Exhibit 10.47
THEATER MANAGEMENT AGREEMENT
This theater management agreement (the "AGREEMENT") is entered into effective as
of the 1st day of January 2002, by and between Liberty Theaters, Inc., a New
York corporation ("OWNER"), and OBI, LLC. ("MANAGER") with reference to the
following facts:
WHEREAS, Owner is in the business of owning and, through its subsidiaries
(the "OPERATING SUBSIDIARIES"), operating Off-Broadway style live theaters
in Manhattan and Chicago,
WHEREAS, Manager is in the business of providing various executive
management, booking and public relations services, and
WHEREAS, Owner desires to retain Manager to perform such executive
management, booking and public relations services for the benefit of the
theaters owned by the Owner and operated by the Operating Subsidiaries,
the parties hereto, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, do hereby agree as follows:
1. DEFINITIONS. The following terms have the meanings set forth below:
MANAGEMENT SERVICES means and includes the following services:
(a) The executive management of each of the Theaters. The Theaters are
currently managed by separate management companies owned by the Owner,
which are responsible for the day-to-day operations of the Theaters and
which employ all personnel used in connection with the operation of the
Theaters, including, without limitation, ushers, maintenance employees,
concession stand employees, and box office employees. Manager will be
responsible for the executive supervision of these employees. A designee
of the Manager, acceptable to the Owner, will serve at the pleasure of the
Board of Directors of the respective Operating Subsidiaries, as the Chief
Executive Officer of each of the Operating Subsidiaries, and at the
pleasure of the Board of Directors of the Owner, as the President of the
Owner. This individual (the "DESIGNATED OBI EXECUTIVE ") will receive no
compensation or other employee benefits
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for serving in such capacities, other than such compensation as he or she
may receive from the Manager, and will not be deemed to be an employee of
the Owner, or any of its subsidiaries, for any purpose. This individual
will initially be Ms. Margaret Cotter.
(b) The negotiation of terms with respect to and the recommendation to the
Owner of productions for the Theaters and for the use of the Theaters for
ancillary revenue generation purposes;
(c) The publicity of the Theaters and the maintenance of appropriate
community relations between the Theaters and their neighbors;
(d) The oversight of the general condition and repair of the Theaters,
including the making of recommendations to the Owner with respect to any
needed maintenance and repair of the Theaters and, upon the direction of
the Owner, the retention and oversight of appropriate persons to affect
such maintenance and to make such repairs as may be so approved by the
Owner;
(e) The preparation, in conjunction with the Owner, of an annual operating
budget for each of the Theaters; and
(f) Such other duties as the parties may from time to time determine, and
memorialize in a writing signed by both parties to this Agreement.
PRODUCTION OCCUPANCY PERIOD has the meaning set forth in clause 3.1(b), below.
SERVICE PACKAGE PERIOD has the meaning set forth in clause 3.1(a), below.
TERM. This Agreement will have an initial term of through and including December
31, 2003, and thereafter, unless earlier terminated pursuant to the provisions
of Section 4, will automatically renew for additional twelve month terms,
[unless notice to terminate is given by either party to the other not less than
six months prior to the expiration of the then existing term of such party's
determination not to renew this Agreement.]
THEATERS means the Minetta Lane, Orpheum, and Union Square Theaters located in
Manhattan and the Royal George Theater Complex in Chicago, and such additional
theaters as the parties may specify from time to time by amendment to this
agreement.
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THEATER CASH FLOW means the earnings before income taxes, depreciation and
amortization from any particular theater (or in the case of the Royal George,
from the entire theater complex), calculated in accordance with generally
accepted accounting principles, applied on a consistent basis, and before
deduction of the incentive fee applicable to that theater or theater complex.
Notwithstanding the above, in the case of any capital expenditures with respect
to any particular theatre made during the term of this Agreement, Theatre Cash
Flow will be determined after deduction of the cost of the depreciation of such
capital expenditure as calculated for book purposes in accordance with generally
accepted accounting principles consistently applied. Furthermore, Theater Cash
Flow for each Theater will also include all profits and losses made by the Owner
(or any one or more of its corporate affiliates) in its capacity as the
"producer" or "financier" of any play appearing in such Theater, calculated as
follows;
- First, 100% of cash flow paid to the Owner and/or such one or more
affiliates will be applied against the Owner's investment in such
play, until such investment has been fully recouped.
- Thereafter, 100% of cash flow paid to Owner and/or such one or more
affiliates will be treated as Theater Cash Flow.
- In the event that the Owner and/or such one or more affiliates, at
the time of the closing of the play, has not recouped its
investment, such loss will be deducted from Theater Cash flow for
the year in which such show closes.
