to the
business of the Company or any such Subsidiary as conducted on the Issue Date;
PROVIDED that (1) such investment occurs or the Company or any such Subsidiary
enters into contractual commitments to make such investment, subject only to
customary conditions (other than the obtaining of financing), within 180 days
following receipt of such Asset Sale Proceeds and (2) Asset Sale Proceeds so
contractually committed are so applied within 270 days following the receipt of
such Asset Sale Proceeds; and (c) third, if on such 180th day in the case of
clauses (iii)(a) and (iii)(b)(1) or on such 270th day in the case of clause
(iii)(b)(2) with respect to any Asset Sale, the Available Asset Sale Proceeds
exceed $5 million, the Company shall apply an amount equal to such Available
Asset Sale Proceeds to an offer to repurchase the Securities, at a purchase
price in cash equal to 100% of the Accreted Value thereof plus accrued and
unpaid interest, if any, to the purchase date (an "EXCESS PROCEEDS OFFER"). If
an Excess Proceeds Offer is not
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fully subscribed, the Company may retain the portion of the Available Asset Sale
Proceeds not required to repurchase Securities.
If the Issuers are required to make an Excess Proceeds Offer, the
Issuers shall mail, within 30 days following the date specified in clause
(iii)(c) above, a notice to the holders stating, among other things:
(1) that such holders have the right to require the Issuers to apply
the Available Asset Sale Proceeds to repurchase such Securities at a
purchase price in cash equal to (x) 100% of the Accreted Value thereof, if
the applicable purchase date is on or prior to September 30, 2000, or (y)
100% of the principal amount at maturity thereof, plus accrued and unpaid
interest, if any, to the purchase date, if the purchase date is after
September 30, 2000;
(2) the purchase date, which shall be no earlier than 30 days and
not later than 45 days from the date such notice is mailed;
(3) the instructions that each holder must follow in order to
have such Securities purchased;
(4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the purchase of such
Securities;
(5) that if the Accreted Value of Securities tendered in the Asset
Sale Offer exceeds the aggregate amount of Available Asset Sale Proceeds,
the Issuers shall select the Securities to be purchased on a pro rata
basis;
(6) that any Security not tendered will continue to accrete
Accreted Value and accrue interest;
(7) that, unless the Issuers default in making payment therefor, any
Security accepted for payment pursuant to the Asset Sale Offer shall cease
to accrete Accreted Value and accrue interest after the purchase date;
(8) that Holders electing to have a Security purchased pursuant to
the Asset Sale Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Asset Sale Offer purchase
date;
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(9) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Asset Sale Offer purchase date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount at maturity of the
Security the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased; and
(10) that Holders whose Securities are purchased only in part will
be issued new Securities in a principal amount at maturity equal to the
unpurchased portion of the Securities surrendered.
On or before the Asset Sale Offer purchase date, the Issuers shall
(i) accept for payment Securities or portions thereof tendered pursuant to the
Asset Sale Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price, plus accrued interest, if any, of all
Securities to be purchased and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail to the Holders of Securities so accepted payment in an amount equal to the
purchase price, plus accrued interest, if any, thereon. For purposes of this
Section 4.13, the Trustee shall act as the Paying Agent.
In the event of the transfer of substantially all of the property
and assets of the Issuers and their Subsidiaries as an entirety to a Person in a
transaction permitted under Article Five, the successor Person shall be deemed
to have sold the properties and assets of the Issuers and their Subsidiaries not
so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale.
The Issuers shall comply with all tender offer rules under state and
federal securities laws, including, but not limited to, Section 14(e) under the
Exchange Act and Rule l4e-1 thereunder, to the extent applicable to such offer.
To the extent that the provisions of any securities laws or regulations conflict
with the foregoing provisions of this Indenture, the Issuers shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the foregoing provisions of this Indenture by
virtue thereof.
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SECTION 4.18. Limitation on Preferred Stock of
SUBSIDIARIES.
The Issuers will not permit any of their Subsidiaries to issue any
Preferred Stock (except Preferred Stock issued to the Company or a Wholly Owned
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Subsidiary of the Company) to hold any such Preferred Stock unless
the Company or such Subsidiary would be entitled to incur or assume Indebtedness
under Section 4.04 (other than Permitted Indebtedness) in the aggregate
principal amount equal to the aggregate liquidation value of the Preferred Stock
to be issued.
SECTION 4.19. Limitation on Sale and Lease-Back
TRANSACTIONS.
The Issuers will not, and will not permit any of their Subsidiaries
to, enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined in good faith by the Board of
Directors of the Company and evidenced by a Board Resolution and (ii) the
Issuers could incur the Attributable Indebtedness in respect of such Sale and
Lease-Back Transaction in compliance with Section 4.04.
SECTION 4.20. LIMITATION ON CONDUCT OF BUSINESS.
The Issuers and their Subsidiaries will not engage in any businesses
which are not the same, similar or related to the businesses in which the
Company and its Subsidiaries are engaged in on the Issue Date.
SECTION 4.21. LIMITATION ON CREATION OF SUBSIDIARIES.
The Issuers shall not create or acquire, nor permit any of their
Subsidiaries to create or acquire, any Subsidiary other than a Subsidiary that
is acquired or created in connection with the acquisition by the Company of a
media related business or asset; PROVIDED, HOWEVER, that each Subsidiary
acquired or created shall at the time it has either assets or stockholder's
equity in excess of $5,000 have evidenced its Guarantee in accordance with
Article Eleven with such documentation satisfactory in form and substance to the
Trustee relating thereto as the Trustee shall require, including, without
limitation, a supplement or amendment to this Indenture and Opinions of Counsel
as to the enforceability of such Guarantee,
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pursuant to which such Subsidiary shall become a Guarantor in accordance with
Article Eleven.
SECTION 4.22. LIMITATION ON CONDUCT OF BUSINESS OF FINANCE.
Finance will not own any operating assets or other properties or
conduct any business other than to serve as an Issuer and an obligor on the
Securities.
SECTION 4.23. PAYMENTS FOR CONSENT.
The Issuers will not, and will not permit any of their Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any holder of any Securities for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Securities unless such consideration is
offered to be paid or agreed to be paid to all holders of the Securities which
so consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. MERGERS, CONSOLIDATIONS AND SALE OF ASSETS.
(a) Neither of the Issuers will consolidate with, merge with or
into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets (as an entirety or substantially as an entirety
in one transaction or a series of related transactions), to any Person unless
(in the case of the Company): (i) the Company shall be the continuing Person, or
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which the properties and assets of the Company
are sold, assigned, transferred, leased, conveyed or otherwise disposed of shall
be a corporation or a limited liability company organized and existing under the
laws of the United States or any State thereof or the District of Columbia and
shall expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company under this Indenture and the Securities and the obligations thereunder
shall remain in full force and effect; PROVIDED, that at any time the Company
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or its successor is a limited liability company, there shall be a co-issuer of
the Securities that is a corporation; (ii) immediately before and immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; (iii) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the Consolidated Net
Worth of the Company or the surviving entity as the case may be is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions; and (iv) immediately after giving effect
to such transaction on a pro forma basis the Company or such Person could incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under Section 4.04. In connection with any consolidation, merger or transfer of
assets contemplated by this provision, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
(b) For purposes of the foregoing paragraph (a), the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
(c) No Guarantor (other than a Guarantor whose Guarantee is to be
released in accordance with the terms of Section 4.17 shall consolidate or merge
with or into any other Person unless (i) the Person surviving such merger (if
other than the Guarantors) is a corporation or limited liability company
organized and existing under the laws of the United States or any State thereof
or the District of Columbia and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all of the obligations of such Guarantor under this Indenture and such
Guarantee and the obligations thereunder shall remain in full force and effect;
(ii) immediately before and immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; and (iii)
immediately after giving effect to such transaction on a pro forma basis, the
Consolidated Net Worth of the Company is at least
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equal to the Consolidated Net Worth of the Company immediately before such
transaction.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any such consolidation, merger, conveyance, lease or transfer
in accordance with the foregoing provisions of this Article Five, the successor
Person formed by such consolidation or into which the applicable Issuer is
merged or to which such conveyance, lease or transfer is made will succeed to,
and be substituted for, and may exercise every right and power of, such Issuer
under this Indenture and the Securities with the same effect as if such
successor had been named as such Issuer therein, and thereafter (except in the
case of a sale, assignment, transfer, lease, conveyance or other disposition)
the predecessor corporation will be relieved of all further obligations and
covenants under this Indenture, the Securities and the Registration Rights
Agreement; PROVIDED that solely for purposes of computing amounts described in
Section 4.03, any successor Person shall only be deemed to have succeeded to and
be substituted for such Issuer with respect to periods subsequent to the
effective time of such merger, consolidation or transfer of assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) there is a default in payment of any Accreted Value, principal
of, or premium, if any, on the Securities whether at maturity, upon
redemption or otherwise;
(b) there is a default for 30 days in payment of any interest on
the Securities;
(c) there is a default by the Issuers or any Subsidiary of the
Company in the observance or performance of any other covenant in the
Securities or this Indenture for 30 days after written notice from the
Trustee or the Holders of not less than 25% in aggregate principal amount
at maturity of the Securities then outstanding (except in the case of a
default with respect to Section 4.16 or Article Five which shall
constitute an Event of Default with such
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notice requirement but without such passage of time requirement);
(d) there is a failure to pay when due principal, interest or
premium in an aggregate amount of $5 million or more with respect to any
Indebtedness of the Issuers or any Subsidiary thereof, or the acceleration
of any such Indebtedness aggregating $5 million or more which default
shall not be cured, waived or postponed pursuant to an agreement with the
holders of such Indebtedness within 60 days after written notice as
provided in this Indenture, or such acceleration shall not be rescinded or
annulled within 20 days after written notice as provided in this
Indenture;
(e) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5 million shall be rendered against
the Issuers or any Subsidiary thereof, and shall not be discharged for any
period of 60 consecutive days during which a stay of enforcement shall not
be in effect;
(f) the Company or any of its Subsidiaries (i) admits in writing its
inability to pay its debts generally as they become due, (ii) commences a
voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (iii) consents to the entry of a judgment, decree or order for
relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (iv) consents to the appointment of a Custodian of it or
for substantially all of its property, (v) consents to or acquiesces in
the institution of a bankruptcy or an insolvency proceeding against it,
(vi) makes a general assignment for the benefit of its creditors or (vii)
takes any partnership or corporate action, as the case may be, to
authorize or effect any of the foregoing;
(g) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Subsidiaries in
an involuntary case or proceeding under any Bankruptcy Law, which shall
(i) approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of the Company or any of
its Subsidiaries, (ii) appoint a Custodian of the Company or any of its
Subsidiaries or for substantially all of any of their property or (iii)
order the winding-up or liquidation of its affairs; and such judgment,
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
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(h) any Guarantee ceases to be in full force and effect or any
Guarantee is declared to be null and void and unenforceable or any
Guarantee of a Significant Subsidiary is found to be invalid or any
Guarantor which is a Significant Subsidiary denies its liability under its
Guarantee (other than by reason of release of such Guarantor in accordance
with the terms of this Indenture).
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above) shall occur and be continuing, the Trustee or the
Holders of at least 25% in principal amount at maturity of outstanding
Securities may declare the Accreted Value of, premium, if any, and accrued and
unpaid interest, if any, on all the Securities to be due and payable by notice
in writing to the Issuers and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration", and the same shall become
immediately due and payable. If an Event of Default specified in clause (f) or
(g) above occurs and is continuing, then all unpaid Accreted Value of, and
premium, if any, and accrued and unpaid interest, if any, on all of the
outstanding Securities shall IPSO FACTO become and be immediately due and
payable without any declaration or other at on the part of the Trustee or any
Holder.
At any time after a declaration of acceleration with respect to the
Securities as described in the preceding paragraph, the Holders of a majority in
principal amount at maturity of the Securities may rescind and cancel such
declaration and its consequences (a) if the rescission would not conflict with
any judgment or decree, (b) if all existing Events of Default have been cured or
waived except nonpayment of Accreted Value, premium or interest that has become
due solely because of the acceleration, (c) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
Accreted Value, which has become due otherwise than by such declaration of
acceleration, has been paid, (d) if the Issuers have paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (e) in the event of the cure or waiver of an
Event of Default of the type described in clause (f) or (g) of the description
of Events of Default above, the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been cured
or waived. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of not less
than a majority in principal amount at maturity of the outstanding Securities by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of Accreted Value or principal of
or interest on any Security as specified in clauses (a) and (b) of Section 6.01.
The Issuers shall deliver to the Trustee an Officers' Certificate stating that
the requisite percentage of Holders have consented to such waiver and attaching
copies of such consents. When a Default or Event of Default is waived, it is
cured and ceases.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of not less than a majority in principal amount at
maturity of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. Subject to Section 7.01, however, the
Trustee may refuse to follow any direction that conflicts with any law or this
Indenture, that the Trustee determines may be unduly prejudicial to the rights
of another Securityholder, or that may involve the Trustee in personal
liability; PROVIDED that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole dis-
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cretion against any loss or expense caused by taking such action or following
such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holder or Holders of at least 25% in principal amount at
maturity of the outstanding Securities make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 30-day period the Holder or Holders of a majority in
principal amount at maturity of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of Accreted Value or principal of and interest on
a Security, on or after the respective due dates expressed in such Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of Accreted Value or principal or
interest specified in clause (a) or (b) of Section 6.01 occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust
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against the Issuers or any other obligor on the Securities for the whole amount
of Accreted Value or principal and accrued interest and fees remaining unpaid,
together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the rate PER ANNUM borne by the Securities and such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Issuers,
their creditors or their property and shall be entitled and empowered to collect
and receive any monies or other property payable or deliverable on any such
claims and to distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Securityholder to make such payments to
the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Securityholders, to pay to the Trustee any amount
due to it for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agent and counsel, and any other amounts due the Trustee
under Section 7.07. Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities
for Accreted Value or principal and interest, ratably, without
preference or priority of any kind, ac-
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cording to the amounts due and payable on the Securities for Accreted Value or
principal and interest, respectively; and
Third: to the Issuers or the Guarantors, as their respective
interests may appear.
The Trustee, upon prior notice to the Issuers, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount at maturity of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default actually known to the Trustee has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs. The Trustee will be
under no obligation to exercise any of its rights or powers under this Indenture
at the request of any of the Holders of Securities, unless they shall have
offered to the Trustee security and indemnity satisfactory to it.
(b) Except during the continuance of an Event of Default actually
known to a Responsible Officer the Trustee:
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(1) The Trustee need perform only those duties as are specifically
set forth herein and no others and no implied covenants or obligations
shall be read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions and such
other documents delivered to it pursuant to Section 12.04 hereof furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive an indemnity satisfactory to it in
its sole discretion against such risk, liability, loss, fee or expense which
might be incurred by it in compliance with such request or direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee
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need not be segregated from other funds except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel, which shall conform to
the provisions of Section 12.05. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than an agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion
of such counsel as to matters of law shall be full and complete
authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity satisfactory to it against the costs,
expenses and liabilities which may be incurred therein or thereby.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise
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deal with the Issuers, their respective Subsidiaries, or their respective
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for the Issuers' use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Issuers in this Indenture or
any document issued in connection with the sale of Securities or any statement
in the Securities other than the Trustee's certificate of authentication. The
Trustee makes no representations with respect to the effectiveness or adequacy
of this Indenture or the Securities.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to each
Securityholder, as their names and addresses appear on the Securityholder list
described in Section 2.05, notice of the uncured Default or Event of Default
within 60 days after the Trustee receives such notice. Except in the case of a
Default or an Event of Default in payment of principal of, or interest on, any
Security, including the failure to make payment on (i) the Change of Control
Payment Date pursuant to a Change of Control Offer or (ii) the Asset Sale Offer
payment date pursuant to an Asset Sale Offer, or the Trustee may withhold the
notice if and so long as the board of directors, the executive committee, or a
trust committee of directors and/or Responsible Officers, of the Trustee in good
faith determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
This Section 7.06 shall not be operative as a part of this Indenture
until this Indenture is qualified under the TIA, and, until such qualification,
this Indenture shall be construed as if this Section 7.06 were not contained
herein.
Within 60 days after each October 1, the Trustee shall, to the
extent that any of the events described in TIA ss. 313(a) occurred within the
previous twelve months, but not otherwise, mail to each Securityholder a brief
report dated as
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of such October 1 that complies with TIA ss. 313(a). The Trustee also shall
comply with TIA ss.ss. 313(b) 313(c) and 313(d).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Issuers and filed with the Commission and each securities
exchange, if any, on which the Securities are listed.
The Issuers shall notify the Trustee if the Securities become listed
on any securities exchange or of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuers shall pay to the Trustee from time to time such
compensation for its services hereunder (which shall be agreed to from time to
time by the Issuers and the Trustee). The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Issuers, jointly and severally, shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances (including reasonable fees and
expenses of counsel) incurred or made by it in addition to the compensation for
its services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or willful misconduct. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 8.01 hereof.
The Issuers, jointly and severally, shall indemnify the Trustee and
each predecessor trustee for, and hold it harmless against, any loss, liability,
claim, damage or expense incurred by the Trustee without negligence or willful
misconduct on its part arising out of or in connection with the administration
of this trust and its duties under this Indenture, including the reasonable
expenses and attorneys' fees of defending itself against any claim of liability
arising hereunder. The Trustee shall notify the Issuers promptly of any claim
asserted against the Trustee for which it may seek indemnity. However, the
failure by the Trustee to so notify the Issuers shall not relieve the Issuers of
their obligations hereunder. The Issuers shall defend the claim and the Trustee
shall cooperate in the defense (and may employ its own counsel) at the Issuers'
expense. The Issuers need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee as a result of the violation of this
Indenture by the Trustee if such violation arose from the Trustee's negligence
or willful misconduct.
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To secure the Issuers' payment obligations in this Section 7.07, the
Trustee shall have a senior claim and lien prior to the Securities against all
money or property held or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an Event
of Default specified in clause (f) or (g) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Issuers' obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Issuers' obligations pursuant to
Article Eight and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the Issuers in
writing. The Holders of a majority in principal amount at maturity of the
outstanding Securities may remove the Trustee by so notifying the Issuers and
the Trustee in writing and may appoint a successor trustee with the Issuers'
consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount at
maturity of the Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately after that,
the retiring Trustee shall
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transfer, after payment of all sums then owing to the Trustee pursuant to
Section 7.07, all property held by it as Trustee to the successor Trustee,
subject to the Lien provided in Section 7.07, the resignation or removal of the
retiring Trustee shall become effective, and the successor Trustee shall have
all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Securityholder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of at least 10% in principal amount at maturity of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuers' obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1) and 310(a)(5). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities,
or certificates of interest or participation in other securities, of the Issuers
are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
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SECTION 7.11. Preferential Collection of
CLAIMS AGAINST COMPANY.
The Trustee, in its capacity as Trustee hereunder, shall comply with
TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A
Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to
the extent indicated.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Issuers may, at their option by Board Resolutions, at any
time, with respect to the Securities, elect to have either paragraph (b) or
paragraph (c) below be applied to the outstanding Securities upon compliance
with the conditions set forth in paragraph (d).
(b) Upon the Issuers' exercise under paragraph (a) of the option
applicable to this paragraph (b), the Issuers and the Guarantors shall be deemed
to have been released and discharged from their obligations with respect to the
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "LEGAL DEFEASANCE"). For this purpose, such Legal Defeasance means
that the Issuers shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections and matters
under this Indenture referred to in (i) and (ii) below, and to have satisfied
all its other obligations under such Securities and this Indenture insofar as
such Securities are concerned, except for the following which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Securities to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of and interest on such Securities when such payments
are due and any Guarantor's obligations in respect thereof, and (ii) obligations
listed in Section 8.03, subject to compliance with this Section 8.01. The
Issuers may exercise their option under this paragraph (b) notwithstanding the
prior exercise of its option under paragraph (c) below with respect to the
Securities.
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(c) Upon the Issuers' exercise under paragraph (a) of the option
applicable to this paragraph (c), the Issuers shall be released and discharged
from its obligations under any covenant contained in Article Five and in
Sections 4.03 through 4.23 with respect to the outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"COVENANT DEFEASANCE"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, the Issuers, their Subsidiaries and any Guarantor
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01(c), nor shall any event referred to in
Section 6.01(d), (e), (h) or (i) thereafter constitute a Default or an Event of
Default thereunder but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Issuers shall have irrevocably deposited in trust with the
Trustee, pursuant to an irrevocable trust and security agreement in form
and substance satisfactory to the Trustee, U.S. Legal Tender or direct
non-callable obligations of, or non-callable obligations guaranteed by,
the United States of America for the payment of which obligation or
guarantee the full faith and credit of the United States of America is
pledged ("U.S. GOVERNMENT OBLIGATIONS") maturing as to principal and
interest in such amounts and at such times as are sufficient, without
consideration of the reinvestment of such interest and after payment of
all Federal, state and local taxes or other charges or assessments in
respect thereof payable by the Trustee, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof (in form and substance reasonably satisfactory to
the Trustee) delivered to the Trustee, to pay the principal of, premium,
if any, and interest on all the
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outstanding Securities on the dates on which any such payments are due and
payable in accordance with the terms of this Indenture and of the Securities;
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
(3) The Trustee shall have received Officers' Certificates stating
that no Default or Event of Default or event which with notice or lapse of
time or both would become a Default or an Event of Default with respect to
the Securities shall have occurred and be continuing on the date of such
deposit or, insofar as Section 6.01(f) or (g) is concerned, at any time
during the period ending on the 91st day after the date of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(4) The Trustee shall have received Officers' Certificates stating
that such deposit will not result in a Default under this Indenture or a
breach or violation of, or constitute a default under, any other material
instrument or agreement to which either Issuer or any of their
Subsidiaries is a party or by which it or its property is bound;
(5) (i) In the event the Issuers elect paragraph (b) hereof, the
Issuers shall deliver to the Trustee an Opinion of Counsel in the United
States, in form and substance reasonably satisfactory to the Trustee to
the effect that (A) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the Issue
Date, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel
shall state that Holders of the Securities will not recognize income gain
or loss for Federal income tax purposes as a result of such deposit and
the defeasance contemplated hereby and will be subject to Federal income
taxes in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred, or (ii) in the event the
Issuers elect paragraph (c) hereof, the Issuers shall deliver to the
Trustee an Opinion of Counsel in the United States, in form and substance
reasonably satisfactory to the Trustee, to the effect that Holders of the
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and the defeasance contemplated
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hereby and will be subject to Federal income tax in the same amounts and
in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred;
(6) The deposit shall not result in either Issuer, the Trustee or
the trust becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940;
(7) The Issuers shall have delivered to the Trustee an Officer's
Certificate, in form and substance reasonably satisfactory to the Trustee,
stating that the deposit under clause (1) was not made by the Issuers or
any Subsidiary of either Issuer with the intent of preferring the Holders
over any other creditors of the Issuers defeating, hindering, delaying or
defrauding any other creditors of the Issuers or any Subsidiary of either
Issuer or others;
(8) The Issuers shall have delivered to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, to
the effect that (A) the trust funds will not be subject to the rights of
holders of Indebtedness of either Issuer or any Guarantor other than the
Securities and (B) assuming no intervening bankruptcy of either Issuer
between the date of deposit and the 91st day following the deposit and
that no Holder of Securities is an insider of either Issuer, after the
passage of 90 days following the deposit, the trust funds will not be
subject to any applicable bankruptcy, insolvency, reorganization or
similar law affecting creditors' rights generally; and
(9) The Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by this
Section 8.01 have been complied with; PROVIDED, HOWEVER, that no deposit
under clause (1) above shall be effective to terminate the obligations of
the Issuers under the Securities or this Indenture prior to 90 days
following any such deposit.
In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Issuers must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Issuers.
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SECTION 8.02. SATISFACTION AND DISCHARGE.
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Securities, as expressly provided for in this Indenture) as to all
outstanding Securities when:
(1) either (a) all the Securities, theretofore authenticated and
delivered (except lost, stolen or destroyed Securities which have been
replaced or paid and Securities for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the Issuers and
thereafter repaid to the Issuers or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) all Securities not
theretofore delivered to the Trustee for cancellation have become due and
payable and the Issuers have irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Securities not theretofore
delivered to the Trustee for cancellation, for principal of, premium, if
any, and interest on the Securities to the date of deposit together with
irrevocable instructions from the Issuers directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case
may be;
(2) the Issuers have paid all other sums payable under this
Indenture by the Issuers; and
(3) the Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions
precedent under this Indenture relating to the satisfaction and discharge
of this Indenture have been complied with.
SECTION 8.03. SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this Indenture and
of the Securities referred to in Section 8.01 or 8.02, the respective
obligations of the Issuers and the Trustee under Sections 2.02, 2.03, 2.04,
2.05, 2.06, 2.07, 2.10, 2.12, 2.13, 4.01, 4.02, 6.07, Article Seven, Sections
8.05, 8.06 and 8.07 shall survive until the Securities are no longer
outstanding, and thereafter the obligations of the Issuers and the Trustee under
Sections 7.07, 8.05, 8.06 and 8.07 shall survive. Nothing contained in this
Article Eight shall abrogate any of the obligations or duties of the Trustee
under this Indenture.
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SECTION 8.04. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE.
Subject to Section 8.07, after (i) the conditions of Section 8.01 or
8.02 have been satisfied, (ii) the Issuers have paid or caused to be paid all
other sums payable hereunder by the Issuers and (iii) the Issuers have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Issuers' and the Guarantors' obligations under this Indenture except for those
surviving obligations specified in Section 8.03.
SECTION 8.05. APPLICATION OF TRUST ASSETS.
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it pursuant to this Article Eight in the irrevocable
trust established pursuant to Section 8.01. The Trustee shall apply the
deposited U.S. Legal Tender or the U.S. Government Obligations, together with
earnings thereon, through the Paying Agent, in accordance with this Indenture
and the terms of the irrevocable trust agreement established pursuant to Section
8.01, to the payment of principal of and interest on the Securities. The U.S.
Legal Tender or U.S. Government Obligations so held in trust and deposited with
the Trustee in compliance with Section 8.01 shall not be part of the trust
estate under this Indenture, but shall constitute a separate trust fund for the
benefit of all Holders entitled thereto.
SECTION 8.06. Repayment to the Issuers or
THE GUARANTORS; UNCLAIMED MONEY
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to
the Issuers , or if deposited with the Trustee by any Guarantor, to such
Guarantor, upon receipt by the Trustee of an Officers' Certificate, any excess
money, determined in accordance with Section 8.01, held by it at any time. The
Trustee and the Paying Agent shall pay to the Issuers or any Guarantor, as the
case may be, upon receipt by the Trustee or the Paying Agent, as the case may
be, of an Officers' Certificate, any money held by it for the payment of
principal, premium, if any, or interest that remains unclaimed for one year
after payment to the Holders is required; PROVIDED, HOWEVER, that the Trustee
and the Paying Agent before being required to make any payment may, but need
not, at the expense of the Issuers cause to be published once in a newspaper of
general circulation in the City of New York or mail to each Holder entitled
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to such money notice that such money remains unclaimed and that after a date
specified therein, which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining will
be repaid to the Issuers. After payment to the Issuers or any Guarantor, as the
case may be, Securityholders entitled to money must look solely to the Issuers
and the Guarantors for payment as general creditors unless an applicable
abandoned property law designates another Person, and all liability of the
Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with this Indenture by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then and only then the Issuers' and each Guarantor's, if any,
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had been made pursuant to this Indenture until
such time as the Trustee is permitted to apply all such U.S. Legal Tender or
U.S. Government Obligations in accordance with this Indenture; PROVIDED,
HOWEVER, that if the Issuers or the Guarantors, as the case may be, have made
any payment of principal of, premium, if any, or interest on any Securities
because of the reinstatement of its obligations, the Issuers or the Guarantors,
as the case may be, shall be, subrogated to the rights of the holders of such
Securities to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Issuers, the Guarantors and the Trustee, together, may amend or
supplement this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to evidence the succession in accordance with Article Five
hereof of another Person to an Issuer and the
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assumption by any such successor of the covenants of the such Issuer herein and
in the Securities;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(4) to make any other change that does not materially and
adversely affect the rights of any Securityholders;
(5) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA; or
(6) to add or release any Guarantor pursuant to the terms of
this Indenture.
PROVIDED that the Issuers have delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Issuers, the Guarantors and the
Trustee, together, with the written consent of the Holder or Holders of at least
a majority in aggregate principal amount at maturity of the outstanding
Securities, may amend or supplement this Indenture or the Securities, without
notice to any other Securityholders. Subject to Section 6.07, the Holder or
Holders of a majority in aggregate principal amount at maturity of the
outstanding Securities may waive compliance by the Issuers with any provision of
this Indenture or the Securities without notice to any other Securityholder.
Without the consent of each Securityholder affected, however, no amendment,
supplement or waiver, including a waiver pursuant to Section 6.04, may:
(i) reduce the amount of Securities whose Holders must consent
to an amendment, supplement, or waiver to this Indenture;
(ii) reduce the rate of or change the time for payment of
interest, including defaulted interest, on any Security;
(iii) reduce the Accreted Value of or premium on or change the stated
maturity of any Security or change the date on which any Securities may be
subject to redemption
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or repurchase or reduce the redemption or repurchase price therefor;
(iv) make any Security payable in money other than that stated in the
Security or change the place of payment from New York, New York;
(v) waive a default on the payment of the Accreted Value of,
interest on, or redemption payment with respect to any Security;
(vi) make any change in provisions of this Indenture protecting the
right of each Holder of Securities to receive payment of Accreted Value of
and interest on such Security on or after the due date thereof or to bring
suit to enforce such payment, or permitting Holders of a majority in
principal amount at maturity of Securities to waive Defaults or Events of
Default;
(vii) make any changes in Section 6.04, 6.07 or this Section 9.02;
(viii) modify or change any provision of this Indenture or the related
definitions affecting the ranking of the Securities or any Guarantee, in a
manner which adversely affects the Holders;
(ix) amend, modify or change in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the
event of a Change of Control or make and consummate an Excess Proceeds
Offer with respect to any Asset Sale that has been consummated or, modify
any of the provisions or definitions with respect thereto; or
(x) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms of
this Indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Issuers shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Issuers to mail such notice, or any defect therein, shall not, however, in
any
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way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. COMPLIANCE WITH TIA.
From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture, the Securities or the
Guarantees shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of his Security by notice to the
Trustee or the Issuers received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver.
The Issuers may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to revoke any consent previously given, whether or not such
Persons continue to be Holders after such record date. No such consent shall be
valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(i) through (x) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; PROVIDED that any such waiver
shall not impair or affect the right of any Holder to receive payment of
Accreted Value or principal of and interest on a Security, on or after the
respective due dates expressed in such Security, or to bring suit for the
enforcement of any such payment on or after such respective dates without the
consent of such Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a
Security, the Issuers may require the Holder of the Security to deliver it to
the Trustee. The Issuers may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Issuers or
the Trustee so determines, the Issuers in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and constitutes the legal, valid and binding obligations of the
Issuers enforceable in accordance with its terms. Such Opinion of Counsel shall
be at the expense of the Issuers, and the Trustee shall have a Lien under
Section 7.07 for any such expense.
ARTICLE TEN
[INTENTIONALLY OMITTED]
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. UNCONDITIONAL GUARANTEE.
Each Guarantor hereby unconditionally guarantees (such guarantee to
be referred to herein as a "GUARANTEE"), on a senior basis jointly and
severally, to each Holder of a Security authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, the Securities or the
Obligations of the Issuers hereunder or thereunder, that: (i) the Accreted Value
or principal of and interest on the Se-
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curities will be promptly paid in full when due, subject to any applicable grace
period, whether at maturity, by acceleration or otherwise and interest on the
overdue Accreted Value or principal, if any, and interest on any interest, to
the extent lawful, of the Securities and all other Obligations of the Company to
the Holders or the Trustee hereunder or thereunder will be promptly paid in full
or performed, all in accordance with the terms hereof and thereof; and (ii) in
case of any extension of time of payment or renewal of any Securities or of any
such other obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, subject to
any applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in Section 11.03. Each Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Indenture, the absence of
any action to enforce the same, any waiver or consent by any Holder of the
Securities with respect to any provisions hereof or thereof, the recovery of any
judgment against the Issuers, and action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of either Issuer, any right to require a proceeding first against
either Issuer, protest, notice and all demands whatsoever and covenants that
this Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture and in this Guarantee.
If any Securityholder or the Trustee is required by any court or otherwise to
return to the Issuers, any Guarantor, or any custodian, trustee, liquidator or
other similar official acting in relation to either Issuer or any Guarantor, any
amount paid by either Issuer or any Guarantor to the Trustee or such
Securityholder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor further agrees that, as
between each Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article Six, such
obligations (whether or not due and payable) shall forthwith become due and
payable by each Guarantor for the purpose of this Guarantee.
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SECTION 11.02. SEVERABILITY.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.03. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.05, result in the obligations of such Guarantor under the
Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 11.04. Guarantors May Consolidate,
ETC., ON CERTAIN TERMS.
(a) Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Guarantor with or into either
Issuer or another Guarantor or shall prevent any sale of assets or conveyance of
the property of a Guarantor as an entirety or substantially as an entirety, to
either Issuer or another Guarantor. Upon any such consolidation, merger, sale or
conveyance, the Guarantee given by such Guarantor shall no longer have any force
or effect.
(b) Upon the sale or disposition (whether by merger, stock purchase,
asset sale or otherwise) of a Guarantor (or all or substantially all its assets)
to a Person which is not a Subsidiary of the Company and which sale or
disposition is otherwise in compliance with Section 4.17 and the other terms of
this Indenture, such Guarantor shall be deemed released from all obligations
under this Article Eleven without any further action required on the part of the
Trustee or any Holder.
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The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Issuers accompanied by an Officers'
Certificate and Opinion of Counsel certifying as to the compliance with this
Section 11.04. Any Guarantor not so released remains liable for the full amount
of principal of and interest on the Securities as provided in this Article
Eleven.
SECTION 11.05. CONTRIBUTION.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "FUNDING GUARANTOR") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets (as
defined below) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Issuers' obligations with respect to the Securities or any other Guarantor's
obligations with respect to the Guarantee.
SECTION 11.06. WAIVER OF SUBROGATION.
Until all Guarantee Obligations are paid in full, each Guarantor
hereby irrevocably waives any claims or other rights which it may now or
hereafter acquire against the Issuers that arise from the existence, payment,
performance or enforcement of such Guarantor's obligations under the Guarantee
and this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in any
claim or remedy of any Holder of Securities against the Issuers, whether or not
such claim, remedy or right arises in equity, or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Issuers, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and the Securities shall not have been paid in full, such amount shall
have been deemed to have been paid to such Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Securities, and shall,
forthwith be paid to the Trustee for the benefit of such Holders to be credited
and applied upon the Securities, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by
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<PAGE>
this Indenture and that the waiver set forth in this Section 11.06 is knowingly
made in contemplation of such benefits.
SECTION 11.07. EXECUTION OF GUARANTEE.
To evidence their guarantee to the Securityholders set forth in this
Article Eleven, the Guarantors hereby agree to execute the Guarantee in
substantially the form included in the Securities, which shall be endorsed on
each Security ordered to be authenticated and delivered by the Trustee. Each
Guarantor hereby agrees that its Guarantee set forth in this Article Eleven
shall remain in full force and effect notwithstanding any failure to endorse on
each Security a notation of such Guarantee. Each such Guarantee shall be signed
on behalf of each Guarantor by two Officers, or an Officer and an Assistant
Secretary or one Officer shall sign and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to such Guarantee prior to the authentication of
the Security on which it is endorsed, and the delivery of such Security by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of such Guarantee on behalf of such Guarantor. Such signatures upon the
Guarantee may be by manual or facsimile signature of such officers and may be
imprinted or otherwise reproduced on the Guarantee, and in case any such officer
who shall have signed the Guarantee shall cease to be such officer before the
Security on which such Guarantee is endorsed shall have been authenticated and
delivered by the Trustee or disposed of by the Issuers, such Security
nevertheless may be authenticated and delivered or disposed of as though the
Person who signed the Guarantee had not ceased to be such officer of the
Guarantor.
SECTION 11.08. WAIVER OF STAY, EXTENSION OR USURY LAWS.
Each Guarantor covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive each such Guarantor from
performing its Guarantee as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) each such
Guarantor hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
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<PAGE>
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of Section 318(c) of the TIA, the imposed
duties shall control.
SECTION 12.02. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to an Issuer or a Guarantor:
c/o ACME Television Holdings, LLC
650 Town Center Drive
Suite 850
Costa Mesa, California 92626
Attention: President
Facsimile: (714) 445-5726
Telephone: (714) 445-5791
with copies to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Attention: Emanuel Faust, Jr., Esq.
Facsimile: (202) 887-0689
Telephone: (202) 785-9700
if to the Trustee:
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 10890
Attention: Corporate Trust Administration
Facsimile: (302) 651-8882
Telephone: (302) 651-1000
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Each of the Issuers and the Trustee by written notice to each other
such Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Issuers and the Trustee, shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and five (5) calendar days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be
mailed to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA ss. 312(b) with
other Securityholders with respect to their rights under this Indenture, the
Securities or the Guarantees. The Company, the Trustee, the Registrar and any
other Person shall have the protection of TIA ss. 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions PRECEDENT.
Upon any request or application by the Issuers to the Trustee to
take any action under this Indenture, the Issuers shall furnish to the Trustee
at the request of the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
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<PAGE>
SECTION 12.05. Statements Required in Certificate or
OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with; provided,
HOWEVER, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 12.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee, Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 12.07. LEGAL HOLIDAYS.
If a payment date is not a Business Day, payment may be made on the
next succeeding day that is a Business Day.
SECTION 12.08. GOVERNING LAW.
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES WILL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto agrees to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Indenture.
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<PAGE>
SECTION 12.09. No Adverse Interpretation of Other
AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of any of the Issuers or any of their respective Subsidiaries.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, equity holder or incorporator, as
such, of either Issuer shall not have any liability for any obligations of the
Issuers under the Securities, this Indenture or the Guarantees or for any claim
based on, in respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 12.11. SUCCESSORS.
All agreements of the Issuers and the Guarantors in this Indenture,
the Securities and the Guarantees shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 12.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each
signed copy or counterpart shall be an original, but all of them together shall
represent the same agreement.
SECTION 12.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture, in the
Securities or in the Guarantees shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
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<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and attested, all as of the date first written above.
THE ISSUERS:
ACME TELEVISION, LLC
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
----------------------
ACME FINANCE CORPORATION
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
---------------------
THE TRUSTEE:
WILMINGTON TRUST COMPANY,
as Trustee
By:/s/Bruce L. Bisson
----------------------------------
Name: Bruce L. Bisson
Title: Vice President
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<PAGE>
THE GUARANTORS:
ACME TELEVISION LICENSES OF
MISSOURI, INC.
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
ACME TELEVISION HOLDINGS OF OREGON, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
ACME TELEVISION HOLDINGS OF
TENNESSEE, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
94
<PAGE>
ACME TELEVISION HOLDINGS OF UTAH, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
ACME TELEVISION HOLDINGS OF NEW MEXICO,
LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
95
<PAGE>
ACME TELEVISION LICENSES OF OREGON, LLC
By: ACME Television Holdings
of Oregon, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
ACME TELEVISION LICENSES OF
TENNESSEE, LLC
By: ACME Television Holdings
of Tennessee, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
96
<PAGE>
ACME TELEVISION LICENSES OF
NEW MEXICO, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
ACME TELEVISION OF OREGON, LLC
By: ACME Television Holdings
of Oregon, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
---------------------
97
<PAGE>
ACME TELEVISION OF
TENNESSEE, LLC
By: ACME Television Holdings
of Tennessee, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
ACME SUBSIDIARY HOLDINGS III, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gelay
----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Thomas D. Allen
--------------------
98
<PAGE>
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITU-TIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER REGULATION D OF THE SECURITIES
ACT (AN "ACCREDITED INVESTOR")) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE ISSUERS OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF
BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (E) PUR-SUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE
IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE ISSUERS SUCH CERTIFICATES, LEGAL OPINIONS OR OTHER
INFOR-MATION AS ANY OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
<PAGE>
ACME TELEVISION, LLC
ACME FINANCE CORPORATION
10-7/8% Senior Discount Note
due September 30, 2004, Series A
THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF
SECTION 1271 ET SEQ. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 OF PRINCIPAL
AMOUNT OF MATURITY OF THIS SECURITY, THE ISSUE PRICE IS $727.83 AND THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT IS $272.17. THE ISSUE DATE OF THIS SECURITY IS
SEPTEMBER 30, 1997 AND THE YIELD TO MATURITY IS 10-7/8%.
CUSIP No.:
No. [ ] $[ ]
Each of ACME TELEVISION, LLC, a Delaware limited liability company
(the "Company"), and ACMC FINANCE CORPORATION, a Delaware corporation ("Finance"
and, together with the Company, the "Issuers"), for value received promises to
pay to [ ] or registered assigns, the principal sum of $[ ], on September 30,
2004.
Interest Payment Dates: March 31 and September 30 commencing
March 31, 2001
Record Dates: March 15 and September 15.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Issuers have caused this Security to be
signed manually or by facsimile by their respective duly authorized officers.
Dated:
ACME TELEVISION, LLC
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
2
<PAGE>
ACME FINANCE CORPORATION
By:________________________________________
Name:
Title:
By:________________________________________
Name:
Title:
3
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10-7/8% Senior Discount Notes due 2004, Series A,
described in the within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY,
as Trustee
By:______________________________________
Authorized Signatory
4
<PAGE>
(REVERSE OF SECURITY)
ACME TELEVISION, LLC
ACME FINANCE CORPORATION
10-7/8% Senior Discount Note
due September 30, 2004, Series A
1. INTEREST.
Each of ACME TELEVISION, LCC, a Delaware limited liability company
(the "Company"), and ACME FINANCE CORPORATION, a Delaware corporation ("Finance"
and, together with the Company, the "Issuers"), promises to pay to the
registered holder of this Security, until the principal hereof is paid or duly
provided for, interest on the principal amount set forth on the face of this
Security at a rate of 10-7/8% per annum commencing September 30, 2000. The
Accreted Value of the Securities shall increase in the manner provided in the
Indenture. Interest on the Securities will accrue from and including the most
recent date to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for, from and including September 30,
2000 through but excluding the date on which interest is paid or duly provided
for. Interest shall be payable in arrears on each March 31 and September 30 and
at stated maturity, commencing March 31, 2001. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The principal of this Security shall not bear or accrue interest
until September 30, 2000, except in the case of a default in payment of Accreted
Value or principal and/or premium, if any, upon acceleration, redemption or
purchase and, in such case, the overdue principal and any overdue premium shall
bear interest at the rate of 10-7/8% PER ANNUM (compounded semiannually on each
March 31 and September 30 (to the extent that the payment of such interest shall
be legally enforceable), from the dates such amounts are due until they are paid
or duly provided for. To the extent, but only to the extent, interest on amounts
in default constituting original issue discount prior to September 30, 2000 is
not permitted by law, original issue discount shall continue to accrete until
paid or duly provided for. On or after September 30, 2000, interest on overdue
principal and premium, if any, and, to the extent permitted by law, on overdue
installments of interest will accrue, until the principal and premium, if any,
is paid or duly provided for, at the rate of 10-7/8% PER ANNUM. Interest on any
overdue Accreted Value or principal or premium shall be payable on demand.
5
<PAGE>
2. METHOD OF PAYMENT.
The Issuers shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Issuers shall pay Accreted Value, principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Issuers may pay principal and interest by wire transfer of Federal funds, or
interest by check payable in such U.S. Legal Tender. The Issuers may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Wilmington Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar
without notice to the Holders.
4. INDENTURE AND GUARANTEES.
The Issuers issued the Securities under an Indenture, dated as of
September 30, 1997 (the "Indenture"), among the Issuers, the Guarantors and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect
on the date of the Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general obligations of the Issuers limited in aggregate principal
amount at maturity to $175,000,000. Payment on each Security is guaranteed on a
senior basis, jointly and severally, by the Guarantors pursuant to Article
Eleven of the Indenture.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Issuers' option, in whole
at any time or in part from time to time, on and after September 30, 2001 at the
following redemption prices
6
<PAGE>
(expressed as percentages of the principal amount at maturity) if redeemed
during the twelve-month period commencing on September 30 of the years set forth
below, plus, in each case, accrued interest thereon to the date of redemption:
YEAR PERCENTAGE
2001.......................... 105.438%
2002.......................... 102.719%
2003 and thereafter........... 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to September 30,
2000, the Issuers may, at their option, use the Net Proceeds of one or more
Public Equity Offerings to redeem up to 35% aggregate principal amount at
maturity of Securities at a redemption price equal to 110.875% of the Accreted
Value thereof; provided that at least 65% of the principal amount at maturity of
Securities originally issued remains outstanding immediately after giving effect
to any such redemption. In order to effect the foregoing redemption with the Net
Proceeds of a Public Equity Offering, the Issuers shall make such redemption not
more than 90 days after the consummation of such Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 principal amount at maturity or less may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $1,000 principal amount at
maturity or any integral multiple thereof) of Securities that have denominations
larger than $1,000 principal amount at maturity.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount at maturity thereof to be redeemed. A new Security in a
principal amount at maturity equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Security. On and after the Redemption Date, Accreted Value will cease to accrete
or interest will cease to accrue, as the case may be, on Securities or portions
thereof called for redemption.
7
<PAGE>
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Issuers will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the Accreted Value thereof (if on or prior to September
30, 2000) or 101% of the principal amount at maturity thereof (if after
September 30, 2000), plus accrued and unpaid interest, if any, as the case may
be, thereon to the date of repurchase.
9. LIMITATION ON DISPOSITION OF ASSETS.
The Issuers are, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their Accreted Value (if on or prior to
September 30, 2000) or 100% of their principal amount at maturity (if after
September 30, 2000), plus accrued and unpaid interest, if any, thereon to the
date of repurchase, as the case may be, with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 principal amount at maturity and integral multiples of
$1,000 principal amount at maturity. A Holder shall register the transfer of or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities or portions thereof
selected for redemption, except the unredeemed portion of any security being
redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. UNCLAIMED FUNDS.
If funds for the payment of Accreted Value or principal or interest
remain unclaimed for one year, the Trustee and the Paying Agent will repay the
funds to the Issuers at its request. After that, all liability of the Trustee
and such Paying Agent with respect to such funds shall cease.
8
<PAGE>
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Issuers and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
15. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount at maturity of the
Securities then outstanding, and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount at maturity of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture, the Securities and the Guarantees to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Securities in addition to or in place of certificated Securities
or comply with any requirements of the Commission in connection with the
qualification of the Indenture under the TIA, or make any other change that does
not materially adversely affect the rights of any Holder of a Security.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of Subsidiaries, to sell assets, to consolidate, merge or sell all
or substantially all of its assets, to engage in transactions with affiliates or
to engage in certain businesses. The limitations are subject to a number of
important qualifications and exceptions. The Issuers must report quarterly to
the Trustee on compliance with such limitations.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of Securities
then outstanding may declare all the Securities to be due and payable
immediately in the manner
9
<PAGE>
and with the effect provided in the Indenture. Holders of Securities may not
enforce the Indenture, the Securities or the Guarantees except as provided in
the Indenture. The Trustee is not obligated to enforce the Indenture, the
Securities or the Guarantees unless it has received indemnity satisfactory to
it. The Indenture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount at maturity of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
17. TRUSTEE DEALINGS WITH ISSUERS.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Issuers, their respective Subsidiaries or their respective Affiliates
as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No equity holder, director, officer, employee or incorporator, as
such, of the Issuers shall have any liability for any obligation of the Issuers
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
10
<PAGE>
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers have caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement, the Issuers will be
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Security shall have the right to exchange
this Series A Security for a Series B Security, which has been registered under
the Securities Act, in like principal amount at maturity and having terms
identical in all material respects as the Series A Securities. The Holders shall
be entitled to receive certain additional cash interest payments in the event
such exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
The Issuers will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture and the Registration
Rights Agreement. Requests may be made to: c/o ACME Television Holdings,
LLC, 650 Town Center Drive, Suite 850, Costa Mesa, CA 92626, Attn: President.
11
<PAGE>
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Security upon which this notation is endorsed and each hereinafter referred to
as a "Guarantor," which term includes any successor person under the Indenture)
have unconditionally guaranteed on a senior basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the Accreted Value or principal of and interest on the Securities,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue Accreted Value or principal and interest, if any, on
the Securities, to the extent lawful, and the due and punctual performance of
all other obligations of the Issuers to the Holders or the Trustee all in
accordance with the terms set forth in Article Eleven of the Indenture and (ii)
in case of any extension of time of payment or renewal of any Securities or any
of such other obligations, that the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise.
No equity holder, officer, director or incorporator, as such, past,
present or future, of any Guarantor shall have any liability under the Guarantee
by reason of his or its status as such stockholder, officer, director or
incorporator.
The Guarantees shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantees are noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
GUARANTORS:
ACME TELEVISION LICENSES OF
MISSOURI, INC.
By:_______________________________________
Name:
Title:
Attest: __________________
<PAGE>
ACME TELEVISION HOLDINGS OF OREGON, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:_______________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION HOLDINGS OF
TENNESSEE, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:_______________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION HOLDINGS OF UTAH, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:_______________________________________
Name:
Title:
Attest: __________________
<PAGE>
ACME TELEVISION HOLDINGS OF NEW MEXICO,
LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:_______________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION LICENSES OF OREGON, LLC
By: ACME Television Holdings
of Oregon, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:_______________________________________
Name:
Title:
Attest: __________________
<PAGE>
ACME TELEVISION LICENSES OF
TENNESSEE, LLC
By: ACME Television Holdings
of Tennessee, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:_______________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION LICENSES OF
NEW MEXICO, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:_______________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION OF OREGON, LLC
By: ACME Television Holdings
of Oregon, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
<PAGE>
By:_______________________________________
<PAGE>
Name:
Title:
Attest: __________________
ACME TELEVISION OF
TENNESSEE, LLC
By: ACME Television Holdings
of Tennessee, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:_______________________________________
Name:
Title:
Attest: __________________
ACME SUBSIDIARY HOLDINGS III, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:_______________________________________
Name:
Title:
Attest: __________________
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
_______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________________________
agent to transfer this Security on the books of the Issuers.
The agent may substitute another to act for him.
Dated:_________________________ Signed:__________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee: __________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuers
pursuant to Section 4.16 or Section 4.17 of the Indenture, check the appropriate
box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Issuers pursuant to Section 4.16 or Section 4.17 of the Indenture, state the
amount: $_____________
Date:_________________________ Your Signature:________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee: __________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
-10-
EXHIBIT B
[FORM OF SERIES B SECURITY]
ACME TELEVISION, LLC
ACME FINANCE CORPORATION
10-7/8% Senior Discount Note
due September 30, 2004, Series B
THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF
SECTION 1271 ET SEQ. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 OF PRINCIPAL
AMOUNT OF MATURITY OF THIS SECURITY, THE ISSUE PRICE IS $727.83 AND THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT IS $272.17. THE ISSUE DATE OF THIS SECURITY IS,
SEPTEMBER 30, 1997 AND THE YIELD TO MATURITY IS 10-7/8%.
CUSIP No.:
No. [ ] $[ ]
Each of ACME TELEVISION, LLC, a Delaware limited liability company
(the "Company"), and ACMC FINANCE CORPORATION, a Delaware corporation ("Finance"
and, together with the Company, the "Issuers"), for value received promises to
pay to [ ] or registered assigns, the principal sum of $[ ] Dollars, on
September 30, 2004.
Interest Payment Dates: March 31 and September 30, commencing
March 31, 2001
Record Dates: March 15 and September 15.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Issuers have caused this Security to be
signed manually or by facsimile by their respective duly authorized officers.
Dated:
ACME TELEVISION, LLC
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
By:________________________________________
Name:
Title:
ACME FINANCE CORPORATION
By:________________________________________
Name:
Title:
By:________________________________________
Name:
Title:
2
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10-7/8% Senior Discount Notes due 2004, Series B,
described in the within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY,
as Trustee
By:_____________________________________
Authorized Signatory
3
<PAGE>
(REVERSE OF SECURITY)
ACME TELEVISION, LLC
ACME FINANCE CORPORATION
10-7/8% Senior Discount Note
due September 30, 2004, Series B
1. INTEREST.
Each of ACME TELEVISION, LCC, a Delaware limited liability company
(the "Company"), and ACME FINANCE CORPORATION, a Delaware corporation ("Finance"
and, together with the Company, the "Issuers"), promises to pay to the
registered holder of this Security, until the principal hereof is paid or duly
provided for, interest on the principal amount set forth on the face of this
Security at a rate of 10-7/8% per annum commencing September 30, 2000. The
Accreted Value of the Securities shall increase in the manner provided in the
Indenture. Interest on the Securities will accrue from and including the most
recent date to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for, from and including September 30,
2000 through but excluding the date on which interest is paid or duly provided
for. Interest shall be payable in arrears on each March 31 and September 30 and
at stated maturity, commencing March 31, 2001. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The principal of this Security shall not bear or accrue interest
until September 30 2000, except in the case of a default in payment of Accreted
Value or principal and/or premium, if any, upon acceleration, redemption or
purchase and, in such case, the overdue principal and any overdue premium shall
bear interest at the rate of 10-7/8% PER ANNUM (compounded semiannually on each
March 31 and September 30) (to the extent that the payment of such interest
shall be legally enforceable), from the dates such amounts are due until they
are paid or duly provided for. To the extent, but only to the extent, interest
on amounts in default constituting original issue discount prior to September
30, 2000 is not permitted by law, original issue discount shall continue to
accrete until paid or duly provided for. On or after September 30, 2000,
interest on overdue principal and premium, if any, and, to the extent permitted
by law, on overdue installments of interest will accrue, until the principal and
premium, if any, is paid or duly provided for, at the rate of 10-7/8% PER ANNUM.
Interest on any overdue Accreted Value or principal or premium shall be payable
on demand.
4
<PAGE>
2. METHOD OF PAYMENT.
The Issuers shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are cancelled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Issuers shall pay Accreted Value, principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Issuers may pay principal and interest by wire transfer of Federal funds, or
interest by check payable in such U.S. Legal Tender. The Issuers may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Wilmington Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar
without notice to the Holders.
4. INDENTURE AND GUARANTEES.
The Issuers issued the Securities under an Indenture, dated as of
September 30, 1997 (the "Indenture"), among the Issuers, the Guarantors and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect
on the date of the Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general obligations of the Issuers limited in aggregate principal
amount at maturity to $175,000,000. Payment on each Security is guaranteed on a
senior basis, jointly and severally, by the Guarantors pursuant to Article
Eleven of the Indenture.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Issuers' option, in whole
at any time or in part from time to time, on and after September 30, 2001 at the
following redemption prices
5
<PAGE>
(expressed as percentages of the principal amount at maturity) if redeemed
during the twelve-month period commencing on September 30 of the years set forth
below, plus, in each case, accrued interest thereon to the date of redemption:
YEAR PERCENTAGE
2001.......................... 105.438%
2002.......................... 102.719%
2003 and thereafter........... 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to September 30,
2000, the Issuers may, at their option, use the Net Proceeds of one or more
Public Equity Offerings to redeem up to 35% aggregate principal amount at
maturity of Securities at a redemption price equal to 110.875% of the Accreted
Value thereof; provided that at least 65% of the principal amount at maturity of
Securities originally issued remains outstanding immediately after giving effect
to any such redemption. In order to effect the foregoing redemption with the Net
Proceeds of a Public Equity Offering, the Issuers shall make such redemption not
more than 90 days after the consummation of such Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 principal amount at maturity or less may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $1,000 principal amount at
maturity or any integral multiple thereof) of Securities that have denominations
larger than $1,000 principal amount at maturity.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount at maturity thereof to be redeemed. A new Security in a
principal amount at maturity equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Security. On and after the Redemption Date, Accreted Value will cease to accrete
or interest will cease to accrue, as the case may be, on Securities or portions
thereof called for redemption.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Issuers will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the Accreted Value thereof (if on or prior to September
30, 2000) or 101% of the principal amount at maturity thereof (if after
September 30, 2000), plus accrued and unpaid interest, if any, as the case may
be, thereon to the date of repurchase.
9. LIMITATION ON DISPOSITION OF ASSETS.
The Issuers are, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their Accreted Value (if on or prior to
September 30, 2000) or 100% of their principal amount at maturity (if after
September 30, 2000), plus accrued and unpaid interest, if any, thereon to the
date of repurchase, as the case may be, with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 principal amount at maturity and integral multiples of
$1,000 principal amount at maturity. A Holder shall register the transfer of or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities or portions thereof
selected for redemption, except the unredeemed portion of any security being
redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. UNCLAIMED FUNDS.
If funds for the payment of Accreted Value or principal or interest
remain unclaimed for one year, the Trustee and the Paying Agent will repay the
funds to the Issuers at its request. After that, all liability of the Trustee
and such Paying Agent with respect to such funds shall cease.
7
<PAGE>
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Issuers and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
14. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount at maturity of the
Securities then outstanding, and any existing Default or Event of Default or
compliance with any provision may be waived with the consent of the Holders of a
majority in aggregate principal amount at maturity of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture, the Securities and the Guarantees to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Securities in addition to or in place of certificated Securities
or comply with any requirements of the Commission in connection with the
qualification of the Indenture under the TIA, or make any other change that does
not materially adversely affect the rights of any Holder of a Security.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of Subsidiaries, to sell assets, to consolidate, merge or sell all
or substantially all of its assets, to engage in transactions with affiliates or
to engage in certain businesses. The limitations are subject to a number of
important qualifications and exceptions. The Issuers must report quarterly to
the Trustee on compliance with such limitations.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of Securities
then outstanding may declare all the Securities to be due and payable
immediately in the manner
8
<PAGE>
and with the effect provided in the Indenture. Holders of Securities may not
enforce the Indenture, the Securities or the Guarantees except as provided in
the Indenture. The Trustee is not obligated to enforce the Indenture, the
Securities or the Guarantees unless it has received indemnity satisfactory to
it. The Indenture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount at maturity of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
17. TRUSTEE DEALINGS WITH ISSUERS.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Issuers, their respective Subsidiaries or their respective Affiliates
as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No equity holder, director, officer, employee or incorporator, as
such, of the Issuers shall have any liability for any obligation of the Issuers
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
9
<PAGE>
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers have caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Issuers will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made
to: c/o ACME Television Holdings, LLC, 650 Town Center Drive, Suite 850,
Costa Mesa, CA 92626, Attn: President.
10
<PAGE>
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Security upon which this notation is endorsed and each hereinafter referred to
as a "Guarantor," which term includes any successor person under the Indenture)
have unconditionally guaranteed on a senior basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the Accreted Value or principal of and interest on the Securities,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue Accreted Value or principal and interest, if any, on
the Securities, to the extent lawful, and the due and punctual performance of
all other obligations of the Issuers to the Holders or the Trustee all in
accordance with the terms set forth in Article Eleven of the Indenture and (ii)
in case of any extension of time of payment or renewal of any Securities or any
of such other obligations, that the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise.
No equity holder, officer, director or incorporator, as such, past,
present or future, of any Guarantor shall have any liability under the Guarantee
by reason of his or its status as such stockholder, officer, director or
incorporator.
The Guarantees shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantees are noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
GUARANTORS:
ACME TELEVISION LICENSES OF
MISSOURI, INC.
By:________________________________________
Name:
Title:
Attest: __________________
<PAGE>
ACME TELEVISION HOLDINGS OF OREGON, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION HOLDINGS OF
TENNESSEE, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION HOLDINGS OF UTAH, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
Attest: __________________
<PAGE>
ACME TELEVISION HOLDINGS OF NEW MEXICO,
LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION LICENSES OF OREGON, LLC
By: ACME Television Holdings
of Oregon, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION LICENSES OF
TENNESSEE, LLC
By: ACME Television Holdings
of Tennessee, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
<PAGE>
Name:
Title:
Attest: __________________
ACME TELEVISION LICENSES OF
NEW MEXICO, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
Attest: __________________
ACME TELEVISION OF OREGON, LLC
By: ACME Television Holdings
of Oregon, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
Attest: __________________
<PAGE>
ACME TELEVISION OF
TENNESSEE, LLC
By: ACME Television Holdings
of Tennessee, LLC,
its majority member
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
Attest: __________________
ACME SUBSIDIARY HOLDINGS III, LLC
By: ACME Television, LLC,
its majority member
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
Attest: __________________
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
_______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________________________
agent to transfer this Security on the books of the Issuers.
The agent may substitute another to act for him.
Dated: ________________________ Signed:____________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee: __________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuers
pursuant to Section 4.16 or Section 4.17 of the Indenture, check the appropriate
box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Issuers pursuant to Section 4.16 or Section 4.17 of the Indenture, state the
amount: $_____________
Date: _______________________ Your Signature:________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee: __________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
<PAGE>
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10-7/8% Senior Discount Notes due 2004, Series A and
10-7/8% Senior Discount Notes due 2004, Series B (the
"Securities"), of ACME Television, LLC and ACME Finance
Corpo-RATION
This Certificate relates to $_______ principal amount of Securities
held in the form of* ___ a beneficial interest in a Global Security or* _______
Physical Securities by ______ (the "Transferor").
The Transferor:*
|_| has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
|_| has requested that the Registrar by written order to exchange or
register the transfer of a Physical Security or Physical Securities.
|X| In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of this Securities does not require registration under the
Securities Act of 1933, as amended (the "Act") because*:
|_| Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16(a)(II)(A) or Section
2.16(d)(i)(A) of the Indenture).
|_| Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
<PAGE>
|_| Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule
501 under the Act.
|_| Such Security is being transferred in reliance on Regulation S
under the Act
|_| Such Security is being transferred in reliance on Rule 144 under the
Act.
|_| Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 or Regulation S under the Act to a person other than an
institutional "accredited investor."
___________________________________________
[INSERT NAME OF TRANSFEROR]
By:_______________________________________
[Authorized Signatory]
Date: ____________________________
*Check applicable box.
<PAGE>
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
---------------, ----
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Re: ACME Television, LLC and ACME Finance Corporation (the "Issuers")
Indenture (the "Indenture") relating to 10-7/8% Senior Discount
Notes due 2004, Series A, or 10-7/8% Senior Discount Notes due 2004,
Series B (the "SECURITIES")
Ladies and Gentlemen:
In connection with our proposed purchase of Securities of the
Issuers, we confirm that:
1. We have received such information as we deem necessary in
order to make our investment decision.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture and
the undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities, we will do so only (A) to the
Issuers or any subsidiary thereof, (B) inside the United States in accordance
with Rule 144A under the Securities Act to a "qualified institutional buyer" (as
defined therein), (C) inside the United States to an institutional "accredited
investor" (as defined below) that, prior to such
<PAGE>
transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Trustee a signed letter substantially in the form hereof,
(D) outside the United States in accordance with Regulations S under the
Securities Act, (E) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing Securities from us a notice advising such purchaser
that resales of the Securities are restricted as stated herein.
4. We understand that, on any proposed resale of Securities, we will
be required to furnish to the Trustee and the Issuers, such certification, legal
opinions and other information as the Trustee and the Issuers may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for our account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
<PAGE>
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:_____________________________________
[Authorized Signatory]
<PAGE>
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
WITH REGULATION S TRANSFERS
---------------, ----
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Re: ACME Television, LLC and ACME Finance Corporation (the
"Issuers") 10-7/8% Senior Discount Notes due 2004,
Series A, and 10-7/8% Senior Discount Notes due 2004,
Series B (the "SECURITIES")
Dear Sirs:
In connection with our proposed sale of $____________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a
person in the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
<PAGE>
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:_______________________________________
[Authorized Signature]
ACME INTERMEDIATE HOLDINGS, LLC
and
ACME INTERMEDIATE FINANCE, INC.,
as Issuers,
AND
WILMINGTON TRUST COMPANY,
as Trustee
-----------------
INDENTURE
Dated as of September 30, 1997
----------------
$71,634,000 Principal Amount at Maturity
12% Senior Secured Discount Notes due 2005, Series A
12% Senior Secured Discount Notes due 2005, Series B
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
SECTION SECTION
310 (a)(1)................................................. 7.10
(a)(2)................................................. 7.10
(a)(3)................................................. N.A.
(a)(4)................................................. N.A.
(a)(5)................................................. 7.08; 7.10
(b).................................................... 7.08; 7.10;
12.02
(c).................................................... N.A.
311 (a).................................................... 7.11
(b).................................................... 7.11
(c).................................................... N.A.
312 (a).................................................... 2.05
(b).................................................... 12.03
(c).................................................... 12.03
313 (a).................................................... 7.06
(b)(1)................................................. 7.06
(b)(2)................................................. 7.06
(c).................................................... 7.06; 12.02
(d).................................................... 7.06
314 (a).................................................... 4.08; 4.10;
12.02
(b).................................................... 10.02
(c)(1)................................................. 7.02; 12.04;
12.05
(c)(2)................................................. 7.02; 12.04;
12.05
(c)(3)................................................. N.A.
(d).................................................... 10.02
(e).................................................... 12.05
(f).................................................... N.A.
315 (a).................................................... 7.01(b); 7.02
(b).................................................... 7.05; 12.02
(c).................................................... 7.01
(d).................................................... 6.05; 7.01(c);
7.02
(e).................................................... 6.11
316 (a)(last sentence)..................................... 2.09
(a)(1)(A).............................................. 6.05
(a)(1)(B).............................................. 6.04
(a)(2)................................................. 9.02
(b).................................................... 6.07
317 (a)(1)................................................. 6.08
(a)(2)................................................. 6.09
(b).................................................... 2.04
318 (a).................................................... 12.01
(c).................................................... 12.01
- ----------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Incorporation by Reference of TIA.............................25
SECTION 1.03. Rules of Construction.........................................26
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating...............................................26
SECTION 2.02. Execution and Authentication..................................27
SECTION 2.03. Registrar and Paying Agent....................................28
SECTION 2.04. Paying Agent To Hold Assets in Trust..........................28
SECTION 2.05. Securityholder Lists..........................................29
SECTION 2.06. Transfer and Exchange.........................................29
SECTION 2.07. Replacement Securities........................................30
SECTION 2.08. Outstanding Securities........................................30
SECTION 2.09. Treasury Securities...........................................31
SECTION 2.10. Temporary Securities..........................................31
SECTION 2.11. Cancellation..................................................31
SECTION 2.12. Defaulted Interest............................................32
SECTION 2.13. CUSIP Number..................................................32
SECTION 2.14. Deposit of Moneys.............................................32
SECTION 2.15. Book-Entry Provisions for Global Securities...................33
SECTION 2.16. Registration of Transfers and Exchanges.......................34
SECTION 2.17. Designation...................................................40
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee............................................40
SECTION 3.02. Selection of Securities To Be Redeemed........................40
SECTION 3.03. Notice of Redemption..........................................41
SECTION 3.04. Effect of Notice of Redemption................................42
SECTION 3.05. Deposit of Redemption Price...................................42
SECTION 3.06. Securities Redeemed in Part...................................43
-i-
<PAGE>
PAGE
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.........................................43
SECTION 4.02. Maintenance of Office or Agency...............................43
SECTION 4.03. Limitation on Restricted Payments.............................44
SECTION 4.04. Limitation on Incurrence of Additional Indebtedness...........45
SECTION 4.05. Corporate Existence...........................................46
SECTION 4.06. Payment of Taxes and Other Claims.............................47
SECTION 4.07. Maintenance of Properties and Insurance.......................47
SECTION 4.08. Compliance Certificate; Notice of Default.....................48
SECTION 4.09. Compliance with Laws..........................................48
SECTION 4.10. Commission Reports............................................48
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.......................49
SECTION 4.12. Limitation on Transactions with Affiliates....................50
SECTION 4.13. Limitation on Investments.....................................51
SECTION 4.14. Limitation on Capital Stock of Subsidiaries...................51
SECTION 4.15. Limitation on Liens...........................................51
SECTION 4.16. Change of Control.............................................51
SECTION 4.17. Limitation on Asset Sales.....................................54
SECTION 4.18. Limitation on Preferred Stock of Subsidiaries.................57
SECTION 4.19. Limitation on Sale and Lease-Back Transactions................58
SECTION 4.20. Limitation on Conduct of Business.............................58
SECTION 4.21. Limitation on Creation of Subsidiaries........................58
SECTION 4.22. Limitation on Conduct of Business of Finance..................58
SECTION 4.23. Payments for Consent..........................................58
SECTION 4.24. Impairment of Security Interest...............................59
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sale of Assets....................59
SECTION 5.02. Successor Corporation Substituted.............................60
-ii-
<PAGE>
PAGE
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.............................................61
SECTION 6.02. Acceleration..................................................62
SECTION 6.03. Other Remedies................................................63
SECTION 6.04. Waiver of Past Defaults.......................................64
SECTION 6.05. Control by Majority...........................................64
SECTION 6.06. Limitation on Suits...........................................64
SECTION 6.07. Rights of Holders To Receive Payment..........................65
SECTION 6.08. Collection Suit by Trustee....................................65
SECTION 6.09. Trustee May File Proofs of Claim..............................66
SECTION 6.10. Priorities....................................................66
SECTION 6.11. Undertaking for Costs.........................................67
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.............................................67
SECTION 7.02. Rights of Trustee.............................................69
SECTION 7.03. Individual Rights of Trustee..................................70
SECTION 7.04. Trustee's Disclaimer..........................................70
SECTION 7.05. Notice of Default.............................................70
SECTION 7.06. Reports by Trustee to Holders.................................71
SECTION 7.07. Compensation and Indemnity....................................71
SECTION 7.08. Replacement of Trustee........................................72
SECTION 7.09. Successor Trustee by Merger, Etc..............................74
SECTION 7.10. Eligibility; Disqualification.................................74
SECTION 7.11. Preferential Collection of Claims Against Company.............74
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance......................74
SECTION 8.02. Satisfaction and Discharge....................................78
SECTION 8.03. Survival of Certain Obligations...............................79
SECTION 8.04. Acknowledgment of Discharge by Trustee........................79
SECTION 8.05. Application of Trust Assets...................................79
SECTION 8.06. Repayment to the Issuers; Unclaimed Money.....................80
SECTION 8.07. Reinstatement.................................................80
-iii-
<PAGE>
PAGE
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders....................................81
SECTION 9.02. With Consent of Holders.......................................81
SECTION 9.03. Compliance with TIA...........................................83
SECTION 9.04. Revocation and Effect of Consents.............................83
SECTION 9.05. Notation on or Exchange of Securities.........................84
SECTION 9.06. Trustee To Sign Amendments, Etc...............................84
ARTICLE TEN
SECURITY
SECTION 10.01. Pledge and Security Documents................................85
SECTION 10.02. Certificates and Opinions....................................85
SECTION 10.03. Authorization of Actions To Be Taken by the
Trustee Under the Security Documents...................85
SECTION 10.04. Authorization of Receipt of Funds by the Trustee
Under the Security Documents...........................86
SECTION 10.05. Specified Releases of Collateral.............................86
SECTION 10.06. Termination of Security Interest.............................87
ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls.................................................88
SECTION 12.02. Notices......................................................88
SECTION 12.03. Communications by Holders with Other Holders.................89
SECTION 12.04. Certificate and Opinion as to Conditions Precedent...........89
SECTION 12.05. Statements Required in Certificate or Opinion................90
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar....................90
SECTION 12.07. Legal Holidays...............................................90
SECTION 12.08. Governing Law................................................91
SECTION 12.09. No Adverse Interpretation of Other Agreements................91
-iv-
<PAGE>
PAGE
SECTION 12.10. No Recourse Against Others...................................91
SECTION 12.11. Successors...................................................91
SECTION 12.12. Duplicate Originals..........................................91
SECTION 12.13. Severability.................................................91
Signatures..................................................................97
Exhibit A - Form of Series A Security
Exhibit B - Form of Series B Security
Exhibit C - Form of Legend for Global Securities
Exhibit D - Transfer Certificate
Exhibit E - Transferee Certificate for Institutional
Accredited Investors
Exhibit F - Form of Transferee Certificate for
Regulation S Transfers
Exhibit G - Securities Pledge Agreement
Note: This Table of Contents shall not, for any purpose, be deemed to be
part of the Indenture.
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INDENTURE dated as of September 30, 1997 among ACME INTERMEDIATE
HOLDINGS, LLC, a Delaware limited liability company (the "COMPANY"), and ACME
INTERMEDIATE FINANCE, INC., a Delaware corporation ("FINANCE" and, together with
the Company, jointly and severally, the "ISSUERS"), as Issuers, and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as Trustee (the "TRUSTEE").
The Issuers have duly authorized the creation of an issue of 12%
Senior Secured Discount Notes due 2005, Series A, and 12% Senior Secured
Discount Notes due 2005, Series B, to be issued in exchange for the 12% Senior
Notes due 2005, Series A, pursuant to the Registration Rights Agreement and, to
provide therefor, the Issuers have duly authorized the execution and delivery of
this Indenture. All things necessary to make the Securities, when duly issued
and executed by the Issuers and authenticated and delivered hereunder, the valid
and binding obligations of the Issuers and to make this Indenture a valid and
binding agreement of the Issuers, have been done.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACCRETED VALUE" means, as of any date prior to September 30, 2002,
an amount per $1,000 principal amount at maturity of Securities that is equal to
the sum of (a) $558.40 and (b) the portion of the excess of the principal amount
at maturity of each Security over $558.40 which shall have been amortized on a
daily basis and compounded semiannually on each March 31 and September 30 at the
rate of 12% per annum from the Issue Date through the date of determination
computed on the basis of a 360-day year of twelve 30-day months; and, as of any
date on or after September 30, 2002, the Accreted Value of each Security shall
mean the aggregate principal amount at maturity of such Security.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at
the time such Person becomes a Subsidiary or is merged into or consolidated with
any other Person or which is assumed in connection with the acquisition of
assets from such Per-
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son and, in each case, not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary or such
merger, consolidation or acquisition.
"AFFILIATE" means, with respect to any specific Person, any other
Person that directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. For
the purposes of this definition, "CONTROL" (including, with correlative
meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that, for purposes of Section 4.12, beneficial
ownership of at least 10% of the voting securities of a Person, either directly
or indirectly, shall be deemed to be control.
"AFFILIATE TRANSACTION" has the meaning set forth in Section 4.12.
"AGENT" means the Registrar or any Paying Agent.
"ASSET ACQUISITION" means (a) an Investment by the Issuers or any
Subsidiary of the Issuers in any other Person pursuant to which such Person
shall become a Subsidiary of the Issuers or any Subsidiary of the Issuers, or
shall be merged with or into the Issuers or any Subsidiary of the Issuers, or
(b) the acquisition by the Issuers or any Subsidiary of the Issuers of the
assets of any Person (other than a Subsidiary of the Issuers) which constitute
all or substantially all of the assets of such Person or comprise any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, assignment, transfer, lease or other disposition (including any Sale
and Lease-Back Transaction), other than to the Company or any of its Wholly
Owned Subsidiaries, in any single transaction or series of related transactions
of (a) any Capital Stock of or other equity interest in any Subsidiary of the
Company or (b) any other property or assets of the Company or of any Subsidiary
thereof; provided that Asset Sales shall not include (i) a transaction or series
of related transactions for which the Company or its Subsidiaries receive
aggregate consideration of less than $500,000 and (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under Article Five.
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"ASSET SALE PROCEEDS" means, with respect to any Asset Sale, (i)
cash received by the Issuers or any Subsidiary of the Issuers from such Asset
Sale (including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Subsidiary of the Issuers as a result of such Asset Sale, (d) repayment
of Indebtedness that is required to be repaid in connection with such Asset Sale
and (e) deduction of appropriate amounts to be provided by the Issuers or a
Subsidiary of the Issuers as a reserve, in accordance with GAAP, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by the Issuers or a Subsidiary after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other non-cash consideration received by the
Issuers or any Subsidiary of the Issuers from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash.
"ATTRIBUTABLE INDEBTEDNESS" in respect of a Sale and Lease-Back
Transaction means, as at the time of determination, the greater of (i) the fair
value of the property subject to such arrangement and (ii) the present value of
the notes (discounted at the rate borne by the Securities, compounded
semi-annually) of the total obligations of the lessee for rental payments during
the remaining term of the lease included in such Sale and Lease-Back Transaction
(including any period for which such lease has been extended).
"AVAILABLE ASSET SALE PROCEEDS" means, with respect to any Asset
Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not been
applied in accordance with clause (iii)(a) or (iii)(b), and that have not yet
been the basis for an Excess Proceeds Offer in accordance with clause (iii)(c),
of the first paragraph of Section 4.17.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means (i) in the case of a Person that is a
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors,
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board of managers, management committee or similar governing body or any
authorized committee thereof responsible for the management of the business and
affairs of such Person.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY" means any day other than a Saturday, Sunday or any
other day on which banking institutions in the City of New York or Wilmington,
Delaware are required or authorized by law or other governmental action to be
closed.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated and
whether or not voting) of corporate stock, partnership or limited liability
company interests or any other participation, right or other interest in the
nature of an equity interest in such Person including, without limitation,
Common Stock and Preferred Stock of such Person, or any option, warrant or other
security convertible into any of the foregoing.
"CAPITALIZED LEASE OBLIGATIONS" means with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the
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United States of American or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
A "CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the adoption of a plan relating to the liquidation or dissolution of
Holdings or the Company or Holdings shall cease to be the managing member of the
Company, (ii) prior to the consummation of an Initial Public Offering, the
Permitted Holders cease to be the beneficial owners (as defined under Rule 13d-3
or any successor rule or regulation promulgated under the Exchange Act) of at
least a majority of the total voting power of the Common Stock entitled to elect
the Board of Directors of Holdings, (iii) prior to the consummation of an
Initial Public Offering, the Permitted Holders shall cease collectively to
control at least a majority of the voting power of the Board of Directors of
Holdings and (iv) in connection with or after an Initial Public Offering, any
Person (including a Person's Affiliates and associates), other than a Permitted
Holder, becomes the beneficial owner of more than 20% of the total voting power
of the Common Stock of Holdings or the Company, and the Permitted Holders
beneficially own, in the aggregate, less than 30% of the total voting power of
Holdings or the Company, as the case may be.
"CHANGE OF CONTROL DATE" has the meaning set forth in Section
4.16.
"CHANGE OF CONTROL OFFER" has the meaning set forth in Section
4.16.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning set forth in
Section 4.16.
"COLLATERAL" means the Pledged Securities and all other assets and
property subject to the Lien of the Security Documents.
"COLLATERAL ACCOUNT" has the meaning set forth in Section 10.05.
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"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person,
for any period, the aggregate amount of interest which, in conformity with GAAP,
would be set forth opposite the caption "interest expense" or any like caption
on an income statement for such Person and its Subsidiaries on a consolidated
basis (including, but not limited to, (i) Redeemable Dividends, whether paid or
accrued, on Subsidiary Preferred Stock, (ii) imputed interest included in
Capitalized Lease Obligations, (iii) all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, (iv) the net costs associated with Interest Rate Agreements and other
hedging obligations, (v) amortization of other financing fees and expenses, (vi)
the interest portion of any deferred payment obligation, (vii) amortization of
discount or premium, if any, and (viii) all other non-cash interest expense
(other than interest amortized to cost of sales)) plus, without duplication, all
net capitalized interest for such period and all interest incurred or paid under
any guarantee of Indebtedness (including a guarantee of principal, interest or
any combination thereof) of any Person, plus the amount of all dividends or
distributions paid on Disqualified Capital Stock (other than dividends paid or
payable in shares of Capital Stock of the Company); PROVIDED that no such
expense relating to the Securities shall be included in the definition of
Consolidated Interest Expense.
"CONSOLIDATED LEVERAGE RATIO" means, with respect to any Person, the
ratio of (i) the sum of the aggregate outstanding amount of Indebtedness of such
Person and its Subsidiaries as of the date of calculation (the "TRANSACTION
DATE") on a consolidated basis determined in accordance with GAAP (provided that
the Securities shall not be considered to be outstanding Indebtedness for
purposes of the Consolidated Leverage Ratio) to (ii) such Person's EBITDA for
the four full fiscal quarters (the "FOUR QUARTER PERIOD") ending on or prior to
the date of determination for which financial statements are available. For
purposes of
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this definition, "EBITDA" shall be calculated after giving effect on a PRO FORMA
basis to (i) the incurrence or repayment of any Indebtedness of such Person or
any of its Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of such
Person or one of its Subsidiaries (including any Person who becomes a Subsidiary
as a result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness and also including any EBITDA (PROVIDED that
such EBITDA shall be included only to the extent includable pursuant to the
definition of "Consolidated Net Income") attributable to the assets which are
the subject of the Asset Acquisition or Asset Sale during the Four Quarter
Period) occurring during the Four Quarter Period or at any time subsequent to
the last day of the Four Quarter Period and on or prior to the Transaction Date,
as if such Asset Sale or Asset Acquisition (including the incurrence, assumption
or liability for any such Acquired Indebtedness) occurred on the first day of
the Four Quarter Period; PROVIDED that if any such Asset Acquisition relates to
the acquisition of a television broadcast station which is not an affiliate of a
Network and which had a negative Net Income for the Four Quarter Period, it may
be assumed, for purposes of such pro forma calculation, that the Net Income of
such station for such period was zero. If such Person or any of its Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if such Person or any Subsidiary or such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED, HOWEVER, that (a) the Net Income of any Person (the "other Person") in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the Net Income of such other Person to
be consolidated into the Net Income
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of the Person in question in accordance with GAAP) shall be included only to the
extent of the amount of dividends or distributions paid to the Person in
question or the Subsidiary, (b) for purposes of calculating Consolidated Net
Income in calculating EBITDA (x) for purposes of determining whether the Company
(but not any of its Subsidiaries) is able to incur Indebtedness pursuant to the
first paragraph of Section 4.04 and (y) for purposes of determining whether a
Restricted Payment identified in clauses (i), (ii), (iii) and (v) of the
definition of Restricted Payment can be made pursuant to Section 4.03, the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions shall be excluded to the extent of such restriction or limitation,
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net gain (but not loss) resulting from an Asset Sale by the Person in question
or any of its Subsidiaries other than in the ordinary course of business shall
be excluded, (d) extraordinary gains and losses shall be excluded, (e) income or
loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued) shall be excluded, and (f) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation prior
to such consolidation, merger or transfer of assets shall be excluded.
"CONSOLIDATED NET WORTH" means with respect to any Person at any
date, the consolidated stockholders' equity or members' capital of such Person
less the amount of such stockholders' equity or members' capital attributable to
Disqualified Capital Stock of such Person and its subsidiaries, as determined in
accordance with GAAP.
"COVENANT DEFEASANCE" has the meaning set forth in Section 8.01.
"CUMULATIVE CONSOLIDATED INTEREST EXPENSE" means, with respect to
any Person, as of any date of determination, Consolidated Interest Expense from
October 1, 1997 to the end of the Company's most recently ended full fiscal
quarter prior to such date, taken as a single accounting period.
"CUMULATIVE EBITDA" means, with respect to any Person, as of any
date of determination, EBITDA from October 1, 1997 to the end of such Person's
most recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
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"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"DEPOSITORY" means, with respect to the Securities issued in the
form of one or more Global Securities, The Depository Trust Company or another
Person designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of a Person or
a Subsidiary thereof which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Securities, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include any Preferred Stock of a Person or a Subsidiary of
such Person, with respect to either of which, under the terms of such Preferred
Stock, by agreement or otherwise, such Person or Subsidiary is obligated to pay
current dividends or distributions in cash during the period prior to the
maturity date of the Securities; provided, however, that (i) Preferred Stock of
a Person or any Subsidiary thereof that is issued with the benefit of provisions
requiring a change of control offer to be made for such Preferred Stock in the
event of a change of control of such Person or Subsidiary which provisions have
substantially the same effect as the provisions of Section 4.16 shall not be
deemed to be Disqualified Capital Stock solely by virtue of such provisions; and
(ii) Capital Stock of any limited liability company or other pass-through entity
for federal income tax purposes shall not be deemed to be Disqualified Capital
Stock solely by virtue of the fact that its holders are entitled to Permitted
Tax Distributions.
"EBITDA" means, with respect to any Person and its Subsidiaries, for
any period, an amount equal to (a) the sum of (i) Consolidated Net Income for
such period, plus (ii) the provision for taxes for such period based on income
or profits to the extent such income or profits were included in computing
Consolidated Net Income and any provision for taxes utilized in comput-
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ing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense
for such period (but only including Redeemable Dividends in the calculation of
such Consolidated Interest Expense to the extent that such Redeemable Dividends
have not been excluded in the calculation of Consolidated Net Income), plus (iv)
depreciation for such period on a consolidated basis, plus (v) amortization of
intangibles and television programming obligations (net of cash payments with
respect to television programming obligations) for such period on a consolidated
basis, plus (vi) any other non-cash items reducing Consolidated Net Income for
such period, minus (b) all non-cash items increasing Consolidated Net Income for
such period, all for such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP; provided, however, that, for
purposes of calculating EBITDA during any fiscal quarter, cash income from a
particular Investment of such Person shall be included only (x) if cash income
has been received by such Person with respect to such Investment during each of
the previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Cash Equivalents.
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"FAIR MARKET VALUE" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Company
delivered to the Trustee.
"FINAL MATURITY DATE" means September 30, 2005.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
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"GLOBAL SECURITY" means a security evidencing all or a portion of
the Securities issued to the Depository or its nominee in accordance with
Section 2.01 and bearing the legend set forth in EXHIBIT C.
"HOLDINGS" means ACME Television Holdings, LLC, a Delaware limited
liability company.
"INCUR" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "INCURRENCE," "INCURRED," "INCURRABLE" and "INCURRING" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"INDEBTEDNESS" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included (i) any Capitalized Lease Obligations of such Person,
(ii) obligations secured by a lien to which the property or assets owned or held
by such Person are subject, whether or not the obligation or obligations secured
thereby shall have been assumed, (iii) guarantees of items of other Persons
which would be included within this definition for such other Persons (whether
or not such items would appear upon the balance sheet of the guarantor), (iv)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (v) Disqualified Capital
Stock of such Person or any Subsidiary thereof, and (vi) obligations of any such
Person under any currency agreement or any Interest Rate Agreement applicable to
any of the foregoing (if and to the extent such currency agreement or Interest
Rate Agreement obligations would appear as a liability upon a balance sheet of
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such Person prepared in accordance with GAAP). The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation; provided that (i) the amount outstanding at any time of
any Indebtedness issued with original issue discount is the principal amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with GAAP
and (ii) Indebtedness shall not include any liability for federal, state, local
or other taxes. Notwithstanding any other provision of the foregoing definition,
(i) any trade payable arising from the purchase of goods or materials or for
services obtained and (ii) television programming obligations entered into in
the ordinary course of business shall not be deemed to be "Indebtedness" of the
Company or any of its Subsidiaries for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"INDEPENDENT FINANCIAL ADVISOR" means an investment banking firm of
national reputation in the United States (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"INITIAL PUBLIC OFFERING" means an underwritten public offering of
Common Stock of the Company or a Parent registered under the Securities Act
(other than a public offering registered on Form S-8 under the Securities Act)
that results in net proceeds of at least $25.0 million to the Company or such
Parent, as the case may be.
"INITIAL PURCHASER" means CIBC Wood Gundy Securities Corp.
"INSTITUTIONAL ACCREDITED INVESTOR" or "ACCREDITED INVESTOR" means
an institution that is an "accredited investor" as that term is defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act.
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"INTEREST PAYMENT DATE" means the stated maturity of an
installment of interest on the Securities.
"INTEREST RATE AGREEMENT" means, with respect to any Person, any
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement designed to protect the party indicated
therein against fluctuations in interest rates.
"INVESTMENTS" means, with respect of any Person, directly or
indirectly, any advance, account receivable (other than an account receivable
arising in the ordinary course of business of such Person), loan or capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others or otherwise), the
purchase of any Capital Stock, bonds, notes, debentures, partnership or joint
venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude (i) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices of such Person and (ii) the repurchase of securities of any Person by
such Person. For the purposes of Section 4.03, the amount of any Investment
shall be the original cost of such Investment plus the cost of all additional
Investments by the Issuers or any of their Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Issuers or any
Subsidiary of the Issuers sells or otherwise disposes of any Common Stock of any
direct or indirect Subsidiary of the Issuers such that, after giving effect to
any such sale or disposition, the Issuers no longer own, directly or indirectly,
greater than 50% of the outstanding Common Stock of such Subsidiary, the Issuers
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Common Stock of such
Subsidiary not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the Securities
under this Indenture.
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14
"LEGAL DEFEASANCE" has the meaning set forth in Section 8.01.
"LIEN" means, with respect to any property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"NET INCOME" means, with respect to any Person, for any period, the
net income (loss) of such Person determined in accordance with GAAP.
"NET PROCEEDS" means (a) in the case of any sale of Capital Stock by
or equity contribution to any Person, the aggregate net proceeds received by
such Person, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market value thereof, as determined in good faith by the Board of
Directors of such Person, at the time of receipt) and (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind for or into shares of Capital Stock of the Issuers which is not
Disqualified Capital Stock, the net book value of such outstanding securities on
the date of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder to such Person upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holders, e.g., on account of fractional shares and less all expenses
incurred by such Person in connection therewith).
"NETWORK" means (i) each of the American Broadcasting Company, CBS,
Inc., Fox Broadcasting Company, National Broadcasting Co., Inc., The WB
Television Network, United Paramount Network and (ii) any successor Person of a
Person identified in clause (i) of this definition.
"OBLIGATIONS" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"OFFICER" means, with respect to any Person (other than the
Trustee), the Chairman of the Board, the Chief Executive Of-
<PAGE>
15
ficer, the President, any Vice President, the Chief Financial Officer, the
Controller, or the Secretary of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed by two
Officers of each Issuer.
"OPINION OF COUNSEL" means a written opinion from legal counsel, who
may be counsel for the Company, which opinion and counsel are reasonably
acceptable to the Trustee.
"PARENT" means any Person which owns all or substantially all of
the Common Stock of the Company.
"PARTICIPANTS" has the meaning set forth in Section 2.15.
"PAYING AGENT" has the meaning set forth in Section 2.03.
"PERMITTED ASSET SWAP" means any transfer of properties or assets by
the Company or any of its Subsidiaries in which 90% of the consideration
received by the transferor consists of properties or assets (other than cash)
that will be used in the business of the transferor; provided, that (i) the
aggregate fair market value (as determined in good faith by the Board of
Directors of Holdings) of the property or assets being transferred by the
Company or such Subsidiary is not greater than the aggregate fair market value
(as determined in good faith by the Board of Directors) of the property or
assets received by the Company or such Subsidiary in such exchange and (ii) the
aggregate fair market value (as determined in good faith by the Board of
Directors) of all property or assets transferred by the Company and any of its
Subsidiaries in connection with exchanges in any period of twelve consecutive
months shall not exceed 15% of the total assets of the Company on the last day
of the preceding fiscal year.
"PERMITTED HOLDERS" means (i) BancBoston Capital, (ii) Alta
Communications, Inc., Alta Communications VI L.P., Alta-Com S by S, LLC, Alta
Subordinated Debt Partners III, L.P. (iii) CEA Capital Partners, CEA Capital
Partners USA, L.P., (iv) Trust Company of the West, (v) any Person controlled by
a Person identified in clauses (i)-(iv) of this definition, (vi) Jamie Kellner,
(vii) Douglas Gealy, (viii) Thomas Allen, (ix) ACME Parent and (x) any
partnership, corporation or other entity all of the partners, shareholders,
members or owners of which are any one or more of the foregoing.
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16
"PERMITTED INDEBTEDNESS" means:
(i) Indebtedness of the Company or any Subsidiary of the Company arising
under or in connection with the Senior Credit Facility in an aggregate
principal amount not to exceed $40 million outstanding at any time;
(ii) Indebtedness under the Subsidiary Senior Discount Notes;
(iii) Indebtedness under the Securities;
(iv) Indebtedness not covered by any other clause of this
definition which is outstanding on the Issue Date;
(v) Indebtedness of the Company to any Wholly Owned
Subsidiary and Indebtedness of any Wholly Owned Subsidiary to
the Company or another Wholly Owned Subsidiary;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebtedness and Capitalized Lease Obligations do not in
the aggregate exceed $20 million;
(vii) Interest Rate Agreements;
(viii) Refinancing Indebtedness;
(ix) fidelity and surety bonds incurred in the ordinary
course of business; and
(x) additional Indebtedness of the Company and its Subsidiaries not to
exceed $5 million in aggregate principal amount at any one time
outstanding.
"PERMITTED INVESTMENTS" means Investments made on or after the
Issue Date consisting of
(i) Investments by the Company, or by a Subsidiary thereof,
in the Company or a Subsidiary of the Company;
(ii) Investments by the Company, or by a Subsidiary thereof, in a Person,
if as a result of such In-
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17
vestment (a) such Person becomes a Subsidiary of the Company or (b) such
Person is merged, consolidated or amalgamated with or into, or transfers
or conveys substantially all of its assets to, or is liquidated into, the
Company or a Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) reasonable and customary loans made to employees in connection with
their relocation or for travel expenses or advances not to exceed $1
million in the aggregate at any one time outstanding;
(v) an Investment that is made by the Company or a Subsidiary thereof in
the form of any Capital Stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Company or such Subsidiary solely as partial consideration
for the consummation of an Asset Sale that is otherwise permitted under
Section 4.17;
(vi) Interest Rate Agreements entered into in the ordinary
course of the Company's or its Subsidiaries business;
(vii) options to purchase television broadcast station licenses and
related assets (or Capital Stock of Persons owning such assets) having an
exercise price of any amount not in excess of $100,000 entered into in
connection with the execution of local marketing agreements and
Investments pursuant to local marketing agreements to operate television
broadcast stations which are combined with such an option;
(viii) deposits made pursuant to legally binding agreements to acquire,
or pursuant to local marketing agreements with options to acquire
broadcast television station licenses and related assets (or Capital Stock
of Persons owning such assets), in an amount not to exceed 10% of the
purchase price; provided that the station to be acquired will be owned by
the Company or a Subsidiary upon consummation of the contemplated
acquisition and provided, further, that deposits made under this clause
shall cease to be treated as Permitted Investments upon forfeit of such
deposit for any reason; and
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18
(ix) additional Investments not to exceed $1 million at any
one time outstanding.
"PERMITTED LIENS" means the following types of Liens:
(a) Liens for taxes, assessments or governmental charges or claims
either (i) not delinquent or (ii) contested in good faith by appropriate
proceedings and as to which the Issuers shall have set aside on their
books such reserves as may be required pursuant to GAAP;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(d) judgment Liens not giving rise to an Event of Default;
(e) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Issuers;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(g) Liens securing Purchase Money Indebtedness of the Issuers;
provided, however, that (i) the Purchase Money Indebtedness shall not be
secured by any property or assets of the Issuers other than the property
and assets so acquired
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19
and (ii) the Lien securing such Indebtedness shall be created within 90
days of such acquisition;
(h) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(i) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Issuers, including rights of offset and set-off;
(j) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture; and
(k) Liens securing Acquired Indebtedness incurred in accordance with
Section 4.04 provided that (i) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by an Issuer and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by an Issuer
and (ii) such Liens do not extend to or cover any property or assets of an
Issuer other than the property or assets that secured the Acquired
Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of an Issuer and are no more favorable to the lienholders
than those securing the Acquired Indebtedness prior to the incurrence of
such Acquired Indebtedness by an Issuer.
"PERMITTED TAX DISTRIBUTIONS" means, subject to the limitations set
forth in clause (v) of the second paragraph of Section 4.03, distributions by
the Company to Holdings from time to time in an amount approximately equal to
the income tax liability for interest or penalties thereon) of the members of
Holdings resulting from (i) the taxable income of the Company (after taking into
account all of the Company's prior tax losses, to the extent such losses have
not previously been deemed to reduce the taxable income of the Company), based
on the approximate highest combined tax rate that applies to any one of such
members; and (ii) any audit of such member (or the Company or Holdings) with
respect to a prior taxable year and paid or payable by such member during the
most recent taxable year, as and to the extent that such amounts are
attributable to the member being allocated more taxable income than was
previously reported to such member as a result of any position taken by the
Company or by
<PAGE>
20
Holdings in determining and reporting its taxable income for the year in
question.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
"PHYSICAL SECURITIES" has the meaning set forth in Section 2.01.
"PLEDGE AGREEMENT" means the Security Pledge Agreement dated as of
the Issue Date between the Pledgors and the Trustee in the form attached hereto
as Exhibit G.
"PLEDGED SECURITIES" means (i) the Capital Stock of ACME Television
LLC and (ii) the Capital Stock of each Subsidiary of the Company directly owned
by the Company made subject to the Lien of this Indenture and the Security
Documents pursuant to Section 4.21.
"PLEDGOR " means each of the Company and ACME Subsidiary Holdings
II, LLC, as a Pledgor under the Pledge Agreement.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on
the Securities in the form set forth on Exhibit A.
"PROPERTY" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"PUBLIC EQUITY OFFERING" means a public offering by the Company or
any Parent of shares of its Common Stock (however designated and whether voting
or non-voting) and any and all rights, warrants or options to acquire such
Common Stock.
"PURCHASE AGREEMENT" means the purchase agreement dated as of
September 24, 1997 by and between the Issuers and the Initial Purchaser.
<PAGE>
21
"PURCHASE MONEY INDEBTEDNESS" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"RECORD DATE" means the applicable Record Date specified in the
Securities.
"REDEEMABLE DIVIDEND" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Securities.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the price fixed for such redemption, payable in immediately
available funds, pursuant to this Indenture and the Securities.
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company or its Subsidiaries
outstanding on the Issue Date or other Indebtedness permitted to be incurred by
the Company or its Subsidiaries pursuant to the first paragraph of Section 4.04
or by the Company or its Subsidiaries pursuant to clause (iii) of the definition
of "Permitted Indebtedness", but only to the extent that (i) the Refinancing
Indebtedness is subordinated to the Securities to at least the same extent as
the Indebtedness being refunded, refinanced or extended, if at all, (ii) the
Refinancing Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended, or (b) after the maturity
date of the Securities, (iii) the portion, if any, of the Refinancing
Indebtedness that is scheduled to mature on or prior to the maturity date of the
Securities has a weighted average life to maturity at the time such Refinancing
Indebtedness is incurred that is equal to or greater than the weighted average
life to maturity of the portion of the Indebtedness being refunded,
<PAGE>
22
refinanced or extended that is scheduled to mature on or prior to the maturity
date of the Securities, (iv) such Refinancing Indebtedness is in an aggregate
principal amount that is equal to or less than the sum of (a) the aggregate
principal amount then outstanding under the Indebtedness being refunded,
refinanced or extended, (b) the amount of accrued and unpaid interest, if any,
and premiums owed, if any, not in excess of preexisting prepayment provisions on
such Indebtedness being refunded, refinanced or extended and (c) the amount of
customary fees, expenses and costs related to the incurrence of such Refinancing
Indebtedness, and (v) such Refinancing Indebtedness is incurred by the same
Person that initially incurred the Indebtedness being refunded, refinanced or
extended, except that the Company may incur Refinancing Indebtedness to refund,
refinance or extend Indebtedness of any Wholly Owned Subsidiary of the Company.
"REGISTERED EXCHANGE OFFER" means the offer to exchange the Series B
Securities for all of the outstanding Series A Securities in accordance with the
Registration Rights Agreement.
"REGISTRAR" has the meaning set forth in Section 2.03.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated as of the Issue Date between the Issuers and the Initial
Purchaser.
"REGULATION S" means Regulation S under the Securities Act.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee,
any officer in the Corporate Trust Office of the Trustee including any vice
president, assistant vice president, assistant secretary, treasurer, assistant
treasurer, or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"RESTRICTED PAYMENT" means any of the following: (i) the declaration
or payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any Subsidiary of the Company or any payment made to the
direct or indirect holders (in their capacities as such) of Capital Stock of the
Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Capital
Stock) or in options, warrants or other rights to purchase such Capital Stock
(other than Disqualified
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23
Capital Stock), and (y) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly Owned Subsidiary of the
Company), (ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Subsidiaries (other than
Capital Stock owned by the Company or a Wholly Owned Subsidiary of the Company,
excluding Disqualified Capital Stock) or any option, warrants or other rights to
purchase such Capital Stock, (iii) the making of any principal payment on, or
the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Indebtedness which is subordinated in
right of payment to the Securities (other than subordinated Indebtedness
acquired in anticipation of satisfying a scheduled sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition), (iv) the making of any Investment or guarantee of any
Investment in any Person other than a Permitted Investment, and (v) forgiveness
of any Indebtedness of an Affiliate of the Company to the Company or a
Subsidiary of the Company. For purposes of determining the amount expended for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other than cash shall be valued at its fair market
value.
"RESTRICTED SECURITY" has the meaning set forth in Rule 144(a)(3)
under the Securities Act; PROVIDED that the Trustee shall be entitled to request
and conclusively rely upon an Opinion of Counsel with respect to whether any
Security is a Restricted Security.
"RULE 144A" means Rule 144A under the Securities Act.
"SALE AND LEASE-BACK TRANSACTION" means any arrangement with any
Person providing for the leasing by the Company or any Subsidiary of the Company
of any real or tangible personal property, which property has been or is to be
sold or transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing.
"SECURITIES" means the Series A Securities and the Series B
Securities treated as a single class of securities, as amended or supplemented
from time to time in accordance with the terms of this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any successor statute or statutes thereto.
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24
"SECURITY DOCUMENTS" means, collectively, the Pledge Agreement,
substantially in the form of Exhibit G hereto, and all other instruments
evidencing or creating any security interest in favor of the Trustee for the
benefit of the Holders, as the same may be amended from time to time in
accordance with their terms.
"SECURITYHOLDER" or "HOLDER" means the Person whose name a Security
is registered on the Registrar's books.
"SENIOR CREDIT FACILITY" means the Credit Agreement to be entered
into between ACME Television, LLC, the lenders party thereto in their capacities
as lenders thereunder and Canadian Imperial Bank of Commerce, New York Agency,
as agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by the
"Limitation on Additional Indebtedness" covenant) or adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"SERIES A SECURITIES" means the 12% Senior Secured Discount Notes
due 2005, Series A, of the Issuers issued pursuant to this Indenture and sold
pursuant to the Purchase Agreement.
"SERIES B SECURITIES" means the 12% Senior Secured Discount Notes
due 2005, Series B, of the Issuers to be issued in exchange for the Series A
Securities pursuant to the Registered Exchange Offer and the Registration Rights
Agreement.
"SUBSIDIARY" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise
<PAGE>
25
or if in accordance with GAAP such entity is consolidated with the first-named
Person for financial statement purposes.
"SUBSIDIARY SENIOR DISCOUNT NOTES " means the 10 7/8% Senior
Discount Notes due 2004 of ACME Television, LLC and ACME Finance Corporation.
"TIA" means the Trust Indenture act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. GOVERNMENT OBLIGATIONS" shall have the meaning set forth in
Section 8.01.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"WHOLLY OWNED SUBSIDIARY" means any Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuers or any
other obligor on the Securities.
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26
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Series A Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of EXHIBIT A hereto,
which is hereby incorporated in and expressly made a part of this Indenture. The
Series B Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of EXHIBIT B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Issuers shall approve the form of the Securities and any notation,
legend or endorsement on them; the Issuers shall furnish any such legends,
notations or endorsements to the Trustee in writing. Each Security shall be
dated the date of its authentication and shall show the date of its issuance.
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27
Securities initially offered and sold by the Initial Purchasers (i)
to Qualified Institutional Buyers in reliance on Rule 144A, (ii) to Accredited
Investors or (iii) in offshore transactions in reliance on Regulation S shall,
unless the applicable Holder requests Securities in the form of Certificated
Securities in registered form ("PHYSICAL SECURITIES") (which shall be in
substantially the form set forth in EXHIBIT A), each to be issued initially in
the form of one or more permanent Global Securities in registered form,
substantially in the form set forth in EXHIBIT A, deposited with the Trustee, as
custodian for the Depository, and shall bear the legend set forth on EXHIBIT C.
One or more separate Global Securities shall be issued to represent Securities
held by (i) Qualified Institutional Buyers (a "QIB GLOBAL SECURITY"), (ii)
Accredited Investors (an "ACCREDITED INVESTOR GLOBAL SECURITY") and (iii)
Persons acquiring Securities in offshore transactions in reliance on Regulation
S (a "REGULATION S GLOBAL SECURITY"). The Issuers shall cause the QIB Global
Securities, Accredited Investor Global Securities and Regulation S Global
Securities to have separate CUSIP numbers. The aggregate principal amount of any
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as
hereinafter provided.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers, or an Officer and an Assistant Secretary, of each
Issuer shall sign, or one Officer of each Issuer shall sign and one Officer or
an Assistant Secretary (each of whom shall, in each case, have been duly
authorized by all requisite corporate actions) of each Issuer shall attest to,
the Securities for the Issuers by manual or facsimile signature.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Series A Securities for original
issue in the aggregate principal amount at maturity not to exceed $71,634,000
and (ii) Series B Securities from time to time only in exchange for a like
principal amount at maturity
<PAGE>
28
of Series A Securities, in each case upon a written order of the Issuers in the
form of an Officers' Certificate. The Officers' Certificate shall specify the
amount of Securities to be authenticated, the series of Securities and the date
on which the Securities are to be authenticated. The aggregate principal amount
at maturity of Securities outstanding at any time may not exceed $71,634,000,
except as provided in Section 2.07. Upon receipt of a written order of the
Issuers in the form of an Officers' Certificate, the Trustee shall authenticate
Securities in substitution for Securities originally issued to reflect any name
change of an Issuer.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuers to authenticate Securities. Unless otherwise provided
in the appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Issuers and Affiliates of the Issuers.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 principal amount at maturity and any integral
multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("REGISTRAR"), (b)
Securities may be presented or surrendered for payment ("PAYING AGENT") and (c)
notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Issuers, upon notice to the Trustee, may have one or
more additional Paying Agents reasonably acceptable to the Trustee. The term
"Paying Agent" includes any additional Paying Agent. Each Issuer initially
appoints the agent of the Trustee identified in Section 4.02 as Registrar and
Paying Agent until such time as the Trustee has resigned or a successor has been
appointed. Neither the Issuers nor any Affiliate of the Issuers may act as
Paying Agent.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Issuers shall require each Paying Agent other than the Trustee
to agree in writing that each Paying Agent shall hold in trust for the benefit
of Holders or the Trustee all assets
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29
held by the Paying Agent for the payment of principal of, or interest on, the
Securities, and shall notify the Trustee of any Default by the Issuers in making
any such payment. The Issuers at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Issuers to the Paying Agent, the Paying Agent shall have no
further liability for such assets.
SECTION 2.05. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Issuers shall furnish to the
Trustee before each Record Date and at such other times as the Trustee may
request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of Holders, which list may be
conclusively relied upon by the Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when Securities
are presented to the Registrar with a request to register the transfer of such
Securities or to exchange such Securities for an equal principal amount at
maturity of Securities of other authorized denominations of the same series, the
Registrar shall register the transfer or make the exchange as requested if its
requirements for such transaction are met; PROVIDED, HOWEVER, that the
Securities surrendered for transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Issuers and the Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing. To permit registrations of transfers and exchanges,
the Issuers shall execute and the Trustee shall authenticate Securities at the
Registrar's written request. No service charge shall be made for any
registration of transfer or exchange, but the Issuers may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than any such transfer taxes or other
governmental charge payable upon exchanges or transfers pursuant to Section
2.02, 2.10, 3.06, 3.07, 4.16, 4.17 or 9.05). The Registrar shall not be required
to register the transfer of or exchange of any Security (i) during a period
beginning at the
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30
opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three,
except the unredeemed portion of any Security being redeemed in part.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Depository
(or its agent), and that ownership of a beneficial interest in a Global Security
shall be required to be reflected in a book entry.
SECTION 2.07. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements are met. Each such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment of
both the Issuers and the Trustee, to protect the Issuers, the Trustee and any
Agent from any loss which any of them may suffer if a Security is replaced. The
Issuers may charge such Holder for its reasonable out-of-pocket expenses in
replacing a Security, including reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the
Issuers.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those canceled by it, those delivered
to it for cancellation and those described in this Section as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding because
either Issuer or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a BONA FIDE purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
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If on a Redemption Date or the Final Maturity Date the Paying Agent
holds U.S. Legal Tender sufficient to pay all of the Accreted Value or principal
and interest due on the Securities payable on that date, then on and after that
date such Securities cease to be outstanding and Accreted Value ceases to
accrete and interest on them ceases to accrue, as the case may be.
SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount
at maturity of Securities have concurred in any direction, waiver or consent,
Securities owned by an Issuer, the Guarantors or any of their respective
Affiliates shall be disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that the Trustee knows are so owned shall be
disregarded.
The Trustee may require an Officers' Certificate listing Securities
owned by the Issuers or their respective Affiliates.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Securities to be
authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Issuers consider
appropriate for temporary Securities. Without unreasonable delay, the Issuers
shall prepare and the Trustee shall authenticate upon receipt of a written order
of the Company pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel and shall dispose of all Securities surrendered
for transfer, exchange, payment or cancellation (subject to the record retention
requirements of the Exchange Act) and
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32
shall deliver a certificate of destruction to the Issuers. Subject to Section
2.07, the Issuers may not issue new Securities to replace Securities that they
have paid or delivered to the Trustee for cancellation. If an Issuer shall
acquire any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuers default in a payment of Accreted Value, principal or
interest on the Securities, they shall pay interest in cash on overdue Accreted
Value and principal and on overdue installments of interest (without regard to
any applicable grace periods) at the rate shown on the Security on each interest
payment date (to the holders of record on the applicable preceding Record Date)
during any interest period during which the Issuers are so in default.
SECTION 2.13. CUSIP NUMBER.
The Issuers in issuing the Securities will use a "CUSIP" numbers and
the Trustee shall use the CUSIP numbers in notices of redemption or exchange as
a convenience to Holders; PROVIDED that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP numbers
printed in the notice or on the Securities, and that reliance may be placed only
on the other identification numbers printed on the Securities.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m. New York City time on each Interest Payment Date
and the Final Maturity Date, the Issuers shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or Final Maturity Date, as the case may
be, in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date or Final Maturity Date, as the case may
be. The Issuers shall deliver an Officer's Certificate to the Trustee no later
than 3 business days prior to any payment date when Damage Amounts (as defined
in the Registration Rights Agreement) are payable. Such certificate shall state
the dollar amount payable per $1,000 aggregate principal amount at maturity of
the Securities.
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33
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set forth
in EXHIBIT C.
Members of, or participants in, the Depository ("PARTICIPANTS")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository, or the Trustee as its custodian, or
under any Global Security, and the Depository may be treated by the Issuers, the
Trustee and any agent of the Issuers or the Trustee as the absolute owner of any
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Issuers, the Trustee or any agent of the
Issuers or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depository or impair, as between the
Depository and Participants, the operation of customary practices governing the
exercise of the rights of a holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Issuers that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Issuers within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Issuers shall execute, and the Trustee shall upon written
instructions from the Issuers authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
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34
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(b) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Securities.
SECTION 2.16. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF PHYSICAL SECURITIES. When Physical
Securities are presented to the Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal number of
Physical Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Indenture as set forth in this Section 2.16 for such
transactions are met; PROVIDED, HOWEVER, that the Physical Securities presented
or surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing; and
(II) in the case of Physical Securities the offer and sale of which
have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the sole discretion of the Issuers, by
the following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the Registrar
by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that
effect (substantially in the form of EXHIBIT D hereto); or
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35
(B) if such Physical Security is being transferred to a Qualified
Institutional Buyer in accordance with Rule 144A, a
certification to that effect (substantially in the form of
EXHIBIT D hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification
to that effect (substantially in the form of EXHIBIT D hereto)
and a Transferee Certificate for Institutional Accredited
Investors substantially in the form of EXHIBIT E hereto; or
(D) if such Physical Security is being transferred in reliance
on Regulation S, delivery of a certification to that effect
(substantially in the form of EXHIBIT D hereto) and a
Transferee Certificate for Regulation S Transfers
substantially in the form of EXHIBIT F hereto and an
Opinion of Counsel reasonably satisfactory to the Issuers
to the effect that such transfer is in compliance with the
Securities Act; or
(E) if such Physical Security is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification
to that effect (substantially in the form of EXHIBIT D hereto)
and an Opinion of Counsel reasonably satisfactory to the
Issuers to the effect that such transfer is in compliance with
the Securities Act; or
(F) if such Physical Security is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially
in the form of EXHIBIT D hereto) and an Opinion of Counsel
reasonably acceptable to the Issuers to the effect that such
transfer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A PHYSICAL SECURITY FOR A BENEFICIAL
INTEREST IN A GLOBAL SECURITY. A Physical Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar of a Physical
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Registrar, together with:
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36
(A) certification, substantially in the form of EXHIBIT D hereto,
that such Physical Security is being transferred (I) to a
Qualified Institutional Buyer, (II) to an Accredited Investor
or (III) in an offshore transaction in reliance on Regulation
S; and
(B) written instructions directing the Registrar to make, or to
direct the Depository to make, an endorsement on the
applicable Global Security to reflect an increase in the
aggregate amount of the Securities represented by the Global
Security,
then the Registrar shall cancel such Physical Security and cause, or direct the
Depository to cause, in accordance with the standing instructions and procedures
existing between the Depository and the Registrar, the principal amount at
maturity of Securities represented by the applicable Global Security to be
increased accordingly. If no Global Security representing Securities held by
Qualified Institutional Buyers, Accredited Investors or Persons acquiring
Securities in offshore transactions in reliance on Regulation S, as the case may
be, is then outstanding, the Issuers shall issue and the Trustee shall, upon
written instructions from the Issuers in accordance with Section 2.02,
authenticate such a Global Security in the appropriate principal amount. The
Issuers shall take such other actions as may be necessary to establish a Global
Security.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
thought the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt by the Registrar of written instructions, or such other
instruction as is customary for the Depository, from the Depository or its
nominee, requesting the registration of transfer of an interest in a QIB Global
Security, an Accredited Investor Global Security or Regulation S Global
Security, as the case may be, to another type of Global Security, together with
the applicable Global Securities (or, if the applicable type of Global Security
required to represent the interest as requested to be transferred is not then
outstanding, only the Global Security representing the interest being
transferred), the Registrar shall cancel such Global Securities (or Global
Security) and the Issuers shall issue and the Trustee shall, upon written
instructions from the Issuers in accordance with Section 2.02, authenticate new
Global Securities of the types so canceled (or the type so canceled and
applicable type required to represent the interest
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37
as requested to be transferred) reflecting the applicable increase and decrease
of the principal amount at maturity of Securities represented by such types of
Global Securities, giving effect to such transfer. If the applicable type of
Global Security required to represent the interest as requested to be
transferred is not outstanding at the time of such request, the Issuers shall
issue and the Trustee shall, upon written instructions from the Issuers in
accordance with Section 2.02, authenticate a new Global Security of such type in
principal amount at maturity equal to the principal amount at maturity of the
interest requested to be transferred.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
PHYSICAL SECURITY.
(i) Any Person having a beneficial interest in a Global Security
may upon request exchange such beneficial interest for a Physical
Security. Upon receipt by the Registrar of written instructions, or such
other form of instructions as is customary for the Depository, from the
Depository or its nominee on behalf of any Person having a beneficial
interest in a Global Security and upon receipt by the Trustee of a written
order or such other form of instructions as is customary for the
Depository or the Person designated by the Depository as having such a
beneficial interest containing registration instructions and, in the case
of any such transfer or exchange of a beneficial interest in Securities
the offer and sale of which have not been registered under the Securities
Act, the following additional information and documents:
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the
beneficial owner, a certification from such Person to
that effect (substantially in the form of EXHIBIT D
hereto); or
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule
l44A, a certification to that effect (substantially in
the form of EXHIBIT D hereto); or
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the form
of EXHIBIT D
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38
hereto) and a Certificate for Institutional Accredited
Investors substantially in the form of EXHIBIT E
hereto; or
(D) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification
to that effect (substantially in the form of EXHIBIT
D hereto) and a Transferee Certificate for Regulation
S Transfers Substantially in the form of EXHIBIT F
hereto and an Opinion of Counsel reasonably
satisfactory to the Issuers to the effect that such
transfer is in compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery
of a certification to that effect (substantially in the
form of EXHIBIT D hereto) and an Opinion of Counsel
reasonably satisfactory to the Issuers to the effect
that such transfer is in compliance with the Securities
Act; or
(F) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect (substantially in the form of EXHIBIT D
hereto) and an Opinion of Counsel reasonably
satisfactory to the Issuers to the effect that such
transfer is in compliance with the Securities Act,
then the Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository and the
Registrar, the aggregate principal amount at maturity of the
applicable Global Security to be reduced and, following such
reduction, the Issuers will execute and, upon receipt of an
authentication order in the form of an Officers' Certificate in
accordance with Section 2.02, the Trustee will authenticate and
deliver to the transferee a Physical Security.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Section 2.16(d) shall be registered in
such names and in such authorized de-
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39
nominations as the Depository, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Registrar or
co-Registrar in writing. The Registrar or co-Registrar shall deliver such
Physical Securities to the Persons in whose names such Physical Securities
are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless, and the Trustee is hereby authorized by an
Officers' Certificate of the Issuers to deliver Securities without the Private
Placement Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Issuers and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act. Upon the effectiveness of a Registration Statement
covering the Securities or a change in the status of a Registration Statement
covering the Securities, the Issuers shall deliver an Officers' Certificate to
the Trustee notifying the Trustee of such change and instructing the Trustee of
the appropriate action to be taken in connection with such change.
(g) GENERAL. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16 as
required by law. The Issuers shall have the right to inspect and make copies of
all such let-
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40
ters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
SECTION 2.17. DESIGNATION.
The Indebtedness evidenced by the Securities is hereby irrevocably
designated as "senior indebtedness" or such other term denoting seniority for
the purposes of any future Indebtedness of the Issuers which the Issuers make
subordinate to any senior indebtedness or such other term denoting seniority.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Issuers elect to redeem Securities pursuant to Paragraph 5 or
Paragraph 6 of the Securities, they shall notify the Trustee in writing of the
Redemption Date, the Redemption Price and the principal amount at maturity of
Securities to be redeemed. The Issuers shall give notice of redemption to the
Paying Agent and Trustee at least 45 days but not more than 60 days before the
Redemption Date (unless a shorter notice shall be agreed to by the Trustee in
writing), together with an Officers' Certificate stating that such redemption
will comply with the conditions contained herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
In the event that less than all of the Securities are to be redeemed
at any time, selection of such Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a PRO RATA basis, by lot
or by such method as the Trustee shall deem fair and appropriate (and in such
manner as complies with applicable legal requirements); PROVIDED, HOWEVER, that
no Securities of a principal amount at maturity of $1,000 or less shall be
redeemed in part; and PROVIDED, FURTHER, that if a partial redemption is made
with the proceeds of a Public Equity Offering, selection of the Securities or
portions thereof for redemption shall be made by the Trustee only on a PRO RATA
basis or on as nearly a PRO RATA
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41
basis as is practicable (subject to the procedures of the Depository), unless
such method is otherwise prohibited.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Issuers
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount at maturity
thereof to be redeemed. Securities in denominations of $1,000 principal amount
at maturity or less may be redeemed only in whole. The Trustee may select for
redemption portions (equal to $1,000 principal amount at maturity or any
integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000 principal amount at maturity. Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Issuers shall mail a notice of redemption by first class mail, postage
prepaid, to each Holder whose Securities are to be redeemed at its registered
address. At the Issuers' request made at least 45 days before the Redemption
Date, the Trustee shall give the notice of redemption in the Issuers' name and
at the Issuers' expense. Each notice for redemption shall identify the
Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if
any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(5) that, unless the Issuers default in making the redemption
payment, principal of Securities called for redemption ceases to accrete
or interest on Securities called for redemption ceases to accrue, as the
case may be, on and after the Redemption Date, and the only remaining
right of the Holders of such Securities is to receive payment of the
Redemption Price plus accrued and unpaid interest, if any, upon surrender
to the Paying Agent of the Securities redeemed;
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42
(6) if any Security is being redeemed in part, the portion of the
principal amount at maturity of such Security to be redeemed and that,
after the Redemption Date, and upon surrender of such Security, a new
Security or Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount at maturity of
Securities to be redeemed and the aggregate principal amount at maturity
of Securities to be outstanding after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the
Securities are to be redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to the
Trustee or Paying Agent, such Securities called for redemption shall be paid at
the Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the close
of business on the relevant Record Dates.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before 10:00 a.m. New York Time on the Redemption Date, the
Issuers shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the Redemption Price of plus accrued interest, if any, on all Securities to be
redeemed on that date.
If the Issuers comply with the preceding paragraph, then, unless the
Issuers default in the payment of such Redemption Price plus accrued interest,
if any, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment.
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43
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part only,
the Trustee shall upon written instruction from the Issuers authenticate for the
Holder a new Security or Securities in a principal amount at maturity equal to
the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Issuers, jointly and severally, will pay the Accreted Value or
principal of and interest on the Securities in the manner provided in the
Securities. An installment of Accreted Value or principal of or interest on the
Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent holds on that date U.S. Legal Tender designated for and sufficient
to pay the installment.
The Issuers, jointly and severally, will pay, to the extent such
payments are lawful, interest in cash on overdue Accreted Value or principal and
it shall pay interest on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the rate borne by the
Securities. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
Each of the Issuers will maintain in the Borough of Manhattan, The
City of New York, the office or agency required under Section 2.03 (which may be
an office or agency of the Trustee) where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Issuers in respect of the Securities and this Indenture may be served. The
Issuers shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Issuers
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 12.02. The Issuers hereby initially designate the office of
Wilmington Trust Company, c/o Har-
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44
ris Trust Company of New York, 88 Pine Street, 19th Floor, Wall Street Plaza,
New York, New York 10005, as their office or agency in the Borough of Manhattan,
The City of New York.
SECTION 4.03. LIMITATION ON RESTRICTED PAYMENTS.
The Issuers will not make, and will not permit any of their
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Issuers could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 4.04; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 100% of the Company's Cumulative EBITDA
minus 1.4 times the Company's Cumulative Consolidated Interest Expense,
(2) 100% of the aggregate Net Proceeds received by the Company from the
issue or sale after the Issue Date of Capital Stock (other than
Disqualified Capital Stock or Capital Stock of the Company issued to any
Subsidiary of the Company) of the Company or any Indebtedness or other
securities of the Company convertible into or exercisable or exchangeable
for Capital Stock (other than Disqualified Capital Stock) of the Company
which has been so converted, exercised or exchanged, as the case may be,
and (3) without duplication of any amounts included in clause (c)(2)
above, 100% of the aggregate Net Proceeds received by the Company from any
equity contribution from a holder of the Company's Capital Stock,
excluding, in the case of clauses (c)(2) and (3), any Net Proceeds from a
Public Equity Offering to the extent used to redeem the Securities. For
purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount
thereof and property other than cash shall be valued at its fair market
value.
The provisions of this covenant shall not prohibit (i) the payment
of any distribution within 60 days after the date of declaration thereof, if at
such date of declaration such payment would comply with the provisions of this
Indenture, (ii) the re-
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45
purchase, redemption or other acquisition or retirement of any shares of Capital
Stock of the Company or Indebtedness subordinated to the Securities by
conversion into, or by or in exchange for, shares of Capital Stock of the
Company (other than Disqualified Capital Stock), or out of the Net Proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Capital Stock of the Company (other than Disqualified Capital
Stock), (iii) the redemption or retirement of Indebtedness of the Company
subordinated to the Securities in exchange for, by conversion into, or out of
the Net Proceeds of, a substantially concurrent sale or incurrence of
Indebtedness of the Company (other than any Indebtedness owed to a Subsidiary)
that is contractually subordinated in right of payment to the Securities to at
least the same extent as the Indebtedness being redeemed or retired, (iv) the
retirement of any shares of Disqualified Capital Stock of the Company by
conversion into, or by exchange for, shares of Disqualified Capital Stock of the
Company, or out of the Net Proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of other shares of Disqualified Capital
Stock of the Company, (v) Permitted Tax Distributions and (vi) the forfeit of a
deposit that was a Permitted Investment under clause (viii) of the definition of
"Permitted Investment" at the time such deposit was made; provided that in
calculating the aggregate amount of Restricted Payments made subsequent to the
Issue Date for purposes of clause (c) of the immediately preceding paragraph,
amounts expended pursuant to clauses (i), (ii) and (vi) shall be included in
such calculation.
Not later than the date of making any Restricted Payment, the
Issuers shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant described above were computed, which
calculations may be based upon the Issuers' latest available financial
statements, and that no Default or Event of Default has occurred and is
continuing and no Default or Event of Default will occur immediately after
giving effect to any such Restricted Payments.
SECTION 4.04. Limitation on Incurrence of
ADDITIONAL INDEBTEDNESS.
The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, incur (as defined) any Indebtedness (including
Acquired Indebtedness); PROVIDED that if no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness, the Company and its Subsidiaries may incur
Indebt-
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46
edness (including Acquired Indebtedness) if after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Company's Consolidated Leverage Ratio is less than 7.0 to 1. The
accretion of original issue discount and accrual of interest on the Securities
and the Subsidiary Senior Discount Notes shall not be deemed an incurrence of
Indebtedness for purposes of this covenant.
Notwithstanding the foregoing, the Company and its Subsidiaries may
incur Permitted Indebtedness; PROVIDED that the Company will not incur any
Permitted Indebtedness that ranks junior in right of payment to the Notes that
has a maturity or mandatory sinking fund payment prior to the maturity of the
Securities.
The Issuers will not incur any Indebtedness which by its terms (or
by the terms of any agreement governing such Indebtedness) is subordinated in
right of payment to any other Indebtedness of the Issuers unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such Indebtedness) made expressly subordinate in right of payment to the
Securities pursuant to subordination provisions that are substantively identical
to the subordination provisions of such Indebtedness (or such agreement) that
are most favorable to the holders of any other Indebtedness of the Issuers.
SECTION 4.05. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Company shall do
or cause to be done all things necessary to preserve and keep in full force and
effect its existence as a limited liability company or corporation and the
limited liability company, corporate, partnership or other existence of each of
its Subsidiaries in accordance with the respective organizational documents of
each such Subsidiary and the rights (charter and statutory) and material
franchises of the Company and each of its Subsidiaries; PROVIDED, HOWEVER, that
the Company shall not be required to preserve any such right or franchise, or
the corporate existence of any such Subsidiary, if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and each of its Subsidiaries, taken
as a whole, and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders.
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47
SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon it or any of its Subsidiaries or
upon the income, profits or property of it or any of its Subsidiaries and (b)
all lawful claims for labor, materials and supplies which, in each case, if
unpaid, might by law become a material liability or Lien upon the property of it
or any of its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which appropriate
provision has been made.
SECTION 4.07. MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall cause all material properties owned by or
leased by it or any of its Subsidiaries used or useful to the conduct of its
business or the business of any of its Subsidiaries to be improved or maintained
and kept in normal condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its judgment may
be necessary, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section 4.07 shall prevent the Company or any of its
Subsidiaries from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors of the Company or any such Subsidiary
concerned, or of an officer (or other agent employed by the Company or of any of
its Subsidiaries) of the Company or any of its Subsidiaries having managerial
responsibility for any such property, desirable in the conduct of the business
of the Company or any such Subsidiary, and if such discontinuance or disposal is
not adverse in any material respect to the Holders.
(b) The Company shall maintain, and shall cause its Subsidiaries to
maintain, insurance with responsible carriers against such risks and in such
amounts, and with such deductibles, retentions, self-insured amounts and
co-insurance provisions, as are customarily carried by similar businesses of
similar size, including property and casualty loss, workers' compensation and
interruption of business insurance.
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48
SECTION 4.08. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Issuers shall deliver to the Trustee, within 90 days after
the close of each fiscal year and 45 days after the close of each of its first
three fiscal quarters an Officers' Certificate stating that a review of the
activities of the Company has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed and
fulfilled its obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of his knowledge the
Issuers during such preceding fiscal year or fiscal quarter, as the case may be,
have kept, observed, performed and fulfilled each and every such covenant and no
Default or Event of Default occurred during such year or quarter, as the case
may be, and at the date of such certificate there is no Default or Event of
Default that has occurred and is continuing or, if such signers do know of such
Default or Event of Default, the certificate shall describe its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
(b) The Issuers shall deliver to the Trustee, forthwith upon
becoming aware of any Default or Event of Default in the performance of any
covenant, agreement or condition contained in this Indenture, an Officers'
Certificate specifying the Default or Event of Default and describing its status
with particularity.
SECTION 4.09. COMPLIANCE WITH LAWS.
The Company will comply, and will cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States, all states and municipalities thereof, and of
any governmental department, commission, board, regulatory authority, bureau,
agency and instrumentality of the foregoing, in respect of the conduct of their
respective businesses and the ownership of their respective properties, except
for such noncompliances as would not in the aggregate have a material adverse
effect on the financial condition or results of operations of the Company and
its Subsidiaries taken as a whole.
SECTION 4.10. COMMISSION REPORTS.
(a) The Issuers will file with the Commission all information,
documents and reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act,
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49
whether or not the Issuers are subject to such filing requirements so long as
the Commission will accept such filings. The Issuers will file with the Trustee
within 15 days after it files them with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) which the Issuers file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. Upon qualification of this Indenture under the TIA,
the Issuers shall also comply with the provisions of TIA ss. 314(a).
(b) Regardless of whether the Issuers are required to furnish such
reports to its stockholders pursuant to the Exchange Act, the Issuers shall
cause their consolidated financial statements, comparable to that which would
have been required to appear in annual or quarterly reports, to be delivered to
the Trustee and the Holders. The Issuers will also make such reports available
to prospective purchasers of the Securities, securities analysts and
broker-dealers upon their request.
(c) For so long as any of the Securities remain outstanding, the
Issuers will make available to any prospective purchaser of the Securities or
beneficial owner of the Securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act during any
period when the Company is not subject to Section 13 or 15(d) under the Exchange
Act.
SECTION 4.11. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Issuers covenant (to the extent that they may lawfully do so)
that they will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Issuers from paying
all or any portion of the Accreted Value or principal of and/or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture, and (to the extent that they may lawfully do so) the Issuers hereby
expressly waive all benefit or advantage of any such law, and covenant that they
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
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50
SECTION 4.12. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Issuers will not, and will not permit any of their Subsidiaries
to, directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with any Affiliate
(each, an "AFFILIATE TRANSACTION") or extend, renew, waive or otherwise modify
the terms of any Affiliate Transaction entered into prior to the Issue Date
unless (i) such Affiliate Transaction is between or among the Issuers and their
Wholly Owned Subsidiaries; or (ii) the terms of such Affiliate Transaction are
fair and reasonable to the Issuers or such Subsidiary, as the case may be, and
the terms of such Affiliate Transaction are at least as favorable as the terms
which could be obtained by the Issuers or such Subsidiary, as the case may be,
in a comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $1 million which is not permitted under
clause (i) above, the Issuers must obtain a resolution of the Board of Directors
of the Issuers certifying that such Affiliate Transaction complies with clause
(ii) above. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $5 million which is not permitted under
clause (i) above, the Issuers must obtain a favorable written opinion as to the
fairness of such transaction or transactions, as the case may be, from an
Independent Financial Advisor.
The foregoing provisions will not apply to (i) any Restricted
Payment that is not prohibited by the provisions of Section 4.03, or (ii)
reasonable fees, compensation and equity incentives in the form of Capital Stock
(other than Disqualified Capital Stock) paid to and indemnity provided on behalf
of, officers, directors or employees of the Issuers or any Subsidiary of the
Issuers as determined in good faith by the Company's Board of Directors or
senior management or (iii) any agreement as in effect as of the Issue Date or
any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement thereto so long
as any such amendment or replacement agreement is not more disadvantageous to
the holders in any material respect than the original agreement as in effect on
the Issue Date or (iv) any affiliation agreements with the WB Television
Network.
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51
SECTION 4.13. LIMITATION ON INVESTMENTS.
The Issuers will not, and will not permit any of their Subsidiaries
to, make any Investment other than (i) a Permitted Investment or (ii) an
Investment that is made as a Restricted Payment in compliance with Section 4.03
after the Issue Date.
SECTION 4.14. LIMITATION ON CAPITAL STOCK OF SUBSIDIARIES.
The Issuers will not (i) sell, pledge, hypothecate or otherwise
convey or dispose of any Capital Stock of a Subsidiary of the Company or (ii)
permit any of its direct Subsidiaries to issue any Capital Stock, other than to
the Issuers or a Wholly Owned Subsidiary of the Issuers. The foregoing
restrictions shall not apply to (x) an Asset Sale made in compliance with
Section 4.17 or the issuance of Preferred Stock in compliance with Section 4.04,
(y) Liens securing the Securities or (z) a Permitted Lien. In no event will the
Company sell, pledge, hypothecate or otherwise convey or dispose of any Capital
Stock of Finance (other than pursuant to the Security Documents) or will Finance
sell any Capital Stock.
SECTION 4.15. LIMITATION ON LIENS.
The Issuers will not create, incur or otherwise cause or suffer to
exist or become effective any Liens of any kind (a) (other than Permitted Liens)
upon any property or asset of the Issuers unless (i) if such Lien secures
Indebtedness which is PARI PASSU with the Securities, then the Securities are
secured on an equal and ratable basis with the obligations so secured until such
time as such obligation is no longer secured by a Lien or (ii) if such Lien
secures Indebtedness which is subordinated to the Securities, any such Lien
shall be subordinated to the Lien granted to the holders of the Securities to
the same extent as such Indebtedness is subordinated to the Securities and (b)
on any of the Collateral (other than Liens created by the Security Documents).
SECTION 4.16. CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, the Issuers shall be
obligated to make an offer to purchase (the "CHANGE OF CONTROL OFFER") each
Holder's outstanding Securities at a purchase price (the "CHANGE OF CONTROL
PURCHASE PRICE") equal to (x) 101% of the Accreted Value thereof, if the Change
of Control Payment Date (as defined) is on or prior to September 30, 2002, or
(y) 101% of the principal amount at maturity, plus accrued and unpaid interest,
if any, to the Change of Control Payment Date,
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52
if the Change of Control Payment Date is after September 30, 2002, in each case
in accordance with the procedures set forth below.
Within 20 days of the occurrence of a Change of Control, the Issuers
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and to
each Holder of the Securities, at the address appearing in the register
maintained by the Registrar of the Securities, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Securities tendered will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 30 days nor later than 45
days from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT
DATE"));
(3) that any Security not tendered will continue to accrete
Accreted Value or accrue interest, as the case may be;
(4) that, unless the Issuers default in the payment of the Change of
Control Purchase Price, any Securities accepted for payment pursuant to
the Change of Control Offer shall cease to accrete Accreted Value or
accrue interest, as the case may be, after the Change of Control Payment
Date;
(5) that Holders accepting the offer to have their Securities
purchased pursuant to a Change of Control Offer will be required to
surrender the Securities to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day preceding
the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Securities delivered for
purchase, and a statement that such Holder is withdrawing his or her
election to have such Securities purchased;
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53
(7) that Holders whose Securities are being purchased only in part
will be issued new Securities equal in principal amount at maturity to the
unpurchased portion principal amount at maturity of the Securities
surrendered;
(8) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment Securities or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Securities or portions thereof
so tendered and (iii) deliver or cause to be delivered to the Trustee Securities
so accepted together with an Officers' Certificate stating the Securities or
portions thereof tendered to the Issuers. The Paying Agent shall promptly mail
to each holder of Securities so accepted payment in an amount equal to the
purchase price for such Securities, and the Issuers shall execute and issue, and
the Trustee shall promptly authenticate and mail to such holder, a new Security
equal in principal amount at maturity to any unpurchased portion of the
Securities surrendered; PROVIDED that each such new Security shall be issued in
an original principal amount in denominations of $1,000 principal amount at
maturity and integral multiples thereof.
If the Senior Credit Facility is in effect and/or any Subsidiary
Senior Discount Notes are outstanding, or any amounts are owing thereunder or in
respect thereof, at the time of the occurrence of a Change of Control, prior to
the mailing of the notice to Holders described in the second preceding
paragraph, but in any event within 20 days following any Change of Control, the
Issuers, on a joint and several basis, covenant to (i) repay in full all
obligations and terminate all commitments under or in respect of the Senior
Credit Facility and/or the Subsidiary Senior Discount Notes, as the case may be,
or offer to repay in full all obligations and terminate all commitments under or
in respect of the Senior Credit Facility and/or the Subsidiary Senior Discount
Notes, as the case may be, and repay the Indebtedness owed to each such lender
and holder who has accepted such offer or (ii) obtain the requisite consents
under the Senior Credit Facility and/or the Subsidiary Senior Discount Notes to
permit the repurchase of the Securities as described above. The Issuers must
first comply with the covenant described in the preceding sentence before it
shall be required to purchase Notes in the event
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54
of a Change of Control; PROVIDED that the Issuers' failure to comply with the
covenant described in the preceding sentence constitutes an Event of Default
described in clause (c) of Section 6.01 if not cured within 30 days after the
notice required by such clause.
If either Issuer or any Subsidiary thereof has issued any
outstanding (i) Indebtedness that is subordinated in right of payment to the
Securities or (ii) Preferred Stock, and such Issuer or such Subsidiary is
required to make a change of control offer or to make a distribution with
respect to such subordinated Indebtedness or Preferred Stock in the event of a
Change of Control, the Issuers shall not consummate any such offer or
distribution with respect to such subordinated Indebtedness or Preferred Stock
until such time as the Issuers shall have paid the Change of Control Purchase
Price in full to the Holders of Securities that have accepted the Issuers'
Change of Control Offer and shall otherwise have consummated the Change of
Control Offer made to Holders of the Securities and the Issuers will not issue
Indebtedness that is subordinated in right of payment to the Securities or
Preferred Stock with change of control provisions requiring the payment of such
Indebtedness or Preferred Stock prior to the payment of the Securities in the
event of a Change in Control under this Indenture.
The Issuers will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
provisions of this Indenture, the Issuers shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under this Indenture by virtue thereof.
SECTION 4.17. LIMITATION ON ASSET SALES.
The Issuers will not, and will not permit any of their Subsidiaries
to, consummate an Asset Sale unless (i) the Issuers or such applicable
Subsidiary, as the case may be, receives consideration at the time of such sale
or other disposition at least equal to the fair market value of the assets sold
or otherwise disposed of (as determined in good faith by the Board of Directors
of the Company, and evidenced by a board resolution); (ii) not less than 80% of
the consideration received by the Company or such applicable Subsidiary, as the
case may be, is in the form of cash or Cash Equivalents other than in the case
where the Company
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55
is undertaking a Permitted Asset Swap; and (iii) the Asset Sale Proceeds
received by the Company or such Subsidiary are applied (a) first, to the extent
the Company or any such Subsidiary, as the case may be, elects, or is required,
to prepay, repay or purchase indebtedness under the Senior Credit Facility, the
Subsidiary Senior Discount Notes and/or any other Indebtedness of a Subsidiary
of the Company incurred in compliance with the Indenture within 180 days
following the receipt of the Asset Sale Proceeds from any Asset Sale; PROVIDED
that any such repayment shall result in a permanent reduction of the commitments
thereunder in an amount equal to the principal amount so repaid; (b) second, to
the extent of the balance of Asset Sale Proceeds after application as described
above, to the extent the Company elects, to an investment in assets (including
Capital Stock or other securities purchased in connection with the acquisition
of Capital Stock or property of another Person) used or useful in businesses
similar or ancillary to the business of the Company or any such Subsidiary as
conducted on the Issue Date; PROVIDED that (1) such investment occurs or the
Company or any such Subsidiary enters into contractual commitments to make such
investment, subject only to customary conditions (other than the obtaining of
financing), within 180 days following receipt of such Asset Sale Proceeds and
(2) Asset Sale Proceeds so contractually committed are so applied within 270
days following the receipt of such Asset Sale Proceeds; and (c) third, if on
such 180th day in the case of clauses (iii)(a) and (iii)(b)(1) or on such 270th
day in the case of clause (iii)(b)(2) with respect to any Asset Sale, the
Available Asset Sale Proceeds exceed $5 million, the Company shall apply an
amount equal to such Available Asset Sale Proceeds to an offer to repurchase the
Securities, at a purchase price in cash equal to 100% of the Accreted Value
thereof plus accrued and unpaid interest, if any, to the purchase date (an
"EXCESS PROCEEDS OFFER"). If an Excess Proceeds Offer is not fully subscribed,
the Company may retain the portion of the Available Asset Sale Proceeds not
required to repurchase Securities.
If the Issuers are required to make an Excess Proceeds Offer, the
Issuers shall mail, within 30 days following the date specified in clause
(iii)(c) above, a notice to the holders stating, among other things:
(1) that such holders have the right to require the Issuers to apply
the Available Asset Sale Proceeds to repurchase such Securities at a
purchase price in cash equal to (x) 100% of the Accreted Value thereof, if
the applicable purchase date is on or prior to September 30, 2002, or (y)
100% of the principal amount at maturity thereof, plus
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56
accrued and unpaid interest, if any, to the purchase date, if the purchase
date is after September 30, 2002;
(2) the purchase date, which shall be no earlier than 30 days and
not later than 45 days from the date such notice is mailed;
(3) the instructions that each holder must follow in order to
have such Securities purchased;
(4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the purchase of such
Securities;
(5) that if the Accreted Value of Securities tendered in the Asset
Sale Offer exceeds the aggregate amount of Available Asset Sale Proceeds,
the Issuers shall select the Securities to be purchased on a pro rata
basis;
(6) that any Security not tendered will continue to accrete
Accreted Value and accrue interest;
(7) that, unless the Issuers default in making payment therefor, any
Security accepted for payment pursuant to the Asset Sale Offer shall cease
to accrete Accreted Value and accrue interest after the purchase date;
(8) that Holders electing to have a Security purchased pursuant to
the Asset Sale Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Asset Sale Offer purchase
date;
(9) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Asset Sale Offer purchase date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount at maturity of the
Security the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Security purchased; and
(10) that Holders whose Securities are purchased only in part will
be issued new Securities in a principal amount at maturity equal to the
unpurchased portion of the Securities surrendered.
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On or before the Asset Sale Offer purchase date, the Issuers shall
(i) accept for payment Securities or portions thereof tendered pursuant to the
Asset Sale Offer, (ii) deposit with the Paying Agent U.S. Legal Tender
sufficient to pay the purchase price, plus accrued interest, if any, of all
Securities to be purchased and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail to the Holders of Securities so accepted payment in an amount equal to the
purchase price, plus accrued interest, if any, thereon. For purposes of this
Section 4.13, the Trustee shall act as the Paying Agent.
In the event of the transfer of substantially all of the property
and assets of the Issuers and their Subsidiaries as an entirety to a Person in a
transaction permitted under Article Five, the successor Person shall be deemed
to have sold the properties and assets of the Issuers and their Subsidiaries not
so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale.
The Issuers shall comply with all tender offer rules under state and
federal securities laws, including, but not limited to, Section 14(e) under the
Exchange Act and Rule l4e-1 thereunder, to the extent applicable to such offer.
To the extent that the provisions of any securities laws or regulations conflict
with the foregoing provisions of this Indenture, the Issuers shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the foregoing provisions of this Indenture by
virtue thereof.
SECTION 4.18. Limitation on Preferred Stock of
SUBSIDIARIES.
The Issuers will not permit any of their Subsidiaries to issue any
Preferred Stock (except Preferred Stock issued to the Company or a Wholly Owned
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Subsidiary of the Company) to hold any such Preferred Stock unless
the Company or such Subsidiary would be entitled to incur or assume Indebtedness
under Section 4.04 (other than Permitted Indebtedness) in the aggregate
principal amount equal to the aggregate liquidation value of the Preferred Stock
to be issued.
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SECTION 4.19. Limitation on Sale and Lease-Back
TRANSACTIONS.
The Issuers will not, and will not permit any of their Subsidiaries
to, enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined in good faith by the Board of
Directors of the Company and evidenced by a Board Resolution and (ii) the
Issuers could incur the Attributable Indebtedness in respect of such Sale and
Lease-Back Transaction in compliance with Section 4.04.
SECTION 4.20. LIMITATION ON CONDUCT OF BUSINESS.
The Issuers and their Subsidiaries will not engage in any businesses
which are not the same, similar or related to the businesses in which the
Company and its Subsidiaries are engaged in on the Issue Date.
SECTION 4.21. LIMITATION ON CREATION OF SUBSIDIARIES.
The Company will not create or acquire any direct Subsidiary other
than a Subsidiary the Capital Stock of which is, to the extent owned by the
Company, pledged to the Trustee in accordance with Article Ten and the Security
Documents.
SECTION 4.22. LIMITATION ON CONDUCT OF BUSINESS OF FINANCE.
Finance will not own any operating assets or other properties or
conduct any business other than to serve as an Issuer and an obligor on the
Securities.
SECTION 4.23. PAYMENTS FOR CONSENT.
The Issuers will not, and will not permit any of their Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any holder of any Securities for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture, the Security Documents or the Securities unless
such consideration is offered to be paid or agreed to be paid to all holders of
the Securities which so consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver or agreement.
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SECTION 4.24. IMPAIRMENT OF SECURITY INTEREST.
The Issuers shall not, and not permit any of their Subsidiaries to,
take or omit to take any action which action or omission would impair the
security interest in favor of the Trustee, on behalf of itself and the holders
of the Notes with respect to the Collateral required to be pledged under this
Indenture, and the Issuers will not create, otherwise incur or suffer to exist,
in favor of any Person (other than the Trustee on behalf of itself and the
holders of the Notes) any interest whatsoever in the Collateral.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. MERGERS, CONSOLIDATIONS AND SALE OF ASSETS.
(a) Neither of the Issuers will consolidate with, merge with or
into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets (as an entirety or substantially as an entirety
in one transaction or a series of related transactions), to any Person unless
(in the case of the Company): (i) the Company shall be the continuing Person, or
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which the properties and assets of the Company
are sold, assigned, transferred, leased, conveyed or otherwise disposed of shall
be a corporation or a limited liability company organized and existing under the
laws of the United States or any State thereof or the District of Columbia and
shall expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company under this Indenture, the Security Documents and the Securities and the
obligations thereunder shall remain in full force and effect; PROVIDED, that at
any time the Company or its successor is a limited liability company, there
shall be a co-issuer of the Securities that is a corporation; (ii) immediately
before and immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; (iii) immediately after
giving effect to such transaction or series of transactions on a pro
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60
forma basis, the Consolidated Net Worth of the Company or the surviving entity
as the case may be is at least equal to the Consolidated Net Worth of the
Company immediately before such transaction or series of transactions; and (iv)
immediately after giving effect to such transaction on a pro forma basis the
Company or such Person could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under Section 4.04. In connection with any
consolidation, merger or transfer of assets contemplated by this provision, the
Issuers shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger or transfer
and the supplemental indenture in respect thereto comply with this provision and
that all conditions precedent herein provided for relating to such transaction
or transactions have been complied with.
(b) For purposes of the foregoing paragraph (a), the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any such consolidation, merger, conveyance, lease or transfer
in accordance with the foregoing provisions of this Article Five, the successor
Person formed by such consolidation or into which the applicable Issuer is
merged or to which such conveyance, lease or transfer is made will succeed to,
and be substituted for, and may exercise every right and power of, such Issuer
under this Indenture, the Security Documents and the Securities with the same
effect as if such successor had been named as such Issuer therein, and
thereafter (except in the case of a sale, assignment, transfer, lease,
conveyance or other disposition) the predecessor corporation will be relieved of
all further obligations and covenants under this Indenture, the Securities, the
Security Documents and the Registration Rights Agreement; PROVIDED that solely
for purposes of computing amounts described in Section 4.03, any successor
Person shall only be deemed to have succeeded to and be substituted for such
Issuer with respect to periods subsequent to the effective time of such merger,
consolidation or transfer of assets.
