<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
Commission file number 0-16265
EZ COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0829355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10800 MAIN STREET
FAIRFAX, VIRGINIA 22030
(Address of principal executive offices) (Zip code)
(703) 591-1000
(Registrant's telephone number, including area code)
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 * NO
________ _________
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock October 31, 1996
--------------------- ----------------
Class A Common Stock, $.01 par value per share 6,464,744 shares
Class B Common Stock, $.01 par value per share 2,677,897 shares
<PAGE>
EZ COMMUNICATIONS, INC.
INDEX
Part II - Other Information Page
- - --------------------------- ----
Item 1. Legal Proceedings 3
Item 6. Exhibits 3
Signatures 4
- - ----------
Exhibit Index
2
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 31, 1996, EZ New Orleans, Inc. filed an application for the
renewal of the license of WEZB-FM in New Orleans, Louisiana with the Federal
Communications Commission. A petition to deny the application dated April 25,
1996, has been filed. The petition alleges, among other things, that the
licensee has presented indecent and obscene programming and improperly
maintained the station's public inspection file; it also contends that the
licensee is not qualified to do business in Louisiana. The licensee filed its
opposition to the petition to deny on June 17, 1996. The petitioners filed a
reply dated July 11, 1996. Informal objections have also been filed against the
WEZB-FM renewal application, raising allegations similar to those in the
petition. The licensee is preparing its response to the informal objections as
well as to an inquiry from the Federal Communications Commission staff
concerning public inspection file compliance. While the Company cannot predict
the outcome of these matters involving WEZB-FM at this time, the Company
believes that the challenges will not have a material adverse effect on the
Company. There can be no assurance, however, that the renewal application will
be granted.
On August 6, 1996, each of EZ and American received an informal inquiry
from the Division of Enforcement of the Securities and Exchange Commission
regarding trading activity in the stock of EZ prior to the announcement of
the proposed merger with American discussed below. On September 11, 1996,
the Division of Enforcement informally requested that each of EZ and American
voluntarily provide certain documents in connection with the Division's
inquiry. Such documents were provided to the Division by EZ on September 26,
1996 and by American on September 27, 1996.
On September 16, 1996, EZ and American each received a Civil Investigative
Demand from the Antitrust Division of the Department of Justice requesting
certain documentary materials regarding the purchase, sale, trade or other
transfer of radio stations in Charlotte, North Carolina. Consummation of the
exchange and the acquisition, which is expected in the first quarter of 1997, is
subject to the consent of the FCC and the expiration or earlier termination of
the HSR waiting period. Upon such consummation, EZ will own six FM stations in
Charlotte and will, therefore, be required to dispose of one of these stations.
In June 1991, Allegheny Communications Group, Inc. ("Allegheny") filed a
competing application and a Petition to Deny against the license renewal
application of EZ Communications, Inc. ("EZ") for station WBZZ-FM in
Pittsburgh. On November 9, 1996, EZ entered into a settlement agreement (the
"Settlement Agreement") with Allegheny, pursuant to which Allegheny agreed to
dismiss its application with prejudice and EZ agreed to purchase the stock of
Allegheny for $4.5 million. On November 12, 1996, the Settlement Agreement
was submitted for approval to an administrative law judge of the Federal
Communications Commission.
ITEM 6. EXHIBITS
(a) The following exhibits are filed herewith:
Exhibit
Number Exhibit Title
- - ------- -------------
10.52 --Settlement Agreement dated November 9, 1996, by and among EZ
Pittsburgh, Inc., Allegheny Communications Group, Inc. ("AGCI")
and AGCI's officers, directors, and shareholders.
10.53 --Joint Request for Approval of Settlement Agreement, dated
November 12, 1996, by EZ Pittsburgh, Inc. and Allegheny
Communications Group, Inc.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December 11, 1996 EZ COMMUNICATIONS, INC.
By: Ronald H. Peele, Jr.
--------------------------------
Ronald H. Peele, Jr.
Chief Financial Officer and
Chief Accounting Officer
4
<PAGE>
SETTLEMENT AGREEMENT
--------------------
This Agreement is made this 9th day of November, 1996, by and among EZ
Pittsburgh, Inc. ("EZ"), Allegheny Communications Group, Inc. ("ACGI"), and
ACGI's officers, directors, and shareholders who have individually executed
this Agreement below (the "ACGI Principals") (collectively, the "Parties").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, EZ is the applicant for renewal of the license of radio
broadcast station WBZZ(FM), in Pittsburgh, Pennsylvania, (FCC File No.
