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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re Application of ) ) PARAMOUNT STATIONS ) GROUP OF KERRVILLE, INC. ) (Assignor) ) ) File No. BALCT-940810KE and ) ) KRRT, Inc. ) (Assignee) ) ) For Assignment of License of ) KRRT(TV), Kerrville, Texas ) MEMORANDUM OPINION AND ORDER Adopted: March 17, 1997 Released: March 25, 1997 By the Commission: 1. The Commission has before it for consideration two applications for review of the June 6, 1995, action by the Chief, Video Services Division, which denied the informal objections separately filed by Harte-Hanks Television, Inc. (Harte-Hanks) and Post-Newsweek Stations, San Antonio, Inc. (Post-Newsweek) against the assignment of license of KRRT(TV), Channel 35, Kerrville, Texas, from Paramount Stations Group of Kerrville, Inc. (Paramount) to KRRT, Inc. (Buyer). See Letter to Paramount and Buyer from Barbara A. Kreisman, Chief, Video Services Division, Appendix, (June 6, 1995) (Division Letter). Buyer filed a joint consolidated opposition to the Harte-Hanks and Post-Newsweek applications for review with River City Broadcasting, L.P. (River City), the general partner of the licensee of KABB-TV, Channel 29, San Antonio, Texas. Buyer proposes to operate KRRT(TV) pursuant to a local marketing agreement (LMA) with River City. 2. Harte-Hanks and Post-Newsweek had opposed Commission action on the assignment of KRRT(TV) from Paramount to Buyer on three general grounds. They alleged that Buyer and River City had not supplied full details of their relationship, including a copy of a proposed LMA agreement; that River City's proposed LMA with Buyer and its role in the structuring and financing of Buyer's acquisition of KRRT(TV) raised a real-party-in-interest issue; and that the assignment application should not be considered until the Commission resolved the pending rulemaking proceedings relating to LMA's. During its consideration of this case, the staff requested additional information and documentation from Buyer and River City. After an exhaustive examination, the staff determined that River City had not exercised control over Buyer by acquiring an option to purchase KRRT(TV) from Paramount and offering Buyer the opportunity to assume and exercise the option. Division Letter at 7. The staff found that Buyer's principals were experienced broadcasters, who possessed equivalent bargaining power and were free to reject River City's offer if they were not satisfied with the terms. Id. The staff also concluded that neither the terms of the LMA agreement, id. at 7-10, nor River City's role in the structuring and financing of Buyer's acquisition of KRRT(TV), id. at 10-13, would impinge upon Buyer's independence or result in an unauthorized transfer of control of the station to River City. Noting that the "decision here should not be viewed as a harbinger of any ultimate resolution of the pending rule making" the staff conditioned grant of the application on the outcome of the proceeding reviewing the Commission's attribution rules. Id. at 14; see also Review of the Commission's Rules Governing Attribution of Broadcast Interests, 10 FCC Rcd 3606 (1995). 3. Repeating these allegations, Harte-Hanks now contends that the staff "failed to consider adequately the clear and convincing evidence that River City is the real-party-in-interest, while Post- Newsweek contends the staff decided the case incorrectly without "receiving any evidence." Upon review of the staff's decision, which is appended to this Order, we find that the staff thoroughly considered all relevant information and its decision is adequately supported and consistent with Commission precedent and policy. However, we take this opportunity to address Post-Newsweek's opposition to Buyer's post-closing amendment, which disclosed that River City has agreed to serve as guarantor for a portion of Buyer's loan. Post-Newsweek argues that the LMA agreement in addition to River City's loan of a portion of the purchase price and execution of the guaranty agreement violates the Commission's interim guidelines for processing applications proposing LMA's and warrants remand of this matter to the staff. We do not agree. 4. On June 1, 1995, the Mass Media Bureau issued an interim policy for processing applications proposing LMA's that limited the number of allowable relationships between the parties to one other relationship in addition to the LMA, i.e., a loan or option to purchase the station. Public Notice (No. 54161, released June 1, 1995). We affirmed the application of those interim guidelines in WGPR, Inc., 10 FCC Rcd 8140, 8142 (1995). We do not believe that the guaranty executed in this case is an additional relationship between River City and Buyer that violates the interim policy. 