2. RETENTION OF MANAGER.
2.1. Performance of Management Services: Owner hereby retains the Manager,
as an independent contractor, to perform and Manager hereby covenants to
perform, again as an independent contractor, the Management Services for
the Theaters for the Term of this Agreement, pursuant to the terms and
provisions set forth in this Agreement. Manager agrees, in performing the
Management Services, to act in good faith in the best interests of the
Owner as such interests are reasonably understood by the Manager, and to
use the same degree of care and to exercise the same level of loyalty as
would be required by an executive officer of a corporation organized under
the laws of the State of Delaware.
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2.2. Key Employees: It is acknowledged and agreed that Margaret Cotter is
a Key Employees, and that Manager will make Ms. Cotter available to the
Company on a full time basis and that Ms. Cotter will serve, at the
pleasure of the Owner, as the Designated OBI Executive.
2.3. Exclusivity: It is acknowledged and agreed that Manager will serve on
an exclusive basis for the areas of Metropolitan New York and Chicago.
Manager is free to represent other theater interests in other areas.
However, in the event that Manager learns of any opportunities for the
acquisition of live theaters in other areas, it will promptly advise the
Owner of such fact. Further, Manager will keep Owner advised as to the
identities of any other theaters for which it may from time be performing
services. This provision will not be interpreted from preventing Manager,
or its employees, from engaging in other aspects of the live theater
business, including, by way of example, the production of plays.
2.4. Confidentiality: Manager agrees that all information it obtains in
the course of its performance of services under this Agreement and which
is not already or at such time otherwise publicly available will be
maintained in confidence by Manager and its employees to the same extent
as though such information were the confidential information of the
Manager.
2.5. Participation in Productions: Except to the extent of its right to
participate in Theater Cash Flow, as provided in this Agreement, neither
the Manager, nor any of its personnel or affiliates, will make any
investment in, or participate in the profits or in the cash flow or in any
other benefits from any production or person utilizing the Theaters,
without the prior written approval of the Owner.
2.6. Bank Accounts: All revenues generated by the Theaters shall be
deposited as directed by the Owner in bank accounts maintained in the name
of and for the benefit of the Owner. The Operating Subsidiaries and
Manager will be paid directly by the Owner. The Owner will have complete
discretion over the signatories to such accounts.
2.7. Nature of Relationship Between the Parties: The parties acknowledge
and agree that the services being performed by Manager hereunder are those
of an independent contractor, that the relationship between the parties is
not that of a partnership or joint venture, and that the Manager shall not
hold itself out as having any power or authority to
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bind the Owner or any of the Operating Subsidiaries or any of the
Theaters. All agreements pertaining to the use or occupancy of any of the
Theaters or the provision of any services to or for the benefit of the
Owner or any of the Theaters must be signed, and will only be valid if
signed or otherwise authorized, by an executive officer designated by the
Owner from time to time (the "Designated Owner Executive") or by another
duly authorized officer of the Owner or the Operating Subsidiary, as the
case may be. The Designated Owner Executive shall initially be James J.
Cotter. Nothing in this Agreement shall be deemed to grant to the Manager
any rights with respect to or interest in the Theater or in any contract
or agreement relating to the Theater, and nothing in this Agreement shall
be in any way binding upon any successor in interest to any one or more of
the Theaters.
3. COMPENSATION. In consideration of the performance of the Management
Services, the Owner will pay to the Manager the following amounts:
3.1. Orpheum Theater:
(a) A weekly pay package of $900 per week, to be adjusted on a pro
rata basis for any partial week, for each week, or portion thereof,
to the extent that the production leasing the Theater pays a weekly
service package to the Theater sufficient to cover (i) such amount
plus (ii) wages and benefits paid to persons employed at the Theater
with respect to such period (the "SERVICE PACKAGE PERIOD").
(b) A monthly pay package of $1,578 per month, to be adjusted on a
pro rata basis for any partial month, for each month, or portion
thereof, that a production is in occupancy of the Theater, including
the load-in, rehearsal, performance and load-out periods (the
"PRODUCTION OCCUPANCY PERIOD").
(c) An incentive fee equal to 20% of the Theater Cash Flow, if any,
after a breakpoint of $208,686.
3.2. Union Square Theater:
(a) A weekly package of $900 per week, to be adjusted on a pro rata
basis for any partial week, during the Service Package Period to the
extent that the production leasing the Theater pays a weekly
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service package to the Theater sufficient to cover (i) such amount
plus (ii) wages and benefits paid to persons employed at the Theater
with respect to such period.
(b) A monthly package of $2,186 per week, to be adjusted on a pro
rata basis for any partial month, during the Production Occupancy
Period.
