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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Amendment No. 3
Under the Securities Exchange Act of 1934*
SILVER KING COMMUNICATIONS, INC.
______________________________________________________________
(Name of Issuer)
Common Stock, par value $.01 per share
______________________________________________________________
(Title of Class of Securities)
827740101
______________________________________________________________
(CUSIP Number)
Stephen M. Brett, Esq. Pamela S. Seymon, Esq.
Senior Vice President and Wachtell, Lipton, Rosen &
General Counsel Katz
Tele-Communications, Inc. 51 West 52nd Street
5619 DTC Parkway New York, New York 10019
Englewood, CO 80111 (212) 403-1000
(303) 267-5500
_______________________________________________________________
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
June 24, 1996
______________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this
statement [ ]. (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting
beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of less than
five percent of such class. See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for
other parties to whom copies are to be sent.
*The remainder of this cover page should be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amend-
ment containing information which would alter disclosures
provided in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
NOTE: THIS STATEMENT CONSTITUTES AMENDMENT NO. 3 OF A
REPORT ON SCHEDULE 13D OF EACH OF BARRY DILLER AND
THE REPORTING GROUP AND AMENDMENT NO. 5 OF A REPORT
ON SCHEDULE 13D OF TELE-COMMUNICATIONS, INC.
Page 1 of 7 pages
CUSIP No. 827740101
_______________________________________________________________
(1) Names of Reporting Persons S.S. or I.R.S.
Identification Nos. of Above Persons
Tele-Communications, Inc.
84-1260157
_______________________________________________________________
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
_______________________________________________________________
(3) SEC Use Only
_______________________________________________________________
(4) Source of Funds
_______________________________________________________________
(5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
_______________________________________________________________
(6) Citizenship or Place of Organization
Delaware
_______________________________________________________________
Number of (7) Sole Voting Power 0 shares
Shares Bene- ___________________________________________
ficially (8) Shared Voting Power 13,915,016 shares
Owned by ___________________________________________
Each Report- (9) Sole Dispositive Power 0 shares
ing Person ___________________________________________
With (10) Shared Dispositive Power 13,915,016 shares
_______________________________________________________________
(11) Aggregate Amount Beneficially Owned by Each Reporting
Person
13,915,016 shares
_______________________________________________________________
(12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares [X]
Excludes options to purchase 625,000 shares of Common
Stock granted to Mr. Diller on November 27, 1995,
which are subject to consummation of the Savoy Merger
and the Exchange, and options to purchase 1,421,885
shares of Common Stock granted on August 24, 1995,
none of which are currently vested or exercisable and
none of which will become exercisable within 60 days.
_______________________________________________________________
(13) Percent of Class Represented by Amount in Row (11)
67%
Because each share of Class B Stock generally is
entitled to ten votes per share while the Common
Stock is entitled to one vote per share, the Report-
ing Persons may be deemed to beneficially own equity
securities of the Company representing approximately
89% of the voting power of the Company.
_______________________________________________________________
(14) Type of Reporting Person (See Instructions)
CO
Page 2 of 7 pages
CUSIP No. 827740101
_______________________________________________________________
(1) Names of Reporting Persons S.S. or I.R.S.
Identification Nos. of Above Persons
Barry Diller
_______________________________________________________________
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
_______________________________________________________________
(3) SEC Use Only
_______________________________________________________________
(4) Source of Funds
_______________________________________________________________
(5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
_______________________________________________________________
(6) Citizenship or Place of Organization
United States
_______________________________________________________________
Number of (7) Sole Voting Power 0 shares
Shares Bene- _____________________________________________
ficially (8) Shared Voting Power 13,915,016 shares
Owned by _____________________________________________
Each Report- (9) Sole Dispositive Power 0 shares
ing Person _____________________________________________
With (10) Shared Dispositive Power 13,915,016 shares
_______________________________________________________________
(11) Aggregate Amount Beneficially Owned by Each Reporting
Person
13,915,016 shares
_______________________________________________________________
(12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares [X]
Excludes options to purchase 625,000 shares of Common
Stock granted to Mr. Diller on November 27, 1995,
which are subject to consummation of the Savoy Merger
and the Exchange, and options to purchase 1,421,885
shares of Common Stock granted on August 24, 1995,
none of which are currently vested or exercisable and
none of which will become exercisable within 60 days.
_______________________________________________________________
(13) Percent of Class Represented by Amount in Row (11)
67%
Because each share of Class B Stock generally is
entitled to ten votes per share while the Common
Stock is entitled to one vote per share, the Report-
ing Persons may be deemed to beneficially own equity
securities of the Company representing approximately
89% of the voting power of the Company.
_______________________________________________________________
(14) Type of Reporting Person (See Instructions)
IN
Page 3 of 7 pages
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3 to
SCHEDULE 13D
Statement Of
TELE-COMMUNICATIONS, INC.
and
BARRY DILLER
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
SILVER KING COMMUNICATIONS, INC.
This Report on Schedule 13D (the "Schedule 13D")
relates to the common stock, par value $.01 per share (the
"Common Stock"), of Silver King Communications, Inc., a
Delaware corporation (the "Company"). The Report on Schedule
13D originally filed by Tele-Communications, Inc., a Delaware
corporation ("TCI"), on August 15, 1994, as amended and
supplemented by the amendments thereto previously filed with
the Commission (collectively, the "TCI Schedule 13D"), is
hereby amended and supplemented to include the information
contained herein, and this Report constitutes Amendment No. 5
to the TCI Schedule 13D. In addition, the Report on Schedule
13D originally filed by each of Mr. Barry Diller (the "Barry
Diller Schedule 13D") and the Reporting Group (the "Reporting
Group Schedule 13D") on August 29, 1995, as amended and
supplemented by the amendments thereto previously filed with
the Commission (collectively, the "Barry Diller Schedule 13D"
and the "Reporting Group Schedule 13D," respectively), is
hereby amended and supplemented to include the information
contained herein, and this Report constitutes Amendment No. 3
to the Barry Diller Schedule 13D and the Reporting Group
Schedule 13D. Barry Diller and TCI (each, a "Reporting
Person") constitute a "group" for purposes of Rule 13d-5 under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with respect to their respective beneficial ownership of
the Common Stock and are collectively referred to as the
"Reporting Group." Capitalized terms not defined herein have
the meanings provided in the prior Reports on Schedule 13D
referred to in this paragraph.
Pursuant to Rule 101(a)(2) of Regulation S-T, which
provides that an amendment to a Schedule 13D relating to a
registrant required to file electronically, including any
amendment to a paper filing, shall be filed electronically and
that the first such amendment shall restate the entire text of
the Schedule 13D, the Original Report and Amendment No. 1 of
the TCI Schedule 13D, as well as the Original Report and
Amendment Nos. 1-2 of the Reporting Group Schedule 13D and the
Barry Diller Schedule 13D (which also constitute, respectively,
Amendment Nos. 2-4 of the TCI Schedule 13D), are attached
hereto in conforming electronic copy format as Attachment Nos.
1-5, respectively, and are hereby incorporated herein by
reference for all purposes. Pursuant to such Rule, exhibits to
the Original Reports and amendments thereto originally filed in
paper format are not being restated electronically.
Page 4 of 7 pages
The summary descriptions contained in this Report of
certain agreements and documents are qualified in their
entirety by reference to the complete texts of such agreements
and documents, filed as Exhibits hereto and incorporated herein
by reference. Information contained herein with respect to
each Reporting Person and its executive officers, directors and
controlling persons is given solely by such Reporting Person,
and no other Reporting Person has responsibility for the
accuracy or completeness of information supplied by such other
Reporting Person.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in Item 5 of the TCI
Schedule 13D, the Barry Diller Schedule 13D and the Reporting
Group Schedule 13D is hereby amended and supplemented by adding
the following information:
The information set forth in Item 6 of this Report is
incorporated herein by reference.
On August 24, 1996, pursuant to the terms of the
Options, Mr. Diller's options with respect to 473,962 shares of
Common Stock granted will become vested and exercisable.
Based on information contained in the Company's
quarterly report on Form 10-Q, dated March 31, 1996 and filed
with the Commission on May 15, 1996, and including the shares
of Class B Stock subject to the Class B Option, the shares of
Common Stock referred to in the previous paragraph and the
shares of Common Stock and Class B Stock that would be issued
upon consummation of the Exchange as outstanding and
beneficially owned by the Reporting Group, TCI and Mr. Diller
collectively beneficially own shares of Common Stock
representing approximately 67% of the outstanding common equity
and 89% of the outstanding voting power with respect to matters
(including the election of directors other than directors
elected by the holders of the Common Stock voting as a separate
class) as to which the holders of Class B Stock and Common
Stock vote together as a single class. Such amounts do not
include shares of Common Stock subject to Options with respect
to 1,421,885 shares of Common Stock and the Additional Options
with respect to 625,000 shares of Common Stock, each of which
is held by Mr. Diller and none of which is currently vested or
currently exercisable or becomes exercisable in the next 60
days.
Mr. Diller has granted to Diane Von Furstenberg an
economic interest in 10% of the after-tax profits upon the sale
for cash of shares of Common Stock acquired by Mr. Diller upon
the exercise of the Options.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIP WITH RESPECT TO THE SECURITIES OF THE
ISSUER
The information set forth in Item 6 of the TCI
Schedule 13D, the Barry Diller Schedule 13D and the Reporting
Group Schedule 13D is hereby amended and supplemented by adding
the following information:
By Memorandum Opinion and Order and Notice of
Apparent Liability, adopted June 6, 1996 and released June 14,
1996 (the "FCC June Order"), the FCC, among other things,
granted in part the Request for Clarification and removed the
Subscriber Condition from its prior grant of approval of
transfer of control of the Silver King television stations from
Roy M. Speer to the Silver Company. In the FCC June Order, the
Page 5 of 7 pages
FCC requires that Silver Company notify the FCC prior to
consummation of any acquisition by Liberty or TCI of cable
systems or other transaction whereby the aggregate percentage
of television households served by cable systems owned or
controlled by TCI in any of the Silver King television markets
would exceed 50%. In the FCC June Order, the FCC also
dissolved the stay of effectiveness of the FCC Order.
The foregoing summary descriptions of certain
provisions of each of the FCC Order, the FCC June Order and the
Request for Clarification are qualified in their entirety by
reference to such documents, which are attached hereto as
Exhibits and incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The information set forth in Item 7 of the TCI
Schedule 13D, the Barry Diller Schedule 13D and the Reporting
Group Schedule 13D is hereby amended and supplemented by adding
the following information:
15. In re Applications of Roy M. Speer and Silver
Management Company, Federal Communications Commission
Memorandum Opinion and Order and Notice of Apparent
Liability, adopted June 6, 1996 and released June 14,
1996.
Page 6 of 7 pages
SIGNATURE
After reasonable inquiry and to the best of his knowledge
and belief, the undersigned certifies that the information in
this statement is true, complete and correct.
Dated: July 3, 1996
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Senior Vice President
and General Counsel
/s/ Barry Diller
Barry Diller
Page 7 of 7 pages
EXHIBIT INDEX
Seq. Pg. No.
1. Written Agreement between TCI and Mr. Diller re-
garding Joint Filing of Schedule 13D.*
2. Definitive Term Sheet regarding Stockholders Agree-
ment, dated as of August 24, 1995, by and between
Liberty Media Corporation and Mr. Diller.*
3. Definitive Term Sheet regarding Equity Compensation
Agreement, dated as of August 24, 1995, by and between
the Company and Mr. Diller.*
4. Press Release issued by the Company and Mr. Diller,
dated August 25, 1995.*
5. Letter Agreement, dated November 13, 1995, by and between
Liberty Media Corporation and Mr. Diller.*
6. Letter Agreement, dated November 16, 1995, by and between
Liberty Media Corporation and Mr. Diller.*
7. First Amendment to Stockholders Agreement, dated as of
November 27, 1995, by and between Liberty Media
Corporation and Mr. Diller.*
8. Agreement and Plan of Merger, dated as of November 27, 1995,
by and among Silver Management Company, Liberty Program
Investments, Inc. and Liberty HSN, Inc.*
9. Exchange Agreement, dated as of November 27, 1995, by
and between Silver Management Company and Silver King
Communications, Inc.*
10. Agreement and Plan of Merger, dated as of November 27,
1995, by and among Silver King Communications, Inc.,
Thames Acquisition Corp. and Savoy Pictures Entertain-
ment, Inc.*
11. Voting Agreement, dated as of November 27, 1995, by
and among Certain Stockholders of the Company and
Savoy Pictures Entertainment, Inc.*
12. Letter Agreement, dated March 22, 1996, by and between
Liberty Media Corporation and Barry Diller.*
* Previously filed.
13. In re Applications of Roy M. Speer and Silver Management
Company, Federal Communications Commission Memorandum
and Order, adopted March 6, 1996 and released March 11,
1996.*
14. In re Applications of Roy M. Speer and Silver Management
Company, Request for Clarification of Silver Management
Company, dated April 10, 1996.*
15. In re Applications of Roy M. Speer and Silver Management
Company, Federal Communications Commission Memorandum
Opinion and Order and Notice of Apparent Liability,
adopted June 6, 1996 and released June 14, 1996.
* Previously filed.
ATTACHMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
Silver King Communications, Inc.
_______________________________________________________________
(Name of Issuer)
Common Stock, par value $.01 per share
_______________________________________________________________
(Title of Class of Securities)
827740101
_______________________________________________________________
(CUSIP Number)
Stephen M. Brett, Esq. Tele-Communications, Inc.
Senior Vice President & 5619 DTC Parkway
General Counsel Englewood, CO 80111
(303) 267-5500
_______________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 4, 1994
_______________________________________________________________
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this
statement [X]. (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting
beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five
percent or less of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for
other parties to whom copies are to be sent.
*The remainder of this cover page should be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amend-
ment containing information which would alter disclosures
provided in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following page(s))
Page 1 of 14 Pages
CUSIP No. 827740101 13D Page 2 of 14 Pages
_______________________________________________________________
1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Tele-Communications, Inc.
84-1260157
_______________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
_______________________________________________________________
3 SEC USE ONLY
_______________________________________________________________
4 SOURCE OF FUNDS*
AF
_______________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
_______________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
_______________________________________________________________
NUMBER OF 7 SOLE VOTING POWER
2,061,630 Shares
SHARES ___________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
0 Shares
OWNED BY ___________________________________________
EACH 9 SOLE DISPOSITIVE POWER
2,061,630 Shares
REPORTING ___________________________________________
PERSON 10 SHARED DISPOSITIVE POWER
0 Shares
WITH
_______________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
2,061,630 Shares
_______________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [X]
See Item 5.
_______________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.3%
_______________________________________________________________
14 TYPE OF REPORTING PERSON*
CO
_______________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Statement of
TELE-COMMUNICATIONS, INC.
(name changed from TCI/Liberty Holding Company)
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
SILVER KING COMMUNICATIONS, INC.
This report on Schedule 13D relates to the Common
Stock, par value $.01 per share (the "Common Stock") of Silver
King Communications, Inc., a Delaware corporation (the
"Company"). On August 4, 1994, Tele-Communications, Inc. ("Old
TCI") and Liberty Media Corporation ("Liberty") consummated a
business combination transaction (the "TCI/Liberty Merger")
whereby each of Liberty and Old TCI became wholly owned
subsidiaries of a newly formed holding company, TCI/Liberty
Holding Company, which was renamed Tele-Communications, Inc.
("TCI" or the "Reporting Person").
This report contains information with respect to the
Company Securities (as defined below) beneficially owned by
Liberty prior to the consummation of the TCI/Liberty Merger,
which Company Securities are currently beneficially owned by
TCI. Prior to the TCI/Liberty Merger, Liberty beneficially
owned greater than five percent of the outstanding Company
Securities and had filed a Report on Schedule 13D with respect
to such beneficial ownership. Such Report on Schedule 13D, as
most recently amended by Amendment No. 2 thereto, dated as of
July 13, 1993 (collectively, the "Liberty Schedule 13D"), is
hereby incorporated by reference into this Report for all
purposes.
ITEM 1. SECURITIES AND ISSUER
The class of equity securities to which this
statement relates is the common stock, par value $.01 per share
(the "Common Stock"), of Silver King Communications, Inc., a
Delaware corporation (the "Company"), which has its principal
executive offices at 12425 - 28th Street North, St. Petersburg,
FL 33716. Pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), this Report also relates to the shares of Common Stock
issuable upon conversion of shares of the Class B Common Stock,
par value .01 per share ("Class B Stock"), of the Company.
Each share of Common Stock is entitled to
Page 3 of 14
one vote per share and, except as provided below, is entitled
to vote as a separate classes with respect to certain
fundamental corporate actions, such as mergers. Each share of
Class B Stock is convertible into one share of Common Stock, is
entitled to ten votes per share on matters presented to
stockholders and votes generally with the holders of Common
Stock as a single class; except that (i) in the event that
there are 2,280,000 or more shares of Class B Stock
outstanding, the holders of Class B Stock would vote as a
separate class with respect to fundamental corporate
transactions, such as mergers, and (ii) in the event that there
are less than 2,280,000 shares of Class B Stock outstanding,
such holders would vote together with the holders of the Common
Stock as a single class on such fundamental corporate
transactions. Notwithstanding the number of shares of Class B
Stock outstanding, holders of the Common Stock are entitled to
vote as a separate class in connection with their right to
elect 25% of the members of the Board of Directors of the
Company. The Common Stock and Class B Stock are hereinafter
sometimes collectively referred to collectively as the "Company
Securities."
The descriptions contained in this Report of certain
agreements and documents are qualified in their entirety by
reference to the complete texts of such agreements and
documents, filed as Exhibits to the Liberty 13D and
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
This Report is being filed by Tele-Communications,
Inc. ("TCI") (Commission File No. 0-20421; IRS Identification
No. 84-126015), a Delaware corporation, formerly known as TCI/
Liberty Holding Company, whose principal business address is
5619 DTC Parkway, Englewood, Colorado 80111. TCI is
principally engaged in the acquisition, development and
operation of cable television systems, assets and interests and
cable television programming assets and interests.
The name, business address and present principal
occupation or employment and the name, address and principal
business of any corporation or other organization in which such
employment is conducted, of (i) each of the executive officers
and directors of TCI, (ii) each person controlling TCI, and
(iii) the executive officers and directors of any corporation
controlling TCI, are set forth in Schedule 1 attached hereto
and incorporated herein by reference.
During the last five years, neither TCI nor, to the
best of its knowledge, any of persons named on Schedule 1 (the
"Schedule 1 Persons") has (i) been convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or
state securities law or finding any violation with respect to
such law. To the best knowledge of TCI, each of its executive
officers and directors is a citizen of the United States.
Page 4 of 14
On August 4, 1994, at Special Meetings of
Stockholders of Old TCI and Liberty, there was approved and
adopted an Agreement and Plan of Merger, dated as of January
27, 1994, as amended, which provided for, among other things,
the business combination of Old TCI and Liberty resulting in
their becoming wholly owned subsidiaries of TCI/Liberty Holding
Company, which was renamed "Tele-Communications, Inc."
(hereinafter sometimes referred to as "New TCI"), effective
upon certain filings which occurred on August 4, 1994.
The description contained herein of the TCI/Liberty
Merger is qualified in its entirety by the more complete
description thereof contained in the Joint Proxy Statement of
Liberty and Old TCI, dated June 23, 1994, and the related
Registration Statement on Form S-4 (No. 33-54263) filed by TCI
(under the name TCI/Liberty Holding Company), which are
incorporated by reference herein for all purposes. Prior to
the TCI/Liberty Merger, Liberty beneficially owned greater than
five percent of the outstanding Company Securities and had
filed the Liberty Schedule 13D (as most recently amended on
July 13, 1993), with respect to such beneficial ownership,
which Report has been incorporated by reference herein for all
purposes.
As a result of the consummation of the TCI/Liberty
Merger, TCI became the beneficial owner of the Company
Securities held by Liberty, although the direct or indirect
legal title to such Company Securities held by Liberty remains
unchanged. TCI is now a publicly held company subject to the
informational requirements of the Securities Exchange Act of
1934 (the "Act") and will, commencing herewith, be a Reporting
Person in respect of the Company Securities beneficially owned
by it. Old TCI and Liberty are now no longer publicly held
Reporting Persons under the Act, but each is now a wholly owned
subsidiary of TCI.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
In addition to the consideration furnished by the
TCI/Liberty Merger disclosed in Item 2, hereof, Liberty
retained its indirect legal title to the Company Securities,
but the beneficial ownership of all of said interest is now in
TCI.
ITEM 4. PURPOSE OF TRANSACTION
The information contained under Items 1 and 2 above
is incorporated by reference in this Item 4.
As more fully described in the Liberty 13D which is
incorporated herein by reference, Liberty and RMS Limited
Partnership, a Nevada limited partnership ("RMS"), entered into
an Agreement in Principle, dated December 4, 1992, as amended
by a letter agreement dated December 22, 1992 (as amended, the
"Agreement"), whereby, among other things, Liberty agreed,
subject to certain conditions, to purchase from RMS 20,000,000
shares of Class B common Stock of Home Shopping Network, Inc.
("HSN"), par value $.01 per share ("HSN Shares") for $1.00 per
share (the "Option").
Page 5 of 14
Upon the exercise of the Option and purchase of the
Class B stock subject to the option (the "Subject Shares"), the
Optionee would effectively control the Company by virtue of the
voting power of the Class B Stock.
The Option Agreement requires RMS (i) to convert into
Common Stock any shares of Class B Stock owned by it which are
not subject to the Option prior to the disposition or pledge of
such shares or any interest therein and (ii) to covert any
remaining shares of Class B Stock held by it prior to the
closing contemplated by the Option Agreement. The conversion
of more than 135,945 of such shares would result in there being
less than 2,280,000 shares of Class B Stock outstanding,
whereupon the holders of the Class B Stock would vote as a
class with the holders of the Common Stock upon all matters
submitted to stockholders, including mergers and similar
fundamental corporate transactions and be entitled to cast ten
votes for each share held. Based upon the present
capitalization of the Company, the voting power of the Subject
Shares (assuming the conversion of the remaining 415,945 shares
of Class B Stock held by RMS into Common Stock) would
constitute 74.6% of the outstanding voting power of the
Company.
It is a condition to the exercise the Option that
Liberty or its assignee have received all necessary FCC and
other approvals prior to the purchase of the Subject Shares.
Depending on the circumstances in effect at the time of
exercise, such approvals may also include the expiration of the
waiting period under the HSR Act. As of the date hereof,
Liberty has not filed any application for the consent of the
FCC to any such transfer or report under the HSR Act with
respect to any such transaction.
Because it is unlikely that TCI will ultimately be
able to acquire the Subject Shares and obtain voting control of
the Company, TCI presently has no plans or proposals with
respect to the Company, other than to attempt to sell or
exchange the right to acquire such controlling interest to a
third party.
Other than as described above, neither TCI nor to the
best of TCI's knowledge, any of the Schedule 1 Persons, has any
present plans or proposals which relate to or would result in:
(a) the acquisition by any person of additional securities of
the Company, or the disposition of securities of the Company;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of
its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Company or of any of its subsidiaries; (d) any
change in the present Board of Directors or management of the
Company, including any plans or proposals to change the number
or terms of directors or to fill any existing vacancies on the
Board of Directors of the Company; (e) any material change in
the present capitalization or dividend policy of the Company;
(f) any other material change in the Company's business or
corporate structure; (g) changes in the Company's charter,
bylaws or instruments corresponding thereto or other actions
which may impede the acquisition of control of the Company by
any person; (h) causing a class of securities of the Company to
be deleted from a national securities exchange or to cease to
be authorized to be quoted in any inter-dealer quotation system
of a registered national securities association; (i) a class of
equity securities of the Company
Page 6 of 14
becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the exchange Act; or (j) any action similar
to any of those enumerated above.
TCI intends to continuously review its investment in
the Company, and subject to any applicable regulatory
constraints, may in the future determine to acquire additional
shares of Common Stock through open market purchases, private
agreements or otherwise, or may determine to dispose of all or
a portion of the Company Securities which it may hold from time
to time. In reaching any conclusion as to the foregoing, TCI
will take into consideration various factors, such as the
Company's business and prospects, other developments concerning
the Company, other business opportunities available to TCI,
developments with respect to TCI's businesses, general economic
conditions and money and stock market conditions, including,
but not limited to, the market price of the Common Stock. The
Reporting Person reserves the right, depending on other
relevant factors, to acquire additional shares of Common Stock
of the Company in open market or privately negotiated
transactions, to dispose of all or a portion of its holdings of
Company Securities or to change its intention with respect to
any or all of the matters referred to in this Item 4.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The information contained under Items 1, 2 and 4
above is incorporated by reference in this Item 5.
(a) Based on information supplied to TCI by the
Company, on May 31, 1994, there were 6,480,394 shares of Common
Stock and 2,415,945 shares of Class B Stock outstanding.
TCI currently beneficially owns an aggregate of
2,061,6301 shares of Common Stock (calculated pursuant to Rule
13d-3), which include 2,000,000 shares of Common Stock issuable
upon exercise of the option and conversion of such shares into
Common Stock. Such shares represent approximately 24.3% of the
outstanding Common Stock and approximately 65.5% of the voting
power of the outstanding equity securities of the Company
(calculated pursuant to Rule 13D-3).
----------------
1 Does not include 2,000 shares of Common Stock owned by
Lenfest Communications, Inc. ("LCI"). TCI holds 50% of the
equity interests in LCI. As a result of such equity ownership,
TCI may be deemed to share beneficial ownership in the Common
Stock beneficially owned by LCI with the other holders of
equity interests in LCI. TCI disclaims beneficial ownership of
the securities of the Company held by LCI. There are no
contracts, agreements or understandings between TCI and LCI
regarding the voting of the shares of Common Stock beneficially
owned by such persons.
Page 7 of 14
To the knowledge of TCI the number of shares of
Common Stock beneficially owned by the Schedule 1 Persons
(beneficial ownership of which shares is disclaimed by TCI) is
set forth below:
No of Shares of Common
Individual Stock Beneficially Owned
---------- ------------------------
Jerome H. Kern 1,000
(b) TCI has the sole power to vote or to direct the
voting of and sole power to dispose of or direct the
disposition of the 61,630 shares of Common Stock which it
beneficially owns.
(c) Except as otherwise reported herein, neither the
Reporting Person nor, to its knowledge, any of the Schedule 1
Persons has executed transactions in the Company Securities
during the past sixty (60) days.
(d) There is no person that has the right to receive
or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the Company Securities beneficially
owned by the Reporting Person, except its wholly owned
subsidiaries, Old TCI and LMC, and then only for the benefit of
the Reporting Person.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES
OF THE ISSUER
There are presently no contracts, arrangements,
understandings or relationships among the Reporting Person and
other persons with respect to the Company Securities pursuant
to which legal title to additional shares may be issued to
subsidiaries of Old TCI or Liberty, and then only for the
benefit of the Reporting Person, except as disclosed in Exhibit
C and D hereto, described in Item 7 below.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
A. Registration Statement on Form S-4, filed by
TCI/Liberty Holding Company on June 23, 1994,
and thereafter amended and ordered effective
June 28, 1994, under Commission File No. 33-
54263, which is hereby incorporated by this
reference.
B. Press Release dated August 4, 1994.
The following exhibits are hereby incorporated by
reference to the Liberty Schedule 13D:
Page 8 of 14
C. Amendment Agreement, dated February 11, 1993,
between Liberty, LPI and RMS filed as Exhibit 4
to Amendment No. 1 to Liberty Schedule 13D on
February 17, 1993.
D. Option Agreement, dated February 11, 1993,
between Liberty and RMS, filed as Exhibit 5 to
Amendment No. 1 to Liberty Schedule 13D on
February 17, 1993.
Page 9 of 14
SIGNATURE
After reasonable inquiry and to the best of his
knowledge and belief, the undersigned certifies that the
information in this statement is true, complete and correct.
Dated:
TELE-COMMUNICATIONS, INC.
By: /s/ Peter R. Barton
Name: Peter R. Barton
Title: Executive Vice
President
Page 10 of 14 pages
SCHEDULE 1
Directors, Executive Officers and Controlling Persons
of
Tele-Communications, Inc. ("TCI")
[name changed from TCI/Liberty Holding Company]
Principal Business
or Organization
Principal Occupation in Which Such
and Employment Is
Name Business Address Conducted
Bob Magness Chairman of the Board Acquisition, development
and Director of TCI and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
John C. Malone President and Chief Executive Acquisition, development
Officer and Director of TCI and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
Deane F. Fisher Executive Vice President, Acquisition, development
Treasurer, and Director and operation cable
of TCI television systems and
5619 DTC Parkway cable television
Englewood, CO 80111 programming
John W. Gallivan Director of TCI; Newspaper publishing
Chairman of the Board
Kearns-Tribune Corporation
400 Tribune Building
Salt Lake City, UT 84111
Anthony Lee Coelho Director of TCI; Investment Services
President and CEO of
Wertheim Schroder Investment
Services, Inc.
787 7th Avenue, 5th Floor
New York, NY 10019
Kim Magness Director of TCI; Ranching and horse
Manages family business breeding
interests, principally in
ranching and breeding
Arabian horses;
1470 South Quebec Way #148
Denver, CO 80231
Page 11 of 14 pages
Principal Business
or Organization
Principal Occupation in Which Such
and Employment Is
Name Business Address Conducted
Robert A. Naify Director of TCI; Motion Picture
President and C.E.O. of Industry
Todd-AO Corporation;
172 Golden Gate Avenue
San Francisco, CA 94102
Jerome H. Kern Director of TCI; Senior Law
Partner in Baker & Botts,
L.L.P.
885 Third Avenue, Suite 1900
New York, NY 10022
Cary K. Bracken Senior Vice President & Acquisition, development
Controller of TCI and operation of cable
Communications, Inc. television systems and
5619 DTC Parkway cable television
Englewood, CO 80111 programming
Stephen M. Brett Executive Vice President, Acquisition, development
Secretary and General and operation of cable
Counsel of TCI television systems and
5619 DTC Parkway cable television
Englewood, CO 80111 programming
Brendan R. Executive Vice President Acquisition, development
Clouston of TCI and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
Barry Marshall Chief Operating Officer of Acquisition, development
TCI Cable Management and operation of cable
Corporation television systems and
5619 DTC Parkway cable television
Englewood, CO 80111 programming
Larry E. Romrell Executive Vice President Acquisition, development
of TCI and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
Bernard W. Senior Vice President & Acquisition, development
Schotters, II Treasurer of TCI and operation of cable
Communications, Inc. television systems and
5619 DTC Parkway cable television
Englewood, CO 80111 programming
J.C. Sparkman Executive Vice President Acquisition, development
of TCI and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
Page 12 of 14 pages
Principal Business
or Organization
Principal Occupation in Which Such
and Employment Is
Name Business Address Conducted
Robert N. Senior Vice President, Acquisition, development
Thomson Government Affairs, of and operation of cable
TCI Communications, Inc. television systems and
5619 DTC Parkway cable television
Englewood, CO 80111 programming
R. E. Turner Director of TCI: Cable industry
Chairman of the Board and
President of Turner
Broadcasting System, Inc.
since 1970
One CNN Center, 14th Fl North
Atlanta, GA 30303
Fred A. Vierra Executive Vice President Acquisition, development
of TCI and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
Peter R. Barton Executive Vice President Acquisition, development
of TCI and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
Page 13 of 14 pages
ATTACHMENT NO. 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(AMENDMENT NO. 1)*
Silver King Communicatins, Inc.
_____________________________________________________________________
(Name of Issuer)
Common Stock, par value $.01 per share
_____________________________________________________________________
(Title of Class of Securities)
827740101
_____________________________________________________________________
(CUSIP Number)
Stephen M. Brett, Esq. Tele-Communications, Inc.
Executive Vice President 5619 DTC Parkway
and General Counsel Englewood, CO 80111
(303) 267-5500
_____________________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 23, 1994
__________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D,
and is filing this schedule because of Rule 13d-1(b)(3) or (4), check
the following box [ ].
Check the following box if a fee is being paid with this statement
[ ]. (A fee is not required only if the reporting person: (1) has a
previous statement on file reporting beneficial ownership of more
than five percent of the class of securities described in Item 1; and
(2) has filed no amendment subsequent thereto reporting beneficial
ownership of less than five percent of such class.) (See Rule
13d-7.)
Note: Six copies of this statement, including all exhibits, should
be filed with the Commission. See Rule 13d-1(a) for other parties to
whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject
class of securities, and for any subsequent amendment containing
information which would alter disclosures provided in a prior cover
page.
The information required on the remainder of this cover page shall
not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act but shall be subject to all
other provisions of the Act (however, see the Notes).
(Continued on following page(s))
Page 1 of 7 Pages
CUSIP No. 827740101 13D Page 2 of 7 Pages
_____________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Tele-Communications, Inc.
84-1260157
_____________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
_____________________________________________________________________
3 SEC USE ONLY
_____________________________________________________________________
4 SOURCE OF FUNDS*
AF
_____________________________________________________________________
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
_____________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
_____________________________________________________________________
NUMBER OF 7 SOLE VOTING POWER
2,061,630 Shares
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
0 Shares
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
2,061,630 Shares
REPORTING
PERSON 10 SHARED DISPOSITIVE POWER
0 Shares
WITH
_____________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,061,630 Shares
_____________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [X]
See Item 5
_____________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.3%
_____________________________________________________________________
14 TYPE OF REPORTING PERSON*
CO
_____________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 827740101
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
to
SCHEDULE 13D
filed by
TELE-COMMUNICATIONS, INC.