5. A guaranty is an independent contract between the lender and the guarantor whereby the guarantor promises the lender it will be collaterally liable if the borrower fails to perform. The Commission has determined that a loan guaranty does not confer an interest upon the guarantor requiring attribution under the multiple ownership rules. See, e.g., Dorothy J. Owens, Debtor in Possession, 5 FCC Rcd 6615, 6617 (1990). Nor does the Commission consider funds obtained in connection with a loan guaranty in calculating the percentage of non-attributable equity interest relevant for cross-interest analyses. See Roy M. Speer, FCC 96-258, 124-126 (released June 14, 1996) citing Cleveland Television Corp., 91 FCC 2d 1129 (Rev. Bd. 1982), rev. denied FCC 83-235 (May 18, 1983), aff'd 732 F.2d 962 (D.C. Cir. 1984). As an independent agreement executed between River City and the senior lender, the loan guaranty does not constitute a direct relationship between River City and Buyer that would implicate the interim LMA policy statement. Buyer remains primarily liable to the senior lender and the additional guaranty obligation incurred by River City does not diminish Buyer's obligation to repay the loan. Nor are the senior lender's rights and remedies against Buyer reduced by River City's role as guarantor. Moreover, under the interim LMA policy, River City could have loaned Buyer the entire purchase price of KRRT(TV). We note that the guaranty does not contain cross-default provisions with the LMA; it is "absolute and unconditional. . . whether the LMA agreement . . . violate[s] any rule or regulation of the FCC." Thus, we conclude that the loan guaranty agreement between River City and the senior lender does not provide River City a means to control the decisions of Buyer, and when considered in conjunction with the other relationships between Buyer and River City, does not persuade us to alter the staff's decision. 6. Accordingly, IT IS ORDERED, That the Applications for Review filed separately by Harte- Hanks Television, Inc. and Post-Newsweek Stations, San Antonio, Inc. ARE DENIED. FEDERAL COMMUNICATION COMMISSION William F. Caton Acting Secretary Appendix June 6, 1995 1800E1-AL Paramount Stations Group of Kerrville, Inc. c/o George H. Shapiro, Esquire Arent, Fox, Kintner, Plotkin & Kahn 1050 Connecticut Avenue, N.W. Suite 600 Washington, D.C. 20036-5339 KRRT, Inc. c/o Dennis F. Begley, Esquire Reddy, Begley, Martin & McCormick 1001 22nd Street, N.W. Suite 350 Washington, D.C. 20037-1803 Dear Counsel: This is in reference to the application for assignment of license of KRRT(TV), Kerrville, Texas, from Paramount Stations Group of Kerrville, Inc. (Paramount) to KRRT, Inc. (Buyer). Buyer proposes to operate KRRT(TV) pursuant to a local marketing agreement with River City Broadcasting, L.P., the licensee of KABB-TV, San Antonio, Texas. An informal objection to the application was filed on September 28, 1994 by Harte-Hanks Television, Inc. (Harte-Hanks), licensee of KENS(TV), San Antonio. Buyer filed a response and a supplement to that response, and Harte-Hanks replied and subsequently filed a pleading urging the Commission to require the submission by the parties of certain documents. On January 20, 1995, the staff requested additional documents, River City submitted the documents, and, on February 16, 1995, Harte-Hanks supplemented its informal objection. On March 8, 1995, Post-Newsweek Stations, San Antonio, Inc. (Post-Newsweek), licensee of KSAT-TV, San Antonio, also filed an objection, to which Buyer responded. On May 15, 1995, River City furnished additional information to the Commission, and on May 30, 1995, Buyer and River City filed an amendment. BACKGROUND Prior to the pending transaction between Paramount and Buyer, River City, on May 24, 1994, entered into an option agreement with Paramount to purchase KRRT(TV). Television station KRRT(TV), whose community of license is Kerrville, is located within the San Antonio-Victoria area of dominant influence (ADI), the nation's thirty-sixth largest market. River City is the licensee of KABB-TV, also located in the San Antonio-Victoria market. As consideration for the option contract, River City paid Paramount $1.5 million. Under the agreement, upon exercise of the option Paramount was to transfer the $1.5 million to an escrow agent, who would hold the money as the deposit for purchase of KRRT(TV). The option agreement also provided that in the event River City exercised its option to purchase the station, the purchase agreement to be executed between River City and Paramount was to be in the form of the Asset Purchase Agreement annexed to the option agreement. Finally, River City was contractually authorized, so long as consented to by Paramount, to assign the option agreement to "any person or entity," who would be entitled to "all rights and obligations" of River City under the agreement, as well as under the companion Asset Purchase Agreement. During the spring of 1994, according to Buyer, River City realized that the Commission would not conclude the pending television ownership rule making proceeding prior to expiration of the option agreement. Under existing rules, River City would not be able to exercise the option to purchase KRRT(TV) while continuing to own KABB-TV in the same market. Consequently, Buyer notes, River City commenced "exploring" the assignment of its option to an experienced broadcaster with whom it wished to enter into a time brokerage arrangement. To that end, Buyer states, River City principal Barry Baker approached Buyer principal Myron Jones regarding the acquisition of KRRT(TV). Jones is majority shareholder, director, chief executive officer and treasurer of JJK Broadcasting, Inc., the parent company of Buyer. Baker, it is represented, had become acquainted, through various industry meetings, with Jones, who is also the longtime majority stockholder of The Jet Broadcasting Co., Inc., licensee of television station WJET-TV and radio station WJET(FM), Erie, Pennsylvania, and of WHOT, Inc., licensee of radio stations WHOT(AM) and WHOT-FM, Youngstown, Ohio. Negotiations between the two parties ensued. On July 15, 1994, via an Assignment and Assumption of Option Agreement executed on