MANAGEMENT AGREEMENT
This Management Agreement (the "Agreement") dated as of the 22nd day of
August, 1997 and executed by and between Xxxxxxx Broadcasting of Salt Lake City,
L.L.C. ("Permittee"), a limited liability company formed under the laws of the
State of Delaware, and ACME Television of Utah, L.L.C. ("Manager"), a limited
liability company formed under the laws of the State of Delaware.
WITNESSETH THAT
WHEREAS, Permittee holds a construction permit (the "CP") from the
Federal Communications Commission ("FCC") for KZAR-TV in Provo, Utah (the
"Station"); and
WHEREAS, Permittee's members and Manager's parent company have entered
into a certain Membership Exchange Agreement dated this same date (the "Exchange
Agreement") under which such parent company is to acquire a minority membership
interest in Permittee from such members;
WHEREAS, Permittee's members and Manager's parent company propose to
enter into a certain option agreement (the "Option Agreement") which would
enable Manager's parent to acquire the majority ownership interest in Permittee
at some future date; and
WHEREAS, pending the execution and consummation of the Option
Agreement, Permittee is desirous of securing Manager's services in the
construction and operation of the Station, all subject to the terms and
conditions of this Agreement; and
WHEREAS, Manager is prepared to provide various services to Permittee
for the construction and operation of the Station, all subject to the terms and
conditions of this Agreement;
NOW, THEREFORE, in light of the foregoing and the mutual promises and
covenants contained herein, the parties hereby agree as set out herein.
ARTICLE I: PROVISION OF MANAGEMENT SERVICES
SECTION 1.1. MANAGER'S CONSTRUCTION AND MANAGEMENT OF STATION FACILITIES
(a) Upon execution of this Agreement, Manager shall assume sole
responsibility for the financial and other obligations of Permittee under those
contracts (the
"Contracts") which Permittee has executed as part of its effort to construct the
Station and true copies of which are annexed hereto in SCHEDULE 1. Permittee
shall have the sole responsibility for obtaining any third party consents
required to make the aforesaid assumption effective.
(b) Manager shall have the option, subject to approval by Permittee, to
enter into other contracts and to take such other actions as may be necessary to
complete construction of the Station in a timely manner and in accordance with
the terms of the CP. Manager shall be solely responsible for any and all
financial obligations imposed by any such contracts.
(c) On the date of closing under the Exchange Agreement, Manager shall
reimburse Permittee for all out of pocket costs and expenses incurred by
Permittee prior to the date hereof in connection with the construction of the
Station, and identified in SCHEDULE 2 HERETO including, without limitation, the
purchase price for the CP, the purchase price or lease payments for any real or
intangible personal property of the Station, all engineering and legal expenses,
and payments under contracts. The amount to be reimbursed hereunder shall in no
event exceed One Million Dollars ($1,000,000).
(d) Subject to supervision and control by the Permittee, Manager shall
complete the construction of the Station at Manager's sole cost and expense.
Such work shall commence promptly following the execution hereof and shall be
completed as promptly as reasonably possible. Manager shall provide Permittee
with construction progress reports in reasonable detail on a monthly basis.
Manager shall be responsible to Permittee for acts of Manager's employees,
contractors, subcontractors and other persons performing any of the
construction. Manager warrants that the construction will be of good quality
free of any material defect and that the construction shall comply in all
material respects with all applicable laws, rules and regulations. Manager shall
maintain insurance to protect Manager and Permittee against claims arising from
such construction, including personal injury, death, property damage, workers
compensation, and builders risk to the extent such claims are based on acts or
omissions occurring after the date hereof and provide Permittee with evidence of
such insurance coverage from financially sound companieS IN amounts normally and
reasonably carried by similar carriers.
(e) Upon completion of construction, Manager shall have the right and
obligation to manage the Station facilities for 168 hours per week to enable
Permittee to comply with applicable law and to fulfill its obligations under the
Communications Act of 1934, as amended (the "Act"), as well as the rules and
policies of the FCC. As part of its responsibilities, Manager will arrange for
programming to be broadcast on the Station for the entire 168-hour weekly period
(subject to any diminution under this Agreement) and
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otherwise manage Station operations under Permittee's supervision.
