LEASE MANAGEMENT AGREEMENT AND PURCHASE OPTION
EXHIBIT
10.2
This
Agreement is made as of the 15 day of September, 2006, between LATINAMERICA
BROADCASTING INC., a California corporation (“LATTV”) and FUEGO ENTERTAINMENT
MEDIA GROUP, LLC (“FUEGO”).
WHEREAS,
under the terms of a Lease Management Agreement and Purchase Option dated
January 10, 2005., LATTV holds a lease for the operation of XXXX Xxxxxxx X00XX
in San Xxxx, Puerto Rico, LPTV station W36DB in Xxxxx, Puerto Rico and LPTV
station W51DJ in Mayaguez, Puerto Rico (collectively the “Stations”); and
WHEREAS,
FUEGO desires to avail itself of the Stations’ 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.
LATTV
agrees to make the broadcasting facilities available to FUEGO and to allow
FUEGO
to broadcast on the Stations, or cause to be broadcast, FUEGO’s programs
(“FUEGO’s Programming Service”).
2. Term.
This
Agreement shall be for a term of twenty-one (21) months commencing on October
1,
2006 and shall continue until 11:50 pm on June 30, 2008.
3. Lease
Payments.
(a) Payment
Amounts:
FUEGO
hereby agrees to pay LATTV a “Monthly LMA Fee” of $29,500 per month, which
payments shall commence on October 1, 2006.
(b) Due
Dates for Payments: The
Monthly LMA Fee is due and payable in full on the third day of each month.
If
LATTV does not receive the Monthly LMA Fee by the fifth day of each month,
LATTV
shall send by facsimile written notice of non-payment to FUEGO.
(c) LATTV’s Remedies: If
within
ten (10) days from the date on which LATTV’s facsimile is received by FUEGO,
LATTV does not receive payment of the overdue Monthly LMA Fee, LATTV may declare
this Agreement to be in default. In the event FUEGO is declared by the LATTV
to
be in default of this Agreement, LATTV may declare FUEGO’s option to purchase
the Station (the “Option”) terminated and the Option Payment forfeited, and
LATTV may declare this Agreement terminated and cease broadcasting FUEGO’s
Programming Service.
(d)
FUEGO’s
Remedies:
The
occurrence and continuation of any of the following will be deemed an Event
of
Default by LATTV under this Agreement: (i) LATTV fails to perform any of its
covenants, warranties, or agreements contained in this Agreement in any material
respect; or (ii) LATTV breaches any representation or warranty made by it under
this Agreement in any material respect. LATTV 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 LATTV within
such time period, FUEGO may terminate this Agreement, effective immediately
upon
written notice to LATTV, with no further liability to LATTV. In such event,
FUEGO’s sole remedy upon such termination shall be the refund of the Option
Payment and the return of that portion of the Monthly LMA Fee which has not
been
earned on a pro rata basis.
4. Broadcast
in Entirety; Lease Payment Abatement.
LATTV
agrees to broadcast FUEGO’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 xxxxxxxx, and any other proprietary material of any kind or
nature included therein. LATTV shall not be required to accept such of FUEGO’s
Programming Service the content of which it finds objectionable or contrary
to
the public interest or obligations of an FCC licensee. The Monthly LMA Fee
shall
be abated to the extent the condition of the Stations and/or its equipment
prevents FUEGO’s use of the Stations and to the extent of any of FUEGO’s
programming is preempted, rejected or not transmitted as a result of a decision
not to broadcast, by LATTV under paragraph 8 below.
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5. Deposit.
On or
before October 1, 2006, FUEGO shall deliver to LATTV a deposit (the “Deposit”)
of Fifty-Nine Thousand Dollars ($59,000.00), which shall be held by LATTV and
applied to the first and last month’s LMA Fee payments under this
Agreement.
6. Operation
and Maintenance.
LATTV
shall be solely responsible for the operation and maintenance of the Stations
and all of its component broadcast equipment, connections to the broadcast
tower, and compliance with all rules and regulations of the Federal
Communications Commission (“FCC”) and applicable provisions of the
Communications Act of 1934, as amended (“Act”) applicable to the Stations,
including but not limited to those set forth explicitly or by reference in
the
License. LATTV shall not be responsible for installing or maintaining any form
of studio to transmitter link or station feed.
7. Programs.
FUEGO
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.
8. Station
Facilities: Operation of Station.
Throughout the term of this Agreement, LATTV shall make the Stations available
to FUEGO for operation twenty-four hours a day, seven days a week. LATTV
represents, warrants and guarantees that the Stations shall be capable of
transmitting FUEGO’s Programming at all times; that all equipment required for
the regular and reliable broadcast operation of the Stations is present and
is
in good working order. There is no additional device, item, connection, power
source, or equipment required in order for the Stations to operate at full
power
and to function as required hereby.
9. Responsibility
for Employees and Expenses.
FUEGO
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). LATTV
shall provide 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 personnel used by LATTV for the operation of the Stations.
