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The following is an excerpt from a SB-2 SEC Filing, filed by LEGACY COMMUNICATIONS CORP on 6/17/2005.
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MINT LEASING INC - SB-2 - 20050617 - SECURITIES_DESCRIPTION

DESCRIPTION OF SECURITIES


We have authorized capital stock consisting of 50,000,000 shares of common stock, $.001 par value per share and 5,000,000 shares of preferred stock, $.001 par value per share.  We had 17,174,172 shares of common stock and no shares of preferred stock issued and outstanding as of March 31, 2005.

 

 

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Common Stock


The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine.  Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders.  There is no cumulative voting of the election of directors then standing for election.  The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption.  Upon liquidation, dissolution or winding up of our business, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors.  Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this offering will upon payment therefore be, duly and validly issued, fully paid and non-assessable.


Preferred Stock


Preferred stock may be issued with preferences and designations as the Board of Directors may from time to time determine. The board may, without stockholders approval, issue preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of our common stockholders and may assist management in impeding an unfriendly takeover or attempted changes in control.  There are no restrictions on our ability to repurchase or reclaim our preferred shares while there is any arrearage in the payment of dividends on our preferred stock.


DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES


Our Bylaws, subject to the provisions of Nevada Corporation Law, contain provisions which allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the corporation.  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.




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DESCRIPTION OF BUSINESS


Legacy Communications Corporation was incorporated in Nevada on September 23, 1997.


We own licenses, have permits to construct, have pending constructions permits, have options to purchase, and agreements to purchase construction permits and to purchase assets of various radio stations.  In the prior two fiscal years we did not generate any significant advertising revenues.  Our business model is based on acquiring, developing, operating and selling radio stations, not upon generating advertising revenues.


As of March  31, 2005, the following were our wholly owned subsidiaries:

 

o

AM Radio 790, Inc. , a Utah corporation and permittee of KBET (AM), Winchester, NV.

o

AM Radio 1370, Inc. , a Utah corporation and licensee of KUPA (AM), Pearl City, HI.

o

AM Radio 1440, Inc. , a Utah corporation and permittee of KPTO (AM), Pocatello, ID.

o

AM Radio 1470, Inc. , a Utah corporation and permittee of KNFL (AM), Tremonton, UT.

o

AM Radio 1490, Inc. , a Utah corporation and applicant for the assignment of KYFO (AM), Ogden, UT.

o

Americast Media Corporation , a Utah corporation and applicant for construction permits of new AM Radio Stations serving the communities of Inkom, ID, Middletown, ID, Beaver, UT, Santa Clara, UT, and Mililani, HI.

o

Diamond Broadcasting Corporation , a Utah corporation and leaseholder of an AM radio transmitter-tower site located in Mililani, HI.

o

Diamond Media, LLC , a Utah limited-liability company and option holder of construction permit applications for new AM Radio Stations with service to Beatty, NV, Bishop, CA, Hawthorne, NV, and Tonopah, NV.

o

Sunset Communications Corporation , a Utah corporation and leaseholder of a Multi-User Communications tower site at Sunset Peak in the Fish Lake National Forest of Central Utah.

o

Tri-State Media Corporation , a Utah corporation and licensee of KITT (FM), Soda Springs, ID.

 

 

Our principal executive offices are located at 210 North 1000 East, St. George, Utah 84770, our mailing address is P.O. Box 1450, St. George, Utah 84771, our telephone number is (435) 628-1000, and our fax number is (435) 628-6636.


In 1999, we entered into an agreement with Lyman Dayton to film the remake of the motion picture "Where the Red Fern Grows."  Production began in August 1999 and ran through November 1999.  The production costs ran over budget resulting in the film production company filing a Chapter 11 bankruptcy on November 3, 2000, that was subsequently converted to a Chapter 7 bankruptcy on June 9, 2001, with a liability balance of $1,795,319.  The assets from the film production were sold in the bankruptcy proceeding on March 28, 2002 for $975,000.  The Chapter 7 trustee is holding remaining proceeds in the amount of $29,039.  The proceeds of the bankruptcy sale were used first to pay priority claims and bankruptcy expenses.  As of the date of this Prospectus, the bankruptcy proceeding has not been finalized.



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Our Stations


We own Broadcast Station Licenses for new AM radio stations in the following communities, as of March 31, 2005:


o

KUPA (AM) 1370kHz , Pearl City, HI - License (Honolulu market)

o

KENT (AM) 1400kHz , Parowan, UT - License (Cedar City market)

o

KITT (FM), 100.1MHz , Soda Springs, ID - License (Pocatello move-in)


We have Broadcast Licenses pending for new AM radio stations in the following communities, as of March 31, 2005:


o

KPTO (AM) 1440kHz , Pocatello, ID - License pending (Pocatello-Idaho Falls market)

o

KNFL (AM) 1470kHz , Tremonton, UT - License pending (Ogden-Salt Lake City market)

o

KOGN (AM) 1490kHz , Ogden, UT - License subject to Closing on October 3, 2005.  