that day, River City assigned to Buyer its option contract with Paramount. Pursuant to the assignment agreement, Buyer agreed to exercise the option and execute the Asset Purchase Agreement as drafted by River City and Paramount and as annexed to their option agreement. In exchange, Buyer promised to deliver to River City a payment of $500,000 and a non-recourse promissory note for the balance of the $1.5 million River City had paid to Paramount. River City states that Buyer wired $500,000 to River City's bank account in St. Louis, Missouri on August 1, 1994, and signed a non- recourse promissory note payable to River City for $1 million on July 17, 1994. The same day that Buyer assumed the option agreement and the related Asset Purchase Agreement from River City, it signed a letter of intent with River City to enter into a definitive time brokerage agreement, based upon the terms of a draft agreement previously reviewed by the staff. On August 1, 1994, Buyer, as assignee of the option agreement, exercised the option and entered into a purchase agreement with Paramount for the assets of KRRT(TV). That purchase agreement is nearly identical to the Asset Purchase Agreement drafted by River City and Paramount in connection with their option agreement. Paramount and Buyer filed with the Commission their assignment application containing the Paramount-Buyer purchase agreement on August 10, 1994. INFORMAL OBJECTIONS Harte-Hanks and Post-Newsweek object to Commission action on the assignment application on three general grounds. First, both Harte-Hanks and Post-Newsweek argue that the Commission should seek more information pertaining to the Buyer-River City relationship before it may make a public interest determination. While Harte-Hanks urges the Commission to compel Buyer and River City to disclose "all of the details" concerning River City's participation in the "entire scheme of contemplated transactions," Post-Newsweek limits its demand to those facts surrounding Buyer's ability to terminate the time brokerage arrangement. Second, Harte-Hanks opposes the assignment because River City's involvement and financial stake in the various transactions described above "strongly suggests" the existence of a real-party-in-interest issue. In support of this latter allegation, Harte-Hanks points to three facets of the proposed enterprise: (1) River City's alleged dominant role in structuring the transaction; (2) River City's proposed time brokerage agreement with Buyer; and (3) River City's alleged "substantial financial stake" in the pending assignment, including its loan to Buyer for one-third of the acquisition price of KRRT(TV) and its payment of brokerage fees, which, Harte-Hanks alleges, constitutes direct repayment of Buyer's senior loan. Finally, Post- Newsweek asserts that the Commission should defer action on Buyer's application pending the outcome of the rule making proceeding relating to local marketing agreements. See Review of the Commission's Regulations Governing Television Broadcasting in MM Docket 91-221, 10 FCC Rcd 3524 (1995). Disclosure of information Preliminarily, we note that Buyer did not indicate on its application that it intended to enter into a time brokerage arrangement with River City. On November 18, 1994, in response to a staff letter requesting that information, Buyer submitted a copy of its proposed Time Brokerage Agreement with River City, a document which was then made available by the staff to Harte-Hanks. At the time, the staff had not expressly required the submission of a time brokerage agreement concurrently with that of a related assignment application. That requirement was articulated by the Mass Media Bureau in a Public Notice released June 1, 1995. We reiterate here that in order that we may render public interest determinations predicated on complete, not partial, proposals of licensees-to-be, we require that time brokerage arrangements be fully referenced in the applications of those intending to lease out their airtime. Since the Buyer's November 18, 1994 submission of the proposed Time Brokerage Agreement, Harte-Hanks, and, later, Post-Newsweek, have requested that Buyer file certain information and copies of various corollary agreements cited in that document and in the Asset Purchase Agreement. Buyer and River City have, upon the request of staff, furnished all of the documents relevant to our determination here, including the Assignment and Assumption of Option Agreement between Buyer and River City, the proposed Option Agreement for purchase of KRRT(TV) by River City, the Loan and Security Agreement and related promissory notes for the funds to be advanced to Buyer by River City, and a proposed subordination agreement between Buyer's senior lender and River City. In light of our receipt of those and other agreements, we dismiss as moot Harte-Hanks' and Post-Newsweek's assertions that Buyer need divulge any further details concerning its relationship with River City. Accordingly, we shall address the merits of the objectors' substantive allegations. River City as the real party-in-interest The Commission evaluates real-party-in-interest allegations as it does those concerning defacto control. Univision Holdings, Inc., 7 FCC Rcd 6672, 6675 (1992), reconsideration denied, 8 FCC Rcd 3931 (1993). That is, we must examine not only the applicant's formal legal control, but any factual circumstances indicating abdication of that legal control. WWIZ, Inc., 36 FCC 561, reconsideration denied, 37 FCC 685 (1964), aff'd sub nom. Lorain Journal v. FCC, 351 F.2d 824 (D.C. Cir. 1965), cert. denied, 383 U.S. 967 (1966). Central to our examination are the loci of control of the proposed licensee's finances, personnel and programming. E.g., Stereo Broadcasters, Inc., 87 FCC 2d 87 (1981), reconsideration denied, 50 R.R.2d 1346 (1982). It is against this legal standard we assess the Harte-Hanks allegations. River City's role in structuring the transaction. Harte-Hanks suggests that the "origin and conception, negotiation, [and] structuring" of the transaction in the assignment now before us demonstrate River City's ability to exercise control over KRRT(TV). Specifically, Harte-Hanks cites River City's negotiation of the terms included in the May 24, 1994 option agreement with Paramount and the accompanying Asset Purchase Agreement, River City's solicitation of Buyer for assumption of the Paramount option contract, Buyer's nearly wholesale assumption of those terms, and River City's unilateral drafting of the proposed Time Brokerage Agreement. It is true that when dealing with "newly created" companies, the circumstances surrounding their creation and the preparation of their applications are relevant. Univision Holdings, Inc., 7 FCC at 6675. But in this case, Buyer, while legally a "newly created" entity, is composed entirely of two shareholders, Myron Jones, as CEO, treasurer, director and 70-percent voting shareholder, and John Kanzius, as president, director, and 30% voting shareholder, who, according to Commission records, also are the sole owners of two established broadcasting entities, The Jet Broadcasting Co. and WHOT, Inc. Those companies, as noted above, are the licensees of four broadcast stations, three of which have been owned and operated by Myron Jones for nearly three decades or more. The facts here, therefore, do not resemble those found in the line of cases where the nominal owners, neophytes in the field of broadcasting, are alleged to have yielded their de jure control to experienced broadcasters assuming purportedly passive roles. E.g., Evergreen Broadcasting Co., 6 FCC Rcd 5599, 5600-01 (1991)("The outsiders' greater familiarity with broadcasting is pertinent in this case in determining the likelihood that the proposed ownership structure accurately reflects how control will be exercised."); Royce International Broadcasting, 5 FCC Rcd 7063 (1990); Metroplex Communications, Inc., 5 FCC Rcd 5610 (1990). Rather, what we are confronted with here is Buyer, which is owned by experienced broadcasters with working knowledge of the rights and obligations contained in contractual arrangements and which has entered into a series of legal transactions with River City, a discrete, equally experienced broadcaster. Based upon the equivalent bargaining power possessed by each of Buyer and River City, we are not persuaded that the chronology of events, either individually or collectively, leading to the assignment application pending before us manifests River City's alleged de facto control of Buyer. First, to find that a third party's solicitation of a proposed licensee's participation in a given transaction is demonstrative of control would unduly inhibit the workings of the marketplace. Option holders, such as River City, would be able to assign their option to only the limited universe of parties who themselves initiate such contacts. Not only do we eschew any undue restriction of the alienability of legitimate options for the purchase of broadcast properties, but we believe active solicitation by the holders of such options is a crucial ingredient of a robust marketplace. Moreover, once approached by River City, Buyer was in no way compelled to pursue the transaction. Buyer was, as it asserts, free to reject River City's proposal had it been unwilling to accept any of the terms. We find, therefore, that River City's initiation of contact with Buyer is not probative of control. That Buyer entered into a purchase agreement with Paramount, whose terms had been negotiated between Paramount and River City, also evidences no control by River City over Buyer. It is an axiom of the law of contracts that the general assignment and/or assumption of a contract operates as "an assignment of the assignor's rights and a delegation of his unperformed duties under the contract." Second Restatement of Contracts, 328(1)(1981). Thus, the acceptance by an assignee of such an assignment operates "as a promise" to the assignor that the assignee will perform the assignor's unperformed duties and the original obligor of the assigned duties, then, is an "intended beneficiary" of that promise. Id. at 328(2). That is, when assuming rights and obligations under an agreement, the assignee steps into the position of the assignor. Buyer here, therefore, had the choice of entering into the Assignment and Assumption Agreement with River City, with its attendant rights and duties as established between Paramount and River City, or of declining to assume River City's position. Finally, River City's early creation, and attempts to obtain staff approval, of the proposed Time Brokerage Agreement indicate only that it was seeking to assign its option agreement to a particular class of assignees: those interested in a time brokerage arrangement, particularly one in conformance with Commission rules. Indeed, Buyer represents in its response that it signed a letter of intent "to enter into a Time Brokerage Agreement based on the terms of the draft time brokerage agreement approved