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) there is a default in payment of any Accreted Value, principal
of, or premium, if any, on the Securities whether at maturity, upon
redemption or otherwise;
(b) there is a default for 30 days in payment of any interest on
the Securities;
(c) there is a default by the Issuers or any Subsidiary of the
Company in the observance or performance of any other covenant in the
Securities or this Indenture for 30 days after written notice from the
Trustee or the Holders of not less than 25% in aggregate principal amount
at maturity of the Securities then outstanding (except in the case of a
default with respect to Section 4.16 or Article Five which shall
constitute an Event of Default with such notice requirement but without
such passage of time requirement);
(d) there is a failure to pay when due principal, interest or
premium in an aggregate amount of $5 million or more with respect to any
Indebtedness of the Issuers or any Subsidiary thereof, or the acceleration
of any such Indebtedness aggregating $5 million or more which default
shall not be cured, waived or postponed pursuant to an agreement with the
holders of such Indebtedness within 60 days after written notice as
provided in this Indenture, or such acceleration shall not be rescinded or
annulled within 20 days after written notice as provided in this
Indenture;
(e) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5 million shall be rendered against
the Issuers or any Subsidiary thereof, and shall not be discharged for any
period of 60 consecutive days during which a stay of enforcement shall not
be in effect;
(f) the Company or any of its Subsidiaries (i) admits in writing its
inability to pay its debts generally as they become due, (ii) commences a
voluntary case or proceeding under any Bankruptcy Law with respect to
itself, (iii) con-
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sents to the entry of a judgment, decree or order for relief against it in
an involuntary case or proceeding under any Bankruptcy Law, (iv) consents
to the appointment of a Custodian of it or for substantially all of its
property, (v) consents to or acquiesces in the institution of a bankruptcy
or an insolvency proceeding against it, (vi) makes a general assignment
for the benefit of its creditors or (vii) takes any partnership or
corporate action, as the case may be, to authorize or effect any of the
foregoing;
(g) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Subsidiaries in
an involuntary case or proceeding under any Bankruptcy Law, which shall
(i) approve as properly filed a petition seeking reorganization,
arrangement, adjustment or composition in respect of the Company or any of
its Subsidiaries, (ii) appoint a Custodian of the Company or any of its
Subsidiaries or for substantially all of any of their property or (iii)
order the winding-up or liquidation of its affairs; and such judgment,
decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(h) any breach by a Pledgor of any representation or warranty set
forth in the Pledge Agreement, or any default by a Pledgor in the
performance of any covenant set forth in the Pledge Agreement, or any
repudiation by a Pledgor of any of its obligations under the Pledge
Agreement or the unenforceability of the Pledge Agreement against a
Pledgor for any reason which, in any case or in the aggregate, results in
a material impairment of the rights intended to be afforded thereby.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above) shall occur and be continuing, the Trustee or the
Holders of at least 25% in principal amount at maturity of outstanding
Securities may declare the Accreted Value of, premium, if any, and accrued and
unpaid interest, if any, on all the Securities to be due and payable by notice
in writing to the Issuers and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration", and (i) the same shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the Senior Credit Facility and or the Subsidiary Senior Discount Notes, shall
become immediately due and payable upon the first to occur of an acceleration
under the Senior Credit Facility or 5 Business
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Days after receipt by the Company and the representative under the Senior Credit
Facility and/or the Trustee in respect of the Subsidiary Senior Discount Notes
of a notice of acceleration by the Trustee hereunder. If an Event of Default
specified in clause (f) or (g) above occurs and is continuing, then all unpaid
Accreted Value of, and premium, if any, and accrued and unpaid interest, if any,
on all of the outstanding Securities shall IPSO FACTO become and be immediately
due and payable without any declaration or other at on the part of the Trustee
or any Holder.
At any time after a declaration of acceleration with respect to the
Securities as described in the preceding paragraph, the Holders of a majority in
principal amount at maturity of the Securities may rescind and cancel such
declaration and its consequences (a) if the rescission would not conflict with
any judgment or decree, (b) if all existing Events of Default have been cured or
waived except nonpayment of Accreted Value, premium or interest that has become
due solely because of the acceleration, (c) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
Accreted Value, which has become due otherwise than by such declaration of
acceleration, has been paid, (d) if the Issuers have paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (e) in the event of the cure or waiver of an
Event of Default of the type described in clause (f) or (g) of the description
of Events of Default above, the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been cured
or waived. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture or the Security
Documents.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
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Each Securityholder, by accepting a Security, (a) acknowledges that
the exercise of remedies by the Trustee with respect to the Collateral is
subject to the terms and conditions of the Security Documents and the proceeds
received upon realization of the Collateral shall be applied by the Trustee in
accordance with Section 6.10 hereof and (b) acknowledges and consents to the
terms of the Security Documents and to the Trustee's performance of its
agreements thereunder.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.09, 6.07 and 9.02, the Holders of not less
than a majority in principal amount at maturity of the outstanding Securities by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of Accreted Value or principal of
or interest on any Security as specified in clauses (a) and (b) of Section 6.01.
The Issuers shall deliver to the Trustee an Officers' Certificate stating that
the requisite percentage of Holders have consented to such waiver and attaching
copies of such consents. When a Default or Event of Default is waived, it is
cured and ceases.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of not less than a majority in principal amount at
maturity of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. Subject to Section 7.01, however, the
Trustee may refuse to follow any direction that conflicts with any law or this
Indenture or any Security Document, that the Trustee determines may be unduly
prejudicial to the rights of another Securityholder, or that may involve the
Trustee in personal liability; PROVIDED that the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.
In the event the Trustee takes any action or follows any direction
pursuant to this Indenture or any Security Document, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
any loss or expense caused by taking such action or following such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities or any Security Document unless:
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(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holder or Holders of at least 25% in principal amount at
maturity of the outstanding Securities make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 30-day period the Holder or Holders of a majority in
principal amount at maturity of the outstanding Securities do not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent
with the request.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of Accreted Value or principal of and interest on
a Security, on or after the respective due dates expressed in such Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of Accreted Value or principal or
interest specified in clause (a) or (b) of Section 6.01 occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Issuers or any other obligor on the Securities for
the whole amount of Accreted Value or principal and accrued interest and fees
remaining unpaid, together with interest on overdue principal and, to the extent
that payment of such interest is lawful, interest on overdue installments of
interest, in each case at the rate PER ANNUM borne by the Securities and such
further amount as shall be sufficient to cover the costs and expenses of
collec-
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tion, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Issuers,
their creditors or their property and shall be entitled and empowered to collect
and receive any monies or other property payable or deliverable on any such
claims and to distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Securityholder to make such payments to
the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Securityholders, to pay to the Trustee any amount
due to it for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agent and counsel, and any other amounts due the Trustee
under Section 7.07. Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07 and for
amounts due under the Security Documents;
Second: to Holders for amounts due and unpaid on the Securities
for Accreted Value or principal and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for Accreted Value or principal and interest,
respectively; and
Third: to the Issuers, as their respective interests may appear.
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The Trustee, upon prior notice to the Issuers, may fix a record date
and payment date for any payment to Securityholders pursuant to this Section
6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount at maturity of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default actually known to the Trustee has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and the Security Documents and use the
same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs. The Trustee will be under no obligation to exercise any of its rights
or powers under this Indenture or the Security Documents at the request of any
of the Holders of Securities, unless they shall have offered to the Trustee
security and indemnity satisfactory to it.
(b) Except during the continuance of an Event of Default actually
known to a Responsible Officer of the Trustee:
(1) The Trustee need perform only those duties as are specifically
set forth herein and no others and no implied covenants or obligations
shall be read into this Indenture against the Trustee.
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(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions and such
other documents delivered to it pursuant to Section 12.04 hereof furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture or the Security Documents shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or to take
or omit to take any action under this Indenture or the Security Documents or
take any action at the request or direction of Holders if it shall have
reasonable grounds for believing that repayment of such funds is not assured to
it or it does not receive an indemnity satisfactory to it in its sole discretion
against such risk, liability, loss, fee or expense which might be incurred by it
in compliance with such request or direction.
(e) Every provision of this Indenture and the Security Documents
that in any way relates to the Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel, which shall conform to
the provisions of Section 12.05. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than an agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion
of such counsel as to matters of law shall be full and complete
authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture or the Security Documents
at the request, order or direction of any of the Holders pursuant to the
provisions of this Indenture or the Security Documents, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
satisfactory to it against the costs, expenses and liabilities which may
be incurred therein or thereby.
(g) Subject to Section 9.02 hereof, the Trustee may (but shall not
be obligated to), without the consent of the Holders, give any consent,
waiver or approval required under the Security Documents or by the terms
hereof with respect to the Collateral, but shall not without the consent
of the Holders of not less than a majority in aggregate principal amount
at maturity of the Securities at the time outstanding
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(i) give any consent, waiver or approval or (ii) agree to any amendment
or modification of the Security Documents, in each case, that shall have
a material adverse effect on the interests of any Holder. The Trustee
shall be entitled to request to whether any consent, waiver, approval,
amendment or modification shall have a material adverse effect on the
interests of any Holder
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Issuers, their
respective Subsidiaries, or their respective Affiliates with the same rights it
would have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the value of the Collateral, or any part thereof, or the validity or
adequacy of this Indenture or the Securities, it shall not be accountable for
the Issuers' use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Issuers in this Indenture or the Security
Documents or any document issued in connection with the sale of Securities or
any statement in the Securities other than the Trustee's certificate of
authentication. The Trustee makes no representations with respect to the
effectiveness or adequacy of this Indenture, the Securities or any Security
Document or the validity or perfection, if any, of liens as granted under this
Indenture or any Security Document.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and the
Trustee receives actual notice of such event, the Trustee shall mail to each
Securityholder, as their names and addresses appear on the Securityholder list
described in Section 2.05, notice of the uncured Default or Event of Default
within 60 days after the Trustee receives such notice. Except in the case of a
Default or an Event of Default in payment of principal of, or interest on, any
Security, including the failure to make payment on (i) the Change of Control
Payment Date pursuant to a Change of Control Offer or (ii) the Asset Sale Offer
payment date pursuant to an Asset Sale Offer, or the Trustee may withhold the
notice if and so long as the board of directors, the executive committee, or a
trust committee of directors and/or Respon-
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sible Officers, of the Trustee in good faith determines that withholding the
notice is in the interest of the Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
This Section 7.06 shall not be operative as a part of this Indenture
until this Indenture is qualified under the TIA, and, until such qualification,
this Indenture shall be construed as if this Section 7.06 were not contained
herein.
Within 60 days after each October 1, the Trustee shall, to the
extent that any of the events described in TIA ss. 313(a) occurred within the
previous twelve months, but not otherwise, mail to each Securityholder a brief
report dated as of such October 1, that complies with TIA ss. 313(a). The
Trustee also shall comply with TIA ss.ss. 313(b) 313(c) and 313(d).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Issuers and filed with the Commission and each securities
exchange, if any, on which the Securities are listed.
The Issuers shall notify the Trustee if the Securities become listed
on any securities exchange or of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuers, jointly and severally, shall pay to the Trustee from
time to time such compensation for its services hereunder and under the Security
Documents (which shall be agreed to from time to time by the Issuers and the
Trustee). The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuers, jointly and
severally, shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for its
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or willful misconduct. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 8.01 hereof.
The Issuers, jointly and severally, shall indemnify the Trustee and
each predecessor trustee for, and hold it harmless against, any loss, liability,
claim, damage or expense incurred
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by the Trustee without negligence or willful misconduct on its part arising out
of or in connection with the administration of this trust and its duties under
this Indenture and the Security Documents, including the reasonable expenses and
attorneys' fees of defending itself against any claim of liability arising
hereunder. The Trustee shall notify the Issuers promptly of any claim asserted
against the Trustee for which it may seek indemnity. However, the failure by the
Trustee to so notify the Issuers shall not relieve the Issuers of their
obligations hereunder. The Issuers shall defend the claim and the Trustee shall
cooperate in the defense (and may employ its own counsel) at the Issuers'
expense. The Issuers need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee as a result of the violation of this
Indenture by the Trustee if such violation arose from the Trustee's negligence
or willful misconduct.
To secure the Issuers' payment obligations in this Section 7.07, the
Trustee shall have a senior claim and lien prior to the Securities against all
money or property held or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an Event
of Default specified in clause (f) or (g) of Section 6.01 occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Issuers' obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Issuers' obligations pursuant to
Article Eight and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the Issuers in
writing. The Holders of a majority in principal amount at maturity of the
outstanding Securities may remove the Trustee by so notifying the Issuers and
the Trustee in writing and may appoint a successor trustee with the Issuers'
consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
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(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount at
maturity of the Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately after that,
the retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.07, all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of at least 10% in principal amount at maturity of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Any resignation or removal of the Trustee pursuant to this Indenture
shall be deemed to be a resignation or removal of the Trustee in its capacity as
Trustee under the Security Documents and any appointment of a successor Trustee
pursuant to this Indenture shall be deemed to be an appointment of a successor
Trustee under the Security Documents and such successor shall assume all of the
obligations of the Trustee in its capacity as Trustee under the Security
Documents.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuers' obligations under Section 7.07 shall continue for the benefit
of the retiring Trustee.
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SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee (and successor Trustee
under the Security Documents).
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1) and 310(a)(5). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities,
or certificates of interest or participation in other securities, of the Issuers
are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of
CLAIMS AGAINST COMPANY.
The Trustee, in its capacity as Trustee hereunder and under the
Security Documents, shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Issuers may, at their option by Board Resolutions, at any
time, with respect to the Securities, elect to have either paragraph (b) or
paragraph (c) below be applied to the outstanding Securities upon compliance
with the conditions set forth in paragraph (d).
(b) Upon the Issuers' exercise under paragraph (a) of the option
applicable to this paragraph (b), the Issuers shall be
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75
deemed to have been released and discharged from their obligations with respect
to the outstanding Securities on the date the conditions set forth below are
satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, such Legal
Defeasance means that the Issuers shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Securities, which shall
thereafter be deemed to be "outstanding" only for the purposes of the Sections
and matters under this Indenture referred to in (i) and (ii) below, and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned, except for the following which shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Securities to receive solely from the trust fund
described in paragraph (d) below and as more fully set forth in such paragraph,
payments in respect of the principal of and interest on such Securities when
such payments are due, and (ii) obligations listed in Section 8.03, subject to
compliance with this Section 8.01. The Issuers may exercise their option under
this paragraph (b) notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Securities.
(c) Upon the Issuers' exercise under paragraph (a) of the option
applicable to this paragraph (c), the Issuers shall be released and discharged
from its obligations under any covenant contained in Article Five and in
Sections 4.03 through 4.23 with respect to the outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"COVENANT DEFEASANCE"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, the Issuers, their Subsidiaries and any Pledgor
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01(c), nor shall any event referred to in
Section 6.01(d), (e), (h) or (i) thereafter constitute a Default or an Event of
Default thereunder but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby.
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(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Issuers shall have irrevocably deposited in trust with the
Trustee, pursuant to an irrevocable trust and security agreement in form
and substance satisfactory to the Trustee, U.S. Legal Tender or direct
non-callable obligations of, or non-callable obligations guaranteed by,
the United States of America for the payment of which obligation or
guarantee the full faith and credit of the United States of America is
pledged ("U.S. GOVERNMENT OBLIGATIONS") maturing as to principal and
interest in such amounts and at such times as are sufficient, without
consideration of the reinvestment of such interest and after payment of
all Federal, state and local taxes or other charges or assessments in
respect thereof payable by the Trustee, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof (in form and substance reasonably satisfactory to
the Trustee) delivered to the Trustee, to pay the principal of, premium,
if any, and interest on all the outstanding Securities on the dates on
which any such payments are due and payable in accordance with the terms
of this Indenture and of the Securities;
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
(3) The Trustee shall have received Officers' Certificates stating
that no Default or Event of Default or event which with notice or lapse of
time or both would become a Default or an Event of Default with respect to
the Securities shall have occurred and be continuing on the date of such
deposit or, insofar as Section 6.01(f) or (g) is concerned, at any time
during the period ending on the 91st day after the date of such deposit
(it being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(4) The Trustee shall have received Officers' Certificates stating
that such deposit will not result in a Default under this Indenture or a
breach or violation of, or constitute a default under, any other material
instrument or agreement to which either Issuer or any of their
Subsidiaries is a party or by which it or its property is bound;
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(5) (i) In the event the Issuers elect paragraph (b) hereof, the
Issuers shall deliver to the Trustee an Opinion of Counsel in the United
States, in form and substance reasonably satisfactory to the Trustee to
the effect that (A) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the Issue
Date, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel
shall state that Holders of the Securities will not recognize income gain
or loss for Federal income tax purposes as a result of such deposit and
the defeasance contemplated hereby and will be subject to Federal income
taxes in the same manner and at the same times as would have been the case
if such deposit and defeasance had not occurred, or (ii) in the event the
Issuers elect paragraph (c) hereof, the Issuers shall deliver to the
Trustee an Opinion of Counsel in the United States, in form and substance
reasonably satisfactory to the Trustee, to the effect that Holders of the
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and the defeasance contemplated
hereby and will be subject to Federal income tax in the same amounts and
in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred;
(6) The deposit shall not result in either Issuer, the Trustee or
the trust becoming or being deemed to be an "investment company" under the
Investment Company Act of 1940;
(7) The Issuers shall have delivered to the Trustee an Officer's
Certificate, in form and substance reasonably satisfactory to the Trustee,
stating that the deposit under clause (1) was not made by the Issuers or
any Subsidiary of either Issuer with the intent of preferring the Holders
over any other creditors of the Issuers defeating, hindering, delaying or
defrauding any other creditors of the Issuers or any Subsidiary of either
Issuer or others;
(8) The Issuers shall have delivered to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, to
the effect that (A) the trust funds will not be subject to the rights of
holders of Indebtedness of either Issuer other than the Securities and (B)
assuming no intervening bankruptcy of either Issuer between the date of
deposit and the 91st day following the deposit and that no Holder of
Securities is an insider of ei-
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ther Issuer, after the passage of 90 days following the deposit, the trust
funds will not be subject to any applicable bankruptcy, insolvency,
reorganization or similar law affecting creditors' rights generally; and
(9) The Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by this
Section 8.01 have been complied with; PROVIDED, HOWEVER, that no deposit
under clause (1) above shall be effective to terminate the obligations of
the Issuers under the Securities, the Security Documents or this Indenture
prior to 90 days following any such deposit.
In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Issuers must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Issuers.
SECTION 8.02. SATISFACTION AND DISCHARGE.
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Securities, as expressly provided for in this Indenture) as to all
outstanding Securities when:
(1) either (a) all the Securities, theretofore authenticated and
delivered (except lost, stolen or destroyed Securities which have been
replaced or paid and Securities for whose payment money has theretofore
been deposited in trust or segregated and held in trust by the Issuers and
thereafter repaid to the Issuers or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) all Securities not
theretofore delivered to the Trustee for cancellation have become due and
payable and the Issuers have irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Securities not theretofore
delivered to the Trustee for cancellation, for principal of, premium, if
any, and interest on the Securities to the date of deposit together with
irrevocable instructions from the Issuers directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case
may be;
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(2) the Issuers have paid all other sums payable under this
Indenture by the Issuers; and
(3) the Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions
precedent under this Indenture relating to the satisfaction and discharge
of this Indenture have been complied with.
SECTION 8.03. SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this Indenture and
of the Securities referred to in Section 8.01 or 8.02, the respective
obligations of the Issuers and the Trustee under Sections 2.02, 2.03, 2.04,
2.05, 2.06, 2.07, 2.10, 2.12, 2.13, 4.01, 4.02, 6.07, Article Seven, Sections
8.05, 8.06 and 8.07 shall survive until the Securities are no longer
outstanding, and thereafter the obligations of the Issuers and the Trustee under
Sections 7.07, 8.05, 8.06 and 8.07 shall survive. Nothing contained in this
Article Eight shall abrogate any of the obligations or duties of the Trustee
under this Indenture.
SECTION 8.04. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE.
Subject to Section 8.07, after (i) the conditions of Section 8.01 or
8.02 have been satisfied, (ii) the Issuers have paid or caused to be paid all
other sums payable hereunder by the Issuers and (iii) the Issuers have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Issuers' and the Guarantors' obligations under this Indenture except for those
surviving obligations specified in Section 8.03.
SECTION 8.05. APPLICATION OF TRUST ASSETS.
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it pursuant to this Article Eight in the irrevocable
trust established pursuant to Section 8.01. The Trustee shall apply the
deposited U.S. Legal Tender or the U.S. Government Obligations, together with
earnings thereon, through the Paying Agent, in accordance with this Indenture
and the terms of the irrevocable trust agreement established pursuant to Section
8.01, to the payment of principal of and interest on the Securities. The U.S.
Legal Tender or U.S. Government Obligations so held in trust and deposited with
the Trustee in compli-
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80
ance with Section 8.01 shall not be part of the trust estate under this
Indenture, but shall constitute a separate trust fund for the benefit of all
Holders entitled thereto.
SECTION 8.06. REPAYMENT TO THE ISSUERS; UNCLAIMED MONEY
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to
the Issuers, upon receipt by the Trustee of an Officers' Certificate, any excess
money, determined in accordance with Section 8.01, held by it at any time. The
Trustee and the Paying Agent shall pay to the Issuers upon receipt by the
Trustee or the Paying Agent, as the case may be, of an Officers' Certificate,
any money held by it for the payment of principal, premium, if any, or interest
that remains unclaimed for one year after payment to the Holders is required;
PROVIDED, HOWEVER, that the Trustee and the Paying Agent before being required
to make any payment may, but need not, at the expense of the Issuers cause to be
published once in a newspaper of general circulation in the City of New York or
mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall be at least 30
days from the date of such publication or mailing, any unclaimed balance of such
money then remaining will be repaid to the Issuers. After payment to the
Issuers, Securityholders entitled to money must look solely to the Issuers for
payment as general creditors unless an applicable abandoned property law
designates another Person, and all liability of the Trustee or Paying Agent with
respect to such money shall thereupon cease.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with this Indenture by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then and only then the Issuers', if any, obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had been made pursuant to this Indenture until such time as the Trustee
is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations
in accordance with this Indenture; PROVIDED, HOWEVER, that if the Issuers have
made any payment of principal of, premium, if any, or interest on any Securities
because of the reinstatement of its obligations, the Issuers shall be,
subrogated to the rights of the holders of such Securities to receive such
payment from the U.S. Legal Tender or U.S. Government Obligations held by the
Trustee or Paying Agent.
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Issuers and the Trustee, together, may amend or supplement this
Indenture, the Security Documents or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to evidence the succession in accordance with Article Five
hereof of another Person to an Issuer and the assumption by any such
successor of the covenants of the such Issuer herein and in the
Securities;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(4) to make any other change that does not materially and
adversely affect the rights of any Securityholders; or
(5) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
PROVIDED that the Issuers have delivered to the Trustee an Opinion of Counsel
and an Officers' Certificate, each stating that such amendment or supplement
complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Issuers and the Trustee, together, with
the written consent of the Holder or Holders of at least a majority in aggregate
principal amount at maturity of the outstanding Securities, may amend or
supplement this Indenture, the Security Documents or the Securities, without
notice to any other Securityholders. Subject to Section 6.07, the Holder or
Holders of a majority in aggregate principal amount at maturity of the
outstanding Securities may waive compliance by the Issuers with any provision of
this Indenture, the Security Documents or the Securities without notice to any
other Securityholder. Without the consent of each Securityholder affected,
however, no amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may:
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(i) reduce the amount of Securities whose Holders must consent
to an amendment, supplement, or waiver to this Indenture;
(ii) reduce the rate of or change the time for payment of
interest, including defaulted interest, on any Security;
(iii) reduce the Accreted Value of or premium on or change the stated
maturity of any Security or change the date on which any Securities may be
subject to redemption or repurchase or reduce the redemption or repurchase
price therefor;
(iv) make any Security payable in money other than that stated in the
Security or change the place of payment from New York, New York;
(v) waive a default on the payment of the Accreted Value of,
interest on, or redemption payment with respect to any Security;
(vi) make any change in provisions of this Indenture protecting the
right of each Holder of Securities to receive payment of Accreted Value of
and interest on such Security on or after the due date thereof or to bring
suit to enforce such payment, or permitting Holders of a majority in
principal amount at maturity of Securities to waive Defaults or Events of
Default;
(vii) make any changes in Section 6.04, 6.07 or this Section 9.02;
(viii) modify or change any provision of this Indenture or the related
definitions affecting the ranking of the Securities in a manner which
adversely affects the Holders;
(ix) amend, modify or change in any material respect the obligation
of the Company to make and consummate a Change of Control Offer in the
event of a Change of Control or make and consummate an Excess Proceeds
Offer with respect to any Asset Sale that has been consummated or, modify
any of the provisions or definitions with respect thereto; or
(x) release any Collateral, except in compliance with the terms of
this Indenture or the Security Documents, or adversely affect the ranking
of any Lien created by the Security Documents.
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It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Issuers shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Issuers to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. COMPLIANCE WITH TIA.
From the date on which this Indenture is qualified under the TIA,
every amendment, waiver or supplement of this Indenture, the Security Documents
or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of his Security by notice to the
Trustee or the Issuers received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver.
The Issuers may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to revoke any consent previously given, whether or not such
Persons continue to be Holders after such record date. No such consent shall be
valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a
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change described in any of clauses (i) through (x) of Section 9.02, in which
case, the amendment, supplement or waiver shall bind only each Holder of a
Security who has consented to it and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security; PROVIDED that any such waiver shall not impair or affect the right of
any Holder to receive payment of Accreted Value or principal of and interest on
a Security, on or after the respective due dates expressed in such Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates without the consent of such Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a
Security, the Issuers may require the Holder of the Security to deliver it to
the Trustee. The Issuers may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Issuers or
the Trustee so determines, the Issuers in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and the Security Documents and constitutes the legal, valid and
binding obligations of the Issuers enforceable in accordance with its terms.
Such Opinion of Counsel shall be at the expense of the Issuers, and the Trustee
shall have a Lien under Section 7.07 for any such expense.
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ARTICLE TEN
SECURITY
SECTION 10.01. PLEDGE AND SECURITY DOCUMENTS.
Each Holder, by accepting any Securities, agrees to all of the terms
and provisions of the Security Documents as the same may be in effect or may be
amended from time to time and authorizes and directs the Trustee to act as
secured party with respect thereto. The due and punctual payment of the Accreted
Value of principal of and interest on the Securities when and as the same shall
be due and payable, whether on an Interest Payment Date, at maturity, by
acceleration, call for redemption or otherwise, and interest on the overdue
Accreted Value of principal and interest, if any, of the Securities and payment
and performance of all other obligations of the Issuers to the Holders or the
Trustee under this Indenture and the Securities, according to the terms
hereunder or thereunder, shall be secured as provided in the Security Documents.
SECTION 10.02. CERTIFICATES AND OPINIONS.
The Issuers shall cause (a) TIA ss. 314(b), relating to Opinions of
Counsel regarding the Lien of the Security Documents and (b) TIA ss. 314(d),
relating to Officers' Certificate or other documents regarding the fair value of
the Collateral, to be complied with.
SECTION 10.03. Authorization of Actions To Be Taken by
THE TRUSTEE UNDER THE SECURITY DOCUMENTS.
The Trustee may (but shall not be obligated to), in its sole
discretion and without the consent of the Holders of the Securities, take all
actions it deems necessary or appropriate in order to (a) enforce or effect the
Security Documents and (b) collect and receive any and all amounts payable in
respect of the obligations of the Issuers hereunder. Such actions shall include,
but not be limited to, advising, instructing or otherwise directing any agent
appointed by it in connection with enforcing or effecting any term or provision
of the Security Documents. Subject to the provisions of the Security Documents
and this Indenture, the Trustee shall have power to institute and to maintain
such suits and proceedings as it may deem ex-
<PAGE>
86
pedient to prevent any impairment of the Collateral by any acts which may be
unlawful or in violation of the Security Documents or this Indenture, and such
suits and proceedings as the Trustee may deem expedient to preserve or protect
its interests and the interests of the Holders in the Collateral (including
power to institute and maintain suits or proceedings to restrain the enforcement
of or compliance with any legislative or other governmental enactment, rule or
order that may be unconstitutional or otherwise invalid if the enforcement of,
or compliance with, such enactment, rule or order would impair the security
hereunder or be prejudicial to the interests of the Holders of Securities or of
the Trustee). Except as otherwise expressly provided in this Indenture, the
Trustee shall not be obligated to take any action with respect to the exercise
of any rights or remedies, or to inquire into or give any notice of default,
under the Security Documents or with respect to the creation, perfection or
preservation of the security interest in the Collateral granted by the Security
Documents.
SECTION 10.04. Authorization of Receipt of Funds by the
TRUSTEE UNDER THE SECURITY DOCUMENTS.
The Trustee is authorized to receive any funds for the benefit of
the Securityholders distributed under the Security Documents, and to make
further distributions of such funds to the Holders in accordance with the
provisions of this Indenture.
SECTION 10.05. SPECIFIED RELEASES OF COLLATERAL.
(a) SATISFACTION AND DISCHARGE; DEFEASANCE. The Company and its
applicable Subsidiaries shall be entitled to obtain a full release of all of the
Collateral from the Liens of this Indenture and of the Security Documents upon
compliance with the conditions precedent set forth in Section 8.02 for
satisfaction and discharge of this Indenture or for defeasance pursuant to
Section 8.01(d). Upon delivery by the Issuers to the Trustee of an Officers'
Certificate and an Opinion of Counsel, each to the effect that such conditions
precedent have been complied with (and which may be the same Officers'
Certificate and Opinion of Counsel required by Article Eight), the Trustee shall
forthwith take all necessary action (at the request of and the expense of the
Issuers) to release and reconvey to the Company and its applicable Subsidiaries
all of the Collateral, and shall deliver such Collateral in its possession to
the Company and its applicable Subsidiaries including, without limitation, the
execution and delivery of releases and satisfactions wherever required.
(b) DISPOSITIONS PERMITTED BY SECTION 4.17. In the event that all of
the Capital Stock of an issuer of Pledged Securities owned by the Company and
its Subsidiaries is sold or otherwise transferred by the Company and/or one or
more of its Sub-
<PAGE>
87
sidiaries to a Person or Persons other than the Company or one of its
Subsidiaries pursuant to an Asset Sale that complies with Section 4.17, the
Company and its applicable Subsidiaries shall be entitled to obtain a release of
the Capital Stock of such issuer of Pledged Securities from Lien of the
applicable Security Documents upon delivery by the Issuers to the Trustee of (i)
an Officers' Certificate stating that (A) no Default or Event of Default has
occurred and is continuing and (B) the release of such Capital Stock complies
with the provisions of this Indenture and the TIA and (ii) all certificates,
opinions and other documentation required by the TIA. All of the Asset Sale
Proceeds from any such Asset Sale shall be deposited in a separate account with
the Trustee (a "COLLATERAL ACCOUNT"), which Collateral Account shall be subject
to the Lien of the applicable Security Documents. The Company and its applicable
Subsidiaries shall be entitled to obtain a release of cash and Cash Equivalents
in a Collateral Account upon delivery by the Issuers to the Trustee of (i) an
Officers' Certificate stating that (A) no Default or Event Default has occurred
and is continuing, (B) such cash and Cash Equivalents (x) will be applied within
five days of such release to either (1) repay Indebtedness in accordance with
Section 4.17, (2) invest in assets in accordance with Section 4.17 or (3)
repurchase Securities pursuant to an Excess Proceeds Offer or (y) are no longer
required to be applied to such uses pursuant to Section 4.17 and (C) the release
of such cash and Cash Equivalents complies with the provisions of this Indenture
and the TIA and (ii) all certificates, opinions and other documentation required
by the TIA.
SECTION 10.06. TERMINATION OF SECURITY INTEREST.
Upon the payment in full of all obligations of the Issuers under
this Indenture, the Security Documents and the Securities, the Trustee shall, at
the request of the Issuers together with an Officers' Certificate to such
effect, acknowledge as pledgee under the Security Documents that such
obligations have been paid in full or, if the Trustee is not the pledgee, send a
certificate executed by a Responsible Officer to such pledgee, stating that such
obligations have been paid in full.
<PAGE>
88
ARTICLE ELEVEN
[INTENTIONALLY OMITTED]
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of Section 318(c) of the TIA, the imposed
duties shall control.
SECTION 12.02. NOTICES.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Issuers:
c/o ACME Television Holdings, LLC
650 Town Center Drive
Suite 850
Costa Mesa, CA 92626
Facsimile: (714) 445-5726
Telephone: (714) 445-5791
with copies to:
Dickstein Shapiro Morin & Oshinsky LLP 2101 L Street, N.W.
Washington, DC 20037
Attention: Emanuel Faust, Jr., Esq.
Facsimile: (202) 887-0689
Telephone: (202) 785-9700
<PAGE>
89
if to the Trustee:
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 10890
Attention: Corporate Trust Administration
Facsimile: (302) 651-8882
Telephone: (302) 651-1000
Each of the Issuers and the Trustee by written notice to each other
such Person may designate additional or different addresses for notices to such
Person. Any notice or communication to the Issuers and the Trustee, shall be
deemed to have been given or made as of the date so delivered if personally
delivered; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and five (5) calendar days after mailing if sent by registered or
certified mail, postage prepaid (except that a notice of change of address shall
not be deemed to have been given until actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be
mailed to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA ss. 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA ss. 312(c).
SECTION 12.04. Certificate and Opinion as to Conditions
PRECEDENT.
Upon any request or application by the Issuers to the Trustee to
take any action under this Indenture, the Issuers shall furnish to the Trustee
at the request of the Trustee:
<PAGE>
90
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. Statements Required in Certificate or
OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with; provided,
HOWEVER, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 12.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee, Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 12.07. LEGAL HOLIDAYS.
If a payment date is not a Business Day, payment may be made on the
next succeeding day that is a Business Day.
<PAGE>
91
SECTION 12.08. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Indenture.
SECTION 12.09. No Adverse Interpretation of Other
AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of any of the Issuers or any of their respective Subsidiaries.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, equity holder or incorporator, as
such, of either Issuer shall not have any liability for any obligations of the
Issuers under the Securities or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 12.11. SUCCESSORS.
All agreements of the Issuers in this Indenture and the Securities
shall bind their respective successors. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 12.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture. Each
signed copy or counterpart shall be an original, but all of them together shall
represent the same agreement.
SECTION 12.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture or in
the Securities shall be held invalid, illegal or unenforceable, in any respect
for any reason, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions shall not in any way be
<PAGE>
92
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
<PAGE>
93
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed and attested, all as of the date first written above.
THE ISSUERS:
ACME INTERMEDIATE HOLDINGS, LLC
By: ACME Television Holdings, LLC,
its majority member
By:/s/Douglas E. Gealy
-----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Tom Allen
-----------------
ACME INTERMEDIATE FINANCE, INC.
By:/s/Douglas E. Gealy
-----------------------------------
Name: Douglas E. Gealy
Title: President
Attest: /s/Tom Allen
-----------------
THE TRUSTEE:
WILMINGTON TRUST COMPANY,
as Trustee
By:/s/Bruce L. Bisson
-----------------------------------
Name: Bruce L. Bisson
Title: Vice President
<PAGE>
- ------------------------------------------------------------------------------
[FORM OF SERIES A SECURITY]
- ------------------------------------------------------------------------------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITU-TIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER REGULATION D OF THE SECURITIES
ACT (AN "ACCREDITED INVESTOR")) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE ISSUERS OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF
BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE
IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
THE TRUSTEE AND THE ISSUERS SUCH CERTIFICATES, LEGAL OPINIONS OR OTHER
INFORMATION AS ANY OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
<PAGE>
2
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE, INC.
12% Senior Secured Discount Note
due September 30, 2005, Series A
THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF
SECTION 1271 ET SEQ. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 OF PRINCIPAL
AMOUNT OF MATURITY OF THIS SECURITY, THE ISSUE PRICE IS $497.67 AND THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT IS $502.33. THE ISSUE DATE OF THIS SECURITY IS
SEPTEMBER 30, 1997 AND THE YIELD TO MATURITY IS .
CUSIP No.:
No. [ ] $[ ]
Each of ACME INTERMEDIATE HOLDINGS, LLC, a Delaware limited
liability company (the "Company"), and ACME INTERMEDIATE FINANCE, INC., a
Delaware corporation ("Finance" and, together with the Company, the "Issuers"),
for value received promises to pay to [ ] or registered assigns, the principal
sum of $[ ], on September 30, 2005.
Interest Payment Dates: March 31 and September 30, commencing
March 31, 2003
Record Dates: March 15 and September 15.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Issuers have caused this Security to be
signed manually or by facsimile by their respective duly authorized officers.
Dated:
ACME INTERMEDIATE HOLDINGS, LLC
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
<PAGE>
3
By:________________________________________
Name:
Title:
ACME INTERMEDIATE FINANCE, INC.
By:________________________________________
Name:
Title:
By:________________________________________
Name:
Title:
<PAGE>
4
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12% Senior Secured Discount Notes due 2005,
Series A, described in the within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY,
as Trustee
By:_____________________________________
Authorized Signatory
<PAGE>
5
(REVERSE OF SECURITY)
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE, INC.
12% Senior Secured Discount Note
due September 30, 2005, Series A
1. INTEREST.
Each of ACME INTERMEDIATE HOLDINGS, LCC, a Delaware limited
liability company (the "Company"), and ACME INTERMEDIATE FINANCE, INC., a
Delaware corporation ("Finance" and, together with the Company, the "Issuers"),
promises to pay to the registered holder of this Security, until the principal
hereof is paid or duly provided for, interest on the principal amount set forth
on the face of this Security at a rate of 12% per annum commencing September 30,
2002. The Accreted Value of the Securities shall increase in the manner provided
in the Indenture. Interest on the Securities will accrue from and including the
most recent date to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for, from and including September 30,
2002 through but excluding the date on which interest is paid or duly provided
for. Interest shall be payable in arrears on each March 31 and September 30 and
at stated maturity, commencing March 31, 2003. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The principal of this Security shall not bear or accrue interest
until September 30, 2002, except in the case of a default in payment of Accreted
Value or principal and/or premium, if any, upon acceleration, redemption or
purchase and, in such case, the overdue principal and any overdue premium shall
bear interest at the rate of 12% PER ANNUM (compounded semiannually on each
March 31 and September 30) (to the extent that the payment of such interest
shall be legally enforceable), from the dates such amounts are due until they
are paid or duly provided for. To the extent, but only to the extent, interest
on amounts in default constituting original issue discount prior to September
30, 2002 is not permitted by law, original issue discount shall continue to
accrete until paid or duly provided for. On or after September 30, 2002,
interest on overdue principal and premium, if any, and, to the extent permitted
by law, on overdue installments of interest will accrue, until the principal and
premium, if any, is paid or duly provided for, at the rate of 12% PER ANNUM.
Interest on any overdue Accreted Value or principal or premium shall be payable
on demand.
<PAGE>
6
2. METHOD OF PAYMENT.
The Issuers shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are canceled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Issuers shall pay Accreted Value, principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Issuers may pay principal and interest by wire transfer of Federal funds, or
interest by check payable in such U.S. Legal Tender. The Issuers may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Wilmington Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar
without notice to the Holders.
4. INDENTURE.
The Issuers issued the Securities under an Indenture, dated as of
September 30, 1997 (the "Indenture"), between the Issuers and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect
on the date of the Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general obligations of the Issuers limited in aggregate principal
amount at maturity to $71,634,000.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Issuers' option, in whole
at any time or in part from time to time, on and after September 30, 2001 at the
following redemption prices (expressed as percentages of the Accreted Value
thereof on the applicable Redemption Date) if redeemed during the twelve-month
period commencing on September 30 of the years set forth below,
<PAGE>
7
plus, in each case, accrued interest thereon to the date of redemption:
YEAR PERCENTAGE
2001.......................... 106.000%
2002.......................... 103.000%
2003 and thereafter........... 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to September 30,
2000, the Issuers may, at their option, use the Net Proceeds of one or more
Public Equity Offerings to redeem up to 35% aggregate principal amount at
maturity of Securities at a redemption price equal to 112% of the Accreted Value
thereof; provided that at least 65% of the principal amount at maturity of
Securities originally issued remains outstanding immediately after giving effect
to any such redemption. In order to effect the foregoing redemption with the Net
Proceeds of a Public Equity Offering, the Issuers shall make such redemption not
more than 90 days after the consummation of such Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 principal amount at maturity or less may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $1,000 principal amount at
maturity or any integral multiple thereof) of Securities that have denominations
larger than $1,000 principal amount at maturity.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount at maturity thereof to be redeemed. A new Security in a
principal amount at maturity equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Security. On and after the Redemption Date, Accreted Value will cease to accrete
or interest will cease to accrue, as the case may be, on Securities or portions
thereof called for redemption.
<PAGE>
8
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Issuers will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the Accreted Value thereof (if on or prior to September
30, 2002) or 101% of the principal amount at maturity thereof (if after
September 30, 2002), plus accrued and unpaid interest, if any, as the case may
be, thereon to the date of repurchase.
9. LIMITATION ON DISPOSITION OF ASSETS.
The Issuers are, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their Accreted Value (if on or prior to
September 30, 2002) or 100% of their principal amount at maturity (if after
September 30, 2002), plus accrued and unpaid interest, if any, thereon to the
date of repurchase, as the case may be, with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 principal amount at maturity and integral multiples of
$1,000 principal amount at maturity. A Holder shall register the transfer of or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities or portions thereof
selected for redemption, except the unredeemed portion of any security being
redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. UNCLAIMED FUNDS.
If funds for the payment of Accreted Value or principal or interest
remain unclaimed for one year, the Trustee and the Paying Agent will repay the
funds to the Issuers at their request. After that, all liability of the Trustee
and such Paying Agent with respect to such funds shall cease.
<PAGE>
9
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Issuers may be discharged from their obligations under the
Indenture and the Securities except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
15. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture and the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount at maturity of the Securities then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount at maturity of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend or
supplement the Indenture and the Securities to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Security.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of Subsidiaries, to sell assets, to consolidate, merge or sell all
or substantially all of its assets, to engage in transactions with affiliates or
to engage in certain businesses. The limitations are subject to a number of
important qualifications and exceptions. The Issuers must report quarterly to
the Trustee on compliance with such limitations.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of Securities
then outstanding may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Secu-
<PAGE>
10
rities may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount at
maturity of the Securities then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of certain continuing Defaults or Events of Default if it
determines that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH ISSUERS.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Issuers, their respective Subsidiaries or their respective Affiliates
as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No equity holder, director, officer, employee or incorporator, as
such, of the Issuers shall have any liability for any obligation of the Issuers
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
<PAGE>
11
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers have caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. SECURITY DOCUMENTS.
In order to secure the due and punctual payment of the Accreted
Value of principal of and interest on the Securities and all other amounts
payable by the Issuers under the Indenture and the Securities when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Company and certain of its Subsidiaries have granted Liens on the Collateral to
the Trustee for the benefit of the Holders of Securities pursuant to the
Indenture and the Security Documents.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
any of the Security Documents and the terms and provisions of the Indenture will
not be deemed for any purpose to be an impairment of the security under the
Indenture.
23. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement, the Issuers will be
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Security shall have the right to exchange
this Series A Security for a Series B Security, which has been registered under
the Securities Act, in like principal amount at maturity and having terms
identical in all material respects as the Series A Securities. The Holders shall
be entitled to receive certain additional cash interest payments in the event
such exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
<PAGE>
12
The Issuers will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture and the Registration
Rights Agreement. Requests may be made to: c/o ACME Television Holdings,
LLC, Suite 850, 650 Town Center Drive, Costa Mesa, CA 92626, Attn: President.
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
_______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________________________
agent to transfer this Security on the books of the Issuers.
The agent may substitute another to act for him.
Dated:__________________________ Signed:__________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:___________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuers
pursuant to Section 4.16 or Section 4.17 of the Indenture, check the appropriate
box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Issuers pursuant to Section 4.16 or Section 4.17 of the Indenture, state the
amount: $_____________
Date:__________________________ Your Signature:_______________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:__________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT B
[FORM OF SERIES B SECURITY]
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE, INC.
12% Senior Secured Discount Note
due September 30, 2005, Series B
THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF
SECTION 1271 ET SEQ. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 OF PRINCIPAL
AMOUNT OF MATURITY OF THIS SECURITY, THE ISSUE PRICE IS $497.67 AND THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT IS $502.33. THE ISSUE DATE OF THIS SECURITY IS
SEPTEMBER 30, 1997 AND THE YIELD TO MATURITY IS 13.92.
CUSIP No.:
No. [ ] $[ ]
Each of ACME INTERMEDIATE HOLDINGS, LLC, a Delaware limited
liability company (the "Company"), and ACME INTERMEDIATE FINANCE, INC., a
Delaware corporation ("Finance" and, together with the Company, the "Issuers"),
for value received promises to pay to [ ] or registered assigns, the principal
sum of $[ ], on September 30, 2005.
Interest Payment Dates: March 31 and September 30, commencing
March 31, 2003.
Record Dates: March 15 and September 15.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Issuers have caused this Security to be
signed manually or by facsimile by their respective duly authorized officers.
Dated:
ACME INTERMEDIATE HOLDINGS, LLC
By: ACME Television Holdings, LLC,
its majority member
By:________________________________________
Name:
Title:
<PAGE>
2
By:________________________________________
Name:
Title:
ACME INTERMEDIATE FINANCE, INC.
By:________________________________________
Name:
Title:
By:________________________________________
Name:
Title:
<PAGE>
3
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 12% Senior Secured Discount Notes due 2005,
Series B, described in the within-mentioned Indenture.
Dated: WILMINGTON TRUST COMPANY,
as Trustee
By:________________________________________
Authorized Signatory
<PAGE>
4
(REVERSE OF SECURITY)
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE, INC.
12% Senior Secured Discount Note
due September 30, 2005, Series B
1. INTEREST.
Each of ACME INTERMEDIATE HOLDINGS, LCC, a Delaware limited
liability company (the "Company"), and ACME INTERMEDIATE FINANCE, INC., a
Delaware corporation ("Finance" and, together with the Company, the "Issuers"),
promises to pay to the registered holder of this Security, until the principal
hereof is paid or duly provided for, interest on the principal amount set forth
on the face of this Security at a rate of 12% per annum commencing September 30,
2002. The Accreted Value of the Securities shall increase in the manner provided
in the Indenture. Interest on the Securities will accrue from and including the
most recent date to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for, from and including September 30,
2002 through but excluding the date on which interest is paid or duly provided
for. Interest shall be payable in arrears on each March 31 and September 30 and
at stated maturity, commencing March 31, 2003. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The principal of this Security shall not bear or accrue interest
until September 30, 2002, except in the case of a default in payment of Accreted
Value or principal and/or premium, if any, upon acceleration, redemption or
purchase and, in such case, the overdue principal and any overdue premium shall
bear interest at the rate of 12% PER ANNUM (compounded semiannually on each
March 31 and September 30) (to the extent that the payment of such interest
shall be legally enforceable), from the dates such amounts are due until they
are paid or duly provided for. To the extent, but only to the extent, interest
on amounts in default constituting original issue discount prior to September
30, 2002 is not permitted by law, original issue discount shall continue to
accrete until paid or duly provided for. On or after September 30, 2002,
interest on overdue principal and premium, if any, and, to the extent permitted
by law, on overdue installments of interest will accrue, until the principal and
premium, if any, is paid or duly provided for, at the rate of 12% PER ANNUM.
Interest on any overdue Accreted Value or principal or premium shall be payable
on demand.
<PAGE>
5
2. METHOD OF PAYMENT.
The Issuers shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date even if the
Securities are canceled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Issuers shall pay Accreted Value, principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
the Issuers may pay principal and interest by wire transfer of Federal funds, or
interest by check payable in such U.S. Legal Tender. The Issuers may deliver any
such interest payment to the Paying Agent or to a Holder at the Holder's
registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Wilmington Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar
without notice to the Holders. The Company or any of its Subsidiaries may,
subject to certain exceptions, act as Registrar or co-Registrar.
4. INDENTURE.
The Issuers issued the Securities under an Indenture, dated as of
September 30, 1997 (the "Indenture"), between the Issuers and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect
on the date of the Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are general obligations of the Issuers limited in aggregate principal
amount at maturity to $71,634,000.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Issuers' option, in whole
at any time or in part from time to time, on and after September 30, 2001 at the
following redemption prices (expressed as percentages of the Accreted Value
thereof) on the applicable Redemption Date if redeemed during the twelve-month
period commencing on September 30 of the years set forth below,
<PAGE>
6
plus, in each case, accrued interest thereon to the date of redemption:
YEAR PERCENTAGE
2001.......................... 106.000%
2002.......................... 103.000%
2003 and thereafter........... 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to September 30,
2000, the Issuers may, at their option, use the Net Proceeds of one or more
Public Equity Offerings to redeem up to 35% aggregate principal amount at
maturity of Securities at a redemption price equal to 112% of the Accreted Value
thereof; provided that at least 65% of the principal amount at maturity of
Securities originally issued remains outstanding immediately after giving effect
to any such redemption. In order to effect the foregoing redemption with the Net
Proceeds of a Public Equity Offering, the Issuers shall make such redemption not
more than 90 days after the consummation of such Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 principal amount at maturity or less may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $1,000 principal amount at
maturity or any integral multiple thereof) of Securities that have denominations
larger than $1,000 principal amount at maturity.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount at maturity thereof to be redeemed. A new Security in a
principal amount at maturity equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Security. On and after the Redemption Date, Accreted Value will cease to accrete
or interest will cease to accrue, as the case may be, on Securities or portions
thereof called for redemption.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Issuers will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the Accreted Value
<PAGE>
7
thereof (if on or prior to September 30, 2002) or 101% of the principal amount
at maturity thereof (if on or prior to September 30, 2002), plus accrued and
unpaid interest, if any, as the case may be, thereon to the date of repurchase.
9. LIMITATION ON DISPOSITION OF ASSETS.
The Issuers are, subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their Accreted Value (if on or prior to
September 30, 2002) or 100% of their principal amount at maturity (if after
September 30, 2002), plus accrued and unpaid interest, if any, thereon to the
date of repurchase, as the case may be, with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 principal amount at maturity and integral multiples of
$1,000 principal amount at maturity. A Holder shall register the transfer of or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay certain transfer taxes or similar governmental charges
payable in connection therewith as permitted by the Indenture. The Registrar
need not register the transfer of or exchange any Securities or portions thereof
selected for redemption, except the unredeemed portion of any security being
redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. UNCLAIMED FUNDS.
If funds for the payment of Accreted Value or principal or interest
remain unclaimed for one year, the Trustee and the Paying Agent will repay the
funds to the Issuers at their request. After that, all liability of the Trustee
and such Paying Agent with respect to such funds shall cease.
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Issuers may be discharged from their obligations under the
Indenture and the Securities except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Securi-
<PAGE>
8
ties, in each case upon satisfaction of certain conditions specified in the
Indenture.
14. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture and the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount at maturity of the Securities then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount at maturity of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend or
supplement the Indenture and the Securities to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Security.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of Subsidiaries, to sell assets, to consolidate, merge or sell all
or substantially all of its assets, to engage in transactions with affiliates or
to engage in certain businesses. The limitations are subject to a number of
important qualifications and exceptions. The Issuers must report quarterly to
the Trustee on compliance with such limitations.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of Securities
then outstanding may declare all the Securities to be due and payable
immediately in the manner and with the effect provided in the Indenture. Holders
of Securities may not enforce the Indenture, the Securities or the Guarantees
except as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount at
maturity of the Securities then outstanding to direct the Trustee in its
exercise of any trust or power. The Trustee may withhold
<PAGE>
9
from Holders of Securities notice of certain continuing Defaults or Events of
Default if it determines that withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH ISSUERS.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Issuers, their respective Subsidiaries or their respective Affiliates
as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No equity holder, director, officer, employee or incorporator, as
such, of the Issuers shall have any liability for any obligation of the Issuers
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of, such obligations or their creation. Each Holder of a Security
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on this Security.
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers have caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
<PAGE>
10
22. SECURITY DOCUMENTS.
In order to secure the due and punctual payment of the Accreted
Value of principal of and interest on the Securities and all other amounts
payable by the Issuers under the Indenture and the Securities when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Securities and the Indenture, the
Company and certain of its Subsidiaries have granted Liens on the Collateral to
the Trustee for the benefit of the Holders of Securities pursuant to the
Indenture and the Security Documents.
Each Holder, by accepting a Security, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
any of the Security Documents and the terms and provisions of the Indenture will
not be deemed for any purpose to be an impairment of the security under the
Indenture.
The Issuers will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
ACME Intermediate Holdings, LLC, c/o ACME Television Holdings, LLC, Suite 850,
650 Town Center Drive, Costa Mesa, CA 92626, Attn: President.
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
______________________________________________________________________________
______________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ______________________________________________________
agent to transfer this Security on the books of the Issuers.
The agent may substitute another to act for him.
Dated:__________________________ Signed:_________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:__________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Issuers
pursuant to Section 4.16 or Section 4.17 of the Indenture, check the appropriate
box:
Section 4.16 [ ] Section 4.17 [ ]
If you want to elect to have only part of this Security purchased by
the Issuers pursuant to Section 4.16 or Section 4.17 of the Indenture, state the
amount: $_____________
Date: ________________________ Your Signature:________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:____________________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
C-1
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
<PAGE>
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 12% Senior Secured Discount Notes due 2005, Series A and 12% Senior
Secured Discount Notes due 2005, Series B (the "Securities"), of
ACME INTERMEDIATE HOLDINGS, LLC and ACME FINANCE INC.
This Certificate relates to $_______ principal amount of Securities
held in the form of* ___ a beneficial interest in a Global Security or* _______
Physical Securities by ______ (the "Transferor").
The Transferor:*
|_| has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
|_| has requested that the Registrar by written order to exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of this Securities does not require registration under the
Securities Act of 1933, as amended (the "Act") because*:
|_| Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16(a)(II)(A) or Section
2.16(d)(i)(A) of the Indenture).
|_| Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
<PAGE>
2
|_| Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule
501 under the Act.
|_| Such Security is being transferred in reliance on Regulation S
under the Act
|_| Such Security is being transferred in reliance on Rule 144 under the
Act.
|_| Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 or Regulation S under the Act to a person other than an
institutional "accredited investor."
___________________________________________
[INSERT NAME OF TRANSFEROR]
By:_______________________________________
[Authorized Signatory]
Date:______________________________
*Check applicable box.
<PAGE>
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
---------------, ----
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Re: ACME Intermediate Holdings, LLC and ACME Finance Inc.
(the "Issuers") Indenture (the "Indenture") relating
to 12% Senior Secured Discount Notes due 2005, Series
A, or 12% Senior Secured Discount Notes due 2005,
Series B (THE "SECURITIES")
Ladies and Gentlemen:
In connection with our proposed purchase of Securities of the
Issuers, we confirm that:
1. We have received such information as we deem necessary in
order to make our investment decision.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture and
the undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities, we will do so only (A) to the
Issuers or any subsidiary thereof, (B) inside the United States in accordance
with Rule 144A under the Securities Act to a "qualified institutional buyer" (as
defined therein), (C) inside the United States to an institutional "accredited
investor" (as defined below) that, prior to such
<PAGE>
2
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
the Trustee a signed letter substantially in the form hereof, (D) outside the
United States in accordance with Regulations S under the Securities Act, (E)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing Securities from us a notice advising such purchaser that
resales of the Securities are restricted as stated herein.
4. We understand that, on any proposed resale of Securities, we will
be required to furnish to the Trustee and the Issuers, such certification, legal
opinions and other information as the Trustee and the Issuers may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for our account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
<PAGE>
3
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:_____________________________________
[Authorized Signatory]
3
<PAGE>
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
WITH REGULATION S TRANSFERS
---------------, ----
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Re: ACME Intermediate Holdings, LLC and ACME Finance
Inc. (the "Issuers") 12% Senior Secured Discount
Notes due 2005, Series A, and 12% Senior Secured
Discount Notes due 2005, SERIES B (THE "SECURITIES")
Dear Sirs:
In connection with our proposed sale of $____________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a
person in the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
<PAGE>
2
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:______________________________________
[Authorized Signature]
<PAGE>
Exhibit G - Securities Pledge Agreement has been intentionally omitted by
the Registrants.
A copy of this omitted Exhibit will be provided to the Securities and
Exchange Commission upon request.
November 14, 1997
ACME Intermediate Holdings, LLC
ACME Intermediate Finance, Inc.
650 Town Center Drive, Suite 850
Costa Mesa, CA 92626
Ladies and Gentlemen:
We have acted as counsel to ACME Intermediate Holdings, LLC, a
Delaware limited liability company (the "Company"), and ACME Intermediate
Finance, Inc., a Delaware corporation ("Intermediate Finance," and together with
the Company, the "Issuers"), in connection with the preparation and filing with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, of a Registration Statement on Form S-4 (the "Registration Statement")
relating to the offer to exchange the Issuers' 12% Senior Secured Discount Notes
due 2005, Series B (the "Exchange Notes"), for a like principal amount of the
Issuers' 12% Senior Secured Discount Notes due 2005, Series A (the "Original
Notes"), of which $71,634,000 aggregate principal amount at maturity is
outstanding on the date hereof.
The Exchange Notes are to be issued pursuant to an Indenture, dated as
of September 30, 1997 (the "Indenture"), among the Issuers and Wilmington Trust
Company, as trustee (the "Trustee"). The Original Notes were sold pursuant to
the Purchase Agreement, dated September 24, 1997 (the "Purchase Agreement"),
among CIBC Wood Gundy Securities Corp. and the Issuers.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings set forth in the Registration Statement.
For the purposes of giving this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records, certificates of public officials and other
instruments as we have deemed necessary or advisable for the purpose of this
opinion, including the organizational documents of each of the Issuers.
<PAGE>
ACME Intermediate Holdings, LLC
ACME Intermediate Finance, Inc.
November 14, 1997
Page 2
We have relied on certificates of, or telegraphic communications from,
public officials as to the corporate or limited liability company good standing
of the Issuers. We have relied upon representations of the Issuers contained in
the Purchase Agreement and certificates of officers of the Company delivered in
connection with the Purchase Agreement as to factual matters underlying the
opinions herein. We believe that we and you are justified in relying thereon. We
have made no other inquiries and no search of the public docket records of any
court, governmental agency or body or administrative agency.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Issuers, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and that such documents constitute valid and binding
obligations of such parties.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The execution and delivery by the Issuers of the Indenture have
been duly authorized by all necessary corporate action of the Issuers and,
assuming due authorization, execution and delivery of the Indenture by the
Trustee, as to which no opinion is expressed, the Indenture will, when duly
executed and delivered by the Issuers, constitute a valid and binding obligation
of the Issuers enforceable against the Issuers in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(ii) The execution and delivery by the Issuers of the Exchange Notes
have been duly authorized by all necessary corporate action of the Issuers and,
assuming the authentication of the Exchange Notes by the Trustee, as to which no
opinion is expressed, the Exchange Notes will, when duly executed and delivered
by the Issuers and exchanged as described in the Registration Statement,
constitute valid and binding obligations of the Issuers enforceable against the
Issuers in accordance with their terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is
<PAGE>
ACME Intermediate Holdings, LLC
ACME Intermediate Finance, Inc.
November 14, 1997
Page 3
sought in a proceeding in equity or at law), and the holders thereof will be
entitled to the benefits provided by the Indenture.
We are licensed to practice law in the District of Columbia and the
State of New York, and do not hold ourselves out as being conversant with the
law of any jurisdiction other than the federal laws of the United States of
America, the District of Columbia, the State of New York and, to the extent
required by the foregoing opinion, the Delaware General Corporation Law, the
Delaware Limited Liability Company Act, the Oregon Limited Liability Company
Act, the Tennessee Limited Liability Company Act and the General and Business
Corporation Law of Missouri. No other opinion is expressed herein as to the laws
of any other jurisdiction.
This opinion is provided to you at your request to enable you to
fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. ss.
229.601(b)(5), in connection with the Registration Statement. This opinion
letter may not be relied upon by any other person or for any other purpose.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Validity of Exchange Notes" in the Prospectus forming a part of the
Registration Statement, without admitting that we are "experts" under the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission issued thereunder, with respect to any part
of the Registration Statement, including this exhibit.
Very truly yours,
/s/ Dickstein Shapiro Morin & Oshinsky LLP
November 13, 1997
ACME Intermediate Holdings, LLC
ACME Intermediate Finance, Inc.
650 Town Center Drive, Suite 850
Costa Mesa, CA 92626
Ladies and Gentlemen:
We have acted as counsel to ACME Intermediate Holdings, LLC, a Delaware
limited liability company (the "Company"), and ACME Intermediate Finance, Inc.,
a Delaware corporation ("Intermediate Finance," and together with the Company,
the "Issuers"), in connection with the preparation and filing with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
of a Registration Statement on Form S-4 (the "Registration Statement") relating
to the offer to exchange the Issuers' 12% Senior Secured Discount Notes due
2005, Series B (the "Exchange Notes"), for a like principal amount of the
Issuers' 12% Senior Secured Discount Notes due 2005, Series A (the "Original
Notes"), of which $71,634,000 aggregate principal amount at maturity is
outstanding on the date hereof.
The Exchange Notes are to be issued pursuant to an Indenture, dated as of
September 30, 1997 (the "Indenture"), among the Issuers and you, as trustee (the
"Indenture Trustee"). The Original Notes were sold pursuant to the Purchase
Agreement, dated September 24, 1997 (the "Purchase Agreement"), among CIBC Wood
Gundy Securities Corp. and the Issuers.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings set forth in the Purchase Agreement or the Registration
Statement.
For the purposes of giving this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records, certificates of public officials and other
instruments as we have deemed necessary or advisable for the purpose of this
opinion, including the organizational documents of each of the Issuers.
<PAGE>
ACME Intermediate Holdings, LLC
ACME Intermediate Finance, Inc.
November 13, 1997
Page 2
We have relied on certificates of, or telegraphic communications from,
public officials as to the corporate or limited liability company good standing
of the Issuers. We have relied upon representations of the Issuers contained in
the Purchase Agreement and certificates of officers of the Company delivered in
connection with the Purchase Agreement as to factual matters underlying the
opinions herein. We believe that we and you are justified in relying thereon. We
have made no other inquiries and no search of the public docket records of any
court, governmental agency or body or administrative agency.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Issuers, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and that such documents constitute valid and binding
obligations of such parties.
Based upon and subject to the foregoing, we are of the opinion that:
(i) each of the Issuers has the requisite power and authority to
execute, deliver and perform its obligations under the Exchange Notes;
(ii) the Exchange Notes have been duly and validly authorized,
executed and delivered by the Issuers for issuance and, when authenticated by
the Trustee in accordance with the provisions of the Indenture, will constitute
valid and legally binding obligations of the Issuers, enforceable against the
Issuers in accordance with their terms, except that the enforcement thereof may
be limited by the Enforceability Exceptions; and
(iii) the Exchange Notes are in the form contemplated by the
Indenture.
We are licensed to practice law in the District of Columbia and the State
of New York, and do not hold ourselves out as being conversant with the law of
any jurisdiction other than the federal laws of the United States of America,
the District of Columbia, the State of New York and, to the extent required by
the foregoing opinion, the Delaware General Corporation Law, the Delaware
Limited Liability Company Act, the Oregon
<PAGE>
ACME Intermediate Holdings, LLC
ACME Intermediate Finance, Inc.
November 13, 1997
Page 3
Limited Liability Company Act and the Tennessee Limited Liability Company Act
statutes. No other opinion is expressed herein as to the laws of any other
jurisdiction.
This opinion is provided to you at your request to enable you to fulfill
the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. Section
229.601(b)(5), in connection with the Registration Statement. This opinion
letter may not be relied upon by any other person or for any other purpose.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Validity of Exchange Notes" in the Prospectus forming a part of the
Registration Statement, without admitting that we are "experts" under the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission issued thereunder, with respect to any part
of the Registration Statement, including this exhibit.
Very truly yours,
/s/Dickstein Shapiro Morin & Oshinsky LLP
STOCK PURCHASE AGREEMENT
BY AND AMONG
ACME TELEVISION HOLDINGS, L.L.C. ("PURCHASER"),
KOPLAR COMMUNICATIONS, INC. ("COMPANY")
AND
THE SHAREHOLDERS NAMED THEREIN ("SELLING SHAREHOLDERS")
DATED JULY 29, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.....................................................................1
PURCHASE AND SALE OF STOCK..............................................1
1.1 Agreement to Purchase and Sell..............................1
1.2 Delivery of Certificates....................................2
1.3 Purchase Price..............................................2
1.4 Determination of Working Capital and Other Adjustments......4
1.5 Payment of Purchase Price...................................5
ARTICLE II....................................................................6
REPRESENTATIONS AND WARRANTIES OFTHE COMPANY AND SELLING SHAREHOLDERS...6
2.1 Organization, Standing, Authority, Subsidiaries and
Authorized Shares...........................................6
2.2 Authorization and Binding Obligation........................7
2.3 Absence of Conflicting Agreements...........................8
2.4 Licenses....................................................8
2.5 Title to and Condition of Real Property.....................8
2.6 Title to and Condition of Personal Property.................9
2.7 Contracts..................................................10
2.8 Consents...................................................10
2.9 Trademarks, Trade Names and Copyrights.....................11
2.10 Audited Financial Statements...............................11
2.11 Insurance..................................................11
2.12 Reports....................................................11
2.13 Compensation and Employee Plans............................12
2.14 Labor Relations............................................13
2.15 Tax Returns and Audit......................................13
2.16 Claims and Legal Actions...................................13
2.17 Compliance with Laws.......................................14
2.18 Conduct of Business in Ordinary Course.....................14
2.19 Related Entities...........................................14
2.20 Environmental..............................................14
2.21 Broker's Fees..............................................15
2.22 Restrictions on Competition................................15
2.23 Cable Carriage.............................................15
ARTICLE III..................................................................15
REPRESENTATIONS AND WARRANTIES OF PURCHASER............................15
3.1 Organization, Standing and Authority.......................15
3.2 Authorization and Binding Obligation.......................15
3.3 Absence of Conflicting Agreements..........................15
3.4 Qualified Transferee.......................................16
i
<PAGE>
ARTICLE IV...................................................................16
COVENANTS OF THE COMPANY...............................................16
4.1 Pre-Closing Covenants......................................16
ARTICLE V....................................................................20
COVENANTS OF PURCHASER.................................................20
5.1 Notification...............................................20
5.2 No Inconsistent Action.....................................20
5.3 Purchaser's Qualifications.................................20
5.4 Schedules..................................................21
ARTICLE VI...................................................................21
SPECIAL COVENANTS AND AGREEMENTS.......................................21
6.1 FCC Consent................................................21
6.2 Antitrust Laws Compliance..................................21
6.3 Control of the Station.....................................22
6.4 Fees and Expenses..........................................22
6.5 Brokers....................................................22
6.6 Confidentiality............................................22
6.7 Public Announcements.......................................23
6.8 Cooperation................................................23
6.9 Excluded Assets and Liabilities............................23
6.10 Koplar Communications Television, L.L.C....................24
6.11 No Solicitation............................................24
6.12 Non-Competition............................................25
ARTICLE VII..................................................................25
ANCILLARY AGREEMENTS...................................................25
7.1 Investment in Purchaser....................................25
7.2 KISI Operations............................................25
7.3 Management Agreement.......................................25
7.4 Company Name...............................................25
ARTICLE VIII.................................................................25
CONDITIONS PRECEDENT TO CLOSING........................................26
8.1 Conditions for Closing.....................................26
8.2 Conditions to Obligations of Purchaser....................27
8.3 Conditions to Obligations of the Company and Selling
Shareholders...............................................29
ARTICLE IX...................................................................29
CLOSING AND CLOSING DELIVERIES.........................................29
9.1 Closing....................................................29
9.2 Deliveries by the Company and Selling Shareholders.........29
ii
<PAGE>
9.3 Deliveries by Purchaser....................................30
9.4 Local Marketing Agreement..................................31
ARTICLE X....................................................................32
TERMINATION............................................................32
10.1 Termination Events.........................................32
10.2 Effect of Termination......................................33
10.3 Remedies...................................................33
ARTICLE XI...................................................................34
INDEMNIFICATION........................................................34
11.1 Indemnification by the Selling Shareholders................34
11.2 Indemnification by Purchaser...............................34
11.3 Limitations on Indemnity...................................35
11.4 Procedure for Indemnification..............................36
ARTICLE XII..................................................................37
MISCELLANEOUS..........................................................37
12.1 Notices....................................................37
12.2 Benefit and Binding Effect.................................38
12.3 Governing Law..............................................39
12.4 Headings; Construction.....................................39
12.5 Time of Essence............................................39
12.6 Entire Agreement...........................................39
12.7 Waiver of Compliance; Consents.............................39
12.8 Severability...............................................40
12.9 Counterparts...............................................40
iii
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of the 29th day
of July, 1997, is made and entered into by and among KOPLAR COMMUNICATIONS,
INC., a Missouri corporation ("Company"), ACME TELEVISION HOLDINGS, L.L.C., a
Delaware limited liability company ("Purchaser") and the shareholders of the
Company set forth on EXHIBIT A attached hereto ("Selling Shareholders").
RECITALS:
A. The Company (through its Subsidiary, Koplar Communications Television,
L.L.C.) is the owner and operator of television station KPLR, Channel 11
("Station"), in St. Louis, Missouri.
B. The Selling Shareholders own all of the issued and outstanding shares
of : (i) the Class A Preferred Voting Stock; and (ii) the Common Non-Voting
Stock of the Company (collectively the "Stock").
C. Purchaser wishes to acquire all of the issued and outstanding Stock of
the Company from the Selling Shareholders and the Selling Shareholders desire to
sell the same to Purchaser, all in accordance with the terms and subject to the
conditions hereinafter set forth.
D. Attached hereto as the Definitions Addendum, and incorporated herein by
this reference, is a definitional listing of certain words (whose initial
letters are capitalized) used in this Agreement.
NOW, THEREFORE, in consideration of the above recitals and the mutual
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 AGREEMENT TO PURCHASE AND SELL . At the Closing and subject to the
terms and conditions of this Agreement, each Selling Shareholder shall sell,
assign, transfer, convey and deliver to Purchaser, free and clear of all
security interests, pledges, liens, charges, claims, options, rights to acquire,
restrictions on transfer or other encumbrances of any nature, the number of
shares of each class of Stock owned by such Selling Shareholder as set forth
opposite such Selling Shareholder's name on EXHIBIT A (the "Shares") (which
Shares, collectively, shall constitute all of the issued and outstanding stock
of the Company as of the Closing) and Purchaser shall purchase all of the Shares
from the Selling Shareholders.
<PAGE>
1.2 DELIVERY OF CERTIFICATES . At the Closing, each Selling Shareholder
shall deliver or cause to be delivered to Purchaser stock certificates
representing the issued and outstanding Shares owned by each Selling
Shareholder, duly endorsed in blank for transfer or accompanied by appropriate
stock powers duly executed in blank.
1.3 PURCHASE PRICE . The aggregate purchase price ("Purchase Price") to be
paid to the Selling Shareholders in exchange for the Shares shall be One Hundred
Forty-Six Million and No/100 Dollars ($146,000,000.00), subject to the
Adjustments and provisions set forth in Sections 1.3(b)-(d), 1.4, and 1.5 below:
(b) The following shall be the adjustments to the Purchase Price
(collectively the "Adjustments"):
(i) The Purchase Price shall be increased to the extent that
Working Capital (as of the date of Closing) is in excess of $3,000,000.00 and
shall be decreased by the amount that Working Capital (as of the date of
Closing) is less than $3,000,000.00. As used herein, "Working Capital" is
intended to mean the amount by which (x) (to the extent not Excluded Assets as
defined in Section 6.10 of this Agreement) the total of the cash, accounts
receivable, other receivables and prepaids of the Company exceeds (y) (to the
extent not Excluded Liabilities as defined in Section 6.10 of this Agreement)
the total of accounts payable, accrued expenses, and lease payables. The amount
of Working Capital, and the specific accounts which are elements of determining
Working Capital as provided for in the previous sentence, shall be determined on
a basis consistent with the Company's December 31, 1996 audited financial
statements included in the Audited Financials;
(ii) The Purchase Price shall be decreased by the amount of
the loan balance as of Closing with respect to all amounts owing to any
institutional lender (presently, the Company's institutional lender is
NationsBank, N.A.) which, unless alternative arrangements are made between
Purchaser and such bank to continue such loan, Purchaser shall cause to be paid
in full coincident with Closing and any liability of the Company incurred
outside of the ordinary course of business from December 31, 1996 to the date of
the Closing, except for those payments or liabilities specifically allowed
pursuant to this Agreement or otherwise reflected in the Working Capital of the
Company as of the Closing;
(iii) To the extent not reflected in the adjustment for
Working Capital Adjustment provided for in Section 1.3(b)(i) above, the Purchase
Price shall be decreased by all amounts payable to H. Max Lummis IV ("Lummis")
pursuant to Paragraph 2.6(e) of the Executive Employment Agreement dated as of
October 15, 1994 ("Lummis Employment Agreement"), between Lummis and the Company
on account of a Sale Transaction (as such term is defined in the Lummis
Employment Agreement) which Purchaser shall cause the Company to pay on the
later of the Closing or January 5, 1998, and which obligation, if paid after the
Closing, shall be secured by a letter of credit (at Lummis' cost) reasonably
acceptable to Lummis;
2
<PAGE>
(iv) To the extent not reflected in the adjustment for Working
Capital Adjustment provided for in Section 1.3(b)(i) above, the Purchase Price
shall be decreased by one-half of the amount of any severance liability
(excluding any amount payable to Lummis pursuant to Section 1.3(b)(iii) of this
Agreement) which arises in connection with Purchaser's termination of any of the
employees of the Company in connection with the purchase and sale of the Shares
pursuant to this Agreement immediately following Closing; PROVIDED, HOWEVER,
that such decrease in the Purchase Price pursuant to this clause (iv) shall not
exceed Three Hundred Thousand and No/100 Dollars ($300,000.00). The Purchaser
shall identify the employees to be terminated by Purchaser in connection with
the purchase and sale of the Shares no less than ten (10) days prior to Closing;
(v) The Purchase Price shall be decreased by the aggregate
amount payable as a consulting fee under the Management Agreement set forth in
Section 7.3 of this Agreement during the initial three (3) year term of the
Management Agreement;
(vi) To the extent not reflected in the adjustment for Working
Capital Adjustment provided for in Section 1.3(b)(i) above, the Purchase Price
shall be decreased by the amount payable to Warner Bros., a division of Time
Warner Entertainment Company, L.P. pursuant to that certain Promissory Note in
the original principal amount of approximately Three Million Six Hundred
Thousand and No/100 Dollars ($3,600,000.00); PROVIDED, HOWEVER, that the amount
of this Adjustment on account of such Promissory Note shall not exceed Two
Million and No/100 Dollars ($2,000,000.00) plus accrued and unpaid interest on
such amount, less any principal and interest payments made prior to Closing
towards such amount; and
(vii) To the extent not reflected in the Working Capital
Adjustment provided for in Section 1.3(b)(i) above, the Purchase Price shall be
decreased by the amount of the Selling Shareholders' costs ("Selling
Shareholders' Costs") associated or incurred in connection with the purchase and
sale of the Shares (including the fees of Communications Equity Associates
("CEA"), if any) to the extent paid or payable by the Company or Purchaser prior
to, as of or coincident with the Closing, including (a) all the legal fees of
the Selling Shareholders related to the purchase and sale of the Shares; (b) all
amounts paid to any holder of those stock options in the Company set forth on
SCHEDULE 2.1(C) for termination of such options in connection with the purchase
and sale of the Shares and (c) for one-half (1/2) of the FCC filing fees, as set
forth in Section 6.5 hereof. Purchaser shall cause all of Selling Shareholders'
Costs to be paid coincident with the Closing, except that the amount payable in
order to terminate the options described in (b) above shall be paid on the later
of the Closing or January 2, 1998, which obligation, if paid after the Closing,
shall be secured by a letter of credit (at the option holder's cost) in a form
reasonably acceptable to the respective option holders.
(c) In addition to the Adjustments provided for in Section 1.3(b)
above, the Selling Shareholders may designate employee bonuses (and all related
payroll tax expense) to be paid to those employees of the Company designated by
the Selling Shareholders and in such amounts as designated by Selling
Shareholders ("Designated Employee Bonuses"). The amount
3
<PAGE>
of such Designated Employee Bonuses will be identified by the Selling
Shareholders on or prior to five (5) days prior to Closing. The amount of the
Designated Employee Bonuses will not be deemed a liability for purposes of the
adjustment for Working Capital provided for in Section 1.3(b)(i).
(d) At least two (2) days prior to Closing, the Company and Selling
Shareholders shall provide Purchaser with documents sufficient to verify those
Adjustments set forth in Sections 1.3(b)(ii)-(vii) hereof.
1.4 DETERMINATION OF WORKING CAPITAL AND OTHER ADJUSTMENTS .
(a) Within one hundred twenty (120) days following Closing, the
Company shall cause the Company's accounting firm, Coopers & Lybrand, L.L.P.
("CPA Firm"), to prepare a balance sheet of the Company as of the close of
business on the Closing Date, in accordance with GAAP applied on a basis
consistent with the Company's December 31, 1996 audited financial statements
included in the Audited Financials ("Closing Balance Sheet") and shall cause the
CPA Firm to compute the adjustment to the Purchase Price with respect to Working
Capital as set forth in Section 1.3(b)(i) hereof in accordance with the terms of
Section 1.3 (the amount of the Adjustments provided in Sections 1.3(b)(i) is
referred to herein as the "Adjustment Amount"). The Closing Balance Sheet,
together with copies of all relevant work papers and a certification of the
Adjustment Amount by CPA Firm, shall be delivered to Selling Shareholders and
Purchaser, and Selling Shareholders and Purchaser shall have timely access to
all other records and computations in regard to the determination of the Closing
Balance Sheet and the Adjustment Amount.
(b) If Purchaser or Selling Shareholders have any objections to the
Adjustment Amount, such party shall notify the other of such disputed amount
("Disputed Amount") in writing, such notice setting forth in reasonable detail
the basis of such party's objection, within thirty (30) days following receipt
of the Closing Balance Sheet and the Adjustment Amount by Selling Shareholders
and Purchaser (the "Objection Period").
(c) If, at the expiration of the Objection Period, neither Purchaser
nor Selling Shareholders have objected to the Adjustment Amount by giving notice
of its objections as provided for in (b) above, then the Purchase Price shall be
increased or decreased, as appropriate, by the Adjustment Amount. If the
Purchase Price is decreased by the Adjustment Amount, Selling Shareholders
shall, within twenty (20) days from the expiration of the Objection Period, pay
the Adjustment Amount to Purchaser. In the event that the Purchase Price is
increased by the Adjustment Amount, Purchaser shall, within twenty (20) days
from the expiration of the Objection Period, pay the Adjustment Amount to
Selling Shareholders. Any payments due hereunder shall be made in cash or by
wire transfer of immediately available funds.
(d) In the event a Disputed Amount arises by notice pursuant to (b)
above, Purchaser and Selling Shareholders will use reasonable efforts to resolve
the Disputed Amount. If
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the parties do not obtain a final resolution of the Disputed Amount within
fifteen (15) days after notice of such Disputed Amount is given, then a mutually
agreeable national accounting firm ("Second CPA Firm") shall resolve any
remaining objections with respect to the Adjustment Amount and make a final
determination with respect to the adjustment to the Purchase Price ("Final
Determination"). In the event the parties submit any Disputed Amount to Second
CPA Firm for a Final Determination as provided herein, the fees and expenses of
Second CPA Firm will be paid by (i) the party objecting, if (x) the Disputed
Amount is resolved in favor of the non-objecting party, (y) the CPA Firm's
Adjustment Amount is equal to the Final Determination; or (z) the difference
between the Final Determination and CPA Firm's Adjustment Amount is less than
two-tenths of one percent (.2%) of the Purchase Price; or (ii) the non-objecting
party if the difference between the Final Determination and CPA Firm's
Adjustment Amount is greater than two-tenths of one percent (.2%) of the
Purchase Price and the Adjustment is in favor of the objecting party. All books
and records necessary for Second CPA Firm to make a Final Determination will be
made available to Purchaser and Selling Shareholders. The Final Determination
made by Second CPA Firm will be conclusive and binding upon the Purchaser and
Selling Shareholders. Once a Final Determination has been made, the Purchaser
shall pay Selling Shareholders, or, as the case may be, Selling Shareholders
shall pay Purchaser, the Adjustment Amount in accordance with the Final
Determination, within five (5) days of delivery of the Final Determination to
Selling Shareholders and Purchaser.
1.5 PAYMENT OF PURCHASE PRICE .
(a) At Closing, the Purchase Price (net of all applicable
Adjustments) shall be paid to the Selling Shareholders. If the Closing takes
place on or prior to December 31, 1997, such Purchase Price (net of the
Adjustments and net ot the Potential Tax Liability which shall be paid directly
to the Escrow Agent as provided in Section 1.5(b)) shall be paid pursuant to a
promissory note in the form of EXHIBIT H ("Promissory Note"), which shall be
secured by a letter of credit ("Letter of Credit") issued by a bank reasonably
acceptable to the Selling Shareholders (and the cost of which will be paid by
Selling Shareholders) in the form of EXHIBIT H-1. At Closing, Purchaser shall
deposit with the bank issuing the Letter of Credit the amount of the Purchase
Price (less the amount placed in the Tax Escrow Fund), which shall serve as cash
collateral for the bank in the event the Letter of Credit is drawn upon by
Selling Shareholders. In the event the Closing takes place after January 1,
1998, then the Purchase Price (net of the Adjustments and net ot the Potential
Tax Liability which shall be paid directly to the Escrow Agent as provided in
Section 1.5(b)) shall be paid to the Selling Shareholders in immediately
available funds by wire transfer as directed by the Selling Shareholders, and
the Promissory Note and Letter of Credit shall not be applicable.
(b) In connection with the pending IRS examination of the Company
for the years 1993 and 1994, it is anticipated that the Company will have a
potential tax liability asserted by the IRS, which the Company will dispute.
Simultaneously with the Closing, each of the parties to this Agreement will
execute and deliver the Tax Escrow Agreement, a copy of which is attached hereto
as EXHIBIT B (the "Tax Escrow Agreement"), and the Purchaser shall deposit with
the
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Escrow Agent (as defined in the Tax Escrow Agreement) in immediately available
funds out of the Purchase Price otherwise payable to the Selling Shareholders at
Closing (i) in the event that the amount of the Potential Tax Liability has been
asserted by the IRS at or prior to Closing, the full amount of the Potential Tax
Liability (as defined in the Tax Escrow Agreement) plus interest and penalties,
if any are asserted by the IRS (calculated through the approximate date of final
resolution of the IRS Examination (as defined in the Tax Escrow Agreement) ("IRS
Final Resolution")); or (ii) if the Potential Tax Liability has not yet been
asserted by the IRS at or prior to Closing, the amount estimated by the
Company's CPA Firm and approved by both Purchaser and Selling Shareholders,
which approval shall not be unreasonably withheld (in either case, the "Tax
Escrow Fund"). The Tax Escrow Fund shall serve as an escrow securing the
obligations of the Company with respect to the Potential Tax Liability, if any,
asserted by the IRS in connection with the IRS Examination. The Tax Escrow Fund
shall be subject to increase or decrease after the Closing in accordance with
the terms and conditions of the Tax Escrow Agreement. In the event that the
Final Tax Liability (as defined in the Tax Escrow Agreement) is greater than the
amount of the Tax Escrow Fund, inclusive of any and all accrued interest and
penalties (if any are asserted by the IRS), then the Selling Shareholders shall
pay the amount of any such shortfall to Purchaser within ten (10) days of
Selling Shareholders' receipt of notice of such shortfall and Purchaser shall be
obligated to fully satisfy the Final Tax Liability.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND SELLING SHAREHOLDERS
The Company and Selling Shareholders represent and warrant to Purchaser as
follows:
2.1 ORGANIZATION, STANDING, AUTHORITY, SUBSIDIARIES AND AUTHORIZED
SHARES .
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Missouri, and is qualified
to conduct business in the State of Missouri. The Company has all requisite
corporate power and authority: (i) to own, lease, and use its assets as
presently owned, leased and used; (ii) to conduct the business or operations of
the Station as presently conducted; and (iii) to execute and deliver this
Agreement and the documents contemplated hereby, and to perform and comply with
all of the terms, covenants and conditions to be performed and complied with by
the Company hereunder and thereunder. Each of the Selling Shareholders has all
requisite power and authority to execute and deliver this Agreement and the
documents contemplated hereby, and to perform and comply with all of the terms,
covenants and conditions to be performed and complied with by such Selling
Shareholder hereunder and thereunder.
(b) Set forth on SCHEDULE 2.1(B) hereto is a true and complete list
of all Subsidiaries of the Company stating, with respect to each Subsidiary, its
jurisdiction of incorporation, capitalization, equity ownership and
jurisdictions in which it is qualified to do
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business. As used in this Agreement, the term "Subsidiary" shall mean any Person
in which the Company owns beneficially securities or interests representing
twenty-five percent (25%) or more of: (i) the aggregate equity or profit
interests; or (ii) the combined voting power of voting interests ordinarily
entitled to vote for management or otherwise. Each of the Subsidiaries set forth
on SCHEDULE 2.1(B) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, has all
requisite corporate or other power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified to do business and is in good standing as a foreign corporation,
partnership or joint venture in each jurisdiction where such qualification is
required. All of the outstanding shares of capital stock of the corporate
Subsidiaries and all equity interests of the other Subsidiaries have been
validly authorized and issued, are fully paid and nonassessable, have not been
issued in violation of any preemptive rights or of any federal or state
securities law and, except as set forth on SCHEDULE 2.1(B) hereto, are
beneficially owned by the Company, free and clear of any security interest,
pledge, lien, charge, claim, option, right to acquire, restriction on transfer,
or encumbrance of any nature whatsoever. Except as set forth on SCHEDULE 2.1(B)
hereto, the Company does not own, directly or indirectly, any ownership, equity,
profits or voting interest in any Person, and has no agreement or commitment to
purchase any such interest. The Company has previously delivered to Purchaser
complete and correct copies of the articles of incorporation and by-laws
(including comparable governing instruments with different names), shareholder
agreements, partnership agreements and other agreements pertaining to the
Company's ownership or voting interest in each Subsidiary, as amended and
presently in effect. Except as the context otherwise requires, for purposes of
each of the representations, warranties and covenants contained in ARTICLE II
and ARTICLE IV of this Agreement, "Company" shall refer to the Company and each
of its Subsidiaries.
(c) The Company is authorized to issue 25,000 shares of $1.00 par
value Common Non-Voting Stock of which 21,206.25 shares are issued and
outstanding, and 5,000 shares of $110.00 par value Class A Preferred Voting
Stock, of which 862.875 shares are issued and outstanding. No other shares of
Stock of the Company are authorized or outstanding. Except as set forth on
SCHEDULE 2.1(C), there is no outstanding right, subscription, warrant, call,
unsatisfied preemptive right, option or other agreement of any kind to purchase
or otherwise to receive from the Company any of the shares of Stock or any other
security of the Company (except those that will be terminated coincident with
Closing as indicated on SCHEDULE 2.1(C)), and there is no outstanding security
of any kind convertible into such Stock. All of the issued and outstanding
shares of Stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable. The issuance of shares in the Company to the
Selling Shareholders did not and does not require any registration under the
Securities Act of 1933 or any other federal or state securities laws. The
Selling Shareholders are and will be on the Closing Date the record and
beneficial owners and holders of all the issued and outstanding shares of Stock
of the Company free and clear of all liens and encumbrances.
2.2 AUTHORIZATION AND BINDING OBLIGATION . The execution, delivery, and
performance of this Agreement by the Company have been duly authorized by all
necessary
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corporate actions on the part of the Company. This Agreement has been duly
executed and delivered by the Company and Selling Shareholders and constitutes
the legal, valid, and binding obligation of the Company and Selling
Shareholders, enforceable against them in accordance with its terms.
2.3 ABSENCE OF CONFLICTING AGREEMENTS . Subject to obtaining the Consents
(as defined in Section 2.8 hereof), the execution, delivery, and performance of
this Agreement by the Company and the Selling Shareholders and the documents to
be executed by such parties contemplated hereby (with or without the giving of
notice, the lapse of time, or both): (i) do not require the consent of any third
party; (ii) will not conflict with any provision of the Articles of
Incorporation or Bylaws of the Company; (iii) will not conflict with, result in
a breach of, or constitute a default under, any law, judgment, order, ordinance,
decree, rule, regulation or ruling of any court or governmental instrumentality,
which is applicable to the Company or the Station or the Selling Shareholders;
(iv) will not conflict with, constitute grounds for termination of, result in a
breach of, constitute a default under, or accelerate or permit the acceleration
of any performance required by the terms of any agreement, instrument, license
or permit to which the Company or any Selling Shareholder is a party or by which
the Company or its assets or any Selling Shareholder may be bound; or (v) will
not create any material claim, liability, mortgage, lien, pledge, condition,
charge, or encumbrance of any nature whatsoever upon the Company's assets.
2.4 LICENSES . The Company (through its Subsidiary, Koplar Communications
Television, L.L.C.) is the authorized legal holder of all the licenses, permits
and other authorizations (collectively "Licenses") required for the lawful
conduct of the business and operations of the Station in the manner they are now
conducted. SCHEDULE 2.4 contains a list of all Licenses and copies of all
Licenses issued by the FCC (subject to the Company's right to supplement such
Schedule provided the Company delivers the same to Purchaser within ten (10)
days from the execution of this Agreement). The Licenses are in full force and
effect, and the conduct of the business and operations of the Station are in
accordance with the Licenses and all statutory and regulatory requirements,
except as set forth on SCHEDULE 2.4. Except as set forth in SCHEDULE 2.4, the
Company and the Selling Shareholders have no reason to believe that the Licenses
issued by the FCC will not be renewed by the FCC for a full term without
material modification or conditions (except for those of general applicability).
2.5 TITLE TO AND CONDITION OF REAL PROPERTY . SCHEDULE 2.5 contains
descriptions of all the real property owned or leased by the Company (including
the location of all improvements thereon), which comprises all real property
interests necessary to conduct the business or operations of the Station as now
conducted (the "Real Property"). The Company has good and marketable fee simple
title to all of the fee estates listed in SCHEDULE 2.5 free and clear of all
liens, mortgages, pledges, covenants, easements, restrictions, encroachments,
leases, charges, and other claims and encumbrances except for: (i) mortgages or
security interests securing Liabilities reflected on the December 31, 1996
balance sheet included in the Audited Financials, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
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default) exists; (ii) liens for real estate taxes not yet due and payable; (iii)
easements, rights-of-way, restrictions of record and other items as disclosed on
SCHEDULE 2.5; (iv) mechanics' liens and other claims or encumbrances which will
be removed prior to or at Closing in accordance with Section 4.1 hereof; and (v)
minor imperfections of title which do not materially detract from the value of
the Real Property and which will not materially interfere with the use of the
Real Property in the manner presently used by the Company in the ordinary course
of its business. The improvements upon any Real Property conform in all material
respects to all lease restrictions, restrictive covenants, and zoning
ordinances. To the Company's and Selling Shareholders' respective Knowledge, no
condemnation or construction is pending or proposed which might have a
materially adverse affect on the use and value of the Real Property. The leases,
agreements and contracts for non-fee estates listed on SCHEDULE 2.5 constitute
valid and binding obligations of the Company, and to the Company's and Selling
Shareholders' respective Knowledge, of all other parties thereto and are in full
force and effect. The Company is not in material default under any of such
leases, agreements or contracts, and to the Company's and Selling Shareholders'
respective Knowledge, the other parties to such leases, agreements and contracts
are not in material default thereunder. Other than the Company and the Company's
Affiliates and except for those parties set forth on SCHEDULE 2.5, there are no
parties in possession of any portion of the Real Property, whether as lessees,
tenants at will, trespassers or otherwise. There are presently in existence
dedicated public access roads as well as telephone, electric, and water lines
(some of which are made available as the result of easements with adjacent
property owners) to or on the Real Property which are sufficient to service
adequately the current operations of each building located on the Real Property
that is used by the Company.
2.6 TITLE TO AND CONDITION OF PERSONAL PROPERTY . SCHEDULE 2.6 contains a
list of all items of personal property as of the date of SCHEDULE 2.6 which are
used or useful in and material to the operations of the Station as conducted as
of the date of this Agreement (the "Personal Property"). Except as described in
SCHEDULE 2.6, the Company owns and has good and marketable title to all Personal
Property. Except as noted in SCHEDULE 2.6, none of the Personal Property owned
by the Company is subject to any security interest, mortgage, pledge,
conditional sales agreement, or other lien or encumbrance, except for: (i) those
securing Liabilities which are reflected on the books and records of the
Company; (ii) liens for current taxes not yet due and payable; and (iii)
mechanics' liens and similar minor encumbrances, all of which shall be
discharged prior to the Closing Date in accordance with Section 4.1 hereof.
Except as shown in SCHEDULE 2.6, each item of Personal Property necessary for
the operation of the Station as conducted as of the date of this Agreement is in
good operating condition and repair (ordinary wear and tear excepted), and is
insurable at standard rates. All items of transmitting and studio equipment
included in the Personal Property and material to the operations of the Station
as now conducted are in compliance with all FCC regulations and requirements in
all material respects. The Company owns all properties necessary to conduct, in
all material respects, the business and operations of the Station as now
conducted.
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2.7 CONTRACTS .
(a) SCHEDULES 2.5, 2.6, 2.7(A), 2.7(B), 2.11 AND 2.13(B) contain
descriptions of all the contracts with respect to the Company, including
self-dealing agreements (the "Contracts"), except for: (i) contracts with
advertisers for the sale of time or talent on the Station for cash and
substantially at rate card or at customary rates and which are not prepaid; (ii)
other contracts, the aggregate liability under which is not greater than
$20,000; and (iii) contracts or agreements terminable on not more than ninety
(90) days notice without material liability to the Company. There are no
agreements for the sale of advertising time for consideration other than cash
("Trade Agreements") except as disclosed on SCHEDULE 2.7(A). The Company has
made available to Purchaser true and correct copies of all written Contracts,
and true and complete memoranda of all oral Contracts required to be listed on
SCHEDULE 2.7(A). Except as set forth on SCHEDULE 2.7(A), each of the Contracts
constitutes a valid and binding obligation of the Company and, to the Knowledge
of the Company and Selling Shareholders, constitutes a valid and binding
obligation of the third parties thereto. Except as set forth on SCHEDULE 2.7(A),
each of the Contracts is in full force and effect and, to the Company's and
Selling Shareholders' respective Knowledge, no other party is in material breach
of the terms of any of the Contracts, and no event has occurred which with the
passage of time or notice, or both, would constitute a material breach or
default of such Contracts and the Company has materially fulfilled and performed
its obligations under each of the Contracts. Except for the Consents (as defined
in Section 2.8 hereof), the consummation of the transactions contemplated by
this Agreement will not affect the validity, enforceability and continuation or
terms of any of the Contracts listed on SCHEDULE 2.7(A). The Contracts include
all Contracts necessary to continue the operations of the Station as now
conducted and substantially consistent with recent past operations.
(b) SCHEDULE 2.7(B) describes all of the Station's programming
agreements as of the date hereof, together with the payments due by month
thereunder and the runs remaining, and describes the barter agreements to which
the Company is bound (the "Programming Agreements"). Each of the Programming
Agreements listed in SCHEDULE 2.7(B) is valid and binding and enforceable
against the other party or parties thereto in accordance with its terms. All
payments required to be paid under any Programming Agreement prior to the
Closing Date shall have been timely paid by the Company when due. Between the
date hereof and the Closing Date, the Company shall maintain film and program
usage schedules and amortization schedules substantially consistent with past
practices.
2.8 CONSENTS . Except for the FCC Consent provided for in Section 6.1, the
HSR Filing pursuant to Section 6.2 and the other consents described in SCHEDULE
2.8 (collectively the "Consents"), no consent, approval, permit or authorization
of, or declaration to or filing with any governmental or regulatory authority,
or any other third party is required: (i) to consummate this Agreement and the
transactions contemplated hereby; or (ii) to enable Purchaser to conduct the
business or operations of the Station after the Closing in substantially the
same manner as such business or operations are conducted as of the date of this
Agreement.
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2.9 TRADEMARKS, TRADE NAMES AND COPYRIGHTS . SCHEDULE 2.9 is a true and
complete list of all copyrights, trademarks, service marks, trade names,
licenses, patents, permits, jingles, privileges and other intangible property
rights and interests applied for, issued to or owned by the Company, or under
which the Company is licensed or franchised, and used in the conduct of the
business or operations of the Station (collectively the "Intellectual
Property"). Except as set forth on SCHEDULE 2.9, the Company is the sole and
exclusive owner of the Intellectual Property, free and clear of any claims,
liens, security interests, licenses, sublicenses, charges or encumbrances. The
Company and Selling Shareholders have no Knowledge that any infringement is
occurring to any of the Intellectual Property identified on SCHEDULE 2.9. The
Company and Selling Shareholders have no Knowledge that the Company is
infringing upon any trademarks, service marks, trade names, copyrights, patents,
patent applications, know-how, methods, or processes owned by any other person
or persons, and there is no claim or action pending or, to the Knowledge of the
Company and Selling Shareholders, threatened with respect thereto.
2.10 AUDITED FINANCIAL STATEMENTS .
(a) SCHEDULE 2.10 contains true and complete copies of the
consolidated audited financial statements of the Company as of and for the
Company's fiscal years ended December 31, 1995 and 1996 (the "Audited
Financials"). Except as set forth on SCHEDULE 2.10, the Audited Financials have
been prepared in accordance with GAAP consistently applied and present fairly
the operating income and financial condition of the Company as of their
respective dates and the results of operations for the respective periods then
ending.
(b) As of December 31, 1996, the Company did not have any
indebtedness, liability, claim or loss, whether contingent or non-contingent
("Liabilities") that, although required to be disclosed or reflected, was not
fully and adequately reflected or reserved against on the December 31, 1996
consolidated balance sheet included in the Audited Financials. Except as set
forth on SCHEDULE 2.10, the Company has not incurred any Liabilities since
December 31, 1996 except in the ordinary course of business.
2.11 INSURANCE . All of the Real Property and Personal Property is insured
against loss or damage in amounts generally customary in the broadcast industry.
Attached hereto as SCHEDULE 2.11 is a description of all liability and casualty
insurance policies maintained by the Company. All such policies are in full
force and effect as of the date of this Agreement and copies of all such
policies have been delivered to Purchaser.
2.12 REPORTS . All material ownership reports, renewal applications,
financial reports and other reports and documents required to be filed with the
FCC by or on behalf of the Company with respect to the Station have been filed
with the FCC, and all such reports, applications and other documents are true
and complete in all material respects.
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2.13 COMPENSATION AND EMPLOYEE PLANS .
(a) SCHEDULE 2.13(A) contains a complete list of all employees of
the Company, their salaries, and basis for determination of bonuses.
(b) SCHEDULE 2.13(B) sets forth a list and description of all
"employee benefit plans" (as such term is defined in Section 3 of the Employment
Retirement Income Security Act of 1974, as amended ("ERISA")) of the Company
(collectively the "Plans") and all bonus, incentive compensation,
profit-sharing, pension, retirement, stock purchase, stock option, deferred
compensation, hospitalization, group insurance, death benefit, disability,
union, collective bargaining, works council, severance and other compensation
and fringe benefit plans, trust agreements, arrangements and commitments of the
Company, including a summary description with respect to the funding of all such
Plans. True, correct and complete copies of all documents creating or evidencing
any such plan, agreement, arrangement or commitment have been made available to
Purchaser. There are no negotiations, demands or proposals which are pending
which concern matters now covered, or that would be covered, by such types of
plans, agreements, arrangements or commitments. Except as set forth in SCHEDULE
2.13(B), the Company is not a party to any multiemployer plan as that term is
defined by ERISA.
(c) All Plans are in compliance with the applicable provisions of
ERISA, and no "reportable event" as defined by ERISA has occurred. Each of the
Plans which is intended to meet the requirements of Section 401(a) of the
Internal Revenue Service to be "qualified" within the meaning of such sections
of the Internal Revenue Code of 1986, as amended (the "Code"), is so qualified
and there exists no fact which would adversely affect the qualified status of
such Plans.
(d) The Company has not incurred any "withdrawal liability" (within
the meaning of Section 4201(a) of ERISA) under any multiemployer plan and except
as noted on SCHEDULE 2.13(D), if the Company were to engage in a "complete
withdrawal" or a "partial withdrawal" (as such terms are defined in Subtitle E
of Title IV of ERISA) from any such plan, the Company would not incur any
"withdrawal liability" under Section 4201 of ERISA.
(e) Other than claims for benefits submitted by participants or
beneficiaries in the ordinary course, there is no request for documents,
litigation, legal action, suit, investigation, claim, counterclaim or proceeding
pending or threatened against or affecting any Plan. Neither the Company nor any
administrator or fiduciary of any Plan (or any agent of any of the foregoing)
has engaged in any transaction or acted or failed to act in a manner which could
subject the Company to any material liability for a breach of fiduciary duty
under ERISA or any other applicable law. If Section 302 of ERISA and Section 412
of the Code apply to any Plan, no "accumulated funding deficiency", as such term
is defined in Section 302 of ERISA and Section 412 of the Code, whether or not
waived, exists with respect to such Plan. The Company has no liability and there
are no claims against the Company pursuant to any provision of the Code or ERISA
by reason of the relationship of the Company to any other incorporated or
unincorporated
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trade or business in the manner described in Section 414(b), (c), (m), or (o) of
the Code or Section 302(d)(8)(C) or Section 4001(b)(1) of ERISA.
2.14 LABOR RELATIONS . The Company is not a party to or subject to any
collective bargaining agreements with respect to the Station except as described
in SCHEDULE 2.7(A) or SCHEDULE 2.13(B). The Company has no written or oral
contracts of employment with any employee of the Station, other than: (i) oral
employment agreements terminable at will or upon less than forty-five (45) days
notice without penalty or other liability except for the payment of severance
obligations consistent with recent past practices or the payment of commissions
for sales made prior to such termination by commissioned sales representatives;
or (ii) those listed in SCHEDULE 2.7(A). The Company has provided Purchaser with
true and complete copies of all such written contracts of employment and true
and accurate memoranda of any such oral contracts to the extent listed in
SCHEDULE 2.7(A). The Company is in material compliance with all applicable laws,
rules and regulations relating to the employment of labor, including those
related to wages, hours, collective bargaining, occupational safety,
discrimination, and the payment of social security and other payroll related
taxes, and it has not received any notice alleging that it has failed to comply
in any material respect with any such laws, rules or regulations. Except as set
forth in SCHEDULE 2.14, the Company is not experiencing any strikes, work
stoppages, or grievance proceedings. No claim of unfair labor practices is
pending or threatened and there are no other material labor controversies
pending, or to the Company's or Selling Shareholders' respective Knowledge,
threatened between the Company and any of the Company's employees.
2.15 TAX RETURNS AND AUDIT . The Company has timely (taking into account
all applicable extensions) filed all federal, state, local, foreign and other
tax returns required by law to be filed for which the due date is on or before
the Closing Date. The Company has paid in full or established adequate reserves
which are reflected in full in the Audited Financials for all taxes and other
charges due to federal, state or local, foreign or any other taxing authorities
by the Company. Except as set forth on SCHEDULE 2.15, no audit or investigation
of any of the Company's tax returns or reports is in progress, pending or
threatened, and there exists no grounds for the assertion or assessment of any
additional taxes against the Company. True and complete copies of all United
States federal income tax returns, tax examination reports and statements of
deficiencies assessed against or agreed to by the Company with respect to the
last five (5) years have been made available to Purchaser.
2.16 CLAIMS AND LEGAL ACTIONS . Except as set forth in SCHEDULE 2.16, and
except for any investigations and rule-making or other proceedings generally
affecting the broadcasting industry, there is no claim, legal action,
counterclaim, suit, arbitration, governmental investigation, application,
complaint, or other legal, administrative or tax proceeding, nor any order,
decree or judgment, in progress or pending or, to the Knowledge of the Company
or the Selling Shareholders, threatened against or relating to the Company, or
the business or operations of the Company, the result of which might reasonably
be expected to have a Material Adverse Effect upon the Company.
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2.17 COMPLIANCE WITH LAWS . The Company has conducted its business in
compliance with all applicable Laws, except to the extent that any
non-compliance would not have a Material Adverse Effect.
2.18 CONDUCT OF BUSINESS IN ORDINARY COURSE . Between December 31, 1996
and the date hereof, the Company has conducted the business and operations of
the Company only in the ordinary course and substantially consistent with recent
past practice and, without limiting the generality of the foregoing, has not:
(a) Suffered any Material Adverse Effect;
(b) Except in the ordinary course of business, and substantially
consistent with past practices: (i) made any material increase in compensation
payable or to become payable to any of the employees of the Company; or (ii)
made any material change in employee benefits arrangements affecting the
employees of the Company;
(c) Made any sale, assignment, lease or other transfer of any of the
Company's Personal Property, Intellectual Property or Real Property other than
in the normal and usual course of business and substantially consistent with
past practices; or
(d) Paid any dividend or made any other distribution (other than
compensation consistent with past practices) to any Selling Shareholder.
2.19 RELATED ENTITIES . Except as listed or described on SCHEDULES 2.5,
2.6, 2.9 AND 2.19, all Real Property, Personal Property, Intellectual Property
and Contracts used or intended for use in the operation of the Station are
owned, leased or held by the Company, and no Affiliate owns or leases property
or is a party to any lease or agreement affecting or relating
to the operations of the Station.
2.20 ENVIRONMENTAL . Other than those matters disclosed in the Phase 1
Environmental Report (a true and complete copy of which has previously been
delivered to Purchaser) (i) the Company has no Knowledge of its violation of any
Environmental Laws with respect to the Company's Real Property or the current
operation of the Station; (ii) the Company has no Knowledge of any condition or
event which has occurred with respect to any of the Company's Real Property or
the operations of the Station which, with the giving of notice, lapse of time,
or both, would constitute a violation of any Environmental Laws; and (iii) the
Company has not engaged in the storage, installation, manufacturing, generation,
disposal or use of any Hazardous Materials on or at any of the Real Property
used in connection with the Station in violation of any Environmental Law. The
Company has not received any notice, summons, citation, directive, letter or
other communications, written or oral, from the United States, the State of
Missouri, or any other party concerning any intentional or unintentional action
or omission on the part of the Company or any other party which resulted in the
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leeching, dumping or disposing of Hazardous
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Materials on, above, or under any of the assets used or useful by the Company or
in the operation of the Station.
2.21 BROKER'S FEES . There are no fees or commissions payable by the
Selling Shareholders or the Company to any broker or finder with respect to the
purchase and sale of the Shares except any commissions which may be payable to
CEA referred to in Section 1.3(b)(vii) of this Agreement.
2.22 RESTRICTIONS ON COMPETITION . Except as disclosed on SCHEDULE 2.22,
there are no agreements in effect restricting the ability of the Company or its
Affiliates to compete with other television broadcasting entities in any part of
the United States, except with respect to the non-competition provision set
forth in that certain Backup Asset Purchase Agreement with Pappas Telecasting
Companies, a copy of which has been delivered to Purchaser.
2.23 CABLE CARRIAGE . To the Knowledge of the Selling Shareholders,
SCHEDULE 2.23 annexed hereto sets forth a complete list of (a) all cable
television systems which carry the Station's signal on the date hereof under the
FCC's "must carry" rules; and (b) all cable television systems which carry the
Station's signal pursuant to retransmission consent agreements, true and
complete copies of which have been delivered to Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company and Selling Shareholders
as follows:
3.1 ORGANIZATION, STANDING AND AUTHORITY . Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of its state of
incorporation and is duly qualified to conduct business in the states in which
such qualification is required. Purchaser has all requisite corporate power and
authority to execute and deliver this Agreement and the documents contemplated
hereby, and to perform and comply with all of the terms, covenants and
conditions to be performed and complied with by Purchaser hereunder and
thereunder.
3.2 AUTHORIZATION AND BINDING OBLIGATION . The execution, delivery, and
performance of this Agreement by Purchaser have been duly authorized by all
necessary corporate actions on the part of Purchaser and its shareholders. This
Agreement has been duly executed by Purchaser and constitutes the legal, valid,
and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms except as the enforceability hereof may be affected by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally,
or by court-applied equitable remedies.
3.3 ABSENCE OF CONFLICTING AGREEMENTS . Subject to obtaining the Consents,
the execution, delivery, and performance of this Agreement and the documents
contemplated hereby
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(with or without the giving of notice, the lapse of time, or both): (i) do not
require the consent of any third party except such consent that has already been
obtained; (ii) will not conflict with the Certificate of Formation, Operating
Agreement or other applicable Organizational Documents of Purchaser; (iii) will
not conflict with, result in a breach of, or constitute a default under, any
law, judgment, order, injunction, decree, rule, regulation or ruling of any
court or governmental instrumentality, which is applicable to Purchaser; or (iv)
will not conflict with, constitute grounds for termination of, result in a
breach of, constitute a default under, or accelerate or permit the acceleration
of any performance required by the terms of, any agreement, instrument,
licenses, or permit to which Purchaser is a party or by which Purchaser may be
bound, such that Purchaser could not acquire or operate the Company and/or the
Station.
3.4 QUALIFIED TRANSFEREE . Purchaser has no Knowledge of any reason why it
should not be found qualified to be the transferee of the Station and, to its
Knowledge, will require no waiver of any FCC regulation or policy in order to
obtain FCC consent to Purchaser's acquisition of control of the Station.
ARTICLE IV
COVENANTS OF THE COMPANY
4.1 PRE-CLOSING COVENANTS . Except as contemplated by this Agreement, or
with the prior written consent of Purchaser, between the date hereof and the
Closing Date, the Company shall operate the Station in the ordinary course of
business in accordance with its past practices (except where such operation
would conflict with the following covenants or with the Company's other
obligations under this Agreement), and the Company shall abide by the following
negative and affirmative covenants:
(a) NEGATIVE COVENANTS. Except as otherwise expressly allowed
or contemplated by this Agreement or except with the prior written consent of
the Purchaser, the Company shall not do any of the following:
(i) COMPENSATION. Increase or agree to increase the
compensation, bonuses or other benefits payable or to be payable to any person
employed in connection with the conduct of the business or operations of the
Station, except in accordance with past practices;
(ii) DISPOSITION OF ASSETS. Sell, assign, lease, or otherwise
transfer or dispose of any of the Company's assets, except for assets consumed
or disposed of in the ordinary course of business or assets which are no longer
used or useful in the business or operations of the Station;
(iii) ENCUMBRANCES. Create, assume or permit to exist any
mortgage, lien, pledge, or title encumbrance upon the Company's assets, except
for: (i) those in existence on the date of this Agreement and disclosed in
Sections 2.5 and 2.6 of this Agreement, (ii) mechanics'
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liens and other similar liens which will be removed prior to the Closing Date,
and (iii) such items which are immaterial to the value of such assets and do not
materially interfere with the operations of the Station as currently conducted;
(iv) LICENSES. Do any act or fail to do any act which might
result in the expiration, revocation, suspension or modification of any of the
Licenses necessary for the operation of the Station, or fail to prosecute with
reasonable due diligence any applications to any governmental authority or any
other licensing authority material to the operation of the Station;
(v) RIGHTS. Waive any right relating to the Station or any of
the Company's assets which is necessary to operate the Station as currently
conducted;
(vi) DIVIDEND PAYMENTS. Make any dividend payment or other
distribution to any Selling Shareholder other than regular compensation and
accrued bonuses consistent with its budget for the 1997 fiscal year (or for any
fiscal year thereafter, consistent with its budget and employment contracts
applicable for such fiscal year);
(vii) REAL PROPERTY. Except as set forth on SCHEDULE
4.1(A)(VII), make, allow or consent to any material change in the Real Property
or in any buildings, leasehold improvements, or fixtures used or useful in the
operation of the Station except in the ordinary course of business;
(viii) INSURANCE POLICIES. Make any material change in the
insurance policies included in SCHEDULE 2.11;
(ix) CABLE CARRIAGE. Take any action or, as the case may be,
fail to take any action necessary to preserve the Station's carriage on cable
television systems identified in SCHEDULE 2.23;
(x) TIME SALES AGREEMENTS. Renew, negotiate, modify, amend or
terminate any existing Time Sales Agreements with respect to the Station except
in the ordinary course of business consistent with past practice;
(xi) PROGRAMMING AGREEMENTS. Enter into or amend any
Programming Agreement with respect to the Station unless the execution of such
Programming Agreement is in accordance with the ordinary course of business for
the Station consistent with past practice;
(xii) INDEBTEDNESS. Create, enter or assume any indebtedness
for borrowed money which will not be discharged on or prior to Closing
excluding, however, borrowings under the existing revolving credit loan with
Boatmen's Bank of St. Louis;
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(xiii) CAPITAL EXPENDITURES. Make any capital expenditures in
excess of $1,000,000 in the aggregate for the annual period ending December 31,
1997 and $1,000,000 in the aggregate for the period thereafter through the
Closing;
(xiv) CHARTER DOCUMENTS. Amend the certificate of
incorporation or by-laws of the Company, except as set forth on SCHEDULE
4.1(A)(XIV);
(xv) ISSUANCE OF SECURITIES. Issue, grant, sell or encumber
any shares of Stock or other securities; issue, grant, sell or encumber any
security, option, warrant, put, call, subscription or other right of any kind
that calls for the acquisition, issuance, sale, pledge or other dispositions of
any Stock or other securities (except for those set forth on SCHEDULE 2.1(C)
hereof) or otherwise change its capital structure, except as the same may be
required in order for the Stock to be sold by Selling Shareholders to Purchaser
in accordance with the terms of this Agreement, except for any redemption of any
Stock by Selling Shareholders in connection with the distribution of Excluded
Assets as defined in Section 6.10 hereof; and
(xvi) NO INCONSISTENT ACTION. Take any other action which is
materially inconsistent with its obligations under this Agreement.
(b) AFFIRMATIVE COVENANTS. Selling Shareholders shall cause the
Company to do the following:
(i) ACCESS TO INFORMATION. Make available to Purchaser and its
authorized representatives (who have a reason to know based upon this Agreement
and, to the extent required by the Company, have signed appropriate
confidentiality agreements) all contracts, agreements, financial data and other
documents affecting the Company and the operations of the Station requested by
Purchaser. Notwithstanding the foregoing, without the prior written consent of
Edward J. Koplar, there shall be no on-site inspection by Purchaser or any of
its authorized agents of any of the premises used in connection with the
business operations of the Company or the Station, PROVIDED, HOWEVER, that
Purchaser shall have the right to conduct, upon reasonable advance notice to
Edward J. Koplar, a Phase 1 and, if Purchaser reasonably deems it necessary or
appropriate, a Phase 2 environmental audit of the assets of the Company. Any
material noncompliance identified by any such Phase 1 or Phase 2 which results
in a misrepresentation or breach of the representation of the Company and
Selling Shareholders set forth in Section 2.20 of this Agreement shall either be
cured prior to Closing or, to the extent such noncompliance cannot be cured
prior to Closing, shall be subject to the pre-Closing indemnification procedures
set forth in Section 8.2(d) of this Agreement;
(ii) MAINTENANCE OF ASSETS. Maintain all of the assets used in
the business operations of the Company or the Station (or replacements thereof
and improvements thereon) consistent in all material respects with the Company's
past practices. The Company shall remove, cure, correct and repair prior to the
Closing Date any deficiencies in such assets which
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are material to the operations of the Station and any material violations which
are inconsistent with the Company's representations, warranties and covenants
contained in this Agreement;
(iii) INSURANCE. Maintain the existing insurance policies, or
comparable insurance coverage, on the Station and the assets owned or leased by
the Company;
(iv) CONSENTS. Use its reasonable best efforts to obtain the
Consents;
(v) PRESERVATION OF BUSINESS. Use its commercially reasonable
efforts to preserve the business and operations of the Station and its present
relationships with suppliers, customers and others having business relations
with it, and continue to conduct financial operations of the Station, including
its credit and collection policies, with substantially the same effort, and to
the same extent and in the same manner, as in the prior conduct of the business
of the Station;
(vi) BOOKS AND RECORDS. Maintain its books and records
substantially in accordance with past practices;
(vii) FINANCIAL INFORMATION. Furnish to Purchaser as soon as
available any audited financial statements for annual periods ending December 31
after the date of this Agreement and, within forty-five (45) days after the end
of each month between June 30, 1997 and the Closing Date, an unaudited internal
statement of income and expense and an unaudited internal balance sheet for the
month just ended, such information to be in the form normally prepared by the
Company for the Company's internal use;
(viii) CONTRACTS. Prior to the Closing Date, deliver to
Purchaser a list of all Contracts entered into between the date hereof and the
Closing Date, of the type required to be listed in SCHEDULE 2.7, together with
true and complete copies of such Contracts;
(ix) BROADCAST INTERRUPTIONS. Notify Purchaser as soon as
practicable if the Station's normal broadcast transmission is interrupted or
impaired eight (8) continuous hours or more except for routine maintenance;
(x) QUALIFICATIONS. Notify Purchaser promptly if any fact
relating to the Company which would cause the FCC to deny its consent to the
transactions contemplated by this Agreement should come to the Company's
attention and use its reasonable efforts to take such steps as may be necessary
to remove any such impediment to the transactions contemplated by this Agreement
and furnish to Purchaser, promptly upon filing, copies of all material reports
and other information filed by the Company or any Subsidiary with the FCC after
the date hereof;
(xi) LITIGATION. Notify Purchaser of any litigation,
arbitration or administrative proceeding pending, or to the Knowledge of Selling
Shareholders or the Company,
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threatened against the Company or the Station or which challenges the
transactions contemplated by this Agreement, within five (5) days of becoming
aware of the same;
(xii) EMPLOYEES. Consistent with past employment policies and
practices, use its reasonable efforts to maintain the employment at the Station
of the employees listed on SCHEDULE 2.13, except to the extent that changes in
employment is instituted in the reasonable business judgment of the management
of the Company; and
(xiii) DISCHARGE OF CERTAIN LIENS. Discharge any mechanics'
liens and similar minor encumbrances on the Personal Property, unless otherwise
agreed by Purchaser.
(xiv) OPTIONS. On or prior to the Closing the Company shall
cause to be canceled and terminated all outstanding options to purchase stock or
other equity interests of the Company (the "Options"), which are described on
SCHEDULE 2.1(C). If prior to such cancellation all or any portion of the Options
have been exercised or otherwise converted into stock of the Company (the
"Option Stock"), the Company shall redeem such Option Stock on or prior to
Closing. Any consideration paid in consideration for cancellation of the Options
or redemption of the Option Stock shall be a reduction in the Purchase Price.
The surrender of the Options or Option Stock by the holders shall be deemed a
release by them of any and all rights they have relating to equity in the
Company (including without limitation as option holders or stockholders), and
the Company and the Selling Shareholders shall obtain written releases from such
holders to that effect as a condition to Closing.
ARTICLE V
COVENANTS OF PURCHASER
5.1 NOTIFICATION . Purchaser shall notify the Company and Selling
Shareholders of any litigation, arbitration or administrative proceeding pending
or, to its Knowledge, threatened against Purchaser which challenges the
transactions contemplated by this Agreement, within five (5) days of becoming
aware of the same. Purchaser shall deliver to the Selling Shareholders all
information and documents relating to its preparation for the Closing and
financing of the Purchase Price as is reasonably requested by the Selling
Shareholders or its legal representatives.
5.2 NO INCONSISTENT ACTION . Purchaser shall not take any other
action which is materially inconsistent with its obligations under this
Agreement.
5.3 PURCHASER'S QUALIFICATIONS . Neither Purchaser nor any of its
Affiliates shall knowingly take any action which would adversely impact
Purchaser's qualifications, including but not limited to, acquisitions or
proposed acquisitions with respect to the St. Louis SMA or anywhere else, which
would cause Purchaser's acquisition of control of the Station to be inconsistent
with the FCC's multiple ownership or other rules or policies.
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5.4 SCHEDULES . Purchaser hereby acknowledges that the Schedules attached
to this Agreement were prepared by the Company and the Selling Shareholders as
of June 1, 1997 and are subject to modification and amendment by the Company and
Selling Shareholders within ten (10) days from the date of execution of this
Agreement, subject to the reasonable approval of Purchaser (to be determined by
the Purchaser within five (5) business days that the modifications and
amendments are delivered to the Purchaser).
ARTICLE VI
SPECIAL COVENANTS AND AGREEMENTS
6.1 FCC CONSENT . The transfer of control of the FCC Licenses as
contemplated by this Agreement is subject to the prior consent and approval of
the FCC (the "FCC Consent"), which shall be deemed to have occurred on the
effective date of the FCC's action granting the transfer application. Purchaser
and the Company will use their commercially reasonable efforts to file with the
FCC an appropriate application for the FCC Consent within five (5) business days
after Purchaser has obtained adequate financing, fully funded, to consummate the
transactions contemplated by this Agreement. The parties shall prosecute said
application with all reasonable diligence and otherwise use commercially
reasonable efforts to obtain the grant of such application as expeditiously as
practicable. The parties will promptly provide each other with a copy of any
pleading, order or other document filed by, served on or received by such party
relating to the FCC application and any filing made by either party with the FCC
relating to the transactions contemplated herein. Each party will use
commercially reasonable efforts and otherwise cooperate with the other parties
in responding to any information requested by the FCC related to the application
or this Agreement, in making any amendment to this Agreement requested by the
FCC which does not adversely affect the party in a material manner, and in
defending against any petition, complaint, or other objection which may be filed
against the application. If the FCC Consent nonetheless imposes any condition on
any party hereto, such party shall use commercially reasonable efforts to comply
with such condition unless compliance would be unduly burdensome or would have a
material adverse effect upon it. If reconsideration or judicial review is sought
with respect to the FCC Consent, Purchaser and the Company shall oppose such
efforts for reconsideration or judicial review.
6.2 ANTITRUST LAWS COMPLIANCE . As soon as practicable (but in no event
less than fifteen (15) business days) after the execution of this Agreement,
Purchaser and the Company will each make filings as required under Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Filing"). Each party will cooperate with the other in accomplishing such filings
and will keep the other party apprised of the status of any inquiries made of
such party by the Federal Trade Commission, the Antitrust Division of the U.S.
Department of Justice, or any other governmental agency with respect to this
Agreement or the transaction contemplated hereby.
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6.3 CONTROL OF THE STATION . Prior to Closing and subject to the
obligations of the Company hereunder, Purchaser shall not, directly or
indirectly, control, supervise, direct, or attempt to control, supervise or
direct, the operations of the Station; such operations, including complete
control and supervision of all of the Station's programs, employees, and
policies, shall, subject to the obligations of the Company hereunder, be the
sole responsibility of the Company until the Closing of the transactions
contemplated by this Agreement.
6.4 FEES AND EXPENSES . Except as otherwise provided in this Agreement and
except for the transaction costs which will be an Adjustment to the Purchase
Price as provided in Section 1.3(b), (c) and (d), each party shall pay its own
expenses in connection with the authorization, preparation, execution, and
performance of this Agreement, including all fees and expenses of counsel,
accountants, agents, and other representatives; provided, that the Selling
Shareholders (considered collectively) and the Purchaser shall each be
responsible for one-half of the FCC filing fees (and Selling Shareholders'
portion of such FCC filing fees shall be reflected as a reduction to the
Purchase Price as set forth in Section 1.3(b)(vii)).
6.5 BROKERS . Except as otherwise disclosed in this Agreement and except
for the fees to be paid by Purchaser to CEA(as defined in Section 1.3(b)(vii)),
pursuant to its agreement with Purchaser, Purchaser, on the one hand, and the
Company and the Selling Shareholders, on the other hand, each represents and
warrants that neither it nor any Person acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transaction contemplated by this Agreement. Purchaser and the Selling
Shareholders, respectively, each agree to indemnify and hold the other harmless
from and against any and all claims, losses, liabilities and expenses (including
reasonable attorneys' fees) arising out of any such agreement or arrangement
made or alleged to have been made, respectively, by Purchaser or Persons acting
on Purchaser's behalf or by the Company or the Selling Shareholders or Persons
acting on the Company's or the Selling Shareholders' behalf.
6.6 CONFIDENTIALITY . Purchaser, the Company and the Selling Shareholders
will maintain in confidence, and will cause the directors, officers, employees,
agents and advisors of Purchaser and the Company to maintain in confidence and
not disclose or utilize for any purpose whatsoever, any written, oral or other
information which is obtained from another party in connection with the
transactions contemplated by this Agreement and, except as provided in Section
6.7, not disclose the existence of this Agreement or the transactions
contemplated hereunder unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate for the consummation of the transactions
contemplated by this Agreement (including Purchaser's obtaining financing
related hereto), or (c) the furnishing of such information is required by law.
In the event this Agreement is terminated and the purchase and sale contemplated
hereby abandoned, each party will return to the other party all documents, work
papers and other written material obtained by it in connection with the
transaction contemplated by this Agreement or certify destruction of such
documents in
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writing. All confidentiality agreements previously executed by any party shall
remain in full force and effect following the execution of this Agreement in
accordance with their terms.
6.7 PUBLIC ANNOUNCEMENTS . The parties to this Agreement will coordinate
and consult with one another before making any press release or other public
announcement concerning the transactions contemplated under this Agreement.
Purchaser acknowledges that announcements and direct or indirect communications
concerning any changes which Purchaser may plan for the future operation of the
Station could adversely affect the Company's operation of the Station prior to
the Closing Date. Accordingly, Purchaser agrees that, until the date on which
the FCC grants the FCC Consent, (a) neither it nor its present or prospective
managerial personnel shall make any formal announcements to the employees of the
Station without written approval of the Company, and (b) except in connection
with Purchaser's efforts to obtain financing, neither it nor its present or
prospective personnel will release or publicize any such planned changes without
the advance written approval of the Company, which shall be granted if necessary
or appropriate to comply with the rules, regulations, or policies of the FCC or
other governmental agencies.
6.8 COOPERATION . Any notices or certifications given under this Agreement
or any related agreement, including the Tax Escrow Agreement, shall be given in
good faith without any intention to unfairly impede or delay the other party.
Purchaser, the Company and the Selling Shareholders shall cooperate fully with
each other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and Purchaser, the Company and Selling Shareholders shall execute
such other documents as may be necessary and desirable to the implementation and
consummation of this Agreement, and otherwise use their best efforts to
consummate the transactions contemplated by this Agreement and to fulfill their
respective obligations under this Agreement.
6.9 EXCLUDED ASSETS AND LIABILITIES . The following assets (hereinafter
referred to as the "Excluded Assets") and liabilities (hereinafter referred to
as the "Excluded Liabilities"), to the extent owned by or due from the Company,
shall be distributed to the Selling Shareholders immediately prior to the
Closing in partial redemption of the Selling Shareholders' Stock (and the
Selling Shareholders shall assume any liabilities or taxes associated with such
assets or their distribution):
a. The notes payable or redeemable by Edward J. Koplar to or
from the Company or any other amounts owing by or to any of the Selling
Shareholders or their Affiliates;
b. All amounts owing from and investments in Roberts Media, L.L.C.
or in connection with personal communications services ("PCS") licenses;
PROVIDED, HOWEVER, such amount shall not include any amounts owing from or
investments in Roberts Broadcasting or the incidental LMA rights and
obligations;
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c. All life insurance policies insuring the life of Edward J.
Koplar, and all cash value associated therewith;
d. All loans payable by, or investments in or accounts receivable
from Koplar Interactive Systems International, L.L.C. ("KISI");
e. All furniture and artwork currently located in or about Edward J.
Koplar's offices at the Company;
f. All furniture and fixtures owned by the Company which are located
in the apartment leased and/or utilized by the Company located at 58 West 58th
Street in New York City, New York (the related lease for such premises shall be
terminated at Closing);
g. All automobiles currently utilized by Edward J. Koplar and his
family to the extent currently owned by the Company and all leasehold interests
in connection with such automobiles; and
h. All loans payable by, investments in or accounts receivable from
Interactive Systems, Inc. (which loans have been written off and are deemed to
be worthless).
i. All tax liabilities for periods prior to Closing (for which the
primary source of payment shall be the Tax Escrow provided for in Section
1.5(b)) except to the extent accrued as a liability as of the Closing and taken
into account for purposes of the Working Capital adjustment to the Purchase
Price as set forth in Section 1.3(b)(i) (provided, however, the Company shall
pay its tax liabilities when the same become due and payable).
j. Upon the termination or expiration of the Management Agreement,
all of the Company's rights, title and interest in and to the six (6) St. Louis
Cardinals Club Seats season tickets (including, but not limited to, all rights
of renewal) shall be transferred to Edward J. Koplar.
6.10 KOPLAR COMMUNICATIONS TELEVISION, L.L.C. Immediately prior to
Closing, Edward J. Koplar shall cause the transfer to the Company of all equity
interests of Koplar Management Co., Inc. in Koplar Communications Television,
L.L.C. so that the Company shall own one hundred percent (100%) of the equity of
Koplar Communications Television, L.L.C.
6.11 NO SOLICITATION . Unless and until such time as this Agreement is
terminated pursuant to Article 10, Selling Shareholders will not, and will cause
the Company not to, directly or indirectly, solicit, initiate or encourage any
proposals from, or discuss or negotiate with or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than those Persons
contemplated by this Agreement) relating to any transaction involving the sale
of the business or assets of the Company (other than in the ordinary course of
business) or relating to
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any transaction involving the sale of any of the Stock of the Company, or any
merger, consolidation or other business combination.
6.12 NON-COMPETITION . The Selling Shareholders shall enter into a
Noncompetition Agreement with the Company, in substantially the form attached
hereto as EXHIBIT C.
ARTICLE VII
ANCILLARY AGREEMENTS
7.1 INVESTMENT IN PURCHASER . The Selling Shareholders shall invest Five
Million Dollars ($5,000.000.00) in the Purchaser on a basis mutually agreeable
to the Selling Shareholders and the Purchaser and in a transaction whose form is
designed to cause the amount of such investment to be made with "before tax
dollars" (i.e., so that the investing Selling Shareholders will not have paid
tax on the amount of the investment being made into the Purchaser), to the
extent such transaction is practicable and does not cause Purchaser to incur any
additional costs in connection therewith. In order to accommodate such tax
consequences, the investment may be made in Stock of the Company immediately
prior to the Closing or by way of a contribution of Stock of the Company
followed by a reverse cash-out merger, all in such other form designed to cause
the investment in the Purchaser to be made with money or other assets which are
not subject to tax by the Selling Shareholders on account of the transactions
contemplated by this Agreement (i.e., made with "before tax" dollars). The
amount of equity per dollar to be received by the investing Selling Shareholders
in the Purchaser shall be equivalent to the amount of equity per dollar received
by other outside cash investors acquiring similar equity in the Purchaser, and
the Selling Shareholders shall have all of such rights and benefits consistent
with documentation as afforded to such outside cash investors in Purchaser to
the extent of the cash investment of such outside cash investors.
7.2 KISI OPERATIONS . At the Closing, the Purchaser will enter into the
Broadcast Signal Encoding Agreement with KISI in substantially the form attached
hereto as EXHIBIT D (the "Broadcast Signal Encoding Agreement").
7.3 MANAGEMENT AGREEMENT . The Company shall enter into a Management
Agreement with Edward J. Koplar, in substantially the form attached hereto as
EXHIBIT E ("Management Agreement").
7.4 COMPANY NAME . The names "Koplar Communications, Inc.", "Koplar
Communications Television, L.L.C." and "KCI" (and any derivations thereof,
excluding the call letters "KPLR") shall be retained by the Selling Shareholders
or returned to the Selling Shareholders by the Purchaser within ninety (90) days
after the Closing, subject to a free transition license in favor of the
Purchaser to the extent such license is necessary.
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ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
8.1 CONDITIONS FOR CLOSING . The Closing of the transactions contemplated
by this Agreement is conditioned upon the following:
(a) FCC CONSENT. (i) The grant of the FCC Consent without any
imposition of material adverse conditions as defined below on Purchaser or the
Company; and (ii) compliance by the parties hereto with the conditions (if any)
imposed in the FCC Consent; provided that, for purposes of this Section 8.1(a),
a "material adverse condition" is a condition which would restrict, limit,
increase the cost or burden of or otherwise adversely affect or impair, in each
case in any material respect, the right of the Purchaser to the ownership, use,
control or operation of the Station or the proceeds therefrom, PROVIDED,
HOWEVER, that any condition which requires (i) that Purchaser or any of its
subsidiaries file reports with the FCC regarding compliance with rules and
policies of the FCC (including but not limited to reports pertaining to
affirmative action and equal opportunity employment or children's programming
commercial limitation compliance), or (ii) that the Station be operated in
accordance with conditions similar to and not more adverse than those contained
in the present FCC licenses issued for operation of the Station, shall not be a
material adverse condition.
(b) HSR FILING. The waiting period relating to the HSR Filing having
duly expired or been duly terminated by the appropriate government agencies
without the commencement or threatened commencement of any action, suit,
investigation or proceeding by any such agencies to restrain, postpone or
otherwise challenge the transaction contemplated by this Agreement;
(c) OPINION OF COUNSEL. The Purchaser receiving an opinion of
counsel to the Selling Shareholders that the trustee(s) for the trusts which are
Selling Shareholders has the power and authority to enter into and execute this
Agreement and any related agreements and to consummate the transactions
contemplated hereby and thereby;
(d) THIRD PARTY CONSENTS. The obtaining of all third party Consents
in a form reasonably satisfactory to Purchaser which are material to the
operation of the Company and required with respect to the purchase and sale of
the Shares; PROVIDED, HOWEVER, that the obtaining of such third party consents
shall not be required if, at Purchaser's option, such requirement is waived and
the Selling Shareholders agree to indemnify Purchaser in such event; and
(e) NO LOSS OR DESTRUCTION. The absence of any loss or destruction
of the assets of the Company which results in a Material Adverse Effect;
PROVIDED, HOWEVER, that the Company shall have the election to repair or replace
such assets if the Company can do so within sixty (60) days, in which case the
Closing shall occur despite such loss or destruction and shall be delayed for
such sixty (60) day period (or until such earlier time that the affected assets
are repaired or
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replaced by the Company). In the event that such loss or destruction results in
less than a Material Adverse Effect, the Closing shall occur as scheduled and
the Purchaser shall be entitled to (i) any insurance proceeds received with
respect to such loss or destruction plus (ii) a reduction in the Purchase Price
equal to the amount of any deductible to the extent not reflected in the
computation of the Adjustment Amount or the Closing Balance Sheet as described
in Section 1.3(b)(i) and Section 1.4.
8.2 CONDITIONS TO OBLIGATIONS OF PURCHASER . All obligations of Purchaser
at the Closing hereunder are subject to the fulfillment prior to and at the
Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. As of the Closing, there is no
fact, condition or occurrence which constitutes a material misrepresentation or
breach of warranty by the Company or the Selling Shareholders pursuant to this
Agreement and which:
(i) has or is likely to have a Material Adverse Effect, taken
as a whole, upon the ability of the Purchaser to broadcast a television signal
in materially the same manner as broadcast by the Company as of the date of this
Agreement;
(ii) constitutes a Liability in excess of Twenty Million
Dollars ($20,000,000.00) (without affecting the definitions of "Material Adverse
Effect" or "material" as such terms are used in this Agreement) ; or
(iii) causes the Company to lose or become likely to lose any
of its FCC Licenses necessary to operate the Station or causes or is likely to
cause a material adverse modification of any FCC License which is necessary to
operate the Station.
It is understood that other than as set forth above, a misrepresentation
or breach of warranty by the Company or the Selling Shareholders shall not
constitute a failure of a condition for Closing by the Purchaser, and that
Purchaser's remedy for such breach shall solely be to seek indemnification
pursuant to the provisions of Article XI of this Agreement.
(b) COVENANTS AND CONDITIONS. The Company and Selling Shareholders
shall have in all material respects performed and complied with all covenants
required by this Agreement to be performed or complied with by it or them, as
the case may be, prior to or on the Closing Date; PROVIDED, HOWEVER, in the
event of an alleged breach of any such covenant, notice of such breach shall be
given to the Company and/or Selling Shareholders and the Company and/or the
Selling Shareholders shall have a reasonable period (of not more than sixty (60)
days unless otherwise extended by FCC rules, policies, or orders) to cure such
breach and the Closing shall, to the extent applicable, be delayed until the
expiration of such cure period or until the breach is cured, whichever is
earlier.
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(c) DELIVERIES. The Company and the Selling Shareholders shall have
made or stand willing and able to make all the deliveries to Purchaser set forth
in Section 9.2 of this Agreement.
(d) CLAIMS FOR INDEMNITY OCCURRING PRIOR TO THE CLOSING. In the
event that Purchaser makes a claim for indemnification on account of an alleged
misrepresentation or breach of warranty of the Company or Selling Shareholders
prior to the Closing, such claim for indemnification shall be disposed of in the
following manner:
(i) In the event that the Selling Shareholders and the
Purchaser agree as to the existence of such misrepresentation or breach of
warranty and to the amount of indemnity to which the Purchaser would be entitled
to pursuant to Article XI of this Agreement, then the amount of such indemnity
to which the Purchaser shall be entitled shall be the amount agreed upon by
Selling Shareholders and Purchaser and shall be a reduction in the amount of the
Purchase Price payable at Closing;
(ii) In the event that Purchaser and the Selling Shareholders
agree as to the existence of a misrepresentation or breach of warranty, but the
amount of indemnity to which the Purchaser is entitled is not agreed to by and
between the parties, then the Company's CPA Firm shall estimate the amount of
indemnity to which the Purchaser would be entitled to pursuant to Article XI of
this Agreement, and such amount shall be deposited by Purchaser in escrow with
Mercantile Trust Company out of the Purchase Price otherwise payable at Closing.
Such escrow fund shall be a source of funds for indemnification once the amount
of such indemnification is finally determined pursuant to Article XI, and any
funds remaining in such escrow after the amount of indemnification to Purchaser
has been satisfied shall be paid to the Selling Shareholders.
(iii) In the event that Purchaser and the Selling Shareholders
do not agree as to the existence of a misrepresentation or breach of warranty
for which the Purchaser would be entitled to indemnification pursuant to Article
XI of this Agreement, then Purchaser's right to indemnification shall be
determined pursuant to the indemnification procedures contained in Article XI of
this Agreement, and there shall be no reduction in the Purchase Price payable to
the Selling Shareholders as of the Closing and the parties shall have all rights
with respect to such misrepresentation or breach of warranty that exist under
this Agreement, or otherwise exist in law or equity.
(iv) Except as otherwise provided in Section 8.2(a), in no
event shall a claim for indemnification or a misrepresentation or breach of
warranty be the basis for Purchaser refusing to consummate the transactions
contemplated by this Agreement, or cause any delay or hindrance with respect to
the Closing.
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8.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND SELLING SHAREHOLDERS .
All obligations of the Company and Selling Shareholders at the Closing hereunder
are subject to the fulfillment prior to and at the Closing Date of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Purchaser contained in this Agreement shall be true and complete
in all material respects at and as of the Closing Date, except for changes
contemplated by this Agreement, as though such representations and warranties
were made at and as of such time.
(b) COVENANTS AND CONDITIONS. Purchaser shall have in all
material respects performed and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date, PROVIDED, HOWEVER, in the event of an alleged
breach of any such covenant, notice of such breach shall be given to Purchaser
and Purchaser shall have a reasonable period (of not more than sixty (60) days)
to cure such breach and the Closing shall, to the extent applicable, be delayed
until the expiration of such cure period or until the breach is cured, whichever
is earlier.
(c) DELIVERIES. Purchaser shall have made or stand willing
and able to make all the deliveries set forth in Section 9.3 of this Agreement.
ARTICLE IX
CLOSING AND CLOSING DELIVERIES
9.1 CLOSING . The closing of the transactions contemplated by this
Agreement ("Closing") shall take place at 10:00 a.m. on a mutually acceptable
day within seven (7) business days after the effective date of the FCC Consent,
and the other conditions for Closing have been fulfilled or waived by the
appropriate party (the "Closing Date"), unless the parties shall mutually agree
to an alternate date, such as the end of a calendar month, in which case the
Closing shall be on such date mutually agreed upon by the parties. Closing shall
be held at the offices of Greensfelder, Hemker & Gale, P.C. in St. Louis,
Missouri, or such other place as shall be mutually agreed upon by Purchaser, the
Company and the Selling Shareholders.
9.2 DELIVERIES BY THE COMPANY AND SELLING SHAREHOLDERS . Prior to or on
the Closing Date, the Company and Selling Shareholders shall deliver to
Purchaser the following, in form and substance reasonably satisfactory to
Purchaser and its counsel:
(a) CONSENTS. The original of each Consent which is a condition
to Closing pursuant to Section 8.1(d);
(b) OPINION OF COUNSEL. An opinion of the counsel to the Company and
Selling Shareholders, dated the Closing Date, in substantially the form attached
hereto as EXHIBIT F and
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an opinion of the FCC counsel to the Company in substantially the form attached
hereto as EXHIBIT F-1.
(c) STOCK CERTIFICATES. The delivery to Purchaser of stock
certificates representing all of the issued and outstanding stock of the
Company, duly endorsed in blank or accompanied by stock powers duly executed in
blank with guaranteed signatures.
(d) OFFICER'S CERTIFICATE. A certificate, dated as of the Closing
Date and signed by the Selling Shareholders and the Company's President or any
duly authorized Vice President, stating that the conditions set forth in Section
8.2 have been satisfied in accordance with the provisions thereof.
(e) ARTICLES OF INCORPORATION. Copies of the Company's Articles of
Incorporation certified as of a recent date (which is not prior to thirty (30)
days prior to Closing) by the Secretary of State of the State of Missouri.
(f) CERTIFICATE OF GOOD STANDING. Certificate of good standing of
the Company issued as of a recent date (which is not prior to thirty (30) days
prior to Closing) by the Secretary of State of the State of Missouri.
(g) SECRETARY'S CERTIFICATE. A certificate of the secretary or an
assistant secretary of the Company, dated as of the Closing Date, in form and
substance reasonably satisfactory to Purchaser as to (i) no amendments to the
Articles of Incorporation of the Company since a specified date; (ii) the
by-laws of the Company; (iii) the resolutions of the Board of Directors of the
Company authorizing the execution and performance of this Agreement and the
transactions contemplated hereby; and (iv) incumbency and signatures of the
officers of the Company executing this Agreement and any related agreement.
(h) ANCILLARY AGREEMENTS. Executed copies of the Management
Agreement, Broadcast Signal Encoding Agreement, Noncompetition Agreement, and
Tax Escrow Agreement.
(i) PAYOFF LETTER. A payoff letter from NationsBank, N.A. (successor
to The Boatmen's National Bank of St. Louis) and a release of the liens of
NationsBank, N.A. on the assets of the Company upon payment in full of the
related loan, as described in Section 1.3(b)(ii) hereof.
(j) RELEASES OF HOLDERS. The releases of the holders of Options
contemplated by 4.1(b)(xiv) of this Agreement, in form and substance reasonably
satisfactory to Purchaser, relating to cancellation and redemption of equity
interests.
9.3 DELIVERIES BY PURCHASER . Prior to or on the Closing Date, Purchaser
shall deliver to the Company and Selling Shareholders the following, in form and
substance reasonably satisfactory to the Company, Selling Shareholders and their
counsel:
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(a) PURCHASE PRICE. The Purchase Price as provided in Section 1.3 of
this Agreement;
(b) OPINION OF COUNSEL. An opinion of Purchaser's counsel dated the
Closing Date, in substantially the form attached hereto as EXHIBIT G.
(c) OFFICER'S CERTIFICATE. A certificate, dated as of the Closing
Date and signed by the Purchaser's President or any duly authorized Vice
President, stating that the conditions set forth in Section 8.3 have been
satisfied in accordance with the provisions thereof.
(d) ARTICLES OF INCORPORATION. Copies of the Purchaser's Articles of
Incorporation or other Organizational Documents certified as of a recent date
(which is not prior to thirty (30) days prior to Closing) by the Secretary of
State of the state of incorporation of Purchaser.
(e) CERTIFICATE OF GOOD STANDING. Certificate of good standing of
the Purchaser issued as of a recent date (which is not prior to thirty (30) days
prior to Closing) by the Secretary of State of the state of incorporation of
Purchaser.
(f) SECRETARY'S CERTIFICATE. A certificate of the secretary or an
assistant secretary of the Purchaser, dated as of the Closing Date, in form and
substance reasonably satisfactory to the Selling Shareholders as to (i) no
amendments to the Articles of Incorporation or other Organizational Documents of
the Purchaser since a specified date; (ii) if applicable, the by-laws of the
Purchaser; (iii) the resolutions of the Board of Directors of the Purchaser
authorizing the execution and performance of this Agreement and the transactions
contemplated hereby; and (iv) incumbency and signatures of the officers of the
Purchaser executing this Agreement and any related agreement.
(g) ANCILLARY AGREEMENTS. Executed copies of the Management
Agreement, Broadcast Signal Encoding Agreement; Noncompetition Agreement,
Promissory Note, if applicable; Letter of Credit, if applicable; and Tax Escrow
Agreement.
9.4 LOCAL MARKETING AGREEMENT . In the event the parties cannot close
because the FCC Consent is not secured prior to October 1, 1997 and all other
conditions for Closing have been fulfilled or waived, the parties shall
negotiate in good faith and execute a local marketing agreement ("Local
Marketing Agreement") for a term ending upon the Closing (which shall occur
within five (5) days of the effective date of the FCC Consent). Upon the
execution of the Local Marketing Agreement, the Purchase Price payable to
Selling Shareholders hereunder shall be paid in escrow pending the Closing
pursuant to a mutually agreeable escrow agreement.
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ARTICLE X
TERMINATION
10.1 TERMINATION EVENTS . This Agreement may be terminated by any of
Purchaser, the Company or any Selling Shareholder, if the terminating party is
not the cause of a failure of a condition for the Closing, by written notice to
the other party, upon the occurrence of any of the following:
(a) on the Closing Date: (i) any of the conditions precedent to the
obligations of the terminating party set forth in Article VIII of this Agreement
shall not have been satisfied; and (ii) satisfaction of such condition shall not
have been waived by the terminating party; provided that, the Company and/or
Selling Shareholders shall have thirty (30) days following any notice of failure
of satisfaction of any such condition to effect a cure of such failure (and the
Closing shall be postponed to accommodate any such thirty (30) day cure period);
(b) the FCC denies or designates for hearing the application
referenced in Section 6.1 of this Agreement and such designation is not reversed
upon pleadings of the parties;
(c) the Station's normal broadcast transmission is continuously
interrupted for a period of not less than five (5) consecutive days and the
cause of such interruption is not or cannot be cured on or before sixty (60)
days from the date that the Closing would otherwise occur or, if cured, would
have after the Closing a Material Adverse effect on the operation of the Station
as to materially and adversely alter the normal operation of the Station as
presently conducted;
(d) the parties shall mutually agree to terminate this Agreement;
(e) the Closing shall not have occurred (other than through the
failure of any party seeking to terminate this Agreement to comply fully with
its obligations under this Agreement) on or before June 30, 1998, or such later
date upon which the parties may agree. Notwithstanding this Section 10.1(e), in
the event the FCC Consent has not been granted on or before June 30, 1998, and
provided that Purchaser is not in material breach of its obligations under this
Agreement and has timely filed an appropriate application for the FCC Consent
and has diligently used best practices to obtain the grant of said application
as expeditiously as practicable, the Closing Date shall be extended to a date
not later than September 30, 1998 (or such later date upon which the parties may
agree); or
(f) Purchaser does not have adequate financing fully funded on or
before September 30, 1997 in order to pay the entire Purchase Price pursuant to
this Agreement.
10.2 EFFECT OF TERMINATION . The right of each party to terminate this
Agreement under Section 10.1 is in addition to any other rights such party may
have under this Agreement or
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otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 10.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 6.4, 6.5, 6.6, and 6.7 will survive; PROVIDED, HOWEVER,
that if this Agreement is terminated by a party because of the breach of the
Agreement by another party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10.3 REMEDIES .
(a) SELLING SHAREHOLDERS' REMEDIES. If the parties hereto shall fail
to consummate this Agreement on the Closing Date due to Purchaser's material
breach of any representation, warranty, covenant or condition which is a
condition for Closing hereunder, and the Selling Shareholders are not at that
time in breach of any material representation, warranty, covenant or condition
which is a condition for Closing hereunder, then Selling Shareholders shall be
entitled to institute any action in law or equity to recover any damages or
other compensatory relief which may be warranted, including an action for
specific performance of the terms of this Agreement and of the Purchaser's
obligation to consummate the transaction contemplated hereby. In the event
Selling Shareholders and/or the Company file a lawsuit or other formal legal
action seeking specific performance of this Agreement, the Purchaser shall waive
the defense that Selling Shareholders and/or the Company have an adequate remedy
at law.
(b) PURCHASER'S REMEDIES. If the parties hereto shall fail to
consummate this Agreement on the Closing Date due to Selling Shareholders'
material breach of any representation, warranty, covenant or condition which is
a condition for Closing hereunder, and the Purchaser is not at that time in
breach of any material representation, warranty, covenant or condition which is
a condition for Closing hereunder, then Purchaser shall be entitled to institute
any action in law or equity to recover any damages or other compensatory relief
which may be warranted, including an action for specific performance of the
terms of this Agreement and of the Selling Shareholders' obligation to
consummate the transaction contemplated hereby. In the event Purchaser files a
lawsuit or other formal legal action seeking specific performance of this
Agreement, the Selling Shareholders and the Company shall waive the defense that
Purchaser has an adequate remedy at law.