We have the following acquisitions pending:


o

Diamond Media, LLC - Option Holder of four (4) new AM radio station Construction Permits for Beatty, NV - An application for Construction Permit was filed November 16, 2004 to build a new AM Radio Station granted under the Singleton rule of FCC AM Auction 84. Awaiting Issuance by the FCC; Bishop, CA - An application for Construction Permit was filed November 16, 2004 to build a new AM Radio Station granted under the Singleton rule of FCC AM Auction 84. Awaiting Issuance by the FCC; Hawthorne, NV - An application for Construction Permit was filed November 16, 2004 to build a new AM Radio Station granted under the Singleton rule of FCC AM Auction 84. Awaiting Issuance by the FCC and Tonopah, NV - An application for Construction Permit was filed November 16, 2004 to build a new AM Radio Station granted under the Singleton rule of FCC AM Auction 84. Awaiting Issuance by the FCC.


o

Americast Media Corporation - Applicant of new AM station on 1490kHz, Santa Clara, UT (St. George market) - An application for Construction Permit was filed November 16, 2004 to build a new AM Radio Station granted under the Singleton rule of FCC AM Auction 84. Awaiting Issuance by the FCC and new AM station on 1350kHz, Inkom, ID (Pocatello market) - An application for Construction Permit was filed November 16, 2004 to build a new AM Radio Station granted under the Singleton rule of FCC AM Auction 84. Awaiting Issuance by the FCC.


o

AM Radio 1490, Inc. , a Utah corporation and wholly owned subsidiary of the Company has an Assignment application approved by the FCC December 6, 2004 for the purchase of KYFO (AM), 1490kHz, Ogden, Utah. The closing is scheduled for October 3, 2005.

 


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We are currently engaged in the following additional  activities:


The FCC granted the following construction permits to Legacy Communications subsidiaries for new AM Radio Stations in AM Auction 32:


o

KPTO, AM1440kHz , Pocatello, ID. Construction of the station as authorized by the amended Construction Permit is complete and an application for Program Test Authority and Broadcast License were filed January 5, 2005. The FCC granted program Test Authority on May 4, 2005. Grant of the Broadcast License remains pending. An option to purchase KPTO (AM) and KITT (FM) was sold to Lakeshore Media, LLC, a subsidiary of Marathon Media, LLP, Chicago on March 3, 2005.


o

KNFL, AM 1470kHz , Tremonton, UT. Construction of the station as authorized by the amended Construction Permit is complete. A request for Program Test Authority and an application for the Broadcast License were accepted for filing by the FCC on October 25, 2004. Both the authorization of Program Test Authority and the grant of the Broadcast License remain pending.


o

KENT, AM 1400kHz , Parowan, UT. Construction of the station as authorized by the amended Construction Permit was completed June 18, 2004 and an application for Broadcast License was accepted for filing on July 2, 2004. The Federal Communication Commission granted a Broadcast License to AM Radio 1400, Inc. for KENT (AM) 1400kHz, Parowan, UT on October 7, 2004.   


o

KBET, AM 790kHz , Winchester, NV (Las Vegas). Construction Permit has been granted. Construction is underway.


o

Americast Media Corporation , a Legacy subsidiary, filed an Expressions of Interest for new Radio Stations in Santa Clara, UT and Inkom, ID, which were determined to be Mutually-Exclusive , and granted Singleton status by the FCC. As a result of the Mutually-Exclusive determination (" Singleton "), Americast Media was invited to file a complete FCC Form 301 - Application for Construction Permit for New AM Radio Station in the following communities:


o

AM 1490kHz , Santa Clara, UT (St. George market) - FCC Form 301, an application for a Construction Permit of a new AM Radio Station at 1490kHz. was filed with the FCC on November 16, 2004. Grant of the Construction Permit remains pending.


o

AM 1350kHz , Inkom, ID (Pocatello market) - FCC Form 301, an application for a Construction Permit of a new AM Radio Station at 1350kHz. was filed with the FCC on November 16, 2004. Grant of the Construction Permit remains pending.


o

Diamond Media, LLC , a Legacy subsidiary, purchased an option to acquire from Eastern Sierra Broadcasting Corporation Construction Permits for new AM radio stations in AM Auction 84. The following Expressions of Interest by Eastern Sierra Broadcasting Corporation were determined to be Mutually-Exclusive and granted Singleton status by the FCC. As a result of the Mutually-Exclusive determination ("Singleton"), Eastern Sierra was invited to file a complete FCC Form 301 application for a Construction Permit for new AM radio stations for the following communities:   

