LEASE MANAGEMENT AGREEMENT AND PURCHASE OPTION
EXHIBIT
10.1
LEASE
MANAGEMENT AGREEMENT AND PURCHASE OPTION
Lease
Management Agreement (“Agreement”) dated as of September 15, 2006, by and
between Mako Communications, LLC. Texas limited liability company (“Lessor”),
the holder of Federal Communications Commission License, (the “Permit”) for LPTV
station KVPX-LP, Las Vegas Nevada, facility I.D. 8887 (the “Station”) and Fuego
Entertainment Media Group, LLC, a Florida Limited Liability Company
(“Lessee”).
WHEREAS,
Lessor holds the Permit for the operation of the Station; and
WHEREAS,
Lessor has determined that the public interest, convenience and necessity would
be served by its broadcast over the Station of programming provided by Lessee;
and
WHEREAS,
Lessee desires to avail itself of the Station’s broadcast time for the
presentation of its programming service, including the sale of advertising
time;
and
NOW,
THEREFORE, for and in consideration of the mutual covenants herein contained,
the parties hereto have agreed and do agree as follows:
1. Facilities.
Lessor
agrees to make its broadcasting facilities available to Lessee and to allow
Lessee to broadcast on the Station, or cause to be broadcast, Lessee’s programs
(“Lessee’s Programming Service”).
2. Term.
This
Agreement shall be for an initial term of two (2) years commencing on the
commencement date (the “Commencement Date”) which shall be November 1, 2007.
This Agreement shall continue until 11:50 pm on the last day of the second
year
of this Agreement.
3. Lease
Payments.
(a) Payment
Amounts: Lessee
hereby agrees to pay Lessor the following “Monthly LMA Fee”, which payments
shall commence upon the Commencement Date:
(1) $25,000
per month for months 1-12; and
(2) $26,250
per month for months 13-24
(b) Due
Dates for Payments: The
Monthly LMA Fee is due and payable in full on the fifth day of each month.
If
Lessor does not receive the Monthly LMA Fee by the fifth day of each month,
Lessor shall send by facsimile or email written notice of non-payment to Lessee.
(c) Lessor’s
Remedies:
If
within
ten (10) days from the date on which Lessor’s facsimile or email is received by
Lessee the Lessor does not receive payment of the overdue Monthly LMA Fee,
Lessor may declare this Agreement to be in default. In the event Lessee is
declared by the Lessor to be in default of this Agreement, Lessor may declare
Lessee’s option to purchase the Station (the “Option”) terminated and the Option
Payment forfeited, should such payment have been made, Lessor may declare the
Deposit forfeited, and Lessor may declare this Agreement terminated and cease
broadcasting Lessee’s Programming.
(d)
Lessee’s
Remedies: The
occurrence and continuation of any of the following will be deemed an Event
of
Default by Lessor under this Agreement: (i) Lessor fails to perform any of
its
covenants, warranties, or agreements contained in this Agreement in any material
respect; or (ii) Lessor breaches any representation or warranty made by it
under
this Agreement in any material respect. Lessor shall have ten (10) days from
the
date on which it receives written notice specifying the Event of Default to
cure
such Event of Default. If the Event of Default cannot be cured by Lessor within
such time period, Lessee my terminate this Agreement, effective immediately
upon
written notice to Lessor, with no further liability to Lessor, and Lessee may
pursue all remedies at law or in equity for breach of this Agreement.
1
4. Broadcast
in Entirety; Lease Payment Abatement.
Lessor
agrees to broadcast Lessee’s Programming Service in its entirety without any
editing, delay, addition, alteration or deletion, including, without limitation,
all network identifications, all promotional material, all copyright notices,
all credits and ▇▇▇▇▇▇▇▇, and any other proprietary material
of any kind or nature included therein. Lessor shall not be required to accept
such of Lessee’s Programming Service the content of which it finds objectionable
or contrary to the public interest or its obligations as an FCC licensee.
The
Monthly LMA Fee shall be abated to the extent the condition of the Station
and/or its equipment prevents Lessee’s use of the Station and to the extent of
any of Lessee’s programming is preempted, rejected or not transmitted as a
result of a decision not to broadcast, by Lessor under paragraph 8
below.
5. Deposit.
Upon
execution of this Agreement, Lessee shall deliver to Lessor a deposit (the
“Deposit”) of Twenty-Five Thousand Dollars ($25,000.00), which shall be held by
Lessor and applied to the last month’s Lease Payment under this Agreement.
