SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 26, 1997
0-14871
(Commission File Number)
ML MEDIA PARTNERS, L.P.
(Exact name of registrant as specified in its governing
Securities registered pursuant to Section 12(b) of the Act:
Delaware
(State or other jurisdiction of organization)
13-3321085
(IRS Employer Identification No.)
World Financial Center
South Tower - 14th Floor
New York, New York 10080-6114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 236-6577
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in a definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Part I.
Item 1. Business.
Formation
ML Media Partners, L.P. (the "Registrant" or the "Partnership"),
a Delaware limited partnership, was organized February 1, 1985.
Media Management Partners, a New York general partnership (the
"General Partner"), is Registrant's sole general partner. The
General Partner is a joint venture, organized as a general
partnership under New York law, between RP Media Management
("RPMM") and ML Media Management Inc. ("MLMM"). MLMM is a
Delaware corporation and an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc. and an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). RPMM is
organized as a general partnership under New York law, consisting
of The Elton H. Rule Company and IMP Media Management Inc. As a
result of the death of Elton H. Rule, the owner of The Elton H.
Rule Company, the general partner interest of the Elton H. Rule
Company may either be redeemed or acquired by a company
controlled by I. Martin Pompadur. The General Partner was formed
for the purpose of acting as general partner of Registrant.
Registrant was formed to acquire, finance, hold, develop,
improve, maintain, operate, lease, sell, exchange, dispose of and
otherwise invest in and deal with media businesses and direct and
indirect interests therein.
On February 4, 1986, Registrant commenced the offering through
Merrill Lynch of up to 250,000 units of limited partnership
interest ("Units") at $1,000 per Unit. Registrant held four
closings of Units; the first for subscriptions accepted prior to
May 14, 1986 representing 144,990 Units aggregating $144,990,000;
the second for subscriptions accepted thereafter and prior to
October 9, 1986 representing 21,540 Units aggregating
$21,540,000; the third for subscriptions accepted thereafter and
prior to November 18, 1986 representing 6,334 Units aggregating
$6,334,000; and the fourth and final closing of Units for
subscriptions accepted thereafter and prior to March 2, 1987
representing 15,130 Units aggregating $15,130,000. At these
closings, including the initial limited partner capital
contribution, subscriptions for an aggregate of 187,994.1 Units
representing the aggregate capital contributions of $187,994,100
were accepted. During 1989, the initial limited partner's
capital contribution of $100 was returned.
The Registration Statement relating to the offering was filed on
December 19, 1985 pursuant to the Securities Act of 1933 under
Registration Statement No. 33-2290 and was declared effective on
February 3, 1986 and amendments thereto became effective on
September 18, 1986, November 4, 1986 and on December 12, 1986
(such Registration Statement, as amended from and after each such
date, the "Registration Statement").
Media Properties
As of December 26, 1997, Registrant's investments in media
properties consist of:
a 50% interest in a joint venture which owns two cable
television systems in Puerto Rico and an AM and FM radio station
combination and a background music service in Puerto Rico. In
October 1997, a sales agreement to sell the radio station
combination and the background music service was entered into
(see further discussion below);
an AM and FM radio station combination in Bridgeport,
Connecticut;
a corporation which owns an FM radio station in Cleveland,
Ohio; and
an AM and FM radio station combination in Anaheim,
California.
Registrant has completed the sale of the following media
properties:
two radio stations, one located in Tulsa, Oklahoma and the
other in Jacksonville, Florida, were sold on July 31, 1990;
the Universal Cable systems were sold on July 8, 1992;
an AM and FM radio station combination in Indianapolis,
Indiana was sold on October 1, 1993;
two VHF television stations, one located in Lafayette,
Louisiana and the other in Rockford, Illinois, were sold on
September 30, 1995 and July 31, 1995, respectively; and
four cable television systems located in the California
communities of Anaheim, Hermosa Beach/Manhattan Beach, Rohnert
Park/Yountville, and Fairfield were sold on May 31, 1996.
Puerto Rico Investments
Cable Television Investments
Pursuant to the management agreement and joint venture agreement
dated December 16, 1986 (the "Joint Venture Agreement"), as
amended and restated, between Registrant and Century
Communications Corp. ("Century"), the parties formed a joint
venture under New York law, Century-ML Cable Venture (the
"Venture"), in which each has a 50% ownership interest. Century
is a publicly held corporation unaffiliated with the General
Partner or any of its affiliates. On December 16, 1986 the
Venture, through its wholly-owned subsidiary corporation, Century-
ML Cable Corporation ("C-ML Cable Corp."), purchased all of the
stock of Cable Television Company of Greater San Juan, Inc. ("San
Juan Cable"), and liquidated San Juan Cable into C-ML Cable Corp.
C-ML Cable Corp., as successor to San Juan Cable, is the operator
of the largest cable television system in Puerto Rico.
On September 24, 1987, the Venture acquired all of the assets of
Community Cable-Vision of Puerto Rico, Inc., Community
Cablevision of Puerto Rico Associates, and Community Cablevision
Incorporated (collectively, the "Community Companies"), which
consisted of a cable television system serving the communities of
Catano, Toa Baja and Toa Alta, Puerto Rico, which are contiguous
to San Juan Cable.
C-ML Cable Corp. and the Community Companies are herein referred
to as C-ML Cable ("C-ML Cable"). As of December 26, 1997, C-ML
Cable serves 123,990 basic subscribers, passes 284,450 homes and
consists of approximately 1,835 linear miles of cable plant.
During 1997, Registrant's share of the net revenues of C-ML Cable
totaled $29,404,870 (55.2% of operating revenues of Registrant).
During 1996, Registrant's share of the net revenues of C-ML Cable
totaled $26,342,927 (36.7% of operating revenues of Registrant).
During 1995, Registrant's share of the net revenues of C-ML Cable
totaled $24,126,675 (22.1% of operating revenues of Registrant).
Radio Investments
On February 15, 1989, Registrant and Century entered into a
Management Agreement and Joint Venture Agreement whereby a new
joint venture, Century-ML Radio Venture ("C-ML Radio"), was
formed under New York law. Responsibility for the management of
radio stations to be acquired by C-ML Radio was assumed by
Registrant.
On March 10, 1989, C-ML Radio acquired all of the issued and
outstanding stock of Acosta Broadcasting Corporation ("Acosta"),
Fidelity Broadcasting Corporation ("Fidelity"), and Broadcasting
and Background Systems Consultants Corporation ("BBSC"); all
located in San Juan, Puerto Rico. The purchase price for the
stock was approximately $7.8 million. At the time of
acquisition, Acosta owned radio stations WUNO-AM and Noti Uno
News, Fidelity owned radio station WFID-FM, and BBSC owned
Beautiful Music Services, all serving various communities within
Puerto Rico.
In February, 1990, C-ML Radio acquired the assets of Radio
Ambiente Musical Puerto Rico, Inc. ("RAM"), a background music
service. The purchase price was approximately $200,000 and was
funded with cash generated by C-ML Radio. The operations of RAM
were consolidated into those of BBSC.
Effective January 1, 1994, all of the assets of C-ML Radio were
transferred to the Venture in exchange for the assumption by the
Venture of all the obligations of C-ML Radio and the issuance to
Century and Registrant by the Venture of new certificates
evidencing partnership interests of 50% and 50%, respectively.
The transfer was made pursuant to a Transfer of Assets and
Assumption of Liabilities Agreement. At the time of this
transfer, Registrant and Century entered into an amended and
restated management agreement and joint venture agreement (the
"Revised Joint Venture Agreement") governing the affairs of the
Venture as revised.
Under the terms of the Revised Joint Venture Agreement, Century
is responsible for the day-to-day operations of C-ML Cable and
Registrant is responsible for the day-to-day operations of C-ML
Radio. For providing services of this kind, Century is entitled
to receive annual compensation of 5% of C-ML Cable's net gross
revenues (defined as gross revenues from all sources less monies
paid to suppliers of pay TV product, e.g., HBO, Cinemax, Disney
and Showtime) and Registrant is entitled to receive annual
compensation of 5% of C-ML Radio's gross revenues (after agency
commissions, rebates or discounts and excluding revenues from
barter transactions). All significant policy decisions relating
to the Venture, the operation of C-ML Cable and the operation of
C-ML Radio however, will only be made upon the concurrence of
both Registrant and Century. Registrant may require a sale of
the assets and business of C-ML Cable or C-ML Radio at any time.
If Registrant proposes such a sale, Registrant must first offer
Century the right to purchase Registrant's 50% interest in such
assets at 50% of the total fair market value of such assets at
such time as determined by independent appraisal. If Century
elects not to purchase Registrant's 50% interest, Registrant may
elect to purchase Century's interest in such assets on similar
terms.
In October 1997, the Venture entered into a sales agreement to
sell C-ML Radio for approximately $11.5 million, subject to
closing adjustments. In addition, in connection with such sales
agreement, Registrant entered into a Local Marketing Agreement,
effective as of October 1, 1997, which, subject to compliance
with the rules of the Federal Communications Commission
("Commission" or "FCC"), allows the buyer to program the station.
Since there are numerous conditions to closing, including FCC
approval, there can be no assurance that the sale will be
consummated as contemplated and without consummation the Local
Marketing Agreement will be cancelled. Registrant anticipates
receiving no proceeds from any resulting sale since any sale
proceeds received from the sale of C-ML Radio are required to be
applied against the aggregate outstanding senior indebtedness
which jointly finances C-ML Radio and C-ML Cable.
During 1997, Registrant's share of the net revenues of C-ML Radio
totaled $2,051,576 (3.9% of operating revenues of Registrant).
During 1996, Registrant's share of the net revenues of C-ML Radio
totaled $2,951,028 (4.1% of operating revenues of Registrant).
During 1995, Registrant's share of the net revenues of C-ML Radio
totaled $2,772,238 (2.5% of operating revenues of Registrant).
California Cable Systems
In December, 1986, ML California Cable Corporation ("ML
California"), a wholly-owned subsidiary of Registrant, entered
into an agreement with SCIPSCO, Inc. ("SCIPSCO"), a wholly-owned
subsidiary of Storer Communications, Inc. for the acquisition by
ML California of four cable television systems servicing the
California communities of Anaheim, Hermosa Beach/Manhattan Beach,
Rohnert Park/Yountville, and Fairfield and surrounding areas.
The acquisition was completed on December 23, 1986 with the
purchase by ML California of all of the stock of four
subsidiaries of SCIPSCO which at closing owned all the assets of
the California cable television systems. The term "California
Cable Systems" or "California Cable" as used herein means either
the cable systems or the owning entities, as the context
requires.
On December 30, 1986, ML California was liquidated into
Registrant and transferred all of its assets, except its FCC
licenses, subject to its liabilities, to Registrant. The
licenses were transferred to ML California Associates, a
partnership formed between Registrant and the General Partner for
the purpose of holding the licenses in which Registrant is
Managing General Partner and 99.99% equity holder.
On November 28, 1994, Registrant entered into an agreement (the
"Asset Purchase Agreement") with Century to sell to Century
substantially all of the assets used in Registrant's California
Cable Systems. On May 31, 1996, Registrant consummated such sale
pursuant to the terms of the Asset Purchase Agreement. The base
purchase price for the California Cable Systems was $286 million,
subject to certain adjustments including an operating cash flow,
as well as, a working capital adjustment, as provided in the
Asset Purchase Agreement.
On August 15, 1996, Registrant made a cash distribution to
limited partners of record on May 31, 1996, of approximately
$108.1 million ($575 per Unit) and approximately $1.1 million to
its General Partner, representing its 1% share, from net
distributable sales proceeds from the sale of the California
Cable Systems.
Pursuant to the Asset Purchase Agreement and a letter agreement,
entered into by Registrant and Century at closing, Registrant
deposited $5 million into an indemnity escrow account pending the
resolution of certain rate regulation and other matters relating
to charges by Registrant to its subscribers for cable service.
On June 3, 1997, Registrant received the release of such escrowed
proceeds ($5 million and approximately $300,000 of interest
earned thereon) generated from the sale of the California Cable
Systems. This release of escrowed proceeds, after accounting for
certain expenses of Registrant, was included in a cash
distribution made to partners on November 25, 1997, in accordance
with the terms of the Partnership Agreement.
In addition, upon closing of the sale of the California Cable
Systems, Registrant set aside approximately $40.7 million in a
cash reserve to cover operating liabilities, current litigation,
and litigation contingencies relating to the California Cable
Systems' operations prior to and resulting from their sale, as
well as a potential purchase price adjustment. In accordance
with the terms of the Partnership Agreement, any amounts which
may be available for distribution from any unused cash reserves,
after accounting for certain other expenses of Registrant
including certain expenses incurred after May 31, 1996, will be
distributed to partners of record as of the date such unused
reserves are released, when Registrant determines such reserves
are no longer necessary, rather than to the partners of record on
May 31, 1996, the date of the sale.
Effective August 14, 1997, reserves in the amount of
approximately $13.2 million were released and, after accounting
for certain expenses of Registrant, in accordance with the terms
of the Partnership Agreement, were included in the cash
distribution that was distributed to partners on November 25,
1997. As of December 26, 1997, Registrant has approximately
$23.3 million remaining in cash reserves to cover operating
liabilities, current litigation, and litigation contingencies
relating to the California Cable Systems prior to and resulting
from their sale.
Upon closing, a portion of the sales proceeds of the California
Cable Systems were allocated to pay approximately $9.2 million to
the General Partner for accrued management fees and expenses as
of the date of sale; of this amount, approximately $7.6 million
was paid through December 26, 1997. In addition, upon the August
14, 1997 release of reserves, a portion of the reserve was
allocated to pay approximately $3.5 million to the General
Partner for accrued management fees and expenses as of such date.
During 1996, until its sale on May 31, 1996, California Cable
Systems generated operating revenues of $24,085,663 (33.5% of
operating revenues of Registrant).
During 1995, California Cable Systems generated operating
revenues of $57,115,752 (52.3% of operating revenues of
Registrant).
WREX Television Station
On April 29, 1987, Registrant entered into an acquisition
agreement with Gilmore Broadcasting Corporation, a Delaware
corporation ("Gilmore"), for the acquisition by Registrant of
substantially all the assets of television station WREX-TV,
Rockford, Illinois ("WREX-TV" or "WREX"). The acquisition was
consummated on August 31, 1987 for $18 million.
On July 31, 1995, Registrant completed the sale to Quincy
Newspapers, Inc. ("Quincy") of substantially all of the assets
used in the operations of Registrant's television station WREX,
other than cash and accounts receivable. The purchase price for
the assets was approximately $18.4 million, subject to certain
adjustments. A reserve of approximately $2.3 million was
established to cover certain purchase price adjustments and
expenses and liabilities relating to WREX, and the balance of
approximately $16.1 million was applied to repay a portion of the
bank indebtedness secured by the assets of WREX and KATC (as
defined below). Quincy did not assume certain liabilities of
WREX and Registrant will remain liable for such liabilities. On
the sale of WREX, Registrant recognized a gain for financial
reporting purposes of approximately $8.8 million in 1995.
Effective August 14, 1997 approximately $1.8 million, a portion
of the reserve established at the time of the WREX-TV sale, was
released. In accordance with the terms of the Partnership
Agreement, such released reserve amounts, after accounting for
certain expenses of Registrant, were included in the cash
distribution made to partners on November 25, 1997. In addition,
effective December 26, 1997 the remaining reserve established at
the time of the WREX sale of approximately $161,000 was released.
Thus, during 1997, Registrant recognized a gain on sale of WREX
of approximately $2.0 million resulting from the release of
reserves and reversal of previous accruals.
During 1995, until its sale on July 31, 1995, WREX generated
operating revenues of $3,053,336 (2.8% of operating revenues of
Registrant).
KATC Television Station
On September 17, 1986, Registrant entered into an acquisition
agreement with Loyola University, a Louisiana non-profit
corporation ("Loyola"), for the acquisition by Registrant of
substantially all the assets of television station KATC-TV,
Lafayette Louisiana ("KATC-TV" or "KATC"). The acquisition was
completed on February 2, 1987 for a purchase price of
approximately $26.7 million.
On September 30, 1995, Registrant completed the sale to KATC
Communications, Inc. (the "KATC Buyer") of substantially all of
the assets used in the operations of Registrant's television
station KATC, other than cash and accounts receivable. The KATC
Buyer did not assume certain liabilities of KATC and Registrant
will remain liable for such liabilities. The purchase price for
the assets was $24.5 million. From the proceeds of the sale,
approximately $6.3 million was applied to repay in full the
remaining bank indebtedness secured by the assets of KATC and
WREX; a reserve of approximately $2.0 million was established to
cover certain purchase price adjustments and expenses and
liabilities relating to KATC; $1.0 million was deposited into an
indemnity escrow account to secure Registrant's indemnification
obligations to the KATC Buyer; approximately $7.6 million was
applied to pay a portion of accrued fees and expenses owed to the
General Partner; and the remaining amount of approximately $7.6
million ($40 per Unit) was distributed to partners in December,
1995. Registrant recognized a gain for financial reporting
purposes of approximately $14.0 million on the sale of KATC in
1995.
On June 24, 1997, Registrant received the release of escrowed
proceeds of $1.0 million (and approximately $100,000 of interest
earned thereon) generated from the sale of KATC. In addition,
effective August 14, 1997, approximately $1.5 million, a portion
of the reserve established at the time of the KATC sale, was
released. In accordance with the terms of the Partnership
Agreement, the amount of such released reserve and escrowed
proceeds, after accounting for certain expenses of Registrant,
were included in the cash distribution made to partners on
November 25, 1997. In addition, effective December 26, 1997, the
remaining reserve established at the time of the KATC sale of
approximately $218,000 was released. Thus, during 1997,
Registrant recognized a gain on sale of KATC of approximately
$1.7 million resulting from the release of reserves and reversal
of previous accruals.
During 1995, until its sale on September 30, 1995, KATC generated
operating revenues of $5,263,423 (4.8% of operating revenues of
Registrant).
WEBE-FM Radio
On August 20, 1987, Registrant entered into an Asset Purchase
Agreement with 108 Radio Company, L.P., for the acquisition of
the business and assets of radio station WEBE-FM, Westport,
Connecticut ("WEBE-FM" or "WEBE") which serves Fairfield and New
Haven counties for $12.0 million.
During 1997, WEBE-FM generated operating revenues of $7,851,792
(14.8% of operating revenues of Registrant).
During 1996, WEBE-FM generated operating revenues of $6,519,197
(9.1% of operating revenues of Registrant).
During 1995, WEBE-FM generated operating revenues of $5,949,654
(5.5% of operating revenues of Registrant).
Wincom
On August 26, 1988, Registrant acquired 100% of the stock of
Wincom Broadcasting Corporation ("Wincom"), an Ohio corporation
headquartered in Cleveland for $46.0 million. At acquisition,
Wincom and its subsidiaries owned and operated five radio
stations - WQAL-FM, Cleveland, Ohio; WCKN-AM/WRZX-FM,
Indianapolis, Indiana (the "Indianapolis Stations", including the
Indiana University Sports Radio Network, which was discontinued
after the first half of 1992); KBEZ-FM, Tulsa, Oklahoma; and WEJZ-
FM, Jacksonville, Florida. On July 31, 1990, Registrant sold the
business and assets of KBEZ-FM and WEJZ-FM to Renda Broadcasting
Corp. for net proceeds of approximately $10.3 million. On
October 1, 1993, Registrant sold the Indianapolis stations which
generated net proceeds in the approximate amount of $6.1 million.
All proceeds of the sales were paid to the lender.
During 1997, Wincom generated operating revenues of $6,995,768
(13.1% of operating revenues of Registrant).
During 1996 Wincom generated operating revenues of $5,428,648
(7.6% of operating revenues of Registrant).
During 1995, Wincom generated operating revenues of $5,079,292
(4.7% of operating revenues of Registrant).
WICC-AM
On July 19, 1989, Registrant purchased all of the assets of radio
station WICC-AM located in Bridgeport, Connecticut ("WICC-AM or
"WICC") from Connecticut Broadcasting Company, Inc. The purchase
price of $6.25 million was financed solely from proceeds of the
Wincom-WEBE-WICC Loan.
During 1997, WICC-AM generated operating revenues of $2,969,144
(5.6% of operating revenues of Registrant).
During 1996, WICC-AM generated operating revenues of $2,494,402
(3.5% of operating revenues of Registrant).
During 1995, WICC-AM generated operating revenues of $2,397,808
(2.2% of operating revenues of Registrant).
Wincom-WEBE-WICC Loan
On July 19, 1989, Registrant entered into an Amended and Restated
Credit Security and Pledge Agreement which provided for
borrowings up to $35.0 million for use in connection with Wincom-
WEBE-WICC (the "Wincom-WEBE-WICC Loan"). On July 30, 1993,
Registrant and Chemical Bank (the "Wincom Bank") executed an
amendment to the Wincom-WEBE-WICC Loan (the "Restructuring
Agreement"), effective January 1, 1993, which cured all
previously outstanding defaults pursuant to the Wincom-WEBE-WICC
Loan. As of December 31, 1997, Registrant was in default on the
Wincom-WEBE-WICC Loan. Registrant and the Wincom Bank are
negotiating the terms of a waiver of the default and an amendment
to the Wincom-WEBE-WICC Loan that would, among other things,
extend the maturity date of the loans to June 30, 1999.
Registrant expects to either enter into such amendment or to
repay the full amount of principal and interest due under the
loan in 1998. Refer to Note 5 of "Item 8. Financial Statements
and Supplementary Data" for further information regarding the
Wincom-WEBE-WICC Loan.
Anaheim Radio Stations
On November 16, 1989, Registrant acquired KORG-AM ("KORG")and
KEZY-FM ("KEZY") (jointly the "Anaheim Radio Stations" or
"KORG/KEZY") located in Anaheim, California, from Anaheim
Broadcasting Corporation. The total acquisition cost was
approximately $15.1 million.
During 1997, the Anaheim Radio Stations generated operating
revenues of $3,950,833 (7.4% of operating revenues of
Registrant).
During 1996, the Anaheim Radio Stations generated operating
revenues of $3,750,442 (5.2% of operating revenues of
Registrant).
During 1995, the Anaheim Radio Stations generated operating
revenues of $3,455,853 (3.1% of operating revenues of
Registrant).
Employees.
As of December 26, 1997, Registrant and its consolidated
subsidiaries employed approximately 409 persons. The business of
Registrant is managed by the General Partner. RPMM, MLMM and ML
Leasing Management Inc., all affiliates of the General Partner,
employ individuals who perform the management and administrative
services for Registrant.
COMPETITION.
Cable Television
Cable television systems compete with other communications and
entertainment media, including off-air television broadcast signals
that a viewer is able to receive directly using the viewer's own
television set and antenna. The extent of such competition is
dependent in part upon the quality and quantity of such off-air
signals. In the areas served by Registrant's systems, a substantial
variety of broadcast television programming can be received off-air.
In those areas, the extent to which cable television service is
competitive depends largely upon the system's ability to provide a
greater variety of programming than that available off-air and the
rates charged by Registrant's cable systems for programming. Cable
television systems also are susceptible to competition from other
multichannel video programming distribution ("MVPD") systems, from
other forms of home entertainment such as video cassette recorders,
and in varying degrees from other sources of entertainment in the
area, including motion picture theaters, live theater and sporting
events.
In recent years, the level of competition in the MVPD market has
increased significantly. Notably, several entities provide high-
powered direct broadcast satellite ("DBS") service in the continental
United States. In addition, the FCC has adopted polices providing for
authorization of new technologies and a more favorable operating
environment for certain existing technologies which provide, or have
the potential to provide, substantial additional competition to cable
television systems. For example, the FCC has revised its rules on
multi-channel multi-point distribution service ("MMDS" or "wireless
cable") to foster MMDS services competitive with cable television
systems, has authorized certain telephone companies to deliver
directly to their subscribers video programming over enhanced
telephone facilities, and recently authorized a new service, the local
multipoint distribution service ("LMDS"), which will employ technology
analogous to that used by cellular telephone systems to distribute
multiple channels of video programming and other data directly to
subscribers. Moreover, the Telecommunications Act of 1996 (the "1996
Act") substantially reformed the Communications Act of 1934, as
amended (the "Communications Act") by, among other things, permitting
telephone companies to enter the MVPD market through a number of
means, including in-region cable systems. Regulatory initiatives that
will result in additional competition for cable television systems are
described in the following sections.
Radio Industry
The radio industry is highly competitive and dynamic, and reaches a
larger portion of the population than any other medium. There are
generally several stations competing in an area and most larger
markets have twenty or more viable stations; however, stations tend to
focus on a specific target market by programming music or other
formats that appeal to certain demographically specific audiences. As
a result of these factors, radio is an effective medium for
advertisers as it can have mass appeal or be focused on a specific
market. While radio has not been subject to an erosion in market
share such as that experienced by broadcast television, it was also
subject to the depressed nationwide advertising market at the
beginning of this decade. Recent changes in FCC multiple ownership
rules have led to more concentration in some local radio markets as a
single party is permitted to own additional stations or provide
programming and sell advertising on stations it does not own. The
provisions of the 1996 Act eliminating national ownership caps and
easing local ownership caps have accelerated this trend, as described
more fully below.
Registrant is subject to significant competition, in many cases from
competitors whose media properties are larger than Registrant's media
properties.
LEGISLATION AND REGULATION.
Cable Television Industry
The cable television industry is extensively regulated by the federal
government, some state governments and most local franchising
authorities. In addition, the Copyright Act of 1976 (the "Copyright
Act") imposes copyright liability on all cable television systems for
their primary and secondary transmissions of copyrighted programming.
The regulation of cable television systems at the federal, state and
local levels is subject to the political process and has been in
constant flux over the past decade. This process continues to
generate proposals for new laws and for the adoption or deletion of
administrative regulations and policies. Further material changes in
the law and regulatory requirements, especially as a result of both
the 1996 Act and the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), must be expected.
There can be no assurance that the Registrant's cable systems will not
be adversely affected by future legislation, new regulations or
judicial or administrative decisions. The following is a summary of
federal laws and regulations materially affecting the cable television
industry and a description of certain state and local laws with which
the cable industry must comply.
Federal Statutes
The 1992 Cable Act imposed certain uniform national standards and
guidelines for the regulation of cable television systems. Among
other things, the legislation regulates the provision of cable
television service pursuant to a franchise, specifies a procedure and
certain criteria under which a cable television operator may request
modification of its franchise, establishes criteria for franchise
renewal, sets maximum fees payable by cable television operators to
franchising authorities, authorizes a system for regulating certain
subscriber rates and services, outlines signal carriage requirements,
imposes certain ownership restrictions, and sets forth customer
service, consumer protection, and technical standards.
The 1996 Act's cable provisions expanded and in some cases
significantly modified the rules established by the 1992 Cable Act.
Most significantly, the 1996 Act took steps to reduce, or in some
cases eliminate, rate regulation of cable systems, while also allowing
substantially greater telephone company participation in the MVPD
market, as well as promoting cable operator provision of
telecommunications services.
Violations of the Communications Act or any FCC regulations
implementing the statutory laws can subject a cable operator to
substantial monetary penalties and other sanctions.
Federal Regulations
Federal regulation of cable television systems under the
Communications Act is conducted primarily through the FCC, although,
as discussed below, the Copyright Office also regulates certain
aspects of cable television system operation. Among other things, FCC
regulations currently contain detailed provisions concerning non-
duplication of network programming, sports program blackouts, program
origination, ownership of cable television systems and equal
employment opportunities. There are also comprehensive registration
and reporting requirements and various technical standards. Moreover,
pursuant to the 1992 Cable Act, the FCC has, among other things,
established regulations concerning mandatory signal carriage and
retransmission consent, consumer service standards, the rates for
service, equipment, and installation that may be charged to
subscribers, and the rates and conditions for commercial channel
leasing. The FCC also issues permits, licenses or registrations for
microwave facilities, mobile radios and receive-only satellite earth
stations, all of which are commonly used in the operation of cable
systems.
The FCC is authorized to impose monetary fines upon cable television
systems for violations of existing regulations and may also suspend
licenses and other authorizations and issue cease and desist orders.
It is likewise authorized to promulgate various new or modified rules
and regulations affecting cable television, many of which are
discussed in the following paragraphs.
The 1992 Cable Act and the 1996 Act
The 1992 Cable Act clarified and modified certain provisions of the
Cable Communications and Policy Act of 1984 ("1984 Cable Act"). It
also codified certain FCC regulations and added a number of new
requirements. Subsequent to the passage of the 1992 Cable Act, the
FCC undertook a substantial number of complicated rulemaking
proceedings resulting in a host of new regulatory requirements or
guidelines. Several of the provisions of the 1992 Cable Act and
certain FCC regulations implemented pursuant thereto are still being
tested in court. At the same time, a number of provisions have been
modified by the 1996 Act. Registrant cannot predict the result of any
pending or future court challenges or the shape any still-pending or
proposed FCC regulations may ultimately take, nor can Registrant
predict the effect of either on its operations.
As discussed in greater detail elsewhere in this filing, some of the
principal provisions of the 1992 Cable Act include: (1) a mandatory
carriage requirement coupled with alternative provisions for
retransmission consent as to over-the-air television signals; (2) rate
regulations that completely replace the rate provisions of the 1984
Cable Act; (3) consumer protection provisions; (4) a three-year
ownership holding requirement; (5) some clarification of franchise
renewal procedures; and (6) FCC authority to examine and set
limitations on the horizontal and vertical integration of the cable
industry. Of these provisions, the 1996 Act sunset certain of the
rate regulations in March 1999 and eliminated the three-year ownership
requirement.
Other provisions of the 1992 Cable Act include: (1) a prohibition on
"buy-throughs," an arrangement whereby subscribers are required to
subscribe to a program tier other than basic in order to receive
certain per-channel or per-program services; (2) requiring the FCC to
develop minimum signal standards, rules for the disposition of home
wiring upon termination of cable service, and regulations regarding
compatibility of cable service with consumer television receivers and
video cassette recorders; (3) a requirement that the FCC promulgate
rules limiting children's access to indecent programming on access
channels; (4) notification requirements regarding sexually explicit
programs; and (5) more stringent equal employment opportunity rules
for cable operators. Of these provisions, the 1996 Act addresses cable
equipment compatibility, as further discussed below.
The 1992 Cable Act also contains a provision barring both cable
operators and certain vertically integrated program suppliers from
engaging in practices which unfairly impede the availability of
programming to other multichannel video programming distributors. In
sum, the 1992 Cable Act established an entirely new set of regulatory
requirements and standards. It is an unusually complicated and
sometimes confusing legislative enactment that spawned a multitude of
FCC enforcement decisions as well as certain still-to-be concluded FCC
proceedings. It also remains subject to certain pending judicial
challenges. Adding to the complexity is the 1996 Act, which in some
areas mandates additional regulation to that required by the 1992
Cable Act and in other areas modifies or eliminates extant cable laws.
Pursuant to the 1992 Cable Act, the FCC promulgated rules and
regulations governing the following areas: indecency on leased access
channels, obscenity on public, educational and governmental ("PEG")
channels, mandatory carriage and retransmission consent of over-the-
air broadcast signals, home wiring, equal employment opportunity, tier
"buy-throughs," customer service standards, cable television ownership
standards, program access, carriage of home shopping stations, and
rate regulation. Most of these new regulations went into effect by
1994. However, in November 1993, a three-judge panel of the United
States Court of Appeals for the D.C. Circuit found the indecency rules
to be unconstitutional and remanded them to the Commission.
Subsequently, the United States Court of Appeals for the D.C. Circuit
vacated the panel decision pending rehearing and a decision by the
full court. On rehearing, the en banc court sustained the
Commission's regulations. The Supreme Court ultimately affirmed the
provision allowing cable operators to decide whether to carry indecent
programming on leased access channels but struck down provisions that
would have (i) allowed cable operators to decide whether to carry such
programming on PEG channels; and (ii) required cable operators to
segregate and block indecent programming allowed on lease access
channels. The latter two provisions were struck down on First
Amendment grounds for being insufficiently tailored to achieve the
legitimate governmental objective of protecting children from exposure
to "patently offensive" programming. On March 31, 1997, the Supreme
Court, in a 5-4 decision, upheld the must carry provisions of the 1992
Cable Act, finding them to be content-neutral regulations that advance
important governmental interests unrelated to the suppression of free
speech. The must carry rules promulgated by the Commission to
implement the must carry provisions were in effect pending the outcome
of the appellate process and will thus remain in effect. On a
separate matter, in September 1993 the United States District Court
for the District of Columbia found that the horizontal ownership
limits called for by the 1992 Cable Act are unconstitutional. The
Commission voluntarily stayed the effect of its horizontal ownership
rules until final judicial resolution of the issue. Thereafter,
petitions for reconsideration were filed with the Commission. In
August 1996, the United States Court of Appeals for the District of
Columbia Circuit consolidated the appeal of the statutory provision
with an appeal of the rules and determined to hold judicial
proceedings in abeyance pending the FCC's action on the petitions for
reconsideration of the rules. Accordingly, the Commission will be
required to review the rules while the constitutionality of the
underlying statutes remains unresolved. Registrant is unable to
predict the ultimate outcome of these proceedings or the impact upon
its operations of various FCC regulations still being formulated
and/or interpreted. As previously noted, under the broad statutory
scheme, cable operators are subject to a two-level system of
regulation with some matters under federal jurisdiction, others
subject strictly to local regulation, and still others subject to both
federal and local regulation. Following are descriptions of some of
the more significant regulatory areas of concern to cable operators.