by the Commission's [staff]." So long as the Commission permits time brokering, see e.g., Part-Time Programming, 82 FCC 2d 107, 108 (1980), we cannot preclude a time broker from seeking willing participants. Time brokerage arrangements are circumscribed by the Commission to the extent that the contracts governing those relationships must include specific provisions relating to programming and other continuing licensee obligations. E.g., Gisela Huberman, Esquire, 6 FCC 2d 5397 (MMB 1991); Joseph A. Belisle, Esquire, 5 FCC Rcd 7585 (MMB 1990); Roy Russo, Esquire, 5 FCC Rcd 7586 (MMB 1990); Dominic Monahan, Esquire, 6 FCC Rcd 1867 (MMB 1990); Peter D. O'Connell, Esquire, 6 FCC Rcd 1869 (MMB 1990); BrianMadden, Esquire, 6 FCC Rcd 1871 (MMB 1990); Joseph F. Bryant, 6 FCC Rcd 6121, 6123 (Video Services Div., MMB 1991). We view River City's consultations with staff, therefore, merely as an attempt to prepare an agreement in compliance with Commission rules and policies, and not an attempt to insert provisions advantageous to itself. We find that Buyer's lack of participation at that stage is not evidence of River City's control over Buyer. In sum, in light of Buyer's established record as a broadcaster, we find that River City has exercised no control over that entity in arranging the preliminaries to the application before us. Indeed, we note that that application has been prepared and prosecuted by Buyer's own attorney, who, based on the WJET(TV) Ownership Reports, has served as the communications counsel of record for Buyer's principals since at least 1986. Time Brokerage Agreement. Harte-Hanks asserts that the very existence of a time brokerage agreement further reinforces the conclusion that Buyer is not a wholly independent entity. Specifically, Harte-Hanks argues that the termination clauses of the Time Brokerage Agreement, which require Buyer to pay to River City an amount equal to all payments of principal to the institutional lender, suggest that River City, not Buyer, is making Buyer's senior debt payments. Harte-Hanks, as well as Post-Newsweek, also point to the termination provisions of the agreement, as well as to the duration of the agreement, as a restraint of Buyer's ability to "escape" the time brokerage arrangement. We note here, as we have earlier, that the brokerage relationship between Buyer and River City has not yet commenced. Indeed, the Time Brokerage Agreement before us has not even been executed. Any concerns we may have with the provisions of that agreement as originally proposed have since been cured, or will be, by amendment prior to execution. Thus, we shall have no basis to assume, absent properly supported specific allegations of fact to the contrary, that Buyer and River City will operate in a manner differing from that delineated in their agreement as amended. News International, PLC, 97 FCC 2d 349, 356 (1984). A licensee's participation in a time brokerage arrangement does not constitute an unauthorized transfer of control under Section 310(d) of the Act unless the agreement vests a disproportionate degree of control in the broker. Roy R. Russo, Esq., 5 FCC Rcd 7586, 7587 (MMB 1990). The Commission's three-part standard for assessing control applies with equal force to a licensee that is party to a local agreement. See, e.g., id. at 7587. Thus, a licensee involved in a local marketing relationship is not relieved of its overarching duty to retain ultimate control, that is, to mandate basic policies pertaining to the fundamental station operations of programming, personnel and finances. But, as is true with any broadcaster, even one whose station is brokered, a licensee is permitted under Section 310(d) to delegate day-to-day operations relating to those three areas, so long as the licensee continues to set the policies guiding those operations. See Southwest Texas Public Broadcasting Council, 85 FCC 2d 713 (1981); The Alabama Educational Television Commission, 33 FCC 2d 495, 508 (1972). In sum, we look not to who executes the programming, personnel and finance responsibilities, but who establishes the policies governing the three areas. Under the draft Time Brokerage Agreement before us, Buyer expressly enjoys ultimate control over the nearly full-time programming to be aired by River City: Buyer can require River City to air issues of importance to the local community and educational and informational programming for children aged 16 years and younger; Buyer may reject or refuse portions of River City programming which Buyer believes to be contrary to the public interest; and Buyer may interrupt River City programming for that which, in its determination, is of greater local or national public importance. In order to enable Buyer to monitor River City's programming, River City is obligated under the agreement to give Buyer at least 24 hours notice of substantial and material changes in programming. Moreover, Buyer is responsible for assessing the issues of concern to Kerrville and area residents and addressing those issues in its public service programming. Although River City has the right to program up to 162 hours per week on KRRT(TV), which constitutes nearly all of Buyer's airtime, the Commission has never set limits on the amount of time a brokered station could sell. Instead, the Commission has cautioned that "extensive time brokering might result in the licensee's relinquished or diminished control over programming" if the licensee abdicates its core duties of ascertaining needs and interests