6. Programs.
Lessee
shall furnish or cause to be furnished the artistic personnel and material
for
the programs as provided by this Agreement and it shall make commercially
reasonable efforts to ensure that all programs shall be in accordance with
FCC
requirements, and that all advertising spots and promotional material or
announcements shall comply with all applicable federal, state, and local
regulations and policies.
7. Station
Facilities: Operation of Station.
Throughout the term of this Agreement, Lessor shall make the Station available
to Lessee for operation twenty-four hours a day, seven days a week. Lessor
represents, warrants and guarantees that the Station shall be equipped as set
forth in the Permit, capable of transmitting Lessee’s Programming at all times;
that all equipment required for the regular and reliable broadcast operation
of
the Station is present, of new quality and design, and is in good working order.
There is no additional device, item, connection, power source, or equipment
required in order for the Station to operate at full power and to function
as
required hereby.
8. Responsibility
for Employees and Expenses.
Lessee
shall employ and be responsible for the salaries, taxes, insurance, and related
costs for all personnel used in the production of its programming (including
salespeople, traffic personnel, board operators, and programming staff). Lessor
shall employ Station personnel as required under the rules, regulations and
policies of the FCC and will be responsible for the salaries, taxes, insurance
and related costs for all the Lessor Station personnel used in the operation
of
the Station. Whenever on the Station’s premises, all of Lessee’s personnel shall
be subject to the supervision and the direction of Lessor’s personnel to the
extent required for the operation of the Station in compliance with FCC
regulations. Lessee shall pay for all fees to ASCAP, BMI, and SESAC, and for
any
other copyright fees attributable to its programming broadcast on the Station.
At its sole cost and expense, Lessor shall retain a broadcast engineer and
shall
be solely responsible for the maintenance, repair, and, where reasonably
required, the replacement of the Station’s transmitter, antenna system,
electrical system, cables, and satellite receivers, so that the Station
transmits Lessee’s programming at full power twenty-four hours per day, seven
days per week without interruption or deterioration of signal. Lessee shall
be
responsible for acquiring and maintaining studios, should Lessee desire to
have
studios, and Lessee shall be responsible for acquiring and maintaining a station
to transmitter link from such studios, should such a link be desired by Lessee.
Lessor shall be responsible for maintaining a receive satellite dish at the
transmitter site but should physical obstruction or terrestrial interference
make receipt of Lessee’s signal impossible or impractical, then Lessor shall be
relieved from this obligation. Lessor shall pay the tower rent and the Station
electric ▇▇▇▇, including electricity consumed in operating the transmitter
and
all other equipment.
9. Advertising
and Programming Revenues.
Lessee
shall retain all revenues for the sale of advertising time on the programs
it
delivers to the Station and may sell such advertising in combination with the
sale of advertising on any other broadcasting station of its
choosing.
10. Operation
of Station.
Notwithstanding anything to the contrary in this Agreement, Lessor shall have
full authority and power over the operation of the Station during the term
of
this Agreement. Lessor shall retain control, to be reasonably exercised, over
the policies, programming and operations of the Station, including, without
limitation, the right to decide whether to accept or reject any programming
or
advertisements; the right to preempt any programs in order to broadcast a
program deemed to be by Lessor of greater national, regional, or local interest;
and the right to take any other actions necessary for compliance with the laws
of the United States, the State of Nevada, the rules, regulations, and policies
of the FCC (including the prohibition on unauthorized transfers of control)
and
rules, regulations and policies of other federal governmental authorities,
including the Federal Trade Commission and the Department of Justice. Lessor
shall at all times be solely responsible for meeting all of the FCC’s
requirements for maintaining the political inspection files. Lessee shall,
upon
request, provide information to enable Lessor to prepare records, reports,
and
logs required by the FCC or other local, state, or federal government agencies.
Nothing in the Agreement is intended, nor shall be deemed to, constitute a
transfer of control of the Station to the Lessee.
2
11. Force
Majeure.