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
SILVER KING COMMUNICATIONS, INC.
This Amendment No. 1 to the Schedule 13D heretofore
filed on August 15, 1994 by the Reporting Person in respect of
the Common Stock, par value $.01 per share (the "Common Stock")
of Silver King Communications, Inc., a Delaware corporation
(the "Company"), is hereby amended as follows (terms not other-
wise defined herein have the meanings assigned thereto in the
Schedule 13D):
ITEM 4. PURPOSE OF TRANSACTION
The second paragraph of Item 4 is hereby amended to
read as follows (amendments are underscored):
As more fully described in the Liberty Schedule 13D
which is incorporated herein by reference,, Liberty and RMS
Limited Partnership, a Nevada limited partnership ("RMS"),
entered into an Agreement in Principle, dated December 4, 1992,
as amended by a letter agreement dated December 11, 1991 (as
amended, the "Agreement"), whereby, among other things, Liberty
agreed, subject to certain conditions, to purchase from RMS
2,000,000 shares of Class B Common Stock of Home Shopping
Network, Inc. ("HSN"), which last-named entity at that time
owned all of the issued and outstanding capital stock of the
Company. On December 28, 1992, HSN issued a
Page 3 of 7
CUSIP No. 827740101
dividend to its stockholders consisting of all the shares of
the capital stock of the Company, which theretofore had been a
wholly owned subsidiary of HSN. As a result of this stock
dividend, RMS became the owner of an aggregate of 2,415,945
shares of the Class B Common Stock of the Company. On February
11, 1993, in connection with the closing under the Agreement,
Liberty and RMS entered into an Option Agreement, dated
February 11, 1993, whereby Liberty received an option to pur-
chase 2,000,000 shares of the Class B Common Stock of the
Company (the "Option"). On September 23, 1994, Liberty and RMS
entered into an Amendment to Option Agreement which extended
the exercise period of the Option to February 11, 1999,
increases the exercise price incrementally each year and other-
wise amends the Option Agreement to relax certain restrictions
on RMS. The foregoing is qualified in its entirety by refer-
ence to Exhibit E, attached hereto and made a part hereof.
The sixth paragraph of Item 4 is hereby amended to
read as follows (amendments are underscored):
Because it is unlikely that TCI will ultimately be
able to acquire the Subject Shares and obtain voting control of
the Company, TCI presently has no plans or proposals with
respect to the Company, other than to attempt to sell or
exchange the right to acquire such controlling interest to a
third party. The applicable rules of the Federal Communica-
tions Commission permit certain types of noncontrolling direct
and indirect ownership interests in the Company to be held by
TCI.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE
ISSUER
This Item is amended so as to substitute the clause
"except as disclosed in Exhibits C, D and E hereto," in the
next to the last line thereof, in the place and stead of the
existing such clause.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Item 7 is hereby amended to add as Exhibit E hereto
the attached Amendment, dated as of September 23, 1994, to the
Option Agreement heretofore filed as Exhibit D to this Item 7.
Page 4 of 7
CUSIP No. 827740101
SIGNATURE
After reasonable inquiry and to the best of his
knowledge and belief, the undersigned certifies that the infor-
mation in this Statement is true, complete and correct.
DATE: October 3, 1994
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Executive Vice President
and General Counsel
Page 5 of 7
ATTACHMENT NO. 3
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934*
SILVER KING COMMUNICATIONS, INC.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
827740101
(CUSIP Number)
Stephen M. Brett, Esq. Pamela S. Seymon, Esq.
Senior Vice President and Wachtell, Lipton, Rosen &
General Counsel Katz
Tele-Communications, Inc. 51 West 52nd Street
5619 DTC Parkway New York, New York 10019
Englewood, CO 80111 (212) 403-1000
(303) 267-5500
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
August 24, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this
statement [X]. (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting
beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of less than
five percent of such class. See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for
other parties to whom copies are to be sent.
*The remainder of this cover page should be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amend-
ment containing information which would alter disclosures
provided in a prior cover page.
Page 1 of 20 pages
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
NOTE: THIS STATEMENT CONSTITUTES AN ORIGINAL REPORT ON
SCHEDULE 13D OF EACH OF BARRY DILLER AND THE
REPORTING GROUP (AS DEFINED IN ITEM 2) AND AMENDMENT
NO. 2 OF A REPORT ON SCHEDULE 13D OF TELE-
COMMUNICATIONS, INC.
Page 2 of 20 pages
CUSIP No. 827740101
_______________________________________________________________
(1) Names of Reporting Persons S.S. or I.R.S.
Identification Nos. of Above Persons
Tele-Communications, Inc.
84-1260157
_______________________________________________________________
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
_______________________________________________________________
(3) SEC Use Only
_______________________________________________________________
(4) Source of Funds
_______________________________________________________________
(5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
_______________________________________________________________
(6) Citizenship or Place of Organization
Delaware
_______________________________________________________________
Number of (7) Sole Voting Power 0 shares
Shares
Bene- ____________________________________________
ficially (8) Shared Voting Power 2,503,618 shares
Owned by ____________________________________________
Each (9) Sole Dispositive Power 0 shares
Report- ____________________________________________
ing Per- (10) Shared Dispositive Power 2,503,618 shares
son With
_______________________________________________________________
(11) Aggregate Amount Beneficially Owned by Each Reporting
Person
2,503,618 shares
_______________________________________________________________
(12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares [X]
Excludes shares beneficially owned by the executive
officers and directors of TCI. See Item 5. Excludes
options to purchase an aggregate of 1,895,847 shares
of Common Stock granted to Mr. Diller, none of which
are currently vested or exercisable and none of which
become exercisable within 60 days. The shares of
Common Stock issuable upon exercise of such options
represent approximately 23% of the outstanding Common
Stock as of June 26, 1995, treating the shares
subject to such options as outstanding.
________________________________________________________________
Page 3 of 20 pages
(13) Percent of Class Represented by Amount in Row (11)
28.0%
Because each share of Class B Stock generally is
entitled to ten votes per share while the Common
Stock is entitled to one vote per share, the Report-
ing Persons may be deemed to beneficially own equity
securities of the Company representing approximately
75% of the voting power of the Company.
_______________________________________________________________
(14) Type of Reporting Person (See Instructions)
CO
Page 4 of 20 pages
CUSIP No. 827740101
_______________________________________________________________
(1) Names of Reporting Persons S.S. or I.R.S.
Identification Nos. of Above Persons
Barry Diller
_______________________________________________________________
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
_______________________________________________________________
(3) SEC Use Only
_______________________________________________________________
(4) Source of Funds
PF
_______________________________________________________________
(5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
_______________________________________________________________
(6) Citizenship or Place of Organization
United States
_______________________________________________________________
Number of (7) Sole Voting Power 0 shares
Shares
Bene- ____________________________________________
ficially (8) Shared Voting Power 2,503,618 shares
Owned by ____________________________________________
Each (9) Sole Dispositive Power 0 shares
Report- ____________________________________________
ing Per- (10) Shared Dispositive Power 2,503,618 shares
son With
_______________________________________________________________
(11) Aggregate Amount Beneficially Owned by Each Reporting
Person
2,503,618 shares
_______________________________________________________________
(12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares [X]
Excludes shares beneficially owned by the executive
officers and directors of TCI. See Item 5. Excludes
options to purchase an aggregate of 1,895,847 shares
of Common Stock granted to Mr. Diller, none of which
are currently vested or exercisable and none of which
become exercisable within 60 days. The shares of
Common Stock issuable upon exercise of such options
represent approximately 23% of the outstanding Common
Stock as of June 26, 1995, treating the shares
subject to such options as outstanding.
_______________________________________________________________
Page 5 of 20 pages
(13) Percent of Class Represented by Amount in Row (11)
28.0%
Because each share of Class B Stock generally is
entitled to ten votes per share while the Common
Stock is entitled to one vote per share, the Report-
ing Persons may be deemed to beneficially own equity
securities of the Company representing approximately
75% of the voting power of the Company.
______________________________________________________________
(14) Type of Reporting Person (See Instructions)
IN
Page 6 of 20 pages
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Statement Of
TELE-COMMUNICATIONS, INC.
and
BARRY DILLER
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
SILVER KING COMMUNICATIONS, INC.
This Report on Schedule 13D (the "Schedule 13D") relates to
the common stock, par value $.01 per share (the "Common Stock"), of
Silver King Communications, Inc., a Delaware corporation (the
"Company"). The Report on Schedule 13D originally filed by Tele-
Communications, Inc., a Delaware corporation ("TCI"), on August 15,
1994, as amended by Amendment No. 1 thereto (collectively, the "TCI
Schedule 13D"), is hereby amended and supplemented to include the
information contained herein, and this Report constitutes Amendment No.
2 to the TCI Schedule 13D. In addition, this Report also constitutes
the initial Report on Schedule 13D of TCI and Mr. Barry Diller, with
respect to the Common Stock. Such persons constitute a "group" for
purposes of Rule 13d-5 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to their respective
beneficial ownership of the Common Stock.
The summary descriptions contained in this Report of certain
agreements and documents are qualified in their entirety by reference
to the complete texts of such agreements and documents, filed as
Exhibits hereto and incorporated herein by reference.
ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this statement
relates is the Common Stock of the Company, which has its principal
executive offices at 12425 28th Street North, St. Petersburg, Florida
33716. The business of the Company is the ownership and operation of
television broadcast stations. Pursuant to Rule 13d-3 promulgated
under the Exchange Act, this Report also relates to the shares of
Common Stock issuable upon (i) conversion of the 2,000,000 shares of
the Company's Class B Common Stock, par value $.01 per share ("Class B
Stock") which TCI has the right to acquire from RMS Limited Partnership
("RMS") upon the exercise of the Class B Option (as defined below)
granted to Liberty Media Corporation ("Liberty"), a wholly owned
subsidiary of TCI, by RMS and (ii) the exercise of certain options to
purchase up to 1,895,847 shares of the Common Stock of the Company at
an exercise price of $22.625 that the Company has granted to Mr. Diller
(the "Options"). Each share of Common Stock is entitled to one vote
per share. Each share of Class B Stock is (a) convertible into one
share of Common Stock, (b) is generally entitled to ten votes per share
and (c) votes together with the Common Stock as a class, except that
(i) the holders of the Common Stock are entitled to elect 25% of the
members of the Board of Directors of the Company voting as a separate
class and (ii) so long as there are at least 2,280,000 shares of Class
B Stock outstanding, the holders of the Class B Stock
Page 7 of 20 pages
are entitled to vote as a separate class with respect to certain
fundamental corporate transactions involving the Company, such as a
merger, reorganization, recapitalization, dissolution, or sale of
substantially all of its assets. According to the Company's quarterly
report on Form 10-Q, dated June 30, 1995 and filed with the Securities
and Exchange Commission (the "June 30 Company 10-Q"), as of June 26,
1995, there were 2,415,945 shares of Class B Stock outstanding. The
Reporting Persons have been advised that all such shares are held by
RMS. In connection with the exercise of the Class B Option, Liberty is
entitled to require RMS to convert the remaining shares of Class B
Stock owned by it at the time of exercise of the Class B Option into a
like number of shares of Common Stock, which conversion would result in
their being fewer than 2,280,000 shares of Class B Stock outstanding
and in which event the Reporting Persons believe that the holders of
the Class B Stock will no longer be entitled to a separate class vote
with respect to such fundamental corporate transactions and will
generally vote together as a class with the holders of the Common Stock
with respect to all matters presented to the stockholders of the
Company, with each share of Common Stock entitled to one vote per share
and each share of Class B Stock entitled to ten votes per share.
Accordingly, because the Reporting Persons would own shares of Common
Stock and Class B Stock representing approximately 75% of the voting
power of the outstanding equity securities of the Company following the
exercise of the Class B Option and the conversion of the remaining
415,945 shares of Class B Stock held by RMS not subject to the Class B
Option into shares of Common Stock, the Reporting Persons believe that
they would be able to effectively control the outcome of the vote on
substantially all matters presented to the stockholders of the Company.
ITEM 2. IDENTITY AND BACKGROUND
This Report is being filed by TCI and Mr. Diller. The
business address of TCI is 5619 DTC Parkway, Englewood, Colorado 80111.
TCI is principally engaged in the acquisition, development and
operation of cable systems, assets and interests and cable television
programming assets and interests. Mr. Diller's present principal
occupation is Chairman of the Board of Directors and Chief Executive
Officer of the Company, and his principal address is 1940 Coldwater
Canyon, Beverly Hills, CA 90210. Mr. Diller is a citizen of the United
States. All references to Mr. Diller include all entities beneficially
owned by him.
The name, business address and present principal occupation
or employment and the name, address and principal business of any
corporation or other organization in which such employment is
conducted, of (i) each of the executive officers and directors of TCI,
(ii) each person controlling TCI, and (iii) the executive officers of
any corporation controlling TCI, are set forth in Schedule 1 attached
hereto and incorporated herein by reference.
During the last five years, neither TCI nor Mr. Diller nor,
to the best of TCI's knowledge, any of the persons named on Schedule 1,
has (i) been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to a civil
proceeding or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities law or finding any
violation with respect to such law. To the best knowledge of TCI, each
of its executive officers and directors is a citizen of the United
States, except as specifically set forth in Schedule 1 hereto.
TCI and Mr. Diller are hereinafter sometimes referred to
individually as a "Reporting Person" and are sometimes referred to
collectively as the "Reporting Persons" or the "Reporting Group."
Page 8 of 20 pages
Liberty and Mr. Diller entered into an agreement, dated as of
August 24, 1995, with respect to their ownership of equity securities
of the Company (the "Stockholders Agreement", a copy of which is
attached as an Exhibit hereto and incorporated by reference herein).
The Stockholders Agreement sets forth certain of the Reporting Persons'
agreements with respect to, among other things, dispositions,
acquisitions and voting of the equity securities of the Company (the
"Company Securities") beneficially owned by such Reporting Persons. As
a result of the Stockholders Agreement, each Reporting Person may be
deemed to share with each other Reporting Person beneficial ownership
of all Company Securities held by the Reporting Persons and to
constitute a "group" within the meaning of Rule 13d-5 promulgated under
the Exchange Act with respect to the Common Stock. It is contemplated
that the Reporting Persons will enter into further definitive
documentation regarding the terms of the Stockholders Agreement. Each
Reporting Person disclaims beneficial ownership of the Company
Securities held by the other Reporting Person.
Information contained herein with respect to each Reporting
Person and its executive officers, directors and controlling persons,
is given solely by such Reporting Person, and no other Reporting Person
has responsibility for the accuracy or completeness of information
supplied by such other Reporting Person.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The information contained in Item 3 of the TCI Schedule 13D
is hereby incorporated by reference herein.
As set forth below, as of August 24, 1995, Mr. Diller
acquired beneficial ownership of an aggregate of 220,994 shares of
Common Stock at a purchase price of $22.625 per share in cash or
$4,999,989.25 in the aggregate (the "Initial Shares). The funds
utilized by Mr. Diller in purchasing the Initial Shares are personal
funds.
As set forth below, as of August 24, 1995, Mr. Diller has
also acquired beneficial ownership of an aggregate of 220,994
additional shares of Common Stock at a purchase price of $22.625 per
share or $4,999,989.25 in the aggregate (the "Additional Shares"). Of
such aggregate purchase price, $2,210 is payable in cash and the
remainder is payable by means of the delivery to the Company of the
Note (as defined below). See Item 6.
ITEM 4. PURPOSE OF TRANSACTION
On February 11, 1993, Liberty, which was then an independent
publicly traded company and is now a wholly owned subsidiary of TCI,
acquired from RMS a transferable option (the "Class B Option") to
purchase 2,000,000 shares of Class B Stock. As previously reported in
the TCI Schedule 13D, the Class B Option was amended in September 1994
to, among other things, extend the exercise period and provide for
certain staged increases of the exercise price of the Class B Option.
The current exercise price of the Class B Option is $1.50 per share,
and such exercise price will increase to $1.75 on February 12, 1996.
The Company's primary business is the ownership and operation
of television broadcast stations. The Communications Act of 1934, as
amended (the "Act"), and the related rules and regulations of the
Federal Communications Commission (the "FCC Rules") currently prohibit
any person or entity (i) holding a 5% or greater voting stock interest
in, or (ii) serving as an officer or director or (iii) entitled to
representation on the board of directors of, a cable television system,
from holding any such interest in a
Page 9 of 20 pages
television broadcast station whose Grade B contour overlaps in whole or
in part the service area of such cable system. TCI's ownership of
substantial cable television system assets makes it unlikely that
Liberty or TCI would be able to obtain the necessary consents or
waivers under the FCC Rules (as currently in effect) in order to
exercise the Class B Option and, by virtue of the special voting rights
attributable to the Class B Stock receivable upon exercise of the Class
B Option, assume voting control of the Company. Thus, as previously
disclosed, Liberty and TCI have, from time to time, considered
assigning the Class B Option to a third party who would be qualified to
assume voting control of the Company.
In August 1995 Mr. Diller and representatives of TCI began
informal discussions regarding the possibility of entering into a joint
venture controlled by Mr. Diller in order to permit the exercise of the
Class B Option and the assumption by Mr. Diller of voting control of
the Company. Pursuant to the terms of the Class B Option, upon
exercise of the Class B Option, RMS will be required to convert all
shares of Class B Stock owned by it which are not subject to the Class
B Option into Common Stock. As a result, pursuant to the Company's
Restated Certificate of Incorporation, because there would be less than
2,280,000 shares of Class B Stock outstanding, the Reporting Persons
believe that the holders of the Class B Stock would vote with the
holders of the Common Stock on substantially all matters presented to
stockholders of the Company and would be entitled to cast ten votes per
share upon matters considered for approval at any meeting of
stockholders. See Item 1.
On August 24, 1995 Mr. Diller and representatives of TCI met
to discuss a proposal (the "Proposal") pursuant to which, among other
things, Mr. Diller would make an equity investment in the Company and
be granted certain options to acquire Common Stock and, in connection
therewith, Mr. Diller would agree to become Chairman of the Board and
Chief Executive Officer of the Company. See Item 6. Subsequently, at
a special meeting of the Board of Directors of the Company on August
24, 1995, representatives of TCI outlined the Proposal to the Board and
Mr. Diller discussed with the Board his views regarding the future
direction of the Company's business. In addition, representatives of
TCI also outlined certain proposed arrangements between Mr. Diller and
TCI pursuant to the Stockholders Agreement, which arrangements are
further described in Item 1 and Item 6 of this Report. After review of
the Proposal and such arrangements, the Board of Directors informed the
Reporting Persons that it had approved the Proposal (including the
purchase of the Initial Shares and the Additional Shares and the grant
of the Options to Mr. Diller) and the arrangements between Mr. Diller
and TCI (including for purposes of Section 203 of the Delaware General
Corporation Law), and that Mr. Diller had been appointed Chairman of
the Board and Chief Executive Officer the Company.
Pursuant to the Stockholders Agreement, Mr. Diller will be
entitled to exercise voting control over all equity securities of the
Company beneficially owned or to be beneficially owned by TCI and him,
including the shares of Class B Stock which will be acquired pursuant
to the exercise of the Class B Option. Mr. Diller and the Company
intend to file promptly the necessary applications with the FCC for the
transfer of control of the Company to an entity in which he will
exercise voting control; and upon receipt of such approval and such
other regulatory approvals as may be required (including, if
applicable, pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended), Mr. Diller intends to cause the exercise of
the Class B Option and to acquire voting control of the Company.
Following the exercise of the Class B Option, subject to applicable law
(including the FCC Rules), Mr. Diller intends to seek majority
representation on the Board of Directors of the Company. See Item 6.
Except as otherwise disclosed in this Schedule 13D, the
Reporting Persons have not made any decision concerning their course of
action with respect to the Company.
Page 10 of 20 pages
The Reporting Persons could decide, depending on market and other
factors, to dispose of shares of the Company Securities beneficially
owned by each of them, to acquire additional Company Securities, or to
take any other available course of action. In this regard, the
Reporting Persons intend to continuously review their investment in the
Company and may in the future determine to change their present plans
and proposals relating to the Company, including determining to abandon
or delay their plans to acquire control of the Company. In reaching
any conclusion as to their future course of action, the Reporting
Persons will take into consideration various factors, including without
limitation the Company's business and financial condition and
prospects, other developments concerning the Company, the effect of the
Act and the FCC regulations and policies of the Federal Communications
Commission (the "FCC") applicable to the Company and the Reporting
Persons, other business opportunities available to the Reporting
Persons, developments with respect to the business of the Reporting
Persons, developments in the television industry generally, general
economic conditions and money and stock market conditions.
Other than as described herein, none of Mr. Diller, TCI, or
to the best of TCI's knowledge, any of its executive officers,
directors or controlling persons, have any present plans or proposals
which relate to or would result in: (a) the acquisition by any person
of additional securities of the Company, or the disposition of
securities of the Company; (b) an extraordinary corporate transaction,
such as a merger, reorganization or liquidation, involving the Company
or any of its subsidiaries; (c) a sale or transfer of a material
amount of assets of the Company or of any of its subsidiaries; (d) any
change in the present Board of Directors or management of the Company,
including any plans or proposals to change the number or terms of
directors or to fill any existing vacancies on the Board of Directors
of the Company; (e) any material change in the present capitalization
or dividend policy of the Company; (f) any other material change in the
Company's business or corporate structure; (g) changes in the Company's
charter, by-laws or instruments corresponding thereto or other actions
which may impede the acquisition of control of the Company by any
person; (h) causing a class of securities of the Company to be deleted
from a national securities exchange or to cease to be authorized to be
quoted in any inter-dealer quotation system of a registered national
securities association; (i) a class of equity securities of the Company
becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Exchange Act; or (j) any action similar to any of those
enumerated above.
Notwithstanding anything contained herein, the Reporting
Persons reserve the right, depending on other relevant factors, to
purchase additional securities of the Company, dispose of all or a
portion of their holdings of securities in the Company, or change their
intention with respect to any and all of the matters referred to in the
preceding paragraph.
The summary description contained herein is qualified in its
entirety by reference to the Exhibits attached hereto, which are hereby
incorporated by reference herein.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The information contained in Item 5 of the TCI Schedule 13D
and in Item 3 above is hereby incorporated by reference herein.
TCI currently holds 61,630 shares of Common Stock and holds
the Class B Option, which is currently exercisable, to acquire
2,000,000 shares of Class B Stock from RMS at a current exercise price
of $1.50 per share, which shares, based upon information contained in
the June 30 Company 10-Q, represent approximately 24% of the
outstanding
Page 11 of 20 pages
Common Stock. TCI's ability to exercise the Class B Option is subject
to, among other things, the receipt of required governmental approvals,
including under the FCC Rules to the change in control of the Company
that would be deemed to occur under applicable FCC rules as a result of
TCI's exercise of the Class B Option. The exercise of the Class B
Option, as well as the voting, disposition and other transfer of the
shares of Class B Stock underlying the Class B Option, are subject to
the terms of the Stockholders Agreement.
As described in Item 6 below, Mr. Diller has acquired
beneficial ownership of the 220,994 Initial Shares and the 220,994
Additional Shares, representing an aggregate of 441,988 shares of
Common Stock. Based on information contained in the June 30 Company 10-
Q and including the shares of Common Stock beneficially owned by Mr.
Diller as outstanding, such shares represent approximately 6% of the
outstanding Common Stock. Such amount does not include the options to
purchase an additional 1,895,847 shares of Common Stock, none of which
is currently vested and none of which is currently exercisable or
becomes exercisable in the next 60 days. Based on information contained
in the June 30 Company 10-Q and including the shares of Common Stock
subject to the Options as well as the shares of Common Stock
beneficially owned by Mr. Diller as outstanding, the shares of Common
Stock subject to the Options, together with the Initial Shares and the
Additional Shares, represent approximately 26% of the outstanding
Common Stock.
Based on information contained in the June 30 Company 10-Q
and including the shares of Class B Stock subject to the Class B Option
as outstanding shares of Common Stock as well as the shares of Common
Stock beneficially owned by Mr. Diller, TCI and Mr Diller collectively
beneficially own shares of Common Stock representing approximately 28%
of the outstanding Common Stock. Assuming that Mr. Diller and Liberty
elect to require the holder of the remaining 415,945 shares of Class B
Stock not subject to the Class B Option to convert such shares into
Common Stock in connection with the exercise of the Class B Option, the
Company Securities beneficially owned by the Reporting Persons would
constitute approximately 75% of the voting power of the outstanding
equity securities of the Company. Such amounts do not include the
Options, none of which is currently vested and none of which is
currently exercisable or becomes exercisable in the next 60 days.
The summary description contained herein is qualified in its
entirety by the Exhibits attached hereto, which are hereby incorporated
by reference herein.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIP WITH
RESPECT TO THE SECURITIES OF THE ISSUER
The information set forth in Item 2 and Item 4 above is
hereby incorporated by reference herein.
Pursuant to the Stockholders Agreement, Liberty and Mr.
Diller will form an entity (the "Silver Company"), to which Liberty
will contribute the Class B Option as well as an amount in cash equal
to the aggregate exercise price thereof, and Mr. Diller will contribute
an amount in cash to be agreed upon. Mr. Diller will initially hold a
common equity interest in the Silver Company constituting all of the
voting stock of the Silver Company, and Liberty will hold a convertible
non-voting preferred participating equity interest. Mr. Diller will
control the Company Securities held by the Silver Company, except that,
subject to applicable law, the approval of both Liberty and Mr. Diller
will be required in connection with certain Fundamental Matters
relating to the Company (as set forth in the Stockholders Agreement).
Liberty and Mr. Diller have agreed to use all reasonable efforts
Page 12 of 20 pages
to seek and obtain approval under FCC rules and regulations for the
exercise of the Class B Option.
At such time as Liberty may be permitted to exercise full
ownership and control over the Company Securities owned by it (a
"Change in Law"), including its pro rata share of Company Securities
held by the Silver Company, Liberty's equity interest in the Silver
Company will be converted into voting common equity of the Silver
Company having the same pro rata rights, powers and preferences as Mr.
Diller's interest in the Silver Company, and Liberty or its designees
will purchase Mr. Diller's equity interest in the Silver Company for an
amount equal to the amount invested by Mr. Diller in the Silver Company
plus interest thereon at the prime rate in effect from time to time
from the date of such investment to the date of such purchase.
The Stockholders Agreement also provides that Mr. Diller is
entitled to exercise voting authority and authority to act by written
consent over all Company Securities owned by any of the Reporting
Persons and certain of their affiliates on all matters submitted to a
vote of the Company's stockholders or by which the Company's
stockholders may act by written consent. In connection therewith,
Liberty will provide Mr. Diller with a conditional proxy, which proxy
shall be valid for the full term of the Stockholders Agreement and will
be irrevocable. The Reporting Persons have agreed to take, and to
cause certain of their affiliates to take, all reasonable actions
required, subject to applicable law, to prevent the taking of any
action by the Company with respect to a Fundamental Matter without the
consent of each of Mr. Diller and Liberty and, following a Change in
Law, to elect a slate of directors of the Company, two of whom will be
designated by Liberty and the remainder of whom will be designated by
Mr. Diller. Subject to applicable law and fiduciary duties, Liberty
will use its reasonable best efforts to cause its designees on the
Board of Directors of the Company to vote in the manner instructed by
Mr. Diller with respect to any matter presented to the Board of
Directors, except with respect to Fundamental Matters and certain
matters relating to Mr. Diller's employment with the Company.
In addition, pursuant to the Stockholders Agreement, Mr.
Diller may exchange shares of Common Stock owned by him and certain of
his affiliates for shares of Class B Stock owned by Liberty or held by
the Silver Company, provided that, after such exchange, Liberty will
not cease to own Company Securities (including its pro rata portion of
any Company Securities held by the Silver Company) constituting at
least 50% of the total voting power of the Company. The Stockholders
Agreement also contains provisions applicable to Mr. Diller and Liberty
relating to rights of first refusal on permitted sales of Company
Securities and, under certain limited circumstances, the right of Mr.
Diller to require Liberty to purchase his Company Securities.
The foregoing summary description of certain provisions of
the Stockholders Agreement is qualified in its entirety by reference to
the definitive term sheet of the Stockholders Agreement, attached
hereto as an Exhibit and incorporated herein by reference.
The Company and Mr. Diller entered into a definitive term
sheet, dated as of August 24, 1995 (the "Equity Compensation
Agreement"), regarding Mr. Diller's purchase of shares of Common Stock
from the Company and the granting to Mr. Diller of certain options to
purchase Common Stock of the Company, as well as Mr. Diller's agreement
to become the Chairman of the Board of Directors and Chief Executive
Officer of the Company. The definitive term sheet regarding such
agreement is set forth as an Exhibit hereto and is hereby incorporated
herein by reference. It is contemplated that the Company
Page 13 of 20 pages
and Mr. Diller will enter into further definitive documentation
regarding the terms of the Equity Compensation Agreement.
On August 24, 1995, pursuant to the Equity Compensation
Agreement, Mr. Diller acquired beneficial ownership of the 220,994
Initial Shares at a purchase price of $22.625 per share, for an
aggregate purchase price of $4,999,989.25 million.
Immediately following Mr. Diller's acquisition of beneficial
ownership of the Initial Shares but prior to Mr. Diller becoming
Chairman of the Board and Chief Executive Officer of the Company, Mr.
Diller (i) acquired beneficial ownership of 220,994 Additional Shares
at a purchase price of $22.625 per share payable by delivery of the
Note (as defined below) plus the sum of $2,210 payable in cash and (ii)
was granted the Options to purchase an aggregate of up to an additional
1,895,847 shares of Common Stock at an exercise price of $22.625 per
share. The non-cash purchase price for the Additional Shares is in the
form of a non-interest bearing promissory note of Mr. Diller (the
"Note") in the principal amount of $4,997,779.25. The Note is non-
recourse but will be secured by the Additional Shares and will be
initially oversecured by a portion of the Initial Shares purchased by
Diller having a fair market value on the purchase date of 20% of the
principal amount of the Note (the "Excess Shares"). The Note may be
prepaid in whole or in part at any time without penalty; upon payment
of the first $2,498,889.63 the security interest on 50% of the Addi-
tional Shares and on all of the Excess Shares will be released. All
amounts outstanding under the Note will mature on the earlier to occur
of (i) the termination of Mr. Diller's employment (x) by the Company
for Cause (as defined in the Equity Compensation Agreement) (which
shall be the only basis for the Company's termination of Mr. Diller's
employment) or (y) prior to the Control Date (as defined in the Equity
Compensation Agreement), by Mr. Diller without Good Reason (as defined
in the Equity Compensation Agreement) and (ii) August 24, 1997. In
addition, Mr. Diller has been granted a bonus arrangement,
contractually independent from the Note, under which he will be paid
(i) on August 24, 1996, a bonus of $2,498,989.63, and (ii) on August
24, 1997, a bonus of $2,498,989.62, except that both bonuses will be
paid immediately (to the extent not previously paid) upon a Change in
Control (as defined in the Equity Compensation Agreement) of the
Company or the termination of Mr. Diller's employment with the Company
for any reason other than (a) by the Company for Cause or (b) by Mr.
Diller prior to the Control Date without Good Reason. There is no
right to offset the note payments against the bonuses, either on the
part of Mr. Diller or on the part of the Company.
The Options vest in four equal annual installments commencing
on the first anniversary of the date of grant, and the Options are
exercisable until the tenth anniversary of the date of grant (subject
to earlier termination in the circumstances described below). The
number of shares included in the Initial Shares, the Additional Shares
and the shares subject to purchase under the Options are equal to 20%
of the outstanding common equity securities of the Company, on a fully
diluted basis, on the date of issuance of the Options. The Options
have been granted in tandem with the grant of an equivalent number of
comparable stock appreciation rights vesting according to the same
schedule as the Options, which SARs shall become exercisable only in
the event of the occurrence of a Change in Control of the Company (the
"Conditional SARs"). All unvested Options (as well as the Conditional
SARs) become vested and exercisable upon the occurrence of a Change in
Control of the Company. The number and type of shares subject to the
Options (as well as the Conditional SARs) and/or the applicable
exercise price are subject to appropriate adjustment in the event of a
stock split, stock dividend, reclassification or similar event
occurring after the date of issuance.
Page 14 of 20 pages
The Equity Compensation Agreement provides that, to the
extent that Mr. Diller becomes obligated to pay any taxes under Section
4999 of the Internal Revenue Code (or any successor or similar
provision) in connection with such a Change in Control of the Company,
the Company shall make a "gross-up" payment to Mr. Diller in respect of
any such tax payment.
The Options (as well as the Conditional SARs) are non-
transferable and may not be sold, assigned, transferred or pledged
without the consent of the Board of Directors of the Company. The
Options (as well as the Conditional SARs) will terminate immediately
upon termination of Mr. Diller's employment by the Company for Cause or
90 days following a termination of employment by Mr. Diller without
Good Reason.
Mr. Diller will be entitled to customary rights for the
registration under the Securities Act of 1933 of the Common Stock.
Following the execution of the equity arrangements discussed
above, Mr. Diller became the Chairman of the Board and Chief Executive
Officer of the Company. The Equity Compensation Agreement provides
that if Mr. Diller subsequently so requests, the Board of Directors
will appoint Mr. Diller as Chairman of the Board and/or Chief Executive
Officer and/or President.