of its viewing public, formulates responsive programming, and maintaining "a familiarity with the content of [its] programs." Cosmopolitan Broadcasting Corporation, 59 FCC 2d 558, 560-61 (1976). In this case, the time brokerage agreement affords Buyer ample rights to exercise control. We expect that that control will be duly exercised. As for other aspects of station operations, Buyer is contractually obligated to maintain its local public inspection file and place materials in that file in a timely fashion and to maintain and staff the main studio. Under the agreement, Buyer "will provide and be responsible" for station personnel necessary for the broadcast transmission of programs and "other aspects of Station operation," including, at minimum, the station's general manager and another employee, and will be responsible for the salaries, taxes, insurance and related costs for all the station personnel. River City, by contrast, is responsible for the employment and costs associated with personnel used in the sale of commercial advertising time and the production of River City's programming. However, whenever on the station's premises, as established in the time brokerage agreement, all of River City's employees will be subject to the overall supervision of Buyer's general manager and/or other employee. This personnel arrangement, as we have found in past cases involving local marketing agreements, does not indicate abdication of control to River City. See, e.g., Peter D. O'Connell, Esquire, 6 FCC Rcd 1869 (MMB 1991). As for Buyer's ability to revoke the activities it has delegated to River City, we also were concerned, as was Harte-Hanks, about obligations originally imposed upon Buyer in the event the brokerage arrangement had been terminated for reasons other than River City's consent. Under those circumstances, Buyer was to be liable to River City for an amount equal to all of the payments of principal paid in due course to Buyer's senior lender, Bankers Trust Company. See Sections 6.2(b), (c), as amended. Initially, River City justified this repayment penalty as an appropriate remedy for Buyer's unilateral termination of the agreement because cessation of the relationship would result in an "unfair windfall [to Buyer] from the deal." To this end, therefore, River City asserted that it had to be made "at least partially whole" by that portion of the time brokerage fee used to pay down the principal of its senior bank debt. The fee arrangements worked out between a licensee and a broker may be based on the licensee's fixed costs, such as operating costs, capital expenditures, debt service, and a profit. But the fee, once paid, becomes the property of the licensee and may be expended in any manner that the licensee chooses. Rather than a "windfall" to the licensee, the brokerage fees should be viewed as the fair value of the licensee's airtime. Buyer and River City have now deleted this provision from their time brokerage agreement and have amended the termination provisions so that now either Buyer or River City may terminate upon six months' written notice. Although the party terminating the agreement must now pay the other party one million dollars, we believe that this level of specified damages, amounting to approximately three percent of the purchase price of the station, and the due date of such damages, at the six-month mark, is not confiscatory or onerous. Finally, the original provision here setting a term of five years and two additional five-year renewals has been reformed by the parties to the agreement in accordance with a ten-year limitation we require of all television brokerage arrangements. In sum, we find that the brokerage arrangement between Buyer and River City, as amended, will not impinge upon Buyer's ultimate control of KRRT(TV). River City's financial stake. Harte-Hanks contends that River City's financial interest in the pending transaction renders River City the "real interested party" on two general grounds: (1) River City's provision of monies to Buyer, as a loan and as payments of brokerage fees; and (2) River City's obligations to Paramount under the purchase agreement as conditions to Buyer's acquisition of KRRT(TV). Specifically, as to the first ground, Harte-Hanks looks to River City's funding of $1 million of the $1.5 million option payment/purchase deposit and of one-third of KRRT(TV)'s $30 million purchase price. Additionally, Harte-Hanks asserts that River City's monthly payments to Buyer under the Time Brokerage Agreement, "under the guise of brokerage fees and an escrow agent's facade," constitutes direct payment by River City of the $20 million senior loan from Bankers Trust. As initially proposed, the monthly fees owed to Buyer by River City each month were to be paid into an escrow account, and under the terms of Attachment 1.5 of the original Time Brokerage Agreement, an escrow agent was to disburse principal and interest payments directly to Buyer's senior lender and the remainder to Buyer. Harte-Hanks concludes that "[i]t is thus evident" that Buyer will be "wholly dependent upon River City" to finance its daily operations, capital expenditures and debt obligations. In response, Buyer represents that on August 1, 1994, pursuant to the Assignment and Assumption of Option Agreement between it and River City, Buyer wired $500,000 to River City's bank account in St. Louis and signed a non-recourse promissory note to River City for $1 million, the balance of the option payment/purchase