NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR RECORD ONLY $// MO&O, Assignment of License, BBC License Subsidiary L.P. //$ $/ 73.3555 - Mutiple Ownership /$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 FCC 95-179 In re Applications of ) ) BBC LICENSE SUBSIDIARY L.P. ) File Nos. BALCT-941014LH (Assignor) ) BALTT-941014LI ) and ) ) SF GREEN BAY LICENSE ) SUBSIDIARY, INC. ) (Assignee) ) ) For Assignment of Licenses of ) WLUK-TV, Green Bay, Wisconsin, ) and W40AN, Escanaba, Michigan ) MEMORANDUM OPINION AND ORDER Adopted: April 27, 1995 Released: April 27, 1995 By the Commission: Commissioners Barrett and Ness issuing separate statements. 1. The Commission has before it for consideration the above-captioned applications seeking consent to the assignment of licenses of WLUK-TV, Channel 11, Green Bay, Wisconsin, and television translator station W40AN, Escanaba, Michigan, to SF Green Bay License Subsidiary, Inc. (SF Green Bay). NBC, Inc. (NBC) timely filed a petitio to deny the applications, SF Green Bay opposed that petition, and NBC replied. On February 22, 1995 and March 30, 1995, the Commission staff sent letters of inquiry to SF Green Bay, which responded to the letters on March 8, 1995 and on April 3, 1995, respectively. In the meantime, on February 24, 1995, NBC requested dismissal of its petition to deny. The dismissal request is currently pending. Even were we to grant NBC's request for withdrawal, we remain obliged to consider the merits of its allegations against the subject applications. Booth American Company, 58 FCC 2d 553, 554 (1976). Without deciding whether a network, such as NBC, has standing to oppose the assignment of one of its own network affiliates to a party owned in part by a competing network, we will now address the merits of the petition to deny. BACKGROUND Ownership of the proposed assignee 2. Savoy Pictures Entertainment, Inc. (Savoy Pictures) is a publicly traded entertainment company whose principal business is financing, marketing and distributing major motion pictures. Fox Television Stations, Inc. (FTS) is currently the licensee of eight television stations and an affiliate of Fox Broadcasting Company, a television network. Savoy Pictures, through its Savoy Stations, Inc. (collectively, Savoy), and FTS, through its FTS Investments, Inc. (collectively, Fox), have recently formed a hierarchy of companies through which they propose to acquire from BBC License Subsidiary L.P., a unit of Burnham Broadcasting Company L.P. (collectively, Burnham), WLUK-TV, Green Bay, Wisconsin, and television translator W40AN, Escanaba, Michigan. The proposed licensee of the broadcast stations, SF Green Bay, is wholly owned by SF Broadcasting of Green Bay, Inc., which, in turn, is wholly owned by SF Broadcasting of Wisconsin, Inc. (SF Wisconsin). 3. In Exhibit 1 to its applications, SF Wisconsin concludes that Fox is not a party, because Fox's stockholdings in SF Wisconsin consist of only nonvoting common and preferred shares. Savoy, according to the applications, holds all of the outstanding Class A common stock, which represents all of the company's voting stock and 75 percent of its "common stock equity," while Fox holds all of the Class B nonvoting common stock, which carries no initial voting rights and represents 25 percent of the "common stock equity." Although the purchase price for each share of common stock is $146,666, under the terms of the SF Wisconsin Subscription and Stockholders Agreement (Stockholders Agreement), Fox is to pay in an additional $100,000 for each of its shares of common stock, or an extra $2.5 million. 4. In the Stockholders Agreement, Savoy grants to Fox an irrevocable option, exercisable for up to one year following the acquisition of WLUK-TV, to purchase an amount of shares from Savoy such that Fox and Savoy will each own one-half of the shares of common stock. All stock purchased by Fox from Savoy will be Class B common, entitling Fox to no voting rights upon exercise of the option. However, commencing approximately three weeks prior to the third anniversary of the Stockholders Agreements, Fox may, in its sole discretion, exchange all of its Class B nonvoting shares for an equal number of Class A voting shares, subject to "receipt of any necessary regulatory approvals." Upon conversion, if it has exercised its option in whole, Fox would hold negative control of SF Wisconsin. 5. As to SF Wisconsin preferred stock, Fox holds 3,000 shares, constituting all such outstanding stock, at a purchase price of $3 million, or $1,000 per share. The preferred stock carries no voting or conversion rights and pays no dividends. Fox may redeem its preferred stock at the end of a calendar year or upon sale of the station to the extent the value of WLUK-TV exceeds a compound annual growth factor of 15 percent. The maximum amount to be paid for redemption of the preferred stock is $3 million, the amount paid in by Fox. In the event of liquidation or dissolution of SF Wisconsin, Fox shall not be entitled to receive, or be paid out of the SF Wisconsin assets available for distribution to stockholders, any payment in respect of its preferred stock beyond that which is redeemable based upon the increase-in-value formula. Governance of the proposed assignee 6. The business and affairs of SF Wisconsin, as set forth in that company's Amended and Restated By-Laws, will be managed by or under the direction of the board of directors. Initially, the SF Wisconsin board is composed of three directors: two Savoy principals, Victor Kaufman