The Equity Compensation Agreement provides that Mr. Diller
will receive an amount in cash (up to $1 million) to cover any taxes
payable by Mr. Diller, on an after-tax basis, by virtue of the purchase
of Initial Shares and Additional Shares at the per share purchase
price. Mr. Diller initially will forgo the receipt of any salary in
respect of his services. The Company will pay or reimburse Mr. Diller
for his out-of-pocket expenses related to his employment with the
Company on a basis consistent with Mr. Diller's historic reimbursement.
Subject to any required approvals of the Board of Directors, Mr. Diller
will also be entitled to participate in any incentive compensation plan
maintained by the Company for its management and/or key employees. In
addition, the Company has agreed to indemnify (and advance expenses to)
Diller in connection with (i) his serving as Chairman of the Board and/
or Chief Executive Officer and/or President of the Company and (ii) his
and his affiliates entering into the arrangements contemplated by the
Equity Compensation Agreement to the fullest extent permitted by law.
If Mr. Diller's employment is terminated by the Company for any reason
other than for Cause before August 24, 1996, Mr. Diller will receive a
severance payment equal to two times the amount, if any, by which
$4,999,989.25 exceeds the fair market value of the Additional Shares;
provided, that such severance payment shall, in no event, exceed $2
million in the aggregate. The Company will also reimburse Diller and
his affiliates for the fees and expenses of their counsel in connection
with the negotiation of the Equity Compensation Agreement and the
definitive agreements contemplated by the Equity Compensation
Agreement.
The foregoing summary description of certain provisions of
the Equity Compensation Agreement is qualified in its entirety by
reference to the definitive term sheet of the Equity Compensation
Agreement, which is attached hereto as an Exhibit and incorporated
herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Written Agreement between TCI and Mr. Diller regarding Joint
Filing of Schedule 13D.
Page 15 of 20 pages
2. Definitive Term Sheet regarding Stockholders Agreement, dated
as of August 24, 1995, by and between Liberty Media Corporation and Mr.
Diller.
3. Definitive Term Sheet regarding Equity Compensation
Agreement, dated as of August 24, 1995, by and between the Company and
Mr. Diller.
4. Press Release issued by the Company and Mr. Diller, dated
August 25, 1995.
Page 16 of 20 pages
SIGNATURE
After reasonable inquiry and to the best of his knowledge and
belief, the undersigned certifies that the information in this
statement is true, complete and correct.
Dated: August 28, 1995
TELE-COMMUNICATIONS, INC.
By: /s/Peter R. Barton
Name:
Title:
/s/Barry Diller
Barry Diller
Page 17 of 20 pages
Directors and Executive Officers
of
Tele-Communications, Inc. ("TCI")
Principal Business
or Organization in
Principal Occupation and Which Such Employment
Name Business Address Is Conducted
Bob Magness Chairman of the Board and Acquisition, development
Director of TCI and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
John C. Malone President and Chief Executive Acquisition, development
Officer and Director of TCI and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
Donne F. Fisher Executive Vice President, Acquisition, development
Treasurer, and Director of TCI and operation cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
John W. Gallivan Director of TCI; Newspaper publishing
Chairman of the Board
Kearns-Tribune Corporation
400 Tribune Building
Salt Lake City, UT 84111
Anthony Lee Director of TCI; Investment Services
Coelho President and CEO of
Wertheim Schroder Investment
Services, Inc.
787 7th Avenue, 5th Floor
New York, NY 10019
Kim Magness Director of TCI; Ranching and horse
Manages family business breeding
interests, principally in
ranching and breeding Arabian
horses;
1470 South Quebec Way #148
Denver, CO 80231
Robert A. Naify Director of TCI; Motion Picture
President and C.E.O. of Industry
Todd-AO Corporation;
172 Golden Gate Avenue
San Francisco, CA 94102
Page 18 of 20 pages
Jerome H. Kern Director of TCI; Senior Law
Partner in Baker & Botts, L.L.P.,
885 Third Avenue, Suite 1900
New York, NY 10022
Gary K. Bracken Senior Vice President & Acquisition, development
Controller of TCI Communications, and operation of cable
Inc. television systems and
5619 DTC Parkway cable television
Englewood, CO 80111 programming
Stephen M. Brett Executive Vice President, Acquisition, development
Secretary and General Counsel and operation of cable
of TCI television systems and
5619 DTC Parkway cable television
Englewood, CO 80111 programming
Brendan R. Executive Vice President of TCI Acquisition, development
Clouston 5619 DTC Parkway and operation of cable
Englewood, CO 80111 television systems and
cable television
programming
Barry Marshall Chief Operating Officer of Acquisition, development
TCI Cable Management Corporation and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
Larry E. Romrell Executive Vice President of TCI Acquisition, development
5619 DTC Parkway and operation of cable
Englewood, CO 80111 television systems and
cable television
programming
Bernard W. Senior Vice President & Treasurer Acquisition, development
Schotters, II of TCI Communications, Inc. and operation of cable
5619 DTC Parkway television systems and
Englewood, CO 80111 cable television
programming
J.C. Sparkman Executive Vice President of TCI Acquisition, development
5619 DTC Parkway and operation of cable
Englewood, CO 80111 television systems and
cable television
programming
Robert N. ThomsonSenior Vice President, Government Acquisition, development
Affairs, of TCI Communications, and operation of cable
Inc. television systems and
5619 DTC Parkway cable television
Englewood, CO 80111 programming
R. E. Turner Director of TCI; Cable Industry
Chairman of the Board and
President of Turner Broadcasting
System, Inc. since 1970
One CNN Center, 14th Fl North
Atlanta, GA 30303*
* Mr. Turner has subsequently resigned from the TCI Board.
Page 19 of 20 pages
Fred A. Vierra Executive Vice President of TCI Acquisition, development
5619 DTC Parkway and operation of cable
Englewood, CO 80111 television systems and
cable television
programming
Peter R. Barton Executive Vice President of TCI Acquisition, development
5619 DTC Parkway and operation of cable
Englewood, CO 80111 television systems and
cable television
programming
Page 20 of 20 pages
ATTACHMENT NO. 4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934*
SILVER KING COMMUNICATIONS, INC.
_____________________________________________________________________
(Name of Issuer)
Common Stock, par value $.01 per share
_____________________________________________________________________
(Title of Class of Securities)
827740101
_____________________________________________________________________
(CUSIP Number)
Stephen M. Brett, Esq. Pamela S. Seymon, Esq.
Senior Vice President and Wachtell, Lipton, Rosen
General Counsel & Katz
Tele-Communications, Inc. 51 West 52nd Street
5619 DTC Parkway New York, New York 10019
Englewood, CO 80111 (212) 403-1000
(303) 267-5500
_____________________________________________________________________
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
November 27, 1995
_____________________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement
[]. (A fee is not required only if the reporting person: (1) has
a previous statement on file reporting beneficial ownership of
more than five percent of the class of securities described in
Item 1; and (2) has filed no amendment subsequent thereto
reporting beneficial ownership of less than five percent of such
class. See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page should be filled out for a
reporting person's initial filing on this form with respect to the
subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in a
prior cover page.
The information required on the remainder of this cover page shall
not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to
the liabilities of that section of the Act but shall be subject to
all other provisions of the Act (however, see the Notes).
NOTE: THIS STATEMENT CONSTITUTES AMENDMENT NO. 1 OF A REPORT
ON SCHEDULE 13D OF EACH OF BARRY DILLER AND THE
REPORTING GROUP AND AMENDMENT NO. 3 OF A REPORT ON
SCHEDULE 13D OF TELE-COMMUNICATIONS, INC.
Page 1 of 11
CUSIP No. 827740101
_______________________________________________________________
(1) Names of Reporting Persons S.S. or I.R.S.
Identification Nos. of Above Persons
Tele-Communications, Inc.
84-1260157
_______________________________________________________________
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
_______________________________________________________________
(3) SEC Use Only
_______________________________________________________________
(4) Source of Funds
OO
_______________________________________________________________
(5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
_______________________________________________________________
(6) Citizenship or Place of Organization
Delaware
_______________________________________________________________
Number of (7) Sole Voting Power 0 shares
Shares Bene- ___________________________________________
ficially (8) Shared Voting Power 13,441,054 shares
Owned by ___________________________________________
Each Report- (9) Sole Dispositive Power 0 shares
ing Person ___________________________________________
With (10) Shared Dispositive Power 13,441,054 shares
_______________________________________________________________
(11) Aggregate Amount Beneficially Owned by Each Reporting
Person
13,441,054 shares
_______________________________________________________________
(12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares [X]
Excludes options to purchase 625,000 shares of Common
Stock granted to Mr. Diller on November 27, 1995,
which are subject to consummation of the transac-
tions, and options to purchase 1,895,847 shares of
Common Stock granted on August 24, 1995, none of
which are currently vested or exercisable and none of
which will become exercisable within 60 days. See
Item 6.
_______________________________________________________________
(13) Percent of Class Represented by Amount in Row (11)
66%
Because each share of Class B Stock generally is
entitled to ten votes per share while the Common
Stock is entitled to one vote per share, the Report-
ing Persons may be deemed to beneficially own equity
securities of the Company representing approximately
89% of the voting power of the Company.
_______________________________________________________________
(14) Type of Reporting Person (See Instructions)
CO
Page 2 of 11
CUSIP No. 827740101
_______________________________________________________________
(1) Names of Reporting Persons S.S. or I.R.S.
Identification Nos. of Above Persons
Barry Diller
_______________________________________________________________
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
_______________________________________________________________
(3) SEC Use Only
_______________________________________________________________
(4) Source of Funds
_______________________________________________________________
(5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e)
[ ]
_______________________________________________________________
(6) Citizenship or Place of Organization
United States
_______________________________________________________________
Number of (7) Sole Voting Power 0 shares
Shares Bene- ___________________________________________
ficially (8) Shared Voting Power 13,441,054 shares
Owned by ___________________________________________
Each Report- (9) Sole Dispositive Power 0 shares
ing Person ___________________________________________
With (10) Shared Dispositive Power 13,441,054 shares
_______________________________________________________________
(11) Aggregate Amount Beneficially Owned by Each Reporting
Person
13,441,054 shares
________________________________________________________________
(12) Check if the Aggregate Amount in Row (11) Excludes
Certain Shares [X]
Excludes options to purchase 625,000 shares of Common
Stock granted to Mr. Diller on November 27, 1995,
which are subject to consummation of the
transactions, and options to purchase 1,895,847
shares of Common Stock granted on August 24, 2995,
none of which are currently vested or exercisable and
none of which will become exercisable within 60 days.
See Item 6.
________________________________________________________________
(13) Percent of Class Represented by Amount in Row (11)
66%
Because each share of Class B Stock generally is
entitled to ten votes per share while the Common
Stock is entitled to one vote per share, the Report-
ing Persons may be deemed to beneficially own equity
securities of the Company representing approximately
89% of the voting power of the Company.
________________________________________________________________
(14) Type of Reporting Person (See Instructions)
IN
Page 3 of 11
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment to
SCHEDULE 13D
Statement Of
TELE-COMMUNICATIONS, INC.
and
BARRY DILLER
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
SILVER KING COMMUNICATIONS, INC.
This Report on Schedule 13D (the "Schedule 13D")
relates to the common stock, par value $.01 per share (the
"Common Stock"), of Silver King Communications, Inc., a
Delaware corporation (the "Company"). The Report on Schedule
13D originally filed by Tele-Communications, Inc., a Delaware
corporation ("TCI"), on August 15, 1994, as amended by
Amendment No. 1 and Amendment No. 2 thereto (collectively, the
"TCI Schedule 13D"), is hereby amended and supplemented to
include the information contained herein, and this Report
constitutes Amendment No. 3 to the TCI Schedule 13D. In addi-
tion, the Report on Schedule 13D originally filed by each of
Mr. Barry Diller (the "Barry Diller Schedule 13D") and the
Reporting Group (the "Reporting Group Schedule 13D") on August
29, 1995 is hereby amended and supplemented to include the
information contained herein, and this Report constitutes
Amendment No. 1 to the Barry Diller Schedule 13D and the
Reporting Group Schedule 13D. Barry Diller and TCI (each, a
"Reporting Person") constitute a "group" for purposes of Rule
13d-5 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), with respect to their respective
beneficial ownership of the Common Stock and are collectively
referred to as the "Reporting Group." Capitalized terms not
defined herein have the meanings provided in the prior Reports
on Schedule 13D referred to in this paragraph.
The summary descriptions contained in this Report of
certain agreements and documents are qualified in their
entirety by reference to the complete texts of such agreements
and documents, filed as Exhibits hereto and incorporated herein
by reference. Information contained herein with respect to
each Reporting Person and its executive officers, directors and
controlling persons is given solely by such Reporting Person,
and no other Reporting Person has responsibility for the
accuracy or completeness of information supplied by such other
Reporting Person.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The information set forth in Item 3 of the TCI
Schedule 13D, the Barry Diller Schedule 13D and the Reporting
Group Schedule 13D is hereby amended and supplemented by adding
the following information:
Page 4 of 11
The consideration to be paid by the Silver Company to
the Company in the Exchange (as defined below) is 17,566,702
shares of common stock (the "HSN Common Stock"), par value $.01
per share, of Home Shopping Network, Inc. ("HSN") for 4,855,436
shares of Common Stock and 20,000,000 shares of Class B common
stock, par value $.01 per share, of HSN (the "HSN Class B
Stock"), for 6,082,000 shares of Class B Stock, all of which
HSN securities (the "TCI HSN Shares") will be acquired by the
Silver Company immediately prior to the Exchange (as defined in
Item 4 below) in the merger (the "Liberty/Silver Merger") of
Liberty HSN, Inc., an indirect wholly-owned subsidiary of TCI,
with and into the Silver Company. The shares to be issued by
the Company in the Exchange ares sometimes referred to herein
as the "Company Exchange Securities". See Item 6.
ITEM 4. PURPOSE OF TRANSACTION
The information set forth in Item 4 of the TCI
Schedule 13D, the Barry Diller Schedule 13D and the Reporting
Group Schedule 13D is hereby amended and supplemented by adding
the following information:
Commencing in August 1995 and from time to time
thereafter, Mr. Diller and representatives of TCI have dis-
cussed the possible acquisition by the Company of TCI's equity
interest in HSN, as well as the possible appointment of Mr.
Diller as the Chairman of the Board of HSN. On November 27,
1995, HSN announced that Mr. Diller had been appointed its
Chairman of the Board and that Mr. Diller and certain members
of his proposed management team had been granted options to
purchase shares of HSN Common Stock. In addition, at separate
meetings of the Boards of Directors of HSN and the Company held
on November 27, 1995, the HSN Board of Directors and the Board
of Directors of the Company approved the acquisition by the
Company of the TCI HSN Shares in a two step transaction. In
the first step, the Silver Company (the entity controlled by
Barry Diller in which Liberty owns a substantial equity stake,
in each case, pursuant to the Stockholders Agreement) would
acquire TCI's interest in HSN pursuant to an Agreement and Plan
of Merger, dated as of November 27, 1995, by and among the
Silver Company, Liberty Program Investments, Inc. and Liberty
HSN, Inc. (the "Liberty HSN Merger Agreement"). In the second
step, the TCI HSN Shares acquired by the Silver Company in the
Liberty/Silver Merger would be exchanged for the Company
Exchange Securities (the "Exchange") pursuant to an Exchange
Agreement, dated as of November 27, 1995, by and between the
Company and the Silver Company (the "Exchange Agreement").
Each of the Liberty HSN Merger Agreement and the Exchange
Agreement is filed as an Exhibit hereto and is incorporated
herein by reference.
In connection with the acquisition of the TCI HSN
Shares, the Company and Liberty requested the Board of
Directors of HSN to consider the proposed transaction and to
approve the acquisition of beneficial ownership of the TCI HSN
Shares by the Company, the Silver Company, Mr. Diller and
Liberty for purposes of Section 203 of the Delaware General
Corporation Law. The Reporting Persons were advised by HSN,
prior to there being any agreement, arrangement or
understanding relating to the acquisition of the TCI HSN
Shares, that the HSN Board of Directors, upon the
recommendation of a special committee of the independent
directors, had approved such transaction.
Separately, on November 27, 1995, the Board of
Directors of the Company approved a merger (the "Savoy Merger")
of a subsidiary of the Company with and into Savoy Pictures
Entertainment, Inc. ("Savoy"), pursuant to an Agreement and
Plan of Merger, dated as of November 27, 1995, by and among the
Company, a wholly-owned
Page 5 of 11
subsidiary of the Company and Savoy, as a result of which Savoy
would become a wholly-owned subsidiary of the Company (the
"Savoy Merger Agreement"). In connection with the Savoy Merger
Agreement, Liberty, Mr. Diller, Arrow Holdings, LLC and the
Silver Company entered into a voting agreement, dated as of No-
vember 27, 1995 (the "Silver Savoy Voting Agreement"), pursuant
to which they agreed, among other things, to vote in favor of
certain matters to be submitted to Company stockholders in
connection with the Savoy Merger and related transactions.
Each of the Savoy Merger Agreement and the Silver Savoy Voting
Agreement is filed as an Exhibit hereto and is incorporated
herein by reference.
In connection with the Savoy Merger and the Exchange,
the Board of Directors has approved, and will submit to
stockholders of the Company for approval at a special meeting
of Company stockholders, among other matters, certain
amendments to the Company's Amended and Restated Certificate of
Incorporation (the "Company Charter") to increase the number of
authorized shares of Common Stock and Class B Stock and to
eliminate the provisions of the Company Charter providing that
the holders of the Common Stock and Class B Stock will each
vote as separate classes in connection with certain matters
specified in the Company Charter at any time that there are at
least 2,280,000 shares of Class B Stock outstanding.
In connection with the foregoing transactions,
Liberty and Mr. Diller entered into an amendment, dated as of
November 27, 1995 (the "First Amendment"), to the Stockholders
Agreement, filed as an Exhibit hereto and incorporated herein
by reference. All of the Company Exchange Securities will
become subject to the terms of the Stockholders Agreement, as
amended by the First Amendment. In addition, Liberty and Mr.
Diller have entered into certain letter agreements regarding
certain regulatory matters in connection with the formation of
the Silver Company, which letter agreements are filed as
Exhibits hereto and incorporated herein by reference.
See also Item 6 for a description of certain
provisions of the First Amendment, the Exchange Agreement and
the Liberty HSN Merger Agreement relating to the matters
identified in paragraphs (a) through (j) of Item 4 of this
Schedule.
The foregoing summary descriptions are qualified in
their entirety by reference to the Exhibits attached hereto,
which are hereby incorporated by reference herein.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The information set forth in Item 5 of the TCI
Schedule 13D, the Barry Diller Schedule 13D and the Reporting
Group Schedule 13D is hereby amended and supplemented by adding
the following information:
Upon consummation of the Liberty/Silver Merger and
the Exchange, the Silver Company will own an additional
4,855,436 shares of Common Stock and 6,082,000 shares of Class
B Stock, which shares, together with the 503,618 shares of
Common Stock and 2,000,000 shares of Class B Stock beneficially
owned by Liberty, Mr. Diller and the Silver Company (as
previously disclosed in the Schedule 13D), represent ap-
proximately 66% of the outstanding Common Stock and Class B
Stock, based upon information contained in the Company's annual
report on Form 10-K, dated November 22, 1995 and filed with the
SEC (the "1995 10-K") and treating as outstanding the shares of
Company stock to be issued in the Exchange (but not the
approximately 6,000,000 shares of Common Stock to be issued in
the Savoy Merger).
Page 6 of 11
Based on information contained in the 1995 10-K,
including the shares of Company stock to be issued in the
Exchange as outstanding and assuming that the Common Stock and
Class B Stock vote together as a single class, TCI, Mr. Diller
and the Silver Company collectively beneficially own shares of
Common Stock and Class B Stock representing approximately 89%
of the voting power of the equity securities of the Company.
In the event that the holders of the Common Stock and Class B
Stock vote separately, TCI, Mr. Diller and the Silver Company
collectively would beneficially own shares of Common Stock
representing approximately 45% of the voting power of the
outstanding Common Stock. As previously disclosed in the
Reporting Group Schedule 13D, upon exercise of the Class B
Option, Liberty is entitled to require the holder of the
remaining outstanding shares of Class B Stock to convert such
shares into a like number of shares of Common Stock.
The foregoing amounts do not include the Options or
the additional options to acquire up to 625,000 shares of
Common Stock (the "Additional Options") at an exercise price of
$30.75 per share granted to Mr. Diller on November 27, 1995,
which Additional Options are subject to consummation of the
Exchange and the Savoy Merger as well as approval by the
Company's stockholders. None of the Options or Additional
Options is currently vested or currently exercisable or becomes
exercisable in the next 60 days.
On August 29, 1995, Peter R. Barton, an Executive
Vice President of TCI and the President of Liberty, purchased
3,000 shares of Common Stock for $32.50 per share in an open
market transaction using personal funds.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIP WITH RESPECT TO THE SECURITIES OF THE
ISSUER
The information set forth in Item 6 of the TCI
Schedule 13D, the Barry Diller Schedule 13D and the Reporting
Group Schedule 13D is hereby amended and supplemented by adding
the following information, as well as the information set forth
in Item 4 above:
Pursuant to the First Amendment, Liberty and Mr.
Diller have agreed, among other things, to take all actions
reasonably necessary, including actions to be taken by Company
stockholders, to approve and consummate the transactions
contemplated by the Liberty HSN Merger Agreement, the Exchange
Agreement and the Savoy Merger Agreement.
Pursuant to the First Amendment, at any time
following consummation of the Exchange that Liberty is no
longer a subsidiary of TCI (and provided that a Change in Law
(as defined in the Stockholders Agreement) has not occurred),
but in no event prior to the earliest to occur of (i) the
termination of the Savoy Merger Agreement, (ii) the eighteen-
month anniversary of the consummation of the Savoy Merger, and
(iii) the consummation of the sale, transfer or other
disposition by the Company of that number of FCC licenses owned
or controlled by it that is required pursuant to FCC rules and
regulations, or in accordance with any conditions specified in
any waiver therefrom, as a result of the Savoy Merger, Liberty
may request by written notice to Mr. Diller and the Company
that Mr. Diller use all reasonable efforts to take and, subject
to any applicable fiduciary duties of Mr. Diller as a director
or officer of the Company, use all reasonable efforts to cause
the Company to undertake any restructuring of the Company's
assets, liabilities and businesses in order that Liberty would
be permitted to exercise its ownership rights (including voting
rights) with respect to the securities of the Company owned by
it (including its pro rata interest in any Company securities
held by the Silver Company) (a "Restructuring Transaction").
In the event that a Restructuring Transaction has not occurred
within 365 days
Page 7 of 11
following delivery of the notice described in the previous
sentence (or, if earlier, such time as Liberty reasonably
determines, after consultation with Mr. Diller, that Mr. Diller
has ceased to use his reasonable efforts to consummate a
Restructuring Transaction), and a Change in Law has not
otherwise occurred by such date, then, notwithstanding the
restrictions in the Stockholders Agreement regarding "Transfers
of Silver Securities," Liberty may sell any and all of its
Company securities (as well as its interest in the Silver
Company), subject only to (x) a right of first refusal by Mr.
Diller (or his designee), (y) Liberty's obligation, at Mr.
Diller's request, to exchange shares of Class B Stock held by
it for shares of Common Stock owned by Mr. Diller and certain
of his affiliates (without regard to the limitation in the
Stockholders Agreement that would permit Liberty to retain
shares of Company stock representing at least 50% of the total
voting power of the Company), and (z) Liberty's further
obligation to convert shares of Class B Stock into Common Stock
prior to such a sale (other than to Mr. Diller and certain of
his affiliates). A third party who acquires Company securities
or Silver Company securities from Liberty pursuant to the
previous sentence will acquire such securities free and clear
of any rights or obligations under the Stockholders Agreement,
other than certain registration rights with respect to Company
securities that are provided for in the Stockholders Agreement.
The First Amendment also sets forth certain
agreements between Liberty and Mr. Diller relating to the
Company's management structure in the event that a Change in
Law occurs.
The First Amendment also contains certain amendments
clarifying the Fundamental Matters.
In the First Amendment, Mr. Diller agrees to use his
reasonable best efforts, if requested by Liberty, to cause one
designee of Liberty to serve on the HSN Board of Directors
following the Liberty/Silver Merger.
Pursuant to the Liberty HSN Merger Agreement, Liberty
HSN will be merged with and into the Silver Company. In the
Liberty/Silver Merger, the TCI HSN Shares will be exchanged for
additional shares of Silver Company non-voting common stock.
Consummation of the merger is conditioned upon satisfaction of
regulatory requirements, as well as other conditions set forth
in the Liberty HSN Merger Agreement. In the Liberty HSN Merger
Agreement, the Silver Company has agreed not to amend or other-
wise alter or waive any of its rights or obligations under the
Exchange Agreement in any material respect, without the prior
written consent of Liberty HSN's parent.
Pursuant to the Exchange Agreement, the Silver
Company will exchange the TCI HSN Shares received in the
Liberty/Silver Merger for 4,855,436 shares of Common Stock and
6,082,000 shares of Class B Stock. Consummation of the
Exchange is conditioned upon Company stockholder approval of
matters related to the Exchange (including approval of
amendments to the Company Charter to authorize the Company
stock required to consummate the Exchange) and satisfaction of
regulatory requirements, as well as other conditions set forth
in the Exchange Agreement. The Silver Company has agreed not
to amend or otherwise alter or waive any of its rights or
obligations under the Liberty HSN Merger Agreement in any
material respect, without the prior written consent of the Com-
pany.
In connection with the Exchange and the Savoy Merger,
the Company has granted Mr. Diller the Additional Options. The
Additional Options are subject to stockholder approval, as well
as to downward adjustment in the event that either the Exchange
or the Savoy Merger is not consummated. In the event that
neither transaction is consummated, the Additional Options will
be cancelled. The Additional Options vest in four equal
Page 8 of 11
annual installments commencing on the first anniversary of the
date of grant, and the Additional Options are exercisable until
the tenth anniversary (subject to earlier termination in the
circumstances described below). The Additional Options have
been granted in tandem with the grant of an equivalent number
of comparable stock appreciation rights vesting according to
the same schedule as the Additional Options, which SARs shall
become exercisable only in the event of the occurrence of a
Change in Control of the Company (as defined in the Company's
1995 Stock Incentive Plan) (the "Conditional SARs"). All un-
vested Additional Options (as well as the Conditional SARs)
become vested and exercisable upon the occurrence of a Change
in Control of the Company. The number and type of shares
subject to the Additional Options (as well as the Conditional
SARs) and/or the applicable exercise price are subject to
appropriate adjustment in the event of a stock split, stock
dividend, reclassification or similar event occurring after the
date of issuance. The Additional Options (as well as the
Conditional SARs) are nontransferable and may not be sold,
assigned, transferred or pledged without the consent of the
Board of Directors of the Company. The Additional Options (as
well as the Conditional SARs) will terminate immediately upon
termination of Mr. Diller's employment by the Company for Cause
or 90 days following a termination of employment by Mr. Diller
without Good Reason (each as defined in the 1995 Stock
Incentive Plan). Mr. Diller will be entitled to customary
rights for the registration under the Securities Act of 1933
for the Common Stock issued upon exercise of the Additional
Options.
The foregoing summary descriptions of each of the
First Amendment, the Savoy Merger Agreement, the Liberty HSN
Merger Agreement and the Exchange Agreement are qualified in
their entirety by reference to such agreements, which are filed
as Exhibits hereto and are incorporated herein by reference.
Reference is also made to the Silver Savoy Voting
Agreement and the two letter agreements regarding cooperation
in connection with certain regulatory matters between Mr.
Diller and Liberty, each of which is filed as an Exhibit hereto
and incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Written Agreement between TCI and Mr. Diller
regarding Joint Filing of Schedule 13D.*
2. Definitive Term Sheet regarding Stockholders
Agreement, dated as of August 24, 1995, by and
between Liberty Media Corporation and Mr. Diller.*
3. Definitive Term Sheet regarding Equity Compensation
Agreement, dated as of August 24, 1995, by and
between the Company and Mr. Diller.*
4. Press Release issued by the Company and Mr. Diller,
dated August 25, 1995.*
5. Letter Agreement, dated November 13, 1995, by and
between Liberty Media Corporation and Mr. Diller.
* Previously filed.
Page 9 of 11
6. Letter Agreement, dated November 16, 1995, by and
between Liberty Media Corporation and Mr. Diller.
7. First Amendment to Stockholders Agreement, dated as
of November 27, 1995, by and between Liberty Media
Corporation and Mr. Diller.
8. Agreement and Plan of Merger, dated as of November
27, 1995, by and among Silver Management Company,
Liberty Program Investments, Inc. and Liberty HSN,
Inc.
9. Exchange Agreement, dated as of November 27, 1995, by
and between Silver Management Company and Silver King
Communications, Inc.
10. Agreement and Plan of Merger, dated as of November
27, 1995, by and among Silver King Communications,
Inc., Thames Acquisition Corp. and Savoy Pictures
Entertainment, Inc.
11. Voting Agreement, dated as of November 27, 1995, by
and among Certain Stockholders of the Company and
Savoy Pictures Entertainment, Inc.
Page 10 of 11
SIGNATURE
After reasonable inquiry and to the best of his knowledge
and belief, the undersigned certifies that the information in
this statement is true, complete and correct.
Dated: November 30, 1995
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Executive Vice President
and General Counsel
/s/ Barry Diller
Barry Diller
Page 11 of 11
ATTACHMENT NO. 5
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Amendment No. 2
Under the Securities Exchange Act of 1934*
SILVER KING COMMUNICATIONS, INC.
_______________________________________________________________
(Name of Issuer)
Common Stock, par value $.01 per share
_______________________________________________________________
(Title of Class of Securities)
827740101
_______________________________________________________________
(CUSIP Number)
Stephen M. Brett, Esq. Pamela S. Seymon, Esq.
Senior Vice President and Wachtell, Lipton, Rosen &
General Counsel Katz
Tele-Communications, Inc. 51 West 52nd Street
5619 DTC Parkway New York, New York 10019
Englewood, CO 80111 (212) 403-1000
(303) 267-5500
_______________________________________________________________
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 10, 1996
_______________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this
statement [ ]. (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting
beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of less than
five percent of such class. See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for
other parties to whom copies are to be sent.
*The remainder of this cover page should be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amend-
ment containing information which would alter disclosures
provided in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
NOTE: THIS STATEMENT CONSTITUTES AMENDMENT NO. 2 OF A
REPORT ON SCHEDULE 13D OF EACH OF BARRY DILLER AND
THE REPORTING GROUP AND AMENDMENT NO. 4 OF A REPORT
ON SCHEDULE 13D OF TELE-COMMUNICATIONS, INC.
Page 1 of 5 pages
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
SCHEDULE 13D
Statement Of
TELE-COMMUNICATIONS, INC.
and
BARRY DILLER
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
SILVER KING COMMUNICATIONS, INC.
This Report on Schedule 13D (the "Schedule 13D")
relates to the common stock, par value $.01 per share (the
"Common Stock"), of Silver King Communications, Inc., a
Delaware corporation (the "Company"). The Report on Schedule
13D originally filed by Tele-Communications, Inc., a Delaware
corporation ("TCI"), on August 15, 1994, as amended and
supplemented by the amendments thereto previously filed with
the Commission (collectively, the "TCI Schedule 13D"), is
hereby amended and supplemented to include the information
contained herein, and this Report constitutes Amendment No. 4
to the TCI Schedule 13D. In addition, the Report on Schedule
13D originally filed by each of Mr. Barry Diller (the "Barry
Diller Schedule 13D") and the Reporting Group (the "Reporting
Group Schedule 13D") on August 29, 1995, as amended and
supplemented by the amendment thereto previously filed with the
Commission (collectively, the "Barry Diller Schedule 13D" and
the "Reporting Group Schedule 13D," respectively), is hereby
amended and supplemented to include the information contained
herein, and this Report constitutes Amendment No. 2 to the
Barry Diller Schedule 13D and the Reporting Group Schedule 13D.
Barry Diller and TCI (each, a "Reporting Person") constitute a
"group" for purposes of Rule 13d-5 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with
respect to their respective beneficial ownership of the Common
Stock and are collectively referred to as the "Reporting
Group." Capitalized terms not defined herein have the meanings
provided in the prior Reports on Schedule 13D referred to in
this paragraph.
The summary descriptions contained in this Report of
certain agreements and documents are qualified in their
entirety by reference to the complete texts of such agreements
and documents, filed as Exhibits hereto and incorporated herein
by reference. Information contained herein with respect to
each Reporting Person and its executive officers, directors and
controlling persons is given solely by such Reporting Person,
and no other Reporting Person has responsibility for the
accuracy or completeness of information supplied by such other
Reporting Person.
Page 2 of 5 pages
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIP WITH RESPECT TO THE SECURITIES OF THE
ISSUER
The information set forth in Item 6 of the TCI
Schedule 13D, the Barry Diller Schedule 13D and the Reporting
Group Schedule 13D is hereby amended and supplemented by adding
the following information:
Pursuant to a letter agreement, dated March 22, 1996
and effective as of November 27, 1995 (the "March Letter
Agreement"), Liberty and Mr. Diller clarified and confirmed
that certain provisions of the First Amendment will not become
effective until the earlier of (i) consummation of the Exchange
and (ii) receipt of the required approvals of the FCC in
connection with implementation of the provisions of Section 3
of the First Amendment.