ARTICLE XI
INDEMNIFICATION
11.1 INDEMNIFICATION BY THE SELLING SHAREHOLDERS . Subsequent to the
Closing and subject to the limitations contained in Section 11.3, Selling
Shareholders shall, jointly and
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severally, indemnify and hold Purchaser harmless against any loss, expense or
liability associated with or arising out of the following matters:
(a) A breach of any representation, warranty or covenant of the
Selling Shareholders or the Company contained in this Agreement or any related
agreement or in any certificate, document or instrument required to be delivered
to Purchaser hereunder or thereunder, regardless of whether such breach is known
to Purchaser prior to Closing (provided Purchaser has notified Selling
Shareholders in writing of its knowledge of and the nature of such breach
promptly after discovering such breach and Purchaser has not waived the same);
(b) Any and all liabilities, costs or expenses (including all
interest and penalties) incurred by the Company (i) for all tax years ended
prior to the Closing in excess of the amount accrued as of December 31, 1996 to
the extent that such liabilities, costs or expenses are not reserved for in the
Tax Escrow Fund referred to in Section 1.5(b) of this Agreement and (ii) with
respect to any taxable year or period beginning before and ending after the
Closing Date, for the portion of such taxable year or period ending on and
including the Closing Date in excess of the amount accrued and set forth in the
Closing Balance Sheet, to the extent not paid as the result of the Tax Escrow
Fund referred to in Section 1.5(b) of this Agreement. In the event that the
Company or Purchaser receive a subsequent tax benefit with respect to any tax
matter for which indemnification was made pursuant to this Paragraph (e.g., a
matter which was previously deducted by the Company is capitalized and
depreciated or amortized for tax purposes during periods occurring after the
Closing), the amount of such tax benefit (not in excess of the tax
indemnification amount received) shall be paid to the Selling Shareholders as
and when such tax benefit is realized by the Company or Purchaser.
(c) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
reasonably attempting to avoid the same or to oppose the imposition thereof, or
in enforcing this indemnity.
(d) Any Excluded Asset or Excluded Liability.
11.2 INDEMNIFICATION BY PURCHASER . Purchaser shall indemnify and hold the
Selling Shareholders harmless against and with respect to, and shall reimburse
the Selling Shareholders for:
(a) Any and all losses, liabilities or damages resulting from any
untrue representation, breach of warranty or nonfulfillment of any covenant by
Purchaser contained herein or in any certificate, document or instrument
delivered by Purchaser to the Selling Shareholders hereunder regardless of
whether such breach is known to any Selling Shareholder prior to Closing
(provided any such Selling Shareholder has notified Purchaser in writing of its
knowledge of and the nature of such breach promptly after discovering such
breach and Selling Shareholders have not waived the same); and
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(b) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
reasonably attempting to avoid the same or to oppose the imposition thereof, or
in enforcing this indemnity.
11.3 LIMITATIONS ON INDEMNITY .
(a) No claim for indemnification may be made by Purchaser pursuant
to Section 11.1(a), or (c), unless and until the aggregate amount of damages or
loss claimed for indemnification by Purchaser exceeds Four Hundred Thousand
Dollars ($400,000.00), which amount shall be a one-time deduction in the amount
of the obligation of the Selling Shareholders to indemnify the Purchaser
pursuant to this Agreement. Such limitation shall expressly not apply to (i) any
claim for indemnification with respect to taxes pursuant to Section 11.1(b) of
this Agreement, (ii) any claim arising out of any Excluded Asset or Excluded
Liability pursuant to Section 11.1(d), (iii) any claim relating to payments to
H. Max Lummis IV under the Lummis Employment Agreement pursuant to Section
1.3(b)(iii) hereof to the extent that such claim is not a reduction Adjustment
in the Purchase Price or is not reflected in the adjustment for Working Capital,
or (iv) any claim based upon any forfeiture, sanction or monetary penalty
imposed on the Company by the FCC in conjunction with the renewal of the
Station's license for the term commencing February 1, 1998.
(b) No claim for indemnification shall be made by Purchaser:
(i) After three (3) years for any breach of any representation
or warranty or covenant (except with respect to those covenants which, by their
terms, extend beyond such three (3) year period) by the Company or the Selling
Shareholders, except for any breach of a representation or warranty relating to
the ownership of the Stock of the Company or any assignment of such Stock to
Purchaser pursuant to this Agreement, and except as otherwise expressly provided
in this Agreement;
(ii) After two (2) years with respect to any claim for
indemnification relating to any breach of the representation or warranty
contained in Section 2.10 of this Agreement; or
(iii) After the expiration of the applicable statutes of
limitation with respect to any claim for indemnification with respect to claims
made pursuant to Section 11.1(b) hereof.
(c) The representations, warranties, covenants and obligations of
the Company shall terminate on the Closing Date. Subsequent to the Closing Date,
none of the parties hereto shall have any right or obligation to seek
indemnification or contribution from the Company.
(d) All damages and loss payable as indemnification by the Selling
Shareholders pursuant to this Agreement shall be net of all insurance proceeds
to which the
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Purchaser or the Company is entitled to receive and net of the tax benefits
actually received by Purchaser or the Company.
11.4 PROCEDURE FOR INDEMNIFICATION . The procedure for indemnification
shall be as follows:
(a) The party claiming indemnification (the "Claimant") shall
promptly give notice to the party from whom indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying: (i) the factual basis for such claim; and (ii) the
amount of the claim. If the claim relates to an action, suit or proceeding filed
by a third party against Claimant, such notice shall be given by Claimant within
five (5) business days after written notice of such action, suit or proceeding
was given to Claimant. Claimant's failure to give the Indemnifying Party such
notice shall not preclude Claimant from obtaining indemnification from the
Indemnifying Party unless Claimant's failure has materially prejudiced the
Indemnifying Party's ability to defend the claim or litigation, and then the
Indemnifying Party's obligation shall be reduced to the extent of such
prejudice.
(b) Following receipt of notice from the Claimant of a claim, the
Indemnifying Party shall have thirty (30) days to make such investigation of the
claim as the Indemnifying Party deems necessary or desirable. For the purposes
of such investigation, the Claimant agrees to make available to the Indemnifying
Party and/or its authorized representatives the information relied upon by the
Claimant to substantiate the claim. If the Claimant and the Indemnifying Party
agree at or prior to the expiration of said thirty (30) day period (or any
mutually agreed upon extension thereof) to the validity and amount of such
claim, the Indemnifying Party shall immediately pay to the Claimant the full
amount of the claim. If the Claimant and the Indemnifying Party do not agree
within said period (or any mutually agreed upon extension thereof), the Claimant
may seek appropriate legal remedy.
(c) With respect to any claim by a third party as to which the
Claimant asserts it is entitled to indemnification hereunder, the Indemnifying
Party shall have the right, at its own expense, to participate in or at its
election to assume control of the defense of such claim, with counsel reasonably
satisfactory to Claimant, subject to reimbursement for actual out-of-pocket
expenses incurred by Claimant as the result of request by the Indemnifying
Party, PROVIDED, HOWEVER, that the Claimant may retain separate co-counsel at
its sole cost and expense and participate in the defense of any such claim by a
third party and, PROVIDED, FURTHER, that the Indemnifying Party shall conduct
the defense of the third party claim actively and diligently thereafter. If the
Indemnifying Party elects to assume control of the defense of any third party
claim, the Indemnifying Party may nevertheless reserve the right to dispute the
amount of indemnification claimed or dispute Claimant's right to be indemnified
with respect to all or any portion of the claim. Except with the written consent
of the Claimant, Indemnifying Party shall not, in defending any claim or any
litigation resulting therefrom, consent to entry of any judgment or enter into
any settlement which does not release the Claimant from all liability in respect
of such claim or litigation. In the event the Claimant fails to consent to any
settlement or
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compromise which results in damages in excess of the amount for which consent
was requested, the limitation of the Indemnifying Party's obligations to
indemnify the Claimant with respect to the subject matter of the claim shall be
the amount of the proposed settlement or compromise rejected by Claimant and the
Claimant shall be responsible for, and shall hold harmless the Indemnifying
Party from, all damages (including, without limitation, attorney's fees, court
costs and other costs of litigation or settlement) in excess of the amount of
the proposed settlement or compromise rejected by Claimant.
(d) If a claim, whether between the parties or by a third party,
requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
(e) In the event an indemnification amount is finally determined to
be due and payable to Purchaser pursuant to the provisions hereof prior to the
time that the Promissory Note is payable, then the amount of such finally
determined indemnification amount shall be applied against the amount payable
pursuant to the Promissory Note and against the amount payable to the Selling
Shareholders as the result of the Letter of Credit.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES . All notices, demands, and requests required or permitted to
be given under the provisions of this Agreement shall be: (i) in writing; (ii)
delivered by personal delivery, sent by commercial delivery service or
registered or certified mail, return receipt requested or sent by facsimile (so
long as there is confirmation that such facsimile was received); (iii) deemed to
have been given on the date of personal delivery or the next day following
delivery to the commercial delivery service or registered or certified mail or
the day of the facsimile transmission, confirmation received; and (iv) addressed
as follows:
If to the Company: Koplar Communications, Inc.
4935 Lindell Boulevard
St. Louis, MO 63108
Attention: Edward J. Koplar
Facsimile: (314) 454-6445
with a copy Joseph D. Lehrer, Esq.
(which shall Greensfelder, Hemker & Gale, P.C.
not constitute 10 South Broadway, Suite 2000
notice) to: St. Louis, MO 63102
Facsimile: (314) 241-8624
37
<PAGE>
If to a Selling Shareholder: Edward J. Koplar
500 South Warson Road
Ladue, MO 63124
Facsimile: (314) 993-9337
with a copy Joseph D. Lehrer, Esq.
(which shall Greensfelder, Hemker & Gale, P.C.
not constitute 10 South Broadway, Suite 2000
notice) to: St. Louis, MO 63102
Facsimile: (314) 241-8624
If to Purchaser: Douglas Gealy
Acme Television Holdings, L.L.C.
7125 Bluffstream Court
Columbus, OH 43235
Facsimile: (614) 436-5119
with a copy Lewis J. Paper, Esq.
(which shall Dickstein, Shapiro, Morin &
not constitute Oshinsky, L.L.P.
notice) to: 2101 L Street, N.W.
Washington, D.C. 20037-1525
Facsimile: (202) 887-0689
or to any such other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
12.1.
12.2 BENEFIT AND BINDING EFFECT . None of the parties to this Agreement
may assign this Agreement without the prior written consent of the other party
hereto, except that Purchaser may designate Acme Television Licenses of
Missouri, Inc., a wholly-owned subsidiary of Purchaser (or any other
wholly-owned subsidiary of Purchaser) to take title to the Stock of the
Company, so long as Purchaser remains obligated pursuant to all provisions of
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
12.3 GOVERNING LAW . This Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Missouri without regard to
that state's conflict of law provisions.
12.4 HEADINGS; CONSTRUCTION . The headings herein are included for ease of
reference only and shall not control or affect the meaning or construction of
the provisions of this Agreement. All words used in this Agreement, regardless
of the gender and number specifically used, shall be deemed and construed to
include any other gender, masculine, feminine or neuter, and any other number,
singular or plural, as the context requires. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
38
<PAGE>
12.5 TIME OF ESSENCE . With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
12.6 ENTIRE AGREEMENT . This Agreement, all schedules hereto, and all
documents and certificates to be delivered by the parties pursuant hereto
collectively represent the entire understanding and agreement between Purchaser,
the Company and Selling Shareholders with respect to the subject matter hereof,
except as otherwise provided in this Agreement. All schedules attached to this
Agreement shall be deemed part of this Agreement and incorporated herein, where
applicable, as if fully set forth herein. This Agreement supersedes all prior
negotiations between Purchaser, the Company and the Selling Shareholders, and
all letters of intent, letters of agreement and other writings relating to such
negotiations, and cannot be amended, supplemented or modified except by an
agreement in writing which makes specific reference to this Agreement or an
agreement delivered pursuant hereto, as the case may be, and which is signed by
the party against which enforcement of any such amendment, supplement or
modification is sought; PROVIDED, HOWEVER, that all prior agreements regarding
the obligations of a party to keep confidential and not use certain information
shall continue to be binding upon the parties.
12.7 WAIVER OF COMPLIANCE; CONSENTS . Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 12.7.
39
<PAGE>
12.8 SEVERABILITY . If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
12.9 COUNTERPARTS . This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
40
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
PURCHASER: SELLING SHAREHOLDERS:
ACME TELEVISION HOLDINGS, L.L.C..
a Delaware limited liability company /s Edward J. Koplar
_______________________________________
Edward J. Koplar
By: /s/ Douglas E. Gealy
__________________________________
Name: Douglas E. Gealy
Title: Presient and Chief Operating
Officer
TRUSTEES OF THE HAROLD KOPLAR
IRREVOCABLE TRUST, FOR THE BENEFIT OF
THE CHILDREN OF EDWARD J. KOPLAR
/s/ Edward J. Koplar
_______________________________________
Edward J. Koplar, Trustee
/s/ Joseph D. Lehrer
_______________________________________
Joseph D. Lehrer, Trustee
COMPANY:
KOPLAR COMMUNICATIONS, INC., a
Missouri corporation
By:/s/ Edward J. Koplar
____________________________________
Edward J. Koplar, President
41
<PAGE>
The following pages contain a list of Addendum, Exhibits and Schedules
which have been intentionally omitted by the Registrants.
A copy of any omitted Addendum, Exhibits or Schedules will be provided to
the Securities and Exchange Commission upon request.
<PAGE>
DEFINITIONS ADDENDUM
SCHEDULES
Schedule 2.1(b) Subsidiaries and Other Ownership
Schedule 2.1(c) Agreements with Respect to Stock
Schedule 2.4 Licenses
Schedule 2.5 Real Property
Schedule 2.6 Personal Property
Schedule 2.7(a) Contracts
Schedule 2.7(b) Programming Agreements
Schedule 2.8 Consents
Schedule 2.9 Intellectual Property
Schedule 2.10 Audited Financial Statements
Schedule 2.11 Insurance
Schedule 2.13(a) Employees
Schedule 2.13(b) Employee Benefit Plans
Schedule 2.13(d) Withdrawal Liability
Schedule 2.14 Strikes, Work Stoppages or Grievance Proceedings
Schedule 2.15 Tax Returns and Audits
Schedule 2.16 Claims and Legal Actions
Schedule 2.19 Related Entities
Schedule 2.22 Restrictions on Competition
Schedule 2.23 Cable Carriage
Schedule 4.1(a)(vii) Changes to Real Property
Schedule 4.1(a)(xiv) Charter Documents
EXHIBITS
Exhibit A Selling Shareholders
Exhibit B Tax Escrow Agreement
Exhibit C Non-Competition
Exhibit D Broadcast Signal Encoding Agreement
Exhibit E Management Agreement
Exhibit F Form of Opinion of Counsel to Company and
Selling Shareholders
Exhibit F-1 Form of Opinion of FCC Counsel to Company
Exhibit G Form of Opinion of Counsel to Purchaser
Exhibit H Form of Secured Promissory Note
Exhibit H-1 Form of Letter of Credit
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made and entered into this
eighth day of September, 1997 among Koplar Communications, Inc. ("Koplar"), a
CORPORATION organized under the laws of Missouri, the shareholders of Koplar
(the "Selling Shareholders"), Acme Television Holdings, LLC ("ACME"), a limited
liability company organized under the laws of Delaware, Acme Television Licenses
of Missouri, Inc. ("ATLMI"), a corporation formed under the laws of Missouri
(ACME and ATLMI are collectively referred to herein as "Buyers" unless the
context requires otherwise), and NationsBank, N.A.
("Escrow Agent").
WITNESSETH:
WHEREAS, Koplar, the Selling Shareholders and Buyers have entered into
a certain Stock Purchase Agreement dated July 29, 1997 (the "Purchase
Agreement") under which and subject to the conditions contained therein (1) the
Selling Shareholders will assign and otherwise convey to Buyers all of the
outstanding stock in Koplar (other than stock redeemed by Selling Shareholders
in connection with the Excluded Assets and Excluded Liabilities as set forth in
Section 6.9 of the Purchase Agreement); (2) the Purchase Price will be paid to
the Selling Shareholders; and (3) Buyers will enter into certain ancillary
agreements specified therein; and
WHEREAS, Selling Shareholders and Buyers desire Escrow Agent to
establish and maintain an escrow account for certain monies to be held to secure
Buyers' performance under the Purchase Agreement and, Escrow Agent is willing to
do so, all upon the terms and conditions set forth in this Agreement; and
WHEREAS, ACME intends to assign its obligations and rights under the
Purchase Agreement to ATLMI in accordance with and subject to Section 12.2 of
the Purchase Agreement; and
WHEREAS, this Agreement is the escrow agreement referred to in Section
9.4 of the Purchase Agreement.
NOW, THEREFORE, on the basis of the mutual promises and covenants set
forth herein, it is agreed as follows:
ARTICLE I. DELIVERY OF ESCROW FUNDS
1.1. (a) Subject to the conditions set forth in this Agreement, and
subject to the receipt of the designation of ACME as the Purchaser by Warner
Bros. under the Purchase Agreement, ATLMI will deliver to Escrow Agent by wire
transfer the amount of One Hundred Forty-Three Million Dollars ($143,000,000) on
or before September 30, 1997. The monies placed in escrow are hereinafter
referred to as the "Escrow Funds."
<PAGE>
Escrow Agent shall have no liability to verify that Selling Shareholders are
entitled to request the amounts designated or that they are within the
limitation provided herein for the maximum amount to be disbursed. The amount of
the monies to be placed or maintained in escrow shall be (i) increased or
decreased, as the case may be, to the extent the Working Capital, as that term
is defined and determined in the Purchase Agreement and subject to the
provisions of this Agreement, exceeds or is less than Three Million Dollars
($3,000,000) on the date the Escrow Funds are placed in escrow; (ii) decreased
if and when and to the extent that Buyers pay all or any portion of the monies
which Koplar owes to NationsBank, N.A. (but without any reduction for any
penalty for prepayment or other charge or fine caused by the early termination
of any LIBOR loan arranged through NationsBank, N.A.); (iii) decreased if and
when and to the extent that Buyers pay all or any portion of the monies owed by
Koplar or its subsidiary to Warner Bros. (up to $2 million) pursuant to that
certain Promissory Note in the original amount of Two Million Dollars
($2,000,000) in accordance with Section 1.3(b)(vi) of the Purchase Agreement;
(iv) decreased by all amounts paid by Koplar to H. Max Lummis IV ("Lummis")
pursuant to paragraph 2.6(e) of the Executive Employment Agreement dated October
15, 1994 between Lummis and Koplar (which amount shall be paid at the direction
of the Selling Shareholders from the Escrow Funds when the Escrow Funds are
distributed pursuant to Section 3.3(a) of this Agreement); (v) decreased, to the
extent applicable, in accordance with the adjustments set forth in Section
1.3(b)(iv) of the Purchase Agreement if and when the liabilities and expenses
set forth in such provisions are paid (which shall include the severance pay for
the termination of the Station's General Sales Manager in calculating the
adjustment under Section 1.3(b)(iv) of the Purchase Agreement notwithstanding
that such termination transpired prior to September 30, 1997, and such severance
pay shall be disregarded for purposes of determining the Working Capital
Adjustments); and (vi) decreased by Five Million Dollars ($5,000,000) if and
when Selling Shareholders decide to make the investment in ACME pursuant to
Section 7.1 of the Purchase Agreement: provided, that such decision must be
conveyed to Buyers by 5 p.m. on September 17, 1997, and, if no decision is
communicated to Buyers by that time, Section 7.1 of the Purchase Agreement shall
be deemed null and void, and Selling Shareholders shall have no right thereafter
to make any investment in ACME (unless ACME becomes publicly held), provided
further, that, on or before September 10, 1997, Buyers shall deliver true and
complete copies of all documents reasonably requested by Selling Shareholders to
make the decision with respect to such investment. Upon written notice to the
Escrow Agent executed by Buyers only, Escrow Agent shall issue a check or wire
monies from the Escrow Funds in such amount and made out to such party or
parties identified in or pursuant to clauses (ii), (iii), and (v) of this
subsection within two (2) business days of Escrow Agent's receipt of such
notice. Any increase or decrease in accordance with clauses (i) of this
subsection and, to the extent any decrease is to be made in the Escrow Funds
under clause (vi) of this subsection after the Escrow Funds are deposited with
Escrow Agent, shall be made pursuant to a written notice to the Escrow Agent
executed by Selling Shareholders and Buyers.
2
<PAGE>
(b) Upon written notice to Escrow Agent executed by Selling
Shareholders only, Escrow Agent shall disburse up to One Million Dollars
($1,000,000) of the Escrow Funds as instructed by Selling Shareholders for any
expenses of Selling Shareholders in connection with the transactions
contemplated by the Purchase Agreement. Such notice shall include the total of
any and all amounts previously instructed by Selling Shareholders to be
disbursed in connection with the expenses of Selling Shareholders and shall set
forth the balance available for distribution in connection therewith (based on
the maximum distribution of $1 million). Escrow Agent shall have no liability to
verify that Selling Shareholders are entitled to request the amounts designated
or that they are within the limitation provided herein for the maximum amount to
be disbursed.
(c) To the extent applicable and subject to Section 3.3(a) of this
Agreement, all Adjustments to the Purchase Price, including but not limited to
the Working Capital Adjustment, shall be determined as of the close of business
on September 30, 1997, and, to that end, the liability of Koplar for accrued
income tax (or the determination of any refund due Koplar for income taxes)
shall be determined as though the bonus payment to Lummis provided for in
Section 1.3(b)(iii) of the Purchase Agreement and any amounts designated as
Designated Employee Bonuses provided for in Section 1.3(c) of the Purchase
Agreement had been paid as of September 30, 1997 and deductible as an expense by
Koplar for federal income tax purposes as of such date.
(d) Escrow Agent shall have no liability or responsibility for the
determination or verification of the increases, decreases or adjustments to the
Escrow Funds or the expenses of the Selling Shareholders set forth in this
section. Except as otherwise provided in this Agreement, (i) all such
determinations and verifications shall be made by Buyers and Selling
Shareholders as they may agree, and (ii) Buyers and Selling Shareholders shall
provide Escrow Agent with instructions regarding the same which are signed by
both Buyers and Selling Shareholders. Escrow Agent shall accept any amounts
deposited by Buyers after the date of this Agreement as increases to the Escrow
Funds and shall invest the same in accordance with Section 4.1 hereof. Each of
the Buyers and Selling Shareholders shall execute and provide all notices to
Escrow Agent as contemplated by this Agreement.
1.2. Any party may terminate this Agreement immediately upon notice to
the other parties if the Escrow Funds are not delivered to Escrow Agent by
September 30, 1997.
1.3. The Escrow Funds shall be held as security on the terms and
subject to the provisions set forth herein for the performance of Buyers'
obligations pursuant to the Purchase Agreement.
1.4. Buyers will cooperate and assist in facilitating a transfer
of the stock of Koplar in exchange for stock of another corporation so long
as such exchanged stock will
3
<PAGE>
be available for transfer to the Buyers pursuant to this Agreement or otherwise
facilitate other tax planning engaged in by Selling Shareholders so long as such
tax planning does not adversely affect the Buyers or impose any additional cost
on the Buyers.
ARTICLE II. OBLIGATIONS OF SELLING SHAREHOLDERS
2.1. Upon notice to the Selling Shareholders from Buyers that (i) the
purchase agreement between ACME and ACME Finance Corporation, on one hand, and
CIBC Wood Gundy Securities Corp. and Merrill Lynch & Co., on the other hand,
relating to One Hundred Fifteen Million Dollars ($115,000,000) gross proceeds of
Senior Discount Notes; and (ii) the purchase agreement between ACME Intermediate
Holdings, LLC and ACME Finance Inc., on the one hand, and CIBC Wood Gundy
Securities Corp., on the other hand, relating to Forty Million Dollars
($40,000,000) gross proceeds of Senior Discount Notes have both been executed
and delivered by the appropriate parties (and provided Warner Bros. has
designated ACME as the Purchaser under the Purchase Agreement), the Selling
Shareholders immediately shall execute and deliver to Selling Shareholders' FCC
counsel an executed Form 315 application to be filed with the Federal
Communications Commissions ("FCC") to request the FCC's approval of the transfer
of control of Koplar, whose subsidiary, Koplar Communications Television, L.L.C.
holds FCC licenses for KPLR-TV in St. Louis, Missouri (the "Station"), which
form shall be immediately filed with the FCC by Selling Shareholders' FCC
counsel or immediately delivered from him to counsel for the Buyers upon receipt
of the Escrow Funds by Escrow Agent pursuant to the terms hereof.
2.2. Upon the filing of the Form 315 application, the parties to the
Purchase Agreement shall, in accordance with the terms of the Purchase
Agreement, use their best efforts to secure a grant of the FCC application and a
consummation of the transactions contemplated by the Purchase Agreement at the
earliest practicable date, but in no event prior to January 2, 1998.
2.3. Escrow Agent shall have no liability with respect to the delivery
of the stock certificates to the appropriate party pursuant to the terms hereof,
except to the extent any such failure to properly deliver is a result of Escrow
Agent's gross negligence or willful misconduct.
ARTICLE III. MAINTENANCE AND DISTRIBUTION OF ESCROW FUNDS
3.1. Upon its receipt of the Escrow Funds, Escrow Agent shall promptly
place the monies in an interest-bearing account selected by Selling Shareholders
or other investments secured by the United States Treasury in the name of "KPLR
Escrow Account." Escrow Agent is hereby authorized and directed to release the
Escrow Funds, Stock and Closing Documents (as defined herein) in accordance with
written instructions from the appropriate parties, as set forth herein.
4
<PAGE>
3.2. Upon notice to Escrow Agent executed by the Selling Shareholders
and Buyers identifying the Closing Date of the Purchase Agreement, Escrow Agent
shall withdraw the Escrow Funds, and, unless Selling Shareholders have already
received those Escrow Funds to which they are entitled under Section 3.3(a) of
this Agreement, shall deliver such funds in accordance with written instructions
signed by the Selling Shareholders, which instructions shall set forth, at a
minimum, the manner of distribution with all details and relevant information
reasonably required by Escrow Agent to complete such transfer and when such
transfer should occur, allowing two (2) business days prior notice: Except as
otherwise specified herein, accrued interest shall at all times be paid to the
Selling Shareholders upon distribution of the Escrow Funds pursuant to this
Agreement.
3.3. (a) Upon at least 10 days prior written notice to Escrow Agent
executed only by Selling Shareholders (prior to Closing under the Purchase
Agreement) that they desire to acquire the Escrow Funds, Escrow Agent shall
deliver the Escrow Funds and all interest accrued thereon to Selling
Shareholders, less any adjustments required or payments to be made by Purchaser
on behalf of Selling Shareholders or the Company under this Agreement or the
Purchase Agreement at Closing (including but not limited to funds to be placed
in the Tax Escrow Agreement pursuant to Section 1.5(b) of the Purchase
Agreement). Such notice shall indicate the total amount of Escrow Funds to be
disbursed plus all interest earned thereon (less disbursements made prior to
such notice in accordance with the terms of this Agreement), the party to
receive the funds, the manner of distribution with all details and relevant
information reasonably required by Escrow Agent to complete such transfer and
when such disbursement should occur, allowing two (2) business days prior notice
for action to be taken by the Escrow Agent. Escrow Agent shall maintain true and
accurate records of all distributions made from the Escrow Funds, which records
shall constitute conclusive evidence of distributions made in the absence of
manifest error. Prior to the expiration of the ten (10) day period set forth
above, Selling Shareholders shall deliver to Escrow Agent (i) all of the Selling
Shareholders' stock in Koplar (other than stock redeemed by Selling Shareholders
in connection with Section 6.9 of the Purchase Agreement) (the "Stock") with
appropriate endorsements in blank along with any and all other documents
reasonably requested by Buyers which are executed by the Company and/or the
Selling Shareholders and are sufficient to transfer the Stock to Buyers (with
such Stock segregated to implement Section 7.1 of the Purchase Agreement if
Selling Shareholders make a timely decision to invest in ACME as required by
Section 1.1 of this Agreement, and with the understanding that parties will take
any and all other actions appropriate and necessary to implement that section),
and (ii) such other documents (the "Closing Documents") reasonably requested by
Buyers, executed by Koplar and/or the Selling Shareholders, sufficient to convey
the Stock from the Selling Shareholders to Buyers to effect a transfer of
control of Koplar and a consummation of the Purchase Agreement. Notwithstanding
anything herein to the contrary, (i) Selling Shareholders shall not be entitled
to obtain any Escrow Funds under this section prior to January 2, 1998, and (ii)
Selling Shareholders shall not request the Escrow Funds under this section
unless, as a result of the distribution of the Escrow Funds pursuant to this
5
<PAGE>
section, Koplar or Selling Shareholders, as appropriate, shall pay or cause to
be paid all expenses identified in Section 1.3(b)(vii) of the Purchase
Agreement, with Buyers having no responsibility for the payment of such
expenses. Upon the delivery of the Stock, the related documents, and the Closing
Documents pursuant to this section, Koplar, Selling Shareholders and Buyer shall
take any and all other actions required to consummate the Purchase Agreement,
including the execution of all ancillary documents identified therein. Nothing
contained in this paragraph shall be construed or intended to place liability or
responsibility upon the Escrow Agent to assure that the Selling Shareholders
deliver the appropriate Stock or Closing Documents or that the Stock is endorsed
as required by the parties or to verify that the Selling Shareholders are
entitled to request such funds when they are requested.
(b) If Selling Shareholders exercise the rights provided in this
section, the Escrow Agent shall subsequently inscribe ATLMI's name on the Stock
and deliver the Stock, related documents andthe Closing Documents delivered to
Escrow Agent to Buyers within two (2) business days of receipt of notice from
and executed only by Buyers that the FCC has issued an order approving the
transfer of the Stock to Buyers, and such transfer of control of Koplar shall
become effective on the date of Escrow Agent's delivery of the Stock and the
related documents along with the Closing Documents to Buyers.
(c) Notwithstanding anything to the contrary in the Purchase
Agreement, no party may terminate the Purchase Agreement prior to the
distribution of Escrow Funds to Selling Shareholders under this section. The
Escrow Funds and accrued interest thereon shall be distributed at the direction
of the Selling Shareholders in accordance with this Section 3.3 notwithstanding
any failure of any condition for Closing in the Purchase Agreement. If Selling
Shareholders exercise the rights provided in this section and the Escrow Funds
are distributed pursuant to this section, the Purchase Agreement can,
notwithstanding anything to the contrary in the Purchase Agreement, be
terminated only at the option of Buyers, which would provide ten (10) days
notice of such termination to the other parties: provided, that in no event will
any such termination require a refund of the Escrow Funds distributed to Selling
Shareholders.
3.4. At the request of Selling Shareholders, which may be made from
time to time upon written notice to the Escrow Agent executed only by Selling
Shareholders, Escrow Agent shall disburse to Edward J. Koplar ("Mr. Koplar") (or
to a person or company selected by him) from the Escrow Funds an aggregate
principal amount not to exceed $2,000,000. Such loan shall be made pursuant to a
promissory note, in a form reasonably acceptable to Mr. Koplar and Buyers, which
shall provide that the interest rate on such amounts borrowed shall at all times
be equal to the interest rate earned on the Escrow Funds. Escrow Agent shall
have no responsibility to provide the promissory note
6
<PAGE>
or to verify its execution of the note. All principal borrowed pursuant thereto
and interest due thereon shall be deducted from the distribution to Selling
Shareholders of the Escrow Funds and accrued interest thereon, and the principal
and interest with respect to any such loans will be satisfied in full at the
time of such distribution. The principal and interest to be deducted from the
Escrow Funds shall be determined by Selling Shareholders and included in the
disbursement directions from Selling Shareholders to Escrow Agent.
ARTICLE IV. GENERAL PROVISIONS
4.1. This Escrow Agreement shall become effective as of the date
hereof and shall continue in force until the delivery of the Escrow Funds and
accrued interest by Escrow Agent pursuant to the terms of this Agreement.
4.2. All notices, demands or other communications required or
permitted by this Escrow Agreement shall be in writing, shall be served on all
other parties (with evidence of such service attached to such communication),
and shall be deemed effective (a) when delivered personally, (b) within five (5)
business days after being sent by certified mail, return receipt requested, (c)
by facsimile with confirmation of receipt, or (d) when delivered by a
nationally-recognized overnight delivery service which issues a receipt for
delivery, with charges prepaid, to all of the following persons at the specified
addresses (or at such other address as any party may designate in writing to the
other parties):
If to Koplar:
Koplar Communications, Inc.
4935 Lindell Boulevard
St. Louis, MO 63108
Attention: Edward J. Koplar
Facsimile: (314) 454-6445
with a copy (but which shall not constitute notice) to:
Joseph D. Lehrer, Esq.
Greensfelder, Hemker & Gale, P.C.
10 South Broadway, Suite 2000
St. Louis, MO 63102
Facsimile: (314) 241-8624
If to Selling Shareholders:
Edward J. Koplar
500 South Warson Road
Ladue, MO 63124
Facsimile: (314) 993-9337
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<PAGE>
with a copy (which shall not constitute notice) to:
Joseph D. Lehrer, Esq.
Greensfelder, Hemker & Gale, P.C.
10 South Broadway, Suite 2000
St. Louis, MO 63102
Facsimile: (314) 241-8624
If to Buyers:
Douglas Gealy
Acme Television Holdings, L.L.C.
890 Bluespring Lane
Frontenac, MO 63131
and
Mr. Tom Allen
Acme Television Holdings, L.L.C.
Suite 850
650 Town Center Drive
Costa Mesa, CA 92626
Facsimile: (714) 445-5726
with a copy (which shall not constitute notice) to:
Lewis J. Paper, Esq.
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Facsimile: (202) 887-0689
If to Escrow Agent:
M01-800-12-20
NationsBank, N.A.
800 Market Street
St. Louis, MO 63101
Facsimile: (314) 466-6027
A copy of any notice of communication given by any party to any other party
hereto shall be given at the same time to every party to this Escrow Agreement.
All notices provided to
8
<PAGE>
Escrow Agent by any party shall indicate the provision hereof giving rise to
such notice. Escrow Agent may rely on said indication as conclusive proof of the
relevant section that the Escrow Agent shall refer to as guidance for
disbursement or actions to be taken by the Escrow Agent hereunder.
4.3. The parties agree to indemnify and hold Escrow Agent harmless
from and against any and all taxes, assessments, liabilities, claims, damages,
actions, suits or other charges incurred by or assessed against Escrow Agent for
anything done or omitted by Escrow Agent in the performance of Escrow Agent's
duties hereunder, except as a result of Escrow Agent's own gross negligence or
willful misconduct. Selling Shareholders and Buyers shall share equally in
paying any fee charged by or expense incurred by the Escrow Agent in the
discharge of its duties hereunder. This provision shall survive any termination
of Escrow Agent's duties hereunder.
4.4. The following terms and conditions shall govern and control with
respect to the rights, duties, liabilities and immunities of Escrow Agent:
(a) Escrow Agent is not a party to, and is not bound by, any
agreement which may be evidenced by, or arise out, the foregoing instructions,
other than as expressly set forth herein. In the event that any of the terms and
provisions of any other agreement (excluding any amendment to this Agreement)
between any of the parties hereto, conflict or are inconsistent with any of the
provisions of this Agreement, the terms and provisions of this Agreement shall
govern and control in all respects.
(b) Escrow Agent shall be protected in acting upon any written
notice, request, waiver, consent, receipt or other document which Escrow Agent
in good faith believes to be genuine and what it purports to be. The Escrow
Agent may rely upon the joint signatures of both Edward J. Koplar acting as a
Selling Shareholder, as a Trustee of a Selling Shareholder, and signing on
behalf of Koplar, and Joseph D. Lehrer acting as a Trustee of a Selling
Shareholder (or any of their successors) on behalf of the Selling Shareholders,
and upon the signature of Douglas Gealy or Thomas Allen (or any individual
succeeding them as an officer of Buyers) on behalf of Buyers.
(c) Escrow Agent shall not be bound by any modification of this
Escrow Agreement unless there is delivered to Escrow Agent a modification signed
by the parties. No such modification shall, without the written consent of
Escrow Agent, modify the provisions of Sections 4.3, 4.4, or 4.6 of this Escrow
Agreement.
(d) Escrow Agent shall have no duties or responsibilities except
those expressly set forth herein. Unless specifically directed to act with
respect to a duty or responsibliity hereunder, Escrow Agent shall have no
responsibility to verify the actions taken or to be taken by Buyers or Selling
Shareholders.
9
<PAGE>
4.5. In the event that one party files a lawsuit or institutes other
formal legal action (including any counterclaim to a lawsuit filed by the other
party) to enforce its right to the Escrow Funds or accrued interest under this
Agreement, the prevailing party shall be reimbursed by the other party or
parties for all reasonable expenses incurred therewith, including reasonable
attorneys' fees.
4.6. This Escrow Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns.
4.7. To reimburse Buyers for the loss of Escrow Funds distributed to
Selling Shareholders under Section 3.3 in the event the Purchase Agreement is
terminated after the Selling Shareholders acquire the Escrow Funds pursuant to
Section 3.3 of this Agreement or the FCC does not provide the requisite approval
of the transfer of control of Koplar by September 30, 1998, the Selling
Shareholders shall, at Buyers' request and at no cost to Selling Shareholders,
immediately initiate efforts, including the retention of CEA, Inc. as broker (at
no cost to Selling Shareholders), to sell to a third party, subject to the prior
approval of the FCC, all the Stock, Station, with all proceeds therefrom (less
Selling Shareholders' expenses) to be paid to Buyers: provided, that in no event
shall Selling Shareholders be responsible for or obligated to reimburse Buyers
for any deficiency, loss, expense or damage with respect thereto: and provided
further, that Selling Shareholders shall retain the Excluded Assets and Excluded
Liabilities identified in Section 6.9 of the Purchase Agreement. Such sale shall
be made with no representations and warranties by Selling Shareholders, and
Selling Shareholders shall be indemnified in a manner reasonably acceptable to
Selling Shareholders. Koplar and Selling Shareholders shall cooperate, at
Buyers's expense, to effectuate any such transfer of control: provided, that
unless and until a consummation of any such transaction (with the prior approval
of the FCC), Selling Shareholders shall, as provided in the Time Brokerage
Agreement being executed this same day by the same parties, retain control over
Station operations. Upon consummation of any such transaction, the Escrow Agent
shall deliver the Stock as provided by Section 3.3 in accordance with written
instructions to Escrow Agent executed by Buyers only, which shall include, at a
minimum, the address to which the Stock should be forwarded. Escrow Agent shall
forward the Stock by means of any delivery service used by Escrow Agent in the
operation of its day-to-day business unless specifically instructed otherwise by
Buyers. Any third party acquiring the Stock pursuant to this section shall be
required to abide by all applicable provisions of the Purchase Agreement,
including but not limited to the execution of any ancillary agreements specified
therein.
4.8. This Escrow Agreement sets forth the entire agreement between
parties and supersedes any and all prior and contemporaneous agreements and
understandings with respect to the escrow of funds under the Purchase Agreement.
This Agreement shall be enforced under the laws of the State of Missouri.
10
<PAGE>
4.9. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
collectively be deemed one and the same document.
4.10. To the extent there is any conflict between the provisions of
this Escrow Agreement and the Purchase Agreement, the provisions of this Escrow
Agreement shall govern.
4.11. Capitalized terms not otherwise defined in this agreement
shall be defined as provided for in the Purchase Agreement.
4.12. In the event of any disagreement of the parties to this Escrow
Agreement, or between any of them and any other person, resulting in adverse
claims or demands being made in connection with the matters contained in this
Escrow Agreement, or in the event that Escrow Agent, in good faith, shall be in
reasonable doubt as to what action it should take hereunder, Escrow Agent may,
at its option, refuse to comply with any claims or demands on it, or refuse to
take any other action hereunder, so long as such disagreement continues or such
reasonable doubt exists, and in any such event, Escrow Agent shall not be or
become liable in any way or to any person for its failure or refusal to act
(except to the extent that such disagreement or doubt arises from Escrow Agent's
gross negligence or willful misconduct): provided, that, in the event such
dispute or doubt exists and is not resolved by the written agreement of Buyers
and Selling Shareholders within thirty days (30) of the occurrence of such
disagreement or doubt, then Escrow Agent may deposit the Escrow Funds and the
accrued interest thereon with a court of competent jurisdiction for such court's
resolution of the disagreement. Prior to such time Escrow Agent shall be
entitled to continue to refrain from acting until (i) the rights of Buyers and
Selling Shareholders shall have been fully and finally adjudicated by a court of
competent jurisdiction or by binding arbitration or mediation; (ii) all
differences shall have been resolved by the Buyers and Selling Shareholders, and
Escrow Agent shall have been notified thereof in writing signed by all such
persons or (iii) until Escrow Agent has deposited the Escrow Funds with a court
of competent jurisdiction. All liability of Escrow Agent (except for that
liability arising as a result of Escrow Agent's gross negligence or willful
misconduct) shall terminate upon such deposit being made. Notwithstanding the
foregoing, Escrow Agent may in its discretion obey the order, judgment decree or
levy of any court of competent jurisdiction, and Escrow Agent is hereby
authorized in its sole discretion to comply with and obey (and shall have no
liability to any person for so doing, except for any liability arising as a
result of its gross negligence or willful misconduct) any such orders,
judgments, decrees or levies which Escrow Agent is advised by legal counsel of
its own choosing is binding upon it. The rights of Escrow Agent hereunder are in
addition to all other rights which it may have by law or otherwise.
4.13. Escrow Agent shall have no liability for any loss arising from
any cause beyond its control, including (but not limited to) the following: (a)
any delay, error, omission or default of any mail, telegraph, cable, or wireless
agency or operator provided
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<PAGE>
Escrow Agent has complied with the terms of the instructions given to it by
Buyers and/or Selling Shareholders, as appropriate; or (b) the acts or edicts of
any government or governmental agency or other group or entity exercising
governmental powers.
4.14. Except as otherwise provided in this Escrow Agreement, Escrow
Agent shall be under no duty or obligation to give any notice or to do or to
omit the doing of any action or anything with respect to the Escrow Funds, Stock
or Closing Documents, except to receive, invest, hold and deliver the same in
accordance with the terms of this Escrow Agreement. Escrow Agent shall not be
liable for any error in judgment, any act or omission, any mistake of law or
fact, or for anything it may do or refrain from doing in connection herewith,
except for its own willful misconduct or gross negligence.
4.15. Upon execution of this Escrow Agreement, Selling Shareholders
and Buyers shall pay to Escrow Agent a fee of $5,000.00 as compensation for
Escrow Agent's services hereunder for the first year of this Escrow Agreement.
Selling Shareholders and Buyers shall pay to Escrow Agent a fee of $5,000.00 on
each anniversary date of this Escrow Agreement. Additional compensation shall be
paid to the Escrow Agent for any unusual or extraordinary services it may be
required to perform hereunder. Selling Shareholders and Buyers shall also
reimburse Escrow Agent upon demand for all costs, expenses and reasonable
attorneys' fees incurred by Escrow Agent in connection with the performance of
its duties hereunder or in the event that Escrow Agent reasonably deems it
necessary to retain legal counsel in connection with any dispute arising in
connection with this Escrow Agreement. In the event that any fees, costs or
expenses attributable to Selling Shareholders and Buyers are not paid by Selling
Shareholders and Buyers within five (5) business days after demand by Escrow
Agent, Escrow Agent shall have the right to offset against the Escrow Funds for
said reimbursement to the extent of Selling Shareholders' and Buyers'
obligations with respect thereto. All amounts payable hereunder shall be shared
equally by Selling Shareholders (considered collectively as one) and Buyers.
4.16. As used in Sections 3.2 and 3.3 of this Agreement, "business"
day shall mean a day other than a Saturday or Sunday when Escrow Agent is open
for business in the State of Missouri.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above set forth.
SELLING SHAREHOLDERS:
/s/ Edward J. Koplar
_______________________________
Edward J. Koplar
TRUSTEES OF THE HAROLD KOPLAR
IRREVOCABLE TRUST, FOR THE
BENEFIT OF THE CHILDREN OF
EDWARD J. KOPLAR
/s/Edward J. Koplar
_______________________________
Edward J. Koplar, Trustee
/s/ Joseph D. Lehrer
_______________________________
Joseph D. Lehrer, Trustee
KOPLAR COMMUNICATIONS, INC., a
Missouri corporation
By: /s/ Edward J. Koplar
____________________________
Edward J. Koplar
President
ACME TELEVISION HOLDINGS, LLC
a Delaware limited liability company
By: /s/ Douglas E. Gealy
____________________________
Douglas Gealy
President
ACME TELEVISION LICENSES OF MISSOURI, INC.
a Missouri corporation
By: /s/ Douglas E. Gealy
____________________________
Douglas Gealy
President
NATIONSBANK, N.A.
13
<PAGE>
By: /s/ Mary E. Garrity
____________________________
Name: Mary E. Garrity
Title: Vice President
14
TIME BROKERAGE AGREEMENT
for
KPLR-TV
by and between
KOPLAR COMMUNICATIONS TELEVISION, L.L.C.
&
KOPLAR COMMUNICATIONS, INC.
and
ACME TELEVISION LICENSES
OF
MISSOURI, INC.
&
ACME TELEVISION HOLDINGS, LLC
<PAGE>
TIME BROKERAGE AGREEMENT
This Agreement ("Agreement") is dated this eighth day of September 1997 and
is by and between KOPLAR COMMUNICATIONS TELEVISION, L.L.C., ("KCT "), a limited
liability company formed under the laws of the State of Missouri, KOPLAR
COMMUNICATIONS, INC. ("Koplar"), a corporation formed under the laws of the
State of Missouri (KCT and Koplar are collectively referred to herein as
"Licensee" unless the context requires otherwise), ACME TELEVISION LICENSES OF
MISSOURI, INC. ("Broker"), a corporation formed under the laws of the State of
Missouri, and ACME TELEVISION HOLDINGS, LLC ("ACME"), a limited liability
company formed under the laws of the State of Delaware.
WHEREAS, Licensee holds licenses and other authorizations from the Federal
Communications Commission ("FCC") for KPLR-TV in St. Louis, Missouri (the
"Station"); and
WHEREAS, ACME, the parent company of Broker, and Koplar, the controlling
member of Licensee, and the Shareholders of Koplar (the "Selling Shareholders")
are parties to a certain Stock Purchase Agreement (the "Purchase Agreement")
dated July 29, 1997 for the sale of all the stock in Koplar; and
WHEREAS, ACME intends to assign its obligations and rights under the
Purchase Agreement to ATLMI in accordance with and subject to Section 12.2 of
the Purchase Agreement; and
WHEREAS, the parties hereto have carefully considered the FCC's time
brokerage policies for television stations and intend that this Agreement in all
respects comply with such policies; and
WHEREAS, Licensee agrees to provide time on the Station to Broker on terms
and conditions that conform with policies of the Station and the FCC for time
brokerage arrangements and that are as set forth herein; and
WHEREAS, Broker agrees to utilize the facilities of the Station solely to
broadcast programming that conforms with the policies of Licensee and the rules
and policies of the FCC, all as set forth herein;
NOW, THEREFORE, in light of the foregoing and the mutual promises and
covenants contained herein, the parties hereby agree as follows:
<PAGE>
ARTICLE I: PROVISION OF PROGRAMMING
SECTION 1.1. BROKER'S USE OF STATION FACILITIES
Licensee shall make the Station's broadcast transmission facilities
available to Broker beginning on the commencement of the Term specified in
Section 1.2 of this Agreement, subject to the provisions 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 (a)
downtime occasioned by maintenance, (b) 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, and (c)
time necessary to comply with Licensee's agreements with program suppliers (the
"Program Contracts"), including but not limited to The WB Network, which are in
effect as of the date of this Agreement. Upon commencement of the Term, Broker
may provide programming to be broadcast on the Station for the entire 168-hour
weekly period subject to (a) any diminution under this Agreement, and (b) the
provisions of Section 1.3. At Broker's option, the programming may originate
from Licensee's studios.
SECTION 1.2. TERM OF PROGRAMMING OBLIGATION
The term of this Agreement (the "Term") shall commence on the same date
(the "Effective Date") on which Broker places monies in escrow as required by
the Escrow Agreement executed in connection with Section 9.4 of the Purchase
Agreement. The Term of this Agreement shall expire on the earlier of the (a)
transfer of control of Koplar to ACME or its assignee as contemplated by the
Purchase Agreement, (b) the termination of the Purchase Agreement prior to any
distribution of the Escrow Funds to the Selling Shareholders, or (c) the date
ten (10) years from the Effective Date: provided, that, at the option of Broker
exercised at least ninety (90) days prior to the expiration of the Term, Broker
and Licensee shall enter into good faith negotiations to extend this Agreement
for another 10-year term under mutually agreeable terms and conditions.
Notwithstanding anything contained herein to the contrary, in the event that the
Escrow Funds have not been distributed to the Selling Shareholders when and as
required by Section 3.3 of the Escrow Agreement, Koplar may terminate this
Agreement upon ten (10) days notice to the other parties.
SECTION 1.3. QUALITY AND NATURE OF PROGRAMMING
(a) 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.
(b) The broadcast of all programming by Broker hereunder shall
be subject to the supervision, direction and control of Licensee. Licensee
shall have the full and
2
<PAGE>
unrestricted right to delete and not broadcast all or any part of the
programming provided by Broker which Licensee regards as being unsuitable for
broadcast or the broadcast of which it believes would be contrary to the public
interest.
(c) Notwithstanding anything in this Agreement to the contrary,
Licensee shall have the right to provide programming pursuant to programming
agreements, the WB Affiliation Agreement and sports rights contracts in effect
as of the Effective Date. It is contemplated that Licensee may make available
additional programming under presently existing program contracts available to
be aired on the Station: provided, that in no event shall Licensee enter into
any new programming agreements after the Effective Date of this Agreement
without the prior consent of Broker except to the extent that Licensee
determines, in the exercise of its discretion, that such agreements are
necessary to enable Licensee to comply with applicable law, including Licensee's
obligations under the Act and FCC rules and policies.
SECTION 1.4. MAINTENANCE OF STATION FACILITIES
(a) Licensee shall be responsible for maintaining the transmission
facilities of the Station and for ensuring compliance by the Station with the
operating, reporting, and other requirements established by the Act and the FCC.
Broker shall be responsible for paying all costs of repairing, maintaining and
operating the Station and the business activities relating to the Station
arising on or after the Effective Date subject to the terms and conditions of
this Agreement. Such costs include but are not limited to the following:
(1) all lease and real estate tax payments in connection with the
real property owned or leased by Licensee for the Station's transmitter sites,
tower, parking facilities and satellite uplink and downlink facilities, and any
and all payments (including lease payments) for use of the Station's main
studios and offices;
(2) all personal property taxes in connection with the personal
property relating to the Station;
(3) utility bills for utility services at the transmitter site
of the Station;
(4) local exchange telephone service costs for the transmitter
and studio locations of the Station;
(5) maintenance of the transmitting facilities of the Station and of
all equipment required by the FCC for the operation of the Station in compliance
with the rules and policies of the FCC, including expenditures required to
repair and replace equipment utilized by the Station;
(6) salaries of Licensee's employees, payroll taxes, insurance
benefits and related costs of all personnel employed by Licensee for the
operation of the Station:
3
<PAGE>
provided, that employee bonuses distributed after the Effective Date shall be
prorated over the calendar year for 1997;
(7) costs of supplies and equipment repair;
(8) premiums for insurance policies reasonably required with respect
to Station assets or operations as determined by Licensee (with Broker named as
an additional insured on all such insurance policies);
(9) salaries and other expenses incurred prior to September 30, 1997
which have not been paid as of Effective Date;
(10) all expenses and payments required by the Program Contracts as
well as restructure payments to program suppliers for programming previously
aired by the Station; and
(11) all liabilities of Licensee which, by their terms, are required
to be paid by the Licensee (whether or not incurred prior to or after the
Effective Date), except for those liabilities to be paid out of the Escrow Fund
pursuant to the Escrow Agreement.
(b) Notwithstanding anything to the contrary in this Agreement,
Licensee will consult with Broker on a weekly basis or as often as is reasonably
required to develop a mutually agreeable budget for Station operations in each
calendar year during the Term of this Agreement. To the extent expenditures in
excess of any such budget are anticipated, Licensee will make commercially
reasonable efforts to provide Broker with as much advance notice as is
practicable and consult with Broker to reach a mutually agreeable determination
of the expenditures to be made: provided, that Licensee shall retain the
ultimate authority to decide which expenses are required to ensure the Station's
compliance with applicable law and the Program Contracts and to preserve the
business and goodwill of the Station. In no event, however, shall the authority
of Edward J. Koplar ("Mr. Koplar"), president of the Licensee, with respect to
the operation of the Station be less than the authority he would have as the
Chief Executive Officer of Koplar Communications, Inc. pursuant to the
Management Agreement included as Exhibit E to the Purchase Agreement.
(c) If either party becomes aware that the Station has suffered any
loss or damage of any nature to its transmission or studio facilities which
results in the interruption of service or the inability of the Station to
operate with its maximum authorized facilities, such party shall immediately
notify the other party of the same. Broker shall, at its sole cost, undertake
such repairs at its expense as are necessary to restore full-time operation of
the Station with its maximum authorized facilities as expeditiously as possible
following the occurrence of any such loss or damage.
(d) During the Term of this Agreement, ACME will cause Broker to
commence payments (the "Payments") to Mr. Koplar of the monies that would
otherwise be due to Mr. Koplar upon execution of the Management Agreement
attached as Exhibit E
4
<PAGE>
to the Purchase Agreement. Such payments shall be made in lieu of any other
payments which Broker would otherwise be obligated to reimburse Koplar for the
compensation paid to Mr. Koplar as an officer, director and employee of Koplar.
The Payments shall be credited against any monies that ACME has to pay Mr.
Koplar upon execution of the Management Agreement (which will occur at the
transfer of control of Koplar after the requisite FCC approval is obtained). The
term of the Management Agreement will be reduced by a period of time measured
from the date on which the Payments commence to the execution of the Management
Agreement.
SECTION 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, faxes, 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. Each party shall immediately notify the other upon its receipt of any
inquiry or other communication from the FCC or member of the public which
relates to matters covered by the Agreement. It shall be the responsibility of
Licensee to respond to all communications from the FCC, although Licensee will
consult with Broker prior to doing so if time permits.
SECTION 1.6. STAFFING REQUIREMENTS AND EXPENSES
(a) The Licensee shall, to the extent required by applicable law or
policy, maintain a main studio within the Station's principal community contour.
Throughout the Term of this Agreement, Licensee shall retain a General Manager
and at least one other full-time employee and all other personnel, if any,
required by the FCC for the Station.
(b) In addition to the employees identified in subsection (a) of this
section, Licensee may continue to employ such other personnel as Licensee deems
appropriate and necessary, subject to the provisions of Section 1.4(b) of this
Agreement. Licensee shall make its employees available for use by Broker in
connection with Broker's fulfillment of its responsibilities under this
Agreement: provided, that all such employees of Licensee shall at all times be
subject to the ultimate control and supervision of Licensee.
(c) Broker shall be responsible for the salaries, commissions, taxes,
insurance and other related costs of all personnel employed by Licensee
(including but not limited to on-air personalities, engineering personnel, sales
persons, traffic personnel, board operators and other programming staff members)
involved in the production, sale, and broadcast of its programming or
administration with respect to the operations of the Station. Broker shall be
fully responsible for all compensation and the immediate supervision and
direction
5
<PAGE>
of its employees, subject, however, to Licensee's ultimate control while
Broker's employees are on the Station's premises. Broker may establish, staff
and maintain a remote control point for the Station, subject to the control and
oversight of the Licensee: provided, that Broker ensures that Licensee maintains
the ability to preempt Broker's programming. Broker shall pay for (1) all
telephone calls associated with program production, (2) any fees billed by
ASCAP, BMI and SESAC, (3) all promotional expenses, and (4) all other copyright
fees attributable to programming provided by Broker under this Agreement.
(d) Notwithstanding anything to the contrary herein, Broker shall have
the option to hire all of the Licensee's employees (except for those identified
in subsection (a) of this section) when all of the Escrow Funds (less any
distributions made therefrom in accordance with the terms of this Agreement) are
distributed to the Selling Shareholders pursuant to Section 3.3 of the Escrow
Agreement.
SECTION 1.7. OPERATION OF STATION
(a) Notwithstanding anything to the contrary in this Agreement, the
Licensee shall retain exclusive authority and control over the policies,
programming and operation of the Station, including, without limitation, the
right (1) to accept or reject any programming or advertisements proffered by
Broker, (2) to cancel or preempt any programs proffered by Broker, (3) to
substitute for any program proffered by Broker a program deemed by the Licensee
to be of greater national, regional or local interest, (4) to require that time
sales by Broker to political candidates comply with law and policy regarding
access, charges and equal opportunities, and (5) 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.
(b) 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.
(c) 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 the 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.
(d) 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.
6
<PAGE>
SECTION 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.
SECTION 1.9. FORCE MAJEURE
No breach of this Agreement shall be deemed to occur if circumstances
beyond the control of the Licensee cause any (1) damage or malfunction in the
Station's transmission facilities, (2) delay or interruption in the broadcast of
programs, or (3) failure at any time to furnish the facilities to Broker:
provided, that Licensee, or Broker acting under Licensee's supervision, shall
undertake any and all commercially reasonable measures to restore the Station to
fully authorized operation at the earliest practicable date, all at Broker's
cost.
SECTION 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.
SECTION 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 60 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.
SECTION 1.12. 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.
SECTION 1.13. ACCOUNTS RECEIVABLE AND OTHER ASSETS
Except as otherwise provided in this Agreement, Broker shall be
entitled to retain any and all notes, monies and other accounts receivable of
the Station relating to the sale of advertising time on the Station (the "LMA
Accounts Receivable") after the Effective
7
<PAGE>
Date of and throughout the Term of this Agreement. At the commencement of the
Term hereof, Licensee shall assign to Broker all of the accounts receivable
generated for the Station prior to the Effective Date of this Agreement
("Licensee's Accounts Receivable") that are outstanding and unpaid on that date
as well as all cash, receivables, and prepaids of the Company. Broker shall not
be required to institute any legal proceedings to enforce the collection of any
Accounts Receivable or to refer any of the Accounts Receivable to a collection
agency.
ARTICLE II: PAYMENT OF MONIES
In addition to the reimbursement of Licensee's expenses pursuant to
Section 1.4(a) of this Agreement, Broker shall pay a monthly fee to Licensee on
the last day of each calendar month equal to the amounts required to be paid by
Licensee to (1) NationsBank, N.A. or (2) Warner Bros. in the following month
pursuant to the agreements Licensee has with those entities in effect as of the
Effective Date.
ARTICLE III: REPRESENTATIONS AND WARRANTIES
SECTION 3.1. MUTUAL REPRESENTATIONS AND WARRANTIES
Except with respect to Licensee's loan with NationsBank, N.A., each
party represents and warrants to the other that it is legally qualified, duly
empowered and 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. Licensee and Broker warrant, represent,
covenant and certify that Licensee maintains, and shall continue to maintain,
ultimate control over the Station's facilities during the Term of this
Agreement, including, without limitation, control over the Station's finances,
personnel and programming. Each party hereto represents and warrants that it has
taken all necessary corporate and other necessary action to make this Agreement
legally binding on such party, and that the individual signing this Agreement on
behalf of such party has been fully authorized and empowered to execute this
Agreement on behalf of such party.
SECTION 3.2. LICENSEE'S REPRESENTATIONS AND WARRANTIES
(a) Except as may be otherwise specified in the Purchase Agreement or
the schedules thereto, (i) Licensee represents and warrants to Broker that it
owns and holds the FCC 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, there is not now pending or, to Licensee's knowledge,
threatened any action by or before the FCC or any court to revoke, cancel,
suspend, refuse to renew or modify adversely the FCC Licenses, (ii) 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, nonrenewal or
termination of any FCC License, (iii) 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
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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 FCC
Licenses, the Station Assets, or Licensee's ability to perform this Agreement,
and (iv) Licensee will not dispose of, transfer, assign or pledge any of the
Station assets except pursuant to the Purchase Agreement or with the prior
written consent of Broker or except for non-material assets disposed of in the
ordinary course of business.
(b) Notwithstanding anything to the contrary in the Purchase Agreement,
the representations and warranties of the Company and the Selling Shareholders
set forth in the following provisions of the Purchase Agreement shall be deemed
to be made as of September 30, 1997, and such representations and warranties
shall not continue beyond such date (meaning that no claim for indemnification
can be made for any change in fact or circumstance relating thereto which occurs
after September 30, 1997): Section 2.4 (solely to the extent of the impact of
this Agreement on such representation and warranty); Section 2.5 (to the extent
related to the condition of the Real Property); Section 2.6 (to the extent
related to the condition of the Personal Property); Section 2.10 (Audited
Financial Statements); Section 2.13 (Compensation and Employee Plans); 2.14
(Labor Relations); Section 2.15 (Tax Returns and Audit, to the extent related to
the Company's financial ability to pay taxes or establish reserves for taxes);
2.16 (Claims and Legal Actions); 2.17 (Compliance with Laws except as to any
matter relating to 2.4 subject to this Agreement not being the cause of any such
violation); Section 2.18 (Conduct of Business in Ordinary Course); Section 2.20
(Environmental); Section 2.23 (Cable Carriage).
(c) Licensee shall update all the schedules in the Purchase Agreement
ten (10) days prior to any distribution of the Escrow Funds to Selling
Shareholders pursuant to Section 3.3 of this Agreement and thereafter as often
as may be requested by Buyers (but in no event more than ONCE A month). Except
as provided in this Agreement or with respect to those representations and
warranties deemed to continue beyond September 30, 1997, Koplar shall have no
liability with respect to any matter disclosed on any updated schedule. In no
event shall Licensee be in breach of any representation or warranty to the
extent caused by Broker's actions or omissions under this Agreement.
SECTION 3.3. BROKER'S REPRESENTATIONS AND WARRANTIES
(a) 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.
(b) 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 such
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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 all terms and conditions of 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.
SECTION 3.4. INDEMNIFICATION
(a) 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) resulting from any material breach or Event of Default under
this Agreement.
(b) A party shall notify the indemnifying party in writing as soon as
it practicable and in any event within twenty (20) days of the occurrence of any
event, or of its discovery of any facts, which in its opinion entitle or may
entitle it to indemnification under this Section: provided, that failure to give
such notice within such 20-day period shall not affect the liability of the
indemnifying party under this Section unless the failure to give such notice
within such time period materially adversely affects the indemnifying party's
ability to defend itself against the event giving rise to the claim for
indemnification or to cure the default giving rise to such claim, and then such
indemnification obligations shall be reduced only to the extent of such material
adverse effect. With respect to threatened or asserted claims of third parties,
the indemnifying party shall promptly defend such claim by counsel of its own
choosing. The other party shall reasonably cooperate in such defense.
(c) If the indemnifying party, within a reasonable time after notice of
a claim hereunder, fails to defend such claim, the other party shall be entitled
to undertake the defense, compromise or settlement of such claim subject to the
right of the indemnifying party to assume the defense of such claim at any time
prior to the settlement, compromise or final determination thereof. Anything in
this Section 3.4 to the contrary notwithstanding: (i) the indemnified party
shall have the right to defend, compromise or settle such claim if the
indemnifying party fails to act in a timely manner and such failure is likely to
have a material adverse effect upon the indemnified party; (ii) the indemnifying
party will not, without the other party's written consent, settle or compromise
any claim or consent to any entry of judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
other party of a release from all liability in respect to such claim; and (iii)
the indemnifying party shall not be liable for any settlement or compromise to
which it did not consent, which consent shall not be unreasonably withheld.
(d) Notwithstanding anything to the contrary in this Agreement, neither
Licensee nor its officers, directors, agents and employees will be responsible
or have any liability with respect to the financial and on-air or other
operational performance of the
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station (e.g. ratings) during the Term of this Agreement: provided, that this
subsection shall not affect Licensee's responsibilities under Section 1.7(c) of
this Agreement.
ARTICLE IV: TERMINATION
SECTION 4.1. EVENTS OF DEFAULT
The following shall, after the expiration of the applicable cure period
provided for in Section 4.2, without curing the acts or omissions set forth
below, constitute an Event of Default:
(a) Broker's failure to fully and timely make any payments to
Licensee required under this Agreement;
(b) a material breach by either party hereto in the material
observance or performance of any material covenant, condition or undertaking
contained herein; or
(c) if any material representation or warranty made by either party in
this Agreement shall prove to have been or become false or misleading in any
material respect.
For purposes of Sections 4.1 (b) and (c) of this Agreement, no noncompliance
will be deemed material unless such noncompliance does have or is likely to have
an adverse impact on Licensee's ability to operate the Station in material
compliance with applicable law or to maintain the business of the Station in any
material respect.
SECTION 4.2. CURE PERIOD
An Event of Default shall not be deemed to have occurred until, in the
case of payment of any money to Licensee, ten (10) business days, or in the case
of any other default thirty (30) 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. The
aforementioned cure period shall be extended for twenty (20) days if the
defaulting party is acting in good faith to cure the default and such delay is
not materially adverse to the other parties. Notwithstanding the foregoing, the
cure period with respect to the failure to timely pay any payroll or payroll tax
deposit payable by Broker pursuant to this Agreement shall be two (2) business
days.
SECTION 4.3. 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 material default
hereunder. If Broker has defaulted in the performance of its obligations and
Licensee terminates this Agreement, Licensee shall be under no obligation to
make available to Broker any further
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broadcast time or broadcast transmission facilities after the effective date of
such termination (as determined by Section 1.2 of this Agreement).
SECTION 4.4. TERMINATION UPON GOVERNMENT ACTION
(a) This Agreement may be or, as the case may be, shall be terminated
under any one of the following circumstances: (i) by Broker, if the FCC revokes
any FCC License for the 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 or Broker elects to contest the agency's
proposed action, this Agreement shall remain in effect pending resolution of
such dispute if permitted under applicable law; provided further, that each
party shall be responsible for its own expenses incurred 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. In the event that the validity of any portion of this Agreement is
called into question by the FCC or as the result of any change in FCC rules or
policies, the parties hereto shall consult with the FCC and its staff concerning
such matters and shall negotiate in good faith a modification of this Agreement
which obviates any such FCC questions as to validity while preserving the intent
of the parties and the economic and other benefits of this Agreement without
imposing or creating a material adverse consequence for either party.
(b) 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 outstanding, in which
event the Broker shall receive such compensation payable therefor. Thereafter,
neither party shall have any liability to the other, except as provided in
Section 3.4.
(c) No termination of this Agreement shall cause a termination of the
Purchase Agreement or cause any delay in the distribution of the Escrow Funds to
the Selling Shareholders pursuant to the Escrow Agreement.
SECTION 4.5. PAYMENTS TO PARTIES
(a) 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.
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(b) Notwithstanding any other provision in this Agreement, in the event
that either party terminates this Agreement without consummation of the Purchase
Agreement, Licensee shall have the option of (i) having assigned to it as of the
date of termination all of the LMA Accounts Receivable generated during the Term
of this Agreement along with the obligation to pay any and all outstanding
obligations of Licensee or Broker under this Agreement or (ii) accepting an
assignment of the LMA Accounts Receivable generated under this Agreement, to and
including the date of termination, for a period of one hundred twenty (120) days
(with all monies collected to be distributed to Broker after each 30-day period
within the aforementioned 120-day collection period and a return of all
uncollected LMA Accounts Receivable to Broker upon expiration of that 120-day
collection period), with Broker retaining sole responsibility for making any and
all payments for expenses incurred under this Agreement prior to the date of
termination. Licensee shall advise Broker of its election simultaneously with
the provision of notice of termination.
ARTICLE V: MISCELLANEOUS
SECTION 5.1. INSURANCE
Licensee shall maintain at Broker's cost 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 its actions and omissions under this Agreement, including
invasion of privacy, libel and defamation claims based on Broker's programming.
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.
SECTION 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; delivered by
hand; or sent 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):
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If to the Licensee:
Edward J. Koplar
President
Koplar Communications Television, L.L.C.
4935 Lindell Boulevard
St. Louis, Missouri 63108
with a copy to (but which shall not constitute
notice to Licensee):
Joseph D. Lehrer, Esq.
Greensfelder, Hemker & Gale, P.C.
10 South Broadway, Suite 2000
St. Louis, MO 63102
If to Broker --
Douglas Gealy
ACME Television Holdings, L.L.C.
890 Bluespring Lane
Frontenac, MO 63131
and
Mr. Tom Allen
ACME Television Holdings, L.L.C.
Suite 850
650 Town Center Drive
Costa, Mesa, CA 92626
with a copy to (but which shall not constitute notice to
Broker):
Lewis J. Paper, Esq.
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, DC 20037
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SECTION 5.3. WAIVER
No modification or waiver of any provision of this Agreement shall be
effective unless in writing. Such modification or waiver shall be effective only
in the specific instance and for the purpose for which given.
SECTION 5.4. CONSTRUCTION
This Agreement shall be construed in accordance with the laws of the
State of Missouri without regard to conflict of laws provisions. Except as
otherwise stated herein, (i) all capitalized terms shall have the same meaning
attributable to them in the Purchase Agreement, and (ii) all other rules of
construction in the Purchase Agreement shall be applicable to this Agreement.
SECTION 5.5. HEADINGS
The headings contained in this Agreement are included for convenience
only and no heading shall alter the meaning of any provision.
SECTION 5.6. ASSIGNMENT
This Agreement may not be assigned by either party without the prior
written consent of the other party: provided, that Broker may (i) assign its
rights and obligations under this Agreement to another party controlled by the
same parties or to parties holding notes (the "Note Holders") issued by Broker
or its parent in conjunction with the financing of the transactions contemplated
by the Purchase Agreement or issued as replacements or substitutes therefor,
including amendments and other modifications thereto and refinancings thereof
(with the right of such Note Holders to acquire such rights and obligations only
upon an event of default by Broker or its parent under the agreements evidencing
such financing(s) or refinancing(s), and with the right of such Note Holders to
further assign such rights and obligations without the consent of Licensee), or
(ii) grant a security interest for its rights under this Agreement without
Licensee's consent (with a subsequent assignment pursuant to any foreclosure
thereunder); provided further, that, upon distribution of any Escrow Funds to
the Selling Shareholders, Broker may assign its rights and obligations under
this Agreement to any other entity without Licensee's consent; and provided
further, that any assignee of Broker's rights and obligations under this
Agreement shall agree to be bound by and assume all of Broker's obligations
under this Agreement. This Agreement shall inure to the benefit of and be
binding upon each party's assignees, transferees, or other
successors-in-interest.
SECTION 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.
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SECTION 5.8. ENTIRE AGREEMENT
This Agreement, the Purchase Agreement, and all documents referenced
herein or therein embody the entire agreement between the parties with respect
to the subject matters contained in this Agreement and supersede any and all
prior and contemporaneous agreements and understandings, oral or written with
respect to the subject matters contained in this Agreement. No amendment of this
Agreement shall be valid unless embodied in a document executed by both parties.
SECTIONN 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.
SECTION 5.10. SEVERABILITY OF PROVISIONS
Except as set forth in Section 4.4 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.
SECTION 5.11. LITIGATION EXPENSES.
If any formal legal proceeding is instituted by a party to enforce that party's
rights under this Agreement, the party prevailing in the proceeding shall be
reimbursed by the other party for all reasonable costs incurred thereby,
including but not limited to reasonable attorneys' fees.
SECTION 5.12. ACME RESPONSIBILITIES.
ACME shall be jointly and severally liable for Broker's obligations
under this Agreement. In no event shall ACME seek indemnification or other
compensations (by way of reduction or Purchase Price under the Purchase
Agreement or otherwise) for any damage or loss to any asset of the Station which
accrues during the Term of this Agreement.
5.13. CONFLICTING PROVISIONS. If any conflict should arise or exist
between any provisions of this Agreement and the Purchase Agreement, the
provisions of this Agreement shall govern.
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ARTICLE VI: CERTIFICATIONS
SECTION 6.1. CERTIFICATION BY THE LICENSEE
By executing this Agreement, Licensee certifies that it retains
ultimate control under this Agreement over the Station's facilities, including
but not limited to Station finances, personnel and programming.
SECTION 6.2. CERTIFICATION BY BROKER
By executing this Agreement, Broker certifies that this Agreement
complies with Section 73.3555 of the FCC's rules.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
KOPLAR COMMUNICATIONS, INC.
By:/s/Edward J. Koplar
----------------------------
Edward J. Koplar
President
KOPLAR TELEVISION CO., LLC
By: /s/Edward J. Koplar
--------------------------
Edward J. Koplar
President
ACME TELEVISION LICENSES OF
MISSOURI, INC.
By: /s/Douglas E. Gealy
--------------------------
Douglas E. Gealy
President
ACME TELEVISION LICENSES, LLC
By: /s/Douglas E. Gealy
---------------------------
Douglas E. Gealy
President
18
MEMBERSHIP CONTRIBUTION AGREEMENT
among
ROBERTS BROADCASTING OF SALT LAKE CITY, L.L.C.,
MICHAEL V. ROBERTS and STEVEN C. ROBERTS
and
ACME TELEVISION HOLDINGS, L.L.C.
<PAGE>
MEMBERSHIP CONTRIBUTION AGREEMENT
THIS MEMBERSHIP CONTRIBUTION AGREEMENT (this "Agreement") is
executed as of August 22, 1997 by and among ROBERTS BROADCASTING OF SALT LAKE
CITY, L.L.C., a Delaware limited liability company ("RBSLC"), MICHAEL V. ROBERTS
and STEVEN C. ROBERTS (collectively, "Members"), and ACME TELEVISION HOLDINGS,
L.L.C., a Delaware limited liability company ("ACME").
RECITALS:
1. Each of the Members holds fifty (50) percent of the ownership
interest in RBSLC, which holds a construction permit (the "CP") from the Federal
Communications Commission ("FCC") to build a new television station under the
call sign of KZAR-TV in Provo, Utah (the "Station").
2. The Members desire to contribute, assign, and transfer, to the
fullest extent permitted by law, forty-nine (49) percent of their collective
ownership interest (the "Membership Interest") in RBSLC to ACME, in
consideration for the issuance by ACME to the Members, to the fullest extent
permitted by law, of Six Million Dollars ($6,000,000) in ownership interests in
ACME, all in accordance with the terms and conditions of this Agreement.
3. RBSLC and ACME Television Holdings of Utah, L.L.C., a Utah
limited liability company ("ATHU") propose to execute, at the time of execution
of this Agreement a Management Agreement (the "MA") which will enable ATHU to
provide programming and other services to the Station in exchange for certain
consideration specified therein.
4. The Members propose to issue and sell, and ACME proposes to
buy, for Three Million Dollars ($3,000,000) at the closing of the transaction
hereunder, an option to acquire all the Members' ownership in RBSLC remaining
after such exchange, pursuant to the Option Agreement attached as EXHIBIT A
hereto (the "Option Agreement"), at which time ACME will simultaneously lend the
Members Four Million Dollars ($4,000,000), which loan will be evidenced by a
promissory note in the form of EXHIBIT B hereto (the "Note").
5. RBSLC and ATHU also propose to undertake, beginning on the
date of the closing of the transaction hereunder, the exchange of the CP or the
Station (as the case may be) for the construction permit or any resulting
licenses for television station KOOG-TV in Salt Lake City, Utah.
<PAGE>
PROVISIONS:
In consideration of the foregoing and the mutual promises and
covenants contained herein, the parties hereby agree as follows:
ARTICLE I. EXCHANGE OF CONSIDERATION.
1.1. CONSIDERATION PROVIDED BY THE MEMBERS. Subject to the terms and
conditions of this Agreement, the Members shall, to the fullest extent permitted
by law, assign, convey, transfer and deliver to ACME at Closing, and ACME shall,
to the fullest extent permitted by law, acquire from the Members at Closing,
free and clear of all debts, liens, claims, options, warrants, financing leases,
security interests, and encumbrances as well existing and future ownership
interests of any kind whatsoever, except as permitted herein, the Membership
Interest. To that end, each of the Members shall assign, convey, transfer and
deliver to ACME at Closing twenty-four and one-half (24.5) percent of the
ownership interest which each Seller currently holds in RBSLC.
1.2. CONSIDERATION PROVIDED BY ACME.
1.2.1. OWNERSHIP INTEREST IN ACME. At the Closing, as defined
herein, ACME will issue and deliver to the Members membership interests in ACME
consisting of Six Thousand (6,000) Seller Units (as defined in the ACME Limited
Liability Company Operating Agreement of June 17, 1997 [the "ACME Operating
Agreement"]) , with one-half (1/2) of such units being issued and delivered to
each of the two (2) Members. The Seller Units of ACME to be provided to the
Members under this Section are hereinafter collectively referred to as the
"Ownership Interest".
1.2.2. PRO-RATA DILUTION. The Members' Ownership Interest
will be subject to dilution for financing agreements, management incentives, and
acquisition of capital after Closing from third parties, ratably with other
Seller Units as a result of issuance of additional membership interests in ACME,
as permitted by the ACME Operating Agreement.
1.3. BOARD SEAT. At Closing, Michael Roberts, or a person designated
by him and approved by ACME (which approval shall not unreasonably be withheld),
will be appointed to the ACME Board of Advisors. Thereafter, until it is subject
to a change of control or completes a public offering of its securities, ACME
will cause Michael Roberts (or his designee approved as foresaid) to be elected
to such Board at any subsequent election in respect thereto. If FCC regulations
prohibit the service of Mr. Roberts or his designee on such Board, he or his
designee (as the case may be) will resign from the Board. ACME will cooperate
with Mr. Roberts' applications to obtain any necessary waivers from the FCC in
respect to his service on the Board, and will allow Mr. Roberts to attend Board
meetings in a non-voting capacity during any period when he is entitled herein
to a Board seat but prohibited from service by FCC regulations.
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<PAGE>
1.4. EXECUTION OF OTHER AGREEMENTS.
1.4.1. EXECUTION OF MA. Also at Closing, ATHU and RBSLC will
execute the MA, and the parties thereto will make all payments provided by the
MA to be made at the execution thereof.
1.4.2. ISSUANCE AND SALE OF OPTION. Also at Closing, the
Members, ACME and RBSLC will execute the Option Agreement, and the parties
thereto will make all payments provided by the Option Agreement to be made at
the execution thereof.
1.4.3. LOAN. Also at Closing, ACME will lend the Members Four
Million Dollars ($4,000,000) and the Members will issue and deliver to ACME the
Note.
1.4.4. EXCHANGE OF KZAR-TV FOR KOOG-TV. Beginning on the date
of Closing, or on any earlier date after the execution hereof if requested in
writing by ATHU, the parties hereto shall each cooperate with the others and
otherwise use any and all commercially reasonable efforts (which shall not, in
the case of the Members or RBSLC, include the incurring of any liability by the
Members, or disbursement of funds unless previously advanced or indemnified by
ACME) in good faith to arrange a transaction which will result in an exchange of
the CP or the license issued to cover it and other assets for KZAR-TV, for the
FCC licenses and other assets for KOOG-TV in Salt Lake City, Utah. To such end,
the parties hereto will from time-to-time provide such information and execute
such documents as may reasonably be requested to effect such a transaction.
1.5. ESCROW FUND. Upon execution of this Agreement, ACME shall
deposit One Hundred Thousand Dollars ($100,000), hereinafter referred to as the
"Escrow Deposit," with the law firm of Dow, Lohnes & Albertson, PLLC ("Escrow
Agent") pursuant to an Escrow Agreement in the form of EXHIBIT C annexed hereto.
At the Closing, the parties shall issue joint instructions to the Escrow Agent
to pay the Escrow Deposit to the Members, and the amount of the Escrow Deposit
shall be deducted from the Purchase Price which ACME is otherwise is required to
pay the Members at Closing. If this Agreement is terminated due to ACME's
material breach, the Escrow Deposit shall be paid to the Members as liquidated
damages and such payment shall be the Members' exclusive remedy for such a
breach, unless such a breach is intentional. If this Agreement is terminated for
any other reason, the Escrow Deposit shall be immediately returned to ACME.
Interest on the Escrow Deposit shall at all times belong to ACME and shall be
paid to ACME at the Closing or upon termination upon of this Agreement, as the
case may be.
1.6. HART-SCOTT-RODINO FILING. Upon execution of this Agreement ACME
shall prepare and file any filings which may be necessary under the Anti-Trust
Improvements Act of 1976, as amended (the "HSR Act"), and pay the necessary
filing fee. The Members will provide and cause RBSLC to provide any information
needed from them in respect to such filing, and otherwise cooperate in respect
thereto.
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<PAGE>
1.7. CLOSING.
1.7.1. DATE AND LOCATION. The closing of the transactions
provided for in this Agreement (the "Closing") shall be held at the offices of
Dickstein Shapiro Morin & Oshinsky LLP, 2101 L Street, N.W., Washington, D.C.
20037, or at such other place mutually agreed to by the parties, commencing at
10:00 a.m. on a date (the "Closing Date") selected by ACME which shall be within
ninety (90) days after the date on which the FCC order (the "Order") approving
the transaction contemplated hereby is placed on public notice; provided, that
the parties shall not be obligated to proceed to Closing if (1) the Order
includes conditions materially adverse to ACME or the Members or (2) the
conditions precedent to Closing have not been satisfied or waived; and provided
further, that ACME shall have the unilateral right to require that Closing occur
only after the Order has become a "Final Order" (which, for purposes of this
Agreement, means that the Order has not been stayed, is not subject to
reconsideration or review by the FCC or a court of competent jurisdiction, and
the time to institute such administrative or judicial review has expired). At
Closing, ACME will pay to the Members One Thousand One Hundred Eleven Dollars
($1,111) per day, to the extent the Closing Date is more than fifty-four (54)
days later than the date the Order is placed on public notice.
1.7.2. EXCHANGE OF DOCUMENTS. At the Closing, the Members and
ACME will each execute and join in the operating agreements of ACME and RBSLC,
respectively, and each party hereto shall execute and deliver to the other party
or parties the other items specified herein as well as any additional
document(s) and item(s) reasonably necessary for the consummation of the
transactions contemplated herein. Such additional documents shall be reasonably
satisfactory to the other party as to both form and substance.
1.8. TIMING. Time is of the essence to implementation of this
Agreement. It is the intention of the parties that the Closing of the
transactions contemplated herein occur not later than June 1, 1998.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE MEMBERS AND RBSLC.
RBSLC and the Members represent and warrant to ACME that the
following matters are true and correct as of the date of this Agreement:
2.1. COMPANY STATUS. RBSLC is a limited liability company duly
organized, validly existing, and in good standing in the State of Delaware.
RBSLC has the power to hold the CP for the Station and to construct the Station
in accordance with the terms of the CP.
2.2. AUTHORIZATIONS. RBSLC is the holder of the CP and all
extensions thereof, copies of which are included in SCHEDULE 1 to this
Agreement. The CP is in full force and effect. The CP and the extensions
constitute all of the authorizations required under the Communications Act of
1934, as amended (the "Act"), and the current rules,
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regulations, and policies of the FCC for the construction of the Station. The
Members have timely filed with the FCC all material applications, reports and
other disclosures required by the Act and by FCC rules and policies. As of the
date of this Agreement, there is not pending or, to the best of the Members'
knowledge, threatened, any petition, complaint, objection (whether formal or
informal), order to show cause, investigation, or other action by or before the
FCC or any court to revoke, cancel, rescind, modify, or refuse to extend the CP,
or which would otherwise have a material adverse impact on the construction or
operation of the Station, except for proceedings of general applicability to the
broadcast industry. Except as set out in Schedule 1, and for proceedings of
general applicability to the broadcasting industry, there is not now pending, or
to the best of the Members' knowledge, threatened, any other petition,
complaint, violation, notice of apparent liability, or notice of forfeiture or
other proceeding by or before the FCC or any court against the Members with
respect to any matter affecting the Station. RBSLC and the Members are in
material compliance with the CP, and the rules, regulations and policies of the
FCC. The CP requires that construction of the Station be completed by May 21,
1997. Currently pending before the FCC is a Form 307 application to extend the
CP to November 21, 1997. The Members have no reason to believe that the latter
application will not be granted by the FCC in due course.
2.3. TITLE. On the Closing Date, the assets of RBSLC will be free
and clear of all debts, claims, liabilities, security interests, mortgages,
pledges, liens, conditional sales agreements, leases, encumbrances, or charges
of any kind or nature.
2.4. EMPLOYEES. RBSLC is not a party to any pending or, to the
Members knowledge, threatened labor dispute affecting the Station. RBSLC (1) has
complied in all material respects with all applicable federal, state, and local
laws, ordinances, rules and regulations and requirements relating to employment
or labor, including but not limited to provisions relative to wages, hours,
collective bargaining, pension, profit-sharing and savings plans and trusts
including, without limitation, 401-K plans ("Trusts") and payment of Social
Security, unemployment and withholding taxes and (2) is not liable for any
arrears of wages or Trusts or benefit payments ("Payments") or any taxes or
penalties for failure to comply with any of the foregoing. RBSLC and the Members
will hold ACME harmless from and against (1) any liability for any taxes or
Payments or penalties which have not been paid or made for employment of persons
by RBSLC which relate to the period prior to the Closing Date, (2) any claims of
discrimination or wrongful termination or hiring, including, without limitation,
violations of federal or state law relating to civil rights, regulations of the
United States Equal Employment Opportunity Commission, or the Americans With
Disabilities Act of 1990 which relate to the period prior to the Closing Date,
(3) all claims for severance which relate to the period prior to the Closing
Date, and (4) any other claims by employees of RBSLC relating to or arising from
their employment (or severance therefrom) by RBSLC. There are no collective
bargaining agreements, or negotiations for the same, in existence which affect
any of the Station's employees.
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2.5. TAXES. Except as disclosed in SCHEDULE 2 annexed hereto, RBSLC
has duly and timely filed all required federal, state and local tax returns and
paid all taxes, interest and penalties due, has sought and obtained extensions
of time to file such and pay same within the time provided therefor, or is
challenging such taxes in good faith in accordance with applicable procedures
(and has in place adequate financial reserves to satisfy any adverse decision).
Between the date hereof and the Closing Date, RBSLC shall duly and timely file
all such required returns and pay all such taxes, interest and penalties or
obtain such extensions within the time provided therefor, unless such taxes are
being challenged in good faith in accordance with applicable procedures (and has
in place adequate financial reserves to satisfy any adverse decision).
2.6. CONTRACTS. SCHEDULE 3 hereto includes true copies of all
written contracts and describes the material terms of all oral contracts
(collectively, the "Contracts") to which RBSLC is a party as of the date of this
Agreement. RBSLC has complied in all material respects with all Contracts and is
not in default beyond any applicable grace periods under any of such Contracts.
To the Members' knowledge, no other contracting party is in material default
under any of the Contracts. All Contracts are in full force and effect and are
valid, binding and enforceable in accordance with their respective terms, except
as enforceability may be limited by laws affecting creditor rights or equitable
principles generally.
2.7. ENVIRONMENTAL. No Hazardous Waste, as defined under any
Environmental Laws has been released, emitted or discharged or, to the Members'
knowledge, is currently located in or on any asset owned or held by RBSLC or in,
on or under the real property on which any of RBSLC assets are or will be
situated in violation of any Environmental Laws. The construction of the Station
is not in material violation of any Environmental Laws, including but not
limited to FCC rules, policies and guidelines concerning RF radiation. Neither
the Members nor RBSLC have received any notice, summons, citation, directive,
letter or other communication, written or oral, from the United States, the
State of Utah, or any other party concerning any intentional or unintentional
action or omission on the part of RBSLC, the Members or any other party which
resulted in the releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leeching, dumping or disposing of
Hazardous Waste on, above or under property owned or used by RBSLC.
2.8. BALANCE SHEET. The Members have provided ACME with true copies
of an unaudited balance sheet for RBSLC dated June 30, 1997 (the "Balance
Sheet"). True copies of the Balance Sheet are attached as SCHEDULE 4 hereto. The
Balance Sheet (1) has been compiled in accordance with Statements on Standards
for Accounting and Review Services issued by the American Institute of Certified
Public Accountants consistently applied, (2) identifies all of RBSLC's material
obligations and liabilities (contingent or matured), and (3) fairly reflects the
financial position of RBSLC as of the date indicated.
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2.9. LITIGATION. Neither the Members nor RBSLC have been operating
under and is not subject to, or in default with respect to, any order, judgment,
writ, injunction, or decree of any court or any federal, state, municipal, or
other governmental department, commission, board, agency, or instrumentality,
foreign or domestic, which has had or could reasonably be expected to have a
material adverse effect on the Station. Except for proceedings of general
applicability to the broadcast industry, there is no Litigation pending by or
against, or, to the best of the Members' knowledge, threatened against the RBSLC
or the Members which relates to or affects the Station or which materially
interferes or could reasonably be expected materially to interfere with (1) the
Members' right, title to, or interest in the Membership Interest, (2) the
construction or operation of the Station or (3) the Members' ability to transfer
the Membership Interest to ACME free of such Litigation.
2.10. COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 5
annexed hereto, RBSLC is in material compliance with all applicable laws, rules,
regulations, policies and orders of the federal, state, and local governments
with respect to the Station. The construction of the Station will not violate
any such laws, regulations, policies or orders in any material respect, and
except for proceedings of general applicability to the broadcast industry, there
is no investigation or proceeding regarding the foregoing which is currently
pending or, to the Members' knowledge, threatened.
2.11. NO DEFAULTS. Neither the execution and delivery by RBSLC or
the Members of this Agreement nor the consummation by the Members of the
transactions contemplated herein are events that, by themselves or with the
giving of notice or the passage of time or both, constitute a material violation
of or will conflict with or result in any material breach of or any default
under (1) the terms, conditions, or provisions of any arbitration award,
judgment, law, order, decree, writ, or regulation to which RBSLC or the Members
are subject, (2) RBSLC's certificate, operating agreement or other
organizational documents, or (3) any agreement or instrument to which the
Members or RBSLC is a party or by which the Members or RBSLC is bound, or result
in the creation of imposition of any lien, charge, or encumbrance on any asset
owned or held by RBSLC or the Membership Interest.
2.12. BROKERS. There is no broker or finder or other person who
would, as a result of any agreement of or action taken by the Members, have any
valid claim against any of the parties to this Agreement for a commission or
brokerage fee in connection with this Agreement or the transactions contemplated
herein (except CEA, Inc., whose fee will be paid by ACME).
2.13. RBSLC AND THE MEMBERS ACTION. This Agreement has been duly and
validly authorized, executed, and delivered by RBSLC and the Members and
constitutes the valid and binding agreement of RBSLC and the Members,
enforceable in accordance with and subject to its respective terms, except as
enforceability may be limited by laws affecting the enforcement of creditor
rights or equitable principles generally.
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2.14. LEASES. Annexed hereto as SCHEDULE 6 are all the leases
relating to real property (the "Real Estate Leases") to which RBSLC is a party.
All of the Real Estate Leases have been complied with in all material respects
by RBSLC, and no material default of RBSLC in respect to any duties or
obligations required to be performed by RBSLC has occurred. All such leases are
valid, binding, and enforceable in accordance with their respective terms. To
the Members' knowledge, no other party to any of the Real Estate Leases is in
default thereunder, except as enforceability may be limited by laws affecting
the enforcement of creditor rights or equitable principles generally.
2.15. INSOLVENCY. No insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
RBSLC or the Members' is pending or, to the best of the Members' knowledge,
threatened, and neither RBSLC nor the Members have made any assignment for the
benefit of creditors, nor taken any actions with a view to, or which would
constitute the basis for, the institution of any such insolvency proceedings.
2.16. APPROVALS. No approval of any third party, governmental agency
or court is required to be obtained by the Members with regard to the assignment
of the Membership Interest except the approval by the FCC as provided herein.
2.17. FAA APPROVAL. No approval or other action by the Federal
Aviation Administration ("FAA") is required to complete construction of the
Station.
2.18. NO MATERIAL OMISSION. Neither RBSLC nor the Members have
failed to disclose any material fact within their knowledge which would make any
statement or representation in this Agreement inaccurate or misleading.
2.19. ACQUISITION FOR OWN ACCOUNT. The Ownership Interest will be
acquired for investment for each Member's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and neither Member has a present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, each Member further represents that he does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Ownership Interest.
2.20 DISCLOSURE OF INFORMATION. Each Member represents that he has
received all the information he considers necessary or appropriate for deciding
whether to acquire the Ownership Interest. Each Member further represents that
he has had an opportunity to ask questions and receive answers from ACME
regarding the terms and conditions of the transaction herein and the business,
properties, prospects and financial condition of ACME.
2.21 INVESTMENT EXPERIENCE. Each Member is an investor in securities
of companies in the development stage and acknowledges that he is able to fend
for himself,
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can bear the economic risk of his investment, and has such knowledge and
experience in financial or business matters that he is capable of evaluating the
merits and risks of the investment in the Ownership Interest.
2.22. ACCREDITED INVESTOR. Each Member is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D under the Act, as presently in effect.
2.23. RESTRICTED SECURITIES. Each Member understands that the
Ownership Interest is characterized as a "restricted securities" under the
federal securities laws inasmuch as it is being acquired from ACME in a
transaction not involving a public offering and that under such laws and
applicable regulations such Ownership Interest may be resold without
registration under the Act only in certain limited circumstances. In this
connection, each Member represents that he is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
2.24. RBSLC OPERATING AGREEMENT. RBSLC has provided ACME a true and
complete copy of its operating agreement and all amendments thereto, if any
(collectively, the "RBSLC Operating Agreement"), true copies of which are
annexed hereto as EXHIBIT D. The transfer of the Membership Interest to ACME has
been authorized by all required actions, corporate and otherwise, and when so
transferred the Membership Interest will be duly and validly issued, fully paid
and nonassessable and will conform to the description thereof contained in the
RBSLC Operating Agreement.
2.25. RBSLC MEMBERSHIP INTERESTS. All of RBSLC's currently
outstanding membership interests are set forth on SCHEDULE 7 annexed hereto. The
option previously issued to Paxson Communications has expired without exercise.
There are no options, warrants or other rights to acquire any interest in RBSLC
or securities convertible into interests in RBSLC except pursuant to the Option
Agreement.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ACME.
ACME represents and warrants to RBSLC and the Members as to the
truth of the following matters as of the date of this Agreement:
3.1. STATUS. ATHU is a limited liability company duly organized,
validly existing, and in good standing in the State of Utah, and has the power
to enter into and consummate the transactions contemplated by this Agreement.
ACME is a limited liability company, duly organized, validly existing, and in
good standing in the State of Delaware, and has the power to enter into and
consummate the transactions contemplated by this Agreement.
3.2. COMPANY ACTION. All actions and proceedings necessary to be
taken by or on the part of ACME in connection with the transactions contemplated
by this Agreement and necessary to make the Agreement effective have been duly
and validly
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taken. This Agreement has been duly and validly authorized, executed, and
delivered by ACME and constitutes the valid and binding agreement of ACME,
enforceable in accordance with and subject to its terms, except as
enforceability may be limited by laws affecting the enforcement of creditors'
rights or equitable principles generally.
3.3. NO DEFAULTS. Neither the execution and delivery by ACME of this
Agreement nor the consummation by ACME of the transactions contemplated herein
are events that, by themselves or with the giving of notice or the passage of
time or both, constitute a material violation of or will conflict with or result
in any material breach of or any default under (a) the terms, conditions, or
provisions of any arbitration award, judgment, law, order, decree, writ or
regulation to which ACME is subject, (b) the certificate, operating agreement or
other organizational documents of ACME, or (c) any agreement or instrument to
which ACME is a party or by which it is bound.
3.4. BROKERS. There is no broker or finder or other person who
would, as a result of any agreement of or action taken by ACME, have any valid
claim against any of the parties to this Agreement for a commission or brokerage
fee in connection with this Agreement or the transactions contemplated herein
(except CEA, Inc., whose fee will be paid by ACME).
3.5. LITIGATION. There is no litigation, proceeding, or
investigation of any nature pending or, to the best of ACME's knowledge,
threatened against or affecting ACME that would affect ACME's ability to carry
out the transactions contemplated herein.
3.6. QUALIFICATION AS A BROADCAST OWNER. ACME knows of no fact, and
will not act in such manner from and after the date hereof, that would, under
the Act and the rules and policies of the FCC, disqualify ACME as an assignee of
the Membership Interest.
3.7. NO MATERIAL OMISSION. ACME has not failed to disclose any
material fact within its knowledge which would make any statement or
representation in this Agreement inaccurate or misleading.
3.8. ACME OPERATING AGREEMENT. ACME has provided to the Members a
true and complete copy of the ACME Operating Agreement, a true copy of which is
annexed hereto as EXHIBIT E. The issuance of the Ownership Interest to the
Members has been authorized by all required actions, corporate and otherwise,
and when issued to the Members the Ownership Interest be duly and validly
issued, fully paid and nonassessable and will conform to the description thereof
contained in the ACME Operating Agreement.
3.9. ACME MEMBERSHIP INTERESTS. All of ACME's currently outstanding
membership interests and the consideration received therefor are set forth on
SCHEDULE 8 annexed hereto. There are no options, warrants or other rights to
acquire any interest in ACME or securities convertible into interests in ACME
except as set forth on SCHEDULE 8 annexed hereto.
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3.10. ACME MANAGEMENT. ACME's managing members and other management
and executive personnel are set forth on SCHEDULE 9 annexed hereto.
3.11. COMPLIANCE WITH LAWS. ACME is in material compliance with all
applicable laws, rules, regulations, policies and orders of all federal, state
and local governments or agencies.
3.12. APPROVALS. No approval of any third party, governmental agency
or court is required to be obtained by ACME for the execution, delivery and
performance of this agreement except for the approval by the FCC as provided
herein.
ARTICLE 4. COVENANTS OF THE MEMBERS PENDING CLOSING.
RBSLC and the Members covenant and agree that, from the date of this
Agreement to and including the Closing Date, subject to the provisions of this
Agreement and the MA they will take, or refrain from taking, the following
actions:
4.1. MAINTENANCE OF STATION. RBSLC and the Members shall continue to
carry on the Station business in accordance with past practices (it being
acknowledge that the Station has not yet been constructed) and keep its books of
account, records, and files in the ordinary course of business and shall
construct the Station in accordance with the terms of the CP and in material
compliance with all applicable rules, regulations, policies and laws. To that
end, the Members will cause RBSLC to (1) timely file with the FCC any and all
reports, applications, and disclosures as may be required by the Act or FCC
rules or policies; and (2) maintain in full force and effect through and
including the Closing Date property damage, liability, and other insurance with
respect to RBSLC's assets to cover contingencies that can reasonably be
anticipated. Prior to the Closing, the Members will not, without the prior
written consent of ACME, allow or cause RBSLC to:
4.1.1. sell, lease, transfer, or agree to sell, lease, or
transfer any of RBSLC's assets without replacement thereof with an asset of
equivalent kind, condition, and value, except that RBSLC may distribute to its
members or otherwise dispose of cash and notes receivable from affiliated
entities without replacement thereof;
4.1.2. enter into any collective bargaining agreement or
written contract of employment, unless said contract is subject to cancellation
upon thirty (30) days notice;
4.1.3. enter into any contract or agreement; or
4.1.4. make, allow, or consent to any material change in the
Real Estate Leases or in any buildings, leasehold improvements, or fixtures used
or useful in the construction or operation of the Station, except in order to
effectuate the construction of the Station in accordance with the terms of the
MA.
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4.2. ORGANIZATION, GOOD WILL, PROMOTION. Subject to the provisions
of this Agreement, the Members will cause RBSLC to use its best efforts to
preserve the business organization of the Station intact and shall cooperate
with ACME to preserve the goodwill of the Station's suppliers, customers, and
others having business relations with the Station.
4.3. ACCESS TO FACILITIES, FILES, AND RECORDS. At the reasonable
request of ACME, the Members shall give ACME and its representatives (1)
reasonable access during normal business hours to all facilities, property,
accounts, title papers, insurance policies, licenses and other authorizations,
agreements, commitments, records, machinery, fixtures, furniture, and
inventories related to the Station, and (2) all such other information
concerning the affairs of RBSLC or the Station as ACME may reasonably request.
4.4. REPRESENTATIONS AND WARRANTIES. The Members shall give notice
to ACME promptly upon the occurrence of, or upon becoming aware of the impending
or threatened occurrence of, any event that would cause or constitute a material
breach of any of the Members' representations or warranties in this Agreement.
4.5. APPLICATION FOR FCC CONSENT. Within five (5) business days
after execution of this Agreement, the Members shall prepare and file an
appropriate application (the "Application") with the FCC requesting its written
consent to the transaction contemplated by this Agreement. The Members shall
diligently take, or cooperate in the taking of, all steps reasonably necessary
and appropriate to expedite the preparation of the Application and its
prosecution to a favorable conclusion. The Members will promptly provide ACME
with a copy of any pleading, order, or other document served on it relating to
the Application. The Members will use commercially reasonable efforts and
otherwise cooperate with ACME in responding to any information requested by the
FCC related to the Application, in making any amendment to this Agreement
requested by the FCC which does not adversely affect the Members in a material
manner, and in defending against any petition, complaint, or objection which may
be filed against the Application. The FCC filing fees shall be paid by the
Members.
4.6. NOTICE OF PROCEEDINGS. The Members will promptly (and in any
event within five (5) business days) notify ACME upon becoming aware of any
actual or threatened claim, dispute, arbitration, litigation, complaint,
judgment, order, decree action or proceeding relating to the Members, RBSLC, the
Station, or the consummation of this Agreement or any transaction contemplated
herein.
4.7. CONFIDENTIAL INFORMATION. If the transactions contemplated in
this Agreement are not consummated for any reason, the Members shall not
disclose to third parties any information designated as confidential and
received from ACME or its agents in the course of investigating, negotiating,
and consummating the transactions contemplated by this Agreement: provided, that
no information shall be deemed to be confidential that (1) becomes publicly
known or available other than through disclosure by the Members; (2) is
rightfully received by the Members from a third party; or (3) is independently
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developed by the Members. All originals of all material provided to the Members
by ACME or its agents shall be returned to ACME and all copies thereof shall be
destroyed.
4.8. CONSUMMATION OF AGREEMENT. RBSLC and the Members shall fulfill
and perform all conditions and obligations to be fulfilled and performed by
RBSLC and the Members under this Agreement and make every reasonable effort to
cause the transactions contemplated by this Agreement to be fully carried out.
4.9. COMPLIANCE WITH LAW. The Members will comply and will cause
RBSLC to comply in all material respects with all applicable federal, state and
local laws, ordinances and regulations, including but not limited to the Act and
the rules, regulations and policies of the FCC.
4.10. PERFORMANCE UNDER CONTRACTS AND LEASES. The Members will cause
RBSLC to perform in all material respects its obligations under, and keep in
good standing, all Contracts and Real Estate Leases to which RBSLC is a party.
4.11. PAYMENT OF LIABILITIES. At or prior to Closing, the Members
will pay or otherwise discharge all liabilities reflected on the Balance Sheet.
4.12. OPERATING AGREEMENT. Prior to Closing, the Members shall cause
the RBSLC Operating Agreement to be amended, in a form reasonably satisfactory
to ACME, to provide the following:
4.12.1 Distributions shall be made according to percentage
interests, and allocations or profits and losses shall be made according to
distributions, substantially as provided in the ACME Operating Agreement; and
4.12.2 The unanimous vote of all member's representatives on
the Management Committee of RBSLC shall be required to increase any Member's
Capital Commitment, request any additional Capital Contributions, issue
additional Membership interests in RBSLC, make distributions other than to
defray imputed tax liabilities of members, or pledge or compel a pledge of any
member's membership interest.
ARTICLE 5. COVENANTS OF ACME PENDING THE CLOSING.
ACME covenants and agrees that, from the date of this Agreement to
and including the Closing, it will take, or refrain from taking, the following
actions:
5.1. REPRESENTATION AND WARRANTIES. ACME shall give notice to the
Members promptly (and in any event within five (5) business days) upon the
occurrence of, or upon becoming aware of the impending or threatened occurrence
of, any event that would cause or constitute a material breach of any of the
representations and warranties of ACME in this Agreement.
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5.2. APPLICATION FOR COMMISSION CONSENT. ACME will diligently take,
or cooperate in the taking of, all steps necessary and appropriate to expedite
the preparation of the Application and its prosecution to a favorable
conclusion. ACME will promptly provide the Members with a copy of any pleading,
order, or other document served on it relating to the Application. ACME will use
commercially reasonable efforts and otherwise cooperate with the Members in
responding to any information requested by the FCC related to the Application or
this Agreement, in making any amendment to this Agreement requested by the FCC
which does not adversely affect ACME in a material manner, and in defending
against any petition, complaint, and other objection which may be filed against
the Application.
5.3. CONFIDENTIAL INFORMATION. If the transactions contemplated in
this Agreement are not consummated for any reason, ACME shall not disclose to
third parties any information designated as confidential and received from the
Members or its agents in the course of investigating, negotiating, and
performing the transactions contemplated by this Agreement: provided, however,
that no information shall be deemed to be confidential that (1) becomes publicly
known or available other than through disclosure by ACME; (2) is rightfully
received by ACME from a third party; or (3) is independently developed by ACME.
All originals of material provided by the Members to ACME or its agents shall be
returned to the Members and all copies thereof destroyed.
5.4. OFFERING MATERIALS. ACME will provide to the Members true and
complete copies of all private placement memoranda and offering documents used
by ACME in connection with any financings or securities offerings after the date
hereof. Such materials and documents will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein or in this Agreement, in the light
of the circumstances under which they were made, not misleading.
5.5. CONSUMMATION OF AGREEMENT. ACME shall fulfill and perform in
all material respects all conditions and obligations to be fulfilled and
performed by ACME under this Agreement and make every reasonable effort to cause
the transactions contemplated by this Agreement to be fully carried out.
5.6. NOTICE OF PROCEEDINGS. ACME will promptly (and in any event
within five (5) business days) notify the Members upon becoming aware of any
actual or threatened claim, dispute, arbitration, litigation, complaint,
judgment, order, decree, action or proceeding relating to ACME, or the
consummation of this Agreement or any transaction contemplated herein.
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ARTICLE 6. CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE MEMBERS TO CLOSE.
The obligation of the Members to consummate the transactions under
this Agreement is subject to the fulfillment of the following conditions prior
to or at the Closing:
6.1. REPRESENTATIONS, WARRANTIES, COVENANTS.
6.1.1. ACME'S REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of ACME contained in this Agreement shall have
been true and accurate in all material respects as of the date when made and as
of the Closing Date;
6.1.2. ACME'S PERFORMANCE UNDER AGREEMENT. ACME shall have
performed and complied in all material respects with each and every covenant and
agreement required by this Agreement to be performed or complied with by it
prior to or at the Closing;
6.1.3. ACME'S DELIVERIES. ACME shall have delivered to the
Members a certificate executed by a managing member of ACME, dated the Closing
Date, certifying to the fulfillment of the conditions set forth in Sections
6.1.1. and 6.1.2 and any documents executed by ACME sufficient to convey the
Ownership Interest to the Members upon the Members' satisfactions of their
obligations under this Agreement.
6.2. PROCEEDINGS.
6.2.1. ABSENCE OF LITIGATION. No action or proceeding shall
be pending or have been instituted before any court or governmental body to
restrain or prohibit, or to obtain substantial damages in respect of, the
consummation of this Agreement that, in the reasonable opinion of the Members,
may reasonably be expected to result in the issuance of a preliminary or
permanent injunction against such consummation or otherwise result in a decision
materially adverse to the Members.
6.2.2. NOTICE OF INVESTIGATION. Neither of the parties to
this Agreement shall have received written notice from any governmental body of
(1) its intention to institute any action or proceeding to restrain or enjoin or
nullify this Agreement or the transactions contemplated hereby, or to commence
any investigation (other than a routine letter of inquiry, including a routine
Civil Investigative Demand) into the consummation of this Agreement or (2) the
actual commencement of such an investigation.
6.3. FCC AND FTC APPROVAL. The FCC approval contemplated by this
Agreement shall have been granted without any conditions materially adverse to
Seller; and (in a case where filings are deemed necessary under the HSR Act),
expiration or early termination of the waiting period under such Act has
occurred.
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6.4. LEGAL OPINION. The Members shall have received an opinion from
ACME's counsel in the form annexed hereto as EXHIBIT F.
6.5. ISSUANCE OF INTERESTS. The Members shall have been issued the
Ownership Interest.
6.6. SIGNING OF MANAGEMENT AND OPTION AGREEMENTS. The MA and the
Option Agreement referenced above shall be executed, and all payments and other
performance due thereunder at execution shall be paid or performed,
simultaneously with Closing hereof.
6.7. No Material Adverse Change. Between the date of this Agreement
and Closing, none of ACME's business, operations or financial condition shall
have incurred or otherwise be subject to any material adverse change. For
purposes hereof, a change shall be material and adverse only if it materially
impairs the ability of ACME to carry out its business plan.
ARTICLE 7. CONDITIONS PRECEDENT TO
OBLIGATIONS OF ACME TO CLOSE.
The obligation of ACME to consummate the transactions under this
Agreement is subject to the fulfillment of the following conditions prior to or
at the Closing:
7.1. REPRESENTATIONS, WARRANTIES, COVENANTS.
7.1.1. THE MEMBERS' REPRESENTATIONS AND WARRANTIES. Each of
the representations and warranties of RBSLC and the Members contained in this
Agreement shall have been true and accurate in all material respects as of the
date when made and as of the Closing Date.
7.1.2 THE MEMBERS' PERFORMANCE UNDER AGREEMENT. RBSLC and the
Members shall have performed and complied in all material respects with each and
every covenant and agreement required by this Agreement to be performed or
complied with by them prior to or at the Closing.
7.1.3. THE MEMBERS' DELIVERIES. The Members shall have
delivered to ACME (a) certificates executed by the Members, dated the Closing
Date, certifying to the fulfillment of the conditions set forth in Sections
7.1.1 and 7.1.2, and (b) documents executed by the Members sufficient to convey
the Membership Interest to ACME upon ACME's satisfaction of its obligations
underthis Agreement.
7.2. PROCEEDINGS.
7.2.1. ABSENCE OF LITIGATION. No action or proceeding shall
be pending or have been instituted before any court or governmental body to
restrain or prohibit, or to obtain substantial damages in respect of, the
consummation of this
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Agreement that, in the reasonable opinion of ACME, may reasonably be expected to
result in the issuance of a preliminary or permanent injunction against such
consummation or otherwise result in a decision materially adverse to ACME.
7.2.2. ABSENCE OF INVESTIGATION. Neither of the parties to
this Agreement shall have received written notice from any governmental body of
(1) its intention to institute any action or proceeding to restrain or enjoin or
nullify this Agreement or the transactions contemplated hereby, or to commence
any investigation (other than a routine letter of inquiry, including a routine
Civil Investigative Demand) into the consummation of this Agreement or (2) the
actual commencement of such an investigation.
7.3. FCC AND FTC APPROVAL. The FCC approval contemplated by this
Agreement shall have been granted without any conditions materially adverse to
ACME and shall have become a Final Order: provided, that the ACME shall have the
unilateral right to waive the requirement that the Order become a Final Order ;
and (in a case where filings are deemed necessary under the HSR Act), expiration
or early termination of the waiting period under such Act has occurred.
7.4. LEGAL OPINION. ACME shall have received an opinion from the
Members' counsel in the form annexed hereto as EXHIBIT G.
7.5. ENVIRONMENTAL AUDITS. Within thirty (30) days of the execution
of this Agreement, ACME may initiate, at ACME's expense, a Phase 1, and, if ACME
deems it appropriate or necessary, a Phase 2 environmental audit of RBSLC's
assets conducted by an environmental firm licensed in the State of Utah (the
"Environmental Audits"). If the Environmental Audits reveal a condition of
material non-compliance with any Environmental Law, then, in that event, RBSLC
or the Members shall cure or remedy the condition of material non-compliance
prior to Closing. If RBSLC or the Members are unwilling or unable to cure or
remediate the condition of material non-compliance prior to Closing, then, in
that event, ACME may elect to (1) accept the Ownership Interest and reduce the
Purchase Price by an amount mutually agreed as sufficient to cure or remediate
the material non-compliance or (2) terminate this Agreement upon twenty (20)
days' prior written notice to the Members without further liability.
7.6. MODIFICATION AND EXTENSION OF CP. The FCC shall grant RBSLC's
pending application to modify the CP, and shall extend the expiration date of
the CP to a date at least six (6) months after the date of the grant of such
modification.
7.7. BUILDING LEASES. The Members shall cause third parties which
they control to execute leases in the form of EXHIBITS H AND I annexed hereto
providing RBSLC with the right to lease premises for studio and transmission
facilities.
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7.8. NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement
and the Closing, none of the Station's business, operations, or financial
condition shall have incurred or otherwise be subject to a material adverse
change.
7.9. SIGNING OF MANAGEMENT AND OPTION AGREEMENTS. The MA and the
Option Agreement referenced above shall be executed, and all payments and other
performance due thereunder at execution shall be paid or performed,
simultaneously with Closing hereof.
ARTICLE 8. INDEMNIFICATION.
8.1. SURVIVAL. The several representations, warranties, covenants,
and agreements of the Members and ACME contained in or made pursuant to this
Agreement shall be deemed to have been made on and as of the Closing, shall
survive the Closing, and shall remain operative and in full force and effect
until the earlier of (1) twelve (12) months after the closing under the Purchase
Agreement (as defined in the Option Agreement), and (2) thirty (30) months after
issuance by the FCC of one or more licenses to cover the CP.
8.2. INDEMNIFICATION OF ACME. The Members shall indemnify, defend,
and hold ACME harmless from and against any and all damages, claims, losses,
expenses, costs, obligations, and liabilities including, without limiting the
generality of the foregoing, liabilities for reasonable attorneys' fees ("Loss
and Expense"), suffered, directly or indirectly, by ACME after the Closing Date
by reason of, or arising out of, (1) any material breach of a representation or
warranty made by RBSLC or the Members pursuant to this Agreement, or (2) any
material failure by RBSLC or the Members to perform or fulfill any of its
covenants or agreements set forth in this Agreement.
8.3. INDEMNIFICATION OF THE MEMBERS. ACME shall indemnify, defend
and hold the Members harmless from and against any and all Loss and Expense
suffered, directly or indirectly, by the Members after the Closing Date by
reason of, or arising out of, (1) any material breach of a representation or
warranty made by ACME pursuant to this Agreement or (2) any material failure by
ACME to perform or fulfill any of its covenants or agreements set forth in this
Agreement.
8.4. NOTICE OF CLAIM. If the Members or ACME believes that any Loss and
Expense has been suffered or incurred, such party shall notify the other
promptly in writing describing such Loss and Expense, the amount thereof, if
known, and the method of computation of such Loss and Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such Loss and Expense shall have occurred. If any
action at law or suit in equity is instituted by a third party with respect to
which any of the parties intends to claim any liability or expense as Loss and
Expense under this Article 8, such party shall promptly notify the indemnifying
party of such action or suit. In no event, however, may the indemnifying party
avoid or limit its obligations under this Article 8 by reason of delay unless
such delay has materially
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<PAGE>
prejudiced the indemnifying party, and then the indemnifying party's obligations
shall be reduced only to the extent of such prejudice.
8.5. DEFENSE OF THIRD PARTY CLAIMS. The indemnifying party under
this Article 8 shall have the right to conduct and control, through counsel of
that party's own choosing, any third party claim, action, or suit at the
indemnifying party's sole cost and expense, but the indemnified party may, at
that latter party's election, participate in the defense of any such claim,
action, or suit at that party's sole cost and expense: provided, that if the
indemnifying party shall fail to defend any such claim, action, or suit, then
the indemnified party may defend, through counsel of that party's own choosing,
such claim, action, or suit and settle such claim, action, or suit, and recover
from the indemnifying party the amount of such settlement or of any judgment and
the costs and expenses of such defense; and provided further, that the
indemnifying party shall be given at least (15) days prior notice of the terms
of any proposed settlement thereof so that the indemnifying party may then
undertake and/or resume the defense against the claim. The indemnifying party
shall not compromise or settle any third party claim, action, or suit without
the prior written consent of the indemnified party, which consent will not be
unreasonably withheld or delayed: provided, that any such compromise or
settlement shall include a release for the Indemnified Party of all liability
with respect to the matter being compromised or settled.
8.6. LIMITATIONS THRESHOLD. No party shall be required to indemnify
any other party under this Article 8 unless written notice of a claim under this
Article 8 was received by the party within the pertinent survival period
specified in Section 8.1. No party shall be required to indemnify any other
party until the indemnified party's claims exceed $25,000 in the aggregate;
provided, that in case such amount is exceeded, the indemnified party's rights
hereunder shall include the right to recover such initial $25,000 of claims.
ARTICLE 9. MISCELLANEOUS.
9.1. TERMINATION OF AGREEMENT. This Agreement may be terminated
immediately on or prior to the Closing under one or more of the following
circumstances:
9.1.1. by the mutual consent of the parties hereto;
9.1.2. by the Members so long as such party is not in
material default hereunder, if any of the conditions provided in Article 6
hereof have not been met by the time required and have not been waived;
9.1.3. by ACME so long as such party is not in material
default hereunder, if any of the conditions provided in Article 7 hereof have
not been met by the time required and have not been waived; or
9.1.4. by any party hereto, if the FCC denies the
Application.
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9.1.5. by any party hereto if Closing has not occurred by
close of business June 1, 1998, so long as such party is not in material default
hereunder.
9.2. LIABILITIES UPON TERMINATION.
9.2.1. RBSLC AND THE MEMBERS' REMEDIES. If the parties hereto
shall fail to consummate this Agreement on the Closing Date due to ACME's
material breach of any representation, warranty, covenant or condition
hereunder, and RBSLC and the Members are not at that time in breach of any
material representation, warranty, covenant or condition hereunder, then RBSLC
and the Members would suffer direct and substantial damages that cannot be
determined with reasonable certainty. In view of the expense and loss which
would be incurred by the Members in such event, RBSLC and the Members shall be
entitled to retain the Escrow Deposit as liquidated damages and as their
exclusive remedy.
9.2.2. ACME'S REMEDIES. If the parties hereto shall fail to
consummate this Agreement on the Closing Date due to RBSLC's or the Members'
material breach of any representation, warranty, covenant or condition
hereunder, and ACME is not at that time in material breach of any
representation, warranty, covenant or condition hereunder, then ACME shall be
entitled to specific performance of the terms of this Agreement and of the
Members' obligation to consummate the transaction contemplated hereby. If any
action is brought by ACME to enforce this Agreement by specific performance,
RBSLC and the Members shall waive the defense that ACME has an adequate remedy
at law.
9.2.3. NOTICE OF BREACH. In the event that any party to this
Agreement believes that the other party is in material breach of its
representations, warranties or obligations hereunder, such party shall give
prompt written notice thereof, detailing the nature of the breach and the steps
necessary to cure such breach. For purposes of this Agreement, no "breach" shall
be deemed to have occurred hereunder unless the party alleged to be in breach
has been afforded a cure period of at least twenty (20) business days following
such notice within which to cure such breach.
9.2.4. SURVIVAL OF CONFIDENTIALITY OBLIGATIONS.
Notwithstanding any other provision of this Agreement, the provisions of
Sections 4.7, and 5.3 shall survive any termination of this Agreement.
9.3. EXPENSES. Except as otherwise provided herein, each party
hereto shall be solely responsible for all fees and expenses each party incurs
in connection with the transactions contemplated by this Agreement, including,
without limitation, legal fees incurred in connection herewith: provided, that
the FCC filing fees shall be paid by the Members.
9.4. ASSIGNMENTS. The Members may not assign their rights or
obligations under this Agreement without the prior written consent of ACME. ACME
may assign its
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rights under this Agreement without the consent of the Members to any party
which (1) is at least majority owned by ACME, or (2) controls ACME or (3) is
controlled by the same parties who control ACME, provided, that such assignment
shall not (1) unreasonably delay the grant by FCC of Consent as provided herein
or (2) relieve ACME of any liability hereunder.
9.5. FURTHER ASSURANCES. From time to time prior to, at and after
the Closing, each party hereto will execute all such instruments and take all
such actions any other party shall reasonably request in connection with
effectuating the intent and purpose of this Agreement and all transactions
contemplated by this Agreement, including, without limitation, the execution and
delivery of any and all confirmatory and other instruments in addition to those
to be delivered at the Closing.
9.6. NOTICES. All notices, demands, waivers and other communications
authorized or required by this Agreement shall be in writing, shall be delivered
by personal delivery, by United States certified mail-return receipt requested
(postage prepaid), or by overnight delivery service (charges prepaid), and shall
be deemed to have been given or made when personally delivered, within five (5)
days after being deposited in the mail, postage prepaid, or within one (1) day
after being delivered to an overnight delivery service, charges prepaid. Notices
shall be delivered to each party at the following addresses (or at such other
address as any party may designate in writing to the other parties):
9.6.1. If to the Members --
Mr. Michael V. Roberts
c/o Roberts Broadcasting of Salt Lake City, L.L.C.
Suite 300
1400 No. Kingshighway
St. Louis, MO 63113
with a copy to (but which shall not constitute
notice to the Members):
Dow, Lohnes & Albertston, P.L.L.C.
1200 New Hampshire Avenue, NW
Washington, DC 20036
Attention: John R. Feore, Jr., Esquire
and
Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square, Suite 2600
St. Louis, MO 63102
Attention: Joseph S. von Kaenel, Esquire
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If to ACME --
ACME Television Holdings, L.L.C.
7125 Bluffstream Ct.
Columbus, OH 43235
Attention: Douglas Gealy, President
with a copy to (but which shall not constitute
notice to ACME):
Dickstein Shapiro Morin & Oshinsky L.L.P.
2101 L Street, N.W.
Washington, DC 20037
Attention: Lewis J. Paper, Esquire
9.7. LAW GOVERNING. This Agreement shall be governed by, construed,
and enforced in accordance with the laws of the State of Delaware without regard
to conflict of laws provisions.
9.8. WAIVER OF PROVISIONS. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time or times to require performance of any provision of this Agreement
shall not affect the exercise of a party's rights at a later date. No waiver by
any party of any condition or the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
9.9. COUNTERPARTS. This Agreement may be executed in counterparts,
and all counterparts so executed shall collectively constitute one agreement,
binding on all of the parties hereto, notwithstanding that all the parties are
not signatory to the original or the same counterpart.
9.10. REIMBURSEMENT OF LEGAL EXPENSES. If a formal legal proceeding
is instituted by a party to enforce that party's rights under this Agreement,
the party prevailing in the proceeding shall be reimbursed by the other party
for all reasonable costs incurred thereby, including but not limited to
reasonable attorneys' fees.
9.11. PUBLICITY. Except as required by applicable law or with the
other party's express written consent, which shall not be unreasonably withheld,
no party to this Agreement nor any affiliate of any party shall issue any press
release or make any public statement (oral or written) regarding the
transactions contemplated by this Agreement.
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9.12. ENTIRE AGREEMENT. This Agreement and the documents referenced
herein constitute the entire agreement among the parties in respect to the
subject matter hereof, supersedes and cancels any and all prior or
contemporaneous agreements and understandings between them, and may not be
amended except in a writing signed by the parties.
ARTICLE 10. RULES OF CONSTRUCTION
10.1. DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
10.1.1."CLOSING" shall have the meaning set out in Section
1.6.1 hereof.
10.1.2."CONTRACTS" shall have the meaning set out in Section
2.6 hereof.
10.1.3."CP" shall have the meaning set out in Recital 1
hereof.
10.1.4."ENVIRONMENTAL LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss. 9601 ET SEQ., the Substances Control Act, as amended, 15 U.S.C. 2601
ET SEQ., the Resource Conservation and Recovery Act of 1976, as amended, U.S.C.
ss. 6901 ET SEQ., the Clean Water Act, as amended, 42 U.S.C. ss. 1251 ET SEQ.,
the Clean Air Act, as amended, 42 U.S.C. ss. 7401 ET SEQ., any other federal,
state or local law relating to the environment, and any regulations or policies
adopted pursuant to such laws.
10.1.5."ESCROW DEPOSIT" shall have the meaning set out in
Section 1.3 hereof.
10.1.6."FCC" means the Federal Communications Commission.
10.1.7."BALANCE SHEET" shall have the meaning set out in
Section 2.8 hereof.
10.1.8."HAZARDOUS WASTE" means any hazardous or toxic waste,
substance, material or pollutant.
10.1.9."IRS" means the Internal Revenue Service.
10.1.10"LITIGATION" means any litigation, arbitration,
dispute, proceeding or investigation.
10.1.11. "MA" shall have the meaning set out in Recital 5
hereof.
10.1.12. "MEMBERSHIP INTEREST" shall have the meaning set out
in Recital 2 hereof.
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10.1.13. "OPTION AGREEMENT" shall have the meaning set out in
Recital 3 hereof.
10.1.14. "OWNERSHIP INTEREST" shall have the meaning set out
in Section 1.2 hereof.
10.1.15. "PAYMENTS" means arrearages of wages or Trust or
benefit payments.
10.1.16. "REAL ESTATE LEASES" shall have the meaning set out
in Recital 1 hereof.
10.1.17. "STATION" shall have the meaning set out in Recital
1 hereof.
10.1.18. "TRUSTS" means pension, profit-sharing and savings
plans and trusts, including without limitation, 401-K plans established by RBSLC
for its employees.
10.1.19. OTHER DEFINITIONS. Other capitalized terms used in
this Agreement shall have the meanings ascribed to them herein.
10.2. NUMBER AND GENDER. Whenever the context so requires, words
used in the singular shall be construed to mean or include the plural and vice
versa, and pronouns of any gender shall be construed to mean or include any
other gender or genders.
10.3. HEADINGS AND CROSS-REFERENCES. Headings of the sections have
been included for convenience of reference only and shall in no way limit or
affect the meaning or interpretation of the specific provisions of this
Agreement. All cross-references to sections herein shall mean the section of
this Agreement unless otherwise stated or clearly required by the context. Words
such as "herein" and "hereof" shall be deemed to refer to this Agreement as a
whole and not to any particular provision of this Agreement unless otherwise
stated or clearly required by the context. The term "including" means "including
without limitation."
10.4. COMPUTATION OF TIME. Whenever any time period provided for in
this Agreement is measured in "business days," there shall be excluded from such
time period each day that is a Saturday, Sunday, recognized federal legal
holiday, or other day on which the FCC's offices are closed and are not reopened
prior to 5:30 p.m. Washington, D.C. time. In all other cases all days shall be
counted.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year written above.
The Members:
/s/Michael V. Roberts
--------------------------------------------
Michael V. Roberts, individually
/s/Steven C. Roberts
--------------------------------------------
Steven C. Roberts, individually
RBSLC: ROBERTS BROADCASTING OF SALT LAKE CITY, L.L.C.
By:/s/Michael V. Roberts
--------------------------------------------
Michael V. Roberts, Managing Member
ACME: ACME TELEVISION HOLDINGS, L.L.C.
By:/s/Douglas E. Gealy
--------------------------------------------
Douglas E. Gealy, President
25
<PAGE>
The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrants.
A copy of any omitted Exhibit or Schedule will be povided to the Securities
and Exchange Commission upon request.
<PAGE>
Exhibit A - OPTION AGREEMENT
Exhibit B - FORM OF PROMISSORY NOTE
Exhibit C - ESCROW AGREEMENT
Exhibit D - RBSLC OPERATING AGREEMENT
Exhibit E - ACME OPERATING AGREEMENT
Exhibit F - FORM OF OPINION OF ACME'S COUNSEL
Exhibit G - FORM OF OPINION OF MEMBER'S COUNSEL
Exhibit H - STUDIO LEASE
Exhibit I - TRANSMISSION FACILITY LEASE
Schedule 1 - LICENSES AND PERMITS OF RBSLC
Schedule 2 - UNFILLED OR UNPAID TAXES, ETC.
Schedule 3 - MATERIAL CONTRACTS OF RBSLC
Schedule 4 - BALANCE SHEET OF RBSLC
Schedule 5 - MATERIAL BREACHES AND VIOLATIONS BY RBSLC
Schedule 6 - REAL ESTATE LEASES OF RBSLC
SCHEDULE 7 - Membership Interests of RBSLC
Schedule 8 - MEMBERSHIP INTEREST, CONSIDERATION, OPTIONS ETC. OF ACME
Schedule 9 - ACME MANAGING MEMBERS AND OTHER MANAGEMENT AND EXECUTIVE
PERSONNEL
27
ASSET PURCHASE AGREEMENT
between
MINORITY BROADCASTERS OF SANTA FE, INC.
and
ACME TELEVISION LICENSES OF NEW MEXICO, L.L.C.
for
KAOU-TV
SANTA FE, NEW MEXICO
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is executed as of
August 22, 1997 by and between MINORITY BROADCASTERS OF SANTA FE, INC., a
Delaware corporation ("Seller"), and ACME TELEVISION LICENSES OF NEW MEXICO,
L.L.C., a Delaware limited liability company ("Buyer").
RECITALS:
1. Seller holds a construction permit (the "CP") from the FCC to
build a new television station under the call sign of KAOU-TV in Santa Fe, New
Mexico (the "Station").
2. Seller desires to sell, assign, and transfer, to the fullest
extent permitted by law, and Buyer desires to acquire to the fullest extent
permitted by law, the CP and all the assets which are or will be used or useful
in the construction or operation of the Station or in respect to the CP, all in
accordance with the terms and conditions herein.
In consideration of the foregoing and the mutual promises and
covenants contained herein, the parties hereby agree as follows.
PROVISIONS
ARTICLE I. EXCHANGE OF CONSIDERATION
1.1 CONSIDERATION CONVEYED BY SELLER. At the Closing, as defined
herein, Seller shall provide Buyer with the following consideration:
1.1.1. INCLUDED ASSETS. Subject to the terms and conditions of
this Agreement, Seller shall, to the fullest extent permitted by law, assign,
convey, transfer, and deliver to Buyer, and Buyer shall, to the fullest extent
permitted by law, acquire from Seller free and clear of all debts, liens,
claims, financing leases, security interests and encumbrances of any kind
whatsoever (except as permitted herein), all of Seller's right, title and
interest in and to the CP and all other assets which are or will be useful in
the construction or the operation of the Station (collectively the "Assets")
except the assets described in Section 1.1.2. of this Agreement. The Assets
shall include, without limiting the generality of the foregoing, the following
items:
(a) CP AND OTHER LICENSES. The CP and all other
licenses and authorizations issued by the FCC or any other governmental
authority, true copies of which are included in SCHEDULE 1 to this Agreement,
together with any and all applications pending before the FCC or any other
governmental authority with respect to renewals, extensions, or modifications
thereof.
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(b) CONTRACTS. All rights in and under certain
contracts, agreements, and leases of any kind (except those relating to real
property) relating to the operation of the Station which Buyer has agreed to
assume, whether in existence as of the date of this Agreement or entered into or
acquired between the date hereof and the Closing Date, as defined herein, in the
ordinary course of business (all of the foregoing collectively referred to
herein as the "Contracts"): provided, that SCHEDULE 2 includes true copies of
all written Contracts as well as accurate descriptions of all oral Contracts to
be assumed by Buyer; provided further, that, except as provided herein, Buyer
shall not assume any Contract not identified in Schedule 2; provided further,
that no Contract created subsequent to the date of this Agreement shall be
assigned to Buyer without Buyer's written approval.
(c) LEASES. All leases relating to real property (the
"Real Estate Leases"), true copies of which or, in the case of oral agreements,
summaries of which are annexed hereto in SCHEDULE 3.
(d) MARKETING ITEMS. All trademarks, call signs,
service marks, franchises, patents, trade names, jingles, fictitious names,
slogans, and logotypes useful or intended for use in connection with the
operation of the Station.
(e) RECORDS. Any and all files, program logs, public
inspection files, and other records that relate to the CP or the operation of
the Station in the possession of Seller on the Closing Date, except Seller's
records that pertain to the organization of Seller.
(f) GOODWILL. All of Seller's goodwill in the CP and
the Station.
(g) CLAIMS. Any and all claims of Seller against
third parties which accrue prior to the Closing Date.
1.1.2. EXCLUDED ASSETS. Notwithstanding the foregoing, there
shall be excluded from the Assets and retained by Seller, to the extent in
existence on the Closing Date, the following assets (the "Excluded Assets"):
(a) CASH AND INVESTMENTS. All cash on hand or in bank
accounts and all cash equivalents and similar investments of Seller, such as
certificates of deposit.
(b) PERSONAL PROPERTY. All tangible personal property.
(c) SECURITIES. Any and all securities owned or held
by Seller.
(d) CONTRACTS. Programming contracts as well as all
other agreements, leases, and contracts not assumed by Buyer in accordance with
Section 1.1.1.(b) and (c) of this Agreement.
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<PAGE>
(e) MISCELLANEOUS ASSETS. Pension, profit-sharing, and
savings plans and trusts and any assets thereof.
(f) ORGANIZATIONAL DOCUMENTS. Seller's books and original
records that pertain to the organization, existence or capitalization of
Seller.
1.1.3. SELLER'S RETAINED LIABILITIES. The Assets shall be sold and
conveyed to Buyer free and clear of all debts, liens, claims, financing leases,
security interests and encumbrances or liabilities of any kind or nature except
for liens for current taxes not yet due and payable (the "Permitted
Encumbrances"). Unless reflected in a document executed by Buyer, Buyer shall
not assume or be liable for (a) any programming contract or other contract,
agreement or lease not specifically assumed by Buyer hereunder; (b) any
obligation of Seller arising out of any contract of insurance, any pension,
retirement or profit-sharing plan, or any trust or other benefit plan; (c) any
litigation, proceeding, or claim relating to the construction or operation of
the Station prior to the Closing, regardless of whether such litigation,
proceeding, or claim is pending, threatened, or asserted before, on, or after
the Closing; or (d) any obligation (including but not limited to wages,
salaries, vacation pay, payroll taxes, COBRA coverage or severance payments) to
or for persons employed by Seller (recognizing that Buyer has no obligation to
employ any of Seller's employees).
1.2 PURCHASE PRICE. The purchase price payable for the Assets (the
"Purchase Price") shall equal the lesser of Ten Thousand Dollars ($10,000) or
the aggregate amount approved by the FCC as having been legitimately and
prudently expended by Seller solely for preparing, filing and advocating the
grant of the CP, and for other steps reasonably necessary toward placing the
Station in operation and itemized in SCHEDULE 4 annexed hereto. Except as
otherwise provided herein, Buyer shall pay Seller the Purchase Price at the
Closing by wire transfer of immediately available federal funds pursuant to
instructions from Seller.
1.3 ALLOCATION. The Purchase Price shall be allocated entirely to
the CP. Such allocation shall be incorporated in an Internal Revenue Service
("IRS") Form 8594. Each party shall be bound by such allocation in any reports,
filings or disclosures to the IRS as well as any and every other governmental
authority.
1.4 CLOSING.
1.4.1 DATE AND LOCATION. The closing of the transactions provided
for in this Agreement (the "Closing") shall be held at the offices of Dickstein
Shapiro Morin & Oshinsky LLP, 2101 L Street, N.W., Washington, D.C. 20037, or at
such other place mutually agreed to by the parties, commencing at 10:00 a.m. on
a date (the "Closing Date") selected by Buyer which shall be within ninety (90)
days after the date on which the FCC places on public notice the order (the
"Order") approving the assignment of the CP from Seller to Buyer; provided, that
the parties shall not be obligated to proceed to Closing if (1) the Order
includes conditions materially adverse to Buyer or Seller; or (2) the
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conditions precedent to Closing have not been satisfied or waived; and, provided
further, that Buyer at its option may require the Closing to occur only after
the Order has become a "Final Order" (which, for purposes of this Agreement,
means that the Order has not been stayed, is not subject to reconsideration or
review by the FCC or a court of competent jurisdiction, and the time to
institute such administrative or judicial review has expired).
1.4.2 EXCHANGE OF DOCUMENTS. At the Closing, each party shall execute
and deliver to the other party the other items specified herein as well as any
additional document(s) and item(s) reasonably necessary for the consummation of
the transactions contemplated herein. Such additional documents shall be
reasonably satisfactory to the other party as to both form and substance.
1.5 TIMING. Time is of the essence to implementation of this
Agreement. It is the intention of the parties that the Closing of the
transactions contemplated herein occur not later than one (1) year from the date
of this Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that the following matters are
true and correct as of the date of this Agreement:
2.1 CORPORATE STATUS. Seller is a corporation duly organized, validly
existing, and in good standing in the State of Delaware. Seller has the power to
carry on the business of the Station as it is now being conducted, to own, hold
and use the Assets, and to enter into and consummate the transactions
contemplated by this Agreement.
2.2 LICENSES. Seller is the holder of the CP and other authorizations,
copies of which are attached as SCHEDULE 1 to this Agreement, all of which are
in full force and effect. The CP and the authorizations from the FAA constitute
all of the authorizations required under the Communications Act of 1934, as
amended (the "Act"), and the current rules, regulations, and policies of the FCC
for the construction of the Station as currently proposed. The CP authorizes the
construction of the Station prior to February 10, 1999. The Seller has filed
with the FCC all material applications, reports and other disclosures required
by the Act and by FCC rules and policies. As of the date of this Agreement,
there is not pending or, to the best of Seller's knowledge, threatened, any
petition, complaint, objection (whether formal or informal), order to show
cause, investigation, or other action by or before the FCC or any court to
revoke, cancel, rescind, modify, or refuse to renew the CP, or which would
otherwise have a material adverse impact on the construction of the Station.
Other than proceedings of general applicability to the broadcasting industry,
there is not now pending or, to the best of Seller's knowledge, threatened, any
other petition, complaint, objection (whether formal or informal),
investigation, order to show cause, notice of violation, notice of apparent
liability, or notice of forfeiture or other proceeding by or before the FCC or
any court against Seller with respect to any matter affecting the CP or the
Station. The Station is
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being constructed in material compliance with the CP, the Act, and the rules,
regulations and policies of the FCC.
2.3 TITLE. On the Closing Date, the Assets will be in each case free
and clear of all debts, claims, liabilities, security interests, mortgages,
pledges, liens, conditional sales agreements, leases, encumbrances, or charges
of any kind or nature whatsoever except for the Permitted Encumbrances.
2.4 EMPLOYEES. Seller is not a party to any pending or, to its
knowledge, threatened labor dispute affecting the Station. Seller (1) has at no
time had any employees, (2) is not in breach of any federal, state, or local
laws, ordinances, rules, regulations or requirements relating to employment or
labor, including but not limited to provisions relative to wages, hours,
collective bargaining, pension, profit-sharing or savings plans and trusts
including, without limitation, 401-K plans ("Trusts") and payment of Social
Security, unemployment and withholding taxes, (3) is not liable for any arrears
of wages or Trusts or benefit payments ("Payments") or any taxes or penalties
for failure to comply with any of the foregoing. Seller will hold Buyer harmless
from and against (1) any liability for any taxes or Payments or penalties which
have not been paid or made for employment of persons by Seller, (2) any claims
of discrimination or wrongful termination or hiring, including, without
limitation, violations of federal or state law relating to civil rights,
regulations of the United States Equal Employment Opportunity Commission, or the
Americans With Disabilities Act of 1990, and (4) all claims for severance
(recognizing that Seller has no employees). There are no collective bargaining
agreements, or negotiations for the same, in existence which affect the Station.
2.5 TAXES. Seller has duly and timely filed all required federal,
state and local tax returns and paid all taxes, interest and penalties due with
respect to Seller's interest in the Assets or its construction of the Station,
has sought and obtained extensions of time to file such and pay same within the
time provided therefor, or is challenging such taxes in good faith in accordance
with applicable procedures (and has in place adequate financial reserves to
satisfy any adverse decision). Between the date hereof and the Closing Date
Seller shall duly and timely file all such required returns and pay all such
taxes, interest and penalties or obtain such extensions within the time provided
therefor, unless such taxes are being challenged in good faith in accordance
with applicable procedures (and has in place adequate financial reserves to
satisfy any adverse decision). Seller shall indemnify, defend, save and hold
Buyer harmless from and against all claims, obligations and liabilities for all
taxes, interest and penalties attributable to Seller's ownership of the CP or
construction of the Station and the ownership or holding of the other Assets
prior to the Closing Date.
2.6 CONTRACTS. Schedule 2 hereto includes true copies of all written
Contracts and describes the material terms of all oral Contracts to which Seller
is a party as of the date of this Agreement and which will be assumed by Buyer.
Those Contracts requiring a third party's consent to assignment are identified
by an asterisk in Schedule 2. Seller has complied in all material respects with
all Contracts and is not in default beyond any applicable grace periods under
any of such Contracts. To Seller's knowledge, no other
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contracting party is in material default under any of the Contracts. All
Contracts are in full force and effect and are valid, binding and enforceable in
accordance with their respective terms, except as enforceability may be limited
by laws affecting creditor rights or equitable principles generally.
2.7 LITIGATION. Seller has not been operating under and is not subject
to, or in default with respect to, any order, judgment, writ, injunction, or
decree of any court or any federal, state, municipal, or other governmental
department, commission, board, agency, or instrumentality, foreign or domestic,
which has had or could reasonably be expected to have a material adverse effect
on the Assets or the manner in which Seller currently operates the Station.
There is no Litigation pending by or against, or, to the best of Seller's
knowledge, threatened against the Station or Seller which relates to or affects
the Assets or the business of the Station or which materially interferes or
could reasonably be expected materially to interfere with Seller's (1) right,
title to, or interest in the Assets, (2) construction of the Station or (3)
ability to transfer the Assets to Buyer free of such Litigation.
2.8 COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 5 annexed
hereto, Seller is in material compliance with all applicable laws, rules,
regulations, policies and orders of the federal, state, and local governments
with respect to the CP. The present uses by Seller of the Assets do not violate
any such laws, regulations, policies or orders in any material respect, and
there is no investigation or proceeding regarding the foregoing which is
currently pending or, to Seller's knowledge, threatened.
2.9 NO DEFAULTS. Neither the execution and delivery by Seller of this
Agreement nor the consummation by Seller of the transactions contemplated herein
are events that, by themselves or with the giving of notice or the passage of
time or both, constitute a material violation of or will conflict with or result
in any material breach of or any default under (a) the terms, conditions, or
provisions of any arbitration award, judgment, law, order, decree, writ, or
regulation to which Seller is subject, (b) Seller's articles of incorporation or
bylaws, or (c) any agreement or instrument to which Seller is a party or by
which Seller is bound, or result in the creation of imposition of any lien,
charge, or encumbrance on any of the Assets.
2.10 BROKERS. There is no broker or finder or other person who would,
as a result of any agreement of or action taken by Seller, have any valid claim
against any of the parties to this Agreement for a commission or brokerage fee
in connection with this Agreement or the transactions contemplated herein
(except CEA, Inc., whose fee will be paid by Buyer).
2.11 SELLER ACTION. All corporate actions and proceedings necessary to
be taken by or on the part of Seller in connection with the transactions
contemplated by this Agreement and necessary to make the Agreement effective
have been duly and validly taken. This Agreement has been duly and validly
authorized, executed, and delivered by Seller and constitutes the valid and
binding agreement of Seller, enforceable in accordance
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with and subject to its respective terms, except as enforceability may be
limited by laws affecting the enforcement of creditor rights or equitable
principles generally. At the Closing, Seller will provide Buyer with certified
resolutions executed by Seller's stockholders and board of directors authorizing
the execution, delivery, and performance of this Agreement.
2.12 LEASES. All of the Real Estate Leases included in Schedule 3 have
been complied with in all material respects by Seller, and no material default
of Seller in respect to any duties or obligations required to be performed by
Seller has occurred. All such leases are valid, binding, and enforceable in
accordance with their respective terms. To Seller's knowledge, no other party to
any of the Real Estate Leases is in default thereunder, except as enforceability
may be limited by laws affecting the enforcement of creditor rights or equitable
principles generally.
2.13 INSOLVENCY. No insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
the Seller or any of the Assets is pending or, to the best of Seller's
knowledge, threatened, and Seller has not made any assignment for the benefit of
creditors, nor taken any actions with a view to, or which would constitute the
basis for, the institution of any such insolvency proceedings.
2.14 APPROVALS. No approval of any third party, governmental agency or
court is required to be obtained by Seller with regard to the assignment of the
CP and other Assets except (1) parties to certain Contracts and Real Estate
Leases being assumed by Buyer under this Agreement, and (2) the approval by the
FCC as provided herein.
2.15 BULK SALES LAW. There is no bulk sales law or other comparable
statute in New Mexico which is applicable to the transactions contemplated by
this Agreement, and Seller hereby indemnifies Buyer from any and all liability
which may be imposed on or incurred by Buyer (including reasonable attorney
fees) under such laws.
2.16 NO MATERIAL OMISSION. Seller has not failed to disclose any
material fact within its knowledge which would make any statement or
representation in this Agreement inaccurate or misleading.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller as to the truth of the
following matters as of the date of this Agreement:
3.1 STATUS. Buyer is a limited liability company duly organized,
validly existing, and in good standing in the State of Delaware, and has the
power to enter into and consummate the transactions contemplated by this
Agreement.
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3.2 MEMBERSHIP ACTION. All actions and proceedings necessary to be
taken by or on the part of Buyer in connection with the transactions
contemplated by this Agreement and necessary to make the Agreement effective
have been duly and validly taken. This Agreement has been duly and validly
authorized, executed, and delivered by Buyer and constitutes the valid and
binding agreement of Buyer, enforceable in accordance with and subject to its
terms, except as enforceability may be limited by laws affecting the enforcement
of creditors' rights or equitable principles generally. At the Closing, Buyer
will provide Seller with a certified copy of the resolutions adopted by Buyer's
Board of Advisers authorizing the execution, delivery and consummation of this
Agreement.
3.3 NO DEFAULTS. Neither the execution and delivery by Buyer of this
Agreement nor the consummation by Buyer of the transactions contemplated herein
are events that, by themselves or with the giving of notice or the passage of
time or both, constitute a material violation of or will conflict with or result
in any material breach of or any default under (a) the terms, conditions, or
provisions of any arbitration award, judgment, law, order, or regulation to
which Buyer is subject, (b) certificate of organization or operating agreement
of Buyer, or (c) any agreement or instrument to which Buyer is a party or by
which it is bound.
3.4 BROKERS. There is no broker or finder or other person who would,
as a result of any agreement of or action taken by Buyer, have any valid claim
against any of the parties to this Agreement for a commission or brokerage fee
in connection with this Agreement or the transactions contemplated herein
(except CEA, Inc., whose fee will be paid by Buyer).
3.5 LITIGATION. There is no litigation, proceeding, or investigation
of any nature pending or, to the best of Buyer's knowledge, threatened against
or affecting Buyer that would affect Buyer's ability to carry out the
transactions contemplated herein.
3.6 QUALIFICATION AS A BROADCAST LICENSEE. To the best of its
knowledge, Buyer is legally qualified under the Act and all other applicable
federal, state and local laws, rules and regulations, to acquire the Assets from
Seller. Buyer knows of no fact, and will not act in such manner from and after
the date hereof, that would, under the Act and the rules and policies of the
FCC, disqualify Buyer as an assignee of the CP or Buyer as owner and holder of
the other Assets.
3.7 NO MATERIAL OMISSION. Buyer has not failed to disclose any
material fact within its knowledge which would make any statement or
representation in this Agreement inaccurate or misleading.
ARTICLE 4. COVENANTS OF SELLER PENDING CLOSING.
Seller covenants and agrees that, from the date of this Agreement to
and including the Closing Date, subject to the provisions of this Agreement, it
will take, or refrain from taking, the following actions:
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4.1 MAINTENANCE OF STATION. Subject to the MA, Seller shall continue
to keep its books of account, records, and files in the ordinary course of
business and shall continue to construct the Station in accordance with the
terms of the CP and in material compliance with all applicable rules,
regulations, policies and laws. To that end, Seller will file with the FCC any
and all reports, applications, and disclosures as may be required by the Act or
FCC rules or policies. Seller shall maintain in full force and effect through
and including the Closing Date the existing property damage, liability, and
other insurance with respect to the Assets to cover contingencies that can
reasonably be anticipated. Prior to the Closing, Seller will not, without the
prior written consent of Buyer:
4.1.1. sell, lease, transfer, or agree to sell, lease, or
transfer any Assets without replacement thereof with an asset of equivalent
kind, condition, and value;
4.1.2. enter into any collective bargaining agreement or written
contract of employment without Buyer's prior approval, unless said contract is
subject to cancellation upon thirty (30) days notice without penalty to Buyer;
4.1.3. subject to Section 1.1.1.(b) hereof, enter into any
contract or agreement with respect to the Station or the Assets except as
provided in this Agreement;
4.1.4. enter into any lease with respect to the Station or the
Assets except leases set out in Schedule 3 hereto;
4.1.5. make, allow, or consent to any material change in the
Real Property or in any buildings, leasehold improvements, or fixtures
intended for use or useful in the operation of the Station except in the
ordinary course of business;
4.1.6. make any material change in its insurance policies ; or
4.2. ACCESS TO FACILITIES, FILES, AND RECORDS. At the reasonable
request of Buyer, Seller shall give Buyer and its representatives (1) reasonable
access during normal business hours to all facilities, property, accounts, title
papers, insurance policies, licenses, agreements, commitments, records,
machinery, fixtures, furniture, and inventories related to the Station or the
Assets, and (2) all such other information concerning the affairs of the Station
as Buyer may reasonably request.
4.3. REPRESENTATIONS AND WARRANTIES. Seller shall give notice to Buyer
promptly upon the occurrence of, or upon becoming aware of the impending or
threatened occurrence of, any event that would cause or constitute a material
breach of any of Seller's representations or warranties in this Agreement.
4.4. APPLICATION FOR FCC CONSENT. Within five (5) business days after
execution of this Agreement, Seller shall prepare and file an appropriate
application (the "Application") with the FCC requesting its written consent to
the assignment of the CP for the Station to Buyer. Seller shall diligently take,
or cooperate in the taking of, all steps necessary and appropriate to expedite
the preparation of the Application and its prosecution
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to a favorable conclusion. Seller will promptly provide Buyer with a copy of any
pleading, order, or other document served on it relating to the Application.
