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Exhibit 10.2
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is entered into as of the 29th day
of August, 1997, by and between The Hearst Corporation ("Hearst"), a Delaware
corporation, and Argyle Television, Inc. ("Argyle"), a Delaware corporation.
WHEREAS, Hearst and Argyle have entered into an Amended and Restated
Agreement and Plan of Merger dated as of March 26, 1997 (the "Merger Agreement")
pursuant to which certain Hearst subsidiaries will, subject to the terms and
conditions of the Merger Agreement, merge with and into Argyle; and
WHEREAS, Argyle will be the surviving corporation under the Merger
Agreement and will be renamed Hearst-Argyle Television, Inc. ("HAT"); and
WHEREAS, this Management Services Agreement is entered into in
accordance with Section 9.01(i) of the Merger Agreement and in further
consideration thereof and shall be binding upon HAT as of the Effective Date of
the Merger contemplated by the Merger Agreement;
NOW, THEREFORE, Hearst and Argyle hereby agree as follows:
1. Managed Stations. Hearst, or a subsidiary, is the licensee of Radio
Stations WBAL(AM) and WIYY-FM, Baltimore, Maryland and Television Stations
WWWB-TV, Lakeland, Florida ("WWWB-TV") and WPBF-TV, Tequesta, Florida
("WPBF-TV"). Additionally, Hearst brokers time and provides programming and
other services to Television Station KCWB-TV, Kansas City, Missouri ("KCWB-TV")
pursuant to a Program Service and Time Brokerage Agreement. WBAL(AM) and
WIYY-FM, WWWB-TV, WPBF-TV and KCWB-TV are collectively referred to herein as the
"Managed Stations." Additionally, Hearst shall have the right (but not the
obligation) to include under this Management Services Agreement any additional
broadcast stations which it or any of its subsidiaries or affiliates (other than
HAT) may acquire (or for which Hearst or any such subsidiary or affiliate enters
into a time brokerage agreement) during the Term hereof; if Hearst desires to
include such additional station hereunder it will so advise HAT in writing and
such station will thereupon be included as a Managed Station hereunder.
2. Services. Subject to applicable laws, rules and regulations
(including those of the FCC), during the term of this Agreement, HAT shall
provide Hearst with respect to the Managed Stations, with management services
substantially similar to those management services Hearst's broadcast group
management has provided to the Managed Stations prior to the Effective Time (as
such term is defined in the Merger Agreement), and HAT's services to Hearst
hereunder will include, without limitation, management services with respect to:
sales; news; programming (subject to the rights of each Managed Station's
licensee to retain sole responsibility for and control of the station's
programming, including the right to pre-empt programming provided for under this
Management Services Agreement); assuring compliance
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with FCC and EEO laws, rules and regulations; finances including preparation of
operating and capital budgets and financial statements in accordance with GAAP);
engineering; promotion; and accounting services.
3. Facilities and Employees of HAT. HAT shall maintain such office
facilities, space, supplies, and equipment and shall hire, supervise, and direct
such employees as are necessary to the performance of the services provided for
herein. HAT will be responsible for the furnishing, recruiting, training,
supervising and managing of all such employees of Hearst employed by Hearst at
the Managed Stations, provided however, such employees shall remain subject to
the ultimate management and direction of Hearst. It is understood and agreed
that the responsibility for compensating the employees of Hearst is solely the
responsibility of Hearst and not that of HAT, regardless of the nature of the
services rendered by such employees of the party benefiting from the same.
4. Management Fee. (a) The management fee with respect to the Managed
Stations shall be an annual amount equal to the greater of (i) (x) $50,000 for
the Managed Radio Stations (counted as a single property) and $50,000 for
KCWB-TV, or (y) for all others, $100,000 per station, and (ii) a percentage
listed below of the positive broadcast cash flow from each such property:
Year 1 - 20%
Year 2 - 30%
Year 3 - 40%
Year 4 and thereafter - 50%
As used herein, "broadcast cash flow" is defined, for each Managed
Station respectively, as station operating income, plus depreciation and
amortization of program rights, minus program payments and adjusted for any
non-cash compensation expense. Reimbursable expenses pursuant to Section 4(b)
below shall also be deducted from broadcast cash flow to the extent such
deductions were not already included in the calculation of broadcast cash flow.