 

 

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o

AM 1340kHz . Bishop, CA - An application for a Construction Permit for a new AM Radio Station granted Mutually-Exclusive ("Singleton") status under the rules and procedures of AM Auction 84 was accepted for filing by the FCC on March 23, 2005.


o

AM 1240kHz , Beatty, NV - An application for Construction Permit to build a new AM Radio Station granted Mutually-Exclusive ("Singleton") status in AM Auction 84 was filed on November 16, 2004.


o

AM 1450kHz , Hawthorne, NV - An application for Construction Permit to build a new AM radio station granted Mutually-Exclusive ("Singleton") status in AM Auction 84 was filed on November 16, 2004.


o

AM 1400kHz , Tonopah, NV - An application for Construction Permit to build a new AM radio station granted Mutually-Exclusive ("Singleton") status in AM Auction 84 was filed on November 16, 2004.


We have the following expressions of interest:


Americast Media Corporation, a Legacy subsidiary filed an FCC short-form 301 application for new AM Radio Stations called " Expressions of Interest " under the rules and procedures of the FCC in AM Auction 84 for the following communities. The FCC engineering staff review determined the following Expressions of Interest applications are Non-Mutually Exclusive or have technical conflicts with other applications. The communities for which Expressions of Interest were filed include:


o

Mililani, HI

-

AM1230kHz.

o

Beaver, UT

-

AM1230kHz.

o

Middleton, ID

-

1400kHz (Boise market)

o

Mesquite, NV

-

AM1250kHz.

o

Santa Clara, UT

-

1290kHz (St. George market)


Once the FCC determines which technical applications are deemed to be in conflict, the FCC will group these applications together and publish a Public Notice of their determination of Non-Mutually Exclusive applications in MX Groups. The FCC will then allow a 60-day period for applicants to file amendments to eliminate the technical issues or find a means of settlement with other applicants. After the 60-day period has expired, the FCC will then review the remaining applicants' 307(b) submission, in which each applicant is evaluated based on how the applicant proposes to serve the public interest. The FCC then grants the Construction Permit to the applicant who demonstrates how their application best serves the public interest.


We have the following current sales:


Legacy Communications through its subsidiaries entered into an Option Agreement on March 3, 2005 to sell KPTO, AM 1440kHz, Pocatello, Idaho, and KITT (FM), 100.1MHz, Soda Springs, Idaho to Lakeshore Media, LLC, a subsidiary of Chicago-based Marathon Media, LLP. The option holder, Lakeshore, has agreed to pay 1.5 million under following terms: $300,000 on or before March 31, 2005 plus a monthly option fee of $8,000. The period of the option expires after 12-months.

 

 

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We have the following options to purchase:


Legacy has acquired the option to buy KACE, AM 1310kHz licensed to Birch Tree, MO. The FCC AM Auction 84 rules and procedures allow for an AM station license holder (licensee) whose license is limited to daytime operation to file an application for Major Change, which includes the change of community to which the license was authorized. Legacy, as the Option Holder, assisted the licensee in filing two (2) applications for Major Change relocating the station to (1) the Salt Lake City market at 770kHz or (2) the Las Vegas market at 1530kHz. Neither Major Change application was determined by the FCC to be Mutually Exclusive or granted as a Singleton under the rules and procedures of AM Auction 84.


Once the FCC determines the technical applications that are determined to be in conflict or Non-Mutually Exclusive, the FCC will group these applicants together and publish a Public Notice of the determination of Non-Mutually Exclusive applications ("MX Groups"). The FCC will then give the applicants a 60-day period in which to file amended applications eliminating the technical issues or come to a settlement with other applicants. After the 60-day period expires, the FCC will then review the remaining applicants who file 307(b) showings upon which the remaining applications will be evaluated based on how the applicant proposes to serve the public interest. The FCC will grant the permit to the applicant who demonstrates how their application best serves the public interest.


Digital HD Radio


We are part of the digital radio revolution. HD Radio is a new technology that enables AM and FM radio stations to broadcast their programs digitally making extraordinary technological leap beyond the traditional analog broadcasts. Digital broadcasting provides listeners with a radically improved audio quality and reception plus new data services. Signal fading, static, hisses and pops are a thing of the past with HD Radio. Data services such as displayed song and artist information, weather and traffic alerts and much more will revolutionize the way we experience AM and FM radio in the future. Legacy has entered into a licensing agreement with iBiquity Digital Corporation, the patent holder of HD Radio technology for all Legacy Communications stations to become digital by the yearend 2007.