Notwithstanding the foregoing, the Permittee may designate such additional time
as it may require without any adjustment of the monthly reimbursement of
expenses to be paid to Permittee hereunder for broadcast of programming
necessary for the Station to broadcast news, public affairs, children's,
religious and non-entertainment programming as required by the FCC. At Manager's
option, the programming may originate either from Permittee's studios or from
other points. In the event of a termination of this Agreement without a Closing
(as defined below), Manager will use reasonable efforts to terminate all
programming obligations created by Manager hereunder.
SECTION 1.2. TERM OF AGREEMENT
The term of this Agreement (the "Term") shall commence one business day
after the date of this Agreement (the "Effective Date") and expire on the
earlier of (a) the date of the consummation (the "Closing") of the Purchase
Agreement (as defined in the Option Agreement), (b) sixty (60) months after the
issuance of a license by the FCC to cover the CP, or (c) the termination of this
Agreement under Article IV hereof, provided, that certain provisions of this
Agreement shall survive such termination and continue in effect beyond the Term,
as more specifically provided below.
SECTION 1.3. QUALITY AND NATURE OF PROGRAMMING
(a) Any and all programming provided or arranged by Manager under this
Agreement shall be in accordance with the Act and the rules and policies of the
FCC. All advertising messages and promotional material or announcements shall
comply with all applicable federal, state and local laws, regulations and
policies.
(b) The Permittee may, in the exercise of its discretion, refuse to
broadcast any program which the Permittee deems to be inconsistent with
subsection (a) of this section or Permittee's obligations under the Act or FCC
rules or policies.
(c) Manager agrees to display the ratings of all applicable programs
broadcast on the Station. Permittee retains the right to change any rating that,
in its discretion, is determined to be inappropriate.
SECTION 1.3. OPERATION AND MAINTENANCE OF STATION FACILITIES
(a) The Manager shall, subject to the terms of this Agreement, assume
responsibility for all reasonable expenses incurred by Permittee in the
construction or operation of the Station subsequent to the Effective Date,
including but not limited to
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salaries, lease payments for studios and broadcast equipment, utilities,
insurance and other routine expenses and repairs (unless the expense or repair
does not involve a routine matter and is caused by the willful misconduct or
negligence of Permittee, its employees or agents). All expenses submitted by
Permittee for reimbursement are subject to verification by Manager.
(b) On the Effective Date, and on the 15th day of each month after the
Effective Date, Permittee shall provide Manager with an itemized budget of
expenses expected in the following 30-day period. Manager shall approve all
expenses in each such budget which are reasonable for the construction and
operation of the Station. Manager shall thereafter pay such approved expenses in
a timely fashion (unless Manager disputes any expense, in which case the
undisputed expenses will be paid and the disputed expense will remain unpaid
until the dispute is resolved by Permittee and Manager).
SECTION 1.15. HANDLING OF MAIL
Except as required to comply with the Act or FCC rules and policies,
including those regarding the maintenance of the public inspection file (which
shall at all times remain the responsibility of the Permittee), the Permittee
shall not be required to receive or handle mail, faxes, or telephone messages in
connection with programming provided by Manager unless the Permittee, at the
request of Manager, has agreed in writing to do so. Notwithstanding anything
herein to the contrary, Manager shall provide the Permittee with copies of any
mail, fax, or telephone message concerning the programming furnished or arranged
by Manager under this Agreement to permit Permittee to place copies thereof in
the Station's public inspection file if required by applicable law, rule, or
policy.
SECTION 1.16. STAFFING REQUIREMENTS AND EXPENSES
(a) The Permittee shall, to the extent required by applicable law or
policy, maintain a main studio within the Station's principal community and have
it staffed as required by FCC rules and policies. The Permittee shall be
responsible for the payment of salaries, taxes, insurance and related costs of
Station personnel, including managerial staff, at such main studio, subject to
any reimbursement by Manager as provided under Section 1.4 of this Agreement.