Whenever on the Stations’ premises, all of FUEGO’s personnel shall be subject to
the supervision and the direction of personnel involved in the operation of
the
Stations in compliance with FCC regulations. FUEGO shall pay for all fees to
ASCAP, BMI, and SESAC, and for any other copyright fees attributable to its
programming broadcast on the Stations. At its sole cost and expense, LATTV
shall
provide a broadcast engineer and shall be solely responsible for the
maintenance, repair, and, where reasonably required, the replacement of the
Stations’ transmitter, antenna system, electrical system and cables, so that the
Stations transmit FUEGO’s programming at full power twenty-four hours per day,
seven days per week without interruption or deterioration of signal. FUEGO
shall
be responsible for acquiring and maintaining studios, should FUEGO desire to
have studios, and FUEGO shall be responsible for acquiring and maintaining
stations to transmitter links from such studios, should such links be desired
by
FUEGO. LATTV shall be responsible for the tower rents and the Stations’ electric
bills, including electricity consumed in operating the transmitter and all
other
equipment.
10. Advertising
and Programming Revenues.
FUEGO
shall retain all revenues for the sale of advertising time on the programs
it
delivers to the Stations and may sell such advertising in combination with
the
sale of advertising on any other broadcasting station of its
choosing.
11. Operation
of Station.
Notwithstanding anything to the contrary in this Agreement, LATTV shall have
full authority and power over the operation of the Stations during the term
of
this Agreement. LATTV shall retain control, to be reasonably exercised, over
the
policies, programming and operations of the Stations, 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 LATTV 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 Commonwealth of Puerto Rico, 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. LATTV shall at all times be solely responsible for
meeting all of the FCC’s requirements for maintaining the political inspection
files. FUEGO shall, upon request, provide information to enable LATTV 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 Stations to FUEGO.
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12. Force
Majeure.
Any
failure or impairment of the Stations’ 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 LATTV, shall not
constitute a breach of this Agreement, and LATTV will not be liable to FUEGO
except that the Monthly LMA Fee to LATTV shall be abated during the term of
any
such failure, impairment, or interruption. In the event that the FCC revokes
or
terminates the licenses for the Stations 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 Stations’
licenses except that the remainder of the Deposit shall be promptly returned
to
FUEGO.
13. Right
to Use the Programs.
The
right to use the programs produced or broadcast by FUEGO and to authorize their
use in any manner and in any media whatsoever shall be, and remain, vested
in
FUEGO.
14. Payola.
FUEGO
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 FUEGO 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.
15. Option
to Acquire.
15.1
Purchase
Option.
On or
before Xxxxxxx 0, 0000, XXXXX may purchase, by paying to LATTV the sum of
Seventy-Six Thousand Dollars ($76,000.00) (the “Option Payment”), an option to
acquire all of the permits, licenses, leases, equipment, and other assets of
the
Stations (“the Purchase Option”) for the purchase price of Three Million Eight
Hundred Thousand Dollars ($3,800,000.00) (the “Option Purchase Price”),
inclusive of the Option Payment. Provided FUEGO is not in breach of this
Agreement, FUEGO may exercise the Purchase Option at any time prior to September
30, 2007, on which date at 11:30pm the Purchase Option shall expire (the “Option
Expiration Date”).
15.2 Exercise
of Option.
FUEGO
shall exercise its Option to purchase the Stations by providing written notice
to LATTV of its election to exercise its Option no later than sixty (60) days
prior to the Option Expiration Date. At the time of written notice of its
election to exercise its Option, FUEGO shall pay to LATTV the sum of Seven
Hundred Sixty Thousand Dollars ($760,000) (the “Option Exercise Deposit”) FUEGO
shall also, at the time of written notice of its election to exercise its
Option, provide LATTV with a bank letter of credit or other evidence acceptable
to LATTV of FUEGO’s ability to pay the remainder of the Option Purchase Price.
The Option Exercise Deposit shall be placed in an escrow account to be applied
to the Option Purchase Price at Closing. In the event that FUEGO does not
exercise its Purchase Option, then the Option Payment shall be retained by
LATTV. In the event that FUEGO exercises its Purchase Option, and the FCC
refuses to consent to assignment of the Stations to FUEGO, FUEGO’s Option
Payment and Option Exercise Deposit shall be refunded. In the event that FUEGO
exercises its Purchase Option and fails to close for any reason other than
the
required FCC consent or the inability of LATTV to perform its duties as set
forth in paragraph 15.5 of this Agreement, then the Option Exercise Deposit
shall be returned to FUEGO but the Option Payment shall be retained by
LATTV.
15.3 Assets
to be Transferred.
In the
event FUEGO exercises the Purchase Option, at Closing, LATTV shall assign,
or
cause to be assigned, to FUEGO, all of the following assets of the Stations
on
the Closing Date:
(a)Station
Licenses.
All
licenses, permits and authorizations issued or granted by the Commission for
the
operation of or used in connection with the operation of the Stations
(collectively, “Commission Authorizations”):
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(b) Leased
Real Property.
The
leasehold estate comprising the tower sites and transmitter storage locations
(“Tower Leases”) for the Stations located and identified as
follows:
1.)
Mayaquez: Mountain Union, FCC Identifier 1220141
2.)
San
Xxxx: Global Tower, FCC identifier 1213684
3.)
