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.
(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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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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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.
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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,
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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 ▇▇▇▇ ▇▇▇▇▇ 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.
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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
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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.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
With a copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Paper, Esquire
If to Permittee Minority Broadcasters of Santa Fe, Inc.
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a copy to: Dow, ▇▇▇▇▇▇ & Albertston, P.L.L.C.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇., 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.
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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
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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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, President
MINORITY BROADCASTERS OF SANTA FE, INC.
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
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Schedule 1
CONTRACTS OF THE PERMITTEE
NONE