The FCC approved HD Radio technology in 2002, and the commercial rollout of the technology across American began in 2003.


Radio Stations Purchased and Sold


Since its incorporation in 1997, Legacy Communications has continually participated in numerous profitable transactions within the media industry. The details of several of the company's recent dealings are set forth below:


o

Principal stockholders of the Company purchased FM Radio Station (104.9MHz), licensed to Tremonton, Utah, on September 21, 1993 for $65,000. The Company subsequently acquired the station from the principal stockholders for stock in Legacy on March 25, 1998. The Company sold the station to 3-Point Media, LLC, a subsidiary of Chicago based Marathon Media, LLP, for $1,750,000 on June 7, 2002.  


o

Principal stockholders of the Company purchased KGNT (FM) 103.9MHz, licensed to Smithfield, Utah, on December 8, 1993 for $325,000 to operate in cooperation with FM 104.9MHz.The Company subsequently acquired the station from the principal stockholders for stock in Legacy on march 25, 1998 and later sold the station to M. Kent Frandsen on February 4, 2002 for $735,000.  


o

One of the principal stockholders helped sort out the legal issues that resulted in the grant of a Construction Permit being issued on November 7, 1992 for KZEZ (FM) 99.7MHz licensed to St. George, Utah. The cost to build the station has been estimated at $175,000. The FCC issued the Broadcast License on February 18, 1997. The Company acquired the station for stock in Legacy on March 25, 1998 from the principal stockholders plus a Multi-User Communication transmitter-tower site to accommodate KZEZ (FM) and other FM stations and translators. The Company sold the station on July 31, 2004 as part of a broadcast package that included KSGI (AM) 1450 kHz, St. George, UT and the Multi-User Communication transmitter-tower site to Canyon Media for $2.1 million.

 

 

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o

o

 

Two of the principal stockholders purchased KSGI (AM) 1450kHz, licensed to St. George, Utah, on October 6, 1995. The Company acquired the station from the principal stockholder for stock in Legacy on March 25, 1998. The Company sold the station on July 31, 2004 as part of broadcast package that included KZEZ (FM) 99.7MHz and the Multi-User tower site to Canyon Media for $2.1 million.


o

Two of the principal stockholders purchased KFMD (FM) 95.7MHz licensed to Delta, Utah, on August 2, 1993 for $115,000. The Company acquired the station on March 25, 1998 from the principal stockholder for stock in Legacy. The Company later sold the station to 3-Point Media, LLC a subsidiary of Chicago based Marathon Media, LLP on August 31, 2003 for $1.25 million.  


o

Two of the principal stockholders acquired a construction permit granted by the FCC on January 9, 1998 for KMGR (FM) 97.5MHz, Richfield, Utah. The cost of engineering and legal fees was $36,127 The Company acquired the Construction Permit from the principal stockholders for stock in Legacy on March 25, 1998. The Company sold the Construction Permit for $250,000 to Sanpete County Broadcasting on June 30, 2001.


o

The Company through a subsidiary purchased KOHO (AM) 1170kHz, Honolulu, HI on April 27, 1999 for $105,000. The Company subsequently sold the station to Salem Media of Hawaii, LLC, on May 28, 2004 for $500,000.


o

The Company through a subsidiary purchased Station KITT (FM), 100.1MHz, Soda Springs, Idaho, on August 5, 2004 for $237,500 and packaged the station with KPTO (AM), 1440kHz, Pocatello, ID and sold it under an Option Agreement dated March 3, 2005 to Lakeshore Media, LLC, a subsidiary of Chicago-based Marathon Media, LLP for $1.5 million.  


Advertising Revenue


In the prior two fiscal years we did not generate any significant advertising revenues.  Our business model is based acquiring, developing and selling radio stations, not upon generating advertising revenues.


Competition


We operate in a highly competitive industry. Our radio stations compete for audiences and advertising revenue directly with other radio stations as well as with other media, such as broadcast television, newspapers, magazines, cable television, satellite television, satellite radio, the Internet, outdoor advertising and direct mail, within their respective markets. Our audience ratings and market shares are subject to change and any adverse change in a particular market could have a material adverse effect on our revenue in that market and possibly adversely affect our revenue in other markets.


 

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Our radio stations compete for listeners and advertising revenue directly with other radio stations within their respective markets. Radio stations compete for listeners primarily on the basis of program content that appeals to a particular demographic group. By building a strong listener base consisting of a specific demographic group programming in each of our markets, we are able to attract advertisers seeking to reach those listeners. From time to time, competitors may change their stations' format or programming to compete directly with our stations for audiences and advertisers, or may engage in aggressive promotional campaigns, which could result in lower ratings and advertising revenue or increased promotion and other expenses and, consequently, lower earnings and cash flow for us. Audience preferences as to format or programming in a particular market may also shift due to demographic or other reasons.