Franchises
The 1984 Cable Act affirmed the right of franchising authorities to
award one or more franchises within their jurisdictions and prohibited
future cable television systems from operating without a franchise.
The 1992 Cable Act provided that franchising authorities may not grant
an exclusive franchise or unreasonably deny award of a competing
franchise. The 1984 Cable Act also provided that in granting or
renewing franchises, franchising authorities may establish
requirements for cable-related facilities and equipment but may not
specify requirements for video programming or information services
other than in broad categories.
Under the 1992 Cable Act, franchising authorities are now exempt from
money damages in cases involving their exercise of regulatory
authority, including the award, renewal, or transfer of a franchise,
except for cases involving discrimination on race, sex, or similar
impermissible grounds. Remedies are limited exclusively to injunctive
or declaratory relief. Franchising authorities may also build and
operate their own cable systems without a franchise.
The 1984 Cable Act permitted local franchising authorities to require
cable operators to set aside certain channels for PEG access
programming and to impose a franchise fee of up to 5% of gross annual
system revenues. The 1984 Cable Act further required cable television
systems with 36 or more channels to designate a portion of their
channel capacity for commercially leased access by third parties,
which generally is available to commercial and non-commercial parties
to provide programming (including programming supported by
advertising). As required by the 1992 Cable Act, the FCC adopted
rules setting maximum reasonable rates and other terms for the use of
such leased channels. In January 1997, the FCC released an order that
established a new formula for setting leased access rates. It is
anticipated that the new formula will lower the rates programmers must
pay to lease capacity on cable systems. The FCC has jurisdiction to
resolve disputes over the provision of leased access.
The 1996 Act modified the definition of a "cable system" by expanding
the so-called "private cable" exemption so that a system serving
subscribers without using any public rights-of-way is not a cable
system, and need not obtain a local franchise.
In 1992, the FCC permitted local exchange carriers to engage in so-
called "video dialtone" operations in their local telephone exchange
areas pursuant to which neither they nor the programming entities they
serve are required to obtain a local cable franchise. However, the
1996 Act repealed the FCC's video dialtone rules and, among other
things, enacted a related "open video system" regulation regime.
Rate Regulation
Under the 1992 Cable Act, cable systems' rates for service and related
subscriber equipment are subject to regulation by the FCC and local
franchising authorities. However, only the rates of cable systems
that are not subject to "effective competition" may be regulated. A
cable system is subject to effective competition if one of the
following conditions is met: (1) fewer than 30% of the households in
the franchise area subscribe to the system; (2) at least 50% of the
households in the franchise area are served by two MVPDs and at least
15% of the households in the franchise area subscribe to any MVPD
other than the dominant cable system; or (3) a franchising authority
for that franchise area itself serves as an MVPD offering service to
at least 50% of the households in the franchise area. The 1996 Act
added a fourth condition: the mere offering (regardless of
penetration) by a local exchange carrier, or an entity using the local
exchange carrier's ("LEC") facilities, of video programming services
(including 12 or more channels of programming, at least some of which
are television broadcasting signals) directly to subscribers by any
means (other than direct-to-home satellite services) in the franchise
area of an unaffiliated cable operator. Pursuant to FCC rules, the
Telecommunications Regulatory Board of Puerto Rico (the "Board") filed
for certification to regulate the rates of the cable system operated
by the Venture. The cable system operator contested the
certification, claiming that it was subject to effective competition,
and therefore exempt from rate regulation, because fewer that 30
percent of the households in the system's franchise area subscribe to
the system. The Commission denied the operator's petition and the
cable operator has filed an application for review of the decision, as
well as a request for stay. Under FCC rules, a cable system remains
subject to rate regulation until the FCC finds that effective
competition exists. The franchising authority for the San Juan Cable
System in Puerto Rico has been authorized by the FCC to regulate the
basic cable service and equipment rates and charges of the system.
The franchising authority has not yet sent a notice to the system to
initiate rate regulation. Regulation may result in reduced revenues
going forward and in refunds to customers for charges above those
allowed by the FCC's rate regulations for up to 12 months
retroactively from when the new rates are initiated or the franchising
authority issues a potential refund accounting order. Registrant is
currently assessing the impact of this regulation.
Under the 1992 Cable Act, a local franchising authority may certify
with the FCC to regulate the Basic Service Tier ("BST") and associated
subscriber equipment of a cable system within its jurisdiction. By
law, the BST must include all broadcast signals (with the exception of
national "superstations"), including those required to be carried
under the mandatory carriage provisions of the 1992 Cable Act, as well
as PEG access channels required by the franchise. The FCC has
jurisdiction over the cable programming service tier ("CPST"), which
generally includes programming other than that carried on the BST or
offered on a per-channel or per-program basis. The 1996 Act, however,
confines rate regulation to the BST after three years: on March 31,
1999, the CPST will be exempted from regulation. The 1996 Act also
modified the rules governing the filing of complaints for rate
increases on the CPST. Under the former procedures, mandated by the
1992 Cable Act, subscribers were allowed to file complaints directly
with the FCC. Under the new procedure, only a local franchising
authority may file an FCC complaint, and then only if the franchising
authority receives "subscriber complaints" within 90 days of the
effective date of a rate increase. The FCC must issue a final order
within 90 days after receiving a franchising authority's complaint.
The FCC's rate regulations generally required regulated cable systems
to use an FCC-prescribed "benchmark" approach to set initial rates for
BSTs and CPSTs. Cable systems ultimately were required to reduce
their rates by approximately 17% from the rates in effect on September
30, 1992. Certain modifications of the rules were made for low-price
cable systems and systems owned by small operators (operators with a
total subscriber base of 15,000 or less and not affiliated with or
controlled by another operator). The United States Court of Appeals
has upheld these regulations, but these and other rate regulations may
be subject to further judicial review, and may be altered by ongoing
FCC rulemaking and case-by-case review.
Alternatively, cable operators may seek to have their rates regulated
under a "cost-of-service" approach, which, much like the method
historically used to regulate the rates of local exchange carriers,
allows cable system operators to recover through regulated rates their
normal operating expenses, and a reasonable return on investment. The
final cost-of-service rules ultimately adopted by the FCC: (1)
establish an industry-wide 11.25% rate of return, (but the Commission
has proposed to use a cable system's actual debt cost and capital
structure to determine its final rate of return); (2) establish a
rebuttable presumption that 34% of the purchase price of cable systems
purchased prior to May 15, 1994 (and not just the portion of the price
allocable to intangibles) must be excluded from the rate base; and (3)
replaced the presumption of a two-year period for accumulated start-up
losses with a case-by-case determination of the appropriate period.
The 1996 Act restricted the FCC from disallowing certain operator
losses for cost-of-service filings. There are no threshold
requirements limiting the cable systems eligible for a cost-of-service
showing except that, once rates have been set pursuant to a cost-of-
service approach, cable systems may not file a new cost-of-service
showing to justify new rates for a period of two years.
Having set an initial permitted rate for regulated service using one
of the above methodologies, a cable system may adjust its rate going
forward either quarterly or annually under the FCC's "price cap"
mechanism, which accounts for inflation, changes in "external costs,"
and changes in the number of regulated channels. External costs
include state and local taxes applicable to the provision of cable
television service, franchise fees, the costs of complying with
certain franchise requirements, annual FCC regulatory fees and
retransmission consent fees and copyright fees incurred for the
carriage of broadcast signals. In addition, a cable system may treat
as external (and thus pass through to its subscribers) the costs, plus
a 20 cent per channel mark-up, for channels newly added to a CPST.
Through 1997, each cable system was subject to an aggregate cap on the
amount it may increase CPST rates due to channel additions. The FCC
has also adopted "tier flexibility" rules that allow cable operators
to reduce BST rates and take a corresponding, revenue neutral,
increase in CPST rates.
The FCC's regulatory treatment of "a la carte" packages of channels
has been a source of particular regulatory uncertainty for many cable
systems. Under the 1992 Cable Act, per-channel and per-program
offerings ("a la carte" channels) are exempt from rate regulation. In
implementing rules pursuant to the 1992 Cable Act, the FCC likewise
exempted from rate regulation packages of a la carte channels if
certain conditions were met. Upon reconsideration, however, the FCC
tightened its regulatory treatment of these a la carte packages by
supplementing its initial conditions with a number of additional
criteria designed to ensure that cable systems creating collective a
la carte offerings do not improperly evade rate regulation. The FCC
later reversed its approach to a la carte packages by ruling that all
non-premium packages of channels -- even if also available on an a la
carte basis -- would be treated as a regulated tier. To ease the
negative effect of these policy shifts on cable systems (and to
further mitigate the rate regulations' disincentive for adding new
program services) the FCC at the same time adopted rules allowing
systems to create currently unregulated "new products tiers", provided
that the fundamental nature of preexisting regulated tiers is
preserved.
The charges for subscriber equipment and installation also are
regulated by the FCC and local franchising authorities. FCC rules
require that charges for converter boxes, remote control units,
connections for additional television receivers, and cable
installations must be based on a cable system's actual costs, plus an
11.25% rate of return. The regulations further dictate that the
charges for each variety of subscriber equipment or installation
charge be listed individually and "unbundled" from the charges for
cable service. Pursuant to the 1996 Act, the FCC revised its rules to
permit cable operators to aggregate, on a franchise, system, regional,
or company level, their equipment costs into broad categories (except
for equipment used only to receive a rate regulated basic service
tier).
In accordance with the intent of the 1992 Cable Act, the FCC has
established special rate and administrative treatment for small cable
systems and small cable companies. In addition to transition rate
relief and streamlined rate reduction approaches to setting initial
permitted rates, the Commission has provided for the following relief
mechanisms for small cable systems and companies: (1) a simplified
cost-of-service approach for small systems owned by small companies in
which a per-channel rate below $1.24 is considered presumptively
reasonable; and (2) a system of any size owned by a small cable
company that incurs additional monthly per subscriber headend costs of
one full cent or more for the addition of a channel may recover a 20
cent mark-up, the license fee (if any) for the channel, as well as the
actual cost of the headend equipment necessary to add new channels
(not to exceed $5,000 per channel) for adding not more than seven new
channels through 1997. By these actions, the FCC stated that it has
expanded the category of systems eligible for special rate and
administrative treatment to include approximately 66% of all cable
systems in the United States serving approximately 12% of all cable
subscribers. The 1996 Act further deregulated small cable companies:
under the 1996 Act, an operator that, directly or through an
affiliate, serves fewer than 1% of all subscribers in the United
States (approximately 600,000 subscribers) and is not affiliated with
an entity whose gross annual revenues exceed $250 million is exempt
from rate regulation of the CPST and also of the BST (provided that
the basic tier was the only tier subject to regulation as of December
31, 1994) in any franchise area in which that operator serves 50,000
or fewer subscribers.
Beginning in late 1995, the FCC demonstrated an increased willingness
to settle some or all of the rate cases pending against a multiple
system operator ("MSO") by entering into a "social contract" or rate
settlement (collectively "social contract/settlement"). While the
terms of each social contract/settlement vary according to the
underlying facts unique to the relevant cable systems, the common
elements include an agreement by an MSO to make a specified subscriber
refund (generally in the form of in-kind service or a billing credit)
in exchange for the dismissal, with prejudice, of pending complaints
and rate proceedings. In addition, the FCC has adopted or proposed
measures that may mitigate the negative effect of the Commission's
rate regulations on cable systems' revenues and profits, and allow
systems to more efficiently market cable service. The FCC implemented
an abbreviated cost-of-service mechanism for cable systems of all
sizes that permits systems to recover the costs of "significant"
upgrades (e.g., expansion of system bandwidth capacity) that provide
benefits to subscribers to regulated cable service. This mechanism
could make it easier for cable systems to raise rates to cover the
costs of an upgrade. The Commission also has proposed an optional
rate-setting methodology under which a cable operator serving multiple
franchise areas could establish uniform rates for uniform cable
service tiers offered in multiple franchise areas.
The 1996 Act also provided operator flexibility for subscriber
notification of rate and service changes, permitting cable operators
to use "reasonable" written means to notify subscribers of rate and
service changes; notice need not be inserted in subscriber bills.
Prior notice of a rate change is not required for any rate change that
is the result of regulatory fee, franchise fee, or any other fee, tax,
assessment, or change of any kind imposed by a regulator or on the
transaction between a cable operator and a subscriber. The FCC has
adopted rules implementing a number of provisions of the 1996 Act and
is considering the adoption of others.
Pending before the FCC is a petition calling for a freeze on cable
rates and increased rate regulation. Congress has also expressed some
interest in cable rates and programming costs. In addition, the
Chairman of the FCC has expressed concern that the March 31, 1999
sunset for regulation of CPST rates may be unrealistic given that
competition to cable has not developed as rapidly as expected
following enactment of the 1996 Act. Registrant cannot predict the
outcome of FCC or congressional action on these issues.
Renewal and Transfer
The 1984 Cable Act established procedures for the renewal of cable
television franchises. The procedures were designed to provide
incumbent franchisees with a fair hearing on past performances, an
opportunity to present a renewal proposal and to have it fairly and
carefully considered, and a right of appeal if the franchising
authority either fails to follow the procedures or denies renewal
unfairly. These procedures were intended to provide an incumbent
franchisee with substantially greater protection than previously
available against the denial of its franchise renewal application. A
federal district court in Kentucky, however, upheld a city's denial of
franchise renewal because the incumbent cable operator's renewal
proposal failed to meet community needs and interests, which the court
gave city officials broad discretion in determining. On February 24,
1997, the United States Court of Appeals for the Sixth Circuit upheld
the denial of the franchise.
The 1992 Cable Act sought to address some of the issues left
unresolved by the 1984 Cable Act. It established a more definite
timetable in which the franchising authority is to act on a renewal
request. It also narrowed the range of circumstances in which a
franchised operator might contend that the franchising authority had
constructively waived non-compliance with its franchise.
Cable system operators are sometimes confronted by challenges in the
form of proposals for competing cable franchises in the same
geographic area, challenges which may arise in the context of renewal
proceedings. In Rolla Cable Systems v. City of Rolla, a federal
district court in Missouri in 1991 upheld a city's denial of franchise
renewal to an operator whose level of technical services was found
deficient under the renewal standards of the 1984 Cable Act. Local
franchising authorities also have, in some circumstances, proposed to
construct their own cable systems or decided to invite other private
interests to compete with the incumbent cable operator. Judicial
challenges to such actions by incumbent system operators have, to
date, generally been unsuccessful. Registrant cannot predict the
outcome or ultimate impact of these or similar franchising and
judicial actions.
The 1996 Act repealed the anti-trafficking rules of the 1992 Cable
Act. Those rules generally prohibited a cable operator from selling a
cable system within three years of acquiring or constructing it.
Pursuant to the 1992 Cable Act, however, where local consent to a
transfer is required, the franchise authority must act within 120 days
of submission of a transfer request or the transfer is deemed
approved. The 120-day period commences upon the submission to local
franchising authorities of information now required on a new
standardized FCC transfer form. The franchise authority may request
additional information beyond that required under FCC rules. Further,
the 1992 Cable Act gave local franchising officials the authority to
prohibit the sale of a cable system if the proposed buyer operates
another cable system in the jurisdiction or if such sale would reduce
competition in cable service.
Cable/Telephone Competition and Cross-Ownership Restrictions
Prior to the passage of the 1996 Act, an LEC was generally prohibited
from owning a cable television system or offering video programming
directly to subscribers in the LEC's local telephone service area.
This cross-ownership ban had been the subject of a number of
successful judicial challenges brought by LECs claiming that the ban
violated their constitutional right of free speech. The 1996 Act
completely revised the law governing cable and telephone company
competition and cross-ownership: the 1996 Act eliminated the
cable/telco cross-ownership ban, 214 certification requirement, and
all of the FCC's video dialtone ("VDT") rules, but retained (in
modified form) the prohibitions on cable/telco buy-outs.
In place of these repealed regulations, the 1996 Act gave telephone
companies four options for entering into the MVPD market, all four of
which are subject to the buy-out provisions: (1) wireless entry
(which is not subject to cable regulation); (2) common carrier entry
(which is subject to Title II common carrier regulation, but not
subject to cable regulation); (3) cable system entry (which is subject
to cable regulation); and (4) "open video system" entry, which is a
new mode of entry established by the 1996 Act that allows a common
carrier to program 33% of its video distribution system, while making
the rest of its capacity available to unaffiliated program providers.
The hybrid common carrier/cable rules governing open video systems
entirely replace the VDT rules. The 1996 Act also provided that
elimination of the VDT rules does not require a VDT system that had
already been approved by the FCC prior to the enactment of the 1996
Act to terminate operation, although the FCC required such entities to
choose one of the four options for regulation available under the 1996
Act. The open video system rules generally subject open video system
operators to reduced regulation. For example, such operators are not
required to obtain a local franchise, nor are they subject to rate
regulation. The FCC has noted, however, that local authorities still
maintain control over their rights of way even after the FCC has
certified that an entity may operate an open video system. The 1996
Act also limited fees that open video system operators may have to pay
to local franchises and clarifies that such operators are not subject
to Title II common carrier requirements. Open video system operators,
which may include entities other than LECs, are required, however, to
comply with certain cable regulations, including the must-
carry/retransmission consent requirements and the rules governing
carriage of PEG channels. Cable companies are, in certain
circumstances, also permitted to operate open video systems.
The FCC's new open video system rules: (1) restrict the amount of
capacity that a carrier or its affiliates may use to provide
programming directly to subscribers; (2) prohibit an open video
systems ("OVS") operator from discriminating among video programming
providers with regard to carriage; (3) permit an OVS operator to carry
on only one channel any video programming service that is offered by
more than one programming provider; and (4) prohibit an OVS operator
from unreasonably discriminating in favor of itself and its affiliates
with regard to material or information provided for the purpose of
selecting programming or presenting information to subscribers.
Although telephone companies may now provide video programming to
their telephone subscribers, the 1996 Act maintains the general
prohibition on cable/telco buy-outs. A LEC or any affiliate may not
acquire more than a 10% financial interest, or any management
interest, in a cable operator serving the LEC's telephone service
area. Similarly, a cable operator may not acquire a 10% financial
interest, or any management interest, in a LEC providing telephone
exchange service within the cable operator's franchise area. Joint
ventures between LECs and cable operators to provide video or
telecommunications in the same market are also prohibited. The 1996
Act provided for a number of limited exceptions to the buy-out and
joint venture prohibitions. These exceptions generally relate to
systems in rural areas and small cable systems and LECs. The 1996 Act
also authorized the FCC to waive the buy-out and joint venture
prohibitions only: (1) if the cable operator or LEC would otherwise be
subject to undue economic distress or if benefits to the community
clearly outweigh the anticompetitive effects of the proposed
transaction; and (2) if the local franchising authority approves of
the waiver.
The 1996 Act also cleared the way for cable provision of telephony.
For example, the 1996 Act preempted cable franchising authority
regulation of telecommunications services. Moreover, under the 1996
Act, Title VI (which governs cable operators) does not apply to cable
operators' provision of telecommunications services. The 1996 Act
also clarified that franchise fees do not include gross revenue
derived from the provision of telecommunications services. State
regulations that may prohibit the ability to provide
telecommunications services are preempted. The 1996 Act also revised
the rules governing pole attachments in order to foster competitive
telecommunications services and remedy inequity in the current charges
for pole attachments. The FCC is considering proposed revisions to
its pole attachment rules.
Concentration of Ownership: The 1992 Cable Act directed the FCC to
establish reasonable limits on the number of cable subscribers a
single company may reach through cable systems it owns (horizontal
concentration) and the number of system channels that a cable operator
could use to carry programming services in which it holds an ownership
interest (vertical concentration). The horizontal ownership
restrictions of the 1992 Cable Act were struck down by a federal
district court as an unconstitutional restriction on speech. Pending
final judicial resolution of this issue, the FCC voluntarily stayed
the effective date of its horizontal ownership limitations, which
would place a 30% nationwide limit on subscribers served by any one
entity. Thereafter, a Motion to lift the Stay and Petitions for
Reconsideration were filed. A challenge was also brought against the
rules in federal court. In August 1996, the United States Court of
Appeals for the District of Columbia Circuit decided to hold court
proceedings in abeyance pending the Commission's reconsideration of
the rules. The FCC's vertical ownership restriction consists of a
"channel occupancy" standard which places a 40% limit on the number of
channels (up to 75 channels) that may be occupied by services from
programmers in which the cable operator has an attributable ownership
interest. Further, the 1992 Cable Act and FCC rules restrict the
ability of programmers to enter into exclusive contracts with cable
operators.
Video Marketplace: As required by the 1992 Cable Act, the Commission
has issued a series of annual reports assessing the status of
competition in the market for the delivery of video programming. The
Commission found that cable television continues to dominate the MVPD
market in most localities and that cable rates are increasing.
However, the Commission concluded that cable's large share of the MVPD
market is of concern only to the extent it reflects an inability of
consumers to switch to some comparable, alternative video programming
source. It also noted that competing distribution technologies have
continued to make substantial strides, in particular DBS (see below).
The Commission identified several steps it has taken to eliminate or
minimize obstacles to competition and will continue to monitor
competition in this area.
Cable Ownership and Cross-Ownership: The 1996 Act repealed or
curtailed several cable-related ownership and cross-ownership
restrictions. In addition to the repeal of the anti-trafficking rules
(discussed above), the 1996 Act eliminated the broadcast network/cable
cross-ownership ban. Although the FCC is allowed to adopt regulations
necessary to ensure carriage, channel positioning, and
nondiscriminatory treatment of nonaffiliated broadcast stations, it
has opted not to impose any such rules at this time. The 1996 Act
also eliminated the statutory prohibition on broadcast/cable cross-
ownership, but left in place the FCC's rules which continue to
restrict the common ownership of cable and television properties in
the same market area. When a cable operator faces effective
competition, the 1996 Act also eliminates the cable/MMDS and
cable/satellite master antenna television facilities ("SMATV") cross-
ownership prohibitions.
Alternative Video Programming Services
Direct Broadcast Satellites: The FCC has authorized the provision of
video programming directly to home subscribers through high-powered
direct broadcast satellites ("DBS"). DBS systems currently are
capable of broadcasting as many as 175 channels of digital television
service directly to subscribers equipped with 18-inch receive dishes
and decoders. Currently, several entities, including DirecTV, Inc., an
affiliate of Hughes Communications Galaxy, United States Satellite
Broadcasting Company and EchoStar Satellite Corporation ("EchoStar"),
provide DBS service to consumers throughout the country. Other DBS
operators hold licenses, but have not yet commenced service.
Generally, the signal of local television broadcast stations are not
carried on DBS systems. In early 1997, however, Echostar and American
Sky Broadcasting ("ASkyB"), a joint venture of MCI Telecommunications
Corporation ("MCI") and The News Corporation, proposed to launch a 500-
channel service, including local broadcast signals. In response to
ASkyB's request for a declaratory ruling that it could deliver
broadcast signals within a television station's market, the Copyright
Office advised ASkyB that it would accept copyright statements but
cautioned that a determination of its eligibility under the cable
compulsory license, discussed below, ultimately must be made by the
courts. Although the proposed transaction collapsed, the desire among
some DBS providers to retransmit local television station signals
continues. In response to a petition by Echostar, the Copyright
Office has opened a proceeding to determine whether local
retransmission of television station signals to subscribers within
those stations' local markets is permissible under a separate
compulsory copyright license available to satellite distributors.
EchoStar has started distributing local signals to major markets, via
either off-air antenna to served households or via satellite to
unserved households.
Following the collapse of the deal to merge ASkyB into Echostar, MCI
agreed to sell its DBS authorization to PRIMESTAR Partners, LP, a
fixed satellite service similar to DBS, in which the country's five
largest cable operators have interests. The transaction has been
opposed and regulatory approval for the deal is pending.
A Copyright Arbitration Royalty Panel convened this year to recommend
adjustments to copyright royalty fees, proposed substantial increases
in the DBS retransmission fees, which the Librarian of Congress
upheld. Over objections of numerous members of Congress and despite
DBS industry efforts to obtain a Stay from the Librarian of Congress
and a federal court, the increased fees went into effect on January 1,
1998, making the first payments at the new rates due on July 30, 1998.
Registrant cannot predict the effect of existing and future DBS
services on its cable television operations.
Digital Television: On April 3, 1997, the FCC announced that it had
adopted rules that will allow television broadcasters to provide
digital television ("DTV") to consumers. The Commission also adopted
a table of allotments for DTV, which will provide eligible existing
broadcasters with a second channel on which to provide DTV service.
Petitions for Reconsideration of the table of allotments are pending.
The allotment plan is based on the use of channels 2-51, although it
has been proposed that the "core" DTV spectrum will be between
channels 2-46 or 7-51. Ultimately, the Commission will recover the
channels currently used for analog broadcasting and will decide at a
later date the use of the recovered spectrum. The FCC has already
reallocated the spectrum comprising channels 60-69 to public safety
agencies and other voice and data services. Television broadcasters
will be allowed to use their channels according to their best business
judgment. Such uses can include data transfer, subscription video,
interactive materials, and audio signals, although broadcasters will
be required to provide a free digital video programming service that
is at least comparable to today's analog service. Broadcasters will
not be required to air "high definition" programming or to simulcast
their analog programming on the digital channel. Certain volunteer
stations in the top ten markets will be on the air with a digital
signal by November 1998. Affiliates of the top four networks (ABC,
CBS, Fox and NBC) in markets 11-30 will be required to be on the air
with a digital signal by November 1, 1999. All other commercial
stations are required to construct their digital facilities by May 1,
2002. An Advisory Committee on Public Interest Obligations of Digital
Television Broadcasters, established by the President, has been
studying what public interest obligations should be imposed on digital
broadcasters and is charged with making recommendations as to these
obligations to the Vice President.
Wireless Cable: The FCC has expanded the authorization of MMDS
services to provide "wireless cable" via multiple microwave
transmissions to home subscribers. In 1990, the FCC increased the
availability of channels for use in wireless cable systems by
eliminating MMDS ownership restrictions and simplifying various
processing and administrative rules. The FCC also modified equipment
and technical standards to increase service capabilities and improve
service quality. Since then, the FCC has resolved certain additional
wireless cable issues, including channel allocations for MMDS,
Operational Fixed Service and Instructional Television Fixed Service
("ITFS") facilities, direct application by wireless operators for use
of certain ITFS channels, and restrictions on ownership or operation
of wireless facilities by cable entities. The Commission has also
proposed amendments to its rules to facilitate the ability of MMDS
operators to provide two-way transmission of Internet and other
digital high-speed data services.
Local Multipoint Distribution Service: In 1992, the FCC proposed a
new service, LMDS, which could be used to supply multichannel video,
telephony, and other communications services directly to subscribers.
This service would operate primarily in the 28 GHz frequency range
and, consistent with the nature of operations in that range, the FCC
envisioned that LMDS transmitters could serve areas of only six to
twelve miles in diameter. Accordingly, it was proposed that LMDS
systems utilize a grid of transmitter "cells," similar to the
structure of cellular telephone operations. In July 1996, the FCC
issued an order designating 1000 MHz of spectrum to accommodate up to
two LMDS operators in each community in the United States.
Additionally, the FCC proposed allocating an additional 300 MHz of
spectrum for LMDS. Auctions for LMDS licenses are scheduled for
February, 1998. Registrant cannot predict the timing or ultimate
impact of any future LMDS operations.
Personal Communications Service: In August 1993, the FCC established
rules for a new portable telephone service, the Personal
Communications Service ("PCS"). PCS has the ability to compete with
landline local telephone exchange services. Among several parties
expressing interest in PCS were cable television operators, whose
plant structures present possible synergies for PCS operation. In
September 1993, the FCC adopted rules for "broadband PCS" service. It
allocated 120 MHz of spectrum in the 2 GHz band for licensed broadband
PCS services, divided into three 30 MHz blocks (blocks A, B and C) and
three 10 MHz blocks (blocks D, E and F). The Commission has also
established two different service areas for these blocks based on Rand
McNally's Basic Trading Areas and Major Trading Areas. Thus, there
are up to six PCS licenses available in each geographic area. The
Commission used competitive bidding to assign the PCS licenses and PCS
service is starting to emerge in various areas, primarily competing
with incumbent cellular telephone operators. During the last year,
however, several of the largest C Block bidders have encountered
financial trouble and have been unable to make scheduled license
payments. The Commission has decided to allow C block licensees to
elect one of four options, including meeting existing obligations,
relinquishing some spectrum rights in exchange for debt reduction,
relinquishing all spectrum rights in exchange for amnesty, or
prepayment of the licenses. The Commission has asked Congress for
legislation authorizing it to seize licenses from bidders seeking
bankruptcy protection.
Information and Interexchange Services (Modified Final Judgment): The
1996 Act explicitly superseded the judicial and regulatory regime
created by the Consent Decree that terminated the United States v.
AT&T antitrust litigation in 1982 (known as the Modification of Final
Judgment). The Consent Decree prohibited the Bell Operating Companies
and their affiliates (collectively, the "Regional Bells") from, among
other things, providing telecommunications services, including certain
cable services, across Local Access and Transport Areas as defined in
the Consent Decree. A Regional Bell was required to obtain a waiver
from the FCC in order to provide such services. The 1996 Act
eliminated this requirement.
Other Multichannel Video Programming Technologies: Several additional
technologies exist or have been proposed that also have the potential
to increase competition in the provision of video programming.
Currently, many cable subscribers can receive programming received by
C-band home satellite dishes or via SMATV.
Programming Issues
Mandatory Carriage and Retransmission Consent: The 1992 Cable Act
required cable operators to carry the signals of local commercial and
non-commercial television stations and certain low power television
stations. The 1992 Cable Act also included a retransmission consent
provision that prohibits cable operators and other multichannel video
programming distributors from carrying broadcast stations without
obtaining their consent in certain circumstances.
The "must carry" and retransmission consent provisions are related in
that television broadcasters, on a cable system-by-cable system basis,
must make a choice once every three years whether or not to proceed
under the must carry rules or to waive that right to mandatory but
uncompensated carriage and negotiate a grant of retransmission consent
to permit the cable system to carry the station's signal. The most
recent required election date was October 1, 1996 with elections
taking effect on January 1, 1997. The next required election date is
October 1, 1999 with elections taking effect on January 1, 2000.
While monetary compensation is possible in return for stations
granting retransmission consent, many broadcast station operators have
accepted arrangements that do not require payment but involve other
types of consideration, such as use of a second cable channel,
advertising time, and joint programming efforts.
On March 31, 1997, the Supreme Court, in a 5-4 decision, upheld the
constitutionality of the must carry provisions of the 1992 Cable Act.
As a result, the regulations promulgated by the FCC to implement the
must carry provisions remain in effect.
Program Content Regulation: In contrast to its deregulatory approach
to media ownership, the 1996 Act contained a number of new regulations
affecting program content. For example, a cable operator is required
to fully scramble or block the audio and video programming of each
channel primarily dedicated to the carriage of sexually explicit adult
programming or to permit the carriage of such programming to the hours
between 10 p.m. and 6 a.m. The court order staying the FCC rules
implementing these provisions has been lifted and the FCC notified
cable operators of their obligation to begin complying with the
provision and its rules in May 1997. Also, the FCC has adopted
regulations requiring the "closed captioning" of programming. The
closed captioning rules went into effect January 1, 1998 but the
Commission is due to reconsider certain of these obligations. The FCC
has requested comment and is considering the appropriate methods and
schedules for phasing in video description. Last, the FCC is due to
decide whether to approve the voluntary television ratings plan
developed by distributors of video programming -- including cable
operators -- to identify programming that contains sexual, violent, or
other indecent material. If the Commission finds the industry-
proposed system unacceptable, the 1996 Act requires it to formulate a
government-recommended alternative in conjunction with a nonpartisan
advisory committee. Distributors of rated programs are required to
transmit these ratings, thereby permitting parents to block the
programs.
Copyright: Cable television systems are subject to the Copyright Act
which, among other things, covers the carriage of television broadcast
signals. Pursuant to the Copyright Act, cable operators obtain a
compulsory license to retransmit copyrighted programming broadcast by
local and distant stations in exchange for contributing a percentage
of their revenues as statutory royalties to the Copyright Office. The
amount of this royalty payment varies depending on the amount of
system revenues from certain sources, the number of distant signals
carried, and the locations of the cable television system with respect
to off-air television stations and markets. Copyright royalty
arbitration panels, to be convened by the Librarian of Congress as
necessary, are responsible for distributing the royalty payments among
copyright owners and for periodically adjusting the royalty rates.