and Lewis Korman, and a former Fox employee, Thomas Herwitz. In response to the staff's inquiry as to how the initial directors were selected, SF Wisconsin represents in its March 8, 1995 response that at the time of the initial discussions with respect to the formation of an entity to acquire television stations, Savoy and Fox "agreed" that Kaufman, Korman and Herwitz would be the initial directors. Each initial director is slated to serve a three-year term, ending on October 12, 1997. No director may be removed, unless that director also is an employee of the company and his employment has terminated. If such employee is terminated, holders of Class A, voting common stock, "shall have the right to remove such Board Member and to designate a substitute. . . ." See Stockholders Agreement at Section 4.02(b). Subsequent boards are selected by the Class A stockholders. 7. The SF Wisconsin board may be expanded to four directors during the first three years, if Savoy so elects. See Stockholders Agreement at Section 4.02(a). In the event Fox converts its Class B nonvoting stock to Class A voting stock, which it may do after September 20, 1997, the board will expand to four members, one of which Fox will be entitled to designate. See Stockholders Agreement at Section 4.02(c)(ii). Fox can designate two of the four board members if, in addition to converting its stock, it has also exercised its option to acquire half of all common shares. Id. at Section 4.02(c)(i). 8. Notwithstanding the nonvoting features of Fox's common stock in SF Wisconsin, Section 4.04 of the Stockholders Agreement endows Fox with the right to approve any "Major Decision." Major decisions are specified as those relating to: entering into any line of business or activities other than the acquisition and operation of WLUK-TV; mergers, consolidations, or sale of all or substantially all of the assets of the company and licensee; the acquisition of another business; the sale or transfer of any securities owned or held by the company; incurrence of debt with respect to acquisition of WLUK-TV; issuance, sale or exchange of stock; making a material tax election; amending the certificate of incorporation or by-laws; and declaring or paying a dividend other than as provided in the Stockholders Agreement. 9. Management of the "business, affairs and operations" of SF Wisconsin's television station, WLUK-TV, is delegated to the company's president, who is to manage "subject to the authority of the Board of Directors." See Stockholders Agreement at Section 4.03, as amended on October 31, 1994. Herwitz has been selected to serve as president for a three- year term, ending on March 17, 1997. According to the declaration of Chase Carey, executive vice president and chief operating officer of FTS, it was Carey who "suggested to Savoy that the new entity should employ Mr. Herwitz as its president." See Declaration of Chase Carey, attached to Letter from SF Wisconsin, March 8, 1995. Carey adds in his declaration: I explained that Mr. Herwitz would be leaving the employment of Fox and recommended that Messrs. Kaufman and Korman meet with him. Following their meeting, Messrs. Kaufman and Korman advised me that they were very impressed with Mr. Herwitz and agreed that the new entity should employ him. I then discussed with them Mr. Herwitz's proposed compensation arrangements. Thereafter, with the concurrence of Messrs. Kaufman and Korman, I presented and negotiated the principal terms of his compensation and employment with Mr. Herwitz. As a condition to their approval of the hiring of Herwitz, Carey states, Kaufman and Korman "informed" Carey that they must have the sole authority to supervise and, if they ever believed it appropriate, to discharge Herwitz. "I acknowledged and accepted this condition," Carey adds. 10. The only other officers named thus far, according to the application, are Savoy principals Terri Napolitani, who is to serve as secretary, and Howard Bass, who is to serve as treasurer. Additionally, upon the recommendation of Herwitz, according to SF Wisconsin, Kaufman and Korman approved the hiring of William Cunningham, who "[i]t is contemplated . . . will be elected as an officer" of SF Wisconsin once Savoy-Fox venture acquisitions are made. Korman states in his declaration that at the time of the recommendation, Cunningham, who had worked for Herwitz at Fox's WTTG(TV), Washington, D.C., "was still employed by Fox." Cunningham's job, Herwitz states, is to assist Herwitz in the evaluation of potential station acquisitions and in the management of the stations to be acquired. 11. Under Section 4.06(b) of the Stockholders Agreement, SF Wisconsin "shall at all times use its best efforts" to operate WLUK-TV as a Fox network affiliate "in good standing." Upon consummation, this provision states, SF Wisconsin shall cause the proposed licensee to enter into a Fox network affiliation agreement for its WLUK-TV for a 10-year period, commencing upon the termination of that station's current affiliation agreement. General allegations of NBC 12. NBC opposed the SF Wisconsin applications on two grounds, requesting that the Commission dismiss the applications, designate them for evidentiary hearing, or conduct a further inquiry. First, it disputes that Fox should be accorded non-party status, arguing instead that WLUK-TV is attributable to Fox because of its de facto control of, or at least its influence over, SF Wisconsin. Adding WLUK-TV to the eight television stations already owned by Fox, as well as to those which Fox seeks to acquire via applications pending before the Commission, would, NBC asserts, place Fox in violation of the 12-station, national ownership cap. See 47 C.F.R. 73.3555(e). 