(b) In addition to such management fee, HAT shall also be entitled to
the reimbursement of HAT's direct operating costs and expenses incurred with
unrelated third parties, plus the reimbursement of amounts paid on behalf of a
Managed Station under the Services Agreement between Hearst and Argyle of even
date to the extent such amounts were paid by HAT and were not paid directly by
the Managed Station. Corporate overhead shall not be a reimbursable expense
except to the extent corporate overhead has been historically treated as an
operating expense for each Managed Station respectively and has been included as
part of the calculation of broadcast cash flow for such Managed Station as shown
in the Form S-4 Registration Station filed by Argyle with the Securities and
Exchange Commission on July 30, 1997.
(c) Management fees (including the reimbursement of expenses) shall be
made on a calendar quarterly basis. HAT shall provide Hearst with a statement
setting forth the reimbursable expenses for such quarter, plus an amount equal
to 25% of the annual fixed amount or positive broadcast cash flow, as the case
may be, within thirty days following the end of each
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quarter. Reasonable estimates of broadcast cash flow may be made, with
adjustments thereto to be made in the following quarter. Each statement shall
include such information as Hearst reasonably requires. Hearst will pay the
quarterly amount due within 15 days of its receipt of such statement.
5. Records. HAT shall, at all times, keep proper books of account and
records relating to services performed hereunder, including records relating to
the computation of management fees, which books of account and records shall be
accessible for inspection by Hearst at any time during normal business hours.
6. Term. The term of this Agreement shall commence upon the Effective
Time and shall continue for each of the Managed Stations respectively until the
earlier of: (i) Hearst's divestiture of such Managed Station to a third party;
(ii) if applicable, the exercise of the option granted to HAT for certain of the
Managed Stations, pursuant to the Option Agreement of even date entered into
between the parties hereto; or (iii) five (5) years following the Effective
Time, provided that, Hearst shall have the right to terminate this Agreement
with respect to any Managed Station at any time upon 90 days prior written
notice if the option period or right of first refusal period with respect to
such Managed Station, as applicable, each as set forth in the Option Agreement,
has expired without having been exercised. Additionally, if either party shall
breach in any material respect any of its obligations or agreements under this
Agreement, and said party does not cure such default within 30 days after
receiving written notice thereof from the non-breaching party, the non-breaching
party may terminate this Agreement by providing written notice of termination
given at least 60 days prior to the proposed termination date. Upon such
termination, Hearst and/or Argyle shall promptly return any and all property of
the other party used in connection with the provision of services hereunder.
7. FCC Filing and Licensee Responsibility. A copy of this Agreement
shall be filed with the Federal Communications Commission in accordance with 47
C.F.R. Section 73.3613(c)(1) (1996). Nothing contained herein shall be construed
so as to constitute a relinquishment, abdication or transfer of control of
responsibility for Hearst's and its subsidiaries' obligations as the licensees
of their respective broadcast stations or tower facilities. It is expressly
recognized and agreed that all services performed for Hearst shall be performed
pursuant to and under the authority of Hearst's management and Board of
Directors and, whenever necessary, Hearst's stockholders.
8. Change in Control. Notwithstanding anything to the contrary
contained herein, this Agreement shall terminate at any time that Hearst ceases
to own more than 50% of HAT's outstanding voting common stock or otherwise
ceases to have the right to elect a majority of the Board of Directors of HAT.
Upon such a termination, the final Management Fees due hereunder will be
determined through the date of termination in a manner consistent with the
quarterly determinations provided hereunder.