Recently, several types of multichannel video distributors that
compete with cable television systems were successful in gaining
compulsory license coverage of their retransmission of television
broadcast signals. Legislation enacted in 1988 and extended in 1994
provided an alternative compulsory license for satellite distributors
through January 1, 2000 and extended permanent coverage of the cable
copyright license to "wireless cable" systems (MMDS). The Copyright
Office also has ruled that some SMATV systems are eligible for the
cable compulsory license. Pursuant to a request by the Chairman of
the Senate Judiciary Committee, the Copyright Office examined the
compulsory license scheme and submitted a report to the Committee in
August 1997. The Copyright Office concluded that the statutorily
imposed licensing schemes could not be eliminated at this time,
suggested harmonizing the cable and satellite licenses, and amending
the statute to allow satellite distributors to retransmit local
broadcast signals. These recommendations may serve as the basis for
legislation to modify the Copyright Act with respect to these
compulsory licensing schemes.
The FCC has, in the past, recommended that Congress eliminate the
compulsory copyright license for cable retransmission of both local
and distant broadcast programming. In addition, legislative proposals
have been and may continue to be made to simplify or eliminate the
compulsory license. As noted, the 1992 Cable Act required cable
systems to obtain permission of certain broadcast licensees in order
to carry their signals ("retransmission consent") should such stations
so elect. (See "Mandatory Carriage and Retransmission Consent"
above). This permission is needed in addition to the copyright
permission inherent in the compulsory license. Without the compulsory
license, cable operators would need to negotiate rights for the
copyright ownership of each program carried on each broadcast station
transmitted by the system. Registrant cannot predict whether Congress
will act on the FCC or Copyright Office recommendations or similar
proposals.
Exclusivity: Except for retransmission consent, the FCC imposes no
restriction on the number or type of distant (or "non-local")
television signals a system may carry. FCC regulations, however,
require cable television systems serving more than 1,000 subscribers,
at the request of a local network affiliate, to protect the local
affiliate's broadcast of network programs by blacking out duplicated
programs of any distant network-affiliated stations carried by the
system. Similar rules require cable television systems to black out
the broadcast on distant stations of certain local sporting events not
broadcast locally.
The FCC rules also provide exclusivity protection for syndicated
programs. Under these rules, television stations may compel cable
operators to black out syndicated programming broadcast from distant
signals where the local broadcaster has negotiated exclusive local
rights to such programming. Syndicated program suppliers are afforded
similar rights for a period of one year from the first sale of that
program to any television broadcast station in the United States. The
FCC rules allow any broadcaster to bargain for and enforce exclusivity
rights. However, exclusivity protection may not be granted against a
station that is generally available over-the-air in the cable system's
market. Cable systems with fewer than 1,000 subscribers are exempt
from compliance with the rules. Although broadcasters generally may,
under certain circumstances, acquire exclusivity only within 35 miles
of their community of license, they may acquire national rights to
syndicated programming. The ability to secure national rights is
intended to assist so-called "superstations" whose local broadcast
signals are then distributed nationally via satellite. The 35-mile
limitation has been subject to possible re-examination by the FCC the
past several years.
Cable Origination Programming: The FCC also requires that cable
origination programming meet certain standards similar to those
imposed on broadcasters. These standards include regulations
governing political advertising and programming, advertising during
children's programming, rules on lottery information, and sponsorship
identification requirements.
Customer Service: Pursuant to the 1992 Cable Act, the FCC has
promulgated rules on customer service standards. The standards govern
cable system office hours, telephone availability, installations,
outages, service calls, and communications between the cable operator
and subscriber, including billing and refund policies. Although the
FCC has stated that its standards are "self effectuating," it has also
provided that a franchising authority wishing to enforce particular
customer service standards must give the system at least 90 days
advance written notice. Franchise authorities also may agree with
cable operators to adopt stricter standards and may enact any state or
municipal law or regulation which imposes a stricter or different
customer service standard than that set by the FCC. Enforcement of
customer service standards, including those set by the FCC, is
entrusted to local franchising authorities.
Pole Attachment Rates, Inside Wiring, and Technical Standards
The FCC currently regulates the rates and conditions imposed by public
utilities for use of their poles, unless, under the Federal Pole
Attachments Act, a state public service commission demonstrates that
it is entitled to regulate the pole attachment rates. The FCC has
adopted a specific formula to administer pole attachment rates under
this scheme. The validity of this FCC function was upheld by the
United States Supreme Court. The 1996 Act revised the pole attachment
rules in a number of ways to encourage competition in the provision of
telecommunications services and to address inequity in the current
pole attachment rates. The FCC currently is considering proposed
revisions to its pole attachment rules.
Recently the FCC established procedures for the orderly disposition of
multiple dwelling unit ("MDU") wiring, making it easier for the owners
and residents of a MDU to change video service providers.
Additionally, the Commission has sought comment on whether to restrict
exclusive agreements for the provision of multichannel video
programming services to MDUs.
The FCC also has set forth standards on signal leakage. Like all
systems, Registrant's cable television systems are subject to yearly
reporting requirements regarding compliance with these standards.
Further, the FCC has instituted on-site inspections of cable systems
to monitor compliance. Any failure by Registrant's cable television
systems to maintain compliance with these new standards could
adversely affect the ability of Registrant's cable television systems
to provide certain services.
The 1992 Cable Act empowered the FCC to set certain technical
standards governing the quality of cable signals and to preempt local
authorities from imposing more stringent technical standards. The
FCC's preemptive authority over technical standards for channels
carrying broadcast signals has been affirmed by the United States
Supreme Court. In 1992, the FCC adopted mandatory technical standards
for cable carriage of all video programming, including retransmitted
broadcast material, cable originated programs and pay channels. The
1992 Cable Act included a provision requiring the FCC to prescribe
regulations establishing minimum technical standards. The FCC has
determined that its 1992 rulemaking proceeding satisfied the mandate
of the 1992 Cable Act. Those standards focus primarily on the quality
of the signal delivered to the cable subscriber's television. In a
related vein, the 1996 Act provided that no local franchising
authority may prohibit, condition, or restrict a cable system's use of
any type of subscriber equipment or any transmission technology.
The 1996 Act also limited the FCC to the adoption of only minimal
standards to achieve compatibility between cable equipment and
consumer electronics (as Congress required the agency to do in the
1992 Cable Act) and to rely on the marketplace for other features,
services, and devices. The FCC, however, had already made much
progress with regard to compatibility pursuant to its 1992 Cable Act
mandate. On May 4, 1994, the Commission released an order
implementing the 1992 Cable Act requirements. In this order, the
Commission adopted a three-phase plan for achieving compatibility
between cable systems and consumer electronics. The Phase I
requirements include the following: (1) cable operators are
prohibited from scrambling or otherwise encrypting signals carried on
the basic tier; (2) cable operators are prohibited from taking actions
that would prevent equipment with remote control capabilities from
operating with commercially available remote controls; (3) cable
operators must offer subscribers supplemental equipment for resolving
specific compatibility problems; and (4) cable operators must provide
more compatibility information to subscribers. During Phase II, cable
operators must use the new "Decoder Interface" standard that is
presently being developed. Finally, the third phase of the
compatibility plan addresses future standards issues to be raised in a
future Notice of Inquiry. A number of cable and electronic company
interests have sought reconsideration of this order. Whether and to
what extent the provisions of the 1996 Act affect the Commission plan
remain unclear to the Registrant.
The 1996 Act directs the FCC, in consultation with private standard
setting organizations, to prescribe regulations to ensure the
commercial availability of converter boxes and other interactive
communications equipment used by consumers to access services provided
by cable operators and MVPDs. The 1996 Act specifies that the
regulations should ensure the availability of such equipment from
manufacturers, retailers, and other vendors not affiliated with an
MVPD. However, MVPDs are not prohibited from offering such equipment
to consumers, provided that they charge separately for equipment and
service, and do not subsidize the equipment charge. Once the market
for MVPDs and converter equipment is fully competitive, the FCC is
required to sunset any pertinent regulations if it determines that
such an elimination would promote competition and be in the public
interest. The FCC has sought comment on the statutory objectives of
the 1996 Act and specific proposals for implementing its requirements.
State and Local Regulation
Local Authority: Cable television systems are generally operated
pursuant to non-exclusive franchises, permits or licenses issued by a
municipality or other local governmental entity. The franchises are
generally in the nature of a contract between the cable television
system owner and the issuing authority and typically cover a broad
range of provisions and obligations directly affecting the business of
the systems in question. Except as otherwise specified in the
Communications Act or limited by specific FCC rules and regulations,
the Communications Act permits state and local officials to retain
their primary responsibility for selecting franchisees to serve their
communities and to continue regulating other essentially local aspects
of cable television. The constitutionality of franchising cable
television systems by local governments has been challenged as a
burden on First Amendment rights but the United States Supreme Court
has declared that while cable activities "plainly implicate First
Amendment interest" they must be balanced against competing societal
interests. The applicability of this broad judicial standard to
specific local franchising activities is subject to continuing
interpretation by the federal courts.
Cable television franchises generally contain provisions governing the
fees to be paid to the franchising authority, the length of the
franchise term, renewal and sale or transfer of the franchise, design
and technical performance of the system, use and occupancy of public
streets, and the number and types of cable services provided. The
specific terms and conditions of the franchise directly affect the
profitability of the cable television system. Franchises are
generally issued for fixed terms and must be renewed periodically.
There can be no assurance that such renewals will be granted or that
renewals will be made on similar terms and conditions.
Various proposals have been introduced at state and local levels with
regard to the regulation of cable television systems and a number of
states have adopted legislation subjecting cable television systems to
the jurisdiction of centralized state governmental agencies, some of
which impose regulation of a public utility character. Increased
state and local regulations may increase cable television system
expenses.
Radio Industry
The radio industry is also subject to extensive regulation by the FCC,
which, among other things, is authorized to issue, renew, revoke and
modify broadcasting licenses; assign frequency bands; determine
stations' frequencies, locations, and power; regulate the equipment
used by stations; adopt other regulations to carry out the provisions
of the Communications Act; impose penalties for violation of such
regulations; and impose fees for processing applications and other
administrative functions. The Communications Act prohibits the
assignment of a license or the transfer of control of a licensee
without prior approval of the FCC.
An application for consent to the assignment of the FCC licenses for
WUNO(AM), San Juan, Puerto Rico, and WFID-FM, Rio Piedras, Puerto
Rico, to Madifide, Inc. is pending at the FCC. A petition to deny the
application was filed in November 1997. The petition questioned
whether the buyer should be found qualified to hold the FCC licenses
for the stations but raised no questions regarding current ownership
of the stations.
The 1996 Act completely eliminated the national radio ownership
restriction. Any number of AM or FM broadcast stations may be owned
or controlled by one entity nationally. The 1996 Act also greatly
eased local radio ownership restrictions. As with the old rules, the
maximum varies depending on the number of radio stations within the
market. In markets with more than 45 stations, one company may own,
operate, or control eight stations, with no more than five in any one
service (AM or FM). In markets of 30-44 stations, one company may own
seven stations, with no more than four in any one service; in markets
with 15-29 stations, one entity may own six stations, with no more
than four in any one service. In markets with 14 commercial stations
or less, one company may own up to five stations or 50% of all of the
stations, whichever is less, with no more than three in any one
service.
This new regulatory flexibility has engendered aggressive local,
regional, and/or national acquisition campaigns. Removal of previous
station ownership limitations on leading major station groups has
increased the competition for and the prices of attractive stations.
In 1992, the FCC placed limitations on local marketing agreements
("LMAs") through which the licensee of one radio station provides the
programming for another licensee's station in the same market.
Stations operating in the same service (e.g., where both stations are
AM) and in the same market are prohibited from simulcasting more than
25% of their programming. Moreover, in determining the number of
stations that a single entity may control, an entity programming a
station pursuant to an LMA is required, under certain circumstances,
to count that station toward its maximum even though it does not own
the station.
The 1996 Act does not alter the FCC's newspaper/broadcast cross-
ownership restrictions. However, the FCC is considering whether to
change the policy pursuant to which it considers waivers of the
radio/newspaper cross-ownership rule.
License Grant and Renewal
Prior to the passage of the 1996 Act, radio broadcasting licenses
generally were granted or renewed for a period of seven years, upon a
finding by the FCC that the "public interest, convenience, and
necessity" would be served thereby. At the time an application is
made for renewal of a radio license, parties in interest may file
petitions to deny the application, and such parties, including members
of the public, may comment upon the service the station has providing
during the preceding license term. In addition, prior to passage of
the 1996 Act, any person was permitted to file a competing application
for authority to operate on the station's channel and replace the
incumbent licensee. Renewal applications were granted without a
hearing if there were no competing applications or if issues raised by
petitioners to deny such applications were not serious enough to cause
the FCC to order a hearing. If competing applications were filed, a
full comparative hearing was required.
Under the 1996 Act, the statutory restriction on the length of
broadcast licenses has been amended to allow the FCC to grant radio
broadcast licenses for terms of up to eight years. The 1996 Act also
requires renewal of a broadcast license if the FCC finds that (1) the
station has served the public interest, convenience, and necessity;
(2) there have been no serious violations of either the Communications
Act or the FCC's rules and regulations by the licensee; and (3) there
have been no other serious violations which taken together constitute
a pattern of abuse. In making its determination, the FCC may still
consider petitions to deny but cannot consider whether the public
interest would be better served by a person other than the renewal
applicant. Instead, under the 1996 Act, competing applications for
the same frequency may be accepted only after the Commission has
denied an incumbent's application for renewal of license.
Applications for the renewal of license of WICC(AM), Bridgeport,
Connecticut and WEBE(FM), Westport, Connecticut are pending at the
FCC. Petitions to deny the renewal applications are due on or before
March 2, 1998. Although Registrant has no reason to believe that
these renewal applications will not be granted, it cannot predict the
outcome of these proceedings.
Alien Ownership Restrictions
The Communications Act restricts the ability of foreign entities or
individuals to own or hold certain interests in broadcast licenses.
Foreign governments, representatives of foreign governments, non-U.S.
citizens, representatives of non-U.S. citizens, and corporations or
partnerships organized under the laws of a foreign nation are barred
from holding broadcast licenses. Non-U.S. citizens, collectively, may
directly or indirectly own or vote up to twenty percent of the capital
stock of a licensee. In addition, a broadcast license may not be
granted to or held by any corporation that is controlled, directly or
indirectly, by any other corporation more than one-fourth of whose
capital stock is owned or voted by non-U.S. citizens or their
representatives, by foreign governments or their representatives, or
by non-U.S. corporations , if the FCC finds that the public interest
will be served by the refusal or revocation of such license. The FCC
has interpreted this provision of the Communications Act to require an
affirmative public interest finding before a broadcast license may be
granted to or held by any such corporation, and the FCC has made such
an affirmative finding only in limited circumstances.
Alternative Radio Services
In January 1995, the FCC adopted rules to allocate spectrum for
satellite digital audio radio service ("DARS"). Satellite DARS
systems potentially could provide for regional or nationwide
distribution of radio programming with fidelity comparable to compact
disks. An auction for satellite DARS spectrum was held in April 1997,
and the Commission has issued two authorizations to launch and operate
satellite DARS service. The FCC also has undertaken an inquiry into
the terrestrial broadcast of DARS signals, addressing, among other
things, the need for spectrum outside the existing FM band and the
role of existing broadcasters. Further, laboratory testing of a
number of competing in-band on-channel DARS technologies, has been
done with many of the systems progressing to the next stage of field
testing. Registrant cannot predict the impact of either satellite
DARS service or terrestrial DARS service on its business.
Impact of Legislation and Regulation
As detailed above, the cable and radio industries are subject to
significant regulation. The foregoing, however, does not purport to
be a complete summary of all the provisions of the Communications Act,
the 1996 Act, or the 1992 Cable Act, nor of the regulations and
policies of the FCC thereunder. Because regulation of the broadcast
and cable industries is subject to the political process, it continues
to change. Proposals for additional or revised regulations and
requirements are pending before and are being considered by Congress
and federal regulatory agencies and will continue to be generated.
Also, various of the foregoing matters are now, or may become, the
subject of court litigation. Registrant cannot predict the outcome of
pending regulatory proposals, any future proposals, or any such
litigation. Nor can Registrant predict the impact of these on its
business.
Item 2. Properties.
A description of the media properties of Registrant is contained
in Item 1 above. Registrant owns or leases real estate for
certain transmitting equipment along with space for studios and
offices. Registrant believes that the properties owned by the
stations and the other equipment and furniture and fixtures owned
are in reasonably good condition and are adequate for the
operations of the stations.
In addition, the offices of RPMM and MLMM are located at 350 Park
Avenue - 16th Floor, New York, New York 10022 and at The World
Financial Center, South Tower - 14th Floor, New York, New York,
10080-6114; respectively.
Item 3. Legal Proceedings.
On May 1, 1996, a purported class action lawsuit was filed in
Orange County Superior Court against Registrant on behalf of
subscribers of Registrant's California Cable Systems serving
Anaheim, Villa Park and adjacent areas of unincorporated Orange
County, California. This purported class action lawsuit alleged
that excessive late fee payments have been charged to such
subscribers since April, 1992. The suit sought refunds of late
fee payments to subscribers and related interest, damages and
legal cost. On September 5, 1997, the Order of the court was
signed and filed to give tentative approval to the late fee class
action settlement in the amount of $57,500. In December 1997,
the Superior Court approved this settlement on behalf of the
plaintiff class as required by law, and such settlement offer has
subsequently been paid and the case concluded.
On August 29, 1997, a purported class action was commenced in New
York Supreme Court, New York County, on behalf of the limited
partners of Registrant, against Registrant, Registrant's general
partner, Media Management Partners (the "General Partner"), the
General Partner's two partners, RP Media Management ("RPMM") and
ML Media Management Inc. ("MLMM"), Merrill Lynch & Co., Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"). The action concerns Registrant's payment of certain
management fees and expenses to the General Partner and the
payment of certain purported fees to an affiliate of RPMM.
Specifically, the plaintiffs allege breach of the Partnership
Agreement, breach of fiduciary duties, and unjust enrichment by
the General Partner in that the General Partner allegedly: (1)
improperly deferred and accrued certain management fees and
expenses in an amount in excess of $14.0 million, (2) improperly
paid itself such fees and expenses out of proceeds from sales of
Registrant assets, and (3) improperly paid MultiVision Cable TV
Corp., an affiliate of RPMM, supposedly duplicative fees in an
amount in excess of $14.4 million.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLMM
and RPMM, plaintiffs claim that these defendants aided and
abetted the General Partner in the alleged breach of the
Partnership Agreement and in the alleged breach of the General
Partner's fiduciary duties. Plaintiffs seek, among other things,
an injunction barring defendants from paying themselves
management fees or expenses not expressly authorized by the
Partnership Agreement, an accounting, disgorgement of the alleged
improperly paid fees and expenses, and compensatory and punitive
damages. On December 12, 1997, defendants served a motion to
dismiss the complaint and each claim for relief therein.
Plaintiffs' response to defendants' motion was served on March
20, 1998. Defendants' reply to plaintiffs' response is due on
April 29, 1998. Defendants believe that they have good and
meritorious defenses to the action.
The Partnership Agreement provides for indemnification, to the
fullest extent provided by law, for any person or entity named as
a party to any threatened, pending or completed suit by reason of
any alleged act or omission arising out of such person's
activities as a General Partner or as an officer, director or
affiliate of either RPMM, MLMM or the General Partner, subject to
specified conditions. In connection with the purported class
action filed on August 29, 1997, Registrant has received notices
of requests for indemnification from the following defendants
named therein: the General Partner, RPMM, MLMM, Merrill Lynch &
Co., Inc. and Merrill Lynch. As of December 26, 1997, Registrant
accrued approximately $280,000 for legal costs incurred through
December 26, 1997, relating to such indemnification.
Registrant is not aware of any other material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters which required a vote of the limited
partners of Registrant during the fourth quarter of the fiscal
year covered by this report.
Part II.
Item 5. Market for Registrant's Common Stock and Stockholder
Matters.
An established public market for Registrant's Units does not now
exist, and it is not anticipated that such a market will develop
in the future. Accordingly, accurate information as to the
market value of a Unit at any given date is not available.
As of March 3, 1998, the number of owners of Units was 14,298.
Beginning with the December 1994 client account statements,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") implemented new guidelines for reporting estimated values
of limited partnerships and other direct investments on client
account statements. As a result, Merrill Lynch no longer reports
general partner estimates of limited partnership net asset value
on its client account statements, although the Registrant may
continue to provide its estimate of net asset value to Unit
holders. Pursuant to the new guidelines, Merrill Lynch will
report estimated values for limited partnership interests
originally sold by Merrill Lynch (such as Registrant's Units) two
times per year. Such estimated values will be provided to
Merrill Lynch by independent valuation services based on
financial and other information available to the independent
service on (1) the prior August 15th for reporting on December
year-end and subsequent client account statements through the
following May's month-end client account statements, and on (2)
March 31st for reporting on June month-end and subsequent client
account statements through the November month-end account
statements of the same year. Merrill Lynch clients may contact
their Merrill Lynch Financial Consultants or telephone the number
provided to them on their account statements to obtain a general
description of the methodology used by the independent valuation
services to determine their estimates of value. The estimated
values provided by the independent services and the Registrant's
current net asset value are not market values and Unit holders
may not be able to sell their Units or realize either amount upon
a sale of their Units. In addition, Unit holders may not realize
the independent estimated value or the Registrant's current net
asset value amount upon the liquidation of Registrant's assets
over its remaining life.
Registrant does not distribute dividends, but rather distributes
Distributable Cash From Operations, Distributable Refinancing
Proceeds, and Distributable Sale Proceeds, to the extent
available. In 1995, $7.5 million ($40 per Unit) was distributed
to its limited partners and $75,957 to its General Partner from
the proceeds of the sale of KATC-TV. In 1996, $108.1 million
($575 per Unit) was distributed to its limited partners and $1.1
million to its General Partner from the proceeds of the sale of
California Cable Systems. In 1997, $18.8 million ($100 per Unit)
was distributed to its limited partners and $189,893 accrued to
its General Partner from the release of (i) certain proceeds that
were deposited into escrow upon the sale of KATC-TV; (ii) certain
proceeds that were deposited into escrow upon the sale of the
California Cable Systems; and (iii) certain reserves previously
established upon the sales of KATC-TV, WREX-TV and the California
Cable Systems.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 26, December 27, December 29,
1997 1996 1995
<S> <C> <C> <C>
Operating revenues $ 53,223,98 $ 71,831,996 $ 109,214,031
3
Gain on sale of the
California Cable
Systems $ - $ 185,609,191 $ -
Gain on sale of
television stations
$ 3,702,72 $ - $ 22,796,454
5
Net Income $ 19,467,68 $ 189,711,304 $ 21,490,240
8
Net Income per Unit
of Limited
Partnership
Interest
$ 102.5 $ 999.04 $ 113.17
2
Number of Units 187,994 187,994 187,994
As of As of As of
December 26, December 27, December 29,
1997 1996 1995
Total Assets $ 156,646,17 $ 160,994,824 $ 210,198,496
8
Borrowings $ 54,244,03 $ 60,348,428 $ 182,821,928
8
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
December 30, December 31,
1994 1993
<S> <C> <C>
Operating revenues $105,910,208 $100,401,671
Net Income/(Loss) $(1,450,756) $ 1,377,340
Net Income/(Loss) per
Unit of Limited
Partnership Interest $ (7.64 $ 7.25
)
Number of Units 187,994 187,994
As of As of
December 30, December 31,
1994 1993
Total Assets $238,330,358 $249,851,937
Borrowings $218,170,968 $232,568,349
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources.
As of December 26, 1997, Registrant had $92,872,891 in cash and
cash equivalents. Of this amount, approximately $39.1 million is
restricted for use at the operating level of the Puerto Rico
Systems (as defined below) to fund capital expenditure programs
and satisfy future non-recourse debt service requirements
(including annual principal payments of $20 million, $10 million
of which is Registrant's share, commencing November 30, 1998) and
approximately $23.3 million is held in cash to cover operating
liabilities, current litigation, and litigation contingencies
relating to the California Cable Systems prior to and resulting
from their sale. In addition, approximately $16.9 million is
being held for use at the operating level of Registrant's other
remaining media properties, and all remaining cash and cash
equivalents are available to Registrant for uses as provided in
the Partnership Agreement. As of December 26, 1997, the amount
payable for accrued management fees and expenses owed to the
General Partner amounted to approximately $4.5 million.
Registrant's ongoing cash needs will be to fund debt service,
capital and operating expenditures and required working capital
as well as providing for costs and expenses related to the
purported class action lawsuit (see below).
On November 25, 1997, Registrant made a $100 per $1,000 limited
partnership unit ("Unit") cash distribution (less applicable
state and federal withholding taxes) totaling $18,799,400.
During 1998, $189,893 was paid to the General Partner
representing its 1% share. The funds for this distribution were
derived from the release of (i) certain proceeds that were
deposited into escrow upon the sale of KATC-TV; (ii) certain
proceeds that were deposited into escrow upon the sale of the
California Cable Systems; and (iii) certain reserves previously
established upon the sales of KATC-TV, WREX-TV and the California
Cable Systems. In accordance with the terms of the Partnership
Agreement, funds received from the release of an indemnity escrow
account, after accounting for certain expenses of Registrant,
including certain expenses incurred after the original sale, are
distributed to partners of record as of the date such unused
amounts are released from escrow, rather than to the partners of
record as of the date of the sale. In addition, funds from sales
reserves are distributed to partners of record as of the date of
their release (the date when Registrant determines such reserves
are no longer necessary), rather than to partners of record on
the date of the sale. Accordingly, the Limited Partners' portion
of such distribution was composed of the following: $10.09 per
Unit (totaling $1,896,860) from the release of the California
Cable Systems escrow account paid to partners of record on June
3, 1997; $5.26 per Unit (totaling $988,848) from the release of
the KATC-TV escrow account paid to partners of record on June 24,
1997; and, $84.65 per Unit (totaling $15,913,692) from the
release of funds from the various reserve accounts established in
connection with the sales of KATC-TV, WREX-TV and the California
Cable Systems paid to partners of record on August 14, 1997.
As of December 26, 1997, Registrant's operating investments in
media properties consisted of a 50% interest in a joint venture
(the "Venture"), which owns an FM (WFID-FM) and AM (WUNO-AM)
radio station combination and a background music service in San
Juan, Puerto Rico ("C-ML Radio"), and 100% of the stock of
Century-ML Cable Corporation ("C-ML Cable"; jointly with C-ML
Radio, the "Puerto Rico Systems"), which owns and operates two
cable television systems in Puerto Rico; an FM (WEBE-FM) and AM
(WICC-AM) radio station combination in Bridgeport, Connecticut;
an FM (KEZY-FM) and AM (KORG-AM) radio station combination in
Anaheim, California, and Wincom Broadcasting Corporation
("Wincom"), a corporation that owns an FM radio station (WQAL-FM)
in Cleveland, Ohio. In early October 1997, the Venture entered
into an agreement to sell C-ML Radio (see below).
Although no assurance can be made concerning the precise timing
of the ultimate disposition of Registrant's remaining media
properties, Registrant currently anticipates entering into
agreements to sell its remaining investments in media properties
in 1998. The General Partner currently anticipates that the
pendency of the lawsuit, (see below) the claims against
Registrant for indemnification, and the related costs, expenses
and involvement of management, will adversely affect (a) the
timing of the dissolution of Registrant, (b) the timing of the
distribution to the limited partners of the net proceeds from the
liquidation of Registrant's remaining assets, and (c) the amount
of proceeds which may be available for distribution.
On May 1, 1996, a purported class action lawsuit was filed in
Orange County Superior Court against Registrant on behalf of
subscribers of Registrant's California Cable Systems serving
Anaheim, Villa Park and adjacent areas of unincorporated Orange
County, California. This purported class action lawsuit alleges
that excessive late fee payments have been charged to such
subscribers since April, 1992. The suit sought refunds of late
fee payments to subscribers and related interest, damages and
legal costs. On September 5, 1997, the Order of the court was
signed and filed to give tentative approval to the late fee class
action settlement in the amount of $57,500. In December 1997, the
Superior Court approved this settlement on behalf of the
plaintiff class as required by law, and such settlement offer has
subsequently been paid and the case concluded.
On August 29, 1997, a purported class action was commenced in New
York Supreme Court, New York County, on behalf of the limited
partners of Registrant, against Registrant, Registrant's general
partner, Media Management Partners (the "General Partner"), the
General Partner's two partners, RPMM and MLMM, Merrill Lynch &
Co., Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"). The action concerns Registrant's payment of
certain management fees and expenses to the General Partner and
the payment of certain purported fees to an affiliate of RPMM.
Specifically, the plaintiffs allege breach of the Partnership
Agreement, breach of fiduciary duties, and unjust enrichment by
the General Partner in that the General Partner allegedly: (1)
improperly deferred and accrued certain management fees and
expenses in an amount in excess of $14.0 million, (2) improperly
paid itself such fees and expenses out of proceeds from sales of
Registrant assets, and (3) improperly paid MultiVision Cable TV
Corp., an affiliate of RPMM, supposedly duplicative fees in an
amount in excess of $14.4 million.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLMM
and RPMM, plaintiffs claim that these defendants aided and
abetted the General Partner in the alleged breach of the
Partnership Agreement and in the alleged breach of the General
Partner's fiduciary duties. Plaintiffs seek, among other things,
an injunction barring defendants from paying themselves fees or
expenses not expressly authorized by the Partnership Agreement,
an accounting, disgorgement of the alleged improperly paid fees
and expenses, and compensatory and punitive damages. On December
12, 1997, defendants served a motion to dismiss the complaint and
each claim for relief therein. Plaintiffs' response to
defendants' motion was served on March 20, 1998. Defendants'
reply to plaintiffs' response is due on April 29, 1998.
Defendants believe that they have good and meritorious defenses
to the action.
The Partnership Agreement provides for indemnification, to the
fullest extent provided by law, for any person or entity named as
a party to any threatened, pending or completed suit by reason of
any alleged act or omission arising out of such person's
activities as a General Partner or as an officer, director or
affiliate of either RPMM, MLMM or the General Partner, subject to
specified conditions. In connection with the purported class
action filed on August 29, 1997, Registrant has received notices
of requests for indemnification from the following defendants
named therein: the General Partner, RPMM, MLMM, Merrill Lynch &
Co., Inc. and Merrill Lynch. As of December 26, 1997, Registrant
accrued approximately $280,000 for legal costs incurred through
December 26, 1997, relating to such indemnification.
Wincom-WEBE-WICC
On July 30, 1993, Registrant and the Chase Manhattan Bank (the
"Wincom Bank") executed an amendment to the Wincom-WEBE-WICC Loan
(the "Restructuring Agreement"), effective January 1, 1993, which
cured all previously outstanding principal and interest payments
and covenant defaults pursuant to the Wincom-WEBE-WICC Loan.
Refer to Note 5 of "Item 8. Financial Statements and
Supplementary Data" for further information regarding the Wincom-
WEBE-WICC Loan and the Restructuring Agreement.
On December 31, 1997, the loans outstanding under the Wincom-WEBE-
WICC Loan matured and became due and payable in accordance with
their terms. As of that date, $4,244,038 of such amount remained
due and payable to the Wincom Bank. As a result of such default,
the Wincom Bank has the right to take actions to enforce its
right under the Wincom-WEBE-WICC Loan including the right to
foreclose on the properties of the Wincom-WEBE-WICC group. The
Wincom-WEBE-WICC Loan is non-recourse to the other assets of
Registrant. Registrant and the Wincom Bank are negotiating the
terms of a waiver of the default and an amendment to the Wincom-
WEBE-WICC Loan that would, among other things, extend the
maturity date of the loan to June 30, 1999. Registrant expects
to either enter into such amendment or to repay the full amount
of principal and interest due under the loan in 1998.
Puerto Rico Radio
In October 1997, the Venture entered into a sales agreement to
sell C-ML Radio for approximately $11.5 million, subject to
closing adjustments. In addition, in connection with such sales
agreement, Registrant entered into a Local Marketing Agreement,
effective as of October 1, 1997, which, subject to compliance
with the rules of the Federal Communications Commission
("Commission" or "FCC"), allows the buyer to program the station.
Since there are numerous conditions to closing, including FCC
approval, there can be no assurance that the sale will be
consummated as contemplated and without consummation the Local
Marketing Agreement will be cancelled. Registrant anticipates
receiving no proceeds from any resulting sale since any sale
proceeds received from the sale of C-ML Radio are required to be
applied against the aggregate outstanding senior indebtedness
which jointly finances C-ML Radio and C-ML Cable.
California Cable Systems
On November 28, 1994, Registrant entered into an agreement (the
"Asset Purchase Agreement") with Century Communications Corp.
("Century") to sell to Century substantially all of the assets
used in Registrant's California Cable Systems. On May 31, 1996,
Registrant consummated such sale pursuant to the terms of the
Asset Purchase Agreement. The base purchase price for the
California Cable Systems was $286 million, subject to certain
adjustments including an operating cash flow, as well as, a
working capital adjustment, as provided in the Asset Purchase
Agreement.
Pursuant to the Asset Purchase Agreement and a letter agreement,
entered into by Registrant and Century at closing, Registrant
deposited $5 million into an indemnity escrow account pending the
resolution of certain rate regulation and other matters relating
to charges by Registrant to its subscribers for cable service.
On June 3, 1997, Registrant received the release of such escrowed
proceeds ($5 million and approximately $300,000 of interest
earned thereon) generated from the sale of the California Cable
Systems. This release of escrowed proceeds, after accounting for
certain expenses of Registrant, was included in a cash
distribution made to partners on November 25, 1997, in accordance
with the terms of the Partnership Agreement.