Any
failure or impairment of the Station facilities or any delay or interruption
in
broadcasting programs, or the failure at any time to furnish facilities, in
whole or in part, for broadcasting, due to acts of God, strikes, or threats
thereof, force majeure, or to causes beyond the control of Lessor, shall not
constitute a breach of this Agreement, and Lessor will not be liable to Lessee
except that the Monthly LMA Fee shall be abated during the term of any such
failure, impairment, or interruption. In the event that the FCC revokes or
terminates the license for the Station for any reason, this Agreement shall
terminate and neither party shall have any claim against or any liability to
the
other party as a result of the termination or revocation of the Station license
except that the Deposit shall be promptly returned to Lessee.
12. Right
to Use the Programs.
The
right to use the programs produced or broadcast by Lessee and to authorize
their
use in any manner and in any media whatsoever shall be, and remain, vested
in
Lessee.
13. Payola.
Lessee
agrees that it will not accept any compensation of any kind of gift or gratuity
of any kind whatsoever, regardless of its value or form, including, but not
limited to, a commission, discount, bonus, materials, supplies, or other
merchandise, services, or labor, whether or not pursuant to written contracts
or
agreements between Lessee and merchants or advertisers, unless the payer is
identified in the program as having paid for or furnished such consideration
in
accordance with FCC requirements.
14. Option
to Acquire.
15.1
Option.
(a) Two
Year Option.
On or
before February 1, 2007, Lessee may purchase an option to acquire the Station
(the “First Purchase Option”) by paying to Lessor the sum of Eighty Thousand
Dollars ($80,000.00) (the “Option Payment”) to acquire all of the permits,
licenses, leases, equipment, and other assets of the Station for the purchase
price (the “Purchase Price”) of Three Million Two Hundred Thousand Dollars
($3,200,000.00) (the “Option Purchase Price”), inclusive of the Option Payment.
Provided Lessee is not in breach of this Agreement, Lessee may exercise the
Purchase Option at any time prior August 1, 2008, on which date at midnight
the
Purchase Option shall expire (the “Option Expiration Date”), if notice of the
exercise has not been received by Lessor.
15.2 Exercise
of Option.
Lessee
shall exercise its Option to purchase the Station by providing written notice
of
its election to exercise its Option no later than the Option Expiration Date.
In
the event that Lessee does not exercise its Option, then the Option Payment
shall be retained by Lessor. In the event that Lessee exercises its Option,
but
the Commission refuses to consent to assignment of the Station to Lessee,
Lessee’s Option Payment shall be refunded.
15.3 Assets
to be Transferred.
In the
event Lessee exercises the Purchase Option, at Closing, Lessor shall assign,
or
cause to be assigned, to Lessee, all of the following assets of Lessor on the
Closing Date:
(a)Station
License.
All
licenses, permits and authorizations issued or granted by the Commission for
the
operation of or used in connection with the operation of the Station
(collectively, “Commission Authorizations”):
(b) Leased
Real Property.
The
leasehold estate comprising Lessor’s tower site and transmitter storage location
for the Station located on the American Tower bearing tower registration number
1009986 (“Tower Lease”).
(c) Tangible
Personal Property.
All of
Lessor’s rights in and to the fixed and tangible personal property owned by
Lessor and used in the operation of the Station, including the physical assets,
together with replacements thereof, and additions and alterations thereto,
made
between the date hereof and the Closing Date.
3
(d) Liabilities
Assumed by Lessee.
As
further consideration for the transfer of the Assets to Lessee, Lessee agrees,
upon the terms and subject to the conditions set forth herein, to assume, at
the
Closing, and thereafter to pay, perform and discharge the Tower Lease. Lessee
shall assume no other liabilities.
All
the
assets and properties being transferred to Lessee pursuant to this Agreement
are
collectively referred to herein as the “Assets”.
15.4 Closing;
Closing Date.
The
closing of the transactions contemplated hereby (the “Closing”) shall take place
(i) at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ on the first Tuesday after
final approval by the Commission of assignment of the Station license to Lessee;
or (ii) at such other time or place or on such other date as the parties hereto
shall agree. The date on which the Closing is required to take place is herein
referred to as the “Closing Date”. At the Closing, subject to the satisfaction
or waiver of the conditions to its obligations set forth in this Agreement,
each
of the parties hereto shall make the following deliveries or such deliveries
in
substitution therefor as are satisfactory to the indicated
recipient:
(a) Deliveries
by Lessor.
(1)Lessor
shall deliver to Lessee a ▇▇▇▇ of Sale substantially in the form of Exhibit
2
(the “▇▇▇▇ of Sale”).
(2)Lessor
shall deliver possession of the Assets to Lessee.