(c) An incentive fee equal to 20% of the Theater Cash Flow, after a
breakpoint of $307,144.
3.3. Minetta Lane Theater:
(a) A weekly package of $900 per week, to be adjusted on a pro rata
basis for any partial week, during the Service Package Period to the
extent that the production leasing the Theater pays a weekly service
package to the Theater sufficient to cover (i) such amount plus (ii)
wages and benefits paid to persons employed at the Theater with
respect to such period.
(b) A monthly package of $2,294 per month, to be adjusted on a pro
rata basis for any partial month, during the Production Occupancy
Period.
(c) An incentive fee equal to 20% of the Theater Cash Flow, after a
breakpoint of $302,863.
3.4. Royal George Theater Complex.
(a) An annual base fee of $35,000 (payable in arrears in equal
monthly installments).
(b) An incentive fee equal to 20% of the Theater Cash Flow, if any,
after a breakpoint of $300,000.
(c) Manager will be entitled to reimbursement for the reasonable
costs of transportation between Chicago and New York and meals and
lodging in Chicago, to the extent such costs are incurred in
connection with the execution of Manager's duties and
responsibilities with respect to the Royal George Theater Complex.
Reimbursed costs must be in accordance with the Owner's travel
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reimbursement policies, as the same may be amended form time to
time, upon reasonable notice to the Manager. A copy of the Owners
current travel reimbursement policies has been previously provided
to the Manager.
3.5. Certain Provisions Relating to Payment of Incentive Compensation:
(a) Incentive Compensation shall be calculated in all cases on a
calendar year basis.
(b) Owner may, but shall be under no obligation to, allow for
advances against such Incentive Compensation, in its discretion.
(c) All weekly and monthly packages and all annual base fees, and in
the case of any incentive fee, the amount of the breakpoint, will be
adjusted annually to reflect any increase, in the consumer price
index, all urban consumers, for the city in which the Theater in
question is located; but only to the extent that the license fees
charged with respect to such one or more Theaters have been likewise
adjusted. The first adjustment will be made effective January 1,
2003, and shall be adjusted, (i) with respect to the New York
Theaters, by the difference between the Northeast Urban Consumer
Price Index between the period November 30, 2000 and November 30,
2002 and (ii) with respect to the Chicago Theater, by the difference
between the Midwest Urban Consumer Price Index between the period
November 30, 2000 and November 30, 2002. Thereafter, subject to the
limitations specified above, such amounts will be increased annually
by the increase in such index between the November 30 immediately
prior to and immediately following the date of the last adjustment.
3.6. Expenses: Manager will be responsible for all of Manager's general
and administrative costs and expenses with respect to the booking of plays
into the Theaters. Direct costs related to the operation of the Theaters
will be treated as direct expenses of and be paid directly by the relevant
Operating Subsidiary or charged back to the relevant Operating Subsidiary
against delivery of appropriate documentation.
3.7 Use of Village East Office Facilities: During the term of this
Agreement, and so long as such facilities are not required for other use
by the Owner or its affiliates, Manager will be permitted to make use,
without
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charge, of the office facilities located at the Village East Cinemas.
Owner agrees, so long as Manager maintains offices at the Village East
Office Facilities, to reimburse to Manager an amount equal to 50% of the
salary and other employee benefits of one full-time administrative
employee to be employed by Manager, and officed at the Village East Office
Facilities, provided that not less than 50% of the time of such individual
is dedicated specifically to the management of the Theaters and that the
costs of such individual are mutually agreeable to the parties.
4. TERMINATION. This Agreement can be terminated at any time, as follows:
4.1. Termination by the Owner:
(a) For Cause: This Agreement may be terminated at any time by the
Owner for cause; provided, however, that in the event of any cause
not exposing the Owner, in its determination, to material loss,
damage or liability, Owner shall allow Manager a reasonable period
of time to cure such default, following notice and demand for cure.
No such notice or cure period need be allowed, however, for
persistent or repetitive breach. Such termination will be effective
upon the date specified by the Owner in its notice of termination.
(b) Without Cause: This Agreement also may be terminated at any time
by the Owner without cause. Such termination will be effective upon
the date specified by the Owner in its notice of termination.
However, any such termination without cause will not relieve the
Owner of its obligations under Section 3.1 through 3.6 of this
Agreement with respect to that period of time between the effective
date of such termination and the date on which this Agreement would
have terminated had either party timely exercised its right to
terminate the contract as of the end of its initial or any then
applicable renewal term. The amounts payable under Section 3 of this
Agreement will be paid on a monthly basis, for the remainder of such
initial or renewal term, as the case may be.
