Membership Contribution Agreement

Exhibit 10.4


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.


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.


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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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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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 thi ...