BRH-910401C2) (the "EZ Application") and ACGI has filed a competing
application for a construction permit specifying the channel for which
WBZZ(FM) is seeking renewal of license (FCC File No. BPH-910628MC) (the "ACGI
Application");
WHEREAS, because the EZ and ACGI Applications are mutually exclusive with
each other, they have been designated for comparative hearing in MM Docket
No. 93-88 (the "WBZZ Hearing") to determine which application should be
granted;
WHEREAS, no issues have been added in the WBZZ Hearing to determine
whether EZ possesses the basic qualifications to receive a grant of the EZ
Application;
WHEREAS, the Parties wish to avoid further costly and lengthy
proceedings before the Federal Communications Commission (the "Commission" or
"FCC") and possibly the courts, as well as
<PAGE>
2
the burden that such proceedings impose upon the personnel and resources of
the Commission, the courts, and the Parties;
WHEREAS, the Parties believe that this Agreement will be in the public
interest in that it will assist in resolving the WBZZ Hearing;
WHEREAS, the Parties pledge mutual cooperation in effectuating the goals
of this Agreement; and
WHEREAS, the obligations of the Parties hereunder are subject to the
prior approval of the Presiding Judge and/or the Commission or its Mass Media
Bureau and subject to satisfaction of the conditions specified herein.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the Parties agree as follows:
1. Within one business day after the date hereof, EZ and ACGI will
file this Agreement with the Presiding Administrative Law Judge in the WBZZ
Proceeding together with a joint request for its approval (the "Joint
Request"), which EZ's counsel shall draft subject to approval by ACGI's
counsel. The Joint Request shall include a request that the Presiding Judge
either
(a) approve this Agreement, with any necessary waiver of the
FCC's rules to permit EZ or its designated purchaser to acquire
the stock of ACGI for $4.5 million as set forth in Paragraph 2,
contingent upon and subject to the following conditions:
(i) dismissal of the ACGI Application with prejudice; and
<PAGE>
3
(ii) grant of the EZ Application; or
(b) immediately certify to the full Commission the question
whether Section 73.3523 of the FCC's rules should be waived to permit
approval of this Agreement, and, upon issuance of such waiver, the
Presiding Judge or the Commission, as appropriate, shall take the
steps note in (a).
The Joint Request shall include (i) specific requests that the ACGI
Application be dismissed and the EZ Application be granted upon approval of
this Agreement by the FCC and (ii) any other information or documents
required by the FCC.
2. Within five business days after release of a final order or orders
approving the Agreement, authorizing payment by EZ to ACGI of $4.5 million,
dismissing the ACGI Application, and granting the EZ Application, EZ or its
designated purchaser will acquire the stock of ACGI for $4.5 million by wire
transfer or certified check. The term "final order" shall mean an order that
is no longer subject to further administrative or judicial review. No later
than 20 days after release of an order or orders approving the Agreement,
authorizing EZ to purchase the stock of ACGI for $4.5 million, dismissing the
ACGI Application and granting the EZ Application, EZ shall deposit the $4.5
million in escrow pursuant to a mutually acceptable escrow agreement, which
shall provide that all interest shall be payable to EZ.
<PAGE>
4
3. Beginning upon the execution of this Agreement, and continuing
while this Agreement is in effect, neither EZ nor ACGI shall file any
pleading, conduct any discovery, or make any written or oral request to the
Presiding Judge, or take any other action in the WBZZ Hearing, except for (i)
the filing of the Joint Request and such further filings as may be necessary
to obtain grant of such request; (ii) such filings as are specifically
requested by written order of the Presiding Judge, the Mass Media Bureau, the
General Counsel, or any other part of the Commission; and (iii) such filings
as may be required in the renewal proceeding in order to prevent dismissal of
the ACGI Application prior to approval of this Agreement, in light of FCC
rulings such as a ruling lifting the current freeze; provided, however, that
the parties shall use their best joint efforts to avoid or defer any such
filings so long as the Agreement is pending before the FCC for approval.
4. (a) Beginning on the date of execution of this Agreement, and
continuing for a period of ten (10) years thereafter, neither ACGI, nor the
ACGI Principals, nor any of ACGI's subsidiaries or affiliates, nor any
person or entity commonly controlled or otherwise subject to the control of
any ACGI Principal, ACGI or any subsidiary or affiliate thereof (collectively
the "ACGI Parties"), shall file, or encourage, induce or pay any other
person or entity to file, any document with the Commission (including, but
not limited to, any petition to deny, informal objection or mutually
exclusive application)
<PAGE>
5
(excluding documents filed in proceedings generally applicable to the
broadcast industry as a whole) that opposes the grant of any application to
which EZ or any subsidiary or affiliate thereof is a party, or any entity
with which EZ had, has, or will have a then-current agreement to provide
programming for more than 15% of the broadcast time of a broadcast station
between (i) the date of filing of the EZ Application; and (ii) the date ten
(10) years from the date of execution of this Agreement.