In addition, upon closing of the sale of the California Cable
Systems, Registrant set aside approximately $40.7 million in a
cash reserve to cover operating liabilities, current litigation,
and litigation contingencies relating to the California Cable
Systems' operations prior to and resulting from their sale, as
well as a potential purchase price adjustment. In accordance
with the terms of the Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement"), any amounts which may
be available for distribution from any unused cash reserves,
after accounting for certain other expenses of Registrant
including certain expenses incurred after May 31, 1996, will be
distributed to partners of record as of the date such unused
reserves are released, when Registrant determines such reserves
are no longer necessary, rather than to the partners of record on
May 31, 1996, the date of the sale.
Effective August 14, 1997, reserves in the amount of
approximately $13.2 million were released and, after accounting
for certain expenses of Registrant, in accordance with the terms
of the Partnership Agreement, were included in the cash
distribution that was distributed to partners on November 25,
1997. As of December 26, 1997, Registrant had approximately
$23.3 million remaining in cash reserves to cover operating
liabilities, current litigation, and litigation contingencies
relating to the California Cable Systems prior to and resulting
from their sale.
Year 2000 Compliance Issue
The inability of computers, software and other equipment
utilizing microprocessors to recognize and properly process data
fields containing a two digit year is commonly referred to as the
Year 2000 Compliance issue. As the year 2000 approaches, such
systems may be unable to accurately process certain data-based
information. Many businesses may need to upgrade existing
systems or purchase new ones to correct the Year 2000 issue.
The total costs to Registrant of the Year 2000 Compliance is not
anticipated to be material to its financial position or results
of operations in any given year. However, there can be no
guarantee that the systems of other companies on which
Registrant's systems rely will be timely converted, or that a
failure to convert by another company or a conversion that is
incompatible with Registrant's systems, would not have a material
adverse effect on Registrant.
Recent Accounting Statements Not Yet Adopted
Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosures about Segments of an Enterprise and Related
Information," was issued in June 1997 and is effective for
financial statements for periods beginning after December 15,
1997. This statement establishes standards for the way public
companies report information about operating segments in annual
and interim financial statements. Registrant believes its
current reporting systems will enable it to comply with the
implementation of SFAS No. 131.
Impact of Legislation and Regulation
The information set forth in the Legislation and Regulation
Section of Part I, Item 1. Business, is hereby incorporated by
reference and made a part hereof.
Forward Looking Information
In addition to historical information contained or incorporated
by reference in this report on Form 10-K, Registrant may make or
publish forward-looking statements about management expectations,
strategic objectives, business prospects, anticipated financial
performance, and other similar matters. In order to comply with
the terms of the safe harbor for such statements provided by the
Private Securities Litigation Reform Act of 1995, Registrant
notes that a variety of factors, many of which are beyond its
control, affect its operations, performance, business strategy,
and results and could cause actual results and experience to
differ materially from the expectations expressed in these
statements. These factors include, but are not limited to, the
effect of changing economic and market conditions, trends in
business and finance and in investor sentiment, the level of
volatility of interest rates, the actions undertaken by both
current and potential new competitors, the impact of current,
pending, and future legislation and regulation both in the United
States and throughout the world, and the other risks and
uncertainties detailed in this Form 10-K. Registrant undertakes
no responsibility to update publicly or revise any forward-
looking statements.
Results of Operations.
For the years ended December 26, 1997 and December 27, 1996:
Net Income.
Registrant's net income for the year ended December 26, 1997 was
approximately $19.5 million, as compared to net income of
approximately $189.7 million for the 1996 period. The decrease
in net income for the 1997 period primarily resulted from the
gain recognized from the sale of the California Cable Systems
during the second quarter of 1996, as well as the effect on
operations of such sale and other factors described below.
Operating Revenues.
During the years ended December 26, 1997 and December 27, 1996,
Registrant had total operating revenues of approximately $53.2
million and $71.8 million, respectively. The approximate $18.6
million decrease in operating revenues was primarily due to a
decrease of approximately $24.1 million in operating revenues
resulting from the sale of the California Cable Systems during
the second quarter of 1996, partially offset by an increase in
operating revenues at C-ML Cable of approximately $2.2 million as
well as a combined increase of approximately $3.4 at the Wincom-
WEBE-WICC Group. The increase in operating revenues at C-ML Cable
occurred as a result of an increase in the number of basic
subscribers during 1997, and implementation of rate increases.
The average level of basic subscribers at C-ML Cable increased to
120,664 in 1997 from 116,497 in 1996, and the total number of
basic subscribers increased to 123,990 at the end of 1997 from
117,338 at the end of 1996. Total premium subscriptions
decreased to 68,445 at the end of 1997 from 75,760 at the end of
1996 at C-ML Cable due to the Disney Channel being switched to
the basic channel line-up. The combined increase in operating
revenues at the Wincom-WEBE-WICC Group is due to stronger market
conditions at all three stations, including higher advertising
rates arising from increased ratings. The remaining increases or
decreases in operating revenues were immaterial, either
individually or in the aggregate.
Interest Income.
Registrant earned interest income of approximately $3.4 million
and $3.7 million during the years ended December 26, 1997 and
December 27, 1996, respectively. The decrease is due primarily
to interest earned on the lower average cash balances that
existed during 1997 and the interest earned on the higher cash
balances that existed during 1996 related to the sale of KATC,
WREX and the California Cable Systems.
Property Operating Expense.
During the years ended December 26, 1997 and December 27, 1996,
Registrant incurred property operating expenses of approximately
$19.2 million and $25.4 million, respectively. Registrant's
total property operating expenses decreased by approximately $6.2
million from year to year primarily as a result of the sale of
the California Cable Systems during the second quarter of 1996,
offset by an increase of approximately $1.2 million at C-ML Cable
due to expenses directly related to the increase in operating
revenues, as well as increased marketing costs and $1.2 million
increase at the combined Wincom-WEBE-WICC Group due to increased
sales compensation resulting from higher revenues as well as
increased advertising, marketing, and programming expense
incurred to combat increased competition. The remaining
increases or decreases in property operating expenses at
Registrant's other properties were immaterial, either
individually or in the aggregate.
General and Administrative Expense.
During the years ended December 26, 1997 and December 27, 1996,
Registrant incurred general and administrative expenses of
approximately $7.9 million and $14.1 million, respectively.
Registrant's total general and administrative expenses decreased
by approximately $6.2 million from year to year primarily as a
result of the sale of the California Cable Systems during the
second quarter of 1996 as well as a $1.1 million decrease at C-ML
Cable due to the recognition of tax benefit items in the current
year. The remaining increases or decreases in general and
administrative expenses at Registrant's other properties were
immaterial, either individually or in the aggregate.
Depreciation and Amortization Expense.
Registrant's depreciation and amortization expense totaled
approximately $7.5 million and $20.2 million during the years
ended December 26, 1997 and December 27, 1996, respectively.
Registrant's total depreciation and amortization expense
decreased by approximately $12.7 million from year to year as a
result of the sale of the California Cable Systems during the
second quarter of 1996 as well as a decrease at C-ML Cable which
primarily resulted from the write-off of certain fixed assets
during 1996. The remaining increases or decreases in
depreciation and amortization expense at Registrant's other
properties were immaterial, either individually or in the
aggregate.
Interest Expense.
Interest expense of approximately $5.1 million and $10.4 million
in the years ended December 26, 1997 and December 27, 1996,
respectively, represents the cost incurred for borrowed funds
utilized to acquire various media properties. The approximate
$5.3 million decrease in interest expense is primarily due to the
repayment in full of the outstanding borrowings of the California
Cable Systems and the Anaheim Radio Stations in 1996.
For the years ended December 27, 1996 and December 29, 1995:
Net Income.
Registrant's net income for the years ended December 27, 1996 was
approximately $189.7 million, as compared to net income of
approximately $21.5 million for the 1995 period. The increase in
net income for the 1996 period primarily resulted from the gain
recognized from the sale of the California Cable Systems during
the second quarter of 1996, partially offset by the sales of KATC-
TV and WREX-TV during 1995, as well as the effect on operations of
such sales and other factors described below.
Operating Revenues.
During the years ended December 27, 1996 and December 29, 1995,
Registrant had total operating revenues of approximately $71.8
million and $109.2 million, respectively. The approximate $37.4
million decrease in operating revenues was primarily due to a
decrease of approximately $41.3 million in operating revenues
resulting from the sale of the California Cable Systems during
the second quarter of 1996 and the sales of KATC and WREX during
1995, partially offset by an increase of approximately $2.2
million in operating revenues at C-ML Cable as well as a combined
increase of approximately $1.0 million in the Wincom-WEBE-WICC
Group. The increase in operating revenues at C-ML Cable occurred
as a result of an increase in the number of basic and premium
subscribers during 1996, implementation of rate increases and an
increase in pay revenue due to both an increase in subscriptions
as well as the average pay rate. The average level of basic
subscribers at C-ML Cable increased to 116,497 in 1996 from
113,942 in 1995, and the total number of basic subscribers
increased to 117,338 at the end of 1996 from 115,655 at the end
of 1995. The number of average premium subscriptions at C-ML
Cable increased to 74,663 during 1996 from 71,150 during 1995 due
to aggressive marketing efforts. Total premium subscriptions
increased to 75,760 at the end of 1996 from 73,565 at the end of
1995 at C-ML Cable. The combined increase in operating revenues
at the Wincom-WEBE-WICC Group was due to stronger local and
national advertising and network revenues resulting from improved
ratings at both WEBE-FM and WQAL-FM. The remaining increases or
decreases in operating revenues were immaterial either
individually or in the aggregate.
Interest Income.
Registrant earned interest income of approximately $3.7 million
and $332,000 during the years ended December 27, 1996 and
December 29, 1995, respectively. The increase is due primarily to
interest earned on the higher cash balances that existed during
1996 related to the sales of KATC, WREX and the California Cable
Systems.
Property Operating Expense.
During the years ended December 27, 1996 and December 29, 1995,
Registrant incurred property operating expenses of approximately
$25.4 million and $39.3 million, respectively. Registrant's
total property operating expenses decreased by approximately
$13.9 million from year to year due primarily as a result of the
sale of the California Cable Systems during 1996 and KATC and
WREX during 1995. The remaining increases or decreases in
property operating expenses at Registrant's other properties were
immaterial, either individually or in the aggregate.
General and Administrative Expense.
During the years ended December 27, 1996 and December 29, 1995,
Registrant incurred general and administrative expenses of
approximately $14.1 million and $22.5 million, respectively.
Registrant's total general and administrative expenses decreased
by approximately $8.4 million from year to year due primarily as
a result of the sale of the California Cable Systems during the
second quarter of 1996 and KATC and WREX during 1995. The
remaining increases or decreases in general and administrative
expenses at Registrant's other properties were immaterial, either
individually or in the aggregate.
Depreciation and Amortization Expense.
Registrant's depreciation and amortization expense totaled
approximately $20.2 million and $28.1 million in the years ended
December 27, 1996 and December 29, 1995, respectively. The
approximate $7.9 million decrease in Registrant's total
depreciation and amortization expense from year to year as a
result of the sale of the California Cable Systems during 1996
and KATC and WREX during 1995, offsetting an approximate $3.8
million increase at C-ML Cable which resulted from the write-off
of certain fixed assets during 1996. The remaining increases or
decreases in depreciation and amortization expense at
Registrant's other properties were immaterial, either
individually or in the aggregate.
Interest Expense.
Interest expense of approximately $10.4 million and $19.4 million
in the years ended December 27, 1996 and December 29, 1995,
respectively, represents the cost incurred for borrowed funds
utilized to acquire various media properties. The approximate
$9.0 million decrease in interest expense is primarily due to a
decrease of approximately $8.8 million related to the combined
effect of the full repayment of the outstanding borrowings of the
California Cable Systems and of the outstanding borrowings of the
television stations in 1995.
Additional Operating Information
Registrant holds a 50% interest in the Venture, which in turn,
through C-ML Cable, passed 284,450 homes, provided basic cable
television service to 123,990 subscribers and accounted for
68,445 pay subscriptions as of December 26, 1997. The following
table shows the numbers of basic subscribers and pay
subscriptions at Registrant's wholly-owned California Cable
Systems and at C-ML Cable:
<TABLE>
<CAPTION> As of As of As of
December 26, December 27, December 29,
1997 1996 1995
<S> <C> <C>
Homes Passed
California Cable
Systems (wholly-
owned) 0 0 221,256
C-ML Cable (50%
owned) 284,450 276,858 272,198
Basic Subscribers
California Cable
Systems (wholly-
owned) 0 0 138,864
C-ML Cable (50%
owned) 123,990 117,338 115,655
Pay Subscriptions
California Cable
Systems (wholly-
owned) 0 0 73,500
C-ML Cable (50%
owned) 68,445 75,760 73,565
</TABLE>
The overall number of homes passed by C-ML Cable increased from
the end of 1995 to the end of 1997 due primarily to the extension
of cable plant to pass incremental homes, and the number of basic
subscribers increased during the same period. This is due to the
extension of cable service to pass additional homes, as well as
to an increased level of marketing. The number of pay
subscriptions at C-ML Cable decreased from the end of 1995 to the
end of 1997, primarily due to the Disney channel being switched
to the basic channel line-up.
As of December 26, 1997, Registrant operated seven radio stations
in three cities in the continental United States and one city in
Puerto Rico. Each of Registrant's broadcast properties competes
with numerous other outlets in its area, with the number of
competing outlets varying from location to location. Stations
are rated in each market versus competitors based on the number
of viewers or listeners tuned to the various outlets in that
market.
The information set forth below briefly describes, for each
station owned by Registrant, the number of competitors that each
station faces in its market and the station's ranking in that
market, where applicable.
Registrant's radio station WQAL-FM in Cleveland, Ohio competes
with approximately 25 other radio stations in the Cleveland
market according to Arbitron, an accepted industry source.
According to Arbitron, the station was ranked number one in the
market in terms of listeners 12+ as of the Fall, 1997 rating
period.
Registrant's radio stations WEBE-FM and WICC-AM in Fairfield
County, Connecticut compete with approximately 45 other radio
stations in the Fairfield County market according to Arbitron.
According to Arbitron, WEBE-FM was ranked number one in Fairfield
County and WICC-AM was ranked number one in Bridgeport,
Connecticut in terms of listeners 12+ as of the Fall, 1997 rating
period.
Market rating information was not available from a reliable
source for Registrant's radio stations in Puerto Rico.
While reliable data is available from Arbitron for Registrant's
radio stations in Anaheim, California, this information is not
available to Registrant, as it does not subscribe to Arbitron or
any other ratings service in the Anaheim market.
The above information on competition and ratings for Registrant's
broadcast properties may give a distorted view of the success of,
or competitive challenges to, each of the properties for a number
of reasons. For example, the signals of stations listed as
competitors may not be of equal strength throughout the market.
In addition, the competitive threat posed by stations that serve
essentially the same broadcast area is largely dependent upon
factors (e.g., financial strength, format, programming,
management, etc.) unknown to or outside the control of
Registrant. Finally, rating information is segmented according
to numerous demographic groups (e.g., listeners 12+, women 25-34,
etc.), some of which are considered more attractive than others
by advertisers. Consequently, a station may be ranked highly for
one group but not another, with strength in different groups
having substantially different impacts on financial performance.
For purposes of the discussion above, the most general type of
rating was used.
Item 8. Financial Statements and Supplementary Data.
TABLE OF CONTENTS
ML Media Partners, L.P.
Independent Auditors' Report
Consolidated Balance Sheets as of December 26, 1997 and
December 27, 1996
Consolidated Income Statements for the Three Years Ended
December 26, 1997
Consolidated Statements of Cash Flows for the Three Years
Ended December 26, 1997
Consolidated Statements of Changes in Partners'
Capital/(Deficit) for the Three Years Ended
December 26, 1997
Notes to Consolidated Financial Statements for the Three
Years Ended December 26, 1997
No financial statement schedules are included because of the
absence of the conditions under which they are required or because
the information is included in the financial statements or the
notes thereto.
INDEPENDENT AUDITORS' REPORT
ML Media Partners, L.P.:
We have audited the accompanying consolidated financial
statements of ML Media Partners, L.P. (the "Partnership") and its
affiliated entities, as listed in the accompanying table of
contents. These consolidated financial statements and financial
statement schedules are the responsibility of the Partnership's
general partner. Our responsibility is to express an opinion on
the consolidated financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by the general partner, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Partnership and its affiliated entities as of December 26, 1997
and December 27, 1996 and the results of their operations and
their cash flows for each of the three years in the period ended
December 26, 1997 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche, LLP.
New York, New York
March 20, 1998
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 26, 1997 AND DECEMBER 27, 1996
1997 1996
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 92,872,891 $ 91,591,280
Investments held by escrow
agents - 6,244,252
Accounts receivable (net of
allowance for doubtful
accounts of $328,702 and
$798,773, respectively) 5,550,419 6,768,307
Prepaid expenses and deferred
charges (net of accumulated
amortization of $3,640,331
and $3,481,529,
respectively) 1,355,810 984,574
Property, plant and equipment
- - net 23,564,815 20,582,046
Intangible assets - net 28,492,491 33,587,880
Assets held for sale 2,906,500 -
Other assets 1,903,252 1,236,485
TOTAL ASSETS $156,646,178 $160,994,824
LIABILITIES AND PARTNERS'
CAPITAL:
Liabilities:
Borrowings $ 54,244,038 $ 60,348,428
Accounts payable and
accrued liabilities 22,252,266 20,941,830
Subscriber advance payments 1,512,748 1,545,835
Total Liabilities 78,009,052 82,836,093
</TABLE>
(Continued on the following page.)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 26, 1997 AND DECEMBER 27, 1996
(continued)
Notes 1997 1996
<S> <C> <C> <C>
Commitments and Contingencies 5,7
Partners' Capital:
General Partner:
Capital contributions, net of
offering expenses 1,708,299 1,708,299
Cash distributions (1,357,734) (1,167,841)
Cumulative income 498,724 304,047
849,289 844,505
Limited Partners:
Capital contributions, net of
offering expenses (187,994
Units of Limited Partnership
Interest) 169,121,150 169,121,150
Tax allowance cash distribution
(6,291,459) (6,291,459)
Cash distributions (134,415,710) (115,616,310)
Cumulative income 49,373,856 30,100,845
77,787,837 77,314,226
Total Partners' Capital 78,637,126 78,158,731
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $ 156,646,178 $ 160,994,824
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 26, 1997
1997 1996 1995
<S> <C> <C> <C>
REVENUES:
Operating revenues $ 53,223,983 $ 71,831,996 $109,214,031
Interest 3,352,983 3,692,033 332,181
Loss on
sale of assets - - (22,802)
Gain on sale of the
California Cable
Systems - 185,609,191 -
Gain on sale of
WREX 2,005,498 - 8,838,248
Gain on sale of
KATC 1,697,227 - 13,958,206
Total revenues 60,279,691 261,133,220 132,319,864
COSTS AND EXPENSES:
Property operating 19,201,288 25,351,743 39,301,436
General and
administrative 7,858,645 14,142,538 22,457,523
Depreciation and
amortization 7,457,623 20,238,004 28,086,433
Interest expense 5,082,776 10,352,597 19,417,987
Management fees 1,211,671 1,337,034 1,566,245
Total costs and
expenses 40,812,003 71,421,916 110,829,624
NET INCOME $ 19,467,688 $189,711,304 $ 21,490,240
PER UNIT OF LIMITED
PARTNERSHIP INTEREST:
NET INCOME $ 102.52 $ 999.04 $ 113.17
Number of Units 187,994 187,994 187,994
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 26, 1997
1997 1996 1995
<S> <C> <C> <C>
Cash flows from
operating activities:
Net income $ 19,467,688 $189,711,304 $ 21,490,24
0
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 7,457,623 20,238,004 28,086,433
Bad debt expense/
(recovery, net) (117,767) 360,989 236,504
Gain on sale of assets - - 22,802
Gain on sale of the
California Cable Systems - (185,609,191) -
Gain on sale of WREX (2,005,498) - (8,838,248)
Gain on sale of KATC (1,697,227) - (13,958,206
)
Changes in operating
assets and liabilities:
Decrease/(Increase):
Short-term investments
held by agents - - 6,000,000
Investments held by
escrow agents 6,244,252 (5,244,252) (1,000,000)
Accounts receivable 683,226 4,387,235 (750,328)
Prepaid expenses and
deferred charges (536,204) 396,823 197,004
Other assets (680,267) (62,218) 1,468,187
(Decrease)/Increase:
Accounts payable and
accrued liabilities 7,775,070 (10,445,177) (10,154,531
)
Subscriber advance
payments (33,087) (101,592) 214,52
9
Net cash provided by
operating activities 36,557,809 13,631,925 23,014,386
</TABLE>
(Continued on the following page.)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 26, 1997
(continued)
1997 1996 1995
<S> <C> <C> <C>
Cash flows from investing
activities:
Proceeds from sale of - - 30,923
assets
Purchase of property,
plant and equipment (7,917,343) (8,236,792) (9,282,276)
Intangible assets - (10,000) (246,699)
Proceeds from sale of the
California Cable
Systems - 286,000,000 -
Payment of costs
incurred related to sale
of the California Cable
Systems (2,455,065) (8,256,285) -
Proceeds from sale of KATC - - 24,500,000
Proceeds from sale of WREX - - 18,370,500
Net cash provided by/
(used in) investing
activities (10,372,408 269,496,923 33,372,448
)
Cash flows from
financing activities:
Principal payments on
borrowings (6,104,390) (122,473,500) (35,349,040)
Cash distributions (18,799,400 (109,188,434) (7,595,717)
)
Net cash used in
financing activities (24,903,790 (231,661,934) (42,944,757)
)
Net increase in cash and
cash equivalents 1,281,611 51,466,914 13,442,077
Cash and cash equivalents
at beginning of year 91,591,280 40,124,366 26,682,289
Cash and cash equivalents
at end of year $ 92,872,891 $ 91,591,280 $ 40,124,366
Cash paid for interest $ 5,614,297 $ 10,772,817 $ 21,384,422
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL/(DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 26, 1997
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
1995:
Partners' Deficit as
of January 1, 1995 $ (99,669) $ (16,158,993) $ (16,258,662)
Net Income 214,902 21,275,338 21,490,240
Cash Distribution (75,957) (7,519,760) (7,595,717)
Partners' Capital/
(Deficit) as of
December 29, 1995 39,276 (2,403,415) (2,364,139)
1996:
Net Income 1,897,113 187,814,191 189,711,304
Cash Distribution (1,091,884) (108,096,550) (109,188,434)
Partners' Capital as
of December 27, 1996 844,505 77,314,226 78,158,731
1997:
Net Income 194,677 19,273,011 19,467,688
Cash Distribution (189,893) (18,799,400) (18,989,293)
Partners' Capital as
of December 26, 1997 $ 849,289 $ 77,787,837 $ 78,637,126
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ML MEDIA PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 26, 1997
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ML Media Partners, L.P. (the "Partnership") was formed and the
Certificate of Limited Partnership was filed under the Delaware
Revised Uniform Limited Partnership Act on February 1, 1985.
Operations commenced on May 14, 1986 with the first closing of
the sale of units of limited partnership interest ("Units").
Subscriptions for an aggregate of 187,994 Units were accepted and
are now outstanding.
Media Management Partners (the "General Partner") is a joint
venture, organized as a general partnership under the laws of the
State of New York, between RP Media Management ("RPMM"), a joint
venture organized as a general partnership under the laws of the
State of New York, consisting of The Elton H. Rule Company and
IMP Media Management, Inc., and ML Media Management Inc.
("MLMM"), a Delaware corporation and an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. The General Partner was
formed for the purpose of acting as general partner of the
Partnership. The General Partner's total capital contribution
amounted to $1,898,934 which represents 1% of the total
Partnership capital contributions.
Pursuant to the terms of the Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement"), the General
Partner is liable for all general obligations of the Partnership
to the extent not paid by the Partnership. The limited partners
are not liable for the obligations of the Partnership in excess
of the amount of their contributed capital.
The Partnership was formed to acquire, finance, hold, develop,
improve, maintain, operate, lease, sell, exchange, dispose of and
otherwise invest in and deal with media businesses and direct and
indirect interests therein.
As of December 26, 1997, the Partnership's operating investments
in media properties consisted of:
a 50% interest in a joint venture (the "Venture"), which owns an
FM (WFID-FM) and AM (WUNO-AM) radio station combination and a
background music service in San Juan, Puerto Rico ("C-ML Radio"),
and 100% of the stock of Century-ML Cable Corporation ("C-ML
Cable", jointly with C-ML Radio, the "Puerto Rico Systems"),
which owns and operates two cable television systems in Puerto
Rico;
an FM (WEBE-FM) and AM (WICC-AM) radio station combination in
Bridgeport, Connecticut;
an FM (KEZY-FM) and AM (KORG-AM) radio station combination in
Anaheim, California;
and Wincom Broadcasting Corporation ("Wincom"), a corporation
that owns an FM radio station (WQAL-FM) in Cleveland, Ohio.
In early October 1997, the Venture entered into an agreement to
sell C-ML Radio (see Note 2).
Reclassifications
Certain reclassifications were made to the 1996 and 1995
financial statements to conform with the current period's
presentation.
Basis of Accounting and Fiscal Year
The Partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax purposes. Pursuant to
generally accepted accounting principles, the Partnership
recognizes revenue as various services are provided. The
Partnership consolidates its 100% interest in Wincom; its 99.999%
interests in WEBE-FM, WICC-AM, KEZY-FM and KORG-AM and its pro
rata 50% interest in the Venture. In addition, the Partnership
consolidated KATC-TV, WREX-TV and California Cable Systems prior
to their respective dispositions (see Note 2). All intercompany
accounts have been eliminated. The fiscal year of the
Partnership ends on the last Friday of each calendar year.
Cash Equivalents
Short-term investments which have an original maturity of ninety
days or less are considered cash equivalents.
Property and Depreciation
Property, plant and equipment is stated at cost, less accumulated
depreciation. Property, plant and equipment is depreciated using
the straight-line method over the following estimated useful
lives:
<TABLE>
<CAPTION>
<S> <C>
Machinery, Equipment and Distribution Systems 5-12 years
Buildings 15-30.5 years
Other 3-10 years
</TABLE>
Initial subscriber connection costs, as it relates to the cable
television systems, are capitalized and included as part of the
distribution systems. Costs related to disconnects and reconnects
are expensed as incurred. Expenditures for maintenance and
repairs are charged to operating expense as incurred.
Betterments, replacement equipment and additions are capitalized
and depreciated over the remaining life of the assets.
Intangible Assets and Deferred Charges
Intangible assets and deferred charges are being amortized on a
straight-line basis over various periods as follows:
<TABLE>
<CAPTION>
<S> <C>
Franchise life of the franchise
Other Intangibles various
Deferred Costs 4-10 years
</TABLE>
The excess of cost over fair value of net assets acquired
("Goodwill") in business combinations consummated since inception
of the Partnership is being amortized to expense over forty years
using the straight-line method.
Asset Impairment
The Partnership assesses the impairment of assets on a regular
basis or immediately upon the occurrence of a significant event
in the marketplace or an event that directly impacts its assets.
The methodology varies depending on the type of asset but
typically consists of comparing the net book value of the asset
to either: (1) the undiscounted expected future cash flows
generated by the asset, and/or (2) the current market values
obtained from industry sources.
If the net book value of a particular asset is materially higher
than the estimated net realizable value, and the asset is
considered to be permanently impaired, the Partnership will write
down the net book value of the asset accordingly; however, the
Partnership may not write its assets down to a value below the
asset-related non-recourse debt. The Partnership relies on
industry sources and its experience in the particular marketplace
to determine whether an asset impairment is other than temporary.
Barter Transactions
As is customary in the broadcasting industry, the Partnership
engages in the bartering of commercial air time for various goods
and services. Barter transactions are recorded based on the fair
market value of the products and/or services received. The goods
and services are capitalized or expensed as appropriate when
received or utilized. Revenues are recognized when the
commercial spots are aired.
Revenue Recognition
Operating revenue, as it relates to the cable television systems,
includes earned subscriber service revenues and charges for
installation and connections. Subscriber services paid for in
advance are recorded as income when earned. Operating revenue,
as it relates to the radio broadcasting properties is net of
commissions paid to advertising agencies.
Management Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107,
"Disclosures about Fair Value of Financial Instruments", requires
companies to report the fair value of certain on- and off-balance
sheet assets and liabilities which are defined as financial
instruments.
Considerable judgment is required in interpreting data to develop
the estimates of fair value. Accordingly, the estimates presented
herein are not indicative of the amounts that the Partnership
could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
Income Taxes
The Partnership accounts for income taxes pursuant to SFAS No.
109 "Accounting for Income Taxes". No provision for income taxes
has been made for the Partnership because all income and losses
are allocated to the partners for inclusion in their respective
tax returns. However, the Partnership owns certain entities
which are consolidated in the accompanying financial statements
which are taxable entities.
For entities owned by the Partnership which are consolidated in
the accompanying financial statements, SFAS No. 109 requires the
recognition of deferred income taxes for the tax consequences of
differences between the bases of assets and liabilities for
income tax and financial statement reporting, based on enacted
tax laws. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be
realized. For the Partnership, SFAS No. 109 requires the
disclosure of the difference between the tax bases and the
reported amounts of the Partnership's assets and liabilities (see
Note 11).
Recent Accounting Statements Not Yet Adopted
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued in June 1997 and is effective
for financial statements for periods beginning after December 15,
1997. This statement establishes standards for the way public
companies report information about operating segments in annual
and interim financial statements. The Partnership believes its
current reporting systems will enable it to comply with the
implementation of SFAS No. 131.
2. DISPOSITION OF ASSETS AND PENDING TRANSACTIONS
WREX
On July 31, 1995, the Partnership completed the sale to Quincy
Newspapers, Inc. ("Quincy") of substantially all of the assets
used in the operations of the Partnership's television station
WREX-TV, Rockford, Illinois ("WREX"), other than cash and
accounts receivable. Quincy did not assume certain liabilities
of WREX. The purchase price for the assets was approximately
$18.4 million, subject to certain adjustments. A reserve of
approximately $2.3 million was established to cover certain
purchase price adjustments and expenses and liabilities relating
to WREX, and the balance of approximately $16.1 million was
applied to repay a portion of the bank indebtedness secured by
the assets of WREX and KATC (as defined below). On the sale of
WREX, the Partnership recognized a gain for financial reporting
purposes of approximately $8.8 million in 1995.
Effective August 14, 1997, approximately $1.8 million, a portion
of the reserve established at the time of the WREX sale, was
released. In accordance with the terms of the Partnership
Agreement, such released reserve amount, after accounting for
certain expenses of the Partnership, were included in the cash
distribution made to partners on November 25, 1997. In addition,
effective December 26, 1997, the remaining reserve established at
the time of the WREX sale of approximately $161,000 was released.
Thus, during 1997, the Partnership recognized a gain on sale of
WREX of approximately $2.0 million resulting from the release of
reserves and reversal of previous accruals.
KATC
On September 30, 1995, the Partnership completed the sale to KATC
Communications, Inc. (the "KATC Buyer") of substantially all of
the assets used in the operations of the Partnership's television
station KATC-TV, Lafayette, Louisiana ("KATC"), other than cash
and accounts receivable. The KATC Buyer did not assume certain
liabilities of KATC. The purchase price for the assets was $24.5
million. From the proceeds of the sale, approximately $6.3
million was applied to repay in full the remaining bank
indebtedness secured by the assets of KATC and WREX; a reserve of
approximately $2.0 million was established to cover certain
purchase price adjustments and expenses and liabilities relating
to KATC; $1.0 million was deposited into an indemnity escrow
account to secure the Partnership's indemnification obligations
to the KATC Buyer; approximately $7.6 million was applied to pay
a portion of accrued fees and expenses owed to the General
Partner; and the remaining amount of approximately $7.6 million
($40 per Unit) was distributed to partners in December, 1995.
The Partnership recognized a gain for financial reporting
purposes of approximately $14.0 million on the sale of KATC in
1995.
On June 24, 1997, the Partnership received the release of
escrowed proceeds of $1.0 million (and approximately $100,000 of
interest earned thereon) generated from the sale of KATC. In
addition, effective August 14, 1997, approximately $1.5 million,
a portion of the reserve established at the time of the KATC
sale, was released. In accordance with the terms of the
Partnership Agreement, the amount of such released reserve and
escrowed proceeds, after accounting for certain expenses of the
Partnership, were included in the cash distribution made to
partners on November 25, 1997. In addition, effective December
26, 1997, the remaining reserve established at the time of the
KATC sale of approximately $218,000 was released. Thus, during
1997, the Partnership recognized a gain on sale of KATC-TV of
approximately $1.7 million resulting from the release of reserves
and reversal of previous accruals.