13. Second, NBC contends that the alien ownership of SF Wisconsin does not comport with Section 310(b) of the Communications Act, 47 U.S.C. 310(b). NBC points to Fox's representation in an ongoing proceeding that it is 99%-owned, through intervening companies, by The News Corporation Limited, an entity organized under the laws of Australia. Equity ownership in the parent of a licensee, NBC contends, is statutorily limited to 25 percent. Yet here, NBC argues, the combined contributions to SF Wisconsin by Fox and Savoy exceed that limit. 14. With regard to NBC's first contention, we find, for reasons discussed below, that Savoy holds de jure, as well as de facto, control of SF Wisconsin. We also find at this time, as discussed more fully in paragraph 44 below, that WLUK-TV is not attributable to Fox. However, the Commission recently adopted a Notice of Proposed Rulemaking concerning attribution issues. Review of the Commission's Regulations Governing Attribution of Broadcast Interests in MM Docket No. 94-150, FCC 94-324 (Attribution Review), released January 12, 1995. The rules emerging from Attribution Review will be applied to the facts of this case, and our grant here is conditioned upon the outcome of that rulemaking proceeding. The parties here should be aware that this rulemaking is being conducted in parallel with the proposed increase of broadcast ownership limits. See Review of the Commission's Regulations Governing Television Broadcasting in MM Docket No. 91-221, FCC 94-322, released January 17, 1995. 15. As to the second NBC allegation, we note that Fox's alien ownership structure and basic qualifications are the subject of an ongoing Commission inquiry undertaken in connection with Fox's pending renewal application for WNYW-TV, New York, New York. File No. BRCT-940201KZ. We are unable, at this time, therefore, to conclusively determine whether a joint venture in which Fox is a participant comports with the statutory proscription. We shall, therefore, grant the applications now before us, but we shall condition our action upon the outcome of the alien ownership and other matters at issue in the pending WNYW-TV renewal proceeding. CONTROL BY/ATTRIBUTABLE STATUS OF FOX Allegations/opposition 16. NBC urges the Commission to find that WLUK-TV, the station to be acquired by SF Wisconsin, is attributable to Fox on one of two predicates: because Fox wields de facto control over that company or because Fox "has such extensive influence" over it. NBC alleges that Fox was the only experienced broadcaster in the two-party venture; that through its then-employee Herwitz, Fox was involved in creating the SF entities; that Fox participated in selecting Herwitz as a director and manager of the SF entities; that Fox assumed substantial risk in the enterprise; that Fox controls in perpetuity the proposed licensees' choice of network affiliation; and that Fox secured the right to take negative control of the business within three years. In determining the attributable status of Fox, NBC maintains that not only must the Commission look to the "separate impact" of each of Fox's various levels of participation in the venture before us, but it must assess their "cumulative effect." 17. In response, SF Wisconsin contends that Savoy, via its ownership of all of the voting stock and, concomitantly, its contractual control of the board under the Stockholders Agreement, enjoys "absolute" legal control of the company. NBC, SF Wisconsin protests, fails to specifically allege that Fox overrides this control held by Savoy, a "major player" in the entertainment industry which is "fully qualified" to continue to exercise control of the venture with Fox. Moreover, Savoy's substantial contribution and its arrangement of debt financing, SF Wisconsin argues, dispel NBC's contention that Fox is in de facto control of SF Wisconsin finances. With its assets and reputation, SF Wisconsin maintains, Savoy could have entered into a broadcast enterprise with any network or group owner, but it selected Fox. In sum, SF Wisconsin concludes, Fox's capital contribution and its affiliation agreement with WLUK-TV are no different from NBC's participation in WKYC-TV, Cleveland, Ohio, activities approved by the Commission in NBC, Inc., 6 FCC Rcd 4882 (1991). 18. Specifically, as to the separate areas of alleged Fox control, NBC cites six areas of concern. SF Wisconsin responds to each. 19. Involvement of Herwitz. Herwitz has been in the employ of Fox since 1986, serving as an executive of that company from the time Fox first acquired a broadcast station. And until late 1993, Herwitz was vice president and general manager of Fox's owned and operated station WTTG(TV), Washington, D.C. The preexisting Herwitz-Fox relationship, NBC suggests, motivated Fox to "ensur[e] he [Herwitz] would be in charge of SF's ongoing operations." NBC argues that the "presence and role" of Herwitz at the center of the SF venture "alone indicates pervasive influence and control." In arguing that the Commission must look to the employer-employee relationship, NBC relies on KKR Associates, 2 FCC Rcd 7104 (1987). In that case the Commission had before it the proposed assignment of five television stations from Gillett Holdings to Busse Broadcasting, an entity whose nonvoting common stock, representing 99 percent of the equity, was owned by the irrevocable Gillett family trust, whose voting stock was owned by a former Gillett executive, and whose sole officers were former Gillett executives. The Commission approved the transaction, but on the condition, inter alia, that there be no direct or indirect communications, oral or written, between the former employer and its former employee, Busse Broadcasting or personnel of that corporation. Id. at 7107. 