The March Letter Agreement also sets forth certain
agreements between Liberty and Mr. Diller relating to the
obligation of Liberty and certain of its affiliates (together
with Liberty, the "Liberty Stockholder Group") to consummate
any of the transactions contemplated by the First Amendment or
the Stockholders Agreement the consummation of which is
dependent or conditioned upon the receipt of any governmental
or regulatory approval in the event that such approval (i) is
conditioned upon the modification of the stockholder or
management provisions set forth in the Stockholders Agreement
or the First Amendment, as the case may be, or (ii) subject to
certain exceptions, contains conditions or restrictions in
addition to those imposed by existing law relating to the
ownership of the respective assets or the conduct of the
respective businesses of the members of the Liberty Stockholder
Group.
The foregoing summary description of certain
provisions of the March Letter Agreement is qualified in its
entirety by reference to the March Letter Agreement, attached
hereto as an Exhibit and incorporated herein by reference.
By Memorandum Opinion and Order, adopted March 6,
1996 and released March 11, 1996 (the "FCC Order"), the FCC
granted, subject to certain conditions, the applications for
transfer of control of the Silver King television stations from
Roy M. Speer to the Silver Company. In the FCC Order, the
Silver Company was also granted, among other things, waivers of
the FCC's television duopoly rule to permit continued ownership
of certain television stations. By Order adopted and released
March 11, 1996, the FCC stayed the effectiveness of the FCC
Order to investigate certain allegations filed by a third party
against Silver King and to assess their impact on the FCC
Order. Silver King has advised Liberty and Mr. Diller that it
believes such allegations are without any merit, and the
parties are awaiting a decision of the FCC.
The provisions of the FCC Order granting the approval
for the transfer of control of the Silver King television
stations described in the preceding paragraph was conditioned
upon, among other things, the requirement that the FCC approve
(i) any substantial and material modification to the
Stockholders Agreement, (ii) any increase in TCI's interest in
Silver King and (iii) any material increase in the percentage
of cable subscribers of TCI-owned cable systems within any of
the eleven markets served by Silver King's television stations
(the "Subscriber Condition"). Neither TCI nor any other member
of the Liberty Stockholder Group has agreed to the Subscriber
Condition, and, accordingly, Silver Company filed a request for
clarification with the FCC, dated April 10, 1996 (the "Request
for Clarification") in which Silver Company, among other
things, has requested that the FCC eliminate the Subscriber
Condition contained in the FCC Order.
Page 3 of 5 pages
The foregoing summary descriptions of certain
provisions of each of the FCC Order and the Request for
Clarification are qualified in their entirety by reference to
such documents, which are attached hereto as Exhibits and
incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The information set forth in Item 7 of the TCI
Schedule 13D, the Barry Diller Schedule 13D and the Reporting
Group Schedule 13D is hereby amended and supplemented by adding
the following information:
12. Letter Agreement, dated March 22, 1996, by and
between Liberty Media Corporation and Barry Diller.
13. In re Applications of Roy M. Speer and Silver
Management Company, Federal Communications Commission
Memorandum and Order, adopted March 6, 1996 and
released March 11, 1996.
14. In re Applications of Roy M. Speer and Silver
Management Company, Request for Clarification of
Silver Management Company, dated April 10, 1996.
Page 4 of 5 pages
SIGNATURE
After reasonable inquiry and to the best of his knowledge
and belief, the undersigned certifies that the information in
this statement is true, complete and correct.
Dated: April 15, 1996
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Senior Vice President
and General Counsel
/s/ Barry Diller
Barry Diller
Page 5 of 5 pages
Exhibit 15
BEFORE THE
FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON, D.C. 20554
FCC 96-258
In re Applications of )
)
ROY M. SPEER )
(Transferor) )
)
and )
)
SILVER MANAGEMENT COMPANY )
(Transferee) )
)
For Transfer of Control of )
)
SKIL Broadcasting Partnership, )
Licensee of WEHS-TV, Aurora, IL ) File Nos. BTCCT-950913KG
)
SKDA Broadcasting Partnership, )
Licensee of KHSX-TV, Irving, TX ) BTCCT-950913KE
)
SKHO Broadcasting Partnership, )
Licensee of KHSH-TV, Alvin, TX ) BTCCT-950913KF
)
SKMD Broadcasting Partnership, )
Licensee of WHSW-TV, Baltimore, MD ) BTCCT-950913KH
)
SKNJ Broadcasting Partnership, )
Licensee of WHSE-TV, Newark, NJ, ) BTCCT-950913KJ
WHSI-TV, Smithtown, NY, and ) BTCCT-950913KK
W60AI, New York, NY ) BTCTTL-950913KQ
)
SKOH Broadcasting Partnership, )
Licensee of WQHS-TV, Cleveland, OH ) BTCCT-950913KL
)
SKLA Broadcasting Partnership, )
Licensee of KHSC-TV, Ontario, CA ) BTCCT-950913KM
)
SKVI Broadcasting Partnership, )
Licensee of WHSP-TV, Vineland, NJ ) BTCCT-950913KN
)
SKFL Broadcasting Partnership, )
Licensee of WYHS-TV, Hollywood, FL ) BTCCT-950913KO
)
SKTA Broadcasting Partnership, )
Licensee of WBHS-TV, Tampa, FL ) BTCCT-950913KP
)
SKMA Broadcasting Partnership )
Licensee of WHSH-TV, Marlborough, MA ) BTCCT-950913KI
)
North Central LPTV, Inc., )
Licensee of W13BN, Columbus, OH, ) BTCTTL-950913KR
K210D, St. Louis, MO ) BTCTTL-950913KS
K26CR, Kansas City, MO ) BTCTTL-950913KT
W33AY, Springfield, IL ) BTCTTL-950913KU
W39BH, Champaign, IL ) BTCTTL-950913KV
W64BM, Toledo, OH ) BTCTTL-950913KW
K35CY, Minneapolis, MN ) BTCTTL-950913KX
K41DD, Des Moines, IA ) BTCTTL-950913KY
)
South Central LPTV, Inc., )
Licensee of K15DD, Witchita, KS ) BTCTTL-950913KZ
K14IE, New Orleans, LA ) BTCTTL-950913LA
K67FD, Shreveport, LA ) BTCTTL-950913LB
K39CW, Tulsa, OK ) BTCTTL-950913LC
)
Southeast LPTV, Inc., )
Licensee of W24BF, St. Petersburg, FL ) BTCTTL-950913LD
W24AL, Atlanta, GA ) BTCTTL-950913LE
W56CM, Knoxville, TN ) BTCTTL-950913LF
W36AJ, Jacksonville, FL ) BTCTTL-950913LG
W58CD, Raleigh, NC ) BTCTTL-950913LH
W52BF, Mobile, AL ) BTCTTL-950913LI
W34BI, Birmingham, AL ) BTCTTL-950913LJ
W31BB, Pensacola, FL ) BTCTTL-950913LK
)
Northeast LPTV, Inc., )
Licensee of W17BH, Huntington, WV ) BTCTTL-950913LL
W56CP, Roanoke, VA ) BTCTTL-950913LM
W56CS, Portsmouth, VA ) BTCTTL-950913LN
)
West LPTV, Inc., )
Licensee of K21CX, Tucson, AZ ) BTCTTL-950913LO
K14IF, Spokane, WA ) BTCTTL-950913LP
)
URBAN TELECOMMUNICATIONS )
CORP. )
(Assignor) )
)
and )
)
URBAN BROADCASTING )
CORPORATION )
(Assignee) )
)
-2-
For Pro Forma Assignment of the ) File No. BAPCT-890418KF
Construction Permit for )
Television Station WTMW(TV), )
Channel 14, Arlington, Virginia )
)
)
JOVON BROADCASTING )
CORPORATION )
)
For Petition for Declaratory Ruling )
Relating to Television Station WJYS-TV, )
Channel 62, Hammond, Indiana )
MEMORANDUM OPINION AND ORDER AND NOTICE OF APPARENT LIABILITY
ADOPTED: June 6, 1996 RELEASED: June 14, 1996
By the Commission: Commissioner Ness issuing a statement.
TABLE OF CONTENTS
Paragraph
INTRODUCTION 1
SILVER KING'S RELATIONSHIP WITH URBAN
Background 5
Pleadings Related to WACCI-VCR's Allegations
WACCI-VCR Allegations 17
Urban/Silver King Joint Opposition 21
WACCI-VCR Comments 23
Silver King Reply 24
Silver Management Reply 25
Pleadings Related to Urban's Allegations
Urban Allegations 26
Silver King Response 35
Urban Reply 43
Silver Management Response 46
Discussion - Attribution/Transfer of Control 49
Resulting Violations of Multiple Ownership Rules 65
Lack of Candor/Misrepresentation
Allegations 67
Discussion 72
Ex Parte Matters 86
Remedy 88
Forfeiture 92
Contractual Arrangements Between Urban and
Silver King 95
Conclusion 103
-3-
SILVER KING'S RELATIONSHIP WITH JOVON
Background 107
Pleadings Related to Jovon's Allegations
Jovon Petition and Comments 112
Silver King Opposition 115
Silver Management Reply 119
Discussion 120
Conclusion 128
SILVER MANAGEMENT'S REQUEST FOR CLARIFICATION
Background 130
Pleadings Related to Silver Management Request
Silver Management Request 132
Jovon Objection 136
Silver Management Reply 137
Discussion 138
CONCLUSION 144
INTRODUCTION
1. On March 11, 1996, the Commission granted the
transfer of control of Silver King Communications, Inc. (Silver
King) from Roy M. Speer to Silver Management Company (Silver
Management). Roy M. Speer (Transfer Order), FCC 96-89 (re-
leased March 11, 1996). The same day, the Commission also is-
sued an order staying the effectiveness of that action pending
the investigation of allegations raised in an informal objec-
tion to the transfer by Urban Broadcasting Corporation (Urban),
the permittee of WTMW(TV), Channel 14, Arlington, Virginia.
Roy M. Speer (Stay Order), FCC 96-100 (released March 11,
1996). Urban alleged in its informal objection that Silver
King, a substantial non-voting equity holder in and creditor of
Urban, had exercised "an impermissible degree of influence" in
WTMW(TV) and had misrepresented and/or lacked candor as to its
activities in connection with that station. In staying grant
of the transfer of Silver King, the Commission stated that it
was doing so in accord with its policy under Jefferson Radio
Co. v. FCC, 340 F.2d 781 (D.C. Cir. 1984), which mandates that
issues bearing on the basic qualifications of both the seller
and the buyer be resolved prior to Commission action on trans-
fer or assignment of the broadcast station. See Stay Order,
FCC 96-100 at Paragraph 3. Urban's allegations, the Stay Order
noted, implicated the qualifications of the transferor, Speer.
Id.
2. Procedurally, the Commission determined to treat
Urban's informal objection to the Silver King transfer as a
-4-
petition for reconsideration1 and established an expedited
pleading schedule for Urban to supplement its March 6, 1996
informal objection by March 15, 1996 and for parties to respond
and reply on March 25 and April 1, 1996.2 Stay Order, FCC
96-100 at Paragraph 4. Urban, Silver King, and Silver
Management were deemed parties to the proceeding, as were two
other parties, Washington Area Citizens Coalition Interested in
Viewers' Constitutional Rights, Jeffra Becknell and Kofi Ofori
(collectively, WACCI-VCR) and Jovon Broadcasting Corporation
(Jovon), whose pending filings in separate proceedings raise
issues relating to Silver King similar to those alleged by
Urban. WACCI-VCR has pending a petition for reconsideration of
Urban Telecommunications Corp), 7 FCC Rcd 3867 (1992), in which
the Commission affirmed the staff's approval of Silver King's
investment in Urban through its grant of the pro forma
assignment of the construction permit of WTMW(TV). See File
No. BAPCT-890418KF. Jovon, the licensee of WJYS(TV), Hammond,
Indiana, has pending a request for declaratory ruling that
Silver King's proposed acquisition of a 45-percent equity
interest in Jovon would violate the Commission's cross-interest
policy and, potentially, the multiple ownership rules.
3. On April 11, 1996, Silver Management timely filed
a request for clarification, seeking deletion of one of the
conditions imposed in Transfer Order, that limiting a material
increase in the cable subscribers of Tele-Communications Inc.
(TCI) in the markets where Silver King's television stations
are located. Jovon objected to the request and Silver Manage-
ment replied. Due to the interrelated nature of these four
separate proceedings, we shall consolidate them and we now con-
sider the pleadings filed by those parties therein in three
parts: Silver King's relationship with Urban, Silver King's
1 Under Section 73.3587 of the Commission's Rules, before
FCC action on any application, any person may file informal
objections to the grant.
2 On April 4, 1996, Jovon filed a reply brief and a motion
for leave to file the brief, arguing that its submission was
necessary in order to give the Commission "a full basis for
making an informed decision." Silver King and Silver Management
both opposed the motion. We deny the motion and note that
Jovon's filing adds no new information to the record. We
shall, however, take official notice of Silver King's Form 10-K
annual report filed with the Securities and Exchange Commission
in November 1995, a copy of which was attached to Jovon's April
4 reply brief.
-5-
relationship with Jovon, and Silver Management's request for
clarification.
4. For reasons that follow, (1) we find that there
was an unauthorized transfer of control of Urban's WTMW(TV)
during the construction of that station, (2) we assess a for-
feiture of $150,000 against Silver King for such violation, as
well as the duopoly rule violation resulting from its simulta-
neous ownership of WHSW-TV, Baltimore, Maryland, whose Grade B
contour overlaps with that of WTMW(TV), (3) we assess a forfei-
ture of $25,000 against Urban for abdicating control of its
station, (4) we require reformation of certain of the contrac-
tual relationships between Silver King and Urban, (5) we limit
exercise of Silver King's option to acquire an equity interest
in Jovon to one-third of Jovon's equity so as to be consistent
with the cross-interest policy in the Chicago market where both
Jovon and Silver King own television stations, (6) we require
reformation of certain of the contractual relationships between
Silver King and Jovon, (7) we remove the condition from Trans-
fer Order requiring maintenance of the status quo between Jovon
and Silver King, and (8) we remove the TCI subscriber condition
from Transfer Order. As a result of the above actions, which
are fully discussed below, we shall dissolve the stay, adopted
in Stay Order, FCC 96-100, and permit the transfer of Silver
King to Silver Management to proceed. However, in view of the
multiple relationships remaining between Silver King and Urban
and Silver King and Jovon, we shall condition Transfer Order
upon the resolution of the pending attribution rule making pro-
ceeding, Review of the Commission's Regulations Governing At-
tribution of Broadcast Interests, 10 FCC Rcd 3606 (1995).
SILVER KING'S RELATIONSHIP WITH URBAN
BACKGROUND
5. Urban Telecommunications Corp. (UTC), whose sole
stockholder was Theodore White, filed a pro forma Form 316 ap-
plication to assign the Channel 14 construction permit from UTC
to Urban on April 18, 1989. According to the application,
Urban was to be a newly formed corporation with two stock-
holders: White and HSN Broadcasting of Virginia, Inc. (HSN
Virginia). The Form 316 application stated that White was to
own all of the voting stock, essentially in exchange for his
contribution of the construction permit, and HSN Virginia, Inc.
was to own convertible nonvoting stock, in exchange for its
contribution of $45,000. WSCT-TV, Inc., which had been one of
several competing applicants for the Channel 14 construction
permit in a comparative hearing, filed an informal objection
against UTC's application and supplemented that objection in
response to a copy of a letter of intent UTC submitted to the
-6-
Commission. The informal objection of WSCT-TV, Inc. alleged,
inter alia, that UTC had abandoned its commitment made during
the comparative proceeding to build a minority-owned, -
operated, and -controlled station that would devote significant
amounts of programming to issues confronting the minority com-
munity.
6. The letter of intent, between UTC and HSN Vir-
ginia's parent company, HSN Communications, Inc. (HSN Communi-
cations), provided that HSN Communications would lend to newly
formed Urban up to $4.5 million to complete construction of the
Channel 14 facility. Once the station was on the air, accord-
ing to the letter of intent, permanent financing to repay the
HSN Communications loan "will be obtained by [Urban] from a
commercial lender." The letter of intent also provided that
following Commission approval of the Form 316 assignment ap-
plication, Urban and HSN Communications were to execute a put/
call agreement and several agreements related to the loan and
the formation of Urban. Copies of these documents were filed
on August 23, 1989 as an amendment. The applicants also filed
with that amendment an unexecuted copy of a Home Shopping Club
affiliation agreement. Schedule A attached to that agreement
was blank, but UTC noted in a September 14, 1989 amendment that
this schedule, which would set forth the Home Shopping Club
network programming time, was "still under negotiation or in
the process of being finalized." UTC "presently anticipates,"
stated the amendment, "that it will reserve on the average of
three hours per day (or on the order of 21-24 hours per week)
for the presentation of non-network programming."
7. Silver King, the licensee of the twelve tele-
vision stations that are the subject of the transfer-of-control
application from Speer to Silver Management in Transfer Order,
was spun-off from Home Shopping in December 1992 and is the
ultimate successor-in-interest to all agreements entered into
by HSN Communications with Urban, except for the Home Shopping
affiliation agreement. For ease of reference, HSN Communica-
tions and its subsidiary HSN Virginia will be referred to as
"Silver King," while the separate programming company will be
referred to as "Home Shopping."
8. By letter of February 2, 1990, the staff denied
WSCT-TV, Inc.'s informal objection, finding that the agreements
between Urban and HSN "adequately demonstrate" that White would
remain in control of the station, because "he will hold, ini-
tially, all of [Urban]'s voting stock." See Letter to Michael
H. Rosenbloom, Esquire, from Chief, Video Services Division
(dated February 2, 1990) at 6. The staff also expressly found
in the letter that Urban would "remain minority controlled,
even in view of the station's affiliation with Home Shopping
-7-
Network." Id. In so concluding, the staff letter relied upon
the original Section 16 of the affiliation agreement, which
stated that Urban may reject or refuse programming it believes
to be unsatisfactory to the public interest and may substitute
a program which it believes to be of greater local or national
importance. Id. The staff letter further found that Urban was
"obligated to provide programming responsive to issues con-
fronting its community, and the affiliation agreement does not
bar a discharge of this obligation." Id. Having denied WSCT-
TV, Inc.'s informal objection on the merits and having deter-
mined that Urban was fully qualified, the staff granted the pro
forma application to assign the WTMW(TV) construction permit
from UTC to Urban.
9. WSCT-TV, Inc. timely filed an application for
review of the staff's action on February 28, 1990. Pending
Commission action on the application for review and pursuant to
Section 73.3613 of the Commission's Rules, Urban, on April 23,
1990, submitted for placement in its ownership files at the
Commission executed copies of, inter alia, a loan agreement for
$5.45 million and related financial and corporate agreements
and amendments, and a Home Shopping Club affiliation agreement.
The agreements were all executed on March 22, 1990, the day the
Urban-Silver King transaction closed, and, with two exceptions,
were identical in almost all respects to those previously filed
by Urban in conjunction with its application.
10. The first exception was Schedule A of the Home
Shopping Club affiliation agreement. Rather than reserving 21
to 24 hours per week of non-network programming, as Urban
stated it "anticipated" would be the case in its application,
Schedule A provided for 18 hours per week of non-network pro-
gramming.3 Second, in lieu of the $4.5 million loan amount
proposed in the application, the loan agreement called for
Silver King to lend to Urban up to $5.45 million. Further, the
loan agreement, a copy of which had never been filed with the
Commission, defined as an event of default a breach of the Home
Shopping affiliation agreement and stated that Urban was to
secure third-party financing to repay the Silver King loan no
3 Schedule A provided for 24 hours per day of Home Shopping
Club network programming, Monday through Saturday, and 20 hours
per day of such network programming on Sunday. However, in
addition, Section 5 of the affiliation agreement allowed for
five minutes per hour of "local programming and commercials,"
for an additional two hours per day each day.
-8-
later than March 22, 1991, unless both parties agreed that
Silver King would be the permanent lender for the station.
11. The Commission affirmed the staff's action and
denied WSCT-TV, Inc.'s application for review. Urban Tele-
communications, 7 FCC Rcd 3867. The Commission found that "to
the extent that WSCT-TV alleges that the loans from [Silver
King] to [Urban] give rise to a question of a de facto transfer
of control, we disagree." Id. at 3869. It continued: "The
loan and stock pledge agreements on file with the Commission
give [Silver King] no powers, express or implied, to control
the permittee." Id. Within 30 days of the release of the Com-
mission's decision, on July 16, 1992, WACCI-VCR attempted to
participate in this proceeding for the first time by petition-
ing the Commission to reconsider its determination. No other
party sought reconsideration or judicial review of the Commis-
sion action.
12. On October 20, 1992, Urban supplemented its own-
ership report with an amendment to the Urban-Silver King loan
agreement and related security and pledge agreements. The
amendment, executed on July 14, 1992, increased the amount of
the loan from $5.45 million to slightly more than $8.89 mil-
lion, and provided that Urban was not required to secure third-
party financing, as originally contemplated, but that Silver
King would continue to serve as its lender. Another supplemen-
tary filing to the Urban ownership report was made on July 7,
1993 to reflect an increase in the amount of the loan to $10.5
million, as of June 16, 1993, and a modification to the affili-
ation agreement. The affiliation agreement decreased the
"local programming and commercial" time available to Urban to
four minutes per hour in lieu of five minutes per hour. In
addition, whereas the original Home Shopping programming was
scheduled for 24 hours per day Monday through Saturday, the
amended programming schedule allowed for two hours of non-
network programming time on those days and the initial four
hours of non-network programming were to continue to be aired
on Sunday, for a total of approximately 27 hours of reserved
non-Home Shopping programming per week.
13. In the meantime, Urban encountered delays in
constructing WTMW(TV), including a zoning dispute over Urban's
original transmitter site in Fairfax County, Virginia, and ob-
taining the necessary permits from the District of Columbia for
relocation of its antenna on a tower there owned by NBC. In
-9-
early August 1993, Urban began airing Home Shopping program-
ming.4 Urban's application for license to cover its construc-
tion permit, filed on April 6, 1993, remains pending. See File
No. BLCT-930406KF.
14. As for servicing the Silver King loan, Urban's
first installment on the Silver King loan was due in early
October 1993. Six months later, in April 1994, Silver King
filed suit in Virginia state court for nonpayment of its loan.
Urban counterclaimed for $6.5 million, alleging, among other
things, that the station had been defectively designed and con-
structed by Silver King, that the equipment was defective, out-
dated and excessively priced, and that Silver King had not in-
curred certain expenditures it had charged to the project.
Silver King and Urban settled the suit the following year, in
May 1995, and the state court approved the settlement. See
Silver King Broadcasting of Virginia, Inc. v. Urban Broadcast-
ing Corp., At Law No. 94-418, Order, June 9, 1995.
15. In July 1995, Urban and White separately filed
voluntary petitions under Chapter 11 of the federal bankruptcy
laws. In accordance with Commission rules, Urban, on September
13, 1995, filed a pro forma application for assignment of
WTMW(TV) from Urban to Urban, Debtor in Possession. See BALCT-
950913LT. That application was granted on September 22, 1995.
Thus, Urban, Debtor in Possession is the permittee of record of
WTMW(TV).
16. On September 13, 1995, Silver King filed appli-
cations seeking Commission consent to the transfer of control
of its 12 television stations, which did not include WTMW-TV,
from Roy Speer to Silver Management, a corporation to be con-
trolled by Barry Diller. In light of the issues raised in the
objection, the Commission released the Stay Order simulta-
neously with the release of the Transfer Order.
PLEADINGS RELATED TO WACCI-VCR'S ALLEGATIONS
WACCI-VCR Allegations
17. WACCI-VCR alleges in its July 16, 1992 petition
for reconsideration that the Commission failed to consider
4 Urban was granted full-time program test authority at only
50 percent of full authorized power due to interference issues
that pertain to Urban's license application. See BLCT-
930406KF.
-10-
"critical provisions" in three of the several agreements Urban
had entered into with Silver King. According to WACCI-VCR,
terms of those agreements -- the Home Shopping Club affiliation
agreement, the loan agreement and the put/call agreement --
deprive Urban of absolute authority over the non-network pro-
gramming it will air and impose "financial penalties" on Urban
for breach of the affiliation agreement, thereby establishing,
WACCI-VCR alleges, that Silver King is in de facto control of
WTMW(TV) and its programming. Control of the station by Silver
King, contends WACCI-VCR, would constitute a violation of Sec-
tion 310(d) of the Communications Act, which prohibits transfer
of control to a party other than the licensee absent prior Com-
mission approval, would violate the so-called "Chain Broadcast-
ing" rules embodied in Section 73.658, which limit a network's
powers over licensees, and would violate the Commission's
policies regarding licensee control of broadcast stations. In
addition, WACCI-VCR asserts that if Silver King is found to
control WTMW(TV), Arlington, Virginia, it would also be in vio-
lation of the Commission's duopoly rule, Section 73.3555(b),
which generally proscribes common ownership and/or control of
television stations whose Grade B contours overlap. A Silver
King subsidiary is the licensee of WHSH-TV, Baltimore, Mary-
land, whose Grade B contour overlaps that of WTMW(TV).
18. Specifically, as to the affiliation agreement,
WACCI-VCR points to Sections 3 and 16 as placing limitations on
Urban's programming discretion. Section 3 provides that Urban
will broadcast the Home Shopping Club programming in its en-
tirety, but it may set aside such time as it may require for
the broadcast of regularly scheduled news, public affairs and
other programming. The station programming time, according to
Section 3, can be amended by "mutual agreement" of station and
Home Shopping from time to time. Section 16 entitles Urban to
refuse Home Shopping Club programming which it "reasonably be-
lieves" to be unsatisfactory or unsuitable or contrary to the
public interest and to substitute programming which in its
opinion is of greater local or national importance. WACCI-VCR
contends that Urban should have unilateral, rather than mutual,
non-network programming modification rights and should not be
subjected to a reasonableness standard in preempting Home Shop-
ping programming.
19. With respect to the loan agreement, WACCI-VCR
questions the powers granted to Silver King, which include the
ability in the event of default to call the loan, to cancel the
affiliation agreement or to unilaterally adjust the hourly com-
pensation rate under the affiliation agreement. An event of
default is defined to occur if, among other things, Urban fails
to perform under the affiliation agreement. Such ability,
-11-
claims WACCI-VCR, gives Silver King control of station program-
ming and finances. Similarly, as farther indication of Silver
King's alleged control, WACCI-VCR cites Silver King's right
under the put/call agreement to require Urban to buy, within 90
days of notification, all of Silver King's nonvoting stock in
Urban, at a price equivalent to 45 percent of the fair market
value of the station, if, among other things, Urban fails to
affiliate with Home Shopping or fails to perform under the Home
Shopping affiliation agreement.
20. On April 29, 1994, WACCI-VCR supplemented its
petition for reconsideration with information it obtained "dur-
ing a routine search" of Commission files and which related to
the July 1993 modifications to the affiliation and loan agree-
ments between Urban and Silver King. WACCI-VCR claims that
these various amendments reduce the amount of non-network pro-
gramming time, double the amount of the original loan, and
thereby "greatly strengthen" the de facto control allegations
raised in its petition for reconsideration.
Urban/Silver King Joint Opposition
21. In their July 29, 1992 joint opposition to
WACCI-VCR's petition for reconsideration, Urban and Silver King
(Urban/Silver King) contended that Silver King's 45 percent
nonvoting equity interest in Urban, even if converted to voting
stock, affords it no ability to control WTMW(TV) operations.
As to the agreements between Urban and Silver King, Urban/
Silver King maintain that the Commission was correct when it
concluded that the agreements do not convey control to Silver
King. The affiliation agreement, according to Urban/Silver
King contains commercially reasonable and standard broadcasting
industry terms and is the result of arms' length negotiations.
Moreover, Urban/Silver King assert that the affiliation agree-
ment complies with Commission requirements as to licensee dis-
cretion and programming obligations. Similarly, argue Urban/
Silver King, the loan agreement comprises commercially reason-
able and standard broadcasting industry terms, including that
provision which defines as an "event of default" Urban's breach
of the programming affiliation agreement. Banks that issue
loans to network affiliates, contend Urban/Silver King, "com-
monly insist" on terms which give the lender the right to call
the loan in the event of the termination of the network affili-
ation agreement, an event "which would have a substantial ad-
verse impact on the company's business."
22. Finally, Urban/Silver King describe Silver
King's ability to put its 45 percent equity interest to Urban
-12-
as a "reasonable business security." One of the primary rea-
sons for Silver King's investment in Urban and Urban's "comple-
mentary decision" to affiliate with Silver King, according to
Urban/Silver King, was their "mutual confidence in [Home
Shopping]'s outstanding commercial viability." Urban, argue
Urban/Silver King, is free to disaffiliate with Home Shopping
whenever it desires, but if it were to do so, Silver King's
interest as a nonvoting minority stockholder would be left
"totally unprotected" against negative financial implications.
WACCI-VCR Comments
23. In response to the pleading cycle established in
Stay Order, WACCI-VCR filed comments on March 25, 1996, in
which it alleges that Urban's informal objection, detailed be-
low, established "the validity" of WACCI-VCR's legal and fac-
tual arguments in its petition for reconsideration. But it
contends that while Urban is unqualified to be a Commission
licensee, the transfer of Silver King should be permitted to go
forward because there is no indication on the record that
Silver Management, the proposed transferee of the Silver King
stations, has had any knowledge of Silver King's alleged con-
trol of Urban. Grant of the transfer, however, WACCI-VCR ap-
pears to argue, should be severed from matters pertaining to
WTMW(TV). Thus, WACCI-VCR urges that Transfer Order be condi-
tioned upon agreement by Speer that he will not "alter" his
direct or indirect ownership interest in Urban or in Silver
King, other than as approved in Transfer Order. However,
WACCI-VCR argues that the Transfer Order be "amended" to find
that assignment of Silver King's nonvoting stock and other in-
terests in Urban without further proceedings "is not in the
public interest." Finally, WACCI-VCR contends that Silver King
under Speer has violated provisions of the Act and Commission
rules, each of which can be sanctioned by forfeitures amounting
to $25,000 per day per violation, up to the maximum of $250,000
per violation. By retaining jurisdiction over the conveyance
of Speer's interests and by using its forfeiture power, con-
cludes WACCI-VCR, the Commission can fulfill the objectives of
Jefferson Radio and prevent "possible unjust enrichment."
Silver King Reply
24. Silver King, in its separate reply to WACCI-
VCR's recent comments, characterizes as "draconian limitations"
WACCI-VCR's proposals that the Commission hold that Silver King
may not assign its interests in Urban without further proceed-
ings and that Speer may not relinquish his direct and indirect
ownership of common stock in Silver King unless expressly ap-
proved by the Commission. As to the first WACCI-VCR proposal,
Silver King asserts that if it is found qualified to proceed
-13-
with the transfer of control, Silver King should not be limited
in its ability to sell its stock interest in Urban. With re-
spect to the proposal concerning Speer, Silver King argues that
WACCI-VCR's motivation is to "punish" him. "Given the absence
of any specific allegations as to the conduct of Mr. Speer,"
maintains Silver King, WACCI-VCR's positions are "utterly with-
out factual or legal foundation." Finally, Silver King asserts
that because Silver King and Home Shopping are now independent
companies and were not so when the Commission issued its 1992
decision in Urban Telecommunications approving the Silver King
relations with Urban, WACCI-VCR propounds no valid reason why
the Commission should reconsider its holding that Silver King
does not possess de facto control over WTMW(TV), especially its
finances and programming.
Silver Management Reply
25. Silver Management states it that endorses WACCI-
VCR's recent comments, "to the extent" that they propose sever-
ing matters pertaining to WTMW(TV) from the Silver King trans-
fer to Silver Management. The proposal to sever, according to
Silver Management, is "mandated" because the Commission's stay
of Transfer Order does not satisfy any of the four factors nec-
essary for a stay, as outlined in Wisconsin Gas Co. v.
F.E.R.C., 758 F.2d 669 (D.C. Cir. 1985).5 Even if Urban's
allegations are true, according to Silver Management, Urban and
the Commission would still have adequate avenues for redress
absent the stay.
Pleadings Related to Urban's Allegations
Urban Allegations
26. Urban had joined with Silver King to oppose the
allegations raised by WSCT-TV, Inc. and, later, by WACCI-VCR
in the pro forma assignment proceeding. However, on March 6,
1996, the same day the Commission adopted a decision in Trans-
fer Order, Urban's sole voting stockholder White filed an in-
formal objection against the transfer of control of Silver
King, alleging that Silver King had knowingly and willfully
5 Those four factors include: (1) the likelihood that the
party seeking the stay will prevail on the merits; (2) the
likelihood that the moving party will be irreparably harmed
absent a stay; (3) the prospect that others will be harmed if
the stay is granted; and (4) the public interest in granting
the stay. Wisconsin Gas Co. v. F.E.R.C., 758 F.2d at 673-74.