Puerto Rico Radio
In October 1997, the Venture entered into a sales agreement to
sell C-ML Radio for approximately $11.5 million, subject to
closing adjustments. In addition, in connection with such sales
agreement, the Partnership entered into a Local Marketing
Agreement, effective as of October 1, 1997, which, subject to
compliance with the rules of the Federal Communications
Commission ("Commission" or "FCC"), allows the buyer to program
the station. Since there are numerous conditions to closing,
including FCC approval, there can be no assurance that the sale
will be consummated as contemplated and without consummation the
Local Marketing Agreement will be cancelled. The Partnership
anticipates receiving no proceeds from any resulting sale since
any sale proceeds received from the sale of C-ML Radio are
required to be applied against the aggregate outstanding senior
indebtedness which jointly finances C-ML Radio and C-ML Cable.
The net assets of C-ML Radio which are to be sold pursuant to the
sale agreement have been included in assets held for sale on the
accompanying Consolidated Balance Sheet as of December 26, 1997.
California Cable
On November 28, 1994, the Partnership entered into an agreement
(the "Asset Purchase Agreement") with Century Communications
Corp. ("Century") to sell to Century substantially all of the
assets used in the Partnership's California Cable Operation
serving the Anaheim, Hermosa Beach/Manhattan Beach, Rohnert
Park/Yountville and Fairfield communities (the "California Cable
Systems"). On May 31, 1996, the Partnership consummated such
sale pursuant to the terms of the Asset Purchase Agreement. The
base purchase price for the California Cable Systems was $286
million, subject to certain adjustments including an operating
cash flow, as well as, a working capital adjustment, as provided
in the Asset Purchase Agreement.
Pursuant to the Asset Purchase Agreement and a letter agreement,
entered into by the Partnership and Century at closing, the
Partnership deposited $5 million into an indemnity escrow account
pending the resolution of certain rate regulation and other
matters relating to charges by the Partnership to its subscribers
for cable service. On June 3, 1997, the Partnership received the
release of such escrowed proceeds ($5 million and approximately
$300,000 of interest earned thereon) generated from the sale of
the California Cable Systems. This release of escrowed proceeds,
after accounting for certain expenses of the Partnership, was
included in a cash distribution made to partners on November 25,
1997, in accordance with the terms of the Partnership Agreement.
In addition, upon closing of the sale of the California Cable
Systems, the Partnership set aside approximately $40.7 million in
a cash reserve to cover operating liabilities, current
litigation, and litigation contingencies relating to the
California Cable Systems' operations prior to and resulting from
their sale, as well as a potential purchase price adjustment. In
accordance with the terms of the Partnership Agreement, any
amounts which may be available for distribution from any unused
cash reserves, after accounting for certain other expenses of the
Partnership including certain expenses incurred after May 31,
1996, will be distributed to partners of record as of the date
such unused reserves are released, when the Partnership
determines such reserves are no longer necessary, rather than to
the partners of record on May 31, 1996, the date of the sale.
Effective August 14, 1997, reserves in the amount of
approximately $13.2 million were released and, after accounting
for certain expenses of the Partnership, in accordance with the
terms of the Partnership Agreement, were included in the cash
distribution that was distributed to partners on November 25,
1997. As of December 26, 1997, the Partnership has approximately
$23.3 million remaining in cash reserves to cover operating
liabilities, current litigation, and litigation contingencies
relating to the California Cable Systems prior to and resulting
from their sale.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION> As of As of
December 26, December 27,
1997 1996
<S> <C> <C>
Land and Improvements $ 549,613 $ 994,026
Buildings 2,070,652 2,330,889
Cable Distribution Systems
and Equipment 34,773,035 31,486,992
Other 1,124,352 1,016,181
38,517,652 35,828,088
Less accumulated (14,952,837) (15,246,042)
depreciation
Property, plant and
equipment, net $ 23,564,815 $ 20,582,046
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION> As of As of
December 26, December 27,
1997 1996
<S> <C> <C>
Goodwill $ 41,611,143 $ 43,798,528
Franchises 35,315,562 35,315,562
Other 8,916,911 8,819,911
85,843,616 87,934,001
Less accumulated (57,351,125) (54,346,121)
amortization
Intangible assets, net $ 28,492,491 $ 33,587,880
</TABLE>
5. BORROWINGS
The aggregate amount of borrowings as reflected on the
Consolidated Balance Sheets of the Partnership is as follows:
<TABLE>
<CAPTION> As of As of
December 26, December 27,
1997 1996
<S> <C> <C>
A)C-ML Notes/Credit $ 50,000,000 $ 50,000,000
Agreement
B)Restructuring
Agreement/Wincom-WEBE-WICC
Loan 4,244,038 10,348,428
$ 54,244,038 $ 60,348,428
</TABLE>
A) Borrowings under the C-ML Notes bear semi-annual interest at
a fixed annual rate of 9.47%. Beginning November 30, 1998,
annual principal payments of $20 million, of which the
Partnership's share is $10 million (see Note 9), commence
and continue thereafter until November 30, 2002. The C-ML
Notes require that C-ML Cable maintain certain ratios such
as debt to operating cash flow, interest expense coverage
and debt service coverage and restricts such items as cash
distributions and certain additional indebtedness.
Borrowings under the C-ML Notes are nonrecourse to the
Partnership and are collateralized with substantially all of
the Venture's interest in C-ML Cable and C-ML Radio, as well
as by all of the assets of C-ML Cable and C-ML Radio.
As of December 26, 1997 and December 27, 1996, outstanding
borrowings under the C-ML Notes totaled $100 million, of
which the Partnership's share is $50 million.
B) On July 30, 1993, the Partnership and Chemical Bank (the
"Wincom Bank") executed an agreement amending the Wincom-
WEBE-WICC Loan (the "Restructuring Agreement"). The
Restructuring Agreement provided for the outstanding
principal and interest due the Wincom Bank as of December
31, 1992 (approximately $24.7 million and $2.0 million,
respectively) to be divided into three notes as follows: a
Series A Term Loan in the amount of $13.0 million; a Series
B Term Loan in the amount of approximately $11.7 million;
and a Series C Term Loan in the amount of approximately $2.0
million which was forgiven by the Wincom Bank on October 1,
1993 pursuant to the terms of the Restructuring Agreement.
The Series A Term Loan bears interest, payable monthly, at
the Wincom Bank's Alternate Base Rate plus 1-3/4% with
principal payments due quarterly through the final maturity
at December 31, 1997. The outstanding balance under the
Series A Term Loan was $1,850,901 as of December 26, 1997.
The Series B Term Loan bears interest at a rate equal to the
Wincom Bank's Alternate Base Rate plus 1-3/4% beginning on
April 30, 1994, with interest payments accruing, and payable
annually only from Excess Cash Flow. The outstanding
balance under the Series B Term Loan was $2,393,137 as of
December 26, 1997, and was due on December 31, 1997.
On December 31, 1997, the Wincom-WEBE-WICC Loan matured and
became due and payable in accordance with their terms. On
that date, the Partnership made a partial payment to the
Wincom Bank but did not repay the remainder of the Wincom-
WEBE-WICC Loan. As a result of such default, the Wincom
Bank has the right to take actions to enforce its right
under the Wincom-WEBE-WICC Loan including the right to
foreclose on the properties of the Wincom-WEBE-WICC group.
The Wincom-WEBE-WICC Loan is non-recourse to the other
assets of the Partnership. The Partnership and the Wincom
Bank are negotiating the terms of a waiver of the default
and an amendment to the Wincom-WEBE-WICC Loan that would,
among other things, extend the maturity date of the loan to
June 30, 1999. The Partnership expects to either enter into
such amendment or to repay the full amount of principal and
interest due under the loan in 1998.
Borrowings under the Wincom-WEBE-WICC Loan are nonrecourse
to the Partnership and are collateralized with substantially
all of the assets of the Wincom-WEBE-WICC group.
After the remaining principal and interest due under the
Series A Term Loan and the Series B Term Loan are satisfied
in full, any remaining Net Cash Proceeds (as defined in the
Restructuring Agreement), from the sale of the stations in
the Wincom-WEBE-WICC group will be divided between the
Partnership and the Wincom Bank, with the Partnership
receiving 85% and the Wincom Bank receiving 15%,
respectively.
As of December 26, 1997, the annual aggregate amounts of
principal payments (inclusive of defaulted principal payments
totaling $4,244,038) required for the borrowings as reflected in
the Consolidated Balance Sheet of the Partnership are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year Ending Principal Amount
1998 $ 14,244,038
1999 10,000,000
2000 10,000,000
2001 10,000,000
2002 10,000,000
Thereafter 0
$ 54,244,038
</TABLE>
Based upon the restrictions of the borrowings as described above,
approximately $94.0 million of assets are restricted from
distribution by the entities in which the Partnership has an
interest as of December 26, 1997.
<PAGE>
6. TRANSACTIONS WITH THE GENERAL PARTNER AND ITS AFFILIATES
During the three years ended December 26, 1997, the Partnership
incurred the following expenses in connection with services
provided by the General Partner and its affiliates:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Media Management
Partners (General
Partner):
Partnership Mgmt. fee $ 557,979 $ 557,979 $ 557,979
Property Mgmt. fee 653,692 779,055 1,008,266
Reimbursement of
Operating Expenses 951,940 799,690 1,039,772
$ 2,163,611 $2,136,724 $ 2,606,017
</TABLE>
In addition, the Partnership, through the California Cable
Systems, was party to an agreement with MultiVision Cable TV
Corp. ("MultiVision"), an affiliate of the General Partner,
whereby MultiVision provided the California Cable Systems with
certain administrative and day-to-day management services. The
California Cable Systems paid for these services at cost. The
reimbursed costs incurred by MultiVision on behalf of the
California Cable Systems amounted to an aggregate of $804,843,
$3,662,649 and $2,629,560 for 1997, 1996 and 1995, respectively.
These costs did not include programming costs that were charged,
without markup, to the California Cable Systems under an
agreement to allocate certain management costs.
Certain administrative and day to day management services were
provided to the Partnership's radio station investments from RP
Radio Management Inc., an affiliate of the General Partner,
during the second half of 1996 and all of 1997. The reimbursed
costs incurred by RP Radio Management Inc. on behalf of the
Partnership's radio station investments totaled $693,929 during
1997 and $143,536 during the second half of 1996. The radio
station investments paid for these services at cost. These
administrative and day-to-day management services were provided
by a third party in prior periods. On December 27, 1997, RP
Radio Management Inc. was merged into RP Radio Management LLC, an
entity wholly owned by the Partnership.
RP Television, an affiliate of the General Partner, provided
certain administrative and accounting services to the
Partnership's television stations. The television stations paid
for these services at cost. The reimbursed cost incurred by RP
Television on behalf of the Partnership's television stations
totaled $101,371, $82,066 and $189,384 for 1997, 1996 and 1995,
respectively.
The reimbursed costs related to MultiVision, RP Radio Management
Inc., and RP Television are included in the Consolidated Income
Statements.
From the initial sale proceeds of the California Cable Systems in
1996, the Partnership will remit accrued management fees and
expenses owed to the General Partner of approximately $9.2
million, of which $7.6 million was paid through December 26,
1997. As of December 26, 1997, December 27, 1996 and December
29, 1995, the amounts payable to the General Partner for
management fees and reimbursement of operating expenses were
approximately $4.5 million, $2.3 million and $7.9 million,
respectively.
7. COMMITMENTS AND CONTINGENCIES
Lease Commitments
C-ML Cable rents office and warehouse facilities under various
operating lease agreements. In addition, Wincom, the Anaheim
Radio Stations, WEBE-FM and WICC-AM lease office space, broadcast
facilities and certain other equipment under various operating
lease agreements. Prior to their disposition, KATC-TV and the
California Cable Systems leased office space, equipment, and
space on utility poles under operating leases with terms of less
than one year, or under agreements which are generally terminable
on short notice. Rental expense was incurred for the three years
ended December 26, 1997 as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
California Cable
Systems $ - $ 199,501 $ 377,186
KATC-TV - - 8,250
WICC-AM 62,457 72,898 105,182
Anaheim Radio Stations 152,016 145,796 136,260
WEBE-FM 199,004 202,730 147,587
Wincom 158,931 148,296 151,477
C-ML Cable 45,075 30,000 30,000
$ 617,483 $ 799,221 $ 955,942
</TABLE>
Future minimum commitments under all of the above agreements in
excess of one year are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year Ending Amount
1998 $ 678,014
1999 616,793
2000 406,324
2001 398,184
2002 361,382
Thereafter 970,444
$3,431,141
</TABLE>
Litigation
On August 29, 1997, a purported class action was commenced in New
York Supreme Court, New York County, on behalf of the limited
partners of the Partnership, against the Partnership, the
Partnership's general partner, Media Management Partners, the
General Partner's two partners, RP Media Management ("RPMM") and
ML Media Management Inc. ("MLMM"), Merrill Lynch & Co., Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"). The action concerns the Partnership's payment of
certain management fees and expenses to the General Partner and
the payment of certain purported fees to an affiliate of RPMM.
Specifically, the plaintiffs allege breach of the Partnership
Agreement, breach of fiduciary duties, and unjust enrichment by
the General Partner in that the General Partner allegedly: (1)
improperly deferred and accrued certain management fees and
expenses in an amount in excess of $14.0 million, (2) improperly
paid itself such fees and expenses out of proceeds from sales of
Partnership assets, and (3) improperly paid MultiVision,
supposedly duplicative fees in an amount in excess of $14.4
million.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLMM
and RPMM, plaintiffs claim that these defendants aided and
abetted the General Partner in the alleged breach of the
Partnership Agreement and in the alleged breach of the General
Partner's fiduciary duties. Plaintiffs seek, among other things,
an injunction barring defendants from paying themselves
management fees or expenses not expressly authorized by the
Partnership Agreement, an accounting, disgorgement of the alleged
improperly paid fees and expenses, and compensatory and punitive
damages. On December 12, 1997, defendants served a motion to
dismiss the complaint and each claim for relief therein.
Plaintiffs' opposition to defendants' motion was served on March
20, 1998. Defendants' reply to plaintiffs' response is due on
April 29, 1998. Defendants believe that they have good and
meritorious defenses to the action.
The Partnership Agreement provides for indemnification, to the
fullest extent provided by law, for any person or entity named as
a party to any threatened, pending or completed suit by reason of
any alleged act or omission arising out of such person's
activities as a General Partner or as an officer, director or
affiliate of either RPMM, MLMM or the General Partner, subject to
specified conditions. In connection with the purported class
action filed on August 29, 1997, the Partnership has received
notices of requests for indemnification from the following
defendants named therein: the General Partner, RPMM, MLMM,
Merrill Lynch & Co., Inc. and Merrill Lynch. As of December 26,
1997, the Partnership accrued approximately $280,000 for legal
costs incurred through December 26, 1997, relating to such
indemnification.
8. SEGMENT INFORMATION
The following analysis provides segment information for the two
main industries in which the Partnership operates. The Cable
Television Systems segment consists of the Partnership's 50%
share of C-ML Cable and the California Cable Systems until its
sale on May 31, 1996. The Television and Radio Stations segment
consists of KATC-TV until its sale on September 30, 1995, WREX-TV
until its sale on July 31, 1995, WEBE-FM, Wincom, WICC-AM, the
Anaheim Radio Stations, and the Partnership's 50% share of C-ML
Radio.
<TABLE>
<CAPTION>
Cable Television
Television and Radio
1997 Systems Stations Total
<S> <C> <C> <C>
Operating revenues $ 29,404,870 $ 23,819,113 $ 53,223,983
Interest income 2,316,128 316,026 2,632,154
Operating expenses (16,723,091) (16,327,067) (33,050,158)
Operating income before
gain on sale of assets 14,997,907 7,808,072 22,805,979
Gain on sale of KATC - 1,697,227 1,697,227
Gain on sale of WREX - 2,005,498 2,005,498
Operating income 14,997,907 11,510,797 26,508,704
Plus: depreciation and
amortization 6,143,721 1,313,902 7,457,623
Operating income before
depreciation and
amortization 21,141,628 12,824,699 33,966,327
Less: depreciation and
amortization (6,143,721) (1,313,902) (7,457,623)
Operating income $ 14,997,907 $ 11,510,797 26,508,704
Interest income 720,829
Interest expense (5,082,776)
Partnership expenses (2,679,069)
Net income $ 19,467,688
Identifiable assets $103,606,224 $ 39,334,158 $142,940,382
Partnership assets 13,705,796
Total $156,646,178
Capital expenditures $ 7,731,495 $ 185,848 $ 7,917,343
Depreciation and
amortization $ 6,143,721 $ 1,313,902 $ 7,457,623
</TABLE>
<TABLE>
<CAPTION>
Cable Television
Television and Radio
1996 Systems Stations Total
<S> <C> <C> <C>
Operating revenues $ 50,428,590 $ 21,143,717 $ 71,572,307
Interest income 1,166,362 346,537 1,512,899
Operating expenses (42,296,680) (16,309,917) (58,606,597)
Operating income before
gain on sale of assets 9,298,272 5,180,337 14,478,609
Gain on sale of the
California Cable
Systems 185,609,191 - 185,609,191
Operating income 194,907,463 5,180,337 200,087,800
Plus: depreciation and
amortization 18,848,938 1,389,066 20,238,004
Operating income before
depreciation and
amortization 213,756,401 6,569,403 220,325,804
Less: depreciation and
amortization (18,848,938) (1,389,066) (20,238,004)
Operating income $194,907,463 $ 5,180,337 200,087,800
Service fee income from
C-ML Radio 259,689
Interest income 2,179,134
Interest expense (10,352,597)
Partnership expenses (2,462,722)
Net income $189,711,304
Identifiable assets $107,467,339 $ 44,693,750 $152,161,089
Partnership assets 8,833,735
Total $160,994,824
Capital expenditures $ 7,833,870 $ 402,922 $ 8,236,792
Depreciation and
amortization $ 18,848,938 $ 1,389,066 $ 20,238,004
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cable Television
Television and Radio
1995 Systems Stations Total
<S> <C> <C> <C>
Operating revenues $ 81,242,427 $ 27,971,604 $109,214,031
Operating expenses (65,687,910) (22,878,517) (88,566,427)
Operating income before
gain/(loss) on sale of
assets 15,554,517 5,093,087 20,647,604
Gain on sale of WREX - 8,838,248 8,838,248
Gain on sale of KATC - 13,958,206 13,958,206
Loss on sale of assets (22,802) - (22,802)
Operating income 15,531,715 27,889,541 43,421,256
Plus: depreciation and
amortization 25,986,951 2,099,482 28,086,433
Operating income before
depreciation and
amortization 41,518,666 29,989,023 71,507,689
Less: depreciation and
amortization (25,986,951) (2,099,482) (28,086,433)
Operating income $ 15,531,715 $ 27,889,541 43,421,256
Interest income 332,181
Interest expense (19,417,987)
Partnership expenses (2,845,210)
Net income $ 21,490,240
Identifiable assets $161,967,792 $ 44,221,535 $206,189,327
Partnership assets 4,009,169
Total $210,198,496
Capital expenditures $ 8,850,903 $ 431,373 $ 9,282,276
Depreciation and
amortization $ 25,986,951 $ 2,099,482 $ 28,086,433
</TABLE>
<PAGE>
9. JOINT VENTURES
Pursuant to a management agreement and joint venture agreement
dated December 16, 1986 (the "Joint Venture Agreement"), as
amended and restated, between the Partnership and Century (the
"Venture"), the parties formed a joint venture in which each has
a 50% ownership interest. The Venture, through its wholly-owned
subsidiary, Century-ML Cable Corp. ("C-ML Cable Corp."),
subsequently acquired Cable Television Company of Greater San
Juan, Inc. ("San Juan Cable") and liquidated San Juan Cable into
C-ML Cable Corp. The Venture also acquired all of the assets of
Community Cable-Vision of Puerto Rico, Inc., Community
Cablevision of Puerto Rico Associates, and Community Cablevision
Incorporated ("Community Companies"), which consisted of a cable
television system serving the communities of Catano, Toa Baja and
Toa Alta, Puerto Rico, which are contiguous to San Juan Cable.
The Community Companies and C-ML Cable Corp. are collectively
referred to as C-ML Cable.
On February 15, 1989, the Partnership and Century entered into a
management agreement and joint venture agreement whereby a new
joint venture, Century-ML Radio Venture ("C-ML Radio"), was
formed under New York law. Responsibility for the management of
radio stations acquired by C-ML Radio was assumed by the
Partnership.
Effective January 1, 1994, all of the assets of C-ML Radio were
transferred to the Venture, in exchange for the assumption by the
Venture of all the obligations of C-ML Radio and the issuance to
Century and the Partnership by the Venture of new certificates
evidencing a partnership interest of 50% and 50%, respectively.
The transfer was made pursuant to a Transfer of Assets and
Assumption of Liabilities Agreement. At the time of this
transfer, the Partnership and Century entered into an amended and
restated management agreement and joint venture agreement (the
"Revised Joint Venture Agreement") governing the affairs of the
Venture as revised.
Under the terms of the Revised Joint Venture Agreement, Century
is responsible for the day-to-day operations of C-ML Cable and
the Partnership is responsible for the day-to-day operations of C-
ML Radio. For providing services of this kind, Century is
entitled to receive annual compensation of 5% of C-ML Cable's net
gross revenues (defined as gross revenues from all sources less
monies paid to suppliers of pay TV product, e.g., HBO, Cinemax
and Showtime) and the Partnership is entitled to receive annual
compensation of 5% of C-ML Radio's gross revenues (after agency
commissions, rebates or discounts and excluding revenues from
barter transactions). All significant policy decisions relating
to the Venture, the operation of C-ML Cable and the operation of
C-ML Radio, however, will only be made upon the concurrence of
both the Partnership and Century. The Partnership may require a
sale of such assets and business of C-ML Cable or C-ML Radio at
any time. If the Partnership proposes such a sale, the
Partnership must first offer Century the right to purchase the
Partnership's 50% interest in such assets being sold at 50% of
the total fair market value at such time as determined by
independent appraisal. If Century elects to sell either the C-ML
Cable or C-ML Radio, the Partnership may elect to purchase
Century's interest in such assets being sold on similar terms.
The total assets, total liabilities, net capital, total revenues
and net income of the Venture as revised are as follows:
<TABLE>
<CAPTION>
December 26, December 27,
1997 1996
<S> <C> <C>
Total Assets $ 152,300,00 $ 126,300,000
0
Total Liabilities $ 127,300,00 $ 117,700,000
0
Net Capital $ 25,000,00 $ 8,600,000
0
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Total Revenues $ 62,900,000 $ 58,600,000 $ 53,800,000
Net Income $ 16,400,000 $ 500,000 $ 4,600,000
</TABLE>
<PAGE>
In October 1997, the Venture entered into a sales agreement to
sell C-ML Radio for approximately $11.5 million, subject to
closing adjustments (see Note 2).
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Assets, including cash and cash equivalents and accounts
receivable and liabilities, such as trade payables, are carried
at amounts which approximate fair value.
The General Partner has been able to determine the estimated fair
value of the C-ML Notes based on a discounted cash flow analysis.
As of December 26, 1997 and December 27, 1996, the estimated fair
value of the C-ML Notes is approximately $104 million and $104
million, respectively, of which approximately 50% of the
estimated fair value or $52 million and $52 million, respectively
pertains to the carrying amount reflected on the Partnership's
Consolidated Balance Sheet.
The General Partner has determined that the carrying value of the
Restructuring Agreement relating to the Wincom-WEBE-WICC Loan
approximates fair value due to the floating rate nature of the
outstanding borrowings without giving effect to the 15% equity
participation.
<PAGE>
11. ACCOUNTING FOR INCOME TAXES
Certain entities owned by the Partnership are taxable entities
and thus are required under SFAS No. 109 to recognize deferred
income taxes. Income taxes consist of the following:
<TABLE>
<CAPTION> Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
Current
Federal $ 155,331 $ - $ -
State 7,100 - -
162,431 - -
Deferred
Federal (1,777,096) - -
State - - -
(1,777,096) - -
Recorded benefit for
income taxes $(1,614,665) $ - $ -
The components of the net deferred tax asset are as follows:
</TABLE>
<TABLE>
<CAPTION> As of As of
December 26, December 27,
1997 1996
<S> <C> <C>
Deferred tax assets:
Basis of intangible assets $ 24,168 $ 52,325
Net operating loss carryforward 7,857,921 15,205,078
Alternative minimum tax credit 301,096 228,765
Other 475,092 30,520
8,658,277 15,516,688
Deferred tax liabilities:
Basis of property, plant and
equipment (26,379) (27,322)
Total 8,631,898 15,489,366
Less: valuation allowance (6,854,802) (15,489,366)
Net deferred tax asset $ 1,777,096 $ 0
</TABLE>
The decrease in the valuation allowance for the year ended
December 26, 1997 of approximately $8.6 million relates primarily
to the utilization and expiration of net operating loss
carryforwards. Management believes that it is more likely than
not that it will generate taxable income sufficient to realize a
portion of the tax benefit associated with future temporary
differences and net operating loss carryforwards prior to their
expiration.
As of December 26, 1997, the taxable entities have available net
operating loss carryforwards of approximately $24.7 million which
may be applied against future taxable income of such entities.
Such net operating loss carryforwards expire at various dates
from 1998 through 2007.
For the Partnership, the differences between the tax basis of
assets and liabilities and the reported amounts are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
As of As of
December 26, December 27,
1997 1996
Partners' Capital - financial
statements $ 78,637,126 $ 78,158,731
Differences:
Offering expenses 19,063,585 19,063,585
Basis of property, plant and
equipment and intangible assets
2,481,101 5,415,192
Cumulative losses of stock
investments (corporations) 62,196,213 72,762,062
Management fees 2,931,410 782,653
Other 2,844,149 (8,240,254)
Partners' Capital - income tax basis
$168,153,584 $167,941,969
</TABLE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Part III.
Item 10. Directors and Executive Officers of the Registrant.
Registrant has no executive officers or directors. The General
Partner manages Registrant's affairs and has general
responsibility and authority in all matters affecting its
business. The responsibilities of the General Partner are
carried out either by executive officers of RP Media Management
or ML Media Management Inc. acting on behalf of the General
Partner. The executive officers and directors of RP Media
Management and ML Media Management Inc. are:
RP Media Management (the "Management Company")
Served in Present
Capacity
Name Since (1) Position Held
I. Martin Pompadur 1/01/86 President, Chief Executive
Officer, Chief Operating
Officer, Secretary,
Director
Elizabeth McNey Yates 4/01/88 Executive Vice President
(1) The Director holds office until his successor is elected and
qualified. All executive officers serve at the pleasure of
the Director.
ML Media Management Inc. ("MLMM")
Served in Present
Capacity
Name Since (1) Position Held
Kevin K. Albert 02/19/91 President
12/16/85 Director
Robert F. Aufenanger 02/02/93 Executive Vice President
03/28/88 Director
Michael E. Lurie 08/10/95 Vice President
08/11/95 Director
Steven N. Baumgarten 02/02/93 Vice President
David G. Cohen 08/11/95 Vice President
Diane T. Herte 08/11/95 Treasurer
(1) Directors hold office until their successors are elected and
qualified. All executive officers serve at the pleasure of
the Board of Directors.
I. Martin Pompadur, 62, Director and President of RP Media
Management. Mr. Pompadur is also the Chairman and Chief
Executive Officer of GP Station Partners which is the General
Partner of Television Station Partners, L.P., a private limited
partnership that owned and operated four network affiliated
television stations. These stations were sold in January 1996
and this partnership is currently in its liquidation phase. Mr.
Pompadur is the Chairman and Chief Executive Officer of PBTV,
Inc., the Managing General Partner of Northeastern Television
Investors Limited Partnership, a private limited partnership
which owned and operated WBRE-TV, a network affiliated station in
Wilkes-Barre/Scranton, Pennsylvania. This station was sold in
January 1998, and is currently in its liquidating phase. Mr.
Pompadur is also the President and a Director of RP Opportunity
Management, L.P. ("RPOM"), a limited partnership organized under
the laws of Delaware, which is indirectly owned and controlled by
Mr. Pompadur. RPOM is a partner in Media Opportunity Management
Partners, an affiliate of the General Partner, and the general
partner of ML Media Opportunity Partners, L.P. which was formed
to invest in under performing and turnaround media businesses.
Mr. Pompadur is the Principal Executive Officer of ML Media
Opportunity Partners, L.P. Mr. Pompadur is also Chief Executive
Officer of MultiVision Cable TV Corp. ("MultiVision"), a cable
television multiple system operator ("MSO") organized in January
1988 and owned principally by Mr. Pompadur and the estate of
Elton H. Rule to provide MSO services to cable television systems
acquired by entities under his control. Mr. Pompadur was the
Principal Executive Officer and principal owner of RP Radio
Management Inc. ("RP Radio"), a company owned principally by Mr.
Pompadur to provide administrative and day-to-day management
services to Registrant's radio properties. On December 27, 1997,
RP Radio Management Inc. was merged into RP Radio Management LLC,
an entity wholly owned by Registrant. Mr. Pompadur is a
principal owner, member of the Board of Directors and Secretary
of Caribbean International News Corporation ("Caribbean").
Caribbean owns and publishes EL Vocero, the largest Spanish
language daily newspaper in the United States.
Elizabeth McNey Yates, 34, Executive Vice President of RP Media
Management, joined RP Companies Inc., an entity controlled by Mr.
Pompadur, in April 1988 and has senior executive responsibilities
in the areas of finance, operations, administration, acquisitions
and dispositions. Ms. Yates is Chief Operating Officer and
Executive Vice President of RP Companies, Inc., Executive Vice
President of RPOM, Chief Operating Officer and Executive Vice
President of RP Radio. In addition, Ms. Yates is the President
and Chief Operating Officer of MultiVision.
Kevin K. Albert, 45, a Managing Director of Merrill Lynch
Investment Banking Group ("ML Investment Banking"), joined
Merrill Lynch in 1981. Mr. Albert works in the Equity Private
Placement Group and is involved in structuring and placing a
diversified array of private equity financings including common
stock, preferred stock, limited partnership interests and other
equity-related securities. Mr. Albert is also a director of ML
Film Entertainment Inc. ("ML Film"), an affiliate of MLMM and the
managing general partner of the general partners of Delphi Film
Associates IV, V and ML Delphi Premier Partners, L.P.; a director
of ML Opportunity Management Inc. ("ML Opportunity"), an
affiliate of MLMM and a joint venturer in Media Opportunity
Management Partners, the general partner of ML Media Opportunity
Partners, L.P.; a director of ML Mezzanine II Inc. ("ML Mezzanine
II"), an affiliate of MLMM and sole general partner of the
managing general partner of ML-Lee Acquisition Fund II, L.P. and
ML-Lee Acquisition Fund (Retirement Accounts) II, L.P.; a
director of ML Mezzanine Inc. ("ML Mezzanine"), an affiliate of
MLMM and the sole general partner of the managing general partner
of ML-Lee Acquisition Fund, L.P.; a director of Merrill Lynch
Venture Capital Inc. ("ML Venture"), an affiliate of MLMM and the
general partner of the Managing General Partner of ML Venture
Partners II, L.P. ("Venture II") and ML Oklahoma Venture Partners
Limited Partnership ("Oklahoma") and a director of Merrill Lynch
R&D Management Inc. ("ML R&D"), an affiliate of MLMM and the
general partner of the General Partner of ML Technology Ventures,
L.P. Mr. Albert also serves as an independent general partner of
Venture II.
Robert F. Aufenanger, 44, a Vice President of Merrill Lynch & Co.
Corporate Credit and a Director of the Partnership Management
Department, joined Merrill Lynch in 1980. Mr. Aufenanger is
responsible for the ongoing management of the operations of
various real estate and project related limited partnerships for
which subsidiaries of ML Leasing Equipment Corp. and Merrill
Lynch, Hubbard Inc., affiliates of Merrill Lynch, are general
partners. Mr. Aufenanger is also a director of ML Opportunity,
MLH Real Estate Inc., an affiliate of MLMM and the general
partner of the Associate General Partner of ML/EQ Real Estate
Portfolio, L.P., MLH Property Managers Inc., an affiliate of MLMM
and the Managing General Partner of MLH Income Realty Partnership
VI, ML Film, ML Venture, ML R&D, ML Mezzanine and ML Mezzanine
II.
Michael E. Lurie, 54, a First Vice President of Merrill Lynch &
Co. Corporate Credit and the Director of the Asset Recovery
Management Department, joined Merrill Lynch in 1970. Prior to
his present position, Mr. Lurie was the Director of Debt and
Equity Markets Credit responsible for the global allocation of
credit limits and the approval and structuring of specific
transactions relating to debt and equity products. Mr. Lurie
also served as Chairman of the Merrill Lynch International Bank
Credit Committee. Mr. Lurie is also a director of ML
Opportunity, ML Film, ML Venture, ML R&D and MLH Real Estate Inc.
Steven N. Baumgarten, 42, a Vice President of Merrill Lynch & Co.
Corporate Credit joined Merrill Lynch in 1986. Mr. Baumgarten
shares responsibility for the ongoing management of the
operations of various project related limited partnerships for
which subsidiaries of ML Leasing Equipment Corp., an affiliate of
Merrill Lynch, are general partners. Mr. Baumgarten is also a
director of ML Film.
David G. Cohen, 35, a Vice President of Merrill Lynch & Co.
Corporate Credit joined Merrill Lynch in 1987. Mr. Cohen shares
responsibility for the ongoing management of the operations of
various project related limited partnerships for which
subsidiaries of ML Leasing Equipment Corp., an affiliate of
Merrill Lynch, are general partners.