(b) This paragraph 4 does not prohibit the ACGI Parties from
filing with the Commission a declaratory statement in good faith bringing
relevant information to the Commission's attention, so long as the statement
does not object, formally or informally, to the grant of an application.
5. This Agreement shall become null and void and the Parties shall
have no further obligation to each other if the Joint Request is denied,
or, if within six (6) months of the date of this Agreement, this Agreement is
not approved, the ACGI Application is not dismissed, and the EZ Application
is not granted.
6. The Parties, and their principals, represent and warrant that they
have carefully read and fully understand this Agreement, that they execute
this document voluntarily as their own free act and deed, with full knowledge
of its significance, effects, and consequences.
<PAGE>
6
7. This Agreement will be executed in identical counterpart copies,
each of which shall be deemed an original, but all of which together shall
constitute a single instrument.
8. Recognizing that this Agreement is expressly subject to the
approval of the Presiding Judge and the need for the Presiding Judge's, the
Mass Media Bureau's, and/or the Commission's approval prior to the
implementation of all its terms, the Parties shall cooperate with each other
and with the Commission by expeditiously providing to each other or to the
Commission, or both, as the case may be, all additional information that may
be necessary or appropriate to comply with Section 73.3523 of the
Commission's Rules. The Parties agree to provide the Commission in a timely
manner with such information as it reasonably requests. The Parties further
agree to use all reasonable efforts in the preparation and filing of all
documents that may be necessary or appropriate to reach the results
contemplated by this Agreement. Further, neither party shall confer with the
Hearing Branch of the Mass Media Bureau concerning this Agreement without the
presence or participation by telephone of the other Party. Each party shall
bear its own expenses for the preparation of this Agreement and all
documents incidental thereto.
9. No Party or its officers, directors, shareholders, agents,
employees, affiliates, related companies and entities, successors, and
assigns, shall, except as specified in this paragraph or as consented to in
writing by the other Party,
<PAGE>
7
divulge to the public any terms of this Agreement or any negotiations or
discussions among the Parties relating thereto. Notwithstanding the
foregoing, nothing in this Paragraph is intended to preclude any Party, or
any officer, director, shareholder, employee, affiliate, related company or
entity, successor or assign, from disclosing to the public the fact of the
filing of this Agreement with the Commission and/or the fact(s) that this
Agreement contemplates (i) the dismissal of the ACGI Application and (ii) the
grant of the EZ Application. The Parties agree to consult with each other
concerning any publicity as to this Agreement while this Agreement is in
effect. This confidentiality provision shall not prohibit any Party, or its
officers, directors, shareholders, agents, employees, affiliates, related
companies and entities, successors, and assigns, from complying with a
subpoena or disclosing information otherwise required by law or offered in
response to or reasonably connected with other governmental requests or
judicial proceedings.
10. It is the intent of the Parties hereto that the obligations
contemplated hereunder comply in all respects with the Communications Act of
1934, as amended, and all applicable rules, regulations, and policies of the
FCC. If any provision of this Agreement shall be declared void, illegal, or
invalid by any governmental authority with jurisdiction thereof, any Party
shall have the right to promptly request a meeting with the other Party in
which case the Parties will use reasonable efforts to reach
<PAGE>
8
agreement on lawful substitute provisions in place of said offending
provision so as to effectuate the Parties' intent as expressed herein. In any
event, the remainder of this Agreement shall remain in full force and effect
without such offending provision so long as such remainder substantially
reflects the original agreement of the Parties hereunder.
11. This Agreement is the only agreement among the Parties hereto and
contains all of the terms and conditions agreed upon by the Parties with
respect to the subject matter hereof. This Agreement may not be amended or
modified except by an instrument in writing signed by the Parties. This
Agreement shall be binding upon and inure to the benefit of the Parties,
their officers, directors, shareholders, agents, employees, affiliates,
related companies and entities, successors (including without limitation
American Radio Systems Corporation and its affiliates, upon consummation of
the merger proposed in FCC File Nos. BTCH-961001GG ET SEQ.) and assigns. Each
Party warrants to the others that it has full power and authority to enter
into this Agreement, and to perform its obligations hereunder.
12. This Agreement shall be construed under the laws of the United
States and the Commonwealth of Virginia.
13. The Parties agree that the benefits conferred on the Parties under
this Agreement are unique, and that monetary damages for the breach of this
Agreement would be difficult or impossible to quantify. Therefore, the Parties
stipulate that specific performance shall be appropriate as a remedy for
breach
<PAGE>
of this Agreement in addition to other legal or equitable remedies, including
monetary damages, available under this Agreement or under the laws of the
United States and the Commonwealth of Virginia. If any legal action is
brought by either party arising out of or with respect to this Agreement, the
prevailing party shall be entitled to recover, in addition to any other legal
or equitable relief to which it may be entitled, all costs of maintaining,
defending or bringing such action including but not limited to reasonable
attorneys' fees.