20. SF Wisconsin contends that NBC does not and cannot explain how Herwitz could ignore the direction of the new venture's board, which is controlled by Kaufman and Korman and which may freely discharge Herwitz. Citing the Commission's approval of spin-off transactions and purportedly continuing relationships between the former parent company and the spun-off company in WWOR-TV, Inc., 6 FCC Rcd 193 (1990), and in Columbia Pictures Industries, Inc., 30 FCC 2d 9 (1971), SF Wisconsin argues that to find a nonvoting stockholder in de facto control based upon the participation of its former employee "seriously impede[s] the mobility of broadcasting executives." 21. Formation of SF Wisconsin. In Univision Holdings, Inc., 7 FCC Rcd 6672 (1992), reconsideration denied, 8 FCC Rcd 3931 (1993), NBC argues, the Commission noted that the "circumstances surrounding [the] creation" of newly formed companies are "relevant" to the issue of de facto control. Accordingly, NBC urges that we give weight to the relative broadcast experience of Fox and Savoy, especially where the "passive investor," Fox, is an experienced owner of several television stations and a broadcast network. NBC also suggests we inquire into the role assumed by Fox in "bringing the SF venture into existence," in negotiating the elements of control between the parties, in initiating contacts with and negotiating the purchase from the assignor of WLUK-TV, and in arranging the financing and other agreements with banks for consummating the transaction. 22. In making its determination, NBC argues, the Commission should also consider all contractual provisions relating to the Savoy-Fox enterprise and submitted in this proceeding, including those since amended by the parties to that agreement. Two such provisions, according to NBC, "clearly reflect the parties [sic] original intention to give Fox control over key aspects of the operation of WLUK-TV." First, as president, Herwitz originally was to manage the business, affairs and operations of the television station not subject to the authority of the board, as is now the case, but in accord with a management agreement "in a form to be agreed upon by the Stockholders" Savoy and Fox. See Stockholders Agreement at Section 4.03. That management agreement, NBC notes, could not be modified "without the consultation and discussion" of such changes with Fox. Id. Second, an original term of the Stockholders Agreement gave Fox the right to approve Savoy-designated replacement directors on the SF Wisconsin board in the event Kaufman and Korman terminated their relationship with Savoy as a result of a spin-off to Savoy stockholders of the SF Wisconsin interest. Id. at Section 7.03. NBC concludes that these original versions indicate that Fox "was clearly the driving force behind the creation of SF. 23. SF Wisconsin emphasizes that although Savoy has not operated television stations, Savoy chairman and chief executive officer Kaufman and Savoy president and chief operating officer Korman are not neophytes to the television industry. Kaufman and Korman, according to their separate declarations, have accumulated many years of experience in the entertainment and communications fields, including ultimate oversight of the television programming businesses of Merv Griffin Enterprises and Columbia Television. At that time, SF Wisconsin states, Columbia Television was the largest television programming business in the industry. 24. No information is provided as to how Savoy and Fox were brought together to form their enterprise or as to who initiated contacts with Burnham, the assignor of WLUK-TV. But SF Wisconsin states, as supported by a declaration from Howard Bass, senior vice president and chief financial officer of Savoy and treasurer of SF Wisconsin, that Korman and Bass "recently concluded negotiations" with a syndicate of banks led by Chemical Bank to "arrange" a credit facility for funding the acquisition of WLUK-TV. 25. As to since-amended provisions of its Stockholders Agreement, SF Wisconsin asserts that "[c]learly, it is permissible for a party to amend its application or change its structure in order to address concerns raised by the staff, the Commission or other parties, or to simplify or shorten the process of FCC review of the application." Relying on KKR Associates, 2 FCC Rcd 7104 (1987), where the Commission approved a transaction after the applicant amended certain terms, SF Wisconsin maintains that the Commission must evaluate the proposal before it, as amended. In this transaction, SF Wisconsin states, Herwitz is now obligated to manage the stations subject to the authority of the board and Fox will have no approval rights with respect to Savoy designees if Kaufman and Korman depart Savoy. Further, Herwitz, Carey and Korman state in their separate declarations that the current SF Wisconsin-Herwitz employment agreement represents the entire understanding between the parties. "There are no other oral or written agreements or understandings governing his employment and compensation," according to Carey's declaration. "Finally," Carey adds, "there are no 'continuing links' or any other understandings of any kind between Fox and Mr. Herwitz, except as disclosed in Mr. Herwitz's declaration of this date which I have reviewed." 