-14-
violated the Commission's rules "by expending millions of dol-
lars to construct and operate WTMW(TV) by bypassing" White,
often times "without even consulting Urban after the fact for
decisions made by Silver King in constructing the station's
facilities." Nine days later, as directed by the Stay Order,
Urban supplemented the informal objection, contending not that
Silver King had assumed de facto control of WTMW(TV) in contra-
vention of Section 310(d) of the Act or the Commission's rules,
but that Silver King had violated the Commission's multiple
ownership rules by holding a 45 percent attributable ownership
interest in Urban, rather than a "mere passive non-voting in-
terest as Silver King has represented to the Commission." In-
deed, Urban asserts that its voting stockholder, White, has
maintained control over WTMW(TV) despite Silver King's best
efforts to dominate the station and now requests that the Com-
mission enforce its multiple ownership rules to ensure his
continuing control. Attribution of WTMW(TV) to Silver King,
according to Urban, would result in its ownership of 13 tele-
vision stations, in excess of the national cap of 12 only
recently eliminated in the Telecommunications Act of 1996.
Urban argues that the remedy for Silver King's actions, which
it asserts resulted in violation of the 12-television-station
limit, be denial or designation for hearing of the applications
for the transfer of control of the Silver King stations to
Diller-controlled Silver Management.
27. In support of its allegations that Silver King's
interest in Urban should be cognizable, Urban points to both
the construction and post-construction phases of its ownership
of WTMW(TV). In connection with the construction of the sta-
tion, Urban alleges that Silver King hired and paid the engi-
neering and law firms that worked on Urban's construction and
related matters, assigned five of its employees to superintend
construction, and selected and paid equipment vendors. Spe-
cifically, Urban provides numerous invoices, totalling hundreds
of thousands of dollars, sent directly from two consulting
engineering firms, John F.X. Browne & Associates and Jules
Cohen & Associates, to Silver King's Vice President of Engi-
neering Al Evans, as well as cancelled checks in payment
thereof sent directly from Silver King to the two firms.
"Urban did not select or interview either firm," according to
Urban, and, it alleges, "Silver King directed their activi-
ties."
28. As for the two law firms allegedly retained by
Silver King for matters arising in connection with WTMW(TV)'s
construction, Dow, Lohnes & Albertson for FCC-related issues,
and McGuire, Woods, Battle & Boothe for zoning-related issues,
Urban contends that it "never interviewed, hired or signed
retainer agreements with either law firm." In support thereof,
-15-
Urban furnishes invoices sent directly from McGuire Woods to
Silver King and cancelled checks indicating direct payment by
Silver King.6 Relying on correspondence between McGuire Woods
and Silver King's Evans regarding an outstanding bill of
$17,200, Urban notes that Silver King "went so far as to re-
solve a fee dispute" with McGuire Woods for work performed on
the zoning matter, "without Urban's knowledge." The billing
records from Dow Lohnes are not provided because, maintains
Urban, Silver King has rejected Urban's requests for production
of those invoices based upon its attorney-client privilege with
the firm.
29. Urban asserts that in addition to Evans, four
Silver King employees, whom Urban "did not hire, retain, or
request" to perform any work or provide any assistance, worked
on the construction of WTMW(TV) "at Silver King's initiative
and under Silver King's direction." The travel expense reports
of each of the five employees are furnished by Urban, which
maintains that the extensive pattern of involvement by the
employees "extends far beyond any mere consultation or advice."
According to Urban, Evans found the tower site in the District
of Columbia, negotiated all the arrangements for the lease with
tower owner NBC, and oversaw and directed the "important
facets" of the construction of WTMW(TV), "as if it were just
another one of Silver King's owned and operated stations. . .
." Urban attempted initially to retain its own engineer, con-
tends Urban, but Evans "threatened" that construction would not
go forward if it did so.
30. With respect to the equipment and services ven-
dors participating in the construction of WTMW(TV), Urban sup-
plies the invoices of 20 companies which directly billed Silver
King and the cancelled checks of Silver King in payment there-
of. Urban asserts that it did not interview or retain any of
these vendors. "Rather," contends Urban, "Silver King, without
the approval of or any consultation with Urban, chose these
vendors to provide extensive equipment and services for the
construction of WTMW(TV). "However, Urban maintains that
Silver King did not select, contract with and pay every vendor.
Urban estimates that Silver King made at least $4.2 million in
direct payments to vendors and Urban paid $4.1 million to ven-
dors it had enlisted, for which it was reimbursed by Silver
King. As was true for the engineering and legal expenses,
6 Urban states that it obtained the McGuire Woods invoices
through discovery on its counterclaim against Silver King in
the Virginia civil litigation. See paragraph 14, supra.
-16-
Urban notes that payments made by Silver King and that were
related to WTMW(TV) were added to the principal loan balance
owed to Silver King by Urban.
31. While Urban's allegations indicate that Silver
King's construction activities on WTMW(TV) commenced in the
first quarter of 1990, Urban contends that as "early" as August
17, 1992, Urban "advised" Silver King's Evans by letter that
Urban had not accepted as loan funds Silver King's direct ven-
dor payments. In the letter, a copy of which was submitted for
the record here, Urban's White recapitulates a telephone con-
versation he had had with Evans three weeks before, in which
Evans broached, "for the first time," the subject of raising
the loan amount from $5.45 million to $8.8 million. White adds
in his letter to Evans: "Until that conversation by phone with
you, I was completely unaware of any changed conditions."
32. Thereafter, according to Urban, White "repeat-
edly attempted to curtail" Silver King's activities. Urban's
vice president and business manager Page Silver dispatched five
followup letters to Silver King management, dated October 7,
October 19, November 29, and December 10, 1993, and February 2,
1994, on the issue of Silver King's accountability for con-
struction expenses incurred on behalf of Urban. In the October
7, 1993 letter, Urban states that "[o]ur accountant has advised
us that proof of payment in the form [of invoices and cancelled
checks] is necessary in order for us to reconcile our books
with the correct documentation indicating that payments have
been applied from the loan as called for by the Note and Loan
Agreement." Two weeks later, in the October 19, 1993 letter,
Urban states that even though Urban protested the spending of
proceeds directly by Silver King, "the minimum acceptable by
[Urban] now is proper documentation and proof of how these
funds were properly spent." In the November 29, 1993 letter
Urban informs Silver King that Urban is depositing all funds
due Silver King relative to the loan agreement in an escrow
account, the finds of which were to be released when Urban re-
ceived documentation that monies have been "properly spent" for
the benefit of Urban. And on December 10, 1993, the day after
meeting with Silver King executive vice president Charles
Bohart, Urban's Silver writes to him, stating that "we expect
to receive these documents" by Wednesday, December 15, 1993.
33. On December 16, 1993, Silver King's Bohart in-
forms Urban via letter that "[w]e are making copies of all in-
voices that we have in our possession covering the expenses,
other than those for certain legal services, and should have
them to you within the week." Disclosure of certain of the
legal invoices, the letter stated, "would endanger Silver
King's attorney-client privilege and counsel's work product
-17-
privileges and for that reason some of these legal invoices
cannot be provided." According to Urban, Silver King supplied
a box of invoices and cancelled checks in late 1993. In the
February 2, 1994 letter to Bohart, Urban stated that Urban was
"vigorously reviewing these materials and [is] experiencing
difficulty in comparing invoices with vendors and manufactur-
ers." Urban's attempts to obtain an accounting from Silver
King by withholding loan payments in escrow apparently culmi-
nated in the civil litigation in April 1994.
34. Beyond the construction phase of WTMW(TV), Urban
contends that Silver King has "continuing influence" over
Urban's programming and personnel and has attempted to "exert
undue influence" over Urban in the ongoing bankruptcy court
proceeding such that its ownership interest should be deemed
cognizable. Although Urban acknowledges the Commission's hav-
ing passed upon the Home Shopping affiliation agreement in
Urban Telecommunications, it urges that the propriety of the
agreement be revisited in light of Silver King's allegedly
active role in the construction of WTMW(TV). As for the per-
sonnel aspect of its station operations, Urban asserts that
Silver King's Evans told Urban that it could hire only 13 em-
ployees, the number of employees at each Silver King-owned and
operated station. Further, Urban notes that after construction
was completed and WTMW(TV) had begun airing Home Shopping pro-
gramming, the engineering firm John F.X. Browne & Associates
received "substantial sums" from Silver King. Finally, Urban
alleges that Silver King has opposed Urban's proposed plan of
reorganization, which would reduce the interest rate on the
Silver King loan by 1.25 percent and extend its term by one
month, thereby attempting to keep Urban in bankruptcy.
Silver King Response
35. Silver King argues that Urban's informal objec-
tion represents an effort to relitigate before the Commission
the private dispute with Silver King already settled in the
Virginia state court proceeding. The Commission, maintains
Silver King, should decline, as it does in other private dis-
putes, to entertain Urban's objection. Even if the Commission
considers Urban's allegations, Silver King asserts that the
record clearly indicates that Urban approved all of the con-
struction expenditures and the engagement of professionals and
retained overall control of the construction process.
36. Silver King claims that White requested the
assistance of Evans, Silver King's chief engineer, and his
staff, because of their extensive experience in the construc-
tion of new UHF stations. Evans states that he assisted Urban
in the construction of WTMW(TV) from March 1990 to August 1993.
-18-
During that time, asserts Evans, "I made numerous trips to the
Washington, D.C. area and frequently met with Mr. White."
Evans denies Urban's contention that he threatened to halt con-
struction if Urban hired another engineer. "In fact," asserts
Evans, "at Mr. White's request, I interviewed a candidate for
chief engineer whom Urban employed in November 1992."
37. When the construction process encountered zoning
and interference problems, it was White, according to Evans,
who was the "ultimate decision maker and strategist" in resolv-
ing them. To assist White with those problems, Evans states
that he "recommended" the engineering firm John F.X. Browne &
Associates and the law firm McGuire Woods. In addition, Evans
declares that White retained engineer Jules Cohen & Associates
"on my recommendation" and that White "utilized the services"
of the Dow Lohnes law firm.
38. In support of Urban's use of Dow Lohnes, Silver
King furnishes three letters from that firm, one sent directly
to Evans with a copy to White and two sent directly to White
with copies to Silver King management. The first, dated July
23, 1991, serves as a cover letter to a copy of the building
permit issued by the District of Columbia for the WTMW(TV) an-
tenna to be installed on NBC's tower and a copy of the antenna
tower sketch approved by the local government. The second
letter, dated August 13, 1991, serves as a cover letter for a
copy of the WTMW(TV) construction permit issued by the FCC, as
well as a letter sent to Fairfax County by McGuire Woods at-
torneys about the transmitter relocation. The third Dow Lohnes
letter, dated December 27, 1991, alerts White that Dow Lohnes
would be providing him with a draft of a request for extension
of construction time for his "review, approval and execution. .
. ." Silver King concludes that whether it recommended the
professional firms to Urban is "immaterial" in light of Urban's
reliance upon those firms for specified FCC applications and
filings, which White reviewed and signed.7
39. Evans further states in his declaration that
when antenna space became available on NBC's tower, "Mr. White
decided to relocate the station." Evans negotiated the tower
lease, he states, but upon White's request. White, according
7 Silver King refers to Urban's request for extension of its
construction permit, File No. BMPCT-910730KE, and its applica-
tion for license to cover the construction permit, BLCT-
930406KF.
-19-
to Evans, was "fully apprised" of the issues during the nego-
tiations and personally signed the lease. As evidence of
White's being kept informed, Silver King provides a January
1991 and a March 1991 memo from Evans to White. The January
memo pertains to the feasibility of the NBC tower for WTMW(TV).
"With your approval I plan to meet with [NBC] next week to pro-
ceed with negotiations," the Evans memo states. The final line
of the memo reads, "Please advise." The March 1991 memo re-
gards the attached NBC site lease agreement. "I have indicated
the changes requested by Urban as submitted to [NBC]," the memo
states. A copy of the lease agreement, signed by White, as
president of Urban, is also submitted by Silver King as evi-
dence of White's participation. Additionally, Evans declares
that White specifically authorized him to enter the leased
premises and furnishes a copy of an August 1991 letter to NBC
from White permitting Evans to enter the WTMW(TV) site "on be-
half of Urban Broadcasting Corporation."
40. As for the selection of vendors, Evans asserts
in his declaration that he "consulted" with White and that
White "personally approved the equipment orders." Silver King
submits a proposal of one vendor signed by White in May 1990
and a March 1991 letter from Dow Lohnes instructing White to
sign an acceptance form of another vendor, which states it was
prepared for Evans. "By Silver King ordering equipment on be-
half of Urban," Evans contends, "Urban was able to obtain dis-
counts and vendor support which would have been otherwise un-
available to it."
41. With respect to the procedure for paying ven-
dors, Silver King contends that its loan agreement with Urban
specifically provides that Silver King may expend funds
directly for the construction of the station. Section 1.05(c)
of the Loan Agreement provides that certain construction and
operating expenses "be paid directly by Lender upon submission
of the appropriate invoices to Lender." Evans alleges that at
the outset of the project, White decided that Silver King
should "in most cases" make payments directly to vendors.
According to Evans, when White received invoices, he forwarded
them to Evans for payment, as evidenced by a December 21, 1991
memo in which White states to Evans that the attached vendor
invoice "should have been sent directly to you" and by a March
7, 1991 memo in which White forwards to Evans another vendor
invoice "which came directly to Urban Broadcasting." Evans
maintains that Urban's understanding that Silver King would
make equipment purchases is reflected in an October 14, 1992
letter from Urban to Joe Centorino, one of the five Silver King
employees working on the WTMW(TV) construction. In that
letter, Urban responds to Centorino's earlier memo regarding
-20-
the establishment of credit with one of the vendors. "[E]stab-
lishing credit was not a priority of ours at this point," the
letter reads, "due to the fact that we have an agreement with
[Silver King] to purchase and finance all equipment and materi-
als at this time."
42. Silver King maintains that since WTMW(TV) went
on the air, it has had no involvement with Urban, except in the
context of enforcing its rights as a lender. Payments received
by the engineering firm of John Browne were for work performed
prior to the August 1993 sign-on. Silver King states that it
is an independent publicly held company and, since December
1992, when it was spun off from Home Shopping Network, with
whom Urban has contracted for network programming, it has been
controlled by Speer. He currently holds no significant inter-
est in the programmer, according to Silver King. Therefore,
Silver King argues it does not now provide, nor has it ever
provided, programming to WTMW(TV). That Silver King has an-
nounced plans to acquire the programmer, contends Silver King,
has no bearing "whatsoever" on the qualifications of Silver
King. As to personnel, Evans declares that he did not direct
Urban to hire or fire any individuals, but that he did explain
that the staffing levels for a "typical" Home Shopping Network
affiliate was thirteen. Finally, Silver King contends that it
is not seeking to coerce Urban in the bankruptcy proceeding.
Rather, it is "taking reasonable measures" to protect its busi-
ness interests.
Urban Reply
43. With respect to the professional firms working
on WTMW(TV) matters, Urban alleges that Evans' claim that he
merely recommended the engineering and law firms to White is
"false." As purported proof thereof, Urban states that site's
name first appears in the time entries in the McGuire Woods
invoices on May 30, 1990, three months after McGuire Woods be-
gan its work on Urban matters, on February 9, 1990. By con-
trast, argues Urban, a February 14, 1990 entry states that a
McGuire Woods attorney held a "strategy" conference on that
date with Evans and the site owner's representative. Citing
further time entries in the McGuire Woods invoices, Urban also
maintains that Silver King's statement that White was the
"strategist" on the zoning matter "is also false." Evans'
name, according to Urban, appears in the entries approximately
182 times while White's name appears only nine times, and not
at all in the last eight monthly invoices. The invoices also
show, asserts Urban, that there were 15 meetings or confer-
ences, three described as relating to strategy, among Evans,
McGuire Woods, Dow Lohnes, John F.X. Browne and/or Jules Cohen.
Urban notes that White is not listed as an attendee at any of
-21-
these meetings. As for hiring Dow Lohnes, Urban claims that it
did not.
44. Urban also denies it ever sought the assistance
of Silver King's employees to work on the construction of its
television facility. It is also a misrepresentation, argues
Urban, for Evans to state that he commenced work with Urban in
March 1990. The McGuire Woods invoices, according to Urban,
contain four time entries prior to March 1990 relating to the
February 14, 1990 strategy conference with Evans and the prepa-
ration of letters from the law firm to Evans. And both the
Browne and Cohen firms sent bills to Silver King dated in Feb-
ruary 1990 for work on WTMW(TV). Further, Urban asserts that
Silver King's claim that Evans consulted with White on vendor
selection, based on two instances in which White was asked to
sign documents, is "conclusory." And, Urban argues that Silver
King's "unsupported assertion" that White decided that Silver
King should pay vendors directly "is false." Moreover, Urban
alleges that contrary to Evans' statement, he did threaten to
halt construction if Urban hired its own engineer to oversee
construction and that Silver King claims "falsely" that Evans
interviewed chief engineer candidates at White's request.
Evans, according to Urban, "interfered" with Urban's personnel
hiring from the outset when he insisted on "reviewing and then
rejecting" numerous resumes that Urban had received from engi-
neers to assist in the construction process.
45. With respect to post-construction influences of
Silver King, Urban contends that notwithstanding the spin-off
of Silver King from Home Shopping, the Silver King loan agree-
ment and put/call agreement continue to contain cross-default
provisions with the Home Shopping affiliation agreement.
Finally, Urban alleges that Silver King is continuing to exert
influence over Urban's programming and personnel. In January
1996, according to Urban, White asked a representative of
Diller if Silver King would accommodate Urban's emergence from
bankruptcy proceedings. The Diller representative declined to
do so, asserts Urban, purportedly because White stated he would
carry Diller's proposed new programming only if he could also
develop and carry his own local programming. As regards per-
sonnel, Urban asserts that Evans attempted to limit Urban's
hiring to 13 persons. Evans, according to Urban, told Urban
that Silver King would not agree to increase Urban's compensa-
tion to pay for additional employees.
Silver Management Response
46. Silver Management's objection relates largely to
the procedural propriety of Urban's filing an informal objec-
tion on the eve of the Commission's action in Transfer Order.
-22-
After five years of the "benefit of its bargain" with Silver
King, asserts Silver Management, Urban surfaced in this "en-
tirely unrelated proceeding" to complain about Silver King's
allegedly impermissible influence. By permitting Urban to
raise untimely allegations in this proceeding, maintains Silver
Management, the Commission invites abuses of its processes and,
therefore, the Commission should dismiss or deny Urban's objec-
tion, the stay should be lifted, and Silver Management should
be permitted to proceed with its acquisition of Silver King.
Urban's objection, according to Silver Management, is to gain
leverage in the private dispute between Urban and Silver King
relating solely to issues of contract interpretation and ac-
counting methodology, matters which the Commission has long
refused to adjudicate.
47. Additionally, Silver Management argues that the
Commission's reliance on Jefferson Radio in staying the effec-
tiveness of Transfer Order was "overbroad and incorrect" in
that the Jefferson Radio policy applies only where basic quali-
fying issues against the licensee have been designated for
hearing. Here, contends Silver Management, no basic qualifying
issue has been alleged, much less designated for hearing.
Urban's only allegation related to the attributable status of
Silver King. To allow Urban's "unsubstantiated allegations and
fallacious arguments" to delay Silver Management's transaction,
according to Silver Management, would be contrary to the recog-
nized public interest benefits of the Silver King transaction.
48. Finally, Silver Management contends that Urban
has presented no basis in law or fact for the attribution of
Silver King's nonvoting stock interest in Urban. Legally,
Silver Management argues that the Commission has never held
that a nonvoting stockholder must be "passive" in order for its
interest to be exempt from attribution. According to Silver
Management, in BBC License Subsidiary, L.P., 10 FCC Rcd 7926,
7933-34 (1995), the Commission declined to attribute a 45 per-
cent nonvoting interest where the investor had multiple "ac-
tive" relationships. The investor in that case, Silver Manage-
ment notes, proposed to supply network programming to the ap-
plicant, had the right to acquire up to half of the applicant's
common stock and vote on major company decisions, recommended
the hiring of its former employee as the applicant's president,
negotiated the principal term of his compensation, and agreed
to permit a current employee to assume an executive position
with the applicant following consummation of the transaction.
Factually, Silver Management asserts that there has been no
post-construction attributable-level influence over Urban be-
cause Silver King is a distinct entity from program supplier
Home Shopping. Also, Silver Management contends, Silver King
did not mandate a limit of 13 employees; rather, the Home
-23-
Shopping affiliation agreement provides for compensation of
only a certain number of employees.
DISCUSSION - ATTRIBUTABLE STATUS OF/
TRANSFER OF CONTROL TO SILVER KING
49. We are confronted here with more than four two-
inch bound volumes of invoices, travel expenses and correspon-
dence furnished by Urban in support of its primary allegation
that Silver King actively and aggressively participated in the
construction and postconstruction activities of Urban's
WTMW(TV) facilities and should, therefore, be deemed by the
Commission to be a cognizable, rather than a non-cognizable,
non-voting investor in Urban. Yet, Urban maintains that de-
spite Silver King's efforts to "dominate" the station, Urban's
voting stockholder White "has maintained control. . . ." See
Urban Supplement at iii. Another party to this proceeding,
WACCI-VCR, contends that the numerous financial and programming
agreements entered into between Silver King and Urban alone
caused an unauthorized shift of control of WTMW(TV) to Silver
King in contravention of numerous Commission rules and policies
and that the conduct described by Urban serves to confirm that
conclusion. In response, Silver King urges us to dismiss the
Urban allegations as a private business dispute. And Silver
Management argues that a non-voting stockholder such as Silver
King need not remain "passive" in order to maintain its non-
attributable status.
50. Procedurally, we conclude that WACCI-VCR's July
16, 1992 petition for reconsideration of Urban Telecommunica-
tions is defective under Section 1.106 of the Commission's
Rules and, therefore, that WACCI-VCR lacks standing in the pro
forma assignment proceeding. Under Section 1.106(b)(1), an
entity which is not already a party to the proceeding is re-
quired to show "good reason" why it was not possible for it to
participate in the earlier stages of the proceeding. 47 C.F.R.
Section 1.106(b)(1). Although the information central to the
allegations raised by WACCI-VCR was filed subsequent to the
staff's grant in February 1990, the information was filed on
April 23, 1990 with the Commission by Urban in accordance with
Section 73.3613 of our rules and was, therefore, publicly
available for more than two years prior to the Commission's
decision in Urban Telecommunications, 7 FCC Rcd 3867.
Accordingly, we dismiss WACCI-VCR's petition for
reconsideration. Nevertheless, in view of the importance of
the issues raised in WACCI-VCR's petition, we shall address its
allegations as part of our independent public interest
analysis. See Spanish International Communications Corp., 2
FCC Rcd 3336, 3342 n.15 (1987), aff'd sub nom. Coalition for
the Preservation of Hispanic Broadcasting v. FCC, 931 F.2d 72
(D.C. Cir. 1991)(en banc).
-24-
51. Substantively, at the outset we note that a dis-
pute is not purely private where a licensee's compliance with
Commission rules is called into question. Here, we shall not
attempt to arbitrate contract interpretation or accounting is-
sues between Urban and Silver King. Rather, our objective is
to determine the locus of control of WTMW(TV) from 1990 to the
present. This is not a case where we attempt to adjudge the
prospective relationship of the relevant parties based upon
their representations and governing corporate documents. See,
e.g., BBC License Subsidiary L.P. (WLUK-TV), 10 FCC Rcd 7926,
7932 (1995)(quoting News International PLC, 97 FCC 2d 349, 356
(1984)). Rather, we are called upon to determine the status of
permittee Urban vis-a-vis its nonvoting stockholder/creditor
Silver King based upon their actual conduct over a course of
years, since 1990, when they entered into a series of finan-
cial, programming, and corporate agreements, and to determine
whether there is a violation of the Commission's rules. We
believe that the conduct in question can be evaluated in two
parts: the construction phase and the post-construction phase.
For each period, the threshold evaluation will be first to as-
certain whether Silver King has influenced Urban such that its
interest should be deemed cognizable and, thereafter, to deter-
mine whether Silver King has assumed unauthorized control of
Urban.
52. As to the attributable status of an investor,
the Commission attempts to identify those interests in or rela-
tionships to a permittee or licensee which confer on its hold-
ers a degree of "influence" such that the holders have "a real-
istic potential to affect" the programming and other decisions
of permittees. Attribution of Ownership Interests, 97 FCC 2d
997, 999, 1005 (1984), recon. granted in part, 58 RR 2d 604
(1985), further recon. granted in part, 1 FCC Rcd 802 (1986).
In furtherance of that objective, the Commission has set
bright-line tests for corporations, like Urban, defuting as
cognizable those investors holding five percent or more voting
stock or the positional interests of officer or director. See
47 C.F.R. Section 73.3555, Note 2. However, the Commission
also has articulated the need to assess the cumulative effect
of all relevant factors so as to determine whether a party
holds an attributable interest. See, e.g., BBC License
Subsidiary L.P. (WLUK-TV), 10 FCC Rcd at 7933 (citing KKR
Associates, 2 FCC Rcd 7104, 7107 (1987); Univision Holdings,
Inc., 7 FCC Rcd 6672, 6677-78 (1992)).
53. As to control, Section 310(d) of the Communica-
tions Act states, in pertinent part:
No construction permit or station license, or any
rights thereunder, shall be transferred, assigned, or
-25-
disposed of in any manner, voluntarily or involun-
tarily, directly or indirectly, or by transfer of
control of any corporation holding such permit or
license, to any person except upon application to the
Commission and upon finding by the Commission that
the public interest, convenience, and necessity will
be served thereby.
47 U.S.C. Section 310(d).8 While there is also no formula for
evaluating whether a party is in de facto, or actual, control,
see, e.g., Stereo Broadcasters, Inc., 55 FCC 2d 819, 821
(1975), we look to whether a new entity has obtained the right
to determine the basic operating policies of the station, that
is, to affect decisions concerning the personnel, programming
or finances of the station. See WHDH, Inc., 17 FCC 2d 856
(1969), aff'd sub nom. Greater Boston Television Corp. v. FCC,
444 F.2d 841 (D.C. Cir. 1970), cert. denied, 403 U.S. 923
(1971). A permittee or licensee may delegate certain functions
on a day-to-day basis to an agent or employee, e.g., Southwest
Texas Public Broadcasting Council, 85 FCC 2d 713, 715 (1981),
but such delegation cannot wholesale. That is, those parties
delegated to a task must be guided by policies set by the
permittee or licensee. See David A. Davila, 6 FCC Rcd 2897,
2899 (1991). Here, based upon the undisputed facts on the
record and for the reasons discussed below, we find that Urban
abdicated and Silver King assumed control of the construction
of WTMW(TV) in violation of the Communications Act and
Commission policies and that the appropriate sanction for both
Urban and Silver King is a monetary forfeiture and a
reformation of some of the contractual provisions between them.
54. Silver King's activities during the construction
phase of WTMW(TV) far exceeded a level of mere influence over,
or attributable interest in, Urban. Indeed, the record indi-
cates that even before it consummated its investment in Urban,
Silver King took charge of the construction project and there-
after arranged, on its own initiative, nearly every aspect of
it. The law firm of McGuire Woods commenced work on the
Channel 14 zoning issue on February 9, 1990 and held a tele-
phonic "status and strategy" conference with Evans on that
matter as early as February 14, 1990. Evans' name appears on
the McGuire Woods time entries five times prior to Silver
King's March 22, 1990 consummation of its investment in Urban
while White's name appears for the first time in the May 30,
8 That statutory provision is implemented in Section
73.3540(a) of the Commission's Rules.
-26-
1990 time entry. Moreover, Evans is listed in the McGuire
Woods invoices at least 200 times, as having attended meetings
and conferences in person or telephonically, as having been
sent correspondence and as having called or been called, on
average, every three days. By contrast, White is identified in
the McGuire Woods invoices only fourteen times in the seventeen
months of that law firm's work on behalf of Urban, from Febru-
ary 1990 through July 1991, as indicated by the invoices.
Silver King's role cannot be construed as one properly dele-
gated to it. Given the scope of its actions and the apparent
remoteness and infrequency of Urban's participation, as re-
flected in Urban's assertions and corroborated in many respects
by the documentary record, there is, in sum, no demonstration
that Silver King's actions were guided by policies set by
Urban. Cf. David A. Davila, 6 FCC Rcd at 2899.
55. In ascertaining a permittee's or licensee's on-
going ultimate control of its broadcast facility, we have in
the past, looked to whether the permittee or licensee alone
decided which bills to pay, whether to acquire additional per-
sonnel, or upgrade or repair the station's facilities, e.g.,
Radio Management Services, Receiver, 7 FCC Rcd 2959, 2964
(1992), whether it was ultimately responsible for all decisions
to incur liabilities at the station, e.g., Arnold L. Chase, 6
FCC Rcd 7387, 7411 (ALJ 1991), whether its approval of the em-
ployment of personnel was "necessary," e.g., David A. Davila, 5
FCC Rcd at 5226, whether it set the terms of employment for
personnel, eg., Radio WAVS, Inc., 92 FCC 2d 1037, 1044 (1982),
and/or whether it was "actively involved and in charge"
throughout the construction period through, inter alia, "daily
personal contact" with those delegated to construct the sta-
tion, e.g., Bee Broadcasting Associates, 6 FCC Rcd 3347, 3348
(ALJ 1991). Here, the record shows that rather than exercise
control of WTMW(TV) in a "very 'hands on' way," id. at 3349,
Urban's nominally controlling stockholder White absolutely
deferred to Silver King, which, through its chief engineer
Evans, controlled the finances and personnel of WTMW(TV) by
making virtually unrestricted decisions for Urban. The record
thus presents not an instance of "delegation of authority," but
a "classic example" of an unauthorized transfer of de facto
control in violation of the Act and of our rules. Black Tele-
vision Workshop of Los Angeles, Inc., 8 FCC Rcd 4192, 4198
(1993), recon. denied, 8 FCC Rcd 8719 (1993).
56. Looking to specific decisions made by Silver
King's chief engineer Evans, we observe that while Evans "rec-
ommended" the four engineering and law firms, there is no
record evidence that once Evans selected the professionals,
White's immediate and express approval was either sought or
obtained. Instead, the record reflects that White apparently
-27-
accepted Evans' actions in this regard, but weeks or months
after those firms had commenced work on Channel 14, and then
only through White's tacit approval, that is, by receiving cor-
respondence from Dow Lohnes without objection to its work on
Urban's behalf, by permitting the firms to work on Urban's be-
half, by signing applications and other filings prepared by the
firms, and by executing the loan agreement amendments which
facilitated payment of the firms. Such ratification by in-
action fails to establish control. While we do not suggest
that a permittee must, in order to claim control of its facil-
ity, construct its station without external technical and legal
assistance, it is incumbent upon a permittee to actively over-
see the construction on an ongoing basis. And even though
Urban "utilized" the services of Dow Lohnes, as Silver King
maintains, each piece of Dow Lohnes correspondence submitted in
this record either copied or was addressed to Silver King prin-
cipals.9 This suggests that the law firm held a duty to advise
and apprise Silver King that was similar to its duty to Urban.
Silver King's invocation of attorney-client privilege in refus-
ing in its December 16, 1993 letter to submit to Urban certain
of the legal invoices further demonstrates that the two law
firms selected by Evans worked at least in part for Silver
King. Indeed, refusing to give Urban work product and invoices
allegedly involving work on WTMW(TV) suggests a supervening
duty to Silver King.
57. Evans maintains he consulted with White on ven-
dor selection and provides as evidence White's signature on one
vendor proposal and White's being directed by Dow Lohnes to
sign one other. Such evidence points only to White's limited
participation in the selection of vendors. However, given that
Urban provided a list of 20 vendors it alleges were chosen uni-
laterally by Silver King for the Channel 14 construction
project, White's explicit acceptance of two vendors not in-
cluded in that list falls well short of rebutting the evidence
suggesting the exercise of control by Silver King. A permittee
is obligated to serve as a "hands-on decisionmaker," not as a
mere "consultant or advisor." Salem Broadcasting, Inc., 6 FCC
Rcd 4172, 4173 (MMB 1991). Further, the number of references
to Evans in the McGuire Woods invoices, fourteen-fold over
9 Even a December 12, 1991 letter sent to the Chief,
Television Branch by Dow Lohnes regarding the status of Urban's
construction, furnished in connection with Urban's supplement
to its informal objection, blind-copied White and Silver King
chief engineer Evans and Silver King executive vice president
and general counsel Michael Drayer.
-28-
those references to White, and the absence of White's name from
so-called "strategy" sessions among Evans, the engineering and
legal firms and others, indicate Evans' undue participation in
making critical decisions for the station. See, e.g., id.
58. Additionally, the direct billing by the profes-
sional firms and vendors and Silver King's direct payment to
those firms signals Silver King's assumption of financial
responsibility from Urban. And White's forwarding of bills to
Silver King and insisting that those bills should not have been
sent to him at all signals Urban's abandonment of such respon-
sibility. See, e.g., WGPR, Inc., 10 FCC Rcd 8140, 8145
(1995)(Licensees must "maintain their own bank accounts, pay
the salaries of their own employees, and remain responsible for
their own obligations to programmers, utility companies, and
other operational matters."). In short, the record demon-
strates that from February 1990 to August 1993, Silver King
wielded control of Urban's personnel and finances. In fact,
the record indicates that White had no involvement whatsoever
with Urban's finances and that he did not even know how much of
its multi-million dollar line of credit had been spent by
Silver King, which assumed responsibility for direct payment
for all equipment and services. Nor did he even initiate the
increase in the original loan amount. White wrote to Evans on
August 17, 1992, about one month after he executed an amended
loan agreement, from $5.45 to $8.89 million, that "you dis-
cussed, for the first time, the issue of raising the loan
amount . . . because you had spent funds in the accounts held
by [Silver King] in [Urban]'s name that exceeded the loan
agreement that both parties had signed. Until that conversa-
tion, White concedes in the letter, "I was completely unaware
of any changed conditions." A permittee monitoring and actively
participating in the construction of its station would have
been keenly aware that millions of dollars more than the loan
amount were being spent.