14. This Agreement shall be effective upon its execution.
15. ACGI and each of the ACGI Principals hereby jointly and severally
represent and warrant to EZ that (i) the ACGI Principals own all of the
issued and outstanding capital stock of ACGI, and that there are no options,
warrants, or other rights to acquire any equity interest in ACGI; and (ii)
that ACGI has never conducted any business aside from prosecution of the ACGI
Application and has no liabilities, fixed or contingent.
16. ACGI and each of the ACGI Principals hereby jointly and severally
agree to indemnify and hold harmless EZ and its officers, directors, and
affiliates from and against any and all liabilities, claims, damages, and
expenses arising from (i) EZ's (or its designated purchaser's) acquisition or
ownership of the capital stock of ACGI; (ii) any breach by ACGI or the ACGI
Principals of any representation, warranty, or covenant in this Agreement; or
(iii) any claims by any former officers, directors,
<PAGE>
10
shareholders, agents, or creditors of ACGI. This indemnification shall
survive any termination of this Agreement.
17. Any notices, requests, statements, or any other communications to be
given hereunder shall be in writing and shall be sent by first class mail,
postage prepaid, to the Parties as follows:
If to EZ:
Mr. Alan Box
EZ Communications, Inc.
10800 Main Street
Fairfax, Virginia 22030
with a copy to:
M. Anne Swanson, Esquire
Koteen & Naftalin, L.L.P.
1150 Connecticut Ave., N.W.
Washington, D.C. 20036
If to Allegheny or the ACGI Principals:
Names and Addresses on Exhibit A
with a copy to:
Gene A. Bechtel, Esquire
Bechtel & Cole, Chartered
1901 L Street, N.W.
Suite 250
Washington, D.C. 20036
or to such other address or to such other person as either party may
designate by notice given in writing. Any notice, request, statement, or
other communication will be deemed to have been given three days after it was
mailed.
<PAGE>
11
IN WITNESS WHEREOF, the Parties have affixed their signatures to this
Agreement on the date(s) indicated below.
EZ PITTSBURGH, INC.
Date: November 9, 1996 By Alan Box
---------------- -----------------------------------
Alan Box
President
ALLEGHENY COMMUNICATIONS GROUP, INC.
Date: _______________ By __________________________
Herbert E. Long, Jr.
President
ACGI PRINCIPALS
By __________________________
Herbert E. Long, Jr.
By __________________________
Herbert E. Long III
By __________________________
Lorraine H. Brown
By __________________________
Diane J. Duggin
By __________________________
Eldridge Smith
<PAGE>
11
IN WITNESS WHEREOF, the Parties have affixed their signatures to this
Agreement on the date(s) indicated below.
EZ PITTSBURGH, INC.
Date: _______________ By __________________________
Alan Box
President
ALLEGHENY COMMUNICATIONS GROUP, INC.
Date: November 8, 1996 By Herbert E. Long, Jr.
---------------- -----------------------------------
Herbert E. Long, Jr.
President
ACGI PRINCIPALS
By Herbert E. Long, Jr.
-----------------------------------
Herbert E. Long, Jr.
By Herbert E. Long III
-----------------------------------
Herbert E. Long III
By Lorraine H. Brown
-----------------------------------
Lorraine H. Brown
By Diane J. Duggin
-----------------------------------
Diane J. Duggin
By Eldridge Smith
-----------------------------------
Eldridge Smith
<PAGE>
12
By William E. Floyd
-----------------------------------
William E. Floyd
By Hazel M. Floyd
-----------------------------------
Hazel M. Floyd
By Alicia Perkins
-----------------------------------
Alicia Perkins
By Odessa Floyd
-----------------------------------
Odessa Floyd
By James Floyd, Sr.
-----------------------------------
James Floyd, Sr.
By William Thompson
-----------------------------------
William Thompson
By Nicholas Perkins
-----------------------------------
Nicholas Perkins
<PAGE>
EXHIBIT B
<PAGE>
DECLARATION
-----------
I, Alan L. Box, declare under penalty of perjury that the following
statements are true and correct to the best of my knowledge and belief:
1. I am the president and director of EZ Pittsburgh, Inc. ("EZ"),
licensee of WBZZ(FM), Pittsburgh, Pennsylvania. EZ's application for renewal
of its license is pending in FCC File No. BPH-910401C2, and it was designated
for hearing in MM Docket No. 93-88.