Factors that are material to a radio station's competitive position include management experience, the station's audience rank in its local market, transmitter power, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other radio stations in the market area. We attempt to improve our competitive position in each market by researching stations' programming, implementing advertising and promotional campaigns aimed at the demographic groups for which our stations program and managing our sales efforts to attract a larger share of advertising revenue. We also compete with other radio station groups to purchase or develop additional stations.


Although the radio broadcasting industry is highly competitive, barriers to entry do exist, which can be mitigated to some extent by, among other things, changing existing radio station formats and upgrading power. The operation of a radio station requires a license or other authorization from the FCC granted to radio station owners. The number of radio stations that can operate in a given market is limited by the availability of FM and AM radio frequencies allotted by the FCC to communities in that market. In addition, the FCC's multiple ownership rules have historically limited the number of stations that may be owned or controlled by a single entity in a given market.


Technological Change


The radio broadcasting industry is also subject to technological change, evolving industry standards and the emergence of new media technologies. Several new media technologies have been or are being developed, including the following:


o

audio programming by cable television systems, direct broadcast satellite systems, Internet content providers (both landline and wireless) and other digital audio broadcast formats;

o

satellite digital audio radio service, which has resulted in the introduction of two new subscriber-based satellite radio services with numerous channels and sound quality equivalent to that of compact discs;

o

in-band on-channel digital radio, which could improve the quality of existing AM and FM radio signals, including stations owned by us; and

o

low power FM radio, which has resulted in additional FM radio broadcast outlets that are designed to serve small, localized areas.

 

 

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A growing population, greater use of automobiles, and an increase in commuter times have contributed to the growth of new technologies for the delivery of entertainment and information, including the introduction of new technologies used in the car such as audio cassettes, compact discs, cellular telephones and satellite radio. Some of the new technologies, particularly digital satellite radio service, will compete with us for the consumers' attention in the car.


Environmental


As the owner, lessee, or operator of various radio properties and facilities, we are subject to various federal, state, and local environmental laws and regulations.  We are subject to RF ("radio frequency") radiation regulations near AM, FM and TV broadcast antennas.  In order to comply with these regulations, we perform routine maintenance on, and quarterly measurements of radiation near, its antennas.  Historically, compliance with these laws and regulations has not had a material adverse effect on our business. There can be no assurance, however, that compliance with existing or new environmental laws and regulations will not require us to make significant expenditures of funds.


Employees


We currently have three total employees, two of which are employed on a full-time basis.  They are management, administrative and clerical. None of these employees are covered by a collective bargaining agreement. We consider our relations with our employees generally to be good.


FEDERAL REGULATION OF RADIO BROADCASTING


Introduction


Our ownership, operation, purchase and sale of radio stations is regulated by the FCC, which acts under authority derived from the Communications Act of 1934, as Amended. Among other things, the FCC:


o

assigns frequency bands for broadcasting;

o

determines the particular frequencies, locations, operating powers and other technical parameters of stations;

o

issues, renews, revokes and modifies station licenses;

o

determines whether to approve changes in ownership or control of station licenses;

o

regulates equipment used by stations; and

o

adopts and implements regulations and policies that directly or indirectly affect the ownership, operation and employment practices of stations.


 

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The FCC has the power to impose penalties for violations of its rules or the Communications Act, including fines, the grant of abbreviated license renewal terms or, for particularly egregious violations, the denial of a license renewal application, the revocation of a license or the denial of FCC consent to acquire additional radio stations.


The following is a brief summary of some provisions of the Communications Act and of specific FCC regulations and policies. The summary is not a comprehensive listing of all of the regulations and policies affecting radio stations. For further information concerning the nature and extent of federal regulation of radio stations, you should refer to the Communications Act, FCC rules and FCC public notices and rulings.


License Grant and Renewal


Radio stations operate under renewable broadcasting licenses that are ordinarily granted by the FCC for maximum terms of eight years. Licenses are renewed through an application to the FCC. A station may continue to operate beyond the expiration date of its license if a timely filed license application is pending. Petitions to deny license renewals can be filed by interested parties, including members of the public. These petitions may raise various issues before the FCC. The FCC is required to hold hearings on renewal applications if the FCC is unable to determine that renewal of a license would serve the public interest, convenience and necessity, or if a petition to deny raises a substantial and material question of fact as to whether the grant of the renewal application would be inconsistent with the public interest, convenience and necessity. If, as a result of an evidentiary hearing, the FCC determines that the licensee has failed to meet various requirements and that no mitigating factors justify the imposition of a lesser sanction, then the FCC may deny a license renewal application. Historically, FCC licenses have generally been renewed, although we cannot assure you that all of our licenses will be renewed. The non-renewal, or renewal with substantial conditions or modifications, of one or more of our FCC radio station licenses could have a material adverse effect on our business.