(b) Deliveries
by Lessee.
Lessee
shall deliver to Lessor the Option Purchase Price.
15.5Warranties
of Lessor.
Lessor
represents and warrants to Lessee that:
(a) Corporate
Organization.
Lessor
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Texas.
(b) Authority
Relative to this Agreement.
Lessor
has full power and authority to execute, deliver and perform this Agreement
and
to consummate the transactions contemplated hereby.
(c) Exclusive
Operation of Station.
Lessor
holds an authorized license for the Station, which license was issued by the
Commission.
(d) Title
to Assets.
Lessor
is the owner of, and has good and indefeasible title to, all the Assets, free
and clear of all encumbrances. Upon Lessor’s transfer of the Assets to Lessee,
pursuant to this Agreement, Lessee will have good and indefeasible title to
all
the Assets, free and clear of all encumbrances.
(e) Sufficiency
and Condition of Assets.
All the
Assets will be on the Closing Date, in the case of tangible assets and
properties, in the same operating condition and repair (ordinary wear and tear
excepted) as they are on the date of this Agreement and have been maintained
in
accordance with sound engineering practice. All tangible assets and properties
included in the Assets are in Lessor’s possession or under its
control.
(f) Brokerage
Fees.
Neither
Lessor nor any of its affiliates has retained any financial advisor, broker,
agent, or finder or paid or agreed to pay any financial advisor, broker, agent,
or finder on account of this Agreement or any transaction contemplated hereby.
Lessor shall indemnify and hold harmless Lessee from and against any and all
losses, claims, damages and liabilities (including legal and other expenses
reasonably incurred in connection with investigating or defending any claims
or
actions) with respect to any finder’s fee, brokerage commission or similar
payment in connection with any transaction contemplated hereby asserted by
any
person on the basis of any act or statement made or alleged to have been made
by
Lessor or any of its affiliates.
15.6 Warranties
of Lessee.
Lessee
represents and warrants to Lessor.
(a) Corporate
Organization.
Lessee
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Florida.
4
(b) Authority
Relative to This Agreement.
Lessee
has full power and authority to execute, deliver and perform this Agreement
and
to consummate the transactions contemplated hereby.
(c) Brokerage
Fees.
Neither
Lessee nor any of its affiliates has retained any financial advisor, broker,
agent, or finder or paid or agreed to pay any financial advisor, broker, agent,
or finder on account of this Agreement or any transaction contemplated hereby.
Lessee shall indemnify and hold harmless Lessor from and against any and all
losses, claims, damages and liabilities (including legal and other expenses
reasonably incurred in connection with investigating or defending any claims
or
actions) with respect to any finder-‘s fee, brokerage commission or similar
payment in connection with any transaction contemplated hereby asserted by
any
person on the basis of any act or statement made or alleged to have been made
by
Lessee or any of its affiliates.
15.7 Additional
Agreements.
(a) Third
Party Consents.
Lessor
and Lessee shall use their best efforts to obtain all consents, approvals,
orders, authorizations, and waivers of, and to effect all declarations, filings,
and registrations with, all third parties (including Governmental Entities)
that
are necessary, required, or deemed by Lessee to be desirable to enable Lessor
to
transfer the Assets to Lessee as contemplated by this Agreement and to otherwise
consummate the transactions contemplated hereby.
(b) Best
Efforts.
Each
party hereto agrees that it will not voluntarily undertake any course of action
inconsistent with the provisions or intent of this Agreement and will use its
best efforts to take, or cause to be taken, all action and to do, or cause
to be
done, all things reasonably necessary, proper or advisable under applicable
laws
to consummate the transactions contemplated by this Agreement.
16. Indemnification;
Warranty.
Lessee
will indemnify and hold Lessor harmless against all liability, including all
legal fees, for libel, slander, illegal competition or trade practice,
infringement of trade marks, trade names, or program titles, violation of rights
of privacy, infringement of copyrights and proprietary rights and monetary
sanctions imposed by the FCC pertaining to violations of FCC rules, regulations
and policies resulting from the broadcast of programming furnished by Lessee.