2. The Settlement Agreement attached as Exhibit A to the Joint Request
for Approval of Agreement constitutes the entire agreement between EZ and
Allegheny Communications Group, Inc. ("ACGI"). The Agreement provides for
payment of $4.5 million to ACGI. No other consideration will be paid by EZ or
ACGI.
By ALAN L. BOX
-------------------------------
Alan L. Box
Date: 11/12/96
-------------------
<PAGE>
EXHIBIT C
<PAGE>
DELCARATION
-----------
I, Herbert E. Long, Jr., declare under the penalty of perjury that the
following statements are true and correct to my best knowledge and belief:
1. I am President of Allegheny Communications Group, Inc.
("Allegheny").
2. The application of Allegheny for construction permit for a new FM
broadcast station at Pittsburgh, Pennsylvania (BPH-910628MC), was filed in
1991 and has been prosecuted before the FCC in good faith for the past
approximately five and one-half years. The application was not filed for the
purpose of reaching or carrying out an agreement with any other applicant
regarding the dismissal and withdrawal of its application.
3. The agreement dated November 8, 1996 between Allegheny and EZ
Communications, Inc. sets forth the terms and provisions of the propsed
settlelment between the parties of the comparative hearing on their
respective applications.
HERBERT E. LONG, JR.
------------------------------
Herbert E. Long, Jr.
Washington, D.C.
November 12, 1996
<PAGE>
CERTIFICATE OF SERVICE
----------------------
I, Barbara Frank, a secretary in the law firm of Koteen & Naftalin,
hereby certify that I have this 12th day of November, 1996, sent copies of
the foregoing to the following by first class United States mail, postage
prepaid to the following, unless service by hand is otherwise shown:
*/ Honorable Edward Luton
- - - Administrative Law Judge
Federal Communications Commission
Room 225
2000 L Street, N.W.
Washington, D.C. 20554
Robert Zauner, Esquire
Hearing Branch
Federal Communications Commission
Room 7212
2025 M Street, N.W.
Washington, D.C. 20554
Gene A. Bechtel, Esquire
Bechtel & Cole, Chartered
1901 L Street, N.W.
Suite 250
Washington, D.C. 20036
BARBARA FRANK
By------------------------------
Barbara Frank
*/ By Hand
- - -
<PAGE>
Before the
Federal Communications Commission
Washington, D.C. 20554
In re Applications of ) MM Docket No. 93-88
)
EZ Communications, Inc. ) File No. BRH-910401C2
)
For Renewal of the License )
of FM Radio Station WBZZ(FM) )
on Channel 229B at Pittsburgh, )
Pennsylvania )
)
Allegheny Communications Group, Inc. ) File No. BRH-910628MC
)
For a Construction Permit for a New )
FM Broadcast Station on Channel 229B )
at Pittsburgh, Pennsylvania )
To: The Honorable Edward Luton
Administrative Law Judge
JOINT REQUEST FOR APPROVAL OF SETTLEMENT AGREEMENT
EZ Pittsburgh, Inc. ("EZ") and Allegheny Communications Group, Inc.
("ACGI"), by their attorneys and pursuant to Section 73.3523 of the
Commission's rules, hereby jointly petition for approval of the attached
Settlement Agreement, which would result in the dismissal of ACGI's
application and grant of EZ's application upon the occurrence of certain
conditions described herein.
BACKGROUND
ACGI has filed a construction permit application that is mutually
exclusive with the pending renewal application of EZ. Both applications were
the subject of a comparative hearing held in the fall of 1993 before the
Presiding Judge. No qualifications issues were added against EZ's
application, and the Mass Media Bureau filed in support of a grant of EZ's
application. To date, an Initial Decision has not been released.
<PAGE>
In order to resolve the conflict between these applications, the
parties have entered into a Settlement Agreement, a copy of which is attached
as Exhibit A. The Agreement provides for dismissal of ACGI's application with
prejudice, grant of EZ's application, and the reimbursement of ACGI by EZ in
an amount in excess of ACGI's reasonable and prudent expenses incurred in
preparing, filing and prosecuting its application. The Agreement is subject
to receipt of prior Commission approval, and such approval as well as
dismissal and grant of the ACGI and EZ applications, respectively, must
become a final order before EZ is obligated to make the payment to ACGI.