26. Selection of SF Wisconsin board of directors and control of its personnel. Important factors in the determination of de facto control, NBC claims, citing Univision Holdings, 7 FCC Rcd 6672 (1992), are the relationship between the board members and the party invoking nonattributable status, as well as control over key personnel who are to manage the licensee or the licensee's day-to-day activities. Here, NBC concludes, without providing support, that "Fox directly participated" in selecting the initial SF Wisconsin board, one of whose three seats is to be held by former Fox employee Herwitz. Savoy's right to elect the board is "illusory," according to NBC, because the initial board is "locked in" for three years. As to Herwitz's presidency, NBC contends that the Commission must inquire as to any existing Fox-Herwitz contracts, as to Fox's role in the hiring of Herwitz as president, and as to any other current or former Fox employees who have been hired to work for SF Wisconsin. 27. NBC's allegations are speculative, SF Wisconsin maintains. But even if the initial board were chosen by Fox, according to SF Wisconsin, the majority vote required for board action under the Stockholders Agreement reposes control of that board in Savoy, which holds two of the three seats. Savoy-designated directors Kaufman and Korman "regularly exercise" Savoy's authority over SF Wisconsin and its president, according to SF Wisconsin, which states that "Herwitz is in regular and direct contact with them about all aspects of the business." In several instances, SF Wisconsin states, based upon the declaration of Savoy principal Bass, treasurer of the joint venture, Kaufman and Korman "declined to authorize" Herwitz to proceed with station acquisition proposals he has made. 28. Moreover, SF Wisconsin emphasizes that it is Savoy principals Kaufman and Korman who are "locked in" for the initial three-year term, not Herwitz, because under Section 4.02(b) of the Stockholders Agreement only directors who are also employees may be removed. Kaufman and Korman are not employees of SF Wisconsin, but as president, Herwitz is. SF Wisconsin notes that the Savoy-controlled board may terminate him "at any time." And the vacancy created by Herwitz's departure would be filled by the Class A stockholders, that is, Savoy, at least for the first three years. 29. Control over finances. As evidence of financial control, NBC points to Fox's payment of an additional $100,000 per share, or $2.5 million, for its common stock, as well as its contribution of $3 million for preferred stock. Fox will not recoup any of the preferred stock investment, NBC contends, unless the stations increase in value by a factor of 15 percent. Thus, $5.5 million of the Fox contribution is "most at risk" in the Savoy-Fox venture and in normal business transactions, NBC argues, the party bearing the most financial risk is entitled to a "higher degree of control and influence" vis-a-vis the other participants. NBC maintains that the Commission, in Univision Holdings, looked to the relative contributions of the shareholders to determine whether the nominal majority shareholder was actually in control. Here, the Commission must recognize, NBC argues, that the balance of financial risk indicates that Fox will be in de facto control of SF Wisconsin. 30. The amount paid in by Fox for its common stock, according to SF Wisconsin, "clearly is irrelevant" to the issue of control. Herwitz, Kaufman and Korman each declare that the interests of the stockholders in SF Wisconsin resulted from "active and intense arm's length negotiations" between Savoy and Fox. During the course of those negotiations, Herwitz states in a declaration, Fox believed that the value of WLUK-TV, once it became a Fox affiliate, would increase more than Savoy believed it would, resulting in Fox's additional investment. "If anything," SF Wisconsin claims, "this agreement on relative share prices serves as evidence of Savoy's strength in relation to Fox." Further, SF Wisconsin notes that of the estimated $41 million required for the acquisition of WLUK-TV, Savoy will contribute nearly $11 million, while Fox contributes $9.125 million. Savoy has also arranged for $21 million in debt financing for the transaction. All expenditures, according to SF Wisconsin, are approved by Savoy, which established and maintains the bank accounts for the venture. In light of Savoy's financial participation, SF concludes, NBC's allegations should be summarily rejected. 31. Control over programming. NBC asserts that Fox "totally controlled" the single most important programming decision a station licensee makes: network affiliation. Section 4.06(b) of the Stockholders Agreement, NBC notes, obligates WLUK-TV to enter into a 10- year affiliation with the Fox network. That provision also requires that SF Wisconsin "at all times" use its "best efforts" to operate the station as a Fox affiliate in good standing. Thus, NBC concludes, as a direct participant in creating SF Wisconsin, Fox "participated in dictating" the affiliation decision, one that "totally foreclosed SF's ability to ever exercise any discretion" over network choice. 