(b) Manager may establish, staff and maintain a remote control point
for the Station, subject to the control and oversight of the Permittee,
provided, that Permittee shall retain the right to preempt Manager's programming
from that remote point. Manager shall be responsible for the payment of (i) all
telephone calls associated with program production and listener responses, (ii)
any fees billed by ASCAP, BMI and
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SESAC, and (iii) all other copyright fees attributable to programming provided
by Manager under this Agreement.
SECTION 1.7. OPERATION OF STATION
(a) Notwithstanding anything herein to the contrary, the Permittee shall
retain exclusive authority for the construction and operation of the Station,
including, without limitation, the right (i) to accept or reject any contract
for the provision of goods and services in the construction of the Station, (ii)
to accept or reject any programming or advertisements proffered by Manager,
(iii) to cancel or preempt any programming proffered by Manager if the broadcast
of such program(s) would, in the Permittee's opinion, not be in the public
interest, (iv) to substitute for any program proffered by Manager a program
deemed by the Permittee to be of greater national, regional or local interest,
(v) to require that time sales by Manager to political candidates comply with
law and policy regarding access, charges and equal opportunities, and (vi) to
take any other action which the Permittee deems necessary for compliance with
federal, state and local laws, including the Act and the rules and policies of
the FCC. Station personnel shall report and be accountable solely to the
Permittee. When they use Permittee's facilities, Manager's personnel shall be
under the ultimate direction, control and supervision of the Permittee's general
manager.
(b) The Permittee will use its best efforts to provide Manager with
reasonable prior notice of any intention to cancel or preempt any programming
proffered by Manager.
(c) Permittee shall be solely responsible for the Station's compliance
with the Act as well as FCC rules and policies. Manager shall provide
information to the Permittee with respect to Manager's programs to assist the
Permittee in assessing the extent to which such programming is responsive to the
needs and interests of the Station's service area and to enable the Permittee to
provide information required by the FCC and other governmental entities,
including but not limited to (i) a quarterly list of community issues and
responsive programming and (ii) a description of programming intended to satisfy
the Permittee's obligations under the CHILDREN'S TELEVISION ACT OF 1990.
(d) Manager shall have no responsibility for Permittee's federal, state
or local income taxes, regardless of when paid or payable by Permittee.
(e) Manager shall have the authority, subject to Permittee's final
approval and in compliance with Permittee policies and all applicable laws, to
hire such personnel as Manager shall deem necessary for the construction and
operation of the Station.
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SECTION 1.8. STATION IDENTIFICATION
The Permittee shall be responsible for the broadcast of all required
Station announcements and all visual or oral notices or rating symbols under
Section 1.3(c). Manager shall make available to Permittee, without charge, such
announcements for such purpose as requested by Permittee and shall air such
announcements during the programming supplied by Manager.
SECTION 1.9. FORCE MAJEURE
No breach of this Agreement shall be deemed to occur if circumstances
beyond the control of the Permittee or Manager cause any (a) damage or
malfunction in the Station's transmission facilities or (b) delay or
interruption in the broadcast of programs; provided that the occurrence of any
Force Majeur shall not excuse Manager from making the payments required to be
made by Manager under Section 1.4.
SECTION 1.10. RIGHT TO USE THE PROGRAMS
Subject to Section 1.1 of this Agreement, the right to use the Manager's
programming and to authorize its use in any manner in any media whatsoever shall
be, and remain, vested in Manager. In the event of a termination of this
Agreement without a Closing of the Option Agreement, Manager will assist
Permittee in an orderly transition of programming.