Approval of the Settlement Agreement requires waiver of Section 73.3523
of the Commission's rules because the settlement payment would be made prior
to release of an Initial Decision in this comparative renewal case, and
because the payment specified in the Agreement exceeds the amount permitted
by that rule at any point in the proceeding. ACGI and EZ submit that such a
waiver is warranted because the relevant provisions of Section 73.3523 no
longer serve a public interest purpose and should be waived, as explained in
detail below, in light of changed conditions which have delayed release of
the Initial Decision in this case and which have also rendered Section
73.3523 a nullity. The circumstances here are also unique and would not lead
to a flood of other cases seeking to depart from Section 73.3523. Thus, the
parties urge the Presiding Judge promptly to waive Section 73.3523 of the
Commission's rules and to grant the Settlement Agreement or immediately
certify the question of the appropriateness of a waiver to the full
Commission for determination.
APPROVAL OF THE SETTLEMENT AGREEMENT COMPLIES WITH SECTION 311(d), AND A
WAIVER OF SECTION 73.3523 IS JUSTIFIED IN THIS CASE.
Section 311(d) of the Communications Act, 47 U.S.C. Section 311(d),
governs the Commission's disposition of any settlement agreement proposed by
a renewal applicant and its challengers.
2
<PAGE>
Section 311(d) provides that the Commission shall approve such an agreement
if the agency determines that it meets two requirements: "(A) the agreement
is consistent with the public interest, convenience, or necessity; and (B) no
party to the agreement filed its application for the purpose of reaching or
carrying out such agreement."(1)
In 1989, after notice and comment rulemaking, the FCC concluded that
some parties were filing applications against renewal applicants, not to
secure a broadcast license but solely to obtain monetary settlements, and the
agency determined that restrictions were needed to curb the abuses.(2) As a
result, the FCC adopted restrictions on the timing and amount of settlement
payments. The new rule banned all payments to competing applicants for the
withdrawal of an application prior to release of an Initial Decision in a
comparative renewal hearing.(3) The new rule did allow settlement payments
after release of an Initial Decision but restricted such payments to
reimbursement of the legitimate and prudent expenses incurred by the
withdrawing party in filing and litigating its application.(4)
In this case, EZ and ACGI submit that a waiver of both the temporal and
monetary limits is appropriate and will serve the public interest. ACGI's
application was filed in June 1991 after the renewal settlement restrictions
in Section 73.3523 had already been adopted, and such restrictions limited
its expectations at the time of filing. Since then, ACGI has spent over five
years prosecuting its application through the motion, discovery, and hearing
stages. Nonetheless, ACGI has yet to obtain an Initial Decision.
- - --------------------------
(1) 47 U.S.C. Section 311(d).
(2) Broadcast Renewal Applicants (Abuses of Comparative Renewal
Process), 66 RR 2d 708, 715 (1989).
(3) 47 C.F.R. Section 73.3523(b)(1).
(4) 47 C.F.R. Section 73.3523(c)(1).
3
<PAGE>
This delay, however, has been caused by developments totally beyond the
control of applicants such as ACGI and EZ. As the Commission recently
acknowledged in waiving the temporal restriction in Section 73.3523(b)(1)
for a ninety-day period, the United States Court of Appeals for the District
of Columbia Circuit in 1993 invalidated the integration criterion used by the
FCC to select among applicants in comparative proceedings.(5) As a
result, the FCC effectively "froze" all comparative cases, halting the
processing of comparative applications and adjudication of comparative
renewal proceedings, such as ACGI's and EZ's, while it re-examined its
comparative criteria in light of the BECHTEL decision.(6) As the Waiver
Public Notice further explained, a recent United States Supreme Court
decision, ADARAND CONSTRUCTION V. PENA 515 S.Ct. 2097 (1995), also required
revaluation of the consideration that the FCC gives to race in comparative
hearings, and the FCC said it would "take some time" to assess the effect of
this additional development on the agency's comparative criteria.(7)
Because of the delay occasioned by BECHTEL, the FCC's "freeze" on the
processing of comparative applications, and ADARAND, none of which applicants
such as ACGI and EZ could have anticipated, the Commission determined that it
was appropriate to waive Section 73.3523(b)(1) and allow monetary settlements
of renewal cases in advance of release of an Initial Decision. For the
ninety-day period following September 15, 1995, the FCC allowed
- - --------------
(5) FCC Public Notice, "FCC Waives Limitations on Payments to
Dismissing Applicants in Universal Settlements of Cases Subject to
Comparative Proceedings Freeze Policy," 10 FCC Rcd. 12182 ("Waiver Public
Notice"), DISCUSSING BECHTEL V. FCC, 10 F. 3d 875 (D.C. Cir. 1993).
(6) Public Notice, "FCC Freezes Comparative Proceedings," 9 FCC Rcd.
1055 (1994); FCC Public Notice, "Modification of FCC Comparative Proceedings
Freeze Policy," 9 FCC Rcd. 6689 (1994).
(7) Waiver Public Notice, 10 FCC Rcd. at 12182.