deposit. Since that response, on May 15, 1995, Buyer has informed the Commission in writing that it will be contributing a total of $500,000 to the acquisition and that those funds will remain as equity. As for the $30 million purchase price, Buyer states that it will obtain a $20 million loan from an institutional lender, Bankers Trust, and the remainder, "a significantly smaller amount of money," or $10 million, from River City. River City's position will be "structurally subordinate to the senior credit facility," Buyer contends, because that loan will be secured by a pledge of the stock of the parent of the licensee, while the senior debt will be secured by a pledge of the stock of the proposed licensee itself. Thus, Buyer concludes, only Buyer's senior lender will have a lien on the operating assets and stock of the licensee-to-be. Buyer also represents that River City will not guarantee the proposed licensee's obligations to the senior lender. As for payment of the brokerage fees to an escrow account, Buyer contends that it is "nothing more than a procedural mechanism" and does not "make River City contractually liable" for Buyer's debts. (Emphasis included.) Nevertheless, Buyer and River City have since amended their time brokerage agreement to eliminate the escrow arrangement in favor of direct payments to Buyer. On June 1, 1995, the Mass Media Bureau released a Public Notice, setting forth the processing standards for assignees proposing to operate a television station under a time brokerage agreement. In the Public Notice, the Bureau stated that it would grant applications where the broker proposes relationships with the assignee which include at most the time brokerage agreement and an arm's-length loan for some or all of the acquisition price of the station or an option to purchase the station. As amended, we find that the debtor-creditor relationship between Buyer and River City complies with the interim standard for time brokerage arrangements. Indeed, Buyer has exceeded that standard in that it has committed $500,000 of its own funds as an equity contribution and has arranged for two-thirds of the purchase price of the station to derive from a commercial lender, Bankers Trust. The broker, permitted under the interim standards to finance all of the acquisition costs, is providing only one-third of the purchase price, or $10 million, and that amount is structurally and expressly subordinated to the Bankers Trust loan. With respect to Harte-Hanks' contention that the brokerage fees flowing from River City to Buyer constitute direct payments to Bankers Trust or, as it alleges, a functional guarantee of the loan, we note, as discussed above, that in a brokerage arrangement the licensee makes its airtime available to the time broker in exchange for the equivalent of "rent," an amount calculated to incorporate the lessor's fixed and operating costs, including debt service, operating expenses, capital expenditures, and a profit. It is irrelevant to the issue of control whether a portion of the time brokerage fees paid to the licensee is applied to a third-party loan or to a loan from the broker itself. Instead, our primary focus of concern is the level of control, if any, abdicated via the terms of the governing loan and/or security agreements. Here, Section 1.04 of the Buyer-River City Loan and Security Agreement provides for amendment of the terms of the agreement and accompanying promissory notes immediately prior to the consummation of the KRRT(TV) acquisition so as to "accommodate the reasonable requests of the senior lenders" of Buyer. According to Buyer and River City, those specific amended terms cannot be finalized until the final documentation of the senior bank financing has been completed, which, in turn, cannot occur, it is represented, until approval of Buyer's application before us. However, both Buyer and River City represent that the amended loan agreement will contain "essentially the same standard terms and conditions as those in the current Loan Agreement." Having reviewed those terms, as cited above, as well as those in the Pledge Agreement between River City and Myron Jones and John Kanzius, the sole shareholders of Buyer's parent, we find no provisions, and Harte-Hanks has failed to cite any, that permit River City to wrest control of the station from Buyer. As for payment of the monthly brokerage fees to an escrow agent, Buyer and River City have eliminated that arrangement from their time brokerage agreement, so that Buyer will be free to dispose of the brokerage fees as it desires. With respect to Harte-Hanks' assertion that Buyer's purported financial dependence upon River City means that Buyer cannot "freely terminate" the time brokerage arrangement without risking default on [that] debt," we disagree. First, there are no terms in either the River City loan agreement, accompanying promissory note, or the Buyer-River City time brokerage agreement which make the River City loan contingent upon the continuation of the brokerage relationship. Second, in its letter of May 31, 1995, Buyer represents that while Bankers Trust "is aware" of Buyer's plans to enter into a time brokerage agreement with River City and has based the station's cash flow projections on the existence of that agreement, "there will be no prohibition in the loan agreement on [Buyer] terminating the LMA." Accordingly, in the event of termination of the agreement with River City, a choice which Buyer can unilaterally make under Section 6.2, Buyer