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7 Law Notes Gen. Prac. 1 (1970-1971)

handle is hein.journals/lwntgen7 and id is 1 raw text is: Law Notes, October, 1970 Volume 7, page 1 Unique Provisions in Contracts for the Purchase of Broadcast Stations by ERWIN G. KRASNOW Kirkland, Ellis, Hodson, Chaffetz, Masters, and Rowe Washington D.C. DAVID W. MAHER Kirkland, Ellis, Hodson, Chaffetz, Masters, and Rowe Chicago, Illinois I. Introduction THE SALE OF A RADIO OR television station, and the transfer of its license, involves legal consid- erations that are not present in the transfer of most other business enterprises. In Law Notes for July, 1966, an article appeared on FCC Procedure in Acquiring AM, FM and TV Licenses.' The sec- ond portion of that article outlined procedures in- volved in securing the Federal Communications Commission's approval of a license transfer. Since it is increasingly difficult to find frequency spec- trum space for the construction of new stations, the transfer of existing licenses takes on ever greater importance. This article presents some practical guidelines for drafting contracts involving the transfer of a broadcast station license. II. Requirement of Prior FCC Approval The Communications Act of 1934, as amended, provides that a license of a broadcast station may not be assigned nor may control of a corporation holding a license be transferred, except upon ap- plication to the FCC and a finding that the public interest, convenience and necessity will be served thereby.2 Premature transfers have resulted in the disapproval of assignment and transfer applications and the institution of proceedings for revocation of the station's license. Accordingly, there should be a specific provision in both option and purchase agreements which provides that consummation shall be subject to the prior written approval of the FCC. Sample Clause: (a) Notwithstanding anything herein to the con- trary, the terms and conditions of this Agreement are subject to the prior consent and approval of the Com- mission. Upon the execution of this Agreement, Buyer and Seller shall proceed as expeditiously as prac- ticable to file with the Commission all requisite appli- cations and all other necessary instruments, which filing shall occur on or before thirty (30) days from the date hereof. Seller and Buyer thereafter agree to pros- ecute said application or applications with all reason- able diligence and otherwise to use their best efforts to obtain the requisite consent and approval promptly. (b) Between the date of this Agreement and the Closing Date, Seller will continue to operate the Sta- tion in the public interest, convenience and necessity and in addition, will file with the Federal Commu- nications Commission all documents required to be filed in connection with the operation of the Station prior to the Closing Date. III. Control The seller must retain control over the station before the closing date and the buyer after the closing date. Sample Clause: Between the date of this Agreement and the closing date, Buyer shall not directly or indirectly control, supervise or direct, or attempt to control, supervise, or direct, the operation of station, but such operation, including complete control and supervision of all pro- grams and employees, shall be the sole responsibility of Seller. Seller shall, however, permit Buyer and its authorized representatives and agents to have full and free access to the premises, books and records of Sell- er, and Seller will furnish Buyer for inspection such financial and operating data and information as Buyer may request to facilitate the transfer of ownership. Seller will furnish to Buyer, at its request, copies of any or all contracts listed in the schedule attached hereto certified by an officer of Seller to be true and correct copies as of the date of this Agreement. In addition, Buyer shall be entitled to reasonable in- spection of the premises and assets and to notice of any unusual operating problems or developments with the purpose that an uninterrupted and efficient transfer of ownership may be accomplished. It is further under- stood and agreed that, effective on the closing date and thereafter, Seller shall have no control over nor right to intervene or participate in the operation of the sta- tion. IV. Consideration Except in the sale of an unbuilt station,3 or where there is a question of trafficking in licens- es, the FCC will not normally look at the consid- © 1970 American Bar Association General permission to republish but not for profit, all or part of this material is granted, provided that reference is made to this publica- tion, its date of issue, and that reprinting privileges were granted by permission of the American Bar Association Sections of General Practice and Young Lawyers. CONTRACTS

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