The FCC classifies each AM and FM station. An AM station operates on one of the following: a clear channel, regional channel or local channel. A clear channel is one on which AM stations are assigned to serve wide areas. Clear channel AM stations are classified as either:


o

Class A stations, which operate on an unlimited time basis and are designed to render primary and secondary service over an extended area;

o

Class B stations, which operate on an unlimited time basis and are designed to render service only over a primary service area; or

o

Class D stations, which operate either during daytime hours only, during limited times only or on an unlimited time basis with low nighttime power.


A regional channel is one on which Class B and Class D AM stations may operate and serve primarily a principal center of population and the rural areas contiguous to it. A local channel is one on which AM stations operate on an unlimited time basis and serve primarily a community and the suburban and rural areas immediately contiguous to it. Class C AM stations operate on a local channel and are designed to render service only over a primary service area that may be reduced as a consequence of interference.

 

 

 

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The minimum and maximum facilities requirements for an FM station are determined by its class. Some FM class designations depend upon the geographic zone in which the transmitter of the FM station is located. In general, commercial FM stations are classified as Class A, B1, C3, B, C2, C1, C0 and C, in order of increasing power and antenna height. The FCC recently adopted a rule that subjects Class C FM stations to involuntary downgrades to Class C0 in various circumstances if they do not meet certain antenna height specifications. We have one application currently pending to upgrade the facility of the station.  


Transfers or Assignments of Licenses


The Communications Act prohibits the assignment of a broadcast license or transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant approval, the FCC considers a number of factors pertaining to the licensee and proposed licensee, including:


o

compliance with the various rules and policies limiting common ownership of media properties in a given market;

o

the "character" of the licensee and those persons holding "attributable" interests in the licensee; and

o

compliance with the Communications Act's limitations on alien ownership, as well as compliance with other FCC regulations and policies.


To obtain FCC consent to assign a broadcast license or transfer control of a broadcast licensee, appropriate applications must be filed with the FCC. If the application involves a "substantial change" in ownership or control, the application must be placed on public notice for not less than 30 days during which time interested parties, including listeners, advertisers and competitors, may file petitions to deny or other objections against the application. These types of petitions are filed from time to time with respect to proposed acquisitions. Informal objections to assignment and transfer of control applications may be filed at any time up until the FCC acts on the application. Once the FCC staff grants an application, interested parties may seek reconsideration of that grant for 30 days, after which time the FCC may for another ten days reconsider the grant of the FCC staff on the FCC's own motion. If the application does not involve a "substantial change" in ownership or control, it is a "pro forma" application. The "pro forma" application is nevertheless subject to having informal objections filed against it. When passing on an assignment or transfer application, the FCC is prohibited from considering whether the public interest might be served by an assignment or transfer of the broadcast license to any party other than the assignee or transferee specified in the application.


Programming and Operation


The Communications Act requires broadcasters to serve the public interest. Since 1981, the FCC gradually has relaxed or eliminated many of the more formalized procedures it developed to promote the broadcast of types of programming responsive to the needs of a station's community of license. However, licensees continue to be required to present programming that is responsive to community problems, needs and interests and to maintain records demonstrating responsiveness. Complaints from listeners concerning a station's programming will be considered by the FCC when it evaluates the licensee's renewal application, although listener complaints may be filed and considered at any time and must be maintained in the station's public file.

 

 

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The FCC's rules prohibit the broadcast of obscene material at any time and indecent material between the hours of 6 am and 10 pm. All broadcasters face the risk of violating the prohibition on the broadcast of indecent material because of the inherent vagueness of the FCC's definition of indecent matter, coupled with the spontaneity of live programming.


Recently, the FCC has begun more vigorous enforcement of its indecency rules against the broadcasting industry as a whole, and has threatened to initiate license revocation proceedings against broadcast licensees for future serious indecency violations. Two Congressional committees have recently conducted hearings related to indecency. Legislation has also been introduced in Congress that would increase the penalties for broadcasting indecent programming, and depending on the number of violations engaged in, would automatically subject broadcasters to license revocation, renewal or qualifications proceedings in the event that they broadcast indecent material. The FCC's more vigorous enforcement of its indecency rules may encourage third parties to challenge our license renewal or assignment applications.