Diane T. Herte, 37, a Vice President of Merrill Lynch & Co.
Investment Banking Group since 1996 and previously an Assistant
Vice President of Merrill Lynch & Co. Corporate Credit Group
since 1992, joined Merrill Lynch in 1984. Ms. Herte's
responsibilities include controllership and financial management
functions for certain partnerships and other entities for which
subsidiaries of Merrill Lynch are the general partner, manager or
administrator.
Mr. Pompadur and Ms. Yates were each executive officers of
Maryland Cable Corp. and Maryland Cable Holdings Corp. at and
during the two years prior to the filing by both companies on
March 10, 1994 of a consolidated plan of reorganization under
Chapter 11 of the United States Bankruptcy Code with the United
States Bankruptcy Court for the Southern District of New York.
Maryland Cable Holdings Corp. was at the time of such filings a
subsidiary of ML Media Opportunity Partners, L.P.
Mr. Aufenanger is an executive officer of Mid-Miami Diagnostics
Inc. ("Mid-Miami Inc."). On October 28, 1994 both Mid-Miami Inc.
and Mid-Miami Diagnostics, L.P. filed voluntary petitions for
protection from creditors under Chapter 7 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York.
An Investment Committee of Registrant was established to have the
responsibility and authority for developing, in conjunction with
the Management Company, diversification objectives for the
investments to be made by Registrant, for reviewing and approving
each investment proposed by the Management Company for Registrant
and for evaluating and approving dispositions of investments of
Registrant. The Investment Committee will also establish
reserves for Registrant for such purposes and in such amounts as
it deems appropriate. A simple majority vote shall be required
for any proposed investment or disposition. The Investment
Committee also has the responsibility and authority for
monitoring the management of the investments of Registrant by the
Management Company. The current members of the Investment
Committee are as follows:
RPMM Representative MLMM Representatives
I. Martin Pompadur Kevin K. Albert
Robert F. Aufenanger
Item 11.Executive Compensation.
Registrant does not pay the executive officers or directors of
the General Partner any remuneration. The General Partner does
not presently pay any remuneration to any of its executive
officers or directors. See Note 6 to the Financial Statements
included in Item 8 hereof, however, for amounts paid by
Registrant to the General Partner and its affiliates for the
three years ended December 26, 1997.
Item 12.Security Ownership of Certain Beneficial Owners and
Management.
As of March 15, 1998, no person was known by Registrant to be the
beneficial owner of more than 5 percent of the Units.
To the knowledge of the General Partner, as of February 1, 1998,
the officers and directors of the General Partner in aggregate
own less than 1% of the outstanding common stock of Merrill Lynch
& Co., Inc.
RP Media Management is owned 50% by IMP Media Management, Inc.
and 50% by the Elton H. Rule Company. IMP Media Management, Inc.
is wholly-owned by Mr. I. Martin Pompadur and The Elton H. Rule
Company is wholly-owned by the Rule Trust.
Item 13.Certain Relationships and Related Transactions.
Refer to Note 6 to the Financial Statements included in Item 8
hereof, and in Item 1 for a description of the relationship of
the General Partner and its affiliates to Registrant and its
subsidiaries.
Part IV.
Item 14.Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) Financial Statements, Financial Statement Schedules and
Exhibits.
(1) Financial Statements
See Item 8. "Financial Statements and Supplementary
Data."
(2) Financial Statement Schedules
No financial statement schedules are included because of
the absence of the conditions which require their
inclusion or because the required information is
included in the financial statements or set forth herein
the notes thereto.
<TABLE>
<CAPTION>
(3) Exhibits Incorporated by Reference to
<S> <C>
3.1 Amended and Restated Certificate Exhibit 3.1 to Registrant's Form S-
of Limited Partnership 1 the Registration Statement
(File No. 33-2290)
3.2.1 Second Amended and Restated Exhibit 3.2.1 to Registrant's
Agreement of Limited Partnership Annual Report on Form 10-K for the
dated May 14, 1986 fiscal year ended
December 26, 1986
(File No. 0-14871)
3.2.2 Amendment No. 1 dated February Exhibit 3.2.2 to Registrant's
27, 1987 to Second Amended and Annual Report on Form 10-K for the
Restated Agreement of Limited fiscal year ended
Partnership December 26, 1986
(File No. 0-14871)
10.1.1 Joint Venture Agreement dated Exhibit 10.1.1 to Registrant's
July 2, 1986 between Registrant Annual Report on Form 10-K for the
and Century Communications fiscal year ended
Corp.("CCC") December 26, 1986
(File No. 0-14871)
10.1.2 Management Agreement and Joint Exhibit 10.1.2 to Registrant's
Venture Agreement dated December Annual Report on Form 10-K for the
16, 1986 between Registrant and fiscal year ended
CCC (attached as Exhibit 1 to December 26, 1986
Exhibit 10.3) (File No. 0-14871)
10.1.3 Management Agreement and Joint Exhibit 10.1.3 to Registrant's
Venture Agreement dated as of Annual Report on Form 10-K for
February 15, 1989 between the fiscal year ended
Registrant and CCC December 30, 1988
(File No. 0-14871)
10.1.4 Amended and Restated Management Exhibit 10.1.4 to Registrant's
Agreement and Joint Venture Annual Report on Form 10-K for the
Agreement of Century/ML Cable fiscal year ended
Venture dated January 1, 1994 December 31, 1993
between Century Communications (File No. 0-14871)
Corp. and Registrant
10.2.1 Stock Purchase Agreement dated Exhibit 28.1 to Registrant's
July 2, 1986 between Registrant Form 8-K Report dated
and the sellers of shares of December 16, 1986
Cable Television Company of (File No. 33-2290)
Greater San Juan, Inc.
10.2.2 Assignment dated July 2, 1986 Exhibit 10.2.2 to Registrant's
between Registrant and Century- Annual Report on Form 10-K for the
ML Cable Corporation ("C-ML") fiscal year ended
December 26, 1986
(File No. 0-14871)
10.2.3 Transfer of Assets and Exhibit 10.2.3 to Registrant's
Assumption of Liabilities Annual Report on Form 10-K for the
Agreement dated January 1, 1994 fiscal year ended
between Century-ML Radio December 31, 1993
Venture, Century/ML Cable (File No. 0-14871)
Venture, Century Communications
Corp. and Registrant
10.3 Amended and Restated Credit Exhibit 10.3.5 to Registrant's
Agreement dated as of March 8, Annual Report on Form 10-K for the
1989 between Citibank, N.A., fiscal year ended
Agent, and C-ML December 30, 1988
(File No. 0-14871)
10.3.1 Note Agreement dated as of Exhibit 10.3.1 to Registrant's
December 1, 1992 between Century-Annual Report on Form 10-K for the
ML Cable Corporation, Century/ML fiscal year ended
Cable Venture, Jackson National December 25, 1992
Life Insurance Company, The (File No. 0-14871)
Lincoln National Life Insurance
Company and Massachusetts Mutual
Life Insurance Company
10.3.2 Second Restated Credit Agreement Exhibit 10.3.2 to Registrant's
dated December 1, 1992 among Annual Report on Form 10-K for the
Century-ML Cable Corporation, fiscal year ended
Century/ML Cable Venture and December 25, 1992
Citibank (File No. 0-14871)
10.3.3 Amendment dated as of September Exhibit 10.3.3 to Registrant's
30, 1993 among Century-ML Cable Quarterly Report on Form 10-Q
Corporation, the banks parties for the quarter ended
to the Credit Agreement, and September 24, 1993
Citibank, N.A. and Century/ML (File No. 0-14871)
Cable Venture
10.3.4 Amendment dated as of December Exhibit 10.3.4 to Registrant's
15, 1993 among Century-ML Cable Annual Report on Form 10-K for the
Corporation, the banks parties fiscal year ended
to the Credit Agreement, and December 31, 1993
Citibank, N.A. and Century/ML (File No. 0-14871)
Cable Venture
10.4 Pledge Agreement dated December Exhibit 10.4 to Registrant's
16, 1986 among Registrant, CCC, Annual Report on Form 10-K for the
and Citibank, N.A., Agent fiscal year ended
December 26, 1986
(File No. 0-14871)
10.5 Guarantee dated as of December Exhibit 10.5 to Registrant's
16, 1986 among Registrant, CCC Annual Report on Form 10-K for the
and Citibank, N.A., Agent fiscal year ended
December 25, 1987
(File No. 0-14871)
10.6 Assignment of Accounts Exhibit 10.6 to Registrant's
Receivable dated as of December Annual Report on Form 10-K for the
16, 1986 among Registrant, CCC fiscal year ended
and Citibank, N.A., Agent December 25, 1987
(File No. 0-14871)
10.7 Real Property Mortgage dated as Exhibit 10.7 to Registrant's
of December 16, 1986 among Annual Report on Form 10-K for the
Registrant, CCC and Citibank, fiscal year ended
N.A., Agent December 30, 1988
(File No. 0-14871)
10.8 Stock Sale and Purchase Exhibit 28.1 to Registrant's
Agreement dated as of December Form 8-K Report dated
5, 1986 between SCIPSCO, Inc. December 23, 1986
and ML California Cable Corp. (File No. 33-2290)
("ML California")
10.8.1 Asset Purchase Exhibit 2 to Registrant's
Agreement dated as of NovemberForm 8-K Report dated
28, 1994 among Registrant andNovember 28, 1994
Century Communications Corp.(File No. 0-14871)
10.9 Security Agreement dated as of Exhibit 10.10 to Registrant's
December 22, 1986 among Annual Report on Form 10-K for the
Registrant, ML California and BA fiscal year ended
December 26, 1987
(File No. 0-14871)
10.10 Assets Purchased Agreement dated Exhibit 28.1 to Registrant's
as of September 17, 1986 between Form 8-K Report dated
Registrant and Loyola University February 2, 1987
(File No. 33-2290)
10.11 Asset Acquisition Agreement Exhibit 28.1 to Registrant's
dated April 22, 1987 between Form 8-K Report dated
Community Cable-Vision of Puerto October 14, 1987
Rico Associates, Community Cable-(File No. 33-2290)
Vision of Puerto Rico, Inc.,
Community Cable-Vision
Incorporated and Century
Communications Corp., as
assigned
10.12 Asset Purchase Agreement dated Exhibit 2.1 to Registrant's
April 29, 1987 between Form 8-K Report dated
Registrant and Gilmore September 16, 1987
Broadcasting Corporation (File No. 33-2290)
10.13 License Holder Pledge Agreement Exhibit 2.5 to Registrant's
dated August 27, 1987 by Form 8-K Report dated
Registrant and Media Management September 15, 1987
Partners in favor of (File No. 33-2290)
Manufacturers Hanover
10.14 Asset Purchase Agreement dated Exhibit 28.1 to Registrant's
August 20, 1987 between 108 Form 8-K Report dated
Radio Company Limited January 15, 1988
Partnership and Registrant (File No. 33-2290)
10.15 Security Agreement dated as of Exhibit 28.3 to Registrant's
December 16, 1987 between Form 8-K Report dated
Registrant and CNB January 15, 1988
(File No. 33-2290)
10.16 Asset Purchase Agreement dated Exhibit 10.25 to Registrant's
as of January 9, 1989 between Annual Report on Form 10-K for the
Registrant and Connecticut fiscal year ended
Broadcasting Company, Inc. December 30, 1988
("WICC") (File No. 0-14871)
10.17.1Stock Purchase Agreement dated Exhibit 28.2 to Registrant's
June 17, 1988 between Registrant Quarterly Report on Form 10-Q
and the certain sellers referred for the quarter ended
to therein relating to shares of June 24, 1988
capital stock of Universal Cable (File No. 0-14871)
Holdings, Inc. ("Universal")
10.17.2Amendment and Consent dated July Exhibit 2.2 to Registrant's
29, 1988 between Russell V. Form 8-K Report dated
Keltner, Larry G. Wiersig and September 19, 1988
Donald L. Benson, Universal (File No. 0-14871)
Cable Midwest, Inc. and
Registrant
10.17.3Amendment and Consent dated July Exhibit 2.3 to Registrant's
29, 1988 between Ellsworth Form 8-K Report dated
Cable, Inc., Universal Cable September 19, 1988
Midwest, Inc. and Registrant (File No. 0-14871)
10.17.4Amendment and Consent dated Exhibit 2.4 to Registrant's
August 29, 1988 between ST Form 8-K Report dated
Enterprises, Ltd., Universal September 19, 1988
Cable Communications, Inc. and (File No. 0-14871)
Registrant
10.17.5Amendment and Consent dated Exhibit 2.5 to Registrant's
September 19, 1988 between Form 8-K Report dated
Dennis Wudtke, Universal Cable September 19, 1988
Midwest, Inc., Universal Cable (File No. 0-14871)
Communications, Inc. and
Registrant
10.17.6Amendment and Consent dated Exhibit 10.26.6 to Registrant's
October 14, 1988 between Down's Annual Report on Form 10-K
Cable, Inc., Universal Cable for the fiscal year ended
Midwest, Inc. and Registrant December 30, 1988
(File No. 0-14871)
10.17.7Amendment and Consent dated Exhibit 10.26.7 to Registrant's
October 14, 1988 between SJM Annual Report on Form 10-K
Cablevision, Inc., Universal for the fiscal year ended
Cable Midwest, Inc. and December 30, 1988
Registrant (File No. 0-14871)
10.17.8Bill of Sale and Transfer of Exhibit 2.6 to Registrant's
Assets dated as of September 19, Form 8-K Report dated
1988 between Registrant and September 19, 1988
Universal Cable Communications (File No. 0-14871)
Inc.
10.18 Credit Agreement dated as of Exhibit 10.27 to Registrant's
September 19, 1988 among Annual Report on Form 10-K
Registrant, Universal, certain for the fiscal year ended
subsidiaries of Universal, and December 30, 1988
Manufacturers Hanover Trust (File No. 0-14871)
Company, as Agent
10.19 Stock Purchase Agreement dated Exhibit 10.28 to Registrant's
October 6, 1988 between Annual Report on Form 10-K
Registrant and the certain for the fiscal year ended
sellers referred to therein December 30, 1988
relating to shares of capital (File No. 0-14871)
stock of Acosta Broadcasting
Corp.
10.20 Stock Purchase Agreement dated Exhibit 28.1 to Registrant's
April 19, 1988 between Quarterly Report on Form 10-Q
Registrant and the certain for the quarter ended
sellers referred to therein June 24, 1988
relating to shares of capital (File No. 0-14871)
stock of Wincom Broadcasting
Corporation
10.21 Subordination Agreement dated as Exhibit 2.3 to Registrant's
of August 15, 1988 among Wincom, Form 8-K Report dated
the Subsidiaries, Registrant and August 26, 1988
Chemical Bank (File No. 0-14871)
10.22 Management Agreement dated Exhibit A to Exhibit 10.30.2 above
August 26, 1988 between
Registrant and Wincom
10.22.1Management Agreement by and Exhibit 10.22.1 to Registrant's
between Fairfield Quarterly Report on Form 10-Q
Communications, Inc. and for the quarter ended
Registrant and ML Media June 25, 1993
Opportunity Partners, L.P. dated (File No. 0-14871)
May 12, 1993
10.22.2Sharing Agreement by and among Exhibit 10.22.2 to Registrant's
Registrant, ML Media Opportunity Quarterly Report on
Partners, L.P., RP Companies, Form 10-Q for the quarter ended
Inc., Radio Equity Partners, June 25, 1993
Limited Partnership and (File No. 0-14871)
Fairfield Communications, Inc.
10.23 Amended and Restated Credit, Exhibit 10.33 to Registrant's
Security and Pledge Agreement Quarterly Report on
dated as of August 15, 1988, as Form 10-Q for the quarter ended
amended and restated as of July June 30, 1989
19, 1989 among Registrant, (File No. 0-14871)
Wincom Broadcasting Corporation,
Win Communications Inc., Win
Communications of Florida, Inc.,
Win Communications Inc. of
Indiana, WEBE Associates, WICC
Associates, Media Management
Partners, and Chemical Bank and
Chemical Bank, as Agent
10.23.1Second Amendment dated as of Exhibit 10.23.1 to Registrant's
July 30, 1993 to the Amended and Quarterly Report on
Restated Credit, Security and Form 10-Q for the quarter ended
Pledge Agreement dated as of June 25, 1993
August 15, 1988, as amended and (File No. 0-14871)
restated as of July 19, 1989 and
as amended by the First
Amendment thereto dated as of
August 14, 1989 among
Registrant, Wincom Broadcasting
Corporation, Win Communications
Inc., Win Communications Inc. of
Indiana, WEBE Associates, WICC
Associates, Media Management
Partners, and Chemical Bank and
Chemical Bank, as Agent
10.24 Agreement of Exhibit 10.34 to Registrant's
Consolidation, Extension,Quarterly Report on
Amendment and Restatement of theForm 10-Q for the quarter ended
WREX Credit Agreement and KATCJune 30, 1989
Credit Agreement between (File No. 0-14871)
Registrant and Manufacturers
Hanover Trust Company dated as
of June 21, 1989
10.25 Asset Purchase Agreement between Exhibit 10.35 to Registrant's
ML Media Partners, L.P. and Quarterly Report on
Anaheim Broadcasting Corporation Form 10-Q for the quarter ended
dated July 11, 1989 September 29, 1989
(File No. 0-14871)
10.26 Asset Purchase Agreement between Exhibit 10.36 to Registrant's
WIN Communications Inc. of Annual Report on Form 10-K
Indiana, and WIN Communications for the fiscal year ended
of Florida, Inc. and Renda December 28, 1990
Broadcasting Corp. dated (File No. 0-14871)
November 27, 1989
10.26.1Asset Purchase Agreement between Exhibit 10.26.1 to Registrant's
WIN Communications of Indiana, Quarterly Report on Form 10-Q
Inc. and Broadcast Alchemy, L.P. for the quarter ended
dated April 30, 1993 June 25, 1993
(File No. 0-14871)
10.26.2 Joint Sales Exhibit 10.26.2 to Registrant's
Agreement between WIN Quarterly Report on
Communications of Indiana, Inc.Form 10-Q for the quarter ended
and Broadcast Alchemy, L.P.June 25, 1993
dated May 1, 1993 (File No. 0-14871)
10.27 Credit Agreement dated as of Exhibit 10.39 to Registrant's
November 15, 1989 between ML Quarterly Report on Form 10-Q
Media Partners, L.P. and Bank of for the quarter ended
America National Trust and June 29, 1990
Savings Association (File No. 0-14871)
10.27.1 First Amendment and Exhibit 10.27.1 to Registrant's
Limited Waiver dated as ofAnnual Report on Form 10-K
February 23, 1995 to the Amendedfor the fiscal year ended
and Restated Credit AgreementDecember 30, 1994
dated as of May 15, 1990 among(File 0-14871)
ML Media Partners, L.P. and Bank
of America National Trust and
Saving Association, individually
and as Agent
10.28 Asset Purchase Agreement dated Exhibit 10.38 to Registrant's
November 27, 1989 between Win Quarterly Report on Form 10-Q
Communications and Renda for the quarter ended
Broadcasting Corp. June 29, 1990
(File No. 0-14871)
10.29 Amended and Restated Credit Exhibit 10.39 to Registrant's
Agreement dated as of May 15, Quarterly Report on Form 10-Q
1990 among ML Media Partners, for the quarter ended
L.P. and Bank of America June 29, 1990
National Trust and Saving (File No. 0-14871)
Association, individually and as
Agent
10.30 Stock Purchase Agreement between Exhibit 10.40.1 to Registrant's
Registrant and Ponca/Universal Quarterly Report on Form 10-Q
Holdings, Inc. dated as of April for the quarter ended
3, 1992 March 27, 1992
(File No. 0-14871)
10.30.1Earnest Money Escrow Agreement Exhibit 10.40.1 to Registrant's
between Registrant and Quarterly Report on Form 10-Q
Ponca/Universal Holdings, Inc. for the quarter ended
dated as of April 3, 1992 March 27, 1992
(File No. 0-14871)
10.30.2Indemnity Escrow Agreement Exhibit 10.40.2 to Registrant's
between Registrant and Form 8-K Report dated July 8, 1992
Ponca/Universal Holdings, Inc. (File No. 0-14871)
dated as of July 8, 1992
10.30.3Assignment by Registrant in Exhibit 10.40.3 to Registrant's
favor of Chemical Bank, in its Form 8-K Report dated July 8, 1992
capacity as agent for itself and (File No. 0-14871)
the other banks party to the
credit agreement dated as of
September 19, 1988, among
Registrant, Universal, certain
subsidiaries of Universal, and
Manufacturers Hanover Trust
Company, as agent
10.30.4Confirmation of final Universal Exhibit 10.40.4 to Registrant's
agreements between Registrant Quarterly Report on Form 10-Q
and Manufacturers Hanover Trust for the quarter ended
Company, dated April 3, 1992 September 25, 1992
(File No. 0-14871)
10.30.5Letter regarding discharge and Exhibit 10.40.5 to Registrant's
release of the Universal Quarterly Report on Form 10-Q
Companies and Registrant dated for the quarter ended
July 8, 1992 between Registrant September 25, 1992
and Chemical Bank (as successor, (File No. 0-14871)
by merger, to Manufacturers
Hanover Trust Company)
10.31.1Asset Purchase Agreement dated Exhibit 10.1 to Registrant's
May 25, 1995 with Quincy Form 8-K dated
Newspapers, Inc. to sell May 25, 1995
substantially all of the assets (File No. 0-14871)
used in the operations of the
Registrant's television station
WREX-TV, Rockford, Illinois
10.31.3Asset Purchase Agreement dated Exhibit to Registrant's
June 1, 1995 with KATC Form 8-K Report dated
Communications, Inc., to sell June 1, 1995
substantially all of the assets (File No. 0-14871)
used in the operations of
Registrant's television station
KATC-TV, Lafayette, Louisiana
10.32 Asset Purchase Agreement dated Exhibit to Registrant's
November 28, 1994 with Century Form 8-K Report dated
Communications Corp., to sell November 28, 1994
substantially all of the assets (File No. 0-14871)
used in Registrant's California
Cable Systems.
10.33 Letter Agreement dated May 31, Exhibit to Registrant's
1996 between Registrant and Form 8-K Report dated
Century Communications Corp. May 31, 1996
(File No. 0-14871)
10.34 Asset Purchase Agreement dated
October 9, 1997 with Madifide,
Inc., to sell substantially all
of the assets used in the
operations of Registrant's C-ML
Radio.
18.1 Letter from Deloitte, Haskins & Exhibit 18.1 to Registrant's
Sells regarding the change in Annual Report on Form 10-K
accounting method, dated March for the fiscal year ended
30, 1989 December 30, 1988
(File No. 0-14871)
27.0 Financial Data Schedule to Form
10-K Report for the fiscal year
ended December 26, 1997
99 Pages 12 through 19 and 38 Prospectus dated February 4, 1986,
through 46 of Prospectus dated filed pursuant to Rule 424(b)
February 4, 1986, filed pursuant under the Securities Act of 1933,
to Rule 424(b) under the as amended
Securities Act of 1933, as (File No. 33-2290)
amended
(b) Reports on Form 8-K.
On February 5, 1998, Registrant filed with the
Securities and Exchange Commission a Current Report on
Form 8-K dated December 31, 1997. This current report
contained details regarding the maturity of the Wincom-
WEBE-WICC Loan and negotiations with the Wincom Bank.
(c) Exhibits.
See (a) (3) above.
(d) Financial Statement Schedules.
See (a) (2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ML MEDIA PARTNERS, L.P.
By: Media Management Partners
General Partner
By: ML Media Management Inc.
Dated: March 26, 1998 /s/ Kevin K. Albert
Kevin K. Albert
Director and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of Registrant in the capacities and on the dates
indicated.
RP MEDIA MANAGEMENT
Signature Title Date
/s/ I. Martin Pompadur President, Secretary March 26, 1998
(I. Martin Pompadur) and Director
(principal executive
officer of the
Registrant)
/s/Elizabeth McNey Yates Executive Vice March 26, 1998
(Elizabeth McNey Yates) President
ML MEDIA MANAGEMENT INC.
Signature Title Date
/s/ Kevin K. Albert Director and March 26, 1998
(Kevin K. Albert) President
/s/ Robert F. Aufenanger Director and March 26, 1998
(Robert F. Aufenanger) Executive Vice
President
/s/ Michael E. Lurie Director and Vice March 26, 1998
(Michael E. Lurie) President
/s/ Diane T. Herte Treasurer (principal March 26, 1998
(Diane T. Herte) financial officer and
principal accounting
officer of the
Registrant)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the year end 1997 Form 10K
Consolidated Balance Sheets and Consolidated Statements of
Operations as of December 26, 1997, and is qualified in its
entirety by reference to such financial statements.
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-26-1997
<PERIOD-END> DEC-27-1996
<CASH> 92,873
<SECURITIES> 0
<RECEIVABLES> 5,879
<ALLOWANCES> 329
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 38,518
<DEPRECIATION> 14,9536
<TOTAL-ASSETS> 156,646
<CURRENT-LIABILITIES> 0
<BONDS> 54,244
<COMMON> 0
0
0
<OTHER-SE> 78,637
<TOTAL-LIABILITY-AND-EQUITY> 156,646
<SALES> 0
<TOTAL-REVENUES> 60,280
<CGS> 0
<TOTAL-COSTS> 35,729
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,083
<INCOME-PRETAX> 19,468
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,468
<EPS-PRIMARY> 102.52
<EPS-DILUTED> 0
</TABLE>
ASSET PURCHASE AGREEMENT
Between
CENTURY - ML CABLE VENTURE
and
MADIFIDE, INC.
Dated October 9, 1997
ASSET PURCHASE AGREEMENT
Dated October 9, 1997
The parties to this agreement are Century-ML Cable
Venture, a New York joint venture (the "Seller"), and MADIFIDE,
Inc., a Puerto Rico corporation (the "Buyer").
The Seller owns and operates the two radio stations
(the "Stations") and the background music service ("BMS") listed
on schedule 1. Simultaneously with the execution of this
agreement, the Seller and the Buyer are entering into a Time
Brokerage Agreement (the "LMA Agreement") pursuant to which the
Seller will make the facilities of the Stations and BMS available
to the Buyer for broadcast of their respective programming and
will provide the commercial time on the Stations to the Buyer for
sale to advertisers effective as of October 1, 1997 (the
"Effective Date"). The Seller desires to sell to the Buyer
substantially all of the assets used in the operations of the
Stations and BMS and the Buyer desires to purchase those assets,
on the terms and conditions contained in this agreement.
Accordingly, it is agreed as follows:
1. Sale and Purchase of Assets.
1.1 Sale of Assets to Buyer. At the closing,
Seller shall sell and assign to the Buyer, and the Buyer shall
purchase and acquire, all of the business of the Seller relating
to the Stations and BMS and all of the assets of the Seller used
in the operations of the Stations and BMS (excluding only the
assets referred to in section 1.2) as those assets exist on the
Closing Date (as defined in section 3.1). Except as otherwise
provided in section 1.2, the assets of the Stations and BMS to be
sold and assigned (collectively, the "Assets") include, but are
not limited to, the following:
(a) all broadcast licenses (the "FCC
Licenses") for the Stations and BMS issued by the Federal
Communications Commission (the "Commission") and any other
permits and authorizations (and applications for any of them)
relating to the operation of the Stations and BMS, including, but
not limited to, those listed on schedule 1.1(a);
(b) all equipment including computers and
office equipment, transmitting towers, transmitters, supplies,
vehicles, furniture, fixtures and leasehold improvements,
improvements on land being acquired by the Buyer pursuant to
section 1.1(c), any tapes and compact discs owned by the Stations
and BMS, and all other tangible personal property, wherever
located, that is owned by the Seller and used in the operation of
the Stations and BMS, including, but not limited to, the items
listed on schedule 1.1(b);
(c) all real property owned by the Seller
relating to the Stations, including, but not limited to, the
property listed on schedule 1.1(c);
(d) all rights of the Seller under leases
and other agreements relating to the business and operations of
the Stations and BMS, to the extent that those rights relate to
the period after 12:00 Midnight on the Closing Date, including,
but not limited to (i) all agreements relating to the sale of
broadcast and advertising time reflected in the sales projection
report previously delivered to Buyer, (ii) the leases and other
agreements listed on schedules 4.13 and 4.14, (iii) the
agreements relating to the news broadcast network, Noti Uno,
listed on schedule 4.13; and (iv) any other leases and other
agreements relating to the business and operations of the
Stations and BMS that are entered into consistent with the
provisions of section 6.2 (and with the prior written consent of
Buyer) between the date of this agreement and the Closing Date;
(e) all promotional materials, trademarks,
trade names, logos, copyrights, whether or not registered (and
all issued registrations and pending applications for
registration of any of them), jingles, slogans and other tangible
and intangible personal property relating to the Stations and BMS
(including, but not limited to, the trademarks, trade names and
logos listed on schedule 1.1(e) and all of the Seller's rights to
use the call letters "WUNO(AM)" and "WFID-FM"), together with the
good will of the business associated with those trademarks, trade
names, logos and copyrights;
(f) all of the Seller's rights in connection
with any "barter" transactions and "trade" agreements relating to
the Stations and BMS;
(g) all of the Seller's rights under
manufacturers' and vendors' warranties relating to items included
in the Assets and all similar rights against third parties
relating to items included in the Assets; and
(h) all files, including, but not limited
to, public files, logs and business records of every kind
relating to the operations of the Stations and BMS, including,
but not limited to, programming information and studies,
technical information and engineering data, news and advertising
studies or consulting reports, sales correspondence, lists of
advertisers, promotional materials, and credit and sales records.
1.2 Excluded Assets. The following assets used
in the operations of the Stations and BMS shall be retained by
the Seller and shall not be sold or assigned to the Buyer:
(a) all cash, bank accounts, certificates of
deposit, commercial paper, treasury bills and notes and all other
marketable securities as of 12:00 Midnight on the Closing Date;
(b) all accounts receivable (the "Accounts
Receivable") of the Stations and BMS for broadcast time and
services provided by the Seller prior to the Effective Time (as
defined below) (except that any amounts included in accounts
receivable with respect to "barter" transactions or "trade"
agreements shall not be excluded from the sale);
(c) any lease or other agreement as to which
consent to assignment is required but cannot be obtained;
(d) the account books of original entry and
general ledgers and all partnership records of the Seller,
including tax returns and transfer books;
(e) any lease or other agreement required to
be listed on schedule 4.13 or 4.14 and not listed on that
schedule;
(f) any rights under "trade" agreements with
the cable system owned by the Seller; and
(g) the assets listed on schedule 1.2(g) and
any other assets of the Seller not used in connection with the
operation of the Stations and BMS.
2. Purchase Price.
2.1 Amount and Payment of Consideration. As full
consideration for the Assets, including the covenant not to
compete pursuant to the Non-competition Agreement referred to in
section 8.3, at the closing the Buyer shall (a) pay to Seller, in
accordance with section 2.2, a purchase price of $11,537,500,
subject to adjustment as provided in section 2.5 ; and (b) as
sume, and agree to pay, perform and discharge (subject to the
provisions of the LMA Agreement and the apportionment provisions
of section 2.5) all of the obligations of the Seller relating to
the operations of the Stations and BMS that arise after 12:00
Midnight on the Closing Date under those leases and other
agreements relating to the operations of the Stations and BMS
assigned to the Buyer pursuant to sections 1.1(d) and 1.1(f)
(except as provided in section 6.8 herein).
2.2 Payment of Purchase Price. The aggregate
purchase price for the Assets shall be paid as follows:
(a) At the closing, the Buyer shall deliver
to Banco Santander (the "Escrow Agent") an amount equal to
$593,125 (the "Indemnity Escrow Amount"), to be held by the
Escrow Agent in an interest bearing account pursuant to the terms
of an escrow agreement (the "Indemnity Escrow Agreement") in the
form of exhibit 2.2(a) which shall be executed on the Closing
Date. The Indemnity Escrow Amount shall be paid in accordance
with the terms of such escrow agreement to (i) the Buyer if it is
determined that the Buyer is entitled to indemnification payments
under section 9.2 (a) of this agreement, or (ii) the Seller to
the extent the Buyer is not determined to be entitled to any such
payments.
(b) If the application (the "Application")
granted by the Commission to increase the authorized nighttime
broadcast power for one of the Stations ("WUNO(AM)") from 1 kW to
2.30kW does not become final prior to the closing, then, at the
closing, Buyer shall deliver to the Escrow Agent an amount equal
to $296,563 (the "Broadcast Power Escrow Amount"), to be held by
the Escrow Agent until December 31, 1998 in an interest bearing
account pursuant to the terms of an escrow agreement (the
"Broadcast Power Escrow Agreement") in the form of exhibit 2.2(b)
which shall be executed on the Closing Date. The Broadcast Power
Escrow Amount shall be paid in accordance with the terms of such
escrow agreement to (i) the Seller if the Application becomes
final prior to December 31, 1998, less $50,000, or Buyer's actual
legal, engineering and other costs, if any, associated with the
Application, whichever is less, which amount shall be paid to
Buyer or (ii) the Buyer if the Application has not become final
prior to December 31, 1998. Any prosecution of the Application
before the Commission shall proceed in accordance with section
6.11.