will be free to join forces with another broker or to affiliate the station with a television network, raising revenues directly through affiliation payments and advertising. Any such new source of revenues will enable Buyer to continue making payments to Bankers Trust and to fulfill its loan obligations to River City as its junior lender. Harte-Hanks' second basis for alleging financial control by River City is predicated upon River City's obligation under the Paramount-Buyer purchase agreement to procure approximately $3 million of Paramount/Viacom programming. According to Harte-Hanks, this obligation is evidence of additional financing provided by River City to effect the assignment before us. The amount owed to Paramount by River City, totalling approximately $3 million, will allegedly be routed to Paramount in the form of programming agreements, the execution of which, Harte-Hanks argues, appears to be a material condition to consummation of the sale to Buyer under the Asset Purchase Agreement. In response, Buyer maintains that River City's obligations are not an investment in KRRT(TV). Rather, according to Buyer, the contracts represent River City's separate investment in Paramount programming and in River City's own television stations: the May 5, 1994, programming agreements, Buyer states, provide that River City will purchase from Paramount programming to be aired on four River City stations in four different markets. We observe that the Paramount-River City option agreement disallowed assignability of River City's rights under the Paramount programming agreements. See Insert D of November 24, 1994 Paramount-River City Option Agreement. As we noted above, Buyer agreed to assume River City's position vis-a-vis the option to purchase the Paramount television station. That River City's obligation to execute programming agreements is a condition to the Paramount-Buyer closing does not demonstrate that River City will control or influence Buyer's operation of KRRT(TV). Nor does it indicate that River City is financing a portion of the KRRT(TV) purchase price, so long as the $3 million in programming agreements to be paid by River City to Paramount is separate and apart from the $30 million consideration owed by Buyer to Paramount under the Asset Purchase Agreement. In sum, we find that River City's provision of a loan and payment of brokerage fees will not diminish Buyer's control over KRRT(TV). Deferral of applications pending outcome of rule making proceeding Post-Newsweek urges that we defer action on the Paramount-Buyer application pending the rule making proceeding relating to the use of local marketing agreements. Deferral, according to Post- Newsweek, will avoid prejudging "the proper resolution of the issues" before parties have had an opportunity to file comments in the docket and setting a result that might be "at odds" with the rules ultimately adopted by the Commission. To act on this adjudicatory proceeding prior to resolution of the rule making proceeding, Post-Newsweek concludes, is to risk "making potentially inconsistent decisions within a relatively brief span of time." Our elicitation of comment on the utilization of local marketing agreements does not constrain us from acting on applications where the proposed buyer seeks to delegate its programming operations to a time broker. Further delay would neither serve the public interest nor, as Post- Newsweek asserts, "permit a more efficient resolution of the issues." Our action here, however, should not be viewed as a harbinger of any ultimate resolution of the pending rule making. As the Supreme Court has stated in a similar procedural context, a petitioner has no vested right in the "suppositious eventualities" that the Commission might at some indeterminate time modify its rules. FCC v. WJR, The Goodwill Station, Inc., 337 U.S. 265, 272 (1949). Accordingly, for equitable reasons, we shall not defer action on the application before us. We shall, however, condition grant of the application here upon resolution of the Commission's related pending rule making proceeding, one reviewing the Commission's attribution rules. Review of the Commission's Rules Governing Attribution of Broadcast Interests (Attribution Review), 10 FCC Rcd 3606 (1995). CONCLUSION In conclusion, we find that neither Harte-Hanks nor Post-Newsweek has raised a substantial and material question of fact that River City is the real-party-in-interest in Buyer. Further, Post- Newsweek has not raised any justification for delaying action on the application before us. We find Buyer to be a qualified licensee and the assignment of license of KRRT(TV) from Paramount to Buyer to be in the public interest. Accordingly, IT IS ORDERED that the informal objections filed by Harte-Hanks and Post- Newsweek ARE DENIED. IT IS FURTHER ORDERED that the application for assignment of license for KRRT(TV), Kerrville, Texas, from Paramount to KRRT, Inc., BALCT-940810KE, IS GRANTED. Grant of this application is without prejudice to any future action the Commission may consider appropriate in light of the outcome of any action or change in rules or policies that the Commission may adopt in Review of the Commission's Regulations Governing Attribution ofBroadcast Interests, 10 FCC Rcd 3606 (1995). Sincerely, Barbara A. Kreisman Chief, Video Services Division Mass Media Bureau cc: Kevin F. Reed, Esquire, counsel for River City Eric Werner, Esquire, counsel for Harte-Hanks Robert Branson, Esquire, counsel for Post-Newsweek