Seller will use its best efforts and otherwise cooperate with Buyer in
responding to any information requested by the FCC related to the Application,
in making any amendment to this Agreement requested by the FCC which does not
adversely affect Seller in a material manner, and in defending against any
petition, complaint, or objection which may be filed against the Application.
The FCC filing fees shall be divided equally between Seller and Buyer.
4.5 CONSENTS. Seller shall obtain or cause to be obtained prior to the
Closing consents to the assignment to or assumption by Buyer of all Contracts
and Real Estate Leases included in the Assets that require the consent of any
third party by reason of the transactions provided for in this Agreement.
4.6 NOTICE OF PROCEEDINGS. Seller will promptly notify Buyer (and in
any event within five [5] business days) upon becoming aware of any actual or
threatened claim, dispute, arbitration, litigation, complaint, judgment, order,
decree action or proceeding relating to Seller, the Station, the Assets, or the
consummation of this Agreement or any transaction contemplated herein.
4.7 CONFIDENTIAL INFORMATION. If the transactions contemplated in this
Agreement are not consummated for any reason, Seller shall not disclose to third
parties any information designated as confidential and received from Buyer or
its agents in the course of investigating, negotiating, and consummating the
transactions contemplated by this Agreement: provided, that no information shall
be deemed to be confidential that (1) becomes publicly known or available other
than through disclosure by Seller; (2) is rightfully received by Seller from a
third party; or (3) is independently developed by Seller. All originals of all
material provided to Seller by Buyer or its agents shall be returned to Buyer
and all copies thereof shall be destroyed.
4.8 CONSUMMATION OF AGREEMENT. Seller shall fulfill and perform all
conditions and obligations to be fulfilled and performed by Seller under this
Agreement and make every reasonable effort to cause the transactions
contemplated by this Agreement to be fully carried out.
4.9 COMPLIANCE WITH LAW. Seller will comply in all material respects
with all applicable federal, state and local laws, ordinances and regulations,
including but not limited to the Act and the rules, regulations and policies of
the FCC.
4.10 PERFORMANCE UNDER CONTRACTS AND LEASES. Seller will perform in
all material respects its obligations under, and keep in good standing, all
Contracts, and Real Estate Leases to which Seller is a party and which will be
assigned to Buyer at the Closing pursuant to this Agreement.
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ARTICLE 5. COVENANTS OF BUYER PENDING THE CLOSING.
Buyer covenants and agrees that, from the date of this Agreement to
and including the Closing, it will take, or refrain from taking, the following
actions:
5.1. REPRESENTATION AND WARRANTIES. Buyer shall give notice to Seller
promptly upon the occurrence of, or upon becoming aware of the impending or
threatened occurrence of, any event that would cause or constitute a material
breach of any of the representations and warranties of Buyer in this Agreement.
5.2. APPLICATION FOR COMMISSION CONSENT. Within five (5) business days
after execution of this Agreement, Buyer will prepare and provide Seller's
counsel with the assignee's portion of the Application. Buyer will diligently
take, or cooperate in the taking of, all steps necessary and appropriate to
expedite the preparation of the Application and its prosecution to a favorable
conclusion. Buyer will promptly provide Seller with a copy of any pleading,
order, or other document served on it relating to the Application. Buyer will
use its best efforts and otherwise cooperate with Seller in responding to any
information requested by the FCC related to the Application or this Agreement,
in making any amendment to this Agreement requested by the FCC which does not
adversely affect Buyer in a material manner, and in defending against any
petition, complaint, and other objection which may be filed against the
Application.
5.3. CONFIDENTIAL INFORMATION. If the transactions contemplated in
this Agreement are not consummated for any reason, Buyer shall not disclose to
third parties any information designated as confidential and received from
Seller or its agents in the course of investigating, negotiating, and performing
the transactions contemplated by this Agreement: provided, however, that no
information shall be deemed to be confidential that (1) becomes publicly known
or available other than through disclosure by Buyer; (2) is rightfully received
by Buyer from a third party; or (3) is independently developed by Buyer. All
originals of material provided by Seller to Buyer or its agents shall be
returned to Seller and all copies thereof destroyed.
5.4. CONSUMMATION OF AGREEMENT. Buyer shall fulfill and perform in all
material respects all conditions and obligations to be fulfilled and performed
by Buyer under this Agreement and make every reasonable effort to cause the
transactions contemplated by this Agreement to be fully carried out.
5.5. NOTICE OF PROCEEDINGS. Buyer will promptly (and in any event
within five (5) business days) notify Seller upon becoming aware of any actual
or threatened claim, dispute, arbitration, litigation, complaint, judgment,
order, decree, action or proceeding relating to Buyer, the Station, the Assets,
or the consummation of this Agreement or any transaction contemplated herein.
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ARTICLE 6. CONDITIONS PRECEDENT TO
OBLIGATIONS OF SELLER TO CLOSE.
The obligation of Seller to consummate the transactions under this
Agreement is subject to the fulfillment of the following conditions prior to or
at the Closing:
6.1. REPRESENTATIONS, WARRANTIES, COVENANTS.
6.1.1. BUYER'S REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Buyer contained in this Agreement shall
have been true and accurate in all material respects as of the date when made
and as of the Closing Date;
6.1.2. BUYER'S PERFORMANCE UNDER AGREEMENT. Buyer shall have
performed and complied in all material respects with each and every covenant
and agreement required by this Agreement to be performed or complied with by
Buyer prior to or at the Closing, other than the delivery by Buyer of the
consideration described in Section 1.2.;
6.1.3. BUYER'S DELIVERIES. Buyer shall have delivered to Seller
(a) a certificate executed by an officer of Buyer, dated the Closing Date,
certifying to the fulfillment of the conditions set forth in Sections 6.1.1.
and 6.1.2., and (b) the resolutions referred to in Section 3.2 of this
Agreement.
6.2. PROCEEDINGS.
6.2.1. ABSENCE OF LITIGATION. No Litigation shall have been
instituted before any court or governmental body which has resulted in the
issuance of a preliminary or permanent injunction against consummation of
this Agreement.
6.2.2. NOTICE OF INVESTIGATION. Neither of the parties to this
Agreement shall have received written notice from any governmental body of the
institution of any investigation to restrain, enjoin or nullify this Agreement
or the transactions contemplated hereby (other than a routine letter of inquiry,
including a routine Civil Investigative Demand).
6.3. FCC APPROVAL. The FCC approval contemplated by this Agreement
shall have been granted without any conditions materially adverse to Seller.
6.4. LEGAL OPINION. Seller shall have received an opinion from
Buyer's counsel in the form annexed hereto as EXHIBIT A.
ARTICLE 7. CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYER TO CLOSE.
The obligation of Buyer to consummate the transactions under this
Agreement is subject to the fulfillment of the following conditions prior to or
at the Closing:
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7.1 REPRESENTATIONS, WARRANTIES, COVENANTS.
7.1.1. SELLER'S REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller contained in this Agreement shall
have been true and accurate in all material respects as of the date when made
and as of the Closing Date.
7.1.2 SELLER'S PERFORMANCE UNDER AGREEMENT. Seller shall have
performed and complied in all material respects with each and every covenant and
agreement required by this Agreement to be performed or complied with by it
prior to or at the Closing other than the delivery to Buyer of the instruments
conveying the Assets to Buyer; and
7.1.3. SELLER'S DELIVERIES. Seller shall have delivered to Buyer (a)
a certificate executed by an officer of Seller, dated the Closing Date,
certifying to the fulfillment of the conditions set forth in Sections 7.1.1. and
7.1.2., (b) the resolutions of Seller's stockholders and board of directors
identified in Section 2.12 of this Agreement, and (c) the consents of third
parties required for the assignment to Buyer of Contracts and Real Estate Leases
specified in Section 1.1.1.
7.2. PROCEEDINGS.
7.2.1. ABSENCE OF LITIGATION. No Litigation shall be pending or have
been instituted before any court or governmental body to restrain or prohibit,
or to obtain substantial damages in respect of, the consummation of this
Agreement that, in the reasonable opinion of Buyer, may reasonably be expected
to result in the issuance of a preliminary or permanent injunction against such
consummation or otherwise result in a decision materially adverse to Buyer.
7.2.2. ABSENCE OF INVESTIGATION. Neither of the parties to this
Agreement shall have received written notice from any governmental body of (1)
its intention to institute any action or proceeding to restrain or enjoin or
nullify this Agreement or the transactions contemplated hereby, or to commence
any investigation (other than a routine letter of inquiry, including a routine
Civil Investigative Demand) into the consummation of this Agreement or (2) the
actual commencement of such an investigation.
7.3. DAMAGE TO THE ASSETS.
7.3.1. NO MATERIAL DAMAGE. There shall not have been any
material damage to any of the Assets.
7.3.2. RISK OF LOSS. The risk of loss or damage to any of the Assets
prior to the Closing shall be upon Seller (except to the extent caused by
Buyer's conduct under the MA). In consultation with Buyer, Seller shall repair,
replace and restore any damaged or lost Asset to its prior condition as soon as
possible and in no event later than the Closing, or, in the alternative and at
Buyer's option, provide a reduction in the
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Purchase Price by an amount equal to the replacement value of the damaged or
lost Asset not covered by an assignment to Buyer of insurance proceeds therefor
and payment by Seller to Buyer of any applicable deductible.
7.4. FCC APPROVAL. The FCC approval contemplated by this Agreement
shall have been granted without any conditions materially adverse to Buyer and
shall have become a Final Order.
7.5. CONTRACT AND REAL ESTATE LEASE PAYMENTS. As of the Closing,
Seller shall be current in its payment of any and all obligations under
Contracts or Real Estate Leases to be assumed by Buyer, or such payments shall
be subject to proration hereunder.
7.6. BULK SALE LAW. Seller shall provide a written indemnification
for Buyer with respect to matters relating to the applicability, if any, of New
Mexico's bulk sales law.
7.7. LEGAL OPINION. Buyer shall have received an opinion from
Seller's counsel in the form annexed hereto as EXHIBIT B.
7.8. EXTENSION OF CP. The CP shall be extended to a date twelve (12)
months after the Closing Date.
7.9. NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement
and the Closing, none of the Assets, including but not limited to the CP and the
Seller's goodwill, or the Station's business, operations, or financial condition
shall have incurred or otherwise be subject to a material adverse change.
ARTICLE 8. INDEMNIFICATION.
8.1. SURVIVAL. The several representations, warranties, covenants, and
agreements of the Seller and Buyer contained in or made pursuant to this
Agreement shall be deemed to have been made on and as of the Closing, shall
survive the Closing, and shall remain operative and in full force and effect for
a period of eighteen (18) months after the Closing; provided, that all
representations, warranties, covenants and agreements relating to litigation or
taxes shall remain operative until the expiration of any applicable statutes of
limitation; and provided further, that liabilities assumed or retained, as the
case may be, pursuant to this Agreement shall remain in effect until such
liabilities have been paid or discharged in full.
8.2. INDEMNIFICATION OF BUYER. Seller shall indemnify, defend, and
hold Buyer harmless from and against any and all damages, claims, losses,
expenses, costs, obligations, and liabilities including, without limiting the
generality of the foregoing, liabilities for reasonable attorneys' fees ("Loss
and Expense"), suffered, directly or indirectly, by Buyer after the Closing Date
by reason of, or arising out of, (1) any material breach of a representation or
warranty made by Seller pursuant to this Agreement, (2) any
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material failure by Seller to perform or fulfill any of its covenants or
agreements set forth in this Agreement, (3) any material failure by Seller to
pay or discharge any liabilities which remain the responsibility of Seller under
this Agreement or to comply, if required, with New Mexico's bulk sales law, or
(4) any Litigation or claim by any third party relating to the business or
construction of the Station prior to the Closing.
8.3. INDEMNIFICATION OF SELLER. Buyer shall indemnify, defend and hold
Seller harmless from and against any and all Loss and Expense suffered, directly
or indirectly, by Seller after the Closing Date by reason of, or arising out of,
(1) any material breach of a representation or warranty made by Buyer pursuant
to this Agreement, (2) any material failure by Buyer to perform or fulfill any
of its covenants or agreements set forth in this Agreement, (3) any material
failure by Buyer to pay or discharge any liabilities assumed pursuant to this
Agreement, or (4) any Litigation or claim by any third party relating to the
business or operation of the Station after the Closing.
8.4. NOTICE OF CLAIM. If either Seller or Buyer believes that any Loss
and Expense has been suffered or incurred, such party shall notify the other
promptly in writing describing such Loss and Expense, the amount thereof, if
known, and the method of computation of such Loss and Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such Loss and Expense shall have occurred. If any
action at law or suit in equity is instituted by a third party with respect to
which any of the parties intends to claim any liability or expense as Loss and
Expense under this Article 8, such party shall promptly notify the indemnifying
party of such action or suit. In no event, however, may the indemnifying party
avoid or limit its obligations under this Article 8 by reason of delay unless
such delay has materially prejudiced the indemnifying party, and then the
indemnifying party's obligations shall be reduced only to the extent of such
prejudice.
8.5. DEFENSE OF THIRD PARTY CLAIMS. The indemnifying party under this
Article 8 shall have the right to conduct and control, through counsel of that
party's own choosing, any third party claim, action, or suit at the indemnifying
party's sole cost and expense, but the indemnified party may, at that latter
party's election, participate in the defense of any such claim, action, or suit
at that party's sole cost and expense: provided, that if the indemnifying party
shall fail to defend any such claim, action, or suit, then the indemnified party
may defend, through counsel of that party's own choosing, such claim, action, or
suit and settle such claim, action, or suit, and recover from the indemnifying
party the amount of such settlement or of any judgment and the costs and
expenses of such defense; and provided further, that the indemnifying party
shall be given at least (15) days prior notice of the terms of any proposed
settlement thereof so that the indemnifying party may then undertake and/or
resume the defense against the claim. The indemnifying party shall not
compromise or settle any third party claim, action, or suit without the prior
written consent of the indemnified party, which consent will not be unreasonably
withheld or delayed: provided, that any such compromise or settlement shall
include a release for the Indemnified Party of all liability with respect to the
matter being compromised or settled.
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8.6. LIMITATIONS. Neither party shall be required to indemnify the
other party under this Article 8 unless written notice of a claim under this
Article 8 was received by the party within the pertinent survival period
specified in Section 8.1.
ARTICLE 9. MISCELLANEOUS.
9.1. TERMINATION OF AGREEMENT. This Agreement may be terminated
immediately on or prior to the Closing under one or more of the following
circumstances:
9.1.1. by the mutual consent of the parties hereto;
9.1.2. by Seller, if any of the conditions provided in Article 6
hereof have not been met by the time required and have not been waived;
9.1.3. by Buyer, pursuant to Section 7.8, or if any of the
conditions provided in Article 7 hereof have not been met by the time required
and have not been waived;
9.1.4. by Buyer, if the FCC has failed to grant the Application
in an Order which has become a Final Order within the time specified in Section
1.6 of this Agreement; or
9.1.5. by any party hereto, if the FCC denies the Application.
9.2. LIABILITIES UPON TERMINATION.
9.2.1. SELLER'S REMEDIES. If the parties hereto shall fail to
consummate this Agreement on the Closing Date due to Buyer's material breach of
any representation, warranty, covenant or condition hereunder, and Seller is not
at that time in breach of any material representation, warranty, covenant or
condition hereunder, then Seller would suffer direct and substantial damages
that cannot be determined with reasonable certainty. In view of the expense and
loss which would be incurred by Seller in such event, Seller shall be entitled
to institute any action in law or equity to recover any damages or other
compensatory relief which may be warranted.
9.2.2. BUYER'S REMEDIES. If the parties hereto shall fail to
consummate this Agreement on the Closing Date due to Seller's material breach of
any representation, warranty, covenant or condition hereunder, and Buyer is not
at that time in material breach of any representation, warranty, covenant or
condition hereunder, then Buyer shall be entitled to specific performance of the
terms of this Agreement and of Seller's obligation to consummate the transaction
contemplated hereby. If any action is brought by Buyer to enforce this Agreement
by specific performance, Seller shall waive the defense that Buyer has an
adequate remedy at law.
9.2.3. NOTICE OF BREACH. In the event that any party to this
Agreement believes that the other party is in material breach of its
representations,
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warranties or obligations hereunder, such party shall give prompt written notice
thereof, detailing the nature of the breach and the steps necessary to cure such
breach. For purposes of this Agreement, no "breach" shall be deemed to have
occurred hereunder unless the party alleged to be in breach has been afforded a
cure period of at least twenty (20) business days following such notice within
which to cure such breach: provided, that the cure period may be extended for an
additional twenty (20) business days in the event that such party is diligently
and in good faith proceeding to cure such breach and the breach is reasonably
capable of being cured within such extended period.
9.2.4. SURVIVAL OF CONFIDENTIALITY OBLIGATIONS. Notwithstanding
any other provision of this Agreement, the provisions of Sections 4.7, and 5.3
shall survive any termination of this Agreement.
9.3. EXPENSES. Except as otherwise provided herein, each party hereto
shall be solely responsible for all fees and expenses each party incurs in
connection with the transactions contemplated by this Agreement, including,
without limitation, legal fees incurred in connection herewith: provided, that
the FCC filing fees shall be divided equally between Seller and Buyer; and,
provided further, that all transfer, sales, use or other taxes or assessments
imposed by any governmental body on the sale of the Assets shall be paid by
Seller.
9.4. ASSIGNMENTS. Seller may not assign its rights or obligations
under this Agreement without the prior written consent of Buyer. Buyer may
assign its rights under this Agreement without the prior written consent of
Seller to any party which (1) controls Buyer, (2) is controlled by the same
parties who control Buyer, or (3) is controlled by Buyer.
9.5. FURTHER ASSURANCES. From time to time prior to, at and after the
Closing, each party hereto will execute all such instruments and take all such
actions any other party shall reasonably request in connection with effectuating
the intent and purpose of this Agreement and all transactions contemplated by
this Agreement, including, without limitation, the execution and delivery of any
and all confirmatory and other instruments in addition to those to be delivered
at the Closing.
9.6. NOTICES. All notices, demands and other communications authorized
or required by this Agreement shall be in writing, shall be delivered by
personal delivery, by United States certified mail-return receipt requested
(postage prepaid), or by overnight delivery service (charges prepaid), and shall
be deemed to have been given or made when personally delivered, within five (5)
days after being deposited in the mail, postage prepaid, or within one (1) day
after being delivered to an overnight delivery service, charges prepaid. Notices
shall be delivered to each party at the following addresses (or at such other
address as any party may designate in writing to the other parties
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9.6.1. If to Seller --
Minority Broadcasters of Santa Fe, Inc.
1408 North Kings Highway, Suite 300
St. Louis, MO 63113
Attention: Victor Roberts
with a copy to (but which shall not constitute
notice to Seller):
Armstrong Teasdale Schafly & Davis
One Metropolitan Square, Suite 2600
St. Louis, MO 63102
Attention: Joseph S. von Kaenel, Esquire
If to Buyer --
ACME Television Holdings
2450 Kiser
Tustin, CA 92782
Attention: Thomas D. Allen
with a copy to (but which shall not constitute
notice to Buyer):
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, DC 20037
Attention: Lewis J. Paper, Esquire
9.7. LAW GOVERNING. This Agreement shall be governed by, construed,
and enforced in accordance with the laws of the State of New Mexico without
regard to conflict of laws provisions.
9.8. WAIVER OF PROVISIONS. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time or times to require performance of any provision of this Agreement
shall not affect the exercise of a party's rights at a later date. No waiver by
any party of any condition or the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
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of any such condition or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
9.9. COUNTERPARTS. This Agreement may be executed in counterparts,
and all counterparts so executed shall collectively constitute one agreement,
binding on all of the parties hereto, notwithstanding that all the parties are
not signatory to the original or the same counterpart.
9.10. REIMBURSEMENT OF LEGAL EXPENSES. If a formal legal proceeding is
instituted by a party to enforce that party's rights under this Agreement, the
party prevailing in the proceeding shall be reimbursed by the other party for
all reasonable costs incurred thereby, including but not limited to reasonable
attorneys' fees.
9.11. PUBLICITY. Except as required by applicable law or with the
other party's express written consent, which shall not be unreasonably withheld,
no party to this Agreement nor any affiliate of any party shall issue any press
release or make any public statement (oral or written) regarding the
transactions contemplated by this Agreement.
9.12. SELLER'S ACCESS TO RECORDS. Any records delivered to Buyer by
Seller relating to the CP, the construction of the Station or Seller's business
shall be maintained by Buyer for a period of five (5) years from and after the
Closing Date. Upon reasonable prior notice, Seller shall be entitled to inspect
and copy any of such records for purposes of preparing and completing any tax
returns or other compilations of its operation in respect to the Station. In the
event that it wishes to dispose of such records, Buyer shall give Seller thirty
(30) days' prior written notice and an opportunity to retrieve such records at
Seller's expense.
9.13. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties on the subject matter hereof, supersedes and cancels
any and all prior or contemporaneous agreements and understandings between them,
on the subject matter hereof, and may not be amended except in a writing signed
by the parties.
ARTICLE 10. DEFINITIONS AND RULES OF CONSTRUCTION
10.1. DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings:
10.1.1. "APPLICATION" shall have the meaning set out in Section
4.5 hereof
10.1.2. "ASSETS" shall have the meaning set out in Section 1.1.1
hereof.
10.1.3. "CONTRACTS" shall have the meaning set out in Section
1.1.1.(c) hereof.
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10.1.4. "CLOSING" and "CLOSING DATE" shall have the meanings set
out in Section 1.3 hereof.
10.1.5. "CP" shall have the meaning set out in Recital 1 hereof.
10.1.6. "EXCLUDED ASSETS" shall have the meaning set out in
Section 1.1.2 hereof.
10.1.7. "FAA" means the Federal Aviation Administration.
10.1.8. "FCC" means the Federal Communications Commission.
10.1.9. "FTC" means the Federal Trade Commission.
10.1.10. "IRS" means the Internal Revenue Service.
10.1.11. "LITIGATION" means any litigation, arbitration, dispute,
proceeding or investigation.
10.1.12. "PAYMENTS" shall have the meaning set out in Section 2.5
hereof.
10.1.13. "PERMITTED ENCUMBRANCES" shall have the meaning set out
in Section 1.1.3 hereof;
10.1.14. "PURCHASE PRICE" shall have the meaning set out in
Section 1.2 hereof.
10.1.15. "REAL ESTATE LEASES" shall have the meaning set out in
Section 1.1.2(j) hereof.
10.1.16. "STATION" shall have the meaning set out in Recital 1
hereof.
10.1.17. "TRUSTS" shall have the meaning set out in Section 2.5
hereof.
10.1.18. OTHER DEFINITIONS. Other capitalized terms used in this
Agreement shall have the meanings ascribed to them herein.
10.2. NUMBER AND GENDER. Whenever the context so requires, words used
in the singular shall be construed to mean or include the plural and vice versa,
and pronouns of any gender shall be construed to mean or include any other
gender or genders.
10.3. HEADINGS AND CROSS-REFERENCES. Headings of the sections have
been included for convenience of reference only and shall in no way limit or
affect the meaning or interpretation of the specific provisions of this
Agreement. All cross-references to sections herein shall mean the section of
this Agreement unless otherwise stated or clearly required by the context. Words
such as "herein" and "hereof" shall be deemed to refer to
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this Agreement as a whole and not to any particular provision of this Agreement
unless otherwise stated or clearly required by the context. The term "including"
means "including without limitation."
10.4. COMPUTATION OF TIME. Whenever any time period provided for
in this Agreement is measured in "business days," there shall be excluded
from such time period each day that is a Saturday, Sunday, recognized federal
legal holiday, or other day on which the FCC's offices are closed and are not
reopened prior to 5:30 p.m. Washington, D.C. time. In all other cases all
days shall be counted.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first written above.
MINORITY BROADCASTERS OF SANTA FE, INC.
By: /s/Victor Roberts
---------------------------------
Victor Roberts, President
ACME TELEVISION LICENSES OF NEW MEXICO, L.L.C.
By: /s/Douglas E. Gealy
---------------------------------
Douglas E. Gealy, President
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The following page contains a list of Exhibits and Schedules which
have been intentionally omitted by the Registrants.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
Schedule 1 - Permits and Licenses
Schedule 2 - Material Contracts
Schedule 3 - Real Estate Leases
Schedule 4 - Construction Expenses
Schedule 5 - Material Breaches
Exhibit A - Opinion of Buyer's Counsel
Exhibit B - Opinion of Seller's Counsel
PURCHASE AGREEMENT
THIS AGREEMENT is made this 28th day of May, 1997, by and among
ACME TELEVISION LICENSES OF TENNESSEE, LLC ("ATLT"), a limited liability company
organized and existing under the laws of the State of Tennessee, and ACME
TELEVISION OF TENNESSEE, LLC ("ATT"), a limited liability company organized and
existing under the laws of the State of Tennessee (with ATLT and ATT
collectively referred to as "Purchaser"), and C.W. TV, INC. ("CWTV"), A FLORIDA
CORPORATION AND THE GENERAL PARTNER OF CROSSVILLE TV LIMITED PARTNERSHIP (THE
"PARTNERSHIP"), A FLORIDA LIMITED PARTNERSHIP; LAURA L. PHIPPS; NANCY P. PHIPPS;
JENNIFER P. MITCHELL; LISA P. RICHARDSON; GAVIN B. S. PHIPPS; COLIN S. PHIPPS,
CUSTODIAN FOR KEEGAN S. PHIPPS, A MINOR; IAN J. PHIPPS; THE COSBY TRUST U/A
DATED 10/18/95, RAYMOND E. LACY, TRUSTEE; THE TAYLOR TRUST U/A DATED 10/18/95,
RAYMOND E. LACY, TRUSTEE; RYAN DENNIS BOYLE IRREVOCABLE TRUST U/A DATED JANUARY
18, 1996, DENNIS O. BOYLE, TRUSTEE; ELIZABETH ANN BOYLE IRREVOCABLE TRUST U/A
DATED JANUARY 18, 1996, DENNIS O. BOYLE, TRUSTEE; RANDALL B. LANE IRREVOCABLE
TRUST U/A DATED JANUARY 18, 1996, W. H. LANE, TRUSTEE; AND SUZANNE R. LANE
IRREVOCABLE TRUST U/A DATED JANUARY 18, 1996, W. H. LANE, TRUSTEE (with all of
the foregoing except the Partnership collectively referred to herein as
"Sellers"), and the PARTNERSHIP.
The parties hereto have agreed that it is in their mutual best
interests for Purchaser to purchase from Sellers all of the general and limited
partnership interests in the Partnership on terms and conditions set forth
herein. The
<PAGE>
parties hereto desire to make this Agreement for the purpose of setting forth
those terms and conditions, including certain representations, warranties and
covenants to be made in connection with the aforesaid purchase and sale of such
partnership interests.
THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, the parties hereto have agreed and do
hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement shall have the
meanings set forth below:
1.01 AFFILIATE - Any person, firm, corporation, partnership or
association controlling, controlled by or under common control with another
person, firm, corporation, partnership or association.
1.02 CLOSING - The closing referred to in Section 2.02 hereof.
1.03 CLOSING DATE - The date referred to in Section 2.02 hereof.
1.04 CODE - The Internal Revenue Code of 1986, as amended.
1.05 FCC OR COMMISSION. The Federal Communications Commission.
1.06 FCC LICENSES. Any and all licenses, permits and other
authorizations issued by the FCC to or held by the
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Partnership with respect to the Station, as well as any and all applications for
modification, extension or renewal thereof.
1.07 FINANCIAL STATEMENTS - The Financial Statements of the
Partnership described in Section 5.03 hereof.
1.08 GENERAL PARTNER - C.W. TV, Inc., a Florida corporation.
1.09 PARTNER - A general or limited partner in the Partnership.
1.10 PARTNERSHIP AGREEMENT - The Partnership Agreement of
Crossville TV Limited Partnership dated July 12, 1995, as amended by a First
Amendment dated October 19, 1995.
1.11 PARTNERSHIP INTEREST - All of a Partner's right, title and
interest in and to the Partnership.
1.12 SCHEDULES - Those Schedules referred to in Article III, IV
and V hereof.
1.13 STATION - Television station WINT-TV, Crossville, Tennessee.
1.14 STATION ASSETS. All of the Partnership's right, title and
interest in property, real and personal, tangible and intangible, and used or
useful in the operation of the Station, including but not limited to the FCC
Licenses, together with any improvements, replacements, additions or
modifications thereto between the date of this Agreement and the Closing Date.
1.15 UNDISCLOSED LIABILITIES - Any material liability or
obligation of the Partnership, whether liquidated or contingent, as of the
Closing Date that is not fully reflected or
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reserved against in the Financial Statements or fully disclosed in a Schedule.
ARTICLE II
PURCHASE AND SALE OF THE PARTNERSHIP INTERESTS
2.01 AGREEMENT TO SELL. For the consideration hereinafter
provided and subject to the terms and conditions herein set forth, on the
Closing Date each of the Sellers shall sell, assign and deliver to Purchaser,
and Purchaser shall purchase and acquire from such Seller, all of his or her
Partnership Interests. At the Closing each Seller shall cause to be delivered to
Purchaser assignments of his or her Partnership Interests.
2.02 CLOSING. The closing of the purchase and sale of the
Partnership Interests and payment of the Purchase Price shall take place at the
offices of the Partnership in Tallahassee, Florida on a date set by Purchaser
within ten (10) business days after the consent of the Federal Communications
Commission ("FCC") to the transfer of control of the FCC Licenses has become a
Final Order (meaning an order which is no longer subject to judicial or
administrative review); provided that waiver of such Final Order requirement may
be made in the sole discretion of Purchaser) or at such other time and place as
shall be mutually agreeable to the parties hereto.
ARTICLE III
PURCHASE PRICE
4
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3.01 PURCHASE PRICE. The total Purchase Price for the acquisition
of the Partnership Interests from the Sellers shall be (i) Thirteen Million Two
Hundred Thousand Dollars ($13,200,000) PLUS (ii) an amount equal to the total of
all liabilities incurred or amounts paid by the Partnership after January 7,
1997 (and projected on Schedule 3.01 hereto or otherwise agreed between the
General Partner (acting on behalf of Sellers) and Purchaser) in connection with
the contracts and invoices for construction of the Station and any improvements
thereto set forth in Schedule 3.01 hereto (collectively, the "Tower Project"),
including, without limitation, the broadcasting tower, antenna and transmitting
facilities.
3.02 PAYMENT OF PURCHASE PRICE. At the Closing, Purchaser shall
pay and deliver the Purchase Price to the Escrow Agent named in the Escrow
Agreement, which the parties will execute contemporaneously with the execution
of this Agreement and which will be in the form of Exhibit A attached hereto, in
cash or by wire transfer, reduced by the amount of the Escrow Deposit (as
hereinafter defined) and other adjustments provided for in this Agreement. The
Escrow Agent shall transfer on the Closing Date, pay by bank charge or wire
transfer, to each of the Sellers the pro rata amount of the Purchase Price due
each Seller in accordance with Schedule 3.02, less a pro rata reduction for the
Post-Closing Escrow Deposit (as hereinafter defined) and the aforementioned
adjustments. Notwithstanding the foregoing provisions, the Escrow Agent shall
pay to the General Partner or
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such other creditors of the Partnership (other than Purchaser) such amounts as
may be necessary to pay off the liabilities of the Partnership (as approved by
the Sellers and Purchaser) other than the Tower Project costs identified in
Schedule 3.01 and such amounts shall be deducted on a pro rata basis from the
amount to be paid to each Seller.
3.03 DEPOSIT. The parties hereby confirm that simultaneously with
the execution and delivery of this Agreement, Purchaser has deposited with the
Escrow Agent the sum of Six Hundred Sixty Thousand Dollars ($660,000) (the
"Escrow Deposit") to be applied as provided herein and in the Escrow Agreement
among the Escrow Agent, Purchaser, Sellers, and the Partnership. In the event of
a termination of this Agreement, the Escrow Deposit shall be paid to the Sellers
or Purchaser as provided in Section 11.03 below. The parties agree to give joint
written instructions to the Escrow Agent in accordance with the provisions of
this Agreement.
3.04 DELIVERY OF THE PARTNERSHIP INTERESTS. Within five (5)
business days after the execution of this Agreement, each Seller shall deliver
to the Escrow Agent a duly executed assignment of such Seller's Partnership
Interest in the form set forth in the Escrow Agreement. The Escrow Agent shall
hold the Sellers' assignments for delivery to Purchaser at the Closing, or, upon
termination of this Agreement, for return to the Sellers. Upon receipt of the
Purchase Price from Purchaser less the Escrow Deposit and any adjustments
specified herein, the
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Escrow Agent shall thereupon deliver the assignments of the Partnership
Interests and irrevocable powers of attorney to Purchaser.
3.05 THE POST-CLOSING ESCROW. At Closing, the Escrow Agent shall
retain $2,000,000 of the Purchase Price (the "Post- Closing Escrow Deposit"),
which shall be held, managed and distributed in accordance with this Agreement
and pursuant to the terms and conditions of the Escrow Agreement in the form
annexed hereto as Exhibit A. The Post-Closing Escrow Deposit shall be held for
the purpose of satisfying any of the Sellers' or Partnership's indemnification
obligations hereunder for twenty-four (24) months; provided, that (i) if Sellers
have received timely written notice of a Claim for indemnification by Purchaser
prior to the expiration of the twenty-four (24) month period, the amount of the
Claim shall continue to be held in escrow until the final arbitration decision
resolving the Claim or final settlement or adjudication of the Claim, at which
time any portion of the Post-Closing Escrow Deposit which is not required to be
paid to Purchaser shall then be distributed to Sellers (pro rata as set forth in
Schedule 3.02); (ii) one-half (1/2) the Post-Closing Escrow Deposit (less the
amount of any Claim made by Purchaser) shall be released to Sellers twelve (12)
months from the Closing Date; (iii) any Seller hereunder shall have recourse
only to other Sellers in the event any or all of the Post-Closing Escrow Deposit
is paid to Purchaser in discharge of an individual Seller or Sellers' liability
hereunder; and (iv) accrued interest
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on the Post-Closing Escrow Deposit shall at all times belong to and be paid to
Sellers.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller severally, but not jointly, and on its own behalf and
not on behalf of any other Seller, hereby represents and warrants to Purchaser
as follows:
4.01 TITLE TO PARTNERSHIP INTERESTS. Each Seller is a partner in
the Partnership and is the owner of all right, title and interest in and to that
percentage of Partnership Interests set forth next to the Seller's name on
Schedule 3.02, free and clear of any and all claims, liens and encumbrances of
any kind or nature, except as set forth in Schedule 4.01 and except for
restrictions expressly set forth in the Partnership Agreement; provided that all
of the foregoing restrictions shall have been either waived or satisfied prior
to Closing.
4.02 CAPACITY AND VALIDITY. Each Seller has the full power,
capacity and authority necessary to enter into and perform its obligations under
this Agreement. This Agreement constitutes the valid and binding obligation of
each Seller, enforceable in accordance with its terms, except as may be limited
by bankruptcy, insolvency or other laws affecting creditors' rights generally,
or as may be modified by a court of equity in an action for specific
performance. Neither the execution and delivery of this Agreement by such Seller
nor the consummation of the transactions contemplated hereby will violate any
provisions
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<PAGE>
of any law, or any regulation, policy or order of any court or any governmental
unit to which such Seller is subject, nor will such execution, delivery or
consummation conflict with, result in a breach of or constitute a default under
any indenture, mortgage, lease, agreement, or other instrument to which such
Seller is a party or by which such Seller is bound, or result in the creation of
any lien, charge or encumbrance upon such Seller's Partnership Interest.
4.03 ORGANIZATION. Each Seller that is listed as a trust is a
trust duly created and validly existing under the laws of the state set forth in
its organizing trust instrument, with the power and authority to own and operate
its assets, to enter into this Agreement, and to fulfill each and every
obligation of such Seller under this Agreement.
4.04 LITIGATION. No Seller is a party to any, or has any
knowledge of any threatened, litigation (i) by which any third party asserts an
interest in the Seller's Partnership Interest or (ii) which seeks to or would
otherwise impair or prevent Seller's conveyance of that Seller's Partnership
Interest to Purchaser.
4.05 COMPLIANCE WITH APPLICABLE SECURITY LAWS. The Partnership
Interests to be conveyed to Purchaser hereunder are intended to be conveyed by
each Seller pursuant to a valid exemption from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act") and in compliance
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<PAGE>
with all applicable federal and state securities laws, regulations and policies.
4.06 INSOLVENCY. No insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
the Seller or the Seller's Partnership Interest, is pending or, to the best of
the Seller's knowledge, threatened, and except for the partnership interest
pledge set forth in Schedule 4.01, the Seller has not made any assignment for
the benefit of creditors, nor taken any actions with a view to, or which would
constitute the basis for, the institution of any such insolvency proceedings.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership and the General Partner jointly and severally
represent and warrant to Purchaser as follows:
5.01 ORGANIZATION OF PARTNERSHIP. The Partnership is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Florida. The Partnership has all requisite partnership power and
authority to carry on its business, to own, hold, lease or operate the Station
Assets and its other properties. The Partnership is duly qualified to do
business and is in good standing in the State of Tennessee. Schedule 3.02 sets
forth the names, addresses and Partnership Interests of each Partner. A true and
correct copy of the Partnership Agreement, with all amendments thereto, and
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the Certificate of Limited Partnership, is attached hereto in Schedule 5.01.
5.02 ORGANIZATION OF GENERAL PARTNER. The General Partner is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida. All of the issued and outstanding shares of common
stock of the General Partner are owned by Cynthia P. Willis, a Florida resident.
5.03 FINANCIAL STATEMENTS.
(a) Annexed hereto in Schedule 5.03 are unaudited
financial statements and an unaudited balance sheet for the calendar year 1996
and for the month ending March 31, 1997 (the "Financial Statements"). The
Financial Statements fairly present in all material respects the Partnership's
financial income, expenses, assets, liabilities, and the results of operations
of the Station as of the dates and for the periods indicated. Except for costs
and liabilities associated with the Tower Project, no event has occurred that
would make such Financial Statements inaccurate or misleading in any material
respect.
(b) Except as disclosed on the Financial Statements or in
the Schedules, there exist no material liabilities of the Partnership,
contingent or absolute, matured or unmatured, known or unknown. Except for
expenses incurred in connection with the Tower Project and except as disclosed
in the Schedules, since March 31, 1997, (i) the Partnership has not incurred any
material obligation or liability (contingent or otherwise), (ii) there has not
been any discharge or satisfaction
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of any material obligation or liability owed to the Partnership, and (iii) there
has not occurred any sale of the Station Assets except those non-material assets
disposed of in the ordinary course of business.
5.04 TAXES. The Partnership has timely filed with all appropriate
governmental authorities any and all federal, state, commonwealth, local, and
other tax or information returns and tax reports (including, but not limited to,
those for any income tax, unemployment compensation, Social Security, payroll,
sales and use, profit, excise, privilege, occupation, property, ad valorem,
franchise, license, school and any other tax under the laws of the United States
or of any state or any commonwealth or any municipal entity or of any political
subdivision with valid taxing authority) due for all periods ended on or before
the date hereof. The Partnership has paid in full all federal, state,
commonwealth, foreign, local and other governmental taxes, estimated taxes,
interest, penalties, assessment and deficiencies (collectively, "Taxes") which
have become due pursuant to such returns or without returns or pursuant to any
assessments received by the Partnership. Such returns and forms are true,
correct and complete in all material respects, and, to the knowledge of the
General Partner and the Partnership, the Partnership has no liability for any
Taxes in excess of the Taxes shown on such returns. The Partnership is not a
party to any pending action or proceeding and, to the knowledge of the General
Partner and the Partnership, there is no action or proceeding
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threatened by any governmental authority against the General Partner of the
Partnership for assessment or collection of any Taxes, and no unresolved claim
for assessment or collection of any Taxes has been asserted against the General
Partner or the Partnership.
5.05 PERSONAL PROPERTY.
(a) Schedule 5.05(a) contains a true and correct copy of
all material machinery, vehicles, equipment and other personal property (the
"Personal Property") owned by the Partnership. The Partnership has good and
marketable title to all of the Personal Property, free and clear of all liens,
claims, charges, security interests and other encumbrances of any kind or
nature, except as disclosed on Schedule 5.05(a). The material Station Assets,
including without limitation any and all studio equipment, satellite receiving
antennas, transmitters, studio-transmitter links, transmission lines and
broadcast antennas, wherever located, meet all government requirements and are
sufficient to enable the Partnership to operate the Station as presently
operated in accordance with the FCC Licenses.
(b) Schedule 5.05(b) contains a list of all material leases
(the "Operating Leases") for machinery, vehicles, equipment and personal
property used or employed by the Partnership, including expiration dates, terms,
details or purchase options, if any, and, with respect to any personal property
subject to a security interest or similar agreement, details thereof, together
with copies of such instruments. Each
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of the Operating Leases is in full force and effect, and there are no existing
defaults or events of default, real or claimed, or events which would, with
notice or lapse of time or both, constitute defaults, the consequence of which,
individually or in the aggregate, would have a material adverse effect on the
Station Assets or the business or financial condition of the Partnership.
5.06 REAL PROPERTY.
(a) The Partnership does not own any real property.
(b) Schedule 5.06(b) contains a true and correct copy of
all leases (the "Real Estate Leases") for real property leased to the
Partnership. Each Real Estate Lease is in full force and effect and there are no
existing defaults or events of default, real or claimed, or events which would,
with notice or lapse of time or both, constitute a material default.
(c) All improvements on the real estate owned by, leased to
or used by the Partnership are in material compliance with all applicable
federal, state and local laws, regulations and policies, including but not
limited to zoning and building ordinances and health and safety ordinances.
5.07 PATENTS AND TRADEMARKS. Schedule 5.07 lists all trade names,
trademarks, trade styles and service marks licensed to, held by or lawfully used
by the Partnership in the conduct of its business at any time since formation of
the Partnership. The Partnership has not received notice that its use of any
such trade names, trademarks, trade styles or service marks violates
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or infringes upon any rights claimed therein by third parties. The Partnership
does not own or have rights as licensee in any patents or patent applications,
and the Partnership has not received notice that its operations violate or
infringe upon any claims of any patent or patent application owned or held by
any third party.
5.08 INSURANCE. Schedule 5.08 contains a summary of all policies
of fire, liability and other forms of insurance owned or held by the Partnership
or in which the Partnership is a named insured. The Partnership is not in
default regarding the provisions of any such policy and has not failed to give
any notice or present any material claim thereunder in due and timely fashion.
5.09 NO DEFAULTS. Neither the execution and delivery by the
Partnership of this Agreement nor the consummation by the Partnership of the
transactions contemplated herein are events that, by themselves or with the
giving of notice or the passage of time or both, constitute a material violation
or of will materially conflict with or result in any material breach of or any
material default under (a) the terms, conditions, or provisions of any
arbitration award, judgment, law, order, decree, writ, governmental policy or
regulation to which the Partnership is subject, (b) the Partnership Agreement or
other organizational documents of the Partnership, or (c) any agreement or
instrument to which the Partnership is a party or by which the Partnership is
bound, or result in the creation or imposition of
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any lien, charge, or encumbrance on any of the Station Assets or other
properties of the Partnership.
5.10 LITIGATION. Except as disclosed in Schedule 5.10, the
Partnership has not been operating under and is not subject to, or in default
with respect to, any order, judgment, writ, injunction, decree of any court or
any federal, state, municipal, or other governmental department, commission,
board, agency, or instrumentality, foreign or domestic, which has had or could
reasonably be expected to have a material adverse effect on the Station Assets
or the manner in which the Partnership currently operates the Station. Except as
disclosed in Schedule 5.10, there is no litigation, arbitration, dispute,
proceeding or investigation ("Litigation") pending by or against, or, to the
best of the General Partner's and the Partnership's knowledge, threatened
against the Station or the Partnership which relates to or affects the Station
Assets or the business of the Partnership and which materially interferes or
could reasonably be expected materially to interfere with the Partnership's (a)
right, title to, or interest in the Partnership or the Station Assets, (b)
operation of the Station, or (c) ability to consummate the transactions
contemplated by this Agreement.
5.11 COMPLIANCE WITH LAWS. Except as disclosed in Schedule 5.11,
neither the General Partner nor the Partnership has failed to comply in any
material respect with, or is in default in any material respect under, any laws,
ordinances,
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requirements, regulations, policies, or orders applicable to the Partnership,
the Station Assets, or the Partnership's business.
5.12 LABOR MATTERS. The Partnership has no employees.
5.13 CONTRACTS AND COMMITMENTS.
(a) Schedule 5.13 contains a true and accurate copy, or in
the case of oral contracts, an accurate description of all material terms of all
material contracts or commitments to which the Partnership is a party or by
which the Partnership benefits or is bound, and which are not provided in any
other Schedule.
(b) Each of the contracts listed in Schedule 5.13 is in
full force and effect, and there are no material existing defaults or events of
default, real or claimed, or events which would, with notice or lapse of time or
both, constitute material defaults. Except as reflected in Schedule 5.13, the
continuation, validity and effectiveness of such contracts, and all other
material terms thereof, will in no way be affected by the transactions
contemplated by this Agreement.
5.14 POWER OF ATTORNEY. Neither the General Partner nor the
Partnership has given any power of attorney regarding its business, properties
and assets except for powers given to John H. Phipps Ventures, Inc. as
"Partnership Administrator" in accordance with the Partnership Agreement. A true
copy of such Designation of Partnership Administrator is attached hereto as
Schedule 5.14.
5.15 AUTHORITY. Except for restrictions on the transfer of
Partnership Interests set forth in the Partnership
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Agreement and other restrictions described in any Schedule to this Agreement,
all of which will be removed or satisfied prior to Closing, neither the
execution and delivery of this Agreement by the Partnership nor the consummation
of the transactions contemplated hereby will violate any provisions of the
Partnership Agreement, any law, or any regulation, policy or order of any court
or any governmental unit to which the Partnership is subject, nor will such
execution, delivery or consummation conflict with, result in a breach of, or
constitute a default under any indenture, mortgage, lease, agreement, or other
instrument to which the Partnership is a party or by which it is bound, or
result in the creation of any lien, charge or encumbrance upon any of the
Partnership's assets or properties.
5.16 BANKS. Schedule 5.16 lists all banks or other financial
institutions with which the Partnership has an account and the account numbers
thereof and names of persons authorized to act in connection therewith.
5.17 GOVERNMENTAL AUTHORIZATIONS. The Partnership is the holder
of licenses and other authorizations from governmental authorities, set forth in
Schedule 5.17, true copies of which are included in Schedule 5.17. Each of such
licenses and other authorizations are in full force and effect. The FCC Licenses
and the Determinations of No Hazard to Air Navigation by the Federal Aviation
Administration ("FAA") constitute all of the licenses and other authorizations
required under the Communications Act of 1934, as amended (the "Act"), and the
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current rules, regulations, and policies of the FCC for the operation of the
Station as currently conducted and for construction of the tower as specified in
file number BPCT-960118KF. The FCC Licenses authorize the operation of the
Station for the license term expiring on August 1, 1997. Except as set forth in
Schedule 5.17, the Partnership has filed with the FCC all material applications,
reports and other disclosures required by the Act and by FCC rules and policies.
As of the date of this Agreement, there is not pending or, to the best of the
Partnership's knowledge, threatened, any petition, complaint, objection (whether
formal or informal), order to show cause, investigation, or other action by or
before the FCC or any court to revoke, cancel, rescind, modify or refuse to
renew any of the FCC Licenses, or which would otherwise have a material adverse
impact on the operation of the Station or the construction of the tower as
specified in file number BPCT-960118KF. Other than proceedings of general
applicability to the broadcasting industry, to the best of the General Partner's
or Partnership's knowledge there is not now pending or threatened any other
petition, complaint, objection (whether formal or informal), investigation,
order to show cause, notice of violation, notice of apparent liability, or
notice of forfeiture or other proceeding by or before the FCC or any court
against the Partnership with respect to any matter affecting the Station. Except
as is set forth in Schedule 5.17, the Station is operating in material
compliance with the FCC Licenses, the Act, and the
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rules, regulations and policies of the FCC and the FAA, and the Station's signal
coverage is not subject to any interference which materially impairs the
reception of its signal within the Station's Grade A or Grade B contours. Except
as is set forth in Schedule 5.17, neither the General Partner nor the
Partnership knows of any reason why the Partnership's FCC Licenses would not be
renewed for a full term in due course without modification.
5.18 ENVIRONMENTAL. Except as disclosed in Schedule 5.18, no
hazardous or toxic waste, substance, material or pollutant (collectively
"Hazardous Waste"), as defined under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601 et seq.,
the Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601 et seq., the
Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. ss.6901 et
seq., the Clean Water Act, as amended, 42 U.S.C. ss.1251 ET SEQ., the Clean Air
Act, as amended, 42 U.S.C. ss.7401 ET SEQ. or any other applicable federal,
state or local law, or any regulations or policies adopted pursuant to such laws
(the foregoing laws, regulations and policies collectively referred to herein as
the "Environmental Laws") has been released, emitted or discharged by the
Partnership or, to the General Partner's or Partnership's knowledge, is
currently located in or on the Station Assets or in, on or under the real
property on which any of the Station Assets are situated in violation of any
Environmental Laws. The Station Assets and Partnership's use thereof are not in
material violation of any Environmental Laws,
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including but not limited to FCC rules, policies and guidelines concerning RF
radiation. The Partnership has not received any notice, summons, citation,
directive, letter or other communication, written or oral, from the United
States, the State of Tennessee, or any other party concerning any intentional or
unintentional action or omission on the part of the Partnership or any other
party which resulted in the releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leeching, dumping, or
disposing of Hazardous Waste on, above or under Station Assets owned or used by
the Partnership in operation of the Station.
5.19 BROKERS. There is no broker or finder or other person who
would, as a result of any agreement of or action taken by the General Partner or
the Partnership, have any valid claim against any of the parties to this
Agreement for a commission or brokerage fee in connection with this Agreement or
the transactions contemplated herein.
5.20 PARTNERSHIP ACTION. All Partnership actions and proceedings
necessary to be taken by or on the part of the Partnership in connection with
the transactions contemplated by this Agreement and necessary to make the
Agreement effective have been duly and validly taken. This Agreement has been
duly and validly authorized, executed, and delivered by the Partnership and
constitutes the valid and binding agreement of Partnership, enforceable in
accordance with and subject to its respective terms, except as enforceability
may be limited by laws affecting
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the enforcement of creditor rights or equitable principles generally.
5.21 INSOLVENCY. No insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
the Partnership or any of the Station Assets is pending or, to the best of the
General Partner's or the Partnership's knowledge, threatened, and the
Partnership has not been made any assignment for the benefit of creditors, nor
taken any actions with a view to, or which would constitute the basis for, the
institution of any such insolvency proceedings.
5.22 CABLE CARRIAGE. Schedule 5.22 annexed hereto sets forth a
correct and complete list of (i) all cable television systems which carry the
Station's signal on the date hereof under the FCC's "must carry" rules; and (ii)
all cable television systems which carry the Station's signal pursuant to
retransmission consent agreements (with copies of such agreements included in
the schedule).
5.23 TRADE, BARTER AND SALES AGREEMENTS. Schedule 5.23 annexed
hereto (a) discloses the material terms of any and all trade and barter
agreements entered into by the Partnership relating to the Station which are
currently in effect or for which a trade or barter obligation remains
unsatisfied, and
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(b) discloses any sales agreements entered into by the Partnership relating to
the Station which have a term longer than thirty (30) days.
5.24 CERTAIN INTERESTS AND RELATED PARTIES. Except as set forth
in Schedule 5.24, (a) neither the General Partner, Partnership Administrator nor
any Seller has any material interest in any property used in or pertaining to
the Station, nor are any of the foregoing indebted or otherwise obligated to the
Partnership; (b) the Partnership is not indebted or otherwise obligated to the
General partner, Partnership Administrator or any Seller or others except for
amounts due under normal arrangements as to salary or reimbursement of ordinary
business expenses not unusual in amount or significance; (c) neither the General
Partner nor Partnership Administrator has any interest whatsoever in any
corporation, firm, partnership or other business enterprise which has had any
business transactions with the Partnership relating to the Station; and (d) no
Seller has entered into any contract with the Partnership relating to the
Station. Except as set forth in Schedule 5.24, the consummation of the
transactions contemplated by this Agreement will not (either alone, or with the
occurrence of any termination or constructive termination of any arrangement, or
with the lapse of time, or both) result in any benefit or payment (severance or
otherwise) arising or becoming due from the Partnership to the General Partner
or Partnership Administrator.
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5.25 PARTNERSHIP BOOKS AND RECORDS. Schedule 5.25 annexed hereto
identifies any and all material Partnership books of account, Station records,
and Partnership records to be delivered to Purchaser at the Closing.
5.26 COMPLIANCE WITH APPLICABLE SECURITIES LAWS. The Partnership
Interests to be conveyed to Purchaser hereunder (a) were offered to the original
purchasers of the Partnership Interests and transferred to the Sellers pursuant
to valid exemptions from the registration requirements of the Securities Act and
in compliance with all applicable state securities laws, regulations, and
policies; and (b) are intended to be transferred to Purchaser pursuant to valid
exemptions from the registration requirements of the Securities Act and in
compliance with all applicable federal and state securities laws, regulations,
and policies.
5.27 PROGRAMMING CONTRACTS. Annexed hereto as Schedule 5.27 are
all contracts for programming entered into and in effect at the Station. All
such contracts: (a) contain a full indemnity from the program provider relating
to the content of the program provided thereunder; and (b) are cancelable on 15
days notice or less, except as set forth on Schedule 5.27.
5.28 STATION ASSETS. Except as set forth in Schedule 5.28 or any
other Schedule to this Agreement, all Station Assets and other property of the
Partnership are free and clear of any and all liens, debts, charges, judgments,
security interests and
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other encumbrances of any nature or kind except those specifically permitted
under this Agreement.
5.29 CORRECTNESS OF REPRESENTATIONS. No representation or
warranty of the General Partner or Partnership in this Agreement or in any
statement, certificate or Schedule furnished by the General Partner or the
Partnership pursuant hereof, or in connection with the transactions contemplated
hereby, contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements contained therein not
inaccurate or misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to Sellers as follows:
6.01 ORGANIZATION AND CAPITALIZATION. Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Tennessee. Purchaser has all requisite power and
authority to carry on its business, to own, lease or operate its properties and
to consummate the transactions contemplated by this Agreement.
6.02 AUTHORITY. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by Purchaser. No further action of any nature is required
pursuant to the organizational documents of the Purchaser. This Agreement
constitutes the valid and binding obligation of Purchaser, except
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as may be limited by bankruptcy, insolvency or other laws affecting creditors'
rights generally or as may be modified by a court of equity in an action for
specific performance. The execution, delivery and performance of this Agreement
will not violate or result in default under any provision of the organizational
documents of Purchaser or any material commitment, indenture, license or other
obligation to which Purchaser is a party, will not contravene any law, rule or
regulation of any administrative agency or governmental body or any order, writ,
injunction or decree of any court, administrative agency or governmental agency
applicable to Purchaser.
6.03 FINANCIAL CAPABILITY. Purchaser has the financial capability
to consummate the transactions contemplated by this Agreement.
6.04 INVESTMENT INTENT.
(a) Purchaser is acquiring the Partnership Interests for
its own account and for investment purposes only, and not with a view to, or
for, resale, distribution or fractionalization thereof, in whole or in part.
(b) Purchaser acknowledges and agrees that the Partnership
Interests may not be sold, transferred or conveyed except pursuant to an
effective registration statement under the Securities Act and the rules and
regulations promulgated thereunder, and in compliance with all applicable state
securities laws, or pursuant to an available exemption from such registration
requirements and applicable state securities laws.
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(c) Purchaser acknowledges that the offer and sale of the
Partnership Interests pursuant to this Agreement are intended to be exempt from
the registration requirements under the Securities Act.
6.05 QUALIFICATION AS A LICENSEE. To Purchaser's knowledge, there
are no facts relating to Purchaser that, under the Act, or the rules,
regulations and policies of the FCC and the FAA, would cause the FCC to deny an
application to assign control of the FCC Licenses to Purchaser or impose any
condition materially adverse to Purchaser in connection therewith. Purchaser is
in compliance with Section 310(b) of the Act.
ARTICLE VII
OBLIGATIONS AND COVENANTS OF SELLERS
AND THE PARTNERSHIP PENDING THE CLOSING
7.01 CONDUCT OF THE PARTNERSHIP'S BUSINESS PRIOR TO CLOSING. From
the date hereof to the Closing Date, and except (a) as otherwise provided in
this Article VII or (b) to the extent that Purchaser shall otherwise consent in
writing, the Partnership shall make its best efforts to continue to operate its
business in the ordinary course and consistent with past practice, and use its
best efforts to (a) preserve intact its goodwill and reputation and to preserve
its relationships with persons having business dealings with it, (b) except as
set forth in Schedule 5.17, comply with all laws applicable to the conduct of
the business of the Partnership the failure of which would result in material
injury to the Partnership, and (c) comply in
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all material respects with all contracts and Real Estate Leases to which the
Partnership is a party or by which the Partnership is bound.
7.02 ACCESS AND INFORMATION. From the date hereof to the Closing
Date the Partnership shall afford to Purchaser, its counsel, accountants and
other representatives, free and full access to all the offices, properties,
books, contracts, commitments and records of the Partnership and shall furnish
such persons with all information (including financial and operating data)
concerning its affairs as they reasonably may request, including copies and
extracts of pertinent records, documents and contracts. The Partnership and the
General Partner will cooperate with all reasonable requests with respect to any
audit conducted by Purchaser of the Partnership's finances or Station Assets.
7.03 NOTIFICATION OF CHANGES. Between the date hereof and the
Closing Date, the Partnership shall promptly (and in any event within five (5)
business days) notify Purchaser of any material adverse change in the business
or assets of the Partnership, the institution of or the threat of institution of
legal proceedings against the Partnership, or upon becoming aware of any event
that would cause or constitute a material breach of any of the representations
or warranties of the Partnership.
7.04 CERTAIN ACTS PROHIBITED. Except for the Tower Project costs
and contracts, between the date hereof and the Closing Date the Partnership
shall not, without the prior written
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consent of Purchaser, which consent shall not be unreasonably withheld:
(a) incur any material liability or encumber or permit the
encumbrance of any properties or assets of the Partnership;
(b) dispose of or contract to dispose of any property or
assets of the Partnership (except those non-material assets consumed or disposed
of in the ordinary course of business); or
(c) enter into any lease or contract for the purchase,
lease or acquisition of real estate or any lease or contract for the purchase,
lease or acquisition of personal property (except for non-material personal
property needed in the ordinary course of business);
(d) enter into any employment agreement or collective
bargaining agreement; or
(e) make any material change in the insurance policies
described in Schedule 5.08.
7.05 MAINTENANCE OF STATION. The Partnership and the General
Partner shall maintain in full force and effect through and including the
Closing Date the existing property damage, liability, and other insurance with
respect to the Station Assets to cover contingencies that can reasonably be
anticipated.
7.06 FCC APPLICATION. Within ten (10) days after execution of
this Agreement, the Partnership and the General Partner shall prepare and
provide Purchaser's counsel with the transferor's portion of an appropriate
application (the
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"Application") with the FCC requesting its written consent to the transfer of
control of the FCC Licenses from the Sellers to Purchaser. The Partnership and
the General Partner shall diligently take, or cooperate in the taking of, all
steps necessary and appropriate to expedite the preparation of the Application
and its prosecution to a favorable conclusion. The Partnership and the General
Partner will promptly provide Purchaser with a copy of any pleading, order, or
other document served on it relating to the Application. The Partnership and the
General Partner will use their respective best efforts and otherwise cooperate
with Purchaser in responding to any information requested by the FCC related to
the Application, in making any amendment to this Agreement requested by the FCC
which does not adversely affect the Partnership or Sellers in a material manner,
and in defending against any petition, complaint, or objection which may be
filed against the Application.
7.07 CONFIDENTIAL INFORMATION. If the transactions contemplated
in this Agreement are not consummated for any reason, neither the General
Partner nor any Seller shall disclose to third parties any information
designated as confidential and received from Purchaser or its agents in the
course of investigating, negotiating, and consummating the transactions
contemplated by this Agreement; provided, that no information shall be deemed to
be confidential that (a) becomes publicly known or available other than through
disclosure by any Seller or
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the General Partner; (b) is rightfully received by any Seller or the General
Partner from a third party; or (c) is independently developed by any Seller or
the General Partner. All originals of all material provided to any Seller or the
General Partner by Purchaser or its agents shall be returned to Purchaser and
all copies thereof shall be destroyed.
7.08 CONSUMMATION OF AGREEMENT. The Partnership and the Sellers
shall make every reasonable effort to fulfill all conditions to be fulfilled by
the Partnership and Sellers, respectively, under this Agreement and make every
reasonable effort to cause the transactions contemplated by this Agreement to be
fully carried out.
7.09 CONSENTS. The Partnership and the General Partner shall make
every reasonable effort to obtain or cause to be obtained prior to the Closing
consents to the change of control of the Partnership contemplated herein of all
material contracts and leases included in the Station Assets that require the
consent of any third party by reason of the transactions provided for in this
Agreement. The Partnership and the General Partner shall use commercially
reasonable efforts prior to Closing to obtain the signature of each lessor of a
material lease held by the Partnership as lessee to an estoppel certificate
which shall set forth, as to such lease: (a) the current term thereof; (b) the
number of options to renew such term, and for what additional term; (c) the
monthly rent, and that such rent is current; (d) that neither party is in
material
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default thereunder and all material obligations have been performed; and (e) to
their knowledge, there is no zoning or similar restriction applicable to the
leased property which impairs or would impair lessee's proposed operations or
permitted activities on such property.
7.10 WAIVER OF TRANSFER RESTRICTIONS. Each Seller hereby waives
the restrictions in Articles 8, 9 and 11 of the Partnership Agreement with
respect to the assignment by all other Sellers of their Partnership Interests as
provided in this Agreement and consents to such assignments.
7.11 DELIVERY OF PARTNERSHIP INTERESTS FREE OF DEBT. At or prior
to the Closing, Sellers shall cause the Partnership to pay all of the
Partnership's existing debts and liabilities, except for debts and liabilities
incurred with respect to the Tower Project referred to in Section 3.01 of this
Agreement, which will be assumed and performed in full by Purchaser.
7.12 DISTRIBUTION OF CASH FROM PARTNERSHIP. At or prior to the
Closing, the Sellers shall withdraw all cash and cash equivalents from the
Partnership and shall be entitled to any cash prepayments or deposits made on
behalf of the Partnership.
7.13 FINAL TAX RETURN. The Sellers shall cause the Partnership to
file a federal and state income tax return for the period beginning January 1,
1997 and ending on the Closing Date.
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ARTICLE VIII
COVENANTS OF PURCHASER PENDING THE CLOSING
Purchaser covenants and agrees that, from the date of this
Agreement to and including the Closing, it will take, or refrain from taking,
the following actions:
8.01 REPRESENTATION AND WARRANTIES. Purchaser shall give notice
to Sellers promptly upon the occurrence of, or upon becoming aware of the
impending or threatened occurrence of, any event that would cause or constitute
a material breach of any of the representations and warranties of Purchaser in
this Agreement.
8.02 APPLICATION FOR COMMISSION CONSENT. Within ten (10) days
after execution of this Agreement, Purchaser shall prepare and file an
appropriate Application with the FCC requesting its written consent to the
transfer of control of the FCC Licenses from the Sellers to Purchaser. Purchaser
will diligently take, or cooperate in the taking of, all steps necessary and
appropriate to expedite the preparation of the Application and its prosecution
to a favorable conclusion. Purchaser will promptly provide the Partnership with
a copy of any pleading, order, or other document served on it relating to the
Application. Purchaser will use its best efforts and otherwise cooperate with
the Partnership in responding to any information requested by the FCC related to
the Application or this Agreement, in making any amendment to this Agreement
requested by the FCC which does not adversely affect Purchaser in
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a material manner, and in defending against any petition, complaint, and other
objection which may be filed against the Application. The FCC filing fees shall
be paid by Purchaser.
8.03 CONFIDENTIAL INFORMATION. If the transactions contemplated
in this Agreement are not consummated for any reason, Purchaser shall not
disclose to third parties any information designated as confidential and
received from Sellers or the Partnership or its agents in the course of
investigating, negotiating, and performing the transactions contemplated by this
Agreement; provided, however, that no information shall be deemed to be
confidential that (a) become publicly known or available other than through
disclosure by Purchaser; (b) is rightfully received by Purchaser from a third
party; or (c) is independently developed by Purchaser. All originals of material
provided by the Partnership and Sellers to Purchaser or its agents shall be
returned to the Partnership and Sellers and all copies thereof destroyed.
8.04 CONSUMMATION OF AGREEMENT. Purchaser shall make every
reasonable effort to fulfill all conditions to be fulfilled by Purchaser under
this Agreement and make every reasonable effort to cause the transactions
contemplated by this Agreement to be fully carried out.
8.05 NOTICE OF PROCEEDINGS. Purchaser will promptly (and in any
event within five (5) business days) notify Sellers upon becoming aware of any
actual or threatened claim, dispute, arbitration, litigation, complaint,
judgment, order, decree,
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action or proceeding relating to Purchaser, the Station, the Station Assets, or
the consummation of this Agreement or any transaction contemplated herein.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions
provided for herein are, at the option of Purchaser, subject to the satisfaction
of the following conditions on or prior to the Closing Date:
9.01 COMPLIANCE BY SELLERS AND THE PARTNERSHIP. All the terms,
covenants and conditions of this Agreement to be complied with and performed by
the Sellers or the Partnership on or before the Closing Date shall have been
complied with and performed in all material respects.
9.02 REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE
PARTNERSHIP. The representations and warranties of Sellers and the Partnership
contained herein and in the Schedules, statements and documents delivered
pursuant hereto or in connection with the transactions contemplated hereby shall
be true and correct in all material respects on and as of the Closing Date with
the same effect as though all such representations and warranties had been made
on and as of that date, and Purchaser shall have received a certificate to such
effect dated the Closing Date signed by the Sellers and the Partnership.
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9.03 LITIGATION. No litigation shall be pending or threatened
before any court, governmental agency, bureau, board or other authority seeking
to enjoin the consummation of this Agreement or seeking damages or other relief
pursuant to any material claim not disclosed herein or in the Schedules
delivered pursuant hereto on the date of this Agreement.
9.04 HART-SCOTT-RODINO FILING. All requirements, if any, imposed
with respect to the transactions contemplated by this Agreement under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C.A. ss.18a, shall
have been satisfied and the applicable waiting period under such Act shall have
expired by or prior to the Closing Date.
9.05 FCC CONSENT. The FCC shall have (a) approved the
Partnership's 1997 license renewal application without modification, and (b)
given all requisite consent to the acquisition of control of the Partnership by
Purchaser as provided in this Agreement, and such approval shall have become a
Final Order (subject to waiver of such final order requirement in the sole
discretion of Purchaser).
9.06 PARTNERSHIP FREE OF DEBT. The Partnership, the Station
Assets and all other property of the Partnership shall be free and clear of any
and all liens, debts, charges, judgments, security interests and other
encumbrances of any nature or kind except those specifically permitted under
this Agreement including debt and liabilities incurred in connection with the
Tower Project.
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9.07 DELIVERIES OF SELLER AT THE CLOSING. Sellers shall have
delivered or caused to be delivered to Purchaser at the Closing the following
items:
(a) valid assignments of the Partnership Interests to
Purchaser;
(b) the books and records of the Partnership referred to in
Section 5.25;
(c) certificates of good standing for the Partnership from
the State of Florida and the State of Tennessee dated no less than thirty (30)
days prior to the Closing Date;
(d) the certificates referred to in Section 9.02 hereof;
(e) a certificate of the General Partner that all
liabilities of the Partnership have been satisfied (except for Tower Project
costs described in Schedule 3.01);
(f) the results of a UCC, lien and docket search regarding
the Partnership and Station Assets in Florida and Tennessee;
(g) one or more opinions of Sellers' counsel and/or special
counsel in substantially the form annexed hereto as Exhibit B (see Exhibit B as
to which party pays for the legal opinions); and
(h) the third party consents of any party required to
enable Purchaser to assume any material contracts or Real Estate Leases or other
items included in the Station Assets.
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9.08 PERMITS AND APPROVALS. The Partnership shall have obtained all
material permits and approvals from governmental authorities necessary for the
operation of the Station as currently conducted and for the construction of the
tower as currently proposed.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligation of Sellers to consummate the transactions provided
for herein is subject to the satisfaction of the following conditions on or
prior to the Closing Date:
10.01 COMPLIANCE BY PURCHASER. All the terms, covenants and
conditions of this Agreement to be complied with and performed by Purchaser on
or before the Closing Date shall have been complied with and performed in all
material respects.
10.02 REPRESENTATIONS AND WARRANTIES OF PURCHASER. The
representations and warranties of Purchaser contained herein shall be true and
correct in all material respects on and as of the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date, and Purchaser shall have furnished to Sellers a
certificate to such effect dated the Closing Date signed by the Managing Member
of Purchaser.
10.03 FCC CONSENT. The FCC shall have (a) approved the
Partnership's 1997 license renewal application without modification or any
condition materially adverse to Purchaser, and (b) given all requisite consent
to the acquisition of control
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of the Partnership by Purchaser as provided in this Agreement, and such approval
shall have become a Final Order (subject to waiver of such final order
requirement in the sole discretion of Purchaser).
10.04 RELEASE FROM TOWER PROJECT LIABILITIES. The General Partner
and the Sellers shall have received releases from appropriate contractors,
subcontractors and vendors of all liabilities and obligations associated with
the Tower Project.
10.05 DELIVERIES BY PURCHASER ON THE CLOSING DATE. Purchaser
shall have delivered or caused to be delivered to Sellers at Closing the
following items:
(a) the Purchase Price (less the Post-Closing Escrow
Deposit and the adjustments specified herein);
(b) the certificate set forth in Section 10.02;
(c) certificates of good standing from the State of
Tennessee; and
(d) an opinion of Purchaser's counsel in substantially the
form annexed hereto as Exhibit C.
ARTICLE XI
TERMINATION
11.01 RIGHT OF TERMINATION. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing Date:
(a) by the mutual consent of Purchaser and Sellers (acting
unanimously).
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(b) by Purchaser in the event that the conditions set forth
in Article IX of this Agreement shall not have been satisfied or waived within
270 days of the date of this Agreement or such later date as shall be agreed
upon by Purchaser and Sellers (acting unanimously);
(c) by Sellers (acting unanimously) in the event that the
conditions set forth in Article X of this Agreement shall not have been
satisfied or waived within 270 days from the date of this Agreement or such
later date as shall be agreed upon by Purchaser and Sellers (acting
unanimously);
(d) by either Purchaser or Sellers if the FCC denies the
Application in an order which has become a Final Order; or
(e) by either Purchaser or Sellers (acting unanimously) if
any action or proceeding before any court or other governmental body or agency
shall have been instituted in good faith by an unrelated third party (i) to
restrain, modify, or prohibit the transactions contemplated by this Agreement;
(ii) to recover damages from Purchaser, the Partnership or Sellers if such
action or proceeding could result in the imposition of a material liability
against or affecting the business or properties of Purchaser, the Partnership or
Sellers in the reasonable opinion of the party seeking to terminate this
Agreement, or (iii) to require Purchaser, Partnership or Sellers to take any
action that would have a material and adverse effect on the business or
properties of Purchaser, the Partnership or Sellers in the reasonable opinion of
the party seeking to
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terminate this Agreement unless either Purchaser, the Partnership or Sellers
causes such action or proceeding to be dismissed within sixty (60) days after it
is filed.
11.02 NOTICE OF TERMINATION. Notice of termination of this
Agreement, as provided for in this Article XI, shall be given by the parties so
terminating to the other parties hereto in accordance with the provisions of
Section 14.07 of this Agreement.
11.03 EFFECT OF TERMINATION. In the event that this Agreement is
terminated pursuant to Section 11.01, except for the confidentiality provisions
of Sections 7.07 and 8.03, which shall remain in full force and effect, this
Agreement shall become void and of no further force and effect, without any
liability on the part of any of the parties hereto, and the Escrow Agent shall
return the Escrow Deposit to Purchaser. Notwithstanding the foregoing sentence,
if the Closing does not occur and the non-occurrence of the Closing is the
result of a material breach by Purchaser of its obligations under this
Agreement, and neither the Partnership nor the Sellers have materially breached
their obligations under this Agreement, the Escrow Agent shall disburse the
Escrow Deposit to the Sellers as liquidated damages resulting to Sellers from
such default. Receipt of the Escrow Deposit by Sellers shall be the exclusive
remedy that any of the Sellers or the Partnership may otherwise have as a result
of Purchaser's breach. If the non-occurrence of the Closing is not the result of
a material breach by Purchaser of its obligations under this
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Agreement, or if the Partnership or the Sellers have materially breached their
obligations under this Agreement, the Escrow Agent shall return the Escrow
Deposit to Purchaser. Accrued interest on the Escrow Deposit shall at all times
belong to and be paid to Purchaser.
11.04 RISK OF LOSS. If the Station Assets are materially damaged
by wind, fire or other casualty prior to the Closing, the Partnership shall use
its best efforts to restore or replace such damaged property prior to the
Closing. If such damaged property is not restored or replaced prior to the
Closing, the transactions contemplated by this Agreement shall be consummated
subject to reduction of the Purchase Price to reflect the cost of repair or
replacement of the damaged asset. The Purchaser and the General Partner (on
behalf of the Sellers) shall negotiate in good faith to arrive at a mutually
acceptable adjustment to the Purchase Price. If Purchaser and the General
Partner are unable to agree upon the amount of such adjustment, the matter shall
be referred to arbitration pursuant to Section 14.02 of this Agreement.
11.05 SPECIFIC PERFORMANCE. The General Partner, Partnership and
the Sellers hereby acknowledge that the Station, FCC licenses and Station Assets
are unique assets not readily available on the open market and that money
damages would be incalculable and inadequate to compensate Purchaser for any
material breach by any of them of their obligations hereunder. Therefore, if the
parties hereto fail to consummate this
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Agreement due to any material breach by the General Partner, the Partnership, or
Sellers of any representation, warranty, covenant, condition, or obligation
hereunder, and the Purchaser has not materially breached any representation,
warranty, covenant, condition, or obligation hereunder, Purchaser shall be
entitled to specific performance of the terms of this Agreement and of Sellers'
obligation to consummate the transaction contemplated hereby, in which event the
General Partner, Partnership and Sellers waive any defense that Purchaser has an
adequate remedy at law.
11.06 ASSUMPTION OF PURCHASER'S LEASES IN CERTAIN EVENTS. The
parties acknowledge that, in anticipation of the Closing, Purchaser may enter
into certain leases for real or personal property in connection with the
operation of the Station after the Closing. If the parties fail to consummate
this Agreement due to any material breach by the General Partner, the
Partnership or Sellers of any representation, warranty, covenant, condition or
obligation hereunder, and Purchaser has not materially breached any
representation, warranty, covenant, condition or obligation hereunder, the
Partnership shall assume Purchaser's obligations under all of such leases that
are reasonably related to the operation of the Station.
ARTICLE XII
INDEMNIFICATION
12.01 SELLERS' AGREEMENT TO INDEMNIFY. Subject to the terms and
conditions of this Article XII, each Seller severally
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(and not jointly) agrees to indemnify, defend and hold Purchaser harmless, but
only in proportion to his, her or its pro rata share of Partnership Interests as
set forth in Schedule 3.02, from and against all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs and expenses,
including without limitation, reasonable attorneys' fees and expenses
(collectively "Claim" or "Claims"), asserted against, imposed upon or incurred
by Purchaser by reason of or resulting from (a) a breach of any representation
or warranty of Sellers or the Partnership contained in or made pursuant to this
Agreement, or (b) a breach of any covenant or agreement of Sellers or the
Partnership contained in or made pursuant to this Agreement, or (c) any
Undisclosed Liability, or (d) any FCC imposed forfeitures relating to actions or
inactions by the Partnership or the General Partner prior to the Closing;
provided, however, Sellers shall not be required to indemnify Purchaser with
respect to any Claim based upon the breach of any warranty, representation,
covenant or agreement contained in or made pursuant to this Agreement unless the
amount of such Claim, when aggregated with all other such Claims, shall exceed
$50,000, but then such indemnification shall be to the full extent of the Claim.
12.02 PURCHASER'S AGREEMENT TO INDEMNIFY. Subject to the terms
and conditions of this Article XII, Purchaser agrees to indemnify, defend and
hold each Seller harmless from and against all Claims asserted against, imposed
upon or incurred by such
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Seller by reason of or resulting from (a) a breach of any representation or
warranty of Purchaser contained in or made pursuant to this Agreement, or (b) a
breach of any covenant or agreement of Purchaser contained in or made pursuant
to this Agreement, or (c) any Claim arising out of the operation of the Station
after the Closing.
12.03 CONDITIONS OF THIRD PARTY INDEMNIFICATION. The obligations
and liabilities of any party hereunder with respect to Claims resulting from the
assertion of liability by third parties shall be subject to the following terms
and conditions:
(a) The party seeking indemnification (the "Indemnified Party")
shall give the party from whom it asserts indemnification (the "Indemnifying
Party") timely notice of any such Claim after the Indemnified Party receives
notice thereof (and in no event less than thirty (30) days after the Indemnified
Party receives such notice), and the Indemnifying Party will undertake the
defense thereof by representatives of its, his or her own choosing. All costs
and expense of such defense (including fees of counsel), and any settlement
resulting from the defense of any Claim by the Indemnifying Party, shall be paid
for by the Indemnifying Party; provided, that in no event may the Indemnifying
Party settle any such Claim without the Indemnified Party's consent if the
settlement fails to include a full release of the Indemnified Party from any and
all liability and a payment of any and all loss incurred by the Indemnified
Party under the Claim.
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(b) In the event that the Indemnifying Party, within a reasonable
time after receipt of notice of any such Claim, but in no event more than thirty
(30) days after receipt of such notice, fails to defend, the Indemnified Party
will have the right to undertake the defense, compromise or settlement of such
Claim on behalf of and for the account and risk of the Indemnifying Party,
subject to the right of the Indemnifying Party to assume the defense of such
Claim at any time prior to settlement, compromise or final determination
thereof.
(c) In the event so requested by the Indemnifying Party, the
Indemnified Party shall use its best efforts to make available all information
and assistance reasonably required in the defense by the Indemnifying Party of a
Claim.
12.04 TAX BENEFITS. In the event a Claim hereunder results in a
tax benefit to the Indemnified Party, the Indemnifying Party shall be entitled
to a credit against any liability thereunder in the amount by which federal and
state income taxes of the Indemnified Party shall be reduced by reason of any
deduction allowed the Indemnified Party for any payment, settlement or
satisfaction of such Claim.
12.05 LIMITATIONS ON SURVIVAL. An Indemnifying Party's obligation
to indemnify an Indemnified Party as provided in this Article XII is subject to
the condition that the Indemnifying Party shall have received written notice of
the Claim for which indemnity is sought within two (2) years after the Closing
Date.
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12.06 BROKERS' AND FINDERS' FEES. Each Seller, the Partnership
and the Purchaser severally agree that each of them is solely responsible for
the payment of brokers' or finders' fees payable to any person retained by any
Seller, the Partnership or Purchaser, respectively, in connection with the
transactions contemplated by this Agreement, and each will indemnify the others
with respect thereto.
12.07 LIMITATION OF SELLERS' LIABILITY. Notwithstanding anything
to the contrary herein contained, except for Claims resulting from fraud by a
Seller or the Partnership and except for Claims resulting from a breach of
Sections 5.04, 5.17 and 5.26, and of this Agreement, (a) the liability of
Sellers to Purchaser under Article 12.01 hereof shall not exceed the
Post-Closing Escrow Deposit (as defined in Section 3.05), and (b) the sole
source of indemnification from Sellers to Purchaser under this Article XII shall
be the Post-Closing Escrow Deposit. The liability of any Seller to Purchaser for
Claims resulting from fraud by a Seller or the Partnership and for Claims
resulting from a breach of Sections 5.04, 5.17 and 5.26 shall not exceed such
Seller's pro rata share of the Purchase Price.
12.08 REMEDIES EXCLUSIVE. The remedies provided in this Article
XII constitute the sole and exclusive remedies for recoveries by one party
against another party with respect to any breach of the representations,
warranties, covenants and agreements set forth in this Agreement; provided,
however, that
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the foregoing shall not limit the right of Purchaser to specifically enforce
Sellers' performance under this Agreement.
ARTICLE XIII
ADDITIONAL COVENANTS
13.01 LOANS TO PARTNERSHIP BY PURCHASER AND ESCROW AGENT. (a) To assist
the Partnership with the construction of the Tower Project, the Escrow Agent
shall loan the Escrow Deposit to the Partnership and Purchaser shall loan to the
Partnership such additional funds as are reasonably needed to complete the Tower
Project (collectively the "Tower Project Loans") from the date hereof and the
Closing Date. Except as otherwise agreed by the General Partner, acting on
behalf of the Sellers, and Purchaser, the funds to be loaned by Purchaser shall
not exceed an amount equal to (i) the budget for the Tower Project set forth in
Schedule 3.01, less (ii) the Escrow Deposit plus $500,000. As an illustration,
if the budget for the Tower Project is $2,800,000, Purchaser need not loan the
Partnership more than $1,640,000 ($2,800,000 less $660,000 less $500,000).
Notwithstanding anything to the contrary in this Section 13.01, neither the
Escrow Agent nor Purchaser shall make any Tower Project Loans in excess of
amounts obligated in executed contracts set forth in Schedule 3.01 unless (i)
the loan amount is properly supported by an invoice and (ii) the invoice
receives the prior written approval of the Purchaser Representative appointed
pursuant to Section 13.02 of this Agreement. Each Tower Project Loan shall be
evidenced by a promissory note to the Escrow Agent in the form
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attached hereto as Exhibit D (the "Escrow Agent Note") and a promissory note to
Purchaser in the form attached hereto as Exhibit E (the "Purchaser Note"). The
Escrow Agent Note and the Purchaser Note (collectively the "Tower Project
Notes") shall be secured by a lien on the Tower Project, the Real Estate Leases,
the Partnership Interests and the Station Assets, subject only to the
Partnership pledge described in Schedule 4.01, the lien of Premier Bank,
Tallahassee, Florida, and any lien imposed by a contractor or vendor of the
Tower Project. The Tower Project Notes shall bear interest at the rate of eight
and one-quarter percent (8.25%) per annum. The Tower Project Notes shall be due
and payable upon the earlier of (a) the Closing, or (b) the termination of this
Agreement pursuant to Article XI; provided that, upon the assignment of the
Partnership Interests to Purchaser at the Closing, the Tower Project Notes
(including principal and accrued interest) shall be cancelled and marked
satisfied and the principal and accrued interest shall be considered part of the
costs of the Tower Project assumed by Purchaser.
(b) To assist the Partnership's construction of the Station, Purchaser
may, with the prior written approval of the Partnership, enter into leases and
other arrangements for the construction of the Station; provided, that if this
Agreement is not consummated for any reason other than a material default by
Purchaser, the Partnership shall accept an assignment of and
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assume responsibility for any such lease or other arrangement that was
previously approved in writing by the Partnership.
13.02 PURCHASER REPRESENTATIVE. The Purchaser shall appoint an
individual (the "Purchaser Representative") to consult with and advise the
Partnership on behalf of the Purchaser with respect to the Tower Project. The
Partnership shall furnish the Purchaser Representative with copies of plans,
proposals and invoices related to the Tower Project and shall permit the
Purchaser Representative to inspect the construction of the Tower Project and
participate in discussions with contractors, subcontractors and vendors.
Notwithstanding the foregoing provisions of this Section 13.02, the Partnership
shall have the final decision with respect to the construction of the Tower
Project. In no event shall Purchaser or the Purchaser's Representative be
entitled to make decisions for the Partnership with respect to the Tower Project
or to otherwise exercise any control over Station finances, personnel, and
programming.
ARTICLE XIV
MISCELLANEOUS
14.01 SURVIVAL OF REPRESENTATIONS. All statements contained in
any Schedule, document, certificate or other instrument delivered by or on
behalf of Purchaser, the Partnership or Sellers pursuant hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties hereunder by Purchaser, the Partnership or
Sellers, as the case may be. The representations, warranties and
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agreements made by Purchaser, the Partnership and Sellers herein shall survive
consummation of the transactions contemplated hereby, subject to the conditions
and limitations of Article XII.
14.02 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in Knoxville, Tennessee in accordance with the Rules of Commercial
Arbitration of the American Arbitration Association, and any decision or award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. The arbitration tribunal shall consist of three arbitrators, of whom
one shall be nominated by Purchaser, one shall be nominated by the Sellers
(acting unanimously), and the third, who shall serve as Chairman, shall be
chosen by the two party-nominated arbitrators, or, in the event the
party-nominated arbitrators are unable to designate the third arbitrator, by the
American Arbitration Association. Any party to this Agreement is authorized to
initiate arbitration by providing written notice of arbitration to the
Administrator of the American Arbitration Association and to the party or
parties against whom a claim is being made. Arbitrators shall be selected by the
parties within ten (10) days after such notice. The award of the arbitrators
shall be final and binding. The parties waive any right to appeal the award, to
the extent a right to appeal may be lawfully waived. Each party retains the
right to seek judicial assistance: (a) to compel arbitration;
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(b) to obtain interim measure of protection pending arbitration; and (c) to
enforce any decision of the arbitrators, including the final award. If any
arbitration or other formal legal proceeding is instituted by any party to
enforce rights under this Agreement (including a lawsuit to compel arbitration),
the prevailing party shall be reimbursed by the other party or parties for all
reasonable expenses incurred thereby, including reasonable attorneys' fees.
14.03 ASSIGNMENT. This Agreement shall not be assignable by any
of the parties hereto without the written consent of the other.
14.04 CONSTRUCTION. This Agreement shall be construed and
enforced in accordance with the laws of the State of Florida.
14.05 AMENDMENT. This Agreement may not be amended, supplemented
or interpreted except by a written instrument executed by all parties hereto.
14.06 EXPENSES. Except as otherwise provided herein, each party
hereto shall pay its, his or her own expenses incident to this Agreement and the
transactions contemplated hereby, including all fees and expenses of their
counsel, whether or not such transactions shall be consummated.
14.07 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have duly
been given if hand-delivered, if sent by facsimile (with written confirmation of
receipt), if mailed, by United States certified or registered mail, postage
prepaid, or
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if sent by overnight courier, charges prepaid, to the parties or their assignees
at the following addresses, (or at such other addresses as shall be given in
writing by the parties to one another):
Purchaser: Douglas Gealy, Managing Member
Acme Television Licenses of Tennessee, LLC
7125 Bluffstream Ct.
Columbus, OH 43235
With copy to: Lewis J. Paper
Dickstein, Shapiro, Morin & Oshinsky, LLP
2101 L Street, N.W.
Washington, DC 20037
Partnership: c/o C.W. TV, Inc.
3110 Capital Circle, N.E.
Tallahassee, FL 32308
Sellers: To the addresses set forth
on the signature pages hereof
With copy to: Alexander & Vann, LLP
P. O. Box 1479
Thomasville, GA 31799
Attn: David E. Wilder
14.08 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.09 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto and
the certificates, Schedules and other documents delivered pursuant hereto or
incorporated by reference herein, contain the entire agreement between the
parties hereto concerning the transaction contemplated herein and supersede all
prior and contemporaneous agreements or understandings between
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the parties hereto relating to the subject matter hereof. No oral
representation, agreement or understanding made by any party hereto shall be
valid or binding upon such party or any other party hereto.
14.10 ADDITIONAL DOCUMENTS. The Parties hereto will at any time
after the date hereof sign, execute, and deliver, or cause others so to do, all
such powers of attorney, deeds, assignments, documents and instruments and do or
cause to be done all such other acts and things as may be reasonably necessary
or proper to carry out the transactions contemplated by this Agreement.
14.11 PRONOUNS. All pronouns used herein shall be deemed to refer
to the masculine, feminine or neuter gender as the context requires.
14.12 CAPTIONS AND SECTION HEADINGS. Captions and section
headings used herein are for convenience only and are not a part of this
Agreement and shall not be used in construing it.
14.13 KNOWLEDGE OF PARTNERSHIP. For purposes of this Agreement,
"knowledge" or "awareness" of the Partnership means those facts known to the
General Partner, or to Dennis O. Boyle.
14.14 DISCLOSURE. Disclosure by the Partnership or a Seller in
one Schedule to this Agreement shall be deemed disclosed for purposes of any
other Schedule.
14.15 PRESS RELEASE. Purchaser and the Sellers (acting
unanimously) shall jointly prepare and determine the timing of any press release
or other announcements to the public
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or the news media relating to the execution of this Agreement. No party hereto
shall issue any press release or make any other public announcement relating to
the transactions contemplated by this Agreement without the prior consent of
both Purchaser and the Partnership, except that any party may make any
disclosure required to be made by it under applicable law (including applicable
FCC regulations, federal or state securities laws and the regulations of
securities markets) if such party determines in good faith that it is
appropriate to do so, gives prior notice thereof to the other parties hereto and
consults with the other parties hereto regarding the contents of such
disclosure.
14.16 PURCHASER. For purposes of this Agreement, (a) Sellers and
the Partnership may rely upon any notice or direction given by either ATLT or
ATT as if such notice or direction were given by Purchaser, and (b) any notice
given by the Partnership or Sellers or any delivery made by the Partnership or
Sellers to either ATLT or ATT shall be deemed given or made to Purchaser.
14.17 ENVIRONMENTAL AUDIT. Purchaser may obtain, at its expense,
a Phase 1 environmental audit of the Station Assets within twenty (20) days
after the execution of this Agreement. The Partnership shall be responsible for
curing or remediating any noncompliance with any Environmental Laws disclosed by
such audit prior to the Closing; provided, that (a) the Partnership may refuse
to expend any amount in excess of $50,000 for any such cure or remediation, and
(b) in the event
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the Partnership refuses to expend any amount in excess of $50,000, Purchaser
may, at its option and within five (5) days after notice of such refusal,
terminate this Agreement by giving notice to the Partnership and Sellers without
further liability to any party. Purchaser shall provide the Partnership and
Sellers with a copy of any environmental audit conducted pursuant to this
section within five (5) business days after receipt of such report, and the
Partership and Sellers shall have ten (10) business days after receipt of the
report to advise Purchaser whether any cure or remediation recommended by the
report would exceed $50,000 and, if so, whether the Partnership and/or Sellers
are prepared to pay any amount in excess of $50,000.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PURCHASER:
ACME TELEVISION LICENSES OF
TENNESSEE, LLC, a Tennessee limited
liability company
By:/s/Douglas E. Gealy
--------------------------------
Douglas E. Gealy
Managing Member
ACME TELEVISION OF
TENNESSEE, LLC, a Tennessee
limited liability company
By:/s/Douglas E. Gealy
--------------------------------
Douglas E. Gealy
Managing Member
{SIGNATURES CONTINUED}
55
<PAGE>
SELLERS:
C.W. TV, Inc.,
a Florida corporation
By:/s/Cynthia P. Willis
--------------------------------
Cynthia P. Willis, President
/s/Laura L. Phipps
--------------------------------
Laura L. Phipps
Address: 3110 Capital Circle, N.E.
Tallahassee, FL 32308
/s/Nancy P. Phipps
--------------------------------
Nancy P. Phipps
Address: 3110 Capital Circle, N.E.
Tallahassee, FL 32308
/s/Jennifer P. Mitchell
--------------------------------
Jennifer P. Mitchell
Address: 3110 Capital Circle, N.E.
Tallahassee, FL 32308
/s/Lisa P. Richardson
--------------------------------
Lisa P. Richardson
Address: 3110 Capital Circle, N.E.
Tallahassee, FL 32308
56
<PAGE>
/s/Gavin B. S. Phipps
--------------------------------
Gavin B. S. Phipps
Address: 3110 Capital Circle, N.E.
Tallahassee, FL 32308
/s/Colin S. Phipps
--------------------------------
Colin S. Phipps, Custodian
for Keegan S. Phipps, a minor
Address: 3110 Capital Circle, N.E.
Tallahassee, FL 32308
{SIGNATURES CONTINUED}
57
<PAGE>
/s/Ian J. Phipps
--------------------------------
Ian J. Phipps
Address: 3110 Capital Circle, N.E.
Tallahassee, Fl 32308
THE COSBY TRUST U/A DATED 10/18/95
By:/s/Raymond E. Lacy
--------------------------------
Raymond E. Lacy, Trustee
Address: Suite 1000
800 S. Gay St.
Knoxville, TN 37929
THE TAYLOR TRUST U/A DATED 10/18/95
By:/s/Raymond E. Lacy
--------------------------------
Raymond E. Lacy, Trustee
Address: Suite 1000
800 S. Gay St.
Knoxville, TN 37929
RYAN DENNIS BOYLE IRREVOCABLE
TRUST U/A DATED JANUARY 18, 1996
By:/s/Dennis O. Boyle
--------------------------------
Dennis O. Boyle, Trustee
Address: 3078 Shamrock North
Tallahassee, FL 32308
ELIZABETH ANN BOYLE IRREVOCABLE
TRUST U/A DATED JANUARY 18, 1996
By:/s/Dennis O. Boyle
Dennis O. Boyle, Trustee
Address: 3078 Shamrock North
Tallahassee, FL 32308
58
<PAGE>
{SIGNATURES CONTINUED}
RANDALL B. LANE IRREVOCABLE
TRUST U/A DATED JANUARY 18, 1996
By:/s/W. H. Lane
--------------------------------
W. H. Lane, Trustee
Address: 3919 Lakeview Dr.
Tallahassee, FL 32310
SUZANNE R. LANE IRREVOCABLE
TRUST U/A DATED JANUARY 18, 1996
By:/s/W. H. Lane
--------------------------------
W. H. Lane, Trustee
Address: 3919 Lakeview Dr.
Tallahassee, FL 32310
PARTNERSHIP:
CROSSVILLE TV LIMITED PARTNERSHIP
By: C.W. TV, INC., General Partner
By:/s/Cynthia P. Willis
--------------------------------
Cynthia P. Willis, President
59
<PAGE>
The following pages contain a list of Exhibits and Schedules which have
been intentionally omitted by the Registrants.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Page 1 of 2
Exhibit A - ESCROW AGREEMENT
Exhibit B - SELLER'S COUNSEL OPINION
Exhibit C - PURCHASER'S COUNSEL OPINION
Exhibit D - ESCROW AGENT NOTE
Exhibit E - PURCHASER NOTE
Schedule 3.01 - TOWER PROJECT
Schedule 3.02 - LIST OF SELLERS AND PARTNERSHIP
INTERESTS
Schedule 4.01 - LIENS ON PARTNERSHIP INTERESTS
Schedule 5.01 - PARTNERSHIP AGREEMENT
Schedule 5.03 - FINANCIAL STATEMENTS
Schedule 5.05(a) - PERSONAL PROPERTY
Schedule 5.05(b) - OPERATING LEASES
Schedule 5.06(b) - REAL ESTATE LEASES
Schedule 5.07 - PATENTS
Schedule 5.08 - INSURANCE
Schedule 5.10 - LITIGATION
Schedule 5.11 - COMPLIANCE WITH LAWS
Schedule 5.13 - CONTRACTS
Schedule 5.14 - DESIGNATION OF PARTNERSHIP ADMINISTRATOR
Schedule 5.16 - BANK ACCOUNTS
Schedule 5.17 - GOVERNMENTAL AUTHORIZATIONS
(INCLUDING FCC LICENSES)
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Page 2 of 2
Schedule 5.18 - ENVIRONMENTAL
Schedule 5.22 - CABLE CARRIAGE
Schedule 5.23 - TRADE, BARTER AND SALES AGREEMENTS
Schedule 5.24 - CERTAIN INTERESTS AND RELATED PARTIES
Schedule 5.25 - PARTNERSHIP BOOKS AND RECORDS
Schedule 5.27 - PROGRAMMING AGREEMENTS
Schedule 5.28 - STATION ASSETS
ASSET PURCHASE AGREEMENT
FOR
KWBP-TV
SALEM, OREGON
BETWEEN
CHANNEL 32 INCORPORATED
AND
NEWCO, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1. Exchange of Consideration................................1
1.1. Consideration Conveyed by Seller.............................1
1.1.1. Station Assets........................................1
1.1.2. Excluded Assets.......................................3
1.1.3. Seller's Retained Liabilities.........................4
1.2. Consideration Conveyed by Buyer..............................4
1.2.1. Purchase Price........................................4
1.2.2. Seller's Stock Acquisition............................5
1.2.3. Loan to Seller........................................5
1.2.4. Noncompetition Agreement..............................5
1.3. Adjustments..................................................6
1.3.1. Prorations............................................6
1.3.2. Trade and Barter Items................................6
1.3.3. Disputes..............................................6
1.4. Allocation...................................................6
1.5. Closing......................................................6
1.5.1. Date and Location.....................................6
1.5.2. Exchange of Documents.................................7
1.6. Timing.......................................................7
ARTICLE 2. Representation and Warranties of Seller..................7
2.1. Corporate Status.............................................7
2.2. Licenses.....................................................7
2.3. Condition of Assets..........................................8
2.4. Title........................................................8
2.5. Employees....................................................8
2.6. Taxes........................................................9
2.7. Contracts....................................................9
2.8. Environmental................................................9
<PAGE>
2.9. Financial Statements.........................................10
2.10. Litigation...................................................10
2.11. Compliance with Laws.........................................10
2.12. No Defaults..................................................10
2.13. Brokers......................................................10
2.14. Seller Action................................................11
2.15. Station Assets...............................................11
2.16. Leases.......................................................11
2.17. Insolvency...................................................11
2.18. Approvals....................................................11
2.19. Cable Carriage...............................................12
2.20. Bulk Sales Law...............................................12
2.21. No Material Omission.........................................12
ARTICLE 3. Representation and Warranties of Buyer...................12
3.1. Status.......................................................12
3.2. Corporate Action.............................................12
3.3. No Defaults..................................................12
3.4. Brokers......................................................13
3.5. Litigation...................................................13
3.6. Qualification as a Broadcast Licensee........................13
3.7. No Material Omission.........................................13
ARTICLE 4. Covenants of Seller Pending Closing......................13
4.1. Maintenance of Station.......................................13
4.1.1. Sell, Lease, Transfer.................................13
4.1.2. Enter into any........................................13
4.1.3. Renew, Renegotiate, Modify............................14
4.1.4. Subject to Section 1.1.1.(c)..........................14
4.1.5. Make, Allow, or Consent...............................14
4.1.6. Make Any Material Change..............................14
<PAGE>
4.1.7. Take Any Action.......................................14
4.2. Organization, Good Will, Promotion...........................14
4.3. Access to Facilities, Files, and Records.....................14
4.4. Representations and Warranties...............................14
4.5. Application for FCC Consent..................................14
4.6. Consents.....................................................15
4.7. Notice of Proceedings........................................15
4.8. Confidential Information.....................................15
4.9. Consummation of Agreement....................................15
4.10. Compliance with Law..........................................15
4.11. Performance under Contracts and Leases.......................15
4.12. HSR Filing...................................................15
ARTICLE 5. Convenants of Buyer Pending the Closing..................16
5.1. Representation and Warranties................................16
5.2. Application for Commission Consent...........................16
5.3. Confidential Information.....................................16
5.4. Consummation of Agreement....................................16
5.5. Notice of Proceedings........................................16
5.6. HSR Filing...................................................17
ARTICLE 6. Conditions Precedent to Obligations of Seller to Close...17
6.1. Representations, Warranties, Covenants.......................17
6.1.1. Buyer's Representation and Warranties.................17
6.1.2. Buyer's Performance Under Agreement...................17
6.1.3. Buyer's Deliveries....................................17
6.2. Proceedings..................................................17
6.2.1. Absence of Litigation.................................17
6.2.2. Notice of Investigation...............................17
6.3. FCC Approval.................................................17
6.4. HSR Approval.................................................18
<PAGE>
6.5. Legal Opinion................................................18
6.6. Cancellation of Note.........................................18
6.7. Issuance of Stock............................................18
ARTICLE 7. Conditions Precedent to Obligations of Buyer to Close....18
7.1. Representations, Warranties, Covenants.......................18
7.1.1. Seller's Representations and Warranties...............18
7.1.2. Seller's Performance Under Agreement..................18
7.1.3. Seller's Deliveries...................................18
7.2. Proceedings..................................................18
7.2.1. Absence of Litigation.................................18
7.2.2. Absence of Investigation..............................19
7.3. Damage to the Assets.........................................19
7.3.1. No Material Damage....................................19
7.3.2. Rick of Loss..........................................19
7.3.3. Broadcast Interruption................................19
7.4. FCC Approval.................................................19
7.5. Contract and Real Estate Lease Payments......................20
7.6. Bulk Sale Law................................................20
7.7. Legal Opinion................................................20
7.8. Environmental Audits.........................................20
7.9. HSR Approval.................................................20
7.10. Noncompetition Agreement.....................................20
7.11. Building Lease...............................................20
7.12. No Material Adverse Change...................................20
ARTICLE 8. Indemnification..........................................20
8.1. Survival.....................................................20
8.2. Indemnification of Buyer.....................................21
8.3. Indemnification of Seller....................................21
8.4. Notice of Claim..............................................21
<PAGE>
8.5. Defense of Third Party Claim.................................21
8.6. Limitations..................................................22
8.7. Offset Against Stock Purchase................................22
ARTICLE 9. Miscellaneous............................................22
9.1. Termination of Agreement.....................................22
9.1.1. By the Mutual Consent.................................22
9.1.2. By Seller.............................................22
9.1.3. By Buyer..............................................22
9.1.4. By Seller or buyer....................................22
9.1.5. By Any Party..........................................22
9.2. Liabilities Upon Termination.................................22
9.2.1. Seller's Remedies.....................................23
9.2.2. Buyer's Remedies......................................23
9.2.3. Notice of Breach......................................23
9.2.4. Survival of Confidentiality Obligations...............23
9.3. Expenses.....................................................23
9.4. Assignments..................................................23
9.5. Further Assurances...........................................24
9.6. Notices......................................................24
9.6.1. If to Seller..........................................24
9.7. Law Governing................................................25
9.8. Waiver of Provisions.........................................25
9.9. Counterparts.................................................25
9.10. Reimbursement of Legal Expenses..............................25
9.11. Publicity....................................................25
9.12. Seller's Access to Records...................................25
9.13. Entire Agreement.............................................26
ARTICLE 10. Rules of Construction...................................26
10.1. Defined Terms................................................26
<PAGE>
10.2. Number and Gender............................................28
10.3. Headings and Cross-References................................28
10.4. Computation of Time..........................................28
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated as of January 31, 1997, and is between Channel
32 Incorporated (the "Seller"), a corporation organized under the laws of
Oregon, and NewCo of Oregon, Inc. (the "Buyer"), a corporation organized under
the laws of Oregon.
R E C I T A L S:
1. Seller holds licenses from the Federal Communications
Commission (the "FCC") for broadcast television station KWBP-TV in Salem, Oregon
(the "Station") and owns or holds other assets used or useful in the operation
of the Station.
2. Seller desires to sell, assign, and transfer, to the fullest
extent permitted by law, the FCC licenses and other assets owned or held by
Seller and used or useful in the operation of the Station.
3. To the fullest extent permitted by law, Buyer desires to
acquire the FCC licenses for the Station and other assets owned or held by
Seller and used or useful in the operation of the Station, all under the terms
described herein.
4. On this same day, Seller and Buyer shall, subject to the
expiration of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR"), execute a Management Agreement
("MA") under which Buyer shall provide programming to be aired on the Station,
which shall remain under the exclusive control of Seller pending consummation of
the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants contained herein, the parties hereby agree as follows:
ARTICLE 1. EXCHANGE OF CONSIDERATION
1.1 CONSIDERATION CONVEYED BY SELLER. At the Closing, as defined
herein, Seller shall provide Buyer with the following consideration:
1.1.1. STATION ASSETS. Subject to the terms and conditions
of this Agreement, Seller shall, to the fullest extent permitted by law, assign,
convey, transfer, and deliver to Buyer, and Buyer shall, to the fullest extent
permitted by law, acquire from Seller free and clear of all debts, liens,
claims, financing leases, security interests and encumbrances of any kind
whatsoever (except as permitted herein), all of Seller's right, title and
interest in and to Seller's assets, real and personal, tangible and intangible,
of every kind and description, owned or held by Seller and used or useful in the
operation of the Station (collectively the "Station Assets") except the assets
described in Section 1.1.2. of this Agreement. The Station Assets consist of the
following items:
<PAGE>
(a) GOVERNMENT LICENSES. All licenses and other
authorizations issued by the FCC to Seller (the "FCC Licenses") with respect to
the Station, as well as any licenses and authorizations issued by any other
governmental authority, true copies of which are included in SCHEDULE 1 to this
Agreement, together with any and all applications pending before the FCC or any
other governmental authority with respect to renewals, extensions, or
modifications thereof.
(b) TANGIBLE PERSONAL PROPERTY. All equipment, furniture,
fixtures, office materials and supplies, spare parts, and other tangible
personal property of every kind and description owned as of the date of this
Agreement by Seller and used or useful in the operation of the Station, with all
material items set forth on SCHEDULE 2 to this Agreement, less any non-material
tangible assets consumed in the ordinary course of the Station's business after
the date hereof, and any additions, improvements, replacements, and alterations
made thereto in the ordinary course of business between the date of this
Agreement and the Closing Date, as defined herein. For purposes of this
paragraph only, a material asset is deemed to be one with a value of at least
$100.
(c) CONTRACTS. All rights in and under certain contracts,
agreements, and leases of any kind (except those relating to real property and
sale of time on the Station) relating to the operation of the Station which
Buyer has agreed to assume, whether in existence as of the date of this
Agreement or entered into or acquired between the date hereof and the Closing
Date, as defined herein, in the ordinary course of business (all of the
foregoing collectively referred to herein as the "Contracts"): provided, that
SCHEDULE 3 includes true copies of all written Contracts as well as accurate
descriptions of all oral Contracts to be assumed by Buyer; provided further,
that, except as provided herein, Buyer shall not assume any Contract not
identified in SCHEDULE 3; provided further, that the discounted value of any
equipment leased pursuant to a Contract to be assumed by Buyer hereunder is
equal to or less than the fair market value of the equipment; provided further,
that no Contract created subsequent to the date of this Agreement shall be
assigned to Buyer without Buyer's written approval unless such Contract involves
less than $5000 value in goods or services (or $50,000 in the aggregate of such
Contracts) and can be canceled upon 30 days notice without liability to Buyer;
and provided further, that Seller shall promptly provide Buyer with a true copy
or, in the event of an oral agreement, an accurate description of all material
terms, of any such Contract entered into subsequent to the date of this
Agreement which is to be assumed by Buyer.
(d) LEASES. All leases relating to real property (the
"Real Estate Leases"), true copies of which or, in the case of oral agreements,
summaries of which are annexed hereto in SCHEDULE 4.
(e) TIME SALES AGREEMENTS. All agreements, including
trade and barter agreements (collectively, the "Trade Agreements"), for the sale
of time on the Station in the ordinary course of business and in accordance with
past practices of the Station: provided, that Buyer shall only assume Trade
Agreements which involve the provision of goods or services related to and
useful in the business of the Station.
2
<PAGE>
(f) MARKETING ITEMS. All trademarks, call signs, service
marks, franchises, patents, trade names, jingles, fictitious names, slogans, and
logotypes owned and used by Seller as of the date hereof, as well as those
acquired between the date hereof and the Closing Date in connection with the
operation of the Station.
(g) PROGRAMMING AND COPYRIGHTS. All programs and
programming materials and elements of whatever form or nature owned or licensed
for use by Seller and used in the operation of the Station as of the date hereof
(except those included in the Excluded Assets), all of which are identified in
SCHEDULE 5 annexed hereto, together with all such programs, materials, elements,
intellectual property rights, and copyrights acquired between the date hereof
and the Closing Date, whether recorded on tape or any other medium or intended
for live performance, and whether completed or in production, and all related
common law and statutory copyrights owned or licensed for use by Seller and used
or useful in the operation of the Station.
(h) RECORDS. Any and all files, program logs, public
inspection files, and other records that relate to the operation of the Station
in the possession of Seller on the Closing Date, except Seller's records that
pertain to the organization of Seller.
(i) GOODWILL. All of Seller's goodwill in and going
concern value of the Station.
(j) ACCOUNTS RECEIVABLE. All notes and accounts receivable
of Seller relating to or arising out of the sale of advertising time on the
Station at any time on or after January 1, 1997 (the "1997 Accounts
Receivable").
1.1.2. EXCLUDED ASSETS. Notwithstanding the foregoing, there
shall be excluded from the Station Assets and retained by Seller, to the extent
in existence on the Closing Date, the following assets (the "Excluded Assets"):
(a) ACCOUNTS RECEIVABLE. All notes and accounts
receivable of Seller relating to or arising out of the sale of advertising time
on the Station prior to January 1, 1997 (the "1996 Accounts Receivable").
(b) CASH AND INVESTMENTS. All cash on hand or in bank
accounts and all cash equivalents and similar investments of Seller, such as
certificates of deposit.
(c) PREPAID ITEMS. All deposits, reserves, and prepaid
expenses and taxes (unless prorated as provided in Section 1.3. of this
Agreement).
(d) PERSONAL PROPERTY. All non-material tangible personal
property disposed of or consumed in the ordinary course of business of the
Station.
(e) INSURANCE. All contracts of insurance.
3
<PAGE>
(f) SECURITIES. Any and all securities owned or held by
Seller.
(g) CLAIMS. Any and all claims of Seller with respect to
transactions which transpire prior to the Closing Date, including, without
limitation, claims for tax refunds.
(h) CONTRACTS. Programming contracts as well as all
other agreements, leases, and contracts not assumed by Buyer in accordance with
Section 1.1.1.(c), (e) and (f) of this Agreement.
(i) MISCELLANEOUS ASSETS. Pension, profit-sharing, and
savings plans and trusts and any assets thereof.
(j) ORGANIZATIONAL DOCUMENTS. Seller's books and original
records that pertain to the organization, existence or capitalization of Seller.
(k) REAL PROPERTY. The real property and improvements
located thereon at 10255 SW Arctic Drive, Beaverton, Oregon 97005;
(l) REAL ESTATE LEASES. Any and all leases for use of
the real property described in Subsection 1.1.2. (k).
1.1.3. SELLER'S RETAINED LIABILITIES. The Station Assets shall
be sold and conveyed to Buyer free and clear of all debts, liens, claims,
financing leases, security interests and encumbrances or liabilities of any kind
or nature except for liens for current taxes not yet due and payable (the
"Permitted Encumbrances"). Unless reflected in a document executed by Buyer,
Buyer shall not assume or be liable for (a) any programming contract or other
contract, agreement or lease not specifically assumed by Buyer hereunder; (b)
any obligation of Seller arising out of any contract of insurance, any pension,
retirement or profit-sharing plan, or any trust or other benefit plan; (c) any
litigation, proceeding, or claim relating to the business or operation of the
Station prior to the Closing, regardless of whether such litigation, proceeding,
or claim is pending, threatened, or asserted before, on, or after the Closing;
or (d) any obligation (including but not limited to wages, salaries, vacation
pay, payroll taxes, COBRA coverage or severance payments) to or for persons
employed by Seller (recognizing that Buyer has no obligation to employ any of
Seller's employees).
1.2. Consideration Conveyed by Buyer.
1.2.1. PURCHASE PRICE. Except as otherwise provided herein,
Buyer shall pay Seller at the Closing Seventeen Million Six Hundred Thousand
Dollars ($17,600,000) (the "Purchase Price") by wire transfer of immediately
available federal funds pursuant to instructions from Seller, less adjustments
made pursuant to this Agreement.
4
<PAGE>
1.2.2. SELLER'S STOCK ACQUISITION. At the Closing, as defined
herein, Buyer will sell, transfer, convey and otherwise assign to Seller a 20
percent ownership interest in Buyer (subject to pro rata dilution for financing
agreements, management incentives, and acquisition of capital after closing from
third parties) provided, that Seller would have the option within six (6) months
of Closing to convert its ownership interest in Buyer to an ownership interest
of comparable value in Buyer's parent on the same terms and conditions provided
to original investors in Buyer or its parent (other than Buyer's founding
parties). The ownership interest in Buyer or its assignee acquired by Seller
under this subsection shall be reconveyed, retransferred, resold, and reassigned
to Buyer on the Fifth Anniversary date of the Closing in accordance with an
appraisal performed by a qualified appraiser. To that end, Seller and Buyer
shall each select a qualified appraiser six (6) months prior to the date of
sale, and the two appraisers shall, within thirty (30) days thereafter, jointly
select the appraiser to provide the appraisal.
1.2.3. LOAN TO SELLER. If the Closing does not occur by May 31,
1997, Buyer will loan or cause to be loaned to Seller Ten Million Dollars
($10,000,000) on that date to be used to pay in full all outstanding balances of
any debt of Seller. The loan will be payable at the Closing or, in the event
there is no Closing, within twelve (12) months from the termination of the
Purchase Agreement. The loan will be evidenced by a Promissory Note (the "Note")
in the form of Exhibit A annexed hereto which will bear annual interest on the
outstanding principal (with the rate of interest to be determined by the third
party lender providing the funds). If there is no Closing then, in that event,
Seller and Buyer will immediately commence efforts to refinance or recapitalize
the Seller. If no agreement can be reached by the parties within 120 days after
termination with respect to any refinancing or recapitalization plan, then, in
that event, Seller shall initiate efforts in conjunction with Buyer and/or its
principals to sell the Station to a third party. The proceeds of the sale to a
third party will be used to (1) first repay the aforementioned loan and accrued
interest (to the extent not previously paid), (2) then reimburse Buyer for any
net losses incurred by Buyer under the MA and (3) then pay Buyer 50% of the
gross amount received in excess of $22 Million. The loan will be secured by (1)
a first security interest in accordance with the form annexed hereto as Exhibit
B in all of the Station Assets, including but not limited to licenses issued by
the FCC (to the extent permitted by law) and the proceeds of the sale of the
Station Assets, (2) pledges of stock for Seller and Peregrine Communication,
Ltd. ("Peregrine") and (3) the personal guarantees of Roy Rose, Daniel J.
Alderman, and Hampton Holdings, L.L.C., an Oregon limited liability company, in
the form of Exhibit C annexed hereto: provided, that Buyer will not invoke its
remedies under those guarantees unless and until it is determined the
aforementioned pledged stock is insufficient to repay the amounts due Buyer
under the aforementioned loan.
1.2.4. NONCOMPETITION AGREEMENT. One Thousand Dollars ($1,000) of
the Purchase Price will be allocated as consideration for the execution by
Seller and its parent company, Peregrine Communications, Ltd., of the
Noncompetition Agreement annexed hereto as EXHIBIT D.
5
<PAGE>
1.3. ADJUSTMENTS.
1.3.1. PRORATIONS. At the Closing, all income of the Station and all
taxes and assessments, rent, water, sewer and other utility charges and lienable
municipal services, if any, with respect to the Station Assets to be acquired by
Buyer shall be apportioned and allocated between Buyer and Seller as of January
1, 1997 on the basis of the period of time to which such income or liabilities
apply. To the extent such items cannot be determined at Closing, a final
settlement on such prorations shall be made within thirty (30) days after the
Closing Date. If the Closing occurs before the tax rate is fixed for the then
current term, the apportionment of taxes at Closing shall be upon the basis of
the tax rate for the preceding tax year applied to the latest assessed
valuation. If the tax rate is changed with respect to any period of time prior
to the Closing Date, as defined herein, the post-Closing proration shall include
a corresponding adjustment in the final proration made pursuant to this Section.
1.3.2. TRADE AND BARTER ITEMS. At the Closing, Seller shall deliver
to Buyer a report, dated the Closing Date (the "Trade Report"), which lists all
Trade Agreements included in the Station Assets, together with an itemized
statement of the aggregate value of time owed (based on the Station's current
rates) pursuant to each of the Trade Agreements and the fair market value of
goods and services to be received pursuant to each of the Trade Agreements as of
the Closing Date. The Purchase Price to be paid by Buyer to Seller at Closing
shall be reduced to the extent that the aggregate value of the Station's
post-Closing obligations under Trade Agreements for the broadcast of advertising
time exceeds the aggregate value of the goods and services to be received by the
Station under the Trade Agreements after the Closing.
1.3.3. DISPUTES. In the event of any disputes between the parties as
to any adjustments under this Section, the amounts not in dispute shall be paid
at the time provided herein and the dispute shall be resolved by an independent
certified public accountant ("CPA") who shall be jointly selected by the parties
within thirty (30) days after the Closing or after the final settlement on
prorations, as the case may be. The decision of the CPA shall be binding on each
of the parties and enforceable by a court of competent jurisdiction. The fees
and expenses of the CPA shall be paid one-half by Seller and one-half by Buyer.
1.4. ALLOCATION. The Purchase Price shall be allocated in accordance
with SCHEDULE 6 annexed hereto and incorporated in an Internal Revenue Service
("IRS") Form 8594. Each party shall be bound by such allocation in any reports,
filings or disclosures to the IRS as well as any and every other governmental
authority.
1.5. CLOSING.
1.5.1. DATE AND LOCATION. The closing of the transactions
provided for in this Agreement (the "Closing") shall be held at the offices of
Dickstein, Shapiro, Morin & Oshinsky, LLP, 2101 L Street, N.W., Washington, D.C.
20037, or at such other
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place mutually agreed to by the parties, commencing at 10:00 a.m. on a date (the
"Closing Date") selected by Buyer which shall be within ten (10) business days
after the date on which the FCC order (the "Order") approving the assignment of
the FCC Licenses from Seller to Buyer becomes a "Final Order" (which, for
purposes of this Agreement, means that the Order has not been stayed, is not
subject to reconsideration or review by the FCC or a court of competent
jurisdiction, and the time to institute such administrative or judicial review
has expired): provided, that the parties shall not be obligated to proceed to
Closing if (1) the Order includes conditions materially adverse to Buyer or
Seller; or (2) the conditions precedent to Closing have not been satisfied or
waived; and provided further, that the Closing shall be held at a date set by
Buyer within ten (10) business days after issuance of the FCC Order if no
petition to deny or other challenge has been filed against the Application, as
defined in Section 4.5 of this Agreement.
1.5.2. EXCHANGE OF DOCUMENTS. At the Closing, each party shall
execute and deliver to the other party the other items specified herein as well
as any additional document(s) and item(s) reasonably necessary for the
consummation of the transactions contemplated herein. Such additional documents
shall be reasonably satisfactory to the other party as to both form and
substance.
1.6. TIMING. Time is of the essence to implementation of this
Agreement. It is the intention of the parties that the Closing of the
transactions contemplated herein occur not later than 270 days from the date of
this Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that the following matters are
true and correct as of the date of this Agreement:
2.1 CORPORATE STATUS. Seller is a Corporation duly organized, validly
existing, and in good standing in the State of Oregon. Seller has the power to
carry on the business of the Station as it is now being conducted, to own, hold
and use the Station Assets, and to enter into and consummate the transactions
contemplated by this Agreement.
2.2. LICENSES. Seller is the holder of the Licenses included in
SCHEDULE 1 to this Agreement, all of which are in full force and effect. The FCC
Licenses constitute all of the licenses required under the Communications Act of
1934, as amended (the "Act"), and the current rules, regulations, and policies
of the FCC for the operation of the Station as currently conducted. The FCC
Licenses authorize the operation of the Station for the license term expiring on
February 1, 1999. The Seller has filed with the FCC all material applications,
reports and other disclosures required by the Act and by FCC rules and policies.
As of the date of this Agreement, there is not pending or, to the best of
Seller's knowledge, threatened, any petition, complaint, objection (whether
formal or informal), order to show cause, investigation, or other action by or
before the FCC or any court to revoke, cancel, rescind, modify, or refuse to
renew any of the FCC Licenses, or which
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would otherwise have a material adverse impact on the operation of the Station.
Other than proceedings of general applicability to the broadcasting industry,
there is not now pending or, to the best of Seller's knowledge, threatened, any
other petition, complaint, objection (whether formal or informal),
investigation, order to show cause, notice of violation, notice of apparent
liability, or notice of forfeiture or other proceeding by or before the FCC or
any court against Seller with respect to any matter affecting the Station. The
Station is operating in material compliance with the FCC Licenses, the Act, and
the rules, regulations and policies of the FCC, and the Station's signal
coverage is not subject to any interference which materially impairs the
reception of its signal within the Station's Grade A or Grade B contours. As
more particularly described in SCHEDULE 1, the Station is not currently
operating at its fully authorized power under its FCC Licenses, but such
operation does not and will not affect the validity of the FCC Licenses,
Seller's ability to assign the FCC Licenses to Buyer as contemplated by this
Agreement, Buyer's ability to broadcast the Station at the full power currently
authorized by the FCC Licenses, or Buyer's ability to secure a timely renewal of
the FCC Licenses.
2.3. CONDITION OF ASSETS. Except as otherwise disclosed herein,
the Station Assets are in good working order, meet all government requirements,
and are being maintained in accordance with generally accepted industry and
engineering practices.
2.4. TITLE. On the Closing Date, the Station Assets will be in each
case free and clear of all debts, claims, liabilities, security interests,
mortgages, pledges, liens, conditional sales agreements, leases, encumbrances,
or charges of any kind or nature whatsoever except for the Permitted
Encumbrances or such liabilities expressly assumed by Buyer hereunder.
2.5. EMPLOYEES. Seller is not a party to any pending or, to its
knowledge, threatened labor dispute affecting the Station. Seller (1) has
complied in all material respects with all applicable federal, state, and local
laws, ordinances, rules and regulations and requirements relating to employment
or labor, including but not limited to provisions relative to wages, hours,
collective bargaining, pension, profit-sharing and savings plans and trusts
including, without limitation, 401-K plans ("Trusts") and payment of Social
Security, unemployment and withholding taxes and (2) is not liable for any
arrears of wages or Trusts or benefit payments ("Payments") or any taxes or
penalties for failure to comply with any of the foregoing. Seller will hold
Buyer harmless from and against (1) any liability for any taxes or Payments or
penalties which have not been paid or made for employment of persons by Seller,
(2) any claims of discrimination or wrongful termination or hiring, including,
without limitation, violations of federal or state law relating to civil rights,
regulations of the United States Equal Employment Opportunity Commission, or the
Americans With Disabilities Act of 1990, (3) all claims for severance
(recognizing that Buyer has no obligation to employ any of Seller's employees),
and (4) any other claims by employees of Seller relating to or arising from
their employment (or severance therefrom) by Seller. There are no collective
bargaining agreements, or negotiations for the same, in existence which affect
any of the Station's employees.
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2.6. TAXES. Except as disclosed in SCHEDULE 7 annexed hereto, Seller
has duly and timely filed all required federal, state and local tax returns and
paid all taxes, interest and penalties due with respect to Seller's interest in
the Station Assets or its operation of the Station, has sought and obtained
extensions of time to file such and pay same within the time provided therefor,
or is challenging such taxes in good faith in accordance with applicable
procedures (and has in place adequate financial reserves to satisfy any adverse
decision). Between the date hereof and the Closing Date Seller shall duly and
timely file all such required returns and pay all such taxes, interest and
penalties or obtain such extensions within the time provided therefor, unless
such taxes are being challenged in good faith in accordance with applicable
procedures (and has in place adequate financial reserves to satisfy any adverse
decision). Seller shall indemnify, defend, save and hold Buyer harmless from and
against all claims, obligations and liabilities for all taxes, interest and
penalties attributable to Seller's ownership or operation of the Station and the
ownership or holding of the Station Assets prior to the Closing Date.
2.7. CONTRACTS. SCHEDULE 3 hereto includes true copies of all written
Contracts and describes the material terms of all oral Contracts to which Seller
is a party as of the date of this Agreement and which will be assumed by Buyer.
Those Contracts requiring a third party's consent to assignment are identified
by an asterisk in SCHEDULE 3. Seller has complied in all material respects with
all Contracts and is not in default beyond any applicable grace periods under
any of such Contracts. To Seller's knowledge, no other contracting party is in
material default under any of the Contracts. All Contracts are in full force and
effect and are valid, binding and enforceable in accordance with their
respective terms, except as enforceability may be limited by laws affecting
creditor rights or equitable principles generally.
2.8. ENVIRONMENTAL. No hazardous or toxic waste, substance, material
or pollutant (collectively "Hazardous Waste"), as defined under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. ss. 9601 et seq., the Toxic Substances Control Act, as
amended, 15 U.S.C. ss. 2601 et seq., the Resource Conservation and Recovery Act
of 1976, as amended, 42 U.S.C. ss. 6901 et seq., the Clean Water Act, as
amended, 42 U.S.C. ss. 1251 ET SEQ., the Clean Air Act, as amended, 42 U.S.C.
ss. 7401 ET SEQ. or any other applicable federal, state or local law, or any
regulations or policies adopted pursuant to such laws (the foregoing laws,
regulations and policies collectively referred to herein as the "Environmental
Laws") has been released, emitted or discharged or, to Seller's knowledge, is
currently located in or on the Station Assets or in, on or under the real
property on which any of the Station Assets are situated in violation of any
Environmental Laws. The Station Assets and Seller's use thereof are not in
material violation of any Environmental Laws, including but not limited to FCC
rules, policies and guidelines concerning RF radiation. Seller has not received
any notice, summons, citation, directive, letter or other communication, written
or oral, from the United States, the State of Oregon, or any other party
concerning any intentional or unintentional action or omission on the part of
Seller or any other party which resulted in the releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging,
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injecting, escaping, leeching, dumping or disposing of Hazardous Waste on, above
or under Station Assets owned or used by Seller in operation of the Station.
2.9. FINANCIAL STATEMENTS. Seller has provided Buyer with true copies
of a balance sheet dated June 30, 1996, audited financial statements for the
Station for fiscal year 1995, and unaudited interim financial statements for the
period ended on November 30, 1996 (all of the foregoing collectively referred to
herein as the "Financial Statements"). True copies of the Financial Statements
are included in SCHEDULE 8. The Financial Statements (1) have been prepared in
accordance with generally accepted accounting principles consistently applied,
(2) identify all of Seller's material obligations and liabilities (contingent or
matured) with respect to the Station, and (3) fairly reflect the financial
performance of the Station for the periods indicated.
2.10. LITIGATION. Seller has not been operating under and is not
subject to, or in default with respect to, any order, judgment, writ,
injunction, or decree of any court or any federal, state, municipal, or other
governmental department, commission, board, agency, or instrumentality, foreign
or domestic, which has had or could reasonably be expected to have a material
adverse effect on the Station Assets or the manner in which Seller currently
operates the Station. There is no litigation, arbitration, dispute, proceeding
or investigation ("Litigation") pending by or against, or, to the best of
Seller's knowledge, threatened against the Station or Seller which relates to or
affects the Station Assets or the business of the Station or which materially
interferes or could reasonably be expected materially to interfere with Seller's
(1) right, title to, or interest in the Station Assets, (2) operation of the
Station or (3) ability to transfer the Station Assets to Buyer free of such
Litigation.
2.11 COMPLIANCE WITH LAWS. Except as disclosed in SCHEDULE 9 annexed
hereto, Seller is in material compliance with all applicable laws, rules,
regulations, policies and orders of the federal, state, and local governments
with respect to the Station. The present uses by Seller of the Station Assets do
not violate any such laws, regulations, policies or orders in any material
respect, and there is no investigation or proceeding regarding the foregoing
which is currently pending or, to Seller's knowledge, threatened.
2.12 NO DEFAULTS. Neither the execution and delivery by Seller of this
Agreement nor the consummation by Seller of the transactions contemplated herein
are events that, by themselves or with the giving of notice or the passage of
time or both, constitute a material violation of or will conflict with or result
in any material breach of or any default under (a) the terms, conditions, or
provisions of any arbitration award, judgment, law, order, decree, writ, or
regulation to which Seller is subject, (b) Seller's articles of incorporation or
bylaws, or (c) any agreement or instrument to which Seller is a party or by
which Seller is bound, or result in the creation of imposition of any lien,
charge, or encumbrance on any of the Station Assets.
2.13. BROKERS. There is no broker or finder or other person who
would, as a result of any agreement of or action taken by Seller, have any
valid claim against any of the
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parties to this Agreement for a commission or brokerage fee in connection with
this Agreement or the transactions contemplated herein (except CEA, Inc., whose
fee will be paid by Buyer).
2.14 SELLER ACTION. All Seller actions and proceedings necessary to be
taken by or on the part of Seller in connection with the transactions
contemplated by this Agreement and necessary to make the Agreement effective
have been duly and validly taken. This Agreement has been duly and validly
authorized, executed, and delivered by Seller and constitutes the valid and
binding agreement of Seller, enforceable in accordance with and subject to its
respective terms, except as enforceability may be limited by laws affecting the
enforcement of creditor rights or equitable principles generally. At the
Closing, Seller will provide Buyer with certified resolutions executed by
Seller's stockholders and board of directors authorizing the execution,
delivery, and performance of this Agreement.
2.15. STATION ASSETS. Except as disclosed in SCHEDULE 9 annexed
hereto, the Station Assets are in good working order, meet any and all
applicable governmental and industry standards, and are sufficient to enable
Seller to operate the Station as currently conducted. All of the statements made
and Schedules referred to in this Agreement with respect to the Station Assets
are true, accurate, and complete in all material respects.
2.16. LEASES. All of the Real Estate Leases included in SCHEDULE 5
have been complied with in all material respects by Seller, and no material
default of Seller in respect to any duties or obligations required to be
performed by Seller has occurred. All such leases are valid, binding, and
enforceable in accordance with their respective terms. To Seller's knowledge, no
other party to any of the Real Estate Leases is in default thereunder, except as
enforceability may be limited by laws affecting the enforcement of creditor
rights or equitable principles generally.
2.17 INSOLVENCY. No insolvency proceedings of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
the Seller or any of the Station Assets is pending or, to the best of Seller's
knowledge, threatened, and Seller has not made any assignment for the benefit of
creditors, nor taken any actions with a view to, or which would constitute the
basis for, the institution of any such insolvency proceedings.
2.18 APPROVALS. Other than Aspen TV LLC (where approval will be
secured by Seller prior to Closing), no approval of any third party,
governmental agency or court is required to be obtained by Seller with regard to
the assignment of the FCC Licenses and other Station Assets except (1) parties
to certain Contracts and Real Estate Leases being assumed by Buyer under this
Agreement, (2) the approval by the FCC as provided herein, and (3) unless
otherwise determined by the parties, the United States Department of Justice
("DOJ") and/or the Federal Trade Commission ("FTC") under the HSR.
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2.19 CABLE CARRIAGE. To Seller's knowledge, SCHEDULE 10 hereto sets
forth a correct and complete list of (1) all cable television systems which
carry the Station's signal on the date hereof under the FCC's "must carry"
rules; and (2) all cable television systems which carry the Station's signal
pursuant to retransmission consent agreements (with copies of such agreements
included in the schedule).
2.20. BULK SALES LAW. There is no bulk sales law or other comparable
statute in Oregon which is applicable to the transactions contemplated by this
Agreement, and Seller hereby indemnifies Buyer from any and all liability which
may be imposed on or incurred by Buyer (including reasonable attorney fees)
under such laws.
2.21. NO MATERIAL OMISSION. Seller has not failed to disclose any
material fact within its knowledge which would make any statement or
representation in this Agreement inaccurate or misleading.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller as to the truth of the
following matters as of the date of this Agreement:
3.1. STATUS. Buyer is a corporation duly organized, validly
existing, and in good standing in the State of Oregon, and has the power to
enter into and consummate the transactions contemplated by this Agreement.
3.2. CORPORATE ACTION. All corporate actions and proceedings necessary
to be taken by or on the part of Buyer in connection with the transactions
contemplated by this Agreement and necessary to make the Agreement effective
have been duly and validly taken. This Agreement has been duly and validly
authorized, executed, and delivered by Buyer and constitutes the valid and
binding agreement of Buyer, enforceable in accordance with and subject to its
terms, except as enforceability may be limited by laws affecting the enforcement
of creditors' rights or equitable principles generally. At the Closing, Buyer
will provide Seller with a certified copy of the resolutions adopted by Buyer's
stockholders and board of directors authorizing the execution, delivery and
consummation of this Agreement.
3.3. NO DEFAULTS. Neither the execution and delivery by Buyer of this
Agreement nor the consummation by Buyer of the transactions contemplated herein
are events that, by themselves or with the giving of notice or the passage of
time or both, constitute a material violation of or will conflict with or result
in any material breach of or any default under (a) the terms, conditions, or
provisions of any arbitration award, judgment, law, order, or regulation to
which Buyer is subject, (b) the articles of incorporation or by-laws of Buyer,
or (c) any agreement or instrument to which Buyer is a party or by which it is
bound.
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3.4. BROKERS. There is no broker or finder or other person who would,
as a result of any agreement of or action taken by Buyer, have any valid claim
against any of the parties to this Agreement for a commission or brokerage fee
in connection with this Agreement or the transactions contemplated herein
(except CEA, Inc., whose fee will be paid by Buyer).
3.5. LITIGATION. There is no litigation, proceeding, or
investigation of any nature pending or, to the best of Buyer's knowledge,
threatened against or affecting Buyer that would affect Buyer's ability to
carry out the transactions contemplated herein.
3.6. QUALIFICATION AS A BROADCAST LICENSEE. To the best of its
knowledge, Buyer is legally qualified under the Act and all other applicable
federal, state and local laws, rules and regulations, to acquire the Station
Assets from Seller. Buyer knows of no fact, and will not act in such manner from
and after the date hereof, that would, under the Act and the rules and policies
of the FCC, disqualify Buyer as an assignee of the FCC Licenses or Buyer as
owner and holder of the other Station Assets.
3.7. NO MATERIAL OMISSION. Buyer has not failed to disclose any
material fact within its knowledge which would make any statement or
representation in this Agreement inaccurate or misleading.
ARTICLE 4. COVENANTS OF SELLER PENDING CLOSING.
Seller covenants and agrees that, from the date of this Agreement to
and including the Closing Date, subject to the provisions of this Agreement, it
will take, or refrain from taking, the following actions:
4.1. MAINTENANCE OF STATION. Subject to the MA, Seller shall continue
to carry on the Station business and keep its books of account, records, and
files in the ordinary course of business and shall continue to operate the
Station in all material respects in accordance with the terms of the FCC
Licenses and in material compliance with all applicable rules, regulations,
policies and laws. To that end, Seller will file with the FCC any and all
reports, applications, and disclosures as may be required by the Act or FCC
rules or policies. Seller shall maintain in full force and effect through and
including the Closing Date the existing property damage, liability, and other
insurance with respect to the Station Assets to cover contingencies that can
reasonably be anticipated. Prior to the Closing, Seller will not, without the
prior written consent of Buyer:
4.1.1. sell, lease, transfer, or agree to sell, lease, or
transfer any Station Assets without replacement thereof with an asset of
equivalent kind, condition, and value;
4.1.2. enter into any collective bargaining agreement or written
contract of employment without Buyer's prior approval, unless said contract is
subject to cancellation upon thirty (30) days notice without penalty to Buyer;
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4.1.3. renew, renegotiate, modify, amend, or terminate any
existing Time Sales Agreements with respect to the Station except in the
ordinary course of business;
4.1.4. Subject to Section 1.1.1.(c) hereof, enter into any
contract or agreement with respect to the Station or the Station Assets
except in the ordinary course of business or as provided in this Agreement;
4.1.5. make, allow, or consent to any material change in the
Real Property or in any buildings, leasehold improvements, or fixtures used
or useful in the operation of the Station except in the ordinary course of
business;
4.1.6. make any material change in the insurance policies
included in SCHEDULE 8; or
4.1.7. take any action or, as the case may be, fail to take any
action necessary to preserve the Station's carriage on cable television
systems identified in SCHEDULE 9.
4.2. ORGANIZATION, GOOD WILL, PROMOTION. Subject to the provisions of
this Agreement and the MA, Seller shall use its best efforts to preserve the
business organization of the Station intact and shall cooperate with Buyer to
preserve the goodwill of the Station's suppliers, customers, and others having
business relations with the Station.
4.3. ACCESS TO FACILITIES, FILES, AND RECORDS. At the reasonable
request of Buyer, Seller shall give Buyer and its representatives (1) reasonable
access during normal business hours to all facilities, property, accounts, title
papers, insurance policies, licenses, agreements, commitments, records,
machinery, fixtures, furniture, and inventories related to the Station or the
Station Assets, and (2) all such other information concerning the affairs of the
Station as Buyer may reasonably request. The rights of Buyer under this Section
shall not be exercised in such a manner as to interfere unreasonably with the
business of the Station.
4.4. REPRESENTATIONS AND WARRANTIES. Seller shall give notice to Buyer
promptly upon the occurrence of, or upon becoming aware of the impending or
threatened occurrence of, any event that would cause or constitute a material
breach of any of Seller's representations or warranties in this Agreement.
4.5. APPLICATION FOR FCC CONSENT. Within five (5) business days after
execution of this Agreement, Seller shall prepare and file an appropriate
application (the "Application") with the FCC requesting its written consent to
the assignment of the FCC Licenses for the Station to Buyer. Seller shall
diligently take, or cooperate in the taking of, all steps necessary and
appropriate to expedite the preparation of the Application and its prosecution
to a favorable conclusion. Seller will promptly provide Buyer with a copy of any
pleading, order, or other document served on it relating to the Application.
Seller will use its best efforts and otherwise cooperate with Buyer in
responding to any information
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requested by the FCC related to the Application, in making any amendment to this
Agreement requested by the FCC which does not adversely affect Seller in a
material manner, and in defending against any petition, complaint, or objection
which may be filed against the Application. The FCC filing fees shall be divided
equally between Seller and Buyer.
4.6. CONSENTS. Seller shall obtain or cause to be obtained prior to
the Closing consents to the assignment to or assumption by Buyer of all
Contracts and Real Estate Leases included in the Station Assets that require the
consent of any third party by reason of the transactions provided for in this
Agreement.
4.7. NOTICE OF PROCEEDINGS. Seller will promptly notify Buyer (and in
any event within five (5) business days) upon becoming aware of any actual or
threatened claim, dispute, arbitration, litigation, complaint, judgment, order,
decree action or proceeding relating to Seller, the Station, the Station Assets,
or the consummation of this Agreement or any transaction contemplated herein.
4.8. CONFIDENTIAL INFORMATION. If the transactions contemplated in
this Agreement are not consummated for any reason, Seller shall not disclose to
third parties any information designated as confidential and received from Buyer
or its agents in the course of investigating, negotiating, and consummating the
transactions contemplated by this Agreement: provided, that no information shall
be deemed to be confidential that (1) becomes publicly known or available other
than through disclosure by Seller; (2) is rightfully received by Seller from a
third party; or (3) is independently developed by Seller. All originals of all
material provided to Seller by Buyer or its agents shall be returned to Buyer
and all copies thereof shall be destroyed.
4.9. CONSUMMATION OF AGREEMENT. Seller shall fulfill and perform all
conditions and obligations to be fulfilled and performed by Seller under this
Agreement and make every reasonable effort to cause the transactions
contemplated by this Agreement to be fully carried out.
4.10 COMPLIANCE WITH LAW. Seller will comply in all material respects
with all applicable federal, state and local laws, ordinances and regulations,
including but not limited to the Act and the rules, regulations and policies of
the FCC.
4.11 PERFORMANCE UNDER CONTRACTS AND LEASES. Seller will perform in
all material respects its obligations under, and keep in good standing, all
Contracts, Time Sales Agreements, and Real Estate Leases to which Seller is a
party and which will be assigned to Buyer at the Closing pursuant to this
Agreement.
4.12 HSR FILING. Within ten (10) business days after execution of this
Agreement, Seller shall file with DOJ and/or the FTC any and all applications
and other documents necessary to comply with HSR and to secure any necessary
approval under
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HSR. The filing fees for any HSR application shall be divided equally between
Seller and Buyer.
ARTICLE 5. COVENANTS OF BUYER PENDING THE CLOSING.
Buyer covenants and agrees that, from the date of this Agreement to
and including the Closing, it will take, or refrain from taking, the following
actions:
5.1. REPRESENTATION AND WARRANTIES. Buyer shall give notice to Seller
promptly upon the occurrence of, or upon becoming aware of the impending or
threatened occurrence of, any event that would cause or constitute a material
breach of any of the representations and warranties of Buyer in this Agreement.
5.2. APPLICATION FOR COMMISSION CONSENT. Within five (5) business days
after execution of this Agreement, Buyer will prepare and provide Seller's
counsel with the assignee's portion of the Application. Buyer will diligently
take, or cooperate in the taking of, all steps necessary and appropriate to
expedite the preparation of the Application and its prosecution to a favorable
conclusion. Buyer will promptly provide Seller with a copy of any pleading,
order, or other document served on it relating to the Application. Buyer will
use its best efforts and otherwise cooperate with Seller in responding to any
information requested by the FCC related to the Application or this Agreement,
in making any amendment to this Agreement requested by the FCC which does not
adversely affect Buyer in a material manner, and in defending against any
petition, complaint, and other objection which may be filed against the
Application.
5.3. CONFIDENTIAL INFORMATION. If the transactions contemplated in
this Agreement are not consummated for any reason, Buyer shall not disclose to
third parties any information designated as confidential and received from
Seller or its agents in the course of investigating, negotiating, and performing
the transactions contemplated by this Agreement: provided, however, that no
information shall be deemed to be confidential that (1) becomes publicly known
or available other than through disclosure by Buyer; (2) is rightfully received
by Buyer from a third party; or (3) is independently developed by Buyer. All
originals of material provided by Seller to Buyer or its agents shall be
returned to Seller and all copies thereof destroyed.
5.4. CONSUMMATION OF AGREEMENT. Buyer shall fulfill and perform in all
material respects all conditions and obligations to be fulfilled and performed
by Buyer under this Agreement and make every reasonable effort to cause the
transactions contemplated by this Agreement to be fully carried out.
5.5. NOTICE OF PROCEEDINGS. Buyer will promptly (and in any event
within five (5) business days) notify Seller upon becoming aware of any actual
or threatened claim, dispute, arbitration, litigation, complaint, judgment,
order, decree, action or proceeding relating to Buyer, the Station, the Station
Assets, or the consummation of this Agreement or any transaction contemplated
herein.
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5.6. HSR FILING. Within ten (10) business days after execution of
this Agreement, Buyer shall file with the DOJ and/or the FTC any and all
applications and other documents necessary to comply with HSR and to secure any
necessary approval under HSR. The filing fees for any HSR application shall be
divided equally between Seller and Buyer.
ARTICLE 6. CONDITIONS PRECEDENT TO
OBLIGATIONS OF SELLER TO CLOSE.
The obligation of Seller to consummate the transactions under this
Agreement is subject to the fulfillment of the following conditions prior to or
at the Closing:
6.1. REPRESENTATIONS, WARRANTIES, COVENANTS.
6.1.1. BUYER'S REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Buyer contained in this Agreement shall
have been true and accurate in all material respects as of the date when made
and as of the Closing Date;
6.1.2. BUYER'S PERFORMANCE UNDER AGREEMENT. Buyer shall have
performed and complied in all material respects with each and every covenant
and agreement required by this Agreement to be performed or complied with by
Buyer prior to or at the Closing, other than the delivery by Buyer of the
consideration described in Section 1.2.;
6.1.3. BUYER'S DELIVERIES. Buyer shall have delivered to Seller
(a) a certificate executed by an officer of Buyer, dated the Closing Date,
certifying to the fulfillment of the conditions set forth in Sections 6.1.1.
and 6.1.2., and (b) the resolutions referred to in Section 3.2 of this
Agreement.
6.2. PROCEEDINGS.
6.2.1. ABSENCE OF LITIGATION. No action or proceeding shall
have been instituted before any court or governmental body which has resulted
in the issuance of a preliminary or permanent injunction against consummation
of this Agreement.
6.2.2. NOTICE OF INVESTIGATION. Neither of the parties to this
Agreement shall have received written notice from any governmental body of the
institution of any investigation to restrain, enjoin or nullify this Agreement
or the transactions contemplated hereby (other than a routine letter of inquiry,
including a routine Civil Investigative Demand).
6.3. FCC APPROVAL. The FCC approval contemplated by this Agreement
shall have been granted without any conditions materially adverse to Seller.
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6.4. HSR APPROVAL. The parties shall have received any necessary
approval under HSR (or the applicable waiting period shall have expired without
further action by the United States Government).
6.5. LEGAL OPINION. Seller shall have received an opinion from
Buyer's counsel in the form annexed hereto as EXHIBIT E.
6.6. CANCELLATION OF NOTE. In the event Seller gives Buyer the
Note pursuant to Section 1.2.4. of this Agreement, Buyer shall (upon
deducting from the Purchase Price the amounts owed to Buyer under the Note)
return the Note to Seller marked "Canceled and Paid in Full."
6.7. ISSUANCE OF STOCK. Seller shall have received a stock
certificate reflecting Seller's acquisition of the ownership interest in
Buyer referenced in Section 1.2.2.
ARTICLE 7. CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYER TO CLOSE.
The obligation of Buyer to consummate the transactions under this
Agreement is subject to the fulfillment of the following conditions prior to or
at the Closing:
7.1. REPRESENTATIONS, WARRANTIES, COVENANTS.
7.1.1. SELLER'S REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller contained in this Agreement shall
have been true and accurate in all material respects as of the date when made
and as of the Closing Date.
7.1.2. SELLER'S PERFORMANCE UNDER AGREEMENT. Seller shall have
performed and complied in all material respects with each and every covenant
and agreement required by this Agreement to be performed or complied with by
it prior to or at the Closing other than the delivery to Buyer of the
instruments conveying the Station Assets to Buyer; and
7.1.3. SELLER'S DELIVERIES. Seller shall have delivered to Buyer (a)
a certificate executed by an officer of Seller, dated the Closing Date,
certifying to the fulfillment of the conditions set forth in Sections 7.1.1. and
7.1.2., (b) the resolutions of Seller's stockholders and board of directors
identified in Section 2.14 of this Agreement, and (c) the consents of third
parties required for the assignment to Buyer of Contracts and Real Estate Leases
specified in Section 1.1.1.
7.2. PROCEEDINGS.
7.2.1. ABSENCE OF LITIGATION. No action or proceeding shall be
pending or have been instituted before any court or governmental body to
restrain or prohibit, or to obtain substantial damages in respect of, the
consummation of this Agreement that, in the reasonable opinion of Buyer, may
reasonably be expected to result
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in the issuance of a preliminary or permanent injunction against such
consummation or otherwise result in a decision materially adverse to Buyer.
7.2.2. ABSENCE OF INVESTIGATION. Neither of the parties to this
Agreement shall have received written notice from any governmental body of (1)
its intention to institute any action or proceeding to restrain or enjoin or
nullify this Agreement or the transactions contemplated hereby, or to commence
any investigation (other than a routine letter of inquiry, including a routine
Civil Investigative Demand) into the consummation of this Agreement or (2) the
actual commencement of such an investigation.
7.3. DAMAGE TO THE ASSETS.
7.3.1. NO MATERIAL DAMAGE. There shall not have been any material
damage to any of the Station Assets, and, except as otherwise permitted herein,
the Station will have remained on air continuously from the date of this
Agreement to and including the Closing Date (excluding downtime occasioned by
routine maintenance).
7.3.2. RISK OF LOSS. The risk of loss or damage to any of the
Station Assets prior to the Closing shall be upon Seller (except to the extent
caused by Buyer's conduct under the MA). In consultation with Buyer, Seller
shall repair, replace and restore any damaged or lost Station Asset to its prior
condition as soon as possible and in no event later than the Closing, or, in the
alternative and at Buyer's option, provide a reduction in the Purchase Price by
an amount equal to the replacement value of the damaged or lost Station Asset
not covered by an assignment to Buyer of insurance proceeds therefor and payment
by Seller to Buyer of any applicable deductible.
7.3.3. BROADCAST INTERRUPTION. Seller shall promptly notify Buyer
upon learning that the Station's normal broadcast transmissions are interrupted
or interfered with for more than four (4) consecutive hours or are in any way
impaired in any material manner. Seller shall provide Buyer with prompt written
notice of the measures being taken to correct such problems. If the Station is
not restored to 90 percent of the power currently utilized by the Station (as
described in SCHEDULE 1 annexed hereto) within three (3) days and 100 percent of
the power currently utilized by the Station within seven (7) days of such event,
or if two (2) such events occur within any thirty (30) day period, then Buyer
shall have the right to terminate this Agreement upon ten (10) days prior
written notice to Seller.
7.4. FCC APPROVAL. The FCC approval contemplated by this Agreement
shall have been granted without any conditions materially adverse to Buyer and
shall have become a Final Order: provided, that the Buyer shall waive the
requirement that the Order become a Final Order if no petition to deny or other
challenge has been filed against the Application.
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7.5. CONTRACT AND REAL ESTATE LEASE PAYMENTS. As of the Closing,
Seller shall be current in its payment of any and all obligations under
Contracts or Real Estate Leases to be assumed by Buyer, or such payments
shall be subject to proration hereunder.