(c) At the closing, or on December 31, 1997,
whichever is earlier, the Buyer (or if on December 31, 1997, the
Seller) shall deliver to the Escrow Agent the Volume Discount
Escrow Amount as provided in section 6.4(d) and at the Effective
Time the Seller shall deliver the Employee Benefit Escrow Amount
as provided in section 6.8(d).
(d) At the closing, the Buyer shall deliver
to the Seller, by wire transfer of immediately available funds or
by delivery of a bank or certified check in immediately available
funds, an amount which, together with the Indemnity Escrow
Amount, the Broadcast Power Escrow Amount (if any), the Volume
Discount Escrow Amount (if funded by Buyer) and the Employee
Benefit Escrow Amount (if funded by Buyer), equals the purchase
price of $11,537,500.
2.3 Deposit; Seller's Liquidated Damages. Upon
execution of this agreement, the Buyer shall deliver to the
Escrow Agent a letter of credit for $1,300,000 (the "Seller's
Liquidated Damages Escrow Amount"), to be held by the Escrow
Agent pursuant to the terms of an escrow agreement in the form of
exhibit 2.3 which is being executed simultaneously with the
execution of this agreement and subject to the following:
(a) If the purchase of the Assets under this
agreement is not consummated as a result of a material breach by
the Buyer of any of its material obligations under this agreement
(and the Seller has not breached any of its material obligations
under this agreement), the Seller shall be entitled to the
Seller's Liquidated Damages Escrow Amount (together with any
interest thereon) to compensate the Seller as liquidated damages
resulting to the Seller from such breach, and consequently Buyer
shall not be subject to any further liabilities as a result
thereof.
(b) If the purchase of the Assets under this
agreement is not consummated due to the nonfulfillment of any of
the conditions in section 7.1 or for any other reason except the
Buyer's default in the performance of any of its material
obligations under this agreement, the Seller shall not be
entitled to the Seller's Liquidated Damages Escrow Account (or
any interest thereon) and, promptly after the termination of this
agreement, the Seller's Liquidated Damages Escrow Account
(together with any interest thereon) shall be paid by the Escrow
Agent to the Buyer.
2.4 Limitation on Assumption of Liabilities.
Except as provided in section 2.1(b) and in the LMA Agreement,
Buyer shall not assume, and shall not pay, perform or discharge,
any liabilities, contingent or otherwise, or any obligations of
the Seller relating to the Stations and BMS, and the Seller shall
pay and perform any such liabilities or obligations.
2.5 Apportionment.
The Seller shall be entitled to all income
earned or accrued and shall be responsible for all liabilities
and obligations incurred or payable in connection with the
operations of the Stations and BMS through 12:00 Midnight on the
day preceding the Effective Date of the LMA Agreement (the
"Effective Time") and the Buyer shall be entitled to all income
earned or accrued and, subject to the provisions of section 2.4,
shall be responsible for all liabilities and obligations incurred
or payable in connection with the operations of the Stations and
BMS after the Effective Time. All overlapping items of income or
expense shall be apportioned (based on the actual number of days
before and after the Effective Time) between the Seller and the
Buyer, as of the Effective Time, in accordance with generally
accepted accounting principles. Items to be apportioned include,
but are not limited to, the following:
(1) advance payments received from
advertisers prior to the Effective Time for services to be
rendered in whole or in part after the Effective Time;
(2) prepaid expenses arising from payments
made for services prior to the Effective Time if all or part of
the services have not been received or used prior to the
Effective Time (for example, rents paid in advance for a rental
period extending beyond the Effective Time);
(3) liabilities, customarily accrued,
arising from expenses incurred but unpaid as of the Effective
Time (excluding severance pay, vacation pay, sick pay or similar
items, which are covered by section 6.8, and employee claims and
other liabilities otherwise specifically provided for in this
agreement); frequency discounts; utility services; rent
(including property taxes payable under leases assumed by the
Buyer); property taxes relating to real property interests
assigned to the Buyer; sales commissions; various business and
professional services; and licensing fees, including prior years'
adjustments; and
(4) personal property taxes and utility
charges related to the Stations and BMS.
2.6 Determination of Apportionments. Prior to
the closing, the Seller shall estimate all apportionments
pursuant to section 2.5 and the purchase price payable at the
closing pursuant to section 2.2 shall be adjusted based on the
estimate. Within 60 days after the Closing Date, the Seller
shall determine all apportionments pursuant to section 2.5 (based
on the actual number of days before and after the Effective Time)
and shall give notice to Buyer of its determination and deliver a
statement of its determination to the Buyer (which statement
shall set forth in reasonable detail the basis for those
determinations); the Buyer shall have 30 days after the notice
from Seller to review the Seller's determination, and within 10
days after such 30-day period the Buyer shall notify the Seller
of any dispute with the Seller's determination and the Buyer
shall pay to the Seller, or the Seller shall pay to the Buyer, as
the case may be, the net amount due as a result of the final
determination of the apportionments (or, if there is any dispute,
the undisputed amount). If the Buyer disputes the Seller's
determinations, the parties shall confer with regard to the
matter and an appropriate adjustment and payment shall be made as
agreed upon by the parties (or, if they are unable to resolve the
matter within 30 days after Buyer's notice to Seller, a firm of
independent certified public accountants shall be designated by
the parties, which firm's decision on the matter shall be binding
and whose fees and expenses shall be borne 50% by the Seller and
50% by the Buyer). If the parties fail to agree on the
accountants, the accountants shall be KPMG Peat Marwick LLP.
2.7 Allocation of Purchase Price. Prior to the
closing, Buyer and Seller shall negotiate in good faith an
allocation of the purchase price for the Assets among the Assets.
If the Buyer and the Seller are unable to agree upon an
allocation of the purchase price for the Assets, the allocation
shall be determined by a firm of independent certified public
accountants designated by the parties. If the parties fail to
agree on the accountants, the accountants shall be KPMG Peat
Marwick LLP, whose fees shall be borne 50% by the Seller and 50%
by the Buyer. Notwithstanding the foregoing, the parties agree
that $1,000,000 of the purchase price is allocable to the
covenant not to compete in the Non-competition Agreement referred
to in section 8.3 and that $1,100,000 of the purchase price is
allocable to the real property listed in Schedule 4.4(a).
3. Closing.
3.1 Date of Closing. The closing under this
agreement shall take place at such place as may be mutually
agreeable to the Buyer and the Seller on the fifth business day
after the conditions specified in sections 7.1(c) and 7.2(c) have
been fulfilled (or waived), or such other date as the parties may
mutually agree upon. The date on which the closing is held is
referred to in this agreement as the "Closing Date." At the
closing, the parties shall execute and deliver the documents
referred to in section 8.
3.2 Outside Date for Closing. If the closing has
not occurred by June 30, 1998, either the Seller or the Buyer may
terminate this agreement by notice to the other; upon such
termination, neither of the parties shall have any liability of
any kind arising out of this agreement other than for any
liability resulting from its breach of this agreement prior to
termination. If the closing is postponed pursuant to section 11
of this agreement, the date referred to in the previous sentence
shall be extended by the period of the postponement.
4. Representations and Warranties by the Seller. The
Seller represents and warrants to the Buyer as follows:
4.1 The Seller's Organization and Authority. The
Seller is a general partnership duly organized and validly
existing under the law of New York and has the full power and
authority under New York law and its partnership agreement to
enter into and to perform this agreement and to own and operate
the Stations and BMS in Puerto Rico.
4.2 Authorization of Agreement. The execution,
delivery and performance of this agreement by the Seller have
been duly authorized by all necessary partnership action of the
Seller and this agreement constitutes a valid and binding
obligation of the Seller enforceable against it in accordance
with its terms, except as may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
4.3 Consents of Third Parties. Subject to
receipt of the consents and approvals referred to in schedule
4.3, the execution, delivery and performance of this agreement by
the Seller will not (i) conflict with the partnership agreement
of the Seller and will not conflict with, or result in a breach
or termination of, or constitute a default under, any lease,
agreement, commitment or other instrument, or any order, judgment
or decree, to which the Seller is a party or by which the Seller
is bound or to which any of the Assets is subject; (ii)
constitute a violation by the Seller of any law applicable to the
Seller; or (iii) result in the creation of any lien, claim,
charge or encumbrance ("Lien") upon any of the Assets. No
consent, approval or authorization of, or designation,
declaration or filing with, any governmental authority is
required on the part of the Seller in connection with the
execution, delivery and performance of this agreement, except for
the filings referred to in section 6.1.
4.4 Title to Assets.
(a) All real property owned by the Seller
included in the Assets (the "Real Property") is listed in
schedule 4.4(a). Except as listed in schedule 4.4(a), Seller has
not received any notice that there is any material violation of
any laws, ordinances or regulations with respect to any Real
Property. Except as set forth on schedule 4.4(a) and except
for property leased pursuant to leases and agreements listed on
schedule 4.13, the Seller has, and at the closing the Buyer will
receive, valid title to all of the personal property and
intangible property included in the Assets, free and clear of any
Lien (except for the lien, if any, of current taxes not yet due
and payable). The Seller has, and will convey to the Buyer on
the Closing Date, good and marketable fee simple title to the
Real Property, free and clear of any Liens, except as set forth
on schedule 4.4(a) and except for the lien, if any, of current
taxes not due and payable and for imperfections of title and
easements that will not in any material respect adversely affect
or impair the Buyer's continued use of the property or detract in
any material respect from the value of the property to the Buyer
(collectively "Permitted Liens").
(b) No condemnation proceeding is in
existence concerning any of the Real Property; there is no
existing notice covering future condemnation; and Seller has no
reason to believe that the Real Property will be condemned.
(c) Except as disclosed in schedule 4.4(a),
the improvements on the Real Property do not violate in any
material respect the provisions of any applicable building codes,
fire regulations, building restrictions, or other governmental
ordinances, orders or regulations. Except as disclosed in
schedule 4.4(a), the Real Property is zoned so as to permit the
present commercial uses of the Real Property. Except as
disclosed in schedule 4.4(a), there are no outstanding variances
or special permits affecting the Real Property or the uses
thereof. All of the Real Property (including all improvements
and fixtures thereon and appurtenances thereto) is in reasonably
good condition and repair, ordinary wear and tear in normal usage
excepted, and is adequate and suitable in all material respects
in accordance with general industry practices for the purposes
for which it is currently used.
(d) The transmitting facilities of the
Stations, including the towers, antennae, guy line, anchors,
ground systems and all other related buildings, structures and
appurtenances, are located entirely within the confines of the
Real Property.
(e) To the best of Seller's knowledge, all
utilities required for the operation of the Real Property and
improvements thereon either enter the Real Property through
adjoining public streets, or if the utilities pass through
adjoining private land, the utilities do so in accordance with
valid easements.
(f) To the best of Seller's knowledge, there
are not now any notices of violations of law or ordinances,
orders or requirements noted in or issued by any federal
department or any department of the Commonwealth of Puerto Rico
or the applicable city or any prosecutions in any federal,
Commonwealth or city court on account thereof, affecting the Real
Property.
(g) Except as set forth on schedule 4.4(a),
the Real Property is freely accessible directly from public
streets, or by the use of adjoining private land, which access
through the private land is done in accordance with valid public
or private easements, and any such private easements are now in
full force and effect, and conveyable to Buyer as a part of the
Real Property.
4.5 FCC Licenses. The Seller holds the FCC
Licenses and all other material permits and authorizations
necessary for or used in the operations of the Stations and BMS,
and each of the FCC Licenses is, and all such permits and
authorizations are, in full force and effect. Schedule 1.1(a)
contains a true and complete list of the FCC Licenses currently
in effect and all such permits and authorizations (showing, in
each case, the expiration date). Except as set forth on schedule
4.5, no application, action or proceeding is pending for the
renewal or modification of any of the FCC Licenses or any of such
permits or authorizations, and no application, action or
proceeding is pending or, to the best of Seller's knowledge,
threatened that may result in the denial of the application for
renewal, the revocation, modification, nonrenewal or suspension
of any of the FCC Licenses or any of such permits or
authorizations, the issuance of a cease-and-desist order, or the
imposition of any administrative or judicial sanction with
respect to the Stations or BMS that may materially adversely
affect the rights of the Buyer under any such FCC Licenses,
permits or authorizations.
4.6 Call Letters. The Seller has the right to
the use of the call letters "WUNO(AM)" and "WFID-FM," pursuant to
the rules and regulations of the Commission.
4.7 Operation of the Stations and BMS. The
Stations and BMS are being operated in all material respects in
accordance with the FCC Licenses and in compliance with the
Communications Act of 1934 and the rules and regulations
thereunder.
4.8 Financial Statements. The Seller has pre
viously delivered to the Buyer the unaudited balance sheets of
the Stations and BMS as of December 31, 1995 and December 31,
1996 and the unaudited balance sheets of the Stations and BMS as
of August 31, 1996 and August 31, 1997, and the related
statements of operations for the years and eight-month periods
then ended. Except as set forth on schedule 4.8, all of those
financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis, are in accordance with Seller's books and records, and
fairly present in all material respects the financial position
and the results of operations of the Stations and BMS as of the
dates and for the periods indicated.
4.9 Absence of Certain Changes. Since August 31,
1997 the Seller has operated the business of the Stations and BMS
in the usual and ordinary course and substantially consistent
with its past practice with respect to the Stations and BMS, and,
except as set forth on schedule 4.9, through the date of this
agreement:
(a) There has been no material adverse
change in the business or operations of the Stations and BMS,
except that the revenues and operating cash flow of the Stations
and BMS for 1997 to date are approximately 9% and 15%,
respectively, lower than for the comparable period of 1996;
(b) The Seller has not, with respect to the
Stations and BMS, entered into any transaction or incurred any
liability or obligation that is material to the business or
operation of the Stations and BMS except in the ordinary course
of its business consistent with past practice;
(c) The Seller has not sold or transferred
any of the assets of the Stations and BMS other than in the
ordinary course of business consistent with past practice;
(d) The Seller has not incurred any
indebtedness with respect to the Stations and BMS other than
indebtedness to trade creditors incurred in the ordinary course
of business consistent with past practice; and
(e) The Seller has not granted or agreed to
grant any increase in any rate or rates of salaries or
compensation or other benefits or bonuses payable to employees of
the Stations and BMS, except for increases in accordance with the
Seller's past employment practices, and has not granted or agreed
to effect any changes in the Seller's management personnel,
policies or employee benefits.
4.10 Tangible Property. Except as set forth on
schedule 4.10, all equipment and other tangible assets to be sold
to Buyer pursuant to this agreement is in reasonably good
operating condition and in reasonably good condition of
maintenance and repair. All items of transmitting and studio
equipment permit the Stations and BMS and any auxiliary
facilities to operate in all material respects in accordance with
the terms of the FCC Licenses, the rules and regulations of the
Commission, and all other applicable federal, Commonwealth and
local statutes, ordinances, rules and regulations.
4.11 Intangible Assets. Schedule 1.1(e) contains
a complete list of the trademarks, trade names, logos, jingles
and slogans used by the Seller in the operation of the Stations
and BMS. Except as set forth on Schedule 4.11, the Seller owns,
free and clear of any Liens, each of the trademarks, trade names,
logos, jingles and slogans listed on schedule 1.1(e). The Seller
is not operating the Stations and BMS in a manner that infringes
in any material respect any patent, copyright or trademark of any
third party or otherwise violates in any material respect the
rights of any third party, and no claim has been made or
threatened against it alleging any such violation. To the best
of Seller's knowledge, there has been no material violation by
others of any right of the Seller in any trademark, trade name,
logo, jingle or slogan used in the operation of the Stations and
BMS.
4.12 Litigation; Compliance with Laws. Except as
set forth on schedule 4.12, there is no claim, litigation,
proceeding or governmental investigation pending or, to the best
of Seller's knowledge, threatened, or any order, injunction or
decree outstanding, against the Seller relating to the Stations
or BMS or the Assets, which if adversely determined might (i)
have a material adverse effect on the operations of the Stations
or BMS, (ii) materially delay approval by the Commission of the
transactions contemplated by this agreement, or (iii) prevent the
consummation of the transactions contemplated by this agreement.
Except as set forth on schedule 4.12, to the best of the Seller's
knowledge, the Seller is not in violation of any law, regulation
or ordinance or any other requirement of any governmental body or
court with respect to the operation of the Stations and BMS,
which violation would have a material adverse effect upon the
operations or business of the Stations or BMS, and no notice has
been received by the Seller alleging any such violation. Seller
is not in default with respect to any order, writ, injunction or
decree of any Federal, Puerto Rico, municipal or other
governmental department in any case, domestic or foreign.
4.13 List of Agreements, etc. Schedules 4.13 and
4.14 together contain, with respect to the Stations and BMS, a
complete list of: (a) all agreements for the purchase of
materials, supplies or equipment, other than agreements that were
entered into in the ordinary course of business and involve an
expenditure by the Seller of less than $10,000 for any one
commitment or two or more related commitments; (b) all notes and
agreements relating to any indebtedness of the Seller that is
secured by any of the Assets, other than the Note Agreement dated
as of December 1, 1992 (the "Note Agreement"); (c) all leases or
other rental agreements under which the Seller is either lessor
or lessee related to the operations or business of the Stations
and BMS; (d) all "barter" and "trade" agreements; (e) all
collective bargaining agreements; and (f) all other agreements
(written or oral) that require payment by the Seller of more than
$10,000 individually (or $30,000 in the aggregate) or cannot be
terminated by the Seller on less than 30 days notice without
liability. True and complete copies of all written leases,
commitments and other agreements referred to on schedules 4.13
and 4.14 have been delivered to the Buyer.
4.14 Agreements Regarding Employees. Except as
set forth in schedule 4.14, the Seller is not a party to or bound
by any fringe benefit or other non-cash compensation plan, or any
pension, thrift, annuity, retirement, savings, profit sharing or
deferred compensation plan or agreement, or any bonus, vacation,
holiday, sick leave, group insurance, health or other personal
insurance or other incentive or benefit agreement, plan or
arrangement. Except as set forth on schedule 4.14, the Seller
does not have any severance policy and no employee of the Station
is entitled to any severance payment, either by law or by
agreement, upon the termination of his or her employment. Except
as set forth on schedule 4.14, no employee of the Stations or BMS
is represented by any union or other collective bargaining agent
and there are no collective bargaining or other labor agreements
with respect to any employee of the Stations or BMS.
4.15 Status of Agreements. All leases and other
agreements to be assumed by the Buyer were entered into in the
ordinary course of the business of the Stations and BMS. Each of
the agreements and leases referred to in section 4.13 and each of
the benefit agreements, plans or arrangements referred to in
section 4.14 is presently in full force and effect in accordance
with its terms and, except as set forth on schedule 4.15, the
Seller is not in material default, and, to the best of the
Seller's knowledge, no other party is in material default under
any agreement referred to in section 4.13 or 4.14. No party to
any of the leases and other agreements referred to in sections
4.13 and 4.14 has made, asserted or has any defense, setoff or
counterclaim under any of those agreements or has exercised any
option granted to it to cancel or terminate its agreement, to
shorten the term of its agreement, or to renew or extend the term
of its agreement and the Seller has not received any notice to
that effect.
4.16 Insurance. Schedule 4.16 contains a
complete list of all of the Seller's insurance policies relating
to the operation of the Stations and BMS specifying the policy
limit, type of coverage, location of the property covered, annual
premium, premium payment date and expiration date of each of the
policies. Seller has not been refused insurance by any carrier
during the past five years.
4.17 Labor Matters. Except as set forth on
schedule 4.17, with respect to the Stations and BMS (a) there is
no unfair labor practice charge or complaint against the Seller
pending before the National Labor Relations Board, Department of
Labor of the Commonwealth of Puerto Rico or any similar Federal
or local agency, any state labor relations board or any court or
tribunal and, to the best of Seller's knowledge, none is or has
been threatened; (b) there is no labor strike, dispute, request
for representation, slowdown or stoppage actually pending against
or affecting the Seller and, to the best of Seller's knowledge,
none is or has been threatened; (c) no grievance which might have
a material adverse effect on the conduct of the operations of the
Stations or BMS taken as a whole or any arbitration proceeding
arising out of or under any collective bargaining agreement is
pending and, to the best of Seller's knowledge, none is or has
been threatened; (d) the businesses of the Stations and/or BMS
are in compliance in all material respects with all applicable
laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged
in any unfair labor practice; (e) there is no pending, or, to the
best knowledge of Seller, threatened, material grievance, and (f)
no material charges with respect to or relating to the operation
of the Stations or BMS are pending before the Equal Employment
Opportunity Commission or any state, Commonwealth or local agency
responsible for the prevention of unlawful employment practices.
Seller has conducted its business in compliance in all material
respects with all Federal and local laws, rules and regulations
related to or affecting employment and employment practices,
including terms and conditions of employment and wages and hours.
Seller has complied in all material respects with laws and
regulations of, and has timely paid all workmen's compensation
insurance premiums to, the State Insurance Fund Administration,
and Seller has timely paid any and all payments for its employees
with respect to payroll withholding taxes and any other salary
withholding obligation, vacation time, Christmas bonus and any
other payment which such employees were entitled to receive
pursuant to the law or otherwise for or related to the period
since the date of employment by Seller of such employees.
Notwithstanding anything to the contrary herein, Seller shall be
responsible for all obligations as employer to all its employees
(with the exception of termination compensation to Covered
Employees (as defined in section 6.8 hereto) for which Buyer will
be responsible) regarding any claim that may arise under any
applicable labor or labor related law or regulation to all
employees employed by Seller during the period of their
employment by Seller.
4.18 Environmental Matters. With respect to (i)
the real property owned or leased by Seller and used exclusively
in the operations of the Stations and BMS or (ii) the operations
of the Stations and BMS:
(a) To the best of Seller's knowledge,
Seller and all of the real property is in compliance in all
material respects with all federal, state and local laws relating
to pollution, the protection of human health or the environment,
including, but not limited to, laws relating to emissions,
discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum
products.
(b) To the best of Seller's knowledge, there
are no past or present actions, activities, circumstances,
conditions, events or incidents, including, but not limited to,
the release, emission, discharge or disposal of any Material of
Environmental Concern, that could form the basis of any material
claim against, or any material violation by, Seller or either
Station or BMS (or, after the closing, the Buyer).
(c) Except as set forth on schedule 4.18, to
the best of Seller's knowledge, (1) there are no underground
storage tanks located on the real property owned or leased by
Seller, (2) there is no asbestos contained in or forming part of
any building, building component, structure or office space owned
or leased by Seller, (3) no polychlorinated biphenyls (PCBs) are
used or stored at any real property owned or leased by Seller,
(4) none of the electrical equipment located at the real property
owned or leased by Seller contains any PCBs, and (5) there are no
on-site or off-site locations where Seller has stored, disposed
or arranged for the disposal of Materials of Environmental
Concern.
4.19 ERISA. Schedule 4.19 lists each "employee
benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")
sponsored or maintained by the Seller, the Stations or BMS for
the benefit of employees of the Stations or BMS.
4.20 Commission Reports. All material returns,
reports and statements required to be filed by the Seller with
the Commission relating to the Stations and BMS have been filed
and complied with and are complete and correct in all material
respects as filed.
4.21 Finders, Brokers. Neither Seller nor anyone
acting on its behalf has taken any action that, directly or
indirectly, would obligate Buyer to anyone acting as broker,
finder, financial advisor or in any similar capacity in
connection with this agreement or any of the transactions
contemplated hereby.
4.22 Ordinary Course of Business. Seller has
continued to conduct and is currently conducting the operations
of the business of the Stations and of BMS in substantially the
same manner as they were conducted in 1996.
4.23 Tax and Other Returns or Filings. All
material tax returns, reports, statements and other similar
filings required to be filed by Seller with respect to any and
all Puerto Rico, federal, state, local and foreign taxes,
assessments, interest, penalties, deficiencies, fees and other
governmental charges or impositions relating to the operations of
the Stations and BMS (the "Tax Returns") (including without
limitation all income tax, unemployment compensation, social
security, payroll, disability, sales and use, excise, privilege,
property, ad valorem, franchise, license and any other tax or
similar governmental charge or imposition under the laws of
Puerto Rico, the United States or any state of or municipal
and/or political subdivision thereof or any foreign country or
political subdivision thereof relating to the operations of the
Stations and BMS) (the "Taxes") have been filed or will be filed
on time with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed,
and all such Tax Returns properly reflect or will properly
reflect the liabilities of Seller for Taxes, for the periods,
property or events covered thereby. All material Taxes,
including without limitation those which are called for by the
Tax Returns, or heretofore claimed to be due by any taxing
authority from Seller with respect to the operations of the
Stations or BMS have been properly accrued or paid. Seller has
not received any notice of assessment or proposed assessment in
connection with any Tax Returns, and there are no pending tax
examinations or tax claims asserted against Seller with respect
to the operations of the Stations or BMS or any of the Assets.
Seller has not extended or waived the application of any statute
of limitations of any jurisdiction regarding the assessment or
collection of any Taxes. Except as listed in schedule 4.23,
there are no tax liens on any of the Assets. Seller has made or
will make all material deposits required by law to be made with
respect to withholding and other employment taxes.
4.24 Compliance with Law; Authorizations. Except
as indicated in schedule 4.24, Seller is in compliance in all
material respects with each law, ordinance or governmental rule
or regulation to which Seller's operations of the Stations and
BMS and/or the Assets are subject (the "Regulations"). Seller
owns, holds, possesses or lawfully uses in the operation of the
businesses of the Stations and of BMS all material franchises,
licenses, permits and other authorizations (the "Authorizations")
which are necessary for it to conduct the same as they are
currently being conducted or for the use and ownership of the
Assets. All of the Authorizations are listed in schedule 4.24.
Seller, to the best of its knowledge, is not in default nor has
it received any notice or claim of default with respect to any
Authorizations. To the best of Seller's knowledge, all of the
Authorizations should be renewable by Seller by their terms or in
the ordinary course of business without the need to comply with
any special qualification procedures or to pay any amount other
than routine filing fees. Seller shall reasonably cooperate with
Buyer in connection with Buyer's application for the transfer,
renewal or issuance of any Authorization, provided that Seller's
cooperation shall not be deemed to include or require actual
expenditure of funds by Seller.
4.25 Utility Services. The water, telephone,
electric and sewer utility services currently available to the
Real Property are adequate for the present use of the Real
Property in the conduct of the businesses of the Stations and of
BMS, and Seller knows of no condition that may result in the
termination of the present access from the Real Property to such
services.
50 Representations and Warranties by the Buyer. The
Buyer represents and warrants to the Seller as follows:
5.1 The Buyer's Organization and Authority. The
Buyer is a corporation duly organized and validly existing under
the law of the Commonwealth of Puerto Rico and has the full power
and authority to enter into and perform this agreement and to own
and operate the Stations and BMS.
5.2 Authorization of Agreement. The execution,
delivery and performance of this agreement by the Buyer have been
duly authorized by all necessary action of the Buyer and this
agreement constitutes a valid and binding obligation of the Buyer
enforceable against it in accordance with its terms, except as
may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
5.3 Consents of Third Parties. The execution,
delivery and performance of this agreement by the Buyer will not
(a) conflict with the Buyer's certificate of incorporation or by-
laws and will not conflict with or result in the breach or
termination of, or constitute a default under, any lease,
agreement, commitment or other instrument, or any order, judgment
or decree, to which the Buyer is a party or by which the Buyer is
bound or (b) constitute a violation by the Buyer of any law
applicable to it. No consent, approval or authorization of, or
designation, declaration or filing with, any governmental
authority is required on the part of the Buyer in connection with
the execution, delivery and performance of this agreement, except
for the filings referred to in section 6.1.
5.4 Litigation. There is no claim, litigation,
proceeding or governmental investigation pending or, to the best
of the Buyer's knowledge, threatened, or any order, injunction or
decree outstanding, against the Buyer or any of its affiliates
that would prevent the consummation of the transactions
contemplated by this agreement.
5.5 Buyer's Qualification. To the best of
Buyer's knowledge, it is legally, financially and otherwise
qualified under the rules and regulations of the Commission and
the Communications Act of 1934, as amended, to become the owner,
operator and licensee of the Stations and BMS.
5.6 Finders, Brokers. Except as provided in
section 12.2, neither Buyer nor anyone acting on its behalf has
taken any action that, directly or indirectly, would obligate
Seller to anyone acting as broker, finder, financial advisor or
in any similar capacity in connection with this agreement or any
of the transactions contemplated hereby.
60 Further Agreements of the Parties.
6.1 Filings. As soon as practicable, but in no
event later than five days after the date of this agreement, the
parties shall file with the Commission an application requesting
consent to the transactions contemplated by this agreement; the
parties shall with due diligence take all reasonable steps
necessary to expedite the processing of the application and to
secure such consent or approval. Each party shall bear its own
costs and expenses (including the fees and disbursements of its
counsel) in connection with the preparation of the portion of the
application to be prepared by it and in connection with the
processing of that application. All filing and grant fees
relating to the transfer of the FCC Licenses, if any, paid to the
Commission, shall be split equally between Buyer and Seller.
6.2 Operations of the Stations and BMS. From the
date of this agreement through the Closing Date, subject to the
terms of the LMA Agreement:
(a) The Seller shall operate the business of
the Stations and BMS in the usual and ordinary course and
substantially consistent with past practices and in substantial
conformity with (i) the FCC Licenses, the Communications Act of
1934, and the rules and regulations of the Commission, and (ii)
all other material laws, ordinances, regulations, rules or orders
relating to the operations of the Stations and BMS;
(b) The Seller shall use reasonable efforts,
consistent with its past practices, (i) to preserve the business
organization of the Stations and BMS intact and to preserve the
goodwill and business of the advertisers, suppliers and others
having business relations with the Stations and BMS, (ii) to
retain the services of the employees of the Stations and BMS as
may be agreed upon between Buyer and Seller, and (iii) to
preserve all trademarks, trade names, service marks and
copyrights and related registrations of the Stations and BMS, and
all slogans and logos, owned by them or in which they have any
rights;
(c) The Seller shall not, except in the
ordinary course and substantially consistent with past practice,
(i) enter into any transaction or incur any liability or
obligation that is material to the business or operations of the
Stations or BMS or (ii) sell or transfer any of the assets
relating to the Stations or BMS, other than assets that have worn
out or been replaced with other assets of equal or greater value
or assets that are no longer needed in the operation of the
Stations or BMS;
(d) The Seller shall not, except with the
Buyer's prior written approval, (i) enter into or renew any lease
or other agreement relating to the Stations or BMS that, if
entered into prior to the date of this agreement, would have been
required to be included on schedule 4.13 or 4.14 (or that would
require receipt of a consent or approval required to be included
on schedule 4.3), (ii) enter into any new time sale agreement for
the Stations or BMS, (iii) cause or take any action to allow any
material lease or other agreement relating to the Stations or BMS
to lapse (other than in accordance with its terms), to be
modified in any adverse respect, or otherwise to become impaired
in any material manner, (iv) grant or agree to grant any general
increases in the rates of salaries or compensation payable to
employees of the Stations or BMS except for increases to be given
consistent with past practices, (v) grant or agree to grant any
specific bonus or increase to any executive or management
employee of the Stations or BMS whose total annual compensation
after the increase would be at an annual rate in excess of
$50,000 except in the ordinary course of business and consistent
with past practices, or (vi) provide for any new pension,
retirement or other employment benefits for employees of the
Stations or BMS or any increase in any existing benefits,
establish any new employee benefit plan or amend or modify any
existing employee benefit plan, or otherwise incur any obligation
or liability under any employee benefit plan materially different
in nature or amount from obligations or liabilities incurred
during similar periods in prior years;
(e) The Seller shall (i) maintain all of its
assets relating to the Stations and BMS in customary repair,
maintenance and condition, except to the extent of normal wear
and tear, and repair or replace, consistently with past practice
and subject to the provisions of section 11 hereof, any asset
that may be damaged or destroyed, and (ii) maintain or cause to
be maintained insurance on the assets and business of the
Stations and BMS as described in section 4.16; and
(f) Seller agrees that it will keep in
effect until the Closing Date, without reduction in amount unless
a material increase in premium is commanded, all insurance
coverages maintained by Seller with respect to the business of
the Stations and/or BMS, provided however, that the above
provision shall not be deemed to impede any carrier from
exercising any legal right which it may have to reduce or
withdraw any coverage it may have granted originally under the
particular policy.
6.3 No Control. Subject to the terms of the LMA
Agreement and section 6.2 of this agreement, (a) between the
date of this agreement and the Closing Date, the Buyer shall not,
directly or indirectly, control, supervise or direct, or attempt
to control, supervise or direct, the operations of the Stations
or BMS, and (b) such operations shall be solely the
responsibility of the Seller and shall be in its complete
discretion.