59. As for Urban personnel, White apparently ceded
control over many aspects of this fundamental permittee func-
tion. White's letter to NBC authorizing Evans to enter the
tower premises "on behalf of Urban Broadcasting Corporation"
demonstrates his approval, albeit delayed, of the assistance
derived from the five Silver King employees. However, while
Silver King billed Urban for the travel expenses of those five
employees working on the construction of Urban's station, there
is no evidence that Urban was charged for their compensation,
an indication that Silver King itself absorbed expenses in the
construction of Channel 14. Payment by Silver King of its em-
ployees for "assisting" in the WTMW(TV) project suggests that
it was Silver King that served as their employer and directed
their activities.
-29-
60. Urban maintains that it attempted to "curtail"
Silver King's impermissible financial activities as "early" as
August 17, 1992. It did so, according to Urban, through
White's letter to Evans on that date requesting documentation
of funds spent on its behalf. However, Urban waited for two
and one-half years after Silver King employees commenced work
on WTMW(TV)'s construction to inquire as to these monies, which
it was obligated to repay under the Silver King loan. This
late inquiry was apparently prompted by Urban's and Silver
King's execution the month before, on July 14, 1992, of an
amendment to the loan agreement which increased the loan amount
from $5.45 million to $8.89 million. The record shows no fur-
ther request by Urban for documentation by Silver King until
after Urban agreed, on June 16, 1993, to a further increase in
the loan amount, this time to $10.5 million.
61. During the last quarter of 1993, Urban for the
first time took affirmative steps in regaining control of its
finances by informing Silver King that it was withholding pay-
ments due to Silver King under the loan and placing them in
escrow until documentation of expenditures was submitted. In a
December 10, 1993 letter to Silver King, Urban stated that "we
expect to receive these documents by Wednesday, December 15,
1993." Although not timely, Silver King did respond coopera-
tively by letter of December 16, 1993, in which it notified
Urban that it was making copies of the requested documents and
that Silver King "should have them to you within the week."
Urban eventually reclaimed control of WTMW(TV), albeit upon the
completion of construction. It was the vacuum of control
created by Urban with respect to the construction of its
WTMW(TV) that provided the opportunity for Silver King to as-
sume that control. Thus, this is not the situation where an
unauthorized party refused to return control to the rightful
permittee or licensee. Eddie Bond, 10 FCC Rcd 12535, 12537
(MMB 1995). Absent Commission authorization, however, such
abdication by Urban and such assumption by Silver King renders
both in violation of Section 310(d) of the Act.
62. The record contains no evidence that Silver King
continued to control or even influence Urban and WTMW(TV) sub-
sequent to the completion of construction and the commencement
of broadcast operations. Indeed, no further equipment or ser-
vices expenses were incurred after August 1993, when WTMW(TV)
commenced airing programming.10 The funds sent to Browne by
10 Although WTMW(TV) commenced programming in August 1993,
the discussions between Urban and Silver King pertaining to
spending accountability which extended into Fall 1993 and
(footnote continued)
-30-
Silver King after that date, according to Silver King and un-
disputed by Urban, were for work performed earlier in connec-
tion with construction. As for Evans' specifying the allowable
number of employees for WTMW(TV), there is no evidence that
Evans attempted to hire or fire anyone, the principal indicator
of control in the area of personnel. See Tri-Counties Commu-
nications, Inc., 31 FCC 2d 83 (1971). Evans merely relayed to
White the number of employees that could be compensated based
upon the monthly affiliation fee to be paid by Home Shopping.
63. With respect to WTMW(TV)'s programming, there is
nothing within the four corners of the Home Shopping affilia-
tion agreement that would suggest an abandonment of control by
Urban. Notwithstanding the contention of WACCI-VCR to the con-
trary, there is no Commission rule or policy that prohibits a
broadcaster from contracting to air approximately 141 hours per
week, or even more, of a network's programming, as Urban has
agreed to do.11 What is required in an affiliation agreement
under our rules is that it permit the permittee or licensee to
reject or to refuse network programs "which the station reason-
ably believes to be unsatisfactory or unsuitable or contrary to
the public interest" and to substitute a program "which, in the
station's opinion, is of greater local or national importance."
47 C.F.R. Section 73.658(e). Section 16 of the Home Shopping
affiliation agreement with Urban contains this rule's language
verbatim. No provision of that agreement penalizes Urban for
exercise of those non-network programming rights and no party,
including Urban, alleges that Home Shopping has abridged those
rights. Moreover, amendment of the station programming time by
"mutual agreement" functionally endows Urban with veto power
(footnote continued)
Winter 1994 were merely vestiges of construction-phase matters.
Moreover, there is no evidence on the record that Silver King
insinuated itself into station matters after the sign-on date
in August 1993. Our conclusion that Silver King's assumption
of control was limited to only the construction of WTMW(TV),
therefore, is sound.
11 Under the amended affiliation agreement, Urban may air
non-network programming four minutes each hour, in addition to
two hours each day, Monday through Saturday, and four hours on
Sunday. See paragraph 12, supra.
-31-
over any modifications to the contractual time. For this rea-
son, we do not view such a provision as shifting programming
control to Home Shopping.
64. Nor shall we attempt to ascertain indicia of
control by Silver King from its actions in the ongoing bank-
ruptcy court proceeding. When a plan of reorganization,
whether proposed by Urban or another party to that proceeding,
is approved by the court, Urban will be obligated under our
rules to file an application with the Commission seeking prior
approval to emerge from bankruptcy. At that time, we will re-
view the plan and any other documents to assess the relation-
ship to Urban of Silver King and any other party. In the mean-
time, we shall, as detailed below, require certain provisions
of the loan agreement and related documents, as well as the
put/call agreement between Silver King and Urban to be re-
formed, but we shall not interfere with the bankruptcy proceed-
ing by preventing parties from pursuing procedural rights duly
accorded them in that forum.
RESULTING VIOLATIONS OF MULTIPLE OWNERSHIP RULES
65. In light of our finding that Silver King assumed
unauthorized control of Urban's WTMW(TV) during the three and
one-half year construction of that station, we must determine
whether that control placed Silver King in violation of any of
our multiple ownership rules. Urban contends that the attribu-
tion to Silver King, the licensee of 12 television stations, of
WTMW(TV), a thirteenth station, placed it in violation of the
recently eliminated national television ownership limitation of
12 stations. As Silver King correctly notes, however, one of
its 12 licensed stations is a television satellite, which, un-
der Note 5 to Section 73.3555, is exempt from all
multiple ownership rules, including the former national
numerical cap. See 47 C.F.R. Section 73.3555, Note 5. Thus,
attribution of WTMW(TV) to Silver King during the construction
period, 1990 to 1993, did not conflict with the national
ownership rule.
66. WACCI-VCR points out that attribution of
WTMW(TV) to Silver King would run afoul of the Commission's
television duopoly rule in that the Grade B contour of Urban's
Arlington, Virginia station substantially overlaps that of
Silver King's WHSW-TV, Baltimore, Maryland. Our records re-
flect that the Grade B contours of WHSW-TV and WTMW(TV) do, in
fact, substantially overlap. Indeed, due to the geographic
proximity of the two communities of license, even the smaller
Grade A contours of the Urban and Silver King stations overlap.
Absent waiver of the rule, a party cannot own and/or control
two television stations whose Grade B contours intersect. See
47 C.F.R. Section 73.3555(b). Thus, because we find that Silver
King
-32-
assumed control of WTMW(TV) without waiver of the rule during
the years 1990 to 1993, we find also that it violated the tele-
vision duopoly rule during that period.
LACK OF CANDOR/MISREPRESENTATION
Allegations
67. Urban alleged in its March 6, 1996 informal ob-
jection that
[c]ontrary to the passive, non-voting interest in
Urban that Silver King has represented to the Commis-
sion, Silver King has in fact knowingly and willfully
violated the Commission's rules by expending millions
of dollars to construct and operate WTMW(TV) by by-
passing Urban's majority and sole voting shareholder,
Theodore White, often times without even consulting
Urban after the fact for decisions made by Silver
King in constructing the station's facilities.
Based upon this statement, we indicated in the Stay Order that
Urban's allegations raise issues of misrepresentation and/or
lack of candor to the Commission. FCC 96-100 at Paragraph 3.
"Given the nature and the source of the allegations against
Silver King," we added in the Stay Order, "we find it necessary
to defer the effectiveness of our decision granting consent to
the transfer of Silver King so that we may investigate these
allegations and assess their impact on our determination that
the transferor in this proceeding is qualified." Id. Urban was
then directed to supplement the unsupported allegations. Id.
at Paragraph 5.
68. In its supplement of March 15, 1996, Urban filed
four separate volumes of exhibits to document what it claimed
was a level of activity by Silver King rising to attributable
status. The exhibits included various correspondence between
Urban and Silver King or at least one of the law firms, in-
voices from the engineering and law firms, and the expense
records of the five Silver King employees included in those
exhibits. Notwithstanding the degree and extent of Silver
King's activities, as well as what it asserted was Silver
King's best effort "to dominate this station," Urban insisted
in the supplement that its sole voting stockholder White "has
maintained control" over WTMW(TV) and that he has been "the
general manager in charge of the operations of Channel 14 from
the outset." See Urban Supplement at 3.
69. Silver King, in its March 25, 1996 opposition,
responds to the Commission's concern enunciated in the Stay
-33-
Order and contends that Silver King has been "completely open
about its involvement" in the construction of WTMW(TV). Ac-
cording to Silver King, not only were the loan documents and
amendments thereto submitted to the Commission, but the Commis-
sion reviewed them and specifically held in Urban Telecommuni-
cations that the loan and stock pledge agreements on file with
the Commission gave Silver King no powers to control Urban.
Further, Silver King asserts that it previously brought its
dispute with Urban to the Commission's "attention" in May 1995,
in comments it filed in the Commission's rule making proceed-
ings regarding attribution and minority ownership of broadcast
stations. See Silver King comments, filed in Review of the
Commission's Regulations Governing Attribution of Broadcast
Interests, MM Docket No. 94-150, May 17, 1995 at 5-8 and filed
in Policies and Rules Regarding Minority and Female Ownership
of Mass Media Facilities (Minority/Female Ownership of Mass
Media), MM Docket Nos. 94-149/91-140, May 17, 1995 at 16-17.
In those comments, Silver King pointed to its litigation with
Urban as evidence that Silver King is a passive investor in
minority entrepreneurs who in fact retain their "independent
nature." There it stated:
For example, SKC [Silver King Communications] is cur-
rently involved in a dispute with Urban concerning
loan payments under the parties' loan agreement. Ac-
cordingly, this dispute is currently the subject of
litigation notwithstanding the operational assistance
SKC provided to Urban in launching WTMW(TV) and SKC's
subsidiary's 45 % nonvoting common stock interest in
Urban.
Comments, Minority/Female Ownership of Mass Media, MM Docket
Nos. 94-149/91-140, at 16.
70. Urban, in its reply of April 1, 1996, alleges
again that "Silver King has lacked candor and made misrepresen-
tations in claiming that it has held a non-attributable inter-
est in Urban." Further, it cites as misrepresentations seven
statements made by Silver King in its March 25, 1996 opposi-
tion. Urban argues that because the proposed transferee of
Silver King, Silver Management, is to be controlled by Barry
Diller, who is currently the chairman of the board and chief
executive officer of Silver King, the Silver King misrepresen-
tations also go to Silver Management's character. Specifi-
cally, Urban describes as "false" the following assertions made
by Silver King, in part through Evans' declaration: (1) that
Silver King was acting merely as a "lender" or a "non-voting
shareholder"; (2) that Evans interviewed a candidate for chief
engineer at White's request; (3) that Evans "recommended" the
-34-
engineering and law firms to White; (4) that White was the "ul-
timate decision maker and strategist" on the zoning matter; (5)
that White "asked" Silver King for the assistance of Evans and
the four other employees; (6) that White decided in most cases
that Silver King should pay vendors directly; and (7) that
Evans began work on the construction of WTMW(TV) in March 1990.
71. Urban, too, is alleged to have made statements
that cannot be "reconciled" with its earlier statements to the
Commission. In its comments in this proceeding, WACCI-VCR
notes that in the pro forma assignment proceeding, Urban repre-
sented in a May 12, 1994 consolidated opposition to the April
29, 1994 supplemented petition for reconsideration filed by
WACCI-VCR that Urban "controls, and has at all times controlled
the programming practices of WTMW-TV." Urban's position in its
informal objection and supplement thereto, according to WACCI-
VCR, is to the "contrary" in that it refers to Silver King's
"excessive influence over Urban's finances, personnel and pro-
gramming," it claims that Silver King has "controlled virtually
all of the programming for the station by virtue of a network
affiliation agreement," and it states that Silver King has
exercised "even postconstruction influence over programming and
personnel."
Discussion
72. It is indisputable that a permittee's or a
licensee's candor "is an issue of utmost importance to us."
Fox Television Stations, Inc., 10 FCC Rcd 8452, 8478 (1995).
While lack of candor is characterized by failure to disclose
material information, misrepresentation is characterized by
making a material false statement to the Commission. See Fox
River Broadcasting, Inc., 93 FCC 2d 127, 129 (1983). An intent
to deceive is an essential component of both. See Pinelands,
Inc., 7 FCC Rcd 6058, 6065 (1992). Indeed, the nature of the
misrepresentation or lack of candor is essentially irrelevant,
because it is the "willingness to deceive" that is most sig-
nificant. FCC v. WOKO, Inc., 329 U.S. 223, 227 (1946).
73. In determining whether allegations raise a sub-
stantial and material question of fact requiring an evidentiary
hearing, we are guided by the statutorily prescribed process of
Section 309(d)(1) of the Act, which mandates that we must first
determine whether the allegations of fact, if true, constitute
a prima facie case that grant of the application would not
serve the public interest, convenience and necessity. See 47
U.S.C. Section 309(d)(1). If so, the Commission must next
determine whether, "on the basis of the application, the
pleadings filed, or other matters which it may officially
notice," a "substantial and material question of fact is
presented." 47 U.S.C.
-35-
Section 309(d)(2). For purposes of this second stage of the
process, we must weigh against the allegations all evidence
before us and, on the basis of all of these materials, we must
decide whether the ultimate question of fact is "substantial,"
that is "whether the totality of the evidence arouses a
sufficient doubt on the point that further inquiry is called
for." Citizens on Jazz on WRVR, Inc. v. FCC, 775 F.2d 392, 395
(D.C. Cir. 1985)(citing Columbus Broadcasting Coalition v. FCC,
505 F.2d 320, 330 (D.C. Cir. 1974), Broadcast Enterprises, Inc.
v. FCC, 390 F.2d 483, 485 (D.C. Cir. 1968)). The ultimate
factual question whose substantiality is at issue is whether
the applicant intentionally misled the Commission. See id.
The final step requires the Commission to determine, whether or
not an evidentiary hearing is held, that the facts establish
that the public interest, convenience and necessity will be
served by granting the application.
74. Because White, the principal of the permittee
itself, was the source of the misrepresentation and control
allegations against Silver King, we found it prudent under the
Commission's Jefferson Radio policy to stay our approval of the
transfer of the Silver King stations from Speer, the control-
ling stockholder of Silver King, until resolution of those is-
sues. See Jefferson Radio v. FCC, 340 F.2d 781. Accordingly,
we gave Urban an opportunity to supplement the bare allegations
contained in its informal objection of March 6, 1996. It did
so by furnishing volumes of documentation relating to Silver
King's participation in the construction of WTMW(TV). Silver
King's opposition largely relies on the declaration by Evans,
who discloses his WTMW(TV) construction activities. But,
Silver King states that "the record is clear" that Urban ap-
proved all of the construction expenses and the engagement of
professionals and that White retained "overall control" of the
construction process. "As the foregoing demonstrates," con-
cludes Silver King, "Silver King does not have an attributable
interest in WTMW -- 'de facto,' 'active,' or otherwise." We
are confronted, therefore, with a level of activity on the part
of Silver King which Urban views as establishing an attribut-
able status, which Silver King contends does not jeopardize its
non-attributable status, and which we find today exceeds per-
missible participation on the part of a non-controlling stock-
holder and, therefore, constitutes an unauthorized transfer of
control.
75. In weighing Urban's general allegation that
Silver King misrepresented or lacked candor with respect to its
non-attributable status, the ultimate question is whether
Silver King intended to deceive the Commission. Given the var-
ious legal conclusions that can be drawn from Silver King's
documented activities, in tandem with Urban's passivity, we
-36-
find it difficult to ascribe to Silver King a motive to mislead
the Commission. Rather, we perceive Silver King's legal argu-
ments as a good faith belief that its participation in the con-
struction of WTMW(TV) was within the bounds of conduct of a
nonvoting, non-attributable stockholder. Moreover, today we
find that Silver King's activities constituted an unauthorized
transfer of control and were attributable. Our conclusion that
such a violation occurred, however, neither requires nor rests
upon a finding of scienter. Furthermore, as we explain below,
there is no evidence, circumstantial or otherwise, that Silver
King knew that its activities augmented its interest in Urban
to a level of control or, even, to attributable status. The
absence of any basis in the record for concluding that Silver
King believed it had violated the law, either the prohibition
on unauthorized transfers of control or the rule prohibiting
television duopolies, undercuts any inference of an intent by
Silver King to deceive the Commission concerning its relation-
ship with Urban. We believe, therefore, that Urban has failed
to raise a substantial and material question that Silver King
intended to misrepresent or conceal its construction-phase con-
duct from the Commission.
76. Moreover, we observe that Silver King's rela-
tions with the Commission in the past have been inconsistent
with an intent to mislead the Commission about its investment
in Urban. Since March 1990, when Silver King consummated its
financial agreements with Urban, Silver King has filed only one
set of applications with the Commission in which it was re-
quired to disclose its other media holdings, the September 13,
1995 applications which are the subject of the recent request
for transfer of control to Silver Management.12 See applica-
tions captioned in Transfer Order, FCC 96-89. In those ap-
plications, Silver King states that it "owns a 45% nonvoting,
convertible stock interest in Urban Broadcasting Corporation."
FCC File Nos. BTCCT-950913KE through KP, Exhibit 4. That
statement is not false. Further, Silver King, in conjunction
with Urban, demonstrated a willingness to disclose documents
and information, including submitting the numerous documents in
the pro forma application filed in 1989, furnishing executed
copies of those and additional documents for Urban's ownership
12 Although Silver King has filed numerous applications since
early 1990, most of them were for pro forma transfers or as-
signments, renewals, licenses to cover, or replacement or
change to construction permit. None of the applications per-
taining to those events requires the applicant to list its
media holdings.
-37-
report within 30 days of consummation of its investment, and
filing two amendments to the loan agreement as it did on Octo-
ber 20, 1992 and on July 7, 1993.
77. In its own ownership report, Silver King, for
every year since its investment in Urban, has reported that it
owns a 45-percent nonvoting, convertible stock interest in
Urban. Even while Commission approval of that investment was
pending, Silver King reported in its 1989 ownership report the
pendency of the application which it stated would result in its
holding a 45-percent nonvoting interest in Urban. Silver King
also appears to have revealed in two sets of recent comments --
those pertaining to attribution of broadcast interests and to
minority ownership of broadcast facilities-- its disputatious
and litigious relationship with Urban, as well as its "opera-
tional assistance . . . in launching WTMW(TV)." These actions
are inconsistent with an intent to deceive and we find that
Silver King's actions have been "consistent with a desire to
insure that the Commission had whatever information it needed"
to approve the transaction. Fox Television Stations, Inc., 10
FCC Rcd at 8490. Therefore, we find that Urban has failed to
raise a substantial and material question that Silver King in-
tended to conceal its construction-phase conduct from the Com-
mission.
78. Nor are we persuaded by Urban's allegations that
Silver King and its chairman/CEO Diller engaged in misrepresen-
tation through the seven enumerated statements concerning the
conduct of Silver King during the construction of WTMW(TV) made
in the Silver King opposition. See paragraph 69, supra. Spe-
cifically, we find that Urban has failed to make a prima facie
case with respect to two of those statements. The first, that
Silver King was acting only as a "lender" or a "non-voting
shareholder" is not a statement of fact that is capable of be-
ing proved true or false. Rather, it is a legal conclusion,
one for the Commission to draw based upon the facts on the
record. We find immaterial the second statement, that Evans
interviewed a chief engineer candidate "at White's request,"
and thus we infer no intent to deceive. The fact that Evans
interviewed such a candidate, whether at Urban's direction or
not, is irrelevant in assessing the locus of control.13 It is
the hiring and firing of employees, not the interviewing of
13 "Material" facts are those that the Commission considers
relevant to making its public interest judgment. See H.R. Rep.
No. 1800, 86th Cong., 2d Sess. 12, reprinted in 1960 U.S Code
Cong. & Admin. News 3516, 3520.
-38-
prospective personnel, that is material. E.g., David A.
Davila, 6 FCC Rcd at 2899. There is also no evidence to sug-
gest that Evans, on his own, hired the engineer he interviewed
or that the employment of that individual was not ultimately
acquiesced to by Urban. Accordingly, we find Urban's allega-
tions of misrepresentation as to these two statements without
merit.
79. Four of the seven statements alleged to be mis-
representation -- that Silver King's Evans "recommended" use of
the professional firms to White, that White was the "ultimate
decision maker and strategist" on zoning matters, that White
"requested" the assistance of Evans and the Silver King con-
struction team, and that White at the outset established direct
payment by Silver King of the vendors -- are characterized by
Urban in its April 1, 1996 reply as "false." Silver King, which
was precluded by the expedited pleading cycle specified in the
Stay Order from filing documents after April 1, 1996, did not
respond to Urban's allegations that any of the statements are
evidence of intentional misrepresentation or lack of candor
that warrant designation for hearing. Given that these state-
ments relate to indicia of influence or control, they are mate-
rial representations. However, weighing the allegations of
misrepresentation against all evidence on the record, we con-
clude that Urban has not raised a substantial factual question
warranting designation for hearing.
80. Based upon the substantial and numerous pieces
of evidence already in the record concerning Silver King's sub-
stantial role, we conclude that the statements could not rea-
sonably be deemed to have been motivated by an intent to de-
ceive the Commission. Indeed, Urban's allegations with respect
to Silver King's statements that Evans recommended the firms
and that White was the ultimate strategist appear not so much
to be that the statements are "false," but that Silver King did
not go far enough in characterizing the nature of its role.
Thus, Urban does not suggest that Evans was not the source of
the legal and engineering services used by Urban during the
construction phase, but asserts that instead Silver King,
rather than Urban, was the true "client" of these firms.
"Clients, not 'recommenders,'" such as Silver King, argues
Urban, "pay the bills." Similarly, while Evans states that
White was the "ultimate strategist" in the zoning matter, Urban
complains that Silver King attempted to hide its extensive role
in developing the strategy on zoning.
81. We do not believe, however, that, on this
record, Silver King's characterizations of its activities raise
an inference of misrepresentation or lack of candor. When the
-39-
Silver King opposition containing the purported misrepresenta-
tions was filed, on March 25, 1996, there was already on the
record Urban's March 15, 1996 supplement and four separate vol-
umes of exhibits. From the various correspondence between
Urban and Silver King or the professional firms, invoices from
those firms, and the expense records of the five Silver King
employees included in those exhibits, a reader could readily
discern that the scope of Silver King's participation in every
facet of the construction of WTMW(TV) was extensive. In fact,
in making the representation relating to the recommendation of
the professional firms, Silver King qualifies its statement by
stating that whether Silver King recommended the engineers and
legal counsel Urban engaged "is immaterial, especially given
the fact that Urban relied upon these for FCC filings and ap-
plications, which Mr. White reviewed and signed."14 And Urban,
itself, in alleging that the "strategist" statement is false,
points to McGuire Woods invoices in the record to argue that
Evans' name appeared some 182 times while White's name appeared
only nine times. Moreover, Evans' own declaration in accom-
panying the Silver King opposition clearly indicates that he
participated extensively in the construction activities. In
these circumstances, therefore, we do not believe that Silver
King's description of its activities suggests that it has at-
tempted to deceive the Commission.
82. As to the other two of the four statements made
by Silver King -- that White requested Evans' assistance and
that White set up the direct payment plan at the outset -- we
do not believe that Urban has raised a substantial factual
question to support its assertion of misrepresentation. Spe-
cifically, the record contains evidence of White's express ac-
quiescence in the active participation by the Silver King em-
ployees, including written updates to White from Evans on the
substitute tower site and a letter from White to the tower site
owner authorizing Evans' entry to the site "on behalf of Urban
14 Notwithstanding Urban's contention to the contrary in its
reply, we find no evidence that Silver King attempted to
"create a semblance" of attorney-client relationship between
Urban and Dow Lohnes. We observe that Silver King represented
only that Urban had "utilized" the services of Dow Lohnes. In
light of Urban's receipt of letters from the firm, his compli-
ance with the firm's directive to sign a vendor proposal, and
his apparent review and signing of FCC applications prepared by
the firm, we find that Urban, in fact, "utilized" the firm's
services.
-40-
Broadcasting Corporation. " In these circumstances, we con-
clude that Urban has not raised a substantial question that
Silver King has falsely characterized the nature of White's
relationship with the Silver King employees.
83. Similarly, we believe Urban has not raised a
substantial factual question that Silver King made misrepresen-
tations regarding the direct payment arrangement. Whether or
not White agreed at the outset to establish a direct payment
procedure by Silver King, that procedure was freely employed by
White, whose memos forwarding bills to Silver King are included
in the record. Most significantly in that regard, the record
contains two letters from Urban to Silver King principals
plainly acknowledging the direct payment scheme. For example,
in the October 14, 1992 letter to Silver King, Urban states
that "we have an agreement with Home Shopping Network (HSN) to
purchase and finance all equipment and materials at this time."
84. Finally, the last of the seven alleged misrepre-
sentations is that Evans began work on the construction of
WTMW(TV) in March 1990, rather than in February 1990, as Urban
insists was the case. In fact, the McGuire Woods invoices fur-
nished by Urban to the Commission prior to Evans' representa-
tion as to his March 1990 commencement date clearly indicate
that he was involved in the zoning issue as early as February
9, 1990. Evans' name appears three times in the February 1990
McGuire Woods invoices. In view of this evidence on the
record, it is reasonable to determine that Silver King, through
Evans' statement, incorrectly recalled by one month his com-
mencement date on the WTMW(TV) project. Given the passage of
time since the event in question, more than six years, Evans'
statement might well be seen as displaying a "faulty shading of
recollection," Grenco, Inc., 39 FCC 2d 732, 737 (1973), rather
than the necessary element of intent to deceive. See Weigel
Broadcasting Company, 2 FCC Rcd 1206, 1211 (1987). In sum, we
find that the totality of the evidence does not warrant desig-
nation for hearing with respect to the seven alleged misrepre-
sentations made by Silver King.
85. As for assertions made against Urban, WACCI-
VCR's objective in pointing to Urban's allegedly irreconcilable
statements is unclear. If WACCI-VCR intends to raise questions
of misrepresentation on the part of Urban so as to implicate
its character qualifications, we note that Urban's positions,
when read in the context of all of its statements, are not in-
consistent. The primary issue in the pro forma Urban assign-
ment proceeding, as raised by WACCI-VCR, is whether Silver
King's contractual rights in Urban endow it with de facto con-
trol. In its opposition filed jointly with Silver King in that
proceeding, Urban refuted that Silver King wielded control. By
-41-
contrast, the primary issue raised by Urban in the Silver King
transfer proceeding is whether Silver King's interest in Urban
renders it a cognizable stockholder, a role not necessarily
coincidental with that of a holder of de facto control. In
light of these two congruous lines of argument, the only Urban
statement cited by WACCI-VCR that may appear to depart from
them is Urban's allegation in its March 6, 1996 informal objec-
tion that Silver King has "controlled virtually all" of the
station's programming "by virtue of a network affiliation
agreement." This statement suggests that Urban believed that
Silver King had control over WTMW(TV)'s programming, but only
through the Home Shopping agreement. In contrast, and consis-
tent with its primary contention that Silver King has not a
controlling, but an attributable, interest in WTMW(TV), Urban
argues in its March 15, 1996 supplement that Silver King "has
continuing influence over Urban's programming" and that Silver
King's construction activities, in tandem with its having "vir-
tually all of the air time on the station" renders Silver King
"more than a passive investor." To highlight this distinction,
in its April 1, 1996 reply, Urban attempts to distinguish be-
tween attribution and control arguments:
The staff's 1990 letter, the 1992 [Commission] deci-
sion, and the Urban/Silver King 1992 pleading con-
cerned whether the loan documents and affiliation
agreement gave Silver King actual control over Urban,
not whether Silver King's conduct made it an attrib-
utable owner. Urban has fought to retain control,
but Silver King has acted improperly as an attribut-
able owner, attempted to seize control, and has now
made misrepresentations about its active role.
(Emphasis included.) In light of its subsequent, qualifying
comments, Urban's arguments are compatible with its contention
that Silver King should be deemed to hold an attributable, not
a controlling, interest in WTMW(TV). In sum, Urban's various
allegations raise no substantial question as to its "propensity
to deal honestly" with the Commission. Policy Regarding Char-
acter Qualifications in Broadcast Licensing, 102 FCC 2d 1179,
1189 (1986).
EX PARTE MATTERS
86. In its April 29, 1994 supplementary pleading,
WACCI-VCR also claims that Urban's failure to serve WACCI-VCR
with the affiliation, loan and security agreement amendments
violates the Commission's ex parte rules. According to WACCI-
VCR, Section 1202(b)(1) and 1204 of those rules, 47 C.F.R.
Sections 1202(b)(1) and 1204, prohibit presentation of
information to the Commission without providing notice to other
parties in a
-42-
restricted proceeding. And in comments filed in response to
the pleading schedule set forth in the Stay Order, WACCI-VCR
argues that Urban's informal objection, filed on March 6, 1996,
also should be considered an ex parte communication.
87. As for the first alleged ex parte contact, we
note that Section 73.3616(a) and (b) of the Commission's Rules
require the filing of all network affiliation contracts, agree-
ments, or understandings and amendments thereto between a tele-
vision broadcast station and a national network, as well as all
contracts, instruments or documents relating to the present or
future ownership or control of the licensee's stock, such as
pledge and security agreements. Urban, therefore, was comply-
ing with that rule when it filed the amended affiliation, loan
and security agreements in October 1992 and July 1993. The
submission of documents either authorized or required by the
Commission's rules generally does not constitute a prohibited
ex parte presentation. See 47 C.F.R. Section 1.1204(b)(1); see
also Daily Telegraph Printing Co., 59 FCC 2d 185, 194-95,
recon. denied, 38 RR 2d 1545 (1976); George L. Lyon, Esguire ,
5 FCC Rcd 4672 (Man. Dir. 1990). Accordingly, we conclude
that Urban's submission of amended documents without service to
WACCI-VCR were not prohibited ex parte presentations. With
respect to the second alleged ex parte contact, the informal
objection, that pleading was filed against the separate pro-
ceeding of the transfer of control of Silver King to Silver
Management pursuant to Section 73.3587 of our rules. The fact
that similar issues were involved in that separate proceeding
did not render it an impermissible ex parte proceeding in the
proceedings involving WTMW(TV), without further action by the
Bureau. See 47 C.F.R. Section 1.1200(a).15 Moreover, WACCI-
VCR has not been prejudiced by these filings, because it became
aware of the filings and commented on them and we are here
considering its comments thereto.
REMEDY
88. We today find that Urban and Silver King engaged
in an unauthorized transfer of de facto control of television
station WTMW(TV), Arlington, Virginia to Silver King, in viola-
tion of Section 310(d) of the Act. We also find that this
transfer in turn resulted in Silver King violating the duopoly
rule because during its control of WTMW(TV), Silver King also
15 Of course, since our decision here to consolidate the
proceedings, from now on these shall all be treated as inter-
related restricted proceedings.
-43-
controlled WHSW-TV, Baltimore, Maryland, the Grade B and Grade
A contours of which overlapped those of WTMW(TV). A transfer-
of-control violation warrants potential revocation of Urban's
permit and Silver King's authorizations if the transfer and
resulting duopoly rule violation were intentionally concealed
from the Commission through misrepresentation or through a lack
of candor. See, e.g., Black Television Workshop of Los
Angeles, Inc., 8 FCC Rcd at 4198; Silver Star Communications-
Albany, Inc., 6 FCC Rcd 6905, 6907 (1991). Here, we find there
is no substantial and material question of fact that either
Urban or Silver King acted with an intent to deceive the Com-
mission. Therefore, we shall not designate for revocation
hearing Urban's or Silver King's Commission authorizations.
Additionally, there are several public interest reasons why
designation for revocation is not warranted.
89. First, as regards WTMW(TV), its permittee Urban
and Urban's controlling stockholder, White, are both in bank-
ruptcy. To commence a revocation hearing could severely impair
the bankruptcy estate which is the subject of the bankruptcy
court proceeding and, consequently, would undermine the goals
of the bankruptcy laws, including efficient and economical ad-
ministration of cases, equality of distribution among credi-
tors,16 and a fresh start for debtors. See Fox Television
Stations Inc. (New York Post), 8 FCC Rcd 5341, 5344 (1993)
(citing Report of the Commission on the Bankruptcy Laws of the
United States, H.R. Doc. No. 93-137, 93d Cong., 1st Sess., Pts.