7.6. BULK SALE LAW. Seller shall provide a written
indemnification for Buyer with respect to matters relating to the
applicability, if any, of Oregon's bulk sales law.
7.7. LEGAL OPINION. Buyer shall have received an opinion from
Seller's counsel in the form annexed hereto as EXHIBIT F.
7.8. ENVIRONMENTAL AUDITS. Within thirty (30) days of the execution of
this Agreement, Buyer may initiate, at Buyer's expense, a Phase 1, and, if Buyer
deems it appropriate or necessary, a Phase 2 environmental audit of the Station
Assets conducted by an environmental firm licensed in the State of Oregon (the
"Environmental Audits"). If the Environmental Audits reveal a condition of
material non-compliance with any Environmental Law, then, in that event, Seller
shall cure or remedy the condition of material non-compliance prior to Closing.
If Seller is unwilling or unable to cure or remediate the condition of material
non-compliance prior to Closing, then, in that event, Buyer may elect to (1)
accept the Station Assets in their then existing condition and reduce the
Purchase Price by the estimated amount necessary to cure or remediate the
material non-compliance or (2) terminate this Agreement upon twenty (20) days'
prior written notice to Seller without further liability.
7.9. HSR APPROVAL. The parties shall have received any necessary
approval under HSR (or the applicable waiting period shall have expired without
further action by the United States Government).
7.10. NONCOMPETITION AGREEMENT. Seller and Peregrine
Communications, Ltd. shall have executed the Noncompetition Agreement in the
form annexed hereto as EXHIBIT D.
7.11. BUILDING LEASE. Seller shall have provided Buyer with an
executed lease in the form of EXHIBIT G annexed hereto providing Buyer with the
right to lease the premises described therein for a studio for a 10-year period
commencing on the Closing Date at a monthly rental of $12,500.
7.12. NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement
and the Closing, none of the Station Assets, including but not limited to the
FCC Licenses and the Seller's goodwill, or the Station's business, operations,
or financial condition shall have incurred or otherwise be subject to a material
adverse change.
ARTICLE 8. INDEMNIFICATION.
8.1. SURVIVAL. The several representations, warranties, covenants, and
agreements of the Seller and Buyer contained in or made pursuant to this
Agreement shall
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be deemed to have been made on and as of the Closing, shall survive the Closing,
and shall remain operative and in full force and effect for a period of eighteen
(18) months after the Closing: provided, that all representations, warranties,
covenants and agreements relating to litigation or taxes shall remain operative
until the expiration of any applicable statutes of limitation; provided further,
that Seller's representations concerning any Environmental Law under Section 2.8
shall survive in perpetuity; and provided further, that liabilities assumed or
retained, as the case may be, pursuant to this Agreement shall remain in effect
until such liabilities have been paid or discharged in full.
8.2. INDEMNIFICATION OF BUYER. Seller shall indemnify, defend, and
hold Buyer harmless from and against any and all damages, claims, losses,
expenses, costs, obligations, and liabilities including, without limiting the
generality of the foregoing, liabilities for reasonable attorneys' fees ("Loss
and Expense"), suffered, directly or indirectly, by Buyer after the Closing Date
by reason of, or arising out of, (1) any material breach of a representation or
warranty made by Seller pursuant to this Agreement, (2) any material failure by
Seller to perform or fulfill any of its covenants or agreements set forth in
this Agreement, (3) any material failure by Seller to pay or discharge any
liabilities which remain the responsibility of Seller under this Agreement or to
comply, if required, with Oregon's bulk sales law, or (4) any litigation,
proceeding, or claim by any third party relating to the business or operation of
the Station prior to the Closing.
8.3. INDEMNIFICATION OF SELLER. Buyer shall indemnify, defend and hold
Seller harmless from and against any and all Loss and Expense suffered, directly
or indirectly, by Seller after the Closing Date by reason of, or arising out of,
(1) any material breach of a representation or warranty made by Buyer pursuant
to this Agreement, (2) any material failure by Buyer to perform or fulfill any
of its covenants or agreements set forth in this Agreement, (3) any material
failure by Buyer to pay or discharge any liabilities assumed pursuant to this
Agreement, or (4) any litigation, proceeding, or claim by any third party
relating to the business or operation of the Station after the Closing.
8.4. NOTICE OF CLAIM. If either Seller or Buyer believes that any Loss
and Expense has been suffered or incurred, such party shall notify the other
promptly in writing describing such Loss and Expense, the amount thereof, if
known, and the method of computation of such Loss and Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such Loss and Expense shall have occurred. If any
action at law or suit in equity is instituted by a third party with respect to
which any of the parties intends to claim any liability or expense as Loss and
Expense under this Article 8, such party shall promptly notify the indemnifying
party of such action or suit. In no event, however, may the indemnifying party
avoid or limit its obligations under this Article 8 by reason of delay unless
such delay has materially prejudiced the indemnifying party, and then the
indemnifying party's obligations shall be reduced only to the extent of such
prejudice.
8.5. DEFENSE OF THIRD PARTY CLAIMS. The indemnifying party under this
Article 8 shall have the right to conduct and control, through counsel of that
party's own
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choosing, any third party claim, action, or suit at the indemnifying party's
sole cost and expense, but the indemnified party may, at that latter party's
election, participate in the defense of any such claim, action, or suit at that
party's sole cost and expense: provided, that if the indemnifying party shall
fail to defend any such claim, action, or suit, then the indemnified party may
defend, through counsel of that party's own choosing, such claim, action, or
suit and settle such claim, action, or suit, and recover from the indemnifying
party the amount of such settlement or of any judgment and the costs and
expenses of such defense; and provided further, that the indemnifying party
shall be given at least (15) days prior notice of the terms of any proposed
settlement thereof so that the indemnifying party may then undertake and/or
resume the defense against the claim. The indemnifying party shall not
compromise or settle any third party claim, action, or suit without the prior
written consent of the indemnified party, which consent will not be unreasonably
withheld or delayed: provided, that any such compromise or settlement shall
include a release for the Indemnified Party of all liability with respect to the
matter being compromised or settled.
8.6. LIMITATIONS. Neither party shall be required to indemnify the
other party under this Article 8 unless written notice of a claim under this
Article 8 was received by the party within the pertinent survival period
specified in Section 8.1.
8.7. OFFSET AGAINST STOCK PURCHASE. Buyer may offset such
unsatisfied liabilities against any monies to be paid to Seller in the
re-purchase of Seller's ownership interest in Buyer in accordance with
Section 1.2.2. of this Agreement.
ARTICLE 9. MISCELLANEOUS.
9.1. TERMINATION OF AGREEMENT. This Agreement may be terminated
immediately on or prior to the Closing under one or more of the following
circumstances:
9.1.1. by the mutual consent of the parties hereto;
9.1.2. by Seller, if any of the conditions provided in Article 6
hereof have not been met by the time required and have not been waived;
9.1.3. by Buyer, pursuant to Sections 7.3.3 or 7.9, or if any of
the conditions provided in Article 7 hereof have not been met by the time
required and have not been waived;
9.1.4. by Seller or Buyer, if the FCC has failed to grant the
Application in an Order which has become a Final Order within the time specified
in Section 1.6 of this Agreement (unless the condition set forth in Section
1.5.1 has been satisfied; or
9.1.5. by any party hereto, if the FCC denies the Application.
9.2. LIABILITIES UPON TERMINATION.
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9.2.1. SELLER'S REMEDIES. If the parties hereto shall fail to
consummate this Agreement on the Closing Date due to Buyer's material breach of
any representation, warranty, covenant or condition hereunder, and Seller is not
at that time in breach of any material representation, warranty, covenant or
condition hereunder, then Seller would suffer direct and substantial damages
that cannot be determined with reasonable certainty. In view of the expense and
loss which would be incurred by Seller in such event, Seller shall be entitled
to institute any action in law or equity to recover any damages or other
compensatory relief which may be warranted.
9.2.2. BUYER'S REMEDIES. If the parties hereto shall fail to
consummate this Agreement on the Closing Date due to Seller's material breach of
any representation, warranty, covenant or condition hereunder, and Buyer is not
at that time in material breach of any representation, warranty, covenant or
condition hereunder, then Buyer shall be entitled to specific performance of the
terms of this Agreement and of Seller's obligation to consummate the transaction
contemplated hereby. If any action is brought by Buyer to enforce this Agreement
by specific performance, Seller shall waive the defense that Buyer has an
adequate remedy at law.
9.2.3. NOTICE OF BREACH. In the event that any party to this
Agreement believes that the other party is in material breach of its
representations, warranties or obligations hereunder, such party shall give
prompt written notice thereof, detailing the nature of the breach and the steps
necessary to cure such breach. For purposes of this Agreement, no "breach" shall
be deemed to have occurred hereunder unless the party alleged to be in breach
has been afforded a cure period of at least twenty (20) business days following
such notice within which to cure such breach: provided, that the cure period may
be extended for an additional 30 days in the event that such party is diligently
and in good faith proceeding to cure such breach and the breach is reasonably
capable of being cured within such extended period.
9.2.4. SURVIVAL OF CONFIDENTIALITY OBLIGATIONS. Notwithstanding
any other provision of this Agreement, the provisions of Sections 4.8, and 5.3
shall survive any termination of this Agreement.
9.3. EXPENSES. Except as otherwise provided herein, each party hereto
shall be solely responsible for all fees and expenses each party incurs in
connection with the transactions contemplated by this Agreement, including,
without limitation, legal fees incurred in connection herewith: provided, that
the FCC and any HSR filing fees shall be divided equally between Seller and
Buyer; and, provided further, that all transfer, sales, use or other taxes or
assessments imposed by any governmental body on the sale of the Station Assets
shall be paid by Seller.
9.4. ASSIGNMENTS. Seller may not assign its rights or obligations
under this Agreement without the prior written consent of Buyer. Buyer may
assign its rights under this Agreement without the prior written consent of
Seller to any party who (1) controls Buyer, (2) is controlled by the same
parties who control Buyer, or (3) demonstrates to the
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reasonable satisfaction of Seller that it has the capability to satisfy Buyer's
obligations (including financial) under this Agreement.
9.5. FURTHER ASSURANCES. From time to time prior to, at and after the
Closing, each party hereto will execute all such instruments and take all such
actions any other party shall reasonably request in connection with effectuating
the intent and purpose of this Agreement and all transactions contemplated by
this Agreement, including, without limitation, the execution and delivery of any
and all confirmatory and other instruments in addition to those to be delivered
at the Closing.
9.6. NOTICES. All notices, demands and other communications authorized
or required by this Agreement shall be in writing, shall be delivered by
personal delivery, by United States certified mail-return receipt requested
(postage prepaid), or by overnight delivery service (charges prepaid), and shall
be deemed to have been given or made when personally delivered, within five (5)
days after being deposited in the mail, postage prepaid, or within one (1) day
after being delivered to an overnight delivery service, charges prepaid. Notices
shall be delivered to each party at the following addresses (or at such other
address as any party may designate in writing to the other parties.
9.6.1. If to Seller --
Daniel J. Alderman
Executive Vice President
Channel 32 Incorporated
Boardwalk Plaza, Suite 350
9725 S.W. Beaverton Hillsdale Highway
Beaverton, Oregon 97005-3366
with a copy to (but which shall not
constitute
notice to Seller):
Allan A. Fulsher, Esq.
Boardwalk Plaza, Suite 350
9725 S.W. Beaverton Hillsdale Highway
Beaverton, Oregon 97005-3366
If to Buyer --
Douglas Gealy,
President
7125 Bluffstream Ct.
Columbus, OH 43235
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with a copy to (but which shall not
constitute notice to Buyer):
Lewis J. Paper, Esq.
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, DC 20037
9.7. LAW GOVERNING. This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of
California without regard to conflict of laws provisions.
9.8. WAIVER OF PROVISIONS. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time or times to require performance of any provision of this Agreement
shall not affect the exercise of a party's rights at a later date. No waiver by
any party of any condition or the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
9.9. COUNTERPARTS. This Agreement may be executed in
counterparts, and all counterparts so executed shall collectively constitute
one agreement, binding on all of the parties hereto, notwithstanding that all
the parties are not signatory to the original or the same counterpart.
9.10. REIMBURSEMENT OF LEGAL EXPENSES. If a formal legal proceeding is
instituted by a party to enforce that party's rights under this Agreement, the
party prevailing in the proceeding shall be reimbursed by the other party for
all reasonable costs incurred thereby, including but not limited to reasonable
attorneys' fees.
9.11. PUBLICITY. Except as required by applicable law or with the
other party's express written consent, which shall not be unreasonably withheld,
no party to this Agreement nor any affiliate of any party shall issue any press
release or make any public statement (oral or written) regarding the
transactions contemplated by this Agreement.
9.12. SELLER'S ACCESS TO RECORDS. Any records delivered to Buyer by
Seller relating to the operation of the Station or Seller's business shall be
maintained by Buyer for a period of seven (7) years from and after the Closing
Date. Upon reasonable prior notice, Seller shall be entitled to inspect and copy
any of such records for purposes of preparing and completing any tax returns or
other compilations of its operation of the Station. In the event that it wishes
to dispose of such records, Buyer shall give Seller thirty (30) days' prior
written notice and an opportunity to retrieve such records at Seller's expense.
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9.13. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties, supersedes and cancels any and all prior or
contemporaneous agreements and understandings between them, and may not be
amended except in a writing signed by the parties.
ARTICLE 10. RULES OF CONSTRUCTION
10.1. DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
10.1.1. "ACCOUNTS RECEIVABLE" means all notes and accounts
receivable of Seller relating to or arising out of the broadcasting of
advertising time by the Station at any time prior to the Closing Date.
10.1.2. "BUYER" means NewCo of Oregon, Inc., an Oregon corporation,
or its assignee.
10.1.3. "CONTRACTS" means those contracts, leases and other
agreements listed or described in Section 1.1.1.(c) which Buyer has agreed to
assume (but not including Time Sales Agreements, Trade Agreements or Real Estate
Leases.)
10.1.4. "DOJ" means the United States Department of Justice.
10.1.5. "ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss. 9601
ET SEQ., the Substances Control Act, as amended, 15 U.S.C. 2601 ET SEQ., the
Resource Conservation and Recovery Act of 1976, as amended, U.S.C. ss. 6901 ET
SEQ., the Clean Water Act, as amended, 42 U.S.C. ss. 1251 ET SEQ., the Clean Air
Act, as amended, 42 U.S.C. ss. 7401 ET SEQ., any other federal, state or local
law relating to the environment, and any regulations or policies adopted
pursuant to such laws.
10.1.6. "ESCROW FUNDS" means funds which are part of the Purchase
Price and placed in a post-Closing escrow account to secure Seller's
indemnification obligations under Article 8 of this Agreement.
10.1.7. "EXCLUDED ASSETS" means those assets excluded from the
Station Assets and retained by Seller, to the extent in existence on the Closing
Date, as specifically described in Section 1.1.2.
10.1.8. "FCC" means the Federal Communications Commission.
10.1.9. "FCC LICENSES" means all licenses and other authorizations
issued by the FCC for the Station and included in SCHEDULE 1.
10.1.10. "FTC" means the Federal Trade Commission.
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10.1.11 "FINANCIAL STATEMENTS" means the balance sheet of Seller
dated June 30, 1996, the audited financial statements for the Station for fiscal
year 1995, and the unaudited interim financial statement for the period ended on
November 30, 1996.
10.1.12. "HAZARDOUS WASTE" means any hazardous or toxic waste,
substance, material or pollutant.
10.1.13. "IRS" means the Internal Revenue Service.
10.1.14. "LITIGATION" means any litigation, arbitration, dispute,
proceeding or investigation pending by or against, or, to the best of Seller's
knowledge, threatened against the Station or Seller which relates to or affect
the Station Assets or the business of the Station or which materially interferes
or could reasonably be expected to materially to interfere with Seller's (a)
right, title to or interest in the Station Assets, (b) operation of the Station
or (c) ability to transfer the Station Assets to Buyer free of such litigation.
10.1.15. "PAYMENTS" means arrearages of wages or Trust or
benefit payments.
10.1.16. "PURCHASE PRICE" means the total consideration for the
Station Assets, the Noncompetition Agreement, and Seller's Stock Purchase as
described in Section 1.2.
10.1.17. "REAL ESTATE LEASES" means all leases relating to real
property to be assumed by Buyer, copies of which are annexed hereto in
SCHEDULE 4.
10.1.18. "SELLER" means Channel 32 Incorporated, an [Oregon]
corporation.
10.1.19. "STATION" means broadcast television station KWBP-TV in
Salem, Oregon.
10.1.20. "STATION ASSETS" means the rights, title and interest, real
and personal, tangible and intangible, owned or held by Seller and used or
useful in the operation of the Station to be acquired by Buyer under this
Agreement.
10.1.21. "TIME BROKERAGE AGREEMENT" means the agreement to be
executed by Buyer and Seller this same date for the provision of programming by
Buyer to be aired on the Station.
10.1.22. "TRADE AGREEMENTS" means trade and barter agreements for the
sale of time on the Station.
10.1.23. "TRADE REPORT" means a listing of all Trade Agreements
included in the Station Assets together with an itemized statement of the
aggregate value of time owed pursuant to each of the Trade Agreements and the
fair market value of goods
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and services to be received pursuant to each of the Trade Agreements as of the
Closing Date.
10.1.24. "TRUSTS" means pension, profit-sharing and savings plans
and trusts, including without limitation, 401-K plans established by Seller for
its employees.
10.1.25. OTHER DEFINITIONS. Other capitalized terms used in this
Agreement shall have the meanings ascribed to them herein.
10.2. NUMBER AND GENDER. Whenever the context so requires, words used
in the singular shall be construed to mean or include the plural and vice versa,
and pronouns of any gender shall be construed to mean or include any other
gender or genders.
10.3. HEADINGS AND CROSS-REFERENCES. Headings of the sections have
been included for convenience of reference only and shall in no way limit or
affect the meaning or interpretation of the specific provisions of this
Agreement. All cross-references to sections herein shall mean the section of
this Agreement unless otherwise stated or clearly required by the context. Words
such as "herein" and "hereof" shall be deemed to refer to this Agreement as a
whole and not to any particular provision of this Agreement unless otherwise
stated or clearly required by the context. The term "including" means "including
without limitation."
10.4. COMPUTATION OF TIME. Whenever any time period provided for in
this Agreement is measured in "business days," there shall be excluded from such
time period each day that is a Saturday, Sunday, recognized federal legal
holiday, or other day on which the FCC's offices are closed and are not reopened
prior to 5:30 p.m. Washington, D.C. time. In all other cases all days shall be
counted.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year written above.
CHANNEL 32 INCORPORATED
By: /s/ Roy Rose
---------------------------------
Roy Rose, Chief Executive Officer
NEWCO OF OREGON, INC.
By: /s/ Douglas E. Gealy
----------------------------------
Douglas E. Gealy, President
<PAGE>
The following page contains a list of Exhibits and Schedules which have
been intentionally omitted by the Registrants.
A copy of any omitted Exhibit or Schedule will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
EXHIBITS
A Promissory Note
B Security Agreement
C Personal Guarantees of Roy Rose, Daniel J. Alderman and Hampton
Holdings, LLC
D Noncompetition Agreement
E Opinion of Seller's Counsel
F Opinion of Buyer's Counsel
G Commercial Building Lease
SCHEDULES
1 Government Licenses
2 Tangible Personal Property
3 Contracts
4 Leases
5 Programming and Copyrights
6 Allocation
7 Taxes
8 Financial Statements
9 Exceptions to Real Property
10 Cable Carriage
AMENDMENT
This Amendment is made this 25th day of April 1997 by and among Channel 32
Incorporated ("Seller") and Acme Television Holdings of Oregon, L.L.C.
("Buyer").
WHEREAS, Seller and Buyer executed that certain Asset Purchase Agreement
(the "Agreement") on January 31, 1997 concerning the sale of the assets for
television stations KWBP-TV in Salem, Oregon (the "Station"); and
WHEREAS, Seller and Buyer filed an application with the Federal
Communications Commission ("FCC") seeking the FCC's approval for the assignment
of the Station's FCC Licenses from Seller to Buyer; and
WHEREAS, the FCC has requested that Seller and Buyer modify certain
language in Section 1.2.3. of the Agreement;
NOW, THEREFORE, in view of the foregoing and the mutual premises and
covenants contained herein, Seller and Buyer hereby agree as follows:
1. Section 1.2.3 of the Agreement is amended to read as follows:
Loan to Seller. If the Closing does not occur by
May 31, 1997, Buyer will loan or cause to be
loaned to Seller Ten Million Dollars ($10,000,000)
on that date to be used to pay in full all
outstanding balances of any debt of Seller. The
loan will be payable at the Closing or, in the
event there is no Closing, within twelve (12)
months from the termination of the Purchase
Agreement. The loan will be evidenced by a
Promissory Note (the "Note") in the form of
Exhibit A annexed hereto which will bear annual
interest on the outstanding principal (with the
rate of interest to be
<PAGE>
determined by the third party lender providing the
funds). If there is no Closing then, in that
event, Seller and Buyer will immediately commence
efforts to refinance or recapitalize the Seller.
If no agreement can be reached by the parties
within 120 days after termination with respect to
any refinancing or recapitalization plan, then, in
that event, Seller shall initiate efforts in
conjunction with Buyer and/or its principals to
sell the Station to a third party. The proceeds of
the sale to a third party will be used to (1)
first repay the aforementioned loan and accrued
interest (to the extent not previously paid), (2)
then reimburse Buyer for any net losses incurred
by Buyer under the MA and (3) then pay Buyer 50%
of the gross amount received in excess of $22
Million. The loan will be secured by (1) a first
security interest in accordance with the form
annexed hereto as Exhibit B in all the Station
Assets (except the FCC Licenses) and in the
proceeds of the sale of all the Station Assets,
including but not limited to the FCC Licenses, (2)
pledges of stock for Seller and Peregrine
Communication, Ltd. ("Peregrine") and (3) the
personal guarantees of Roy Rose, Daniel J.
Alderman, and Hampton Holdings, L.L.C., an Oregon
limited liability company, in the form of
Exhibit C annexed hereto: provided, that Buyer
will not invoke its remedies under those
guarantees unless and until it is determined that
the aforementioned pledged stock is insufficient
to repay the amounts due Buyer under the
aforementioned loan.
2. Except as set forth in paragraph 1 of this Amendment, the Agreement, as
amended on February 26, 1997, remains unchanged.
3. This Amendment may be executed in counterparts, and all counterparts
shall collectively be deemed one and the same document.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
written above.
CHANNEL 32 INCORPORATED
By:/s/Roy Rose
--------------------------------
Roy Rose, Chief Executive Officer
ACME TELEVISION HOLDINGS OF
OREGON, L.L.C.
By:/s/Douglas Gealy
--------------------------------
Douglas Gealy, Managing Member
3
AMENDMENT
This Amendment is made this 2nd day of June, 1997 by and between ACME
Television Holdings of Oregon, L.L.C. ("ACME") and Channel 32 Incorporated
("Channel 32").
WHEREAS, NewCo of Oregon, Inc. and Channel 32 entered into a certain Asset
Purchase Agreement (the "Agreement") dated January 31, 1997 concerning the
assignment of certain assets used or useful in the operation of KWBP-TV in
Salem, Oregon (the "Station"); and
WHEREAS, NewCo of Oregon, Inc. assigned its interest in the Agreement to
ACME; and
WHEREAS, the Federal Communications Commission ("FCC") has approved the
assignment of the FCC licenses for the Station from Channel 32 to ACME; and
WHEREAS, ACME is prepared to advance $125,000 of the Purchase Price under
the Agreement to Channel 32 prior to Closing of the transactions contemplated by
the Agreement in exchange for Channel 32's cooperation in deferring the Closing
of the transaction until June 10, 1997 or later;
NOW, THEREFORE, in light of the foregoing and the mutual promises and
covenants contained herein, the parties hereby agree as follows:
<PAGE>
1. Upon execution of this Amendment, ACME will, on behalf of Channel 32,
wire or otherwise provide $125,000 to the account of Peregrine Communications
LTD. The $125,000 shall be deducted from the Purchase Price to be paid by Buyer
to Seller at the Closing pursuant to Section 1.2 of the Agreement. If the
Closing contemplated by the Agreement is not held for any reason, Channel 32
shall be obligated to reimburse ACME for the foregoing $125,000 in accordance
with the provisions of Section 1.2.3 of the Agreement.
2. Notwithstanding anything to the contrary in Section 1.5.1 of the
Agreement, the Closing, as that term is defined in the Agreement, shall be held
at a date set by Buyer on or before June 26, 1997.
3. This Amendment may be signed in counterpart, and all such counterparts
shall collectively be deemed one and the same document.
4. Except as reflected in this Amendment and any prior document executed by
both parties, the Agreement remains unchanged.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first set forth above.
CHANNEL 32 INCORPORATED
By:/s/Daniel J. Alderman
--------------------------------
Daniel J. Alderman, Executive
Vice President
ACME TELEVISION HOLDINGS OF
OREGON, L.L.C.
By:/s/Douglas Gealy
--------------------------------
Douglas Gealy, Managing Member
3
MANAGEMENT AGREEMENT
This Agreement ("Agreement") is dated this 6th day of February 1997 and
is by and between Channel 32 Incorporated (the " Licensee"), a corporation
formed under the laws of the State of Oregon, and NEWCO of Oregon, Inc.
("Manager"), a corporation formed under the laws of the State of Oregon.
WHEREAS, Licensee holds licenses and other authorizations from the
Federal Communications Commission ("FCC") for KWBP-TV in Salem, Oregon (the
"Station"); and
WHEREAS, Licensee and Manager are parties to a certain Asset Purchase
Agreement dated January 31, 1997 (the "Purchase Agreement") for the assignment
and sale of the FCC Licenses and other assets of the Station from Licensee to
Manager; and
WHEREAS, Licensee is desirous of securing programming and related
services for the Station prior to the consummation of the Purchase Agreement;
and
WHEREAS, Manager has programming and other resources and management
expertise which could be utilized for the benefit of the Station;
NOW, THEREFORE, in light of the foregoing and the mutual promises and
covenants contained herein, the parties hereby agree as follows:
ARTICLE I: PROVISION OF MANAGEMENT SERVICES
SECTION 1.1. MANAGER'S MANAGEMENT OF STATION FACILITIES
Licensee shall retain Manager's services beginning on the commencement
of the Term specified in Section 1.2 of this Agreement. The Licensee shall
authorize Manager to manage the Station facilities for one hundred sixty-eight
(168) hours per week, Sunday through Saturday, to enable 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, Manager will arrange for programming to be broadcast
on the Station for the entire 168-hour weekly period (subject to any diminution
under this Agreement) and otherwise manage Station operations under Licensee's
supervision. At Manager's option, the programming may originate either from
Licensee's studios or from other points. In the event of a termination of this
Agreement without a Closing, Manager will use reasonable efforts to terminate
all programming obligations created by Manager hereunder.
<PAGE>
SECTION 1.2. TERM OF AGREEMENT
The term of this Agreement (the "Term") shall commence on February 6,
1997 (the "Effective Date"). Manager shall, as of the Effective Date, arrange
for programming to be utilized on the Station and provide other management
services until the expiration of the Term, which shall be the earlier of (a) the
date of the consummation of the sale of the Station pursuant to the Purchase
Agreement (the "Closing") or (b) the termination of this Agreement under Article
IV hereof.
SECTION 1.3. QUALITY AND NATURE OF PROGRAMMING
(a) Any and all programming provided or arranged by Manager 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.
(b) The Licensee may, in the exercise of its discretion, refuse to
broadcast any program which the Licensee deems to be inconsistent with
subsection (a) of this section or the Licensee's obligations under the Act or
FCC rules or policies.
(c) Manager agrees to display the ratings of all applicable programs
broadcast on the Station. License retains the right to change any rating that,
in its discretion, is determined to be in appropriate.
SECTION 1.4. OPERATION AND MAINTENANCE OF STATION FACILITIES
(a) Notwithstanding anything herein to the contrary, the Manager shall,
subject to the terms of this Agreement, assume responsibility for all usual and
ordinary expenses incurred by Licensee in the operation of the Station
subsequent to December 31, 1996, including but not limited to salaries, lease
payments for studios and broadcast equipment, utilities, insurance and other
routine expenses and repairs (unless the expense or repair does not involve a
routine expense and is not caused by the willful misconduct or negligence of
Manager, its employees or agents: provided, that, notwithstanding the foregoing,
Manager shall assume responsibility for replacement of the Station's
transmitter). Annexed hereto as Schedule 1 is a list of the Station's current
full-time and part-time employees who are or will be employed by the Station at
the Effective Date, the position held by each employee, and the monthly
compensation of each employee. All expenses submitted by Licensee for
reimbursement are subject to verification by Manager's accountant.
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<PAGE>
(b) Within one (1) business day of the execution of this Agreement,
Manager will pay Licensee $150,000 as a deposit to cover expenses both incurred
and paid in January 1997 in excess of net receipts both earned and received in
January 1997.
The aforesaid monies will be deposited into the new operational checking
account, to which Licensee and Manager will be the sole signatories. On or
before February 15, 1997, Licensee shall provide Manager with an accounting of
such expenses. Any amount still owed (in the case where such expenses have
exceeded the $150,000) will be added to the purchase price due the Licensee at
Closing under the Purchase Agreement. In the event that the January 1997
expenses did not exceed the $150,000 deposit, then such amount will be credited
against any future amounts otherwise due the Licensee. Thereafter, Licensee
shall, on the 25th day of each month (beginning in February 1997), provide
Manager with an itemized list of salaries and other expenses incurred subsequent
to December 31, 1996 and paid since the previous accounting along with net
revenues earned subsequent to December 31, 1996 and received since the previous
accounting. If the net revenues exceed the expenses, then Licensee shall remit
to such amount to Manager within the same five (5) day period.
(c) Except for those matters falling within Manager's responsibility
under subsection (a) of this section, the Licensee shall be responsible for the
repair of any damage to or malfunction of any of the Station transmission
facilities not caused by ordinary wear and tear or by the negligent or willful
misconduct of Manager, its employees or agents.
SECTION 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 file (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 Manager unless the Licensee, at the
request of Manager, has agreed in writing to do so. Notwithstanding anything
herein to the contrary, Manager shall provide the Licensee with copies of any
mail, fax, or telephone message concerning the programming furnished or arranged
by Manager under this Agreement to permit Licensee to place copies thereof in
the Station's public inspection file if required by applicable law, rule, or
policy.
SECTION 1.6. STAFFING REQUIREMENTS AND EXPENSES
(a) The Licensee shall, to the extent required by applicable law or
policy, maintain a main studio within the Station's Grade A contour. The
Licensee shall be responsible for the payment of salaries, taxes, insurance and
related costs of Station
3
<PAGE>
personnel, including managerial staff, at the main studio, subject to any
reimbursement by Manager as provided under Section 1.4(a) of this Agreement.
(b) Manager may establish, staff and maintain a remote control point
for the Station, subject to the control and oversight of the Licensee: provided,
that Manager ensures that Licensee maintains the ability to preempt Manager's
programming. Manager shall reimburse Licensee under Section 1.4 of this
Agreement 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 Manager under this
Agreement.
SECTION 1.7. OPERATION OF STATION
(a) 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 Manager (ii) to cancel or preempt any programming
proffered by Manager if the broadcast of such program(s) would, in the
Licensee's opinion, not be in the public interest, (iii) to substitute for any
program proffered by Manager a program deemed by the Licensee to be of greater
national, regional or local interest, (iv) to require that time sales by Manager
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. Station personnel shall report and be
accountable solely to the Licensee. When they use Licensee's facilities,
Manager's personnel shall be under the ultimate direction, control and
supervision of the Licensee's general manager. Manager shall provide Licensee
with at least seven (7) days notice of the intent to run programming and the
anticipated date and time of such broadcast.
(b) The Licensee will use its best efforts to provide Manager with
reasonable prior notice of any intention to cancel or preempt any programming
proffered by Manager.
(c) Licensee shall be solely responsible for the Station's compliance
with the Act as well as FCC rules and policies, Manager shall provide
information to the Licensee with respect to Manager's programs to assist the
Licensee in assessing the extent to which such programming is responsive to the
needs and interests of the Station's service area and to enable the Licensee to
provide information required by the FCC and other governmental entities,
including but not limited to (i) a quarterly list of community issues and
responsive programming and (ii) a description of programming intended to satisfy
the Licensee's obligations under the Children's Television Act of 1990.
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<PAGE>
(d) Manager shall have no responsibility for Licensee's federal, state
or local income taxes, regardless of when paid or payable by Licensee.
(e) Manager shall have the authority, subject to Licensee's final
approval and in compliance with Licensee policies and all applicable laws, to
hire such personnel as Manager shall deem necessary to the operation of the
Station.
SECTION 1.8. STATION IDENTIFICATION
The Licensee shall be responsible for the broadcast of all required
station announcements and all visual or oral notices or rating symbols under
Section 1.3(c). Manager 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 Manager. Required announcements
shall include those announcements required by Station's role as the primary
emergency alert system station for the Capital Operational Area.
SECTION 1.9. FORCE MAJEURE
No breach of this Agreement shall be deemed to occur if circumstances
beyond the control of the Licensee cause any (a) damage or malfunction in the
Station's transmission facilities or (b) delay or interruption in the broadcast
of programs
SECTION 1.10. RIGHT TO USE THE PROGRAMS
Subject to Section 1.1, the right to use the Manager's programming and
to authorize its use in any manner in any media whatsoever shall be, and remain,
vested in Manager. In the event of a termination of this Agreement without a
Closing of the Purchase Agreement, Manager will assist Licensee in an orderly
transition of programming.
SECTION 1.11. PAYOLA
Neither Manager 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 Manager and merchants or
advertisers, unless the payer is identified in the program in accordance with
the Act and FCC rules and policies. Manager shall provide the Licensee with an
appropriate affidavit within 45 days of the Effective Date of this
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<PAGE>
Agreement and thereafter on an annual basis, and more frequently if reasonably
requested by Licensee, attesting to its compliance with this section.
SECTION 1.12. COMPLIANCE WITH LAW
Manager shall comply with all laws, rules, regulations and policies
applicable to Manager's performance under this Agreement or to which the
Licensee is subject in the operation of the Station.
SECTION 1.13. ACCOUNTS RECEIVABLE
Licensee hereby assigns to Manager all accounts receivable generated by
the sale of time on the Station generated on or after January 1, 1997, through
and including the Effective Date. Manager shall be entitled to retain any and
all accounts receivable generated after the Effective Date of this Agreement.
ARTICLE II PAYMENT OF MONIES
SECTION 2.1. PAYMENTS OF MONEY
On or before thirty (30) days following the execution of this
Agreement, Manager shall place Three Hundred Thousand Dollars ($300,000) in the
account established pursuant to Section 1.4(b) of this Agreement which will (a)
be utilized for the deposit of all accounts receivable generated from the sale
of time on the Station on or after January 1, 1997, and (b) be utilized for the
payment of all expenses which are subject to payment or reimbursement under
Section 1.4 of this Agreement after February 1, 1997. At the Closing of the
Purchase Agreement, the balance of the account shall be transferred to Manager.
SECTION 2.2. ADJUSTMENTS AT CLOSING OF PURCHASE AGREEMENT
(a) At the Closing of the Purchase Agreement, Licensee shall provide
Manager with a preliminary accounting of the final amounts due and unpaid under
this Agreement, and in the event that such amount is due to the Licensee, that
amount shall be added to the purchase price to be paid to Licensee. If the net
amount due and unpaid under this Agreement is due at that time to the Manager,
that latter amount shall be deducted from the purchase price to be paid to
Licensee. A final accounting of such amounts due and unpaid will be completed by
the Licensee and delivered to the Manager
6
<PAGE>
within 15 days of the Closing, and any difference between the preliminary
accounting and the final accounting will be paid within 5 days of such
rendering.
(b) Notwithstanding anything to the contrary in this Agreement, at the
Closing of the Purchase Agreement, Licensee will provide Manager with a
Promissory Note (the "Note") equal to 20% of the net losses incurred by Manager
under the Agreement. The Note will bear interest at a rate equal to the interest
rate paid by Manager for any financing secured by Manager to fulfill its
financial obligations under the Purchase Agreement. Licensee will be obligated
to pay the principal and all accrued interest under the Note prior to or
simultaneous with the sale of Licensee's stock in Manager as provided in Section
1.2.2. of the Purchase Agreement: provided, that, if Licensee exercises its
option under Section 1.2.2. of the Purchase Agreement to convert its ownership
interest in Manager to a comparable ownership interest in Manager's parent
corporation, then, in that event, Licensee shall have the option to (i) prepay
the principal and all accrued interest under the Note prior to such conversion
or (ii) reduce the value of the ownership interest to be acquired in the
Manager's parent corporation by an amount equal to the outstanding principal of
the Note). For purposes of this Agreement, "net losses" means the extent to
which the expenses paid or incurred by Manager under this Agreement exceed the
Account Receivables collected or generated (and less than 90 days old) by
Manager under this Agreement.
SECTION 2.3. REIMBURSEMENT OF MANAGER
In the event the Purchase Agreement is terminated prior to any Closing
thereunder, then, in that event, Licensee shall use the proceeds of the
subsequent sale of the Station (by asset agreement, stock purchase, or
otherwise) to (a) reimburse Manager for all net losses paid by Manager under
this Agreement and (b) pay manager 50% of the gross proceeds of the sale of the
Station in excess of $22 million.
ARTICLE III REPRESENTATIONS AND WARRANTIES
SECTION 3.1. 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.
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<PAGE>
SECTION 3.2. LICENSEE'S REPRESENTATIONS AND WARRANTIES
Licensee represents and warrants to Manager (a) that Licensee holds the
FCC licenses (the "FCC Licenses" ) for the Station, (b) that each such license
is in full force and effect, unimpaired by any acts or omissions of Licensee or
its agents, (c) that there is not now pending or, to Licensee's knowledge,
threatened any action by or before the FCC or any court to revoke, cancel,
suspend, refuse to renew or modify adversely the FCC Licenses, (d) that, 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, termination or
adverse modification of any FCC Licensee, (e) that 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, (f) that Licensee will not dispose of, transfer, assign or pledge any
of the Station Assets except with the prior written consent of Manager or except
for non-material assets disposed of in the ordinary course of business, (g) that
Licensee is now and will remain in compliance during the Term of this Agreement
with any and all loans, notes, and other debt instruments to which Licensee is a
party and by which it is bound, and (h) that Licensee has disclosed to Manager
in the Purchase Agreement any and all exceptions that relate to the foregoing
representations: provided that Licensee will provide Manager with immediate
notice of the breach or anticipated breach of any of the foregoing
representations, and Manager shall have the unilateral right, but not the
obligation, to cure any anticipated or actual breach without prejudice to any of
Manager's rights or remedies under this Agreement.
SECTION 3.3. MANAGER'S REPRESENTATIONS AND WARRANTIES
Manager represents and warrants to Licensee (a) that Manager 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, (b)
that, during the Term of this Agreement, Manager 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 such advertisements will be aired on a run of schedule basis at a time or
times determined by Manager and preemptable for any party who will pay cash for
the time, and (c) that Manager 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.
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SECTION 3.4. 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
attorney's fees) in connection with or resulting from (a) any breach or default
under this Agreement or (b) 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.
ARTICLE IV: TERMINATION
SECTION 4.1. EVENT OF DEFAULT
(a) The following shall, after the expiration of the applicable cure
period provided in subsection (b) of this section, constitute an Event of
Default:
(i) Manager's :failure to timely make any payments to
Licensee required under this Agreement;
(ii) the default by either party hereto in the material
observance or performance of any material covenant,
condition or undertaking contained herein; or
(iii) if any material representation or warranty made by either party
shall prove to have been or become false or misleading in any material
respect.
(b) 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.
This period may be extended for a reasonable period of time if the defaulting
party is acting in goad faith to cure the default and such default is not
materially adverse to the other party.
(c) Upon the occurrence of an Event of Default, the nondefaulting party
may terminate this Agreement, unless the latter party is also in default
hereunder.
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(d) In the event this Agreement is terminated because of an Event of
Default by Licensee, Manager shall become entitled to reimbursement of all net
losses incurred under this Agreement and paid by Manager through either (a) a
reduction in the purchase price to be paid to Licensee by Manager at the Closing
of the Purchase Agreement or (b) if there is no Closing of the Purchase
Agreement, the proceeds of the sale of the Station to a third party, which shall
be secured by Licensee at the earliest practicable date after termination by
making the Station available for sale in conjunction with the efforts of
Manager's principals: provided, that, if there is no Closing under the Purchase
Agreement, Manager shall also be entitled to 50% of the gross amount received
from the sale of the Station in excess of $22 million.
SECTION 4.2. TERMINATION OPTION
Manager may terminate this Agreement at any time if, notwithstanding
anything in this Agreement to the contrary, the Licensee cancels or preempts
programming proffered for broadcast by Manager during ten percent (10%) or more
of the total hours of operation of the Station during any calendar month. Either
party may terminate this Agreement if, the Purchase Agreement has not been
consummated within 270 days after its execution. In the event either party
elects to terminate this Agreement pursuant to this section, notice shall be
given the other party of such election at least thirty (30) days prior to the
termination date. Termination under this section shall not affect Manager's
entitlement to any reimbursement under Section 2.3 of this Agreement.
SECTION 4.3. TERMINATION UPON GOVERNMENT ACTION
(a) This Agreement may be terminated under any one of the following
circumstances: (i) by Manager, if the FCC revokes, refused to renew, or fails to
extend any FCC License for any Station; (ii) by Manager or Licensee, as the case
may be, if the FCC or any other governmental agency with jurisdiction over this
Agreement issues a Final Order which requires a modification to this Agreement
which is materially adverse to Manager and/or Licensee; or (iii) by Manager or
Licensee, if the FCC or any other governmental agency with jurisdiction over
this Agreement requires the termination of this Agreement.
(b) In the event of termination of this Agreement under this section,
Licensee shall cooperate with Manager to the extent practicable to enable
Manager to fulfill advertising or other programming contracts for cash
compensation then outstanding, in which event the Licensee shall receive such
compensation payable to Manager therefor. In no event shall termination under
this section affect either party's entitlement to reimbursement under Section
2.3 of this Agreement.
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ARTICLE V: MISCELLANEOUS
SECTION 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 Manager to
be named as an additional insured thereunder. Any insurance proceeds received by
Licensee for damaged Station Assets will be used to repair or replace such asset
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 Manager under Section 1.4(a) of this
Agreement.
SECTION 5.2. NOTICES
All necessary notices, demands, requests and other communications
permitted or required under this Agreement shall be in writing and shall be
delivered by certified mail-return receipt requested, postage prepaid; by hand;
or by overnight courier service, charges prepaid. In each case the communication
shall be addressed as follows (or to such other addresses as either party may
designate in writing to the other):
If to Manager: Douglas Gealy
President
7125 Bluffstream Court
Columbus, Ohio 43235
With a copy to: Lewis J. Paper, Esq.
Dickstein, Shapiro, Morin & Oshinsky, LLP
2101 L Street, NW
Washington, DC 20037
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If to the Licensee: Daniel J. Alderman
Executive Vice President
Suite 350
9725 SW Beaverton Hillsdale Hwy.
Beaverton, Oregon 97005
With a Copy to: Allan A. Fulsher, Esq.
Suite 350
9725 SW Beaverton Hillsdale Hwy.
Beaverton, Oregon 97005
Such communications shall be effective upon delivery.
SECTION 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.
SECTION 5.4. CONSTRUCTION
This Agreement shall be construed in accordance with the laws of the
State of Oregon without regard to conflict of laws provisions.
SECTION 5.5. HEADINGS
The headings contained in this Agreement are included for convenience
only and no heading shall alter the meaning of any provision.
SECTION 5.6. ASSIGNMENT
This Agreement may not be assigned by Licensee without the prior
written consent of the Manager. Manager may assign its rights and obligations
under this Agreement without Licensee's consent.
SECTION 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.
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SECTION 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.
SECTION 5.9. NO PARTNERSHIP OR JOINT VENTURE CREATED
Nothing in this Agreement shall be construed to make the licensee and
Manager partners or part of a joint venture or to vest any rights in any third
party.
SECTION 5.10 SEVERABILITY OF PROVISIONS
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 holdings shall not affect any other provision hereof, and
this Agreement shall be construed as if such valid, illegal or unenforceable
provision had not be contained herein.
SECTION 5.11. LITIGATION PROCEDURES AND EXPENSES
Any and all disputes concerning or under this Agreement shall be
resolved in arbitration to be conducted in Los Angeles, California in accordance
with the rules of the American Arbitration Association. The decision of the
arbitrator shall be final, binding and enforceable in any court of competent
jurisdiction. If either party initiates arbitration or other formal 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 fees.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
NEWCO OF OREGON, INC.
By: /s/ Douglas E. Gealy
-----------------------------
Douglas Gealy
President
CHANNEL 32 INCORPORATED
By:/s/ Roy Rose
------------------------------
Roy Rose
Chief Executive Officer
14
AMENDMENT
This Amendment (the "Amendment)" dated June 17, 1997 to that certain
Management Agreement ("Agreement") by and between Channel 32 Incorporated
("Licensee") and Newco of Oregon, Inc. dated February 6, 1997, is made by and
between Licensee and Acme Television Holdings of Oregon, L.L.C., assignee of
Newco's interest under the Agreement ("Broker"). All capitalized terms used
herein shall refer to the definitions set forth in the Agreement and in the
Purchase Agreement.
1. Section 2.2 (b) of the Agreement provides that at the Closing as defined
in the Purchase Agreement, Seller shall execute a Promissory Note with Broker as
Lender in the amount of 20% of the net losses incurred by Broker ("Principal")
under the Agreement.
2. The parties hereto have been able to determine the amount of Principal
due to Broker for the period from the commencement of the Agreement through
April 30, 1997, however, the parties have not determined the amount of Principal
due to Broker for the period May 1 through the Closing Date.
3. The parties therefore agree that, on the Closing Date, Licensee shall
execute and deliver to Broker a Promissory Note in the form attached hereto as
Exhibit A in the amount of Principal due to Broker through April 30, 1997, and
further, that upon the earlier of sixty (60) days after the Closing Date or
within five (5) business days after the amount of additional Principal has been
determined by mutual agreement, Licensee shall deliver to Broker an Amended
Promissory Note with a Principal amount equal to 20% of the aggregate net losses
of Broker from the commencement of the Agreement through the Closing Date.
Interest on the Principal amount of the Amended Promissory Note shall be
calculated as accruing from the Closing Date. Upon delivery to Broker of the
Amended Promissory Note, Broker shall cancel, mark as void and deliver to
Licensee the Promissory Note delivered at the Closing.
4. In the event that the parties can not agree as to the net losses
incurred by Broker for the period May 1 through the Closing Date, the matter
shall be referred to the decision of a mutually acceptable CPA, whose decision
shall be final and binding on the parties. Such referral shall occur if the
Amended Promissory Note has not been executed and delivered to Broker within
sixty (60) days of the Closing Date.
5. All other terms and conditions of the Agreement shall remain in full
force and effect, and shall not be deemed to be modified hereby, unless and only
to the extent specifically referred to herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment,
intending to be bound by the provisions hereof, as of the date set forth above.
CHANNEL 32 INCORPORATED
/s/Roy Rose
---------------------------------
Roy Rose, Chief Executive Officer
ACME TELEVISION HOLDINGS OF OREGON, L.L.C.
/s/Douglas Gealy
----------------------------------
Douglas Gealy, Managing Member
2
NONCOMPETITION AGREEMENT
THIS AGREEMENT is made as of this 17th day of June 1997 by and among
Peregrine Communications, Ltd., Peregrine Holdings, Ltd. (together "Peregrine"
), corporations organized under the laws of Oregon, Channel 32 Incorporated, a
corporation organized under the laws of Oregon, ("Channel 32") (together
Peregrine and Channel 32 are referred to herein as "Covenantors") and Acme
Television Holdings of Oregon, L.L.C. ("Acme"), a limited liability company
organized under the laws of Oregon ("Buyer").
RECITALS:
WHEREAS, Peregrine is the parent company of Channel 32 Incorporated
("Channel 32"), a corporation organized under the laws of Oregon; and
WHEREAS, Channel 32 is the licensee of television station KWBP-TV in
Salem, Oregon, (the "Station"); and
WHEREAS, Channel 32 and Acme have entered into an Asset Purchase
Agreement, as amended (the "Purchase Agreement") dated January 31, 1997 pursuant
to which Channel 32 has agreed to sell and assign, and Buyer has agreed to
purchase and acquire, the assets used or useful in the operation of the Station;
and
WHEREAS, as the parent company of Channel 32, Peregrine will benefit
from consummation of the Purchase Agreement; and
WHEREAS, the Purchase Agreement requires Covenantors to enter into a
Noncompetition Agreement for the Salem, Oregon market upon consummation of the
Purchase Agreement; and
WHEREAS, the Federal Communications Commission (the "FCC") has granted
its consent to the assignment of the FCC Licenses (as defined in the Purchase
Agreement) from Channel 32 to Buyer; and
WHEREAS, in accordance with the terms of the Purchase Agreement, the
parties hereto wish to enter into a noncompetition agreement with respect to the
Station and the area surrounding the Station upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises set forth herein, the parties hereby agree as follows:
1. PAYMENT OF CONSIDERATION. In consideration of their obligations
hereunder, Buyer has paid Covenantors on this date the sum of One Thousand
Dollars
<PAGE>
($1,000), which sum is part of the Purchase Price paid by Buyer to Covenantors
under the Purchase Agreement.
2. COVENANTORS' OBLIGATIONS.
a. For a period of two (2) years from the date of this Agreement
(the "Noncompetition Period"), neither Covenantors nor their Affiliates (as
defined below) shall, directly or indirectly, (i) own, manage, operate, control,
join, assist, lend money to, guarantee the obligation of, or participate in the
ownership, management, operation or control of, or be involved as consultant,
stockholder, or partner with, or participate in any manner with the
establishment of, any Competitive Business (as defined below), or (ii) solicit
or induce any employee of Buyer while an employee of the Station (and which
employee was formerly an employee of KWBP-TV immediately before the execution
and delivery of the Purchase Agreement) to terminate such employment to become
employed by Covenantor or an Affiliate and (iii) these restrictions shall apply
to all future assignees of Covenantors and their Affiliates.
b. "Competitive Business" means any television station as
defined in the FCC's rules and regulations in the Salem, Oregon metro market,
as defined by Arbitron as of the date of this Agreement.
c. "Restricted Region" means the Salem, Oregon television
metro market, as defined by Arbitron as of the date of this Agreement.
d. An "Affiliate" means any other person or entity that
controls or is controlled by any Covenantor.
3. EXTENSION OF NONCOMPETITION PERIOD. If any Covenantor or Affiliate
thereof violates this Agreement and Buyer secures appropriate injunctive or
other equitable relief from a court of competent jurisdiction, the
Noncompetition Period for any such Covenantor shall be computed anew from the
date judicial relief is afforded to Buyer but reduced by the time expired
between the date the initial Noncompetition Period commenced and the date of the
first violation by the Covenantor or its Affiliate.
4. AMENDMENT BY COURT ORDER. If any provision of the Agreement shall
be determined by any court of competent jurisdiction to be unenforceable for any
reason, the Agreement shall be deemed to be amended to conform with any such
judicial determination but only to the extent necessary to avoid such provision
from being declared null and void or otherwise unenforceable.
5. ASSIGNMENT. Buyer may assign its rights under this Agreement to,
and this Agreement shall thereafter be binding upon and inure to the benefit of,
any subsequent licensee of the Stations, and such assignee shall thereupon
be deemed substituted for Buyer upon the terms and subject to the conditions
hereof.
<PAGE>
6. NOTICES. All notices, requests, demands, and other communications
permitted or required by this Agreement shall be in writing and shall be deemed
given when delivered personally (which shall include delivery by any reputable
overnight courier service that issues a receipt or other confirmation of
delivery) or five (5) business days after the date mailed by certified or
registered U.S. mail, return receipt requested, postage prepaid, and addressed
as follows:
If to Covenantors:
Daniel Alderman
Channel 32 Incorporated
Boardwalk Plaza, Suite 350
9725 S.W. Beaverton Hillsdale Highway
Beaverton, OR 97005-3366
With a copy (which shall not constitute notice) to:
Allan A. Fulsher, Esq.
Boardwalk Plaza, Suite 350
9725 S.W. Beaverton Hillsdale Highway
Beaverton, OR 97005-3366
If to Buyer:
Douglas Gealy
President, Acme Television Holdings of Oregon,
L.L.C.
7125 Bluffstream Court
Columbus, OH 43235
With a copy (which shall not constitute notice) to:
Lewis J. Paper, Esq.
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, DC 20037
Either party may change the address to which such notices are to be addressed by
notice thereof to the other party in the manner set forth above.
<PAGE>
7. APPLICABLE LAW. This Agreement shall be interpreted and enforced
under the laws of the State of Oregon without regard to conflict of laws
provisions.
8. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between and among the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous oral and written agreements,
understandings and commitments between the parties with respect to the subject
matter hereof. No amendments to this Agreement may be made except by a writing
signed by all parties hereto.
9. WAIVERS. No failure or delay of Buyer in exercising any of its
rights or remedies hereunder for breach of any provision hereof shall constitute
a waiver of such rights or remedies or any waiver in connection with any
subsequent breach thereof. No waiver of any provision of this Agreement shall be
effective unless in writing and signed by the party against which such waiver is
sought to be enforced.
10. ACKNOWLEDGMENTS. Covenantors hereby acknowledge (1) that they have
had the opportunity to consult independent counsel of their choosing in
connection with the preparation and execution of this Agreement, (2) that the
provisions of this Agreement have been negotiated and carefully tailored with a
view to preventing the serious and irreparable injury that Buyer will suffer in
the event of competition by Covenantors with Buyer in the Restricted Region
during the Noncompetition Period, (3) that Buyer is providing the benefits set
forth in this Agreement in reliance on Covenantors' joint and several
representations that the restrictions set forth in this Agreement will not
impose an undue hardship on any Covenantors since each has other business
opportunities with respect to the operation of the television station, (4) that
Covenantors' individual or joint breach of this Agreement will cause irreparable
injury to Buyer, the exact amount of which will be difficult to ascertain, and
that the remedies at law for any such breach would be inadequate, and (5) that,
if any Covenantor or its Affiliate breaches this Agreement, Buyer shall be
entitled to injunctive relief without posting bond or other security.
11. COUNTERPARTS. This Agreement may be signed in multiple
counterparts, all of which together shall constitute one agreement binding on
the parties hereto, notwithstanding that all of the parties have not signed
the same counterpart.
12. LEGAL FEES AND COSTS. If any action in law or in equity is
instituted to enforce the provisions of this Agreement, the prevailing party
shall be entitled to reimbursement by the other party for all reasonable
costs incurred thereby, including reasonable attorneys' fees.
13. CONSTRUCTION. The section headings of this Agreement are
for convenience only and in no way modify, interpret or construe the meaning
of specific provisions of the Agreement. As used herein, the neuter gender
shall also denote the masculine and feminine, and the masculine gender shall
also denote the neuter and feminine, where the context so permits or
requests. To the extent it is not defined in this
<PAGE>
Agreement, any term used herein shall have the same meaning herein as in the
Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CHANNEL 32 INCORPORATED
By: /s/ Daniel J. Alderman
___________________________
Daniel Alderman
Executive Vice President
PEREGRINE COMMUNICATIONS, LTD.
By: /s/ Roy Rose
___________________________
Chief Executive Officer
PEREGRINE HOLDINGS, LTD.
By: /s/ Roy Rose
___________________________
Chief Executive Officer
ACME TELEVISION HOLDINGS OF OREGON, L.L.C.
By: /s/ Douglas E. Gealy
___________________________
Douglas Gealy
Managing Member
MANAGEMENT AGREEMENT
This Management Agreement (the "Agreement") dated as of the 22nd day of
August, 1997 and executed by and between Roberts Broadcasting of Salt Lake City,
L.L.C. ("Permittee"), a limited liability company formed under the laws of the
State of Delaware, and ACME Television of Utah, L.L.C. ("Manager"), a limited
liability company formed under the laws of the State of Delaware.
WITNESSETH THAT
WHEREAS, Permittee holds a construction permit (the "CP") from the
Federal Communications Commission ("FCC") for KZAR-TV in Provo, Utah (the
"Station"); and
WHEREAS, Permittee's members and Manager's parent company have entered
into a certain Membership Exchange Agreement dated this same date (the "Exchange
Agreement") under which such parent company is to acquire a minority membership
interest in Permittee from such members;
WHEREAS, Permittee's members and Manager's parent company propose to
enter into a certain option agreement (the "Option Agreement") which would
enable Manager's parent to acquire the majority ownership interest in Permittee
at some future date; and
WHEREAS, pending the execution and consummation of the Option
Agreement, Permittee is desirous of securing Manager's services in the
construction and operation of the Station, all subject to the terms and
conditions of this Agreement; and
WHEREAS, Manager is prepared to provide various services to Permittee
for the construction and operation of the Station, all subject to the terms and
conditions of this Agreement;
NOW, THEREFORE, in light of the foregoing and the mutual promises and
covenants contained herein, the parties hereby agree as set out herein.
ARTICLE I: PROVISION OF MANAGEMENT SERVICES
SECTION 1.1. MANAGER'S CONSTRUCTION AND MANAGEMENT OF STATION FACILITIES
(a) Upon execution of this Agreement, Manager shall assume sole
responsibility for the financial and other obligations of Permittee under those
contracts (the
<PAGE>
"Contracts") which Permittee has executed as part of its effort to construct the
Station and true copies of which are annexed hereto in SCHEDULE 1. Permittee
shall have the sole responsibility for obtaining any third party consents
required to make the aforesaid assumption effective.
(b) Manager shall have the option, subject to approval by Permittee, to
enter into other contracts and to take such other actions as may be necessary to
complete construction of the Station in a timely manner and in accordance with
the terms of the CP. Manager shall be solely responsible for any and all
financial obligations imposed by any such contracts.
(c) On the date of closing under the Exchange Agreement, Manager shall
reimburse Permittee for all out of pocket costs and expenses incurred by
Permittee prior to the date hereof in connection with the construction of the
Station, and identified in SCHEDULE 2 HERETO including, without limitation, the
purchase price for the CP, the purchase price or lease payments for any real or
intangible personal property of the Station, all engineering and legal expenses,
and payments under contracts. The amount to be reimbursed hereunder shall in no
event exceed One Million Dollars ($1,000,000).
(d) Subject to supervision and control by the Permittee, Manager shall
complete the construction of the Station at Manager's sole cost and expense.
Such work shall commence promptly following the execution hereof and shall be
completed as promptly as reasonably possible. Manager shall provide Permittee
with construction progress reports in reasonable detail on a monthly basis.
Manager shall be responsible to Permittee for acts of Manager's employees,
contractors, subcontractors and other persons performing any of the
construction. Manager warrants that the construction will be of good quality
free of any material defect and that the construction shall comply in all
material respects with all applicable laws, rules and regulations. Manager shall
maintain insurance to protect Manager and Permittee against claims arising from
such construction, including personal injury, death, property damage, workers
compensation, and builders risk to the extent such claims are based on acts or
omissions occurring after the date hereof and provide Permittee with evidence of
such insurance coverage from financially sound companieS IN amounts normally and
reasonably carried by similar carriers.
(e) Upon completion of construction, Manager shall have the right and
obligation to manage the Station facilities for 168 hours per week to enable
Permittee to comply with applicable law and to fulfill its obligations under the
Communications Act of 1934, as amended (the "Act"), as well as the rules and
policies of the FCC. As part of its responsibilities, Manager will arrange for
programming to be broadcast on the Station for the entire 168-hour weekly period
(subject to any diminution under this Agreement) and
2
<PAGE>
otherwise manage Station operations under Permittee's supervision.
Notwithstanding the foregoing, the Permittee may designate such additional time
as it may require without any adjustment of the monthly reimbursement of
expenses to be paid to Permittee hereunder for broadcast of programming
necessary for the Station to broadcast news, public affairs, children's,
religious and non-entertainment programming as required by the FCC. At Manager's
option, the programming may originate either from Permittee's studios or from
other points. In the event of a termination of this Agreement without a Closing
(as defined below), Manager will use reasonable efforts to terminate all
programming obligations created by Manager hereunder.
SECTION 1.2. TERM OF AGREEMENT
The term of this Agreement (the "Term") shall commence one business day
after the date of this Agreement (the "Effective Date") and expire on the
earlier of (a) the date of the consummation (the "Closing") of the Purchase
Agreement (as defined in the Option Agreement), (b) sixty (60) months after the
issuance of a license by the FCC to cover the CP, or (c) the termination of this
Agreement under Article IV hereof, provided, that certain provisions of this
Agreement shall survive such termination and continue in effect beyond the Term,
as more specifically provided below.
SECTION 1.3. QUALITY AND NATURE OF PROGRAMMING
(a) Any and all programming provided or arranged by Manager 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.
(b) The Permittee may, in the exercise of its discretion, refuse to
broadcast any program which the Permittee deems to be inconsistent with
subsection (a) of this section or Permittee's obligations under the Act or FCC
rules or policies.
(c) Manager agrees to display the ratings of all applicable programs
broadcast on the Station. Permittee retains the right to change any rating that,
in its discretion, is determined to be inappropriate.
SECTION 1.3. OPERATION AND MAINTENANCE OF STATION FACILITIES
(a) The Manager shall, subject to the terms of this Agreement, assume
responsibility for all reasonable expenses incurred by Permittee in the
construction or operation of the Station subsequent to the Effective Date,
including but not limited to
3
<PAGE>
salaries, lease payments for studios and broadcast equipment, utilities,
insurance and other routine expenses and repairs (unless the expense or repair
does not involve a routine matter and is caused by the willful misconduct or
negligence of Permittee, its employees or agents). All expenses submitted by
Permittee for reimbursement are subject to verification by Manager.
(b) On the Effective Date, and on the 15th day of each month after the
Effective Date, Permittee shall provide Manager with an itemized budget of
expenses expected in the following 30-day period. Manager shall approve all
expenses in each such budget which are reasonable for the construction and
operation of the Station. Manager shall thereafter pay such approved expenses in
a timely fashion (unless Manager disputes any expense, in which case the
undisputed expenses will be paid and the disputed expense will remain unpaid
until the dispute is resolved by Permittee and Manager).
SECTION 1.15. 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 file (which
shall at all times remain the responsibility of the Permittee), the Permittee
shall not be required to receive or handle mail, faxes, or telephone messages in
connection with programming provided by Manager unless the Permittee, at the
request of Manager, has agreed in writing to do so. Notwithstanding anything
herein to the contrary, Manager shall provide the Permittee with copies of any
mail, fax, or telephone message concerning the programming furnished or arranged
by Manager under this Agreement to permit Permittee to place copies thereof in
the Station's public inspection file if required by applicable law, rule, or
policy.
SECTION 1.16. STAFFING REQUIREMENTS AND EXPENSES
(a) The Permittee shall, to the extent required by applicable law or
policy, maintain a main studio within the Station's principal community and have
it staffed as required by FCC rules and policies. The Permittee shall be
responsible for the payment of salaries, taxes, insurance and related costs of
Station personnel, including managerial staff, at such main studio, subject to
any reimbursement by Manager as provided under Section 1.4 of this Agreement.
(b) Manager may establish, staff and maintain a remote control point
for the Station, subject to the control and oversight of the Permittee,
provided, that Permittee shall retain the right to preempt Manager's programming
from that remote point. Manager shall be responsible for the payment of (i) all
telephone calls associated with program production and listener responses, (ii)
any fees billed by ASCAP, BMI and
4
<PAGE>
SESAC, and (iii) all other copyright fees attributable to programming provided
by Manager under this Agreement.
SECTION 1.7. OPERATION OF STATION
(a) Notwithstanding anything herein to the contrary, the Permittee shall
retain exclusive authority for the construction and operation of the Station,
including, without limitation, the right (i) to accept or reject any contract
for the provision of goods and services in the construction of the Station, (ii)
to accept or reject any programming or advertisements proffered by Manager,
(iii) to cancel or preempt any programming proffered by Manager if the broadcast
of such program(s) would, in the Permittee's opinion, not be in the public
interest, (iv) to substitute for any program proffered by Manager a program
deemed by the Permittee to be of greater national, regional or local interest,
(v) to require that time sales by Manager to political candidates comply with
law and policy regarding access, charges and equal opportunities, and (vi) to
take any other action which the Permittee deems necessary for compliance with
federal, state and local laws, including the Act and the rules and policies of
the FCC. Station personnel shall report and be accountable solely to the
Permittee. When they use Permittee's facilities, Manager's personnel shall be
under the ultimate direction, control and supervision of the Permittee's general
manager.
(b) The Permittee will use its best efforts to provide Manager with
reasonable prior notice of any intention to cancel or preempt any programming
proffered by Manager.
(c) Permittee shall be solely responsible for the Station's compliance
with the Act as well as FCC rules and policies. Manager shall provide
information to the Permittee with respect to Manager's programs to assist the
Permittee in assessing the extent to which such programming is responsive to the
needs and interests of the Station's service area and to enable the Permittee to
provide information required by the FCC and other governmental entities,
including but not limited to (i) a quarterly list of community issues and
responsive programming and (ii) a description of programming intended to satisfy
the Permittee's obligations under the CHILDREN'S TELEVISION ACT OF 1990.
(d) Manager shall have no responsibility for Permittee's federal, state
or local income taxes, regardless of when paid or payable by Permittee.
(e) Manager shall have the authority, subject to Permittee's final
approval and in compliance with Permittee policies and all applicable laws, to
hire such personnel as Manager shall deem necessary for the construction and
operation of the Station.
5
<PAGE>
SECTION 1.8. STATION IDENTIFICATION
The Permittee shall be responsible for the broadcast of all required
Station announcements and all visual or oral notices or rating symbols under
Section 1.3(c). Manager shall make available to Permittee, without charge, such
announcements for such purpose as requested by Permittee and shall air such
announcements during the programming supplied by Manager.
SECTION 1.9. FORCE MAJEURE
No breach of this Agreement shall be deemed to occur if circumstances
beyond the control of the Permittee or Manager cause any (a) damage or
malfunction in the Station's transmission facilities or (b) delay or
interruption in the broadcast of programs; provided that the occurrence of any
Force Majeur shall not excuse Manager from making the payments required to be
made by Manager under Section 1.4.
SECTION 1.10. RIGHT TO USE THE PROGRAMS
Subject to Section 1.1 of this Agreement, the right to use the Manager's
programming and to authorize its use in any manner in any media whatsoever shall
be, and remain, vested in Manager. In the event of a termination of this
Agreement without a Closing of the Option Agreement, Manager will assist
Permittee in an orderly transition of programming.
SECTION 1.11. PAYOLA
Neither Manager 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 Manager and merchants or
advertisers, unless the payer is identified in the program in accordance with
the Act and FCC rules and policies. Manager shall provide the Permittee with an
appropriate affidavit within 60 days of the Effective Date of this Agreement and
thereafter on an annual basis, and more frequently if reasonably requested by
Permittee, attesting to its compliance with this section.
6
<PAGE>
SECTION 1.12. COMPLIANCE WITH LAW
Manager shall comply with all laws, rules, regulations and policies
applicable to Manager's performance under this Agreement or to which the
Permittee is subject in the construction or operation of the Station.
ARTICLE II: MANAGEMENT FEES
In consideration for the services to be rendered hereunder, Manager
shall retain any and all accounts receivable generated by the sale of time on
the Station.
ARTICLE III: REPRESENTATIONS AND WARRANTIES
SECTION 3.1. 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 (1) its certificate, operating agreement or
other organizational documents or (2) any agreement, contract or other
obligation to which either party is subject or by which it is bound.
SECTION 3.2. PERMITTEE'S REPRESENTATIONS AND WARRANTIES
Permittee represents and warrants to Manager (a) that Permittee holds
the CP for the Station, (b) that the CP is in full force and effect, unimpaired
by any acts or omissions of Permittee or its agents, (c) that there is not now
pending or, to Permittee's knowledge, threatened any action by or before the FCC
or any court to revoke, cancel, suspend, refuse to extend or modify adversely
the CP, (d) that, 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, cancellation or adverse modification of the CP, (e) that Permittee
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
construction or operation of the Station, (f) that Permittee will not dispose
of, transfer, assign or pledge any Permittee's assets except with the prior
written consent of Manager and (g) that Permittee will provide Manager with
immediate notice of the breach or anticipated breach of any of the foregoing
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<PAGE>
representations, and Manager shall have the unilateral right, but not the
obligation, to cure any anticipated or actual breach without prejudice to any of
Manager's rights or remedies under this Agreement.
SECTION 3.3. MANAGER'S REPRESENTATIONS AND WARRANTIES
Manager represents and warrants to Permittee that Manager 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.
SECTION 3.4. INDEMNIFICATION
Each party shall defend, indemnify and hold harmless the other party
and its partners, members, 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
attorney's fees) in connection with or resulting from (a) any breach or default
by the indemnifying party under this Agreement or (b) 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, or any claim or
liability resulting from any alleged libel, invasion of privacy or defamation by
the indemnifying party.
ARTICLE IV: TERMINATION
SECTION 4.1. EVENT OF DEFAULT
(a) The following shall, after the expiration of the applicable cure
period provided in subsection (b) of this section, constitute an Event of
Default:
(i) the breach by either party hereto in the
observance or performance of any material covenant,
condition or undertaking contained herein; or
(ii) if any material representation or warranty made by either party
shall prove to have been or become false or misleading in any material
respect.
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(b) An Event of Default shall not be deemed to have occurred until
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. This period may be extended for
a reasonable period of time if the defaulting party is acting in goad faith to
cure the default and such default is not materially adverse to the other party.
(c) Upon the occurrence of an Event of Default, the
nondefaulting party may terminate this Agreement, unless the non-defaulting
party is also in default hereunder.
(d) If this Agreement is terminated because of an Event of Default by
Permittee as defined in Section 4.1(a), Permittee shall pay Manager for all Net
Losses incurred under this Agreement and paid by Manager through either (i) a
reduction in the purchase price to be paid to Permittee by Manager at the
Closing of the Option Agreement or (ii) if there is no Closing of the Option
Agreement, by payment from Permittee within 90 days of termination of the Option
Agreement. Likewise, if closing fails to occur under the Exchange Agreement and
Manager's parent company is not in material breach under such Agreement,
Permittee shall pay Manager for all Net Losses, with such payment being made
within ninety (90) days after termination of the Exchange Agreement. For
purposes of this Agreement, "Net Losses" means the extent to which the
unreimbursed expenses paid or incurred by Manager under this Agreement exceed
the Account Receivables collected or generated (and less than 90 days old) by
Manager as Management fees pursuant to Article II of this Agreement.
SECTION 4.2. MANAGER'S TERMINATION OPTION
Manager may terminate this Agreement at any time if (a) notwithstanding
anything herein to the contrary, the Permittee cancels or preempts programming
proffered for broadcast by Manager during ten percent (10%) or more of the total
hours of operation of the Station during any calendar month or (b) the Option
Agreement is terminated. In the event Manager elects to terminate this Agreement
pursuant to this section, notice shall be given to Permittee of such election at
least thirty (30) days prior to the termination date.
SECTION 4.3. TERMINATION UPON GOVERNMENT ACTION
(a) This Agreement may be terminated under any one of the following
circumstances: (i) by Manager, if the FCC revokes, refuses to renew, or fails to
extend any FCC authorization for any Station; (ii) by Manager or Permittee, as
the case may be, if the FCC or any other governmental agency with jurisdiction
over this Agreement issues a Final
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Order which requires a modification to this Agreement which is materially
adverse to Manager or Permittee; or (iii) by Manager or Permittee, if the FCC or
any other governmental agency with jurisdiction over this Agreement requires the
termination of this Agreement.
(b) In the event of termination of this Agreement under this section,
Permittee shall cooperate with Manager to the extent practicable to enable
Manager to fulfill advertising or other programming contracts for cash
compensation then outstanding, in which event the Permittee shall receive such
compensation payable to Manager therefor.
ARTICLE V: MISCELLANEOUS
SECTION 5.1. EXPIRATION OF OPTION
If the Option Agreement expires according to its terms without exercise
and without material breach by any party, the Manager and the Permittee shall
negotiate in good faith to amend the terms hereof as shall be fair and
appropriate in such circumstance; such negotiation shall address (without
limiting the generality of the foregoing) modification of the management fee
payable hereunder based on comparable arm's-length fees charged in similar
circumstances.
SECTION 5.2 INSURANCE
Permittee shall maintain in full force and effect such insurance
policies 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. Permittee shall cause
Manager to be named as an additional insured thereunder. Any insurance proceeds
received by Permittee for damaged Station assets will be used to repair or
replace such asset so that the construction and operation of the Station
conforms with this Agreement. The premiums for any insurance policies maintained
by Permittee shall be included in the expenses subject to reimbursement by
Manager under Section 1.4(a) of this Agreement.
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SECTION 5.3. NOTICES
All necessary notices, demands, requests and other communications
permitted or required under this Agreement shall be in writing and shall be
delivered by certified mail-return receipt requested, postage prepaid; by hand;
or by overnight courier service, charges prepaid. In each case the communication
shall be addressed as follows (or to such other addresses as either party may
designate in writing to the other):
If to Manager: ACME Television of Utah, L.C.C.
7125 Bluffstream Court
Columbus, Ohio 43235
Attention: Douglas Gealy, President
With copies to: Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, NW
Washington, DC 20037
Attention: Lewis J. Paper, Esquire
If to Permittee: Roberts Broadcasting of Salt Lake City, L.L.C.
Suite 300
1400 No. Kingshighway
St. Louis, MO 63113
Attention: Michael Roberts, Managing Member
With a Copy to: Dow, Lohnes & Albertston, P.L.L.C.
1200 New Hampshire Avenue, NW
Washington, DC 20036
Attention: John R. Feore, Jr., Esquire
and
Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square, Suite 2600
St. Louis, MO 63102
Attention: Joseph S. von Kaenel, Esq.
Such communications shall be effective upon delivery.
11
<PAGE>
SECTION 5.4. 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.
SECTION 5.5. CONSTRUCTION
This Agreement shall be construed in accordance with the laws of the
State of Utah without regard to conflict of laws provisions.
SECTION 5.6. HEADINGS
The headings contained in this Agreement are included for convenience
only and no heading shall alter the meaning of any provision.
SECTION 5.7. ASSIGNMENT
This Agreement may not be assigned by Permittee without the prior
written consent of the Manager. Manager may not assign its rights and
obligations under this Agreement except to any affiliated person of Manager:
provided, that no such assignment shall relieve Manager of its obligations
hereunder. An "affiliated person" of Manager shall mean a person or entity in
control of, controlled by or under common control with Manager.
SECTION 5.8. 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.
SECTION 5.9. ENTIRE AGREEMENT
This Agreement embodies the entire agreement between the parties
concerning the construction and operation of the Station and supersedes 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.
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SECTION 5.10. NO PARTNERSHIP OR JOINT VENTURE CREATED
Nothing in this Agreement shall be construed to make the Permittee and
Manager partners or part of a joint venture or to vest any rights in any third
party.
SECTION 5.11. SEVERABILITY OF PROVISIONS
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 holdings shall not affect any other provision hereof, and
this Agreement shall be construed as if such valid, illegal or unenforceable
provision had not be contained herein.
SECTION 5.12. LITIGATION PROCEDURES AND EXPENSES
If either party initiates a lawsuit or other formal 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 fees.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ACME TELEVISION OF UTAH, L.L.C.
By: /s/Douglas E. Gealy
------------------------------
Douglas E. Gealy, President
ROBERTS BROADCASTING OF SALT LAKE
CITY, L.L.C.
By:/s/Michael V. Roberts
-------------------------------
Michael V. Roberts, Managing Member
14
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Schedule 1
ASSUMED CONTRACTS
NONE
15
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SCHEDULE 2
CONSTRUCTION EXPENSES
16
MANAGEMENT AGREEMENT
This Management Agreement (the "Agreement"), executed as of the 22nd day
of August, 1997 by and between Minority Broadcasters of Santa Fe, Inc., a
Delaware corporation ("Permittee"), and ACME Television of New Mexico, L.L.C., a
Delaware limited liability company ("Manager"),
WITNESSETH THAT
WHEREAS, Permittee holds a construction permit (the "CP") from the
Federal Communications Commission (the"FCC"), to construct a television station
with call letters KAOU-TV in Santa Fe, New Mexico (the "Station"); and
WHEREAS, Permittee and an affiliate of Manager are parties to a certain
Asset Purchase Agreement (the "Purchase Agreement") dated this same day, which
provides for the sale by permittee to the affiliate of the CP and the assets of
Permittee associated therewith or with the Station; and
WHEREAS, pending consummation of the Purchase Agreement, Permittee is
desirous of securing Manager's services in the construction and operation of the
Station, all subject to the terms and conditions of this Agreement; and
WHEREAS, Manager is prepared to provide various services to Permittee
for the construction and operation of the Station, all subject to the terms and
conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein, the undersigned parties hereby agree as set out herein.
ARTICLE I: PROVISION OF MANAGEMENT SERVICES
SECTION 1.1. MANAGER'S CONSTRUCTION AND MANAGEMENT OF STATION FACILITIES
(a) Upon execution of this Agreement, Manager shall assume sole
responsibility for the financial and other obligations of Permittee under those
contracts (the "Contracts") which Permittee has executed as part of its effort
to construct the Station and true copies of which are annexed hereto in SCHEDULE
1. Permittee shall have the sole responsibility for obtaining any third party
consents required to make the aforesaid assignment effective.
<PAGE>
(b) Manager shall have the option, subject to approval by Permittee, to
enter into other contracts and to take such other actions as may be necessary to
complete construction of the Station in a timely manner and in accordance with
the terms of the CP.
Manager shall be solely responsible for any and all financial obligations
imposed by any such contracts.
(c) In consultation with the Permittee, Manager shall complete the
construction of the Station at Manager's sole cost and expense. Such work shall
commence promptly following the execution hereof and shall be completed as
promptly as reasonably possible. Manager shall be responsible to Permittee for
acts of Manager's employees, contractors, subcontractors and other persons
performing any of the construction. Manager warrants that the construction will
be of good quality free of any material defect and that the construction shall
comply in all material respects with all applicable laws, rules and regulations.
Manager shall maintain insurance and protect Manager and permittee against
claims arising from such construction, including personal injury, death and
property damage, to the extent such claims are based on acts or omissions
occurring after the date hereof.
(d) Upon completion of construction, Manager shall have the right and
obligation to manage the Station facilities for 168 hours per week to enable
Permittee to comply with applicable law and to fulfill its obligations under the
Communications Act of 1934, as amended (the "Act"), as well as the rules and
policies of the FCC. As part of its responsibilities, Manager will arrange for
programming to be broadcast on the Station for the entire 168-hour weekly period
(subject to any diminution under this Agreement) and otherwise manage Station
operations under Permittee's supervision. Notwithstanding the foregoing, the
Permittee may designate such additional time as it may require without any
adjustment of the monthly reimbursement expenses to be paid to Permittee
hereunder for broadcast of programming necessary for the Station to broadcast
news, public affairs, children's, religious and non-entertainment programming as
required by the FCC. At Manager's option, the programming may originate either
from Permittee's studios or from other points.
SECTION 1.2. TERM OF AGREEMENT
The term of this Agreement (the "Term") shall commence one business day
after the date of this Agreement (the "Effective Date") and expire on the
earlier of (a) the date of the consummation (the "Closing") of the Purchase
Agreement, (b) sixty (60) months after the Effective Date, or (c) the
termination of this Agreement under Article IV hereof, PROVIDED, HOWEVER, that
certain provisions of this Agreement shall survive such termination and continue
in effect beyond the Term, as more specifically provided below.
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<PAGE>
SECTION 1.3. QUALITY AND NATURE OF PROGRAMMING
(a) Any and all programming provided or arranged by Manager
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.
(b) The Permittee may, in the exercise of its discretion, refuse to
broadcast any program which the Permittee deems to be inconsistent with
subsection (a) of this section or Permittee's obligations under the Act or FCC
rules or policies.
(c) Manager agrees to display the ratings of all applicable programs
broadcast on the Station. Permittee retains the right to change any rating that,
in its discretion, is determined to be inappropriate.
SECTION 1.4. OPERATION AND MAINTENANCE OF STATION FACILITIES
(a) Notwithstanding anything herein to the contrary, the Manager shall,
subject to the terms of this Agreement, assume responsibility for all expenses
incurred by Permittee in the construction or operation of the Station subsequent
to the Effective Date, including but not limited to salaries, lease payments for
studios and broadcast equipment, utilities, insurance and other routine expenses
and repairs (unless the expense or repair does not involve a routine matter and
is caused by the willful misconduct or negligence of Permittee, its employees or
agents).
(b) Beginning on the 15th day of each month after the Effective Date,
Permittee shall provide Manager with an itemized list of expenses incurred since
the Effective Date or the last accounting, whichever is later. Manager shall
then pay such expenses in a timely fashion (unless Manager disputes any expense,
in which case the undisputed expenses will be paid and the disputed expense will
remain unpaid until the dispute is resolved by Permittee and Manager).
SECTION 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 file (which
shall at all times remain the responsibility of the Permittee), the Permittee
shall not be required to receive or handle mail, faxes, or telephone messages in
connection with programming provided by Manager unless the Permittee, at the
request of Manager, has agreed in writing to do so. Notwithstanding anything
herein to the contrary, Manager shall provide the Permittee with
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<PAGE>
copies of any mail, fax, or telephone message concerning the programming
furnished or arranged by Manager under this Agreement to permit Permittee to
place copies thereof in the Station's public inspection file if required by
applicable law, rule, or policy.
SECTION 1.6. STAFFING REQUIREMENTS AND EXPENSES
(a) The Permittee shall, to the extent required by applicable law or
policy, maintain a main studio within the Station's City of License and have it
staffed as required by FCC rules and policies. The Permittee shall be
responsible for the payment of salaries, taxes, insurance and related costs of
Station personnel, including managerial staff, at such main studio, subject to
any reimbursement by Manager as provided under Section 1.4 of this Agreement.
(b) Manager may establish, staff and maintain a remote control point
for the Station, subject to the control and oversight of the Permittee,
provided, that Permittee shall retain the right to preempt Manager's programming
from that remote point. Manager shall be responsible for the payment of (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 Manager under this Agreement.
SECTION 1.7. OPERATION OF STATION
(a) Notwithstanding anything herein to the contrary, the Permittee
shall retain exclusive authority for the construction and operation of the
Station, including, without limitation, the right (i) to accept or reject any
contract for the provision of goods and services in the construction of the
Station, (ii) to accept or reject any programming or advertisements proffered by
Manager, (iii) to cancel or preempt any programming proffered by Manager if the
broadcast of such program(s) would, in the Permittee's opinion, not be in the
public interest, (iv) to substitute for any program proffered by Manager a
program deemed by the Permittee to be of greater national, regional or local
interest, (v) to require that time sales by Manager to political candidates
comply with law and policy regarding access, charges and equal opportunities,
and (vi) to take any other action which the Permittee deems necessary for
compliance with federal, state and local laws, including the Act and the rules
and policies of the FCC. Station personnel shall report and be accountable
solely to the Permittee. When they use Permittee's facilities, Manager's
personnel shall be under the ultimate direction, control and supervision of the
Permittee's general manager.
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(b) The Permittee will use its best efforts to provide Manager with
reasonable prior notice of any intention to cancel or preempt any programming
proffered by Manager.
(c) Permittee shall be solely responsible for the Station's compliance
with the Act as well as FCC rules and policies. Manager shall provide
information to the Permittee with respect to Manager's programs to assist the
Permittee in assessing the extent to which such programming is responsive to the
needs and interests of the Station's service area and to enable the Permittee to
provide information required by the FCC and other governmental entities,
including but not limited to (i) a quarterly list of community issues and
responsive programming and (ii) a description of programming intended to satisfy
the Permittee's obligations under the Children's Television Act of 1990.
(d) Manager shall have no responsibility for Permittee's federal, state
or local income taxes, regardless of when paid or payable by Permittee.
(e) Manager shall have the authority, subject to Permittee's final
approval and in compliance with Permittee policies and all applicable laws, to
hire such personnel as Manager shall deem necessary for the construction and
operation of the Station.
SECTION 1.8. STATION IDENTIFICATION
The Permittee shall be responsible for the broadcast of all required
Station announcements and all visual or oral notices or rating symbols under
Section 1.3(c). Manager shall make available to Permittee, without charge, such
announcements for such purpose as requested by Permittee and shall air such
announcements during the programming supplied by Manager.
SECTION 1.9. FORCE MAJEURE
No breach of this Agreement shall be deemed to occur if circumstances
beyond the control of the Permittee or Manager cause any (a) damage or
malfunction in the Station's transmission facilities or (b) delay or
interruption in the broadcast of programs; provided that the occurrence of or
Force Majeure shall not excuse Manager from making the payments required to be
made by manager under Section 1.4.
SECTION 1.10. RIGHT TO USE THE PROGRAMS
Subject to Section 1.1 of this Agreement, the right to use the
Manager's programming and to authorize its use in any manner in any media
whatsoever shall be, and remain, vested in Manager. In the event of a
termination of this Agreement less than sixty
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(60) months after the Effective Date, Manager will assist Permittee in an
orderly transition of programming.
SECTION 1.11. PAYOLA
Neither Manager 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 Manager and merchants or
advertisers, unless the payer is identified in the program in accordance with
the Act and FCC rules and policies. Manager shall provide the Permittee with an
appropriate affidavit within 60 days of the Effective Date and thereafter on an
annual basis, and more frequently if reasonably requested by Permittee,
attesting to its compliance with this section.
SECTION 1.12. COMPLIANCE WITH LAW
Manager shall comply with all laws, rules, regulations and policies
applicable to Manager's performance under this Agreement or to which the
Permittee is subject in the construction or operation of the Station.
SECTION 1.13. ACCOUNTS RECEIVABLE
Manager shall retain any and all accounts receivable generated by the
sale of time on the Station during the term hereof.
ARTICLE II: MANAGEMENT FEES
Unless there is a material breach of one or more covenants,
representations or warranties by Manager herein or the FCC denies the
application for transfer of the CP filed pursuant to the Purchase Agreement due
to an intentional breach of the Purchase Agreement or this Agreement by Manager
or its affiliates, Permittee shall pay, on the first day of each calendar month
beginning twelve (12) months after the Effective Date, a monthly management fee
to Manager of Three Hundred Sixteen Thousand, Eight Hundred Seventy-seven
Dollars ($316,877), with such payments to continue for twenty-four (24) months.
6
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ARTICLE III: REPRESENTATIONS AND WARRANTIES
SECTION 3.1. 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 hereof shall not constitute a
breach or violation of (1) its certificate, operating agreement or other
organizational documents or (2) any agreement, contract or other obligation to
which either party is subject or by which either is bound.
SECTION 3.2. PERMITTEE'S REPRESENTATIONS AND WARRANTIES
Permittee represents and warrants to Manager (a) that Permittee holds
the CP for the Station, (b) that the CP is in full force and effect, unimpaired
by any acts or omissions of Permittee or its agents, (c) that there is not now
pending or, to Permittee's knowledge, threatened any action by or before the FCC
or any court to revoke, cancel, suspend, refuse to extend or modify adversely
the CP, (d) that, as of the Effective Date, no event has occurred that does
justify or, after notice or lapse of time or both, would justify the revocation,
cancellation or adverse modification of the CP, (e) that Permittee 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 construction or operation of
the Station, (f) that Permittee will not dispose of, transfer, assign or pledge
any Permittee's assets except with the prior written consent of Manager and (g)
that Permittee will provide Manager with immediate notice of the breach or
anticipated breach of any of the foregoing representations, and Manager shall
have the unilateral right, but not the obligation, to cure any anticipated or
actual breach without prejudice to any of Manager's rights or remedies under
this Agreement.
SECTION 3.3. MANAGER'S REPRESENTATIONS AND WARRANTIES
Manager represents and warrants to Permittee that Manager 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.
SECTION 3.4. INDEMNIFICATION
Each party shall defend, indemnify and hold harmless the other party
and its partners, members, officers, stockholders, directors, employees, agents,
successors and assigns, from and against any and all costs, losses, claims,
liabilities, fines, expenses,
7
<PAGE>
penalties, and damages (including reasonable attorney's fees) in connection with
or resulting from (a) any breach or default under this Agreement or (b) 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, or any claim or liability resulting from any alleged libel, invasion of
privacy or defamation by the indemnifying party.
ARTICLE IV: TERMINATION
SECTION 4.1. EVENT OF DEFAULT
(a) The following shall, after the expiration of the applicable cure
period provided in subsection (b) of this section, constitute an Event of
Default:
(i) the breach by either party hereto in the
observance or performance of any material covenant,
condition or undertaking contained herein; or
(ii) if any material representation or warranty made by either party
shall prove to have been or become false or misleading in any material
respect.
(b) An Event of Default shall not be deemed to have occurred until
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. This period may be extended for
a reasonable period of time if the defaulting party is acting in goad faith to
cure the default and such default is not materially adverse to the other party.
(c) Upon the occurrence of an Event of Default, the
nondefaulting party may terminate this Agreement, unless the non-defaulting
party is also in default hereunder.
(d) In the event this Agreement is terminated because of an Event of
Default by Permittee as defined in Section 4.1(a), Manager shall become entitled
to reimbursement of all Net Losses incurred under this Agreement and paid by
Manager, by payment from Permittee within 30 days of termination. For purposes
of this Agreement, "Net Losses" means the extent to which the expenses paid or
incurred by Manager under this Agreement exceed the Account Receivables
collected or generated (and less than 90 days old) by Manager under this
Agreement.
8
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(e) In the event this Agreement is terminated for any reason by any
party pursuant to this Article IV, Permittee's obligation to pay Management Fees
under Article II hereof shall survive such termination.
SECTION 4.2. MANAGER'S TERMINATION OPTION
Manager may terminate this Agreement at any time if (a) notwithstanding
anything herein to the contrary, the Permittee cancels or preempts programming
proffered for broadcast by Manager during ten percent (10%) or more of the total
hours of operation of the Station during any calendar month or (b) the Purchase
Agreement is terminated. In the event Manager elects to terminate this Agreement
pursuant to this section, notice shall be given to Permittee of such election at
least thirty (30) days prior to the termination date.
SECTION 4.3. TERMINATION UPON GOVERNMENT ACTION
(a) This Agreement may be terminated under any one of the following
circumstances: (i) by Manager, if the FCC revokes, refuses to renew, or fails to
extend any FCC authorization for any Station; (ii) by Manager or Permittee, as
the case may be, if the FCC or any other governmental agency with jurisdiction
over this Agreement issues a Final Order which requires a modification to this
Agreement which is materially adverse to Manager or Permittee; or (iii) by
Manager or Permittee, if the FCC or any other governmental agency with
jurisdiction over this Agreement requires the termination of this Agreement.
(b) In the event of termination of this Agreement under this section,
Permittee shall cooperate with Manager to the extent practicable to enable
Manager to fulfill advertising or other programming contracts for cash
compensation then outstanding, in which event the Permittee shall receive such
compensation payable to Manager therefor.
ARTICLE V: MISCELLANEOUS
5.1. INSURANCE
Permittee shall maintain in full force and effect such insurance
policies 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
9
<PAGE>
facilities comparable to those of the Station. Permittee shall cause Manager to
be named as an additional insured thereunder. Any insurance proceeds received by
Permittee for damaged Station assets will be used to repair or replace such
asset so that the construction and operation of the Station conforms with this
Agreement. The premiums for any insurance policies maintained by Permittee shall
be included in the expenses subject to reimbursement by Manager under Section
1.4(a) of this Agreement.
SECTION 5.2. NOTICES
All necessary notices, demands, requests and other communications
permitted or required under this Agreement shall be in writing and shall be
delivered by certified mail-return receipt requested, postage prepaid; by hand;
or by overnight courier service, charges prepaid. In each case the communication
shall be addressed as follows (or to such other addresses as either party may
designate in writing to the other):
If to Manager: ACME Television of New Mexico, L.C.C.
7125 Bluffstream Court
Columbus, Ohio 43235
Attention: Douglas Gealy, President
With a copy to: Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, NW
Washington, DC 20037
Attention: Lewis J. Paper, Esquire
If to Permittee Minority Broadcasters of Santa Fe, Inc.
Suite 300
1400 No. Kingshighway
St. Louis, MO 63113
Attention: Victor Roberts
With a copy to: Dow, Lohnes & Albertston, P.L.L.C.
1200 New Hampshire Avenue, NW
Washington, DC 20036
Attention: John R. Feore Jr., Esquire
Such communications shall be effective upon delivery.
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SECTION 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.
SECTION 5.4. CONSTRUCTION
This Agreement shall be construed in accordance with the laws of the
State of Delaware without regard to conflicts of law provisions.
SECTION 5.5. HEADINGS
The headings contained in this Agreement are included for convenience
only and no heading shall alter the meaning of any provision.
SECTION 5.6. ASSIGNMENT
This Agreement may not be assigned by Permittee without the prior
written consent of the Manager. Manager may assign its rights and obligations
under this Agreement to any affiliated person of Manager without Permittee's
consent; or to any person, with Permittee's consent, which shall not
unreasonably be withheld.
SECTION 5.7. COUNTERPART SIGNATURE
This Agreement may be signed in one or more counterparts or with one or
more counterpart signature pages, and all such counterparts shall be deemed to
be one and the same document.
SECTION 5.8. ENTIRE AGREEMENT
This Agreement embodies the entire agreement between the parties
concerning the construction and operation of the Station and supersedes any and
all prior and contemporaneous agreements and understandings, oral or written. No
amendment hereof shall be valid unless embodied in a document executed by both
parties.
SECTION 5.9. NO PARTNERSHIP OR JOINT VENTURE CREATED
Nothing in this Agreement shall be construed to make the Permittee and
Manager partners or part of a joint venture or to vest any rights in any third
party.
11
<PAGE>
SECTION 5.10. SEVERABILITY OF PROVISIONS
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 holdings shall not affect any other provision hereof, and
this Agreement shall be construed as if such valid, illegal or unenforceable
provision had not be contained herein.
SECTION 5.11. LITIGATION PROCEDURES AND EXPENSES
If either party initiates a lawsuit or other formal 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 fees.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ACME TELEVISION OF NEW MEXICO, L.L.C.
By: /s/ Douglas E. Gealy
-------------------------------
Douglas Gealy, President
MINORITY BROADCASTERS OF SANTA FE, INC.
By:/s/ Victor Roberts
--------------------------------
Victor Roberts, President
12
<PAGE>
Schedule 1
CONTRACTS OF THE PERMITTEE
NONE
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of May 28, 1997 (the "Closing Date"),
among ACME TELEVISION LICENSES OF TENNESSEE, LLC, a Tennessee limited liability
company, and ACME TELEVISION OF TENNESSEE, LLC, a Tennessee limited liability
company (collectively "Buyer"); C.W. TV, INC. (the "General Partner"), a Florida
corporation; LAURA L. PHIPPS; NANCY P. PHIPPS; JENNIFER P. MITCHELL ;LISA P.
RICHARDSON, GAVIN B. S. PHIPPS; COLIN S. PHIPPS, CUSTODIAN FOR KEEGAN S. PHIPPS,
A MINOR; IAN J. PHIPPS; THE COSBY TRUST U/A DATED 10/18/95, RAYMOND E. LACY,
TRUSTEE; THE TAYLOR TRUST U/A DATED 10/18/95, RAYMOND E. LACY, TRUSTEE; RYAN
DENNIS BOYLE IRREVOCABLE TRUST U/A DATED JANUARY 18, 1996, DENNIS O. BOYLE,
TRUSTEE; ELIZABETH ANN BOYLE IRREVOCABLE TRUST U/A DATED JANUARY 18, 1996,
DENNIS O. BOYLE, TRUSTEE; RANDALL B. LANE IRREVOCABLE TRUST U/A DATED JANUARY
18, 1996, W. H. LANE, TRUSTEE; AND SUZANNE R. LANE IRREVOCABLE TRUST U/A DATED
JANUARY 18, 1996, W. H. LANE, TRUSTEE (collectively "Sellers"); CROSSVILLE TV
LIMITED PARTNERSHIP, a Florida limited partnership (the "Partnership"); and
NATIONSBANK, N.A. (SOUTH), a national banking association, as escrow agent
("Escrow Agent").
This is the Escrow Agreement referred to in Section 3.02 of the
Purchase Agreement dated May 28, 1997 (the "Purchase Agreement") among Buyer,
Sellers and the Partnership. Capitalized terms used in this agreement without
definition shall have the respective meanings given to them in the Purchase
Agreement.
The parties, intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) In accordance with Section 3.03 of the Purchase Agreement,
Buyer is depositing with Escrow Agent an amount equal to $660,000 in immediately
available funds (the "Escrow Fund"). Escrow Agent acknowledges receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to
hold, safeguard and disburse the Escrow Fund only pursuant to the terms and
conditions hereof.
2. INVESTMENT OF FUNDS
Except as Buyer and the General Partner, acting on behalf of Sellers,
may from time to time jointly instruct Escrow Agent in writing, the Escrow Fund
shall be invested in United States Treasury bills having a remaining maturity of
90 days or less and repurchase obligations secured by such United States
Treasury Bills, with any remainder being deposited and maintained in an
interest-bearing money market deposit account with Escrow Agent until
disbursement of the entire Escrow Fund. Escrow Agent is
<PAGE>
authorized to liquidate in accordance with its customary procedures any portion
or all of the Escrow Fund consisting of investments to provide for payments
required to be made under this Agreement.
3. TERMINATION AND DISTRIBUTION OF ESCROW
(a) Notwithstanding anything herein to the contrary, Escrow
Agent may disburse all or a portion of the Escrow Fund to Sellers upon receipt
of a Promissory Note (a "Note") in the form of Exhibit A annexed hereto with the
original signatures of the General Partner and Buyer's Managing Member, in which
case the amount of the disbursement to Sellers will be equal to the amount
specified in the Note. Upon repayment, Escrow Agent shall mark any and all Notes
so received as "Paid in Full" and shall return such Notes to Sellers upon
repayment. If the Purchase Agreement or this Agreement is terminated prior to
the Closing, Escrow Agent shall, upon receipt of notice of such termination from
Buyer with service on Sellers, distribute and assign for collection any and all
Notes held in escrow.
(b) At the Closing and in accordance with Section 3.02 of the
Purchase Agreement, Buyer shall transfer to Escrow Agent the Purchase Price,
reduced by the Escrow Deposit and other adjustments provided for in the Purchase
Agreement. If the Escrow Fund contains less than $660,000 at the time of Closing
Buyer shall transfer into the Escrow Fund that amount necessary to restore the
Escrow Fund to $660,000. All accrued interest and any amount in the Escrow Fund
exceeding $660,000 at the Closing shall be distributed to Buyer to the Closing.
(c) At the Closing and in accordance with Section 3.05 of the
Purchase Agreement, Escrow Agent shall retain the sum of $2,000,000 as the
"Post-Closing Escrow Deposit." Escrow Agent shall disburse the Post-Closing
Escrow Deposit at the times and in such amounts as provided in Section 3.05 of
the Purchase Agreement, but only upon the receipt of (i) joint written
instructions of Buyer and Sellers, or (ii) a written decision by Purchase
Agreement, or (iii) a final non-appealable order of a court of competent
jurisdiction. Upon complete disbursement by Escrow Agent of The Escrow Fund,
this Escrow Agreement shall be deemed terminated and Escrow Agent shall be
relieved and discharged from any further obligations hereunder. In no event
shall Buyer be obligated to instruct the Escrow Agent to disburse all of the
Escrow Fund if, at the time such disbursement is otherwise due under the
Purchase Agreement, there are unresolved or unpaid claims for indemnification by
Buyer against Sellers under the Purchase Agreement.
(d) At the Closing, the Escrow Agent shall (i) disburse the
Purchase Price (reduced by the Post-Closing Escrow Deposit and
<PAGE>
the adjustments specified in Section 3.02 of the Purchase Agreement) to Sellers
in accordance with Section 3.02 of the Agreement, and (ii) deliver the
assignments of the Partnership Interests to Buyer in accordance with Section
3.04 of the Agreement.
(e) If the Closing does not occur, Escrow Agent shall hold the
Escrow Fund and shall distribute the Escrow Fund only upon the receipt of (i)
joint written instructions of Buyer and Sellers, or (ii) a written decision by
an arbitration tribunal as described in Section 14.02 of the Purchase Agreement,
or (iii) a final non-appealable order of a court of competent jurisdiction. The
Escrow Agent shall have not duty to collect any Promissory Note. Such Promissory
Note, if due and payable, shall be assigned to Purchaser for collection.
4. DUTIES OF ESCROW AGENT
(a) Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorneys' fees and disbursements,
arising out of and in connection with this Agreement. Without limiting the
foregoing, Escrow Agent shall in no event be liable in connection with its
investment or accordance with the terms hereof, including, without limitation,
any liability for any delays (not resulting from its gross negligence or willful
misconduct) in the investment or reinvestment of the Escrow Fund, or any loss of
interest incident to any such delays.
(b) Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent amy act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person purporting
to give receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so. Escrow
Agent may conclusively presume that the undesigned representative of any party
hereto which is an entity other than a natural person has full power and
authority to instruct Escrow Agent on behalf of that party unless written notice
to the contrary is delivered to Escrow Agent.
<PAGE>
(c) Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not be liable for any
action taken or omitted by it in good faith in accordance with such advice.
(d) Escrow Agent does not have any interest in the Escrow Fund
deposited hereunder but is serving as escrow holder only and having only
possession thereof. The parties hereto will provide Escrow Agent with
appropriate Internal Revenue Service Forms W-9 for tax identification number
certification, or non-resident alien certifications. This Section 4(d) and
Section 4(a) shall survive notwithstanding any termination of this Agreement or
the resignation of Escrow Agent.
(e) Escrow Agent (and any successor Escrow Agent) may at any
time resign as such by delivering the Escrow Fund to any successor Escrow Agent
jointly designated by the other parties hereto in writing, or to any court of
competent jurisdiction pursuant to an interpleader complaint or other proceeding
initiated before such court, whereupon Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this Agreement.
The resignation of Escrow Agent will take effect on the earlier of (a) the
appointment of a successor (including a court of competent jurisdiction) or (b)
the day which is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time Escrow Agent has not
received a designation of a success Escrow Agent, Escrow Agent's sole
responsibility after that time shall be to retain and safeguard the Escrow Fund
until receipt of a designation of successor Escrow Agent or a joint written
disposition instruction by the other parties hereto or a final non-appealable
order of a court of competent jurisdiction.
(f) In the event of any disagreement between the other parties
hereto resulting in adverse claims or demands being made in connection with the
Escrow Fund, Escrow Agent shall retain the Escrow Fund until Escrow Agent shall
have received (i) a written decisions by an arbitration tribunal as described in
Section 14.02 of the Purchase Agreement, or (ii) a final non-appealable order of
a court of competent jurisdiction directing delivery of the Escrow Fund or (iii)
a written agreement executed by Buyer and Sellers directing delivery of the
Escrow Fund, in which event Escrow Agent shall disbursement the Escrow Fund in
accordance with such order or agreement.
(g) Buyer shall pay Escrow Agent compensation for the services
to be rendered by Escrow Agent hereunder as determined by mutual agreement of
the parties hereto. Buyer shall reimburse Escrow Agent for all reasonable
expenses, disbursements and advances incurred or made by Escrow Agent in
performance of its duties hereunder (including reasonable fees, expenses and
disbursements of its counsel).
<PAGE>
5. LIMITED RESPONSIBILITY
This Agreement expressly sets forth all the duties of Escrow Agent
with respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this agreement against Escrow Agent. Escrow Agent
shall not be bound by the provisions of any agreement among the other parties
hereto except this Agreement.
6. OWNERSHIP FOR TAX PURPOSES
(a) The parties agree that, for purposes of federal and other
taxes based on income, prior to the Closing Buyer will be treated as the owner
of the Escrow Fund, and that for such period Buyer will report all income, if
any, that is earned on, or derived from, the Escrow Fund as its income, in such
proportions, in the taxable year or years in which such income is properly
includible and pay any taxes attributable thereto.
(b) The parties agree that, for purposes of federal and other
taxes based on income, after the Closing Sellers will be treated as the owners
of the Escrow Fund, and that for such period Sellers will report all income, if
any, that is earned on, or derived from, the Escrow Fund as their income, in
such proportion, in the taxable year or years in which such income is properly
includible and pay any taxes attributable thereto.
7. NOTICES
All notices, consents, waivers and other communications required or
authorized under this Agreement must be in writing and will be deemed to have
been duly given when (a) delivered by telecopier (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt) provided
that a copy is mailed by certified mail, return receipt requested and postage
prepaid, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested and charges prepaid),
in each case to the appropriate addresses set forth in the Purchase Agreement
(or to such other addresses as a party may designate by notice to the other
parties).
8. ARBITRATION
If any dispute arises out of an interpretation of the Purchase
Agreement, any party may request arbitration as provided in Section 14.02 of the
Purchase Agreement and all parties agree that the dispute shall be settled by
arbitration in accordance with Section 14.02 of the Purchase Agreement. Process
in any action or proceeding referred to in the preceding sentence may be served
on any party anywhere in the world.
<PAGE>
9. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original and all of which, when taken together,
will be deemed to constitute one and the same.
10. SECTION HEADINGS
The headings of sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation.
11. WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the comments referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12. ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior and contemporaneous agreements
and understandings among the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the Buyer, the Sellers and the Escrow Agent.
13. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Florida,
without regard to conflicts of law principles.
<PAGE>
14. LITIGATION EXPENSES
If any arbitration or other litigation is instituted to enforce or
define a party's rights or obligations under this agreement, the prevailing
party shall be reimbursed by the other party for all reasonable expenses
incurred thereby, including reasonable attorneys' fees.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER:
ACME TELEVISION LICENSES OF
TENNESSEE, LLC,
a Tennessee limited liability company
By: /s/Douglas E. Gealy
________________________________________
Douglas Gealy, Managing Member
ACME TELEVISION OF TENNESSEE, LLC,
a Tennessee limited liability company
By: /s/Douglas E. Gealy
________________________________________
Douglas Gealy, Managing Member
SELLERS:
C.W. TV, Inc.,
a Florida corporation
By: /s/Cynthia P. Willis
________________________________________
Cynthia P. Willis, President
/s/Laura L. Phipps
________________________________________
Laura L. Phipps
/s/Nancy P. Phipps
________________________________________
Nancy P. Phipps
{SIGNATURES CONTINUED}
<PAGE>
/s/Jennifer P. Mitchell
________________________________________
Jennifer P. Mitchell
/s/Lisa P. Richardson
________________________________________
Lisa P. Richardson
/s/Gavin B. S. Phipps
________________________________________
Gavin B. S. Phipps
/s/Colin S. Phipps
________________________________________
Colin S. Phipps, Custodian
for Keegan S. Phipps, a minor
/s/Ian J. Phipps
________________________________________
Ian J. Phipps
THE COSBY TRUST U/A DATED 10/13/95
By: /s/Raymond E. Lacy
____________________________________
Raymond E. Lacy, Trustee
THE TAYLOR TRUST U/A DATED 10/18/95
By: /s/Raymond E. Lacy
____________________________________
Raymond E. Lacy, Trustee
RYAN DENNIS BOYLE IRREVOCABLE
TRUST U/A DATED JANUARY 18, 1996
By: /s/Dennis O. Boyle
____________________________________
Dennis O. Boyle, Trustee
ELIZABETH ANN BOYLE IRREVOCABLE
TRUST U/A DATED JANUARY 18, 1996
By: /s/Dennis O. Boyle
____________________________________
Dennis O. Boyle, Trustee
RANDALL B. LANE IRREVOCABLE TRUST
U/A DATED JANUARY 18, 1996
By: /s/W. H. Lane
____________________________________
W. H. Lane, Trustee
{SIGNATURES CONTINUED}
<PAGE>
SUZANNE R. LANE IRREVOCABLE TRUST
U/A DATED JANUARY 18, 1996
By: /s/W. H. Lane
____________________________________
W. H. Lane, Trustee
PARTNERSHIP:
CROSSVILLE TV LIMITED PARTNERSHIP
By: C.W. TV, INC., General Partner
By: /s/Cynthia P. Willis
____________________________________
Cynthia P. Willis, President
ESCROW AGENT:
NATIONSBANK, N.A. (SOUTH)
By: /s/Shari B. Sawyers
____________________________________
Title: Vice President
STATION AFFILIATION AGREEMENT
Dated as of June 10, 1997
ACME Holdings of Oregon, LLC
10255 SW Arctic Drive
Beaverton, Oregon 97005
Attention: Doug Gealy
The following shall comprise the agreement between The WB Television Network
Partners, L.P. dba The WB Television Network ("WB," "we," or "us"), and ACME
Holdings of Oregon, LLC ("Affiliate" or "you") for the affiliation of your
television station KWBP ("Station") with WB for carriage of WB programming. The
Federal Communications Commission ("FCC") has issued a broadcast license
("License") to you to operate Station in Portland, Oregon, the community in
which Station is licensed by the FCC ("Community of License"). All references in
this Agreement to "WB program(s)" and "WB programming" and any variations
thereof shall mean the programming made available by WB under this Agreement.
1. WB PROGRAMMING: WB will make available to Affiliate WB programs for
free over-the-air broadcast and broadcast by any other means by Station
in the Community of License during the term of this Agreement. During
such term, except as otherwise provided herein, WB grants Affiliate the
exclusive right to have Station broadcast the WB programming in the
Community of License only as scheduled by WB over free over-the-air
television and by such other technological means as are available to
Affiliate for broadcast in the Community of License so long as Station
broadcasts the WB programming for over-the-air television.
Notwithstanding the foregoing, for an initial period, until such time
that WB offers exclusivity against the signal of WGN to its affiliates,
WB may allow the signal of WGN to be imported into the Community of
License. WB shall have the sole discretion to select, schedule,
substitute and/or withdraw WB programming or any portion(s) thereof.
WB shall also have the right to authorize any television broadcasting
station, regardless of the community in which it is licensed by the
FCC, to broadcast any presentation of a subject we deem to be of
immediate national significance including, but not limited to, a
Presidential
<PAGE>
address. Except as provided herein, during the term of this Agreement
Affiliate shall be the sole affiliate of WB for transmission for
exhibition on television of WB programming in the Community of License.
2. PROGRAM CARRIAGE:
(a) We agree to make available for broadcast by Station WB
programming for the hours programmed by WB at the times and dates
scheduled by WB throughout the term of this Agreement. You
acknowledge that the times and roll-out dates set forth in this
Agreement are approximate only and you agree to have Station
broadcast WB programs irrespective of whether WB meets, fails to
meet or otherwise varies from the anticipated program schedule
set forth herein; provided, however, that WB hereby agrees not to
accelerate such anticipated program schedule. To the extent WB
makes available such WB programming for broadcast, this Agreement
both obligates us to make available such WB programs to Station
and obligates Station to broadcast such WB programs over-the-air
pursuant to the terms of this Agreement.
(b) Subject to the exceptions set forth in subparagraph 2(e) and the
right of preemption set forth in subparagraph 2(f), Station shall
broadcast WB programs on the dates and at the times scheduled by
WB. Station shall broadcast WB programs in their entirety,
including but not limited to WB commercial announcements, WB
identifications, program promotional material, and credit
announcements contained in such programs, without interruption or
deletion or addition of any kind, except for the commercial
announcements that Station is allowed to add pursuant to
Paragraph 5. Notwithstanding the foregoing, you may substitute
other WB promotional announcements in lieu of program promotional
material that is inaccurate as it pertains to Station's schedule.
No commercial announcement, promotional announcement or public
service announcement will be broadcast by Station during any
interval within a WB program, which interval is designated by WB
as being for the sole purpose of making a station identification
announcement.
(c) The initial Scheduled Program Times of WB programming and the
anticipated roll-out dates of that programming are set forth as
follows (the specified times apply for
2
<PAGE>
the Eastern and Pacific Time Zones; the Mountain and Central Time
Zones are one hour earlier for Prime Time and Latenight programming
only, except as otherwise agreed by us):
Prime Time: 7:00 p.m. - 10:00 p.m. Sunday
8:00 p.m. - 10:00 p.m. Monday through Saturday.
Two nights, to be designated by us, during the
1994/1995 broadcast year (one night in January
1995 with the second night commencing during the
third quarter of 1995); one additional night
commencing during the 1995/1996 broadcast year;
and one additional night during each broadcast
year thereafter until seven nights of programming
are made available.
Children's: 7:00 a.m. - 8:00 a.m.; 7:30 a.m. - 8:30 a.m.; or 8:00
a.m. - 9:00 a.m. (at WB's election) Monday
through Friday;
3:00 p.m. - 5:00 p.m. Monday through Friday;
8:00 a.m. - 12:00 noon Saturday;
Weekday mornings (one hour) and Saturday
mornings (three hours) commencing September
1995; One additional Saturday hour commencing
September 1996; Monday through Friday
afternoons (two hours) commencing September
1997. It is anticipated that the additional
Children's programming will commence in
approximately the second week of September.
Latenight: 11:00 p.m. - 12:00 midnight Monday through
Friday, commencing not earlier than 1997 and
subject to the approval of the WB Affiliate's
Council (as defined in Paragraph 13 below).
(d) Notwithstanding the roll-out schedule for Children's afternoon
programming in subparagraph (c) above, WB's supply of Children's
afternoon programming shall be subject to the expiration of the
current agreements between WB affiliates and suppliers of
Children's
3
<PAGE>
afternoon programming. Station agrees not to extend or renew any
agreement it may have with such suppliers for such programming
during the term of this Agreement if such renewal or extension would
interfere with the broadcast of the WB Children's afternoon
programming.
(e) You confirm that as of the date of this Agreement you have no
commitments, except those listed in Schedule 1 hereto, which
would impede Station's broadcasting all WB programming made
available during the term of this Agreement. If any WB
programming is not broadcast by you because of any such
commitment expressly described in Schedule 1 (but excluding
extensions by exercise of options by Affiliate [but not by the
programming licensor] or otherwise), then such programming shall
be broadcast in a time period upon which you and we shall
mutually agree and which shall be of quality and rating value
comparable to that of the Scheduled Program Times. These programs
will not be considered preempted for purposes of subparagraph
2(f).
(f) Notwithstanding anything in this Agreement to the contrary, nothing
in this Agreement shall be construed to prevent or hinder Affiliate
from (i) rejecting or refusing any WB program which Affiliate
reasonably believes to be unsatisfactory or unsuitable or contrary
to the public interest or (ii) substituting a program which, in
Affiliate's opinion, is of greater local or national importance. In
such an event, you shall provide us with advance written notice of
any such rejection, refusal or substitution, no later than 14 days
prior to the air date of such programming, except where the nature
of the substitute program makes such notice impracticable (e.g.,
coverage of breaking news or other unscheduled events) or the
programming has not been made available to you by such date, in
which cases you agree to give us as much advance notice as the
circumstances permit. Such notice shall include a statement of the
reasons you believe that the rejected WB programming is
unsatisfactory or unsuitable or contrary to the public interest,
and/or that a substituted program is of greater local or national
importance. In view of the limited amount of WB programming to be
supplied pursuant to this Agreement
4
<PAGE>
(at least until such time as the full WB programming schedule has
been rolled out) you acknowledge that you do not foresee any need to
substitute programming of greater local or national importance for
WB programming, except in those circumstances requiring live
coverage of fast-breaking news events or very infrequent special
events.
To the extent you substitute another program for a WB program as
permitted under subparagraph 2(f)(ii), then you will broadcast such
omitted program and the commercial announcements contained therein
(or any replacement programming provided by WB and the commercial
announcements contained therein) during a time period upon which you
and we shall promptly and mutually agree and which shall be of
quality and rating value comparable to that of the preempted
program's Scheduled Program Time. In the event that the parties do
not promptly agree upon such a time period after reasonable
consultation in good faith and after taking into account the
practical alternatives under the circumstances, then, without
limiting any other rights of WB under this Agreement or otherwise,
we shall have the right to license the broadcast rights to the
applicable omitted programming (or replacement programming) to
another television station located in the Community of License.
In addition, if three or more episodes of a program series are
preempted by you as permitted hereunder in any thirteen-week period,
for any reasons other than force majeure as provided in Paragraph 6,
we shall have the right, upon 60 days prior written notice, to
terminate your right to broadcast that program series and to
withdraw all future episodes of that series. Such thirteen-week
periods shall be measured consecutively from the first broadcast
date of the program series in question. If we subsequently place
such a series on another station in the Community of License, we
reserve the right not to offer you the broadcast rights to that
series for subsequent broadcast seasons.
5
<PAGE>
In addition to all other remedies, to the extent one or more episodes
of a program series is preempted by you in violation of (i.e., other
than as permitted under) this Paragraph 2, we shall have the right,
upon 30 days prior written notice, to terminate your right to
broadcast the remainder of the program series and withdraw all future
episodes of that series from you.
(g) Nothing in this Agreement shall be construed to prevent or hinder
WB from (i) substituting one or more WB programs for previously
scheduled WB programs, in which event WB will make the
substituted programs available to Station pursuant to the
provisions of Paragraph 1 and Paragraph 3; (ii) cancelling one or
more WB programs; or (iii) postponing any scheduled roll-out
dates of WB programming. Further, nothing in this Agreement
shall be construed to obligate WB (x) to provide a minimum or
specific number of WB programs; (y) to commence providing WB
programming on any particular date; or (z) to expand the amount
of WB programming pursuant to a specified timetable.
3. DELIVERY: WB agrees to make available the WB programming for satellite
transmission. WB shall incur no costs regarding the satellite downlink
and broadcast by Station; Station shall incur no up-link costs with
regard to the delivery of the WB programming.
4. PROMOTION:
(a) We will provide you with on-air promotional announcements ("WB
Promos") for WB programming, which WB Promos are intended for
broadcast during Station's broadcast of non-WB programming. You
agree to provide an on-air promotional schedule consistent with
our recommendations. You shall maintain complete and accurate
records of all WB Promos that are broadcast. Upon request by WB
for those records, you shall provide copies of all such records
to WB within two weeks of such request.
(b) You shall budget Station's advertising availabilities in such a
manner as to enable Station to broadcast additional WB Promos during
periods in which Station is deemed a "Subperformer." Station shall
be deemed to be a
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"Subperformer" from the time its "sweeps rating" is below the
average prime time rating for all WB affiliated broadcast stations
until such time as Station's sweeps rating is no longer below the
average prime time rating for all WB affiliated broadcast stations.
The Station's sweeps rating means the Station's average A.C. Nielsen
rating for the most recently completed sweeps period for adults
18-49 for all prime time hours programmed by WB. For such time as
Station remains a Subperformer, Station shall: (i) broadcast, during
each one-half hour of all periods of each day that Station is
broadcasting non-WB programming, at least one (1) 30-second Promo
(or Promos aggregating 30 seconds, to the extent we so elect) for
Station's local, syndicated or WB programming; and (ii) broadcast
during all periods when Station is broadcasting non-WB programming
WB Promos for not less than:
Prime Time Hours Programmed by WB
2 hours - 20% of 100%
4 hours - 25% "
6 hours - 30% "
8 hours - 35% "
10 hours - 40% "
12 hours* - 45% "
(* 12 or more hours)
(the "Applicable Percentage") of the total, aggregate gross ratings
points ("GRPs") for all the promotional announcements broadcast by
Station ("Aggregate Promotional GRPs") within the periods in which
non-WB programming is being broadcast. The specific WB Promos
broadcast by Station and the number of broadcasts of each WB Promo
may be specified by WB and the broadcast of the WB Promos shall be
made so that the Aggregate Promotional GRPs allocated to WB Promos
are distributed fairly and reasonably across the periods when non-WB
programming is being broadcast. For such time as Station's sweeps
rating ranks Station within the bottom 50% (ranked highest to
lowest) of those WB affiliated broadcast stations that are
Subperformers, then the
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Applicable Percentage for Station shall be not less than 55% of 100%
of the Aggregate Promotional GRPs. The WB Promos broadcast during
each half-hour of non-WB programming, as required by this
subparagraph 4(b), may be counted toward Station's Applicable
Percentage. Station shall continue to air WB Promos under this
schedule until Station is no longer a Subperformer, as defined
above.
(c) In addition to providing WB Promos, we shall make available for
your use, at reasonable cost, such other promotional and sales
materials as we and you may mutually consider appropriate. You
shall not delete any copyright, trademark, logo or other notice,
or any credit included in any such materials relating to WB, and
you shall not exhibit, display, distribute or otherwise use any
trademark, logo or other material or item delivered pursuant to
this Paragraph 4 or otherwise, except as instructed by us at the
time.
(d) Commencing on the first date that WB programming is aired by
Station and for the remaining term of this Agreement, Station
shall identify itself as a WB affiliate, both on and
off-the-air. Prior to the "Launch Date" (as defined in
subparagraph 9(b)), Station shall identify itself as a WB
affiliate only after WB gives Affiliate permission to do so and
only in a manner reasonably directed by WB. Prior to the Launch
Date, Affiliate shall not, without the express written permission
of WB, make any disclosures to the press or business community or
issue any press announcements about Station's affiliation with WB.
5. COMMERCIAL ANNOUNCEMENTS:
(a) With respect to WB programming, the parties to this Agreement shall
be entitled to insert the following number of commercial
announcements (Station's allotment includes station breaks but
excludes 5-second prime time station identification breaks at the
beginning of each hour):
(1) Prime Time (as defined in subparagraph 2(c)) hour (pro-rated
for half-hour programs):
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You shall have the right to insert six 30-second
commercial announcements. WB shall have the right to
insert eighteen 30-second commercial announcements.
(2) Children's:
Weekday half-hour:
You shall have the right to insert six 30-second
commercial announcements (or other material constituting
"commercial matter" under the FCC's regulations). WB
shall have the right to insert six 30-second commercial
announcements.
Weekend half-hour:
You shall have the right to insert five 30-second
commercial announcements (or other material constituting
"commercial matter" under the FCC's regulations). WB
shall have the right to insert five 30-second commercial
announcements and one 15-second commercial.
(3) Latenight (as defined in subparagraph 2(c)):
You will receive half the total number of commercial
announcements as specified by WB or less as mutually
agreed to.
(b) If the amount of commercial advertising, commercial matter or
other non-program time included in WB programming is reduced for
any reason (including but not limited to the adoption or
modification of statutes or regulations or any other governmental
action), then we shall be entitled to reduce the number of
commercial announcements available to you to the extent necessary
to provide WB and Affiliate with the same proportionate amount of
commercial time (inclusive of station breaks with respect to
Affiliate) that each party is entitled to under this Agreement.
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(c) Your broadcast over Station of the commercial announcements included
by us in WB programming is of the essence to this Agreement, and
nothing contained in this Agreement (other than in subparagraph
2(f)) shall limit our rights or remedies relating to your failure to
so broadcast said commercial announcements. You shall maintain
complete and accurate records of all commercial announcements
broadcast as provided herein. Within two weeks following each
request by us therefor, you will submit copies of all such records
to WB.
6. FORCE MAJEURE: WB shall not be liable for failure to make available
any programming or any portion(s) thereof, and Station shall not be
liable for failure to broadcast any such programming or any portion(s)
thereof, by reason of any act of God, equipment failure, action or
claims by any third person, labor dispute, law, governmental regulation
or order, or other cause beyond either party's reasonable control
("force majeure event"). If due to any force majeure event, we
substantially fail to make available all of the programming to be
delivered to Affiliate under the terms of this Agreement, or you
substantially fail to broadcast such programming as scheduled by WB for
four consecutive weeks, or for six weeks in the aggregate during any
12-month period, then the "non-failing" party may terminate this
Agreement upon thirty 30 days prior written notice to the "failing"
party so long as such notice is given at any time prior to the
"non-failing" party's receipt of actual notice that the force majeure
event(s) has ended; provided further, however, that notwithstanding the
above provisions, you shall not have any right to so terminate this
Agreement, upon a force majeure event or otherwise, if we: (i) fail to
make available a minimum or specific number of WB programs; (ii) fail
to commence making available WB programming on any particular date;
(iii) fail to expand the amount of WB programming pursuant to a
specified timetable; (iv) substitute one or more WB programs for
previously scheduled WB programs; (v) cancel one or more WB programs;
or (vi) postpone the roll-out of any WB programming.
7. ASSIGNMENT OR TRANSFER OF AFFILIATE AGREEMENT AND/OR STATION LICENSE:
(a) Assignment or Transfer of Affiliation Agreement: This Agreement
shall not be assigned by Licensee without the
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prior written consent of WB. Any purported assignment by Licensee
without such consent shall be null and void, shall not be
enforceable against WB, and shall not relieve Licensee of all its
obligations hereunder.
(b) Assignment or Transfer of Station License: If any application is
made to the Federal Communications Commission (FCC) concerning a
purported, attempted or actual transfer of control or assignment of
the Station license, you shall notify us immediately in writing of
the filing of such application. Unless the transfer of control or
assignment is one provided for by Section 73.3540 (f) of the FCC's
current rules and regulations (a "short form" assignment or transfer
of control that does not involve a material assignment or transfer
of control), we shall have the right to terminate this Agreement
upon twenty (20) days' advance notice to you, at any time after the
filing of such application. If WB does not terminate this Agreement
on or before twenty days before the effective date of such transfer,
this Agreement shall be deemed to have been fully assigned to the
transferee or assignee of Station's license and such transferee or
assignee will assume and perform all of the obligations and duties
contained in this Agreement without limitation of any kind, as of
the effective date of transfer. In addition, if Licensee fails,
prior to the effective date of the transfer, to procure in a written
form satisfactory to WB the agreement of the assignee or transferee
to assume and perform this Agreement in its entirety without
limitation of any kind, or fails to immediately notify WB of the
application to transfer control or assign the Station license, then
Licensee shall remain fully responsible for the full performance of
all provisions of the Agreement during the full term of the
Agreement as set forth in Paragraph 9, and in the event of
non-performance, Licensee shall be considered in material breach of
this Agreement and WB shall have all rights and remedies available
for such breach, including but not limited to specific performance
and damages.
8. UNAUTHORIZED COPYING: You shall not, and shall not cause or authorize
others to record, copy or duplicate any programming or other material
we furnish pursuant to this Agreement, in
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whole or in part, and you shall take all reasonable precautions to prevent
any such recording, copying or duplication. Notwithstanding the foregoing,
if Station is located in the Mountain Time Zone you may pre-record WB
programming for later broadcast at the times scheduled by us. You shall
erase all such pre-recorded programming promptly after its scheduled
broadcast. Notwithstanding the above provisions, Station may make a
non-broadcast quality recording of its entire broadcast day for archival,
file and reference purposes and uses only, which copy shall be kept in
Station's possession at all times.
9. TERM:
(a) The term of this Agreement shall commence on the effective date
of transfer of the station license from Willamette Valley
Broadcasting to ACME Holdings of Oregon, LLC and shall continue
for 36 months thereafter. The term of this Agreement may be
extended for additional successive periods of two years each, by
us, in our sole discretion, giving written notice of such
extension to you at least 120 days prior to the expiration of the
then-current period; provided, however, that if, within 30 days
of your receipt of the notice of extension, you, in your sole
discretion, give us written notice that you reject such
extension, then the extension notice shall not be effective and
this Agreement shall terminate upon expiration of the
then-current period.
(b) The "Launch Date" shall be the date on which WB first makes WB
programming available to Affiliate for broadcast by Station on a
regularly scheduled basis.
(c) Each "Contract Year" hereunder shall be an annual period during the
term of this Agreement. The First Contract Year is the annual period
beginning on the Launch Date; the Second Contract Year is the annual
period commencing one year after the Launch Date, etc.
(d) WB shall, within its sole discretion and without liability, have the
right to terminate this Agreement so long as we (i) provide sixty
days prior written notice to you and (ii) are either: (A) ceasing
operation as a
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television network; or (B) substantially restructuring the ownership
of the television network.
(e) Notwithstanding anything to the contrary contained in this
Agreement, upon the termination or expiration of the term of this
Agreement, all of your rights to broadcast or otherwise use any WB
program or any trademark, logo or other material or item hereunder
shall immediately cease and neither you nor Station shall have any
further rights whatsoever with respect to any such program,
trademark, logo, material or item.
10. APPLICABLE LAW: The obligations of you and WB under this Agreement are
subject to all applicable federal, state, and local laws, rules and
regulations (including, but not limited to, the Communications Act of
1934, as amended, and the rules, regulations and policies of the FCC)
and this Agreement and all matters or issues collateral thereto shall
be governed by the laws of the State of California without regard to
California's conflict of law rules. The California State Courts and
the U.S. District Courts located in California shall have jurisdiction
over the interpretation of this Agreement or with regard to any dispute
arising under this Agreement. The venue for any such action concerning
this Agreement shall be in the County of Los Angeles, California.
11. STATION ACQUISITION BY WB: During the term of this Agreement, WB agrees
that neither we nor Time Warner Inc. nor any of its subsidiary companies
will acquire, as defined by the attribution rules of the FCC, a television
broadcast station licensed in the Community of License.
12. CHANGE IN OPERATIONS: In the event that Station's transmitter
location, power, frequency, programming format or hours of operation
are materially changed at any time during the term of this Agreement so
that Station is of materially less value to us as a broadcaster of WB
programming than at the date of this Agreement, then we shall have the
right to terminate this Agreement upon 30 days prior written notice.
You shall notify WB immediately in writing if application is made to
the FCC to modify in a material manner the transmitter location, power
or frequency of Station or if Affiliate plans to modify in a material
manner the hours of operation of Station. If you fail to notify us as
required herein, then we shall have the right to terminate this
Agreement by giving you 30 days prior written notice.
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At any time during the term if Station is off the air, or operating at
less than fifty percent (50%) of its licensed power, for a period of 12
hours or longer, Station must immediately notify WB. WB may terminate this
agreement upon thirty (30) days prior written notice in the event that
Station is off the air for a period exceeding seven (7) days or if is
operating at less than fifty percent (50%) of its full licensed power for
a period exceeding seven (7) days. Affiliate will install a satellite
antenna and receiver of sufficient quality, in the exclusive judgment of
WB, to receive a network quality signal from WB. Affiliate shall also use
switches, microwaves and all other transmission equipment necessary to
telecast a network quality picture. If, in the exclusive judgment of WB,
the picture or sound quality of Station's transmission is insufficient, WB
will provide Station with notice of the deficiency, and Station shall have
thirty (30) days to cure. In the event that Station should fail to cure
then WB may cancel this agreement upon thirty (30) days written notice.
13. WB AFFILIATES COUNCIL: You, with the other affiliates of WB, shall form a
WB Affiliates Council (the "Council"), which shall be comprised of
representatives from five different affiliates of WB.
14. NON-LIABILITY OF COUNCIL MEMBERS: To the extent the Council and its
members are acting in their capacity as such, then the Council and each
member so acting shall not have any obligation or legal or other
liability whatsoever to you in connection with this Agreement,
including without limitation, with respect to the Council's or such
member's approval or non-approval of any matter, exercise or
non-exercise of any right or taking of or failing to take any other
action in connection therewith.
15. WARRANTIES AND INDEMNITIES:
(a) WB agrees to indemnify, defend and hold Affiliate harmless
against and from all claims, damages, liabilities, costs and
expenses arising out of the use by Station under this Agreement
of any WB program or other material furnished by WB under this
Agreement, provided that Affiliate promptly notifies WB of any
claim or litigation to which this indemnity shall apply, and
provided further that Affiliate cooperates fully with WB in the
defense or settlement of such claim or
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litigation. Affiliate agrees to indemnify, defend and hold WB
harmless against and from all claims, damages, liabilities, costs
and expenses with respect to Affiliate's operation of the Station or
any material furnished, added or deleted to or from WB programming
by Affiliate. This indemnity shall not apply to litigation expenses,
including attorneys' fees, that the indemnified party elects to
incur on its own behalf. Except as otherwise provided in this
Agreement, neither Affiliate nor WB shall have any rights against
the other for claims by third persons, or for the failure to operate
facilities or to furnish WB programs if such failure is the result
of a force majeure event as defined in Paragraph 6. Furthermore,
notwithstanding any other provisions of this Agreement, Affiliate
shall not have any rights against WB for claims by third parties or
Affiliate arising out of any actions or omissions of WB permitted
under subparagraph 2(g).
(b) You agree to maintain for Station such licenses, including
performing rights licenses as now are or hereafter may be in
general use by television broadcasting stations and are necessary
for you to broadcast the television programs which we furnish to
you hereunder. We will clear all music in the repertory of
SESAC, ASCAP and BMI used in our programs, thereby licensing the
broadcasting of such music in such programs over Station. You
will be responsible for all music license requirements (and all
other permissions) for any commercial or other material inserted
by you within or adjacent to WB programs in accordance with this
Agreement.
(c) You warrant that the License is in good standing and you agree to
comply with all relevant statutes and FCC rules and requirements
so as to maintain the License in good standing. In the event you
are found to have materially violated any laws or FCC rules or
requirements (after the exhaustion of all appeals so long as
Station retains the License during the pendency of such appeal),
the effect of which is that Station is of materially less value
to us as a broadcaster of WB programming than as of the date of
this Agreement, then we shall have the right to terminate this
Agreement upon 30 days prior written notice. You shall notify us
immediately of any action by the FCC imposing any forfeitures or
other
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sanction(s) on Station or you including but not limited to
short-term renewals, revocation or denial of renewal.
(d) You warrant that all information delivered by you to us in
connection with this Agreement shall be true and correct in all
material respects.
(e) You warrant that execution of this Agreement and performance of
its obligations will not violate or result in a default under (i)
any material agreement or instrument to which you are party or
(ii) any statute, ordinance, governmental rule or regulation in
any material respect, or order, judgment, injunction, decree or
ruling of any court or administrative agency applicable to you,
which default would materially interfere with the performance of
your obligations hereunder.
(f) You warrant that you are not a party to any legal action or other
proceeding before any court or administrative agency which could
prohibit the performance of your obligations under this Agreement.
16. RETRANSMISSION CONSENT: If any law, governmental regulation or other
action permits you to elect to require any cable television system or
other multichannel video program distributor to obtain your consent to
such system's or distributor's retransmission of Station's broadcast of
either Station's signal as a whole or any WB programming included
therein, then Affiliate and WB agree to negotiate in good faith
regarding whether such consent is to be given (including without
limitation, whether you shall or shall not, in lieu of requiring
consent, elect to require any cable system to comply with any "must
carry" rules, regulations or laws) and, if so, the terms under which
such consent is to be given (including without limitation, the amount
and type of compensation, if any, to be paid by the system or
distributor for such consent and whether any of that compensation shall
be shared between you and us).
17. NETWORK NON-DUPLICATION PROTECTION: During the term of this Agreement,
Affiliate shall be entitled to network non-duplication protection, as
provided by Sections 76.92 through 76.97 of the FCC's rules, against
the presentation of any WB program by a cable system during the period
commencing one
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day before and ending fourteen (14) days after receipt of such WB program
by Station. The geographic zone of network non-duplication protection
shall be the Designated Market Area ("DMA") (as defined by Nielsen) in
which your Station is located or any lesser zone mandated by Sections
76.92 and 73.658(m) of the FCC's rules as those rules exist as of the date
of this Agreement. Network non-duplication protection shall extend only to
WB programs that Station is carrying in accordance with the terms of this
Agreement and such protection shall be subject to the terms and provisions
of subparagraph 2(f). You are under no obligation to exercise in whole or
in part the network non-duplication rights granted herein. Notwithstanding
anything to the contrary in this paragraph, no non- duplication protection
is provided against the signal of WGN until such time that WB offers
exclusivity against the signal of WGN to its affiliates.
18. AFFILIATION RATINGS PAYMENTS. Affiliate agrees to pay to WB an annual
payment, based on the Station's television market ratings, for WB prime
time programming, commencing with the initial broadcast by Station of such
programming, all as defined and set forth in the "Annual Ratings Payment"
Exhibit attached hereto. These payments are intended to compensate WB for
the WB programming and are in no way intended to, nor do they, confer on
WB any ownership or other equity interest in Station.
19. NOTICES AND REPORTS:
(a) In addition to any other reports or forms requested herein, you will
provide to us in writing, in the manner reasonably requested by WB,
such reports covering WB programs broadcast by Station as we may
request from time to time. To the extent we provide you forms for
such purpose, you shall provide such reports on these forms.
(b) All notices, reports or forms required or permitted hereunder to
be in writing shall be deemed given when personally delivered
(including, without limitation, by overnight courier or other
messenger or upon confirmed receipt of facsimile copy) or on the
date of mailing postage prepaid, addressed as specified below, or
addressed to such other address as such party may hereafter
specify in a written notice. Notice to
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Affiliate shall be to the address set forth for Affiliate on page 1
of this Agreement. Notice to WB shall be to: The WB Television
Network, 4000 Warner Boulevard, Burbank, California, 91522,
Attention: General Counsel.
20. MISCELLANEOUS:
(a) Nothing contained in this Agreement shall create any partnership,
association, joint venture, fiduciary or agency relationship between
the parties hereto.
(b) Nothing contained in this Agreement nor the conduct of any
officer, director, agent or employee of either WB or Affiliate
shall be deemed to create or to constitute ownership by WB, in
whole or in part, of Affiliate, Station or the License or in any
way constitute a derogation of the rights, duties and
responsibilities imposed upon Affiliate. Nothing in this
Agreement shall be deemed to delegate to WB, directly or
indirectly, any right to control the operations of Station.
(c) You shall at all times permit us, in connection with WB programming,
without charge, to place on, maintain and use at Station's premises,
at our expense, such equipment as WB shall reasonably require.
Station shall operate such equipment for us, to the extent we
reasonably request, and no fee shall be charged by Station therefor.
(d) No waiver of any failure of any condition or of the breach of any
obligation hereunder shall be deemed to be a waiver of any preceding
or succeeding failure of the same or any other condition, or a
waiver of any preceding or succeeding breach of the same or any
other obligation.
(e) Each and all of the rights and remedies of WB and Affiliate under
this Agreement shall be cumulative, and the exercise of one or
more of said rights or remedies shall not preclude the exercise
of any other right or remedy under this Agreement, at law or in
equity. Notwithstanding anything to the contrary contained in
this Agreement, in no event shall either party hereto be entitled
to recover any lost profits or consequential damages because of a
breach or failure by the other
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party, and except as expressly provided in this Agreement to the
contrary, neither WB nor Affiliate shall have any right against the
other with respect to claims by any third person or other third
entity.
(f) Paragraph headings are included in this Agreement for convenience
only and shall not be used to interpret this Agreement or any of the
provisions hereof, nor shall they be given any legal or other
effect.
(g) This Agreement, including all Exhibits attached hereto,
constitutes the entire understanding between WB and Affiliate
concerning the subject matter hereof and shall not be amended,
modified, changed, renewed, extended or discharged except by an
instrument in writing signed by the parties or as otherwise
expressly provided herein. No inducement, representations or
warranties except as specifically set forth herein have been made
by either party to this Agreement to the other. This Agreement
replaces any and all prior and contemporaneous agreements,
whether oral or written, pertaining to the subject matter hereof.
(h) This Agreement may be executed in counterparts, with the Agreement
being effective when each party hereto has executed a copy and
delivered that copy to the other party hereto.
(i) The parties hereto agree that Station will be treated in a manner
which is the same as, or similar to, other WB affiliates with
respect to the following terms and conditions of this Agreement:
Station's allotment of commercial announcements, promotion
announcement procedures, WB program carriage (except as to items
identified in each Station's Schedule 1), delivery requirements,
assignment restrictions and retransmission consent. The parties
hereto acknowledge that the "most favored" protection that is
granted to Station in this subparagraph (i) relates only to the
Affiliation Agreement and not to any agreements of any other
nature that may exist between WB and any third party.
Notwithstanding the provisions of this subparagraph (i) Station
acknowledges that the Affiliation Agreement for "Superstation"
WGN may contain terms in addition to and different from the terms
contained in this Affiliation
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Agreement. The premises and rationale for preparation of the "Annual
Ratings Payment" Exhibit will be the same for all WB affiliates,
however it is acknowledged that each affiliate will have a different
schedule of payment amounts under these Plans based on each
station's base year calculation. Additionally, guarantee payments
will only be required of stations in the top 15 markets.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first written above.
THE WB TELEVISION NETWORK PARTNERS ACME HOLDINGS OF OREGON, LLC.
L.P. dba THE WB TELEVISION NETWORK
("WB") ("Affiliate")
By: /s/John Maatta By: /s/Douglas E. Gealy
-------------------------- -------------------------
Title: ______________________ Title: President and Chief Operating Officer
Date: June 17, 1997 Date: 6/17/97
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The ANNUAL RATINGS PAYMENT EXHIBIT has been intentionally omitted by the
Registrants.
A copy of this omitted Exhibit will be provided to the Securities and
Exchange Commission upon request.
[On The WB Television Network Letterhead]
August 21, 1997
Mr. Douglas Gealy
President Acme Television Holdings
c/o Emanuel Faust, Esq.
Dickstein, Shapiro, Morin & Oshinsky, LLP
2101 L Street NW
Washington, DC 20037-1526 via telecopier 202-887-0689
Dear Doug:
I am writing to confirm the intention of The WB Television Network
("WB") with regard entering into network affiliation agreements with broadcast
facilities that are owned or operated by Acme Television Holdings ("ACME").
We understand that ACME will control television stations in the
following broadcast markets (the "markets"):
St. Louis, Missouri
Portland, Oregon,
Knoxville, Tennessee
Albuquerque, New Mexico
Salt Lake City, Utah
WB will offer ACME a five year WB network affiliation in each of the
markets where there is no existing WB affiliation; and WB will agree to extend
the affiliation to a five year term in any of the markets where there is an
existing affiliation at an ACME station.
In each of the markets where WB and ACME enter into an affiliation the
parties will execute a long form station affiliation agreement subject to good
faith negotiation and modifications to which WB customarily agrees.
The offer of WB network affiliations in the markets contained herein
will remain open until March 30, 1998. If by that date long form affiliation
agreements have not been executed, we will enter into good faith discussions
with you with regard to extending the offer of affiliation.
Please contact me if you have any questions or concerns with regard to
this matter.
Sincerely,
/s/John D. Maata
John D. Maatta
cc: Jamie Kellner
Tom Allen
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 17th day of June, 1997 by and between
ACME TELEVISION HOLDINGS, LLC, a Delaware limited liability company, with
offices at 2450 Kiser, Tustin, California 92782 (hereinafter "Company") and
DOUGLAS E. GEALY, residing at 7125 Bluffstream Court, Columbus, Ohio 43235
(hereinafter "Executive").
STATEMENT OF PURPOSE
Executive is one of the Management Members of the Company as that term
is defined in the Limited Liability Company Operating Agreement for the Company
(the capitalized terms used in this Agreement that are not defined herein are
defined in the LLC Agreement). Company wishes to employ Executive, and Executive
is willing to undertake such employment on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. EMPLOYMENT. The Company hereby employs Executive as President and
Chief Operating Officer to perform such management and executive duties on
behalf of the Company as the Chief Executive Officer or Board of Advisors of the
Company may from time to time determine.
2. DUTIES. Executive hereby accepts such employment and agrees that
throughout the period of his employment hereunder, he will devote his full
professional time, attention, knowledge and skills faithfully, diligently and to
the best of his ability in furtherance of the business of the Company. Executive
currently resides with his family in Columbus, Ohio. If the Board of Advisors or
60% in interest of the holders of the Class B Founders Units, as that term is
defined in the LLC Agreement, determine that it is in the best interest of the
Company, Executive will relocate to a city in a Company station market (along
with a majority of the Company's staff). In that event, Executive will be
entitled to a relocation package satisfactory to both Executive and 60% in
interest of the holders of the Class B Founders Units.
3. TERM. Executive shall be employed for a term of six (6) years subject
to a reduction to five (5) years in the event of an initial public offering of
the Company prior to the fifth anniversary of this Agreement, unless Executive's
employment is terminated prior to the expiration of that term pursuant to the
provisions hereof. After the expiration of the term, employment of the Executive
shall continue at will until terminated for any reason by either the Executive
or the Company upon ninety (90) days prior written notice to the other.
<PAGE>
4. COMPENSATION. As compensation for his services hereunder, the Company
will pay Executive the following:
4.1 BASE SALARY. A Base Salary ("Base Salary") of a minimum of
$250,000.00 retroactive to January 1, 1997 per annum payable in monthly
installments in accordance with the Company's normal payroll practices.
Starting in 1998, the Base Salary shall increase annually as of January
1 by the amount of the increase in the Consumer Price Index (All Urban
Consumers) during the previous year, and shall be reviewed annually by
the Company's Compensation Committee to determine whether an additional
increase is appropriate. Executive's Base Salary shall be subject to
reduction (and subsequent restoration) as provided in Section 4.08 of
the LLC Agreement.
4.2 PERFORMANCE BONUS. Starting in 1998, Executive shall receive
a performance bonus in respect of each fiscal year during the term of
this Agreement in an amount up to 50% of his Base Salary in effect at
the end of such fiscal year in which the Company achieves between 101%
and 130% of its projected earnings before interest, taxes, depreciation
and amortization, which projections have been delivered to and accepted
by, the Company's Class B Founders as contemplated by the LLC Agreement
and the Investment Agreement referred to therein, and adjusted as
contemplated in the Investment Agreement for subsequent acquisitions
(the "EBITDA Projections"). The bonus shall be awarded on a straightline
basis in proportion to the EBITDA actually achieved, e.g. a bonus equal
to 1 2/3% of salary for each 1% by which actual EBITDA exceeds EBITDA
Projections.
4.3 MANAGEMENT CARRY. In addition to his Base Salary, performance
bonus and additional benefits, Executive shall be entitled to receive a
participating interest in distributions of the Company referred to as
the Management Carry, which is subject to vesting and divestment, all as
governed by and more particularly set out in the LLC Agreement for the
Company.
4.4 ADDITIONAL BENEFITS. During the term of this Agreement,
Executive shall be entitled to participate, to the extent he is eligible
under the terms and conditions thereof, in any pension, profit sharing,
retirement, hospitalization, insurance, medical service or other
employee benefit plan generally available to the executives of the
Company which may be in effect from time to time during the period of
his employment hereunder, it being understood that the Company shall pay
the entire costs of any health insurance or disability insurance
maintained by the Company for Executive in accordance with Company's
policies generally in effect.
2
<PAGE>
4.5 VACATIONS. Executive shall be entitled to four (4) weeks of
paid vacation (in addition to Company-wide holiday periods) annually,
two weeks of which may be carried forward to the following year.
5. REIMBURSEMENT. The Company shall reimburse Executive for all expenses
reasonably incurred by him in connection with the performance of his duties
hereunder or in the business of the Company.
6. NON-COMPETITION AND BUSINESS OPPORTUNITIES. Executive is subject to
and agrees to be bound by the provisions of Section 9.02 of the LLC Agreement
regarding restrictions on competition with the Company and business
opportunities which provisions shall be deemed to be incorporated herein by
reference as if fully set out.
7. TERMINATION.
(a) The employment relationship of Executive with the Company may
be terminated prior to the expiration of the term of this Agreement as
contemplated by the provisions of Section 4.09 of the LLC Agreement
which shall be deemed to be incorporated herein as if fully set out. In
addition, the employment relationship may be terminated upon any sale of
the Company or all or substantially all of the Company's assets (a
"Company Sale").
(b) Severance pay shall be payable in connection with the
termination of this Agreement as follows:
(i) In the event of early termination by reason of
Executive's death or disability, Executive or his estate will be
entitled to one year's Base Salary as severance pay, payable in
monthly installments in advance.
(ii) In the event Executive's employment is terminated by
the Company after the occurrence of a "Sales Event" as that term
is defined in the Investment Agreement regarding the Company, he
shall be entitled to receive one year's Base Salary as severance
pay, payable in monthly installments in advance; provided,
however, that in the event that the Executive has breached his
FCC Cooperation obligations as set forth in the Investment
Agreement, he may be terminated without any severance payment and
if he subsequently breaches such FCC cooperation obligations he
shall not thereafter receive any further severance payments.
(iii) In the event Executive's employment is terminated by
the Company, without Cause, as that term is defined in the LLC
Agreement,
3
<PAGE>
he shall be entitled to receive severance pay for a period of
18 months, based upon his Base Salary in effect at the time of
his termination, payable in monthly installments in advance.
(iv) In the event that the Executive's employment is
terminated as a result of his resignation, termination for Cause
or a Company Sale, he shall not be entitled to any severance
payments.
8. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES. Executive represents and
warrants to the Company that: (i) the Executive has the unfettered right to
enter into this Agreement on the terms and subject to the conditions hereof and
(ii) neither the execution and delivery of this Agreement nor the performance by
Executive of any of Executive's obligations hereunder constitute or will
constitute a violation or breach of or a default under any agreement,
arrangement or understanding or any other restriction of any kind to which
Executive is a party or by which Executive is bound.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings among the parties or any of them. There are
no representations, warranties, agreements or understandings other than those
expressly contained herein. No termination, alteration, modification, variation
or waiver of this Agreement or any of the provisions hereof shall be effective
unless in writing and signed by the party against whom enforcement thereof is
sought.