4
<PAGE>
parties who had not yet received an Initial Decision in their cases to
dismiss their applications in exchange for reimbursement of the legitimate
and prudent expenses they had incurred in prosecuting their applications.(8)
ACGI and EZ contend that the same reasons that justified a Commission
waiver of the temporal limit last fall continue to support such a waiver.
Moreover, even more significant changes since that period compel waiver as
well of the limit on the amount of the settlement payment to be made in this
case prior to release of the Initial Decision. On February 8, 1996, President
Clinton signed into law the Telecommunications Act of 1996, which added a new
Section 309(k) to the Communications Act. This section eliminates the right of
challengers to file applications, such as ACGI's, against an incumbent
licensee's renewal application.(9) Thus, the Congress has removed any
opportunity for challengers to initiate comparative renewal proceedings and
rendered Section 73.3523 a nullity.(10) Without the opportunity to file and
precipitate a hearing, the Commission's rules no longer need to address
limits on settlements of such hearings as a means of deterring non-BONA FIDE
filings, and enforcement of the rule no longer serves any public interest
purpose.(11)
- - --------------
(8) ID.
(9) Pub. L. No. 104-104, 110 Stat. 56 (1996).
(10) In adopting the restrictions in Section 73.3523, the FCC,
recognizing that challengers had the opportunity, incentive, and mechanisms
to file non-BONA FIDE applications intended only to secure a monetary
pay-off, said that it was addressing the incentives and the mechanisms that
helped give rise to such filings. Broadcast Renewal Applicants, 66 RR 2d at
715. CONGRESS HAS NOW ACTED TO REMOVE THE UNDERLYING OPPORTUNITY ENTIRELY.
(11) In fact, the parties are informed by the Mass Media Bureau's
Hearing Division staff that only five comparative renewal hearing proceedings
remain unresolved and pending before administrative law judges. Of these, one
is the subject of a proposed settlement involving a merger of the applicants.
Another has resulted in designated qualifications issues against the
incumbent licensee, unlike the situation here. The other three remaining
proceedings,
(continued...)
5
<PAGE>
Nothing in Section 311(d) of the Communications Act or its legislative
history prohibits the Commission from waiving either the timing or the limit
on the amount of a monetary settlement if the agency otherwise determines
that no party has filed its application for the purpose of obtaining a
settlement and that the agreement is consistent with the public interest,
convenience, and necessity. Indeed, in floor debate on Section 311(d),
Representative Wirth specifically noted that "the intent of the Congress was
not, in any way, to prevent an incumbent licensee from making a payment in
excess of expenses to a party challenging that licensee as a means of
settling a challenge" except when the applicant was not BONA FIDE.(12)
In adopting Section 73.3523, the FCC stated that it was pegging the
permissibility of payment to release of an Initial Decision because
perseverance through that point in a proceeding was indicative of good faith:
By banning all settlement payments through the Initial Decision stage, we
are further reducing the potential for abuse. First, we are increasing
the likelihood that only serious, BONA FIDE applicants will have the
opportunity to settle out their competing applications. It is time
consuming and expensive to litigate an application through the Initial
Decision stage. Moreover, an applicant that makes it through the Initial
Decision stage has demonstrated that it is willing to develop a complete
record on all pertinent hearing issues including technical issues,
standard comparative issues and any basic qualifications issues
designated . . . . For these reasons, we believe that an applicant's
prosecution of its application through the Initial Decision stage is a
persuasive indication of the BONA FIDES of the application. Thus,
restricting settlements to the post-Initial Decision stage helps ensure
that settlements will be among BONA FIDE competing applicants and
incumbents only.(13)
- - --------------
(11) (continued...)
including this one, have concluded the hearing phase and do not involve any
qualifications issues against the incumbent.
(12) 127 Cong. Rec. 18956 (1981)(remarks of Cong. Wirth). The
legislative history of Section 311(d) is otherwise scant. SEE H.R. Conf. Rep.
No. 97-208, 97th Cong., 1st Sess. 898, REPRINTED IN 1981 U.S.C.C.A.N. 1010,
1260 (1981).
(13) Broadcast Renewal Applicants, 66 RR 2d at 715 (footnote omitted).
6
<PAGE>
Thus, prosecution through the Initial Decision stage is compelling evidence
of a BONA FIDE application.