SECTION 1.11. PAYOLA
Neither Manager nor its employees or designated agents shall accept any
consideration, compensation gift or gratuity of any kind, regardless of its
value or form, including but not limited to a commission, discount, bonus,
material, supplies or other merchandise, services or labor whether or not
pursuant to written contract or agreement between Manager and merchants or
advertisers, unless the payer is identified in the program in accordance with
the Act and FCC rules and policies. Manager shall provide the Permittee with an
appropriate affidavit within 60 days of the Effective Date of this Agreement and
thereafter on an annual basis, and more frequently if reasonably requested by
Permittee, attesting to its compliance with this section.
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SECTION 1.12. COMPLIANCE WITH LAW
Manager shall comply with all laws, rules, regulations and policies
applicable to Manager's performance under this Agreement or to which the
Permittee is subject in the construction or operation of the Station.
ARTICLE II: MANAGEMENT FEES
In consideration for the services to be rendered hereunder, Manager
shall retain any and all accounts receivable generated by the sale of time on
the Station.
ARTICLE III: REPRESENTATIONS AND WARRANTIES
SECTION 3.1. MUTUAL REPRESENTATIONS AND WARRANTIES
Each party represents and warrants to the other that it is legally
qualified, duly empowered and expressly authorized to enter into this Agreement
and that the execution, delivery and performance of this Agreement shall not
constitute a breach or violation of (1) its certificate, operating agreement or
other organizational documents or (2) any agreement, contract or other
obligation to which either party is subject or by which it is bound.
SECTION 3.2. PERMITTEE'S REPRESENTATIONS AND WARRANTIES
Permittee represents and warrants to Manager (a) that Permittee holds
the CP for the Station, (b) that the CP is in full force and effect, unimpaired
by any acts or omissions of Permittee or its agents, (c) that there is not now
pending or, to Permittee's knowledge, threatened any action by or before the FCC
or any court to revoke, cancel, suspend, refuse to extend or modify adversely
the CP, (d) that, as of the date of this Agreement, no event has occurred that
does justify or, after notice or lapse of time or both, would justify the
revocation, cancellation or adverse modification of the CP, (e) that Permittee
is not in material violation of any statute, ordinance, rule, regulation,
policy, order or decree of any federal, state, or local governmental entity,
court or authority having jurisdiction over it or over any part of the
construction or operation of the Station, (f) that Permittee will not dispose
of, transfer, assign or pledge any Permittee's assets except with the prior
written consent of Manager and (g) that Permittee will provide Manager with
immediate notice of the breach or anticipated breach of any of the foregoing
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representations, and Manager shall have the unilateral right, but not the
obligation, to cure any anticipated or actual breach without prejudice to any of
Manager's rights or remedies under this Agreement.
SECTION 3.3. MANAGER'S REPRESENTATIONS AND WARRANTIES
Manager represents and warrants to Permittee that Manager is not in
material violation of any statute, ordinance, rule, regulation, policy, order or
decree of any federal, state or local governmental entity, court or authority
having jurisdiction over it or over any part of its operation or assets.
SECTION 3.4. INDEMNIFICATION
Each party shall defend, indemnify and hold harmless the other party
and its partners, members, officers, stockholders, directors, employees, agents,
successors and assigns, from and against any and all costs, losses, claims,
liabilities, fines, expenses, penalties, and damages (including reasonable
attorney's fees) in connection with or resulting from (a) any breach or default
by the indemnifying party under this Agreement or (b) any claim of any nature
whatsoever made with respect to programming supplied by the indemnifying party,
including without limitation, any liability for any fines imposed by the FCC as
a result of programming supplied by the indemnifying party, or any claim or
liability resulting from any alleged libel, invasion of privacy or defamation by
the indemnifying party.
ARTICLE IV: TERMINATION
SECTION 4.1. EVENT OF DEFAULT
(a) The following shall, after the expiration of the applicable cure
period provided in subsection (b) of this section, constitute an Event of
Default:
(i) the breach by either party hereto in the
observance or performance of any material covenant,
condition or undertaking contained herein; or
(ii) if any material representation or warranty made by either party
shall prove to have been or become false or misleading in any material
respect.