9. Limitation of Liability; Consequential Damages. In providing the
Services, HAT shall not have any liability hereunder except to the extent that
HAT shall be finally judicially determined to have engaged in gross negligence
or willful misconduct. In addition, HAT shall not be liable, whether in
contract, in tort (including negligence and strict liability), or otherwise,
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for any special, indirect, incidental or consequential damages whatsoever
(including, but not limited to, lost profits), which in any way arise out of,
relate to, or are a consequence of, its performance or nonperformance under this
Agreement, or the provision of or failure to provide any service under this
Agreement.
10. Indemnity. (a) HAT hereby agrees to indemnify and hold harmless
Hearst, and its affiliates, their respective officers, directors, employees,
successors and assigns and agents and each other person, if any, controlling
Hearst, or any of its affiliates (Hearst and each such other person being a
"Hearst Indemnified Person") from and against any and all losses, claims,
damages, liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) related to, arising out of or in connection with
the services provided pursuant to this Agreement, provided, however, HAT shall
not be responsible for any losses, claims, damages or liabilities (or expenses
relating thereto) that are finally judicially determined to have resulted from
the gross negligence or willful misconduct of any Hearst Indemnified Person; and
provided further that nothing contained herein shall cause HAT to be liable to
Hearst for operating losses at the Managed Stations not caused by the gross
negligence or willful misconduct of HAT.
(b) Hearst hereby agrees to indemnify and hold harmless HAT, its
affiliates, and their respective officers, directors, employees, successors
and assigns and agents and each other person, if any, controlling HAT, or any of
its affiliates from and against any and all losses, claims, damages or
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that are finally judicially determined to have resulted
from the gross negligence or willful misconduct of Hearst in connection with the
services provided pursuant to this Agreement.
(c) The party making a claim under this Section 10 is referred
to as the "Indemnified Party" and the party against whom such claims are
asserted under this Section 10 is referred to as the "Indemnifying Party." All
claims by any Indemnified Party under this Section 10 shall be asserted and
resolved as follows:
(i) In the event that any claim or demand for which an
Indemnifying Party would be liable to an Indemnified Party hereunder is asserted
against or sought to be collected from such Indemnified Party by a third party,
said Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand, specifying the basis for such claim
or demand, and the amount or the estimated amount thereof to the extent then
determinable (which estimate shall not be conclusive of the final amount of such
claim or demand, and the amount or the estimated amount thereof to the extent
then determinable (which estimate shall not be conclusive of the final amount of
such claim and demand) (the "Claim Notice"); provided, however, that any failure
to give such Claim Notice will not be deemed a waiver of any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced by such failure. The Indemnifying Party shall have the right
to control the defense of such claim or demand and shall retain counsel (who
shall be reasonably acceptable to the Indemnified Party) to represent the
Indemnified Party and shall pay the reasonable fees and disbursements of such
counsel with regard thereto; provided, however, that any Indemnified Party is
hereby authorized prior to the date on which it receives written notice from the
Indemnifying Party designating such counsel, to retain counsel, whose
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fees and expenses shall be at the expense of the Indemnifying Party, to file any
motion, answer or other pleading and take such other action which it reasonably
shall deem necessary to protect its interests or those of the Indemnifying Party
until the date on which the Indemnified Party receives such notice from the
Indemnifying Party. After the Indemnifying Party shall retain such counsel, the
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party.
The Indemnifying Party shall not, in connection with any proceedings or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one counsel for the Indemnified Party (except to the extent the
Indemnified Party retained counsel to protect its (or the Indemnifying Party's)
rights prior to the selection of counsel by the Indemnifying Party). If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any claim or demand
which the Indemnifying Party defends. A claim or demand may not be settled by
the Indemnifying Party without the prior written consent of the Indemnified
Party (which consent will not be unreasonably withheld) unless, as part of such
settlement, the Indemnified Party shall receive a full and unconditional release
reasonably satisfactory to the Indemnified Party. If the Indemnifying Party
elects to defend a claim or demand, the Indemnified Party shall not pay or
settle such claim or demand without the consent of the Indemnifying Party. In
each instance, the Indemnified Party shall have the right to be kept fully
informed by the Indemnifying Party and its legal counsel with respect to any
legal proceedings.