Xxxxx: Crown Castle, FCC identifier 1202505
(c) Tangible
Personal Property.
All of
LATTV’s rights in and to the fixed and tangible personal property used in the
operation of the Stations, including the physical assets, together with
replacements thereof, and additions and alterations thereto, made between the
date hereof and the Closing Date.
(d) Liabilities
Assumed by FUEGO.
As
further consideration for the transfer of the Assets to FUEGO, FUEGO 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 Leases. FUEGO
shall assume no other liabilities.
All
the
assets and properties being transferred to FUEGO 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 0000 Xxxxxxx, Xxxxx 00000, Xxxxxxx, Xxxxx on the first Tuesday after
final approval by the Commission of assignment of the Stations licenses to
FUEGO; 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 LATTV.
(1)LATTV
shall deliver to FUEGO a Xxxx of Sale substantially in the form of Exhibit
1
(the “Xxxx of Sale”). - to come
(2)LATTV
shall deliver possession of the Assets to FUEGO.
(b) Deliveries
by FUEGO.
FUEGO
shall deliver to LATTV the Option Purchase Price.
15.5Warranties
of LATTV.
LATTV
represents and warrants to FUEGO that:
(a) Corporate
Organization.
LATTV
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of California.
(b) Authority
Relative to this Agreement.
LATTV
has full power and authority to execute, deliver and perform this Agreement
and
to consummate the transactions contemplated hereby, subject to obtaining the
approvals of the FCC required for the assignment of the Commission
Authorizations and the assignment of the Tower Leases.
(c) Exclusive
Operation of Station.
LATTV
has a valid option to acquire the authorized licenses for the Stations, which
licenses were issued by the Commission.
(d) Title
to Assets.
LATTV
has the option to become the owner of, and will have good and indefeasible
title
to, all the Assets, free and clear of all encumbrances, subject to obtaining
the
required consents of the FCC. Upon transfer of the Assets to FUEGO, pursuant
to
this Agreement, FUEGO will have good and indefeasible title to all the Assets,
free and clear of all encumbrances subject to obtaining the required consents
of
the FCC and the consents of the respective landlords regarding the Tower
Leases.
(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.
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(f) Brokerage
Fees.
Neither
LATTV 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.
LATTV shall indemnify and hold harmless FUEGO 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
LATTV or any of its affiliates.
15.6
Warranties
of FUEGO.
FUEGO
represents and warrants to LATTV.
(a) Corporate
Organization.
FUEGO
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of ___________.
(b) Authority
Relative to This Agreement.
FUEGO
has full power and authority to execute, deliver and perform this Agreement
and
to consummate the transactions contemplated hereby. FUEGO has reviewed all
requirements of the FCC for transferees and assignees of FCC broadcast licenses
and is aware of no basis on which the FCC could or would reject the application
to transfer the Commission Authorizations to FUEGO.
(c) Brokerage
Fees.
Neither
FUEGO 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.
FUEGO shall indemnify and hold harmless LATTV 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
FUEGO or any of its affiliates.
15.7 Additional
Agreements.
(a) Third
Party Consents.
LATTV
and FUEGO 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 FUEGO to be desirable to enable LATTV
to
transfer the Assets to FUEGO 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.
FUEGO
will indemnify and hold LATTV 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 FUEGO.
LATTV reserves the right to refuse to broadcast any program containing matter
which is, or in the reasonable opinion of the LATTV 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. FUEGO’s obligation to hold
LATTV harmless against the liabilities specified above shall survive any
termination of this Agreement. LATTV shall indemnify, defend, and hold FUEGO
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) LATTV’s broadcast or programs other
than those provided by FUEGO on the Station; or (ii) any misrepresentation
or
breach of any covenant, warranty, or agreement of LATTV in this
Agreement.
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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.
FUEGO’s
failure to timely pay, to LATTV, 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.
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
LATTV: Latin
America Broadcasting, Inc.
Attn: X.
X.
Xxxxxxxxxxx
0000
Xxxxxxx
Xxxxx
00000
Xxxxxxx
Xxxxx, 00000
Fax:
000-000-0000
Email:
xxxxxxxxxxxx@xxxxx.xxx
If
to
FUEGO: Fuego
Entertainment Media Group, LLC
Attn:
Xxxx Xxxxxx
00000
XX
00xx
Xxxxx
Xxxxx,
Xxxxxxx, 00000
Office:
000 000-0000
Fax:
000-000-0000
18. 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
LATTV nor FUEGO may assign this Agreement without the prior written consent
of
the other party.
19.
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.
20. 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.
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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.
LATTV
and FUEGO are not, and shall not be deemed to be, agents, partners, or
representatives of each other.
[Signature
page follows.]
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
LATTV: LATIN
AMERICA BROADCASTING, INC.
A
California Corporation
By:
/s/ X.X. Xxxxxxxxxxx
X.X.
Xxxxxxxxxxx
Title: President & CEO
Title: President & CEO
FUEGO:
FUEGO
ENTERTAINMENTMEDIAGROP, LLC
By:
/s/ Xxxx X Xxxxxx
Xxxx
X Xxxxxx
Title:
President & CEO
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