I and II, chapter 3 (1973)). We must "constantly be alert" to
determine whether our policies might conflict with other poli-
cies and whether such conflict can be minimized. LaRose v.
FCC, 494 F.2d 1145, 1146 n.2 (D.C. Cir. 1974). Because we find
that there are no serious unresolved questions concerning
Urban's character qualifications, our decision to pursue less
drastic remedies and not to designate Urban's authorization for
revocation is consistent with the Communications Act and with
our interest in the integrity of our rules.
90. Second, Silver King has sought consent to trans-
fer control from Speer to Silver Management. Allowing that
transaction to go forward would result in the ultimate acquisi-
tion of control of the twelve Silver King television stations
by Diller, who had no knowledge of and did not participate in
the unauthorized transfer of control of WTMW(TV) or in the
resulting duopoly rule violation. Moreover, the Commission
16 Silver King, according to Urban's supplement, is not
Urban's only creditor. See Urban Supplement at 16.
-44-
found in the Transfer Order that the public interest would be
served by the transfer of the Silver King stations to Silver
Management, FCC 96-89 at Paragraph 46, and nothing in the
record since that decision alters our conclusion in this
regard.
91. Notwithstanding our public interest determina-
tion to refrain from a revocation hearing in this case, we be-
lieve that a remedy is warranted to sanction Urban's and Silver
King's serious misconduct and to insure that such violations do
not occur in the future. To that end, we shall apply a two-
part remedy. First, we shall levy a forfeiture against each
entity commensurate with its violation or violations of our
rules. Second, we shall require modification of certain pro-
visions in the existing agreements between Urban and Silver
King. A transfer of Silver King includes not only a transfer
of control of the 12 television stations to Silver Management,
but a transfer of all Silver King investments in other sta-
tions, including Urban's WTMW(TV). Thus, we shall not, as
urged by WACCI-VCR, sever the Urban investment from the trans-
fer of the Silver King stations.
Forfeiture
92. A forfeiture penalty may be assessed against any
person found to have willfully or repeatedly failed to comply
with any of the provisions of the Communications Act or of the
Commission's rules. 47 U.S.C. Section 503(b)(1); 47 C.F.R.
Section 1.80(a). If the violator is a broadcast station
licensee or permittee, the forfeiture penalty shall not exceed
$25,000 for each violation or each day of a continuing
violation, except that the amount assessed for any continuing
violation shall not exceed a total of $250,000 for any single
act or failure to act. 47 U.S.C. Section 503(b)(2); 47 C.F.R.
Section 1.80(b). In determining the amount of forfeiture,
Section 503(b)(2)(D) of the Act obligates us to consider the
nature, circumstances, extent, and gravity of the violation
and, with respect to the violator, the degree of culpability,
any history of prior offenses, ability to pay, and "such other
matters as justice may require." 47 U.S.C. Section
503(b)(2)(D); see also 47 C.F.R. Section 1.8(b)(4). The
unauthorized transfer of control of WTMW(TV) to Silver King is
a serious violation of the statute and of our rules that
extended for a period of 42 months. During that period, Silver
King's misconduct also resulted in a violation of our duopoly
rule, Section 73.3555(b).
93. Applying the criteria of Section 503(b)(2)(D),
we note that Urban's controlling stockholder, White, was in-
experienced as a broadcaster. He entered into numerous agree-
ments with longtime group owner Silver King, which provided for
Urban's funding via a loan agreement that was twice modified to
-45-
accommodate the mounting construction expenses and which ini-
tially provided for its programming via an affiliation agree-
ment involving monthly compensation payments. It is incumbent
upon the permittee to actively oversee the construction of its
facility and upon the assisting broadcaster to defer to the
permittee by seeking affirmative and frequent approval of its
activities. Further aggravating Silver King's transfer-of-
control violation is the resulting duopoly violation. As for
Urban, the disparity in broadcasting experience between it and
Silver King does not exonerate Urban. Another factor warrant-
ing a diminished forfeiture for Urban is its bankrupt status.
Given these circumstances we believe that it is appropriate to
assess Urban a $25,000 forfeiture for the unauthorized transfer
of control and Silver King a $150,000 forfeiture for the un-
authorized transfer of control and violation of the television
duopoly rule.
94. In regard to this forfeiture, Urban and Silver
King are afforded a period of thirty (30) days from the date of
this order to show in writing why a forfeiture penalty should
not be imposed or to pay the forfeiture. Any showing as to why
the forfeiture should not be imposed or should be reduced shall
include a factual statement and such documentation and affi-
davits as may be pertinent. See 47 C.F.R. Section 1.80(f)(3).
Other relevant provisions of Section 1.80 are summarized in the
attachment to this Order and Notice.
Contractual Arrangements Between Urban and Silver King
95. We have previously reviewed the multiple con-
tractual arrangements between Silver King and Urban and found
that they did not present an unacceptable risk of arrogation by
Silver King of Urban's day-to-day responsibilities as the per-
mittee of WTMW(TV). Urban Telecommunications, 7 FCC Rcd 3867.
In reaching this decision, we evaluated the contractual ar-
rangements between Silver King and Urban on a predictive, not
an empirical, basis. Now, however, Silver King's actual con-
duct under the rubric of these contractual arrangements has
been documented. That conduct, most particularly Silver King's
role during the construction of WTMW(TV) which we here find
constituted an unauthorized transfer of control, strongly sug-
gests that our determination in Urban Telecommunications should
be revisited. We have done so and conclude that the collective
rights afforded Silver King under its various agreements with
Urban substantially abetted the overreaching conduct of Silver
King in constructing Urban's station.
96. To reduce the risk of further violations, we
believe that it is necessary to direct the parties to reform
certain provisions of their contractual arrangements. We note
-46-
that our action here with respect to the reordering of rela-
tionships is not prompted principally by any facial defect in
the particular contractual provisions we seek to reform, but by
the effect of these provisions when taken together with other
exacerbating considerations present in this case. We consider
it particularly important in this regard that both Silver King
and Urban are broadcasters and that their close relationship is
tied directly to specific programming affiliation arrangements
-- the Home Shopping Network -- in which Silver King's inves-
tor, Liberty Media Corporation (Liberty), has a substantial
stake and with which Silver King has both a past, and appar-
ently, a future relationship. When the loan and stock sub-
scription agreements were entered into in March 1990, Silver
King was commonly owned and controlled with Home Shopping.
Notwithstanding Silver King's assertion that it is, and has
been since December 1992, an entity independent from Urban's
program supplier Home Shopping Network, we believe that there
is a symbiosis between the two companies which warrants our
viewing them as one working for the good of the other. That
symbiosis is evidenced by a common owner, Liberty, which is the
controlling stockholder of Home Shopping and a beneficial owner
of approximately 21 percent of the equity of Silver King. See
Silver King SEC Form 10-K, filed November 1995, at 65 (attached
to Jovon's reply brief of April 4, 1996). In addition, Silver
King's Form 10-K indicates that in the years 1993 through 1995,
Home Shopping affiliation compensation for the twelve Silver
King stations accounted for more than 85 percent of Silver
King's net revenues in the years 1993 through 1995. The com-
monality of interests between the two purportedly independent
companies is further evidenced by the retention of Home
Shopping affiliation agreement-related cross-default provisions
in the Urban-Silver King loan agreement and other commercial
documents despite the 1992 separation of Silver King and Home
Shopping.17 Moreover, Silver King is not just Urban's dominant
creditor, it is also a substantial nonvoting equity investor in
Urban, with an array of investor rights in addition to its pre-
rogatives as a creditor. And both as a creditor and as an
equity investor, Silver King's rights are linked to Urban's
performance under its affiliation agreement with Home Shopping.
17 Further, as Silver King acknowledges in its opposition, it
has been publicly announced that Silver King may gain control
of its former parent, Home Shopping Network, which would place
Urban's creditor, stockholder and programmer under the control
of the same parent corporation.
-47-
97. Thus, if Urban fails to perform under the Home
Shopping affiliation agreement, Urban can be deemed in default
under the loan agreement and Silver King may then declare the
entire unpaid principal and interest immediately due and pay-
able and may, "at its exclusive option," cancel the Home
Shopping affiliation and/or "unilaterally adjust" the hourly
affiliation compensation rate. See Loan Agreement, Sections
7.01(d), 7.02. Additionally, in the event of such failure to
perform under the Home Shopping agreement, Silver King may,
under the put/call agreement, compel Urban to buy back Silver
King's stock at a purchase price equal to 45 percent of the
fair market value of the station. Given Urban's financial
dependence on Silver King, these provisions effectively insure
that Urban will be forced into an ongoing and indefinite af-
filiation with Home Shopping. The only feasible alternative
for Urban, should Silver King exercise its creditor/investor
rights, would be to sell its station.
98. Absent these entanglements -- for example, if
Silver King were merely a commercial lender -- the contractual
provisions with which we are concerned would be less troubling.
Outside lenders, those with no other ties to the licensee, such
as commercial banks, are singularly motivated by the licensee's
repayment of the principal, payment of scheduled interest, and
preservation of assets securing the loan. We acknowledge that
such an outside lender legitimately has concerns about the pro-
gramming affiliation agreements of the station operated by the
borrower-licensee, but that those concerns are prompted by an
interest in insuring the continued influx of revenues generated
by such affiliation, not by the commercial success of a given
television network or other programmer. Therefore, we under-
stand that lenders must be permitted latitude with respect to a
borrower-licensee's programming affiliation, but only insofar
as it relates to the licensee's ability to service the debt.
Lenders may, without triggering our attribution rules, hold
approval rights over a borrower's proposed programming affilia-
tion change so long as the approval right is guided only by
commercial reasonability. Silver King's current loan agreement
with Urban goes well beyond such "commercially reasonable" ap-
proval terms. Accordingly, to avoid attribution in WTMW(TV) by
Silver King, all references to the Home Shopping affiliation
agreement used in defining an event of default, as provided in
Section 7.01 of the loan agreement, or in defining Silver
King's rights upon such default, as provided in Section 7.02 of
the loan agreement, must be eliminated. Recognizing Silver
King's legitimate needs as a creditor, however, we would not
object to Silver King exercising a right of review and approval
over any change in Urban's affiliation, so long as that right
is defined in terms of reasonable commercial lender protec-
tions. Thus, for example, it would not be acceptable for
-48-
Silver King to hold the right to reject a proposed affiliation
change by Urban even though that change can reasonably be ex-
pected to be revenue neutral.
99. With respect to equity investments, we acknowl-
edge that the holders of these interests possess different ex-
pectations than do the holders of promissory notes. Stock-
holders of a licensee are entitled to ownership in the assets.
While there is risk associated with both a loan and an equity
interest, an equity investment constitutes risk capital en-
tirely subject to the fortunes of the corporate venture. We
assume that stockholders of a licensee which also own or have
an economic interest in a television network or programmer used
by the licensee invest in the licensee primarily to promote the
network or programmer.18 Our assumption is substantiated in
part by the "exit" devices which such investors typically at-
tach to their investments. One example of such an exit device
is a put right, which gives stockholders the right to compel
the licensee to purchase its full equity interest upon an aban-
donment of the stockholders' network or programmer. In the
face of the exercise of such a right, the choices for a lic-
ensee are limited: it may continue indefinitely to broadcast
programming it no longer believes is best for its viewers or
itself; it may obtain a loan to redeem the equity interest; or
it may sell its station in order to finance the purchase of the
equity interest. Where the equity investor is also a creditor
of the licensee and enjoys approval rights over the further
incurrence of debt, pledge of stock or security of assets, the
licensee in all likelihood could not pursue the choice of ob-
taining an outside loan to buy the equity interest. We do not
seek to bind an equity investor to a licensee in perpetuity,
but we also do not believe that an investor motivated by the
success of its affiliated network or programmer should hold the
power to compel programming decisions or to force disposal of
the station. Programming decisions constitute a fundamental
responsibility of the permittee or licensee as a public trustee
and such decisions cannot be dictated or coerced by another
party, financially or otherwise.
18 See, e.g., Assignment/transfer of licenses/permit of KCNC-
TV, Denver, WTVJ-TV (now WFOR-TV), Miami, KYW-TV, Philadelphia,
KUTV-TV, Salt Lake City, and KUSG-TV, St. George, Utah, to
Group W/CBS Television Stations Partners, a joint venture be-
tween Westinghouse Electric Corporation and CBS Inc. File Nos.
BALCT-941222KL-KM, KX; BTCCT-941222KN - KO.
-49-
100. Here, Silver King's put right, if exercised,
mandates that Urban purchase, within 90 days of Silver King's
demand, any Urban stock held by Silver King at a put price of
45 percent of the fair market value of all of the Urban assets.
The put option, which is valid so long as Silver King owns
Urban nonvoting stock, is triggered by certain "Specified
Events," including the failure of Urban to affiliate with Home
Shopping, to perform under that affiliation agreement, and to
renew such affiliation agreement "on terms consistent with the
agreements offered by HSN to its other broadcasting affiliates
(including the payment by HSN of reasonable hourly compensa-
tion)." Other "Specified Events" include a change in control
of Urban, a default by Urban under any of its loans, and a
material breach by Urban of its obligations under its certifi-
cate of incorporation or the shareholder agreement with Silver
King. In lieu of paying the put price, i.e., 45 percent of the
fair market value of its assets, Urban may sell all or substan-
tially all of its assets or all of the stock, including that
held by Silver King, to a third party. Silver King has the
right to make an offer for any or all of the assets or for all
of the common stock and a right of first refusal to match any
offer received. Net proceeds from the sale are to be distrib-
uted 55 percent to White and 45 percent to Silver King.
101. It is the Home Shopping affiliation-related
triggering event which concerns us here. Accordingly, all ref-
erences to the affiliation agreement must be removed from the
put/call agreement. However, we note that in the event Urban
no longer affiliates with Home Shopping, Silver King is free to
sell its 45-percent equity interest to a third party or may
convert that interest to a loan. Any loan agreement arising
out of the conversion, of course, must conform with the com-
mercial reasonableness discussed above. See paragraph 97,
supra.
102. Finally, we observe that there are other con-
tractual provisions which do not comport with our rules and
policies which are unrelated to the network/programming rela-
tionship. While we acknowledge that these provisions were be-
fore us earlier, in Urban Telecommunications, they were not the
subject of any parties' petition below. Nor has any party ob-
jected to the provisions in the proceeding initiated by the
Stay Order, FCC 96-100. Rather, our heightened independent
scrutiny of the contractual arrangements here has revealed that
certain contract sections should be reformed. First, the par-
ties must conform two covenants of Urban found in Article VI of
the loan agreement to track the Commission's approach to such
provisions in analogous cases. The Commission has ruled spe-
cifically on such covenants in the context of minority stock-
holder approval rights. See, e.g., Transfer Order, FCC 96-89
-50-
at 118; Quincy Jones, FCC 95-497 (released December 12, 1995)
at Paragraph 9; BBC License Subsidiary L.P. (WLUK-TV, 10 FCC
Rcd at 7927. In light of Silver King's role as minority
investor, as well as lender, we believe that the approval
rights in the Urban/Silver King loan document should be guided
by those cases. The first covenant prohibits Urban, without
the prior written consent of Silver King, from incurring
indebtedness except for that incurred in the ordinary course of
business not to exceed $50,000 in the aggregate at any one
time. See Loan Agreement, Section 6.02(a). We believe a
permittee requires greater borrowing latitude to freely operate
its station in the ordinary course. Accordingly, the parties
should either justify the $50,000 amount as providing
sufficient independence to Urban or increase the amount to a
level commensurate with past cases. Additionally, Section
6.03(d) of the loan agreement mandates that Urban submit a
quarterly budget at least 20 days prior to each fiscal quarter
that "shall be satisfactory in form" to Silver King. We
believe that this vaguely defined right endows Silver King with
virtual veto power over Urban's budget and as such accords
Silver King a level of authority inconsistent with passive,
nonattributable status. Accordingly, this provision must be
modified to eliminate the absolute and standardless nature of
this authority.
CONCLUSION
103. In view of the above, we find that there are no
remaining character qualifications issues against Urban or
Silver King. The remedy we apply here does not preclude us
from finding that Urban and Silver King are qualified to be
Commission licensees. Further, we find that allowing the
transfer of Silver King to Silver Management would serve the
public interest. However, we note that even after reforming
their contractual provisions, as discussed above, Urban and
Silver King will still enjoy several relationships, including
debtor-creditor, affiliate-network programmer, and company-
stockholder. When viewed separately, none triggers our at-
tribution rules. However, as the Commission stated in BBC
License Subsidiary L.P. (WLUK-TV), 10 FCC Rcd at 7933, to view
each of those relationships in isolation "would be to undermine
the underlying objectives of our attribution rules." Indeed,
one of the questions we posed in our pending rule making on
attribution was whether and under what circumstances multiple
relationships, which taken individually are nonattributable,
should be considered attributable in the aggregate. See Review
of the Commission's Regulations Governing Attribution of Broad-
cast Interests (Attribution Review), 10 FCC Rcd 3606, 3609
(1995). In accord with our action in BBC License Subsidiary,
therefore, we shall condition grant of Transfer Order, FCC 96-
89, upon the resolution of the attribution rule making. Thus,
-51-
whether Silver King's interest in Urban is attributable is to
be resolved by the pending rule making in Attribution Review.
104. Accordingly, pursuant to Section 1.115(h)(2),
we shall affirm our decision in Transfer Order, modified as
discussed here and below, and shall dissolve the stay issued in
Stay Order. In so doing, we expect that Silver King will amend
its relationships with Urban, as discussed above, and with
Jovon, as discussed below. To the extent, therefore, that
Silver Management objects to the imposition of the stay, that
argument is mooted by our action here.
SILVER KING'S RELATIONSHIP WITH JOVON
105. Jovon is the licensee of television station
WJYS(TV), Channel 62, Hammond, Indiana, which is located in the
Chicago designated market area (DMA), the same market in which
Silver King's WEHS-TV, Channel 60, Aurora, Illinois is located.
As set forth in Transfer Order, FCC 96-89 at Paragraphs 5-8,
Jovon initially petitioned to deny the transfer of control of
Silver King to Silver Management. It requested withdrawal of
that petition, but substituted a petition for declaratory
ruling, requesting that the Commission issue a two-part
declaratory relating to financial agreements and a network
affiliation agreement Jovon entered into with Silver King/Home
Shopping Network in 1990. Briefly, Jovon first alleges that
Silver King's proposed exercise of an option to acquire a 45
percent equity interest in Jovon would implicate the
Commission's cross-interest policy and second, that Silver
King's rights and powers obtained through the other agreements
constitute de facto control over Jovon and WJYS(TV). Silver
King refutes Jovon's allegations, arguing that the various
Jovon-Silver King agreements are consistent with Commission
case law and circumscribe no Commission policy or rule.
106. For reasons that follow, we find that Silver
King's full exercise of the existing option to buy a 45-percent
equity interest in Jovon would conflict with the Commission's
cross-interest policy. Additionally, we shall require amend-
ment or elimination of certain provisions in the Jovon-Silver
King agreements which, if fully exercised, would endow Silver
King with a potentially impermissible level of influence.
-52-
BACKGROUND
107. On August 7, 1990, Silver King19 entered into
an agreement to lend $3.6 million to Jovon, a minority-
controlled broadcaster, for construction and operation of
WJYS(TV), Hammond, Indiana. To secure the loan, Jovon's sole
shareholders, Joseph and Yvonne Stroud, pledged all of their
voting stock to Silver King and personally guaranteed repayment
of the loan. Additionally, Jovon entered into a security
agreement with Silver King, granting it a first position secu-
rity interest in all of Jovon's tangible and intangible assets,
excluding its FCC authorizations. As inducement for the loan,
Jovon granted to Silver King an option to acquire a 45 percent
nonvoting convertible stock interest in Jovon at an exercise
price of $45,000, as well as the right to "put," or sell, its
exercised or unexercised option to Jovon upon the occurrence of
certain events. Three weeks prior to the execution of these
documents, Jovon had entered into a television affiliation
agreement with Home Shopping to broadcast the home shopping
network fare.
108. As a result of network programming preemption
disputes between Jovon and Home Shopping, on August 18, 1994,
Home Shopping, then separate from Silver King, notified Jovon
that it was terminating the network affiliation agreement ef-
fective November 18, 1994. On October 21, 1994, Silver King
notified Jovon of its election to exercise the option to pur-
chase 45 percent of Jovon's stock.20 Jovon's president, Joseph
Stroud, by letter of November 23, 1994, offered to acquire
Silver King's option for $500,000. Such purchase, Stroud
wrote, "would remove" the cross-interest issue. Silver King
declined Jovon's offer.
19 As is true with the Urban-Silver King relationship, Jovon
initially entered the various agreements with Home Shopping,
then commonly owned with Silver King. Home Shopping is cur-
rently a separate entity in control of the network programming
affiliation agreements, while Silver King apparently became the
successor-in-interest to the financial and option agreements.
Accordingly, we shall refer to Home Shopping separately with
respect to the affiliation agreement.
20 I The option period, as set forth in Section 2.2 of the
option agreement, expires on the later of the termination of
the loan agreement and the expiration of the initial term of
the Home Shopping affiliation agreement.
-53-
109. Despite Silver King's repeated attempts, Jovon
has refused to consummate the option. In one such attempt, by
letter of November 30, 1994, Silver King indicated to Jovon
that it "would be willing to take whatever actions the FCC
might in the future request of it with regard to its stock
holdings in Jovon Broadcasting Corporation." In an October 11,
1995 letter, Silver King offered to "fully indemnify" Jovon
against any "consequences" of the cross-interest policy. And,
in the October 11, 1995 letter to Jovon, Silver King asserted
that Jovon's failure to perform under the Home Shopping affili-
ation agreement "would constitute an event of default under the
[Silver King] Loan Agreement, which alleged default has never
been waived by Silver King." The October 11, 1995 letter con-
tinues:
I have been advised by counsel that the Loan Agree-
ment and the related security documents, including
the Promissory Note, Guaranty, Security Agreement,
Pledge Agreement, Option Agreement and Leasehold
Mortgage (collectively, the "Loan Documents") provide
Silver King with comprehensive remedies in the event
of a default by Jovon. I am also advised that such
remedies include the right to declare all monies
under the Promissory Note (including all unpaid prin-
cipal, interest and any other amounts) immediately
due and payable, to take possession of Jovon's real
and personal assets and its issued and outstanding
Class A common stock.
110. In Transfer Order, the Commission ordered main-
tenance of the status quo between Jovon and Silver King pending
resolution of the petition for declaratory ruling. FCC 96-89
at Paragraph 48. Since that Commission action, according to
Jovon's March 25, 1996 comments, Silver King "effectively
blocked Jovon's ability to secure additional financing," which,
it argues, would have enabled it to fully repay the Silver King
loan. Silver King did so, maintains Jovon, by conditioning its
consent to the new financing on Jovon's forbearance from con-
testing "Silver King's ability to control Jovon."
111. In response, Silver King agrees that on March
19, 1996, Jovon's sole stockholders, the Strouds, pursuant to
the request of a commercial lender, sought Silver King's per-
mission to pledge their stock to the new lender. Silver King
executed an agreement permitting such pledge, but, according to
a copy of that agreement attached to Silver King's April 1,
1996 opposition, the permission was conditioned upon Jovon's
acknowledgement that Silver King "has the right" under the op-
tion agreement to acquire 45 percent of the equity of Jovon
"effective upon the issuance" by the FCC of a ruling in the
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pending declaratory ruling proceeding or in any rule making
proceeding in connection with the implementation of the Tele-
communications Act of 1996 "which permits such acquisition
(upon the satisfaction of any conditions imposed by the FCC)."
PLEADINGS RELATED TO JOVON'S PETITION FOR DECLARATORY RULING
Jovon Petition and Comments
112. First, Jovon urges the Commission to find that
Silver King's attempted exercise of an option to acquire a 45-
percent nonvoting convertible common stock interest in Jovon
would violate the Commission's cross-interest policy should be
deemed void. Jovon maintains that the Commission has never
approved a 45 percent convertible common stock interest in a
television station held by a party owning and controlling
another television station in the same market. Moreover, Jovon
asserts that rights accorded to Silver King through other
agreements entered into with Jovon, such as the loan and re-
lated agreements and the put/call agreement, combine to create
the "potential for undue influence, contingent control and un-
fair competition" by Silver King in the Chicago market in con-
travention of the Commission's cross-interest policy.
113. Second, Jovon seeks a declaration by the Com-
mission that rights and powers accorded Silver King in the sev-
eral agreements demonstrate that Silver King is "attempting to
exercise a degree of control over Jovon" in violation of the
Commission's duopoly rule, as it applies to Jovon's WJYS(TV)
and Silver King's WEHS-TV.21 Specifically, Jovon points to
provisions in the agreements which, inter alia, entitle Silver
King to convert its 45 percent equity to voting stock at any
time after exercising the option, endow Silver King with ap-
proval rights over various Jovon corporate actions, obligate
Jovon to provide Silver King with financial information and
advance annual budgets, and create a default on the loan when
Jovon fails to perform under the Home Shopping Network program-
ming affiliation agreement. While maintaining it has exercised
control over its television station WJYS(TV), Jovon claims it
21 That rule, Section 73.3555(b), generally proscribes a
party from owning attributable interests in or controlling
television stations whose Grade B contours overlap. According
to engineering exhibits furnished by both Jovon and Silver
King, the Grade B contour of Jovon's WJYS(TV) is almost com-
pletely encompassed by the Grade B contour of Silver King's
WEHS-TV.
-55-
had no prior broadcasting experience nor FCC counsel to draw
upon in executing the several agreements with Silver King.
114. In its recent comments, in response to the Stay
Order, Jovon largely reiterates allegations made in its peti-
tion for declaratory ruling. In addition, Jovon asserts that
the Silver King transfer should not proceed without addressing
Silver King's prospective exercise of its powers over Jovon.
According to Jovon, misconduct by Silver King "has transpired
and is on-going," contrary to the Commission's conclusion in
Transfer Order, FCC 96-89 at Paragraph 8, in which it stated
that Silver King had not yet engaged in behavior which called
into doubt its qualifications as a licensee. Further, Jovon
contends that Silver King's "web of agreements" with Jovon, in
addition to exercising the option to obtain a 45 percent equity
interest, requires waiver of the cross-interest policy and the
duopoly rule. To grant such a waiver, according to Jovon,
would essentially "rescind" the policy and the rule. Accord-
ingly, argues Jovon, the Commission must take steps to block
Silver King's future actions with respect to Jovon.
Silver King Oppositions
115. In response, Silver King argues that Jovon's
concern as to the cross-interest policy is an attempt to jus-
tify its breach of the option agreement and that allegations of
de facto control are "equally pretextual." Station WJYS(TV),
Silver King suggests, is valued at approximately $60 million,
the recent purchase price of a similarly situated Chicago area
UHF station. The option, therefore, could be valued at as much
as $27 million. With respect to the cross-interest allega-
tions, Silver King argues that Jovon's WJYS(TV) and Silver
King's WEHS-TV serve "substantially different areas" and Silver
King's ownership of a nonvoting interest in Jovon, therefore,
would implicate no cross-interest concerns. Geographically,
according to Silver King, the two television stations are
licensed to different communities, Hammond, Indiana, and
Aurora, Illinois, which are located 44 miles apart in different
states and which constitute separate primary metropolitan sta-
tistical areas (PMSAs).
116. The Gary-Hammond PMSA and the Aurora-Elgin
PMSA, Silver King notes, lie on opposite sides of the larger
Chicago consolidated metropolitan statistical area, of which
each PMSA, along with others, are a part. And the city-grade
contour of Jovon's WJYS(TV), contends Silver King, covers only
slightly more than one-half of the land area and less than 65
percent of the population covered by the city-grade contour of
Silver King's WEHS-TV. The overlap area of the city-grade con-
tours of the two stations falls within the Chicago market,
-56-
which, Silver King asserts, is served by numerous competing
broadcast outlets, including 16 television stations, three low
power television stations, and 89 radio stations. Given these
"dramatic" differences in areas served and the plethora of
television services in the overlap area, argues Silver King,
the likelihood of any diminution in competition and diversity
of viewpoints resulting from Silver King's exercise of an
equity stake in Jovon is "greatly attenuated."
117. Even if Jovon's WJYS(TV) and Silver King's
WEHS-TV are deemed to serve substantially the same area, Silver
King maintains that its 45-percent equity interest in Jovon
would be in accord with Cleveland Television Corp., 91 FCC 2d
1129 (Rev. Bd. 1972), rev. denied, FCC 83-235 (May 18, 1983),
aff'd 732 F.2d 962 (D.C. Cir. 1984). In that case, the Commis-
sion permitted under the cross-interest policy the owner of an
AM-FM radio combination to acquire a convertible nonvoting one-
third equity interest in a licensee of a television station in
the same market and guarantee one-third of the bank loan used
by an attributable investor to purchase its one-third equity
interest in the television station licensee. The nonattribut-
able stockholder's financial involvement, Silver King argues,
citing the Court of Appeals, could be seen to extend to 44 per-
cent of the paid-in capital of the television station lic-
ensee.22 Further, Silver King adds that it would have no vot-
ing rights in Jovon or representatives on its board of direc-
tors. The two stations, maintains Silver King, would continue
to operate independently in all respects, including program-
ming, sales and employment.
118. As for Jovon's allegations relating to Silver
King's attempted de facto control of Jovon and its WJYS(TV),
Silver King argues first that Silver King's lack of control of
Jovon is evidenced by its year-long attempt and failure to ex-
ercise its contractual right under the option agreement to ac-
quire a 45-percent equity interest in that company. Further,
Silver King asserts that under Commission rules, a loan to a
licensee does not confer a cognizable interest. This is par-
ticularly true, argues Silver King in its recent filing, be-
cause Silver King provides no programming to Jovon and "has no
22 The Court of Appeals stated that "[a]t the extreme," the
nonattributable investor's financial involvement "could be seen
to extend" to 44% of the paid-in capital: the one-ninth of the
licensee's capitalization covered by the guarantee plus the
one-third preferred stock capital contribution. Cleveland
Television Corp. v. FCC, 732 F.2d at 968.
-57-
ability to control or influence that programming in any
way. . . ." Additionally, according to Silver King, the loan
documents are "typical" of arrangements entered into by parties
"in the ordinary course of business" and, it argues, citing
Crosby N. Boyd, 54 FCC 2d 669 (1975) and Data Transmission Co.,
44 FCC 2d 935 (1974), that the Silver King approval rights
serve only to "protect" the loan. Moreover, Silver King as-
serts, relying on National Broadcasting Co., 6 FCC Rcd 4882
(1991), that neither options nor convertible nonvoting stock
are cognizable or constitute elements of control under the Com-
mission's attribution rules and cases. Even if converted to
voting stock, adds Silver King, a 45-percent voting interest
would not be attributable in view of Jovon's single majority
shareholder status. Accordingly, Silver King contends that the
Commission should deny Jovon's dual requests and declare that
the exercise of the option and performance of the associated
agreements comply fully with the Commission's rules and poli-
cies.
Silver Management Reply
119. Silver Management contends that in the pleading
cycle set forth in Stay Order, Jovon essentially seeks recon-
sideration of its voluntary dismissal of its petition to deny
the Silver King transfer. Now, according to Silver Management,
Jovon seeks to have its allegations resolved in the Transfer
Order proceeding. And Jovon's request that the Commission "re-
strain" Silver King's activities as a condition of its grant of
the Silver King transfer, according to Silver King, is moot in
light of the express condition placed upon Silver King in
Transfer Order, that is, that there be a maintenance of the
status quo by Silver King, either as currently controlled by
Speer or proposed to be controlled by Diller through Silver
Management. FCC 96-89 at Paragraph 48.
DISCUSSION
120. Like Urban, Jovon has entered into numerous
contractual arrangements with Silver King. Presently, Silver
King, to whom Jovon currently owes approximately $1.6 million
of the initial loan amount of $3.6 million, is Jovon's only
creditor and has the ability under the loan documents to pre-
vent Jovon from obtaining alternative financing. Silver King
is entitled under the loan documents, upon Jovon's breach of
the Home Shopping affiliation agreement, to take possession of
Jovon's real and personal assets and, with prior Commission
approval, all of its voting stock. Because of the affiliation
termination, Jovon is not presently an affiliate of Home
Shopping, but Silver King, via its letter of October 11, 1995,
indicated to Jovon that its "comprehensive" remedies stemming
-58-
from the alleged breach of the affiliation agreement remain
viable. Even absent an equity interest in Jovon, we believe
that Silver King has the potential to influence the licensee
commensurate with that of a cognizable stockholder. Addition-
ally, Silver King's station WEHS-TV is located in the same
market, Chicago, where Jovon operates WJYS(TV). Thus, not only
must Silver King avoid holding an attributable interest in
Jovon, as is true with respect to Urban, but it must also avoid
implicating the cross-interest policy. In light of these re-
quirements, we seek to remove any opportunity for Silver King
to exercise a level of influence in Jovon such that would
trigger our attribution rules or to hold a "meaningful" inter-
est that would trigger our cross-interest policy. We find that
to achieve these objectives certain contractual provisions,
including some cited by Jovon, must be eliminated and that the
equity option must not be exercised in full. We reiterate, as
we did in connection with our discussion of Silver King's re-
lationship to Urban, that a reordering of rights and powers
accorded to Silver King is necessitated by its multiple rela-
tionships with the licensee and the nature of the particular
parties involved.