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(b) An Event of Default shall not be deemed to have occurred until
twenty (20) business days after the nondefaulting party has provided the
defaulting party with written notice specifying the event or events that, if not
cured, would constitute an Event of Default and specifying the action necessary
to cure the Event of Default within such period. This period may be extended for
a reasonable period of time if the defaulting party is acting in xxxx xxxxx to
cure the default and such default is not materially adverse to the other party.
(c) Upon the occurrence of an Event of Default, the
nondefaulting party may terminate this Agreement, unless the non-defaulting
party is also in default hereunder.
(d) If this Agreement is terminated because of an Event of Default by
Permittee as defined in Section 4.1(a), Permittee shall pay Manager for all Net
Losses incurred under this Agreement and paid by Manager through either (i) a
reduction in the purchase price to be paid to Permittee by Manager at the
Closing of the Option Agreement or (ii) if there is no Closing of the Option
Agreement, by payment from Permittee within 90 days of termination of the Option
Agreement. Likewise, if closing fails to occur under the Exchange Agreement and
Manager's parent company is not in material breach under such Agreement,
Permittee shall pay Manager for all Net Losses, with such payment being made
within ninety (90) days after termination of the Exchange Agreement. For
purposes of this Agreement, "Net Losses" means the extent to which the
unreimbursed expenses paid or incurred by Manager under this Agreement exceed
the Account Receivables collected or generated (and less than 90 days old) by
Manager as Management fees pursuant to Article II of this Agreement.
SECTION 4.2. MANAGER'S TERMINATION OPTION
Manager may terminate this Agreement at any time if (a) notwithstanding
anything herein to the contrary, the Permittee cancels or preempts programming
proffered for broadcast by Manager during ten percent (10%) or more of the total
hours of operation of the Station during any calendar month or (b) the Option
Agreement is terminated. In the event Manager elects to terminate this Agreement
pursuant to this section, notice shall be given to Permittee of such election at
least thirty (30) days prior to the termination date.
SECTION 4.3. TERMINATION UPON GOVERNMENT ACTION
(a) This Agreement may be terminated under any one of the following
circumstances: (i) by Manager, if the FCC revokes, refuses to renew, or fails to
extend any FCC authorization for any Station; (ii) by Manager or Permittee, as
the case may be, if the FCC or any other governmental agency with jurisdiction
over this Agreement issues a Final
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Order which requires a modification to this Agreement which is materially
adverse to Manager or Permittee; or (iii) by Manager or Permittee, if the FCC or
any other governmental agency with jurisdiction over this Agreement requires the
termination of this Agreement.
(b) In the event of termination of this Agreement under this section,
Permittee shall cooperate with Manager to the extent practicable to enable
Manager to fulfill advertising or other programming contracts for cash
compensation then outstanding, in which event the Permittee shall receive such
compensation payable to Manager therefor.
ARTICLE V: MISCELLANEOUS
SECTION 5.1. EXPIRATION OF OPTION
If the Option Agreement expires according to its terms without exercise
and without material breach by any party, the Manager and the Permittee shall
negotiate in good faith to amend the terms hereof as shall be fair and
appropriate in such circumstance; such negotiation shall address (without
limiting the generality of the foregoing) modification of the management fee
payable hereunder based on comparable arm's-length fees charged in similar
circumstances.
SECTION 5.2 INSURANCE
Permittee shall maintain in full force and effect such insurance
policies with responsible and reputable insurance companies or associations
covering such risks (including fire and other risks insured against by extended
coverage, broadcaster's general liability, including errors and omissions,
invasion of privacy, libel and defamation claims, public liability insurance,
insurance for claims against personal injury or death or property damage and
such other insurance as may be required by law) and in such amounts and on such
terms as is conventionally carried by broadcasters operating television stations
with facilities comparable to those of the Station. Permittee shall cause
Manager to be named as an additional insured thereunder. Any insurance proceeds
received by Permittee for damaged Station assets will be used to repair or
replace such asset so that the construction and operation of the Station
conforms with this Agreement. The premiums for any insurance policies maintained
by Permittee shall be included in the expenses subject to reimbursement by
Manager under Section 1.4(a) of this Agreement.