10. NOTICE. Any notice required, permitted or desired to be given
pursuant to any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if sent by certified or registered
mail, return receipt and postage prepaid, hand delivered, overnight delivery
service or sent by telephone facsimile as follows:
If to the Company, to it at:
Acme Television Holdings, LLC
2450 Kiser, Tustin, CA 92782
Attention: Tom Allen
Facsimile No.: (714) 832-4307
4
<PAGE>
If to Executive, to him at:
7125 Bluffstream Court
Columbus, Ohio 43235
Either of the parties hereto may at any time and from time to time change the
address to which notice shall be sent hereunder by notice to the other party
given under Paragraph 10. The date of the giving of any notice sent by mail
shall be the date of the posting of the mail; by any other means of delivery it
shall be the date of receipt.
11. ASSIGNMENT. Neither this Agreement nor the right to receive any
payments hereunder may be assigned by Executive nor Company.
12. WAIVER. No course of dealing nor any delay on the part of the
Company in exercising any rights hereunder shall operate as a waiver of any such
rights. No waiver of any default or breach of this Agreement shall be deemed a
continuing waiver or a waiver of any other breach or default.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
executed and to be performed entirely therein.
14. SEVERABILITY. Should any clause, paragraph or part of this Agreement
be held or declared to be void or illegal for any reason, all other clauses,
paragraphs or parts of this Agreement which can be effected without such illegal
clause, paragraph or part shall nevertheless remain in full force and effect.
If, in the opinion of any court, any clause, paragraph or part of this Agreement
is unreasonable or unenforceable, such court shall have the right, power and
authority to excise or modify such provisions, or portions thereof, of this
Agreement as the court shall find not be reasonable or enforceable and to
enforce the remainder of such clause, paragraph or part as so excised or
modified.
15. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Company, Executive and Executive's heirs and personal
representatives.
16. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not constitute a part hereof or affect
in any way the meaning or interpretation of this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
ACME TELEVISION HOLDINGS, LLC
By: /s/ Thomas D. Allen
_________________________________
Thomas D. Allen
Executive Vice President
/s/ Douglas E. Gealy
_________________________________
Douglas E. Gealy
President
6
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 17th day of June, 1997 by and between
ACME TELEVISION HOLDINGS, LLC, a Delaware limited liability company, with
offices at 2450 Kiser, Tustin, California 92782 (hereinafter "Company") and TOM
ALLEN, residing at 2450 Kiser, Tustin, CA 92782 (hereinafter "Executive").
STATEMENT OF PURPOSE
Executive is one of the Management Members of the Company as that term
is defined in the Limited Liability Company Operating Agreement for the Company
(the capitalized terms used in this Agreement that are not defined herein are
defined in the LLC Agreement). Company wishes to employ Executive, and Executive
is willing to undertake such employment on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. EMPLOYMENT. The Company hereby employs Executive as Executive Vice
President and Chief Financial Officer to perform such management and executive
duties on behalf of the Company as the Chief Executive Officer or Board of
Advisors of the Company may from time to time determine.
2. DUTIES. Executive hereby accepts such employment and agrees that
throughout the period of his employment hereunder, he will devote his full
professional time, attention, knowledge and skills faithfully, diligently and to
the best of his ability in furtherance of the business of the Company.
3. TERM. Executive shall be employed for a term of six (6) years subject
to a reduction to five (5) years in the event of an initial public offering of
the Company prior to the fifth anniversary of this Agreement, unless Executive's
employment is terminated prior to the expiration of that term pursuant to the
provisions hereof. After the expiration of the term, employment of the Executive
shall continue at will until terminated for any reason by either the Executive
or the Company upon ninety (90) days prior written notice to the other.
4. COMPENSATION. As compensation for his services hereunder, the
Company will pay Executive the following:
4.1 BASE SALARY. A Base Salary ("Base Salary") of a minimum of
$250,000.00 retroactive to June 1, 1997 per annum payable in monthly
installments in accordance with the Company's normal payroll practices.
Starting in 1998, the Base Salary shall increase annually as of January
1 by the amount
<PAGE>
of the increase in the Consumer Price Index (All Urban Consumers) during
the previous year, and shall be reviewed annually by the Company's
Compensation Committee to determine whether an additional increase is
appropriate. Executive's Base Salary shall be subject to reduction (and
subsequent restoration) as set out in Section 4.08 of the LLC Agreement.
4.2 PERFORMANCE BONUS. Executive shall receive a one time bonus
of $105,000.00 payable upon Company's closing of the acquisition of its
fourth station. Starting in 1998, Executive shall also receive a
performance bonus in respect of each fiscal year during the term of this
Agreement in an amount up to 50% of his Base Salary in effect at the end
of such fiscal year in which the Company achieves between 101% and 130%
of its projected earnings before interest, taxes, depreciation and
amortization, which projections have been delivered to and accepted by,
the Company's Class B Founders as contemplated by the LLC Agreement and
the Investment Agreement referred to therein, and adjusted as
contemplated in the Investment Agreement for subsequent acquisitions
(the "EBITDA Projections"). The bonus shall be awarded on a straightline
basis in proportion to the EBITDA actually achieved, e.g. a bonus equal
to 1 2/3% of salary for each 1% by which actual EBITDA exceeds EBITDA
Projections.
4.3 MANAGEMENT CARRY. In addition to his Base Salary, performance
bonus and additional benefits, Executive shall be entitled to receive a
participating interest in distributions of the Company referred to as
the Management Carry, which is subject to vesting and divestment, all as
governed by and more particularly set out in the LLC Agreement for the
Company.
4.4 ADDITIONAL BENEFITS. During the term of this Agreement,
Executive shall be entitled to participate, to the extent he is eligible
under the terms and conditions thereof, in any pension, profit sharing,
retirement, hospitalization, insurance, medical service or other
employee benefit plan generally available to the executives of the
Company which may be in effect from time to time during the period of
his employment hereunder, it being understood that the Company shall pay
the entire costs of any health insurance or disability insurance
maintained by the Company for Executive in accordance with Company's
policies generally in effect.
4.5 VACATIONS. Executive shall be entitled to four (4) weeks of
paid vacation (in addition to Company-wide holiday periods) annually,
two weeks of which may be carried forward to the following year.
2
<PAGE>
5. REIMBURSEMENT. The Company shall reimburse Executive for all
expenses reasonably incurred by him in connection with the performance of his
duties hereunder or in the business of the Company.
6. NON-COMPETITION AND BUSINESS OPPORTUNITIES. Executive is subject to
and agrees to be bound by the provisions of Section 9.02 of the LLC Agreement
regarding restrictions on competition with the Company and business
opportunities which provisions shall be deemed to be incorporated herein by
reference as if fully set out.
7. TERMINATION.
(a) The employment relationship of Executive with the Company may
be terminated prior to the expiration of the term of this Agreement as
contemplated by the provisions of Section 4.09 of the LLC Agreement
which shall be deemed to be incorporated herein as if fully set out. In
addition, the employment relationship may be terminated upon any sale of
the Company or all or substantially all of the Company's assets (a
"Company Sale").
(b) Severance pay shall be payable in connection with the
termination of this Agreement as follows:
(i) In the event of early termination by reason of
Executive's death or disability, Executive or his estate will be
entitled to one year's Base Salary as severance pay, payable in
monthly installments in advance.
(ii) In the event Executive's employment is terminated by
the Company after the occurrence of a "Sales Event" as that term
is defined in the Investment Agreement regarding the Company, he
shall be entitled to receive one year's Base Salary as severance
pay, payable in monthly installments in advance; provided,
however, that in the event that the Executive has breached his
FCC Cooperation obligations as set forth in the Investment
Agreement, he may be terminated without any severance payment and
if he subsequently breaches such FCC cooperation obligations, he
shall not thereafter receive any further severance payments.
(iii) In the event Executive's employment is terminated by
the Company, without Cause, as that term is defined in the LLC
Agreement, he shall be entitled to receive severance pay for a
period of 18 months, based upon his Base Salary in effect at the
time of his termination, payable in monthly installments in
advance.
3
<PAGE>
(iv) In the event that the Executive's employment is
terminated as a result of his resignation, termination for Cause
or a Company Sale, he shall not be entitled to any severance
payments.
8. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES. Executive represents and
warrants to the Company that: (i) the Executive has the unfettered right to
enter into this Agreement on the terms and subject to the conditions hereof and
(ii) neither the execution and delivery of this Agreement nor the performance by
Executive of any of Executive's obligations hereunder constitute or will
constitute a violation or breach of or a default under any agreement,
arrangement or understanding or any other restriction of any kind to which
Executive is a party or by which Executive is bound.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings among the parties or any of them. There are
no representations, warranties, agreements or understandings other than those
expressly contained herein. No termination, alteration, modification, variation
or waiver of this Agreement or any of the provisions hereof shall be effective
unless in writing and signed by the party against whom enforcement thereof is
sought.
10. NOTICE. Any notice required, permitted or desired to be given
pursuant to any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if sent by certified or registered
mail, return receipt and postage prepaid, hand delivered, overnight delivery
service or sent by telephone facsimile as follows:
If to the Company, to it at:
Acme Television Holdings, LLC
c/o Jamie Kellner
Attention: 3701 West Oak Street, BLDG 3R,
Suite 130, Burbank, CA 91505
Facsimile No.: (818) 977-6808
4
<PAGE>
If to Executive, to him at:
2450 Kiser
Tustin, CA 92782
Either of the parties hereto may at any time and from time to time change the
address to which notice shall be sent hereunder by notice to the other party
given under Paragraph 10. The date of the giving of any notice sent by mail
shall be the date of the posting of the mail; by any other means of delivery it
shall be the date of receipt.
11. ASSIGNMENT. Neither this Agreement nor the right to receive any
payments hereunder may be assigned by Executive nor Company.
12. WAIVER. No course of dealing nor any delay on the part of the
Company in exercising any rights hereunder shall operate as a waiver of any such
rights. No waiver of any default or breach of this Agreement shall be deemed a
continuing waiver or a waiver of any other breach or default.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
executed and to be performed entirely therein.
14. SEVERABILITY. Should any clause, paragraph or part of this Agreement
be held or declared to be void or illegal for any reason, all other clauses,
paragraphs or parts of this Agreement which can be effected without such illegal
clause, paragraph or part shall nevertheless remain in full force and effect.
If, in the opinion of any court, any clause, paragraph or part of this Agreement
is unreasonable or unenforceable, such court shall have the right, power and
authority to excise or modify such provisions, or portions thereof, of this
Agreement as the court shall find not be reasonable or enforceable and to
enforce the remainder of such clause, paragraph or part as so excised or
modified.
15. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Company, Executive and Executive's heirs and personal
representatives.
16. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not constitute a part hereof or affect
in any way the meaning or interpretation of this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
ACME TELEVISION HOLDINGS, LLC
By: /s/ Douglas E. Gealy
_____________________________________
President and Chief Operating Officer
/s/ Thomas D. Allen
_____________________________________
Tom Allen
6
CONSULTING AGREEMENT
THIS AGREEMENT is made as of the 17th day of June, 1997 by and between
ACME TELEVISION HOLDINGS, LLC, a Delaware limited liability company, with
offices at 2450 Kiser, Tustin, California 92782 (hereinafter "Company") and
JAMIE KELLNER, residing at 1545 E. Valley Rd., Santa Barbara, Cal., 93108
(hereinafter "Executive").
STATEMENT OF PURPOSE
Executive is one of the Management Members of the Company as that term
is defined in the Limited Liability Company Operating Agreement for the Company
(the capitalized terms used in this agreement that are not defined herein are
defined in the LLC Agreement). Company wishes to engage Executive's services as
a consultant to the Company and Executive is willing to undertake such
engagement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. CONSULTING. The Company hereby engages Executive as a consultant to
perform such management and executive duties on behalf of the Company as the
Board of Advisors of the Company may from time to time determine. Consultant
shall use the title "Chairman and Chief Executive Officer" and shall be free to
control the time and manner in which he performs his duties.
2. DUTIES. Executive hereby accepts such engagement and agrees that
throughout the period of his employment hereunder, he will devote such of his
time, attention, knowledge and skills as shall be necessary to faithfully,
diligently and to the best of his ability acquit his responsibilities in
furtherance of the business of the Company. There is no minimum time commitment
required hereunder. Executive acknowledges that he is an independent contractor
and agrees to be responsible for payment of all taxes due on the payments to him
hereunder and to file any necessary state and federal tax forms and returns in
connection therewith.
3. TERM. Executive shall be retained for a term of six (6) years subject
to a reduction to five (5) years in the event of an initial public offering of
the Company prior to the fifth anniversary of this Agreement, unless Executive's
engagement as a consultant is terminated prior to the expiration of that term
pursuant to the provisions hereof. After the expiration of the term, engagement
of the Executive as a consultant shall continue at will until terminated for any
reason by either the Executive or the Company upon ninety (90) days prior
written notice to the other.
<PAGE>
4. COMPENSATION. As compensation for his services hereunder, the
Company will pay Executive the following:
4.1 CONSULTING FEES. During the first year of the consulting
arrangement, Executive shall not receive a fee for his services. In
subsequent years, Executive's fee shall be established by the
Company's Compensation Committee in its reasonable discretion.
4.2 PERFORMANCE BONUS. Starting in 1998, Executive shall receive
a performance bonus of $100,000.00 in respect of each fiscal year during
the term of this Agreement in which the Company achieves 100% of its
projected earnings before interest, taxes, depreciation and
amortization, and up to an additional $50,000.00 per year on a
straightline basis in proportion to the earnings actually achieved, in
each year in which the Company achieves between 101% and 130% of its
projected earnings before interest, taxes, depreciation and
amortization, which projections have been delivered to and accepted by,
the Company's Class B Founders as contemplated by the LLC Agreement and
the Investment Agreement referred to therein, and adjusted as
contemplated in the Investment Agreement for subsequent acquisitions
(the "EBITDA Projections"). The bonus shall be awarded on a straightline
basis in proportion to the EBITDA actually achieved, e.g. a bonus equal
to 1 2/3% of salary for each 1% by which actual EBITDA exceeds EBITDA
Projections.
4.3 MANAGEMENT CARRY. In addition to his performance bonus and
any consulting fees, Executive shall be entitled to receive a
participating interest in distributions of the Company referred to as
the Management Carry, which is subject to vesting and divestment, all as
governed by and more particularly set out in the LLC Agreement for the
Company.
5. REIMBURSEMENT. The Company shall reimburse Executive for all expenses
reasonably incurred by him in connection with the performance of his duties
hereunder or in the business of the Company.
6. NON-COMPETITION AND BUSINESS OPPORTUNITIES. Executive is subject to
and agrees to be bound by the provisions of Section 9.02 of the LLC Agreement
regarding restrictions on competition with the Company and business
opportunities which provisions shall be deemed to be incorporated herein by
reference as if fully set out.
2
<PAGE>
7. TERMINATION.
(a) The consulting relationship of Executive with the Company may
be terminated prior to the expiration of the term of this Agreement as
contemplated by the provisions of Section 4.09 of the LLC Agreement
which shall be deemed to be incorporated herein as if fully set out. In
addition, the consulting relationship may be terminated upon any sale of
the Company or all or substantially all of the Company's assets (a
"Company Sale").
(b) Severance shall be payable in connection with the early
termination of this Agreement as follows:
(i) In the event of early termination by reason of
Executive's death or disability, Executive or his estate will be
entitled to one year's severance, based upon the Consulting Fee
in effect at the date of termination, payable in monthly
installments in advance.
(ii) In the event Executive's engagement is terminated by
the Company after the occurrence of a "Sales Event" as that term
is defined in the Investment Agreement regarding the Company, he
shall be entitled to receive one year's severance, based upon the
Consulting Fee in effect at the date of termination, payable in
monthly installments in advance; provided, however, that in the
event that the Executive has breached his FCC Cooperation
obligations as set forth in the Investment Agreement, he may be
terminated without any severance payment and if he subsequently
breaches such FCC cooperation obligations, he shall not
thereafter receive any further severance payments.
(iii) In the event Executive's engagement is terminated by
the Company, without Cause, as that term is defined in the LLC
Agreement, he shall be entitled to receive severance for a period
of 18 months, based upon his Consulting Fee in effect at the time
of his termination, payable in monthly installments in advance.
(iv) In the event that the Executive's engagement is
terminated as a result of his resignation, termination for Cause
or a Company Sale, he shall not be entitled to any severance
payments.
3
<PAGE>
8. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES. Executive represents and
warrants to the Company that: (i) the Executive has the unfettered right to
enter into this Agreement on the terms and subject to the conditions hereof and
(ii) neither the execution and delivery of this Agreement nor the performance by
Executive of any of Executive's obligations hereunder constitute or will
constitute a violation or breach of or a default under any agreement,
arrangement or understanding or any other restriction of any kind to which
Executive is a party or by which Executive is bound.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings among the parties or any of them. There are
no representations, warranties, agreements or understandings other than those
expressly contained herein. No termination, alteration, modification, variation
or waiver of this Agreement or any of the provisions hereof shall be effective
unless in writing and signed by the party against whom enforcement thereof is
sought.
10. NOTICE. Any notice required, permitted or desired to be given
pursuant to any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if sent by certified or registered
mail, return receipt and postage prepaid, hand delivered, overnight delivery
service or sent by telephone facsimile as follows:
If to the Company, to it at:
Acme Television Holdings, LLC
2450 Kiser, Tustin, CA 92782
Attention: Tom Allen
Facsimile No.: (714) 832-4307
If to Executive, to him at:
1545 E. Valley Rd.
Santa Barbara, CA 93108
4
<PAGE>
Either of the parties hereto may at any time and from time to time change the
address to which notice shall be sent hereunder by notice to the other party
given under Paragraph 10. The date of the giving of any notice sent by mail
shall be the date of the posting of the mail; by any other means of delivery it
shall be the date of receipt.
11. ASSIGNMENT. Neither this Agreement nor the right to receive any
payments hereunder may be assigned by Executive nor Company.
12. WAIVER. No course of dealing nor any delay on the part of the
Company in exercising any rights hereunder shall operate as a waiver of any such
rights. No waiver of any default or breach of this Agreement shall be deemed a
continuing waiver or a waiver of any other breach or default.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
executed and to be performed entirely therein.
14. SEVERABILITY. Should any clause, paragraph or part of this Agreement
be held or declared to be void or illegal for any reason, all other clauses,
paragraphs or parts of this Agreement which can be effected without such illegal
clause, paragraph or part shall nevertheless remain in full force and effect.
If, in the opinion of any court, any clause, paragraph or part of this Agreement
is unreasonable or unenforceable, such court shall have the right, power and
authority to excise or modify such provisions, or portions thereof, of this
Agreement as the court shall find not be reasonable or enforceable and to
enforce the remainder of such clause, paragraph or part as so excised or
modified.
15. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Company, Executive and Executive's heirs and personal
representatives.
16. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not constitute a part hereof or affect
in any way the meaning or interpretation of this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
ACME TELEVISION HOLDINGS, LLC
By: /s/ Thomas D. Allen
________________________________
Thomas D. Allen
Executive Vice President
/s/ Jamie Kellner
________________________________
Jamie Kellner
6
COMMERCIAL BUILDING LEASE
This lease (the "Lease"), dated June 17, 1997, by and between Peregrine
Communications, Ltd. an Oregon corporation ("Landlord") and ACME Television
Holdings of Oregon, L.L.C. an Oregon limited liability company ("Tenant"), is
entered into pursuant to the provisions of the Asset Purchase Agreement as
amended, ("Purchase Agreement") dated January 31, 1997 by and between Channel 32
Incorporated, a direct subsidiary of Landlord, Tenant, and Tenant's affiliate
ACME Television Licenses of Oregon, L.L.C.
1 BASIC PROVISIONS. The following basic provisions apply to, and shall be
construed in conjunction with, this Lease.
1.1 LANDLORD. Peregrine Communications, Ltd. is the "Landlord" with a
mailing address of 9725 SW Beaverton-Hillsdale Hwy., Suite 350,
Beaverton, Oregon 97005-3366. Landlord is an Oregon corporation.
1.2 TENANT. ACME Television Holdings of Oregon, L.L.C. is the "Tenant."
Tenant is an Oregon limited liability company, with a mailing address
of 10255 SW Arctic Dr., Beaverton, Oregon 97005.
1.3 PREMISES AND PROPERTY. "Premises" is the certain commercial office space
located at 10255 SW Arctic Drive, Beaverton, Oregon, consisting of
interior office and related space and the Tower located therein, all as
more fully described on the attached Schedule 1.3 ("Premises"). (As used
herein, "Property" shall refer to the real property lot upon which the
Premises are located)
1.4 PERMITTED USE. The permitted use under this Lease is for television
studio, including, without limitation, video production, broadcasting
facilities, sales and management offices and all related activities
("Permitted Use").
1.5 TERM AND COMMENCEMENT DATE. The Term of this Lease shall commence on
June 17, 1997 ("Commencement Date") and shall end at midnight of June
, 2006, unless terminated earlier as provided in Section 9 ("Term"), or
extended pursuant to the Option to Renew Rider, or by purchase of the
Premises and Property by Tenant.
1.6 BASE RENT. Tenant shall pay to Landlord the monthly Base Rent of
$12,500.00 ("Base Rent"). The Base Rent shall be adjusted as
provided in this Lease.
1.7 UTILITIES AND SERVICES. All utilities and Janitorial Services necessary
to or desired by Tenant shall be paid by Tenant. Tenant shall be
responsible for routine repairs and maintenance, Security Services,
Janitorial Services, Communications Services and all other such regular
services necessary or desired for operation of the Premises or Property.
Tenant shall pay for the utility or service cost directly to the
relevant supplier. If additional or expanded utilities or services are
required beyond the utilities or services existing as of the
Commencement Date, then Tenant shall provide and pay for the additional
or expanded utilities or services.
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2. RIDERS. This Lease includes and incorporates the following riders:
x Schedule 1.3 (Premises).
x Option to Renew.
3. GRANT OF THE PREMISES AND POSSESSION.
3.1 GRANT OF PREMISES. Landlord leases to Tenant and Tenant leases from
Landlord the Premises and the Property subject to the terms and
conditions of this Lease.
3.2 POSSESSION. Landlord shall deliver possession of the Premises to Tenant
on the Commencement Date. During the Term, Landlord covenants on behalf
of itself, its successors, assigns and persons rightfully claiming by or
through Landlord to not disturb the quiet enjoyment, possession, or
Permitted Use of the Premises and Property by Tenant, subject to the
rights of Landlord set forth in this Lease.
4. RENT.
4.1 DEFINITION OF RENT. The term "rent" includes the Base Rent, any
adjustments to the Base Rent, additional rent, and any other amount
payable by Tenant to Landlord under this Lease.
4.2 TIME OF PAYMENT. Except as expressly provided otherwise, each monthly
rent payment due from Tenant to Landlord shall be due on or before the
first (1st) calendar day of each month of the Term, with the first
monthly rent payment due on the execution of this Lease. The date on
which a monthly rent payment is due is the "Due Date."
4.3 FORM AND PLACE OF PAYMENT. Tenant shall pay rent in the form of a check
made payable to Landlord. The check shall be received by Landlord at
Landlord's address set forth in Section 1.1 on or before the Due Date.
4.4 APPLICATION OF PAYMENTS. Payments made by Tenant to Landlord shall first
be applied to late fees, if any, then to additional rent, if any, then
to any other amounts due from Tenant to Landlord, if any, and last to
the Base Rent, as adjusted.
4.5 PRORATION OF RENT. If the Term begins on other than the first calendar
day of a month, or ends on other than the last calendar day of a month,
the Base Rent amount that is due is the monthly Base Rent (as adjusted)
divided by the number of calendar days in that month.
4.6 RENT ADJUSTMENT. The Base Rent shall be adjusted on June 17, 2001 and
on June 17 every third year thereafter for the term of this Lease and
any renewal term hereunder. The Base Rent, as adjusted, shall be equal
to the greater of (i) the Base Rent in the preceding period, or (ii) the
Base Rent plus the C.P.I. Adjustment. For purposes of this Section,
"C.P.I." refers to the Consumer Price Index for all Urban Consumers,
U.S. City Average, All Items, compiled by the Bureau of Labor
Statistics, United States Department of Labor, using the index for
December, 1967 as a base of 100. In the event the C.P.I. is replaced or
revised, a comparable or replacement index shall be based upon or
adjusted to a December 1967 base of 100. The "C.P.I. Adjustment"
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is computed by dividing the C.P.I. for the calendar month immediately
preceding the adjustment by the C.P.I. for the month immediately
preceding the Commencement Date or the last adjustment under this Lease,
as the case may be, and multiplying the quotient by the initial Base
Rent. The minimum adjustment for any period shall be a one percent (1%)
increase and the maximum adjustment for any period shall be a seven and
one half percent (7.5%) increase.
4.7 REAL AND PERSONAL PROPERTY TAXES. Tenant shall be liable for and shall
pay before the same shall be past due all taxes levied against its trade
fixtures and equipment and other personal property placed upon, or owned
by Tenant in, on or about the Premises or Property, plus those levied
against the personal property, if any, being leased to Tenant under this
Lease, and all taxes levied against the value of the real property and
improvements of the Premises and Property.
5. OPERATION OF PREMISES AND PROPERTY.
5.1 TENANT'S USE OF PREMISES. The Premises shall be occupied and used only
for the Permitted Use and for no other purpose, and Tenant shall operate
the entire Premises during the Term and any renewal.
5.2 JANITORIAL AND UTILITY SERVICES. The term "Janitorial Services" is
defined to include the following for the Premises and Property: (i)
sweep, vacuum, or mop all floors as appropriate: (ii) collect and empty
into appropriate containers all trash and garbage; (iii) clean all
offices, rest rooms, and other rooms; (iv) supply all soap, towels,
tissues and other supplies for the rest rooms; (v) maintain all light
bulbs and tubes in operating condition; (vi) clean all interior and
exterior glass surfaces as needed; (vii) clean all unsightly or abnormal
stains, dirt or other problems as needed; (viii) clean all walking areas
to a condition of "broom clean;" and (ix) periodically replace filters
for the heating and air conditioning systems as needed.
5.3 COMMUNICATION SERVICES. Tenant shall maintain, at Tenant's expense, all
necessary or desired communication, telephone, data, audio-visual,
video, cable, computer and electronic services and equipment
("Communication Services") for the Premises. Landlord is not obligated
to supply or maintain any Communication Services to or on the Premises.
Tenant may install Communication Services lines and cables at the
locations and using the methods as Landlord and Tenant shall agree.
5.4 SECURITY SERVICES. Tenant may provide and maintain such Security
Services for the Premises and/or the Property that are appropriate for
Tenant's use. The term "Security Services" includes, but is not limited
to, any watchperson, locks, lights, fences, alarms, doors, or other
services, devices, procedures, barriers or otherwise for the purpose of
protecting, safeguarding, defending, or policing persons or property
from any theft, vandalism or other loss or damage. Tenant may use or
install fences, locks, alarms, doors or other devices to provide
Security Services, and the installation of any Security Services shall
be (i) consistent with the overall design and use of the Premises and
Property, and (ii) subject to the terms of this Lease regarding
"alterations, improvements and additions". Landlord shall provide no
Security Services for the Premises.
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5.5 SIGNS. The design, installation, removal, compliance with applicable
laws and all other matters related to signage shall be at Tenant's
expense and Tenant's sole discretion, subject to Section 5.9 hereof.
5.6 ROUTINE REPAIRS AND MAINTENANCE. Tenant shall make all repairs and
replacements necessary to maintain the Premises and Property in the
condition not less than the condition of the Premises existing as of the
Commencement Date, normal wear and tear excepted.
5.7 STRUCTURAL AND SYSTEMS MAINTENANCE. Tenant shall be responsible for all
structural and system maintenance including, but not limited to,
maintaining in good working order the roof, paved parking areas, and the
heating, ventilating, air conditioning, plumbing, and electrical
systems, and light ballasts. Landlord represents and warrants that, as
of the Commencement Date, to the best of Landlord's knowledge, all such
structural and mechanical components and systems are in good working
order and free of material defects. In the event that this
representation and warranty is untrue as of the Commencement Date, the
Landlord will repair or replace the structural or mechanical component
or system that is not in good working order or has a material defect at
the Commencement Date.
5.8 TENANT'S LIABILITY FOR REPAIRS AND MAINTENANCE. Notwithstanding any
other provision of this Lease, Tenant shall be liable for and shall
promptly repair all damage to the Premises or Property caused by Tenant
or Tenant's partners, officers, directors, employees, invitees, guests,
customers, clients or licensees, regardless whether the damage is caused
by the negligence of the Tenant. All repairs made by Tenant shall be at
least equal to the original work in class and quality. If Tenant fails
to repair, (i) Landlord or its agents, may, but is not required to,
enter the Premises at any reasonable time to make repairs, and (ii)
Tenant shall pay to Landlord the reasonable cost of such maintenance or
repairs as additional rent due with the next monthly rent payment after
receiving an invoice or invoices for such repairs.
5.9 ALTERATIONS, IMPROVEMENTS AND ADDITIONS. Tenant shall not make any
alteration, improvement or addition to the Premises without the prior
written consent of Landlord, which consent shall not be unreasonably
withheld. Landlord specifically consents to Tenant's installation or
erection at the Premises or Property of additional engineering equipment
such as satellite receiving antennas, studio transmitter links,
microwave antennas or similar devices, necessary or useful to the
operation of Tenant's television station, consistent with industry
standards as to design, installation and local zoning and building
codes. Tenant shall advise Landlord of such installations before they
are performed. All alterations, improvements, and additions (i) shall be
performed at the sole cost and expense of Tenant in compliance with all
laws and regulations of any federal, state, or local governmental body,
and (ii) shall become and remain the property of Landlord except that
any video production or broadcast related equipment installed by Tenant
shall remain the property of Tenant unless abandoned at the end of the
term of this Lease. In contracting for any alterations, improvements or
additions, Tenant shall not act as the agent of Landlord. Tenant shall
be responsible for compliance with the requirements of the Americans
with Disabilities Act to the extent that any repair, alteration,
improvement or addition requires such compliance.
5.10 HAZARDOUS MATERIAL USE. Tenant shall not cause or permit any Hazardous
Material to be brought upon, kept, disposed on, in or at, released or
threatened to release or used in or about the Premises or Property by
Tenant, its agents, employees, contractors, customers, clients,
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guests or invitees. Tenant shall comply with all applicable laws and
regulations regulating the use, reporting, storage, and disposal of
Hazardous Material.
5.11 HAZARDOUS MATERIAL DEFINITION. As used in the Lease, the term "Hazardous
Material" means any hazardous or toxic substance, material or waste
which is or becomes regulated by any federal, state or local
governmental authority or political subdivision. The term "Hazardous
Material" includes, without limitation, any material or substance that
is (i) defined as a "hazardous substance" under applicable law, (ii)
petroleum, (iii) asbestos, (iv) polychlorinated biphenyl ("PCB"), (v)
designated as a "hazardous substance" pursuant to Section 31 1 of the
Federal Water Pollution Control Act (33 U.S.C. ss. 1 321), (vi) defined
as a "hazardous waste" pursuant to Section 1004 of the Solid Waste
Disposal Act (42 U.S.C. ss.6903), (vii) defined as a "hazardous
substance" pursuant to Section 1 01 of the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss.9601), (viii)
defined as a "regulated substance" pursuant to Section 9001 of the Solid
Waste Disposal Act (Regulation of Underground Storage Tanks), 42 U.S.C.
ss.6991 , (ix) considered a "hazardous chemical substance and mixture"
pursuant to Section 6 of the Toxic Substance Control Act (1 5 U.S.C. ss.
2605), or (x) defined as a "pesticide" pursuant to Section 2 of the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 1 36).
5.13 COVENANT AGAINST LIENS. Except as to real property trust deeds,
mortgages and security interests of Landlord entered in the ordinary
course, Landlord and Tenant each agrees not to suffer or permit any lien
(including, but not limited to, tax liens and liens of mechanics or
materialmen) to be placed against the Premises or Property. If a lien is
placed against the Premises or Property that is directly or indirectly
related to an act or failure to act of a party, that party agrees to
notify the other party and pay off and remove such lien within thirty
(30) days of receipt of notice of the lien, regardless whether such
party contests the validity of the lien. Neither has authority or power
to cause or permit any lien or other encumbrance created by act of the
party, operation of laws, or otherwise to attach to or be placed upon
the other parties title or interest in the Premises, or the Property or
any personal property located therein.
5.14 DESIGNATION OF REPRESENTATIVES. Each party shall designate, in writing,
one representative to coordinate and implement the party's obligations
and to accept responsibility for the party's compliance with this Lease.
The representative shall have full authority to represent the party. If
the representative is changed, then the party changing its
representative shall notify the other party in writing within seven (7)
days.
5.15 RIGHTS RESERVED TO LANDLORD. Landlord shall have the following rights,
but not obligations, exercisable without notice and without liability to
Tenant for damage or injury to property, person, or business: (i) to
show the Premises or Property to prospective tenants at reasonable hours
during the last six (6) months of the Term if the Term has not been
extended, and, if the Premises are vacated prior to the end of the Term,
to prepare the Premises or Property for occupancy by a tenant; (ii)
subject to the provisions of this Lease, to have and retain paramount
title to the Premises or Property free and clear of any act or inaction
of Tenant that my restrict or encumber the Premises or Property;
and (iii) to encumber, sell, assign, or otherwise transfer Landlord's
interest in the Premises or Property subject to the provisions of
Section 11.1 hereof.
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6. CHANGES IN THE PARTIES.
6.1 RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall be
construed as creating the relationship of principal or agent,
partnership or joint venture. Neither the method of computation of rent
nor any other provision of this Lease, nor any act of the parties, shall
be deemed to create any relationship other than that of landlord and
tenant.
6.2 SUCCESSORS AND ASSIGNS. This Lease shall benefit and bind the
successors and permitted assigns of Landlord and Tenant.
6.3 ASSIGNMENT AND SUBLETTING. Tenant may not, without the prior written
consent of Landlord, (i) assign this Lease or any interest in this
Lease, (ii) permit or suffer any assignment of this Lease by operation
of law, (iii) sublet all or any portion of the Premises, or (iv) permit
the use of the Premises by any party other than Tenant and its partners,
officers and employees. Landlord's consent to any proposed assignment or
subletting shall not be unreasonably withheld. Landlord may reasonably
withhold consent to any subletting or assignment unless (i) the credit
history, financial strength, and business reputation of the subtenant or
assignee is reasonably acceptable to Landlord and Landlord's lender,
(ii) Tenant pays the reasonable costs (including attorney fees) incurred
by Landlord in investigating the subletting or assignment, and (iii) the
subtenant's proposed use of the Premises is consistent with the current
uses of the Premises and Property. No assignment or subletting shall
release Tenant from any of the obligations set forth in this Lease.
6.4 LANDLORD'S TRANSFER. Landlord may sell, assign or otherwise transfer the
Premises and Property subject to the provisions of Section 11.1 hereof.
If Landlord should sell or transfer its interest in the Premises or
Property, then effective with the date of the sale or transfer, Landlord
shall be released and discharged from any and all further obligations
and responsibilities under this Lease (except those already accrued)
upon written assumption by the buyer or transferee of Landlord's
obligations and liabilities under this Lease.
6.5 ATTORNMENT. Tenant shall attorn to, and recognize as successor Landlord
under this Lease, any person that purchases or obtains title to the
Premises pursuant to (i) foreclosure proceedings, (ii) exercise of the
power of sale under a deed of trust, or (iii) a deed in lieu of
foreclosure or similar transfer.
6.6 SUBORDINATION. Tenant agrees that this Lease is and shall remain
subordinate to any existing or subsequent mortgage or deed of trust
covering the fee title to the Premises, together with any renewals,
modifications or extensions of existing or subsequent mortgages or deeds
of trust. Upon Landlord's request, Tenant shall execute the instruments
that are reasonably required to subordinate this Lease to mortgages or
deeds of trust made by Landlord.
6.7 ESTOPPEL CERTIFICATE. From time to time, but no more than twice in any
calendar year, upon not less than five (5) days prior written request by
Landlord, Tenant will deliver to Landlord a certificate in writing
stating (i) that this Lease is unmodified and in full force and effect
(or that the Lease as modified is in full force and effect, describing
the modifications), (ii) that the rents and other charges have been paid
to date without any prepayments or defaults (or if any prepayments or
defaults, the nature of the prepayments or defaults), and (iii) that
Landlord is not in default under any provision under this Lease (or, if
in default, the nature of the default).
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The certificate may be relied upon by a mortgagee, an assignee of a
mortgage, or a purchaser of Landlord's interest in the Premises. If
Tenant shall fail to respond within five days of receipt by Tenant of
Landlord's written request, Tenant shall be deemed to have given
the certificate without modification.
7. LOSS OF PREMISES OR PROPERTY.
7.1 INSURANCE. Tenant shall purchase and obtain the following insurance
policies (or if so notified by Landlord such additional insurance
coverage as is reasonably required by Landlord's lender or lenders): (i)
the policies set forth in the attached Additional Terms Rider, if any;
(ii) a policy of comprehensive general liability insurance utilizing an
Insurance Services Office standard form with broad form general
liability endorsement, or equivalent, in an amount of not less than $
1,000,000.00 per occurrence of bodily injury and property damage
combined. The policy shall insure Tenant with Landlord as an additional
insured and shall also insure against liability arising out of the use,
occupancy or maintenance of the Premises and Property; and (iii) a
policy of fire and extended coverage insurance in an amount equal to but
not less than the full insurable value (from time to time) of all of
Tenant's personal property, fixtures, equipment and tenant improvements
and protecting Tenant against loss on account of damage to or
destruction of the Premises or Property by fire or other casualty
covered by a so-called "extended coverage" endorsement or a "special
forms" policy, including, without limitation, vandalism and malicious
mischief endorsements. If Tenant does not maintain the required
insurance, then Tenant is in default, is deemed to self-insure and bears
all risk of loss or damage caused by Tenant, Tenant's agents, employees
and invitees. The policy shall be with an insurer with a Best's rating
of B + or higher. Compliance with this Section shall not limit the
liability of Tenant under this Lease. Tenant shall deliver to Landlord
copies of the required insurance policies within thirty (30) days after
the Commencement Date. No policy shall be canceled or modified except
after thirty (30) days prior written notice to Landlord. Tenant shall,
at least seven (7) days prior to the expiration of the policies, upon
request, furnish Landlord with copies of the renewal policies. Each
party may, but is not obligated to, obtain insurance for its own
benefit. Except as provided in the Lease, each party (i) is not
obligated to obtain, (ii) is not obligated to be named in, (iii) shall
have no right to any proceeds of, and (iv) waives all claims on
insurance purchased by or for the benefit of the other party.
7.2 WAIVER OF SUBROGATION. To the extent permitted by their respective
insurers, Landlord and Tenant (and each person claiming an interest in
the Premises or Property through Tenant) release and waive their entire
right of recovery against the other for direct, incidental or
consequential or other loss or damage arising out of, or incident to,
the perils covered by insurance carried by each party, whether due to
the negligence of Landlord or Tenant. If necessary, all insurance
policies shall be endorsed to evidence this waiver.
7.3 EFFECT OF ONE PARTY'S ACTIONS ON OTHER PARTY'S INSURANCE. Neither party
shall do or permit to be done anything which shall invalidate any
insurance carried by the other party. Tenant shall pay the entire
increase in the insurance premium if the increase is specified by
Landlord's insurer as caused by the actions or omissions of Tenant.
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7.4 FIRE AND CASUALTY.
7.4.1 TERMINATION OR REPAIR. If all or any portion of the Premises or
Property are damaged or destroyed by fire or other casualty,
Landlord shall deliver to Tenant written notice within thirty (30)
days of the damage or destruction stating whether the Premises and
Property can be restored within one hundred eighty (180) days of
the damage or destruction. Landlord shall have no obligation to
expend more in repairing, restoring or rebuilding than the
proceeds of insurance available for the purposes. If, in
Landlord's reasonable judgment, the insurance settlement, permit
and construction work for repairing and rebuilding the damaged or
destroyed portion of the Premises or Property can be completed
within the period with the available insurance proceeds, Landlord
shall promptly proceed to repair or rebuild the damaged or
destroyed portion of the Premises or Property. If, in Landlord's
reasonable judgment, the insurance settlement, permit and
construction work for repairing and rebuilding the damaged or
destroyed portion of the Premises or Property cannot be completed
within the period with the available insurance proceeds, either
Landlord or Tenant may terminate this Lease upon thirty (30) days
written notice to the other party.
7.4.2 ABATEMENT OR APPORTIONMENT OF RENT. If the Lease is not
terminated, and if the damage or destruction to the Premises or
Property is not caused by the act or failure to act of Tenant, its
partners, officers, employees, agents, guests, customers, clients
or invitees, then a just portion of the rent shall abate as of the
date of the damage or destruction until the Premises and Property
are repaired or rebuilt. If the Lease is terminated, the rent
shall be apportioned as of the date of the damage or destruction.
7.4.3 ALTERATIONS, IMPROVEMENTS AND ADDITIONS. With respect to any
damage or destruction of alterations, improvements or additions
made to the Premises by Tenant, (i) this Section 7.4 shall be
inapplicable, (ii) no abatement of rent shall occur, and (iii)
Landlord shall not be obligated to repair or rebuild the Tenant's
alterations, improvements, or additions.
7.5 CONDEMNATION. If all of the Premises are taken or condemned by any
authority for any use or purposes, this Lease shall terminate upon, and
the rent shall be apportioned as of, the date when actual possession of
the Premises is required for the condemned use or purpose. If less than
all of the Premises are taken or condemned by any authority for any use
of purpose, then (i) Landlord or Tenant may terminate this Lease upon
thirty (30) days written notice of termination, or (ii) in the event the
parties elect to continue the Lease, a just portion of the rent will
abate as of the date when actual possession of condemned portion of the
Premises is required for the condemned use or purpose. Landlord reserves
all rights to damages to the Premises for any taking or condemnation of
all or any portion of the Premises. Tenant assigns to Landlord any right
Tenant may have to any award or damages. Tenant shall have the right to
claim and recover from the condemning authority compensation for any
loss for moving expenses and for interruption of or damage to Tenant's
business only if such award or damages are awarded separately and not as
part of the award or damages recoverable by Landlord.
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8. DEFAULT BY TENANT OR LANDLORD.
8.1 DEFAULT BY TENANT. Tenant shall be in default under this Lease if any of
the following occur: (i) Tenant fails to pay within ten (10) days after
the date when due any monthly rent or other payment required to be paid
by Tenant under this Lease; (ii) Tenant fails to perform or observe any
other material covenant, agreement or condition which Tenant is required
to perform or observe and the failure shall not be cured within thirty
(30) days after delivery of written notice to Tenant of the failure;
(iii) Tenant is named as a debtor in any voluntary or involuntary
bankruptcy proceeding not dismissed within ninety (90) days; (iv)
substantially all of Tenant's assets are placed in receivership or are
subjected to attachment or other judiciary seizure; (v) Tenant makes or
suffers a general assignment for the benefit of creditors; or (vi)
Tenant vacates or abandons the Premises.
8.2 REMEDIES OF LANDLORD. In the event of Tenant's default as set forth
in Section 8.1, Landlord shall have the remedies set forth in this
Lease. Landlord's remedies are cumulative and not alternative
remedies.
8.2.1 LEGAL AND EQUITABLE REMEDIES. Landlord shall have all remedies
available at law or in equity.
8.2.2 TERMINATION OF LEASE. Landlord may terminate the Lease. Following
termination of the Lease and for purposes of reletting the
Premises, Landlord may make any necessary or convenient
decorations, repairs, changes, alterations or additions to the
Premises in connection with any reletting of the Premises.
8.2.3 ADVANCE. In the event of Tenant's breach, Landlord may remedy the
breach for the account and at the expense of Tenant. If Landlord
at any time, by reason of the breach, is compelled to pay, or
elects to pay, any money or do any act which will require the
payment of any money, or is compelled to incur any expense,
including reasonable attorneys' fees, in instituting or
prosecuting any action or proceeding to enforce Landlord's rights
under this Lease, the money so paid by Landlord, with interest
from the date of payment at the rate set forth in Section 11.2,
shall be additional rent and shall be due from Tenant to Landlord
as set forth in Section 4.
8.3 DEFAULT BY LANDLORD. Landlord shall be in default under this Lease if
Landlord fails to perform or observe any material covenant, agreement or
condition which Landlord is required to perform or observe and the
failure shall not be cured within thirty (30) days after delivery of
written notice to Landlord by Tenant of the failure.
8.4 REMEDIES OF TENANT. In the event of Landlord's material default as set
forth in Section 8.3, Tenant shall have all rights provided at law or in
equity.
9. TERMINATION OF LEASE.
9.1 EVENTS OF TERMINATION. This Lease shall terminate upon the occurrence of
one or more of the following events: (i) by mutual written agreement of
Landlord and Tenant; (ii) by Landlord pursuant to this Lease; (iii) by
Tenant pursuant to this Lease; (iv) upon lapse of the Term or renewal
term; or (v) by reason of Sections 7.4 or 7.5 relating to destruction or
condemnation of the Premises.
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9.2 SURRENDER, OF POSSESSION. Upon termination of this Lease, Tenant will
immediately surrender possession of the Premises to Landlord. If
possession is not immediately surrendered, Landlord may re-enter and
repossess the Premises and remove all persons or property using such
force as may be necessary without being deemed guilty of, or liable for,
any trespass, forcible entry, detainer, breach of the peace, or damage
to persons or property.
9.3 CONDITION OF PREMISES UPON TERMINATION OR ABANDONMENT. Tenant, upon
termination or abandonment of this Lease or termination of Tenant's
right of possession, agrees as follows:
9.3.1 REMOVAL OF PROPERTY. Except as permitted herein, Tenant shall not
remove any alterations, improvements or additions made to the
Premises by Tenant or others without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. Tenant
shall immediately remove, in a good and workmanlike manner, (i) all
personal property of Tenant, and (ii) the alterations, improvements
and additions made to the Premises by Tenant as Landlord may request
in writing to be removed. All damage occasioned by the removal shall
be promptly repaired by Tenant in a good and workmanlike manner. If
Tenant fails to remove any property, Landlord may (i) accept the
title to the property without credit or compensation to Tenant, or
(ii) remove and store the property, at Tenant's expense, in any
reasonable manner that Landlord may choose.
9.3.2 RESTORATION OF PREMISES. Tenant shall restore the Premises to the
condition existing on the Commencement Date, with the exception of
(i) ordinary wear and tear, and (ii) alterations, improvements and
additions which Landlord has not directed to Tenant in writing to
remove. If Tenant fails to properly restore the Premises, Landlord,
at Tenant's expense, may restore the Premises in any reasonable
manner that Landlord may choose.
9.4 HOLDING OVER. If Tenant fails to deliver actual possession of the
Premises to Landlord upon termination of this Lease, Landlord shall have
all remedies available at law or in equity to a lessor of real property
in the State of Oregon Landlord may recover damages from Tenant in an
amount equal to (a) 150% the monthly rental payment applicable
immediately prior to termination for each full or partial month that
Tenant fails to deliver actual possession of the Premises to Landlord,
and (b) all damages sustained by Landlord by reason of Tenant's failure
to deliver actual possession of the Premises to Landlord.
10. CLAIMS AND DISPUTES.
10.1 RIGHTS AND REMEDIES CUMULATIVE. Except as expressly provided in this
Lease, each party's rights and remedies described in this Lease are
cumulative and not alternative remedies.
10.2 NONWAIVER OF REMEDIES. A waiver of any condition stated in this Lease
shall not be implied by any neglect of a party to enforce any remedy
available by reason of the failure to observe or perform the condition.
A waiver by a party shall not affect any condition other than the one
specified in the waiver and a waiver shall waive a specified condition
only for the time and in the manner specifically stated in the waiver.
The acceptance by Landlord of rent or other money from Tenant after
termination of the Lease, after termination of Tenant's right of
possession, after the occurrence of a default, or after institution of
any remedy by Landlord shall not alter, diminish, affect or waive the
Lease termination, termination of possession, default or remedy.
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10.3 INDEMNIFICATION. To the extent caused by an act or failure to act of
Tenant or Tenant's partners, officers, directors, employees, invitees,
guests, customers, clients or licensees, and regardless whether the act
or failure to act is negligent, Tenant shall defend, indemnify and hold
harmless Landlord, and its partners, officers, directors, agents and
employees from any liabilities, damages and expenses (including attorney
fees) arising out of or relating to (i) the Premises or Property, or
(ii) Tenant's use or occupancy of the Premises.
10.4 HAZARDOUS MATERIAL INDEMNIFICATION. Tenant shall indemnify, defend and
hold Landlord harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities or losses (including, without
limitation, diminution in value of the Premises or Property, damages for
the loss or restriction on use of rentable or useable space or any
amenity of the Premises or Property, damages arising from any adverse
impact on marketing of space, and sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees) which arise during or
after the Term as a result of Tenant's breach of the obligations stated
in this Section regarding Hazardous Material. This indemnification of
Landlord by Tenant includes, without limitation, costs incurred in
connection with any investigation of site conditions or any cleanup,
remedial, removal, or restoration work required by any federal, state,
or local governmental agency or political subdivision because of
Hazardous Material present in the soil or ground water on or under the
Premises or Property. Without limiting the preceding, if the presence of
any Hazardous Material on the Premises or Property caused or permitted
by Tenant results in any contamination of the Premises or Property,
Tenant shall promptly take all actions at Tenant's sole expense as are
necessary to return the Premises or Property to the condition existing
prior to the introduction of any Hazardous Material to the Premises or
Property.
10.5 EFFECT OF LANDLORD INSURANCE ON TENANT OBLIGATIONS. From time to time
and without obligation to do so, Landlord may purchase insurance against
damage or liability arising out of or related to the Premises or
Property. The purchase or failure to purchase insurance shall not
release or waive the obligations of Tenant set forth in this Lease.
Tenant waives all claims on insurance purchased by Landlord.
10.6 DISPUTES. This Lease shall be governed by Oregon law. The Oregon courts
of Washington County have exclusive jurisdiction and venue. If a party
is in default under this Agreement, then the defaulting party shall pay
to the other party as additional rent reasonable attorney fees and costs
(i) incurred by the other party after default and referral to an
attorney and (ii) incurred by the prevailing party in any litigation or
arbitration. The invalidity of any portion of this Lease shall not
affect the validity of any other portion of this Lease.
11. OPTION TO PURCHASE.
11.1 OPTION. At any time, if this Lease is then in good standing and Tenant
is not in default hereunder, Tenant shall have the option to purchase
the Property for the total sum of $1,500,000. Tenant shall exercise the
option by providing not less than thirty (30) days written notice of
intent to exercise to Landlord. Upon exercise, Tenant shall pay the
purchase price in cash. In the event Landlord desires to sell the
Premises and Property to a third party, Tenant shall have twenty (20)
days after receipt of notice from Landlord that Landlord has received
and
11
<PAGE>
intends to accept a bona fide offer to purchase the premises in which
to elect to purchase the Premises and Property. This right shall
expire in the event of sale of the Premises and Property to a third
party after the required notice to Tenant and Tenant's failure to
exercise the right.
12. TOWER LEASES
12.1 LEASE INCOME. A microwave tower ("Tower") has been constructed as an
integral part of the Premises. As of the commencement Date, two leases
with telecommunications companies exist on the Premises leasing space
on the Tower for cellular telephone equipment ("Existing Leases"). All
income from the Existing Leases will be paid to and be the property of
Landlord. In the event that any future leases of space on the Tower are
entered into during the term of this Lease (including any renewals
thereof), the Landlord and Tenant shall equally share the income
therefrom for the remaining term of the Lease (including any renewals
thereof). Upon termination of this Lease for any reason, all income
from any lease of space on the Tower shall be payable to the then owner
of the Premises.
13. GENERAL PROVISIONS.
13.1 NOTICES. All notices under this Lease shall be in writing and shall be
deemed to be delivered on the date of delivery if delivered in person
or by fax, or on the date of receipt if delivered by U.S. Mail or
express courier. Proof of delivery shall be by affidavit of personal
delivery, machine generated confirmation of fax transmission or return
receipt issued by U.S. Postal Service or express courier. Notices
shall be addressed to the address set forth in Section 1 (or at the
other addresses one party may give to another party by written
notice).
13.2 INTEREST ON PAST DUE AMOUNTS. All past due rent or other payments
under this Lease not received within ten days after the due date shall
bear interest at the rate of one and one half percent (11/2 %) per
month (annual percentage rate of 18%) compounded monthly, or the
highest rate permitted by law, whichever is less. Interest shall be
calculated from the due date until paid.
13.3 BROKERS. Tenant warrants that Tenant has no arrangement with any
realtor, broker or agent in connection with the negotiations of this
Lease except as Tenant notifies Landlord prior to the execution of
this Lease. Tenant agrees to defend, indemnify and hold Landlord
harmless from any cost, expense or liability for any compensation,
commission or charges claimed by any realtor, broker or agent with
respect to this Lease except as Landlord agrees in writing before the
execution of this Lease.
13.4 NON-RECORDING. This Lease or any memorandum of this Lease shall not be
recorded unless the parties consent.
13.5 TIME IS OF THE ESSENCE. Time is of the essence with respect to the
obligations to be performed under this Lease.
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<PAGE>
SIGNATURES.
LANDLORD TENANT
PEREGRINE COMMUNICATIONS, LTD. ACME TELEVISION HOLDINGS OF
OREGON, L.L.C.
By: /s/ Daniel J. Alderman By: /s/ Douglas E. Gealy
----------------------------- ---------------------------
Daniel J. Alderman, E.V.P. Douglas Gealy, President
Date: 6/25/97 Date: 7/1/97
------- ------
<PAGE>
OPTION TO RENEW
1. OPTION TO RENEW.
Tenant is granted the option to renew the Term of this Lease for one or
more successive periods as set forth below:
Renewal Period(s)
Period No. 1 May 30, 2006 to May 29, 2011
Period No. 2 May 30, 2011 to May 29, 2016
Period No. 3. May 30, 2021 to May 29 2026
Period No 4. May 30, 2026 to May 29, 2031
2. EXERCISE OF OPTION.
2.1 Option Period. Tenant shall have the right to exercise the Option(s)
granted by this Option to renew Rider during the period commencing with the
Commencement Date and ending six months prior to the expiration of the term
immediately preceding the relevant renewal period ("Option Period").
2.2 Delivery of Notice. The option may be exercised and is effective only
if (i) Tenant gives written notice of the exercise of the Option within the
Option Period, (ii) Landlord receives the written notice within the Option
Period, and (iii) at Landlord's option, Tenant is not in default under the terms
of this Lease on the date of the exercise of the Option or on the date of the
commencement of the renewal period.
3 TERMS AND CONDITIONS ON RENEWAL.
The terms and conditions set forth in this Lease shall constitute the
lease terms and conditions during the renewal term, except that (i) no
additional renewals beyond the renewal terms set forth above shall be permitted,
and (ii) the monthly Base Rent shall be adjusted as set forth in the Rent
Adjustment Rider.
INITIALED BY TENANT /s/DG INITIALED BY LANDLORD /s/DJA
----- ------
<PAGE>
Schedule 1.3 - Description of Premises has been intentionally omitted by
the Registrants.
A copy of this omitted Schedule 1.3 will be provided to the Securities and
Exchange Commission upon request.
AMENDED AND RESTATED
LEASE AGREEMENT
EFFECTIVE: July 1, 1996
BETWEEN: KKSN, INC. "LESSOR"
AND: CHANNEL 32 INCORPORATED "LESSEE"
1. LEASED PREMISES. Lessor hereby leases to Lessee certain antenna
attachment space consisting of approximately 50 vertical feet centered at the
approximately 200 foot level, on any side of the tower known as The KXYQ Tall
Tower, or top mounted on The KXYQ Robin Tower to the extent that certified
engineering studies are approved by the Lessor and Lessee, such approval not to
be unreasonably withheld (either tower hereby known as the "Tower"), together
with space for one studio transmitter link open and receiver antenna at
approximately the 100 foot level of the Tower. The Tower is located in the
County of Clackamas at Molalla, Oregon. Lessee shall also have access to the
equipment house as described in paragraph 5 below (the Tower and equipment house
shall be considered the "premises.")
2. LEASE TERM. The term of this Lease shall commence on July 1, 1996
and shall continue until December 31, 1996, unless otherwise terminated or
renewed pursuant to this Lease. The Tower is located on real property leased by
Lessor under a Ground Site Lease Agreement (the "Master Lease") with Cavenham
Forest Industries, Inc. (the 'Master Lessor") expiring on August 31, 2001, and
subject to renewal at Lessor's option through August 31, 2016. The leased
premises shall only be used by Lessee or its successor for the audio and visual
signal of one television station.
3. RENTAL. Lessee shall pay Lessor as monthly rent for the initial
term the sum of $4,100, payable on the first day of the month. Lessor
acknowledges receipt of $4,000 paid by Lessee as a security deposit. Lessor may
commingle the deposit with its funds and Lessor shall have the right to offset
against the deposit any sums owing from Lessee to Lessor or any other party and
not paid when due, any damages caused by Lessee's default, the cost of curing
any default by Lessee should Lessor elect to do so, and the cost of performing
any repair or cleanup that is Lessee's responsibility under this Lease. Offset
against the deposit shall not be an exclusive remedy in any of the above cases,
but may be invoked by Lessor, at its option, in addition to any other remedy
provided by law or this Lease for Lessee's nonperformance. Each time an offset
is claimed against the deposit, and, unless the lease is terminated, Lessee
shall, after ten days notice from Lessor, deposit a sum equal to the amount of
the offset so that the total deposit amount shall remain constant throughout the
Lease term. The deposit (or any sum that has not been
<PAGE>
retained by the Lessor as set forth above) shall be refundable to Lessee within
30 days after expiration of the Lease or other termination not caused by
Lessee's default.
4. RENEWAL OPTION. If this Lease is not in default at the time each
option is exercised or at the time the renewal term is to commence, and subject
to subparagraph G of this paragraph 4, Lessee shall have the option to renew
this Lease, as follows:
A. On December 31, 1996, Lessee shall have the option to
renew the Lease for a period of three years, with rent to be paid monthly in
advance on the first day of the month as follows:
OPTION YEAR MONTHLY RENT ANNUAL RENT
----------- ------------ -----------
1 $4,300 $51,600
2 $4,400 $52,800
3 $4,500 $54,000
B. On December 31, 1999, Lessee shall have the option to
renew the Lease for 2 period of five years with the rent to be paid monthly, in
advance on the first day of the month as follows:
OPTION YEAR MONTHLY RENT ANNUAL RENT
----------- ------------ -----------
1 $4,680 $56,160
2 $4,867 $52,404
3 $5,062 $60,744
4 $5,264 63,168
5 $5,475 $65,700
C. On December 31, 2004, Lessee shall have the option to
renew the Lease for a period of five years with rent to be paid monthly in
advance on the first day of the month as follows:
OPTION YEAR MONTHLY RENT ANNUAL RENT
----------- ------------ -----------
1 $5,694 $68,328
2 $5,922 $71,064
3 $6,159 $73,908
4 $6,405 $76,860
5 #6,661 $79,932
D. On December 31, 2009, Lessee shall have the option to
renew the Lease for a period of five years with rent to be paid monthly in
advance on the first day of the month as follows:
<PAGE>
OPTION YEAR MONTHLY RENT ANNUAL RENT
----------- ------------ -----------
1 $6,927 $83,129
2 $7,205 $86,454
3 $7,493 $89,913
4 $7,792 $93,509
5 $8,104 $7,250
E. On December 31, 2014, Lessee shall have the option to
renew the Lease for a period of 20 months with rent to be paid monthly in
advance on the first day of the month as follows:
MONTHS MONTHLY RENT
January-December 2015 $8,428
January-August 2016 $8,765
F. The following shall apply to any renewal terms:
(1) Each of the renewal terms shall commence on the
day following expiration of the preceding term.
(2) The option may be exercised by written notice to
Lessor given not less than 90 days prior to the last
day of the expiring term.
(3) The terms and conditions of the Lease for each
renewal term shall be identical with the original term
except for rent and except that Lessee will no longer
have any option to renew this Lease for any term that
has been exercised.
G. Lessor will use its best efforts to keep the Master Lease
in full force and effect but shall have no liability to Lessee for (i) damages
to Lessee resulting from a breach of the Master Lease by the Master Lessor or
(ii) Lessor's failure to exercise its renewal option (effective August 31, 2001)
under the Master Lease. If, however, Lessor fails to exercise its renewal option
under the Master Lease, Lessor shall notify Lessee as early as Lessor is aware
of its intent not to renew thus providing Lessee with the option to renew the
Master Lease via Lessee's direct contractual agreement thereafter with Master
Lessor.
5. USE OF PREMISES. Lessee shall use the leased premises during the
term of this Lease solely for the purpose of affixing Lessee's antenna to the
Tower and for no other purpose whatsoever without Lessor's prior written
consent. Lessee shall also have the right to p lace its transmitter, space tuner
and related equipment in the
<PAGE>
equipment house used in coordination with the Tower, and to place necessary
connection cables and wave guide from the equipment house to Lessee's antenna.
Lessee shall have the right to ingress and egress in and upon the lease premises
for the purpose of operating, repairing, inspecting and placing such
transmitter, antenna and related equipment. Lessee shall have such additional
rights as are set forth on Exhibit A hereto.
Any and all work performed by Lessee on the Tower or in the equipment
building in connection with this paragraph or paragraph 7 below shall be
performed in a workmanlike, professional manner in accordance with generally
accepted standards of good engineering practice, and in compliance with all
international, federal, state and local treaties, laws, codes, rules and
regulations. Lessee further agrees that only Lessee's staff or bonded and
insured companies; acceptable to Lessor will be permitted to climb; install
equipment, or otherwise work on the Tower. Lessee shall not make any unlawful,
improper or offensive use of the lease premises, will not permit any
objectionable noise or odor to escape out of or to be emitted from the lease
premises or do anything or permit anything to be done upon or about the premises
in any way tending to create a nuisance. Lessee shall comply at Lessee's own
expense with all laws and regulations of any municipal, county, state, federal
or other public authority respecting the use of the premises by Lessee.
In the event that Lessee wishes to add any equipment to the Tower, it
shall provide Lessor with a complete written description of the equipment,
including the manufacturer's specifications and the location where it would be
placed on the tower. Lessor will then conduct, or have conducted, an engineering
analysis to determine the feasibility of adding the equipment. The cost of such
study, whether conducted by Lessor or an outsider, shall be borne by Lessee upon
prior consultation with Lessee and approval of Lessee (which shall not
unreasonably be withheld). In the event Lessor approves the addition of said
equipment, and the parties agree on the rent to be charged for such equipment
and any other special terms relative thereto, the parties shall enter into an
Addendum to this Lease setting forth the details of their agreement with respect
to said equipment.
6. UTILITIES AND SERVICES. Lessee shall pay for all of its utilities
and shall pay for separate metering of the electrical power it uses at the
premises.
7. REPAIRS AND IMPROVEMENTS, OBJECTIONABLE INTERFERENCE.
A. Lessor shall maintain the Tower structure in substantially
its present condition throughout the term of this lease but shall not be
required to make any other repairs, alterations, additions or improvements to or
upon the lease premises during the term of this Lease. Lessee hereby agrees to
maintain and keep the lease premises in good order and repair during the entire
term of this Lease at Lessee's own cost and expense. Lessee agrees to comply
with all electrical building codes and
<PAGE>
safety regulations applicable to the leased premises. Lessee further agrees that
it will make no alterations, additions, or improvements to or upon the premises
without the prior written consent of Lessor.
B. It is understood and agreed that Lessor reserves and at
any and all times shall have the right to alter, repair or improve the Tower and
equipment house or to add thereto, and for that purpose at any time may erect
scaffolding and all other necessary structures about and upon the demised
premises, and Lessor and Lessor's representatives, contractors, and workmen for
that purpose may enter in or about the demised premises with such materials as
Lessor may deem necessary therefore, and Lessee waives any claim to damages. In
connection with any such alteration, repair or improvement, Lessee shall comply
with requests by Lessor to decrease power or reduce or cease broadcasting until
such time as the alteration, repair or improvement is completed. Lessor agrees
that work will be done in such a way as to cause minimal interference with
Lessee's broadcasts, shall complete timely improvements and shall make every
effort to maintain the full broadcast signal. For any repairs by Lessor
requiring Lessee to cease broadcasting Lessor shall use its best efforts to
complete such repairs during the hours of 12 midnight to 5 A.M.
C. As used herein, the term "Interference with a Broadcasting
Activity" means (a) a condition existing which constitutes "interference" within
the meaning of the provisions of the recommended practices of the Electronics
Industry Association ("EIA") as well as the rules and regulations of the FCC
then in effect, or (b) there exists a material impairment of the quality of
either the sound or picture signals of a broadcasting activity of any tenant on
the Tower in a material portion of the broadcast service area of such activity,
as compared to those which were obtained prior to commencement of or alteration
to the operations of the broadcaster involved on the Tower.
D. Lessee, Lessor and future occupants (i.e. any other tenant
or other occupant on the tower, including but not limited to, Lessor) herein
defined as "Occupant" shall comply with all FCC requirements for resolving
radiated and blanketing types of interference. In addition to any responsibility
indicated by FCC regulations, any interference determined to be caused by a
single tenant shall be that tenant's sole responsibility to resolve. In the
event that a change in power output, antenna gain, or location, or the addition
of another broadcast tenant creates radio frequency radiation levels in excess
of local, state or federal regulations, the tenant making the change will be
fully responsible for reducing radiation power to compliance levels.
E. Occupant shall conduct its broadcasting activities in
accordance with all FCC regulations, and sound engineering practices, and shall
cooperate to the fullest extent with other tenants and Lessor. In the event the
use of Occupant's equipment results in Interference with a Broadcasting
Activity, Occupant shall be so
<PAGE>
notified, and shall take immediate steps to correct such interference. Failure
of Occupant to commence correction within 48 hours of such notice shall
constitute a material breach of this Lease and Occupant hereby authorizes Lessor
to take whatever steps are necessary to prevent or correct such interference in
the event of Occupant's failure to promptly do so. Failure of Occupant to
accomplish corrections within 30 days of such notice shall constitute a material
breach of this Lease, and Lessor shall be entitled to equitable relief upon any
breach hereof.
F. If, in the sole judgment of Lessor, any electrical,
electromagnetic, radio frequency or other interference shall result from the
operation of any of Occupant's equipment, other than its main broadcast
transmitter, Occupant agrees that Lessor may, at Lessor's sole option, shut down
Occupant's equipment upon four hours prior oral notice to Occupant; provided,
however if an -emergency situation exists, which Lessor reasonably determines in
its sole discretion to be attributable to Occupant's equipment, Lessor shall
immediately notify Occupant verbally, who shall act immediately to remedy the
emergency situation. Should Occupant fail to so remedy said emergency situation,
Lessor may then act to shut down Occupant's equipment. Occupant shall indemnify
Lessor and hold it harmless from all expenses, costs, damages, loss, claims or
other liabilities arising out of said shutdown. Occupant agrees to cease
operations (except for intermittent testing on a schedule approved by Lessor)
until the interference has been corrected to the satisfaction of Lessor. If such
interference has not been corrected within 60 days, Lessor may, at its sole
option, either terminate this Lease, or may require that Occupant immediately
remove from the premises the specific item of equipment causing such
interference, in which latter case the Monthly Rent shall be reduced by the
portion of the rent applicable to such equipment for the remainder of the term
of this Lease and all other terms and conditions of this Lease shall remain in
full force and effect.
8. LESSOR'S RIGHT OF ENTRY. Lessor may enter the lease
premises at any time to (i) inspect the premises, Tower, and equipment house,
(ii) exhibit the premises to prospective purchasers, lenders, or tenants, (iii)
determine whether Lessee is complying with all its obligations hereunder, (iv)
post notices of nonresponsibility, and (v) make repairs or repairs to any
adjoining space or utility services or make repairs, alterations or improvements
to any other portion of the premises, except as provided in paragraph 7.B.
Lessee hereby waives any claim for damages for any injury or inconvenience to or
interference with Lessee's business, any loss of occupancy or quiet enjoyment of
the premises, or any other loss occasioned by such entry. Lessor shall at all
times have and retain a key with which to unlock all of the doors in, upon, or
about the premises (excluding Lessee's vaults, safes, and similar areas
designated in writing by Lessee in advance), and Lessor shall have the right to
use any and all means which Lessor may deem proper to open said doors in an
emergency in order to obtain entry to the premises, and any entry to the
premises obtained by Lessor by any of said means, or otherwise, shall not under
any circumstances be construed or
<PAGE>
deemed to be a forcible or unlawful entry into or a detainer of the premises or
an eviction, actual or constructive, of Lessee from the premises, or any portion
thereof.
9. ASSIGNMENT.
A. Lessee shall not assign, sublet, transfer, pledge,
hypothecate, surrender, or dispose of this Lease, or any interest herein, or
permit any other person or persons whomsoever to occupy the premises without the
prior written consent of Lessor (which consent shall be based upon the financial
capabilities and reputation within the broadcast industry of the proposed
assignee, sublessee or transferee but shall not be unreasonably withheld by
Lessor; it being further understood that Lessor's failure to object within 15
days of receiving notice requesting Lessor's consent shall be deemed to
constitute Lessor's consent). Any such attempted assignment without such consent
shall be void and shall constitute a breach of this Lease. In the event Lessor
gives its consent, the transferee shall expressly assume all of Lessee's
obligations under this Lease, provided that consent to the transferee's
assumption shall not in any way relieve or discharge Lessee's obligations under
this Lease. If Lessee is a corporation, any transfer of this Lease from Lessee
by merger, consolidation or liquidation or any change in the ownership of, or
power to vote, the majority of the outstanding voting stock of Lessee, shall
constitute an assignment for the purposes of this section. Notwithstanding the
foregoing, Lessor consents to the collateral assignment of this Lease by Lessee
to Aspen TV pursuant to Aspen TV's loan agreements with Lessee. If Lessee (other
than in the course of a bona fide sale of its television station) assigns this
Lease or sublets the lease premises for an amount in excess of the rent called
for by this Lease, such excess shall be paid to Lessor promptly as it is
received by Lessee. In the event Lessee shall assign or sublet the lease
premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorney's fees incurred in connection
therewith.
B. Lessor may at any time assign or transfer its interest as
Lessor in and to this Lease, or any part thereof, and may at any time sell or
transfer its interest in the fee of the Property, or its interest in and to the
whole or any portion of the Property, subject to Lessee's rights under this
Lease. If the transferee assumes all of Lessor's obligations under this Lease,
Lessor shall be released from all liability hereunder.
10. LIENS; TAXES. Lessee will not permit any lien of any kind, type
or description to be placed or imposed upon the Tower. In addition, Lessee shall
pay as due all taxes on its personal property located on the lease premises and
shall provide satisfactory proof of payment of such taxes to Lessor.
<PAGE>
11. INSURANCE AND INDEMNITY.
A. Lessee agrees to promptly reimburse Lessor for Lessee's
pro rata share (based upon the number of Occupants on the Tower and those using
the equipment house) of all costs for the property and casualty insurance
obtained by Lessor with respect to the Tower and equipment lease.
B. Lessee further agrees at all times during the term of this
Lease, at its own expense, to maintain, keep in effect, furnish, and deliver to
Lessor its own liability insurance policy in form and with an insurer
satisfactory to Lessor, insuring Lessee against all liability for damages to
person or property in or about the leased premises, the Tower and equipment
house; the amount of the liability insurance shall not be less than $500,000 for
injury to one person, $1,000,000 for injuries arising out of any one accident
and not less than $100,000 for property damage, and shall also maintain in
effect worker's compensation insurance. The limits of said insurance shall not,
however, limit the liability of Lessee hereunder. Lessee shall name Lessor as an
additional insured thereunder and shall present Lessor with proof of insurance
and such policies shall further provide that they are not cancelable or
materially alterable except upon no less than 30 day, advance written notice to
Lessor. Lessor shall provide its own liability insurance independent of
aforementioned Lessee liability policy.
C. Lessee shall indemnify and save harmless Lessor and its
agents, of and from any and all claims, demands, actions, losses, costs,
expenses (including reasonable attorneys' fees whether or not an action is
instituted), damages, liabilities, or recoveries in connection with loss of
life, personal injury and/or damage to property arising from or out of or by
reason of the condition, use, misuse, or occupancy of the leased premises and
Tower or any occurrence in, upon, at or about the leased premises and Tower
caused by Lessee, its employees, invitees, customers or any other person in or
about the lease premises at Lessee's request or Lessee's failure to comply with
any covenant of this Lease on his part to be performed. Lessee further agrees
that Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers or any other person
in or about the lease premises at Lessee's request, nor shall Lessor be liable
for injury to Lessee's employees, agents or contractors, whether such damage or
injury is caused by or results from fire, steam, electricity, gas, water or
rain, or from the breakage, leakage, obstruction or other defects or pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures,
or from any other cause, whether the said damage or injury results from
conditions arising upon the lease premises or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Lessee. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant, if any, of the
lease premises.
<PAGE>
D. Each of Lessor and Lessee agrees that its respective
insurance carriers shall not have a subrogated claim against the other party
hereto.
12. DAMAGE BY CASUALTY, FIRE AND DUTY TO REPAIR. In the event of the
destruction of the Tower or equipment house by fire or other casualty, either
party may terminate this Lease as of the date of the fire or casualty; provided
however that in the event of damage to the Tower by force or other casualty to
the extent of 25% or more of the value of the Tower, the Lessor may or may not
elect to repair the Tower. Written notice of Lessor's election shall be given to
Lessee within fifteen days after the occurrence of the damage. As long as Lessee
is not then in default, any prepaid rent and deposits for the unexpired term
shall be refunded to the Lessee within 30 days after Lessor's election
13. EMINENT DOMAIN. In case of the condemnation or purchase of all or
any substantial part of the leased premises by any public or private corporation
with the power of condemnation, and such action materially interferes with
Leasee's or Lessor's use of the premises, this Lease may be terminated,
effective on the date possession is taken, by either party upon written notice
to the other and, in that case, the Lessee shall not be liable for any rent
after the termination date (provided, however, that Lessor shall not terminate
this Lease if Lessor elects to continue its own broadcast activities at the
Tower). Lessee shall not be entitled to and hereby expressly waives any right to
any part of the condemnation award or purchase price other than a reasonable
value of loss of tenancy. As long as Lessee is not then in default,, any prepaid
rent and deposits for the unexpired term shall be resumed to the Lessee within
30 days from the date possession is taken.
14. DELIVERING UP PREMISES ON TERMINATION. At the expiration of the
term or upon any sooner termination thereof, Lessee will quit and deliver up the
premises and all future erections or additions to or upon the same to Lessor or
those having Lessor's estate in the premises, peaceably, quietly, and in as good
order and condition, reasonable use and wear alone excepted, as the same are now
in or hereafter may be put in by Lessor.
15. DEFAULT, INSOLVENCY AND LESSOR'S RIGHTS. The occurrence of any
one or more of the following events ("Event of Default") shall constitute a
material default and breach of this Lease by Lessee:
A. If Lessee shall fail to pay any rent when the same becomes
due and payable and such failure shall continue for a period of 10 days after
written notice of such failure (provided, however, that notice shall be required
on no more than one occasion during any calendar year); or
<PAGE>
B. If Lessee shall fail to pay any other sum or charge
payable by Lessee hereunder when the same becomes due and payable and such
failure shall continue for more than 10 days after written notice of such
failure; or
C. If Lessee shall make any transfer or assignment of any
interest in the Premises or under this Lease without Lessor's prior written
consent; or
D. If Lessee shall make a general assignment for the benefit
of creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a petition in bankruptcy, or shall be adjudicated as
bankrupt or insolvent, or shall file a petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any present or future statute, law, or regulation, or shall file an
answer admitting 6r shall fail timely to contest the material allegations of a
petition filed against it in any such proceeding, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver, or liquidator of Lessee
or any material part of its properties; or
E. If within 90 days after the commencement of any proceeding
against Lessee seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any present or
future statute, law, or regulation, such proceeding shall not have been
dismissed or if, within 90 days after the appointment without the consent or
acquiescence of Lessee of any trustee, receiver, or liquidator of Lessee or of
any material part of its properties, such appointment shall not have been
vacated; or
F. If this Lease or any estate of Lessee hereunder shall be
levied upon under any attachment or execution and such attachment or execution
is not vacated within 10 days; or
G. If Lessee shall abandon the premises. For purposes of this
Lease, abandon shall mean the failure of Lessee to occupy the premises or the
Tower for 1 5 days for the purposes permitted under this Lease.
16. REMEDIES ON DEFAULT. Upon any Event of Default, Lessor may
exercise any one or more of the remedies set forth in this section, or any other
remedy available under applicable law or contained in this Lease.
A. Lessor may terminate this Lease and keep any and all
monies previously collected and advanced to Lessor.
B. Lessor may reenter the premises and Tower and remove all
persons and property and repossess and enjoy the premises and Tower, without
notice, either by summary proceedings, or by any other applicable action or
proceeding, or by force or otherwise (without being liable to indictment,
prosecution or damages therefore).
<PAGE>
Lessor may use the premises and Tower for Lessor's own purposes or relet it,
without prejudice to any other remedies that Lessor may have by reason of
Lessee's default. None of these actions will be deemed an acceptance of
surrender by Lessee. To the extent permitted by law, Lessee expressly waives the
service of any notice of intention to terminate this Lease or to retake the
premises and Tower, and waives service of any demand for payment of rent or for
possession, and of any and every other notice or demand required or permitted
under applicable law.
C. Lessor at its option may relet the whole or any part of
the premises and Tower from time to time, either in the name of Lessor or
otherwise, to such tenants, for such terms ending before, on, or after the
expiration date of the lease term, at such rentals and upon such other
conditions (including concessions and free rent periods) as Lessor, in its sole
discretion, may determine to be appropriate. Lessor shall have no obligation to
relet the premises and Tower or any part and shall not be liable for refusal or
failure to relet the premises and Tower or, in the event of any such reletting,
for refusal or failure to collect any rent due upon such reletting. No such
refusal or failure shall operate to relieve Lessee of any liability under this
Lease or otherwise affect any such liability. Lessor at its option may make such
physical changes to the premises and Tower as Lessor, in its sole discretion,
considers advisable or necessary in connection with any such reletting or
proposed relenting, without relieving Lessee of any liability under this Lease
or otherwise affecting Lessee's liability. If there is other unleased space on
the Tower, Lessor shall have no obligation to attempt to relet the premises and
Tower prior to leasing other space on the Tower.
D. Whether or not Lessor retakes possession or relets the
premises and Tower, Lessor shall have the right to recover unpaid rent and all
damages caused by the default, including attorneys' fees. Damages shall include,
without limitation, (i) all rentals lost, (ii) all legal expenses and other
related costs incurred by Lessor following Lessee's default, (iii) all costs
incurred by Lessor in restoring the premises and Tower to good order and
condition, or in remodeling, renovating, or otherwise preparing the premises and
Tower for reletting, and (iv) all costs incurred by Lessor in reletting the
premises and Tower, including, without limitation, any brokerage commissions and
the value of Lessor's time. Lessor may sue periodically for damages as they
accrue without barring a later action for further damages. Lessor may in one
action recover accrued damages plus damages attributable to the remaining lease
term equal to the difference between the rent reserved in this Lease (including
estimated amount of additional rent as determined by Lessor) for the balance of
the lease term after the time of award, and the fair rental value of the
premises and Tower for the same period, discounted to the time of award at the
rate of 9% per annum. If Lessor has relet the premises and Tower for the period
which otherwise would have constituted the unexpired portion of the lease term,
or any part, the amount of rent received upon such reletting shall be deemed,
prima facie, to be the fair and
<PAGE>
reasonable rental value for the part or the whole of the premises and Tower so
relet during the term of relenting.
E. The remedies provided for in this Lease are in addition to
any other remedies available to Lessor at law or in equity by statute or
otherwise.
17. HOLDING OVER. In the event that Lessee for any reason shall hold
over the expiration of this Lease, or any allowed renewal thereof as set out in
paragraph 4 above, such holding over shall not be deemed to operate as a renewal
or extension of this Lease, but shall only create a tenancy from month to month
which may be terminated at will at any time by Lessor.
18. ATTORNEYS' FEES AND COURT COSTS. In case suit or action is
instituted to enforce compliance with any of the terms, covenants or conditions
to this lease, or to collect the rental which may become due hereunder, or any
portion thereof, the losing party agrees to pay such sum as the trial court may
adjudge reasonable as attorneys' fees to be allowed plaintiff in such suit or
action and in the event any appeal is taken from any judgment or decree in such
suit or action, the losing party agrees to pay such further sum as the appellate
court shall adjudge reasonable as plaintiffs attorney's fees on such appeal.
Lessee also agrees to pay and discharge all Lessor's costs and expenses,
including Lessor's reasonable attorneys' fees, that shall arise from enforcing
any provisions or covenants of this Lease even though no suit or action is
instituted.
19. WAIVER. Any waiver by Lessor of any breach of any covenant herein
contained to be kept and performed by Lessee shall not be deemed or considered
as a continuing waiver, and shall not operate to bar or prevent Lessor from
declaring a default for any succeeding breach, either of the same condition or
covenant or otherwise.
20. SUCCESSORS. This Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, no transfer of this Lease by Lessee or its successors or
assigns, whether by operation of law or by voluntary or involuntary assignment
with or without the consent of Lessor, shall diminish, alter, or reduce the
direct and primary liability of Lessee under this Lease for the full and
complete performance during and throughout the lease term of all covenants,
obligations, and agreements contained herein.
21. SEVERABILITY. Any provision of this Lease determined to be
invalid by a court of competent jurisdiction shall in no way affect any other
provision hereof.
22. NOTICES. Any notice, consent, demand, request, approval or other
communication to be given hereunder by any party to another shall be deemed to
have been duly given if given in writing and personally delivered or sent by
overnight
<PAGE>
delivery service, telegram, facsimile transmission, telex or United States mail,
registered or certified, postage prepaid, with return receipt requested, to the
following addresses:
If to Lessor: KKSN, Inc.
888 Northwest Fifth Avenue, Suite 790
Portland, Oregon 97204
ATT: General Manager
Fax: 503-243-3299
with a copy to:
c/o Heritage Media Corporation
One Galleria Tower, Suite 1500
13355 Noel Road
Dallas, Texas 75240
ATT: Paul W. Fiddick, President--Radio Group
Fax: 214-702-7382
If to Lessee: Channel 32 Incorporated
10255 SW Arctic Drive
Beaverton, Oregon 97005
ATT: DANIEL J. ALDERMAN
Fax: (503) 626-3576
Either party may change its address for notice purposes by giving notice of such
new address to the other party in accordance with the terms of this section.
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the fourth calendar day after posting, in the case of
notice so given by overnight delivery service, on the date of actual delivery
and, in the case of notice so given by telegram, facsimile transmission, telex
or personal delivery, on the date of actual transmission or, as the case may be,
personal delivery.
23. EXCULPATORY CLAUSES.
A. Except for damage resulting from Lessor's negligence,
Lessor shall not be liable to Lessee, or to any other person, for any damage
occasioned by failure in any electrical, plumbing, gas, water, steam, sprinkler,
or other pipe or sewage systems, or by the leaking of any pipes in or about the
leased premises and Tower, or for any damage occasioned by water being upon or
coming through the roof, or for any damage arising from any acts or neglect of
occupants of adjacent property or the public.
<PAGE>
B. No act or omission of either party occurring prior to the
effective date of this agreement shall be asserted as a claim or defense by the
other party, by way of setoff, or otherwise, in any action or proceeding arising
from this lease agreement, or the relationship created by this lease agreement.
C. Lessee accepts the leased premises, the Tower and the
equipment house in 'AS IS' condition, subject to all applicable zoning,
municipal, county, state and federal laws, ordinances and regulations governing
and regulating the use of the lease premises. Lessee acknowledges that Lessor
has made no representations or warranties as to the present or future
suitability of the leased premises for the conduct of Lessee's business.
24. ENTIRE AGREEMENT. This Lease is the entire agreement between the
parties, and there are no agreements or representations between the parties
except as expressed herein. Except as otherwise provided herein, no subsequent
change or addition to this Lease shall be binding unless in writing and signed
by the parties hereto.
25. INTENDED BENEFICIARIES. The rights and obligations contained in
this Lease are hereby declared by the parties hereto to have been provided
expressly for the exclusive benefit of such entities as set forth herein and
shall not benefit, and do not benefit, any unrelated third parties.
26. MUTUAL CONTRIBUTION. The parties to this Lease and their counsel
have mutually contributed to its drafting. Consequently, no provision of this
Lease shall be construed against any party on the ground that such party drafted
the provision or caused it to be drafted or the provision contains a covenant of
such party.
27. NUMBER AND GENDER. When required by the context, each number
(singular and plural) shall include all numbers and each gender shall include
the feminine, masculine and neuter.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this instrument
effective the date and year first written above.
KKSN, INC. CHANNEL 32 INCORPORATED
By: /s/ Paul W. Fiddick /s/ Daniel J. Alderman
_____________________________ By: ____________________________
Paul W. Fiddick Daniel J. Alderman
President-Radio Group Executive Vice President
<PAGE>
EXHIBIT A
CHANNEL 32 INCORPORATED
10255 SW Arctic Drive
Beaverton, OR 97005
KKSN, Inc.
Re: Tower Lease
Ladies and Gentlemen:
Concurrently herewith you, KKSN, Inc. ("Lessor"), and we, Channel 32
Incorporated ('Lessee"), are entering into an Amended and Restated Lease
Agreement dated JULY 1 , 1996, for lease of space on a tower and equipment house
at Molalla, Oregon in Clackamas County (the "Lease"). All terms defined in the
Lease are used with the same meaning herein.
Lessee may attempt to negotiate, but has no obligation to negotiate,,
with the Owner of the fee property surrounding the premises (the "Owner") for
additional land on which to construct a new equipment house (the 'New Building")
in order to get Lessee's equipment farther from the Tower to reduce the risk of
damage to the equipment from ice sheeting off of the Tower. If Lessee decides to
enter into such negotiations with the Owner, and concludes such negotiations
with the Owner, the Lessor hereby consents to Lessee's construction of such New
Building on land outside of the premises and agrees that Lessee shall have such
rights of ingress and egress from the New Building to the premises as Lessee
shall require in order to connect Lessee's equipment in the New Building with
Lessee's transmitter and other equipment that remain on the premises. Lessor
further acknowledges that Lessee's abandonment of the equipment house on the
premises because of Lessee having moved its equipment to the New Building will
not be considered an abandonment of the Lease.
Please confirm your agreement to the foregoing by signing in the
space below.
CHANNEL 32 INCORPORATED
By: /s/ Daniel J. Alderman
_____________________________
Daniel J. Alderman
Its EXECUTIVE VICE PRESIDENT
ACCEPTED AND AGREED:
KKSN, INC.
By /s/ Paul W. Fiddick
___________________________
Its PRESIDENT - RADIO GROUP
LEASE AGREEMENT
This LEASE AGREEMENT, made and entered into as of the 14TH day of JULY,
1997 by and between Richardson V. Turner, of Knoxville, Tennessee ("Lessor"),
and ACME TELEVISION OF TENNESSEE, LLC a TENNESSEE corporation, having its
principal place of business in KNOXVILLE, TENNESSEE ("Lessee").
WITNESSETH:
WHEREAS, Lessor is the owner of certain real property located in the Sixth
(6th) Civil District of Knox County, Tennessee, ("Property"); and
WHEREAS, there is presently located on the Property an office building and
warehouse ("Structure") having a street address of 10427 Cogdill Road,
Knoxville, TN 37932; and
WHEREAS, Lessee is desirous of leasing approximately 8,000 square feet of
the Structure ("Demised Premises"), as delineated on the attached floor plan
under the terms and conditions contained herein.
NOW, THEREFORE, for and in consideration of the premises and the covenants
and agreements herein contained and for SIX THOUSAND & NO/100 DOLLARS (1ST
MONTH'S RENT) AND FOR SIX THOUSAND SIX HUNDRED & NO/100 DOLLARS (LAST MONTH'S
RENT) and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged and evidenced on EXHIBIT A attached hereto and
incorporated herein by reference, Lessor and Lessee hereby mutually covenant and
agree as follows:
DEMISE, TERM AND RENT
Section 1.01 DEMISE AND INITIAL TERM. Lessor does hereby lease and demise
unto Lessee, and Lessee does hereby lease from Lessor, the Demised Premises for
a term of ONE HUNDRED TWENTY (120) months commencing on October 1, 1997, and
terminating on September 30, 2007, unless sooner terminated or extended as
herein provided ("Initial Term").
Section 1.02 OPTION TERMS. N/A
Section 1.03 RENT. Lessee shall make the following rental payments to
Lessor:
<PAGE>
(a) Lessee covenants and agrees to pay Lessor as rent hereunder for the
Demised Premises during the Initial Term a monthly rent as follows:
$6,000/MONTH FOR THE FIRST 5 YEARS (60 MONTHS). INCREASE BY 10% TO $6,600/MONTH
STARTING WITH OCTOBER 1, 2002 THROUGH SEPTEMBER 30, 2007.
(b) Rent is due on the first day of each month. Rents received after the
tenth (10th) of any month will include a $25 late fee. Rent not received by the
last day of the month will be cause to void this Lease Agreement. All rents
shall be paid to Lessor without demand and without set-off at the offices of
RICHARDSON TURNER CONSTRUCTION CO., INC., 10425 COGDILL RD., KNOXVILLE, TN 37932
or at such other address as Lessor may from time to time designate to Lessee by
notice in the manner hereinafter provided.
All taxes, charges, costs and expenses which Lessee is required to pay
pursuant to SECTION 3.01 or other sections hereof, together with all interest
and penalties that may accrue thereon in the event of Lessee's failure to pay
such amounts, and all damages, costs and expenses which Lessors may incur by
reason of any default of Lessee or failure on Lessee's part to comply with the
term of this Lease, shall be deemed to be additional rent hereunder (hereinafter
called the "Additional Rent"), and in the event of nonpayment by Lessee within
the time period set forth above, Lessor shall have all the rights and remedies
with respect thereto as Lessor have for the nonpayment of the above specified
monthly rental.
COVENANTS AND WARRANTIES OF LESSOR
Section 2.01 ESTATE OF LESSOR. Lessor represents and warrants to Lessee
that they have full right and lawful authority to enter into this Lease, that
the Demised Premises are free and clear of all liens, exceptions, restrictions
and encumbrances created or granted by Lessor except those which are of record
in the Register's Office of Knox County, Tennessee.
Section 2.02 QUIET POSSESSION. Lessor covenants that Lessee, upon
performing and observing the covenants to be observed and performed by Lessee
under the terms of this Lease, shall peaceably hold, occupy and enjoy the
Demised Premises during the Term of this Lease without interference by Lessor or
by any other person claiming by, through or under Lessor.
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<PAGE>
The Lessor covenants and warrants that at the time of delivery of possession,
the Demised Premises are and will be in compliance with all applicable laws,
ordinanaces, orders, rules and regulations, in a clean, safe, sanitary
condition, in good repair and in compliance with all federal, state and county
law.
TAXES, UTILITIES, COMMON AREA MAINTENANCE, ASSESSMENTS, CHARGES, COMPLIANCE
WITH LAW, AND LIENS
Section 3.01 RENTAL ADJUSTMENTS: As hereinafter used in this Lease with
reference to Lessee's obligations to pay taxes, maintenance costs, insurance
premiums or other amounts due hereunder, the Lessee's "pro rata" share thereof
shall be deemed to be equal to TWENTY EIGHT AND .57 PERCENT (28.57%) of the
total area of the Structure. In addition to the rentals hereinbefore required,
Lessee further agrees to pay as Additional Rent, the following items which may
be assessed by Lessor from time to time, and which shall be paid by Lessee
within thirty (30) days after demand therefor:
(i) All charges for electricity, water, gas, telephone and other
utilities furnished to the Demised premises or utilized thereon by or for
Lessee, it being understood and agreed that all electrical, natural gas, water
and/or sewer services shall be separately metered to Lessee's premises.
(ii) Lessee's pro rata share of all taxes assessed by any proper
taxing authority against the Structure or the or the Property; provided,
however, that Lessee shall be solely and exclusively responsible for payment of
all taxes assessed against any property owned or used by or for Lessee within,
upon or about the Demised Premises or installed by Lessee within or upon the
Demised Premises or arising out of the conduct and operation of Lessee's
business within, upon or about the Demised Premises.
(iii) The Lessor will maintain the building in good functioning
condition. Lessee will maintain all consumable items, i.e., light bulbs and HVAC
filters, and maintenance work caused by use, such as clogged drains, janitorial
and paint touch-up.
(iv) Lessee will pay a pro rata share (28.57%) for property and
liability insurance on the Property and Structure.
(v) The Lessee will pay pro rata share for fire department
protection (28.57%).
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<PAGE>
(vi) Lessee will pay a pro rata share (28.57%) for all common
area maintenance.
Lessee agrees to pay monthly to Lessor a sum representing Lessee's pro rata
share of the costs as defined above. Lessee shall pay to Lessor the estimated
share of $665.00 each month along with each rent payment as the Lessee's share
of said expenses during the term of the Lease. Lessor will reconcile the charges
on an annual basis and refund any difference promptly. Any additional charges
owed by Lessee will be due in 60 days after presentation of reconciliation by
Lessor.
Section 3.02 LESSOR'S RIGHTS UPON NONPAYMENT. Subject to the terms and
provisions of Section 3.05 hereof, Lessor shall have the right after delinquency
at all times during the term hereof to pay any taxes, assessments, utility
charges, common area expenses, levies, interest or other charges upon the
Demised Premises, and to pay, cancel and clear all tax sales, liens, charges and
claims upon or against the Demised Premises or any improvements that are now, or
may be hereof, placed thereon, and to redeem said Demised Premises from the
same, or any of them, from validity of the same. Any sums so paid by Lessor
shall become Additional Rent due and payable by Lessee on the next day after
such payment by Lessor, together with interest at the rate of fifteen percent
(15%) per annum from such date to the day of payment thereof by Lessee to
Lessor.
Section 3.03 COMPLIANCE WITH LAWS. Prior to occupancy of the Demised
Premises, Lessor, at its cost and expense, shall comply with and cause the
Demised Premises to comply with all applicable federal, state, county and
municipal laws, rules, orders, regulations and ordinances affecting the Demised
Premises (all or any one of which are herein referred to as "Regulations").
Thereafter, if Lessee, by its actions causes the non-conformance, then Lessee
will bear the cost and expense of compliance.
Section 3.04 LIENS. In the event Lessee makes any improvements to portions
of the Demised Premises pursuant to SECTION 5.01 hereof, Lessee shall not permit
any liens to attach to Lessor's interest in the Premises. If any mechanics lien
or other lien or order for the payment of money shall be filed against the
Demised Premises or improvements thereon by reason of, or arising out of, any
labor or material furnished or alleged to have been furnished to or for Lessee
at the Demised Premises, or for or by reason of any change, alteration or
addition by the Lessee, or the cost or expense thereof or any contract relating
thereto, or against Lessor, then Lessee shall within thirty (30) days after the
filing of any such lien cause the same to be
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<PAGE>
canceled and discharged of record, by bond or otherwise, at the election and
expense of Lessee, and shall defend on behalf of Lessor, at Lessee's sole cost
and expense, any action, suit or proceeding which may be brought thereon or for
the enforcement of such lien, liens or orders, and Lessee shall pay any damages
and discharge any judgment entered thereon and shall indemnify and save harmless
Lessor from any claim or damage resulting therefrom. If Lessee fails to keep
this covenant, in addition to any other remedies available to Lessor under this
Lease or otherwise, Lessor may at its option discharge such lien, in which event
Lessee agrees to pay Lessor, on demand, a sum equal to one hundred fifteen
percent (115%) of the amount of the lien thus discharged by Lessor plus Lessor's
attorney's fees.
Section 3.05 PERMITTED CONTESTS. Lessee, at its expense, may contest (by
appropriate legal proceedings conducted in good faith and with due diligence),
the amount, validity or application, in whole or part, or any tax or charge
referred to in SECTION 3.01 hereof, or any Regulation referred to in SECTION
3.03 hereof, provided that Lessee shall give Lessor prior written notice of such
contest and Lessee shall have deposited with Lessor or the taxing authorities a
surety company bond in such sum and upon such conditions as will assure payment,
upon termination of such proceedings, of the amount of taxes or other charge so
contested and unpaid, together with all interest and penalties in connection
therewith and all charges that may or might be assessed against or become a
charge on the Demised Premises in said proceedings. Upon the termination of such
proceedings, Lessee shall deliver to Lessor proof of the amount of the
imposition as finally determined in such proceedings. Lessor, on behalf of
Lessee and at Lessee's sole expense, shall join in any such proceedings and
shall cooperate with Lessee to the end that such proceedings may be brought to a
successful conclusion. Lessee shall be entitled to any refund of any such tax or
other charges and penalties or interest thereon which shall have been paid by
Lessee. Lessee shall indemnify and save harmless Lessors from responsibility,
financial or otherwise, arising out of any such proceedings.
USE AND SURRENDER OF THE DEMISED PREMISES
Section 4.01 USE OF THE DEMISED PREMISES. Lessee may use the Demised
Premises exclusively for the purpose of conducting the development of computer
software, provided, however, that such use shall not constitute a public or
private nuisance or violate any applicable law, ordinance or regulation. No
activity will take place which would interfere with the other tenants of the
building. The Lessor shall have the right of approval of all electronic
equipment installed in or on the Demised Premises. Such approval shall not be
unreasonably withheld.
Section 4.02 FOR LEASE SIGNS BY LESSOR. Lessor or Lessor's agents, at any
time within ninety (90) days before the expiration of any term hereof, shall
have the right to enter upon
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<PAGE>
the Demised Premises and to affix upon any suitable part thereof a notice or
notices for the leasing of the Demised Premises, which Lessee shall not remove,
and Lessor shall further be allowed to show the Demised Premises to prospective
tenants during such 90 day period.
Section 4.03 SIGNS. Any signs erected on the Demised Premises must conform
with the general architectural scheme of the Demised Premises and the Structure.
The design, size and location of any such signs must be approved by Lessor prior
to the installation thereof.
Section 4.04 SURRENDER OF DEMISED PREMISES.
(a) It is agreed that at the termination of this Lease, Lessee may remove
any movable personal property which Lessee has placed in the Demised Premises,
except any property which has been attached to the Demised Premises in such a
manner as to become a fixture, including, but not limited to, such property as
electric and gas fixtures, switches and controls, floor and wall coverings,
heating and air conditioning equipment and alterations, additions or
improvements of any kind to the Demised Premises, all of which shall become the
property of Lessor upon the termination of this Lease, provided, however, that
no such alterations, additions or improvements may be made to the Demised
Premises without the prior written consent of Lessor as herein specified, and
provided further, that the foregoing rights of Lessee are subject to the
Landlord's lien provided for herein.
(b) Lessee covenants and agrees, at the expiration or earlier termination
of this Lease, whether by limitation, forfeiture or otherwise, to quit,
surrender and deliver to Lessor possession of the Demised Premises with all the
improvements thereon (excluding any personal property properly removed under
SECTION 4.04 (A) above) free from all liens thereon, in good condition and
repair, ordinary wear and tear excepted, all of which shall become and remain in
the property of Lessor. Lessee's obligations to observe or perform this covenant
shall survive the expiration or other termination of the term of this Lease. If
Lessee shall default in so surrendering the Demised Premises, Lessee's occupancy
subsequent to such expiration or termination, in the absence of written consent
of the Lessor to remain in the Demised Premises for a specified period of time,
shall be deemed to be a tenancy-at-will and in no event for month-to-month or
year-to-year and it shall be subject to all the terms, covenants and conditions
of this Lease applicable thereto, and no extension or renewal of this Lease
shall be deemed to have occurred by such holding over.
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<PAGE>
Section 4.05 NOISE, OBSTRUCTION AND NUISANCES. Lessee covenants that it
will not (i) display any merchandise or maintain any stands in front of the
Demised Premises; (ii) erect or maintain any barricade or scaffolding which may
obscure the signs, entrances or show window of any other tenant in the
Structure, or tend to interfere with any such other tenant's business; (iii)
create or maintain, or allow others to create or maintain, any nuisances,
including without limiting the foregoing general language, loud noises, sound
effects, offensive odors and smoke or dust in or about the Demised Premises;
(iv) place or maintain any signs in any parking area serving the Demised
Premises; (v) commit any waste; (vi) maintain or allow to be maintained any
devices or similar devices, the effect of which will be visible from the
exterior of the Demised Premises; or (vii) store or maintain within or around
the Demised Premises any explosive material or any other hazardous material or
condition that could adversely affect the Property, Structure or the other
tenants thereof.
CONSTRUCTION OF IMPROVEMENTS, REPAIRS AND ALTERATIONS AND INSPECTIONS DURING
THE TERM
Section 5.01 Construction of Improvements, Alterations and Additions by
Lessee. Lessee shall not make any alteration, improvement or addition to the
Demised Premises without the prior written consent of the Lessor, which consent
shall not be unreasonably withheld. Lessor specifically consents to Lessee's
installation or erection at the Demised Premises of additional engineering
equipment such as satellite receiving antennas, studio transmitter links,
microwave antennas or similar devices, necessary or useful to the operation of
Lessee's television station, consistent with industry standards as to design,
installation and local zoning and building codes. Lessee shall advise Lessor of
such installations before they are performed. All alterations, improvements, and
additions (i) shall be performed at the sole cost and expense of Lessee in
compliance with all laws and regulations of any federal, state, or local
governmental body, and (ii) shall, at the expiration of the lease term, become
and remain the property of Lessor except that any video production or broadcast
related equipment installed by Lessee shall remain the property of Lessee unless
abandoned at the end of the term of the Lease, and (iii) shall be consistent
with the overall design and use of the Demised Premises and property and not
interfere with other tenants of the Demised Premises and Property. In
contracting for any alterations, improvements or additions, Lessee shall not act
as the agent of Lessor. Lessee, in regards to the Demised Premises only, shall
be responsible for compliance with the requirements of the Americans with
Disabilities Act to the extent that any repair, alteration, improvement or
addition requires such compliance.
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Section 5.02 MAINTENANCE AND REPAIR. Lessee shall at Lessee's own cost and
expense throughout the term of this Lease, and so long as it shall remain in
possession of the Demised Premises, keep and maintain in good repair and in a
reasonably satisfactory condition of cleanliness, including reasonably periodic
painting of the interior of the Demised Premises, all portions thereof (except
the main walls, roof, and structural portions of the Demised Premises, as
hereinafter provided) appurtenances and machinery therein which are brought into
and become a part of the real estate, and all glass, including but not limited
to plate glass, windowpanes, etc., to the satisfaction of Lessor and of the
municipality and any other governmental authorities during the term of this
Lease.
All property of every kind which may be on the Demised Premises during the
term hereof shall be at the sole risk of Lessee or those claiming under Lessee
and Lessor shall not be liable to Lessee or to any other person whomsoever for
any injury, loss or damage to any such property in or upon said Demised
Premises, or the entrances, sidewalks and walkways adjoining same unless such
injury, loss or damage results, directly or indirectly, from Lessor's gross
negligence or willful misconduct.
Section 5.03 LESSOR'S DUTIES WITH REFERENCE TO ROOFS, MAIN WALLS AND
STRUCTURAL PORTIONS OF DEMISED PREMISES. Anything herein contained to the
contrary notwithstanding, Lessor covenants and agrees to maintain the roof of
the Structure, the main walls thereof and the other structural portions of the
Demised Premises, in good repair, but Lessor shall not be liable to Lessee or
Lessee's agents, employees and invitee for any damages resulting from failure to
maintain same unless and until written notice of the existence and approximate
location of any damage thereto has been received by Lessor or his agent and a
reasonable time allowed for making needed repairs after receipt of said notice
has lapsed, but in all events within 30 days.
Section 5.04 INSPECTION BY LESSOR. Lessor and Lessor's agents shall have
the right to enter the Demised Premises at all reasonable hours for the purposes
of (i) inspecting same; (ii) performing obligations of Lessor under this Lease;
(iii) performing obligations of the Lessee hereunder in which the Lessee may
neglect or refuse to perform; (iv) showing the Demised Premises to persons
wishing to purchase Lessor's interest therein; and (v) within the 90 day time
period set forth hereinabove, showing the Demised Premises to prospective
tenants if Lessee does not extend the lease term. The provisions contained in
this section shall not impose on Lessor any of Lessee's obligations under this
Lease, nor shall it create any liability of Lessor by virtue of Lessor's having
inspected the Demised Premises.
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Section 5.05 CONSTRUCTION OF IMPROVEMENTS BY LESSOR. Lessor hereby
reserves the right at any time to make alterations or additions to the Structure
and to construct additional improvements on the Property, all without notice to
or the consent of Lessee so long as Lessee's space is not affected nor its use
or access thereto impaired.
INSURANCE
Section 6.02 CLASSES OF INSURANCE. Lessee during the term of this Lease
shall keep in full force and effect the policies of insurance described below,
with the coverage in amounts not less than those specified:
(a) LIABILITY INSURANCE. Lessee agrees to maintain at its expense at all
times during the lease term full general liability insurance properly protecting
and indemnifying Lessor and naming Lessor and Lessor's lender (if requested) as
additional insureds in an amount not less than $300,000.00 per accident for
injuries or damages to persons, and not less than $500,000.00 for damage or
destruction of property, written by insurers acceptable to Lessor and licensed
to do business in the State of Tennessee. Lessee shall deliver to Lessor
certificates of such insurance, which shall declare that the respective insurer
may not cancel the same in whole or in part without giving Lessor and Lessor's
lender written notice of its intention so to do at least ten (10) days in
advance.
(b) WORKMEN'S COMPENSATION INSURANCE. Lessee agrees to maintain workmen's
compensation insurance covering all persons employed in connection with any work
performed by Lessee, and any all agents or employees of Lessee with respect to
whom death or bodily injury claims could be asserted against Lessor or Lessee as
required by applicable law.
Section 6.02 FAILURE TO PROCURE INSURANCE. In the event Lessee shall fail
to procure insurance required under this Article and fail to maintain the same
in force continuously during the term, Lessor shall be entitled to procure the
same and Lessee shall immediately reimburse Lessor for such premium expense.
Section 6.03 INCREASE IN FIRE INSURANCE PREMIUM. Lessee agrees not to keep
upon the Demised Premises any article or goods which may be prohibited by the
standard form of fire insurance policy. It is agreed between the parties that in
the event the insurance rates applicable to fire and extended coverage insurance
covering the Demised Premises shall be increased by reason of any use of the
Demised Premises made by the Lessee, then Lessee shall pay to Lessor such
increase in insurance as shall be occasioned by said use.
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Section 6.04 PROPERTY OF LESSEE. Lessee agrees that all property owned by
it in, on or about the Demised Premises shall be at the sole risk and hazard of
the Lessee. Lessor shall not be liable or responsible for any loss of or damage
to Lessee, or anyone claiming under or through Lessee, or otherwise, whether
caused by or resulting from a peril required to be insured hereunder, or from
water, steam, gas, leakage, plumbing, electricity or electrical apparatus, pipe
or apparatus of any kind, the elements or other similar causes, and whether or
not originating in the Demised Premises or elsewhere.
Section 6.05 LIABILITY OF TENANT. Lessee shall protect, indemnify and save
Lessor harmless from and against all and any liability and expense of any kind,
including reasonable attorney's fees, arising from injuries or damages to
persons or property in, on or about the leased premises arising out of or
resulting in any way from any act or omission of Lessee, its agents, servants
and employees, in the use of the Demised Premises during the term of this Lease.
Section 6.06 REQUIREMENTS. All of the aforesaid insurance shall be written
in the name of Lessor (and any designee (s) of Lessor) and Lessee and shall be
written by one or more responsible insurance companies with a Bests Insurance
Guide rating of A+ authorized to do business in Tennessee; all such insurance
shall contain endorsements that: such insurance may not be canceled or amended
with respect to Lessor (or its designee) except upon ten (10) days' prior
written notice to Lessor (or such designee) by the insurance company. Lessee
shall be solely responsible for the payment of the premiums therefor and Lessor
(or its designee) shall not be required to pay any premium for such insurance.
The minimum limits of comprehensive general liability policy of insurance shall
in no way limit or diminish Lessee's liability hereunder. Lessee shall deliver
to Lessor at least ten (10) days prior to the expiration of such policy, either
a duplicate original or a certificate of insurance on all policies secured by
Lessee in compliance with its obligations hereunder, together with evidence
satisfactory to Lessor of the payment of the premiums therefor. If Lessee fails
to obtain and provide any or all of the aforesaid insurance, then Lessor may,
but shall not be required to, purchase such insurance on behalf of Lessee and
add the costs of such insurance as Additional Rent due under this Lease.
ASSIGNMENT, SUBLETTING AND MORTGAGING
Section 7.01 Assignment and Subletting. Lessee may not, without the prior
written consent of Landlord (i) assign this Lease or any interest in this Lease,
(ii) permit or suffer any assignment of this Lease by operation of law, (iii)
sublet all or any portion of the Demised Premises, or (iv) permit the use of the
Demised Premises by any party other than Lessee and
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its' partners, officers and employees. Lessor's consent to any proposed
assignemnt or subletting shall not be unreasonably withheld. Lessor may
reasonably withhold consent to any subletting or assignment unless (i) the
credit history, financial strength, and business reputation of the sublesses or
assignee is reasonably acceptable to Lessor and Lessor's lender, (ii) Lessee
pays the reasonable costs (including attorney fees) incurred by Lessor in
investigating the subletting or assignment, and (iii) the sublessee's proposed
use of the Demised Premises is consistent with the current uses of the Demised
Premises and Property. No assignment or subletting shall release Lessee from any
of the obligations set forth in the Lease.
Section 7.02 MORTGAGING. Lessee may not mortgage or
otherwise encumber its interest in the Demised Premises or the improvements
thereon unless approved in writing by Lessor.
DEFAULT
Section 8.01 EVENTS OF DEFAULT. The occurrence of any of the following
acts or events, shall constitute events of default under this Lease (herein
referred to as "Default"):
(a) Lessee fails to make any payment required hereunder when due;
(b) Lessee fails to fulfill or perform any of Lessee's covenants (other
than the payment of rent which is specified in SECTION 8.01 (A) above),
agreements or obligations under this Lease and such failure continues for a
period of fifteen (15) days after Lessor shall have given Lessee written notice
thereof and specifying the nature of such failure;
(c) If at any time during the term herein there shall be filed by or
against Lessee, or against any successor Lessee then in possession, in any court
pursuant to any petition in bankruptcy, alleging in insolvency, for
reorganization, for the appointment of a receiver, or for an arrangement under
the Bankruptcy Code, or if a similar type of proceeding shall be filed;
(d) If Lessee shall abandon the Demised Premises for a period of ten
(10) or more days; or
(e) If this Lease or the estate of Lessee hereunder shall be transferred
or passed to or devolve upon any other person, firm, association or corporation,
except with Lessor's consent.
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Section 8.02 RIGHTS OF LESSOR UPON DEFAULT. Upon the occurrence of any
Default hereunder, Lessor shall have the right, at its option, and without
further notice, to give Lessee written notice of the termination of this Lease
as of the date of such written notice or such date as may be specified in such
notice of termination. On such termination date, this Lease and the term hereby
granted and created, as well as all of the right, title and interest of Lessee
hereunder (without further action on Lessor's part or those claiming under
Lessor) shall wholly cease and expire, in the same manner and with the same
force and effect as if the expiration of time in such notice were the end of the
term herein originally demised. Lessor or those claiming under Lessor may
immediately or at any time thereafter, and without further notice or demand,
enter into and upon the Demised Premises or any part thereof, and repossess the
same as of Lessor's first and former estate, and expel Lessee and those claiming
under Lessee and remove Lessee's effects (forcibly, if necessary) without being
taken or deemed guilty of any manner of trespass and without prejudice to any
remedies that might otherwise be used for arrears of rent or breach of
contracts. Lessee agrees that, notwithstanding the termination of the Lease and
the possession regained by Lessor, it will indemnify Lessor against all loss of
rent which Lessor may suffer by reason of such termination, during the remainder
of the term hereof, as well as all other damages to which Lessor may be
entitled. It is especially agreed and understood that Lessor may retain all
advance rentals or deposits in Lessor's possession as and for damages to apply
against rentals to accrue during the remainder of the term hereof and any other
damages. Lessor shall not be required to relet the Demised Premises nor exercise
any other right granted to Lessor hereunder, Lessor shall exercise reasonable
efforts to minimize Lessee's loss as a result of Lessee's default. If Lessor
attempts to relet the Demised Premises, Lessor shall be the sole judge as to
whether or not a proposed tenant is suitable and acceptable.
Upon the occurrence of any Default hereunder, Lessor shall have, in
addition to any other remedies which it may have hereunder, the right to invoke
any remedy allowed at law or in equity to enforce Lessor's rights or any of
them, as if reentry and other remedies were not herein provided for, including
without limitation, the right to elect not to terminate this Lease and require
Lessee to cure any default hereunder.
In the event Lessor does not exercise the rights of reentry hereinabove
given Lessor, Lessor may accept rent from any receiver, trustee, or other
officer in possession thereof, for the term of such occupancy without impairing
or affecting in any way the rights of Lessor against Lessee hereunder or his
right to such advance rentals or deposit. Any neglect or failure to enforce the
right of forfeiture of this Lease or reentry upon the breach of any of the
conditions, covenants, terms and agreements
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herein contained, shall not be deemed a waiver of such right upon any continuing
or subsequent breach of any such or any other condition, covenant, term and/or
agreement herein contained.
If Lessor shall deem it necessary to engage attorneys to enforce its
rights hereunder, with the determination of such necessity to be in the sole
discretion of Lessor, Lessee will reimburse Lessor for the reasonable costs and
expenses incurred thereby, including but not limited to court costs and
attorneys' fees.
MORTGAGE AND ESTOPPEL CERTIFICATE
Section 9.01 SUBORDINATION. This Lease shall be subject and subordinate at
all times to the lien of existing mortgages and of mortgages which hereafter may
be made a lien on the Demised Premises. Although no instrument or act on the
part of lessee shall be necessary to effectuate such subordination, Lessee
agrees it will execute such further instruments subordinating this Lease to the
liens of such mortgages as may be requested by the mortgagee at no cost or
expense to Lessee.
Section 9.02 RIGHTS OF LESSOR'S MORTGAGEE. Provided any of Lessor's
mortgagees advises Lessee of its lien (Mortgagee"), the following provisions
shall apply:
(a) CONSENT TO AMENDMENT. There shall be no cancellation, surrender or
amendment of this Lease by Lessor and/or Lessee without the prior written
consent of any of the Mortgagees.
(b) NOTICES. Lessor, upon delivering to Lessee any notice required to be
given to Lessee by Lessor under this Lease, shall simultaneously deliver a copy
of such notice to any of the Mortgagees.
Section 9.03 ESTOPPEL CERTIFICATE. Lessor and Lessee agree that Lessee
will at any time and from time to time, but not more than twenty (20) days after
written request by either of them to the other, execute, acknowledge and deliver
to the requesting party a statement in writing certifying that this Lease is
unmodified and is in full force and effect (or if there have been such
modifications, that the same is in full force and effect as modified, and
stating the modification) and the date to which the rental and other changes
have been paid in advance, it being intended that any such statement delivered
pursuant to this section may be relied upon by any prospective purchaser of the
fee, mortgagee or asignee of any mortgage upon the fee or leasehold interest in
the Demised Premises or by the assignee of the Lessee if such assignment is
permitted by the Lessor as otherwise herein required. The requesting party of
any such Estoppel Certificate shall bear the cost and expenses reasonably
incurred by the Lessor or Lessee, as the case may be, in connection with the
execution and delivery of such Estoppel Certificate.
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CONDEMNATION
Section 10.01 TAKING. Any taking during the Term of this Lease of any
interest in the Demised Premises as a result of the actual exercise of the power
of condemnation or eminent domain by the United States or any other body having
such power or any sale or other transfer of any such interest in lieu of or in
anticipation of the impending exercise of any such power, to any person legally
empowered to exercise such power shall, for the purposes of this Lease, be
herein referred to as a "Taking".
Section 10.02 TOTAL TAKING. In the event all of the Demised Premises or
such portion thereof as makes the residue of substantially no commercial value
to Lessee (as reasonably determined by Lessor) is subject to a Taking, this
Lease shall automatically terminate on the date that title to the Demised
Premises or portion thereof vests in the condemning authority; provided,
however, that the termination of this Lease shall not benefit the condemnor and
shall be without prejudice to the rights of either Lessor or Lessee to recover
just and adequate compensation from the condemning authority.
Section 10.03 PARTIAL TAKING. In the event less than all of the Demised
premises is subject to a Taking and/or the residue after a Taking remains of
substantial commercial value to Lessee (as reasonably determined by Lessor),
this Lease shall not terminate, provided, however, that (i) the rent payable
hereunder shall be equitably reduced by Lessor in proportion to the portion of
the Demised Premises which has been subject to a Taking; and (ii) such
continuing of this Lease shall be without prejudice to the rights of either
Lessor or Lessee to recover just and adequate compensation from the condemning
authority.
DAMAGE OR DESTRUCTION
Section 11.01 LESSEE TO GIVE NOTICE. In the event of any damage to or
destruction of the Demised Premises or any improvements or any part thereof,
Lessee will give written notice thereof to Lessor describing the nature and
extent of such damage or destruction.
Section 11.02 TOTAL DESTRUCTION. In the event all of the Demised Premises
or such portion thereof as makes the residue of substantially no commercial
value to Lessee is destroyed by fire or other casualty, (i) Lessor may, at its
option, promptly restore the Demised Premises as soon as reasonably possible to
the condition of the same prior to such damage or destruction, in which event
the rent payable hereunder shall abate until the
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completion of said restoration, or (ii) Lessor may terminate this Lease without
penalty. All insurance proceeds received by Lessor or Lessee pursuant to the
provisions of this Lease, less the cost, if any, of the recovery of said
proceeds, shall be applied to the payment for such restoration, if said
restoration is elected by lessor. Any balance of such proceeds thereafter
remaining shall be payable to Lessor. If Lessor elects not to so restore the
Demised Premises, then this Lease shall terminate as of the date of such damage
or destruction. Lessor shall notify Lessee within sixty (60) days after the date
of such damage or destruction of Lessor's election to restore or not to restore
the Demised Premises.
Section 11.03 PARTIAL DESTRUCTION. In the event less than all of the
Demised Premises is damaged or destroyed and/or the residue after damage or
destruction of the Demised Premises remains of substantial commercial value to
Lessee (as reasonably determined by Lessor), this lease shall not terminate;
provided, however, that Lessor shall promptly proceed to restore the portion of
the Demised Premises which was damaged or destroyed as nearly as possible to its
condition prior to such damage or destruction. All insurance proceeds received
by Lessor or Lessee pursuant to provisions of this Lease, less the cost, if any,
of the recovery of said proceeds shall be applied to the payment for such
restoration and any balance thereafter remaining shall be paid to Lessor. The
rent payable hereunder shall be reduced by mutual agreement of Lessee and Lessor
in proportion to the portion of the Demised Premises which has been damaged or
destroyed until the completion of the renovation thereof.
WAIVER OF SUBROGATION
Section 12.01 CONDITIONAL MUTUAL RELEASE AND WAIVER OF SUBROGATION. Lessor
and Lessee hereby release the other from any and all liability or responsibility
to the other or anyone claiming through or under them by way of subrogation or
otherwise for any loss or damage to property caused by fire or any extended
coverage or supplementary contract casualties, even if such fire or other
casualty shall have been caused by the fault or negligence of the other party,
or anyone for whom such party may be responsible, PROVIDED, HOWEVER, that this
release shall be applicable and in force and effect only with respect to loss or
damage fully covered by insurance and occurring during such time as the
releasor's insurance policies shall contain a clause or endorsement to the
effect that any such release shall not adversely affect or impair said policies
or prejudice the right of the releasor to recover thereunder. Lessor and Lessee
each agree that they will request their insurance carriers to include in their
policies such a clause or endorsement. If extra cost shall be charged therefor,
each party shall advise the other
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thereof and of the amount of the extra cost, and the other party, at its
election, may pay the same, but shall not be obligated to do so.
CONDITION OF DEMISED PREMISES
Section 13.01 LESSEE'S INSPECTION; DISCLAIMER OF ANY REPRESENTATIONS BY
LESSOR. Except as otherwise set forth in this Lease, Lessee accepts this Lease
of the Demised Premises "as is" on the date of occupancy and further agrees
that, in taking this Lease, it is governed by its own inspection of the Demised
Premises and the plans for the rental space leased hereby and its own judgment
of their desirability for its purpose, and has not been governed or influenced
by any representation of Lessor as to condition and character of the Demised
Premises; that no agreements, stipulations, reservations, exceptions or
conditions whatsoever have been made or entered into in regard to the Demised
Premises or this Lease, which will in any way vary, contradict or impair the
validity of this Lease or any of its terms and conditions as herein set forth,
and that no modification of this Lease shall be binding unless it be in writing
and executed by all the parties hereto. Furthermore, Lessee takes this Lease on
the Demised Premises subject to all statutes, ordinances and regulations of
competent governmental authority affecting the occupancy and use thereof, the
construction and maintenance of improvements thereof, and the business and
occupations to be engaged in by Lessee, in force now or subsequently put in
force during the term of this Lease.
HAZARDOUS WASTE
Section 14.01 LESSOR'S PROTECTION FROM HAZARDOUS WASTE. Throughout the
term of this Lease Lessee shall not undertake or permit any use, storage,
installation, existence, release, threatened release, discharge, generation,
abatement, removal, disposal, handling or transportation on, under, or from the
Demised Premises of any hazardous or toxic substance or hazardous or toxic
waste, as defined by any applicable ordinance law, regulation or requirement of
any governmental body except if Lessee is in compliance with all applicable
ordinances, laws, regulations and requirements of any governmental body and such
use is customary for Lessee's use as herein defined. If Lessor is not satisfied
that such activities are in compliance with such ordinances, laws, regulations
or requirements, Lessee shall immediately, upon notice thereof, cease such
activities. Lessor shall have the right from time to time to conduct an
environmental audit of the Demised Premises and Lessee shall cooperate in the
conduct of such audit. If Lessee shall breach any covenant provided in this
SECTION 14.01, then, in addition to any other rights and remedies Lessor may
have under this Lease or otherwise, Lessor may require Lessee to take all
actions, or reimburse Lessor for the costs of
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such actions taken by Lessor as are reasonably necessary to cure such breach.
The Lessor represents that to the best of its knowledge, without the benefit of
inspection and analysis, no hazardous or toxic substances or wastes exist within
the Demised Premises, the Building, or upon the property and Lessor agrees to
remove or cause the removal of all such substances and wastes not generated by
the Lessee, or allowed upon the property by the Lessee, from the Demised
Premises or the common areas of the building. Lessor shall not undertake or
permit any use, storage, installation, existence, release, threatened release,
discharge, generation, abatement, removal, disposal, handling or transportation
on, under or from the common areas of the Demised Premises of any hazardous or
toxic substance or hazardous or toxic waste, as defined by any applicable
ordinance, law, regulation or requirement of any governmental body except if
Lessor is in compliance with all applicable ordinances, law, regulations and
requirements of any governmental body. The obligations of Lessor and Lessee
under this Section shall survive the expiration or other termination of this
Lease.
HOLD HARMLESS AGREEMENT
Section 15.01 LESSOR PROTECTED FROM CLAIMS OR DAMAGES. From and after the
day hereof, Lessee covenants and agrees to defend and hold Lessor harmless
against any and all claims, suits, damages or causes of action for damages,
arising from the date hereof, and against any orders, decrees or judgments which
may be entered in, as a result of any alleged injury to person and/or property
or alleged loss of life sustained in the Demised Premises and the buildings and
improvements thereon, by any person or persons whomsoever, except as such shall
result from the gross negligence or willful acts of Lessor or from a breach of
this Lease by Lessor.
MISCELLANEOUS
Section 16.01 WAIVER. Failure of Lessors to insist upon the strict
performance by Lessee of any term, condition or covenant on Lessee's part to be
performed pursuant to the term of this Lease or to exercise any option, right,
power or remedy of Lessors contained in this Lease shall not be deemed nor
construed as a waiver of such right now or subsequent hereto. No waiver of any
terms or provisions hereof shall be valid unless such waiver is in writing.
Section 16.02 SEPARABILITY. Each and every covenant and agreement
contained in this Lease shall be for any and all purposes hereof construed as
separate and independent and the breach of any covenant by Lessors shall not
discharge or relieve Lessee from its obligation to perform each and every
covenant and
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agreement to be performed by Lessee under this Lease. All rights, power and
remedies provided herein may be exercised only to the extent that the exercise
thereof does not violate applicable law and shall be limited to the extent
necessary to render this Lease valid and enforceable. If any term, provision or
covenant of this Lease or the application thereof to any person or circumstance
shall be held to be invalid, illegal or unenforceable, the validity of the
remainder of this Lease or the application of such term, provision or covenant
to persons or circumstances other than those to which it is held invalid or
unenforceable shall not be affected thereby.
Section 16.03 NOTICES, DEMAND AND OTHER INSTRUMENTS. All notices, demands,
requests, consents and other instruments required or permitted to be given
pursuant to the term of this Lease shall be in writing and shall be deemed to
have been properly given (i) upon personal delivery, or (ii) upon deposit in the
United States Mail, if sent by first class, registered or certified United
States Mail, return receipt requested, addressed to each party hereto at:
Lessors: Richardson V. Turner
10425 Cogdill Road, Suite 100
Knoxville, TN 37932
Lessee: Mechanical Data, Inc.
10427 Cogdill Road
Knoxville, TN 37932
ATTN: Allen Holman, President
or at such other address in the United States as Lessors or Lessee may from time
to time designate in writing and deliver to the other party.
Section 16.04 SUCCESSORS AND ASSIGNS. Each and every covenant, term,
condition and obligation contained in this Lease shall apply to and be binding
upon and inure to the benefit or detriment of the respective legal
representatives, successors and assigns of Lessor and Lessee. Whenever reference
to the parties hereto is made in this Lease, such reference shall be deemed to
include the legal representatives, successors and assigns of Lessor and Lessee
as if in each case expressed. The term "Person" when used in this Lease shall
mean any individual, corporation, partnership, firm, trust, joint venture,
business association, syndicate, government or governmental organization or any
other entity.
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Section 16.05 HEADINGS. The headings to the various sections of this Lease
have been inserted for purposes of reference only and shall not limit or define
the express terms and provisions of this Lease.
Section 16.06 COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which is an original, but all of which shall constitute
one instrument.
Section 16.07 APPLICABLE LAW. This Lease shall be construed under
and enforced in accordance with the laws of the State of Tennessee.
Section 16.08 ALL GENDERS AND NUMBERS INCLUDED. Whenever the singular or
plural number, or masculine, feminine or neuter gender is used in this Lease, it
shall equally apply to, extend to and include the other.
Section 16.09 TIME OF THE ESSENCE. It is specifically agreed that the
timely payment of each and every installment of rent and performance of each and
every one of the terms, covenants and conditions hereof is of the essence of
this Lease.
Section 16.10 SHORT FORM LEASE. The parties will at any time at the
request of either one, execute duplicate originals of any instrument in
recordable form which will constitute a short form lease or memorandum of lease
setting forth the description of the Demised Premises and the term of this Lease
so that it will not be necessary to record this Lease in its entirety.
Section 16.11 AMENDMENT OR MODIFICATION. Lessee acknowledges and agrees
that Lessee has not relied upon any statement, representations, agreements or
warranties except as expressed herein, that this Lease contains the entire
agreement of the parties, and that no amendment or modification of this Lease
shall be valid or binding unless expressed in writing and executed by the
parties in writing hereto in the same manner as the execution of this Lease.
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Section 16.12 SPECIAL STIPULATIONS. The attached Special Stipulations are
incorporated in and made a part of the within Lease, and if any are in conflict
with any terms of this Lease, the Special Stipulations shall control. See
attached Exhibit "B".
IN WITNESS WHEREOF, Lessor and Lessee have caused this LEASE AGREEMENT to
be executed as of the day and year first above written.
LESSOR:
/s/Richardson V. Turner
-----------------------------------
RICHARDSON V. TURNER
LESSEE: Acme Television of Tennessee, LLC
By: /s/Thomas D. Allen
-------------------------------
Thomas D. Allen
Title: Executive Vice President
<PAGE>
The following page contains a list of Exhibits and Attachment which have
been intentionally omitted by the Registrants.
A copy of any omitted Exhibit or Attachment will be provided to the
Securities and Exchange Commission upon request.
<PAGE>
Attachment - Floor Plan
Exhibit A - Receipt of Rent
Exhibit B - Special Stipulations
AGREEMENT OF LEASE
THIS AGREEMENT OF LEASE, made and entered into this the 20th day of
March, 1997, by and between, Don O. Collins, d/b/a Tennessee Valley
Communications ("Lessor") and Crossville TV Limited Partnership ("Lessee") a
Florida limited partnership, C. W. TV: Inc., general partner.
W I T N E S S E T H :
NOW, THEREFORE, the Lessor, for and in consideration of the agreements
herein contained, does hereby lease, let and demise to Lessee for a period of
five (5) years (with options to renew as herein set forth in Section 5),
commencing on April 1, 1997, and ending March 31, 2002, that tract of land
situated within the First Civil District of Anderson County, Tennessee on
Buffalo Mountain near Windrock and also being more fully described by metes and
bounds as follows: (herein after referred to as the "Leased Premises"):
SEE EXHIBIT A (DESCRIPTION OF LEASED PREMISES) ATTACHED HERETO PRIOR
DEED REFERENCES: Book 588 Page 42 and Book 755 page 885 in the Anderson County
Register's office.
SECTION 1.
Lessor represents and warrants that he has the absolute and uncontrolled
right to possess, occupy, use and lease the Leased Premises for the duration of
this Lease by virtue of an agreement
<PAGE>
between Lessor and Coal Creek Mining and Manufacturing Company dated October 12,
1988, and as further evidenced by the Consent Agreement executed by Coal Creek
in conjunction with this Agreement, and to which Consent Agreement is hereby
made.
SECTION 2.
The Leased Premises shall be used for installation, operation and
maintenance of a broadcasting antenna tower and building including antenna
poles, masts, cabling and/or wiring and accessories used therewith. All
equipment, the tower, and/or other property attached to or otherwise brought
onto the Leased Premises shall at all times be personal property (or property
used for the construction of a building) and shall belong to Lessee. Lessee
shall also have a maintenance easement across property immediately adjacent to
the Lease Premises, including the property located under the Guy wires. If for
any reason the existing Guy anchors are not sufficient, Lessee may erect of
construct such other or additional Guy anchors as may be reasonably necessary
and such additional locations shall be added to the Leased Premises by amendment
hereto. The word "installation" shall mean the construction of and erection of
towers and buildings. Lessee agrees to conduct its business in an
environmentally safe manner and agrees to adhere to all federal, state and local
environmental, aviation and communication regulations. Lessee shall have the
right to make improvements to the leased property as is reasonably necessary to
carry out its business.
SECTION 3.
The Lessee shall have the unrestricted right to occupy, enter or leave
the leased premises at all times. The Lessee covenants and agrees that the
Lessor, his agents or engineers, or others in its behalf, shall have the right
to enter the Leased Property at all reasonable times in order to inspect,
<PAGE>
examine, survey or measure the same or any part thereof, or for any other lawful
purpose and to use free the means of access to said Leased Premises without
hindrance or molestation and without cost to said Lessor or its agents.
SECTION 4.
Lessee may assign, mortgage or encumber this Lease, without Lessor's
consent, provided that an assignee shall assume all of Lessee's obligations
under this Lease. Lessee may not sublease the Leased Premises or any part
thereof without prior written consent of Lessor.
SECTION 5.
The term of this Lease Agreement shall be for five (5) years beginning
April 1, 1997, and ending March 31, 2002. Lessee shall have the option to renew
for an additional fifteen (15) years in three (3) five (5) year increments and
which renewal options shall be automatically exercises unless canceled by
furnishing Lessor with notice in writing of such desire at lease sixty (60) days
prior to the expiration of this Agreement or any renewal term, as the case may
be. The rental to be paid by Lessee during such renewal terms will be:
$1,400 per month (2nd five year term)
$1,650 per month (3rd five year term)
$1,900 per month (4th five year term)
SECTION 6.
If the Leased Premises become unfit for use by Lessee for the purposes
herein granted by the occurrence of an event hereafter, Lessee shall promptly
advise Lessor of such conditions by written notice, specifying the condition
which Lessee contends renders the Leased Premises unusable for its purposes. In
the event Lessor is either unable or unwilling to remedy the condition within
thirty (30) days after receipt of notice from Lessee thereof, Lessee shall have
the right to terminate this Lease and remove its improvements from the Leased
Premises. Provided, however, any change in condition
<PAGE>
of the Leased Premises to justify termination by Lessee must be of a material
adverse nature rendering unfit the premises for Lessee's permitted use.
Otherwise, Lessee shall have no right of termination, notwithstanding its
abandonment of the Leased Premises from active use.
SECTION 7.
Lessee agrees to pay to Lessor commencing April 1, 1997, in advance,
each month during the first five (5) years of this Lease Agreement, a monthly
rental of One Thousand One Hundred Fifty ($1,150). During the remaining five-
(5) year terms of this Lease Agreement the Lessee agrees to pay the Lessor
commencing April 1st, in advance, each month a monthly rental as stated in
Section 5. A late fee of $200 shall be paid for any rent not paid within 10 days
of its due date. It is further agreed that if the Lessee shall at any time
default in the payment of any rent hereinabove stipulated, then and from the
time of such default, a lien shall exist and is hereby declared in favor of the
Lessor upon all of the improvement owned by the Lessee that the Lessee may have
placed on the Leased Premises, and if such default shall continue for a period
of sixty (60) days, Lessor shall have the right to take possession of such
improvements, and advertise and sell the same or any part thereof to satisfy
said lien in the manner provided by law for the sale of personal property under
execution; provided, however, this lien shall be inferior and subordinate to the
rights of any secured creditor or mortgagee of Lessee and may not be exercised
unless any such secured creditor or mortgagee and Lessee are given advance
notice and the right to cure such default by payment within thirty (30) days of
such notice.
SECTION 8.
Lessee hereby agrees to indemnity and save harmless the Lessor from all
claims, whether in contract or in tort, against Lessor caused by the tortuous
conduct or negligence of Lessee's servants,
<PAGE>
agents or invitees. Lessee agrees to secure adequate general liability insurance
and to name Tennessee Valley Communications and/or Don D. Collins and The Coal
Creek Mining & Manufacturing Company as an additional insured therein,
furnishing Lessor with current evidence of the existence of such insurance. Such
general liability coverage shall be in an amount not less than TWO MILLION
DOLLARS ($2,000,000).
SECTION 9.
During the term of this Lease, the Lessee agrees to keep the Leased
Premises in good condition and repair. Upon termination or expiration of this
Lease, the Lessee will surrender the site of the Lessor in good condition except
(a) for reasonable wear and tear, or (b) for damage due to causes beyond
Lessee's control or without its fault or negligence or (c) for both. Upon the
termination of this Lease, Lessor agrees to allow Lessee access to the Leased
Premises for a reasonable period of time to remove its equipment and
improvements, the duration of which period shall not exceed thirty (30) days
after such termination or expiration. If such equipment and other improvements
are not removed by Lessee, they shall become the property of Lessor.
SECTION 10.
During the term of this lease, Lessee agrees that it will not allow,
permit or suffer the operation or erection of any broadcasting equipment or
other electronic equipment which might interfere with existing installations and
rights under existing leases between Lessor and others on
<PAGE>
property of Lessor not embraced within the boundaries of the Leased Premises.
Lessee hereby agrees to conduct its operations in such a manner as to avoid
interference with existing lessees and to indemnity and save harmless Lessor
from any claims, demands, actions, causes of action or expenses incurred in
connection with an actual or alleged interference by Lessee with permitted
operation of such additional Lessees on adjoining properties of Lessor. In the
event of failure of Lessee to satisfy this requirement, Lessee agrees to remove
such offending equipment causing interference and to promptly cease and desist
from its operations affecting other Lessees of Lessor. Provided, however, Lessee
has examined the Leased Premises, is aware of the proximity of such premises to
other Lessees of Lessor and the creation or maintenance by Lessee of a condition
causing interference with other Lessees of Lessor shall not constitute a basis
for Lessee's termination of this Lease Agreement, except that Lessee shall not
be bound by the conditions of this provision if other existing Lessees of Lessor
change in any respect their use of such adjoining property or the operations
being conducted thereon so as to create interferences currently not in
existence.
SECTION 11.
In connection with the erection and operation of a tower and the
installation of equipment and operation of a television station pursuant to the
provisions of this Lease, Lessee covenants and agrees that it will comply with
the requirements of all statutes, rules and regulations of the United States of
America and of the State of Tennessee and any agency thereof promulgating rules
and regulations applicable to Lessee's use of the Leased Premises. Lessee will
indemnify and save harmless the Lessor from any claims of any nature arising out
of or relating to Lessee's violation of any such statutes, rules and
regulations.
SECTION 12.
<PAGE>
Lessor guarantees that Lessee shall have access to the Leased Premises
and Lessee shall have the right to use any road to the Leased Premises without
material interference with the operations of other Lessees of Lessor by whom
said roads may have been constructed, but in the use of such facilities, Lessee
will be required to contribute a fair share of the expense of the upkeep of such
portions of said roads as it might use. Lessor shall have no obligation to
maintain the road or roads providing access to the Leased Premises.
SECTION 13.
The Lessor shall provide to the Leased Premises a power line for the
lessee's three- (3) phase power requirement. A new power line will be
constructed and maintained by Lessor at his expense for this purpose. This power
is provided to the Leased Premises for the sole use of Lessee only and no power
shall be sold or used by Lessee for any other purpose except power shall be
provided to Lessor by Lessee for Lessor's existing and future operations at a
rate equal to the same rate as charged by Clinton Utility Board to the Lessee.
Lessor shall not be responsible to Lessee for any power failure or interruption
unless the failure is the result of negligent maintenance by Lessor of its power
line to the Leased Premises. It will be the responsibility of Lessee to
construct and maintain a sub-station for their specific power requirements.
SECTION 14.
All antennas and all electronic systems shall be built, maintained, and
repaired by Lessee as its sole expense. The building and grounds shall be used
for the storage and operations of UHF Channel 20, WINT-TV and any frequencies
required by the FCC
<PAGE>
to operate its HDTV business. No additional systems shall be added to the
existing system without the written, prior approval of Lessor.
SECTION 15.
Lessee agrees to pay all taxes or levies upon all owned personal
property situated within the Leased Premises.
SECTION 16.
If any portion of this Lease Agreement shall be held invalid, the
remainder shall nevertheless, be deemed valid and effective, it being the
intention of the parties hereto that each provision hereof shall be stipulated
separately in the event one or more of such provisions shall be held invalid.
SECTION 17.
Any notices which may be required hereby shall be sent by United States Mail,
postage prepaid, to the parties at the following addresses:
(A) IF TO LESSOR: Tennessee Valley Communications
ATTN: DON COLLINS
138 Dale Avenue
Oliver Springs, TN 37840
(B) IF TO LESSEE: Crossville Limited Partnership
ATTN: CINDY P. WILLIS, PRESIDENT, C. W. TV, INC.
3110 Capitol Circle, N.E.
Tallahassee, FL 32308
SECTION 18.
Lessor agrees that Lessee, upon making the lease payments provided for
in this Lease and performing and observing all of the agreements on its part to
be performed and observed, shall lawfully, peaceably and quietly hold, occupy
and enjoy the Leased Premises during the term of this
<PAGE>
Lease and any extensions thereof without any manner of hindrance from Lessor or
any persons lawfully claiming through Lessor or claiming by title superior to
that of Lessor. Lessor's covenant of quiet enjoyment hereby made to Lessee shall
also include Lessee's right to be free from interference in its broadcast
transmissions caused by any other owner or lessee under any other agreement in
the future.
SECTION 19.
This Lease shall be binding upon and shall inure to the benefit of the
parties, their heirs, personal representatives, successors and assigns.
SECTION 20.
The parties agree that upon the request of either party, a short form
memorandum of this Lease shall be executed, acknowledged and recorded in the
appropriate deed records. This Lease may be executed in counterparts, each of
which shall be deemed as an original. Facsimile transfer of signatures is
permitted.
IN WITNESS WHEREOF, Lessor has executed this Lease and Lessee has caused
its name to be signed by its proper representative. Signed and dated only on the
day and date above written.
<PAGE>
LESSOR:
/s/ Don D. Collins
____________________________________ ____________________________________
WITNESS DON D. COLLINS d/b/a
TENNESSEE VALLEY COMMUNICATIONS
LESSEE:
CROSSVILLE TV LIMITED PARTNERSHIP
BY: C. W. TV, INC., GENERAL PARTNER
/s/ Witness /s/ Cynthia P. Willis
____________________________________ ____________________________________
WITNESS CYNTHIA P. WILLIS, PRESIDENT
/s/ Witness
____________________________________
WITNESS
STATE OF TENNESSEE
COUNTY OF ANDERSON
<PAGE>
Personally appeared before me, /s/ Lisa L. Russell, a Notary
Public, DON D. COLLINS, with whom I am personally acquainted (or proved to me on
the basis of satisfactory evidence), and who acknowledged that he executed the
within instrument for the purposes therein contained.
Witness my hand, at office, this the 20 day of March, 1997.
/s/ Lisa L. Russell
_____________________________
NOTARY PUBLIC
My Commission Expires: 2-25-98
<PAGE>
STATE OF FLORIDA
COUNTY OF LEON
Personally appeared before me, /s/ Kimberly S. Rogers, a Notary
Public, CYNTHIA P. WILLIS, with whom I am personally acquainted (or proved to me
on the basis of satisfactory evidence), and who acknowledged that she executed
the within instrument for the purposes therein contained and who further
acknowledged that she is the President of C. W. TV, Inc., a corporation, and
that she executed the foregoing instrument for the purposes therein contained,
by signing the name of the corporation by herself as President.
Witness my hand, at office, this the 20 day of May, 1997.
/s/ Kimberly S. Rogers
_____________________________
NOTARY PUBLIC
My Commission Expires: Kimberly S. Rogers
My Commission #CC460029 Expires
July 13, 1999
Bonded Thru Troy Fain Insurance, Inc.
<PAGE>
Exhibit A - Description of Leased Premises has been intentionally
omitted by the Registrants.
A copy of this omitted Exhibit A will be provided to the Securities and
Exchange Commission upon request.
FIRST MODIFICATION
TO AGREEMENT OF LEASE
(With Owner Consent)
THIS AGREEMENT is made and entered into by and between DON R. COLLINS,
d/b/a/ TENNESSEE VALLEY COMMUNICATIONS ("Lessor") and CROSSVILLE TV LIMITED
PARTNERSHIP ("Lessee").
WITNESSETH: THAT, WHEREAS, the parties hereto are parties to that certain
Agreement of Lease dated March 20, 1997, and to which Agreement of Lease
specific reference is hereby made;
AND, WHEREAS, the parties now desire to amend the Agreement of Lease as
hereinafter set forth, otherwise to remain in full force and effect as
originally executed.
NOW, THEREFORE, for and in consideration of the sum of One Dollar ($1.00),
and other good valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby agree that the Agreement of
Lease shall by amended, so as to ad the following language to paragraph 10
thereof:
"Notwithstanding any other provision of this Agreement of
Lease which may be to the contrary, the parties agree that
Lessee shall have the full responsibility for any and all
damage or loss of any nature on or to the property Lessor
(or others in possession through Lessor) caused by any of
Lessee's equipment, including but not limited to damage or
loss from the falling of the tower, within a radius of 790
feet from the base of the tower."
IN WITNESS WHEREOF, the parties have executed this First Modification to
Agreement of Lease on this the 23rd day of May, 1997.
<PAGE>
LESSOR:
/s/Don D. Collins
_______________________________ ____________________________________
WITNESS DON D. COLLINS, d/b/a
TENNESSEE VALLEY COMMUNICATIONS
LESSEE:
CROSSVILLE TV LIMITED PARTNERSHIP
By C.W. TV, Inc., General Partner
/s/Witness By /s/Cynthia P. Willis
_______________________________ ____________________________________
WITNESS CYNTHIA P. WILLIS, PRESIDENT
/s/Witness
________________________________
WITNESS
STATE OF TENNESSEE Section
Section
COUNTY OF Anderson Section
Personally appeared before me, Lisa L. Russell, a duly commissioned Notary
Public in and for the State and County aforesaid, DON D. COLLINS d/b/a Tennessee
Valley Communications with whom I am personally acquainted, and who acknowledged
that he executed the within instrument for the purposes therein contained.
Witness my hand at office this the 23rd day of May, 1997.
/s/ Lisa L. Russell
________________________________________
Notary Public
My Commission Expires: 2-25-98
<PAGE>
CONSENT
THE UNDERSIGNED OWNER, having consented to the Agreement of Lease between
DON D. COLLINS, d/b/a Tennessee Valley Communications, and CROSSVILLE TV LIMITED
PARTNERSHIP, dated March 20, 1997, and which Consent Agreement is likewise dated
March 20, 1997, does hereby agree and consent to the terms of the First
Modification to the Agreement of Lease, to which this Consent is attached.
DATED this 11th day of June, 1997.
THE COAL CREEK MINING &
MANUFACTURING COMPANY
By: /s/ Chuck Whieke
__________________________
Title: General Manager
STATE OF TENNESSEE Section
Section
COUNTY OF Anderson Section
Personally appeared before me, Lisa L. Russell, a duly commissioned Notary
Public in and for the State and County aforesaid, Chuck Whieke, with whom I am
personally acquainted, and who acknowledged that __he executed the within
instrument for the purposes therein contained, and who further acknowledged that
__he is the General Manager for the Maker, THE COAL CREEK MINING & MANUFACTURING
COMPANY, or a constituent of the Maker, and is authorized by the Maker or by its
constituent, the constituent being authorized by the Maker, to execute the
foregoing instrument on behalf of the Maker.
Witness my hand at office this the 11th day of June, 1997.
/s/ Lisa L. Russell
______________________________
Notary Public
My Commission Expires: 2-25-98
<PAGE>
STATE OF FLORIDA Section
Section
COUNTY OF Leon Section
Personally appeared before me, Kimberly S. Rogers, a duly commissioned
Notary Public in and for the State and County aforesaid, CYNTHIA P. WILLIS, with
whom I am personally acquainted, and who acknowledged that she executed the
within instrument for the purposes therein contained, and who further
acknowledged that she is the PRESIDENT of C.W. TV, INC., the general partner of
the Maker, CROSSVILLE TV LIMITED PARTNERSHIP, or a constituent of the Maker, and
is authorized by the Maker or by its constituent, the constituent being
authorized by the Maker, to execute the foregoing instrument on behalf of the
Maker.
Witness my hand at office this the 29th day of July, 1997.
/s/ Kimberly S. Rogers
__________________________________
Notary Public
My Commission Expires: Kimberly S. Rogers
My Commission # CC460029 Expires
July 13, 1999
Bonded Thru Troy Fain Insurance, Inc.
COMMERCIAL LEASE
THIS LEASE, MADE AND ENTERED INTO, THIS 1st DAY OF January 1994,
BY AND BETWEEN
Koplar Properties Inc., a Missouri corporation
PARTIES HEREINAFTER CALLED LESSOR, AND
Koplar Communications, Inc., a Missouri corporation
HEREINAFTER CALLED LESSEE,
WITNESSETH, THAT THE SAID LESSOR FOR AND IN CONSIDERATION OF
THE RENTS, COVENANTS AND AGREEMENTS HEREINAFTER MENTIONED AND HEREBY
AGREED TO BE PAID, KEPT AND PERFORMED BY SAID LESSEE, OR LESSEES,
SUCCESSORS AND ASSIGNS, HAS LEASED AND BY THESE PRESENTS DOES LEASE
TO SAID LESSEE THE FOLLOWING DESCRIBED PREMISES, SITUATED IN THE
City OF St. Louis STATE OF MISSOURI, TO-WIT:
The portion of the roof of the premises located at 26 Maryland
Plaza on which now stands an antenna and receiving dish and
related equipment, plus the space within ten feet on all sides.
PREMISES
USE OF TO HAVE AND TO HOLD THE SAME, SUBJECT TO THE CONDITIONS HEREIN
PREMISES CONTAINED, AND FOR NO OTHER PURPOSES OF BUSINESS THAN THAT OF
Placement and use of an antenna and receiving and
related equipment
TERM AND FOR AND DURING THE TERM OF ten years COMMENCING ON THE first day
RENTAL of January 1994 AND ENDING ON THE thirty-first day of December
2004 AT THE YEARLY RENTAL OF Ninety-Six Thousand
-------------DOLLARS, PAYABLE IN ADVANCE IN EQUAL quarterly
INSTALLMENTS OF Twenty-Four Thousand ($24,000) DOLLARS
Quarterly payments are due on Jan 1, Apr 1, July 1 and Oct 1. Lessor
shall have the right to cancel this lease at any time after one year
upon thirty days notice to Lessee.
At Option of Lessor, this lease may be extended for an additional
three years by Lessor giving additional notice to Lessee at least
sixty days prior to the end of the initial term.