(ii) In the event any Indemnified Party shall have a claim
against any Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party.
(d) The provisions of this Section 10 shall survive the expiration
or termination of this Agreement.
11. Successors and Assigns. This Agreement may not be assigned by
Hearst or HAT without the prior written consent of the other party, except that
either Hearst or HAT may assign its right and obligations hereunder to one of
its wholly owned subsidiaries, and any attempt to assign any rights or
obligations arising under this Agreement without such prior consent in violation
hereof shall be null and void.
12. Governing Law. The construction, validity and enforceability of
this Agreement shall be governed by the laws of the State of New York, without
regard to conflicts of laws principles.
13. Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
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(a) If to Hearst:
The Hearst Corporation
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
(b) If to HAT:
Hearst-Argyle Television, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
Any party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other parties hereto.
14. No Waiver. The failure of either party at any time to require
performance by the other party of any provision of this Agreement shall in no
way affect the right of such party to require performance of that provision. Any
waiver by either party of any breach of any provision of this Agreement shall
not be construed as a waiver of any continuing or succeeding breach of such
provision, a waiver of the provision itself or a waiver of any right under this
Agreement.
15. Severability. All provisions of this Agreement are severable and
any provision which may be prohibited by law shall be ineffective to the extent
of such prohibition without invalidating the remaining provisions of this
Agreement.
16. Entire Agreement; Modifications and Amendments. This Agreement
constitutes the entire agreement between the parties concerning the subject
matter thereof and supersedes all prior agreements and understandings, both oral
or written, between the parties with respect to the subject matter hereof, and
cannot be modified or amended except by an instrument in writing signed by all
parties hereto or their respective successors or assigns.
17. Independent Contractor Status. HAT shall be deemed to be an
independent contractor to Hearst. Nothing contained in this Agreement shall
create or be deemed to create the relationship of employer and employee, and no
party to this Agreement shall, by reason hereof, be deemed to be a partner or a
joint venturer of any other party hereto in the conduct of their respective
business and/or the conduct of the activities contemplated by this Agreement.
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18. Binding Effects; Benefits. This Agreement will be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
Nothing contained in this Agreement, express or implied, is intended to confer
upon any person other than the parties and their respective successors and
permitted assigns any rights or remedies under or by reason of this Agreement.
19. Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not in any way control the meaning or
interpretation of this Agreement.
20. Force Majeure. HAT shall be excused from performing the services
under this Agreement and shall have no liability to Hearst for any period it is
prevented from performing the services, in whole or in part, as a result of
delays caused by an act of God, war, civil disturbance, court order, labor
dispute, or other cause beyond its reasonable control, including failures or
fluctuations in electrical power or telecommunications or, in the event that HAT
obtains any services from a third party, the failure of such third party to
provide such services, or the misconduct or negligence of such party in
providing such services. Additionally, in the event the force majeure period
continues for six consecutive months, either party may terminate this Agreement
on written notice given by the terminating party at least five days prior to the
proposed termination date. Also, if during the force majeure period, HAT
outsources to a third party any services provided by it hereunder, the
management fees payable to HAT hereunder shall be adjusted to reflect amounts
paid to such third party.
21. Counterparts. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall constitute an
original, but all such counterparts shall together constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE HEARST CORPORATION
By:/s/ Xxxxxxxx X. Xxxxxxxxx
----------------------------
Name: Xxxxxxxx X. Xxxxxxxxx
Title: Vice President
ARGYLE TELEVISION, INC.
By:/s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer
Assistant Secretary & Treasurer
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