(c) In the event of the sale of a Theater: Notwithstanding any other
provision of this Agreement, this Agreement may be terminated on 60
days notice with respect to any Theater which is sold to a third
party.
(d) In the event of any termination by the Owner without cause,
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or any failure of the Owner to renew this Agreement, other than for
cause, Manager will be entitled to continue to receive the incentive
fees set out in Section 3 with respect to any production booked into
a Theater during the term of this Agreement.
4.2. Termination by Manager:
(a) For Cause: This Agreement may be terminated at any time by the
Manager for cause, provided, however, that in the event of
immaterial breach, Manager shall allow Owner a reasonable period of
time to cure such default, following notice and demand for cure. No
such notice or cure period need be allowed, however, for persistent
or repetitive breach. Such termination will be effective upon the
date specified by the Manager in its notice of termination.
(b) Without Cause: Manager will have no right to terminate this
Agreement without cause, except on not less that ninety (90) day's
prior written notice, provided that Owner may at any time after the
receipt of any such notice immediately terminate this Agreement
without further liability to the Manager.
4.3. Effect of Termination: No termination of this Agreement will relieve
any party from liability to the other party (a)for antecedent breach or (b)
under any indemnity provided for under this Agreement, to the extent that the
act or omission giving rise to such claim of indemnity occurred prior to the
date of such termination.
5. INDEMNITY.
5.1. Indemnity by Owner:
(a) Insurance: Owner will acquire and maintain in full force and
effect the insurance described in Schedule 5 to this Agreement (the
"INSURANCE POLICIES"), and will maintain Manager and its, owners,
officers, directors and employees (collectively "the COVERED
PERSONS"), as additional insureds under such policies, with
provisions for waiver of subrogation. Manager will not engage in any
conduct or course of action, or to do or refrain from doing any act,
and will not permit any persons under its supervision or control to
engage in any conduct or course of action, or to do or refrain from
doing any act, which creates a risk of increase in the cost of any
one or more
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of the Insurance Policies or the cancellation of any one or more of
the Insurance Policies.
(b) Indemnity: To the extent of any liability not covered by the
Insurance Policies, which is the result of any act or omission on
the part of the Owner, its owners, officers, directors, employees,
agents or contractors ("OWNERS' AGENTS"), Owner will indemnify and
hold the Covered Persons harmless against any such liability, except
to the extent that such liability was the result o the default,
negligence or willful misconduct of such Covered Person.
(c) Indemnity Procedures: Manager will give the Owner prompt notice
of any claim for indemnity under this Agreement (provided that the
failure to give such notice on a timely basis will not relieve the
Owner of its obligations under this section in the absence of actual
prejudice resulting from such delay).
(d) Owner, at its election, will be entitled to provide a defense
for any Covered Person(s) claiming a right to indemnity under this
Agreement, and by providing such defense will not be deemed to have
conceded any obligation on its part to indemnify such person with
respect to such claim, so long as the Owner gives notice in writing
to such person of such reservation of rights.
5.2. Indemnity by Manager: Manager will indemnify Owner against any and
all liabilities resulting from its breach of this Agreement.
6. GENERAL PROVISIONS.
6.1. Choice of Law; Attorney's Fees. This Agreement shall be interpreted
in accordance with the Laws of the State of New York, as those laws
pertain to contracts made and to be performed entirely within such state.
In the event of any litigation between the parties with respect to this
Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys fees.
6.2. Assignment. The rights and obligations of the parties to this
Agreement are not assignable.
6.3. Notices: All notices required or permitted to be given under this
Agreement shall be in writing, and shall be deemed given (a) when
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personally delivered to the other party, or (2) two business days after
deposit, delivery fees prepaid, with a nationally recognized courier
service, or (c) five business day after deposit in the US Mail if sent
certified or registered mail, postage prepaid, or (d) immediately upon
receipt by the other party if sent by fax or by E-Mail, provided that the
transmitting party receives a verification of receipt of such fax or
E-Mail transmission. Any such notices shall be directed as follows:
If to Owner:
Liberty Theaters, Inc.
550 S. Hope Street
Los Angeles, California 90071
Attention: Chief Financial Officer
If to Manager
OBI, LLC
189 Second Avenue, Suite 3S
New York, New York 10003
Provided, that the above addresses may be changed at any time by such
party, pursuant to notice given pursuant to this section.
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6.4. Counterparts: This Agreement may be signed in counterparts.
6.5. No Third Party Beneficiaries: There are no third party beneficiaries
to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be entered
into as of the date fist set forth above.
LIBERTY THEATERS, INC., OBI, LLC
By: /s/Andrzej Matyczynski By: /s/ Margaret Cotter
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Its: Chief Financial Officer/Treasurer Its: President
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