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SECTION 5.3. NOTICES
All necessary notices, demands, requests and other communications
permitted or required under this Agreement shall be in writing and shall be
delivered by certified mail-return receipt requested, postage prepaid; by hand;
or by overnight courier service, charges prepaid. In each case the communication
shall be addressed as follows (or to such other addresses as either party may
designate in writing to the other):
If to Manager: ACME Television of Utah, L.C.C.
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxxxxx Xxxxx, President
With copies to: Xxxxxxxxx Xxxxxxx Xxxxx & Xxxxxxxx LLP
0000 X Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Paper, Esquire
If to Permittee: Xxxxxxx Broadcasting of Salt Lake City, L.L.C.
Xxxxx 000
0000 Xx. Xxxxxxxxxxxx
Xx. Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, Managing Member
With a Copy to: Dow, Xxxxxx & Albertston, P.L.L.C.
0000 Xxx Xxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, Xx., Esquire
and
Armstrong, Teasdale, Schlafly & Xxxxx
Xxx Xxxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xx. Xxxxx, XX 00000
Attention: Xxxxxx X. xxx Xxxxxx, Esq.
Such communications shall be effective upon delivery.
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SECTION 5.4. WAIVER
No waiver of any provision of this Agreement shall be effective unless
in writing. Such waiver shall be effective only in the specific instance and for
the purpose for which given.
SECTION 5.5. CONSTRUCTION
This Agreement shall be construed in accordance with the laws of the
State of Utah without regard to conflict of laws provisions.
SECTION 5.6. HEADINGS
The headings contained in this Agreement are included for convenience
only and no heading shall alter the meaning of any provision.
SECTION 5.7. ASSIGNMENT
This Agreement may not be assigned by Permittee without the prior
written consent of the Manager. Manager may not assign its rights and
obligations under this Agreement except to any affiliated person of Manager:
provided, that no such assignment shall relieve Manager of its obligations
hereunder. An "affiliated person" of Manager shall mean a person or entity in
control of, controlled by or under common control with Manager.
SECTION 5.8. COUNTERPART SIGNATURE
This Agreement may be signed in one or more counterparts, and all
counterparts shall be deemed to be one and the same document.
SECTION 5.9. ENTIRE AGREEMENT
This Agreement embodies the entire agreement between the parties
concerning the construction and operation of the Station and supersedes any and
all prior and contemporaneous agreements and understandings, oral or written. No
amendment of this Agreement shall be valid unless embodied in a document
executed by both parties.
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SECTION 5.10. NO PARTNERSHIP OR JOINT VENTURE CREATED
Nothing in this Agreement shall be construed to make the Permittee and
Manager partners or part of a joint venture or to vest any rights in any third
party.
SECTION 5.11. SEVERABILITY OF PROVISIONS
In the event any provision contained in this Agreement is held to be
invalid, illegal or unenforceable by the FCC or any court of competent
jurisdiction, such holdings shall not affect any other provision hereof, and
this Agreement shall be construed as if such valid, illegal or unenforceable
provision had not be contained herein.
SECTION 5.12. LITIGATION PROCEDURES AND EXPENSES
If either party initiates a lawsuit or other formal action to enforce
its rights hereunder, the prevailing party shall be reimbursed by the other
party for all reasonable expenses incurred thereby, including reasonable
attorney fees.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ACME TELEVISION OF UTAH, L.L.C.
By: /s/Xxxxxxx X. Xxxxx
------------------------------
Xxxxxxx X. Xxxxx, President
XXXXXXX BROADCASTING OF SALT LAKE
CITY, L.L.C.
By:/s/Xxxxxxx X. Xxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxx, Managing Member
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Schedule 1
ASSUMED CONTRACTS
NONE
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SCHEDULE 2
CONSTRUCTION EXPENSES
16