32. SF Wisconsin disputes NBC's premise that network affiliation is the most important programming decision. Instead, SF Wisconsin cites local news, public affairs and other informational programming as at least equally important. Moreover, SF Wisconsin states that Savoy chose Fox over other networks because it believed the relationship "would serve Savoy's best interests and the interests of the local market[ ] which would see significantly more local news as a result of the acquisition[ ]." (Emphasis included.) Further, as support for the its own arrangement, SF Wisconsin points to the Commission-approved NBC relationship with WKYC-TV, Cleveland, in NBC, Inc., 6 FCC Rcd 4882 (1991). In that case, the Commission found that the station was not attributable to NBC even though NBC (1) owned nonvoting stock representing 49 percent of the licensee's equity, (2) held an option to convert that stock to voting stock, (3) enjoyed a veto right over certain extraordinary corporate actions, and (4) entered into a network affiliation with the licensee. 33. Additional avenues of control. Citing Fox's future powers under the Stockholders Agreement to increase its ownership to half of all common stock, to convert its nonvoting shares to voting, and to appoint board members, NBC posits that these rights "reflect an intent to secure Fox [sic] continuing control over the station and to secure leverage over management." Under the option, NBC notes, Fox may hold a 49 or 50 percent interest in the number of common shares immediately after closing. In the fall of 1997, NBC adds, three weeks before the expiration of the term of the initial SF Wisconsin board, Fox may convert all of those shares to voting stock, thereby giving Fox "seamless control" over the composition of the board and "continuous leverage" over Herwitz. Fox's future decision- making authority over Herwitz's employment, NBC concludes, "is a powerful means of immediate and ongoing day-to-day control." 34. Commission precedent on future rights "is clear," according to SF Wisconsin, relying on Attribution of Ownership Interests, 97 FCC 2d 997 (1984). There the Commission stated that holders of options to buy stock or rights to convert nonvoting interests to voting interests are not attributed unless and until exercised. Moreover, SF Wisconsin asserts that Fox's interest is now and would remain nonattributable under the Commission's rules even if its nonvoting stock were converted into voting Class A stock, so long as Savoy remains the single majority shareholder. Conversion of Fox's interest, SF Wisconsin adds, is, under Section 6.03(a) of the Stockholders Agreement, "subject to receipt of any necessary regulatory approval." Discussion 35. In urging that we find that Fox, a nonvoting shareholder, wields de facto control of SF Wisconsin, NBC requests, in essence, that we ignore Savoy's de jure, or legal, control of that company. Evaluating whether a party is in de facto, or actual control, of an applicant is not formulaic, but is fact-intensive, dependent upon the "special circumstances presented." Stereo Broadcasters, Inc., 55 FCC 2d 829, 821 (1975). Such relevant circumstances are those demonstrating the minority shareholder's "power to dominate the management of corporate affairs," Benjamin L. Dubb, 16 FCC 274, 289 (1951), including the ability to elect the members of an applicant's board of directors, Metromedia, Inc., 98 FCC 2d 300, 303, reconsideration denied, 56 RR 2d 1198 (1984), appeal dismissed sub nom. California Association of the Physically Handicapped v. FCC, 778 F.2d 823 (D.C. Cir. 1985), as well as the ability to direct the applicant's finances, personnel and programming, see, e.g. Stereo Broadcasters, Inc., 87 FCC 2d 87 (1981), reconsideration denied, 50 RR 2d 1346 (1982). When the applicant in question is a newly formed company, as is SF Wisconsin, the circumstances surrounding the formation of that company are also relevant. Univision Holdings, 7 FCC Rcd at 6675. 36. Applying these standards, we determine that Savoy holds both de jure and de facto control of SF Wisconsin. In so concluding, we rely on several factors. Preliminarily, we acknowledge the disparate levels of broadcasting experience of Savoy and Fox. But unlike the nominally active owners in the Commission's line of "pre-formation activities" cases implicitly relied upon in Univision Holdings, 7 FCC Rcd at 6675, e.g., Evergreen Broadcasting Company, 6 FCC Rcd 5599 (1991); Royce International Broadcasting, 5 FCC Rcd 7063 (1990); Metroplex Communications, Inc., 5 FCC Rcd 5610 (1999), Savoy is contributing from its own funds approximately 55 percent of SF Wisconsin's total equity and has negotiated for all of the debt financing required to consummate the purchase of WLUK-TV. The extent of Savoy's financial participation does not prompt us to question its bona fides as the controlling entity of SF Wisconsin. We also dismiss as speculation NBC's allegation that Fox "prevailed and controlled" the decision to acquire WLUK-TV from Burnham. While it may be that Fox's willingness to contribute an extra $2.5 million for its common stock and $3 million for preferred persuaded Savoy to participate in the purchase, the Fox premium paid into SF Wisconsin does not indicate control of that decision. 