6.4 Accounts Payable; Accounts Receivable.
(a) Not later than 10 days after the
Effective Time, the Seller shall furnish to Buyer a list of any
Accounts Receivable outstanding as of the Effective Time and of
any accounts payable ("Accounts Payable") that are payable by
Seller after the Effective Time; it being understood that Buyer
is not a collection agent and that Buyer will not obtain a
license as a collection agency. For a period of 120 days after
the Effective Time, Buyer shall on a best effort basis and
without other compensation collect the Accounts Receivable, net
of any applicable agency commission or prompt payment discount,
and Buyer shall pay the Accounts Payable for Seller. Within 15
days after the last day of each calendar month during the 120 day
period, Buyer shall remit to Seller the amount collected by Buyer
during that month with respect to the Accounts Receivable (net of
sales commissions payable and paid to agencies or employees of
the Stations and BMS or brokers) less the amount paid by Buyer
with respect to the Accounts Payable and Buyer shall provide
Seller with a report setting forth the Accounts Receivable
collected by Buyer during that particular month and the Accounts
Payable paid by Buyer during that particular month (and if the
amount of the Accounts Payable paid exceeds the net amount of the
Accounts Receivable collected, Seller shall promptly pay such
excess to Buyer). Buyer shall furnish Seller with such records
and other information as Seller may reasonably require to verify
the amounts collected by Buyer with respect to the Accounts
Receivable or paid with respect to the Accounts Payable.
(b) For the purpose of determining amounts
collected by Buyer with respect to the Accounts Receivable (other
than the Accounts Receivable from the account debtors listed on
schedule 6.4(a) (the "120 Day Debtors")), (i) in the absence of a
bona fide dispute between such an account debtor of the Seller or
its representative and the Seller, all payments by such account
debtor shall first be applied to Accounts Receivable due from
such account debtor (it being understood that for the purposes of
this section an account debtor will be deemed to be the ultimate
beneficiary of the broadcasting time generated by a particular
purchase, that is, for example, in the case of a purchase
undertaken by an advertising agency, on behalf or for the benefit
of a particular client, the client for whom the particular
purchase was undertaken shall be deemed to be the account debtor
for purposes of this section), and (ii) any amount received by
Buyer which is from an account debtor who claims, or whose
representative claims, to have a bona fide dispute with Seller
shall be deemed to have been received with respect to the
accounts receivable due Buyer to the extent of such dispute. For
the purpose of determining amounts collected by Buyer with
respect to Accounts Receivable from 120 Day Debtors, each payment
from that Debtor shall be applied as indicated by the Debtor in
making the payment (and, if the Debtor does not indicate, the
Buyer shall request that the account debtor indicate how the
payment is to be applied).
(c) Buyer shall not be required to retain a
collection agency, bring any suit, or take any other action out
of the ordinary course of business to collect any of the Accounts
Receivable. Buyer shall not compromise, settle or adjust the
amount of any of the Accounts Receivable without the written
consent of Seller. By the same token, during the afore referred
120 day period after the Effective Time, Seller shall not
threaten to sue, sue or engage any collection agency or any
collection procedure of any kind with regard to any account
included in the Accounts Receivable other than any account owed
by any 120 Day Debtor who is not a current client of the Stations
or BMS at the time such action is taken, provided that Seller
gives Buyer 10 days prior notice of such proposed action and
Buyer does not notify Seller within that 10-day period that the
120-Day Debtor is a current client of the Stations or BMS.
(d) Each advertising agency placing time on
the Stations is entitled to a volume discount for calendar year
1997 if it purchases a minimum amount (the "Minimum Amount") of
time on the Stations during that year, as set forth on schedule
6.4(d). At the closing (or on December 31, 1997, whichever is
earlier), Buyer (or, if on December 31, 1997, Seller) shall
deliver to the Escrow Agent an amount equal to 9/12 of the
aggregate volume discount Seller paid to advertising agencies
with respect to calendar year 1996, or $215,627 (the "Volume
Discount Escrow Amount). The Volume Discount Escrow Amount shall
be held by the Escrow Agent pursuant to the terms of an escrow
agreement in the form of exhibit 6.4(d) hereto. If the amount of
time on the Stations purchased by any advertising agency in all
of calendar year 1997 exceeds the Minimum Amount, then (1) Buyer
shall pay the entire volume discount for 1997 to the agency
before April 30, 1998, and (2) Buyer shall notify Seller of the
payment, and Buyer may withdraw from the Volume Discount Escrow
Amount an amount equal to the volume discount on the amount of
time on the Stations purchased by that agency prior to the
Effective Date of the LMA Agreement determined as provided below.
Subject to the provisions of Sections 3.01 and 4.01 of the escrow
agreement referred to above, to the extent amounts are not paid
to advertising agencies as provided in the preceding sentence or
claimed by advertising agencies before April 30, 1998, the
remainder shall be paid to Seller. For purposes of the
foregoing, the volume discount portion of the total volume
discount paid to a particular agency that will correspond to
Seller shall be an amount which bears the same ratio to such
total volume discount as the gross revenues sold by the Station
to the particular agency during calendar year 1997 through the
Effective Date of the LMA Agreement bears to the total annual
gross revenues sold by the Stations to the particular agency for
all of calendar year 1997.
6.5 Access to Information. Prior to the closing,
the Buyer and its representatives may make such investigation of
the property, assets and businesses of the Stations and BMS as it
may desire, and the Seller shall give to the Buyer and to its
counsel, accountants and other representatives, upon reasonable
notice, full access during normal business hours throughout the
period prior to the closing to all of the assets, books,
commitments, agreements, records and files of the Seller relating
to the Stations and BMS, except that Buyer shall do no
environmental testing without the consent of Seller, which
consent shall not be unreasonably withheld, and the Seller shall
furnish to the Buyer during that period all documents and copies
of documents and information concerning the businesses and
affairs of the Stations and BMS as the Buyer reasonably may
request. The Buyer shall hold, and shall cause its
representatives to hold, all such information and documents and
all other information and documents delivered pursuant to this
agreement confidential and, if the purchase and sale contemplated
by this agreement is not consummated for any reason, shall return
to the Seller all such information and documents and any copies
as soon as practicable, and shall not disclose any such
information (that has not previously been disclosed and generally
made available to the public other than by Buyer or its
representatives, provided that the source of such disclosure is
not bound by a confidentiality agreement (whether written or
oral) with the Seller) to any third party unless required to do
so pursuant to a request or order under applicable laws and
regulations or pursuant to a subpoena or other legal process.
The Buyer's obligations under this section shall survive the
termination of this agreement.
6.6 Consents; Assignment of Agreements. The
Seller shall use reasonable efforts (but shall not be required to
make any payment) to obtain at the earliest practicable date all
consents and approvals referred to in section 4.3. If, with
respect to any lease or agreement to be assigned to the Buyer, a
required consent to the assignment is not obtained (and,
accordingly, pursuant to section 1.2(c), the lease or agreement
is excluded from the sale to the Buyer), the Seller shall so
advise Buyer (and advise Buyer from time to time prior to the
Closing of its efforts to obtain such consent), use reasonable
efforts to keep it in effect and give the Buyer the benefit of it
to the same extent as if it had been assigned, and the Buyer
shall perform Seller's obligations under the agreement relating
to the benefit obtained by the Buyer. Nothing in this agreement
shall be construed as an attempt to assign any agreement or other
instrument that is by its terms nonassignable without the consent
of the other party.
6.7 Title Insurance; Transfer and Recording Fees.
The Buyer shall pay any stamp or transfer taxes, real or personal
property taxes or recording fees payable in connection with the
sale of the Assets, and any fees for title insurance on the fee
interest acquired by the Buyer pursuant to this agreement. The
Seller shall pay the internal revenue stamps to be affixed to the
original of the deed of purchase and sale of the Real Property
and shall pay the notarial fees corresponding to the same. The
Buyer shall choose the notary public that will draft and execute
the deed of purchase and sale. The Buyer shall pay the internal
revenue stamps to be affixed on the certified copy of the deed of
purchase and sale and the recording fees payable in connection
with the deed of purchase and sale.
6.8 Employees.
(a) Employment. The Buyer shall employ
those employees listed on schedule 6.8(a) at the Effective Time
or on the Closing Date as indicated on schedule 6.8(a). The
Buyer shall have no obligation to offer employment to the one
employee indicated on schedule 6.8(a).
(b) Employee Benefits Generally. The Buyer
shall provide all employees of the Seller that become employees
of the Buyer ("Covered Employees") all accrued vacation and sick
leave, Christmas bonus and similar benefits provided for and
funded by Seller in the Accrued Benefit Escrow Amount referred to
in section 6.8(d). Buyer shall also provide the Covered
Employees employee benefits that in the aggregate are no less
favorable than those benefits provided by Seller to the Covered
Employees as of the Effective Time and Buyer shall give to each
Covered Employee past service credit for purposes of eligibility
and vesting under all employee benefit plans for employees of the
Buyer (and past service credit for all purposes, including the
amount of benefits, under the severance, vacation, sick pay and
similar policies of the Buyer). In no event shall Buyer be
obligated for any benefit or perquisite of employment which
derives from the employment relationship between Seller and its
employees or the termination thereof (except termination
compensation for Covered Employees who are terminated by Buyer),
including but not limited to severance payment, labor or
employment law related claims, benefits or perquisites provided
by Seller pursuant to any benefit plan, insurance contract,
employment or other benefit arrangement either under Federal or
Puerto Rico laws. Seller thus shall indemnify Buyer and hold
Buyer harmless of and from any and all claims, expenses, actions,
causes of action, damages or losses incurred or suffered by Buyer
in connection with claims by any persons or any agency, whether
public or private, related to any such labor matters, under any
applicable law or regulation.
(c) Medical Benefits. The Buyer shall
provide all Covered Employees (and their dependents) with medical
benefit coverage similar to that provided by Seller to those
Employees prior to the Effective Time. The Buyer shall use
reasonable efforts (without incurring any disbursement or payment
obligation of any sort) to cause its plan(s) to waive any pre-
existing condition exclusions and waiting periods (except to the
extent that such exclusions would have then applied or waiting
periods were not satisfied under Seller's medical plan) and to
credit or otherwise consider any monies paid (or accrued) under
Seller's medical plan by Covered Employees (or their dependents)
since January 1, 1997 toward any deductibles, co-pays or other
maximums under its plan(s) during the first plan year. The Buyer
shall be responsible for satisfying its obligations under Section
601 et seq. of ERISA and Section 4980B of the Internal Revenue
Code to provide continuation coverage ("COBRA") to any Covered
Employee in accordance with law and shall provide COBRA coverage
to any employees of the Seller not employed by the Buyer at the
Effective Time or at the Closing, as the case may be (and to any
former employees of the Seller being provided COBRA coverage by
Seller at the Effective Time), to the extent required by COBRA.
(d) Accrued Benefits. Seller shall be
responsible for all vacation pay, sick pay, Christmas bonus and
similar benefits accruing through the Effective Date of the LMA
(collectively "Accrued Benefits") to all Covered Employees.
Buyer and Seller estimate that the maximum liability of Seller
for Accrued Benefits to Covered Employees is $219,925 (the
"Accrued Benefit Escrow Amount"). At the Effective Time, Seller
shall deliver to the Escrow Agent the Accrued Benefit Escrow
Amount to be held by the Escrow Agent pursuant to the terms of an
escrow agreement in the form of Exhibit 6.8(d). Buyer may, after
notice to Seller, withdraw from the Accrued Benefit Escrow Amount
any amounts paid by Buyer to employees of Seller with respect to
Accrued Benefits, as provided in the escrow agreement. To the
extent amounts are not paid to Covered Employees from the Accrued
Benefit Escrow Amount, the amount remaining on December 31, 1998
and unclaimed shall be paid to Seller.
(e) Employment Agreement. Seller has
entered into an employment agreement with Jose Pagan, as general
manager of the Stations, and Buyer shall assume the agreement at
the Effective Time.
6.9 Expenses. Each party shall bear its own
expenses incurred in connection with the negotiation and pre
paration of this agreement and in connection with all obligations
required to be performed by it under this agreement, except where
specific expenses have been otherwise allocated by this
agreement.
6.10 Financial Statements and Information.
During the term of the LMA Agreement, the Buyer shall provide to
the Seller monthly financial statements relating to the Stations
and BMS and any other financial information with respect to the
Stations and BMS as the Seller may reasonably request.
6.11 Application for Increased Power. Until the
closing, the Seller and its Commission counsel, Wiley, Rein &
Fielding, shall continue to prosecute the Application to increase
the authorized nighttime broadcast power of WUNO(AM) from 1 kW to
2.30 kW. If the Application is still pending on the Closing
Date, the Buyer and its Commission counsel shall continue to
prosecute the Application thereafter, but Seller and its
Commission counsel may continue to participate in the prosecution
of the Application. Buyer shall not seek to increase the
authorized nighttime power for WUNO(AM) to 5 kW unless and until
the increase to 2.30 kW has become final.
6.12 Other Action. Each of the parties to this
agreement shall use its best efforts to cause the fulfillment at
the earliest practicable date of all of the conditions to the
obligations of the parties to consummate the sale and purchase
under this agreement.
6.13 Further Assurances. At any time and from
time to time after the closing, each of the parties shall,
without further consideration, execute and deliver to the other
such additional instruments and shall take such other action as
the other may request to carry out the transactions contemplated
by this agreement. For a period of three years after the
closing, each party shall grant the other reasonable access
during normal business hours upon reasonable prior notice to the
books and records of that party for the purpose of complying with
any applicable law or governmental rule or request relating to
the period during which the other party operated the Station or
as otherwise reasonably required.
70 Conditions Precedent to Closing.
7.1 Conditions Precedent to the Obligations of
the Buyer. The Buyer's obligation to consummate the purchase
under this agreement is subject to the fulfillment, at or prior
to the closing, of each of the following conditions (any of which
may be waived in writing by the Buyer):
(a) all representations and warranties of
the Seller under this agreement shall be true at and as of the
time of the closing with the same effect as though those
representations and warranties had been made again at and as of
that time, except to the extent any failure to be true results
from the operations of the Stations and BMS by Buyer during the
term of the LMA Agreement and with such exceptions as do not have
a material adverse effect on the operations or business of the
Stations and BMS taken as a whole;
(b) the Seller shall have performed and
complied in all material respects with all obligations, covenants
and conditions required by this agreement to be performed or
complied with by it prior to or at the closing;
(c) the Commission shall have given all
requisite approvals and consents, without any condition or
qualification materially adverse to the Buyer or the operations
of the Stations and BMS taken as a whole, to the assignment of
the FCC Licenses to the Buyer and the acquisition of control of
the Stations and BMS by the Buyer as provided in this agreement
and such approvals shall have become a Final Order (as defined
below);
(d) the Seller shall have duly received,
without any condition materially adverse to the Buyer, all
consents and approvals referred to in schedule 7.1(d);
(e) there shall not be in effect an in
junction or restraining order issued by a court of competent
jurisdiction in an action or proceeding against the consummation
of the transactions contemplated by this agreement; and
(f) the Buyer shall have been furnished with
a certificate of an officer of the Seller, dated the Closing
Date, in form and substance reasonably satisfactory to the Buyer,
certifying to the fulfillment of the conditions set forth in
sections 7.1(a) and (b).
For the purpose of this agreement, "Final
Order" means action by the Commission (a) which has not been
vacated, reversed, stayed, set aside, annulled or suspended, (b)
with respect to which no appeal, request for stay, or petition
for rehearing, reconsideration or review by any party or by the
Commission on its motion, is pending, and (c) as to which the
time for filing any such appeal, request, petition, or similar
document for the reconsideration or review by the Commission on
its own motion under the express provisions of the Communications
Act of 1934 and the rules and regulations of the Commission, has
expired (or if any such appeal, request, petition or similar
document has been filed, a Commission order has been upheld in a
proceeding pursuant thereto and no additional review or
reconsideration may be sought).
7.2 Conditions Precedent to the Obligations of
the Seller. The Seller's obligation to consummate the sale under
this agreement is subject to the fulfillment, at or prior to the
closing, of each of the following conditions (any of which may be
waived in writing by the Seller):
(a) all representations and warranties of
the Buyer under this agreement shall be true at and as of the
time of the closing with the same effect as though those
representations and warranties had been made at and as of that
time, with such exceptions as do not in the aggregate have a
material adverse effect on the ability of the Buyer to consummate
the transactions contemplated by this agreement;
(b) the Buyer shall have performed and
complied in all material respects with all obligations, covenants
and conditions required by this agreement to be performed or
complied with by it prior to or at the closing;
(c) the Commission shall have given all
requisite approvals and consents, without any condition or
qualification materially adverse to the Seller, to the assignment
of the FCC Licenses to the Buyer and the acquisition of control
of the Stations and BMS by the Buyer as provided in this
agreement, and such approvals shall have become a Final Order;
(d) the lenders under the Note Agreement
shall have released their lien on substantially all of the
Assets;
(e) there shall not be in effect an in
junction or restraining order issued by a court of competent
jurisdiction in an action or proceeding against the consummation
of the transactions contemplated by this agreement; and
(f) the Seller shall have been furnished
with a certificate of an officer of the Buyer, dated the Closing
Date, in form and substance reasonably satisfactory to the
Seller, certifying to the fulfillment of the conditions set forth
in sections 7.2(a) and (b).
80 Transactions at the Closing.
8.1 Documents to be Delivered by the Seller. At
the closing, the Seller shall deliver to the Buyer the following:
(a) such bills of sale, assignments, deeds
or other instruments of transfer and assignment, and such
termination letters and satisfactions of mortgages and chattel
mortgages, all in form and substance reasonably satisfactory to
the Buyer and its counsel, as shall be effective to vest in Buyer
title to the Assets in accordance with section 4.4;
(b) an opinion of Proskauer Rose LLP,
counsel to the Seller, dated the Closing Date, in form reasonably
acceptable to the Buyer and its counsel;
(c) an opinion of Wiley, Rein & Fielding,
Commission counsel to the Seller, dated the Closing Date, in form
reasonably acceptable to the Buyer and its counsel;
(d) the certificate referred to in section
7.1(f);
(e) copies of all consents and approvals
received pursuant to section 6.6; and
(f) a copy of resolutions of the managing
general partner of the Seller authorizing the execution, delivery
and performance of this agreement by the Seller, certified as of
the Closing Date and reflecting that such resolutions were duly
adopted and are in full force and effect.
8.2 Documents to be Delivered by the Buyer. At
the closing, the Buyer shall deliver to the Seller the following:
(a) wire transfer of funds or a bank or
certified check in the amount provided in section 2.2(d);
(b) instruments, in form and substance
reasonably satisfactory to the Seller and its counsel, pursuant
to which the Buyer shall assume the obligations of the Seller to
be assumed by the Buyer pursuant to section 2.1(b);
(c) an opinion of Totti and Rodriguez-Diaz,
counsel to the Buyer, dated the Closing Date, in form reasonably
acceptable to the Seller and its counsel;
(d) a copy of resolutions of the board of
directors of the Buyer authorizing the execution, delivery and
performance of this agreement by the Buyer, and a certificate of
the secretary or an assistant secretary of the Buyer, dated the
Closing Date, that such resolutions were duly adopted and are in
full force and effect; and
(e) the certificate referred to in section
7.2(f).
8.3 Documents Executed at Closing. At the
closing, the Buyer and the Seller shall execute and deliver the
Indemnity Escrow Agreement, the Broadcast Power Escrow Agreement
(if applicable) and a Non-competition Agreement in the form of
exhibit 8.3 and, if the Closing is after December 31, 1997, a
Volume Discount Escrow Agreement.
90 Survival of Representations and Warranties;
Indemnification.
9.1 Survival. All representations, warranties,
covenants and agreements of the Seller and the Buyer contained in
this agreement shall survive the Closing Date. Neither party
shall, however, have any liability for misrepresentation or
breach of warranty, covenant or agreement hereunder except to the
extent that notice of a claim is asserted in writing and
delivered to the other party not later than the first anniversary
of the closing (or the fifth anniversary of the closing in the
case of any claim asserted against Buyer by any employee of
Seller arising under any applicable labor or labor related law or
representation with respect to the employment of such employee by
Seller prior to the Effective Date of the LMA Agreement). Any
notice of a claim for misrepresentation or breach of warranty,
covenant or agreement shall state specifically the representation
or warranty, covenant or agreement with respect to which the
claim is made, the facts giving rise to an alleged basis for the
claim, and the amount of liability asserted against the other
party by reason of the claim. The consummation by the Seller or
the Buyer of the purchase and sale contemplated by this agreement
with knowledge of a misrepresentation or breach of warranty by
the other party shall be considered a waiver of any claim with
respect to that misrepresentation or breach of warranty.
9.2 Indemnification.
(a) Subject to sections 9.1 and 9.3, the
Seller shall indemnify and hold harmless the Buyer against all
loss, liability, damage or expense (including reasonable fees and
expenses of counsel) (together, "Losses"), that the Buyer may
suffer, sustain or become subject to as a result of (i) any
misrepresentation by the Seller or any breach by the Seller of
any warranty, covenant or other agreement contained in this
agreement, (ii) the failure by the Seller to pay, perform or
discharge when due any of the Seller's obligations, liabilities,
agreements or commitments not assumed by the Buyer pursuant to
this agreement, (iii) any liability under any agreement assumed
by the Buyer pursuant to section 2.1(b) but not listed on
schedule 4.12 or 4.13, and (iv) any claim with respect to the
termination of any of the employees of the Seller who do not
become Covered Employees or any claim by any employee of Seller
relating to the period such employee was employed by Seller.
(b) Subject to section 9.1, the Buyer shall
indemnify and hold harmless the Seller against all Losses that
the Seller may suffer, sustain or become subject to as a result
of (i) any misrepresentation by the Buyer or any breach by the
Buyer of any warranty, covenant or other agreement contained in
this agreement, (ii) the failure by Buyer to pay, perform or
discharge any of the obligations arising after 12:00 Midnight on
the Closing Date under those leases and other agreements assigned
to Buyer pursuant to sections 1.1(d) and (f), as provided in
section 2.1, and (iii) any claim by any of the Covered Employees
relating to the period such employee was employed by Buyer.
(c) If any claim is made against the Buyer
that, if sustained, would give rise to a liability of the Seller
under this agreement, or otherwise, the Buyer promptly shall
cause notice of the claim to be delivered to the Seller and shall
afford the Seller and its counsel, at the Seller's expense, the
opportunity to defend or settle the claim. If such notice and
opportunity are not given, or if notice is given but the claim is
settled without the Seller's consent, which consent shall not be
unreasonably withheld, the Seller shall not have any liability to
the Buyer with respect to the claim. The Buyer shall cooperate
with the Seller in the defense of the claim and may, at its own
expense, participate in the defense, but complete control of the
defense shall remain with the Seller. The Seller shall give
notice to the Buyer prior to settlement of any claim, and the
Seller shall not settle any claim in a manner that would have an
adverse effect on the operation of the Stations or BMS, without
the consent of the Buyer, which consent shall not be unreasonably
withheld.
(d) If any claim is made against the Seller
that, if sustained, would give rise to a liability of the Buyer
under this agreement, or otherwise, the Seller promptly shall
cause notice of the claim to be delivered to the Buyer and shall
afford the Buyer and its counsel, at the Buyer's expense, the
opportunity to defend or settle the claim. If such notice and
opportunity are not given, or if notice is given but the claim is
settled without the Buyer's consent, the Buyer shall not have any
liability to the Seller with respect to the claim. The Seller
shall cooperate with the Buyer in the defense of the claim and
may, at its own expense, participate in the defense, but complete
control of the defense shall remain with the Buyer.
9.3 Limitation on Liability. Notwithstanding
anything to the contrary in this agreement;
(a) the Seller shall not be liable to the
Buyer for misrepresentation or breach of warranty or for
indemnification pursuant to section 9.2(a)(iii) or 9.2(a)(iv)
except to the extent that the aggregate amount of loss,
liability, damage and expense incurred as a result of all such
misrepresentations and breaches of warranty or for such
indemnification exceeds in the aggregate the sum of $75,000;
(b) the aggregate liability of the Seller to
the Buyer for indemnification or otherwise under this agreement
shall be limited solely to the Indemnity Escrow Amount; and
(c) except as provided in section 12.10, the
Buyer shall have no other recourse against the Seller or any
partner of Seller with respect to such indemnity obligations or
otherwise arising under this agreement.
Notwithstanding the foregoing, the Seller shall
indemnify and hold harmless the Buyer against all out-of-pocket
costs and expenses (including reasonable fees and expenses of
counsel) resulting from any claims asserted against Buyer or the
Assets by any third party unrelated to Buyer resulting solely
from the operations of the Stations and BMS prior to the
Effective Date of the LMA Agreement.
10. Termination.
10.1 Termination. Except with respect to
provisions that expressly survive termination, this agreement may
be terminated:
(a) by written agreement of the Buyer and
the Seller;
(b) by the Seller, by notice to the Buyer,
if the LMA Agreement is terminated as a result of a breach by the
Buyer;
(c) by the Buyer or the Seller, by notice to
the other, if at any time prior to the Closing Date any event
shall have occurred or any state of facts shall exist that
renders any of the conditions to its obligations as provided in
this agreement incapable of fulfillment;
(d) by the Buyer as provided in section 11;
or
(e) by the Buyer or the Seller, by notice to
the other, if the Commission designates for a hearing the
application for Commission consent contemplated by this
agreement.
10.2 Liability. The termination of this
agreement under section 10.1(b), (c) or (d) shall not relieve any
party of any liability for breach of this agreement prior to the
date of termination.
11. Risk of Loss. The risk of loss or damage to any
of the Assets shall be on the Seller prior to the closing and
thereafter shall be on the Buyer. If any material Asset is
damaged or destroyed prior to the Closing Date (any such event
being referred to as an "Event of Loss"), the Seller shall
immediately notify Buyer in writing of the Event of Loss. The
notice shall specify with particularity the loss or damage
incurred, the cause of the Event of Loss, if known or reasonably
ascertainable, and the applicable insurance coverage. If the
Seller elects to repair, replace or restore the Asset and the
Asset so damaged or destroyed cannot be completely repaired,
replaced or restored by the scheduled date of the closing but can
be accomplished within 90 days after that date, the date of the
closing shall be postponed for up to that 90-day period to allow
the Seller an opportunity to repair, replace or restore the
Asset. If the Seller does not elect to repair, replace or
restore the Asset or if the repair, replacement or restoration
cannot be accomplished within that 90-day period, the Buyer may
elect, by written notice to the Seller within 20 days after the
Buyer has received notice that an Event of Loss has occurred or
that the repair, replacement or restoration cannot be so
completed:
(a) to close the transaction on the
scheduled date of the closing and accept the damaged Asset as is
(together with all insurance proceeds paid or payable with
respect to the Event of Loss) ; or
(b) to terminate this agreement without
liability, in which event the Escrow Agent shall return Seller's
Liquidated Damage Escrow Amount to Buyer.
If the date of the closing is postponed
beyond the time specified in section 3.2, the parties shall amend
their application or applications to the Commission to request an
extension of the date of closing.
12. Miscellaneous.
12.1 Notices. Any notice or other communication
under this agreement shall be in writing and shall be considered
given when delivered personally or when mailed by registered
mail, return receipt requested, to the parties at the addresses
set forth below (or at such other address as a party may specify
by notice to the other):
to the Buyer, to it at:
24th Street and Munoz Marin Avenue
P.O. Box 487
Caguas, Puerto Rico 00726
with a copy to:
Juan Rodriguez Diaz, Esq.
Edificio Union Plaza
Avenida Ponce De Leon 416
Suite 1200
Hato Rey, PR 00918
if to Seller, to it at:
350 Park Avenue
16th Floor
New York, New York 10022
Attention: I. Martin Pompadur
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Lawrence H. Budish, Esq.
12.2 Brokers. Each of the Buyer and the Seller
represents and warrants to the other that it has not retained or
dealt with any broker or finder in connection with the
transactions contemplated by this agreement, except that the
Buyer has retained and shall pay the fees payable to Rumbaut and
Company pursuant to a separate agreement between Buyer and
Rumbaut and Company.
12.3 Entire Agreement. This agreement, including
the schedules and exhibits, contains a complete statement of all
the arrangements between the parties with respect to its subject
matter, supersedes any previous agreement between them relating
to that subject matter, and cannot be changed or terminated
orally. Except as specifically set forth in this agreement,
there are no representations or warranties by either party in
connection with the transactions contemplated by this agreement.
12.4 Headings. The section headings of this
agreement are for reference purposes only and are to be given no
effect in the construction or interpretation of this agreement.
12.5 Governing Law. This agreement shall be
governed by and construed in accordance with the law of the
Commonwealth of Puerto Rico applicable to agreements made and to
be performed in Puerto Rico.
12.6 Separability. If any provision of this
agreement is invalid or unenforceable, the balance of this
agreement shall remain in effect.
12.7 Assignment. No party may assign any of its
rights or delegate any of its duties under this agreement prior
to the Closing without the consent of the other except that the
Buyer may assign its rights and delegate its duties to an
affiliate provided such assignment does not delay Commission
approval of the transactions contemplated by this agreement.
This agreement shall be binding upon and inure to the benefit of
the parties hereto, their successors and permitted assigns.
12.8 Publicity. Except as required by applicable
law, no party shall issue any press release or other public
statement regarding the transactions contemplated by this
agreement without consulting with the other.
12.9 Knowledge. As used in this agreement, the
phrase "to the best of Seller's knowledge" means the knowledge of
I. Martin Pompadur, Elizabeth McNey Yates, Ray Edwards, Jr. or
Jose Pagan.
12.10 Specific Performance. The Seller
acknowledges that the Assets are of a special, unique and
extraordinary character, and that any breach of this agreement by
the Seller could not be compensated for by damages, and the
Seller agrees that the Buyer's right to specific performance is
essential to protect the rights of the Buyer hereunder.
Accordingly, if the Seller breaches its obligations under this
agreement, the Buyer shall be entitled, in addition to any other
remedies that it may have, subject to obtaining any necessary
approval of the Commission, to enforcement of this agreement by a
decree of specific performance requiring the Seller to fulfill
its obligations under this agreement.
12.11 Counterparts. This agreement may be
executed in any number of counterparts, which together shall
constitute one and the same instrument.
MADIFIDE, INC.
By:____________________
Name:
Title:
CENTURY-ML CABLE VENTURE
By:____________________
Name:
Title:
Table of Contents
Page
1. Sale and Purchase of Assets 1
1. Sale of Assets to Buyer 1
1.2 Excluded Assets 3
2. Purchase Price 3
2.1 Amount and Payment of Consideration. 3
2.2 Payment of Purchase Price 4
2.3 Deposit; Seller's Liquidated Damages 5
2.4 Limitation on Assumption of Liabilities 6
2.5 Apportionment 6
2.6 Determination of Apportionments 7
2.7 Allocation of Purchase Price 7
3. Closing 8
3.1 Date of Closing 8
3.2 Outside Date for Closing 8
4.1 The Seller's Organization and Authority 8
4.2 Authorization of Agreement 8
4.3 Consents of Third Parties 8
4.4 Title to Assets 9
4.5 FCC Licenses 10
4.6 Call Letters 11
4.7 Operation of the Stations and BMS 11
4.8 Financial Statements 11
4.9 Absence of Certain Changes 11
4.10 Tangible Property 12
4.11 Intangible Assets 12
4.12 Litigation; Compliance with Laws 13
4.13 List of Agreements, etc. 13
4.14 Agreements Regarding Employees 13
4.15 Status of Agreements 14
4.16 Insurance 14
4.17 Labor Matters 14
4.18 Environmental Matters 15
4.19 ERISA 16
4.20 Commission Reports 16
4.21 Finders, Brokers 16
4.22 Ordinary Course of Business 17
4.23 Tax and Other Returns or Filings 17
4.24 Compliance with Law; Authorizations 17
4.25 Utility Services 18
5. Representations and Warranties by the Buyer 18
5.1 The Buyer's Organization and Authority 18
5.2 Authorization of Agreement 18
5.3 Consents of Third Parties 19
5.4 Litigation 19
5.5 Buyer's Qualification 19
5.6 Finders, Brokers 19
6. Further Agreements of the Parties 19
6.1 Filings 19
6.2 Operations of the Stations and BMS 20
6.3 No Control 21
6.4 Accounts Payable; Accounts Receivable 21
6.5 Access to Information 24
6.6 Consents; Assignment of Agreements 24
6.7 Title Insurance; Transfer and Recording Fees 25
6.8 Employees 25
6.9 Expenses 27
6.10 Financial Statements and Information 27
6.11 Application for Increased Power 27
6.12 Other Action 27
6.13 Further Assurances 28
7. Conditions Precedent to Closing 28
7.1 Conditions Precedent to the Obligations of the Buyer
28
7.2 Conditions Precedent to the Obligations of the Seller
29
8. Transactions at the Closing 30
8.1 Documents to be Delivered by the Seller 30
8.2 Documents to be Delivered by the Buyer 31
8.3 Documents Executed at Closing 31
9. Survival of Representations and Warranties; Indemnification
31
9.1 Survival 31
9.2 Indemnification 32
9.3 Limitation on Liability 33
10. Termination 34
10.1 Termination 34
10.2 Liability 34
11. Risk of Loss 34
12. Miscellaneous 35
12.1 Notices 35
12.2 Brokers 36
12.3 Entire Agreement 36
12.4 Headings 36
12.5 Governing Law 36
12.6 Separability 36
12.7 Assignment 37
12.8 Publicity 37
12.9 Knowledge 37
12.10 Specific Performance 37
12.11 Counterparts 8