121. The Silver King agreements separately entered
into by Urban and Jovon are, provision-for-provision, nearly
identical. We shall, therefore, reference provisions cited
with respect to the Urban-Silver King agreements, above, and
require reformation of these provisions consistent with our
earlier discussion of them. First, as was required with re-
spect to Silver King's loan agreement with Urban, the parties
must amend the two Jovon covenants -- that relating to the in-
currence of debt23 and that relating to the submission of bud-
gets24 -- as noted above. See paragraph 101, supra. We shall
not, as Jovon urges, require deletion of the covenant mandating
23 That provision is found at Section 6.02(a) of the Jovon-
Silver King loan agreement. The Jovon-Silver King loan agree-
ment contains a separate covenant, at Section 6.02(i), not
found in the Urban-Silver King loan document and which also
requires Silver King's written consent in order to enter into
any "contract or commitment" relating to its stock or assets
involving aggregate payments of more than $5,000. We under-
stand this provision to further severely restrict Jovon's bor-
rowing ability. Accordingly, this covenant must be amended to
conform with the discussion in paragraph 101, supra.
24 That provision is found at Section 6.03(d) of the Jovon-
Silver King loan agreement.
-59-
Jovon's submission of financial statements to Silver King on a
quarterly basis and a balance sheet and statement of income and
expenses on an annual basis. That provision is one we find
serves as a reasonable lender protection, with little risk of
use as a means of control.
122. Next, as required of the Urban-Silver King loan
agreement, all references in the Jovon-Silver King loan agree-
ment and related documents25 relating to the Home Shopping af-
filiation agreement and its breach as an event of loan default
must be eliminated. We require those deletions even though
Jovon's affiliation with Home Shopping apparently has termi-
nated and we expect that Silver King will take no legal or
other action under the loan agreement and any related documents
based solely upon a breach of the affiliation provisions. How-
ever, as we permitted under the Urban-Silver loan, Silver King
may be accorded an approval right over any change in Jovon's
network affiliation, so long as that right is predicated upon
commercial reasonableness. Further, we observe that Jovon is
subject to additional impermissible covenants under its loan
agreement not contained in Urban's loan agreement with Silver
King. Under Section 6.02(l) of the Jovon-Silver King loan
agreement, Jovon may not, without the prior written consent of
Silver King, "[s]uffer any material increase in excess of the
reasonable range in the broadcast industry in the same or simi-
lar markets" with respect to compensation payable to any em-
ployee, or any bonus payment made to any employee, or any mate-
rial change in personnel policies, insurance benefits or other
compensation arrangements. This Silver King right impinges
substantially on Jovon's day-to-day authority over personnel
matters. Accordingly, this section must be deleted or amended
so as not to interfere with Jovon's fundamental personnel re-
sponsibilities as a licensee.
123. Additionally, we agree with Jovon that Section
6.02(f) of the loan agreement and Section 6.3 of the option
agreement should be deleted. That covenant precludes Jovon
from building or acquiring another broadcast station in any of
the 50 largest television markets in the United States without
the prior written consent of Silver King. This provision is,
in essence, a non-competition covenant which prevents Jovon
from engaging in broadcasting in markets where Silver King may
25 Those related documents include the promissory note,
security agreement, pledge agreement, leasehold mortgage and
guaranty.
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not even own and operate stations. We have permitted non-
competition agreements so long as they are "reasonably ancil-
lary to the legitimate purposes of an agreement." Inter-
continental Radio, Inc., 62 RR 2d 1565, 1567 (1985). Thus,
such covenants have been approved in connection with the sale
of stations, where the agreement was reasonably in duration
and geographic extent and necessary to protect the good will of
the station being sold. Id. (citing Raul Santiago Roman, 38
FCC 290 (Rev. Bd. 1965). Here, it is unclear why a non-
competition provision is "reasonably ancillary" to the purposes
of a loan agreement, whose legitimate purpose is to earn a
specified return on principal. Similarly, the legitimacy of
such a provision in an option agreement is questionable in that
the exercise of the option is for future ownership rights in
WJYS(TV), not present rights in that station. Further, in
light of the borrowing constraints placed on Jovon, which alone
sufficiently protect Silver King as Jovon's lender, we find
this covenant is too intrusive upon Jovon's future broadcast
activities and is inconsistent with the public interest. Ac-
cordingly, we require that it be deleted from both documents.
124. As to whether Silver King's exercise of the
option would violate our cross-interest policy, we note that
the Commission's cross-interest policy generally focuses on the
potential adverse effects on competition and diversity in situ-
ations where a party owns an attributable interest in one media
outlet and enjoys a "meaningful relationship" with another
media outlet serving "substantially the same area." Reexami-
nation of the Commission's Cross-Interest Policy, 2 FCC Rcd
3699, 3699, 3700 (1989). The ultimate objective of the cross-
interest policy is to insure continued competition and diver-
sity. See id. at 3699. Concerning the first element of the
cross-interest analysis, contrary to Silver King's reliance on
its 45-percent equity interest being "consistent" with our case
law, the Commission has not in the context of its cross-
interest policy tolerated a nonattributable equity interest in
excess of 33 percent. See Cleveland Television Corp., 91 FCC
2d at 1133. Nor has Silver King propounded a persuasive argu-
ment for raising that precedential ceiling. While the one-
third minority investor in Cleveland Television had also guar-
anteed one-third of the funds borrowed by an attributable
shareholder for its one-third equity investment, in evaluating
the cross-interest issue, both the Commission and the Court of
Appeals focused their attention upon only the equity investment
as represented by the nonvoting preferred stock. See Cleveland
Television Corp., 91 FCC 2d at 1134 ("And we decline to rule,
as a matter of law, that the non-voting preferred stockholder
relationship that exists between" licensee and investor is
"ipso facto a prohibited cross-interest."); Cleveland Tele-
vision Corp. v. FCC, 732 F.2d at 970-71 ("The relevant question
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accordingly may be framed: Did the FCC act reasonably when it
determined that the Malrite preferred stock holdings in [the
licensee] did not create a 'meaningful relationship' with the
proposed station?"). We do not, therefore, view precedent as
establishing a cross-interest ceiling of 44 percent equity in-
terest in a station or other media outlet. Funds obtained with
the aid of a guaranty are not attributable to the guarantor
unless and until that guarantor makes payments on the subject
loan. Until such time, those payments will not be viewed as
equity contributions. See, e.g., Dorothy J. Owens, Debtor in
Possession, 5 FCC Rcd 6615, 6617 (1990). We find that Silver
King's 45 percent equity interest in Jovon would exceed that
previously found permissible under our cross-interest policy.
125. As to the second element of the policy, we note
that the Commission generally equates "substantially the same
area" with "substantially the same market." Reexamination of
the Commission's Cross-Interest Policy, 2 FCC Rcd at 3700; see
also Farmville Broadcasting Co., 47 FCC 2d 463, 464 (1974).
Here, both the Jovon and Silver King stations are located
within the Chicago DMA, or television market. That the com-
munities of license of the two stations belong to separate
PMSAs is, under our existing policy, irrelevant to our analy-
sis. The underlying objective of the cross-interest policy is
to prevent a diminution of competition and diversity in a given
market. Without data indicating that the revenues for each
station and viewership are equally dichotomized or other rele-
vant economic information demonstrating the division of the
Chicago market into two distinct economic/advertising sectors,
we are not persuaded that Silver King would not operate its own
Chicago-market station so as to protect its investment in the
Jovon Chicago-market station or to otherwise suppress competi-
tion. We are particularly concerned about competition between
the two stations where Silver King also is a creditor of Jovon,
yielding a greater incentive to protecting a financial interest
in WJYS(TV) than the equity interest would reflect. See, e.g.,
Quincy D. Jones, FCC 95-497, released December 12, 1995 at
Paragraphs 34-35. Moreover, we are concerned about the impact
on diversity that would ensue in the Chicago market were Silver
King to fully own and operate WEHS-TV while holding a substan-
tial equity and debt interest in WJYS(TV). Finally, Silver
King has chosen not to submit a market-specific study demon-
strating that its common ownership of these interests would not
unduly diminish diversity and competition in the Chicago mar-
ket.
126. In sum, therefore, Silver King's holding of a
45-percent ownership interest in Jovon does not comport with
existing cross-interest policy or Commission precedent on that
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policy. Nor has evidence been provided on this record to jus-
tify expansion of that policy or precedent. Accordingly,
Silver King may not exercise its option in full at this time.26
It may, however, exercise the option so that it acquires no
more than one-third of the equity of Jovon. Silver King may do
so only so long as it does not penalize Jovon for not issuing
to Silver King stock representing less than 45 percent of the
licensee.
127. There is a further concern related to the op-
tion. In the event Silver King does not exercise its option,
the put/call agreement between Jovon and Silver King permits
Silver King at any time to "put" its unexercised option to
Jovon. At such time, Jovon must essentially redeem, or buy
back the unexercised option, at an amount equal to 45 percent
of the fair market value of the assets of Jovon's station. If
Jovon is unable to raise the amount of funds to redeem the op-
tion, Jovon may, pursuant to the put/call agreement, sell
WJYS(TV) and deliver to Silver King 45-percent of the proceeds
from the sale. We believe that the option itself, even un-
exercised, entitles Silver King to 45-percent of the value of
Jovon's television station and is, therefore, the equivalent of
an equity stake in WJYS(TV). In short, it appears that through
the put/call agreement, Silver King already holds a 45-percent
financial interest in Jovon and that the option exercise price
of $45,000 is a mere formality. Thus, the put/call agreement
must be amended to delete references to full redemption of the
option and to align it with the one-third equity interest
limit, as discussed above.27 In addition, the Jovon-Silver
26 The question of whether and to what extent the Commission
should, under its cross-interest policy, continue to limit
common ownership of attributable and non-attributable equity
interests in separate facilities serving the same market re-
mains at issue in Attribution Review. Should our decision in
that proceeding ultimately determine that continued limitation
of such interests is no longer warranted, Silver King would,
consistent with that decision, be free to exercise its option
fully.
27 The option agreement includes a provision which Jovon al-
leges grants to Silver King rights greater than those
permissible for a nonattributable stockholder. Section 4.4
grants to Silver King, its counsel, accountants, engineers and
other authorized personnel access to the assets, officers, em-
ployees, agents, books and records of Jovon and Jovon must fur-
nish all information relating to the assets and the company
"that they reasonably request at any time" during the option
(footnote continued)
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King put/call agreement must be modified so as to eliminate
references to the Home Shopping agreement, as discussed in the
context of the Urban-Silver King put/call agreement, in para-
graph 100, supra.28
CONCLUSION
128. Upon modification of these various contractual
arrangements between Jovon and Silver King, we believe that
Silver King may proceed with exercise of the option for up to
one-third of the capital stock of Jovon without violating the
Commission's ownership rules or cross-interest policy. Accord-
ingly, we remove from Transfer Order the condition requiring
maintenance of the status quo between Jovon and Silver King.
FCC 96-89 at Paragraph 48. However, in the event Silver King
serves as more than a lender to Jovon, that is, it becomes an
equity investor in Jovon and/or provides network programming to
its station, we believe that whether Silver King's interests in
Jovon should be deemed attributable is a question to be
resolved in Attribution Review, our pending rule making
proceeding on attribution. Accordingly, we shall attach as a
condition to Transfer Order, FCC 96-89, that Silver King's
attributable status with respect to Jovon is subject to the
outcome of that rule making.
SILVER MANAGEMENT'S REQUEST FOR CLARIFICATION
129. Silver Management requests that the Commission
delete the condition in Transfer Order which requires prior
Commission approval of any material increase in the percentage
of subscribers of TCI cable systems within any of the eleven
markets served by Silver King's television stations. FCC 96-89
at Paragraph 48. As an alternative to the prior approval
condition, Silver Management proposes that it will notify the
Commission prior to the consummation of any transaction
resulting in TCI's ownership or control of cable systems
serving in the aggregate
(footnote continued)
period. We shall not require deletion or modification of this
provision in that it mirrors the access-to-information rights
granted to creditors under loan agreements.
28 Any provisions relating to Silver King's put right in its
Shareholder Agreement with Jovon also must be deleted.
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more than 50 percent of the television households in any of the
Silver King television markets. Absent this relief, Silver
Management states that it has been "advised" that the prior
approval condition relating to TCI subscribers is "unaccept-
able" to TCI and that it "cannot proceed" with the Silver
Management/Silver King transaction if the condition remains in
place. Jovon opposes Silver Management's request for deletion
and alternative proposal.
BACKGROUND
130. The Transfer Order conditionally approved the
transfer of Silver King and its broadcast stations to Silver
Management, a corporation whose stockholders are Arrow Holdings
L.L.C., wholly owned by Diller, and Liberty, wholly owned by
TCI, and found that TCI's interest in the Silver King stations,
as currently structured, was neither attributable nor in vio-
lation of the Commission's cross-interest policy. A cross-
interest policy analysis is ordinarily triggered where an en-
tity owns an attributable interest in or controls a media out-
let in a market and has a "meaningful" relationship with
another media outlet serving substantially the same area. In
Transfer Order, we found that TCI's 21.37 percent indirect
equity interest in Silver King could reasonably be deemed
greater than its face value given the control rights attached
to TCI's stock. We stated that TCI's interest in Silver King,
augmented by a control premium, might "at least approach" the
33 percent equity interest permitted in Cleveland Television,
the largest level of equity allowed to date under the cross-
interest policy. FCC 96-89 at Paragraph 29. We agreed,
however, with Silver King's contention that the TCI cable
systems did not serve "substantially the same area" as that
served by the Silver King television stations because the TCI
cable subscriber households constituted only from 2.86 percent
to 21.16 percent of the total television households in the
eleven television markets. Id. We determined that "so long as
TCI's financial interest in Silver King does not increase and
TCI's cable subscribership is not materially augmented. . . in
any of the eleven affected markets, we shall not attempt to
divine the exact value of TCI's interest in Silver King," and
we found that that interest "does not raise cross-interest
policy concerns." Id. at Paragraph 30 (notation omitted).
131. We concluded that TCI's "current level" of
financial interest in the Silver King stations and its opera-
tion and control of "currently held" cable systems in the
Silver King television markets would not impair economic com-
petition and diversity in those eleven markets. Accordingly,
we conditioned grant of Silver King's applications upon our
prior approval of: (1) "any increase" in TCI's interest in
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Silver King; (2) "any material increase" in the percentage of
subscribers of TCI-owned cable systems within any of the eleven
markets; and (3) "any substantial and material modification" to
the agreements among Silver Management, Diller and TCI.29
Transfer Order, FCC 96-89 at Paragraphs 30, 48. Silver
Management seeks deletion or alternative relief with respect to
only the second of those conditions, the so-called "subscriber
condition."
PLEADINGS RELATED TO SILVER MANAGEMENT'S REQUEST FOR
CLARIFICATION
Silver Management Request
132. The subscriber condition, Silver Management
asserts, is "unnecessary" under Commission precedent and pol-
icy. The cross-interest policy, claims Silver Management, is
violated only where each of three elements can be shown: that
an entity has an attributable interest in a media outlet and a
"meaningful" relationship with another media outlet; that the
two media outlets serve "substantially the same area"; and that
the arrangement is likely to result in a "significant" diminu-
tion of competition or diversity. None of the three is present
in the eleven Silver King markets, according to Silver Manage-
ment. As to whether TCI's interest in Silver King is "meaning-
ful," the element we left undetermined in Transfer Order,
Silver Management assails our conclusion that a control premium
should attach to TCI's 21.37 percent equity stake. Silver Man-
agement argues that the record establishes that even upon con-
version of TCI's non-voting stock, Diller will continue to vote
all Silver King stock held by Silver Management and TCI and he
will continue to control the Silver King board of directors.
Further, Silver Management points out that pursuant to the
stockholders agreement on file in the Transfer Order proceed-
ing, TCI generally would be restricted from selling its shares
of Silver Management and would be precluded for five years from
selling any of its stock in Silver King, and thereafter could
do so only after offering the stock to Diller. Silver Manage-
ment concludes that because Diller's association with Silver
King has increased the value of the company's publicly traded
stock and because his abdication of control would likely have a
29 There was a fourth condition that required the maintenance
of the status quo between Jovon and Silver King pending resolu-
tion of Jovon's petition for declaratory ruling. Silver Man-
agement does not object to this condition, which we remove in
this order. See paragraph 127, supra.
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negative effect on the value, it is Diller's interest, not
TCI'S, that "is likely to carry a premium." Additionally,
Silver Management cites non-quantitative reasons for viewing
TCI's interest as less than "meaningful," including the absence
of any material involvement by Liberty in the management or
operation of Silver King or the stations and the separate op-
eration of the stations and the TCI cable systems.
133. Silver Management also asserts that because the
Commission concluded in Transfer Order that TCI's interest did
not violate the cross-interest policy, the imposition of condi-
tions in anticipation of a "theoretically possible set of
future facts" has not been and should not be Commission policy.
Instead, Silver Management insists that the "proper course" for
the Commission is to deal with changes as, and if, they occur.
Here, Silver Management notes that it has been publicly an-
nounced that Silver Management will acquire TCI's controlling
interest in Home Shopping Network, a transaction which would
increase TCI's equity interest in Silver King and change cer-
tain corporate governance provisions. Silver Management com-
mits that it will seek the Commission's approval with respect
to any changes in Liberty's or TCI's interests in Silver King
prior to consummation of the Home Shopping transaction. Ac-
cordingly, Silver Management contends that the Commission could
"revisit" the issues of TCI's relationship to, and subscriber-
ship overlap with, Silver King in connection with that acquisi-
tion.
134. Finally, Silver Management argues that the sub-
scriber condition "hamstrings" TCI's core business, the owner-
ship and operation of cable television systems, in the eleven
of the 23 largest television markets in the country. The prior
approval condition, according to Silver Management, would dis-
advantage TCI in any competitive bidding to acquire additional
cable systems in these markets and would be delayed in closing
on a large acquisition involving a number of cable systems only
one of which may be located in a Silver King market.
135. As an alternative to the subscriber condition,
Silver Management commits that it will seek to have Liberty/TCI
notify Silver Management prior to the consummation of a trans-
action that leads to TCI's owning or controlling cable systems
within one of the Silver King markets and its serving more than
50 percent of the television homes passed.30 Silver Management
30 It bases the 50-percent threshold alternative upon the
now-repealed Section 76.501(b)(1)(ii), which prohibited
network/cable cross-ownership where the cable systems pass more
than 50 percent of homes passed in any television market.
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would, in turn, notify the Commission and submit a further
cross-interest policy analysis, according to Silver Management.
Jovon Objection
136. Jovon objects to Silver Management's request
for clarification on three grounds. First, it contends that
the subscriber condition insures effectuation of the cross-
interest policy, which, it argues, is a policy that is preven-
tive, not remedial in nature. According to Jovon, citing Re-
examination of the Commission's Cross-Interest Policy, Policy
Statement, 4 FCC Rcd 2208, 2209 (1989), the Commission applies
the policy to anticipate "potential" anticompetitive abuses
before they occur. Second, Jovon contends that TCI's cable
systems serve substantially the same area as Silver King and
Jovon in the Chicago market because that market is "uniquely
consolidated." Cable systems in Chicago, according to Jovon,
are represented by a common advertising agent, which gives TCI
and others advertising access to all of Chicago. And, asserts
Jovon, of the 128 communities served by TCI in the Chicago
area, the majority are situated within at least one of the six-
teen counties served by Silver King's WEHS-TV. Moreover, it
states that TCI's cable subscribers represent about 33 percent
of the total cable households in the Chicago market and its
systems serve nearly 17 percent, not the 14.79 percent reported
by Silver Management, of the television households. This
"anticompetitive situation," concludes Jovon, is "aggravated"
when Silver King's potential 45-percent ownership interest in
Jovon's Chicago-market television station WJYS(TY) is consid-
ered. Third, Jovon urges rejection of the alternative proposal
suggested by Silver Management, that it notify the Commission
when TCI's penetration exceeds 50 percent in a Silver King mar-
ket, because the subscriber condition as imposed by the Commis-
sion "will maintain necessary oversight."
Silver Management Reply
137. In response, Silver Management notes that Jovon
acknowledges that Chicago is currently served by not only TCI,
but, among others, another three of the largest and five of the
28 largest cable system operators in the country. Further,
Silver Management contends that Jovon's data regarding TCI's
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one-third share of Chicago-market cable households are "ir-
relevant" to the cross-interest element of "substantially the
same area." As for the common advertising agent, Silver Man-
agement states that that agent sells national and regional ad-
vertising only and is not the exclusive agent of the cable sys-
tems. In view of Jovon's statistics regarding the Chicago
market, Silver Management asserts that its own commitment to
provide notice of any TCI transaction by which TCI's cable sub-
scribership exceeds 50 percent, will provide the Commission
with "ample opportunity" to undertake a cross-interest analysis
and take any action it deems appropriate.
DISCUSSION
138. In Transfer Order, the Commission found that
the equilibrium achieved by TCI's current financial interest in
Silver King and the current percentage of television households
served by TCI cable systems in the Silver King markets avoided
cross-interest concerns. In so doing, we refrained from ascer-
taining the value of TCI's 21.37 percent interest, as augmented
by an appropriate control premium, and essentially mandated
maintenance of the status quo by imposing prior approval condi-
tions on any changes in TCI's financial interest in Silver King
or in TCI's subscribership in the relevant markets. However,
Silver Management's request now compels us to assign a value to
the TCI interest. It argues that no premium should be calcu-
lated and that the value of TCI's interest in Silver King
should be set at 21.37 percent, a level not deemed "meaningful"
under Commission precedent. Upon such a finding, Silver Man-
agement concludes, in essence, that TCI may be relieved of the
obligation to seek prior Commission approval of "any material
increase" in the number of its subscribers and may be un-
fettered in its acquisition of cable systems in the Silver King
markets. For reasons discussed below, we determine that the
level of TCI's current financial interest is likely within the
boundaries set by Cleveland Television and shall, therefore,
remove the subscriber condition. We shall accept, however,
Silver Management's alternate notification proposal and condi-
tion our grant on compliance with it.31
31 Jovon contends that because Silver Management rejects the
TCI subscriber condition placed on Transfer Order, the Commis-
sion must set the application for hearing, as Section 1.110 of
the Commission's Rules provides. We note that Silver Manage-
ment also seeks relief from the condition pursuant to Section
1.106(a) of the Rules, which sets forth procedure for petitions
for reconsideration. For purposes of efficiency, we shall pro-
ceed pursuant to the Section 1.106 procedure.
-69-
139. In determining the level of TCI's financial
interest in Silver King, we continue to believe that it is ap-
propriate to factor in a control premium. A "control premium"
is that percentage of increase over the book value of a block
of stock which carries control of the corporation. See, e.g.,
Thomas D. Hall, Comment, "Valuing Closely Held Stock: Control
Premiums and Minority Discounts," 31 Emory L.J. 139, 144
(1982). In contrast to control, a control block of stock can
be defined as an aggregate of shares which inherently conveys
to the owner the entitlement to more than 50 percent of
corporate voting power. See id. at 157. Silver Management
abjures our consideration of the attachment of a control
premium based upon what it terms our "apparent factual error"
in the Transfer Order in describing TCI as the "ultimate
controlling stockholder" of Silver King upon a "change in law."
FCC 86-89 at Paragraph 29. What we were attempting to convey
in that statement was not that TCI possessed control of Silver
King, which was a separate issue confronting us in Transfer
Order, FCC 96-89 at Paragraph 21, but that TCI possessed a
block of Silver King stock which carried a conditional right to
obtain control. Thus, Silver Management's observations that
under the stockholders agreement Diller will, even upon a
"change in law," continue (1) to vote all of Silver
Management's Silver King stock, (2) to vote all of TCI's Silver
King stock, and (3) to control the board, are relevant to the
locus of control of Silver King, but do not negate TCI's owner-
ship of a control block. We agree with Silver Management that
Diller will control Silver King even upon a "change in law."
But Diller will do so only by virtue of an irrevocable proxy
granted him by TCI, whose ownership of the control block of
Silver King stock gives it the power to grant such control.
140. TCI's restricted ability to transfer its Silver
Management and Silver King stock does not, as Silver Management
suggests, annul the control premium. While it is true that the
control premium is by its very nature realized only at the
moment of sale, TCI may, under the stockholders agreement,
transfer all, and only all, of its Silver King stock after the
fifth anniversary of the agreement, with a right of first re-
fusal to Diller. Whether the purchaser is Diller or a third
party, TCI is likely to seek, and the purchaser is likely to
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pay, a control premium for the TCI control block.32 Moreover,
upon a termination of the stockholders agreement entered into
by Diller and TCI, which occurs, inter alia, if Diller no
longer serves as chairman and/or CEO and/or president of Silver
King, not only do Diller's management and control rights via
the proxy terminate, but TCI is free to dispose of its control
block of publicly traded Silver King stock. It is the antici-
pated value of the stock upon sale with its added control pre-
mium that we believe presently constitutes TCI's financial in-
terest in Silver King.
141. That Diller's association with Silver King in-
creases the value of Silver King stock and that his disassoci-
ation would decrease the value is relevant only to the base, or
book, value of all shares of Silver King, regardless of who
holds those shares. It is irrelevant to the existence or non-
existence of a control premium attaching to TCI's control block
of shares in that a premium is added to the book value, what-
ever that may be at a given time. Thus, absent a showing that
the value of the stock would be so reduced in value upon
Diller's departure as to render it negligible for purposes of
cross-interest policy analysis, a showing which has not been
made here, we believe that application of a control premium to
determine the ultimate value of TCI's interest in Silver King
is appropriate. Indeed, to ignore the control premium would
underestimate the potential financial motive TCI would have in
altering its cable system operations which might retard compe-
tition and diversity in the eleven affected markets. As we
stated in Transfer Order, at issue under the cross-interest
policy is not whether TCI can take an active role in the Silver
King stations, but whether it could adjust its cable television
system practices to protect its investment in the television
stations. FCC 96-89 at Paragraph 29.
142. We do not purport to have expertise in the val-
uation of stock or premiums. Accordingly, for purposes of a
cross-interest analysis, we shall utilize the average control
32 If Diller rejects the right of first refusal to obtain the
TCI block of stock, it appears that the third-party purchaser
would be willing to pay a control premium because the stock-
holders agreement would terminate under the terms of the agree-
ment in light of TCI's ceasing to own at least one million
shares of Silver King stock, an event of termination. Thus,
the third-party purchaser would be free of the proxy and any
other obligations TCI was subject to under the stockholders
agreement.
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premium paid in public stock markets. Empirical studies indi-
cate that the average is between 40 and 50 percent above the
price of minority shares. See John D. Emory, Jr., Comment,
"The Role of Discounts in Determining 'Fair Value' Under Wis-
consin's Dissenters' Rights Statutes: The Case for Discounts,"
1995 Wis. L. Rev. 1155 1160 (1995) (citing Paul J. Much & Louis
A. Paone, Fair Value in Dissenter Actions, in Financial Valua-
tion: Business and Business Interests U9A-1, U9A-4 (James H.
Zukin et al. eds., 1995)). Here, even were we to ascribe a 50-
percent premium to TCI's 21.37 percent interest, TCI's finan-
cial interest would amount to 32.07 percent, less than the
financial interest permitted in Cleveland Television. Conse-
quently, we find that TCI's interest in Silver King is "not
meaningful" for purposes of our cross-interest analysis.
143. Having found that TCI's interest in Silver King
is "not meaningful" for purposes of triggering our concern
under the cross-interest policy, we may and will accommodate
Silver Management's request to remove the third condition in
Transfer Order that required our prior approval before TCI
could materially increase its subscribership reach in markets
served by Silver King stations. Given the relatively high
level of TCI's ascribed interest in Silver King, however, we
believe it would be prudent to accept Silver Management's pro-
posal that it notify the Commission prior to consummation of a
transaction which would result in TCI's subscribership exceed-
ing 50 percent of the television households in any one of the
markets where Silver King operates a television station. We
believe that this action will also respond to Jovon's concerns
about the potential impairment of competition and diversity in
the Chicago market.33 In the event the "must carry" rules are
no longer in place, we reserve the right to revisit this mat-
ter. Further, we expect that, with the exception of the Jovon-
related condition, which we also remove today, the remaining
conditions in Transfer Order will be honored.
33 In the event Silver King were to acquire a one-third
equity interest in Jovon, TCI's interest in Jovon, through its
interest in Silver King, would be approximately eleven percent
(33% times 32.07%). We do not believe that this attenuated
level of financial interest compels us to impose a more onerous
notification or prior approval requirement for the Chicago
market.
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CONCLUSION
144. We find that Speer, the current controlling
stockholder of Silver King is qualified to be a Commission
licensee and that under our Jefferson Radio policy, see Jef-
ferson Radio Co. v. FCC, 340 F.2d 781 (D.C. Cir. 1984), he may
transfer control of the Silver King broadcast stations. We
also affirm our conclusion in Transfer Order, FCC 96-89 at
Paragraph 46, that Diller and Silver Management, the parties to
whom Speer seeks to transfer control, are fully qualified to be
Commission licensees and that a grant of the applications would
serve the public interest. However, our grant in Transfer
Order is subject to the further condition that attribution of
the Urban and Jovon stations to Silver King is subject to the
outcome of the pending attribution rule making, Attribution
Review, 10 FCC Rcd 3606 (1995).
145. Accordingly, IT IS ORDERED that the informal
objection, filed by Urban, and treated as a petition for recon-
sideration of our action in Transfer Order IS GRANTED IN PART
AND DENIED IN PART.
146. IT IS FURTHER ORDERED that the petition for
reconsideration of the subscriber condition, filed by Silver
Management, IS GRANTED and that the third condition of para-
graph 48 IS DELETED AND REPLACED BY the condition that:
Silver Management notify the Commission prior to con-
summation of Liberty/TCI's acquisition of cable sys-
tems or other transaction whereby the aggregate per-
centage of television households served by cable
systems owned or controlled by TCI in any of the
Silver King television markets would exceed 50 per-
cent, as discussed in paragraph 142, supra.
147. IT IS FURTHER ORDERED that the petition for
reconsideration of the Commission action in Urban Telecommuni-
cations Corp., 7 FCC Rcd 3867 (1992), filed by WACCI-VCR, IS
DISMISSED.
148. IT IS FURTHER ORDERED that the petition for
declaratory ruling, filed by Jovon, IS GRANTED IN PART AND
DENIED IN PART and that the condition relating to Jovon in
Transfer Order is deleted.
149. IT IS FURTHER ORDERED that, as directed in
paragraph 93, supra, Silver King must either show why the for-
feiture of $150,000 should be reduced or not imposed or should
pay the forfeiture.
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150. IT IS FURTHER ORDERED that, as directed in
paragraph 93, supra, Urban must either show why the forfeiture
of $25,000 should be reduced or not imposed or should pay the
forfeiture.
151. IT IS FURTHER ORDERED that the stay imposed in
Stay Order, FCC 96-100, of the Commission's action in Transfer
Order, FCC 96-89, IS DISSOLVED.
FEDERAL COMMUNICATIONS COMMISSION
William F. Caton
Acting Secretary
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June 12, 1996
SEPARATE STATEMENT
OF
COMMISSIONER SUSAN NESS
Re: Silver King Reconsideration
With adoption of this item, Silver Management may proceed with
its acquisition of the Silver King stations. I believe that
Silver Management's stated intention to provide entertainment,
news, and informational programming will serve the public in-
terest.
Our cross-interest policies were designed to ensure that our
decisions consistently protect and further the diversity and
competition goals which underlie our ownership rules. They are
based on concerns with conflicts of interest, unfair competi-
tion, and detriments to the public interest that may result
from certain business relationships. In addressing removal of
the cable subscriber condition, preserving competition and
diversity remain my paramount concerns.
In voting for the original transfer order, I considered the
totality of factors before me at that time, including TCI's
financial interest in, and cable overlap with, the Silver King
stations. TCI's financial interest in Silver King was an im-
portant issue because as the relationship is currently struc-
tured, TCI's Liberty will hold 21.37 percent of Silver King
equity (approximately 32 percent after applying the control
premium). This is barely under the one-third percentage
allowed under our precedent.
In the original transfer order, we agreed that the TCI cable
systems did not serve "substantially the same area" as the
Silver King stations because TCI cable penetration in those
markets ranged from 2.86 percent to 21.16 percent. After eval-
uating the issues involved and Barry Diller's proven track
record and reputation for independent management, I concluded
that TCI's proposed interest in the Silver King stations did
not violate the Commission rules and precedent, including its
cross-interest policy.
We are now asked to allow TCI to increase its cable subscriber-
ship in any Silver King market up to a 50 percent penetration
level, based on TCI owning less than one-third of Silver King.
I support today's decision to allow for an ownership interest
of less than one-third because it comports with our rules and
precedent.
An ownership interest exceeding one-third, however, would
present an entirely different situation. In this regard, I
note that Silver King has announced its intention to acquire a
stake in Home Shopping Network which could result in TCI's
Liberty acquiring a 45 percent financial interest in Silver
King. Such a level would eclipse the standard defined in our
precedent, even without the control premium and would present a
new mix of factors that would have to be considered in their
totality. Silver Management has committed to seek Commission
approval prior to consummation of the HSN transaction, and as-
sumes the risk of any adverse finding that may result.
On this basis, I agree with our action today approving the
Silver King transfer.