37. Augmenting the credibility of Savoy's control of a newly formed broadcasting company is its management, comprising longtime and active players in motion pictures and television programming, Kaufman and Korman, who have, each declares, "competed intensely" in the past with Fox in those areas. Kaufman has served as the president and CEO of Columbia Pictures Entertainment, Inc. and as the founding chairman and CEO of Tri-Star Pictures, Inc., while Korman has served as senior executive vice president and chief operating officer of Columbia Pictures and senior executive vice president of Tri-Star Pictures. The Kaufman-Korman team now heads Savoy, a publicly traded company with $850 million of total capital available. In light of their substantial and acknowledged business experience, we reject NBC's request that we seek further information pertaining to the manner in which Savoy and Fox came to enter into the SF Wisconsin agreement. See KIST Corp., 102 FCC 2d at 291 n.8 (Commission need not examine manner in which parties entered into enterprise where enterprise is "clearly bona fide."). 38. Looking to the proposed governance of SF Wisconsin, we are guided largely by documents, as amended, which establish the relationship between the sole voting stockholder, Savoy, and Fox. The business and affairs of SF Wisconsin are managed by or under the direction of the board of directors. See SF Wisconsin By-Laws, as amended, at Article III, Section 1. The initial, three-member board is indisputably composed of two Savoy representatives, Kaufman and Korman. Any action taken by the board requires at least two affirmative votes, enabling Savoy to outvote Herwitz and thereby to control the board. See Stockholders Agreement at Section 402(e)(v). While the business, affairs and operations of WLUK-TV are entrusted to Herwitz as president, he exercises those duties "subject to the authority of the Board of Directors." See id. at amended Section 4.03. Indeed, the board, under the majority control of Savoy, may discharge Herwitz at any time. Herwitz's termination as president, in turn, triggers Savoy's right to also remove him from the board. See id. at Section 4.02(b). And the vacancy created thereby will be filled by a director elected by Savoy, as the holder of all Class A voting common stock. That SF Wisconsin has been governed in practice as described on paper is evidenced by the SF Wisconsin representation that "[i]n several instances, when Mr. Herwitz has made station acquisition proposals to them, Messrs. Kaufman and Korman declined to authorize him to proceed." In sum, we find that there is no evidence that the SF Wisconsin board or its personnel will not be under the ultimate control of Savoy. 39. Finally, merely entering into an affiliation agreement with a network which is also an equity partner does not, without more, establish an attributable interest, let alone control. NBC, Inc., 6 FCC Rcd 4882 (1991). While such a relationship may prompt us to scrutinize the level of influence in, and possible control over, the nominally controlling stockholder, we note that the affiliation relationship here does not suggest Fox's ability to control SF Wisconsin. As previously stated, "it can no longer be said that the power of a network television supplier over an affiliate amounts to 'life or death.'" Seven Hills Television Co., 2 FCC Rcd 6867, 6881 (Rev. Bd. 1987). In light of the evidence on the record before us, we find that Savoy is in de jure and de facto control of SF Wisconsin. As for future conduct, we do not expect that an applicant "will not faithfully carry out its representations or that [an applicant] will be operated or controlled in a manner that differs from the [transaction] under consideration." News International PLC, 97 FCC 2d 349, 356 (1984). 40. At a minimum, a finding that Fox is in de facto control of SF Wisconsin would mean that WLUK-TV is attributable to Fox. That finding, of course, could potentially affect Fox's compliance with the Commission's multiple ownership rules. As NBC alternatively argues, an interest in an applicant need not rise to the level of control, whether de facto or de jure, in order to be cognizable for purposes of applying our multiple ownership rules to Fox in this case. In determining which interests are cognizable, the Commission attempts to identify those interests in or relationship to an applicant which confer on its holders a degree of "influence" such that the holders have "a realistic potential to affect the programming decisions of licensees." 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). Consequently, the Commission defines as attributable those ownership interests of five percent or more voting stock and those positional interests of officer or director. Id. at 1006, 1025; see also, 47 C.F.R. 73.3555, Note 2. 41. Under our rules of attribution, each of the discrete factors here, considered alone, renders Fox's interest a noncognizable one. First, nonvoting stock is not attributable under our rules. 47 C.F.R. 73.3555, Note 2(f). Even if Fox's 25 percent of the common stock carried voting rights, that interest would not be attributable because Savoy would be the single majority shareholder. Id. at Note 2(b). Second, the right to vote on matters involving extraordinary corporate actions does not ordinarily undermine the nonattributable character of otherwise non-cognizable interests, so long as that right is narrowly circumscribed. E.g., News International PLC, 97 FCC 2d 349, 354 (1984). Third, a programmer, even a network, such as Fox, is not attributable simply by its acting as program supplier for a company's television station. See NBC, Inc., 6 FCC Rcd 4882, 4883 (1991). Next, a former network employee hired by a new broadcast enterprise does not, without anything more, impart to the network a cognizable interest. Spanish International Communications Corporation, 2 FCC Rcd 3962, 3965 (MMB 1987), aff'd 3 FCC Rcd 4319 (1988), aff'd sub nom. Coalition for the Preservation of Hispanic Broadcasting v. FCC, 931 F.2d 74 (D.C. Cir. 1991). Finally, an option to acquire up to half of the shares of common stock and a right to convert nonvoting stock are rights that invoke the attribution rules only at the moment of exercise. 