Membership Purchase Agreement

MEMBERSHIP PURCHASE AGREEMENT


between


ROBERTS BROADCASTING OF SALT LAKE CITY, L.L.C.


MICHAEL V. ROBERTS and STEVEN C. ROBERTS


and


ACME TELEVISION HOLDINGS , L.L.C.


for majority interest in


ROBERTS BROADCASTING OF SALT LAKE CITY, L.L.C.,


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MEMBERSHIP PURCHASE AGREEMENT


This Membership Agreement (this "Agreement") is dated as of July 10, 1998 and is between Roberts Broadcasting of Salt Lake City, L.L.C., a Delaware limited liability company (collectively, with successors and assigns, "RBSLC"), Michael Roberts and Steven C. Roberts ("Sellers"), and ACME Television Holdings, L.L.C., a Delaware limited liability company (collectively, with successors and assigns, "Buyer").


RECITALS:


Sellers together hold fifty one percent (51%), and Buyer holds forty-nine percent (49%), of the ownership interest in RBSLC. Buyer's ownership interest in RBSLC was acquired from Sellers. RBSLC previously held a construction permit (the "CP") from the Federal Communications Commission (the "FCC") to build a new television station (the "Station") under the call sign of KZAR-TV in Provo, Utah, and currently holds certain licenses (the "Licenses") issued by the FCC to cover the CP.


Sellers desire to sell, assign, and transfer, to the fullest extent permitted by law their remaining ownership interest (the "Majority Interest") in RBSLC to Buyer, and Buyer desires to acquire the Majority Interest in RBSLC to the fullest extent permitted by law, all in accordance with the terms and conditions of this Agreement.


RBSLC will benefit from Buyer's purchase of the Majority Interest contemplated by this Agreement.


RBSLC and ACME Television of Utah, LLC ("ATU") previously executed a Management Agreement (the "MA") under which ATU has provided programming and other services to the Station in exchange for certain consideration specified therein. Buyer is the parent company and sole owner or ATU.


This Agreement has been executed under terms and upon the exercise of a certain Option Agreement (the "Option Agreement") previously executed by Sellers and Buyer.


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 Sellers. Subject to the terms and conditions of this Agreement, Sellers shall, to the fullest extent permitted by law, assign, convey, transfer and deliver to Buyer at Closing, and Buyer shall, to the fullest extent permitted by law, acquire from Sellers 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 Majority Interest. To that end, each of the Sellers shall assign, convey, transfer and deliver to Buyer at Closing all of the remaining ownership interest which each Seller currently holds in RBSLC, such interest being in each case twenty-five and one-half percent (25.5%) of the total ownership interest in RBSLC.


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1.2 Consideration Conveyed by Buyer.


1.2.1 Purchase Price. Except as otherwise provided herein, at the Closing Buyer shall pay Sellers by wire transfer of immediately available federal funds, pursuant to instructions from Sellers, less adjustments made pursuant to this Agreement, the amount (the "Purchase Price") equal to the lesser of


(1) the sum of (a) Six Hundred Sixty-seven Dollars ($667)
per day for each day elapsed from the date of the Option
Agreement through the Closing Date (as defined below), and (b)
Five Million Dollars ($5,000,000); and


(2) (ii) the sum of (a) Six Hundred Sixty-Seven Dollars
($667) per day for each day elapsed from the date of the Option
Agreement through the Closing Date, and (b) 51% of the Fair
Market Value of RBSLC as of a date which is thirty days prior to
the date of this Agreement, as determined utilizing the
procedures set forth in subsection 1.2.2.


1.2.2 Appraisal. Fair Market Value of RBSLC shall be determined by an appraisal in accordance with the following provisions:


(1) The Fair Market Value of RBSLC shall be equal to the
appraised value of the assets of RBSLC on a going concern basis
exclusive of any broker's fee, less the amount of any
outstanding debt of RBSLC following the date hereof.


(2) The appraisal will be conducted in conformity with
standard appraisal techniques in use at the time of the
appraisal, applying the market and economic factors then
relevant.


(3) The appraisal will be conducted by a qualified appraiser
with experience in the television broadcasting industry to be
agreed upon by Sellers and Buyer; provided, that, if the parties
fail to agree on an appraiser, any party may apply to the
American Arbitration Association for the appointment of an
appraiser, who shall be a qualified appraiser with experience in
the television broadcasting industry.


(4) The value of the assets of RBSLC arrived at by the
appraiser shall, absent manifest error, be conclusive and
binding on the relevant parties.