 

Stations also must pay regulatory and application fees and follow various FCC rules that regulate, among other things, political advertising, the broadcast of obscene or indecent programming, the advertisement of casinos and lotteries, sponsorship identification and technical operations, including limits on radio frequency radiation.


The FCC adopted new EEO rules for broadcasters, which became effective March 10, 2003. The new rules are outreach and recruitment focused and require that broadcasters: (1) widely disseminate information for each full-time job vacancy, except for vacancies filled in exigent circumstances; (2) provide notification to community and recruitment organizations that have requested information on all or selected job vacancies; and (3) participate in "longer-term" recruitment initiatives, such as job fairs, internships, scholarships and EEO/anti-discrimination training programs. Broadcasters remain subject to the FCC's anti-discrimination policy but the use of minority or women-targeted recruitment sources is no longer mandated. The new rules also require a broadcaster to keep extensive internal records regarding its recruitment efforts including information regarding its recruitment sources and interviewees, notification to requesting community groups and specifics regarding participation in the longer-term initiatives. Broadcasters must also prepare and place in the public inspection file (and on their website if they maintain one) an annual EEO public file report that details recruitment efforts and interviewee totals, the referral sources used for each vacancy, the community groups notified, and specifics regarding participation in longer-term recruitment initiatives. Broadcasters are subject to an FCC mid-term review in the fourth year of the license term and an FCC review as part of the license renewal application, both requiring the submission of the annual EEO public file report for the preceding two years with a statement certifying that the broadcaster's reports are accurate. As of June 30, 2003, the FCC has not reinstated its requirement for a broadcaster to submit its annual workforce employment information to the FCC for statistical purposes. The FCC is expected to address the workforce employment information and filing requirements in a separate Report and Order. Also pending is the FCC's review of recruitment requirements for part-time vacancies and it issued a Further Notice of Proposed Rulemaking in conjunction with the new rules to solicit public comment on this issue.

 

 

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The FCC has issued a decision holding that a broadcast station may not deny a candidate for federal political office a request for broadcast advertising time solely on the grounds that the amount of time requested is not the standard length of time that the station offers to its commercial advertisers. The effect that this FCC decision will have on our programming and commercial advertising is uncertain at this time.


Proposed and Recent Changes


Congress, the FCC or other federal agencies may in the future consider and adopt new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of our radio stations, result in the loss of audience share and advertising revenue for our radio stations, and affect our ability to acquire additional radio stations or finance acquisitions. These matters include:


o

changes in the FCC's ownership rules and policies, including changes to the local radio ownership rules and the limitations on the cross-ownership of radio and other media proposals to increase regulatory fees or to impose spectrum use or other fees on FCC licensees;

o

technical and frequency allocation matters and changes to broadcast technical requirements;

o

proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages;

o

proposals to restrict or prohibit the advertising of on-line casinos or on-line sports-betting services;

o

proposals to limit the tax deductibility of advertising expenses by advertisers;

o

restatement in revised form of FCC's equal employment opportunity rules and revision to rules relating to political broadcasting; and

o

proposals to regulate or prohibit payments to stations by independent record promoters.


The FCC recently selected In-Band, On-Channel™ technology as the exclusive standard for digital services for terrestrial AM and FM broadcasters. The FCC has authorized the immediate commencement of "hybrid" transmissions-simultaneous transmissions in both analog and digital-pending the adoption of formal licensing and service rules, using In-Band, On-Channel™ systems for FM stations. Tests of the In-Band, On Channel™ technology for AM stations are ongoing and hybrid transmissions for AM stations have not yet been authorized. Digital audio broadcasting's advantages over traditional analog broadcasting technology include improved sound quality and the ability to offer a greater variety of auxiliary services. In-Band, On-Channel™ technology will permit radio stations to transmit radio programming in both analog and digital formats, and eventually in digital only formats, using the bandwidth that the radio station is currently licensed to use. It is unclear what formal licensing and service rules the FCC will adopt regarding digital audio broadcasting and what effect these regulations will have on our business or the operations of our stations.



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In January 2000, the FCC created a new low power FM radio service. The new low power stations operate at a maximum power of between ten and 100 watts in the existing FM commercial and non-commercial band. Low power stations may be used by governmental and non-profit organizations to provide non-commercial educational programming or public safety and transportation radio services. No existing broadcaster or other media entity is permitted to have an ownership interest or enter into any program or operating agreement with any low power FM station. During the first two years of the new service, applicants must be based in the area that they propose to serve. Applicants are not permitted to own more than one station nationwide during the initial two-year period. After the initial two-year period, entities are allowed to own up to five stations nationwide, and after three years, the limit will be raised to ten stations nationwide. A single person or entity may not own two low power stations whose transmitters are less than seven miles from each other. The authorizations for the new stations are not transferable. In April 2001, the FCC adopted a third channel interference protection standard, and prohibited any applicant from obtaining a low power FM station who has previously operated a station without a license.