This lease is not assignable, nor shall said premises or any
part thereof be sublet, used or permitted to be used for any
purpose other than above set forth without the written consent of
the Lessor endorsed hereon; and if this lease is assigned or the
ASSIGNMENT premises of any part thereof sublet without the written consent
OR of the Lessor, or if the Lessee shall become the subject of a
SUB-LETTING court proceeding in bankruptcy or liquidating receivership or
shall make an assignment for the benefit of creditors, this lease
may by such fact or unauthorized act be canceled at the option of
the Lessor. Any assignment of this lease or subletting of said
premises or any part thereof with the written consent of the Lessor
shall not operate to release the Lessee from the fulfillment
on Lessee's part of the covenants and agreements herein
contained to be by said Lessee performed, nor authorize any
subsequent assignment of subletting without the written consent of
the Lessor.
REPAIRS All repairs and alterations deemed necessary by Lessee
AND shall be made by said Lessee at Lessee's cost and expense with
ALTERATIONS the consent of Lessor; and all repairs and alterations so made
shall remain as a part of the realty; all plate and other glass now
in said demised premises is at the risk of said Lessee, and if
broken, is to be replaced by and at the expense of said Lessee.
<PAGE>
The Lessee agrees to keep said premises in good order and
repair and free from any nuisance or filth upon or adjacent thereto,
and not to use or permit the use of the same or any part thereof f or
any purpose forbidden by law or ordinance now in force or hereafter
enacted in respect to the use or occupancy of said premises. The
Lessor or legal representatives may, at all reasonable hours, enter
upon said premises for the purpose of examining the condition thereof
and making such repairs as Lessor may see fit to make.
If the cost of insurance to said Lessor on said premises shall
be increased by reason of the occupancy and use of said demised
premises by said Lessee or other person under said Lessee, all such
increase over the existing rate shall be paid by said Lessee to said
Lessor on demand. The Lessee agrees to pay double rent for each day
the Lessee, or any one holding under the Lessee, shall retain the
demised premises after the termination of this lease, whether by
limitation or forfeiture.
DAMAGE TO Lessor shall not be liable to said Lessee or any other person
TENANTS' or corporation, including employees, for any damage to their person
PROPERTY or property caused by water, rain, snow, frost, fire, storm
and accidents, or by breakage, stoppage or leakage of water, gas,
heating and sewer pipes or plumbing, upon, about or adjacent
to said premises.
The destruction of said building or premises by fire, or the
elements, or such material injury thereto as to render said premises
unquestionably untenantable for ___ days, shall at the option of said
Lessor or Lessee produce and work a termination of this lease.
If the Lessor and Lessee cannot agree as to whether said
building or premises are unquestionably untenantable for ___ days,
the fact shall be determined by arbitration; the Lessor and the
Lessee shall each choose an arbitrator within five days after either
has notified the other in writing of such damage, the two so chosen,
before entering on the discharge of their duties, shall elect a
third, and the decision of any two of such arbitrators shall be
conclusive and binding upon both parties hereto.
If it is determined by arbitration, or agreement between the
Lessor and the Lessee, that said building is not unquestionably
untenantable for days, then said Lessor must restore said building at
Lessor's own expense, with all reasonable speed and promptness, and
in such case a just and proportionate part of said rental shall be
abated until said premises have been restored.
Failure on the part of the Lessee to pay any installment of
rent or increase in insurance rate promptly as above set out, as and
when the same becomes due and payable, or failure of the Lessee
promptly and faithfully to keep and perform each and every covenant,
agreement and stipulation herein on the part of the Lessee to be kept
and performed, shall at the option of the Lessor cause the forfeiture
of this lease.
Possession of the within demised premises and all additions and
permanent improvements thereof shall be delivered to Lessor upon ten
days' written notice that Lessor has exercised said option, and
thereupon Lessor shall be entitled to and may take immediate
possession of the demised premises, any other notice or demand being
hereby waived.
Any and all notices to be served by the Lessor upon the Lessee
for any breach of covenant of this lease, or otherwise, shall be
served upon the Lessee in person, or left with anyone in charge of
the premises, or posted upon some conspicuous part of said premises.
<PAGE>
Said Lessee will quit and deliver up the possession of said
premises to the Lessor or Lessor's heirs, successors, agents or
assigns, when this lease terminates by limitation or forfeiture, with
all window glass replaced, if broken, and with all keys, locks,
bolts, plumbing fixtures, elevator, sprinkler, boiler and heating
appliances in as good order and condition as the same are now, or may
RE-ENTRY hereafter be made by repair in compliance with all the covenants of
this lease, save only the wear thereof from reasonable and careful
use.
But it is hereby understood, and Lessee hereby covenants with
the Lessor, that such forfeiture, annulment or voidance shall not
relieve the Lessee from the obligation of the Lessee to make the
monthly payments of rent herein before reserved, at the times and in
the manner aforesaid; and in case of any such default of the Lessee,
the Lessor may re-let the said premises as the agent for and in the
name of the Lessee. at any rental readily obtainable, applying the
proceeds and avails thereof, first, to the payment of such expense as
the Lessor may be put to in re-entering, and then to the payment of
said rent as the same may from time to time become due, and toward
the fulfillment of the other covenants and agreements of the Lessee
herein contained, and the balance, if any, shall be paid to the
Lessee; and the Lessee hereby covenants and agrees that if the Lessor
shall recover or take possession of said premises as aforesaid, and
be unable to re-let and rent the same so as to realize a sum equal to
the rent hereby reserved, the Lessee shall and will pay to the Lessor
any and all loss of difference of rent for the residue of the term.
The Lessee hereby gives to the Lessor the right to place and maintain
its usual "for rent" signs upon the demised premises, in the place
that the same are usually displayed on property similar to that
herein demised or the last thirty days of this lease.
Lessee shall have an easement of access through the premises of
26 Maryland Plaza to the roof of the premises for purposes of
maintenance and repair of the antenna, receive disk and related
equipment.
Lessee shall pay the entire cost of electricity for 26 Maryland
Plaza. In the event a part or all of the building is occupied
by other persons or entities, the parties will mutually agree
on the portio not the electric bill to be paid by Lessee.
<PAGE>
No waiver of any forfeiture, by acceptance of rent or
No otherwise, shall waive any subsequent cause of forfeiture, or breach
Construc- of any condition of this lease; nor shall any consent by the Lessor
tive to any assignment or subletting of said premises, or any part
Waiver thereof, be held to waive or release any assignee or sub-lessee from
any of the foregoing conditions or covenants as against him or them;
but every such assignee and sub-lessee shall be expressly subject
thereto.
Whenever the word "Lessor" is used herein it shall be construed
to include the heirs executors, administrators, successors, assigns
or legal representatives of the Lessor; and the word "Lessee" shall
include the heirs, executors, administrators, successors, assigns or
legal representatives of the Lessor; and the word "Lessee" shall
include the heirs, executors, administrators, successors, assigns or
legal representatives of the Lessee and the words Lessor and Lessee
shall include single and plural, individual or corporation, subject
always to the restrictions herein contained, as to subletting or
assignment of this lease.
IN WITNESS WHEREOF, the said parties aforesaid have duly
executed the foregoing instrument or caused the same to executed the
day and year first above written.
KOPLAR PROPERTIES INC.
BY: /s/Edward J. Koplar
------------------------------
Lessor
KOPLAR COMMUNICATIONS INC.
BY: /s/Edward J. Koplar
-----------------------------
Lessee
AGREEMENT OF LEASE
AGREEMENT OF LEASE made this 16 day of May, 1986 (herein called the
"Lease"), between CBS INC., a New York corporation with offices located at 51
West 52 Street, New York, New York (herein called "CBS"), and KOPLAR
COMMUNICATIONS INC., a Missouri corporation with offices located at 4935 Lindell
Boulevard, St. Louis, Missouri (herein called "Koplar") .
1. DEMISED PREMISES. CBS hereby leases to Koplar and Koplar hereby
leases, takes and hires from CBS upon the terms and conditions hereinafter
set forth the following:
(a) That portion of the parcel of land located on Reavis Barracks
Road in St. Louis County. Missouri as more particularly described on Exhibit A
attached hereto and made a part hereof (herein called the "Site"). Koplar agrees
that at the expiration or termination of the term of this Lease, all right,
title and interest in said building and all other improvements (except
apparatus, air conditioning equipment, other equipment and furnishings installed
in the building) on the demised portion of the Site shall pass to CBS.
(b) A portion of the broadcasting tower as described on Exhibit A -
1 attached hereto and made a part hereof erected by CBS on the Site containing
the Channel 11 antenna, or such other television equipment (including
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antennas) which will not cause interference to, or be subject to interference
from, the operations of CBS. Said portion of the tower leased hereunder shall be
used solely by Koplar for the installation and maintenance of such television
equipment and apparatus. On or before the expiration or termination of this
Lease, Koplar shall have the right and agrees to remove said antennas and
transmission lines and all other equipment and apparatus and repair any damage
occasioned thereby. The tower shall be and remain the property solely of CBS,
and Koplar shall merely have the right to use part of it, as provided herein.
Koplar's antennas and transmission lines and all other equipment and apparatus
shall be and remain the property solely of Koplar, which agrees to keep them in
good order and repair. Koplar agrees to make no changes in its ant-ennas or
transmission lines without the prior written approval of CBS which will not be
unreasonably withheld. Koplar hereby grants to CBS the right to erect and
maintain transmission lines and other necessary apparatus and equipment in and
on said portion of the broadcasting tower referred to in this paragraph l(b)
necessary for the operation of its antenna on said tower and an easement and
right of way over said portion to and from said antenna.
(c) The portions of the premises described in paragraphs (a) and (b)
hereof are sometimes collectively
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referred to herein as the "Demised Premises".
(d) Koplar may install or maintain on the Demised Premises or any
improvements thereon any signs of the same type, size and character and in the
same general location as those installed by CBS, but may not install or maintain
any other signs without the prior approval of CBS.
2. TERM. (a) The term of this Lease (the "Initial Term") shall be a
period of ten (10) years, commencing as of February 1, 1984 (the "Commencement
Date")
(b) Provided that at the time of the exercise of the option(s)
contained in this Article 2. Koplar is not in default under any of the
provisions of this Lease beyond the applicable grace period, if any. Koplar
shall have the right to renew the Initial Term for a period of ten (10) years
("First Renewal Term"), commencing on the tenth (10th) anniversary of the
Commencement Date on the same terms as contained in this Lease (including
Article 3, without any change in the Base Year or any other provisions of
Article 3). If Koplar elects to renew the Initial Term for the First
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Renewal Term, Koplar shall give notice to CBS of such election not later than
eighteen (18) months prior to the expiration date of the Initial Term. Upon CBS'
receipt of such notice, this Lease, subject to the provisions of this Article 2,
shall be automatically extended for the First Renewal Term with respect to the
Demised Premises then covered by this Lease with the same force and effect as if
the First Renewal Term had been originally included in the term.
(c) If this Lease shall have been so renewed then at the end of the said
First Renewal Term, provided is not in default under any of the provisions of
this Lease beyond the applicable grace period, if any, Koplar shall have the
right to renew the First Renewal Term of this Lease for a period of five (5)
years ("Second Renewal Term"), commencing on the twentieth (20th) anniversary of
the Commencement Date on the same terms as contained in this Lease (including
Article 3, without -any change in the Base Year or any other provisions of
Article 3). If Koplar so elects to renew the First Renewal Term for the Second
Renewal Term, Koplar shall give notice to CBS of such election not later tha-n
eighteen (18) months prior to the expiration date of the First Renewal Term.
Upon CBS' receipt of such notice, this Lease, subject to the provisions of this
Article 2, shall be automatically extended for the second Renewal Term with
respect to the Demised Premises then covered by this Lease with the same force
and effect as if. the Second Renewal Term had been originally included in the
term.
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(d) The term of this Lease shall automatically expire at the expiration
date of the Initial Term unless Koplar notifies CBS in writing as stated herein
of its intention to renew the terms of this Lease. The term of this Lease shall
automatically expire at the expiration date of the First Renewal Term, unless
Koplar notifies CBS, in writing as provided herein, of its intention to renew
the First Renewal Term. Koplar shall have no right to renew the term of this
Lease for any period beyond the Second Renewal Term.
3. RENTAL:
(a) FIXED RENTAL. Koplar agrees to pay CBS during the remainder of the
first three years of the term of this Lease, an annual fixed rental of
THIRTY-ONE THOUSAND TWO HUNDRED ($31,200.00) DOLLARS (the "Fixed Rental") in
equal monthly installments of TWO THOUSAND SIX HUNDRED ($2,600.00) DOLLARS,
payable in advance, without notice or demand, on the first day of each calendar
month during the term hereof. Commencing on the first day of February, 1987, and
on the same day of the month every three years thereafter during the. term of
this Lease, as such term may be extended pursuant to Article 2 herein, the Fixed
Rental shall be increased by the percentage of increase in the cost of living as
determined in accordance with the provisions of
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this Article.
3.1 (a) On the third anniversary date of the Commencement Date and on
each subsequent third anniversary date of the Commencement Date occuring during
the term of this Lease (each such date being a "Fixed Rental Adjustment Date"),
as such term may be extended pursuant to Article 2 herein, the Fixed Rental
shall be increased by an amount determined by multiplying the Fixed Rental, as
same may have been previously adjusted pursuant to this Section by a fraction,
the numerator of which shall be the latest Consumer Price Index for Urban Wage
Earners and Clerical Workers (all items) for St. Louis, Missouri, 1977=100 (the
"Index") for the month or period immediately preceding the Fixed Rental
Adjustment Date in question and the denominator of which shall be (i) -for the
first Fixed Rental Adjustment Date the Index in effect for the month or period
immediately preceding the Commencement Date and (ii) for each subsequent Fixed
Rental Adjustment Date, the Index in effect for the month or period immediately
preceding the last prior Fixed Rental Adjustment Date.
(b) In the event that (i) the Index (or any index substituted
therefor as hereinafter provided) shall cease to be published, then for the
purposes of this paragraph, there shall be substituted for the Index such other
index of a si-
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milar kind published by a governmental or other non-partisan organization, or
(ii) there is any change in the computation of the Index or of any such
substituted index, then for the purposes of this paragraph, such index as so
changed shall be substituted for the index in effect prior thereto.
3.2. CBS shall, within a reasonable time after obtaining the
appropriate data necessary for computing such increase give Koplar notice of any
increase so determined, and CBS' computation shall be conclusive and binding
(but shall not preclude any adjustment which may be required in the event of a
published amendment of the index figures upon which the computation was based).
3.3 The rent due pursuant to this Article shall be due and payable to
CBS in equal monthly installments commencing with the first month of the fourth
year of this Lease.
(b) REDUCTION IN FIXED RENTAL. Koplar currently provides the
services to CBS described on Exhibit B attached hereto and made a part hereof
(the "downlink services"). As long as Koplar continues to provide the downlink
services to CBS, the Fixed Rental payable hereunder shall be reduced by the sum
of FIVE HUNDRED ($500.00) DOLLARS per month throughout the terms of this Lease,
as such term may be extended pursuant to Article 2 herein, which reductions
shall be
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increased on each anniversary date of the commencement date occurring during the
term of this Lease (each such date being an "Adjustment Date") by multiplying
same by a fraction. the numerator of which shall be the Index for the month or
period immediately preceding the Adjustment Date in question and the denominator
of which shall be the Index in effect for the month or period immediately
preceding the Commencement Date. In the event that CBS desires to
discontinue the use of said services, it may do so upon three (3) months prior
written notice to Koplar, whereupon Koplar shall pay to CBS the full Fixed
Rental without any reduction, as provided herein.
(b) REAL PROPERTY TAX PAYMENT. Koplar agrees to pay CBS during the
term of this Lease, as such term may be extended pursuant to Article 2 herein,
one-half of all real property taxes paid by CBS, as well as one-half of personal
property taxes applicable to the Demised Premises. Koplar shall, within thirty
(30) days of receipt of demand therefor, reimburse CBS for its one-half share of
such taxes.
4. Termination of Lease. (a) CBS shall have the right to terminate
this Lease, upon one (1) year's prior written notice to Koplar, at any time
during the term of this Lease, as said term may be extended pursuant to Article
2 herein, until the billing dispute on payment for downlink
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services has been resolved in writing by both parties, and this Lease shall
terminate on the date specified in CBS' notice. Koplar shall not be obligated to
make any further payments of Fixed Rental hereunder as of the termination date
specified in CBS' notice. Notwithstanding the foregoing. in the event Koplar is
unable, after utilizing its best efforts, to move off the tower within said one
(1) year period, CBS agrees to enter into good faith negotiations with Koplar to
determine a time period, not to exceed one (1) year, during which Koplar can
leave the tower (the "Extended Term"). During the Extended Term, Koplar shall
continue to pay the Fixed Rental, as same may be increased pursuant to the
provisions of Article 3. In the event that this Lease shall not be terminated
under the provisions of the preceding sentence, and CBS shall, nevertheless,
discontinue the use of its tower and move its antenna to another tower, then on
and after the date on which CBS shall have ceased to use the tower because it
has moved its antenna to another tower, Koplar shall pay to CBS within thirty
(30) days after CBS gives notice of such expenses to Koplar, 100% of the annual
cost of
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maintenance of the tower, unless the tower shall be used by other.
commercial television broadcasters, in which event Koplar shall pay to CBS that
part of 100% of the annual cost of maintenance of the tower which is
proportionate to the total number of parties then using the tower.
(b) Koplar shall have the right to terminate this Lease on any
anniversary date of the Commencement Date, upon one (1) year's written notice to
CBS. provided that Koplar will use its best efforts to ensure that CBS is given
the right to move its antenna to the same tower to which Koplar moves its
antenna, on terms which are at least as favorable as granted to any other
television station which also moves its antenna to the same tower. In the event
Koplar does not own, either in full or in part, such tower, Koplar will use its
best efforts to ensure that CBS will be able to move its antenna to said tower
on terms which are at least as favorable as those granted to Koplar.
5. USE. (a) The building and installation shall be used exclusively
for television purposes. Koplar agrees to keep the portion of the Site leased
hereunder and said building and improvements thereon free and clear of all
mechanics' and materialmen's liens.
During the term hereof, Koplar agrees to
keep the building and installation and the Demised Premises in good order and
appearance.
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(b) If the tower becomes unuseable for television broadcasting
purposes by Koplar by reason of damage, deterioration or destruction, CBS shall
have no obligation to make the tower useable, except as provided in Article 24
herein. During the period when the tower is so unuseable, Fixed Rental to be
paid by Koplar hereunder shall be abated. If the period of such unuseability
exceeds twelve (12) months, either party hereto may terminate this Lease by
written notice to the other.
6. COOPERATION. Koplar agrees to give its full and complete
cooperation to CBS in obtaining, if required, the approval of all appropriate
Federal, state and local authorities, to the tower and multiple broadcasting
therefrom, the site and improvements thereon.
7. MAINTENANCE AND REPAIR OF THE DEMISED PREMISES. CBS shall maintain
and repair the Demised Premises. Koplar shall, within thirty (30) days of
receipt of demand therefor, pay CBS one-half (1/2) of CBS' costs and expenses
arising out of or in any way connected with the maintenance of the Demised
Premises for that repair or maintenance work which shall inure to the benefit of
both CBS and Koplar, including, but not limited to, maintenance of the lawn and
shrubbery located on the Site, maintenance of the elevators
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servicing the tower and painting and repair of the tower and guy wires. CBS
shall not be responsible to Koplar for any loss or damage occasioned by any
interruption of the use of the tower for any reason whatsoever, unless directly
caused by the willful misconduct or negligence of CBS. CBS agrees that in
repairing and maintaining the tower it will take all necessary precautions to
avoid any interference to the broadcasting activities of Koplar.
8. CHANGES IN TOWER. If, at any time during the term of this Lease, as
such term may be extended pursuant to Article 2 herein, any changes or
alterations in the tower are required by any Federal, state or local authorities
having jurisdiction, CBS will promptly make such change or alteration, and
Koplar shall, within thirty (30) days of receipt of demand therefor. reimburse
CBS for one-half (1/2) of the expenditure. Notwithstanding the foregoing, (i) if
the change would make it impracticable to use the tower as altered for multiple
broadcasting, this Lease shall terminate forthwith without liability of either
party hereto to the other, and (ii) if the change would cost more than fifty
(50%) percent of the then current replacement cost of the tower, CBS shall not
be required to make any change and either party hereto may terminate the Lease,
by written notice to the other. If any change reduces the height of
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the tower, the space referred to in paragraph l(b) hereof shall be modified to
similar space on the tower below the space to be used by CBS' Channel 4 antenna
at the top portion of the tower as changed.
9. OBJECTIONABLE INTERFERENCE. (a) If any broadcasting activity of
either party causes objectionable interference to the broadcasting activities of
the other, the party causing the interference shall discontinue such
interference immediately upon notice from the other party.
(b) Before Koplar shall make any changes in or additions to existing
installations, it shall submit to CBS specifications, plans and specific designs
therefor, whereupon CBS shall notify Koplar, within sixty (60) days, if it finds
objection to the proposal.
(c) If either party in actual broadcasting operations shall be
alleged to cause objectionable interference to the broadcasting activities of
the other party, and there is a dispute as to whether there is objectionable
interference occuring, the party claiming interference may object.
(d) If the party receiving an objection shall thereafter be
unwilling to alter its proposals or operations, as the case may be, to meet the
objections, the dispute shall be submitted to an arbitration committee,
consisting of one (1) engineer selected by CBS, one (1) engineer
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selected by Koplar and the third (3rd) engineer to be selected by the two
engineers so selected (herein called the "Committee"). It shall be the duty of
the members of the Committee to determine whether, in their opinion, the
specifications, plans and designs are such that there will result no
objectionable interference to any broadcasting activity then being conducted
from the tower, or whether there exists any objectionable interference if an
actual broadcasting activity is complained of. If a majority of the Committee
shall be of the opinion that such objectionable interference will necessarily
result, or is resulting, the proposing party shall not proceed therewith or
continue therewith. However, if a majority of the Committee shall be of the
opinion that no such objectionable interference will result or is resulting, the
proposing party or allegedly interfering party may proceed therewith in
accordance with such specifications, plans and designs or with the broadcasting
complained of. The time for selection of arbitrators and the conduct of the
arbitration shall be governed by the rules of the American Arbitration
Association.
10. OBJECTIONABLE INTERFERENCE CRITERION. "Objectionable
interference" to a broadcasting activity shall be
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deemed to exist if:
(a) the Committee determines it exists as provided in paragraph
10 hereof,
(b) the determination to that effect is made by an authorized
representative of the Federal Communications Commission,
(c) a condition exists which constitutes interference within the
meaning of the provisions of the rules and regulations of the Federal
Communications Commission in effect at the time, or
(d) there is material impairment of the quality of either sound or
picture of a broadcasting activity in any portion of the protected service area
of such activity, as such area is or may be defined by the Federal
Communications Commission at any hour during the period of operation of such
activity.
If any dispute arises as to questions of fact relating to subparagraphs (c) and
(d) hereof, such dispute shall be determined by the Committee under the
procedures hereinbefore set forth.
11. DISCONTINUANCE OF OBJECTIONABLE INTERFERENCE.
(a) The party responsible for the Objectionable Interference shall
immediately discontinue it until such interference can be corrected, or may, in
lieu of discontin-
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uing such activity, transfer it to a temporary or emergency antenna
if-objectionable interference will thereby be eliminated.
(b) If, in order to correct objectionable interference caused by its
broadcasting activities or equipment, either party may desire, at its expense,
to attach protective devices to the equipment of the other party, said other
party will consent thereto if there will result no interference with the conduct
or use of any of its broadcasting activities or equipment.
12. RESUMPTION OF BROADCASTING. Whenever either party shall discontinue
a broadcasting activity or transfer it to a temporary or emergency antenna, it
shall not resume such broadcasting activity or re-transfer such broadcasting
activity from such-temporary or emergency antenna to the regular or permanent
antenna thereto fully in use, unless in either case it complies with conditions
set forth by CBS for engaging in the operation of a broadcasting activity.
13. EASEMENTS. Koplar shall have full right of access necessary for the
operation, upkeep and maintenance of its facilities. using for that purpose to
the. extent reasonably. convenient for the purpose, easements designated by CBS
over and upon the parts of the Demised Premises not reserved exclusively to CBS
or its tenants in common with CBS, such
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use to be exercised in such manner as to cause minimum interference with such
use by others or other occupancy of the Site.
14. EXCHANGE OF INFORMATION. In addition to the specific obligations
imposed by this Lease, each party will endeavor in good faith to conduct its
broadcasting activities in accordance with the intent of this Lease and will
cooperate with the other party so as to anticipate and prevent any objectionable
interference. To this end, each party will, upon request of the other party,
exchange full information as to present and future operations from the tower.
15. LEGAL RIGHTS. It is not the intention of the parties that
arbitration and other provisions hereof shall deprive either party of the right
to seek legal damages against the other for any damage or loss that may be
suffered because of objectionable interference, which a party has caused or
bears the responsibility to cease under the terms of this Lease.
16. EQUITABLE RELIEF. The provisions hereof for protection against
objectionable interference are the essence of the agreements of the parties
hereto, and such interference will, or may result, in immediate and irreparable
loss
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and damage to the party suffering such interference and the loss or damage will
be such that money damages in a court of law cannot fully compensate therefore.
Accordingly, whenever a party is required by the provisions of this Lease to
discontinue an interfering broadcast activity and fails to do so, the other
party will be entitled to appropriate injunctive and other equitable relief.
17. INDEMNITY AND INSURANCE. Each party agrees to indemnify and hold
the other harmless against any liability, damages. loss or expense, including
attorneys' fees, incurred or suffered in consequence either of injury, including
death at any time resulting therefrom, to any person, or of damage to property
due to any act or omission of the former or of any of its contractors,
representatives, employees or agents on or about the Site-and the tower. Koplar
agrees to proc-ure and keep in force and effect at all times with premiums paid
liability insurance covering the above indemnity in amounts reasonably
satisfactory to CBS.
18. REPRESENTATIONS AND WARRANTIES OF KOPLAR. With respect to downlink
services referred to in paragraph 3.3(b) herein, Koplar hereby warrants that
should any signal(s) become encoded. Koplar will promptly provide a decoded
signal(s) to KMOX-TV, at its sole cost and expense. and will not pass along to
KHOX-TV any costs associated with such
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decoding, or any other costs including. but not limited to, acquisition rights;
provided, however, in the event Koplar incurs any out of pocket expenses in
connection with such decoding. and such decoding is solely for the benefit of
KMOX-TV, KMOX-TV shall reimburse Koplar for such out of pocket expenses upon
receipt of invoices in good order. CBS will make the final determination
regarding the acceptability of signal(s) based upon its own minimum technical
standards.
19. NOTICES. Any notice or communication to either party hereto shall
be deemed sufficiently given if the same be in writing and sent by certified
mail, addressed to the other party at its above address, or personally delivered
to an officer of the party at the offices of the party at that address, and the
time of giving of such notice or communication shall be deemed to be the time
when the same is so mailed or personally delivered.
20. ASSIGNMENT. This Lease may not be assigned by Koplar without the
written consent of CBS except to a corporation, individual, partnership or other
business enterprise which acquires Koplar's television broadcasting license,
obtains the permission or approval of the Federal Communications Commission to
carry on commercial television broadcasting from the tower, assumes in writing
the full and
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entire obligations of Koplar hereunder and is reasonably judged by CBS to be
financially responsible. This Lease may be assigned by CBS without the written
consent of Koplar. Koplar hereby acknowledges that CBS will assign its interest
in this Lease to Viacom International Inc., or a wholly owned subsidiary. Upon
such assignment, Koplar shall release CBS from all obligations under this Lease,
provided Viacom International Inc., or a wholly owned subsidiary thereof,
assumes all obligations under this Lease.
21. REGULATIONS. Koplar shall comply with all present and future
requirements of law, rules, ordinances, orders and regulations of all
appropriate governmental and municipal authorities, and Koplar shall not do any
action or suffer any condition to exist in, upon or about the Demised Premises
which shall subject CBS in any way to any liability for penalties, fines or
damage.
22. MECHANICS' LIENS. If a notice of mechanics' liens be filed against
the Demised Premises purporting to be for labor or material alleged to have been
furnished to Koplar, and if Koplar shall not cause such lien to be discharged
within ninety (90) days after the filing of such notice, CBS may at its option
discharge the lien, and all cost in so doing shall be additional rental
hereunder to be paid by Koplar upon receipt of invoice therefor, unless
discharge of
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such lien shall be secured by surety bond of a surety company satisfactory to
CBS.
23. DEFAULT. (a) If Koplar shall make a general assignment f o r the
benefit o. f creditors or shall be adjudicated bankrupt, the term of this Lease
shall thereby at the option of CBS, expressed in a one-day written notice to
Koplar, expire on the expiration of said one-day notice as fully and completely
as if such date of expiration were the date herein determined for the expiration
of the term of this Lease.
(b) If Koplar shall make default in the payment of Fixed Rental or
in the payment of any other sum of money required to be paid under the terms of
this Lease, and such default shall continue and not be fully cured within ten
(10) days after written notice by CBS setting forth the nature of such default,
then, at the expiration of said ten (10) days, CBS may at its option forthwith
or at any time thereafter terminate this Lease by written notice to Koplar and
on the date of termination as specified therein by CBS, this Lease shall
terminate and expire as fully and completely as if that specified date were the
date herein fixed for the expiration of the term of this Lease.
(c) If Koplar shall default in fulfilling any of the covenants and
obligations of this Lease other than de-
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faults for the payment of monies hereinabove specified, and such default shall
continue for thirty (30) days after notice thereof from CBS setting forth the
nature of such default, provided that such thirty (30) day period may be
extended to a maximum of ninety (90) days from the date of notice of the default
if Koplar commences to cure and diligently pursues the curing of such default
within such time period, CBS may at any time thereafter give Koplar a notice of
termination of this Lease, and on the date of termination as specified therein,
this Lease shall terminate and expire as fully and completely as if that
specified date were the date herein fixed for the expiration of the term of this
Lease.
(d) No delay in asserting and no waiver of default by CBS hereunder
shall be deemed a waiver of subsequent defaults or of any provision of this
Lease, or prejudice its right to terminate hereunder.
(e) Upon any such termination as herein provided, Koplar shall
remain liable under the terms of this Lease as provided by law.
24. DAMAGE AND DESTRUCTION.
(a) If the Demised Premises or any part thereof should be destroyed
or damaged by fire or other casualty during the term of this Lease, as
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such term may be extended pursuant to Article 2 herein, then, unless this Lease
is terminated by Koplar as hereinafter provided, CBS shall promptly proceed to
reconstruct, restore and repair. the Demised Premises to a condition
substantially equivalent to their former condition; provided, however, if the
estimated cost of repair or restoration shall' exceed fifty (50%) percent of
CBS' current replacement costs of the Demised Premises, CBS may elect to
terminate this Lease by written notice to Koplar given within ninety (90) days
after such fire or casualty specifying a date for the expiration of the Lease.
Upon the date specified in such notice, the term of this Lease shall expire.
(b) If the Demised Premises are partially damaged or rendered
partially unusable by fire or other casualty and CBS elects to repair same, the
Fixed Rental and any other sums payable hereunder shall be apportioned from the
day following the casualty according to the part of the Demised Premises which
is usable, until such repair shall be substantially completed.
25. EMINENT DOMAIN. If the Demised Premises or any part thereof be
taken by eminent domain or condemnation proceedings, CBS shall be entitled to
receive any and all
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awards that may be made for or on account of the Demised Premises, excluding
any award made specifically for Koplar's transmitter building and improvements.
26. SUBORDINATION. This Lease shall be and at all times remain subject
and subordinate to any mortgages, deeds of trust, leases, bond issues or trust
indentures now on or which may hereafter be placed upon the Demised Premises.
27. MISCELLANEOUS.
(a) This Lease embodies and constitutes the entire understanding
between the parties with respect to the transaction contemplated herein, and all
prior agreements. understandings and statements, oral or written, are merged
into this Lease. Neither this Lease nor any provision hereof can be waived,
changed or terminated orally or in any manner other than by a written agreement
executed by both parties. This Lease shall not be binding, or evidence any
understanding or agreement, until signed by both parties hereto.
(b) If any provision of this Lease shall be invalid or unenforceable
as against any person or under certain circumstances, the remainder of this
Lease and the applicability of such provision to other persons or circumstances
shall not be affected thereby and each provision of this Lease shall, except as
otherwise herein provided, be valid
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and enforced to the fullest extent permitted by law.
(c) The provisions of this Lease shall extend to, bind and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
(d) This Lease shall be governed by and construed in accordance with
the laws of the State of Missouri.
(e) The captions in this Lease are for convenience of reference
only and in no way define. describe or limit the scope or intent of this
Lease or any of the provisions hereof.
(f) This Lease may be executed in one or more counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties have respectfully signed and sealed
this Lease as of the day and year first above written.
(Seal) KOPLAR COMMUNICATIONS INC.
By/s/Larry Marcus
--------------------------------
CBS INC.
(Seal) By/s/Martha Snyder
--------------------------------
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EXHIBIT A-1 Description of broadcasting tower has been intentionally
omitted by the Registrants.
A copy of this omitted Exhibit A-1 will be provided to the Securities
and Exchange Commission upon request.
26
September 2, 1986
Mr. Larry D. Marcus
Vice President, Business Affairs
Koplar Communications, Inc.
4935 Lindell Boulevard
St. Louis, MO 63108
Dear Larry:
The Agreement of Lease between Viacom Broadcasting of Missouri Inc. ("Viacom")
as successor-in-interest to CBS Inc. and Koplar Communications Inc. ("Koplar")
dated May 16, 1986 (the "Agreement") is hereby amended as follows:
1. With respect to the provision of downlink services as provided for in
paragraph 3.3(b) and Exhibit B of the Agreement, no station connection charge,
or similar charge, shall be payable for any such service regardless of whether
or not Viacom requires that Koplar reorient a TVRO in order to receive a signal
requested by Viacom. In the event that a re-orientation of Koplar's TVRO is
required in order to receive a signal, Koplar's tariff rates (exclusive of any
station connection charge or similar charge), as published on its then
applicable rate card, shall apply.
2. The last sentence of Exhibit B of the Agreement is hereby deleted and the
following is inserted in its place:
Koplar will provide uplinking services to Viacom on the
following basis:
(a) Services shall be charged at Koplar's applicable
rate card rates (exclusive of any station connection
or similar charge) except that the charge for such
services provided between the hours of 9 A.M.-10
P.M. ("Day Time Service") shall be reduced by 50%.
For services provided between the hours of 10 P.M.-9
A.M. ("Night Time Service"), the 50% reduction shall
be available only to the extent that the total
charges for Night Time Service in any month do not
exceed the
<PAGE>
total rate card charges (exclusive of any station
connection or similar charge) for Daytime Service in
that same month. In no event will the reduction in
rate card rates exceed the sum of $500/mth. (the
"Full Reduction Benefit").
(b) If charges for uplink service in any month are
insufficient for Viacom to realize the Full
Reduction Benefit, the difference between Viacom's
actual charge reduction for that month and the Full
Reduction Benefit for such month shall not be
applied to reduce the uplink charges in any
subsequent month.
(c) The aforesaid 50% reduction shall be available
to meet the needs and requirements of KMOV-TV and
not for the sole benefit of any other entity.
3. Koplar warrants and represents that it does not and will" not provide uplink
or downlink services to any other party at rates below those rates which may be
established from time to time on a published rate card. In the event that Koplar
discounts the rates it charges from said rate card rates, Viacom shall receive
the benefit of any such discount.
4. Charges to Viacom for applicable downlink or uplink services shall be paid
within 30 days of invoicing by Koplar except that any such charges may be offset
against any arrearages in payments due to Viacom from Koplar under the
Agreement.
5. Paragraph 2 of the Agreement is hereby deleted and the following is inserted
in its place:
The term of this Lease shall be for a period of 25 years
commencing as of February 1, 1984 (the "Commencement
Date").
6. Paragraph 4(a) of the Agreement is hereby deleted and the following is
inserted in its place:
If Viacom shall discontinue the use of its tower because
it has moved its antenna to another tower, or because of
any other reason, Koplar shall pay to Viacom within 30
days after Viacom gives notice of such expenses to
Koplar, 100% of the annual cost of maintenance of the
tower, unless the tower shall be used by other
commercial television broadcasters, in which event
Koplar shall pay to Viacom that part of 100% of the
annual cost of maintenance of the tower, which is
proportionate to the total number of parties then using
the tower for so long as such parties continue to use
the tower.
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<PAGE>
7. The following is inserted at the beginning of paragraph 4(b) of the
Agreement:
In the event a new tower is built in the St. Louis market
whose height and/or coverage is superior to the demised
premises and as a result Koplar decides to transfer its
broadcasting transmission facilities, then . . . .
8. The following is inserted at the end of paragraph 4(b) of the Agreement:
Koplar's obligation to employ its best efforts on behalf
of Viacom as described in this paragraph is contingent
upon the tower's structural ability to meet Viacom's
needs.
9. The termination letter from Viacom to Koplar dated May 27, 1986, is hereby
rescinded, and Koplar and Viacom acknowledge that the billing dispute for
payment for downlink services has been resolved so that Viacom shall not be
charged for any station connection charge or similar charge for downlink or
uplink services.
Except as provided hereinabove, the Agreement of Lease between
Viacom and Koplar dated May 16, 1986, shall remain in full force and effect on
all the same terms and conditions as provided therein.
VIACOM BROADCASTING
OF MISSOURI INC.
/s/Arthur Tek
-----------------------------------
KOPLAR COMMUNICATIONS INC.
/s/Larry Marcus 9/10/86
-------------------------------------
4
*********
AGREEMENT
THIS AGREEMENT is made as of June 1, 1995, by and among KOPLAR
COMMUNICATIONS, INC., a Missouri corporation ("Koplar"), ROBERTS BROADCASTING
COMPANY, a Delaware corporation ("Company"), MICHAEL V. ROBERTS ("Mike") and
STEVEN C. ROBERTS ("Steve") (Company, Mike and Steve are collectively referred
to herein as "Roberts").
RECITALS
A. Company is the licensee of television station WHSL-TV, East St.
Louis, Illinois (the "Station"), pursuant to licenses issued by the Federal
Communications Commission ("FCC").
B. Mike and Steve collectively own a majority of the capital stock of
the Company which is entitled to vote.
C. The parties, all having experience in the television broadcast
industry, desire to set forth certain rights which the Company shall grant to
Koplar and certain restrictions, covenants and agreements with respect to the
Company and its Station and with respect to the potential acquisition of
additional television broadcast properties by Koplar, Mike and Steve.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants and agreements contained herein, the parties, intending to be
legally bound, agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth below:
1.1 "AFFILIATE" means any Person controlling, controlled by, or under
common control with Koplar, Company, Mike or Steve, as applicable. For purposes
hereof, "control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting interests, by contract or otherwise.
1.2 "ENCUMBER" OR "ENCUMBRANCE" means any mortgage, deed of trust,
pledge, assignment, security interest, encumbrance, lien (statutory or other),
preference, priority or other agreement having substantially the same economic
effect as any of the forgoing and the filing of any financing statement under
the Uniform Commercial Code of the State of Missouri or comparable laws of any
jurisdiction, but excluding conditional sale contracts for equipment, financing
leases for equipment, and mechanic's liens or tax liens being contested in good
faith.
1.3 "GOVERNMENTAL AUTHORITY" means any federal, state, or local
government or regulatory body, or subdivision, agency, instrumentality,
authority, department, commission, court, tribunal, board or bureau thereof,
including without limitation the FCC.
<PAGE>
1.4 "HSN" means Home Shopping Network, Inc., a Delaware corporation.
1.5 "INFOMERCIALS" means a television program which is primarily for the
purpose of selling a product or a service and within which no spot commercial
advertising time is sold or displayed to or on behalf of a third Person.
1.6 "KOPLAR INVESTMENT" means the total Capital Contributions (as
defined in the Newco Operating Agreement) invested by Koplar in Newco.
1.7 "LAWS" means any law, statute, code, ordinance, rule or regulation
of any Governmental Authority.
1.8 "NEWCO" means Roberts Media, L.L.C., a Missouri limited liability
company owned by Koplar, Mike and Steve.
1.9 "NEWCO OPERATING AGREEMENT" means the Operating Agreement of Newco
in substantially the same form as attached hereto as EXHIBIT A.
1.10 "ORDER" means any order, judgment, injunction, award, decree or
writ of any Governmental Authority.
1.11 "PERMITTED PROGRAMMING" means the commitment of Station programming
time (i) pursuant to the Television Affiliation Agreement; (ii) for up to four
(4) hours of Sunday morning and any other broadcast programming to the extent
presently permitted without the necessity of any further consent or agreement
from HSN, pursuant to the Television Affiliation Agreement as existing on the
date of this Agreement; (iii) for Infomercials; and (iv) for the sole purpose of
compliance with applicable Laws.
1.12 "PERSON" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, limited liability company, Governmental Authority or other entity.
1.13 "PRE-TAX CASH FLOW" means the total revenue less all programming
costs, sales costs, capital costs, traffic costs and other operational
expenditures; provided that any payments to or charges by Koplar shall be on an
arm's length, competitive market rate basis.
1.14 "PURCHASE PRICE" means a price equal to Koplar's Adjusted Capital
Contribution (as defined in the Newco Operating Agreement).
1.15 "RIGHT OF FIRST REFUSAL PERIOD" means the period commencing as of
the date of this Agreement and ending on the later of (i) the fifth anniversary
date of this Agreement, and (ii) the date the Koplar Investment has been paid or
returned in full to Koplar, and Koplar is no longer required or committed to
make any further capital contribution to Newco, pursuant to Section 7.01 of the
Newco Operating Agreement.
2
<PAGE>
1.16 TELEVISION BROADCAST PROPERTY" means any television broadcast over
the air station licensed (or applying for a license) by the Federal
Communications Commission.
1.17 "TELEVISION AFFILIATION AGREEMENT" means that certain Television
Affiliation Agreement by and between HSN and Company, dated as of August 27,
1989 as amended by agreements dated December 18, 1992 and November 26, 1993.
2. RESTRICTIONS, COVENANTS AND AGREEMENTS
2.1 In consideration for the compensation described in Paragraph 4
hereof, Roberts, jointly and severally, covenant and agree that for a period of
three (3) years following the date of this Agreement:
(a) Company shall not sell, assign, or transfer (or enter into
any agreement to sell, assign or transfer) the FCC broadcast license for the
Station.
(b) Except for the Permitted Programming, Company shall not
commit any Station programming time for commercial programming or advertising,
or enter into any local marketing agreement, time brokerage agreement, or any
other agreement by which Company could commit any Station programming time to
another Person. Notwithstanding the above, Koplar and Company may, upon their
mutual agreement, enter into said agreements with one another.
(c) Mike and Steve shall not, directly or indirectly, sell,
assign, transfer, or Encumber (other than to a commercial lender, for the
purpose of securing debt owing to such commercial lender) any of their capital
stock in Company, or permit any such sale, assignment, transfer or Encumbrance
(other than to a commercial lender, for the purpose of securing debt owing to
such commercial lender).
2.2 Roberts shall have the option to extend the restrictions contained
in Section 2.1 above for an additional two (2) years (i.e., for a total of 5
years), by giving a written notice, executed by each of Mike, Steve and the
Company, agreeing to extend the restrictions contained in Section 2.1 for such
additional two (2) year period; provided, however, in the event any Law
concerning duopolies, local marketing agreements, time brokerage agreements or
any other agreements relating to the provision of programming or sale of
advertising by a third party become materially more restrictive than those in
place as of the date of this Agreement, then Koplar shall have the absolute
right to reject the aforementioned two (2) year option by giving notice within
ten (10) days of receipt of notice from Roberts of such intent to extend, which
notice shall specify, in reasonable detail, the reason for such rejection.
2.3 Roberts agree to use its best efforts to maintain the Television
Affiliation Agreement in full force and effect. Notwithstanding anything
contained in Section 2.1 to the contrary, in the event the Television
Affiliation Agreement is terminated by HSN, through no fault and without the
compliance or cooperation of Roberts (the "HSN Termination"), the restrictions
contained in Section 2.1 above shall no longer be applicable, subject to the
following provisions of
3
<PAGE>
this Section 2.3. If the restrictions contained in Section 2.1 are no longer
applicable because an HSN Termination has occurred during the three (3) year
period following the date of this Agreement or during the additional two (2)
year period if the option to extend is exercised by Roberts pursuant to Section
2.2 above, Roberts shall have the right to substitute another home shopping
format or an Infomercial format, so long as such substitute format is
substantially similar to HSN's scheduling and format; but, if Roberts does not
substitute HSN with such substantially similar home shopping or Infomercial
scheduling and format, then Koplar and the Company shall enter into a time
brokerage arrangement, which will provide for the following:
(i) Company shall receive monthly payments from Koplar which
shall be on the same basis as the payments Company would have received from HSN
pursuant to the Television Affiliation Agreement, for the same applicable time
period, and such payments shall be at the current rate of One Hundred Ninety
Dollars ($190) per hour for One Hundred Sixty Four (164) hours per week or the
rate in effect immediately prior to such termination, whichever is greater.
(ii) Koplar shall provide and schedule all programming to be
carried on the Station except to the extent that programming is required to be
controlled by the Company in order to avoid a "change of control" under
applicable FCC regulations.
(iii) Koplar, in consultation with Roberts, shall sell all
commercial time and receive all revenues as a result of the sale of commercial
advertising and operations of the Station.
(iv) The Company shall do all things necessary to maintain its FCC
license with respect to the Station, and the Company shall be responsible to
maintain its broadcast signal for the Station and do all other things necessary
to continuously broadcast in a manner similar to its current broadcast, subject
only to such changes made necessary as a result of the time brokerage
arrangement with Koplar.
(v) In addition to the amounts to be paid by Koplar to Roberts
pursuant to (i) above, Koplar shall pay to the Company an amount equal to fifty
percent (50%) of the Pre-Tax Cash Flow of Koplar as a result of the time
brokerage arrangement (the "Cash Flow Payment"), as follows: (A) on or before
July 31st of each applicable year, Koplar shall pay to the Company sixty percent
(60%) of the Cash Flow Payment for the period January 1st through June 30th of
such year; (B) on or before March 31st of the following year, Koplar shall pay
to the Company the balance of the Cash Flow Payment for the period January 1st
through December 31st of the prior calendar year. Roberts shall have the right
to review and audit the books and records of Koplar relevant to the
determination of the Pre-Tax Cash Flow as a result of the time brokerage
arrangement.
(vi) Koplar and the Company may enter into such further agreements
regarding the time brokerage arrangement which are consistent with the
provisions provided for in this Section 2.3 and containing such other provisions
which are customary for time brokerage arrangements.
4
<PAGE>
3. RIGHT OF FIRST REFUSAL
3.1 During the Right of First Refusal Period, Roberts covenant and agree
that, if Company receives a BONA FIDE offer ("Company Offer"), from a third
party ("an Outsider") for the purchase of Company's FCC broadcast license for
the Station, or to enter into any agreements as contemplated under Section
2.1(b) above, or if Mike and/or Steve receive a bona FIDE offer ("Shareholder
Offer") (Company Offer and Shareholder Offer are collectively referred to as
"Offer") from an Outsider for the purchase of the Station or for the purchase of
any capital stock in the Company, before accepting such Offer, the Company, Mike
and/or Steve, as applicable, shall offer the right to purchase such property or
to enter into such agreements, as applicable, in writing to Koplar (or its
designated Affiliate), upon the same terms and conditions set forth in the
Offer. Roberts shall give Koplar written notice which shall set forth (i) the
name and address of the Outsider, and (ii) all of the terms and conditions of
the Offer (the "Offer Notice") (The Offer Notice may be delivered concurrently
with any notice required to be delivered to Silver King pursuant to Section
3.1(c) below). In addition, Roberts shall provide Koplar, within five (5) days
from Koplar's request, with any additional information in their possession or of
which they have knowledge regarding the Offer that Koplar may reasonably
request.
(a) Within sixty (60) days (plus an additional fourteen (14) days
if Silver King then has the right of first refusal as mentioned in Section
3.1(c) below) after its receipt of the Offer Notice (which period may run
concurrently with any notice required to be given by Roberts to Silver King's
right of refusal noted in Section 3.1(c) below), Koplar shall notify Roberts if
Koplar (or its designated Affiliate) determines to purchase such property or
enter into such agreements, as applicable, in accordance with the terms set
forth in the Offer Notice. If Koplar gives proper notice as required by this
Agreement, Company, Mike and/or Steve (as applicable) and Koplar (or its
designated Affiliate) shall proceed to closing in accordance with the
substantive terms and conditions of the Offer, with such non-material changes as
are appropriate due to the change in the purchasing parties.
(b) If Koplar (or its designated Affiliate) does not notify
Roberts of its intention to exercise the aforesaid right of first refusal within
the time period specified in Section 3.1(a), Company, Mike and/or Steve (as
applicable) may, subject to Section 3.2 of this Agreement, sell such property or
enter into such agreement, as applicable, to the Outsider, in accordance with
all of the terms and conditions set forth in the Offer Notice, with such
non-material changes as are appropriate due to the passage of time. If Koplar
gives notice of its intention to exercise its right of first refusal but, due to
Koplar or its Affiliates' own fault and through no fault of Roberts, any
Affiliate of Roberts, or any other Person, Koplar is unable to close on such
transaction within the later of (i) One Hundred Eighty (180) days after such
notice, (ii) the time provided in the Offer, or (iii) the time necessary to
obtain any regulatory approval required in connection with such transaction,
then Roberts shall be free to consummate the proposed transaction with the
Outsider. If Company, Mike and/or Steve (as applicable), do not consummate the
sale of such property or enter into such agreements, as applicable, with the
Outsider prior to one hundred eighty (180) days after the date of the Offer
Notice or such longer time as is necessary to obtain any regulatory approval
required in connection with such
5
<PAGE>
transaction, or if the terms or provisions as described in the Offer Notice are
changed in any material respect, then any such sale or agreement with the
Outsider shall be null, void and of no effect, and the Company, Mike and/or
Steve (as applicable) may not enter into any transaction contemplated by Section
3.1(c) without making a new offer pursuant to the right of first refusal set
forth in this Section 3.1.
(c) Notwithstanding anything contained herein to the contrary,
Koplar acknowledges that Silver King Broadcasting of Missouri, Inc., a Delaware
Corporation ("Silver King"), pursuant to that certain Right of First Refusal and
Put Agreement, dated as of April 28, 1989, by and among the Company, Silver
King, and the holder of the Company's Class A Voting Common Stock (a true and
correct copy of which has been delivered to Koplar), has an existing right of
first refusal regarding the sale of the Station (whether by way of the purchase
of all or substantially all of the assets of the Station or for the sale of
stock in the Company) to a third party, and Koplar's right of first refusal is
subordinate to the presently existing right of first refusal, lien and other
rights of Silver King pursuant to such aforementioned agreement with Silver
King, and a Shareholder Agreement with Silver King dated February 21, 1989 (a
true and correct copy of which has been delivered to Koplar).
3.2 In the event Koplar does not exercise its right of first refusal as
set forth in Section 3.1 above, and if Company proposes to sell Company's FCC
broadcast license for the Station to a Baker Related Entity (as defined below),
or to enter into any agreements as contemplated under Section 2.1(b) above with
a Baker Related Entity, or if Mike and/or Steve propose to sell the Station or
any capital stock in the Company to a Baker Related Entity, then Koplar may, by
written notice ("Election Notice") to Roberts within sixty (60) days after its
receipt of the Offer Notice, require Roberts to purchase all of Koplar's
Membership Interest (as defined in the Newco Operating Agreement) in Newco at
the Purchase Price, prior to or simultaneously with the consummation of such
agreement or sale . Notwithstanding anything contained herein to the contrary,
if Koplar gives the Election Notice as required herein, Company, Mike and/or
Steve (as applicable) may not sell such property to or enter into such agreement
with a Baker Related Entity, as applicable, until Koplar has been paid the full
Purchase Price. As used herein, a "Baker Related Entity" is Barry Baker; any
spouse, child, or sibling of Barry Baker; or any entity in which Barry Baker,
any Affiliate of Barry Baker, or any spouse, child or sibling of Barry Baker is
(i) a five percent (5%) or greater equity holder or participant as a
stockholder, partner, participant, member, or equity holder; or (ii) is an
officer, director, lender of funds, or guarantor of obligations or liabilities
of such entity.
3.3 So long as Koplar has a Membership Interest in Newco, Roberts
covenant and agree, that except for television broadcast properties proposed and
80% or more financed by Silver King or HSN, Paxson Communications Corporation, a
Delaware corporation, Roy Speer, or Lowell Speer, or any of their respective
Affiliates, if Company, Mike or Steve, or any of their Affiliates, desire to
acquire any ownership or equity interest in a television broadcast property or
any Person which owns or is contemplating owning, directly or indirectly through
any Affiliate, a television broadcast property (the "Acquisition") before
acquiring any such equity or ownership interest: Roberts shall offer in writing
the right to purchase such ownership interest in the subject television property
to Newco (or its designated Affiliate); and, if the Acquisition includes
6
<PAGE>
participation of an equity investor ("Outside Investor") in the Person which
owns or is contemplating owning, directly or indirectly through an Affiliate, a
television broadcast property, Roberts shall offer to Koplar, or its designated
Affiliate, the right to participate as an equity investor upon the same terms
and conditions as being proposed or offered with respect to the Outside
Investor. Roberts shall give Newco and Koplar written notice which shall set
forth (i) the name and address of the proposed television broadcast property
related to the Acquisition, and (ii) all of the terms and conditions of the
Acquisition including but not limited to all provisions relating to the proposed
investment and financial terms related to any Outside Investor (the "Acquisition
Notice"). In addition, Roberts shall provide Newco and Koplar, within five (5)
days from Newco's or Koplar's reasonable request, with any additional
information in the possession or knowledge of Roberts regarding the Acquisition
that Newco or Koplar may request. Notwithstanding the above, Roberts shall not
be prohibited from individually owning shares of stock of any company which is
traded publicly on a national stock exchange without offering such investment to
Newco and Koplar pursuant to the provisions of this Section 3.3. As used herein,
"control" means the ownership of more than fifty percent (50%) of the voting
securities and more than fifty percent (50%) of all of the equity of a Person.
(a) Within sixty (60) days after its receipt of the Acquisition
Notice, Newco shall notify Roberts if Newco (or its designated Affiliate)
determines to purchase an interest in the television broadcast property included
in the Acquisition Notice, in accordance with the terms set forth in the
Acquisition Notice
(b) In the event that the Acquisition includes the ownership of
any equity interest by Roberts in a Person in which an Outside Investor will
own, directly or indirectly, an equity interest, then within sixty (60) days
after its receipt of the Acquisition Notice, Koplar shall notify Roberts if
Koplar (or its designated Affiliate) determines to participate in the
Acquisition upon substantially the same terms and provisions as are being
proposed or offered with respect to the Outside Investor.
(c) If Newco and Koplar (or their designated Affiliates) do not
exercise the aforesaid rights of first refusal, Roberts may acquire such
interest in such television broadcast property or in such Person, provided,
however, all of the terms and conditions shall be identical to those set forth
in the Acquisition Notice with such non-material changes as are appropriate due
to the change in the purchasing parties or passage of time. If Roberts does not
consummate the purchase of such interest prior to one hundred and eighty (180)
days after the date of the Acquisition Notice or such longer time as may be
necessary to obtain any required regulatory approval, or if the terms or
provisions as described in the Acquisition Notice are changed in any material
respect, then any such Acquisition shall be null, void and have no effect and
the right of first refusal set forth in this Section 3.2 shall again apply.
(d) Steve, Mike and the Company agree to cooperate with Koplar
and Newco in acquiring the television broadcast property and/or equity interest
in a Person, pursuant to Newco's or Koplar's exercise of its rights of first
refusal contained in this Section 3.3.
7
<PAGE>
(e) If Newco holds a license or construction permit ("Permit")
for the development of a broadcast television property, but chooses not or does
not have the available financial resources to construct and develop such
property, and if (i) Roberts proposes to develop such property on its own, or
(ii) Roberts proposes accepting a firm and bona fide offer from a third party to
participate as an equity investor in the development of such property, then (i)
Newco shall have the right to participate on the same basis as Roberts, or (ii)
Koplar shall have the right to participate on the same basis as such third
party, pursuant to the right of first refusal provisions set forth in this
Section 3.3. If Newco and Koplar do not exercise the aforesaid rights of first
refusal, Roberts may acquire from Newco for cash such Permit and all other
rights of Newco with respect to such property for an amount equal to Newco's
direct costs, plus 9% per annum. In the event, pursuant to the above, Roberts
purchases such Permit and other rights to develop such property on its own, and
prior to broadcasting on such property for at least twelve (12) consecutive
months, Roberts proposes to have a third party participate as an equity investor
in such property or the entity which directly or indirectly owns an equity
interest in such property, then Koplar shall have the right to participate on
the same basis as such third party, pursuant to the right of first refusal
provisions set forth in this Section 3.3.
4. COMPENSATION
4.1 In consideration of the covenants and agreements of Roberts
hereunder, Koplar shall pay to Company a total of Three Hundred Thousand Dollars
($300,000), to be paid as follows:
(a) One Hundred Thousand Dollars ($100,000) shall be paid upon
execution of this Agreement (the "Initial Payment").
(b) One Hundred Thousand Dollars ($100,000) shall be paid on the
first anniversary date of this Agreement.
(c) The final One Hundred Thousand Dollars ($100,000) shall be
paid on the second anniversary date of this Agreement.
4.2 In the event Roberts elect, by written notice pursuant to Section
2.2 above, to extend the restrictions contained in Section 2.1 above for an
additional two (2) years (i.e., for a total of 5 years), then Koplar shall pay
to Company One Hundred Fifty Thousand Dollars ($150,000) on the third
anniversary date of this Agreement and One Hundred Fifty Thousand Dollars
($150,000) on the fourth anniversary date of this Agreement.
4.3 Notwithstanding anything contained herein to the contrary, in the
event (a) of an HSN Termination (referred to in Section 2.3); (b) Company sells
Company's FCC broadcast license for the Station, or Company enters into any
agreements as contemplated under Section 2.1(b) above; or (c) Mike and/or Steve
sell the Station or any capital stock in the Company, all compensation
thereafter required to be paid by Koplar pursuant to this Agreement shall
immediately cease and Koplar shall have no further monetary obligations to
Roberts pursuant to this Agreement.
8
<PAGE>
4.4 Notwithstanding Section 4.3(c) above, nothing contained in this
Agreement shall prohibit Mike and/or Steve from transferring any capital stock
in the Company to a revocable trust created by Mike and/or Steve for the primary
benefit of themselves, their respective spouses and/or children or from
transferring any capital stock in the Company directly to their spouse and/or
children; provided, however, that such transferee shall thereafter remain
subject to all of the restrictions, terms and conditions of this Agreement, and
such transferee shall join in and execute an agreement to such effect in form
and substance reasonably satisfactory to Koplar.
5. ADDITIONAL AGREEMENTS
5.1 Upon execution of this Agreement, Koplar, Mike and Steve shall
execute the Newco Operating Agreement and take such other action as is necessary
to cause the formation of Newco.
5.2 Upon execution of this Agreement, Koplar shall submit to Mike and
Steve, written evidence from Foothill Capital Corporation, that Koplar has
$3,250,000 of irrevocable funds available for investment in Newco, as
contemplated and set forth in the Newco Operating Agreement (the "Foothill
Financing"). Thereafter, from time to time as reasonably requested by Roberts,
Koplar shall provide written evidence of its continuing ability to provide the
necessary funds for its investment in Newco, as contemplated and set forth in
the Newco Operating Agreement.
6. REPRESENTATIONS AND WARRANTIES OF ROBERTS
Roberts represent and warrant to Koplar as follows:
6.1 Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, is duly qualified as a
foreign corporation and is in good standing in the State of Missouri and in
those jurisdictions where the failure to so qualify would have a material
adverse effect on Company. Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby.
6.2 This Agreement and all other documents executed instant hereto or
thereto (collectively the "Transaction Documents") have been duly authorized,
executed and delivered by Roberts and constitute legal, valid and binding
obligations of Roberts in accordance with their respective provisions. Neither
the execution nor performance of the Transaction Documents by Mike, Steve and
the Company (i) violates or will violate any provisions of any Law, or (i)
requires any approval, consent or withholding of objections on the part of any
Governmental Authority (except with regard to a transfer of control pursuant to
Section 3 of this Agreement, which may require FCC approval), or (iii) conflicts
with any of the provisions of Company's Articles of Incorporation or Bylaws, or
(iv) conflicts with, results in a breach of or constitutes a default under any
indenture, mortgage, agreement, lease or other instrument to which Mike, Steve
or the Company is a party or by which any of them are bound.
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6.3 Roberts is not in violation, and has not received notice of any
alleged violation, of any applicable, federal, state, local or foreign Law,
Order or other requirement of any Governmental Authority, which violation could
have material adverse effect on the operation of the Company or the Station.
Company holds, and at all relevant times held, all licenses, permits,
registrations and authorizations necessary for the lawful operations of the
Station in all material respects.
6.4 Roberts have not retained any broker or finder with respect to the
transactions contemplated by this Agreement.
6.5 No consent, approval, or authorization by or notice to any
Governmental Authority (except with regard to a transfer of control pursuant to
Section 3 of this Agreement, which may require FCC approval), is required in
connection with the execution, delivery or performance by Roberts of this
Agreement or the transactions contemplated hereby.
7. REPRESENTATIONS AND WARRANTIES OF KOPLAR
Koplar represents and warrants to Roberts as follows:
7.1 Koplar is a corporation , duly organized, validly existing and in
good standing under the laws of the State of Missouri and has all requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated by it, including without limitation, the Foothill
Financing.
7.2 The Transaction Documents have been duly authorized, executed and
delivered by Koplar and constitute legal, valid and binding obligations of
Koplar in accordance with their respective provisions. Neither the execution nor
performance of the Transaction Documents, including without limitation, the
Foothill Financing, by Koplar (i) violates or will violate any provision of any
Law, or (ii) requires any approval, consent or withholding of objections on the
part of any Governmental Authority (except with regard to a transfer of control
pursuant to Section 3 of this Agreement, which may require FCC approval), or
(iii) conflicts with any of the provisions of Koplar's Articles of Incorporation
or Bylaws, or (iv) conflicts with, results in a breach of or constitutes a
default under any indenture, mortgage, agreement, lease or other instrument of
which Koplar is a party or by which it is bound.
7.3 No consent, approval, or authorization by or notice to any
Governmental Authority (except with regard to a transfer of control pursuant to
Section 3 of this Agreement, which may require FCC approval), is required in
connection with the execution, delivery or performance by Koplar of this
Agreement or the transactions contemplated hereby.
7.4 Koplar has not retained any broker or finder with respect to the
transactions contemplated by this Agreement.
7.5 Koplar has the necessary funding in order to make its required
$3,500,000 investment into Newco as and when required under the Newco Operating
Agreement.
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8. OBLIGATIONS
8.1 Simultaneous with the execution of this Agreement, Roberts shall
deliver to Koplar in accordance herewith:
(a) The Newco Operating Agreement, duly executed by Mike and
Steve;
(b) Corporate resolutions of Company authorizing the transactions
contemplated by this Agreement;
(c) The favorable written opinion of Armstrong, Teasdale,
Schlafly & Davis, counsel for Roberts, to Koplar regarding the relevant
representations and warranties contained in Section 6 of this Agreement, and
which is otherwise reasonably satisfactory to Koplar and Koplar's counsel; and
(d) All such other certificates, affidavits, consents and other
documents reasonably required by Koplar to effectively comply with the
provisions of this Agreement.
8.2. Simultaneous with the execution of this Agreement, Koplar shall
deliver to Roberts in accordance herewith:
(a) The Initial Payment;
(b) The Newco Operating Agreement, duly executed by Koplar;
(c) Written evidence from Foothill Capital Corporation, that
Koplar has Three Million Five Hundred Thousand Dollars ($3,500,000) of
irrevocable funds available for investment in Newco, as contemplated and set
forth in the Newco Operating Agreement;
(d) Corporate resolutions of Koplar authorizing the transactions
contemplated by this Agreement;
(e) The favorable written opinion of Greensfelder, Hemker & Gale,
P.C., counsel for Koplar, to Roberts regarding the relevant representations and
warranties contained in Section 7 of this Agreement, and which is otherwise
reasonably satisfactory to Roberts and Roberts' counsel; and
(f) All such other certificates, affidavits, consents and other
documents reasonably required by Roberts to effectively comply with the
provisions of this Agreement.
9. REMEDIES
Recognizing that immediate irreparable injury will result to
Koplar and Roberts, their respective businesses and properties in the event of a
breach of any of the provisions of Sections 2 or 3 of this Agreement, that such
provisions are necessarily of a special, unique and
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extraordinary nature and that the loss arising from a breach of any of such
provisions cannot reasonably and adequately be compensated by money damages, and
because this Agreement is based in large measure upon such provisions, Koplar
and Roberts expressly agree that in the event of a violation of any of such
provisions, the nonbreaching party shall be entitled, in addition to any other
remedies and damages such nonbreaching party could recover, at law or in equity,
as a result of any such violation, to obtain restraining orders and/or
injunctions, both temporary and permanent, in order to prevent future violations
thereof by the breaching party and any Affiliate. If the nonbreaching party
seeks such an order or injunction and the court requires the nonbreaching party
to post a bond in connection therewith, Koplar and Roberts stipulate and
acknowledge that the reasonable amount of such bond shall be limited to $50,000.
Seeking and/or obtaining equitable relief shall not preclude the nonbreaching
party from obtaining damages arising out of any breach of this Agreement. Koplar
and Roberts may pursue either or both of the remedies (injunction and damages)
described in this paragraph concurrently or consecutively in any order as to any
such breach or violation, and the pursuit of one of such remedies at any time
will not be deemed an election of remedies or waiver of the right to pursue the
other of such remedies. Koplar and Roberts hereby waive the claim or defense the
nonbreaching party has an adequate remedy at law, and Koplar and Roberts shall
not claim, at any such action or proceeding, that an adequate remedy at law
exists. If (i) Koplar fails to make any payments to Roberts required under this
Agreement and such failure to make such required payment continues for the ten
(10) day period following notice by Roberts to Koplar of such failure to pay, or
if (ii) a final unappealable determination is made by a court of competent
jurisdiction (or an arbitrator if the parties mutually agree to arbitration)
that Koplar failed to make an investment into Newco that was required under the
Newco Operating Agreement, or if (iii) Koplar fails to provide evidence of its
continuing financial ability pursuant to Section 5.2 and such failure continues
after sixty (60) days' notice from Roberts, then Roberts may, at their election,
terminate this Agreement, and shall thereafter be relieved of all future
obligations and restrictions hereunder; provided, however, that Roberts shall
retain all available rights and remedies against Koplar as a result of such
breach.
10. MISCELLANEOUS
10.1 Any obligation, agreement, covenant, representation or warranty
undertaken by Roberts hereunder shall be deemed to be undertaken by Company,
Mike and Steve, jointly and severally.
10.2 All notices and other communications made pursuant to this
Agreement shall be in writing and shall be deemed to have been given or
delivered upon receipt if given by hand, or three business days after being
mailed by registered or certified mail, postage prepaid, return receipt
requested, in each case addressed as follows:
If to Company, Roberts Broadcasting Company
Mike or Steve: Kingsway Centre
1408 North Kingshighway, Suite 300
St. Louis, Missouri 63113
Attn: Steven C. Roberts, President
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with a copy to: Armstrong, Teasdale, Schlafly & Davis
One Metropolitan Square, Suite 2600
St. Louis, Missouri 63102
Attn: Joseph S. von Kaenel
If to Koplar: Koplar Communications, Inc.
4935 Lindell Blvd.
St. Louis, Missouri 63108
Attn: Edward J. Koplar, President
with a copy to: Greensfelder, Hemker & Gale, P.C.
10 South Broadway, Suite 1800
St. Louis, Missouri 63102
Attn: Joseph D. Lehrer
PROVIDED, HOWEVER, any party may, be notice given in accordance with this
Section to the other party, designate another address or person for receipt of
notices hereunder.
10.3 The headings of the Sections of this Agreement and in the Exhibits
to this Agreement are inserted for convenience of reference only and shall not
be used in interpreting this Agreement. Unless specifically stated otherwise,
references to Section, paragraphs, or Exhibits refer to the Sections,
paragraphs, or Exhibits to this Agreement.
10.4 All of the Exhibits to this Agreement constitute an integral part
of this Agreement as if fully written within it.
10.5. This Agreement and the agreements, documents and instruments to be
delivered under it constitute the entire understanding and agreement between the
parties concerning the subject matter covered hereby and supersede all prior
agreements, understandings and commitments with respect to such subject matter
including without limitation the Letter of Intent.
10.6. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Missouri, without regards to conflicts
of law principles.
10.7. Neither party shall make any public announcements concerning this
Agreement or the transactions contemplated by it without the prior written
consent of the other party. Notwithstanding the foregoing, either party may
disclose the transactions in accordance with applicable Laws.
10.8. This Agreement and the rights and duties hereunder shall be
binding upon and inure to the benefit of the successors and assigns of each of
the parties hereto, but shall not be assignable or delegable by any party
without the prior written consent of the other, or as specifically permitted
herein, and any purported assignment without such prior written consent shall be
null and void.
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10.9. Any waiver by Roberts or by Koplar of any breach of or failure to
comply with any provision of this Agreement by another party, shall be in
writing and shall not be construed as, or constitute, a continuing waiver of
such provision, or a waiver of any other breach of, or failure to comply with,
any other provision of this Agreement.
10.10. This Agreement may not be amended orally but only by an
instrument in writing duly executed by the parties.
10.11. More than one counterpart of this Agreement may be executed by
the parities hereto, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
10.12. Except as otherwise specifically provided in this Agreement, each
party hereto shall be solely liable for all costs and expenses (including but
not limited to attorneys', accountants', brokers and finder fees) incurred by it
in connection with the negotiation of this Agreement and the consummation of the
transactions contemplated hereby.
10.13. All pronouns and any variations thereof refer to the masculine,
feminine, neuter, singular or plural, as the context may require.
10.14 The non-prevailing party in any arbitration or legal proceeding
pursuant this Agreement shall indemnify and hold the prevailing party harmless
from all costs and expenses (including reasonable attorneys' fees) incurred by
the prevailing party in enforcing the prevailing party's rights under this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the day and year first above written.
ROBERTS BROADCASTING COMPANY KOPLAR COMMUNICATIONS, INC.
By:/s/Steven C. Roberts By:/s/Edward J. Koplar
_____________________________ ____________________________
Name: Steven C. Roberts Name: Edward J. Koplar
Title: President Title: President
/s/Michael V. Roberts
________________________________
Michael V. Roberts
/s/Steven C. Roberts
________________________________
Steven C. Roberts
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<PAGE>
Exhibit A - Operating Agreement of Newco has been intentionally omitted by
the Registrants.
A copy of this omitted Exhibit A will be furnished to the Securities and
Exchange Commission upon request.
- ------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of September 30, 1997
by and among
ACME INTERMEDIATE HOLDINGS, LLC,
ACME INTERMEDIATE FINANCE, INC.
and
CIBC WOOD GUNDY SECURITIES CORP.
as Initial Purchaser
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
1. Definitions................................................... 1
2. Exchange Offer................................................ 5
3. Shelf Registration............................................ 8
(a) Initial Shelf Registration.............................. 8
(b) Subsequent Shelf Registrations.......................... 9
(c) Supplements and Amendments.............................. 9
4. Damage Amounts................................................ 9
5. Registration Procedures....................................... 11
6. Registration Expenses......................................... 22
7. Indemnification............................................... 24
8. Rules 144 and 144A............................................ 27
9. Underwritten Registrations.................................... 28
10. Miscellaneous................................................. 28
(a) Remedies................................................ 28
(b) Enforcement............................................. 28
(c) No Inconsistent Agreements.............................. 29
(d) Adjustments Affecting Registrable Notes................. 29
(e) Amendments and Waivers.................................. 29
(f) Notices................................................. 29
(g) Successors and Assigns.................................. 30
(h) Counterparts............................................ 30
(i) Headings................................................ 30
(j) Governing Law........................................... 30
(k) Severability............................................ 31
(l) Entire Agreement........................................ 31
(m) Notes Held by the Obligors or Their
Affiliates............................................. 31
-i-
<PAGE>
NOTES REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") dated as of
September 30, 1997, by and between ACME INTERMEDIATE HOLDINGS, LLC, a Delaware
limited liability company (the "COMPANY"), ACME FINANCE INC., a Delaware
Corporation (together with the Company, the "Issuers"), and CIBC WOOD GUNDY
SECURITIES CORP. (the "INITIAL PURCHASER").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of September 24, 1997, by and among the Issuers and the
Initial Purchaser (the "PURCHASE AGREEMENT") relating to the sale by the Issuers
to the Initial Purchaser of $71,634,000 aggregate principal amount at maturity
of 12% Senior Secured Discount Notes due 2005 of the Issuers (the "NOTES").
In order to induce the Initial Purchaser to enter into the Purchase
Agreement, the Issuers have agreed to provide the registration rights set forth
in this Agreement for the benefit of the Initial Purchaser and the Holders. The
execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADVICE: See Section 5.
APPLICABLE PERIOD: See Section 2(b).
CLOSING: See the Purchase Agreement.
COMPANY: See the introductory paragraph to this Agreement.
DAMAGE AMOUNTS: See Section 4(a).
EFFECTIVENESS DATE: The 150th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a).
EVENT DATE: See Section 4(b).
<PAGE>
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a).
EXCHANGE OFFER: See Section 2(a).
EXCHANGE REGISTRATION STATEMENT: See Section 2(a).
FILING DATE: The 45th day after the Issue Date.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c).
INDEMNIFYING PERSON: See Section 7(c).
INDENTURE: The Indenture, dated as of September 30, 1997, by and
between the Issuers and Wilmington Trust Company, as trustee, pursuant to which
the Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
INITIAL PURCHASER: See the introductory paragraph to this
Agreement.
INITIAL SHELF REGISTRATION: See Section 3(a).
INSPECTORS: See Section 5(o).
ISSUE DATE: The date on which the original Notes are sold to the
Initial Purchasers pursuant to the Purchase Agreement.
LIEN: See the Indenture.
NASD: See Section 5(t).
NOTES: See the introductory paragraphs to this Agreement.
PARTICIPANT: See Section 7(a).
PARTICIPATING BROKER-DEALER: See Section 2(b).
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PERSON: An individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government (including any agency or political subdivision
thereof).
PRIVATE EXCHANGE: See Section 2(b).
PRIVATE EXCHANGE NOTES: See Section 2(b).
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs to this
Agreement.
RECORDS: See Section 5(o).
REGISTRABLE NOTES: The Notes upon original issuance of the Notes and
at all times subsequent thereto and, if issued, the Private Exchange Notes,
until in the case of any such Notes or any such Private Exchange Notes, as the
case may be, (i) a Registration Statement covering such Notes or such Private
Exchange Notes has been declared effective by the SEC and such Notes or such
Private Exchange Notes, as the case may be, have been disposed of in accordance
with such effective Registration Statement, (ii) such Notes or such Private
Exchange Notes, as the case may be, are sold in compliance with Rule 144, (iii)
in the case of any Note, the Exchange Offer has been consummated, (iv) such
Notes or such Private Exchange Notes, as the case may be, cease to be
outstanding or (v) two years have passed from the Issue Date.
REGISTRATION DEFAULT: See Section 4(a).
REGISTRATION STATEMENT: Any registration statement of the Issuers,
including, but not limited to, the Exchange Registration Statement, which covers
any of the Registrable Notes pursuant to the provisions of this Agreement,
including
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<PAGE>
the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES: See the introductory paragraphs to this Agreement.
SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c).
SHELF REGISTRATION: See Section 3(b).
SUBSEQUENT SHELF REGISTRATION: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration
in which securities of the Obligors are sold to an underwriter(s) for reoffering
to the public.
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2. EXCHANGE OFFER
(a) The Issuers agree to use their best efforts to file with the SEC as
soon as practicable after the Closing, but in no event later than the Filing
Date, an offer to exchange (the "EXCHANGE OFFER") any and all of the Notes for a
like aggregate principal amount at maturity of debt securities of the Obligors
which are identical to the Notes (the "EXCHANGE NOTES") (and which are entitled
to the benefits of the Indenture or a trust indenture which is substantially
identical to the Indenture (other than such changes to the Indenture or any such
identical trust indenture as are necessary to comply with any requirements of
the SEC to effect or maintain the qualification thereof under the TIA) and
which, in either case, has been qualified under the TIA), except that the
Exchange Notes shall have been registered pursuant to an effective Registration
Statement under the Securities Act. The Exchange Offer will be registered under
the Securities Act on an appropriate form (the "EXCHANGE REGISTRATION
STATEMENT") and will comply with all applicable tender offer rules and
regulations under the Exchange Act. The Issuers agree to use their best efforts
to (x) cause the Exchange Registration Statement to become effective under the
Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer
open for at least 30 days (or longer if required by applicable law) after the
date that notice of the Exchange Offer is mailed to Holders; and (z) consummate
the Exchange Offer on or prior to the 180th day following the Issue Date. Each
Holder who participates in the Exchange Offer will be required to represent that
any Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, and that such Holder is not an affiliate of
the Obligors within the meaning of Rule 405 promulgated under the Securities Act
or if it is such an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable. Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, MUTATIS
MUTANDIS, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers (as defined
below), and the Issuers shall have no further obligation to register Registrable
Notes (other than Private Exchange Notes and Exchange Notes held by
Participating Broker-Dealers) pursuant to Section 3 of this Agreement.
5
<PAGE>
(b) The Issuers shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchaser, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act)
of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"PARTICIPATING BROKER-DEALER"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies, in
the reasonable judgment of the Initial Purchasers, represent the prevailing
views of the staff of the SEC. Such "Plan of Distribution" section shall also
allow the use of the Prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes.
The Issuers shall use their best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes, PROVIDED that such period shall not
exceed 180 days (or such longer period if extended pursuant to the last
paragraph of Section 5) after the date of the consummation of the Exchange Offer
(the "APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Issuers upon the request of the Initial Purchaser
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to the Initial Purchaser, in exchange (the "PRIVATE
EXCHANGE") for the Notes held by the Initial Purchaser, a like principal amount
at maturity of debt securities of the Issuers that are identical in all material
respects to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and which are
issued pursuant to the same indenture as the Exchange Notes). The Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes. The
Exchange Notes and any Private Exchange Notes will be exchanged at the Accreted
Value of the Notes existing on the date the exchange is effected;
6
<PAGE>
and, if cash interest has begun to accrue on the Notes, interest on the Exchange
Notes and any Private Exchange Notes will accrue from the later of (i) the last
interest payment date on which interest was paid on the Notes surrendered in
exchange therefor or (ii) if the Notes are surrendered for exchange on a date in
a period which includes the record date for an interest payment date to occur on
or after the date of such exchange and as to which interest will be paid, the
date of such interest payment date.
In connection with the Exchange Offer, the Issuers shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) utilize the services of a depository for the Exchange Offer
with an address in New York, New York; and
(iii) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Issuers shall:
(i) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount at maturity to the Notes of such Holder so
accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture substantially identical to the
Indenture, which in either event will provide that the Exchange Notes will not
be subject to the transfer restrictions set forth in the Indenture and that the
7
<PAGE>
Exchange Notes, the Private Exchange Notes and the Notes will vote and consent
together, to the extent provided by the Indenture, on all matters as one class
and that neither the Exchange Notes, the Private Exchange Notes nor the Notes
will have the right to vote or consent as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer, the
Issuers or Holders of at least a majority in aggregate principal amount at
maturity of the Registrable Notes reasonably determine in good faith that (i)
the Exchange Notes would not, upon receipt, be tradable by such Holders which
are not affiliates (within the meaning of the Securities Act) of the Issuers
without restriction under the Securities Act and without restrictions under
applicable state securities laws or (ii) after conferring with counsel, the SEC
is unlikely to permit the consummation of the Exchange Offer prior to 180 days
after the Issue Date, (2) subsequent to the consummation of the Private
Exchange, any holder of the Private Exchange Notes so requests, or (3) the
Exchange Offer is commenced and not consummated within 180 days of the Issue
Date, then the Issuers shall promptly deliver to the Holders and the Trustee
written notice thereof (the "SHELF NOTICE") and shall file an Initial Shelf
Registration pursuant to Section 3.
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c),
then:
(a) INITIAL SHELF REGISTRATION. The Issuers shall prepare and file
with the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Notes (the "INITIAL
SHELF REGISTRATION"). The Issuers shall use their best efforts to file with the
SEC the Initial Shelf Registration within 30 days of the delivery of the Shelf
Notice. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
such Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Issuers shall not permit
any securities other than the Registrable Notes to be included in the Initial
Shelf Registration or any Subsequent Shelf Registration (as defined below). The
Issuers shall use their best efforts to cause the Initial Shelf Registration to
be declared effective under the Securities Act on or prior to the Effectiveness
Date and to keep the Initial Shelf Registration continuously effective under the
Securities Act until two years from the Issue Date (the "EFFECTIVENESS PE-
8
<PAGE>
RIOD"), or such shorter period ending when (i) all Registrable Notes covered by
the Initial Shelf Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Registrable Notes has been declared effective
under the Securities Act.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (prior to the sale of all of
the securities registered thereunder), the Issuers shall use their best efforts
to obtain the prompt withdrawal of any order suspending the effectiveness
thereof, and in any event shall within 45 days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Notes (a "SUBSEQUENT SHELF REGISTRATION"). In the event that
the Issuers become eligible to use any form other than form S-1 for a Subsequent
Shelf Registration, if permitted under applicable law, the Issuers shall be
entitled to cause a Subsequent Shelf Registration to be substituted for the
Initial Shelf Registration. If a Subsequent Shelf Registration is filed, the
Issuers shall use their best efforts to cause the Subsequent Shelf Registration
to be declared effective as soon as practicable after such filing and to keep
such Registration Statement continuously effective during the Effectiveness
Period. As used herein the term "SHELF REGISTRATION" means the Initial Shelf
Registration and any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Issuers shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount at maturity
of the Registrable Notes covered by such Registration Statement or by any
underwriter(s) of such Registrable Notes.
4. ADDITIONAL INTEREST
(a) The Issuers and the Initial Purchaser agree that the Holders of
Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the
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Obligors agree to pay liquidated damage payments on the Notes ("DAMAGE AMOUNTS")
under the circumstances set forth below:
(i) if the Exchange Registration Statement has not been filed on or
prior to the Filing Date or the Initial Shelf Registration has not been
filed within 30 days following the delivery of a Shelf Notice prior to the
filing date;
(ii) if neither the Exchange Registration Statement nor the Initial
Shelf Registration has been declared effective on or prior to the
Effectiveness Date; and/or
(iii) if either (A), if applicable, the Issuers have not exchanged
the Exchange Notes for all Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to the 180th day following the
Issue Date or (B) , if applicable, the Exchange Registration Statement
ceases to be effective at any time prior to the time that the Exchange
Offer is consummated or (C) if applicable, the Shelf Registration has been
declared effective and such Shelf Registration ceases to be effective at
any time prior to the earlier of the date on which all Registrable Notes
covered by the Shelf Registration have been sold in the manner set forth
and as contemplated in the Shelf Registration or the second anniversary of
the Issue Date;
(each such event referred to in clauses (i) through (iii) above is a
"REGISTRATION DEFAULT"), the sole remedy available to holders of the Notes will
be the accrual and cash payment of Damage Amounts as follows: upon the
occurrence of one or more Registration Defaults, Damage Amounts shall begin to
accrue at a rate equal to 0.5% per annum of the average Accreted Value of the
Notes for the first 90 days during which any such Registration Default exists;
and the per annum Damage Amount accrual rate will increase by an additional
0.25% per annum of the average Accreted Value (as defined in the Indenture) of
the Notes for each subsequent 90-day period during which any Registration
Default remains uncured, up to a maximum Damage Amount accrual rate of 2.0% per
annum of the average Accreted Value of the Notes for all Registration Defaults,
PROVIDED, HOWEVER, that (1) upon the filing of the Exchange Registration
Statement or the Initial Shelf Registration (in the case of (i) above), (2) upon
the effectiveness of the Exchange Registration Statement or a Shelf Registration
(in the case of (ii) above) or (3) upon the exchange of Exchange Notes for all
Notes tendered (in the case of (iii)(A) above), or upon the effectiveness of
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the Exchange Registration Statement which had ceased to remain effective (in the
case of (iii)(B) above), or upon the effectiveness of the Shelf Registration
which had ceased to remain effective (in the case of (iii)(C) above), Damage
Amounts on the Notes as a result of such clause (i), (ii) or (iii) (or the
relevant subclause thereof), as the case may be, shall cease to accrue, and
PROVIDED, FURTHER, that in the case of a Registration Default under (iii)(C)
above, will only be payable with respect to Notes so long as they are
Registrable Notes.
(b) The Issuers shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which Damage
Amounts are required to be paid (an "EVENT DATE"). Any Damage Amounts due
pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in
cash semi-annually on each March 31 and September 30 (to the Holders of record
on the March 15 and September 15 immediately preceding such dates), commencing
with the first such date occurring after any such Damage Amounts commence to
accrue. The Damage Amounts with respect to each Note will be determined by
multiplying the applicable Damage Amounts accrual rate by the average Accreted
Value of such Note during the applicable period, multiplied by a fraction, the
numerator of which is the number of days such Damage Amounts accrual rate were
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
5. Registration Procedures
In connection with the registration of any Registrable Notes or
Private Exchange Notes pursuant to Section 2 or 3 hereof, the Issuers shall
effect such registrations to permit the sale of such Registrable Notes or
Private Exchange Notes in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Issuers shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section
2 or 3, and shall use their best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein,
PROVIDED that, if (1) such filing is pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Reg-
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istration Statement or Prospectus or any amendments or supplements thereto,
the Issuers shall, if requested by any Holders of Registrable Notes,
furnish to and afford such Holders of the Registrable Notes and each such
Participating Broker-Dealer, as the case may be, covered by such
Registration Statement, their counsel and the managing underwriter(s), if
any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference therein
and all exhibits thereto) proposed to be filed (at least 5 business days
prior to such filing). The Issuers shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect
of which the Holders must be afforded an opportunity to review prior to the
filing of such document, if the Holders of a majority in aggregate
principal amount at maturity of the Registrable Notes covered by such
Registration Statement, or such Participating Broker-Dealer, as the case
may be, their counsel, or the managing underwriter(s), if any, shall
reasonably object; PROVIDED, HOWEVER, during any delay in meeting the time
frames contemplated by Section 4 hereof as a result of actions of any
Holder (other than by reason of a reasonable objection of such Holder as
provided above) of Registrable Notes, no Damage Amounts shall accrue or be
payable to such Holder.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the
Applicable Period, as the case may be; cause the related Prospectus to be
supplemented by any prospectus supplement required by applicable law, and
as so supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to them with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus; the Issuers
shall be deemed not to have used their best efforts to keep a Registration
Statement effective during the Applicable Period if either Issuer
voluntarily takes any action that would result in selling Holders of the
Registrable Notes covered thereby or Partici-
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pating Broker-Dealers seeking to sell Exchange Notes not being able to sell
such Registrable Notes or such Exchange Notes during that period unless
such action is required by applicable law or unless the Issuers comply with
this Agreement, including without limitation, the provisions of clause
5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or (2)
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, notify the selling Holders of Registrable Notes, or each
such Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriter(s), if any, promptly (but in any event within two
business days), and confirm such notice in writing, (i) when a Prospectus
or any prospectus supplement or post-effective amendment thereto has been
filed, and, with respect to a Registration Statement or any post-effective
amendment thereto, when the same has become effective (including in such
notice a written statement that any Holder may, upon request, obtain,
without charge, one conformed copy of such Registration Statement or
post-effective amendment thereto including financial statements and
schedules, documents incorporated or deemed to be incorporated by reference
and exhibits), (ii) of the issuance by the SEC of any stop order suspending
the effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary Prospectus or the initiation of any
proceedings for that purpose, (iii) if at any time when a Prospectus is
required by the Securities Act to be delivered in connection with sales of
the Registrable Notes the representations and warranties of the Issuers
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv) of
the receipt by the Issuers of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event or any information becoming
known to the Issuers that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in
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any material respect or that requires the making of any changes in, or
amendments or supplements to, such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, and (vi) the Issuers' reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use their best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use their best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
reasonably requested by the managing underwriter(s), if any, or the
Holders of a majority in aggregate principal amount at maturity of the
Registrable Notes being sold in connection with an underwritten offering,
(i) promptly incorporate in a Prospectus supplement or post-effective
amendment thereto such information as the managing underwriter(s), if any,
or such Holders reasonably request to be included therein, (ii) make all
required filings of such Prospectus supplement or such post-effective
amendment thereto as soon as practicable after the Issuers have received
notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment thereto and (iii), if applicable,
supplement or make amendments to such Registration Statement.
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(f) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Registrable Notes
and to each such Participating Broker-Dealer who so requests and to
counsel and the managing underwriter(s), if any, without charge, one
conformed copy of the Registration Statement or Registration Statements
and each post-effective amendment thereto, including financial statements
and schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Registrable
Notes, or each such Participating Broker-Dealer, as the case may be, their
counsel, and the managing underwriter or underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses (including each
form of preliminary Prospectus) and each amendment or supplement thereto
and any documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this Section 5,
the Issuers hereby consent to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case
may be, and the managing underwriter or underwriters or agents, if any,
and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by or the sale by Participating Broker-Dealers
of the Exchange Notes pursuant to such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, to use their best efforts to register or qualify,
and to cooperate with the selling Holders of Registrable Notes or each
such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwrit-
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ers, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes or Exchange Notes for offer and
sale under the securities or Blue Sky laws of such jurisdictions within
the United States as any selling Holder, Participating Broker-Dealer, or
the managing underwriter or underwriters, if any, reasonably request in
writing, PROVIDED that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Issuers agree to cause their counsel to perform
Blue Sky investigations and file registrations and qualifications required
to be filed pursuant to this Section 5(h); keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; PROVIDED that the Issuers shall not be
required to (A) qualify generally to do business in any jurisdiction where
it is not then so qualified, (B) take any action that would subject it to
general service of process in any such jurisdiction where it is not then
so subject or (C) subject itself to taxation in excess of a nominal dollar
amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request and which are consistent with the terms of the
indenture under which the Registrable Notes are issued.
(j) Use their best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
United States governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the managing under-
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writer or underwriters, if any, to consummate the disposition of such
Registrable Notes, except as may be required solely as a consequence of
the nature of such selling Holder's business, in which case the Issuers
will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals at such sellers'
cost and expense.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) above, as promptly as reasonably practicable
prepare and (subject to Section 5(a) above) file with the SEC, at the
expense of the Issuers, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference,
or file any other required document so that, as thereafter delivered to
the purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered
by a Participating Broker-Dealer during the Applicable Period, any such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(l) Use their best efforts to cause the Registrable Notes covered by
a Registration Statement or the Exchange Notes sold by a Participating
Broker-Dealer during the Applicable Period, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate principal amount of Registrable Notes covered
by such Registration Statement or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with printed
certificates for the Registrable Notes in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the
Registrable Notes.
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(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter(s), if any, in order to expedite or facilitate the
registration or the disposition of such Registrable Notes, and in such
connection, (i) make such reasonable representations and warranties to the
managing underwriter or underwriters on behalf of any underwriters, with
respect to the business of the Issuers and their subsidiaries and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are
customarily made by Issuers to underwriters in underwritten offerings of
debt securities, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Issuers and updates thereof in form and
substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the managing underwriter or underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings of debt securities and such other matters as may be
reasonably requested by underwriters; (iii) obtain "cold comfort" letters
and updates thereof in form and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Issuers (and, if necessary, any other independent
certified public accountants of any subsidiary of the Issuers or of any
business acquired by the Obligors for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to the managing underwriter or underwriters on
behalf of any underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters
in connection with underwritten offerings of debt securities and such
other matters as reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount at maturity of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each
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closing under such underwriting agreement, or as and to the extent
required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, make available for inspection by any selling Holder
of such Registrable Notes being sold who holds at least $2.0 million in
aggregate principal amount at maturity of Registrable Notes, or each such
Participating Broker-Dealer, as the case may be, the managing underwriter
or underwriters participating in any such disposition of Registrable
Notes, if any, and any attorney, accountant or other agent retained by any
such selling Holder or each such Participating Broker-Dealer, as the case
may be (collectively, the "INSPECTORS"), at the offices where normally
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Issuers and their
subsidiaries (collectively, the "RECORDS") as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the
Issuers and their subsidiaries to supply all information in each case
reasonably requested by any such Inspector in connection with such
Registration Statement. Records which the Issuers determine, in good
faith, to be confidential and any Records which they notify the Inspectors
are confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a material
misstatement or material omission in such Registration Statement and the
Issuers fail to promptly correct such material misstatement or omission
after notice thereof, (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction or
(iii) the information in such Records has been made generally available to
the public other than through the Inspectors' breach of any
confidentiality agreement. Each selling Holder of such Registrable Notes
and each such Participating Broker-Dealer or underwriter will be required
to agree that information obtained by it as a result of such inspections
shall be deemed confidential and shall not be used by it for any purpose
other than discharging due diligence responsibilities. In addition, such
information shall not be used as the basis for any market transactions in
the securities of the Issuers
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unless and until such is made generally available to the public. Each
selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Issuers and allow the Issuers to
undertake appropriate action to prevent disclosure of the Records deemed
confidential at their
expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange
Offer Registration Statement or the first Registration Statement relating
to the Registrable Notes; and in connection therewith, cooperate with the
trustee under any such indenture and the Holders of the Registrable Notes,
to effect such changes to such indenture as may be required for such
indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use their best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable such indenture
to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to their securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Issuers
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuers, in a form customary for
underwritten offerings of debt securities similar to the Notes, addressed
to the Trustee for the benefit of all Holders of Registrable
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Notes participating in the Exchange Offer or the Private Exchange, as the
case may be, and which includes an opinion that (i) the Issuers have duly
authorized, executed and delivered the Exchange Notes and Private Exchange
Notes and the related indenture and (ii) each of the Exchange Notes or the
Private Exchange Notes, as the case may be, and related indenture
constitute a legal, valid and binding obligation of the Issuers,
enforceable against the Issuers in accordance with its respective terms
(with customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers (or to
such other Person as directed by the Issuers) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Issuers shall
mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being canceled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; and, in no event shall
such Registrable Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use their reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Issuers may, from time to time, reasonably request. The Issuers may exclude from
such registration the Registrable Notes of any seller or Participating
Broker-Dealer who fails to furnish such information within a reasonable time
after receiving such request, and during any delay in meeting the time frames
contemplated by Section 4 hereof as a result of a delay
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in receiving any such information, no Additional Interest shall accrue or be
payable.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
receipt of any notice from the Issuers of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will
forthwith discontinue disposition of such Registrable Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such Holder
or Participating Broker-Dealer, as the case may be, until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "ADVICE") by the Issuers that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Issuers shall give any such
notice, the Applicable Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of Exchange Notes to be sold by such
Participating Broker-Dealer, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with one underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange Notes for
investment under the laws of such jurisdictions (x) where the Holders of
Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h), in the case of Registrable Notes or Exchange Notes to
be sold by a Participating Broker-Dealer during the Applicable Period)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Notes or Exchange Notes in a form
22
<PAGE>
eligible for deposit with The Depository Trust Company and of printing
Prospectuses if the printing of Prospectuses is reasonably requested by the
managing underwriter or underwriters, if any, or, in respect of Registrable
Notes or Exchange Notes to be sold by any Participating Broker-Dealer during the
Applicable Period, by the Holders of a majority in aggregate principal amount of
the Registrable Notes included in any Registration Statement or of such Exchange
Notes, as the case may be), (iii) reasonable messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Issuers and fees and
disbursements of special counsel for the sellers of Registrable Notes (subject
to the provisions of Section 6(b)), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(n)(iii)
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (vi) rating
agency fees, (vii) Securities Act liability insurance, if the Issuers desire
such insurance, (viii) fees and expenses of the Trustee (including, without
limitation, fees and disbursements of counsel), (ix) fees and expenses of all
other Persons retained by the Issuers, (x) internal expenses of the Issuers
(including, without limitation, all salaries and expenses of officers and
employees of the Issuers performing legal or accounting duties), (xi) the
expense of any annual audit, (xii) the reasonable fees and expenses incurred in
connection with any listing of the securities to be registered on any securities
exchange if the Issuers elect to list any such securities and (xiii) the
expenses incurred by the Issuers relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, securities
sales agreements, indentures and any other documents necessary in order to
comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuers
shall reimburse the Holders of the Registrable Notes being registered in such
registration for the actual reasonable fees and disbursements of not more than
one counsel (in addition to appropriate local counsel) chosen by the Holders of
a majority in aggregate principal amount at maturity of the Registrable Notes to
be included in such Registration Statement and other reasonable out-of-pocket
expenses of the Holders of Registrable Notes incurred in connection with the
registration of the Registrable Notes. Notwithstanding anything to the contrary
contained herein, the Issuers shall not have any obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Notes.
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<PAGE>
7. INDEMNIFICATION
(a) The Issuers agree to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers and directors of each such person,
and each person, if any, who controls any such person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act (each,
a "PARTICIPANT"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, the reasonable legal fees and other
expenses incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (as amended or supplemented if the Issuers shall have
furnished any amendments or supplements thereto) or any preliminary Prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except, with respect to any Participant, insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to such Participant or underwriter
furnished to the Issuers in writing by such Participant or underwriter expressly
for use therein; PROVIDED that the foregoing indemnity with respect to any
preliminary Prospectus shall not inure to the benefit of any Participant or
underwriter (or to the benefit of any person controlling such Participant or
underwriter) from whom the person asserting any such losses, claims, damages or
liabilities purchased Registrable Notes or Exchange Notes if such untrue
statement or omission or alleged untrue statement or omission made in such
preliminary Prospectus is eliminated or remedied in the related Prospectus (as
amended or supplemented if the Issuers shall have furnished any amendments or
supplements thereto) and a copy of the related Prospectus (as so amended or
supplemented) shall have been furnished to such Participant or underwriter at or
prior to the sale of such Registrable Notes or Exchange Notes, as the case may
be, and such Participant or underwriter shall have failed to deliver a copy of
such Prospectus to such person at or prior to the confirmation of the applicable
sale or at a time the Issuers had notified persons under the last paragraph of
Section 5 hereof to cease using such Registration Statement or Prospectus.
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<PAGE>
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless each of the Issuers, their respective
directors and officers and each person who controls any such person within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Issuers to each Participant,
but only with reference to information relating to such Participant furnished to
the Issuers in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
Prospectus. The liability of any Participant under this paragraph (b) shall in
no event exceed the proceeds received by such Participant from sales of
Registrable Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) of this Section 7, such person (the "INDEMNIFIED PERSON")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PERSON") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain one counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses incurred by such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person unless (i) the Indemnifying Person and
the Indemnified Person shall have mutually agreed in writing to the contrary,
(ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person or (iii) the named
parties in any such proceeding (including any impleaded parties) include both
the Indemnifying Person and the Indemnified Person and representations of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Participants and such control persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Reg-
25
<PAGE>
istrable Notes sold by all such Participants and any such separate firm for the
Issuers, their directors, their officers and such control persons of the Issuers
shall be designated in writing by the Company. The Indemnifying Person shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, the Indemnifying Person agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such Indemnifying Person of a request for fees and expenses of
counsel retained by the Indemnified Person pursuant to this paragraph and (ii)
such Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; PROVIDED,
HOWEVER, that the Indemnifying Person shall not be liable for any settlement
effected without its consent pursuant to this sentence if the Indemnifying
Person is contesting, in good faith, the request for reimbursement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party, unless such
settlement includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding.
If the indemnification provided for in paragraphs (a) and (b) of
this Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Issuers on the
one hand and the Participants on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Issuers on the one hand and the Participants on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers or by the Participants and the
parties' relative
26
<PAGE>
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes exceeds the amount of any damages that such Participant has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
7 will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
Each of the Issuers agrees that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Issuers are not required to file such reports, it will, upon the request of
any Holder of Registrable Notes, make publicly available other information of a
like nature until no longer necessary to permit sales pursuant to Rule 144 or
Rule 144A. The Issuers further covenant that so long as any Registrable Notes
remain outstanding to make available to any Holder of Registrable Notes in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable Notes
pursuant to (a) such Rule 144A, or (b) any similar rule or regulation
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<PAGE>
hereafter adopted by the SEC, unless at such time the Registrable Notes are
fully salable under Rule 144 or any successor provision.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Notes covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount at maturity of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Issuers.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Issuers of any of
their obligations under this Agreement, other than the occurrence of an event
which requires payment of Damage Amounts, each Holder of Registrable Notes, in
addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchaser, in the Purchase Agreement or
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. In the event of a breach by the
Issuers of any of their obligations under this Agreement, other than the
occurrence of an event which required payment of Damage Amounts, the Issuers
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
(b) ENFORCEMENT. The Trustee shall be authorized to enforce the
provisions of this Agreement for the ratable benefit of the Holders.
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(c) NO INCONSISTENT AGREEMENTS. The Issuers do not have, as of the
date hereof, and the Issuers shall not, after the date of this Agreement, enter
into any agreement with respect to any of their securities that is inconsistent
with the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Issuers have not entered and
will not enter into any agreement with respect to any of their securities which
will grant to any Person piggy-back rights with respect to a Registration
Statement.
(d) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Issuers shall not,
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Issuers have obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount at maturity of Registrable Notes. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount at maturity of the Registrable Notes being sold by
such Holders pursuant to such Registration Statement, PROVIDED that the
provisions of this sentence may not be amended, modified or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(f) NOTICES. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most current
address given by the Trustee to the Issuers; and
(ii) if to the Issuers:
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<PAGE>
ACME Television LLC
650 Town Center Drive
Suite 850
Costa Mesa, CA 92626
Tel: (714) 445-5791
Fax: (714) 445-5726
with a copy to:
Dickstein Shapiro
2101 L Street, NW
Washington, DC 20037-1526
Attention: Emmanuel Faust, Esq.
Tel: (202) 828-2265
Fax: (202) 887-0689
All such notices and communications shall be deemed to have been
duly given: (i) when delivered by hand, if personally delivered; (ii) three
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) one business day after being timely delivered to a next-day air courier;
and (iv) when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Notes.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED
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<PAGE>
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
(k) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.
(l) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(m) NOTES HELD BY THE ISSUERS OR THEIR AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Issuers or their affiliates
(as such term is defined in Rule 405 under the Securities Act) shall not be
deemed outstanding for such purpose and shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
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IN WITNESS WHEREOF, the parties have executed this Notes Registration
Rights Agreement as of the date first written above.
ACME INTERMEDIATE HOLDINGS, LLC
By: ACME Television Holdings, LLC
its majority member
By: /s/ Douglas E. Gealy
-----------------------------------
Name: Douglas Gealy
Title: President
ACME INTERMEDIATE FINANCE, INC.
By: /s/ Douglas E. Gealy
-----------------------------------
Name: Douglas Gealy
Title: President
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Andrew Meyer
---------------------------
Name: Andrew Meyer
Title: Managing Director
- ------------------------------------------------------------------------------
MEMBERSHIP UNITHOLDERS AGREEMENT
Dated as of September 30, 1997
among
ACME INTERMEDIATE HOLDINGS, LLC
and
ACME TELEVISION HOLDINGS, LLC
and
CIBC WOOD GUNDY SECURITIES CORP.
(as Initial Purchaser)
- ------------------------------------------------------------------------------
<PAGE>
THIS MEMBERSHIP UNITHOLDERS AGREEMENT (the "Agreement") is made and
entered into as of September 30, 1997 among ACME Intermediate Holdings, LLC, a
Delaware limited liability company (the "Company"), ACME Television Holdings,
LLC, a Delaware limited liability company ("ACME Parent"), and CIBC Wood Gundy
Securities Corp., as Initial Purchaser (the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement, dated as
of September 24, 1997, among the Company, ACME Finance Inc., a Delaware
corporation ("Finco" and, together with the Company, the "Notes Issuers"), and
the Initial Purchaser (the "Purchase Agreement"), relating, among other things,
to the sale to the Initial Purchaser of an aggregate of 71,634 Units, each Unit
consisting of $1,000 principal amount at maturity of the Notes Issuers' 12%
Senior Secured Discount Notes due 2005 (the "Notes") and one membership unit of
the Company (each, a "Membership Unit"). In order to induce the Initial
Purchaser to enter into the Purchase Agreement, the Company and ACME Parent have
agreed to enter into this Agreement for the benefit of the holders of Membership
Units.
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"ACME PARENT" shall have the meaning set forth in the preamble and
shall also include ACME Parent's successors.
"AFFILIATE" has the meaning ascribed to such term in the
Indenture.
"AGREEMENT" means this Membership Unit holders Agreement.
"BOARD OF DIRECTORS" has the meaning ascribed to such term in the
Indenture.
"BUSINESS DAY" shall mean a day that is not a Legal Holiday.
"CHANGE OF CONTROL" has the meaning ascribed to such term in the
Indenture.
"CHANGE OF CONTROL EQUITY OFFER" has the meaning set forth in
Section 4.1(a).
<PAGE>
"CHANGE OF CONTROL EQUITY OFFER EXPIRATION DATE" shall have the
meaning set forth in Section 4.1(b).
"CLOSING DATE" shall mean the Closing Date as defined in the
Purchase Agreement.
"COMMON STOCK" of any Person means equity securities of such Person
generally entitled to vote in the election of directors of such Person, if
such Person is a corporation, or if such Person is not a corporation,
generally entitled to vote or otherwise participate in the election of the
governing body, partners, managers or others that will control the
management and policies of such Person.
"COMPANY" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"CONVERTIBLE DEBENTURES" means the 6 1/2% Convertible Debentures of
ACME Subsidiary Holdings IV, LLC issued on the Closing Date.
"CONVERTIBLE PREFERRED UNITS" means the preferred membership units
of ACME Subsidiary Holdings IV, LLC issued on the Closing Date.
"CONVERTIBLE SECURITIES" means the Convertible Debentures and the
Convertible Preferred Units.
"DEMAND EVENT" means the date of the earliest to occur of (i) a
Change of Control, (ii) the date on which the Company consummates an
Initial Public Equity Offering, (iii) the date on which any Common Stock
of the Company is listed on a national securities exchange or authorized
for quotation on the NASDAQ National Market System or (iv) September 30,
2002. The Company will promptly mail to each holder of Registrable
Membership Units notice of the occurrence of a Demand Event.
"DEMAND OFFER" shall have the meaning set forth in Section 3.1(b).
"DEMAND OFFER EXPIRATION DATE" shall have the meaning set forth in
Section 3.1(b).
"DEMAND REGISTRANT" has the meaning set forth in Section 3.1(a).
"DEMAND REGISTRATION" shall have the meaning set forth in Section
3.1(a).
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<PAGE>
"DRAG ALONG PURCHASE" shall have the meaning set forth in Section
4.2.
"EQUITY EXCHANGE OFFER" has the meaning set forth in Section 2.1.
"EQUITY EXCHANGE SECURITIES" has the meaning set forth in Section
2.1.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE ISSUER" has the meaning set forth in Section 2.1.
"EXCHANGE OFFER EXPIRATION DATE" has the meaning set forth in
Section 2.3(a).
"EXCHANGE OFFER NOTICE" has the meaning set forth in Section
2.3(a).
"FCC" means the Federal Communications Commission.
"HOLDER" shall have the meaning set forth in Section 6(a).
"INCLUDED SECURITIES" shall have the meaning set forth in Section
3.1(b).
"INDENTURE" means the Indenture dated as of September 30, 1997
between the Notes Issuers and Willmington Trust Company, as trustee, as in
effect on the date hereof.
"INITIAL PUBLIC EQUITY OFFERING" of any Person means an underwritten
public offering by such Person of Common Stock of such Person (which
Common Stock is generally freely transferable, subject to applicable
securities laws and FCC rules and regulations) registered under the
Securities Act and listed on a national securities exchange or authorized
for quotation on the NASDAQ National Market System.
"INITIAL PURCHASER" shall have the meaning set forth in the
preamble.
"LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on which
banking institutions in New York, New York
3
<PAGE>
are required by law, regulation or executive order to remain closed.
"MANDATORY EXCHANGE" has the meaning set forth in Section 2.1.
"MANDATORY EXCHANGE DATE" has the meaning set forth in Section
2.2.
"MANDATORY EXCHANGE NOTICE" has the meaning set forth in Section
2.2.
"MEMBERSHIP UNIT" shall have the meaning set forth in the preamble
and shall include any Common Stock into which the Membership Units are
converted or exchanged, upon conversion of the Company to a corporation or
otherwise.
"NOTES" shall have the meaning set forth in the preamble.
"NOTES ISSUERS" shall have the meaning set forth in the preamble.
"PERMITTED HOLDER" shall have the meaning ascribed to such term
in the Indenture.
"PERSON" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"PIGGY-BACK REGISTRATION" shall have the meaning set forth in
Section 3.2.
"PURCHASE AGREEMENT" shall have the meaning set forth in the
preamble.
"REGISTRABLE EQUITY EXCHANGE SECURITIES" means each Equity Exchange
Security, including each Equity Exchange Security issuable or issued upon
conversion of the Convertible Securities, until such Equity Exchange
Security is sold pursuant to an effective Registration Statement in
connection with a Demand Registration or a Piggy-Back Registration.
"REGISTRABLE MEMBERSHIP UNITS" means each Membership Unit (or other
Common Stock into which such Membership Unit is converted or exchanged,
upon conversion of the Company to a corporation or otherwise), including
each Membership Unit issuable or issued upon conversion of the
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<PAGE>
Convertible Securities, until such Membership Unit (or other Common Stock)
is (i) sold pursuant to an effective Registration Statement in connection
with a Demand Registration or a Piggy-back Registration or (ii) purchased
pursuant to a Change of Control Equity Offer or a Drag Along Purchase.
"REGISTRABLE SECURITIES" means the Registrable Membership Units
and/or the Registrable Equity Exchange Securities, as the context
requires.
"REGISTRANT" shall have the meaning set forth in Section 6(a).
"REGISTRATION EXPENSES" shall mean all expenses incident to the
Company's and the Exchange Issuer's performance of or compliance with this
Agreement, including, without limitation, all SEC and stock exchange or
National Association of Securities Dealers, Inc. registration and filing
fees and expenses, fees and expenses of compliance with securities or blue
sky laws (including, without limitation, reasonable fees and disbursements
of counsel for the underwriters in connection with blue sky qualifications
of the Registrable Securities), rating agency fees, printing expenses,
messenger, telephone and delivery expenses, fees and disbursements of
counsel for the Company and the Exchange Issuer and all independent
certified public accountants, the fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (but not including
any underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Securities by holders of such
Registrable Securities) and the reasonable fees and expenses of one firm
acting as counsel to the Holders.
"REGISTRATION STATEMENT" shall mean any registration statement of
the Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to any
such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"SEC" or "COMMISSION" shall mean the Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
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<PAGE>
"SUBSIDIARY" has the meaning ascribed to such term in the
Indenture.
2. EXCHANGE RIGHTS.
2.1 EQUITY EXCHANGE SECURITIES. If ACME Parent or any of its
Subsidiaries (other than the Company) proposes to consummate an Initial Public
Equity Offering prior to the consummation of an Initial Public Equity Offering
by the Company, ACME Parent (if it proposes to consummate such Initial Public
Equity Offering) or its Subsidiary that proposes to consummate such Initial
Public Equity Offering (such person, the "Exchange Issuer") shall have the
option to either (a) exchange equity securities of the Exchange Issuer of the
same class and series which are proposed to be sold in such Initial Public
Equity Offering (the "Equity Exchange Securities") for all outstanding
Registrable Membership Units at an exchange ratio based on the fair market
values of the Membership Units and the Equity Exchange Securities (without any
discount for lack of liquidity of the Membership Units or the fact that the
Membership Units may represent a minority interest in a private company or a
company under the control of another person) as determined in good faith by the
Board of Directors of the Exchange Issuer and determined to be fair, from a
financial point of view, to the holders of Registrable Membership Units by a
nationally recognized investment banking firm (as set forth in such firm's
written fairness opinion) (the "Mandatory Exchange") or (b) offer to Exchange
Equity Securities for all outstanding Registrable Membership Units at an
exchange ratio based on the fair market values of the Membership Units and the
Exchange Equity Securities (without any discount for lack of liquidity of the
Membership Units or the fact that the Membership Units may represent a minority
interest in a private company or a company under the control of another person)
as determined in good faith by the Board of Directors of the Exchange Issuer and
determined to be fair, from a financial point of view, to the holders of
Registrable Membership Units by a nationally recognized investment banking firm
(as set forth in such firm's written fairness opinion) (the "Equity Exchange
Offer"). The consummation of the Mandatory Exchange or the Equity Exchange Offer
shall be subject to the consummation of the Initial Public Equity Offering by
the Exchange Issuer.
2.2 MANDATORY EXCHANGE PROCEDURES. If the Exchange Issuer elects to
consummate the Mandatory Exchange, it shall give notice of such election (the
"Mandatory Exchange Notice") to each holder of Registrable Membership Units, no
more than 60 days and not less than 30 days prior to the anticipated date of
consummation of the Initial Public Equity Offering by the Ex-
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change Issuer, by first class mail, postage prepaid. The Mandatory Exchange
Notice shall (a) set forth the exchange ratio and the respective fair market
values of the Membership Units and the Exchange Equity Securities as determined
by the Board of Directors of the Exchange Issuer, (b) include the full text of
the fairness opinion referred to in clause (a) of Section 2.1, (c) identify the
anticipated date on which the exchange shall occur, which exchange shall occur
simultaneously with the consummation of the Initial Public Equity Offering by
the Exchange Issuer (the "Mandatory Exchange Date"); PROVIDED that if the
consummation of such Initial Public Equity Offering shall not have occurred
within 90 days following the date the Mandatory Exchange Notice is mailed to the
holders of Registrable Membership Units, the Exchange Issuer shall mail notice
thereof to the holders of Registrable Membership Units by first class mail,
postage prepaid, which notice shall revoke the Mandatory Exchange; PROVIDED,
FURTHER, that if such Initial Public Equity Offering is thereafter consummated,
the Exchange Issuer shall mail a second Mandatory Exchange Notice within 10 days
of such consummation that complies with clauses (i)-(v) of this paragraph and
the Mandatory Exchange Date with respect thereto shall be not less than 30 nor
more than 60 days following the date the second Mandatory Exchange Notice is so
mailed, (iv) identify where certificates representing the Registrable Membership
Units are to be delivered for exchange and (v) state that unless the Exchange
Issuer defaults in making the Mandatory Exchange, holders of Registrable
Membership Units shall have no right as members of the Company and the only
remaining right of such holders is to receive the applicable amount of Exchange
Equity Securities. Promptly after the Mandatory Exchange Date (and thereafter
upon receipt of certificates reporting Registrable Membership Units), the
Exchange Issuer shall issue in exchange for the Registrable Membership Units
certificates for the applicable amount of Exchange Equity Securities to holders
of Registrable Membership Units. After the Mandatory Exchange Date, each
Convertible Security will be convertible into that number of Equity Exchange
Securities equal to the number of Equity Exchange Securities the holder of such
Convertible Security would have received in the Mandatory Exchange had such
Convertible Security been converted immediately prior to the Mandatory Exchange
Date.
2.3 EQUITY EXCHANGE OFFER PROCEDURES. (a) If the Exchange Issuer
elects to consummate the Equity Exchange Offer, it shall give notice of such
election (the "Exchange Offer Notice") to each holder of Registered Membership
Units, no more than 60 days and not less than 30 days prior to the anticipated
date of consummation of the Initial Public Equity Offering by the Exchange
Issuer, by first class mail, postage prepaid, of-
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fering to exchange the Exchange Equity Securities for the Registrable Membership
Units. The Exchange Offer Notice shall govern the terms of the Equity Exchange
Offer and shall (i) set forth the exchange ratio and the respective fair market
values of the Membership Units and the Equity Exchange Securities as determined
by the Board of Directors of the Exchange Issuer, (ii) include the full text of
the fairness opening referred to in clause (b) of Section 2.1, (iii) identify
the date on which the Equity Exchange Offer will expire (the "Exchange Offer
Expiration Date"), which date shall be not less than 30 days following the date
of commencement of the Equity Exchange Offer and shall be extended, if
necessary, such that the Exchange Offer Expiration Date shall be the date on
which the Initial Public Equity Offering is consummated by the Exchange Issuer,
which commencement date shall be the date the Exchange Offer Notice is mailed to
holders of Registrable Membership Units, (iv) each holder of Registrable
Membership Units may tender all of such holders' Registrable Membership Units,
but not a portion thereof, (v) include a letter of transmittal which identifies
where certificates representing the Registrable Membership Units tendered for
exchange pursuant to the Equity Exchange Offer are to be delivered, (vi) state
that unless the Exchange Issuer defaults in exchanging Exchange Equity
Securities for Registrable Membership Units promptly following the Exchange
Offer Expiration Date, holders of Registrable Membership Units tendered for
exchange shall have no rights as members of the Company after the Exchange Offer
Expiration Date and the only remaining right of such holders is to receive the
applicable amount of Equity Exchange Securities promptly after the Exchange
Offer Expiration Date and (vii) each holder of Registrable Membership Units that
elects not to tender such holder's Registrable Membership Units pursuant to the
Equity Exchange Offer will not have any rights after the Exchange Offer
Expiration Date to effect a Demand Registration (as defined below) with respect
to the Registrable Membership Units. If a holder of the Convertible Securities
elects to participate in the Equity Exchange Offer, it shall provide written
notice of such participation to the Company, but need not surrender the
certificate(s) representing such Convertible Securities.
(b) On the Exchange Offer Expiration Date, the Exchange Issuer will
(i) accept for exchange all Registrable Membership Units tendered pursuant to
the Equity Exchange Offer and (ii) promptly deliver to tendering holders of
Registrable Membership Units certificates representing their respective amounts
of Equity Exchange Securities. If a holder of a Convertible Security elects to
participate in the Equity Exchange Offer, after the Exchange Offer Expiration
Date, such Convertible Security will be convertible into that number of Equity
Ex-
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change Securities equal to the number of Equity Exchange Securities the holder
of such Convertible Security would have received in the Equity Exchange Offer
had such Convertible Security been converted and tendered immediately prior to
the Exchange Offer Expiration Date.
(c) The Exchange Issuer and the Company will comply with the
requirements of the Exchange Act and other securities laws and regulations to
the extent such laws and regulations are applicable in connection with the
Equity Exchange Offer. To the extent the provisions of any securities laws or
regulations conflict with the Equity Exchange Offer provisions of this
Agreement, the Company and the Exchange Issuer shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under this Agreement by virtue thereof.
(d) ACME Parent shall cause the Exchange Issuer (if other than ACME
Parent) to become a party to this Agreement. Neither ACME Parent nor any of its
Subsidiaries shall be obligated to consummate more than one Mandatory Exchange
or Equity Exchange Offer.
3. REGISTRATION RIGHTS.
3.1 DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. Prior to the consummation of an
Initial Public Equity Offering by ACME Parent or one of its Subsidiaries (other
than the Company), holders of Registrable Membership Units shall have the demand
registration rights set forth in this Section 3.1 with respect to Registrable
Membership Units of the Company after the occurrence of a Demand Event. After
consummation of such an Initial Public Equity Offering, holders of Registrable
Equity Exchange Securities shall have the demand registration rights set forth
in this Section 3.1 with respect to Registrable Equity Exchange Securities of
the Exchange Issuer received after consummation of the Mandatory Exchange or
Equity Exchange Offer, as the case may be.
After the occurrence of (i) a Demand Event or (ii) the consummation
of a Mandatory Exchange or Equity Exchange Offer, (a) the holders of Registrable
Membership Units equivalent to 25% of the Membership Units originally issued as
part of the Units (in the case of clause (i)), including the Membership Units
issuable upon conversion of the Convertible Securities, or (b) the holders of
Registrable Equity Exchange Securities equivalent to 25% of the Equity Exchange
Securities issued as
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part of the Mandatory Exchange or Equity Exchange Offer, including Equity
Exchange Securities issuable upon conversion of the Convertible Securities, as
the case may be (in the case of clause (ii)), will be entitled to require the
Company or the Exchange Issuer, as the case may be (the "Demand Registrant"), to
effect up to two registrations (each, a "Demand Registration") under the
Securities Act of the applicable Registrable Securities; PROVIDED, HOWEVER, that
if a Demand Registration is requested with respect to the Company prior to the
consummation of an Initial Public Equity Offering by the Company, ACME Parent or
one of its Subsidiaries may consummate a Mandatory Exchange in accordance with
Sections 2.1 and 2.2 hereof, in which case the Demand Registration shall be
consummated by the Exchange Issuer. Any such request will specify the number of
Registrable Securities proposed to be sold and will also specify the intended
method of disposition thereof. No Demand Registration may be requested either
(x) within 180 days of the consummation of an underwritten public offering of
Common Stock by the Demand Registrant or (y) after notice of a Piggy-Back
Registration has been mailed to holders of Registrable Securities and until the
earlier of the withdrawal of the Piggy-Back Registration by the Demand
Registrant or 180 days after consummation of the Piggy-Back Registration.
Subject to Section 3.1(b), upon a demand, the Demand Registrant will prepare,
file and cause to be effective within 180 days of such demand a Registration
Statement in respect of all the Included Securities (including any Registrable
Securities issuable upon conversion of Convertible Securities requested to be
included in the Demand Registration by holders of Convertible Securities). The
Demand Registrant shall give written notice of such registration request within
10 days after the receipt thereof to all other holders of the Registrable
Securities. Within 20 days after receipt of such notice by any such holder, such
holder may request in writing that Registrable Securities be included in such
registration and the Demand Registrant shall include in the Demand Registration
the Registrable Securities of any such holder requested to be so included (all
such Registrable Securities requested to be registered, the "Included
Securities"). Each such request by such holders shall specify the number of
Included Shares proposed to be sold and the intended method of disposition
thereof. If a Demand Registration is requested in the form of an underwritten
public offering, (x) it shall be a condition to a holder of Registrable
Securities including such securities therein that such holder agree to enter
into customary underwriting, custody and power of attorney agreements and a
"lock-up" agreement for a period of up to 180 days and (y) the underwriters in
such public offering shall agree to purchase from each holder of Included
Securities issuable upon conversion of a Convertible Security such Convertible
Security
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(or applicable portion thereof) at a purchase price equal to the product of (x)
the price per Included Security to be paid by the underwriters and (y) the
number of Included Securities issuable upon conversion of such Convertible
Security on the date of consummation of such public offering. Subject to Section
3.1(c), the Demand Registrant shall be required to register Registrable
Securities pursuant to this Section 3.1 on a maximum of two separate occasions.
(b) REPURCHASE ELECTION. (i) Notwithstanding the foregoing
provisions of Section 3.1(a), in lieu of filing and causing to become effective
a Registration Statement with respect to a Demand Registration, the Demand
Registrant may satisfy its obligation with respect to such Demand Registration
by making an offer to purchase (the "Demand Offer") (x) all Included Securities
at a cash purchase price at least equal to the fair market value of the Included
Securities (without any discount for lack of liquidity, the amount of Included
Securities proposed to be sold or the fact that the Included Securities may
represent a minority interest in a private company or a company under the
control of another person) as determined in good faith by the Board of Directors
of the Demand Registrant and determined to be fair, from a financial point of
view, to the holders of Included Securities by a nationally recognized
investment banking firm (as set forth in such firm's written fairness opinion
delivered to the holders of Included Securities) and (y) all Convertible
Securities convertible into Included Securities at a cash purchase price equal
to the product of (A) the purchase price per Included Security set forth in
clause (x)of this Section 4.1(b)(i) and (B) the number of Included Securities
issuable upon conversion of such Convertible Security on the Demand Offer
Expiration Date. It shall be a condition to the consummation of a Demand Offer
that a majority of the Included Securities (either directly or through the
tender of Convertible Securities) are tendered for purchase in such Demand
Offer. If a majority of the Included Securities are not so tendered, the Company
shall not be deemed to have satisfied its obligation with respect to the Demand
Registration, PROVIDED that the holders of Registrable Securities may again
require a Demand Registration only after 180 days have elapsed from the date
notice of such Demand Offer was mailed to the holders of Included Securities.
(ii) If the Demand Registrant elects to make the Demand Offer in lieu
of a Demand Registration, it shall give notice of such election to each holder
of Included Securities by first class mail, postage prepaid, within 30 days of
receipt of the notice for a Demand Registration, which notice shall govern the
terms of the Demand Offer and shall (A) set forth the pur-
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chase price to be paid for the Included Securities tendered in the Demand Offer,
(B) include the full text of the fairness opinion referred to in the immediately
preceding paragraph, (C) identify the date on which the Demand Offer will expire
(the "Demand Offer Expiration Date"), which date shall be not less then 20
business days following the date of commencement of the Demand Offer, which
commencement date shall be the date such notice is mailed to holders of Included
Securities, (D) include a letter of transmittal which identifies where
certificates representing the Included Securities tendered pursuant to the
Demand Offer are to be delivered, (E) state that, unless the Demand Registrant
defaults in the purchase of the Included Securities and Convertible Securities
tendered pursuant to the Demand Offer or a majority of the Included Securities
are not tendered pursuant thereto, holders of Included Securities and
Convertible Securities so tendered shall have no rights with respect to such
Included Securities and Convertible Securities tendered after the Demand Offer
Expiration Date and the only remaining right of such holders is to recover the
purchase price therefor promptly after the Demand Offer Expiration Date and (F)
that holders whose Included Securities and Convertible Securities are tendered
for purchase in part only will be issued new certificates representing the
number of unpurchased Registrable Securities, Convertible Debentures or
Convertible Preferred Units, as the case may be, surrendered.
(iii) On the Demand Offer Expiration Date, if a majority of the
Included Securities have been tendered for purchase, the Demand Registrant will
(A) accept for purchase all Included Securities and Convertible Securities
tendered pursuant to the Demand Offer, (B) promptly deliver to tendering holders
of Included Securities and Convertible Securities the purchase price therefor
and (C) issue and mail or deliver to holders tendering a portion of their
Included Securities, Convertible Debentures or Convertible Preferred Units, as
the case may be, new certificates representing a number of Registrable
Securities, Convertible Debentures or Convertible Preferred Units, as the case
may be, equal to the unpurchased portion of the Registrable Securities,
Convertible Debentures or Convertible Preferred Units, as the case may be,
surrendered.
(iv) The Demand Registrant will comply with the requirements of the
Exchange Act and other securities laws and regulations to the extent such laws
and regulations are applicable in connection with the Demand Offer. To the
extent the provisions of any securities laws or regulations conflict with the
Demand Offer provisions of this Agreement, the Demand Registrant shall comply
with the applicable securities laws and
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regulations and shall not be deemed to have breached its obligations under this
Agreement by virtue thereof.
(c) EFFECTIVE REGISTRATION. A registration will not be deemed to
have been effective as a Demand Registration unless it has been declared
effected by the SEC and the Demand Registrant has complied in all material
respects with its obligations under this Agreement with respect thereto;
PROVIDED that if, after it has become effective, the offering of the Registrable
Securities pursuant to such registration is or becomes the subject of any stop
order, injunction or other order or requirement of the SEC or any other
governmental or administrative agency, or if any court prevents or otherwise
limits the sale of Registrable Securities pursuant to the registration (for any
reason other than the act or omissions of the holders of Registrable
Securities), such registration will be deemed not to have been effected. If (i)
a registration requested pursuant to this Section 3.1 is deemed not to have been
effected or (ii) the registration requested pursuant to this Section 3.1 does
not remain effective for a period of at least 180 days beyond the effective date
thereof or until the consummation of the distribution by the holders of the
Included Securities, then the Demand Registrant shall continue to be obligated
to effect an additional registration pursuant to this Section 3.1. The holders
of Included Securities shall be permitted to withdraw all or any part of the
Included Securities from a Demand Registration at any time prior to the
effective date of such Demand Registration. If at any time a Registration
Statement is filed pursuant to a Demand Registration, and subsequently a
sufficient number of Included Securities are withdrawn from the Demand
Registration so that such Registration Statement does not cover at least 25% of
the Registrable Securities held by all holders, the holders who have not
withdrawn their Included Securities shall have the opportunity to include an
additional number of Registrable Securities in the Demand Registration so that
such Registration Statement covers at least 25% of the Registrable Securities
held by all holders. If an additional number of Registrable Securities is not so
included, the Demand Registrant may withdraw the Registration Statement. Such
withdrawn Registration Statement will not count as a Demand Registration
effected pursuant to this Section 3.1.
(d) PRIORITY IN DEMAND REGISTRATIONS PURSUANT TO SECTION 3.1. If a
Demand Registration pursuant to this Section 3.1 involves an underwritten
offering and the managing underwriter advises the Demand Registrant in writing
that, in its opinion, the number of securities requested to be included in such
registration (including securities of the Demand Regis-
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trant) exceeds the number which can be sold in such offering, the Demand
Registrant will include in such registration only the Registrable Securities
requested to be included in such registration. In the event that the number of
Registrable Securities requested to be included in such registration exceeds the
number which, in the opinion of such managing underwriter, can be sold, the
number of such Registrable Securities to be included in such registration shall
be allocated pro rata among all requesting holders on the basis of the relative
number of Registrable Securities requested for registration by each such holder.
In the event that the number of Registrable Securities requested to be included
in such registration is less than the number which, in the opinion of the
managing underwriter, can be sold, the Demand Registrant may include in such
registration the securities the Demand Registrant proposes to sell up to the
number of securities that, in the opinion of the underwriter, can be sold.
(e) SELECTION OF UNDERWRITER. If the holders so elect, the offering
of such Registrable Securities pursuant to such Demand Registration shall be in
the form of an underwritten offering. The holders making such Demand
Registration shall select one or more nationally recognized firms of investment
bankers, who shall be reasonably acceptable to the Demand Registrant, to act as
the managing underwriter or underwriters in connection with such offering and
shall select any additional investment bankers and managers to be used in
connection with the offering.
(f) EXPENSES. The Demand Registrant will pay all Registration
Expenses in connection with the registrations requested pursuant to Section
3.1(a). Each holder of Included Securities shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such holder's of Included Securities pursuant to a registration
statement requested pursuant to this Section 3.1.
3.2 PIGGY-BACK REGISTRATION. If at any time the Company or the
Exchange Issuer proposes to file a Registration Statement under the Securities
Act with respect to an offering by the Company or the Exchange Issuer for its
own account or for the account of any of its respective securityholders of any
class of its Common Stock (other than (i) a Registration Statement on Form S-4
or S-8 (or any substitute form that may be adopted by the SEC) or (ii) a
Registration Statement filed in connection with an offer or offering of
securities solely to the Company's or the Exchange Issuer's existing
securityholders), then the Company or the Exchange Issuer, as the case may be,
shall give written notice of such proposed filing to the
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holders of Registrable Membership Units or Registrable Equity Exchange
Securities, as the case may be, as soon as practicable (but in no event less
than 20 Business Days before the anticipated filing date), and such notice shall
offer such holders the opportunity to register such number of the applicable
Registrable Securities as each such holder may request (a "Piggy-Back
Registration"). The Company or the Exchange Issuer, as the case may be, shall
use its best efforts to cause any managing underwriter or underwriters of a
proposed underwritten offering to permit the Registrable Securities requested to
be included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Company or the Exchange Issuer, as
the case may be, or any other securityholder included therein and to permit the
sale or other disposition of such Registrable Securities in accordance with the
intended method of distribution thereof. The underwriters in such public
offering shall agree to purchase from each holder of Registrable Securities
issuable upon conversion of a Convertible Security such Convertible Security (or
applicable portion thereof) at a purchase price equal to the product of (x) the
price per Registrable Security to be paid by the underwriters and (y) the number
of Included Securities issuable upon conversion of such Convertible Security on
the date of consummation of such public offering. Any holder shall have the
right to withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 3.2 by giving written notice to
the Company or the Exchange Issuer, as the case may be, of its request to
withdraw. The Company or the Exchange Issuer, as the case may be, may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective;
PROVIDED that the Company or the Exchange Issuer, as the case may be, shall give
prompt notice thereof to participating holders. The Company or the Exchange
Issuer, as the case may be, will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 3.2, and each holder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such holder's Registrable Securities pursuant to a registration statement
effected pursuant to this Section 3.2.
3.3 REDUCTION OF OFFERING. (a) If a managing underwriter or
underwriters of any underwritten offering described in Section 3.2 have
informed, in writing, the holders of the Registrable Securities requesting
inclusion in such offering that it is their opinion that the total number of
shares which the Company or the Exchange Issuer, as the case may be, such
holders and any other Persons desiring to participate in such registration
intend to include in such offering is such as
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to materially and adversely affect the success of such offering, including the
price at which such securities can be sold, then the number of shares to be
offered for the account of such holders and all such other Persons (other than
the Company or the Exchange Issuer, as the case may be) participating in such
registration shall be reduced or limited PRO RATA in proportion to the
respective number of securities requested to be registered to the extent
necessary to reduce the total number of securities requested to be included in
such offering to the number of securities, if any, recommended by such managing
underwriters; PROVIDED, HOWEVER, that if such offering is effected for the
account of any securityholder of the Company or the Exchange Issuer, as the case
may be, other than the holders of Registrable Securities, pursuant to the demand
registration rights of any such securityholder, then the number of securities to
be offered for the account of the holders of Registrable Securities (but not
such securityholders who have exercised their demand registration rights or the
Company or the Exchange Issuer, as the case may be) shall be reduced or limited
PRO RATA in proportion to the respective number of securities requested to be
registered to the extent necessary to reduce the total number of securities
requested to be included in such offering to the number of securities, if any,
recommended by such managing Underwriters.
(b) If, as a result of the proration provisions of Section 3.3, any
holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such holder has requested to be included, such
holder may elect to withdraw his request to include Registrable Securities in
such registration; PROVIDED, HOWEVER, that such election shall be irrevocable
and, after making such election, a holder shall no longer have any right to
include Registrable Securities in the registration as to which such election was
made.
4. TAKE ALONG AND DRAG ALONG RIGHTS; CERTAIN AGREEMENTS.
4.1 TAKE ALONG RIGHTS. (a) If, prior to the consummation of an
Initial Public Equity Offering by ACME Parent or any of its Subsidiaries
(including the Company), a Change of Control occurs pursuant to which a Person
(including such Person's Affiliates and associates), other than a Permitted
Holder, becomes the beneficial owner of more than 70% of the total voting power
of the Common Stock of ACME Parent or the Company, and ACME Parent is not
eligible to, or elects not to, effect a Drag Along Purchase, ACME Parent shall
make an offer to purchase (the "Change of Control Equity Offer") (i) any and all
of the outstanding Registrable Membership Units at a cash
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purchase price at least equal to (x) if such Change of Control resulted from a
purchase of Membership Units, the price paid by the acquiring Person in the
transaction pursuant to which such Change of Control Occurred or (y) in each
other case, the fair market value of the Registrable Membership Units (without
any discount for lack of liquidity, the amount of Registrable Membership Units
offered to be purchased or the fact that the Registrable Membership Units
represent a minority interest in a private company or a company under the
control of another Person) as determined in good faith by the Board of Directors
of ACME Parent and determined to be fair, from a financial point of view, to the
holders of Registrable Membership Units by a nationally recognized investment
banking firm (as set forth in such firm's written fairness opinion delivered to
the holders of Registrable Membership Units) and (ii) any and all Convertible
Securities at a cash purchase price for each Convertible Security at least equal
to the product of (x) the purchase price per Registrable Membership Unit set
forth in clause (i) of this Section 4.1(a) and (y) the number of Registrable
Membership Units issuable upon conversion of such Convertible Security on the
Change of Control Equity Offer Expiration Date.
(b) Within 30 days of such a Change of Control, ACME Parent shall
give notice of the Change of Control Equity Offer to each holder of Registrable
Membership Units by first class mail, postage prepaid, which notice shall govern
the terms of the Change of Control Equity Offer and shall (i) set forth the
purchase price to be paid for Registrable Membership Units and Convertible
Debentures tendered in the Change of Control Equity Offer, (ii) if clause (y) of
Section 4.1(a) is applicable, include the full text of the fairness opinion
referred to in Section 4.1(a), (iii) identify the date on which the Change of
Control Equity Offer will expire (the "Change of Control Equity Offer Expiration
Date"), which date shall not be less than 20 business days following the date of
commencement of the Change of Control Equity Offer, which commencement date
shall be the date such notice is mailed to holders of Registrable Membership
Units, (iv) explain the facts and circumstances of the Change of Control, (v)
include a letter of transmittal which identifies where certificates representing
the Registrable Membership Units and Convertible Debentures tendered pursuant to
the Change of Control Equity Offer are to be delivered, (vi) state that, unless
ACME Parent defaults in the purchase of the Registrable Membership Units and
Convertible Securities tendered pursuant to the Change of Control Equity Offer,
holders of Registrable Membership Units so tendered shall have no rights with
respect to the Registrable Membership Units tendered, and holders of Convertible
Securities shall have no rights with respect to the Convertible Securities
tendered, after the Change of
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Control Expiration Date and the only remaining right of such holders with
respect thereto is to receive the purchase price therefor promptly after the
Change of Control Equity Offer Expiration Date and (vii) that holders whose
Registrable Membership Units and Convertible Securities are tendered for
purchase in part only will be issued new certificates representing the number of
unpurchased Registrable Membership Units, Convertible Debentures or Convertible
Preferred Units as the case may be, surrendered.
(c) On the Change of Control Equity Offer Expiration Date, ACME
Parent will (i) accept for purchase all Registrable Membership Units and
Convertible Securities tendered pursuant to the Change of Control Equity Offer,
(ii) promptly deliver to tendering holders of Registrable Membership Units and
Convertible Debentures the purchase price therefor and (iii) issue and mail or
deliver to holders tendering a portion of their Registrable Membership Units or
Convertible Debentures, Convertible Preferred Units new certificates
representing a number of Registrable Membership Units, Convertible Debentures or
Convertible Preferred Units, as the case may be, equal to the unpurchased
portion of the Registrable Membership Units, Convertible Debentures or
Convertible Preferred Units, as the case may be, surrendered.
(d) ACME Parent will comply with the requirements of the Exchange
Act and other securities laws and regulations to the extent such laws and
regulations are applicable in connection with the Change of Control Equity
Offer. To the extent the provisions of any securities laws or regulations
conflict with the provisions of this Agreement, ACME Parent shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Agreement by virtue thereof.
4.2 DRAG ALONG RIGHTS. For so long as ACME Parent, together with its
Affiliates, beneficially owns at least a majority of the outstanding Common
Stock of the Company, if, at any time prior to the consummation of an Initial
Public Equity Offering by ACME Parent or any of its Subsidiaries (including the
Company), ACME Parent, together with its Affiliates, determines to sell all of
the Common Stock of the Company beneficially owned by ACME Parent and its
Affiliates to a Person other than an Affiliate of ACME Parent or an underwriter
in an Initial Public Equity Offering of the Company, ACME Parent shall have the
right to require the holders of Registrable Membership Units and Convertible
Preferred Units to sell such Membership Units and Convertible Preferred Units to
such transferee; PROVIDED that the consideration to be received by such
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<PAGE>
holders is the same as that to be received by ACME Parent and its Affiliates
and, in any event, shall be cash and/or securities registered under the
Securities Act and listed on a national security exchange or authorized for
quotation on the NASDAQ National Market System and (b) after giving effect to
such transaction, ACME Parent and its Affiliates shall not beneficially own,
directly or indirectly, any Common Stock of the Company. Any (i) Registrable
Membership Units purchased pursuant to this Section 4.2 (a "Drag Along
Purchase") shall be purchased at the same price per Membership Unit and (ii)
each Convertible Preferred Unit purchased pursuant to a Drag Along Purchase
shall be purchased at a price equal to the product of (x) the purchase price per
Registrable Membership Unit set forth in clause (i) of this Section 4.2 and (y)
the number of Membership Units issuable upon conversion of such Convertible
Preferred Unit on the closing date of the Drag Along Purchase and, in each case,
upon the same terms and conditions of such proposed transfer by ACME Parent and
its Affiliates. Immediately prior to the closing of the Drag Along Purchase,
each Holder of a Convertible Debenture shall have the right to require the
transferee to purchase such Convertible Debenture at a purchase price equal to
the product of (x) the consideration per Registrable Membership Unit to be paid
in the Drag Along Purchase by the transferee and (y) the number of Registrable
Membership Units issuable upon conversion of such Convertible Debenture. In
addition, the transferee in the Drag Along Purchase shall have the right to
require each holder of a Convertible Debenture which is unconverted as of the
closing of the Drag Along Purchase to sell such Convertible Debenture to such
transferee at a purchase price equal to the principal amount of such Convertible
Debenture plus accrued and unpaid interest to the date of closing of the Drag
Along Purchase.
4.3 CERTAIN AGREEMENTS. (a) ACME Parent agrees that it shall not,
and shall not permit any of its Subsidiaries to, enter into any amendment,
modification or waiver with respect to the Amended and Restated Limited
Liability Company Agreement dated the date hereof of the Company (the "LLC
Agreement") that would materially and adversely affect the rights of the holders
of Registrable Membership Units thereunder without the prior written consent of
holders of a majority of the then outstanding Registrable Membership Units.
(b) The Company agrees that it shall not issue any additional
Capital Stock (as defined in the Indenture) unless the Majority Member (as
defined in the LLC Agreement) or members owning a majority of the outstanding
Membership Units, as the case may be, determine in good faith that the
consideration
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<PAGE>
to be received therefor by the Company is at least equal to the fair market
value of such Capital Stock.
(c) So long as ACME Parent has the right to cause a Drag Along
Purchase pursuant to Section 4.2, ACME Parent shall cause ACME Subsidiary
Holdings IV, LLC to own exactly that number of Membership Units equal to the
Membership Units issuable upon conversion of the Convertible Securities and no
other significant assets.
5. REGISTRATION PROCEDURES. In connection with the obligations
of the Company or the Exchange Issuer with respect to any Registration
Statement pursuant to Sections 3.1 or 3.2 hereof, the Company or the Exchange
Issuer, as the case may be, shall:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the Securities Act, which form (i) shall be
selected by the Company or the Exchange Issuer, as the case may be, and
(ii) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith, and the Company or the Exchange
Issuer, as the case may be, shall use its best efforts to cause such
Registration Statement to become effective and remain effective in
accordance with Section 3 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period, cause each
Prospectus to be supplemented by any required prospectus supplement and,
as so supplemented, to be filed pursuant to Rule 424 under the Securities
Act;
(c) furnish to each holder of Registrable Securities and to each
underwriter of an underwritten offering of Registrable Securities, if any,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and such
other documents as such holder or underwriter may reasonably request, in
order to facilitate the public sale or other disposition of the
Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or Blue Sky laws of such
jurisdictions as any holder thereof covered by a Registration Statement
shall reasona-
20
<PAGE>
bly request in writing by the time the applicable Registration Statement
is declared effective by the SEC, and do any and all other acts and things
which may be reasonably necessary or advisable to enable such holder to
consummate the disposition in each such jurisdiction of such Registrable
Securities owned by such holder; PROVIDED, HOWEVER, that neither the
Company nor the Exchange Issuer, as the case may be, shall be required to
(i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for
this Section 5(d), (ii) file any general consent to service of process or
(iii) subject itself to taxation in any such jurisdiction if it is not so
subject;
(e) notify each holder of Registrable Securities promptly and, if
requested by such holder, confirm such advice in writing (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request
by the SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for additional
information after the Registration Statement has become effective, (iii)
of the issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if, between the
effective date of a Registration Statement and the closing of any sale of
Registrable Securities covered thereby, the representations and warranties
of the Company or the Exchange Issuer, as the case may be, contained in
any underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to the offering cease to be true and correct
in all material respects or if the Company or the Exchange Issuer, as the
case may be, receives any notification with respect to the suspension of
the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose and (v)
of the happening of any event during the period a Registration Statement
is effective which makes any statement made in such Registration Statement
or the related Prospectus untrue in any material respect or which requires
the making of any changes in such Registration Statement or Prospectus in
order to make the statements therein not misleading;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
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<PAGE>
(g) furnish to each holder of Registrable Securities and to the
Initial Purchaser, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (with
documents incorporated therein by reference or exhibits thereto);
(h) cooperate with the holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any
restrictive legends and registered in such names as the holders may
reasonably request at least two Business Days prior to the closing of any
sale of Registrable Securities;
(i) upon the occurrence of any event contemplated by Section 5(e)(v)
hereof, use reasonable efforts to prepare a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that the Company or the
Exchange Issuer, as the case may be, shall not be required to amend or
supplement a Registration Statement, any related Prospectus or any
document incorporated therein by reference in the event that, and for so
long as, an event occurs and is continuing as a result of which the
Registration Statement, any related Prospectus or any document
incorporated therein by reference as then amended or supplemented would,
in the good faith judgment of the Company or the Exchange Issuer, as the
case may be, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein
not misleading in light of the circumstances under which they are made.
The Company or the Exchange Issuer, as the case may be, agrees to notify
each Holder to suspend use of the Prospectus as promptly as practicable
after the occurrence of such an event, and each Holder hereby agrees to
suspend use of the Prospectus until the Company or the Exchange Issuer, as
the case may be, has amended or supplemented the Prospectus to correct
such misstatement or omission. At such time as such public disclosure is
otherwise made or the Company or the Exchange Issuer, as the case may be,
determines in good faith that such disclosure is not necessary, the
Company or the Exchange Issuer, as the case may be,
22
<PAGE>
agrees promptly to notify each Holder of such determination, to amend or
supplement the Prospectus if necessary to correct any untrue statement or
omission therein and to furnish each Holder such numbers of copies of the
Prospectus as so amended or supplemented as each Holder may reasonably
request;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of such
document to the Holders and make available for discussion of such document
the representatives of the Company or the Exchange Issuer, as the case may
be, as shall be reasonably requested by the Holders of Registrable
Securities;
(k) obtain a CUSIP number for the Registrable Securities;
(l) (i) make reasonably available for inspection by a representative
of, and counsel for, any underwriter participating in any disposition
pursuant to a Registration Statement, all relevant financial and other
records, pertinent corporate documents and properties of the Company and
(ii) cause the officers, directors and employees of the Company or the
Exchange Issuer, as the case may be, to supply all relevant information
reasonably requested by such representative, counsel or any such
underwriter in connection with any such Registration Statement; and
(m) if requested by the holders in connection with any Registration
Statement, shall use its best efforts to cause (w) counsel for the Company
or the Exchange Issuer, as the case may be, to deliver an opinion relating
to the Registration Statement and the Registrable Securities, in customary
form, (x) its officers to execute and deliver all customary documents and
certificates requested by a representative of the holders or any
underwriter, as applicable and (y) its independent public accountants to
provide a comfort letter in customary form.
The Company or the Exchange Issuer, as the case may be, may, as a
condition to such holder's participation in any Registration Statement, require
each holder of Registrable Securities to (i) furnish to the Company or the
Exchange Issuer, as the case may be, such information regarding the holder and
23
<PAGE>
the proposed distribution by such holder of such Registrable Securities as the
Company or the Exchange Issuer, as the case may be, may from time to time
reasonably request in writing and (ii) agree in writing to be bound by this
Agreement.
6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company or the
Exchange Issuer, as the case may be, with respect to each Registration Statement
(and related Prospectus) filed by it (with respect to such Registration
Statement, the "Registrant") agrees to indemnify and hold harmless each holder
whose Registrable Securities are included in such Registration Statement (each,
a "Holder"), the officers and directors of such Holder and each person, if any,
who controls such Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, or is under common control
with, or is controlled by, such Holder, from and against all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred by any of them in connection with defending or
investigating any such action or claim) caused by, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
any Prospectus, preliminary prospectus or Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities were registered
under the Securities Act, or caused by, arising out of or based upon any
omission or alleged omission to state therein a material fact necessary to make
the statements therein in light of the circumstances under which they were made
not misleading, or caused by any untrue statement or alleged untrue statement of
a material fact contained in any Prospectus (as amended or supplemented if the
Registrant shall have furnished any amendments or supplements thereto), or
caused by any omission or alleged omission to state therein a material fact
necessary to make the statements therein in light of the circumstances under
which they were made not misleading, except, with respect to a Holder, its
officers and directors and its controlling person, insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to such Holder furnished to the Registrant in writing by such Holder expressly
for use in any such Registration Statement, Prospectus or preliminary
prospectus.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Registrant, its directors, its officers and each person, if
any, who controls the Registrant within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Registrant to such Holder, but
24
<PAGE>
only with reference to information relating to such Holder furnished to the
Registrant in writing by such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto) or any preliminary prospectus. The liability of any Holder
under this paragraph (b) shall in no event exceed the proceeds received by such
Holder from sales of Registrable Securities giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental
investigation), claim or demand shall be brought or asserted involving any
person in respect of which indemnity may be sought pursuant to either paragraph
(a) or (b) above, such person (the "indemnified party") shall promptly notify
the person against which such indemnity may be sought (the "indemnifying party")
in writing but failure to so notify the indemnified party shall not relieve the
indemnifying party from any liability which it may have hereunder or otherwise
except to the extent such failure actually prejudiced the rights of the
indemnifying party, and the indemnifying party, upon request of the indemnified
party, shall retain counsel (and any local counsel) reasonably satisfactory to
the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the reasonable
fees and disbursements of such counsel (and any local counsel) relating to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed in writing to the retention of such
counsel or (ii) the indemnifying party fails promptly to assume the defense of
such proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party or parties or (iii) the named parties to any such proceeding
(including any impleaded parties) include both such indemnified party or parties
and the indemnifying parties or an affiliate of the indemnifying parties or such
indemnified parties, and there may be one or more defenses available to such
indemnified party or parties that are different from or additional to those
available to the indemnifying parties, in which case, if such indemnified party
or parties notifies the indemnifying parties in writing that it elects to employ
separate counsel of its choice at the expense of the indemnifying parties, the
indemnifying parties shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the indemnifying parties, it being
understood, however, that except as provided above, the indemnifying parties
shall not, in connection with any one such proceeding or separate but
substantially similar or related proceedings in
25
<PAGE>
the same jurisdiction, arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for such
indemnified party or parties. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but, if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, the indemnifying party agrees that it shall be liable
for any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by such
indemnifying party of a request for fees and expenses of counsel retained by the
indemnified party pursuant to this paragraph and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement; PROVIDED, HOWEVER, that the indemnifying
party shall not be liable for any settlement effected without its consent
pursuant to this sentence if the indemnifying person is contesting, in good
faith, the request for reimbursement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is a
party, and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 6 is unavailable to an indemnified party or insufficient
in respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Registrant on the one hand and the Holders on the other hand from the offering
of such Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Registrant on the one hand and the Holders on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
26
<PAGE>
considerations. The relative fault of the Registrant on the one hand and the
Holders on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Registrant or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Registrant and each Holder agrees that it would not be just
or equitable if contribution pursuant to this Section 6 were determined by PRO
RATA allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred (and not otherwise reimbursed) by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for in
this Section 6 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in equity.
7. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. Each of the ACME Parent and the
Company has not entered into nor will ACME Parent or the Company on or after the
date of this Agreement enter into any agreement which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of holders
of at least a majority of the Registrable Securities affected by such amendment,
modification, supplement, waiver or consent; PROVIDED, however, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other holders of Reg-
27
<PAGE>
istrable Securities may be given by the holders of a majority of the Registrable
Securities proposed to be sold.
(c) NOTICES. Each notice given to a holder of Membership Units
pursuant to this Agreement shall simultaneously be given to the holder of the
Convertible Security. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to the Initial Purchaser, at its address set forth in the
Purchase Agreement; (ii) if to the Company or ACME Parent, at the Company's
address set forth in the Purchase Agreement; (iii) if to a holder of Membership
Units, as set forth in the register of the Membership Units; or (iv) if to the
holder of a Convertible Debenture, as set forth in the register of the
Convertible Debenture; or (v) if to a holder of a Convertible Preferred Unit, as
set forth in the register of the Convertible Preferred Units.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered, five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including without limitation and without the need for an express
assignment, subsequent holders of Registrable Securities. If any transferee of
any holder of Registrable Securities shall acquire Registrable Securities in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement and such person shall be entitled to receive the benefits hereof.
(e) THIRD PARTY BENEFICIARY. The holders of Registrable Securities
shall be third party beneficiaries to the agreements made hereunder between the
Company and ACME Parent, on the one hand, and the Initial Purchaser, on the
other hand, and the Initial Purchaser shall have the right to enforce such
agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights or the rights of holders of Registrable
Securities hereunder.
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<PAGE>
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without any
regard to conflict of laws provisions thereof.
(i) SEVERABILITY. In the event that any on or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impair thereby.
29
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Membership
Unitholders Agreement as of the date first written above.
ACME INTERMEDIATE HOLDINGS, LLC
By: ACME Television Holdings, LLC
its majority member
By:/s/ Douglas E. Gealy
---------------------------------
Name: Douglas Gealy
Title: President
ACME TELEVISION HOLDINGS, LLC
By:/s/ Douglas E. Gealy
---------------------------------
Name: Douglas Gealy
Title: President
CIBC WOOD GUNDY SECURITIES CORP.
By:/s/ Andrew R. Meyer
--------------------------------
Name: Andrew Meyer
Title: Managing Director
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE INC.
Units Consisting of
$71,634,000 Principal Amount at Maturity of
12% Senior Secured Discount Notes due 2005
and
71,634 Membership Units
PURCHASE AGREEMENT
September 24, 1997
CIBC WOOD GUNDY SECURITIES CORP.
425 Lexington Avenue
3rd Floor
New York, New York 10017
Ladies and Gentlemen:
ACME Intermediate Holdings, LLC, a Delaware limited liability
company (the "Company"), and ACME Intermediate Finance Inc., a Delaware
corporation ("Finance" and, together with the Company, the "Issuers"), hereby
confirm their agreement with you (the "Initial Purchaser"), as set forth below.
1. THE SECURITIES. Subject to the terms and conditions herein
contained, the Issuers propose to issue and sell to the Initial Purchaser 71,634
units (the "Units"), each Unit consisting of $1,000 aggregate principal amount
at maturity of the Issuers' 12% Senior Secured Discount Notes due 2005 (the
"Notes") and one membership unit of the Company (each, a "Membership Unit"). The
Notes are to be issued pursuant to the Indenture (the "Indenture"), dated as of
September 30, 1997, among the Issuers and Wilmington Trust Company, as trustee
(the "Trustee"). The Units, Notes and Membership Units are hereinafter referred
to collectively as the "Securities."
The Securities will be offered and sold to the Initial Purchaser
without such offers and sales being registered under the Securities Act of 1933,
as amended (together with the rules and regulations of the Securities and
Exchange Commission (the "Commission") promulgated thereunder, the "Securities
Act"), in reliance on exemptions therefrom.
In connection with the sale of the Securities, the Issuers have
prepared a preliminary offering memorandum dated
<PAGE>
September 17, 1997, the "Preliminary Memorandum") and a final offering
memorandum dated September 24, 1997 (the "Final Memorandum"; the Preliminary
Memorandum and the Final Memorandum each herein being referred to as a
"Memorandum"), each setting forth or including a description of the terms of the
Securities, the terms of the offering of the Securities, a description of the
Company and its subsidiaries and any material developments relating to the
Company and its subsidiaries occurring after the date of the most recent
historical financial statements included therein.
The Issuers understand that the Initial Purchaser proposes to
make an offering of the Securities only on the terms and in the manner set forth
in the Memorandum and Section 9 hereof as soon as the Initial Purchaser deems
advisable after this Agreement has been executed and delivered, to persons in
the United States whom the Initial Purchaser reasonably believes to be qualified
institutional buyers ("QIBs") as defined in Rule 144A under the Securities Act,
as such rule may be amended from time to time ("Rule 144A"), in transactions
under Rule 144A, and to a limited number of institutional "accredited investors"
("Accredited Investors"), as defined in Rule 501(a)(1), (2), (3) and (7) under
Regulation D of the Securities Act, in private sales exempt from registration
under the Securities Act, and outside the United States to certain persons in
reliance on Regulation S under the Securities Act.
The Initial Purchaser and its direct and indirect transferees of
the Notes will be entitled to the benefits of the Registration Rights Agreement
dated as of the Closing Date among the parties hereto (the "Registration Rights
Agreement") pursuant to which the Issuers have agreed, among other things, to
file (i) a registration statement (the "Registration Statement") with the
Commission registering the Notes or the Exchange Notes (as defined in the
Registration Rights Agreement) under the Securities Act or (ii) a shelf
registration statement pursuant to Rule 415 under the Securities Act relating to
the resale of the Notes by holders thereof or, if applicable, relating to the
resale of Private Exchange Notes (as defined in the Registration Rights
Agreement) by the Initial Purchaser pursuant to an exchange of the Notes for
Private Exchange Notes. The
Initial Purchaser and its direct and indirect transferees of the Membership
Units will be entitled to the benefits of a Membership Unitholders Agreement
dated as of the Closing Date among the Company, ACME Parent (as defined) and the
Initial Purchaser (the "Membership Unitholders Agreement").
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The Securities, the Indenture, the Pledge Agreement (as defined
in the Indenture), the Registration Rights Agreement, the Membership Unitholders
Agreement and this Agreement are herein collectively referred to as the "Basic
Documents".
ACME Television Holdings, LLC, a Delaware limited liability
company ("ACME Parent"), has entered into an acquisition agreement dated July
29, 1997 (the "St. Louis Acquisition Agreement") pursuant which ACME Television,
LLC, a Delaware limited liability company ("ACME Television"), has agreed to
acquire (the "St. Louis Acquisition") Station KPLR, St. Louis, Missouri (the
"St. Louis Station") and ACME Television has entered into a local marketing
agreement with respect to the St. Louis Station (the "St. Louis LMA"). In
addition, ACME Television or one of its subsidiaries has entered into (i) an
agreement dated August 22, 1997 (the "Salt Lake City Acquisition Agreement") to
construct and acquire (the "Salt Lake City Acquisition") a new television
broadcast station in Salt Lake City, Utah (the "Salt Lake City Station") (each
as described in the Final Memorandum), (ii) an agreement dated August 22, 1997
(the "Albuquerque Acquisition Agreement") to construct and acquire (the
"Albuquerque Acquisition") a new television broadcast station in Albuquerque,
New Mexico (the "Albuquerque Station") (each as described in the Final
Memorandum) and (iii) an agreement dated May 28, 1997 (the "Knoxville
Acquisition") to upgrade the studio and transmitting capabilities and acquire
(the "Knoxville Acquisition") Station WINT, Knoxville, Tennessee (the "Knoxville
Station") (each as described in the Final Memorandum). The St. Louis Acquisition
Agreement, the Salt Lake City Acquisition Agreement, the Albuquerque Acquisition
Agreement and the Knoxville Acquisition Agreement are collectively referred to
herein as the "Acquisition Agreements." The St. Louis Acquisition, the Salt Lake
City Acquisition, the Albuquerque Acquisition and the Knoxville Acquisition are
collectively referred to herein as the "Acquisitions." The St. Louis Station,
the Salt Lake City Station, the Albuquerque Station and the Knoxville Station
are collectively referred to herein as the "Acquisition Stations."
On the Closing Date, prior to or simultaneously with the closing
hereunder, (i) ACME Parent will make a capital contribution to the Company of
$21.7 million, which the Company will simultaneously contribute to the capital
of ACME Television (the "Parent Equity Contribution"), and (ii) ACME Television
and ACME Finance Corporation will issue $175,000,000 principal amount at
maturity of their 10-7/8% Senior Discount Notes due 2004 (the "ACME Television
Offering").
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The offer, purchase and sale of the Securities as contemplated by
this Agreement, the consummation of the Revolving Credit Facility and the
Capital Lease Facilities (each as defined and described in the Final
Memorandum), the Parent Equity Contribution, the ACME Television Offering, the
St. Louis LMA and the Acquisitions are collectively referred to herein as the
"Transactions."
2. REPRESENTATIONS AND WARRANTIES OF THE ISSUERS. The Issuers,
jointly and severally, represent and warrant to and agree with the Initial
Purchaser that:
(a) Neither the Preliminary Memorandum as of the date thereof nor
the Final Memorandum nor any amendment or supplement thereto as of the
date thereof and at all times subsequent thereto up to the Closing Date
contained or contains any untrue statement of a material fact or omitted
or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, except that the representations and warranties set forth
in this Section 2 do not apply to statements or omissions made in
reliance upon and in conformity with information relating to the Initial
Purchaser furnished to the Company in writing by the Initial Purchaser
expressly for use in the Preliminary Memorandum, the Final Memorandum or
any amendment or supplement thereto.
(b) Each of the Company and its subsidiaries set forth in EXHIBIT
A hereto (the "Subsidiaries") has been duly incorporated or otherwise
organized and each of the Company and the Subsidiaries is validly
existing and in good standing as a corporation, limited partnership or
limited liability company, as the case may be, under the laws of its
jurisdiction of incorporation or organization, with the requisite
corporate or other power and authority to own its properties and conduct
its business as now conducted as described in the Final Memorandum and
is duly qualified to do business as a foreign corporation, limited
partnership or limited liability company, as the case may be, in good
standing in all other jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
general affairs, management, business, condition (financial or other),
properties, prospects or results of operations of the Company and the
Subsidiaries, taken as a whole,
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both before and after giving effect to each of the Acquisitions (any
such event, a "Material Adverse Effect"); as of the Closing Date, the
Company will have the authorized, issued and outstanding capitalization
set forth in the Final Memorandum (or, if the Final Memorandum is not in
existence, the most recent Preliminary Memorandum); except as set forth
in EXHIBIT A hereto, the Company does not have any subsidiaries or own
directly or indirectly any of the capital stock or other equity or
long-term debt securities of or have any equity interest in any other
person; all of the outstanding shares of capital stock, partnership
interests or membership units, as the case may be, of the Company and
the Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and were not issued in violation of any
preemptive or similar rights and, except as disclosed in the Final
Memorandum, all of the outstanding shares of capital stock, partnership
interests or membership units, as the case may be, of the Subsidiaries
are owned, directly or indirectly, by the Company free and clear of all
liens, encumbrances, equities and restrictions on transferability (other
than those imposed by the Securities Act and the state securities or
"Blue Sky" laws) or voting; except as set forth in the Final Memorandum,
no options, warrants or other rights to purchase from the Company or any
Subsidiary, agreements or other obligations of the Company or any
Subsidiary to issue or other rights to convert any obligation into, or
exchange any securities for, shares of capital stock, partnership
interests or membership units of, or ownership interests in, the Company
or any Subsidiary are outstanding and no holder of securities of the
Company or any Subsidiary is entitled to have such securities registered
under the Registration Statement; and except as set forth in the Final
Memorandum, there is no agreement, understanding or arrangement among
the Company or any Subsidiary and each of their respective stockholders,
partnership interest holders or membership unit holders, as the case may
be, or any other person relating to the ownership or disposition of any
capital stock, partnership interests or membership units of the Company
or any Subsidiary or the election of directors or similar officers of
the Company or any Subsidiary or the governance of the Company's or any
Subsidiary's affairs, and, if any, such agreements, understandings and
arrangements will not be breached or violated as a result of the
execution and delivery of, or the consummation of the transactions
contemplated by, the Basic Documents or the consummation of any of the
other Transactions.
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<PAGE>
(c) Each of the Issuers has the requisite corporate power and
authority to execute, deliver and perform its obligations under the
Notes. The Notes have been duly and validly authorized by the Issuers
for issuance and, when executed by the Issuers and authenticated by the
Trustee in accordance with the provisions of the Indenture, and
delivered to and paid for by the Initial Purchaser in accordance with
the terms hereof, will have been duly executed, issued and delivered and
will constitute valid and legally binding obligations of the Issuers,
entitled to the benefits of the Indenture and enforceable against the
Issuers in accordance with their terms except that the enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally or (ii) general principles of
equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is
considered in a proceeding at law or in equity) (collectively, the
"Enforceability Exceptions"); the Notes are in the form contemplated by
the Indenture.
(d) Each of the Issuers has the requisite corporate power and
authority to execute, deliver and perform its obligations under the
Indenture. The Indenture has been duly and validly authorized by the
Issuers and meets the requirements for qualification under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and, when
executed and delivered by the Issuers (assuming the due authorization,
execution and delivery by the Trustee), will constitute a valid and
legally binding agreement of the Issuers, enforceable against the
Issuers in accordance with its terms, except that the enforcement
thereof may be limited by the Enforceability Exceptions.
(e) Each of the Company and ACME Subsidiary Holdings II, LLC
(together, the "Pledgors") has the requisite power and authority to
execute, deliver and perform its obligations under the Pledge Agreement.
The Pledge Agreement has been duly and validly authorized by the
Pledgors and, when executed and delivered by the Pledgors (assuming the
due authorization, execution and delivery by the Trustee), will
constitute a valid and legally binding agreement of the Pledgors,
enforceable against the Pledgors in accordance with its terms, except
that the enforcement thereof may be limited by the Enforceability
Exceptions.
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<PAGE>
(f) The Membership Units have been duly and validly authorized
for issuance by the Company and, when delivered to and paid for by the
Initial Purchaser in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable; the Membership Units are in the
form contemplated by the limited liability company agreement of the
Company; no holder of a Membership Unit will be subject to personal
liability by reason of being such a holder.
(g) Each of the Company and ACME Parent has the requisite power
and authority to execute, deliver and perform its obligations under the
Membership Unitholders Agreement. The Membership Unitholders Agreement
has been duly and validly authorized by the Company and ACME Parent and,
when executed and delivered by the Company and ACME Parent, will
constitute a valid and legally binding agreement of the Company and ACME
Parent, enforceable against them in accordance with its terms, except
that the enforcement thereof may be limited by the Enforceability
Exceptions and except as any rights to indemnity or contribution
may be limited by federal and state securities laws and public policy
considerations.
(h) Each of the Issuers has the requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly and validly authorized by the
Issuers and, when executed and delivered by the Issuers, will constitute
a valid and legally binding agreement of the Issuers, enforceable
against the Issuers in accordance with its terms, except that the
enforcement thereof may be limited by the Enforceability Exceptions and
except as any rights to indemnity or contribution hereunder may be
limited by federal and state securities laws and public policy
considerations.
(i) Each of the Issuers has the requisite corporate power and
authority to execute, deliver and perform its obligations under the
Registration Rights Agreement. The Registration Rights Agreement has
been duly and validly authorized by the Issuers and, when executed and
delivered by the Issuers, will constitute a valid and legally binding
agreement of the Issuers, enforceable against the Issuers in accordance
with its terms, except that the enforcement thereof may be limited by
the Enforceability Exceptions and except as any rights to indemnity or
contri-
7
<PAGE>
bution thereunder may be limited by federal and state securities laws
and public policy considerations.
(j) The Securities, the Indenture, the Membership Unitholders
Agreement and the Registration Rights Agreement conform in all material
respects to the descriptions thereof in the Final Memorandum.
(k) Each of the Limited Liability Company Agreement and Investors
Agreement of ACME Parent conforms in all material respects to the
description thereof in the Final Memorandum.
(l) (i) The Issuers have delivered to the Initial Purchaser a
true and correct copy of each of the Acquisition Agreements and the St.
Louis LMA, together with all related agreements and all schedules and
exhibits thereto, and as of the date hereof there have been no material
amendments, alterations, modifications or waivers of any of the
provisions of any of the Acquisition Agreements or the St. Louis LMA
since their date of execution or from the form in which any such
agreement has been delivered to the Initial Purchaser except for any
such amendment, modification or waiver a copy of which has been
delivered to the Initial Purchaser; and (ii) there exists as of the date
hereof (after giving effect to the transactions contemplated by each of
the Basic Documents and the other Transactions) no event or condition
that would constitute a default or an event of default by any of the
Obligors under any of the Acquisition Agreements or the St. Louis LMA
that would result in a Material Adverse Effect or materially adversely
affect the ability to consummate any of the Transactions.
(m) Except as disclosed in the Final Memorandum (including the
absence of FCC approvals with respect to the Station Acquisitions), no
consent, approval, authorization, license, qualification, exemption or
order of any court or governmental agency or body or third party is
required for the performance of any of the Basic Documents by any of the
Issuers or ACME Parent or for the consummation of any of the other
Transactions, except as has already been acquired or as may be required
under state securities or "Blue Sky" laws in connection with the
purchase and distribution of the Securities by the Initial Purchaser;
all such consents, approvals, authorizations, licenses, qualifications,
exemptions and orders set forth in the Final Memorandum which are
required to be obtained
8
<PAGE>
by the Closing Date have been obtained or made, as the case may be, and
are in full force and effect and not the subject of any pending or, to
the best knowledge of the Issuers, threatened attack by appeal or direct
proceeding or otherwise.
(n) None of the Company or any of the Subsidiaries or ACME Parent
is (i) in violation of its certificate of incorporation or bylaws (or
similar organizational document), (ii) in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to it or
any of its properties or assets, which breach or violation would,
individually or in the aggregate, have a Material Adverse Effect, or
(iii) in default (nor has any event occurred which with notice or
passage of time, or both, would constitute a default) in the performance
or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit,
certificate or agreement or instrument to which it is a party or to
which it is subject, which default could, individually or in the
aggregate, have a Material Adverse Effect.
(o) (x) The execution, delivery and performance of Basic
Documents by the Issuers or ACME Parent and (y) except for receipt of
applicable final governmental and regulatory approvals relating to the
consummation of the Acquisitions which have not yet been obtained, the
consummation of the other Transactions will not (a) violate, conflict
with or constitute or result in a breach of or a default under (or an
event that, with notice or lapse of time, or both, would constitute a
breach of or a default under) any of (i) the terms or provisions of any
contract, indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, permit, certificate or agreement or
instrument to which any of ACME Parent, the Company or any of the
Subsidiaries is a party or to which any of their respective properties
or assets are subject, (ii) the certificate of incorporation or bylaws
of any of ACME Parent, the Company or any of the Subsidiaries (or
similar organizational document) or (iii) (assuming compliance with all
applicable state securities or "Blue Sky" laws) any statute, judgment,
decree, order, rule or regulation of any court or governmental agency or
other body applicable to ACME Parent, the Company or any of the
Subsidiaries or any of their respective properties or assets or (b)
except as disclosed in the Fi-
9
<PAGE>
nal Memorandum, result in the imposition of any lien upon or with
respect to any of the properties or assets now owned or hereafter
acquired by ACME Parent, the Company or any of the Subsidiaries, which
violation, conflict, breach, default or lien could, individually or in
the aggregate, have a Material Adverse Effect.
(p) The audited consolidated financial statements included in the
Final Memorandum present fairly the consolidated financial position,
results of operations and cash flows of such entities at the dates and
for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis; the interim unaudited consolidated financial
statements included in the Final Memorandum present fairly the
consolidated financial position, results of operations and cash flows of
such entities at the dates and for the periods to which they relate
subject to year-end audit adjustments and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis with the audited consolidated financial statements
included therein; the summary and selected financial and statistical
data included in the Final Memorandum present fairly the information
shown therein and have been prepared and compiled on a basis consistent
with the audited financial statements included therein, except as
otherwise stated therein; and the auditors which have examined certain
of such financial statements as set forth in their reports included in
the Final Memorandum are an independent public accounting firm as
required by the Securities Act.
(q) The pro forma financial statements and other pro forma
financial information (including the notes thereto) included in the
Final Memorandum (A) have been prepared in accordance with applicable
requirements of Regulation S-X promulgated under the Securities Exchange
Act of 1934, as amended (together with the rules and regulations of the
Commission promulgated thereunder, the "Exchange Act") (other than the
information under the caption "Projected Financial Data"), and (B) have
been properly computed on the bases described therein; and the
assumptions used in the preparation of the pro forma financial
statements and other pro forma financial information included in the
Final Memorandum are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred
to therein. The Company believes that the assumptions used in the
preparation of the
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<PAGE>
Projected Financial Data included in the Final Memorandum are
reasonable.
(r) Except as described in the Final Memorandum, there is not
pending or, to the best knowledge of the Issuers, threatened any action,
suit, proceeding, inquiry or investigation, governmental or otherwise,
to which any of the Company or any of the Subsidiaries is a party, or to
which their respective properties or assets or, to the knowledge of the
Issuers, any of the Acquisition Stations are subject, before or brought
by any court, arbitrator or governmental agency or body, that, if
determined adversely to the Company or any such Subsidiary or with
respect to any such Acquisition Station could, individually or in the
aggregate, have a Material Adverse Effect or that seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge any of the
Transactions.
(s) None of the Company or any of the Subsidiaries has, and,
after giving effect to the Transactions, will not have, any liability
for any prohibited transaction or funding deficiency or any complete or
partial withdrawal liability with respect to any pension, profit sharing
or other plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to which any of the Company
or any of the Subsidiaries makes or ever has made a contribution or in
which any employee of any of the Company or the Subsidiaries or, to the
knowledge of the Issuers, any employee of an Acquisition Station is or
has ever been a participant. With respect to such plans, the Company and
any of the Subsidiaries are, and, after giving effect to the
Transactions, will be, in compliance in all material respects with all
provisions of ERISA.
(t) Except as described in the Final Memorandum, the Company and
the Subsidiaries own or possess adequate licenses or other rights to use
all patents, trademarks, service marks, trade names, copyrights and
know-how that are necessary to conduct their business as described in
the Final Memorandum. None of the Company or any of the Subsidiaries has
received any notice of infringement of or conflict with (or knows of any
such infringement of or conflict with) asserted rights of others with
respect to any patents, trademarks, service marks, trade names,
copyrights or know-how that, if such assertion of infringement or
conflict were sustained, would, individually or in the aggregate, have a
Material Adverse Effect.
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<PAGE>
(u) Except as described in the Final Memorandum (including the
absence of FCC approvals with respect to the Station Acquisitions), each
of the Company and the Subsidiaries possesses all licenses, permits,
certificates, consents, orders, approvals and other authorizations from,
and has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals presently required or
necessary to own or lease, as the case may be, and to operate its
respective properties and to carry on its respective businesses as now
or proposed to be conducted as set forth in the Final Memorandum
("Permits"), except where the failure to obtain such Permits would not,
individually or in the aggregate, have a Material Adverse Effect; each
of the Company and the Subsidiaries has fulfilled and performed all of
its obligations with respect to such Permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of
the rights of the holder of any such Permit; and none of the Company or
the Subsidiaries has received any notice of any proceeding relating to
revocation or modification of any such Permit, except as described in
the Final Memorandum and except where such revocation or modification
would not, individually or in the aggregate, have a Material Adverse
Effect.
(v) Subsequent to the respective dates as of which information
is given in the Final Memorandum and except as described therein, (i)
the Company, the Subsidiaries and, to the knowledge of the Issuers, the
Acquisition Stations have not incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions, in either case whether or not in the ordinary course of
business, (ii) the Company and the Subsidiaries have not purchased any
of their respective outstanding capital stock, or declared, paid or
otherwise made any dividend or distribution of any kind on any of their
respective capital stock or otherwise (other than, with respect to any
of such Subsidiaries, the purchase of, or dividend or distribution on,
capital stock owned by the Company) and (iii) there shall not have been
any change in the capital stock or long-term indebtedness of the Company
or any of the Subsidiaries.
(w) There are no legal or governmental proceedings, nor are there
any contracts or other documents that would be required by the
Securities Act to be described in a
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prospectus relating to the Securities that are not described in the
Final Memorandum.
(x) None of the Company or the Subsidiaries has taken or will
take any action that would cause this Agreement or the issuance or sale
of the Securities to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or
as the same may hereafter be in effect, on the Closing Date.
(y) Each of the Company and the Subsidiaries has good and
marketable title to all real property described in the Final Memorandum
as being owned by it and good and marketable title to the leasehold
estate in the real property described therein as being leased by it,
free and clear of all liens, charges, encumbrances or restrictions,
except, in each case, as described in the Final Memorandum or such as
would not, individually or in the aggregate, have a Material Adverse
Effect. All leases, contracts and agreements, including those referred
to in the Final Memorandum to which the Company or any of the
Subsidiaries is a party or by which any of them is bound are valid and
enforceable against the Company or any such Subsidiary except that the
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally or (ii)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding at law or in equity)
(collectively, the "Enforceability Exceptions"), and are, to the
knowledge of the Issuers, valid and enforceable against the other party
or parties thereto (subject to the Enforceability Exceptions) and are in
full force and effect.
(z) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns,
except where the failure to so file such returns would not, individually
or in the aggregate, have a Material Adverse Effect, and have paid all
taxes shown as due thereon; and other than tax deficiencies which the
Company or any Subsidiary is contesting in good faith and for which
adequate reserves have been provided in accordance with generally
accepted accounting principles, there is no tax deficiency that has been
asserted against the Company or any Subsidiary that would, indi-
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vidually or in the aggregate, have a Material Adverse Effect.
(aa) (i) To the best knowledge of the Company, immediately after
the consummation of the Transactions, the fair value and present fair
salable value of the assets of each of the Issuers will exceed the sum
of its stated liabilities and identified contingent liabilities; and
(ii) each of the Issuers is not, nor will it be, after giving effect to
the consummation of the Transactions, (a) left with unreasonably small
capital with which to carry on its business as it is proposed to be
conducted, (b) unable to pay its debts (contingent or otherwise) as they
mature or (c) otherwise insolvent.
(bb) Except as disclosed in the Final Memorandum and except as
would not, individually or in the aggregate, have a Material Adverse
Effect, (A) each of the Company, the Subsidiaries and to the knowledge
of the Issuers, the Acquisition Stations is in compliance with all
applicable Environmental Laws, (B) each of the Company, the Subsidiaries
and to the knowledge of the Issuers, the Acquisition Stations has made
all filings and provided all notices required under any applicable
Environmental Law, and has all permits, authorizations and approvals
required to be in effect as of the date hereof under any applicable
Environmental Laws and is in compliance with their requirements, (C)
there is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter or request for information pending or, to the knowledge
of the Issuers, threatened against the Company, any of the Subsidiaries
or, to the knowledge of the Issuers, any of the Acquisition Stations
under any Environmental Law, (D) no lien, charge, encumbrance or
restriction has been recorded under any Environmental Law with respect
to any assets, facility or property owned, operated, leased or
controlled by the Company or any of the Subsidiaries or, to the
knowledge of the Issuers, any of the Acquisition Stations, (E) neither
the Company nor any of the Subsidiaries nor, to the knowledge of the
Issuers, any of the Acquisition Stations has received notice that it has
been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), or any comparable state law, and (F) no
property or facility of the Company or any of the Subsidiaries or, to
the knowledge of the Issuers, any of the Acquisition Stations is (i)
listed or proposed for
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listing on the National Priorities List under CERCLA or (ii) listed in
the Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any state or local governmental authority.
For purposes of this Agreement, the following terms shall have
the following meanings: "Environmental Law" means any federal, state,
local or municipal statute, law, rule, regulation, ordinance, code,
policy or rule of common law and any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree or judgment binding on any of the Company or the
Subsidiaries or, to the knowledge of the Issuers, any of the Acquisition
Stations, relating to pollution or protection of the environment or
health or safety or any chemical, material or substance, that is subject
to regulation thereunder. "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, notices of responsibility, information requests, liens,
notices of noncompliance or violation, investigations or proceedings
relating in any way to any Environmental Law.
(cc) None of the Company or the Subsidiaries is, or immediately
after the Closing Date will be, required to register as an "investment
company" or a company "controlled by" an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(dd) None of the Company or the Subsidiaries or any of such
entities' directors, officers, employees, agents or controlling persons
has taken, directly or indirectly, any action designed, or that might
reasonably be expected, to cause or result, under the Securities Act or
otherwise, in, or that has constituted, stabilization or manipulation of
the price of the Securities.
(ee) None of the Company, the Subsidiaries or any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under
the Securities Act) directly, or through any agent, (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of
any "security" (as defined in the Securities Act) which is or could be
integrated with the sale of the Securities in a manner that would
require the registration under the Securities Act of the Securities or
(ii) engaged in any form of general solicitation or general advertising
(as those
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<PAGE>
terms are used in Regulation D under the Securities Act) in connection
with the offering of the Securities or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
Assuming the accuracy of the representations and warranties of the
Initial Purchaser in Section 9 hereof, it is not necessary in connection
with the offer, sale and delivery of the Securities to the Initial
Purchaser in the manner contemplated by this Agreement to register any
of the Securities under the Securities Act or to qualify the Indenture
under the Trust Indenture Act.
(ff) No securities of any Issuer are of the same class (within
the meaning of Rule 144A under the Securities Act) as the Securities and
listed on a national securities exchange registered under Section 6 of
the Exchange Act, or quoted in a U.S. automated inter-dealer quotation
system.
(gg) Except as set forth in the Final Memorandum, there is no
strike, labor dispute, slowdown or work stoppage with the employees of
the Company or any of the Subsidiaries or, to the knowledge of the
Issuers, of any of the Acquisition Stations which is pending or, to the
best knowledge of the Issuers, threatened.
(hh) Each of the Company and the Subsidiaries and, to the
knowledge of the Issuers, the Acquisition Stations carries insurance
(including self-insurance) in such amounts and covering such risks as in
its reasonable determination is adequate for the conduct of its business
and the value of its properties.
(ii) Each of the Company and the Subsidiaries and, to the
knowledge of the Issuers, the Acquisition Stations (i) makes and keeps
accurate books and records and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B) transactions
are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to
its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(jj) No holder of securities of ACME Parent, the Company or any
Subsidiary will be entitled to have such
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securities registered under the registration statements required to be
filed by the Company pursuant to the Registration Rights Agreement other
than as expressly permitted thereby.
(kk) The statistical and market and industry-related data
included in the Final Memorandum are based on or derived from sources
which the Issuers believe to be reliable and accurate or represent the
Issuers' good faith estimates that are made on the basis of data derived
from such sources.
(ll) Except as stated in the Final Memorandum, the Issuers do not
know of any claims for services, either in the nature of a finder's fee
or financial advisory fee, with respect to the offering of the
Securities or any of the other Transactions.
(mm) None of the Company, the Subsidiaries, any of their
respective Affiliates or any person acting on its or their behalf (other
than the Initial Purchaser) has engaged in any directed selling efforts
(as that term is defined in Regulation S under the Securities Act
("Regulation S")) with respect to the Securities and the Company, the
Subsidiaries and their respective Affiliates and any person acting on
its or their behalf have acted in accordance with the offering
restrictions requirement of Regulation S.
Any certificate signed by any officer of ACME Parent, the Company
or any Subsidiary and delivered to the Initial Purchaser or to counsel for the
Initial Purchaser shall be deemed a joint and several representation and
warranty by the Issuers to the Initial Purchaser as to the matters covered
thereby.
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Issuers agree to issue
and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase
from the Issuers, the Units, at $541.60 per Unit. One or more certificates in
definitive form for the Notes and the Membership Units that the Initial
Purchaser has agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Initial Purchaser
requests upon notice to the Company at least 48 hours prior to the Closing Date
(as defined) shall be delivered by or on behalf of the Company, against payment
by or on behalf of the Initial Pur-
17
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chaser, of the purchase price therefor by wire transfer of immediately available
funds to the account of the Company previously designated by it in writing. Such
delivery of and payment for the Notes and the Membership Units shall be made at
the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York
10005, at 9:00 A.M., New York time, on September 30, 1997, or at such date as
the Initial Purchaser and the Company may agree upon, such time and date of
delivery against payment being herein referred to as the "Closing Date." The
Company will make such certificate or certificates for the Notes and the
Membership Units available for checking and packaging by the Initial Purchaser
at the offices in New York, New York of CIBC Wood Gundy Securities Corp. at
least 24 hours prior to the Closing Date.
4. OFFERING BY THE INITIAL PURCHASER. The Initial Purchaser
proposes to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchaser is advisable.
5. CERTAIN COVENANTS. The Issuers jointly and severally covenant
and agree with the Initial Purchaser that:
(i) The Issuers will not amend or supplement the Final
Memorandum or any amendment or supplement thereto of which the Initial
Purchaser shall not have been advised and furnished a copy for a
reasonable period of time prior to the proposed amendment or supplement
and as to which the Initial Purchaser shall not have given its consent
(which consent shall not be unreasonably withheld). The Issuers will
promptly, upon the reasonable request of the Initial Purchaser or
counsel for the Initial Purchaser, make any amendments or supplements to
the Preliminary Memorandum or the Final Memorandum that may be necessary
in connection with the resale of the Securities by the Initial
Purchaser.
(ii) The Issuers will cooperate with the Initial Purchaser in
arranging for the qualification of the Securities for offering and sale
under the securities or "Blue Sky" laws of such jurisdictions as the
Initial Purchaser may designate and will continue such qualifications in
effect for as long as may be necessary to complete the resale of the
Securities by the Initial Purchaser; PROVIDED, HOWEVER, that in
connection therewith neither Issuer shall be required to qualify as a
foreign corporation or to execute a general consent to service of
process in any juris-
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<PAGE>
diction or to take any other action that would subject it to general
service of process or to taxation in excess of a nominal amount in
respect of doing business in any jurisdiction in which it is not
otherwise subject.
(iii) If, at any time prior to the completion of the resale by
the Initial Purchaser of the Securities, any event shall occur as a
result of which it is necessary, in the reasonable opinion of counsel
for the Initial Purchaser, to amend or supplement the Final Memorandum
in order to make such Final Memorandum not misleading in the light of
the circumstances existing at the time it is delivered to a purchaser,
or if for any other reason it shall be necessary to amend or supplement
the Final Memorandum in order to comply with applicable laws, rules or
regulations, the Issuers shall (subject to Section 5(i)) forthwith amend
or supplement such Final Memorandum at their own expense so that, as so
amended or supplemented, such Final Memorandum will not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading and will comply with all applicable laws, rules or
regulations.
(iv) The Issuers will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of
each Preliminary Memorandum or Final Memorandum or any amendment or
supplement thereto as they may reasonably request.
(v) Neither of the Issuers or any of their respective Affiliates
will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Securities
Act) which could be integrated with the sale of the Securities in a
manner which would require the registration under the Securities Act of
the Securities.
(vi) For so long as any of the Securities remain outstanding, the
Company will furnish to the Initial Purchaser (a) as soon as available,
a copy of each report or other communication (financial or otherwise) of
the Company mailed to the Trustee or holders of the Securities or
holders of other publicly traded securities of the Company or filed with
the Commission or any national securities exchange on which any class of
securities of the Company may be listed, and (b) from time to time such
other infor-
19
<PAGE>
mation concerning the Issuers as the Initial Purchaser may reasonably
request.
(vii) The Company will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Final Memorandum.
(viii) Prior to the Closing Date, the Company will furnish to the
Initial Purchaser, as soon as they have been prepared by or are
available to the Company, a copy of any unaudited interim consolidated
financial statements of the Company and the Subsidiaries, for any period
subsequent to the period covered by the most recent financial statements
appearing in the Final Memorandum.
(ix) The Company will not, and will not permit any of
Subsidiaries to, engage in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act) in connection with the offering of the Securities or in
any manner involving a public offering of the Securities within the
meaning of Section 4(2) of the Securities Act.
(x) For so long as any of the Securities remain outstanding, the
Company will make available at its expense, upon request, to any holder
of Securities and any prospective purchasers thereof the information
specified in Rule 144A(d)(4) under the Securities Act, unless the
Company is then subject to Section 13 or 15(d) of the Exchange Act.
(xi) The Issuers will use their best efforts to (i) permit the
Notes to be designated PORTAL securities in accordance with the rules
and regulations adopted by the National Association of Securities
Dealers, Inc. (the "NASD") relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages market (the "Portal
Market") and (ii) permit the Notes to be eligible for clearance and
settlement through The Depository Trust Company.
(xii) In connection with Securities offered and sold in an
offshore transaction (as defined in Regulation S), the Issuers will not
register any transfer of such Securities not made in accordance with the
provisions of Regulation S and will not, except in accordance with the
provisions of Regulation S, if applicable, issue any such Securities in
the form of definitive securities.
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<PAGE>
(xiii) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provision hereof (other than by reason
of a default or omission by the Initial Purchaser of its obligations
hereunder) or if this Agreement shall be terminated by the Initial
Purchaser because of any failure or refusal on the part of the Issuers
to comply with the terms or fulfill any of the conditions of this
Agreement, the Issuers, jointly and severally, agree to reimburse the
Initial Purchaser for all reasonable out-of-pocket expenses (including
fees and expenses of counsel for the Initial Purchaser) incurred by the
Initial Purchaser in connection herewith, but in no event will the
Issuers be liable to the Initial Purchaser for damages on account of
loss of anticipated profits from the sale of the Securities.
6. EXPENSES. Notwithstanding any termination of this Agreement
(pursuant to Section 11 or otherwise), the Issuers, jointly and severally, agree
to pay the following costs and expenses and all other costs and expenses
incident to the performance by the Issuers of their obligations hereunder: (i)
the negotiation, preparation, printing, typing, reproduction, execution and
delivery of this Agreement and of the other Basic Documents, any amendment or
supplement to or modification of any of the foregoing and any and all other
documents furnished pursuant hereto or thereto or in connection herewith or
therewith; (ii) the preparation, printing or reproduction of each Preliminary
Memorandum, the Final Memorandum and each amendment or supplement to any of
them; (iii) the printing (or reproduction) and delivery (including postage, air
freight charges and charges for counting and packaging) of such copies of each
Preliminary Memorandum, the Final Memorandum and all amendments or supplements
to any of them as may be reasonably requested for use in connection with the
offering and sale of the Securities; (iv) the preparation, printing,
authentication, issuance and delivery of certificates for the Notes and the
Membership Units, including any stamp taxes in connection with the original
issuance and sale of the Securities and trustees' fees; (v) the reproduction and
delivery of this Agreement and the other Basic Documents, the preliminary and
supplemental "Blue Sky" memoranda and all other agreements or documents
reproduced and delivered in connection with the offering of the Securities; (vi)
the registration or qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the several states (including filing fees and the
fees, expenses and disbursements of Cahill Gordon & Reindel, counsel to the
Initial Purchaser, relating to such registration and qualification); (vii) the
transportation and other expenses incurred
21
<PAGE>
by or on behalf of Company representatives in connection with presentations to
prospective purchasers of the Securities; (viii) the fees and expenses of the
Company's and the St. Louis Station's accountants and the fees and expenses of
counsel (including local and special counsel) for the Issuers; (ix) fees and
expenses of the Trustee including fees and expenses of its counsel; (x) all
expenses and listing fees incurred in connection with the application for
quotation of the Securities on the PORTAL Market; and (xi) any fees charged by
investment rating agencies for the rating of the Securities.
Subject to the completion of the closing hereunder, as
adjustments to the foregoing paragraph, the Issuers will not be required to
reimburse the out-of-pocket expenses of the Initial Purchaser, except for 50% of
the airplane expenses relating to item (vii), above.
7. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The
obligation of the Initial Purchaser to purchase and pay for the Securities is
subject to the accuracy of the representations and warranties contained herein,
to the performance by the Issuers of their respective covenants and agreements
hereunder and to the following additional conditions unless waived in writing by
the Initial Purchaser:
(i) The Initial Purchaser shall have received an opinion of
counsel to the Issuers in form and substance satisfactory to the Initial
Purchaser and Cahill Gordon & Reindel, counsel to the Initial Purchaser,
dated the Closing Date, of Dickstein Shapiro Morin & Oshinsky LLP,
substantially in the form of EXHIBIT B hereto. In rendering such
opinion, Dickstein Shapiro Morin & Oshinsky LLP shall have received and
may rely upon such certificates and other documents and information,
including one or more opinions of local counsel reasonably acceptable to
the Initial Purchaser and Cahill Gordon & Reindel, counsel to the
Initial Purchaser, as they may reasonably request to pass upon such
matters.
(ii) The Initial Purchaser shall have received an opinion, dated
the Closing Date, of Cahill Gordon & Reindel, counsel to the Initial
Purchaser, with respect to the sufficiency of certain legal matters
relating to this Agreement and such other related matters as the Initial
Purchaser may require. In rendering such opinion, Cahill Gordon &
Reindel shall have received and may rely upon such certificates and
other documents and information as they may reasonably request to pass
upon such matters. In
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<PAGE>
addition, in rendering their opinion, Cahill Gordon & Reindel may state
that their opinion is limited to matters of New York, Delaware corporate
and federal law.
(iii) The Initial Purchaser shall have received from Coopers &
Lybrand L.L.P. and KPMG Peat Marwick LLP, independent public accountants
for the St. Louis Station and Channel 32, Incorporated, respectively,
"comfort" letters dated the date hereof and the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchaser and
Cahill Gordon & Reindel, counsel to the Initial Purchaser.
(iv) The representations and warranties of the Issuers contained
in this Agreement shall be true and correct on and as of the Closing
Date; the Issuers shall have complied in all material respects with all
agreements and satisfied all conditions on their part to be performed or
satisfied hereunder at or prior to the Closing Date.
(v) (a) There shall not have been any change in the capital
stock or partners or members equity of the Company or any of the
Subsidiaries or any material increase in the consolidated short-term or
long-term debt of the Company from that set forth or contemplated in the
Final Memorandum and (b) the Company, the Subsidiaries and the
Acquisition Stations shall not have any liabilities or obligations,
contingent or otherwise (whether or not in the ordinary course of
business), that are material to the Company and the Subsidiaries, taken
as a whole, both before and after giving effect to each Acquisition,
other than those reflected in the Final Memorandum.
(vi) None of the Transactions shall be enjoined (temporarily or
permanently) and no restraining order or other injunctive order with
respect thereto shall have been issued; and there shall not have been
any legal action, order, decree or other administrative proceeding
instituted or threatened against any of the Issuers or the Acquisition
Stations or against the Initial Purchaser relating to any of the
Transactions.
(vii) Subsequent to the date of this Agreement and since the date
of the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the date
hereof), there shall not have occurred (i) any change, or any
development involving a prospective change, in or affecting the general
affairs,
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<PAGE>
management, business, condition (financial or other), properties,
prospects or results of operations of the Company and the Subsidiaries,
taken as a whole, both before and after giving effect to each
Acquisition, not contemplated by the Final Memorandum that, in the
opinion of the Initial Purchaser, would materially adversely affect the
market for the Securities, or (ii) any event or development relating to
or involving any of the Company or the Subsidiaries or any of the
officers or directors of the Company or the Subsidiaries or any of the
Acquisition Stations that makes any statement made in the Final
Memorandum untrue or that, in the opinion of the Issuers and their
counsel or the Initial Purchaser and its counsel, requires the making of
any addition to or change in the Final Memorandum in order to state a
material fact required by any applicable law, rule or regulation to be
stated therein or necessary in order to make the statements made therein
not misleading.
(viii) The Initial Purchaser shall have received certificates,
dated the Closing Date and signed by the president and the chief
financial officer of the Company, to the effect that:
a. All of the representations and warranties of the Issuers set
forth in this Agreement are true and correct as if made on and as
of the Closing Date and the Issuers have complied in all material
respects with all agreements and satisfied all conditions on
their part to be performed or satisfied at or prior to the
Closing Date.
b. The issuance and sale of the Securities pursuant to this
Agreement and the Final Memorandum and the consummation of the
Transactions have not been enjoined (temporarily or permanently)
and no restraining order or other injunctive order has been
issued and there has not been any legal action, order, decree or
other administrative proceeding instituted or threatened against
any of the Issuers relating to the issuance of the Securities or
in connection with any of the other Transactions.
c. Subsequent to the date of this Agreement and since the date of
the most recent financial statements in the Final Memorandum
(exclusive of any amendment or supplement thereto after the
24
<PAGE>
date hereof), there has not occurred (i) any change, or any
development involving a prospective change, in or affecting the
general affairs, management, business, condition (financial or
other), properties, prospects or results of operations of the
Company and the Subsidiaries, taken as a whole, both before and
after giving effect to each Acquisition, not contemplated by the
Final Memorandum that would materially adversely affect the
market for the Securities, or (ii) any event or development
relating to or involving any of the Company or the Subsidiaries
or any of the respective officers or directors of the Company or
the Subsidiaries or any Acquisition Station that makes any
statement made in the Final Memorandum untrue or that requires
the making of any addition to or change in the Final Memorandum
in order to state a material fact required by any applicable law,
rule or regulation to be stated therein or necessary in order to
make the statements made therein not misleading.
d. (a) There has not been any change in the capital stock or
members or partners equity of the Company or any of the
Subsidiaries nor any material increase in the consolidated
short-term or long-term debt of the Company from that set forth
or contemplated in the Final Memorandum and (b) the Company, the
Subsidiaries, and the Acquisition Stations have no liabilities or
obligations, contingent or otherwise (whether or not in the
ordinary course of business), that are material to the Company
and the Subsidiaries, taken as a whole, both before and after
giving effect to our Acquisition, other than those reflected in
the Final Memorandum.
(ix) Each of the Acquisition Agreements and the St. Louis LMA
shall be in full force and effect, and there shall have been no material
amendments, alterations, modifications or waivers of any provision
thereof since the date of this Agreement (unless consented to in writing
by the Initial Purchaser).
(x) All proceedings taken in connection with the issuance of the
Securities and the transactions contemplated by this Agreement and the
other Basic Documents and all
25
<PAGE>
documents and papers relating thereto shall be reasonably satisfactory
to the Initial Purchaser and counsel to the Initial Purchaser.
(xi) ACME Parent shall have contributed and assigned to ACME
Television all of ACME Parent's assets and rights relating to the
Acquisition Agreement, the St. Louis LMA and the Acquisition Stations
pursuant to documents satisfactory to the Initial Purchaser and its
counsel.
(xii) The Company shall have received at least $21.7 million
aggregate cash proceeds from the Parent Equity Contribution.
(xiii) The ACME Television Offering shall have been consummated
with gross proceeds to ACME Television of at least $115,000,000.
(xiv) There shall not have been any announcement by any
"nationally recognized statistical rating organization," as defined for
purposes of Rule 436(g) under the Securities Act, that (A) it is
downgrading its rating assigned to any debt securities of the Company or
any of its Subsidiaries, or (B) it is reviewing its rating assigned to
any debt securities of the Company or any of its Subsidiaries with a
view to possible downgrading, or with negative implications, or
direction not determined.
(xv) The Initial Purchaser shall have received the Registration
Rights Agreement executed by the Issuers and such agreement shall be in
full force and effect.
(xvi) The Initial Purchaser shall have received the Membership
Unitholders Agreement executed by the Company and ACME Parent and such
agreement shall be in full force and effect.
(xvii) The Trustee shall have received the Pledge Agreement duly
executed by the Pledgors, together with (i) certificates representing
all of the outstanding membership units of ACME Television and all of
the outstanding capital stock, partnership interests or membership
units, as the case may be, owned directly by the Company of each
Subsidiary (collectively, the "Pledged Securities") and (ii) UCC-1
Financing Statements with respect to each Pledgor to be filed in the
State of New York, the state of such Pledgor's incorporation or
formation and the state of such Pledgor's principal place of business.
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<PAGE>
(xviii) The Issuers shall have furnished or caused to be furnished
to the Initial Purchaser such further certificates and documents as the
Initial Purchaser shall have reasonably requested.
8. INDEMNIFICATION AND CONTRIBUTION. (a) Each Issuer jointly and
severally agrees to indemnify and hold harmless the Initial Purchaser, each
director, officer, employee or agent of the Initial Purchaser and each person,
if any, who controls the Initial Purchaser within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages, liabilities or expenses to which theInitial Purchaser or such
director, officer, employee, agent or controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as any such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in any Preliminary Memorandum or the Final
Memorandum or any amendment or supplement thereto; or
(ii) the omission or alleged omission to state in any
Preliminary Memorandum or the Final Memorandum or any amendment or
supplement thereto, a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and will
reimburse, as incurred, the Initial Purchaser and each such director,
officer, employee, agent or controlling person for any legal or other
expenses reasonably incurred by the Initial Purchaser or such director,
officer, employee, agent or controlling person in connection with
investigating, defending against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability, expense or
action; PROVIDED, HOWEVER, that neither of the Issuers will be liable in
any such case to the Initial Purchaser or any director, officer,
employee, agent or controlling person of the Initial Purchaser to the
extent that any such loss, claim, damages, liability, expense or action
arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary
Memorandum or the Final Memorandum or any amendment or supplement
thereto in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Initial Purchaser
specifically for use therein; and PROVIDED, FURTHER, that
27
<PAGE>
neither of the Issuers will be liable to the Initial Purchaser or any
director, officer, employee, agent or any person controlling the Initial
Purchaser with respect to any such untrue statement or omission made in
any Preliminary Memorandum that is corrected in the Final Memorandum (or
any amendment or supplement thereto) if the person asserting any such
loss, claim, damage, expense or liability purchased Securities from the
Initial Purchaser in reliance upon the Preliminary Memorandum but was
not sent or given a copy of the Final Memorandum (as amended or
supplemented) that was made available by the Company to the Initial
Purchaser at or prior to the written confirmation of the sale of the
Securities to such person, unless such failure to deliver such Final
Memorandum (as amended or supplemented) was a result of noncompliance by
the Issuers with Section 5(iv) of this Agreement. This indemnity
agreement will be in addition to any liability that the Issuers may
otherwise have to the indemnified parties. The Issuers further agree
that the indemnification, contribution and reimbursement commitments set
forth in this Section 8 shall apply whether or not the Initial Purchaser
is a formal party to any such lawsuits, claims or other proceedings.
Neither of the Issuers will without the prior written consent of the
Initial Purchaser, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification by the Initial Purchaser may be
sought hereunder (whether or not the Initial Purchaser or any person who
controls the Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of the Initial Purchaser
and each such director, officer, employee, agent or controlling person
from all liability arising out of such claim, action, suit or
proceeding.
(b) The Initial Purchaser will indemnify and hold harmless the
Issuers, their respective directors, officers, employees and agents and each
person, if any, who controls either of the Issuers within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act against any losses,
claims, damages or liabilities to which either of the Issuers or any such
director, officer, employee, agent or controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
28
<PAGE>
statement of any material fact contained in any Preliminary Memorandum or the
Final Memorandum or any amendment or supplement thereto, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement was made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Initial Purchaser specifically
for use therein; and, subject to the limitation set forth immediately preceding
this clause, will reimburse, as incurred, any legal or other expenses reasonably
incurred by either of the Issuers or any such director, officer, employee, agent
or controlling person in connection with investigating or defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will be
in addition to any liability that the Initial Purchaser may otherwise have to
the indemnified parties.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability that it may have to any indemnified party except to the extent
that such omission results in the forfeiture by the indemnifying party of
substantial rights and defenses. In case any such action is brought against any
indemnified party, and such indemnified party notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if the named
parties in any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties that are different from or additional to
those available to any such indemnifying party, then the indemnifying parties
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not
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<PAGE>
be liable to such indemnified party under this Section 8 for any legal or other
expenses, other than reasonable out-of-pocket costs of investigation, incurred
by such indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions); (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying parties; or (iii) the
indemnifying party shall have failed to assume the defense or retain counsel
reasonably satisfactory to the indemnified party. After such notice from the
indemnifying parties to such indemnified party (so long as the indemnified party
shall have informed the indemnifying parties of such action in accordance with
this Section 8 on a timely basis prior to the indemnified party seeking
indemnification hereunder), the indemnifying parties will not be liable under
this Section 8 for the costs and expenses of any settlement of such action
effected by such indemnified party without the consent of the indemnifying
party, unless such indemnified party waived its rights under this Section 8, in
which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 8 is unavailable or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages,
expenses or liabilities (or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable contribution, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect (i) the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or
30
<PAGE>
omissions or alleged statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities (or actions in respect thereof). The
relative benefits received by the Issuers on the one hand and the Initial
Purchaser on the other shall be deemed to be in the same proportion as the total
proceeds from the offering of the Securities (before deducting expenses)
received by the Company bear to the total discounts and commissions received by
the Initial Purchaser. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers on the one hand or the Initial
Purchaser on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the circumstances. The
amount paid or payable by a party as a result of the losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other fees
or expenses incurred by such party in connection with investigating or defending
any such claim. The Issuers and the Initial Purchaser agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Issuers on the one hand and the Initial Purchaser
on the other hand were treated as one entity for such purpose) or by any other
method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Initial Purchaser
shall not be obligated to make contributions hereunder that in the aggregate
exceed the total discounts and commissions received by the Initial Purchaser
under this Agreement, less the aggregate amount of any damages that the Initial
Purchaser has otherwise been required to pay by reason of the untrue or alleged
untrue statements, and no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each director, officer,
employee or agent of and each person, if any, who controls the Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Initial
Purchaser, and each director, officer, employee and agent of either of the
Issuers and each person, if any, who controls either of the Issuers within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Issuers.
31
<PAGE>
(e) Notwithstanding anything to the contrary in this Section 8,
the indemnification and contribution provisions of each of the Registration
Rights Agreement and the Membership Unitholders Agreement shall govern any claim
with respect thereto.
9. OFFERING OF SECURITIES; RESTRICTIONS ON TRANSFER. (a) The
Initial Purchaser represents and warrants that it is a QIB. The Initial
Purchaser agrees with the Issuers that (i) it has not and will not solicit
offers for, or offer or sell, the Securities by any form of general solicitation
or general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act; and (ii) it has and will solicit offers
for the Securities only from, and will offer the Securities only to, (A) in the
case of offers inside the United States (x) persons whom the Initial Purchaser
reasonably believes to be QIBs or, if any such person is buying for one or more
institutional accounts for which the person is acting as fiduciary or agent,
only when such person has represented to the Initial Purchaser that each such
account is a QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A and, in each case, in transactions under
Rule 144A or (y) a limited number of other institutional investors reasonably
believed by the Initial Purchaser to be Accredited Investors that, prior to
their purchase of the Securities, deliver to the Initial Purchaser a letter
containing the representations and agreements set forth in Appendix A to the
Final Memorandum and (B) in the case of offers outside the United States, to
persons other than U.S. persons ("foreign purchasers," which term shall include
dealers or other professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an estate or
trust)); PROVIDED, HOWEVER, that, in the case of this clause (B), in purchasing
such Securities such persons are deemed to have represented and agreed as
provided under the caption "Notice to Investors" contained in the Final
Memorandum (or, if the Final Memorandum is not in existence, the most recent
Preliminary Memorandum).
(b) The Initial Purchaser represents and warrants with respect to
offers and sales outside the United States that (i) it has and will comply with
all applicable laws and regulations in each jurisdiction in which it acquires,
offers, sells or delivers Securities or has in its possession or distributes any
Memorandum or any such other material, in all cases at its own expense; (ii) the
Securities have not been and will not be offered or sold within the United
States or to, or for the ac-
32
<PAGE>
count or benefit of, U.S. persons except in accordance with Regulation S under
the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act; (iii) it has offered the Securities and will
offer and sell the Securities (A) as part of its distribution at any time and
(B) otherwise until 40 days after the later of the commencement of the offering
and the Closing Date, only in accordance with Rule 903 of Regulation S and,
accordingly, neither it nor any persons acting on its behalf have engaged or
will engage in any directed selling efforts (within the meaning of Regulation S)
with respect to the Securities, and any such persons have complied and will
comply with the offering restrictions requirement of Regulation S; and (iv) it
agrees that, at or prior to confirmation of sales of the Securities, it will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the following
effect:
"The securities covered hereby have not been registered under the United
States Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of the distribution of the
securities at any time or (ii) otherwise until 40 days after the later
of the commencement of the offering and the closing date of the
offering, except in either case in accordance with Regulation S (or Rule
144A if available) under the Securities Act. Terms used above have the
meaning given to them in Regulation S."
Terms used in this Section 9 and not defined in this Agreement have the meanings
given to them in Regulation S.
10. SURVIVAL CLAUSE. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Issuers, their
respective officers and the Initial Purchaser set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Issuers, any of their respective officers or directors, the
Initial Purchaser or any controlling person referred to in Section 8 hereof and
(ii) delivery of, payment for or disposition of the Securities, and shall be
binding upon and shall inure to the benefit of any successors, assigns, heirs or
personal representatives of the Issuers, the Initial Purchaser and indemnified
parties referred
33
<PAGE>
to in Section 8 hereof. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6 and 8 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.
11. TERMINATION. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchaser by notice to the Company given in the event
that the Issuers shall have failed, refused or been unable to satisfy all
conditions on their part to be performed or satisfied hereunder on or prior to
the Closing Date or if at or prior to the Closing Date:
(i) any of the Company, the Subsidiaries or the Acquisition
Stations shall have sustained any loss or interference with respect to
their respective businesses or properties from fire, flood, hurricane,
earthquake, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding, which loss or interference, in the sole judgment of the
Initial Purchaser, has had or has a material adverse effect on the
general affairs, management, business, condition (financial or other),
properties, prospects or results of operations of the Company and the
Subsidiaries, taken as a whole, both before and after giving effect to
each Acquisition, or there shall have been any material adverse change,
or any development involving a prospective material adverse change
(including without limitation a change in management or control of the
Company or any Subsidiary), in the general affairs, management,
business, condition (financial or other), properties, prospects or
results of operations of the Company and the Subsidiaries, taken as a
whole, both before and after giving effect to each Acquisition, except
as described in or contemplated by the Final Memorandum (exclusive of
any amendment or supplement thereto);
(ii) trading in securities of the Company or any Subsidiary or in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ National Market shall have been suspended or
minimum or maximum prices shall have been established on any such
exchange;
(iii) a banking moratorium shall have been declared by New York
or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any for-
34
<PAGE>
eign power, (B) an outbreak or escalation of any other insurrection or
armed conflict involving the United States or any other national or
international calamity or emergency, or (C) any material change in the
financial markets of the United States that, in the case of (A), (B) or
(C) above, in the sole judgment of the Initial Purchaser, makes it
impracticable or inadvisable to proceed with the delivery of the
Securities as contemplated by the Final Memorandum, as amended as of the
date hereof; or
(v) any securities of the Company or any of the Subsidiaries
shall have been downgraded or placed on any "watch list" for possible
downgrading by any nationally recognized statistical rating
organization.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided in
Section 10 hereof.
12. NOTICES. All communications hereunder shall be in writing
and, if sent to the Initial Purchaser, shall be hand delivered, mailed by
first-class mail, couriered by next-day air courier or telecopied and confirmed
in writing to CIBC Wood Gundy Securities Corp., 425 Lexington Avenue, 3rd Floor,
New York, New York 10017, Attention: Corporate Finance Department, and with a
copy to Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005,
Attention: Roger Meltzer, Esq. If sent to either of the Issuers, shall be
mailed, delivered or telecopied and confirmed in writing, to ACME Intermediate
Holdings, LLC, c/o ACME Television, LLC, Suite 850, 650 Town Center Drive, Costa
Mesa, California 92626, Attention: Chief Financial Officer, and with a copy to
Dickstein Shapiro Morin & Oshinsky, 2101 L Street NW, Washington, DC 20037,
Attention: Emanuel Faust, Jr., Esq.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier guaranteeing overnight
delivery; and when receipt is acknowledged by the addressee, if telecopied.
13. SUCCESSORS. This Agreement shall inure to the benefit of and
be binding upon the Initial Purchaser and each of the Issuers and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person
35
<PAGE>
any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Issuers contained in Section 8 of this Agreement shall
also be for the benefit of the directors, officers, employees and agents and any
person or persons who control the Initial Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Initial Purchaser contained in Section 8 of this Agreement
shall also be for the benefit of the directors, officers, employees and agents
of the Issuers and any person or persons who control either Issuer within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act.
No purchaser of Securities from theInitial Purchaser will be deemed a successor
because of such purchase.
14. NO WAIVER; MODIFICATIONS IN WRITING. No failure or delay on
the part of either Issuer or the Initial Purchaser in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to either Issuer or the Initial Purchaser at law
or in equity or otherwise. No waiver of or consent to any departure by either
Issuer or the Initial Purchaser from any provision of this Agreement shall be
effective unless signed in writing by the party entitled to the benefit thereof,
PROVIDED that notice of any such waiver shall be given to each party hereto as
set forth below. Except as otherwise provided herein, no amendment, modification
or termination of any provision of this Agreement shall be effective unless
signed in writing by or on behalf of each of the Issuers and the Initial
Purchaser. Any amendment, supplement or modification of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Issuers or the Initial Purchaser from the terms of any
provision of this Agreement shall be effective only in the specific instance and
for the specific purpose for which made or given. Except where notice is
specifically required by this Agreement, no notice to or demand on the Issuers
in any case shall entitle the Issuers to any other or further notice or demand
in similar or other circumstances.
36
<PAGE>
15. INFORMATION SUPPLIED BY THE INITIAL PURCHASER. The statements
set forth in the last two sentences of the third paragraph and the third
sentence of the fifth paragraph, in each case under the heading "Plan of
Distribution" in the Final Memorandum (to the extent such statements relate to
the Initial Purchaser) constitute the only information furnished by the Initial
Purchaser to the Company for purposes of Section 8 hereof.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, among the parties hereto with
respect to the subject matter hereof.
17. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. JOINT AND SEVERAL OBLIGATIONS. All of the obligations of the
Issuers hereunder shall be joint and several obligations of each of them.
37
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this Agreement shall constitute a binding agreement among the Issuers
and the Initial Purchaser.
Very truly yours,
ACME INTERMEDIATE HOLDINGS, LLC
By: ACME Television Holdings, LLC
its majority member
By:/s/Douglas E. Gealy
--------------------------------
Name: Douglas E. Gealy
Title: President
ACME INTERMEDIATE FINANCE INC.
By:/s/Douglas E. Gealy
--------------------------------
Name: Douglas E. Gealy
Title: President
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
CIBC WOOD GUNDY SECURITIES CORP.
By:/s/Andrew R. Meyer
-----------------------------
Name: Andrew R. Meyer
Title: Managing Director
36
<PAGE>
EXHIBIT A
<TABLE>
<S> <C> <C>
- ---------------------------- -------------------------- ---------------------------------
Outstanding Ownership of
SUBSIDIARIES EQUITY INTERESTS EQUITY INTERESTS
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Subsidiary Holdings Membership Units ACME Intermediate (100%)
II, LLC
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Intermediate Finance, Common Stock ACME Intermediate (100%)
Inc.
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television, LLC Membership Units ACME Intermediate (99.5%)
ACME Subsidiary Holdings II
(0.5%)
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Finance Corporation Common Stock ACME Television (100%)
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television Licenses Common Stock ACME Television (100%)1
of Missouri, Inc.
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television Holdings Membership Units ACME Television (99%) ACME
of Oregon, LLC Licenses - Oregon (1%)
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television Holdings Membership Units ACME Television (99%)
of Tennessee, LLC ACME Licenses - Tennessee (1%)
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television Holdings Membership Units ACME Television (99.5%)
of Utah, LLC ACME Subsidiary Holdings III
(0.5%)
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television Holdings Membership Units ACME Television (99.5%)
of New Mexico, LLC ACME Subsidiary Holdings III
(0.5%)
- ---------------------------- -------------------------- ---------------------------------
<PAGE>
- ---------------------------- -------------------------- ---------------------------------
ACME Television Licenses Membership Units ACME Holdings - Oregon (99%)
of Oregon, LLC ACME Television - Oregon (1%)
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television Licenses Membership Units ACME Holdings - Tennessee (99%)
of Tennessee, LLC ACME Television - Tennessee (1%)
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television Licenses Membership Units ACME Television (99.5%)
of New Mexico, LLC ACME Subsidiary Holdings III
(0.5%)
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television of Oregon, Membership Units ACME Holdings - Oregon (99%)
LLC ACME Licenses - Oregon (1%)
- ---------------------------- -------------------------- ---------------------------------
- ---------------------------- -------------------------- ---------------------------------
ACME Television of Membership Units ACME Holdings - Tennessee (99%)
Tennessee, LLC ACME Licenses - Tennessee (1%)
- ---------------------------- -------------------------- ---------------------------------
<FN>
- ---------------------------------------------
1 In addition, ACME Telvision will lend approximately $135 to $146 million to
ACME Licenses-Missouri on a long term basis.
</FN>
</TABLE>
<PAGE>
EXHIBIT B - FORM OF OPINION OF DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP
has been intentionally omitted by the Registrants. A copy of this omitted
Exhibit B will be provided to the Securities and Exchange Commission upon
request.
SECURITIES PLEDGE AGREEMENT
THIS SECURITIES PLEDGE AGREEMENT (the "AGREEMENT"), dated as of
September 30, 1997 made by ACME Intermediate Holdings, LLC, a Delaware limited
liability Company ("ACME Intermediate") having an office at 650 Town Center
Drive, Suite 850, Costa Mesa, CA 92626, and ACME Subsidiary Holdings II, LLC, a
Delaware Limited Liability Company having an office at 650 Town Center Drive,
Suite 850, Costa Mesa, CA 92626 ("ACME Sub II" and, together with ACME
Intermediate, "PLEDGORS"), in favor of WILMINGTON TRUST COMPANY, a Delaware
banking corporation having an office at Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, as trustee (in such capacity and
together with any successors in such capacity, the "TRUSTEE") pursuant to the
Indenture (as hereinafter defined).
R E C I T A L S :
A. Contemporaneously with the execution and delivery of this
Agreement, ACME Intermediate and ACME Finance Inc., a Delaware corporation
("Finance" and, together with ACME Intermediate, the "Notes Issuers") and the
Trustee are entering into a certain indenture (as amended from time to time, the
"INDENTURE"), dated as of the date hereof, pursuant to which the Notes Issuers
are issuing their 12% Senior Secured Discount Notes due 2005, Series A (the
"SERIES A NOTES"), in the aggregate principal amount at maturity of $71,634,000
and the Exchange Notes (as hereinafter defined). It is contemplated that the
Notes Issuers may, after the date hereof, issue exchange notes pursuant to the
Indenture (the "EXCHANGE NOTES; together with the Series A Notes, the "NOTES")
in exchange for the Series A Notes.
B. Each Pledgor is the legal and beneficial owner of the
Pledged Collateral (as hereinafter defined) pledged by it hereunder.
C. This Agreement is given by Pledgors in favor of the Trustee for
its benefit and the benefit of the Holders of the Notes (collectively, the
"SECURED PARTIES") to secure the payment and performance of the Secured
Obligations (as defined in Section 3).
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgors and the Trustee hereby agree as follows:
<PAGE>
2
SECTION 1. DEFINITIONS. Capitalized terms used herein but not
otherwise defined shall have the meanings assigned to such terms in the
Indenture. Such definitions shall be applicable equally to the singular and
plural forms of the terms defined.
SECTION 2. PLEDGE. As collateral security for the payment and
performance when due of all the Secured Obligations, each Pledgor hereby
pledges, assigns, transfers and grants to the Trustee for its benefit and the
benefit of the Secured Parties, a continuing first priority security interest in
and to all of the right, title and interest of Pledgor in, to and under the
following property, whether now existing or hereafter acquired of such Pledgor
(collectively, the "PLEDGED COLLATERAL"):
(a) all issued and outstanding Capital Stock of each Person
described under such Pledgor's name in SCHEDULE I hereto (the "PLEDGED
SHARES") (which are and shall remain at all times until this Agreement
terminates, certificated shares), including the certificates representing
the Pledged Shares and any interest of such Pledgor in the entries on the
books of any financial intermediary pertaining to the Pledged Shares all
of the foregoing together with stock powers endorsed in blank for each
share;
(b) all additional shares of Capital Stock, or options, warrants
or other rights to acquire Capital Stock, of any issuer of the Pledged
Shares from time to time acquired by such Pledgor in any manner (which, if
certificated, shall remain at all times until this Agreement terminates,
certificated securities) (which shares shall be deemed to be part of the
Pledged Shares), including the certificates representing such additional
securities and any interest of such Pledgor in the entries on the books of
any financial intermediary pertaining to such additional securities all of
the foregoing together with stock powers endorsed in blank for each share;
(c) so long as a Default or an Event of Default shall have
occurred and is continuing, all dividends, distributions, returns of
capital and other property from time to time received, receivable or
otherwise distributed to such Pledgor in respect of or in exchange for any
or all of the Pledged Shares (collectively, "DISTRIBUTIONS"); and
(d) all Asset Sale Proceeds from an Asset Sale of any of the
foregoing until (i) such cash and Cash Equiva-
<PAGE>
3
lents are applied (A) to repay Indebtedness in accordance with Section
4.17 of the Indenture, (B) to an investment pursuant to clause (iii)(b) of
the first paragraph of Section 4.17 of the Indenture or (C) to repurchase
Notes pursuant to an Excess Proceeds Offer in accordance with Section 4.17
of the Indenture or (ii) such Asset Sale Proceeds are no longer required
to be applied to such uses pursuant to
Section 4.17 of the Indenture.
(e) the Trustee shall invest such Distributions as directed in
writing by a majority of the Noteholders in Permitted Investments (as
defined in the Indenture). The Trustee shall not be responsible for any
loss that results from making an investment in accordance with these
instructions including any loss of principal, interest or any penalty.
SECTION 3. SECURED OBLIGATIONS. This Agreement secures, and the
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrete or accrue and become due but for the filing of a petition in
bankruptcy or the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Law) of (i) all of the obligations, liabilities and
indebtedness of the Notes Issuers now existing or hereafter arising under or in
respect of the Indenture and the Notes (including, without limitation, the
obligation of the Notes Issuers to pay principal of, accreted value, premium, if
any, and interest on the Notes when due and payable) and all other charges,
fees, expenses, commissions, reimbursements, premiums, indemnities and all other
amounts due or to become due under or in connection with the Indenture and the
Notes and (ii) without duplication of the amounts described in clause (i), all
obligations, indebtedness and liabilities of Pledgors now existing or hereafter
arising under or in respect of this Agreement, including, without limitation,
with respect to all charges, fees, expenses, commissions, reimbursements,
premiums, indemnities and other payments related to or in respect of the
obligations contained in this Agreement (the obligations described in clauses
(i) and (ii) of this Section 3, collectively, the "SECURED OBLIGATIONS").
SECTION 4. NO RELEASE. Nothing set forth in this Agreement shall
relieve a Pledgor from the performance of any term, covenant, condition or
agreement on a Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or
<PAGE>
4
in respect of any of the Pledged Collateral or shall impose any obligation on
the Trustee or any Secured Party to perform or observe any such term, covenant,
condition or agreement on a Pledgor's part to be so performed or observed or
shall impose any liability on the Trustee or any Secured Party for any act or
omission on the part of a Pledgor relating thereto or for any breach of any
representation or warranty on the part of a Pledgor contained in this Agreement,
or under or in respect of the Pledged Collateral or made in connection herewith
or therewith.
SECTION 5. DELIVERY OF PLEDGED COLLATERAL.
(a) All certificates, agreements or instruments representing or
evidencing the Pledged Collateral, to the extent not previously delivered
to the Trustee, shall immediately upon receipt thereof by Pledgor be
delivered to and held by or on behalf of the Trustee pursuant hereto. All
Pledged Collateral shall be in suitable form for transfer by delivery or
shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance reasonably satisfactory to
the Trustee. The Trustee shall have the right, at any time upon the
occurrence and during the continuance of an Event of Default, to endorse,
assign or otherwise transfer to or to register in the name of the Trustee
or any of its nominees any or all of the Pledged Collateral. In addition,
the Trustee shall have the right at any time upon the occurrence and
during the continuance of an Event of Default to exchange certificates
representing or evidencing Pledged Collateral for certificates of smaller
or larger denominations.
(b) If the issuer of Pledged Shares is incorporated in a
jurisdiction which does not permit the use of certificates to evidence
equity ownership, then the applicable Pledgor shall, to the extent
permitted by applicable law, record such pledge on the stock register of
the issuer, execute any customary stock pledge forms or other documents
necessary or appropriate to complete the pledge and give the Trustee the
right to transfer such Pledged Shares under the terms hereof and provide
to the Trustee an Opinion of Counsel, in form and substance satisfactory
to the Trustee, confirming such pledge. Any such Opinion of Counsel
confirming the pledge shall be updated on an annual basis.
SECTION 6. SUPPLEMENTS, FURTHER ASSURANCES.
(a) Each Pledgor agrees that at any time and from time to time, at
the sole cost and expense of such Pledgor, such Pledgor shall prepare or
cause to be prepared and shall
<PAGE>
5
promptly execute and deliver all further instruments and documents, including,
without limitation, supplemental or additional UCC-1 financing statements, and
take all further action that may be necessary or that the Trustee may reasonably
request, in order to perfect and protect the pledge, security interest and Lien
granted or purported to be granted hereby or to enable the Trustee to exercise
and enforce its rights and remedies hereunder with respect to any Pledged
Collateral, and a copy of any such filing shall be delivered to the Trustee. In
addition, upon the reasonable request of the Trustee, the Pledgors shall provide
to the Trustee an Opinion of Counsel, in form and substance satisfactory to the
Trustee, confirming the perfection of the security interest and Lien as to the
Pledged Collateral.
(b) Each Pledgor shall, upon obtaining any Pledged Shares of any
Person, promptly (and in any event within five Business Days) deliver to
the Trustee a pledge amendment, duly executed by such Pledgor, in
substantially the form of EXHIBIT A hereto (each, a "PLEDGE AMENDMENT"),
in respect of the additional Pledged Shares which are to be pledged
pursuant to this Agreement, and confirming the attachment of the Lien
hereby created on and in respect of such additional shares. Each Pledgor
hereby authorizes the Trustee to attach each Pledge Amendment to this
Agreement and agrees that all Pledged Shares listed on any Pledge
Amendment delivered to the Trustee shall for all purposes hereunder be
considered Pledged Collateral.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each
Pledgor represents, warrants and covenants as follows:
(a) NO LIENS. Such Pledgor is, and at the time of any delivery of
any Pledged Collateral to the Trustee pursuant to Section 5 of this
Agreement will be, the sole legal and beneficial owner of the Pledged
Collateral. All Pledged Collateral is on the date hereof, and will be, so
owned by such Pledgor free and clear of any Lien, except for the Lien
granted to the Trustee pursuant to this Agreement.
(b) AUTHORIZATION, ENFORCEABILITY. Such Pledgor has the requisite
power, authority and legal right to pledge and grant a security interest
in all the Pledged Collateral pursuant to this Agreement, and this
Agreement constitutes the legal, valid and binding obligation of Pledgor,
enforceable against such Pledgor in accordance with its terms,except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and
<PAGE>
6
similar laws relating to or affecting creditors' rights generally or by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(c) NO CONSENTS, ETC. No consent of any party (including, without
limitation, securityholders or creditors of such Pledgor) and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body or other Person is
required (x) for the pledge by such Pledgor of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or performance
of this Agreement by such Pledgor, or (y) for the exercise by the Trustee
of the voting or other rights provided for in this Agreement, or (z) for
the exercise by the Trustee of the remedies in respect of the Pledged
Collateral pursuant to this Agreement and except for consents,
authorizations, approvals and other filings and notices required under the
Securities Act or under state or "Blue Sky" securities laws.
(d) DUE AUTHORIZATION AND ISSUANCE. All of the Pledged Shares have
been, and to the extent hereafter issued will be upon such issuance, duly
authorized and validly issued and fully paid and nonassessable.
(e) CHIEF EXECUTIVE OFFICE. ACME Intermediate's chief executive office is
located at West Oak Street, Burbank, California 91505. ACME Sub II's chief
executive office is located at West Oak Street, Burbank, California 91505.
Neither Pledgor shall move its chief executive office except to such new
location as such Pledgor may establish in accordance with the last sentence of
this Section 7(e). Neither Pledgor shall establish a new location for its chief
executive office nor shall it change its name until (i) it shall have given the
Trustee not less than twenty (20) days' prior written notice of its intention so
to do, clearly describing such new location or name and providing such other
information in connection therewith as the Trustee may reasonably request, and
(ii) with respect to such new location or name, such Pledgor shall have taken
all action reasonably satisfactory to the Trustee to maintain the perfection and
priority of the security interest of the Trustee for the benefit of the Secured
Parties in the Pledged Collateral intended to be granted hereby including, but
not limited to, preparing and making all appropriate filings to continue the
perfection of the lien and delivery of Opinions of Counsel from
<PAGE>
7
all appropriate jurisdictions on the perfection of the liens on an annual basis.
(f) DELIVERY OF PLEDGED COLLATERAL; FILINGS. Such Pledgor has
delivered to the Trustee all certificates representing its Pledged Shares
and ACME Intermediate has caused to be filed with the Secretary of State
of the States of California, Delaware and New York, and ACME Sub II has
caused to be filed with the Secretary of State of the States of
California, Delaware and New York UCC-1 financing statements evidencing
the Lien created by this Agreement, and such delivery, filing and pledge
of the Pledged Collateral pursuant to this Agreement creates a valid and
perfected first priority security interest in the Pledged Collateral
securing the payment of the Secured Obligations pursuant to the provisions
of the Uniform Commercial Code as in effect in any relevant jurisdiction
(the "UCC"), including, without limitation, the States of California,
Delaware and New York.
(g) PLEDGED COLLATERAL. All information set forth herein,
including the Schedules annexed hereto, relating to the Pledged Collateral
is accurate and complete in all material respects.
(h) NO VIOLATIONS, ETC. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulation G, T, U or X of the
Federal Reserve Board.
(i) OWNERSHIP OF PLEDGED COLLATERAL. Except as otherwise permitted
by the Indenture, such Pledgor at all times will be the sole beneficial
owner of the Pledged Collateral.
(j) NO OPTIONS, WARRANTS, ETC. There are no options, warrants,
calls, rights, commitments or agreements of any character to which such
Pledgor is a party or by which it is bound obligating such Pledgor to
issue, deliver or sell or cause to be issued, delivered or sold,
additional Pledged Shares or obligating such Pledgor to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
There are no voting trusts or other agreements or understandings to which
such Pledgor is a party with respect to the voting of the capital stock of
any issuer of the Pledged Shares.
<PAGE>
8
SECTION 8. VOTING RIGHTS; DISTRIBUTIONS; ETC.
(a) So long as no Default or Event of Default shall have occurred
and be continuing:
(i)Pledgors shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms or purpose of this
Agreement and the Indenture; PROVIDED, HOWEVER, that Pledgors shall not in
any event exercise such rights in any manner which may have an adverse
effect on the value of the Pledged Collateral or the security intended to
be provided by this Agreement.
(ii)Subject to the terms of the Indenture, Pledgors shall be
entitled to receive and retain, and to utilize free and clear of the Lien
of this Agreement, any and all Distributions, but only if and to the
extent made in accordance with the provisions of the Indenture.
(iii)Prior to the occurrence of an Event of Default, the Trustee
shall be deemed without further action or formality to have granted to
Pledgors all necessary consents relating to voting rights and shall, if
necessary, upon written request of a Pledgor and at such Pledgor's sole
cost and expense, from time to time execute and deliver (or cause to be
executed and delivered) to such Pledgor all such instruments as such
Pledgor may reasonably request in order to permit such Pledgor to exercise
the voting and other rights which it is entitled to exercise pursuant to
Section 8(a)(i) hereof and to receive the Distributions which it is
authorized to receive and retain pursuant to Section 8(a)(ii) hereof.
(b) Upon the occurrence and Event of Default, subject to receipt of
any required approvals from the Federal Communications Commission (which
approvals each Pledgor will use its best efforts to assist the Trustee or its
agent or designee in obtaining) all rights of the Pledgors to exercise the
voting and other consensual rights they would otherwise be entitled to exercise
pursuant to Section 8(a)(i) hereof without any action or the giving of any
notice shall cease, and all such rights shall thereupon become vested in the
Trustee or its agent or designee, which shall thereupon have the sole right to
exercise such voting and other consensual rights.
(c) Upon the occurrence and during the continuance of a Default or an
Event of Default, all rights of the Pledgors
<PAGE>
9
to receive Distributions which they would otherwise be authorized to receive and
retain pursuant to Section 8(a)(ii) hereof shall cease and all such rights shall
thereupon become vested in the Trustee, which shall thereupon have the sole
right to receive and hold as Pledged Collateral such Distributions.
(d) Each Pledgor shall, at such Pledgor's sole cost and expense, from
time to time execute and deliver to the Trustee appropriate instruments as the
Trustee may reasonably request in order to permit the Trustee to exercise the
voting and other rights which it may be entitled to exercise pursuant to Section
8(b)(i) hereof and to receive all Distributions which it may be entitled to
receive under Section 8(b)(ii) hereof.
(e) All Distributions which are received by the Pledgors contrary to
the provisions of Section 8(b)(ii) hereof shall be received in trust for the
benefit of the Trustee, shall be segregated from other funds of the Pledgors and
shall immediately be paid over to the Trustee as Pledged Collateral in the same
form as so received (with any necessary endorsement).
SECTION 9. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES; PRINCIPAL
OFFICE.
(a) The Pledgors shall not (i) sell, convey, assign or otherwise
dispose of, or grant any option, right or warrant with respect to, any of the
Pledged Collateral except as permitted by the Indenture, (ii) create or permit
to exist any Lien upon or with respect to any Pledged Collateral other than the
Lien and security interest granted to the Trustee under this Agreement, or (iii)
except as permitted by the Indenture, permit any issuer of the Pledged Shares to
merge, consolidate or change its legal form, unless all of the outstanding
capital stock of the surviving or resulting corporation, partnership or limited
liability Company, as the case may be, is, upon such merger or consolidation,
pledged hereunder and no cash, securities or other property is distributed in
respect of the outstanding shares of any other constituent corporation.
(b) The Pledgors shall (i) not authorize any issuer of the Pledged
Shares to issue any stock or other securities in addition to or in substitution
for the Pledged Shares issued by such issuer, except to Pledgor, and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all additional shares of capital stock of the issuer of the Pledged
Shares which are required to be pledged hereunder.
<PAGE>
10
SECTION 10. REASONABLE CARE. The Trustee shall be required to exercise
the same standard of care with respect to the Pledged Collateral that it is
required to exercise under the Indenture. Neither the Trustee nor any of the
Secured Parties shall have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders, stock
splits, voting or other matters relating to any Pledged Collateral, whether or
not the Trustee or any other Secured Party has or is deemed to have knowledge of
such matters, or (ii) taking any necessary steps to preserve rights against any
Person with respect to any Pledged Collateral.
SECTION 11. REMEDIES UPON DEFAULT; DECISIONS RELATING TO EXERCISE
OF REMEDIES.
(a) If any Event of Default shall have occurred and be continuing, the
Trustee shall have the right, but not the obligation, in addition to other
rights and remedies provided for herein or otherwise available to it to be
exercised in accordance with the terms of, and at the times, if any, specified
in the Indenture, (i) to retain and apply the Distributions to the Secured
Obligations as provided in Section 12 hereof, and (ii) to exercise all the
rights and remedies of a secured party on default under the UCC at that time,
and the Trustee may also, in accordance with applicable law, sell the Pledged
Collateral or any part thereof (including, without limitation, any partial
interest in the Pledged Shares) at public or private sale, at any exchange,
broker's board or at any of the Trustee's offices or elsewhere, for cash, on
credit or for future delivery, at commercially reasonable prices and terms. The
Trustee or any other Secured Party may be the purchaser of any or all of the
Pledged Collateral at any such sale and shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Pledged Collateral sold at such sale, to use and apply any of the
Secured Obligations owed to such Person as a credit on account of the purchase
price of any Pledged Collateral payable by such Person at such sale. Each
purchaser at any such sale shall acquire the property sold absolutely free from
any claim or right on the part of the applicable Pledgor, and the Pledgors
hereby waive, to the fullest extent permitted by law, all rights of redemption
and/or appraisal which they now have or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted. Each Pledgor
acknowledges and agrees that, to the extent notice of sale shall be required by
law, ten days notice to such Pledgor of the time and place of any public sale or
the time after which any private sale or other intended disposition is to take
place shall constitute reasonable notification of such matters. The Trus-
<PAGE>
11
tee shall not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Trustee may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. Each Pledgor hereby waives, to the fullest extent permitted by
law, any claims against the Trustee arising by reason of the fact that the price
at which any Pledged Collateral may have been sold at such a private sale was
less than the price which might have been obtained at a public sale, even if the
Trustee accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree; PROVIDED, HOWEVER, that the foregoing shall
not release the Trustee from its obligation to sell the Pledged Collateral (or
any part thereof) at prices and terms which are commercially reasonable. Each
Pledgor will use its best efforts to assist the Trustee and its agent or
designee, and any Person who acquires any Pledged Collateral upon a sale by the
Trustee and its agent or designee, in obtaining all requisite governmental
approvals (including approvals from the Federal Communication Commission) to
permit the Trustee and its agent or designee and any such acquiring Person to
acquire all right title and interest in the Pledged Collateral, including
without limitation, filing all requisite applications for license transfers with
the Federal Communication Commission.
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of the
Pledged Collateral, to limit purchasers to Persons who will agree, among other
things, to acquire the Pledged Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. Each Pledgor
acknowledges that any such private sales may be at prices and on terms less
favorable to the Trustee than those obtainable through a public sale without
such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Trustee shall have no obligation to engage in public sales and no obligation to
delay the sale of any Pledged Collateral for the period of time necessary to
permit the issuer thereof to register it for a form of public sale requiring
registration under the Securities Act or under applicable state securities laws,
even if such issuer would agree to do so.
<PAGE>
12
(c) If the Trustee determines to exercise its right to sell any or all
of the Pledged Collateral, upon written request, the applicable Pledgor shall
from time to time furnish to the Trustee and its agent or designee and counsel
all such information as the Trustee and its agent or designee and counsel may
request in order to determine the number of securities included in the Pledged
Collateral which may be sold by the Trustee and its agent or designee as exempt
transactions under the Securities Act and the rules of the Commission
thereunder, as the same are from time to time in effect.
(d) Each Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign governmental
authority, the Trustee may be compelled, with respect to any sale of all or any
part of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign governmental authority. Each Pledgor acknowledges
that any such sales may be at prices and on terms less favorable to the Trustee
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such restricted sale shall
not be deemed to have been made in a commercially unreasonable manner solely for
such reason and that, except as may be required by applicable law, the Trustee
shall have no obligation to engage in public sales.
(e) In addition to any of the other rights and remedies hereunder, the
Trustee shall have the right to institute a proceeding seeking specific
performance in connection with any of the agreements or obligations hereunder.
(f) Notwithstanding anything to the contrary contained herein, the
Trustee shall exercise all of its rights and powers under this Section in
accordance with the written direction of the majority of Noteholders as set
forth in the Indenture.
SECTION 12. APPLICATION OF PROCEEDS. The proceeds received by the
Trustee in respect of any sale of, collection from or other realization upon all
or any part of the Pledged Collateral pursuant to the exercise by the Trustee of
its remedies as a secured creditor as provided in Section 11 hereof shall be
applied, together with any other sums then held by the Trustee pursuant to this
Agreement, promptly by the Trustee in the manner set forth in the Indenture.
SECTION 13. EXPENSES. The Pledgors or the Holders following the
occurrence and continuation of an Event of Default will upon demand pay to
the Trustee the amount of any and
<PAGE>
13
all reasonable expenses, including the reasonable fees and expenses of its
outside counsel and the fees and expenses of any experts and agents which the
Trustee may incur in connection with (i) the collection of the Secured
Obligations, (ii) the enforcement and administration of this Agreement, (iii)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the exercise or
enforcement of any of the rights of the Trustee or any Secured Party hereunder
or (v) the failure by a Pledgor to perform or observe any of the provisions
hereof. All amounts payable by the Pledgors under this Section 13 shall be due
upon demand and shall be part of the Secured Obligations. Each Pledgor's
obligations under this Section 13 shall survive the termination of this
Agreement and the discharge of such Pledgor's other obligations hereunder
including any termination or discharge under any bankruptcy law. When the
Trustee incurs expenses or renders services after an Event of Default (as
defined in the Indenture), under this Agreement the expenses of its agents and
counsel under this Agreement shall be preferred over the status of the
Noteholders in or proceeding under any Bankruptcy Law and are intended to
constitute expenses of administration under any Bankruptcy Law.
SECTION 14. NO WAIVER; CUMULATIVE REMEDIES. (a) No failure on the part
of the Trustee to exercise, no course of dealing with respect to, and no delay
on the part of the Trustee in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies herein
provided are cumulative and are not exclusive of any remedies provided by law.
(b) In the event the Trustee shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee,
then and in every such case, each Pledgor, the Trustee and each holder of any of
the Secured Obligations shall be restored to their respective former positions
and rights hereunder with respect to the Pledged Collateral, and all rights,
remedies and powers of the Trustee and the Secured Parties shall continue as if
no such proceeding had been instituted.
SECTION 15. TRUSTEE. The Trustee has been appointed as collateral
agent hereunder pursuant to the Indenture. The Trustee shall take or refrain
from taking actions hereunder at
<PAGE>
14
the direction of the Holders in accordance with the provisions of the Indenture.
The Trustee shall have the right hereunder to make demands, to give notices, to
exercise or refrain from exercising any rights, and to take or refrain from
taking action (including, without limitation, the release or substitution of
Pledged Collateral), in accordance with this Agreement and the Indenture. The
Trustee may resign and a successor Trustee may be appointed in the manner
provided in the Indenture. Upon the acceptance of any appointment as Trustee by
a successor Trustee, that successor Trustee shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Trustee under this Agreement, and the retiring Trustee shall thereupon be
discharged from its duties and obligations under this Agreement; PROVIDED,
HOWEVER, that the foregoing shall not operate or be construed as a waiver of
claims by the Pledgors. Prior to any appointment of a successor Trustee becoming
effective the Pledgors shall pay all outstanding amounts due to the retiring
Trustee. After any retiring Trustee's resignation, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Trustee.
SECTION 16. TRUSTEE MAY PERFORM; TRUSTEE APPOINTED Attorney-in-Fact.
If a Pledgor shall fail to do any act or thing that it has covenanted to do
hereunder or if any warranty on the part of a Pledgor contained herein shall be
breached, the Trustee or any Secured Party may (but shall not be obligated to)
do the same or cause it to be done or remedy any such breach, and may expend
funds for such purpose. Any and all amounts so expended by the Trustee or such
Secured Party shall be paid by the Pledgors promptly upon demand therefor, with
cash interest at the rate per annum equal to two (2) percent in excess of the
rate payable under the Notes (whether or not cash interest is then accruing)
during the period from and including the date on which such funds were so
expended to the date of repayment. Each Pledgor's obligations under this Section
16 shall survive the termination of this Agreement and the discharge of such
Pledgor's other obligations under this Agreement or any other termination under
any bankruptcy law. Each Pledgor hereby appoints the Trustee its
attorney-in-fact with an interest, with full authority in the place and stead of
such Pledgor and in the name of such Pledgor, or otherwise, from time to time in
the Trustee's discretion to take any action and to execute any instrument
consistent with the terms of this Agreement and the Indenture which the Trustee
may deem necessary or advisable to assure, perfect, convey, assign, transfer and
confirm unto the Trustee the Lien on the Pledged Collateral intended to be
provided by this Agreement and which such
<PAGE>
15
Pledgor fails to do or execute and deliver within five (5) Business Days after
such Pledgor's receipt of written notice to do or execute and deliver the same.
The foregoing grant of authority is a power of attorney coupled with an interest
and such appointment shall be irrevocable for the term of this Agreement.
SECTION 17. NOTICES. Any notice or other communication herein required
or permitted to be given shall be given in the manner at the address set forth
in the Indenture, or as to any party at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 17.
SECTION 18. CONTINUING SECURITY INTEREST; ASSIGNMENT. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon each Pledgor, its successors and assigns, and (ii) inure,
together with the rights and remedies of the Trustee hereunder, to the benefit
of the Trustee and the other Secured Parties and each of their respective
successors, transferees and assigns; no other Person (including, without
limitation, any other creditor of a Pledgor) shall have any interest herein or
any right or benefit with respect hereto. Without limiting the generality of the
foregoing clause (ii), any Secured Party may assign or otherwise transfer any
Note held by it secured by this Agreement to any other Person in accordance with
the terms of the Indenture, the Notes and relevant federal and state securities
laws, and such other Person shall thereupon become vested with all the benefits
in respect thereof granted to such Secured Party, herein or otherwise, subject
however, to the provisions of the Indenture.
SECTION 19. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 20. CONSENT TO JURISDICTION. EACH OF THE PARTIES HERETO AGREES
TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
SECTION 21. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in
<PAGE>
16
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 22. EXECUTION IN COUNTERPARTS. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same agreement.
SECTION 23. HEADINGS. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction
of this Agreement.
SECTION 24. OBLIGATIONS ABSOLUTE. All obligations of the Pledgors
hereunder shall be absolute and unconditional irrespective of:
(i)any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of a Pledgor;
(ii)any lack of validity or enforceability of the Indenture or the
Notes, or any other agreement or instrument relating thereto;
(iii)any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture
or the Notes, or any other agreement or instrument relating thereto;
(iv)any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v)any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement, the
Indenture or the Notes except as specifically set forth in a waiver
granted pursuant to the provisions of the Indenture; or
<PAGE>
17
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, a Pledgor.
SECTION 25. MODIFICATION IN WRITING. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Indenture. Any amendment,
modification or supplement of or to any provision of this Agreement, any waiver
of any provision of this Agreement, and any consent to any departure by a
Pledgor from the terms of any provision of this Agreement, shall be effective
only in the specific instance and for the specific purpose for which made or
given.
SECTION 26. RELEASE. Upon a request for a release of Pledged
Collateral in accordance with Section 10.05(b) of the Indenture, the Trustee
shall, at the sole cost and expense of the Pledgors, forthwith assign, transfer
and deliver to the applicable Pledgor, against receipt and without recourse to
or warranty by the Trustee, such Pledged Collateral, on the order of and at the
sole cost and expense of such Pledgor, and such proper instruments, and/or
instruments (including UCC termination statements on Form UCC-3) as may be
reasonably requested by such Pledgor acknowledging the release of such Pledged
Collateral. Upon the payment in full in cash of all Secured Obligations then due
and owing, and the termination of the Indenture, the Trustee shall, upon the
request and at the sole cost and expense of the Pledgors, forthwith assign,
transfer and deliver to the Pledgors, against receipt and without recourse to or
warranty by the Trustee, such of the Pledged Collateral of the Pledgors as may
be in the possession of the Trustee and as shall not have been sold or otherwise
applied pursuant to the terms hereof, on the order of and at the sole cost and
expense of the Pledgors, and such proper instruments and/or agreements
(including UCC termination statements on Form UCC-3) as may be reasonably
requested by the Pledgors acknowledging the termination of this Agreement and/or
the release of such Pledged Collateral.
17
<PAGE>
IN WITNESS WHEREOF, each Pledgor has caused this Securities Pledge
Agreement to be executed and delivered by its duly authorized officer as of the
date first above written.
ACME INTERMEDIATE HOLDINGS, LLC, as Pledgor
By: ACME Television Holdings, LLC, its majority members
By: /s/Douglas E. Gealy
----------------------------
Name: Douglas E. Gealy
Title: President
ACME Subsidiary Holdings II, LLC
as Pledgor
By: ACME Intermediate Holdings, LLC,
its majority member
By: ACME Television Holdings, LLC,
its majority member
By: /s/Douglas E. Gealy
----------------------------
Name: Douglas E. Gealy
Title: President
WILMINGTON TRUST COMPANY
as Trustee
By: /s/Burce L. Bisson
----------------------------
Name: Bruce L. Bisson
Title: Vice President
<PAGE>
SCHEDULE I
PLEDGED SHARES
PLEDGOR: ACME INTERMEDIATE
<TABLE>
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF
CLASS OF NUMBER OF CLASS OF
CAPITAL PAR VALUE CERTIFICATE SHARES, UNITS CAPITAL STOCK
ISSUER STOCK (IF APPLICABLE) NO(S). OR INTERESTS OUTSTANDING
ACME Television, 1 199 99.5
LLC
ACME Intermediate $.01 1 100 100.0
Finance, Inc.
ACME Subsidiary 1 10 100.0
Holdings II, LLC
PLEDGOR: ACME SUB II
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF
CLASS OF NUMBER OF CLASS OF
CAPITAL PAR VALUE CERTIFICATE SHARES, UNITS CAPITAL STOCK
ISSUER STOCK (IF APPLICABLE) NO(S). OR INTERESTS OUTSTANDING
ACME Television, 2 1 .5
LLC
</TABLE>
<PAGE>
EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is delivered pursuant
to Section 6 of the Agreement referred to below. The undersigned hereby agrees
that this Pledge Amendment may be attached to the Securities Pledge Agreement,
dated as of [ ], 1997 between the undersigned, the other Pledgor and Wilmington
Trust Company, as Trustee (the "AGREEMENT"; capitalized terms used herein and
not defined have the meanings ascribed to them in the Agreement), and that the
Pledged Shares listed on this Pledge Amendment shall be deemed to be and shall
become part of the Pledged Collateral and shall secure all Secured Obligations.
[ ],
as Pledgor
By:____________________________
Name:
Title:
<PAGE>
PLEDGED SHARES
<TABLE>
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF
CLASS OF NUMBER OF CLASS OF
CAPITAL PAR VALUE CERTIFICATE SHARES, UNITS CAPITAL STOCK
ISSUER STOCK (IF APPLICABLE) NO(S). OR INTERESTS OUTSTANDING
</TABLE>
(See Schedule I)
Subsidiaries of the Registrants
ACME Television Licenses of Missouri, Inc. Missouri
ACME Television Holdings of Oregon, LLC Oregon
ACME Television Holdings of Tennessee, LLC Tennessee
ACME Television Holdings of Utah, LLC Delaware
ACME Television Holdings of New Mexico, LLC Delaware
ACME Television Licenses of Oregon, LLC Oregon
ACME Television Licenses of Tennessee, LLC Tennessee
ACME Television Licenses of Utah, LLC Delaware
ACME Television Licenses of New Mexico, LLC Delaware
ACME Television of Oregon, LLC Oregon
ACME Television of Tennessee, LLC Tennessee
ACME Television of Utah, LLC Delaware
ACME Television of New Mexico, LLC Delaware
ACME Subsidiary Holdings III, LLC Delaware
EXHIBIT 23.2
The Members
ACME Intermediate Holdings, LLC:
We consent to the use of our reports included herein and to the reference to our
firm under the heading 'Experts' in the prospectus.
KPMG PEAT MARWICK LLP
Los Angeles, California
November 13, 1997
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form S-4 of our
report dated March 28, 1997, except for Note 19, as to which the date is
September 30, 1997, on our audits of the financial statements of Koplar
Communications, Inc. and Subsidiary. We also consent to the reference to our
Firm under the capitions "Experts."
/s/Coopers & Lybrand L.L.P.
St. Louis, Missouri
November 10, 1997
EXHIBIT 23.4
The Board of Directors
Channel 32, Incorporated:
We consent to the use of our reports included herein and to the reference to our
firm under the heading 'Experts' in the prospectus.
KPMG PEAT MARWICK LLP
Los Angeles, California
November 13, 1997
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Douglas Gealy, Emanuel Faust, Jr. and
Joel J. Garris as his true and lawful attorney-in-fact and agent, each with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign the Form S-4 Registration Statement of ACME Intermediate
Holdings, LLC and ACME Intermediate Finance, Inc., and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite as fully to all intents and purposes as he might or could do in
person, and ratifying and confirming all that said attorney-in-fact and agent or
his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
/s/Thomas Allen
_____________________________
Thomas Allen
Date: November 10, 1997
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Thomas Allen, Emanuel Faust, Jr. and Joel
J. Garris as his true and lawful attorney-in-fact and agent, each with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign the Form S-4 Registration Statement of ACME Intermediate
Holdings, LLC and ACME Intermediate Finance, Inc., and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite as fully to all intents and purposes as he might or could do in
person, and ratifying and confirming all that said attorney-in-fact and agent or
his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
/s/Douglas E. Gealy
______________________________
Douglas Gealy
Date: November 5, 1997
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints each of Thomas Allen, Douglas Gealy, Emanuel
Faust, Jr. and Joel J. Garris as his true and lawful attorney-in-fact and agent,
each with full power of substitution, for him and in his name, place and stead,
in any and all capacities, to sign the Form S-4 Registration Statement of ACME
Intermediate Holdings, LLC and ACME Intermediate Finance, Inc., and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite as fully to all intents and purposes as he might
or could do in person, and ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
/s/Jamie Kellner
_______________________________
Jamie Kellner
Date: November 4, 1997
Registration No.
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE, INC.
(Exact name of obligor as specified in its charter)
Delaware 52-2050589
Delaware 33-0776962
(State of incorporation) (I.R.S. employer identification no.)
650 Town Center Drive, Suite 850
Costa Mesa, CA 92626
(Address of principal executive offices) (Zip Code)
12% Senior Secured Discount Notes due 2005, Series A
12% Senior Secured Discount Notes due 2005, Series B
(Title of the indenture securities)
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor
is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington Trust
Company to commence business and the authorization of
Wilmington Trust Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 11th day
of November, 1997.
WILMINGTON TRUST COMPANY
[SEAL]
Attest:/s/ W. Chris Sponenberg By:/s/ Emmett R. Harmon
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "Wilmington Trust Company" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and silver
bullion and foreign coins, to buy and sell bills of exchange, and
generally to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation which are proper
or necessary for the transaction of the business of the Corporation
hereby created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property,
real or personal, against any claim or claims, adverse to his
interest therein, and to prepare and give certificates of title for
any lands or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort
and kind, from executors, administrators, guardians, public
officers, courts, receivers, assignees, trustees, and from all
fiduciaries, and from all other persons and individuals, and from
all corporations whether state, municipal, corporate or private, and
to rent boxes, safes, vaults and other receptacles for such
property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation,
association, state or municipality, and may receive and manage any
sinking fund therefor on such terms as may be agreed upon between
the two parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or
persons, for the faithful performance of any trust, office, duty,
contract or agreement, either by itself or in conjunction with any
other person, or persons, corporation, or corporations, or in like
manner become surety upon any bond, recognizance, obligation,
judgment, suit, order, or decree to be entered in any court of
record within the State of Delaware or elsewhere, or which may now
or hereafter be required by any law, judge, officer or court in the
State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity in the receiving, holding, managing, and disposing of any
and all estates and property, real, personal or mixed, and to be
appointed as such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator, guardian
or bailee by any persons, corporations, court, officer, or
authority, in the State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation, court,
officer or authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator, guardian,
bailee, or in any other trust capacity, it shall not be required to
give bond with surety, but its capital stock shall be taken and held
as security for the performance of the duties devolving upon it by
such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for
the assumption of any responsibility the said Corporation may be
entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or of
any state, territory, colony, or possession thereof, or of any
foreign government or country; to receive, collect, receipt for, and
dispose of interest, dividends and income upon and from any of the
bonds, mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness and
other property held and owned by it, and to exercise in respect of
all such bonds, mortgages, debentures, notes, shares of capital
stock, securities, obligations, contracts, evidences of indebtedness
and other property, any and all the rights, powers and privileges of
individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and
from time to time to vary or realize such investments; to issue
bonds and secure the same by pledges or deeds of trust or mortgages
of or upon the whole or any part of the property held or owned by
the Corporation, and to sell and pledge such bonds, as and when the
Board of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by
law, to lease, purchase, hold, sell, assign, transfer, pledge,
mortgage and convey real and personal property of any name and
nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that
the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in
any manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary
or convenient in and about the conduct and management of such
business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose
of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount,
execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of,
real and personal property, of every class and description, in any
State, District, Territory or Colony of the United States, and in
any foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited or
restricted by reference to or inference from the terms of any other
clause of this or any other paragraph in this charter, but that the
objects, purposes and powers specified in each of the clauses of
this paragraph shall be regarded as independent objects, purposes
and powers.
Fourth: - (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and the
preferences and relative, participating, optional and other special rights
of each such series, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph (c) of this Article Fourth, the Board of Directors of the
Corporation is hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a particular
series of Preferred Stock, the voting powers and the designations,
preferences and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series, including,
but without limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions on which, Preferred
Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section
(b) of this Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article Fourth), and subject further to any conditions which may
be fixed in accordance with the provisions of section (b) of this Article
Fourth, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution
or sale of assets, dissolution or winding- up, of the Corporation,
the holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article Fourth, each
holder of Common Stock shall have one vote in respect of each share
of Common Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or
series of stock or securities convertible into or exchangeable for stock,
or carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons, firms,
corporations or associations, whether such holders or others, and upon
such terms as may be deemed advisable by the Board of Directors in the
exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article Fourth and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the
powers, preferences and rights of such other series shall be fixed by the
Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them;
provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article Fourth that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred Stock
may, without a class or series vote, be increased or decreased from time
to time by the affirmative vote of the holders of a majority of the stock
of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the time in office,
and provided further, that the number of directors constituting the whole
Board shall be twenty-four until otherwise fixed by a majority of the
whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the
next succeeding annual meeting, directors of the second class shall be
elected to hold office for a term expiring at the second succeeding annual
meeting and directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting. Any vacancies
in the Board of Directors for any reason, and any newly created
directorships resulting from any increase in the directors, may be filled
by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall
hold office until the next annual election of directors. At such election,
the stockholders shall elect a successor to such director to hold office
until the next election of the class for which such director shall have
been chosen and until his successor shall be elected and qualified. No
decrease in the number of directors shall shorten the term of any
incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By- Laws of the Corporation), any director or
the entire Board of Directors of the
8
<PAGE>
Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered
or mailed, as prescribed, to the Secretary of the Corporation not later
than the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on
behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such
nominee and (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized
under the Act entitled "An Act Providing a General Corporation Law",
approved March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
9
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Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make, alter
or repeal any By-Law whether or not adopted by them, provided however,
that any such additional By-Laws, alterations or repeal may be adopted
only by the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
Fourteenth: - Meetings of the Directors may be held outside of the State
of Delaware at such places as may be from time to time designated by the
Board, and the Directors may keep the books of the Company outside of the
State of Delaware at such places as may be from time to time designated by
them.
Fifteenth: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or
not itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
10
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(C) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or
more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to any one or
more of clauses (A) through (E) of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article Fifteenth shall not
be applicable to any particular business combination and such business
combination shall require only such affirmative vote as is required by
law and any other provisions of the Charter or Act of Incorporation of
By-Laws if such business combination has been approved by a majority
of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have occurred
in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act
of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an
Affiliate or Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as to the
matters referred to in paragraph (3) of section (c), or (4) whether
the assets subject to any business combination or the consideration
received for the issuance or transfer of securities by the
Corporation, or any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who
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shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board
of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept and
promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
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<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at
all meetings of the Board and shall have such further authority and powers and
shall perform such duties as the Board of Directors may from time to time confer
and direct. He shall also exercise such powers and perform such duties as may
from time to time be agreed upon between himself and the President of the
Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of
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<PAGE>
Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President
as designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
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There may be one or more subordinate accounting or controller
officers however denominated, who may perform the duties of the Controller and
such duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of the Auditor and
such duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank
to all Vice Presidents with such functional titles as shall be determined from
time to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the
Company shall be those usually pertaining to their respective offices, subject
to the direction of the Board of Directors, the Executive Committee, Chairman of
the Board of Directors or the President and the officer in charge of the
department or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of
the Company and a transfer book shall be kept in which all transfers of stock
shall be recorded.
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to
fix in advance a record date for the determination of the stockholders entitled
to notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
7
<PAGE>
any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the
words "Wilmington Trust Company"
within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar
year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
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<PAGE>
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X shall not
be exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these
By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in
whole or in part, and any new By-Law or By-Laws adopted at any regular or
special meeting of the Board of Directors by a vote of the majority of all the
members of the Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: November 11, 1997 By: /s/ Emmett R. Harmon
Name: Emmett R. Harmon
Title: Vice President
11
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember
banks and savings banks with state publication
requirements. It has not been approved by any
state banking authorities. Refer to your
appropriate state banking authorities for your
state publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
Name of Bank City
in the State of DELAWARE , at the close of business on June 30, 1997.
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins...................208,942
Interest-bearing balances...................................................0
Held-to-maturity securities..............................................403,700
Available-for-sale securities............................................905,200
Federal funds sold and securities purchased under agreements to resell...151,700
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,816,484
LESS: Allowance for loan and lease losses. . . . . . 54,535
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve....3,761,949
Assets held in trading accounts................................................0
Premises and fixed assets (including capitalized leases)..................95,762
Other real estate owned....................................................1,751
Investments in unconsolidated subsidiaries and associated companies...........42
Customers' liability to this bank on acceptances outstanding...................0
Intangible assets..........................................................3,572
Other assets.............................................................108,295
Total assets...........................................................5,640,913
CONTINUED ON NEXT PAGE
<PAGE>
LIABILITIES
Deposits:
In domestic offices....................................................3,864,774
Noninterest-bearing . . . . . . . . 875,081
Interest-bearing. . . . . . . . . . 2,989,693
Federal funds purchased and Securities sold under agreements
to repurchase...........................................................337,784
Demand notes issued to the U.S. Treasury..................................95,000
Trading liabilities (from Schedule RC-D).......................................0
Other borrowed money:....................................................///////
With original maturity of one year or less...................775,000
With original maturity of more than one year..................43,000
Bank's liability on acceptances executed and outstanding.......................0
Subordinated notes and debentures..............................................0
Other liabilities (from Schedule RC-G)....................................84,197
Total liabilities......................................................5,199,755
EQUITY CAPITAL
Perpetual preferred stock and related surplus..................................0
Common Stock.................................................................500
Surplus (exclude all surplus related to preferred stock)..................62,118
Undivided profits and capital reserves...................................376,212
Net unrealized holding gains (losses) on available-for-sale securities...(2,328)
Total equity capital.....................................................441,158
Total liabilities, limited-life preferred stock, and equity capital....5,640,913
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ACME Intermediate Holdings, LLC Financial Data Schedule for Nine Months
ending September 30, 1997.
</LEGEND>
<CIK> 0001049530
<NAME> Acme Intermediate Holdings, LLC
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 27,211
<SECURITIES> 0
<RECEIVABLES> 405
<ALLOWANCES> 39
<INVENTORY> 0
<CURRENT-ASSETS> 43,228
<PP&E> 4,177
<DEPRECIATION> 115
<TOTAL-ASSETS> 226,896
<CURRENT-LIABILITIES> 14,732
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 48,125
<TOTAL-LIABILITY-AND-EQUITY> 226,896
<SALES> 2,155
<TOTAL-REVENUES> 2,155
<CGS> 4,820
<TOTAL-COSTS> 4,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 573
<INCOME-PRETAX> (3,238)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,238)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,238)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE, INC.
LETTER OF TRANSMITTAL
FOR
TENDER OF 12% SENIOR SECURED DISCOUNT NOTES DUE 2005,
SERIES A
IN EXCHANGE FOR
12% SENIOR SECURED DISCOUNT NOTES DUE 2005, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
___________________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME
PRIOR TO THE EXPIRATION DATE.
DELIVER TO THE EXCHANGE AGENT:
WILMINGTON TRUST COMPANY
By Registered or Certified Mail or by By Hand:
Overnight Courier:
Wilmington Trust Company Wilmington Trust Company
Attn: Jill Rylee Attn: Corporate Trust Operations
Corporate Trust & c/o Harris Trust Co.
Administration Window of New York as Agent
1100 North Market Street 88 Pine Street
Rodney Square North 19th Floor
Wilmington, DE 19890-0001 Wall Street Plaza
New York, NY 10005
By Facsimile:
Wilmington Trust Company
(302) 651-1079
Confirm by Telephone:
(302) 651-8869
Jill Rylee
<PAGE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated ____________________, 1998 (the "Prospectus") of ACME Intermediate
Holdings, LLC (the "Company") and ACME Intermediate Finance, Inc. ("ACME
Finance" and, together with the Company, the "Issuers") and this Letter of
Transmittal (the "Letter of Transmittal"), which together describe the Issuers'
offer (the "Exchange Offer") to exchange their 12% Senior Secured Discount Notes
due 2005, Series B (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which the Prospectus is a part, for a like principal
amount of its issued and outstanding 12% Senior Secured Discount Notes due 2005,
Series A (the "Original Notes"). Capitalized terms used but not defined herein
have the respective meaning given to them in the Prospectus.
The Issuers reserve the right, at any time or from time to time, to extend
the Exchange Offer at their discretion, in which event the term "Expiration
Date" shall mean the latest time and date in which the Exchange Offer is
extended. The Issuers shall notify the holders of the Original Notes of any
extension by oral or written notice prior to 5:00 P.M., New York City time, on
the prior business day before the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a Holder of Original Notes if
(i) certificates representing Original Notes are to be physically delivered to
the Exchange Agent, (ii) tender of Original Notes is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer - Book-Entry
Transfer," or (iii) tender of the Original Notes is to be made according to the
guaranteed delivery procedures described in "Exchange Offer -- Guaranteed
Delivery Procedures" in the Prospectus. See Instruction 2. This Letter of
Transmittal must be completed, signed and delivered even if tender instructions
are being transmitted through the Book-Entry Transfer Facility Automated Tender
Offer Program (ATOP).
Holders of Original Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP, for
<PAGE>
which the transaction will be eligible. DTC participants that are accepting the
Exchange Offer must transmit their acceptances to DTC, which will verify the
acceptance and execute a book-entry delivery to the Exchange Agent's account at
DTC. DTC will then send an Agent's Message to the Exchange Agent for its
acceptance. Each DTC participant transmitting an acceptance of the Exchange
Offer through the ATOP procedures will be deemed to have agreed to be bound by
the terms of this Letter of Transmittal. Nevertheless, in order for such
acceptance to constitute a valid tender of the DTC participant's Original Notes,
such participant must complete and sign a Letter of Transmittal and deliver it
to the Exchange Agent before the Expiration Date.
Holders of Original Notes whose Original Notes are not immediately
available, or who are unable to deliver their Original Notes and all other
documents required by this Letter of Transmittal to the Exchange Agent on or
prior to the Expiration Date, or who are unable to complete the procedure for
book-entry transfer on a timely basis, must tender their Original Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer - Guaranteed Delivery Procedures." See
Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Original Notes are registered on the books of the Issuers or any
other person who has obtained a properly completed bond power from the
registered Holder. The undersigned has completed, executed and delivered this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer. Holders who wish to tender their Original
Notes must complete this Letter of Transmittal in its entirety. The undersigned
has checked the appropriate boxes below and signed this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<PAGE>
List below the Original Notes to which this Letter of Transmittal relates.
If the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
DESCRIPTION OF ORIGINAL NOTES TENDERED
- -------------------------------------------------------------------------------
Name(s) and address(es) of
Registered Holder(s), Aggregate
Exactly as Name(s) Principal
Appear(s) on Original Amount Principal
Notes Registered Represented By Amount
(Please Fill in, If Blank) Numbers* Note(s) Tendered**
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, any tendering Holder of Original Notes will be
deemed to have tendered the entire aggregate principal amount represented
by such Original Notes. All tenders must be in integral multiples of
$1,000.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
|_| CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.
|_| CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering
Institution:__________________________________________________
Account Number:____________________________________________
Transaction Code
Number:____________________________________________________
<PAGE>
|_| CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Original Notes:
_______________________________________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________________________
Window Ticket Number (if available): __________________________________________
Name of Eligible Institution that Guaranteed Delivery: _______________________
Account Number (if delivered by book-entry transfer): _________________________
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:__________________________________________________________________________
Address:_______________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Original Notes, it acknowledges that
the Original Notes were acquired as a result of market-making activities or
other trading activities and that it will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Issuers for exchange the principal amount of Original
Notes indicated above. Subject to and effective upon the acceptance for exchange
of the principal amount of Original Notes tendered in accordance with this
Letter of Transmittal, the undersigned hereby exchanges, assigns and transfers
to the Issuers all right, title and interest in and to the Original Notes
tendered for exchange hereby. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent, the agent and attorney-in-fact of the undersigned
(with full knowledge that the Exchange Agent also acts as the agent of the
Issuers in connection with the Exchange Offer) with respect to the tendered
Original Notes with full power of substitution to (i) deliver such Original
Notes, or transfer ownership of such Original Notes on the account books
maintained by the Book- Entry Transfer Facility, to the Issuers and deliver all
accompanying evidences of transfer and authenticity, and (ii) present such
Original Notes for transfer on the books of the Issuers and receive all benefits
and otherwise exercise all rights of beneficial ownership of such Original
Notes, all in accordance with the terms of the Exchange Offer. The power of
attorney granted in this paragraph shall be deemed to be irrevocable and coupled
with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Original
Notes tendered hereby and to acquire the Exchange Notes issuable upon the
exchange of such tendered Original Notes, and that the Issuers will acquire good
and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by the Issuers.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the
"Commission") that the Exchange Notes issued in exchange for the Original Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such Holders' business and such Holders are not
engaging in and do not intend to engage in a distribution of the Exchange Notes
and have no arrangement or understanding with any person to participate in a
distribution of such Exchange Notes. The undersigned hereby further represent(s)
to the Issuers that (i) any Exchange Notes acquired in exchange for Original
Notes tendered hereby are being acquired in the ordinary
<PAGE>
course of business of the person receiving such Exchange Notes, whether or not
the undersigned, (ii) neither the undersigned nor any such other person is
engaging in or intends to engage in a distribution of the Exchange Notes, (iii)
neither the undersigned nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes, and (iv) neither the Holder nor any such other person is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuers or,
if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
If the undersigned or the person receiving the Exchange Notes is a
broker-dealer that is receiving Exchange Notes for its own account in exchange
for Original Notes that were acquired as a result of market-making activities or
other trading activities, the undersigned acknowledges that it or such other
person will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that the undersigned or such other
person is an "underwriter" within the meaning of the Securities Act. The
undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the Commission in
certain no-action letters and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction of the Exchange
Notes, in which case the registration statement must contain the selling
security holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission, and (ii) failure to comply with such
requirements in such instance could result in the undersigned incurring
liability under the Securities Act for which the undersigned is not indemnified
by the Issuers.
If the undersigned or the person receiving the Exchange Notes is an
"affiliate" (as defined in Rule 405 under the Securities Act), the undersigned
represents to the Issuers that the undersigned understands and acknowledges that
the Exchange Notes may not be offered for resale, resold or otherwise
transferred by the undersigned or such other person without registration under
the Securities Act or an exemption therefrom.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuers to be necessary or
desirable to complete the exchange, assignment and transfer of the Original
Notes tendered hereby, including the transfer of such Original Notes on the
account books maintained by the Book-Entry Transfer Facility.
<PAGE>
For purposes of the Exchange Offer, the Issuers shall be deemed to have
accepted for exchange validly tendered Original Notes when, as and if the
Issuers give oral or written notice thereof to the Exchange Agent. Any tendered
Original Notes that are not accepted for exchange pursuant to the Exchange Offer
for any reason will be returned, without expense, to the undersigned at the
address shown below or at a different address as may be indicated herein under
"Special Delivery Instructions" as promptly as practicable after the Expiration
Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Issuers' acceptance of properly
tendered Original Notes pursuant to the procedures described under the caption
"The Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Issuers upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the Exchange Notes issued in exchange for the Original Notes accepted for
exchange and return any Original Notes not tendered or not exchanged, in the
name(s) of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Original Notes accepted for exchange and any Original Notes not
tendered or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Issuance Instructions" and "Special Delivery
Instructions" are completed, please issue the Exchange Notes issued in exchange
for the Original Notes accepted for exchange in the name(s) of, and return any
Original Notes not tendered or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Issuers have no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Original Notes from the name of the registered holder(s) thereof if the
Issuers do not accept for exchange any of the Original Notes so tendered for
exchange.
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Original Notes in a principal amount not
tendered, or Exchange Notes issued in exchange for Original Notes accepted for
exchange, are to be issued in the name of someone other than the undersigned, or
(ii) if Original Notes tendered by book-entry transfer which are not exchanged
are to be returned by credit to an account maintained at the Book-Entry Transfer
Facility. Issue Exchange Notes and/or Original Notes to:
Name(s):_______________________________________________________________________
(Please Type or Print)
Address:_______________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Tax Identification or Social Security No.)
(Complete Substitute Form W-9)
|_| Credit unexchanged Original Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:
_______________________________________________________________________________
(Book-Entry Transfer Facility
Account Number, if applicable)
PLEASE SIGN HERE WHETHER OR NOT ORIGINAL NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
__________________________________________________ __________________
Date
__________________________________________________ __________________
Date
Area Code and Telephone Number: _______________________________________________
<PAGE>
The above lines must be signed by the registered Holder(s) of Original
Notes as name(s) appear(s) on the Original Notes or on a security position
listing, or by person(s) authorized to become registered Holder(s) by a properly
completed bond power from the registered Holder(s), a copy of which must be
transmitted with this Letter of Transmittal. If Original Notes to which this
Letter of Transmittal relate are held of record by two or more joint Holders,
then all such Holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Issuers, submit evidence satisfactory to the Issuers of such
person's authority so to act. See Instruction 5 regarding the completion of this
Letter of Transmittal, printed below.
Name(s):_______________________________________________________________________
(Please Type or Print)
Capacity:______________________________________________________________________
Address: ______________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
<PAGE>
MEDALLION SIGNATURE GUARANTEE
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
_______________________________________________________________________________
(Authorized Signature)
_______________________________________________________________________________
(Title)
_______________________________________________________________________________
(Name of Firm)
_______________________________________________________________________________
(Address, Include Zip Code)
_______________________________________________________________________________
(Area Code and Telephone Number)
Dated:____________________, 19__
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Original Notes in a principal amount not tendered,
or Exchange Notes issued in exchange for Original Notes accepted for exchange,
are to be mailed or delivered to someone other than the undersigned, or to the
undersigned at an address other than that shown below the undersigned's
signature.
Mail or deliver Exchange Notes and/or Original Notes to:
Name:
_______________________________________________________________________________
(Please Type or Print)
Address:
_______________________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Tax Identification or Social Security No.)
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Original Notes or Book- Entry
Confirmations. All physically delivered Original Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Original Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on or prior to
the Expiration Date. The method of delivery of the tendered Original Notes, this
Letter of Transmittal and all other required documents to the Exchange Agent is
at the election and risk of the Holder and, except as otherwise provided below,
the delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the Holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure delivery to the Exchange Agent before the Expiration Date.
No Letter of Transmittal or Original Notes should be sent to the Issuers.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Original Notes for exchange.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
2. Guaranteed Delivery Procedures. Holders who wish to tender their
Original Notes and (a) whose Original Notes are not immediately available, or
(b) who cannot deliver their Original Notes, this Letter of Transmittal or any
other documents required hereby to the Exchange Agent prior to the Expiration
Date or (c) who are unable to complete the procedure for book-entry transfer on
a timely basis, must tender their Original Notes according to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers Inc. or a commercial bank or a trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution"); (ii) prior to the
<PAGE>
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder of the Original Notes, the registration number(s) of such
Original Notes and the principal amount of Original Notes tendered, stating that
the tender is being made thereby and guaranteeing that, within three (3) New
York Stock Exchange, Inc. ("NYSE") trading days after the Expiration Date, this
Letter of Transmittal (or facsimile hereof) together with the Original Notes (or
a Book-Entry Confirmation) in proper form for transfer, must be received by the
Exchange Agent within three (3) NYSE trading days after the Expiration Date; and
(iii) the certificates for all physically tendered shares of Original Notes, in
proper form for transfer, or Book-Entry Confirmation, as the case may be, and
all other documents required by this Letter are received by the Exchange Agent
within three (3) NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
Any Holder of Original Notes who wishes to tender Original Notes pursuant
to the guaranteed delivery procedures described above must ensure that the
Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m.,
New York City time, on the Expiration Date. Upon request of the Exchange Agent,
a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their
Original Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a Holder of Original Notes may tender such
Original Notes in the Exchange Offer. Any beneficial Holder of Original Notes
who is not the registered Holder and who wishes to tender should arrange with
the registered Holder to execute and deliver this Letter of Transmittal on his
behalf or must, prior to completing and executing this Letter of Transmittal and
delivering his Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such Holder's name or obtain a properly
completed bond power from the registered Holder.
4. Partial Tenders; Withdrawals. If less than the entire principal amount
of Original Notes evidenced by a submitted certificate is tendered, the
tendering Holder should fill in the principal amount tendered in the column
entitled "Principal Amount Tendered" of the box entitled "Description of
Original Notes Tendered." A newly issued Original Note for the principal amount
of Original Notes submitted but not tendered will be sent to such Holder as soon
as practicable after the Expiration Date. All Original Notes delivered to the
Exchange Agent will be deemed to have been tendered in full unless otherwise
indicated.
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date, after which tenders of Original
<PAGE>
Notes are irrevocable. To be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent.
Any such notice of withdrawal must (i) specify the name of the person having
deposited the Original Notes to be withdrawn (the "Depositor"), (ii) identify
the Original Notes to be withdrawn (including the registration number(s) and
principal amount of such Original Notes, or, in the case of Original Notes
transferred by book-entry transfer, the name and number of the amount at DTC to
be credited), (iii) be signed by the Holder in the same manner as the original
signature on this Letter of Transmittal (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Original Notes register the transfer of such
Original Notes into the name of the person withdrawing the tender and (iv)
specify the name in which any such Original Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Issuers, whose determination shall be final and binding on all parties. Any
Original Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with respect
thereto unless the Original Notes so withdrawn are validly retendered. Any
Original Notes which have been tendered but which are not accepted for exchange
will be returned to the Holder thereof without cost to such Holder as soon as
practicable after withdrawal, rejection of tender or termination of Exchange
Offer.
5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Medallion Guarantee of Signatures. If this Letter of Transmittal (or facsimile
hereof) is signed by the record Holder(s) of the Original Notes tendered hereby,
the signature must correspond with the name(s) as written on the face of the
Original Notes without alteration, enlargement or any change whatsoever. If this
Letter of Transmittal is signed by a participant in the Book-Entry Transfer
Facility, the signature must correspond with the name as it appears on the
official DTC security position listing.
If any of the Original Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Original Notes registered in different names are tendered,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Original
Notes.
Signatures of this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Original
Notes tendered hereby are tendered (i) by a registered Holder who has not
completed the box entitled "Special Registration Instructions" or "Special
Delivery
<PAGE>
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Original Notes listed and tendered hereby and
the Exchange Notes issued in exchange therefor is to be issued (or any
untendered principal amount of Original Notes is to be reissued) to the
registered Holder, the said Holder need not and should not endorse any tendered
Original Notes, nor provide a separate bond power. In any other case, such
registered Holder must either properly endorse the Original Notes tendered or
transmit a properly completed separate bond power with this Letter of
Transmittal, with the signatures on the endorsement or bond power guaranteed by
an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Original Notes listed, such
Original Notes must be endorsed or accompanied by appropriate bond powers, in
each case signed as the name of the registered Holder or Holders appears on the
Original Notes allowing sufficient time to effectuate the transfer prior to the
Expiration Date.
If this Letter of Transmittal (or facsimile hereof) or any Original Notes
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys- in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuers, evidence satisfactory to the Issuers of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Original Notes or signatures on bond powers must be
guaranteed by an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address (or account at
the Book-Entry Transfer Facility) to which Exchange Notes or substitute Original
Notes for principal amounts not tendered or not accepted for exchange are to be
issued or sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated and the tendering Holder should complete the applicable box.
<PAGE>
If no instructions are given, the Exchange Notes (and any Original Notes
not tendered or not accepted) will be issued in the name of and sent to the
acting Holder of the Original Notes or deposited at such Holders account at DTC.
7. Transfer Taxes. The Issuers will pay all transfer taxes, if any,
applicable to the exchange of Original Notes pursuant to the Exchange Offer. If,
however, Exchange Notes or Original Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered Holder of the Original
Notes tendered hereby, or if tendered Original Notes are registered in the name
of any person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Original Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE ORIGINAL NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law required that a holder
of any Original Notes which are accepted for exchange must provide the Issuers
(as payers) with its correct taxpayer identification number ("TIN"), which, in
the case of a holder who is an individual is his or her social security number.
If the Issuers are not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by Internal Revenue Service. (If withholding results in
an over- payment of taxes, a refund may be obtained.) Certain holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Original Notes are registered in more than one name or are not in the
name of the actual owner, see
<PAGE>
the enclosed "Guidelines for Certification of Taxpayer Identification Number of
Substitute Form W-9 for information on which TIN to report.
The Issuers reserve the right in its sole discretion to take whatever steps
are necessary to comply with the Issuers' obligation regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Original Notes will be
determined by the Issuers, in their sole discretion, which determination will be
final and binding. The Issuers reserve the right to reject any and all Original
Notes not validly tendered or any Original Notes, the Issuers' acceptance of
which would, in the opinion of the Issuers or its counsel, be unlawful. The
Issuers also reserve the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Original Notes as to any ineligibility
of any holder who seeks to tender Original Notes in the Exchange Offer. The
interpretation of the terms and conditions of the Exchange Offer (includes this
Letter of Transmittal and the instructions hereto) by the Issuers shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within such time as the
Issuers shall determine. The Issuers will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Original
Notes, but shall not incur any liability for failure to give such notification.
10. Waiver of Conditions. The Issuers reserve the absolute right to waive,
in whole or part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Original Notes on transmittal of this Letter of Transmittal
will be accepted.
12. Mutilated, Lost, Stolen or Destroyed Original Notes. Any Holder whose
Original Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
<PAGE>
14. Acceptance of Tendered Original Notes and Issuance of Exchange Notes;
Return of Original Notes. Subject to the terms and conditions of the Exchange
Offer, the Issuers will accept for exchange all validly tendered Original Notes
as soon as practicable after the Exchange Date and will issue Exchange Notes
therefor as soon as practicable thereafter. For purposes of the Exchange Offer,
the Issuers shall be deemed to have accepted tendered Original Notes when, as
and if the Issuers have given written and oral notice thereof to the Exchange
Agent. If any tendered Original Notes are not exchanged pursuant to the Exchange
Offer for any reason, such unexchanged Original Notes will be returned, without
expense, to the undersigned at the address shown above (or credited to the
undersigned's account at the Book-Entry Transfer Facility designated above) or
at a different address as may be indicated under the box entitled "Special
Delivery Instructions."
15. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE ORIGINAL NOTES) WHICH MUST BE DELIVERED BY BOOK-ENTRY
TRANSFER OR IN ORIGINAL HARD COPY FORM) OR THE NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION TIME.
<PAGE>
(TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5))
PAYER'S NAME: WILMINGTON TRUST COMPANY
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------
SUBSTITUTE PART I - Taxpayer Identification No. - For all Social Security
FORM W-9 accounts, enter your taxpayer identification number in Number
DEPARTMENT OF THE the appropriate box. For most individuals and sole ______________
TREASURY proprietors, this is your social security number. For OR
INTERNAL REVENUE other entities, it is your Employer Identification
SERVICE Number. If you do not have a number, see How to Employer
Obtain a TIN in the enclosed Guidelines. Note: If the Identification
account is in more than one name, see Employer Number
Identification Number the chart on page 2 of the ______________
enclosed Guidelines to determine what number to enter.
- -------------------------------------------------------------------------------
Payer's Request for Taxpayer Part II - For Payees Exempt from Backup
Identification Number Withholding (see enclosed Guidelines)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and either (a) I have
mailed or delivered an application to receive a taxpayer identification
number to the appropriate Internal Revenue Service Center or Social
Security Administration Office or (b) I intend to mail or deliver an
application in the near future. I understand that if I do not provide a
taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide
a number;
(2) I am not subject to backup withholding either because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding; and
(3) Any other information provided on this form is true, correct and complete.
SIGNATURE _____________________________ Date _____________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE
EXCHANGE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-
9 FOR ADDITIONAL DETAILS.
NOTICE OF GUARANTEED DELIVERY
for
Tender of 12% Senior Secured Discount Notes due 2005, Series A
in Exchange for
12% Senior Secured Discount Notes due 2005, Series B
ACME INTERMEDIATE HOLDINGS, LLC
ACME INTERMEDIATE FINANCE, INC.
This form or one substantially equivalent hereto must be used by a
holder to accept the Exchange Offer of ACME Intermediate Holdings, LLC (the
"Company") and ACME Intermediate Finance, Inc. ("ACME Finance" and, together
with the Company, the "Issuers"), who wishes to tender 12% Senior Secured
Discount Notes due 2005, Series A (the "Original Notes") to the Exchange Agent
pursuant to the guaranteed delivery procedures described in "The Exchange Offer
- -- Guaranteed Delivery Procedures" of the Issuers' Prospectus, dated
____________, 1998 (the "Prospectus") and in Instruction 2 to the related Letter
of Transmittal. Any holder who wishes to tender Original Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives this
Notice of Guaranteed Delivery prior to the Expiration Date (as defined below) of
the Exchange Offer. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_______________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). ORIGINAL NOTES
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
WILMINGTON TRUST COMPANY
By Registered or Certified
Mail or by Overnight Courier: By Hand:
Wilmington Trust Company Wilmington Trust Company
Attn: Jill Rylee Attn: Corporate Trust Operations
Corporate Trust & c/o Harris Trust Company
Administration Window of New York, as Agent
1100 North Market Street 88 Pine Street
<PAGE>
Rodney Square North 19th Floor
Wilmington, DE 19890-0001 Wall Street Plaza
New York, NY 10005
By Facsimile:
Wilmington Trust Company
(302) 651-1079
____________________________
Confirm by Telephone:
(302) 651-8869
Jill Rylee
______________________________________________
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED BOX ON THE
LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Original Notes set forth below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Original Notes listed below:
CERTIFICATE NUMBER(S)
(IF KNOWN) OF ORIGINAL AGGREGATE AGGREGATE
NOTES OR ACCOUNT PRINCIPAL PRINCIPAL
NUMBER AT THE BOOK- AMOUNT AMOUNT
ENTRY FACILITY REPRESENTED TENDERED
<PAGE>
PLEASE SIGN AND COMPLETE
Signatures of Registered
Holder(s) or Authorized
Signatory:
_______________________________ Date: __________________________
_______________________________ Address: _______________________
________________________________
Name(s) of Registered Area Code and Telephone No.:
Holder(s):
_______________________________ _______________________________
_______________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Original Notes or on a
security position listing as the owner of Original Notes, or by person(s)
authorized to become Holder(s) by endorsements and documents transmitted with
this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administer, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
_______________________________________
_______________________________________
_______________________________________
Capacity: _____________________________
Address(es): __________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Original Notes tendered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Original
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
described in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures" and in the Letter of Transmittal and any other required
documents, all by 5:00 p.m., New York City time, within five New York Stock
Exchange trading days following the Expiration Date.
Name of Firm:
_______________________________ _______________________________
(AUTHORIZED SIGNATURE)
Address:
_______________________________ Name: _________________________
(INCLUDE ZIP CODE) Title: ______________________
(PLEASE TYPE OR PRINT)
Area Code and Telephone No.:
_______________________________ Date: ________________, 19____
DO NOT SEND ORIGINAL NOTES WITH THIS FORM. ACTUAL SURRENDER OF ORIGINAL NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any other
required documents to the Exchange Agent is at the election and sole risk of the
holder, and the delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. As an alternative to delivery by
mail, the holders may wish to consider using an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Original Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Original Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Original Notes, the signature must correspond with
the name shown on the security position listing as the owner of the Original
Notes.
- If this Notice of Guaranteed Delivery is signed by a person
other than the registered holder(s) of any Original Notes listed or
a participant of the Book-Entry Transfer Facility, this Notice of
Guaranteed Delivery must be accompanied by appropriate bond powers,
signed as the name of the registered holder(s) appears on the
Original Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a
corporation, or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and submit
with the Letter of Transmittal evidence satisfactory to the Issuers
of such person's authority to so act.
<PAGE>
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus may
be directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
Letter to Brokers
for
Tender of 12% Senior Secured Discount Notes Due 2005, Series A
in Exchange for
12% Senior Secured Discount Notes Due 2005, Series B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON _____________, 1998,
UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer
by ACME Intermediate Holdings, LLC (the "Company") and ACME Intermediate
Finance, Inc. ("ACME Finance" and, together with the Company, the "Issuers"), to
exchange their 12% Senior Secured Discount Notes due 2005, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), for a like principal amount of its issued and
outstanding 12% Senior Secured Discount Notes due 2005, Series A (the "Original
Notes") upon the terms and subject to the conditions set forth in the Issuers'
Prospectus, dated ___________, 1998, and the related Letter of Transmittal
(which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated _______________, 1998;
2. Letter of Transmittal (ogether with accompanying Substitute Form W-9
Guidelines);
3. Notice of Guaranteed Delivery; and
4. Letter which may be sent to your clients for whose account you hold
Original Notes in your name or in the name of your nominee, with
space provided for obtaining such client's instruction with regard
to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
<PAGE>
The Exchange Offer is not conditioned upon any minimum number of Original
Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Original Notes will
represent to the Issuers that (i) the Exchange Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
within the meaning of the Securities Act of such Exchange Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
Exchange Notes for its own account in exchange for Original Notes, neither the
undersigned nor any such other person is engaged in or intends to participate in
the distribution of such Exchange Notes and (iv) neither the undersigned nor any
such other person is an "affiliate" of the Issuers within the meaning of Rule
405 under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
Exchange Notes for its own account in exchange for Original Notes, it represents
that such Original Notes were acquired as a result of market-making activities
or other trading activities, and it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. By acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes, the undersigned is not deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The enclosed Letter to Clients contains an authorization by the beneficial
owners of the Original Notes for you to make the foregoing representations.
The Issuers will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Original Notes pursuant to the Exchange Offer. The
Issuers will pay or cause to be paid any transfer taxes payable on the transfer
of Original Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
Letter to Clients
for
Tender of 12% Senior Secured Discount Notes Due 2005, Series A
in Exchange for
12% Senior Secured Discount Notes Due 2005, Series B
EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON __________________, 1998, UNLESS EXTENDED
(THE "EXPIRATION DATE").
ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE
WITHDRAWN ANY TIME PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated ______________, 1998, of
ACME Intermediate Holdings, LLC (the "Company") and ACME Intermediate Finance,
Inc. ("ACME Finance" and, together with the Company, the "Issuers"), and a
related Letter of Transmittal (which together constitute the "Exchange Offer")
relating to the offer by the Issuers, to exchange their 12% Senior Secured
Discount Notes Due 2005, Series B (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of its issued and outstanding 12% Senior Secured
Discount Notes Due 2005, Series A (the "Original Notes"), upon the terms and
subject to the conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of Original
Notes being tendered.
We are the holder of record of Original Notes held by us for your own
account. A tender of such Original Notes can be made only by us as the record
holder and pursuant to your instructions. The Letter of Transmittal is furnished
to you for your information only and cannot be used by you to tender Original
Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Original Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
<PAGE>
Pursuant to the Letter of Transmittal, each holder of Original Notes will
represent to the Issuers that (i) the Exchange Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
undersigned, (ii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the distribution
within the meaning of the Securities Act of such Exchange Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
Exchange Notes for its own account in exchange for Original Notes, neither the
undersigned nor any such other person is engaged in or intends to participate in
the distribution of such Exchange Notes and (iv) neither the undersigned nor any
such other person is an "affiliate" of the Issuers within the meaning of Rule
405 under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
Exchange Notes for its own account in exchange for Original Notes, it represents
that such Original Notes were acquired as a result of market-making activities
or other trading activities, and it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. By acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes, the undersigned is not deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Very truly yours,
Instruction to Registered Holder and/or Book
Transfer Participant from Beneficial Owner
for
Tender of 12% Senior Secured Discount Notes Due 2005, Series A
in Exchange for
12% Senior Secured Discount Notes Due 2005, Series B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, __________________, 1998,
UNLESS EXTENDED (THE "EXPIRATION DATE").
ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE
WITHDRAWN ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holder and/or Participant
of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
_________________, 1998 (the "Prospectus") of ACME Intermediate Holdings, LLC
(the "Company") and ACME Intermediate Finance, Inc. ("ACME Finance" and,
together with the Company, the "Issuers"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the Issuers'
offer (the "Exchange Offer") to exchange its 12% Senior Secured Discount Notes
Due 2005, Series B (the "Exchange Notes") for all of its outstanding 12% Senior
Secured Discount Notes Due 2005, Series A (the "Original Notes"). Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Original Notes held by you for the account of
the undersigned.
The aggregate face amount of the Original Notes held by you for the
account of the undersigned is (FILL IN AMOUNT):
$_____________________ of the 12% Senior Secured Discount Notes Due 2005,
Series A.
<PAGE>
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
|_| To TENDER the following Original Notes held by you for the account of
undersigned (INSERT PRINCIPAL AMOUNT OF ORIGINAL NOTES TO BE TENDERED (IF ANY)):
$____________________
|_| Not to TENDER any Original Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Original Notes held by you
for the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including, but not limited to, the representations, that (i)
the Exchange Notes acquired pursuant to the Exchange Offer are being acquired in
the ordinary course of business of the undersigned, (ii) neither the undersigned
nor any such other person has an arrangement or understanding with any person to
participate in the distribution within the meaning of the Securities Act of
1933, as amended (the "Securities Act") of such Exchange Notes, (iii) if the
undersigned is not a broker- dealer, or is a broker-dealer but will not receive
Exchange Notes for its own account in exchange for Original Notes, neither the
undersigned nor any such other person is engaged in or intends to participate in
the distribution of such Exchange Notes and (iv) neither the undersigned nor any
such other person is an "affiliate" of the Issuers within the meaning of Rule
405 under the Securities Act or, if the undersigned is an "affiliate," that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the undersigned
is a broker-dealer (whether or not it is also an "affiliate") that will receive
Exchange Notes for its own account in exchange for Original Notes, it represents
that such Original Notes were acquired as a result of market-making activities
or other trading activities, and it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. By acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes, the undersigned is not deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s): ______________________________________
Signature(s):______________________________________________________
Name(s) (please print):____________________________________________
Address: __________________________________________________________
Telephone Number: _________________________________________________
Taxpayer Identification of Social Security Number: ________________
Date: _____________________________________________________________
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
Guidelines For Determining The Proper Identification Number To Give The
Payer --- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
GIVE THE SOCIAL
FOR THIS TYPE OF ACCOUNT: SECURITY NUMBER OF:
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the account or, if
account) combined funds, any one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of the account or, if
joint funds, either person (1)
4. Custodian account of a minor The minor (2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the only
contributor, the minor (1)
6. Account in the name of guardian or The ward, minor, or incompetent person
committee for a designated ward,
minor or incompetent person (3)
7. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is also
trustee)
b. So-called trust account that
is not a legal or valid trust under
state law The actual owner(1)
8. Sole proprietorship account The owner(4)
9. A valid trust estate or pension
trust The legal entity (Do not furnish the
identification number of the personal
representative or trustee unless the
legal
<PAGE>
entity itself is not designated in the
account title.)(5)
10. Corporate account The organization
11. Religious, charitable, or The corporation
educational organization account
12. Partnership account The partnership
13. Association, club or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
____________________________
(1) List first and circle the name of the person whose number you furnish
(2) Circle the minor's name and furnish the minor's social security number
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
A corporation.
A financial institution.
An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
The United States or any agency or instrumentality thereof.
A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
An international organization or any agency or instrumentality thereof.
A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
A real estate investment trust.
A common trust fund operated by a bank under section 584(a) of the Code.
An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1) of the Code.
<PAGE>
An entity registered at all times under the Investment Company Act of 1940.
A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
Payments of patronage dividends where the amount received is not paid in
money.
Payments made by certain foreign organizations.
Payments made to a nominee.
Payment of interest not generally subject to backup withholding include the
following:
Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is in
the course of the payer's trade or business and you have not your correct
taxpayer identification number to the payer.
Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
Payments described in section 6049(b)(5) of the Code to non-resident
aliens.
Payments on tax-free covenant bonds under section 1451 of the Code.
Payments made by certain foreign organizations.
Payments made to a nominee.
<PAGE>
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9
ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART III OF THE FORM, WRITE "EXEMPT" ON THE FACE OF THE
FORM AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A, and 605ON of the Code and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file a tax return.
Payers must generally withhold 31% of taxable interest, dividends, and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
<PAGE>
PAYER'S NAME: WILMINGTON TRUST COMPANY
SUBSTITUTE
FORM W-9 Part III - Social Security
DEPARTMENT OF Number OR Employer
THE TREASURY Part I - Please provide Identification Number
INTERNAL REVENUE your TIN in the box at _____ (If awaiting TIN
SERVICE right and certify by write "Applied For")
signing and dating below.
Payer's Request for Part II - For Payees Exempt From Backup
Taxpayer Identification Withholding, see the enclosed Guidelines for
Number (TIN) Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed
therein.
CERTIFICATION - Under penalties of perjury - I certify that:
(1) The Number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends,
or the IRS has notified me that I am no longer subject to withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding, you received
another notification from the IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines.)
NAME _________________________________
(Please Print)
SIGNATURE____________________________ DATE____________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE TO PURCHASE.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 ADDITIONAL DETAILS.
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU ARE AWAITING A TIN.
CERTIFICATE OF AWAITING TAXPAYER
IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60) days, 31%
of all payments with respect to the Original Notes or the Exchange Notes made to
me thereafter will be withheld until I provide a number.
SIGNATURE_________________________ DATE_________________
CONSENT OF PERSON TO BE APPOINTED
MEMBER OF BOARD OF ADVISORS
Pursuant to Section 3.03 of the Limited Liability Company Agreement, as
amended (the "LLC Agreement"), of ACME Television Holdings, LLC, a Delaware
limited liability company (the "Company"), the undersigned hereby evidences his
prior consent to being appointed a member of the Board of Advisors of the
Company upon consummation of the St. Louis Acquisition as defined in Article I
of the LLC Agreement to serve until his resignation, removal or death and
consents to being identified as being appointed a member of the Board of
Advisors of the Company upon consummation of the St. Louis Acquisition as
defined in Article I of the LLC Agreement in the Registration Statement filed on
Form S-4 of ACME Intermediate Holdings, LLC and ACME Intermediate Finance, Inc.
and the Registration Statement filed on Form S-4 of ACME Television, LLC, ACME
Finance Corporation, and the additional registrants named therein.
Date: November 11, 1997 /s/Edward J. Koplar
____________________________
Edward J. Koplar
CONSENT OF PERSON TO BE APPOINTED
MEMBER OF BOARD OF ADVISORS
Pursuant to Section 3.03 of the Limited Liability Company Agreement, as
amended (the "LLC Agreement"), of ACME Television Holdings, LLC, a Delaware
limited liability company (the "Company"), the undersigned hereby evidences his
prior consent to being appointed a member of the Board of Advisors of the
Company upon consummation of the Salt Lake City Acquisition as defined in
Article I of the LLC Agreement to serve until his resignation, removal or death
and consents to being identified as being appointed a member of the Board of
Advisors of the Company upon consummation of the Salt Lake City Acquisition as
defined in Article I of the LLC Agreement in the Registration Statement filed on
Form S-4 of ACME Intermediate Holdings, LLC and ACME Intermediate Finance, Inc.
and the Registration Statement filed on Form S-4 of ACME Television, LLC, ACME
Finance Corporation, and the additional registrants named therein.
Date: November 10, 1997 /s/ Michael V. Roberts
___________________________
Michael V. Roberts