1.2.3 Escrow Fund. On the date of this Agreement, Buyer shall deposit One Hundred Thousand Dollars ($100,000), hereinafter referred to as the "Escrow Deposit," with the law firm of Dow, Lohnes & Albertson ("Escrow Agent") pursuant to an Escrow Agreement in the form of EXHIBIT A annexed hereto. At the Closing, the parties shall issue joint instructions to the Escrow Agent to pay the Escrow Deposit to Sellers, and the amount of the Escrow Deposit shall be deducted from the Purchase Price which the Buyer is otherwise is required to pay Sellers at


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4 Closing. If this Agreement is terminated due to Buyer's material breach, the Escrow Deposit shall be paid to Sellers as liquidated damages and as their exclusive remedy. If this Agreement is terminated for any other reason, the Escrow Deposit shall be immediately returned to Buyer. Interest on the Escrow Deposit shall at all times belong to Buyer and shall be paid to Buyer at the Closing or upon termination upon of this Agreement, as the case may be.


1.3 Closing.


1.3.1 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 ten (10) business days after the date on which the FCC order (the "Order") approving the transaction contemplated hereby 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 Sellers or (2) the conditions precedent to Closing have not been satisfied or waived; and provided further, that Buyer shall have the unilateral right to waive the condition that Closing not occur until after the Order has become a Final Order and, if Buyer does waive that condition, the Closing shall occur within give (5) business days after Buyer provides Sellers with notice of such waiver.


1.3.2 Exchange of Documents. At the Closing, each party 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.


1.4 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 twelve (12) months after the date hereof.


ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLERS AND RBSLC.


RBSLC and Sellers represent and warrant to Buyer 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 Licenses and to operate the Station in accordance with the Licenses.


2.2 Authorizations. RBSLC is the holder of the Licenses and all related authorizations, copies of which are included in SCHEDULE 1 to this Agreement. The Licenses are in full force and effect. The items listed on SCHEDULE 1 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 operation of the Station. The Sellers 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


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5 of Sellers' 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 Licenses, or which would otherwise have a material adverse impact on the operation of the Station, except for proceedings of general applicability to the broadcasting industry. Other than proceedings of general applicability to the broadcasting industry, there is not now pending, or to the best of Sellers' 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 Company or Sellers with respect to any matter affecting the Station. RBSLC and the Sellers are in material compliance with the terms of the Licenses, the Act, and the rules, regulations and policies of the FCC. Sellers have no reason to believe that the Licenses will not be renewed by the FCC in due course for a full term without modification.


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, except as may have been incurred by ATU pursuant to the MA.


2.4 Employees. RBSLC is not a party to any pending or, to Sellers 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 Sellers 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 RBSLC which relate to a period prior to the date of the Option Agreement, (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 a period prior to the date of the Option Agreement, (3) all claims for severance which relate to a period prior to the date of the Option Agreement, 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.


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).


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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 Sellers' 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 the Environmental Laws has been released, emitted or discharged or, to Sellers' 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 Sellers 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, Sellers 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. Sellers have caused RBSLC to provide Buyer with true copies of a balance sheet for RBSLC dated December 31 of the most recently ended calendar year (the "Balance Sheet"). A true copy of the Balance Sheet is included in SCHEDULE 4 annexed hereto. The Balance Sheet (1) has been prepared in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. in all material respects, (2) identifies all of RBSLC's material obligations and liabilities (contingent or matured), and (3) fairly reflects the financial position of RBSLC at the date indicated.


2.9 Litigation. Neither Sellers 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 broadcasting industry, there is no Litigation pending by or against, or, to the best of Sellers' knowledge, threatened against the RBSLC or Sellers which relates to or affects the Station or which materially interferes or could reasonably be expected materially to interfere with (1) Sellers' right, title to, or interest in the Majority Interest, (2) the construction or operation of the Station or (3) Sellers' ability to transfer the Majority Interest to Buyer 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 broadcasting industry, there is no investigation or proceeding regarding the foregoing which is currently pending or, to Sellers' knowledge, threatened.


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2.11 No Defaults. Neither the execution and delivery by RBSLC or Sellers of this Agreement nor the consummation by Sellers 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 Sellers are subject, (2) RBSLC's certificate, operating agreement or other organizational documents, or (3) any agreement or instrument to which Sellers or RBSLC is a party or by which Sellers 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 Majority 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 Sellers, 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.


2.13 RBSLC and Sellers Action. This Agreement has been duly and validly authorized, executed, and delivered by RBSLC and Sellers and constitutes the valid and binding agreement of RBSLC and Sellers, 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.


2.14 Leases. Annexed hereto as SCHEDULE 6 are all the leases relating to real pro ...