Lessor reserves the right to refuse to broadcast any program containing matter
which is, or in the reasonable opinion of the Lessor may be, or which a third
party claims to be, violative of any right of theirs or which may constitute
a
personal attack as the term is defined by the FCC. Lessee’s obligation to hold
Lessor harmless against the liabilities specified above shall survive any
termination of this Agreement. Lessor shall indemnify, defend, and hold Lessee
harmless against all liability, including all legal fees, including but not
limited to those relating to copyright infringement, libel, slander, defamation or invasion
of privacy, arising out of: (i) Lessor’s broadcast or programs other than those
provided by Lessee on the Station; or (ii) any misrepresentation or breach
of
any covenant, warranty, or agreement of Lessor in this Agreement.
17.
Events
of Default: Cure Periods and Remedies. The
following shall, after the expiration of the applicable cure periods, constitute
Events of Default under the Agreement and shall result in the termination of
this Agreement:
(a) Non-Payment.
Lessee’s failure to timely pay the Monthly LMA Fee provided for in Paragraph 2
hereof;
(b) Default
in Covenants or Adverse Legal Action.
The
default by either party hereto in the material observance or performance of
any
material covenant, condition or agreement contained herein, or if either party
shall (a) make a general assignment for the benefit of creditors, or (b) files
or has filed against it a petition for bankruptcy, for reorganization or an
arrangement, or for the appointment of a receiver.
(c) Cure
Periods.
An
Event of Default shall not be deemed to have occurred until ten (10) 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 actions necessary to cure within such
period.
5
18. Notice.
All
notices, requests, demands, and other communications required or permitted
to be
given or made hereunder by any party hereto shall be in writing and shall be
deemed to have been duly given or made if (i) delivered personally, (ii)
transmitted by first class registered or certified mail, postage prepaid, return
receipt requested, (iii) sent by prepaid overnight courier service, (iv) sent
by
telecopy or facsimile transmission, (v) sent by electronic mail, with
confirmation of receipt, to the parties at the following addresses (or at such
other addresses as shall be specified by the parties by like
notice):
If
to
Lessee: Fuego
Entertainment Media Group, LLC
▇▇▇▇▇
▇▇
▇▇▇▇. ▇▇▇▇▇
▇▇▇▇▇,
▇▇▇▇▇▇▇,
▇▇▇▇▇
Office:
▇▇▇ ▇▇▇-▇▇▇▇
Fax:
▇▇▇
▇▇▇- ▇▇▇▇
If
to
Lessor: Mako
Communications, LLC
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
19. Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their successors and permitted assigns. Notwithstanding the foregoing, neither
Lessor nor Lessee may assign this Agreement without the prior written consent
of
the other party.
20. Applicable
Law.
This
Agreement shall be construed and enforced in accordance with the laws of the
state of Texas applicable to contracts entered into and performed in said state
and without regard to choice of law principles.
21. Subject
to Laws; Invalidity.
The
obligations of the parties under this Agreement are subject to FCC requirements,
the Act, and other applicable laws. The parties acknowledge that this Agreement
is intended to comply with FCC requirements. However, in the event that the
FCC
determines that the continued performance of this Agreement is in violation
of
FCC requirements, each party will use its commercially reasonable efforts to
comply with FCC requirements or will in good faith contest or seek to reverse
any such action or agree on the terms of a revision to this Agreement, in each
case, on a time schedule sufficient to meet FCC requirements and so long as
the
fundamental nature of the business arrangement between the parties evidenced
by
this Agreement is maintained. If any provision of this Agreement is otherwise
held to be illegal, invalid, or unenforceable under present or future laws,
then
such provision shall be fully severable, this Agreement shall be construed
and
enforced as if such provision had never comprised a part thereof, and the
remaining provisions shall remain in full force and effect, in each case so
long
as the fundamental nature of the business relationship of the parties has been
maintained.
22. Entire
Agreement. This
Agreement embodies the entire understanding among the parties with respect
to
the subject matter hereof, and supersedes any prior of contemporaneous written
or oral agreements between the parties regarding such subject
matter.
23. Relationship
of Parties.
Lessor
and Lessee are not, and shall not be deemed to be, agents, partners, or
representatives of each other.
[Signature
page follows.]
6
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
Lessor:
MAKO
COMMUNICATIONS, LLC
A
Texas
Limited Liability Company
By:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇
Title:Managing
Member
Lessee:
FUGO
ENTERTAINMENT MEDIA GROUP, LLC
By:
/s/ ▇▇▇▇
▇. ▇▇▇▇▇▇
▇▇▇▇
▇.
▇▇▇▇▇▇
Title:
President & CEO
7