In this case, ACGI has done everything within its power to litigate its
application through the Initial Decision stage. It has filed and defended
against requests for addition of issues, conducted full-blown discovery,
including depositions, participated in a lengthy hearing before the Presiding
Judge, and submitted findings of fact and conclusions of law and reply
findings and conclusions. The BECHTEL decision and the subsequent "freeze,"
however, have made it impossible for ACGI and EZ to reach the Initial
Decision stage of this proceeding. But for such circumstances beyond the
parties' control, this five-year old proceeding would long ago have resulted
in an Initial Decision, and, in the FCC's explanation quoted above, further
demonstrated ACGI's BONA FIDES as an applicant.(14)
There is no doubt that the Commission has broad authority under Section
311(d) to decide whether settlement agreements should be approved or
disapproved under the public interest, convenience, and necessity
standard.(15) At the same time, the FCC has acknowledged that when abuse is not
a factor, settlements are to be encouraged as "an efficient way to resolve
comparative licensing proceedings, preserve funds for service to the
___________________
(14) CF. National Broadcasting Co., Inc. (KNBC), 19 RR 2d 634 (1970)(despite
the FCC's then existing policy of not approving any settlements of
comparative renewal cases, approving joint request for settlement in light of
changed circumstances occasioned by change in standards announced in a court
decision and a new FCC policy statement).
(15) Broadcast Renewal Applicants, 66 RR 2d at 717. ("As long as the
Commission determines that 'no party to the agreement filed its application
for the purpose of reaching or carrying out such an agreement,' the
Commission has broad authority under Section 311(d) to decide whether
settlement agreements should be approved or disapproved under the public
interest, convenience, and necessity standard.")
7
<PAGE>
public, and allow . . . [the] conserv[ation of] unlimited administrative
resources."(16) Such settlement of ongoing litigation is to be favored:
Given the facts that law and society both generally favor settlement of
competing claims and that requiring an applicant to prosecute its
application when it clearly has no interest in doing so would be
anomalous, we believe that any detriment stemming from the loss of a
choice between applicants is more than offset by the overall benefit to
the public interest attributable to the termination of the
litigation.(17)
Given the changed circumstances that have occurred since the filing of ACGI's
application, particularly the "freeze" on comparative hearings and the
abolition of the right to file applications challenging renewal applications,
this proposed settlement evidences exactly the kind of "good cause" the
Commission recently indicated would need to be presented for it to consider
further waivers of its settlement rules.(18)
The terms of the attached Settlement Agreement, including the proposed
settlement amount, have been freely negotiated between ACGI and EZ and
reflect each party's estimate of the value of settlement to it. Any failure
to settle the proceeding at this point raises the prospect of further
litigation before both the FCC and the courts. Not only would such litigation
be extremely expensive, but, from EZ's standpoint, it would also be terribly
disruptive of the ongoing operations of WBZZ(FM). It would require the
attention and input of staff at both the station and the company's
headquarters. In addition, as has been announced in the trade press and is
reflected in a pending application for Commission consent, EZ has proposed to
merge into a much larger radio company. (SEE FCC File Nos. BTCH-961001GG ET
SEQ.) Pendency of the WBZZ(FM) renewal presents issues that the
___________________
(16) ID. at 716.
(17) Western Connecticut Broadcasting Co., 50 RR 2d 1335, 1339 (1982).
(18) Settlements in Comparative Broadcast Proceedings, 2 Com. Reg. 1240,
1243 (1996).
8
<PAGE>
parties to the merger believe they have addressed in the merger contract, but
the solution is nonetheless administratively complicated to effectuate. The
negotiated payment amount set forth in the Settlement Agreement reflects all
these concerns and is a marketplace decision of the type courts ordinarily
respect. There is no reason, particularly in light of the changed legal
circumstances discussed above, for the FCC to act any differently.
Attached as Exhibits B and C are declarations, respectively, of Herbert
E. Long, Jr., president of ACGI, and Alan L. Box, president of EZ. Mr. Long's
declaration provides that the ACGI application was not filed for the purpose
of reaching or carrying out an agreement regarding the dismissal or
withdrawal of its application and that the Settlement Agreement constitutes
the complete agreement between the parties. Mr. Box's declaration provides
that the Settlement Agreement represents the complete agreement between the
parties.
For the reasons set forth above, and on the basis of the affidavits
submitted herewith, ACGI and EZ respectfully request that the Commission
approve this Settlement Agreement and concurrently dismiss ACGI's application
and grant EZ's application.
Respectfully submitted, Respectfully submitted,
EZ PITTSBURGH, INC. ALLEGHENY COMMUNICATIONS
GROUP, INC.
By M. ANNE SWANSON By GENE A. BECHTEL
-------------------------------- --------------------------------
M. Anne Swanson Gene A. Bechtel
of of
Koteen & Naftalin Bechtel & Cole, Chartered
Suite 1000 1901 L Street, N.W.
1150 Connecticut Avenue, N.W. Suite 250
Washington, D.C. 20036 Washington, D.C. 20036
(202) 467-5700 (202) 833-4190
Its Attorneys Its Attorneys
November 12, 1996
9
<PAGE>
EXHIBIT A