At this time it is difficult to assess the competitive impact of these new stations. Although the new low power stations must comply with certain technical requirements aimed at protecting existing FM radio stations from interference, we cannot be certain of the level of interference that low power stations will cause after they begin operating. Moreover, if low power FM stations are licensed in the markets in which we operate, the low power stations may compete with us for listeners. The low power stations may also limit our ability to obtain new licenses or to modify our existing facilities, or cause interference to areas of existing service that are not protected by the FCC's rules, any of which may harm our business.


On January 28, 2003, Senator Russell Feingold reintroduced a bill in the U.S. Senate entitled "The Competition in Radio and Concert Industries Act". The bill purports to address anti-competitive practices in the radio and concert industries. Among other things, the bill would impose a 60% national audience reach cap for commercial radio stations and a local radio ownership cap of 35% of the local audience share or 35% of the local radio revenue. It would also prohibit the FCC from relaxing the present local numerical radio ownership caps. The bill would further regulate local marketing agreements, joint sales agreements and other contractual relationships between radio stations, including limiting the duration of local marketing agreements entered into after the enactment of the legislation to no more than one year.


The Feingold legislation would also modify Federal law that prohibits the payment of money, services or other valuable consideration to a radio station or station employee in exchange for the inclusion of any matter in the station's programming without on-air disclosure, known as payola.  


The Feingold legislation would prohibit a radio station from using its control over any matter broadcast to extract consideration from a record company, artist, concert promoter, or other entity. It is unclear what impact the legislation, if adopted, would have on existing relationships between radio stations and independent record promoters.


We cannot predict what other matters might be considered in the future by the FCC or Congress, nor can we judge in advance what impact, if any, the implementation of any of these proposals or changes might have on our business.

 

 

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Federal Antitrust Considerations


The Federal Trade Commission and the Department of Justice, which evaluate transactions to determine whether those transactions should be challenged under the federal antitrust laws, have been increasingly active recently in their review of radio station acquisitions, particularly where an operator proposes to acquire additional stations in its existing markets.


For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules promulgated there under, require the parties to file Notification and Report Forms with the Federal Trade Commission and the Department of Justice and to observe specified waiting period requirements before consummating the acquisition. During the initial 30-day period after the filing, the agencies decide which of them will investigate the transaction. If the investigating agency determines that the transaction does not raise significant antitrust issues, then it will either terminate the waiting period or allow it to expire after the initial 30 days. On the other hand, if the agency determines that the transaction requires a more detailed investigation, then, at the conclusion of the initial 30-day period, it will issue a formal request for additional information. The issuance of a formal request extends the waiting period until the 20th calendar day after the date of substantial compliance by all parties to the acquisition. Thereafter, the waiting period may only be extended by court order or with the consent of the parties. In practice, complying with a formal request can take a significant amount of time. In addition, if the investigating agency raises substantive issues in connection with a proposed transaction, then the parties frequently engage in lengthy discussions or negotiations with the investigating agency concerning possible means of addressing those issues, including persuading the agency that the proposed acquisition would not violate the antitrust laws, restructuring the proposed acquisition, divestiture of other assets of one or more parties, or abandonment of the transaction. These discussions and negotiations can be time consuming, and the parties may agree to delay completion of the acquisition during their pendency.


At any time before or after the completion of a proposed acquisition, the Federal Trade Commission or the Department of Justice could take action under the antitrust laws as it considers necessary or desirable in the public interest, including seeking to enjoin the acquisition or seeking divestiture of the business or other assets acquired. The Federal Trade Commission or the Department of Justice may investigate acquisitions that are not required to be reported under the Hart-Scott-Rodino Act under the antitrust laws before or after completion. In addition, private parties may under certain circumstances bring legal action to challenge an acquisition under the antitrust laws.


As part of its increased scrutiny of radio station acquisitions, the Department of Justice has stated publicly that it believes that commencement of operations under time brokerage agreements, local marketing agreements, joint sales agreements and other similar agreements customarily entered into in connection with radio station transfers prior to the expiration of the waiting period under the Hart-Scott-Rodino Act could violate the Hart-Scott-Rodino Act. In connection with acquisitions subject to the waiting period under the Hart-Scott-Rodino Act, so long as the Department of Justice policy on the issue remains unchanged, we would not expect to commence operation of any affected station to be acquired under a time brokerage agreement, local marketing agreement or similar agreement until the waiting period has expired or been terminated.

 

 

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