47 C.F.R. 73.3555, Note 2(f). 42. To view each of these factors in isolation, however, would be to undermine the underlying objectives of our attribution rules, that is, recognition of those interests that convey influence or control over an applicant. Indeed, despite the approach in Attribution, of ascertaining the cognizable status of a given interest or relationship individually, the Commission has, in adjudicatory proceedings, expressly embraced the conclusion that we must assess the cumulative effect of all relevant factors to determine whether the goals of our multiple ownership rules will be "served or hindered by the structure and relationships presented to us." KKR Associates, 2 FCC Rcd at 7107; see also Univision Holdings, 7 FCC Rcd at 6677-78. We must, therefore, evaluate as a whole the totality of Fox's myriad interlocking interests in and relationships to SF Wisconsin. Fox is a nonvoting stockholder; Fox will pay in 45 percent of the equity of the applicant; Fox may vote on major company decisions; Fox "agreed" to the slate of directors sitting on the applicant's board for the first three years, including its own former employee Herwitz; Fox recommended to the majority shareholder the hiring of Herwitz as president; Fox negotiated the principal terms of Herwitz's compensation as president; Fox has a current employee, Cunningham, set to assume an executive position with the company upon consummation of the proposed transaction; Fox is under common ownership with the network affiliated with the applicant's proposed television station; and Fox has the right to acquire up to half of the applicant's common stock and to convert that stock into voting class. 43. Notwithstanding SF Wisconsin's contention to the contrary, we believe that the interests and relationships in this case do not squarely fall within any of the cases, such as NBC, Inc., in which the Commission has previously found multiple relationships between a network and its affiliate nonattributable. Moreover, whether and under what circumstances multiple relationships, which taken individually are nonattributable, should be considered attributable in the aggregate, is precisely the question we have posed in the pending rulemaking on attribution, Attribution Review. We believe that question is a very difficult one, one that is best answered with the benefit of a full and carefully considered record in the Attribution Review proceeding. 44. At the same time, we do not believe it is fair or reasonable, given the time constraints and business expectations implicit in broadcast sale proceedings, to defer our consideration of SF Wisconsin's application. Accordingly, on this record, we will deem Fox's interests in SF Wisconsin to be nonattributable and will grant SF Wisconsin's application. However, we will condition that grant upon the outcome of our rulemaking proceeding in Attribution Review. Should we determine in that proceeding that the interests and relationships presented here are cognizable, we will then attribute the interests to Fox. Alternatively, Savoy and Fox could modify their relationships to conform with our decision or could elect to provide a showing as to why these interests should not be attributed to Fox. ALIEN OWNERSHIP OF SF WISCONSIN 45. Savoy is approximately 19% percent-owned by aliens, according to an April 3, 1995 amendment to the SF Wisconsin application. Fox's alien ownership structure is currently the subject of an ongoing proceeding. See Renewal of license for WNYW-TV, New York, New York, File No. BRCT-940201KZ. Fox has reported to the Commission in that proceeding that the alien equity in FTS comprises the "the indirect approximately 99 percent economic/equity interest of News Corp in THC [the parent company of FTS]." See Letter from Fox to Roy Stewart, Chief, Mass Media Bureau, May 23, 1994. With respect to the Savoy-Fox joint venture, Savoy is represented to hold 75% of "the common stock equity" of SF Wisconsin, while Fox holds 25%. Based upon total capital contributions, however, it appears that Savoy holds approximately 55% of the equity and Fox holds 45%. An issue in the pending inquiry into Fox's alien ownership is whether the Commission should consider capital contributions as an appropriate measure of ownership in evaluating a corporation's compliance with the 25% benchmark of Section 310(b)(4). In view of the pendency of that proceeding, we shall condition grant of the applications here upon the outcome of this issue and other matters raised in the WNYW-TV license renewal proceeding. CONCLUSION 46. We find that the applicant is otherwise fully qualified and that a grant of the applications would serve the public interest. 47. Accordingly, IT IS ORDERED that the petition to deny of NBC, Inc. IS DENIED. 48. IT IS FURTHER ORDERED, that the applications for assignment of licenses of WLUK-TV, Green Bay, Wisconsin, and W40AN, Escanaba, Michigan, from BBC License Subsidiary, L.P. to SF Green Bay License Subsidiary, Inc. ARE GRANTED subject to: 1. the resolution of the rulemaking proceeding relating to attribution rules, Attribution Review, FCC 94-324, released January 12, 1995; and 2. the outcome of the WNYW-TV license renewal proceeding involving Fox Television Stations, Inc., File No. BRCT-940201KZ. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary