AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY 2, 1997
REGISTRATION NO. 333-____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SINCLAIR BROADCAST GROUP, INC. KDSM, INC. SINCLAIR CAPITAL
(Exact name of registrant as (Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter) specified in its charter)
---------------- --------------- -----------------
MARYLAND MARYLAND DELAWARE
(State or other jurisdiction (State or other jurisdiction (State or other jurisdiction
of incorporation or organization) of incorporation or organization) of incorporation or organization)
---------------- --------------- -----------------
52-1494660 52-1975792 52-2026076
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
---------------- --------------- -----------------
4833 4833 6159
(Primary Standard Industrial (Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number) Classification Code Number)
</TABLE>
--------------------
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211
(410) 467-5005
(address, including ZIP Code, and telephone number, including area code, of
registrants' principal executive offices)
--------------------
DAVID D. SMITH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SINCLAIR BROADCAST GROUP, INC.
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211
(410) 467-5005
(Name, address, including ZIP Code, and telephone number, including area
code, of agent for service)
--------------------
Copies to:
George P. Stamas, Esq. Steven A. Thomas, Esq.
Wilmer, Cutler & Pickering Thomas & Libowitz, P.A.
2445 M Street, N.W. 100 Light Street -- Suite 1100
Washington, D.C. 20037 Baltimore, MD 21202
(202) 663-6000 (410) 752-2468
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If any of the Securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993 check the following box. [X]
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED PER SECURITY PRICE(1) FEE
- --------------------------------------------------------- ------------- -------------- ------------------- ---------------
<S> <C> <C> <C> <C>
11 5/8 % High Yield Trust Offered Preferred Securities of
Sinclair Capital $200,000,000 100% $200,000,000 $ 60,606.06
11 5/8 % Senior Debentures due 2009 of KDSM, Inc.(2) -- -- -- n/a
12 5/8 % Series C Preferred Stock, par value $.01 per
share of Sinclair Broadcast Group, Inc.(3) -- -- -- n/a
Sinclair Broadcast Group, Inc.'s guarantee with respect
to High Yield Trust Offered Preferred Securities(4) -- -- -- n/a
Sinclair Broadcast Group, Inc.'s guarantee with respect
to KDSM Senior Debentures(5) -- -- -- n/a
Total $200,000,000 100% $200,000,000 $ 60,606.06
</TABLE>
================================================================================
<PAGE>
(1) Calculated pursuant to Rule 457(f) solely for the purpose of calculating
the registration fee. Such amount represents the aggregate offering price
for 11 5/8 % High Yield Trust Offered Preferred Securities of Sinclair
Capital (the "Old Preferred Securities") that Sinclair Capital is offering
to accept in exchange for the 11 5/8 % High Yield Trust Offered Preferred
Securities of Sinclair Capital registered pursuant to this Registration
Statement (the "New Preferred Securities").
(2) A series of the 11 5/8 % Senior Debentures of KDSM, Inc. (the "Old KDSM
Senior Debentures") were originally purchased by Sinclair Capital with the
proceeds of the sale of the Old Preferred Securities. No separate
consideration will be received for the 11 5/8 Senior Debentures due 2009 of
KDSM, Inc. offered for exchange in the transaction contemplated herein (the
"New KDSM Senior Debentures"), or upon the distribution of the New KDSM
Senior Debentures in the event of a liquidation of Sinclair Capital or a
Tax Event (as defined herein).
(3) The 12 5/8 % Series C Preferred Stock of Sinclair Broadcast Group, Inc.
(the "Old Parent Preferred") was originally purchased by KDSM, Inc. with
the proceeds of the sale of the Old KDSM Senior Debentures. No separate
consideration will be received for the 12 5/8 % Series C Preferred Stock of
Sinclair Broadcast Group, Inc. offered for exchange in the transaction
contemplated herein (the "New Parent Preferred").
(4) No separate consideration will be received for the Sinclair Broadcast
Group, Inc. guarantee relating to the New Preferred Securities (the "New
Parent Guarantee").
(5) No separate consideration will be received for the Sinclair Broadcast
Group, Inc. guarantee relating to the New KDSM Senior Debentures (the "New
Parent Debenture Guarantee").
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 2, 1997
PROSPECTUS
OFFER FOR ALL OUTSTANDING
11 5/8 % HIGH YIELD TRUST OFFERED PREFERRED SECURITIES
(LIQUIDATION AMOUNT $100 PER PREFERRED SECURITY)
IN EXCHANGE FOR
11 5/8 % HIGH YIELD TRUST OFFERED PREFERRED SECURITIES
(LIQUIDATION AMOUNT $100 PER PREFERRED SECURITY)
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OF
SINCLAIR CAPITAL
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
[SINCLAIR BROADCAST GROUP]
[GRAPHICS OMITTED]
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _______ __, 1997, UNLESS EXTENDED.
Sinclair Capital (the "Trust"), a special purpose statutory business trust,
which was created under the laws of the State of Delaware and which is governed
by an amended and restated trust agreement (the "Trust Agreement"), Sinclair
Broadcast Group, Inc., a Maryland corporation ("Sinclair" or the "Company") and
KDSM, Inc., a Maryland corporation (together with its subsidiaries, "KDSM,
Inc.") hereby offer, upon the terms and subject to the conditions set forth in
this Prospectus (such Prospectus, as it may be amended or supplemented from time
to time, the "Prospectus") and in the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"), to exchange up to $200,000,000
aggregate liquidation amount of the Trust's 11 5/8 % High Yield Trust Offered
Preferred Securities (the "New Preferred Securities") which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration Statement (as defined herein), of which this Prospectus
constitutes a part, for a like aggregate liquidation amount of the Trust's
outstanding 11 5/8% High Yield Trust Offered Preferred Securities (the "Old
Preferred Securities") of which $200,000,000 is outstanding.
Also pursuant to the Exchange Offer (i) KDSM, Inc. is offering to exchange
all of its 11 5/8 % Senior Debentures due 2009 (the "Old KDSM Senior
Debentures"), of which $206,200,000 aggregate principal amount is outstanding,
for a like principal amount of its 11 5/8 % Senior Debentures due 2009 (the "New
KDSM Senior Debentures"), which New KDSM Senior Debentures have been registered
under the Securities Act; (ii) the Company is offering to exchange all of its 12
5/8 % Series C Preferred Stock, par
(Continued on Page iii)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 27 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS WHO TENDER OLD PREFERRED SECURITIES IN THE EXCHANGE
OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is May 2, 1997.
<PAGE>
[Map showing locations of television and radio stations owned and operated by
the Company, programmed by the Company pursuant to LMAs, provided selling
services pursuant to JSAs, subject to options to acquire, or under agreement to
be acquired as set forth under "Business of Sinclair."]
ii
<PAGE>
(Continued From Cover Page)
value $.01 per share, (the "Old Parent Preferred"), of which 2,062,000 shares
having an aggregate liquidation amount of $206,200,000 are outstanding, for a
like number of shares having a like aggregate liquidation amount of its 12 5/8 %
Series C Preferred Stock, par value $.01 per share (the "New Parent Preferred"),
which New Parent Preferred has been registered under the Securities Act; and
(iii) the Company is offering to exchange its guarantees (described herein) with
respect to the Old Preferred Securities and the Old KDSM Senior Debentures (the
"Old Parent Guarantee" and the "Old Parent Debenture Guarantee," respectively)
for like guarantees (described herein) with respect to the New Preferred
Securities and the New KDSM Senior Debentures (the "New Parent Guarantee" and
the "New Parent Debenture Guarantee," respectively). The New Parent Guarantee
and the New Parent Debenture Guarantee have been registered under the Securities
Act. Sinclair Capital and KDSM, Inc. will exchange Old KDSM Senior Debentures,
Old Parent Preferred, the Old Parent Guarantee and the Old Parent Debenture
Guarantee for New KDSM Senior Debentures, New Parent Preferred, the New Parent
Guarantee and the New Parent Debenture Guarantee.
This Prospectus also relates to the resale of Preferred Securities by certain
holders who may have the right pursuant to the Registration Rights Agreement to
require the Company and the Trust to register the resale of the Preferred
Securities because such holders are not eligible to rely on the registration of
the New Preferred Securities to resell the New Preferred Securities. Holders of
Preferred Securities who seek to resell their Preferred Securities pursuant to
this Prospectus, if any, will be identified in a Prospectus supplement.
The Old Preferred Securities, the Old KDSM Senior Debentures, the Old Parent
Preferred, the Old Parent Guarantee and the Old Parent Debenture Guarantee are
collectively referred to herein as the "Old Securities." The New Preferred
Securities, the New KDSM Senior Debentures, the New Parent Preferred, the New
Parent Guarantee and the New Parent Debenture Guarantee are collectively
referred to herein as the "New Securities." In addition, as the context may
require, unless expressly stated otherwise, (i) "Preferred Securities" means the
Old Preferred Securities and the New Preferred Securities, (ii) "KDSM Senior
Debentures" means the Old KDSM Senior Debentures and the New KDSM Senior
Debentures, (iii) "Parent Preferred" means the Old Parent Preferred and the New
Parent Preferred, (iv) "Parent Guarantee" means the New Parent Guarantee and the
Old Parent Guarantee, and (v) "Parent Debenture Guarantee" means the New Parent
Debenture Guarantee and the Old Parent Debenture Guarantee.
The terms of the New Securities will be identical in all material respects to
the respective terms of the Old Securities, except that (i) the New Securities
will have been registered under the Securities Act and therefore will not be
subject to certain restrictions on transfer applicable to the Old Securities and
(ii) the New Preferred Securities, the New KDSM Senior Debentures and the New
Parent Preferred will not be subject to an increase in interest payments or
other distributions thereon as a consequence of a failure to take certain
actions in connection with their registration under the Securities Act.
The New Preferred Securities are being offered for exchange in order to
satisfy certain obligations of the Company, the Trust and KDSM under the
Registration Rights Agreement dated March 5, 1997 (the "Registration Rights
Agreement") among the Company, the Trust, KDSM, Inc. and the Initial Purchasers
(as defined herein). In the event the Exchange Offer is consummated, any Old
Preferred Securities which remain outstanding after consummation of the Exchange
Offer and the New Preferred Securities issued in the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage of outstanding liquidation amount thereof have taken
certain actions or exercised certain rights under the Trust Agreement.
In connection with the Exchange Offer, holders of Preferred Securities are
being asked to approve a technical amendment to the Articles Supplementary to
the Sinclair Amended and Restated Certificate of Incorporation (the "Amended
Certificate") which specify the terms of the Parent Preferred (the "Parent
Preferred Articles Supplementary") to clarify the ability of Sinclair to issue
the New Parent Preferred in connection with the Exchange Offer. Submission of
Preferred Securities for exchange pursuant to the Letter of Transmittal will,
unless the holder indicates otherwise, constitute consent to this amendment.
iii
<PAGE>
The Preferred Securities represent preferred undivided beneficial interests
in the assets of the Trust. KDSM, Inc. is the owner of the common securities
(the "Common Securities" and, together with the Preferred Securities, the
"Issuer Securities") representing undivided beneficial interests in the assets
of the Trust. First Union National Bank of Maryland is the Property Trustee (the
"Property Trustee") and First Union Bank of Delaware is the Delaware Trustee
(the "Delaware Trustee") of the Trust. KDSM, Inc. is an indirect wholly-owned
subsidiary of Sinclair. The Trust exists for the sole purpose of issuing for
cash the Issuer Securities and using the proceeds therefrom to purchase the KDSM
Senior Debentures and engaging in only those activities necessary or incidental
thereto. The ability of the Trust to make distributions and pay other amounts on
the Preferred Securities is and will be solely dependent upon KDSM, Inc. making
interest and other payments on the KDSM Senior Debentures as and when required.
Such payments on the KDSM Senior Debentures, if made in accordance with the
terms of the indenture under which the KDSM Senior Debentures were issued (the
"KDSM Senior Debenture Indenture"), will provide funds sufficient to enable the
Trust to make distributions and pay other amounts on the Preferred Securities.
KDSM, Inc. owns the License Assets (as defined herein) and the Non-License
Assets (as defined herein) used in the operations of television station KDSM in
Des Moines, Iowa. KDSM, Inc. used the proceeds of the issuance of the Old KDSM
Senior Debentures to purchase the Old Parent Preferred which has an aggregate
stated Liquidation Amount (as defined herein) equal to the aggregate stated
Liquidation Value (as defined herein) of the Old Preferred Securities and Common
Securities, collectively. KDSM, Inc.'s obligations under the New KDSM Senior
Debentures will be secured by a first priority pledge of KDSM Inc.'s interest in
the New Parent Preferred pursuant to a pledge and security agreement by and
between KDSM, Inc. and the Trust (the "Pledge Agreement"). The New Parent
Preferred will have dividend payment and redemption provisions that correspond
to the distribution payment and redemption provisions of the New Preferred
Securities and the interest payment and redemption provisions of the New KDSM
Senior Debentures, except that the dividend rate on the New Parent Preferred
will be one percentage point higher than the distribution rate on the New
Preferred Securities and the interest rate on the New KDSM Senior Debentures.
Accordingly, the Trust's ability to make payments on the New Preferred
Securities will be substantially dependent on the ability of Sinclair to make
dividend and other payments on the New Parent Preferred as well as on the
operating performance of KDSM-TV. In certain circumstances, KDSM, Inc. may
transfer all or substantially all of its assets (without regard to the New
Parent Preferred or the Common Securities owned by KDSM, Inc.) including KDSM-TV
and the assets related thereto in exchange for other assets used in the business
of operating one or more television or radio broadcasting stations or assets
related thereto, and having a fair market value equal to the greater of (a) $50
million and (b) 90% of the fair market value of KDSM-TV on the date of transfer.
See "Relationship Among the New Preferred Securities, the New KDSM Senior
Debentures, the New Parent Preferred and the New Parent Guarantee" and "Risk
Factors--Ability of KDSM, Inc. to Transfer KDSM-TV." Sinclair's ability to make
dividend and other payments on capital stock (including the New Parent
Preferred) is restricted in certain circumstances by the terms of the Bank
Credit Agreement (as defined in Certain Definitions) and certain outstanding
senior subordinated notes of Sinclair (the "Existing Notes"). Sinclair currently
is limited in its ability to redeem capital stock (including the Parent
Preferred) by the terms of the Bank Credit Agreement and the Existing Notes. The
holders of the Preferred Securities will have a preference, with respect to cash
distributions and amounts payable on liquidation, redemption or otherwise over
the holders of the Common Securities issued by the Trust. The Preferred
Securities and Common Securities will represent 97% and 3%, respectively, of the
total capital of the Trust. See "Description of the New Preferred
Securities--Subordination of Common Securities" and "--Liquidation Distribution
Upon Dissolution."
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions payable quarterly in arrears on March 15, June 15, September 15
and December 15 of each year at the rate of 11 5/8 % per annum of the
Liquidation Value of $100 per Preferred Security. Distributions on the Old
Preferred Securities accrue from March 12, 1997, the issue date. The first
distribution payment date with respect to the Old Preferred Securities is June
15, 1997. Holders of the New Preferred Securities will be entitled to
iv
<PAGE>
receive cumulative cash distributions from the most recent distribution date on
the Old Preferred Securities surrendered in exchange for such New Preferred
Securities or, if no distribution has been paid on such Old Preferred
Securities, from March 12, 1997. The Trust's ability to make such payments will
be dependent on its receiving interest payments from KDSM, Inc. on the New KDSM
Senior Debentures, and KDSM, Inc.'s ability to make interest payments will be
substantially dependent upon KDSM, Inc. receiving dividends from Sinclair on the
New Parent Preferred. The failure to pay interest on the New KDSM Senior
Debentures (beyond a 30-day grace period) will be an Event of Default
thereunder. However, Sinclair will have the right, at any time and from time to
time, to defer dividend payments on the New Parent Preferred for up to three
consecutive quarters by extending the dividend payment period thereon (each an
"Extension Period"); provided that Sinclair will be required to pay all
dividends due and owing on the New Parent Preferred at least once every four
quarters and must pay all dividends due and owing on the New Parent Preferred on
March 15, 2009. Similarly, KDSM, Inc. will have the right, at any time and from
time to time, to defer interest payments on the New KDSM Senior Debentures for
(i) up to three consecutive quarters by extending the interest payment period
thereon for any period for which it does not receive dividends on the New Parent
Preferred and (ii) one quarter even if KDSM, Inc. receives dividends on the New
Parent Preferred; provided that KDSM, Inc. will be required to pay all interest
due and owing on the New KDSM Senior Debentures at least once every four
quarters and must pay all interest due and owing on the maturity date of the New
KDSM Senior Debentures. If interest payments on the New KDSM Senior Debentures
are so deferred, distributions on the New Preferred Securities will also be
deferred for the same deferral period. In order to exercise such deferral
rights, the Trust, KDSM, Inc. and Sinclair must issue a press release at least
ten business days prior to the record date for such payments. During an
Extension Period, (i) the dividends on the New Parent Preferred will continue to
accumulate and will accrue additional dividends at a rate of 12 5/8 % compounded
quarterly, (ii) the interest payments on the New KDSM Senior Debentures will
continue to accrue and interest will accrue on any deferred interest at a rate
of 11 5/8 % compounded quarterly, and (iii) the distributions on the New
Preferred Securities will continue to accumulate and will accrue additional
distributions at a rate of 11 5/8 % compounded quarterly. See "Description of
the New KDSM Senior Debentures--Option to Extend Interest Payment Period."
Pursuant to the New Parent Guarantee, Sinclair will irrevocably guarantee on
a junior subordinated basis to the limited extent set forth in the New Parent
Guarantee the payment of distributions out of funds legally available and held
by the Trust and payments on dissolution, winding-up or termination of the Trust
or the redemption of New Preferred Securities, as set forth below. See
"Description of the New Parent Guarantee." If KDSM, Inc. fails to make interest
payments on the New KDSM Senior Debentures held by the Trust, the Trust will not
have sufficient funds to pay distributions on the New Preferred Securities. The
New Parent Guarantee will not cover payment of distributions when the Trust does
not have sufficient funds legally available to pay such distributions. If
payment under the KDSM Senior Debentures is not made as required, the remedy of
a holder of New Preferred Securities will be to seek to cause the Trustees (as
defined herein) under the Trust to enforce the rights of the Trust under the New
KDSM Senior Debentures held by the Trust and under the Pledge Agreement.
Sinclair's obligations under the New Parent Guarantee will be subordinated and
junior in right of payment to all other liabilities of Sinclair except any
liabilities that may be made pari passu with or subordinate to the New Parent
Guarantee expressly by their terms.
The New Preferred Securities must be redeemed upon, and to the extent of,
repayment of the New KDSM Senior Debentures held by the Trust at maturity or the
earlier redemption of the New KDSM Senior Debentures for any reason, at the
Liquidation Value of $100 per New Preferred Security plus accumulated and unpaid
distributions to the Redemption Date (as defined herein), whether or not earned
or declared, to the date of payment; provided that, if the New KDSM Senior
Debentures are redeemed at a price in excess of their principal amount, the New
Preferred Securities will be redeemed at the same higher percentage of their
Liquidation Value. KDSM, Inc. will have the option (i) at any time on or after
March 15, 2002, to redeem the New KDSM Senior Debentures, in whole or in part in
cash at the redemption prices set forth herein, and (ii) at any time on or prior
to March 15, 2000, to redeem up to 33 1/3 % of the aggregate principal amount of
the New KDSM Senior Debentures, with the proceeds of one or more redemptions of
the New Parent Preferred held by KDSM, Inc. (which New Parent Preferred would be
simultaneously redeemed from the proceeds of one or more Public Equity Offerings
(as defined herein) of Sinclair), at a cash redemp-
v
<PAGE>
tion price of 111.625% of the principal amount thereof, plus accrued interest to
the date of redemption; provided that after any such redemption at least 66 2/3
% of the aggregate principal amount of the New KDSM Senior Debentures originally
issued in respect of the New Preferred Securities remains outstanding. In either
case (i) or (ii), KDSM, Inc. will obtain the funds to make such redemption as a
result of Sinclair redeeming New Parent Preferred held by KDSM, Inc. Under the
terms of the Parent Preferred Articles Supplementary, Sinclair will have the
option to redeem the New Parent Preferred in the same circumstances and at the
same redemption prices (expressed as a percentage of Liquidation Amount) as
KDSM, Inc. will have the option to redeem the New KDSM Senior Debentures as
described above.
In addition, KDSM, Inc. will have the option (i) upon a Tax Event or an
Investment Company Act Event (each as defined herein), to redeem in whole or in
part the New KDSM Senior Debentures for cash at a redemption price of 105.813%
in the case of a Tax Event, and 101% in the case of an Investment Company Act
Event, in each case of the aggregate principal amount of the New KDSM Senior
Debentures redeemed, plus all accrued and unpaid interest and to require
Sinclair to redeem the New Parent Preferred for cash pursuant to the terms
thereof at the same redemption prices; provided that at the time of redemption
in the case of a Tax Event triggered by an amendment, clarification or change,
such amendment, clarification or change remains in effect or (ii) upon a Tax
Event, as the holder of all of the Common Securities of the Trust, to cause the
dissolution of the Trust with each holder of New Preferred Securities receiving
New KDSM Senior Debentures in a principal amount equal to the Liquidation Value
of their New Preferred Securities. If KDSM, Inc. exercises the option in clause
(i) above, KDSM, Inc. will use the cash proceeds from the redemption of the New
Parent Preferred to redeem the New KDSM Senior Debentures held by the Trust at a
price that is a percentage above their principal amount equal to the same
percentage above the Liquidation Amount, if any, for which Sinclair redeems the
New Parent Preferred. The Trust will then promptly redeem New Preferred
Securities with the proceeds it receives from KDSM, Inc. If KDSM, Inc. exercises
the option in clause (ii) above, (a) pursuant to the KDSM Senior Debenture
Indenture, Sinclair has agreed to the New Parent Debenture Guarantee, under
which, effective at the time of such distribution, Sinclair will fully and
unconditionally guarantee the payment of the New KDSM Senior Debentures on a
junior subordinated basis; provided that Sinclair confirms the effectiveness of
the New Parent Debenture Guarantee at the time of distribution, which it may not
do if the New Parent Debenture Guarantee is not then permitted under the terms
of the Bank Credit Agreement or the Existing Notes and (b) the Trust may not be
dissolved unless the New Parent Debenture Guarantee is effective. In addition,
KDSM, Inc. must deliver a tax opinion to the Trust to the effect that the
dissolution of the Trust and the distribution of the New KDSM Senior Debentures
will not be a taxable event for United States federal income tax purposes to the
holders of the New Preferred Securities. Sinclair is currently prohibited from
taking any of the prospective actions referred to above by the Bank Credit
Agreement and the Existing Notes and therefore KDSM, Inc. would not currently be
able to dissolve the Trust upon a Tax Event.
Upon a Change of Control (as defined in the relevant governing document) of
Sinclair, each holder of New Preferred Securities will have the right to require
the Trust to redeem all or a portion of such holder's New Preferred Securities
from the proceeds of a redemption by KDSM, Inc. of New KDSM Senior Debentures
held by the Trust at a cash redemption price equal to 101% of such New Preferred
Securities' Liquidation Value, plus accrued and unpaid distributions, if any, to
the date of redemption. Under the terms of the New Parent Preferred, upon a
Change of Control of Sinclair, Sinclair will be required to redeem sufficient
shares of New Parent Preferred to enable KDSM, Inc. to redeem the appropriate
aggregate principal amount of New KDSM Senior Debentures held by the Trust.
Notwithstanding the foregoing, the holders of the New Preferred Securities, the
New KDSM Senior Debentures and the New Parent Preferred will not have the right
to require the issuers of such securities to redeem, repay or repurchase, as the
case may be, such securities upon a Change of Control under any circumstances
unless all of the Existing Notes and all indebtedness under the Bank Credit
Agreement are repaid, redeemed or repurchased, all of the commitments and
letters of credit issued under the Bank Credit Agreement are terminated and all
interest rate protection agreements entered into between Sinclair and any
lenders under the Bank Credit Agreement are terminated at the time of such
Change of Control, or the holders of such instruments have consented to a Change
of Control Offer (as defined in the relevant governing document), in which case
the date on which all Existing Notes and all indebtedness under the Bank Credit
Agreement are so repaid, redeemed or repurchased and such commitments, letters
of credit and interest rate protec-
vi
<PAGE>
tion agreements are terminated or the holders of such instruments have consented
to a Change of Control Offer shall be deemed to be the date on which such Change
of Control shall have occurred. If Sinclair does not make and consummate a
Change of Control Offer upon a Change of Control, the holders of the Preferred
Securities will have the right to elect two directors to the board of directors
of Sinclair pursuant to the Pledge Agreement and the Trust Agreement.
The holders of the Preferred Securities will not have any voting rights in
ordinary circumstances. However, the affirmative vote of the holders of a
majority in aggregate Liquidation Value of outstanding Preferred Securities
(100% of the holders in certain circumstances) will be required to approve (i)
an amendment to the Trust Agreement, (ii) any proposed action that would
adversely affect the powers or preferences of the Preferred Securities or cause
the dissolution of the Trust, (iii) any amendment to the KDSM Senior Debenture
Indenture that would adversely affect the holders of the Preferred Securities,
(iv) any waiver of an Event of Default under the KDSM Senior Debenture Indenture
or the Pledge Agreement, (v) any issuance by the Trust of any additional Equity
Interests (as defined in Certain Definitions) or the incurrence by the Trust of
any Indebtedness (as defined in Certain Definitions) and (vi) pursuant to the
Pledge Agreement, any action that may be taken by KDSM, Inc. as the holder of
the New Parent Preferred. In addition, upon an Event of Default under the Trust
Agreement, the holders of a majority of the Liquidation Value of the Preferred
Securities will have the right to elect new trustees of the Trust. Upon a Voting
Rights Triggering Event (as defined herein) under the New Parent Preferred,
KDSM, Inc. will have the right to elect two directors to the board of directors
of Sinclair. Pursuant to the Pledge Agreement and the Trust Agreement, the
nominees of the holders of a majority of the Liquidation Value of outstanding
Preferred Securities will be elected to such directorships. See "Risk
Factors--Limited Voting Rights; Remedies Upon Default Under New Parent Preferred
and New KDSM Senior Debentures."
In the event of the dissolution of the Trust, the holders of the New
Preferred Securities will be entitled to receive for each New Preferred Security
a liquidation preference of $100 (the "Liquidation Value"), plus accrued and
unpaid distributions thereon, whether or not earned or declared, to the date of
payment subject to certain limitations, unless in connection with such
dissolution upon a Tax Event, New KDSM Senior Debentures are distributed to the
holders of New Preferred Securities in which case each holder of the New
Preferred Securities will receive New KDSM Senior Debentures having a principal
amount equal to the Liquidation Value of such holder's New Preferred Securities.
If the dissolution of the Trust occurs as a result of a redemption of New KDSM
Senior Debentures for cash at a price equal to a percentage over their principal
amount, the Trust will redeem the New Preferred Securities at a price that is
the same percentage amount above the Liquidation Value of the New Preferred
Securities. See "Description of the New Preferred Securities--Liquidation
Distribution Upon Dissolution."
The Old Parent Preferred was issued to KDSM, Inc. in exchange for the
proceeds received by KDSM, Inc. from the issuance of the Old KDSM Senior
Debentures. The Old Parent Preferred had, and the New Parent Preferred will have
a maturity date of March 15, 2009. Dividends on the New Parent Preferred will be
payable quarterly at a rate of 12 5/8 % per annum (one percentage point higher
than the interest rate on the New KDSM Senior Debentures and the distribution
rate on the New Preferred Securities). As described above, Sinclair will have
the right to defer dividend payments on the New Parent Preferred for up to three
consecutive quarters subject to the requirement that it pay all dividends due
and owing thereon at least once every four quarters and must pay all dividends
due and owing on the New Parent Preferred on March 15, 2009. For a description
of the terms of the New Parent Preferred, see "Description of the New Parent
Preferred."
The New KDSM Senior Debentures will be senior indebtedness of KDSM, Inc. The
KDSM Senior Debenture Indenture limits the amount of indebtedness that KDSM,
Inc. may incur. See "Description of the New KDSM Senior Debentures--Certain
Covenants--Limitation on Indebtedness." As of the date on which the Exchange
Offer is consummated (the "Exchange Date") KDSM, Inc. will have no long-term
Indebtedness for borrowed money other than the KDSM Senior Debentures. The New
Parent Guarantee will be subordinated and junior in right of payment to all
liabilities of Sinclair except any liabilities that may be made pari passu with
or subordinate to the New Parent Guarantee expressly by their terms. The New
Parent Debenture Guarantee, if made effective, will be subordinated and junior
in right of payment to all Senior
vii
<PAGE>
Indebtedness (as defined herein) of Sinclair. The New Parent Preferred will
rank, with respect to dividend rights and rights upon liquidation, dissolution
or winding-up of Sinclair (i) junior to all indebtedness of Sinclair and its
subsidiaries, (ii) senior to all common stock of Sinclair and (iii) senior to
Sinclair's Series B Convertible Preferred Stock ($111.5 million liquidation
value as of the date hereof), except that the Series B Convertible Preferred
Stock will in certain circumstances rank pari passu with the Parent Preferred in
respect of dividends and rights upon liquidation, dissolution and winding-up.
See "Description of Capital Stock--Preferred Stock--Series B Convertible
Preferred Stock." As of March 31, 1997, Sinclair had approximately $1.1 billion
of indebtedness outstanding, all of which is senior to or structurally senior to
the New Parent Guarantee and the New Parent Debenture Guarantee, if effective.
See "Description of the New Parent Guarantee--Status of the New Parent
Guarantee" and "Description of the New Parent Debenture Guarantee--Subordination
of New Parent Debenture Guarantee."
The Company, KDSM, Inc. and the Trust are making the Exchange Offer with
respect to the New Preferred Securities in reliance on the position of the staff
of the Division of Corporation Finance of the Securities and Exchange Commission
(the "Staff") as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Company, KDSM, Inc. nor the
Trust has sought its own interpretive letter and there can be no assurance that
the Staff would make a similar determination with respect to the Exchange Offer
as it has in such interpretive letters to third parties. Based on these
interpretations by the Staff, and subject to the two immediately following
sentences, the Company, KDSM, Inc. and the Trust believe that New Preferred
Securities issued pursuant to this Exchange Offer in exchange for Old Preferred
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Preferred Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Preferred Securities. However, any holder of Old Preferred Securities
who is an "affiliate" of the Company, KDSM, Inc. or the Trust or who intends to
participate in the Exchange Offer for the purpose of distributing New Preferred
Securities, or any broker-dealer who purchased Old Preferred Securities from the
Trust to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or
any other available exemption under the Securities Act, (a) will not be able to
rely on the interpretations of the Staff set forth in the above-mentioned
interpretive letters, (b) will not be permitted or entitled to tender such Old
Preferred Securities in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Preferred Securities
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Old Preferred
Securities acquired for its own account as a result of market-making or other
trading activities and exchanges such Old Preferred Securities for New Preferred
Securities, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such New
Preferred Securities.
Each holder of Old Preferred Securities who wishes to exchange Old Preferred
Securities for New Preferred Securities in the Exchange Offer will be required
to represent that (i) it is not an "affiliate" of the Company, KDSM, Inc. or the
Trust, (ii) any New Preferred Securities to be received by it are being acquired
in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Preferred Securities and (iv) if such
holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such New Preferred Securities. In addition, the Company, KDSM, Inc. and the
Trust may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Company, KDSM, Inc. and the
Trust (or an agent thereof), in writing, information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) on behalf of whom such holder holds the
Preferred Securities to be exchanged in the Exchange Offer. Each broker-dealer
that receives New Preferred Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Preferred Securities
for its own account as the result of market-making activities or other
viii
<PAGE>
trading activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Preferred Securities. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
Based on the positions taken by the Staff in the interpretive letters
referred to above, the Company, KDSM, Inc. and the Trust believe that
broker-dealers who acquired Old Preferred Securities for their own accounts, as
a result of market-making activities or other trading activities ("Participating
Broker-Dealers") may fulfill their prospectus delivery requirements with respect
to the New Preferred Securities received upon exchange of such Old Preferred
Securities (other than Old Preferred Securities which represent an unsold
allotment from the original sale of the Old Preferred Securities) with a
prospectus meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains a description
of the plan of distribution with respect to the resale of such New Preferred
Securities. Accordingly, this Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer during the
period referred to below in connection with resales of New Preferred Securities
received in exchange for Old Preferred Securities where such Old Preferred
Securities were acquired by such Participating Broker-Dealer for its own account
as a result of market-making or other trading activities. Subject to certain
provisions set forth in the Registration Rights Agreement, the Company, KDSM,
Inc. and the Trust have agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such New Preferred Securities for a period ending 180
days after the Registration Statement of which this Prospectus constitutes a
part is declared effective. See "Plan of Distribution." Any Participating
Broker-Dealer who is an "affiliate" of the Company, KDSM, Inc. or the Trust may
not rely on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. See "The Exchange Offer--Resales of New Preferred
Securities."
In that regard, each Participating Broker-Dealer who surrenders Old Preferred
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that, upon receipt of notice from the
Company, KDSM, Inc. or the Trust of the occurrence of any event or the discovery
of any fact which makes any statement contained or incorporated by reference in
this Prospectus untrue in any material respect or which causes this Prospectus
to omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Preferred Securities pursuant to this
Prospectus until the Company, KDSM, Inc. or the Trust has amended or
supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company, KDSM, Inc. or the Trust has given notice that the
sale of the New Preferred Securities may be resumed, as the case may be.
Prior to the Exchange Offer, there has been no public market for the Old
Preferred Securities. The New Preferred Securities will be a new issue of
securities for which there currently is no market. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Preferred
Securities. None of the Company, KDSM, Inc. or the Trust currently intends to
apply for listing of the New Preferred Securities on any securities exchange or
for quotation through the Nasdaq Stock Market.
Any Old Preferred Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Amended and
Restated Trust Agreement (except for those rights that terminate upon
consummation of the Exchange Offer). Following consummation of the Exchange
Offer, the holders of Old Preferred Securities will continue to be subject to
all of the existing restrictions upon transfer thereof and neither the Company
nor KDSM, Inc. nor the Trust will have any further obligation to such holders
(other than under certain limited circumstances) to provide for registration
under the Securities Act of the Old Preferred Securities held by them. To the
extent that Old Preferred Securities are
ix
<PAGE>
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Preferred Securities could be adversely affected. See "Risk
Factors--Consequences of a Failure to Exchange Old Preferred Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD PREFERRED SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD PREFERRED SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Preferred Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on_____________, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Company, KDSM, Inc. and the Trust (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Old Preferred Securities may be withdrawn at any time on
or prior to the Expiration Date. The Exchange Offer is not conditioned upon any
minimum liquidation amount of Old Preferred Securities being tendered for
exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Company or the Trust and to the terms and
provisions of the Registration Rights Agreement. The Company has agreed to pay
all expenses of the Exchange Offer. See "The Exchange Offer--Fees and Expenses."
Each New Preferred Security will pay cumulative distributions from the most
recent distribution date on the Old Preferred Securities surrendered in exchange
for such New Preferred Securities or, if no distributions have been paid on such
Old Preferred Securities, from March 12, 1997. Holders of the Old Preferred
Securities whose Old Preferred Securities are accepted for exchange will not
receive accumulated distributions on such Old Preferred Securities for any
period from and after the last distribution date on such Old Preferred
Securities prior to the original issue date of the New Preferred Securities or,
if no such distributions have been paid, will not receive any accumulated
distributions on such Old Preferred Securities, and will be deemed to have
waived the right to receive any distributions on such Old Preferred Securities.
This Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders of Old Preferred Securities as of May___, 1997.
Neither the Company, KDSM, Inc. nor the Trust will receive any cash proceeds
from the issuance of the New Preferred Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
----------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE TRUST OR KDSM, INC. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS
OF THE COMPANY OR THE TRUST SINCE THE
DATE HEREOF.
---------------------------
AVAILABLE INFORMATION
The Company is, and after consummation of the Exchange Offer, KDSM, Inc. and
the Trust will be, subject to the information requirements of the Exchange Act,
and in accordance therewith files (or will file) reports, proxy statements and
other information with the Securities and Exchange Commission (the
x
<PAGE>
"Commission"). Such reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: 5 Park Place, Room 1228, New York, New York 10007 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60621. Copies of such material may
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. at prescribed rates. Such reports and other
information can also be reviewed through the Commission's Electronic Data
Gathering, Analysis, and Retrieval System ("EDGAR") which is publicly available
though the Commission's World Wide Web site (http://www.sec.gov). In addition,
the Company's Class A Common Stock is listed on the Nasdaq Stock Market's
National Market System, and material filed by the Company can be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
No separate financial statements of the Trust have been included or
incorporated by reference herein. The Company does not believe such financial
statements would be material to holders of the Preferred Securities because (i)
all of the voting securities of the Trust are owned directly or indirectly by
the Company and KDSM, Inc. which are or will be reporting companies under the
Exchange Act, (ii) the Trust has no independent operations but exists for the
sole purposes of issuing securities representing undivided beneficial interests
in its assets, investing the proceeds thereof in the KDSM Senior Debentures and
engaging in only those activities necessary or incidental thereto, and (iii) the
obligations of the Trust under the Preferred Securities are guaranteed by the
Company to the extent described herein. See "Relationship Among the New
Preferred Securities, the New KDSM Senior Debentures, the New Parent Preferred
and the New Parent Guarantee."
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Company, the Trust and KDSM, Inc.
with the Commission under the Securities Act. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission, and reference is hereby made to the Registration Statement and to
the exhibits relating thereto for further information with respect to the
Company, KDSM, Inc., the Trust and the New Securities. Any statements contained
herein concerning the provisions of any document are not necessarily complete,
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by the Company are
incorporated by reference in this Prospectus:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1996 (as amended), together with the report of Arthur Andersen
LLP, independent certified public accountants; and
(b) The Company's Current Reports on Form 8-K and Form 8-K/A filed May 10,
1996, May 13, 1996, May 17, 1996, May 29, 1996, August 30, 1996,
September 5, 1996 and February 25, 1997.
All documents filed by the Company pursuant to Sections 13(a) and (c), 14, or
15(d) of the Exchange Act after the date hereof and prior to the termination of
the offering of the securities offered hereby shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
xi
<PAGE>
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon request, a copy of any or all of the foregoing
documents described above which have been or may be incorporated by reference in
this Prospectus other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents).
Such request should be directed to:
Patrick J. Talamantes
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, MD 21211
The New Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
See "Description of the New Preferred Securities--Book-Entry Securities; The
Depository Trust Company; Delivery and Form."
xii
<PAGE>
SUMMARY
The following summary should be read in conjunction with the more detailed
information, financial statements and notes thereto appearing elsewhere in this
Prospectus. Unless the context otherwise indicates or unless specifically
defined otherwise, as used herein, the "Company" or "Sinclair" means Sinclair
Broadcast Group, Inc. and its direct and indirect wholly-owned subsidiaries
(collectively, the "Subsidiaries"), "KDSM, Inc." means KDSM, Inc. and its direct
and indirect wholly owned subsidiaries and the "Trust" means Sinclair Capital.
As the context may require, unless expressly stated otherwise, (i) "Preferred
Securities" means the Old Preferred Securities (as defined herein) together with
the New Preferred Securities (as defined herein), (ii) "KDSM Senior Debentures"
means the Old KDSM Senior Debentures (as defined herein) together with the New
KDSM Senior Debentures (as defined herein), (iii) "Parent Preferred" means the
Old Parent Preferred (as defined herein) together with the New Parent Preferred
(as defined herein), (iv) "Parent Guarantee" means the New Parent Guarantee (as
defined herein) together with the Old Parent Guarantee (as defined herein), and
(v) "Parent Debenture Guarantee" means the New Parent Debenture Guarantee (as
defined herein) together with the Old Parent Debenture Guarantee (as defined
herein). Capitalized terms used in this Prospectus have the meaning set forth in
"Certain Definitions" and in the "Glossary of Defined Terms."
SINCLAIR
The Company is a diversified broadcasting company that owns or provides
programming services to more television stations than any other commercial
broadcasting group in the United States. The Company currently owns or provides
programming services to 28 television stations and has agreed to acquire one
additional television station. The Company believes it is also one of the top 20
radio groups in the United States, when measured by the total number of radio
stations owned, programmed or with which the Company has joint sales agreements
("JSAs"). The Company owns or provides programming services to 25 radio
stations, has a pending acquisition of one radio station, has a JSA with one
additional radio station and has options to acquire an additional seven radio
stations.
The 28 television stations the Company owns or programs pursuant to local
marketing agreements (each an "LMA" (as defined herein)) are located in 20
geographically diverse markets, with 23 of the stations in the top 51 television
DMAs in the United States. The Company's television station group is diverse in
network affiliation with ten stations affiliated with Fox, 11 with UPN, two with
ABC, two with WB and one with CBS. Two stations operate as Independents.
The Company's radio station group is also geographically diverse with a
variety of programming formats including country, urban, news/talk/sports,
progressive rock and adult contemporary. Of the 26 stations owned, programmed or
with which the Company has a JSA, 12 broadcast on the AM band and 14 on the FM
band. The Company owns or programs from two to seven stations in all but one of
the radio markets it serves.
The Company has undergone rapid and significant growth over the course of the
last six years. Beginning with the acquisition of WPGH in Pittsburgh in 1991,
the Company has increased the number of television stations it owns or programs
from three to 28. From 1991 to 1996, net broadcast revenues increased from $39.7
million to $346.5 million, representing a compound annual growth rate of 54%,
while operating cash flow increased from $15.5 million to $180.3 million,
representing a compound annual growth rate of 63%. Pro forma for the 1996
Acquisitions (as defined below), 1996 net broadcasting revenue and operating
cash flow would have been $445.0 million and $206.5 million, respectively.
KDSM, INC.
KDSM, Inc. is an indirect wholly owned subsidiary of Sinclair. KDSM, Inc.
owns all of the License and Non-License Assets related to the operation of
television station KDSM in Des Moines, Iowa. See "Risk Factors--Multiple
Ownership Rules and Effect on LMAs," "LMAs--Rights of Preemption and
Termination" and "Ability of KDSM, Inc. to Transfer KDSM-TV."
1
<PAGE>
KDSM, Inc. and its predecessor had combined net broadcast revenues of $8.2
million and combined broadcast cash flow of $3.7 million in 1996. The Company
has received a third-party appraisal valuing KDSM, Inc.'s assets (other than the
Parent Preferred and the Common Securities) at $50.2 million as of February 18,
1997.
1996 ACQUISITIONS
On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act") was
signed into law. The 1996 Act represents the most sweeping overhaul of the
country's telecommunications laws since the Communications Act of 1934, as
amended (the "Communications Act"). The Company believes that the enactment of
the 1996 Act, which relaxes the broadcast ownership rules, presents a unique
opportunity to build a larger and more diversified broadcasting company.
Accordingly, the Company has acted to capitalize on the opportunities provided
by the 1996 Act. During 1996, the Company acquired, obtained options to acquire,
or obtained the right to program 16 television and 33 radio stations for an
aggregate consideration of approximately $1.2 billion. These acquisitions (the
"1996 Acquisitions") are described below, and are included in the pro forma
consolidated financial data appearing elsewhere in this Prospectus.
o River City Acquisition. On April 10, 1996, the Company agreed to
acquire certain assets of River City Broadcasting, L.P. (together with
its controlled entities, "River City"), a major television and radio
broadcasting company headquartered in St. Louis, Missouri (the "River
City Acquisition"). On May 31, 1996, the Company acquired the
Non-License Assets of nine television stations (one of which was owned
by another party and programmed by River City pursuant to an LMA),
including KDSM-TV, and 21 radio stations. Concurrently, the Company
acquired (i) an option to purchase the License Assets of eight of the
television stations and all 21 radio stations owned by River City for
an exercise price of $20 million, (ii) River City's rights under an
LMA with respect to one television and one radio station (which radio
station the Company has since acquired), (iii) River City's rights
under JSAs with respect to three radio stations (two of which the
Company has since acquired), and (iv) River City's rights to acquire
eight additional radio stations (one of which the Company has
subsequently exercised). The Company has since acquired the License
Assets of 19 of these radio stations and two of the television
stations, and has received approval from the FCC to transfer the
licenses relating to the remaining two radio stations and one more of
the television stations. The Company also entered into an LMA with
River City to program the eight television stations and 21 radio
stations that are the subject of the option pending acquisition of the
License Assets. The Company paid an aggregate of $847.6 million in
cash, issued 1,150,000 shares of Series B Convertible Preferred Stock
(as defined herein) and 1,382,435 stock options to acquire the
Non-License Assets, the options for the License Assets and the rights
described above. The Company also obtained an option to purchase from
River City the assets of WSYX-TV in Columbus, Ohio, for an exercise
price of approximately $235 million. See "Business of
Sinclair--Broadcasting Acquisition Strategy."
o Superior Acquisition. On May 8, 1996, the Company acquired WDKY-TV
(Lexington, Kentucky) and KOCB-TV (Oklahoma City, Oklahoma) by
acquiring the stock of Superior Communications Group Inc. (the
"Superior Acquisition") for approximately $63.5 million.
o Flint Acquisition. On February 27, 1996, the Company acquired the
assets of WSMH-TV (Flint, Michigan) (the "Flint Acquisition") for
approximately $35.8 million by exercising options acquired in May
1995.
o Cincinnati/Kansas City Acquisitions. On July 1, 1996, the Company
acquired the assets of KSMO-TV (Kansas City, Missouri) ("KSMO") and on
August 1, 1996, it acquired the assets of WSTR-TV (Cincinnati, Ohio)
("WSTR" and, together with KSMO, the "Cincinnati/Kansas City
Acquisitions") for approximately $34.2 million.
2
<PAGE>
o Peoria/Bloomington Acquisition. On July 1, 1996, the Company acquired
the assets of WYZZ-TV (Peoria/Bloomington, Illinois) (the
"Peoria/Bloomington Acquisition" or "WYZZ") for approximately $21.2
million.
1997 ACQUISITIONS
Since the end of 1996, the Company has entered into agreements to acquire one
television station and four radio stations, and completed the acquisition of two
television stations and four radio stations. On January 30, 1997, the Company
entered into an agreement to acquire the assets of KUPN-TV, the UPN affiliate in
Las Vegas, Nevada for approximately $87.0 million. The FCC has approved this
acquisition. The Company also entered into an agreement on January 29, 1997 to
acquire the assets of WGR-AM and WWWS-AM in Buffalo, New York for approximately
$1.5 million. The Company's acquisition of WGR-AM and WWWS-AM was consummated on
April 18, 1997. On January 31, 1997, the Company completed the acquisition of
the assets of WWFH-FM and WILP-AM, each in Wilkes-Barre, Pennsylvania, for
aggregate consideration of approximately $773,000. On April 22, 1997, the
Company consummated its acquisition of the License Assets of KOVR-TV in
Sacramento, California and KDSM-TV in Des Moines, Iowa. The Company acquired the
options to do so in the River City Acquisition. On March 12, 1997, the Company
entered into an agreement to acquire the assets of radio station WKRF-FM in the
Wilkes-Barre/Scranton, Pennsylvania market. In April 1997, the Company entered
into an agreement to acquire the assets of radio station WWSH-FM, also in the
Wilkes-Barre/Scranton, Pennsylvania market.
The Company continues to evaluate potential radio and television acquisitions
focusing primarily on stations located in the 15th to the 75th largest DMAs or
MSAs. In assessing potential acquisitions, the Company examines opportunities to
improve revenue share, audience share and/or cost control.
OPERATING STRATEGY
The Company's operating strategy is to (i) attract audience share through the
acquisition and broadcasting of popular programming, children's television
programming, counter-programming, local news programming in selected DMAs, and
popular sporting events in selected DMAs; (ii) increase its share of market
revenues through innovative sales and marketing efforts; (iii) aggressively
control programming and other operating costs; (iv) attract and retain high
quality management; (v) involve its stations extensively in their communities;
and (vi) establish additional television LMAs and increase the size of its radio
clusters.
The Company's LMA arrangements in markets where it already owns a television
station are a major factor in enabling the Company to increase its revenues and
improve operating margins. These LMAs have also helped the Company to manage its
programming inventory effectively and increase the Company's broadcast revenues
in those markets. In addition, the Company believes that its LMA arrangements
have assisted certain television and radio stations whose operations may have
been marginally profitable to continue to air popular programming and contribute
to programming diversity in their respective television DMAs and radio MSAs.
CORPORATE HISTORY
The Company is the successor to businesses founded by the late Julian S.
Smith, the father of the Company's current majority stockholders. These
predecessor businesses began broadcasting on their first television station in
1971 when construction of WBFF in Baltimore was completed. Subsequently, the
predecessor businesses were expanded through the construction of stations in
additional markets and, in 1986, were acquired by the Company. The Company was
formed by certain stockholders, including the Company's current majority
stockholders, David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E.
Smith (collectively, the "Controlling Stockholders"), and their parents.
The Company is a Maryland corporation that was formed in 1986. The Company's
principal offices are located at 2000 West 41st Street, Baltimore, Maryland
21211, and its telephone number is (410) 467-5005.
3
<PAGE>
TELEVISION BROADCASTING PROPERTIES
The Company owns and operates, provides programming services to, or has
agreed to acquire the following television stations:
<TABLE>
<CAPTION>
MARKET
MARKET RANK(A) STATIONS STATUS(B) CHANNEL AFFILIATION
- -------------------------------- -------- ---------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
Pittsburgh, Pennsylvania 19 WPGH O&O 53 FOX
WPTT LMA 22 UPN
St. Louis, Missouri 20 KDNL LMA (d)(h) 30 ABC
Sacramento, California 21 KOVR O&O 13 CBS
Baltimore, Maryland 23 WBFF O&O 45 FOX
WNUV LMA 54 UPN
Indianapolis, Indiana 25 WTTV LMA (d) 4 UPN
WTTK(c) LMA (d) 29 UPN
Cincinnati, Ohio 29 WSTR O&O 64 UPN
Raleigh-Durham, North Carolina 30 WLFL O&O 22 FOX
WRDC LMA 28 UPN
Milwaukee, Wisconsin 31 WCGV O&O 24 UPN
WVTV LMA 18 WB
Kansas City, Missouri 32 KSMO O&O 62 UPN
Columbus, Ohio 34 WTTE O&O 28 FOX
Asheville, North Carolina and
Greenville/Spartanburg/Anderson,
South Carolina 35 WLOS LMA (d) 13 ABC
WFBC LMA (e) 40 IND(g)
San Antonio, Texas 37 KABB LMA (d) 29 FOX
KRRT LMA (f) 35 UPN
Norfolk, Virginia 40 WTVZ O&O 33 FOX
Oklahoma City, Oklahoma 43 KOCB O&O 34 UPN
Birmingham, Alabama 51 WTTO O&O 21 WB
WABM LMA 68 UPN
Flint/Saginaw/Bay City,
Michigan 60 WSMH O&O 66 FOX
Las Vegas, Nevada 64 KUPN Pending 21 UPN
Lexington, Kentucky 68 WDKY O&O 56 FOX
Des Moines, Iowa 72 KDSM O&O 17 FOX
Peoria/Bloomington, Illinois 109 WYZZ O&O 43 FOX
Tuscaloosa, Alabama 187 WDBB LMA 17 IND(g)
</TABLE>
- ----------
(a) Rankings are based on the relative size of a station's DMA among the 211
generally recognized DMAs in the United States as estimated by Nielsen.
(b) "O&O" refers to stations owned and operated by the Company, "LMA" refers to
stations to which the Company provides programming services pursuant to an
LMA and "Pending" refers to stations the Company has agreed to acquire. See
"Business of Sinclair--1997 Acquisitions."
(c) WTTK currently simulcasts all of the programming aired on WTTV.
(d) Non-License Assets acquired from River City and option exercised to acquire
License Assets. Will become owned and operated subject to FCC approval of
transfer of License Assets and closing of acquisition of License Assets.
(e) Non-License Assets acquired from River City. License Assets to be acquired
by Glencairn Ltd., subject to the Company's LMA, upon FCC approval of
transfer of License Assets.
(f) River City provided programming to this station pursuant to an LMA. The
Company acquired River City's rights under the LMA from River City and the
Non-License Assets from the owner of this station. The License Assets are
to be acquired by Glencairn Ltd., subject to the Company's LMA, upon FCC
approval of transfer of License Assets.
(g) "IND" or "Independent" refers to a station that is not affiliated with any
of ABC, CBS, NBC, Fox, UPN or WB.
(h) The FCC has approved the Company's acquisition of the License Assets of
this station.
4
<PAGE>
THE EXCHANGE OFFER
STRUCTURAL OVERVIEW OF ISSUERS AND SECURITIES
[GRAPHICS OMITTED]
1. SINCLAIR CAPITAL. Sinclair Capital (the "Trust") is a special purpose
statutory business trust created under the laws of the State of Delaware
for the sole purposes of (i) issuing the Preferred Securities and the
Common Securities; (ii) using the proceeds of the sale of the Preferred
Securities and Common Securities to purchase the KDSM Senior Debentures;
and (iii) generally engaging in only those activities necessary or
incidental thereto. The Trust issued $200,000,000 aggregate liquidation
value of the Preferred Securities for aggregate consideration of
$200,000,000 on March 12, 1997 (the "Old Securities Offering"). The Trust
has no subsidiaries and has no assets other than the KDSM Senior
Debentures. In the opinion of counsel to the Company, the Trust will not be
taxed as a corporation for federal income tax purposes. KDSM, Inc. has
agreed to pay all expenses of the Trust.
2. KDSM, INC., a Maryland corporation and an indirect wholly-owned subsidiary
of Sinclair, is the owner of the Common Securities of the Trust, which
represent 3% of the total capital of the Trust. KDSM, Inc. issued the Old
KDSM Senior Debentures to the Trust for cash and used the proceeds
therefrom to purchase the Old Parent Preferred of Sinclair. The assets of
KDSM, Inc. currently consist of the License Assets and Non-License Assets
used in the operation of KDSM-TV Des
5
<PAGE>
Moines, Iowa. The License Assets used in the operation of KDSM-TV are owned
by KDSM Licensee, Inc., a wholly owned subsidiary of KDSM, Inc. The Company
has received a third-party appraisal valuing KDSM, Inc.'s assets (other
than the Parent Preferred and the Common Securities) at $50.2 million as of
February 18, 1997. See "Risk Factors--Ability of KDSM, Inc. to Transfer
KDSM-TV."
3. Sinclair Broadcast Group, Inc. Sinclair issued the Old Parent Preferred to
KDSM, Inc. in exchange for the proceeds of the sale by KDSM, Inc. to the
Trust of the Old KDSM Senior Debentures. Sinclair also provided the Old
Parent Guarantee of the Old Preferred Securities (and will provide the New
Parent Guarantee of the New Preferred Securities) pursuant to which it
guarantees on an unsecured and junior subordinated basis the payment of (i)
any accrued and unpaid distributions on the Preferred Securities that have
been theretofore properly declared out of legally available funds in
accordance with the terms of the Trust Agreement as in effect on March 12,
1997, the date on which the Old Preferred Securities were issued ("the
Issue Date"), (ii) the Redemption Price (as defined herein) payable with
respect to any Preferred Securities called for redemption by the Trust out
of funds legally available therefor in accordance with the terms of the
Trust Agreement as in effect on the Issue Date and (iii) upon a voluntary
or involuntary dissolution, winding-up or termination of the Trust (other
than in connection with a redemption of all of the Preferred Securities),
the lesser of (a) the aggregate Liquidation Value, plus accrued and unpaid
distributions, and (b) the fair market value of assets of the Trust legally
available for distribution to holders of the Preferred Securities in
liquidation of the Trust. The Trust Agreement provides that distributions
on the Preferred Securities are not properly declarable, and funds are not
legally available for redemption of Preferred Securities, unless the Trust
has cash sufficient to pay such distributions or make such redemption, as
the case may be.
The principal executive offices of the Trust, KDSM, Inc. and Sinclair are
located at 2000 W. 41st Street, Baltimore, Maryland 21211 (Phone 410-467-5005).
I--THE EXCHANGE OFFER
The Exchange Offer Up to $200,000,000 aggregate liquidation value of New
Preferred Securities are being offered in exchange for
a like aggregate liquidation value of Old Preferred
Securities (the "Exchange Offer"). The Trust will
issue, promptly after the Expiration Date, $1,000
liquidation value of New Preferred Securities in
exchange for each $1,000 liquidation value of
outstanding Old Preferred Securities tendered and
accepted in connection with the Exchange Offer. The
Company and the Trust are making the Exchange Offer in
order to satisfy obligations under the Registration
Rights Agreement relating to the Old Preferred
Securities. For a description of the procedures for
tendering Old Preferred Securities, see "The Exchange
Offer--Procedures for Tendering Old Preferred
Securities."
Expiration Date 5:00 p.m., New York City time, on __________, 1997
(such time on such date being hereinafter called the
"Expiration Date") unless the Exchange Offer is
extended by the Company, KDSM, Inc. and the Trust (in
which case the term "Expiration Date" shall mean the
latest date and time to which the Exchange Offer is
extended). See "The Exchange Offer--Expiration Date;
Extensions; Amendments."
Conditions to the
Exchange Offer The Exchange Offer is subject to certain conditions,
which may be waived by the Company, KDSM, Inc. and the
Trust in their sole discretion. The Exchange Offer is
not conditioned upon any minimum liquidation value of
Old Preferred Securities being tendered. See "The
Exchange Offer--Conditions to the Exchange Offer." The
Company, KDSM, Inc. and the Trust
6
<PAGE>
reserve the right in their sole and absolute
discretion, subject to applicable law, at any time and
from time to time, (i) to delay the acceptance of the
Old Preferred Securities for exchange, (ii) to
terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer and retain all
Old Preferred Securities tendered pursuant to the
Exchange Offer, subject, however, to the right of
holders of Old Preferred Securities to withdraw their
tendered Old Preferred Securities, or (iv) to waive any
condition or otherwise amend the terms of the Exchange
Offer in any respect. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
Withdrawal Rights Tenders of Old Preferred Securities may be withdrawn at
any time on or prior to the Expiration Date by
delivering a written notice of such withdrawal to First
Union National Bank of Maryland (the "Exchange Agent")
in conformity with certain procedures set forth below
under "The Exchange Offer--Withdrawal Rights."
Procedures for Tendering
Old Preferred
Securities Tendering holders of Old Preferred Securities must
complete and sign a Letter of Transmittal in accordance
with the instructions contained therein and forward the
same by mail, facsimile or hand delivery, together with
any other required documents, to the Exchange Agent,
together with the Old Preferred Securities to be
tendered or in compliance with the specified procedures
for guaranteed delivery of Old Preferred Securities.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect tenders by
book-entry transfer. Holders of Old Preferred
Securities registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish to
tender Old Preferred Securities pursuant to the
Exchange Offer. See "The Exchange Offer--Procedures for
Tendering Old Preferred Securities." Letters of
Transmittal and certificates representing Old Preferred
Securities should not be sent to the Company, KDSM,
Inc. or the Trust. Such documents should only be sent
to the Exchange Agent. Questions regarding how to
tender and requests for information should be directed
to the Exchange Agent. See "The Exchange
Offer--Exchange Agent."
Resales of New Preferred
Securities The Company, KDSM, Inc. and the Trust are making the
Exchange Offer in reliance on the position of the staff
(the "Staff") of the Division of Corporation Finance of
the Securities and Exchange Commission (the
"Commission") as set forth in certain interpretive
letters addressed to third parties in other
transactions. However, none of the Company, KDSM, Inc.
or the Trust has sought its own interpretive letter and
there can be no assurance that the Staff would make a
similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the Staff,
and subject to the two immediately following sentences,
the Company, KDSM, Inc. and the Trust believe that New
Preferred Securities issued pursuant to this Exchange
Offer in exchange for Old Preferred Securities may be
offered for resale, resold and otherwise transferred by
a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the
registration and prospectus delivery requirements of
the Securities Act, provided
7
<PAGE>
that such New Preferred Securities are acquired in the
ordinary course of such holder's business and that such
holder is not participating, and has no arrangement or
understanding with any person to participate, in a
distribution (within the meaning of the Securities Act)
of such New Preferred Securities. However, any holder
of Old Preferred Securities who is an "affiliate" of
the Company, KDSM, Inc. or the Trust or who intends to
participate in the Exchange Offer for the purpose of
distributing the New Preferred Securities, or any
broker-dealer who purchased the Old Preferred
Securities from the Trust to resell pursuant to Rule
144A or any other available exemption under the
Securities Act, (a) will not be able to rely on the
interpretations of the Staff set forth in the
above-mentioned interpretive letters, (b) will not be
permitted or entitled to tender such Old Preferred
Securities in the Exchange Offer and (c) must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection with
any sale or other transfer of such Old Preferred
Securities unless such sale is made pursuant to an
exemption from such requirements. In addition, as
described below, if any broker-dealer holds Old
Preferred Securities acquired for its own account as a
result of market-making or other trading activities and
exchanges such Old Preferred Securities for New
Preferred Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such
New Preferred Securities.
Each holder of Old Preferred Securities who wishes to
exchange Old Preferred Securities for New Preferred
Securities in the Exchange Offer will be required to
represent that (i) it is not an "affiliate" of the
Company, KDSM, Inc. or the Trust, (ii) any New
Preferred Securities to be received by it are being
acquired in the ordinary course of its business, (iii)
it has no arrangement or understanding with any person
to participate in a distribution (within the meaning of
the Securities Act) of such New Preferred Securities,
and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the
Securities Act) of such New Preferred Securities.
Each broker-dealer that receives New Preferred
Securities for its own account pursuant to the Exchange
Offer must acknowledge that it acquired the Old
Preferred Securities for its own account as the result
of market-making activities or other trading activities
and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of such New Preferred
Securities. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Based on the position taken by the Staff in the
interpretive letters referred to above, the Company,
KDSM, Inc. and the Trust believe that broker-dealers
who acquired Old Preferred Securities for their own
accounts as a result of market-making activities or
other trading activities ("Participating
Broker-Dealers") may fulfill their prospectus delivery
requirements with respect to the New Preferred
Securities received upon exchange of such Old Preferred
Securities (other than Old Preferred Securities which
represent an unsold allotment from the original sale of
the Old Preferred Securities) with a prospectus meeting
the requirements of the Securities Act, which may be
the prospectus prepared for an ex
8
<PAGE>
change offer so long as it contains a description of
the plan of distribution with respect to the resale of
such New Preferred Securities. Accordingly, this
Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating
Broker-Dealer in connection with resales of New
Preferred Securities received in exchange for Old
Preferred Securities where such Old Preferred
Securities were acquired by such Participating
Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights
Agreement and to the limitations described below under
"The Exchange Offer--Resale of New Preferred
Securities," the Company, KDSM, Inc. and the Trust have
agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales
of such New Preferred Securities for a period ending
180 days after the Registration Statement of which this
Prospectus constitutes a part is declared effective.
See "Plan of Distribution." Any Participating
Broker-Dealer who is an "affiliate" of the Company,
KDSM, Inc. or the Trust may not rely on such
interpretive letters and must comply with the
registration and prospectus delivery requirements of
the Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of New
Preferred Securities."
Exchange Agent The exchange agent with respect to the Exchange Offer
is First Union National Bank of Maryland. The
addresses, and telephone and facsimile numbers of the
Exchange Agent are set forth in "The Exchange
Offer--Exchange Agent" and in the Letter of
Transmittal.
Use of Proceeds None of the Company, the Trust or KDSM, Inc. will
receive any cash proceeds from the issuance of the New
Preferred Securities offered hereby. See "Use of
Proceeds."
Certain United States
Federal Income Tax
Consequences Holders of Old Preferred Securities should review the
information set forth under "Certain United States
Federal Income Tax Consequences" prior to tendering Old
Preferred Securities in the Exchange Offer.
Amendment of the Parent
Preferred Articles
Supplementary In connection with the Exchange Offer, the Company is
proposing to make a technical amendment to the Parent
Preferred Articles Supplementary to clarify the ability
of Sinclair to issue the New Parent Preferred in
connection with the Exchange Offer. The consent of the
holders of a majority in aggregate liquidation value of
the Preferred Securities will be required to effect the
amendment. See "The Exchange Offer--Amendment of Parent
Preferred Articles Supplementary."
II--NEW PARENT PREFERRED
Security Sinclair issued 2,062,000 shares of its 12 5/8 % Series
C Preferred Stock, par value $.01 per share (the "Old
Parent Preferred"), to KDSM, Inc. in exchange for the
proceeds received by KDSM, Inc. from the issuance of
the Old KDSM Senior Debentures. The Old Parent
Preferred is governed by Articles Supplementary (the
"Parent Preferred Articles Supplementary") to the
Amended and restated Articles of Incorporation of
Sinclair (the "Amended
9
<PAGE>
Certificate"). In connection with the Exchange Offer,
Sinclair will offer to exchange the 2,062,000 shares of
Old Parent Preferred for a like amount of newly issued
shares of Series C Preferred Stock that have been
registered under the Securities Act (the "New Parent
Preferred"). The New Parent Preferred will have terms
that are identical in all material respects to those of
the Old Parent Preferred, except that the New Parent
Preferred will not contain terms with respect to
transfer restrictions or provide for Penalty Amounts
(as defined herein) for future periods.
Maturity The New Parent Preferred will have a maturity date of
March 15, 2009 and will be mandatorily redeemable on
its maturity date. Sinclair currently is limited in its
ability to redeem capital stock (including the New
Parent Preferred) by the terms of the Bank Credit
Agreement (as defined in Certain Definitions) and the
Existing Notes (as defined herein).
Ranking The New Parent Preferred will rank junior in right of
payment to all indebtedness of Sinclair and its
subsidiaries. The New Parent Preferred will, with
respect to dividend rights and rights upon liquidation,
winding-up and dissolution of Sinclair, rank senior to
Sinclair's common stock and Sinclair's Series B
Convertible Preferred Stock ($111.5 million liquidation
value outstanding as of the date hereof) (the "Series B
Convertible Preferred Stock") which was issued in
connection with the River City Acquisition, except that
upon the termination of Barry Baker's employment (i) by
Sinclair prior to May 31, 2001, for any reason other
than "for cause," or (ii) by Mr. Baker under certain
circumstances described under "Description of Capital
Stock--Preferred Stock--Series B Convertible Preferred
Stock," then the New Parent Preferred will rank pari
passu with the Series B Convertible Preferred Stock in
respect of dividend rights and rights upon liquidation,
dissolution and winding-up of Sinclair. In connection
with the River City Acquisition, Sinclair agreed to
appoint Mr. Baker Executive Vice President of Sinclair
at such time as Mr. Baker is able to hold that position
under applicable rules and policies of the FCC. He
currently serves as a consultant to Sinclair. See
"Management" in Sinclair's Annual Report on Form 10-K
incorporated herein by reference.
Dividends Dividends on the Parent Preferred are payable quarterly
at a rate per annum of 12 5/8% of the stated
Liquidation Amount of $100 per share of Parent
Preferred. Such dividend rate is one percentage point
higher than the interest rate on the KDSM Senior
Debentures and the distribution rate on the Preferred
Securities. Dividends on the Parent Preferred are
payable in arrears on March 15, June 15, September 15
and December 15 of each year (each a "Dividend Payment
Date") to the holders of record on the March 1, June 1,
September 1 and December 1 next preceding each Dividend
Payment Date. The first Dividend Payment Date with
respect to the Old Parent Preferred is June 15, 1997.
Dividends on the Old Parent Preferred cumulate from
March 12, 1997 (the "Issue Date"). Dividends on the New
Parent Preferred will cumulate from the most recent
Dividend Payment Date on the Old Parent Preferred
surrendered in exchange for such New Parent Preferred
or, if no dividend has been paid on such Old Parent
Preferred, from March 12, 1997.
10
<PAGE>
Deferral Provisions Sinclair will have the right, at any time and from time
to time, to defer dividend payments for up to three
consecutive quarters (each a "Dividend Extension
Period"); provided that Sinclair will be required to
pay all dividends due and owing on the New Parent
Preferred at least once every four quarters and must
pay all dividends due and owing on the New Parent
Preferred on March 15, 2009. Quarterly distributions on
the New Preferred Securities will be deferred by the
Trust during any such Dividend Extension Period (but
will continue to accumulate and compound quarterly, and
Additional Amounts (as defined under "Description of
the New Preferred Securities--Distributions") generally
intended to provide quarterly compounding on
distribution arrearages will also accumulate during any
such Dividend Extension Period). The remedy for the
holders of the New Parent Preferred upon a failure by
Sinclair to pay all dividends due and owing thereon at
least once every four quarters (or for any other
breaches under the New Parent Preferred) will be the
right to elect two directors to Sinclair's board of
directors. See "--Voting Rights" and "Risk
Factors--Restrictions Imposed by Terms of
Indebtedness."
Liquidation Preference $100 per share of New Parent Preferred (the
"Liquidation Amount") (subject to increase in the case
of certain redemptions), plus an amount equal to any
accumulated and unpaid dividends (whether or not earned
or declared) to the date of payment.
Voting Rights Holders of the New Parent Preferred will not have any
voting rights in ordinary circumstances. However, the
vote of the holders of a majority in aggregate
Liquidation Amount of outstanding Parent Preferred
(100% in certain circumstances) will be required to
approve any amendment to the Amended Certificate that
would adversely affect the powers, preferences or
special rights of the holders of the Parent Preferred
or cause the liquidation, dissolution or winding-up of
Sinclair. The vote of the holders of a majority in
aggregate Liquidation Amount of outstanding Parent
Preferred will be required to approve any amendment to
the Parent Preferred Articles Supplementary if such
amendment would adversely affect the powers,
preferences or special rights of such holders. In
addition, the approval of the holders of a majority in
aggregate Liquidation Amount of outstanding Parent
Preferred will be required to approve the issuance of
any preferred stock by Sinclair which is senior to the
Parent Preferred in right of payment. In addition, upon
a Voting Rights Triggering Event (as defined herein),
the holders of a majority in aggregate Liquidation
Amount of the outstanding Parent Preferred will have
the right to elect two directors to the board of
directors of Sinclair. KDSM, Inc. agreed in the Pledge
Agreement (as defined herein) not to take or consent to
any actions or waive any rights under the Parent
Preferred or elect any such directors without the
approval of the holders of the majority in principal
amount of the KDSM Senior Debentures, which, while the
Trust holds the KDSM Senior Debentures, will not,
pursuant to the Pledge Agreement, be provided without
the approval of the holders of a majority in aggregate
Liquidation Value of the outstanding Preferred
Securities (100% in certain circumstances). See
"Description of the New Preferred Securities--Voting
Rights" and "Description of the New KDSM Senior
Debentures--Events of Default."
Covenants The Parent Preferred Articles Supplementary contain
certain covenants, including, but not limited to,
covenants with respect
11
<PAGE>
to the following matters: (i) limitation on
indebtedness; (ii) limitation on restricted payments;
(iii) limitation on transactions with affiliates; (iv)
limitation on sale of assets; (v) limitation on
unrestricted subsidiaries; (vi) restrictions on
mergers, consolidations and the transfer of all or
substantially all of the assets of the Company to
another person; (vii) provision of financial
statements; and (viii) limitation on the issuance of
senior preferred stock. Violation of any of these
covenants (after a grace period in certain
circumstances) will be a Voting Rights Triggering
Event. See "Description of the New Preferred
Securities--Voting Rights."
Change of Control Upon a Change of Control of Sinclair, Sinclair will be
required to make an offer (a "Change of Control Offer")
to redeem all or a portion of the shares of New Parent
Preferred at 101% of such shares' aggregate Liquidation
Amount, plus accrued and unpaid dividends, if any, to
the date of redemption. As described under "--New
Preferred Securities--Change of Control," upon a Change
of Control of Sinclair, the holders of the Preferred
Securities will have the right to require the Trust to
redeem all or a portion of the Preferred Securities
from the proceeds of a redemption by KDSM, Inc. of New
KDSM Senior Debentures held by the Trust at a cash
purchase price of 101% of their Liquidation Value plus
accrued and unpaid interest, if any, to the date of
redemption. KDSM, Inc. will obtain the funds necessary
to make such redemption by requiring Sinclair to redeem
a sufficient number of shares of New Parent Preferred
held by KDSM, Inc. pursuant to the provision described
in the first sentence of this paragraph.
Notwithstanding the foregoing, the holders of the New
Preferred Securities, the New KDSM Senior Debentures
and the New Parent Preferred will not have the right to
require the issuers of such securities to redeem, repay
or repurchase, as the case may be, such securities upon
a Change of Control under any circumstances unless all
of the Existing Notes and all indebtedness under the
Bank Credit Agreement are repaid, redeemed or
repurchased, all of the commitments and letters of
credit issued under the Bank Credit Agreement are
terminated and all interest rate protection agreements
entered into between Sinclair and any lenders under the
Bank Credit Agreement are terminated at the time of
such Change of Control or the holders of such
instruments have consented to a Change of Control
Offer, in which case the date on which all Existing
Notes and all indebtedness under the Bank Credit
Agreement are so repaid, redeemed or repurchased and
said commitments, letters of credit and interest rate
protection agreements are terminated or the holders of
such instruments have consented to such Change of
Control Offer shall be deemed to be the date on which
such Change of Control shall have occurred. If Sinclair
does not make and consummate a Change of Control Offer
upon a Change of Control, the holders of the Preferred
Securities will have the right to elect two directors
to the board of directors of Sinclair pursuant to the
Pledge Agreement and the Trust Agreement.
Redemption Rights As described below under "--New Preferred
Securities--Redemption," Sinclair shall have the right
to redeem the New Parent Preferred in certain
circumstances.
12
<PAGE>
III--NEW KDSM SENIOR DEBENTURES
Security KDSM, Inc. issued approximately $206.2 million
principal amount of 11 5/8 % KDSM Senior Debentures due
2009 (the "Old KDSM Senior Debentures") to the Trust.
$200 million of such Old KDSM Senior Debentures were
issued in respect of the proceeds of the Old Preferred
Securities and $6.2 million were issued in respect of
the proceeds of the Common Securities. In connection
with the Exchange Offer, KDSM, Inc. will offer to
exchange the $206.2 million principal amount of Old
KDSM Senior Debentures for a like principal amount of
11 5/8 % Senior Debentures due 2009 that have been
registered under the Securities Act (the "New KDSM
Senior Debentures"). The New KDSM Senior Debentures
will have terms that are identical in all material
respects to those of the Old KDSM Senior Debentures,
except that the New KDSM Senior Debentures will not
contain terms with respect to transfer restrictions or
provide for Penalty Amounts for future periods.
Maturity The New KDSM Senior Debentures will mature on March 15,
2009.
Interest The KDSM Senior Debentures bear interest at the rate of
11 5/8 % per annum payable quarterly in arrears on
March 15, June 15, September 15 and December 15 of each
year (each, an "Interest Payment Date") to the Person
in whose name each KDSM Senior Debenture is registered
as of the March 1, June 1, September 1 and December 1
next preceding each such Interest Payment Date.
Interest on the Old KDSM Senior Debentures accrues from
March 12, 1997, the date of original issuance. The
first Interest Payment Date with respect to the Old
KDSM Senior Debentures is June 15, 1997. Interest on
the New KDSM Senior Debentures will accrue from the
most recent Interest Payment Date of the Old KDSM
Senior Debentures surrendered in exchange for such New
KDSM Senior Debentures, or, if no interest has been
paid on such Old KDSM Senior Debentures, from March 12,
1997. It is anticipated that the New KDSM Senior
Debentures will be held in the name of the Trust and
will be held by the Property Trustee for the benefit of
the holders of the New Preferred Securities.
Deferral KDSM, Inc. has the right, at any time and from time to
time, to defer any interest payments on the New KDSM
Senior Debentures for (i) up to three consecutive
quarters for any period for which it does not receive
dividends on the New Parent Preferred and (ii) one
quarter even if KDSM, Inc. receives dividends on the
New Parent Preferred (each an "Interest Extension
Period"); provided that KDSM, Inc. will be required to
pay all interest due and payable on the New KDSM Senior
Debentures at least once every four quarters and must
pay all interest due and owing on the maturity date of
the New KDSM Senior Debentures. Sinclair may elect to
defer dividend payments from time to time on the New
Parent Preferred for up to three consecutive quarters;
provided that Sinclair shall be required to pay all
dividends due and owing on the New Parent Preferred at
least once every four quarters and must pay all
dividends due and owing on the New Parent Preferred on
March 15, 2009. Upon the termination of any Interest
Extension Period and the payment of all amounts then
due, KDSM, Inc. may select a new Interest Extension
Period, subject to the terms of the preceding
sentences. No interest shall be due
13
<PAGE>
and payable during an Interest Extension Period until
the end of such period. If KDSM, Inc. defers an
interest payment or otherwise fails to make an interest
payment, KDSM, Inc. will be prohibited from paying
dividends or distributions on its capital stock or
other securities and making any other restricted
payments until quarterly interest payments are resumed
and all accumulated and unpaid interest (including any
interest payable to effect quarterly compounding) on
the New KDSM Senior Debentures is paid in full.
Security Interest The New KDSM Senior Debentures will be secured by a
first priority security interest in the New Parent
Preferred pursuant to a pledge and security agreement
between KDSM, Inc. and the Trust (the "Pledge
Agreement").
Ranking The payment of the principal of and interest on the New
KDSM Senior Debentures will rank pari passu in right of
payment with the Old KDSM Senior Debentures and all
senior indebtedness of KDSM, Inc. and senior to all
junior indebtedness of KDSM, Inc. As of December 31,
1996 on a pro forma basis, KDSM, Inc. would have had no
long-term indebtedness outstanding other than the KDSM
Senior Debentures.
Covenants The indenture under which the New KDSM Senior
Debentures will be issued (the "KDSM Senior Debenture
Indenture") contains covenants: (a) limiting restricted
payments; (b) limiting indebtedness; (c) requiring
KDSM, Inc. to own 100% of the Common Securities and
Sinclair to own, directly or indirectly, 100% of the
equity interests in KDSM, Inc.; (d) limiting
dissolution of the Trust; (e) requiring KDSM, Inc. to
use reasonable efforts to cause the Trust to remain a
business trust and not be classified as a corporation
for tax purposes; (f) requiring KDSM, Inc. to promptly
redeem the New KDSM Senior Debentures from the proceeds
of any redemption of the New Parent Preferred and to
promptly make interest payments on the New KDSM Senior
Debentures if Sinclair makes dividend payments on the
New Parent Preferred except that KDSM, Inc. is
permitted to defer interest payments for one quarter
even if KDSM, Inc. receives dividends on the New Parent
Preferred; (g) limiting liens; (h) limiting mergers,
consolidation and sales of assets; (i) limiting
transactions with affiliates; (j) limiting sales of
assets other than for fair market value; (k) providing
for financial statements; (l) requiring that upon the
acceptance by the holders of the Preferred Securities
of a Change of Control Offer for the Preferred
Securities, KDSM, Inc. will request redemption of the
same percentage of shares of the Parent Preferred as
the percentage of KDSM Senior Debentures which the
Trust requires to be redeemed upon such event; (m)
prohibiting KDSM, Inc. from selling, offering to sell,
granting any option with respect to, pledging or
incurring any lien or encumbrance with respect to the
New Parent Preferred; and (n) limiting guarantees by
subsidiaries. See "Description of New KDSM Senior
Debentures--Certain Covenants." Pursuant to the Pledge
Agreement, KDSM, Inc. will be prohibited from providing
any consents or taking any actions under the New Parent
Preferred without the consent of the Trust which will
require the approval of the holders of a majority in
aggregate Liquidation Value of the outstanding
Preferred Securities (100% in certain circumstances)
and will be required to elect the nominees of the
holders of a majority
14
<PAGE>
in Liquidation Value of the Preferred Securities to
Sinclair's board of directors if it has that right
because of a Voting Rights Triggering Event under the
New Parent Preferred.
Rights Upon a Tax Event
or Investment Company
Act Event KDSM, Inc. will have the option (a) upon a Tax Event or
an Investment Company Act Event (each as defined
below), to redeem in whole or in part, the New KDSM
Senior Debentures for cash at a redemption price of
105.813% in the case of a Tax Event and 101% in the
case of an Investment Company Act Event, in each case
of the aggregate principal amount of the New KDSM
Senior Debentures redeemed, plus all accrued and unpaid
interest, and to require Sinclair to redeem the New
Parent Preferred for cash pursuant to the terms thereof
at the same redemption prices; provided that at the
time of redemption in the case of a Tax Event triggered
by an amendment, clarification or change, such
amendment, clarification or change remains in effect or
(b) upon a Tax Event, as the holder of all of the
Common Securities of the Trust, to cause the Trust to
be dissolved with each holder of New Preferred
Securities receiving New KDSM Senior Debentures in a
principal amount equal to the Liquidation Value of
their New Preferred Securities. If KDSM, Inc. exercises
the option in clause (a) above, KDSM, Inc. will use the
cash proceeds from the redemption of the New Parent
Preferred to redeem New KDSM Senior Debentures held by
the Trust at a price that is a percentage above their
principal amount equal to the same percentage above the
Liquidation Amount, if any, for which Sinclair redeems
the New Parent Preferred. The Trust would then promptly
redeem New Preferred Securities with the proceeds it
received from KDSM, Inc. If KDSM, Inc. exercises the
option in clause (b) above, (i) pursuant to the KDSM
Senior Debenture Indenture, Sinclair has agreed,
effective at the time of such distribution, to fully
and unconditionally guarantee (with respect to the New
KDSM Senior Debentures, the "New Parent Debenture
Guarantee") the payment of the New KDSM Senior
Debentures on a junior subordinated basis provided that
Sinclair confirms the effectiveness of the New Parent
Debenture Guarantee at the time of distribution, which
it may not do if the New Parent Debenture Guarantee is
not then permitted under the terms of the Bank Credit
Agreement or the Existing Notes, (ii) the Trust may not
be dissolved unless the New Parent Debenture Guarantee
is effective and (iii) KDSM, Inc. must deliver a tax
opinion to the Trust to the effect that the dissolution
of the Trust and the distribution of the New KDSM
Senior Debentures will not be a taxable event for
United States federal income tax purposes to the
holders of the Preferred Securities. Sinclair is
currently prohibited from taking any of the prospective
actions referred to above by the Bank Credit Agreement
and the Existing Notes.
A "Tax Event" means the receipt by the Trust of an
opinion of counsel to the Trust experienced in such
matters to the effect that, as a result of (i) any
amendment to, clarification of, or change (including
any announced prospective change) in the laws or
treaties (or any regulations thereunder) of the United
States or any political subdivision or taxing authority
thereof or therein affecting taxation, (ii) any
judicial decision, official administrative
pronouncement, ruling, regulatory procedure, notice or
announcement (including any notice or announcement of
intent to adopt such procedures or regulations)
("Administrative Ac
15
<PAGE>
tion") or (iii) any amendment to, clarification of, or
change in the official position or the interpretation
of such Administrative Action or judicial decision or
any interpretation or pronouncement that provides for a
position with respect to such Administrative Action or
judicial decision that differs from the theretofore
generally accepted position, in each case, by any
legislative body, court, governmental authority or
regulatory body, irrespective of the manner in which
such amendment, clarification or change is made known,
which amendment, clarification, or change is effective
or such pronouncement or decision is announced on or
after the first date of the issuance of the Old
Preferred Securities, there is more than an
insubstantial risk that (a) the Trust is, or will be,
subject to United States federal income tax with
respect to the interest received on the KDSM Senior
Debentures, (b) interest payable by KDSM, Inc. on the
KDSM Senior Debentures is not, or will not be, fully
deductible for United States federal income tax
purposes, or (c) the Trust is, or will be, subject to
more than a de minimis amount of other taxes, duties,
or other governmental charges. See "Description of New
Preferred Securities--Redemption Upon a Tax Event or an
Investment Company Act Event." "Investment Company Act
Event" means the receipt by the Trust or KDSM, Inc. of
an opinion of nationally recognized independent counsel
experienced in practice under the Investment Company
Act of 1940, as amended (the "1940 Act"), to the effect
that as a result of the occurrence of a change in law
or regulation or a change in official interpretation or
application of law or regulation by any legislative
body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), the Trust or
KDSM, Inc. is or will be considered an "investment
company" which is required to be registered under the
1940 Act, which Change in 1940 Act Law becomes
effective on or after the Issue Date.
Ability of KDSM, Inc.
to Transfer KDSM-TV Under certain circumstances, KDSM, Inc. is permitted to
transfer all or substantially all of its assets
(without regard to the Parent Preferred or the Common
Securities owned by KDSM, Inc.) including KDSM-TV and
the assets related thereto, in exchange for assets used
in the business of operating one or more television or
radio broadcasting stations or assets related thereto,
without the transferee of such assets from KDSM, Inc.
becoming obligated under the New KDSM Senior
Debentures, so long as the fair market value of the
assets received by KDSM, Inc. is equal to the greater
of (i) $50 million or (ii) 90% of the fair market value
of the assets transferred by KDSM, Inc. See "Risk
Factors--Ability of KDSM, Inc. to Transfer KDSM-TV."
Redemption Rights As described below under "--New Preferred
Securities--Redemption" and "--Change of Control,"
KDSM, Inc. will have additional rights to redeem the
New KDSM Senior Debentures and may be required to
redeem the New KDSM Senior Debentures in certain
circumstances.
16
<PAGE>
IV--SECURITIES ISSUED BY THE TRUST
Securities Offered On March 12, 1997, the Trust issued $200 million
aggregate principal amount of 11 5/8 % High Yield Trust
Offered Preferred Securities (the "Old Preferred
Securities"). Pursuant to the Exchange Offer, the Trust
is offering to exchange up to $200 million aggregate
principal amount of its 11 5/8 % High Yield Trust
Offered Preferred Securities that have been registered
under the Securities Act (the "New Preferred
Securities"). The terms of the New Preferred Securities
will be identical in all material respects to those of
the Old Preferred Securities, except that the New
Preferred Securities will not contain terms with
respect to transfer restrictions and will not provide
for penalty amounts for future periods.
Maturity March 15, 2009.
Distributions Distributions on the Preferred Securities are entitled
to a preference fixed at a rate per annum of 11 5/8 %
of the stated Liquidation Value of $100 per Preferred
Security. Distributions on the Old Preferred Securities
cumulate from the Issue Date. Holders of the New
Preferred Securities will be entitled to receive
cumulative cash distributions from the most recent
distribution date on the Old Preferred Securities
surrendered in exchange for such New Preferred
Securities, or, if no distribution has been paid on
such Old Preferred Securities from the Issue Date.
Subject to the distribution deferral provisions
described in "--Deferral Provisions" below,
distributions on the Preferred Securities are payable
quarterly in arrears on March 15, June 15, September 15
and December 15 of each year (each a "Distribution
Payment Date") to the holders of record on the March 1,
June 1, September 1 and December 1 next preceding such
Distribution Payment Date. Distributions that are in
arrears (whether or not properly deferred) accrue
additional distributions at a rate per annum of 11 5/8
%, compounded quarterly. The First Distribution Payment
Date with respect to the Old Preferred Securities is
June 15, 1997.
Interest payments from KDSM, Inc. on the New KDSM
Senior Debentures, if made in accordance with the terms
of the KDSM Senior Debenture Indenture, will provide
sufficient funds to enable the Trust to make
distributions and pay other amounts on the New
Preferred Securities. The ability of KDSM, Inc. to make
interest payments on the New KDSM Senior Debentures
will be substantially dependent on its receipt of
dividend payments on the New Parent Preferred and its
ability to generate cash flow and earnings from its
operations (which at closing will consist of the
operations of KDSM-TV in Des Moines, Iowa, but KDSM,
Inc. may transfer KDSM-TV for other assets used in the
business of television or radio broadcasting or in
businesses reasonably related thereto in certain
circumstances). See "Description of the New Preferred
Securities--Distributions," "Description of the New
Parent Preferred," "Relationship Among the New
Preferred Securities, the New KDSM Senior Debentures,
the New Parent Preferred and the New Parent Debenture
Guarantee" and "Risk Factors--Ability of KDSM, Inc. to
Transfer KDSM-TV." The holders of the Preferred
Securities will have a preference with respect to cash
distributions and amounts payable on liquidation,
redemption or otherwise over the holders of the Common
Securities. See "Risk Factors--Restrictions Imposed by
Terms of Indebtedness," "Description of the New
Preferred Securities--
17
<PAGE>
Subordination of Common Securities" and "--Liquidation
Distribution Upon Dissolution."
Deferral Provisions Distributions on the New Preferred Securities may be
deferred to the extent payment of interest on the New
KDSM Senior Debentures is properly deferred. Sinclair
will have the right, at any time and from time to time,
to defer dividend payments on the New Parent Preferred
for up to three consecutive quarters (each a
"Distribution Extension Period"); provided that
Sinclair will be required to pay all dividends due and
owing on the New Parent Preferred at least once every
four quarters and must pay all dividends due and owing
on the New Parent Preferred on March 15, 2009.
Similarly, KDSM, Inc. will have the right, at any time
and from time to time, to defer interest payments on
the New KDSM Senior Debentures for up to (i) three
consecutive quarters by extending the interest payment
period thereon for any period for which it does not
receive dividends on the New Parent Preferred and (ii)
one quarter even if KDSM, Inc. receives dividends on
the New Parent Preferred; provided that KDSM, Inc. will
be required to pay all interest due and owing on the
New KDSM Senior Debentures at least once every four
quarters and must pay all interest due and owing on the
maturity date of the New KDSM Senior Debentures.
Quarterly distributions on the New Preferred Securities
will be deferred by the Trust during any such Interest
Extension Period (but will continue to accumulate and
compound quarterly, and Additional Amounts intended to
provide quarterly compounding on distribution
arrearages will also accumulate during any such
period).
Liquidation Preference $100 per New Preferred Security (the "Liquidation
Value"), plus an amount equal to any accumulated and
unpaid distributions (whether or not earned or
declared) to the date of payment. See "--Redemption"
and "Description of the New Preferred
Securities--Subordination of Common Securities" and
"--Liquidation Distribution Upon Dissolution."
Redemption The New Preferred Securities will be subject to
mandatory redemption at maturity. The New Preferred
Securities also must be redeemed upon, and to the
extent of, repayment of the New KDSM Senior Debentures
held by the Trust at maturity or their earlier
redemption for any reason, at the Liquidation Value of
$100 per New Preferred Security plus accumulated and
unpaid distributions to the Redemption Date, whether or
not earned or declared, provided that, if the New KDSM
Senior Debentures are redeemed at a price in excess of
their principal amount, the New Preferred Securities
will be redeemed at a price that is the same higher
percentage of their Liquidation Value. See "Description
of the New Preferred Securities--Optional Redemption."
The proceeds from any repayment of the New KDSM Senior
Debentures will be applied first to the redemption of
the Preferred Securities and any remaining amounts will
be applied to the redemption of the Common Securities.
KDSM, Inc. will have the option (a) at any time on or
after March 15, 2002 to redeem the New KDSM Senior
Debentures, in whole or in part, in cash at the
redemption prices set forth herein and (b) at any time
on or prior to March 15, 2000 to redeem, in whole or in
part, up to 33 1/3 % of the aggregate principal amount
of the New KDSM Senior Debentures, with the proceeds of
one or more redemptions of the New Parent Preferred by
Sinclair (which New Parent Preferred would be simul
18
<PAGE>
taneously redeemed from the proceeds of one or more
Public Equity Offerings of Sinclair), at a cash
redemption price of 111.625% of the principal amount
thereof, plus accrued interest to the date of
redemption; provided that after any such redemption at
least 66 2/3 % of the aggregate principal amount of the
New KDSM Senior Debentures originally issued in respect
of the Preferred Securities remain outstanding and that
such redemption be made within 180 days of each such
Public Equity Offering of Sinclair. Under the terms of
the New Parent Preferred Articles Supplementary,
Sinclair will have the option to redeem the New Parent
Preferred in the same circumstances and at the same
redemption prices (expressed as a percentage of
Liquidation Amount) as KDSM, Inc. will have the option
to redeem the New KDSM Senior Debentures as described
above.
Rights Upon a Tax Event
or Investment Company
Act Event KDSM, Inc. will have the option (a) upon a Tax Event or
an Investment Company Act Event, to redeem the New KDSM
Senior Debentures for cash at the redemption price of
105.813% in the case of a Tax Event, and 101% in the
case of an Investment Company Act Event, in each case
of the aggregate principal amount of the New KDSM
Debentures redeemed, plus all accrued and unpaid
interest, and to require Sinclair to redeem the New
Parent Preferred for cash pursuant to the terms thereof
at the same redemption price; provided that at the time
of redemption in the case of a Tax Event triggered by
an amendment, clarification or change, such amendment,
clarification or change remains in effect or (b) upon a
Tax Event, as the holder of all the Common Securities
of the Trust, to cause the Trust to be dissolved with
each holder of New Preferred Securities receiving New
KDSM Senior Debentures in a principal amount equal to
the Liquidation Value of their New Preferred
Securities. If KDSM, Inc. exercises the option in
clause (a) above, KDSM, Inc. will use the cash proceeds
from the redemption of the New Parent Preferred to
redeem New KDSM Senior Debentures held by the Trust at
a price that is a percentage above their principal
amount equal to the same percentage amount above the
Liquidation Amount, if any, for which Sinclair redeems
the New Parent Preferred. The Trust would then promptly
redeem New Preferred Securities with proceeds it
received from KDSM, Inc. If KDSM, Inc. exercises the
option in clause (b) above, (i) pursuant to the KDSM
Senior Debenture Indenture, Sinclair has agreed,
effective at the time of such distribution, to fully
and unconditionally guarantee the payment of the New
KDSM Senior Debentures on a junior subordinated basis
pursuant to the New Parent Debenture Guarantee;
provided that Sinclair confirms the effectiveness of
the New Parent Debenture Guarantee at the time of
distribution which it may not do if such guarantee is
not then permitted under the terms of the Bank Credit
Agreement or the Existing Notes and (ii) the Trust may
not be dissolved unless the New Parent Debenture
Guarantee is effective. Sinclair is currently
prohibited from taking any of the prospective actions
referred to above by the Bank Credit Agreement and the
Existing Notes. KDSM, Inc. will also be required to
deliver a tax opinion to the Trust to the effect that
the dissolution of the Trust and the distribution of
the New KDSM Senior Debentures will not be a taxable
event for United States federal in-
19
<PAGE>
come tax purposes to the holders of the Preferred
Securities. See "Risk Factors--Restrictions Imposed by
Terms of Indebtedness."
Change of Control Upon a Change of Control of Sinclair, each holder of
New Preferred Securities will have the right to require
the Trust to redeem all or a portion of such holder's
New Preferred Securities from the proceeds of a
redemption by KDSM, Inc. of New KDSM Senior Debentures
held by the Trust at a cash purchase price equal to
101% of such New Preferred Securities' Liquidation
Value, plus accrued and unpaid distributions, if any,
to the date of redemption. Under the terms of the New
Parent Preferred, upon a Change of Control of Sinclair,
Sinclair will be required to redeem sufficient shares
of New Parent Preferred to enable KDSM, Inc. to redeem
the appropriate aggregate principal amount of New KDSM
Senior Debentures held by the Trust. Notwithstanding
the foregoing, the holders of the New Preferred
Securities, the New KDSM Senior Debentures and the New
Parent Preferred will not have the right to require the
issuers of such securities to redeem, repay or
repurchase, as the case may be, such securities upon a
Change of Control under any circumstances unless all of
the Existing Notes and all indebtedness under the Bank
Credit Agreement are repaid, redeemed or repurchased,
all of the commitments and letters of credit issued
under the Bank Credit Agreement are terminated and all
interest rate protection agreements entered into
between Sinclair and any lenders under the Bank Credit
Agreement are terminated as a result of such Change of
Control, or the holders of such instruments have
consented to a Change of Control Offer in which case
the date on which all Existing Notes and all
indebtedness under the Bank Credit Agreement are so
repaid, redeemed or repurchased and said commitments,
letters of credit and interest rate protection
agreements are terminated or the holders of such
instruments have consented to a Change of Control Offer
shall be deemed to be the date on which such Change of
Control shall have occurred. If Sinclair does not make
and consummate a Change of Control Offer upon a Change
of Control, the holders of the Preferred Securities
will have the right to elect two directors to the board
of directors of Sinclair pursuant to the Pledge
Agreement.
Voting Rights Holders of the New Preferred Securities will not have
any voting rights in ordinary circumstances. However,
the affirmative vote of the holders of a majority in
aggregate Liquidation Value of outstanding Preferred
Securities (100% of the holders in certain
circumstances) will be required to approve any
amendment to the Trust Agreement or any proposed action
by the Trustees thereunder that would adversely affect
the powers, preferences or special rights of the
holders of the Preferred Securities or cause the
dissolution, winding-up or termination of the Trust
(other than pursuant to the Trust Agreement). In
addition, pursuant to the Trust Agreement, the approval
of the holders of a majority in aggregate Liquidation
Value of outstanding Preferred Securities (100% of the
holders in certain circumstances) will be required to
approve (i) any amendment to the KDSM Senior Debenture
Indenture that would adversely affect the holders of
the Preferred Securities, (ii) any waiver of an Event
of Default (as defined in the relevant governing
document) under the KDSM Senior Debenture Indenture or
the Pledge Agreement or KDSM, Inc.'s obligation to
comply with any covenant thereunder, (iii) any issuance
20
<PAGE>
by the Trust of any additional equity interests or the
incurrence by the Trust of any indebtedness, and (iv)
pursuant to the Pledge Agreement, any action requiring
approval of the holders of the Parent Preferred. In
addition, the holders of a majority in aggregate
Liquidation Value of the Preferred Securities may have
the right to cause the liquidation of the Trust in the
event of the bankruptcy, liquidation, insolvency or
dissolution of Sinclair or of one or more of its
subsidiaries that collectively own directly or
indirectly 50% or more of Sinclair's consolidated
assets as described under "--Dissolution of Trust Upon
Certain Events." In addition, upon an Event of Default
under the Preferred Securities, the holders of a
majority in aggregate Liquidation Value of the
Preferred Securities will have the right to elect new
trustees of the Trust. Furthermore, upon a Voting
Rights Triggering Event under the Parent Preferred,
KDSM, Inc., as holder of the Parent Preferred, will
have the right to elect two directors to Sinclair's
board of directors. Pursuant to the Pledge Agreement,
KDSM, Inc. will agree that it will elect the nominees
of the Trust; the Trust will agree to elect the
nominees of the holders of a majority in aggregate
Liquidation Value of outstanding Preferred Securities
to such directorships. If an Event of Default under the
KDSM Senior Debenture Indenture has occurred and shall
be continuing, the holders of at least 25% in aggregate
Liquidation Value of outstanding Preferred Securities
shall have the right to direct the Trustees under the
Trust to declare the principal of and interest on the
KDSM Senior Debentures immediately due and payable. See
"Description of the New Preferred Securities--Voting
Rights" and "Description of the New KDSM Senior
Debentures--Events of Default."
Dissolution of Trust
Upon Certain Events In the event that Sinclair (or one or more of its
subsidiaries that collectively own directly or
indirectly 50% or more of Sinclair's consolidated
assets) becomes bankrupt or insolvent or is dissolved
or liquidated, the Trust, at the option of the holders
of a majority in Liquidation Value of the Preferred
Securities, may be dissolved and liquidated and the
holders of the New Preferred Securities and the Common
Securities may receive portions of the New KDSM Senior
Debentures in exchange therefor to the extent such
assets are legally available for distribution to
holders of New Preferred Securities (together with any
Additional Amounts, if applicable), after satisfaction
of liabilities to creditors of the Trust, if any. Under
current bankruptcy laws, the holders of the New
Preferred Securities may not be able to exercise this
right to dissolve the Trust. See "Description of the
New Preferred Securities--Liquidation Distribution Upon
Dissolution."
Common Securities On March 12, 1997, the Trust issued approximately $6.2
million of Common Securities to KDSM, Inc. in exchange
for cash. The Common Securities represent approximately
3% of the equity of the Trust.
V--NEW PARENT GUARANTEE
Terms of New Parent
Guarantee Sinclair has agreed to unconditionally guarantee (the
"Old Parent Guarantee"), on a junior subordinated
basis, the payment in full under the Preferred
Securities of (i) any accrued and unpaid dis-
21
<PAGE>
tributions on the Preferred Securities that have been
theretofore properly declared on the Preferred
Securities from funds of the Trust legally available
therefor in accordance with the Trust Agreement, (ii)
the Redemption Price payable with respect to any
Preferred Securities called for redemption by the
Trust, from funds legally available therefor in
accordance with the terms of the Trust Agreement and
(iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in
connection with a redemption of all of the Preferred
Securities), the payment of an amount if, when, and to
the extent holders of the Preferred Securities are
lawfully entitled to payment thereof from the Trust
equal to the lesser of (a) the full liquidation
preference plus accumulated and unpaid dividends to
which the holders of the Preferred Securities are
lawfully entitled, and (b) the amount of the Trust's
legally available assets remaining after satisfaction
of all claims of other parties which, as a matter of
law, are prior to those of the holders of the Preferred
Securities. In connection with the Exchange Offer,
Sinclair will offer to exchange the Old Parent
Guarantee for a guarantee that has been registered
under the Securities Act (the "New Parent Guarantee").
The terms of the New Parent Guarantee will be identical
to those of the Old Parent Guarantee.
The Trust Agreement provides that distributions on the
New Preferred Securities are not properly declarable,
and funds are not legally available for redemption of
the Preferred Securities, unless the Trust has cash
sufficient to pay such distributions or make such
redemption, as the case may be. The New Parent
Guarantee will not run to the benefit of any creditors
of the Trust. The New Parent Guarantee will be
unsecured and will rank subordinate and junior in right
of payment to all liabilities of Sinclair (excluding
liabilities that are made pari passu with or
subordinate to the New Parent Guarantee expressly by
their terms). The New Parent Guarantee is a guarantee
of payment with respect to the New Preferred Securities
in certain limited circumstances and not of collection.
See "Risk Factors--Limited Rights Under the New Parent
Guarantee" and "Description of the New Parent
Guarantee--General" and "--Status of the New Parent
Guarantee."
VI--OTHER INFORMATION
Expense Agreement KDSM, Inc. has entered into an agreement (the "Expense
Agreement") pursuant to which it agreed to pay all of
the expenses of the Trust. Failure to pay such expenses
would be an Event of Default under the KDSM Senior
Debenture Indenture.
Use of Proceeds Neither the Company, KDSM, Inc. nor the Trust will
receive any cash proceeds from the issuance of the New
Preferred Securities offered hereby. See "Use of
Proceeds."
Form of New Preferred
Securities The New Preferred Securities received by qualified
institutional buyers (as defined pursuant to Rule 144A
under the Securities Act of 1933, as amended, "QIBs")
will be represented by a single permanent global
certificate in definitive registered form (a "Global
Security"), registered in the name of DTC or its
nominee. The New Preferred Securities purchased by
institutional "accredited investors" (as defined in
Rule 501(a)(1), (2),
22
<PAGE>
(3) or (7) under the Securities Act) who are not QIBs
("Accredited Investors") will be issued in registered
certificated form ("Certificated Securities").
Beneficial interests in the Global Securities will be
evidenced by, and transfers thereof will be effected
only through, records maintained by participants in
DTC. As described herein, certain circumstances may
arise where Certificated Securities will be required to
be issued to all holders (such Certificated Securities
with those Certificated Securities held by Accredited
Investors collectively referred to as "Non-Global
Securities"). See "Description of the New Preferred
Securities--Book-Entry Securities; The Depository Trust
Company; Delivery and Form." If the New Parent
Preferred, New KDSM Senior Debentures or any New Parent
Debenture Guarantee are issued to the public for any
reason, the issuing entity will also seek to have such
securities represented by a certificate or certificates
registered in the name of DTC or its nominee, if
permissible under the rules of the DTC.
Absence of Public Trading
Market There is no public market for the New Preferred
Securities. The Trust has been advised by Smith Barney
Inc. and Chase Securities Inc. (together the "Initial
Purchasers") that the Initial Purchasers intend to make
a market in the New Preferred Securities; however, they
are under no obligation to do so and may discontinue
any market-making activities at any time without
notice. No assurance can be given as to the liquidity
of the trading market for the New Preferred Securities
or that an active public market will develop. If an
active trading market does not develop or is not
maintained, the market price and liquidity of the New
Preferred Securities may be adversely affected. In
addition, there is no public market for the New KDSM
Senior Debentures, the New Parent Preferred or the
Parent Debenture Guarantee which may be issued directly
to the holders of the New Preferred Securities in
certain circumstances. No assurance can be given as to
the liquidity of the trading market for any such
securities if they are issued to the holders of New
Preferred Securities for any reason. If an active
public market does not develop for such securities, the
market price and liquidity of such securities may be
adversely affected. The Company does not intend to
apply to list the New Preferred Securities on any
national exchange.
23
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
SINCLAIR BROADCAST GROUP, INC.
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
The summary historical consolidated financial data for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996 have been derived from the
Company's audited Consolidated Financial Statements (the "Consolidated Financial
Statements"). The Consolidated Financial Statements for the years ended December
31, 1994, 1995 and 1996 are incorporated herein by reference. The summary pro
forma consolidated financial data of the Company reflect the 1996 Acquisitions
and the application of the proceeds of the Old Securities Offering as set forth
in "Use of Proceeds" as though they occurred at the beginning of the periods
presented and are derived from the pro forma consolidated financial statements
of the Company included elsewhere in this Prospectus. See "Pro Forma
Consolidated Financial Information of Sinclair." The information below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations of Sinclair" and Sinclair's Consolidated
Financial Statements, both incorporated herein by reference to Sinclair's Annual
Report on Form 10-K (as amended) for the period ended December 31, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
PRO FORMA
1992 1993 1994(A) 1995(A) 1996(A) 1996(B)
---------- ---------- ----------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcast revenues(c) $61,081 $69,532 $118,611 $187,934 $346,459 $445,008
Barter revenues 8,805 6,892 10,743 18,200 32,029 36,065
---------- ---------- ----------- ---------- ---------- ------------
Total revenues 69,886 76,424 129,354 206,134 378,488 481,073
---------- ---------- ----------- ---------- ---------- ------------
Operating expenses, excluding depreciation and
amortization, deferred compensation and
special bonuses paid to executive officers 32,993 32,295 50,545 80,446 167,765 224,061
Depreciation and amortization(d) 30,943 22,486 55,587 80,410 121,081 153,705
Amortization of deferred compensation -- -- -- -- 739 933
Special bonuses paid to executive officers -- 10,000 3,638 -- -- --
---------- ---------- ----------- ---------- ---------- ------------
Broadcast operating income 5,950 11,643 19,584 45,278 88,903 102,374
---------- ---------- ----------- ---------- ---------- ------------
Interest and amortization of debt discount
expense 12,997 12,852 25,418 39,253 84,314 104,662
Interest and other income 1,207 2,131 2,447 4,163 3,478 1,925
Distributions made to outside investors of the
Trust(e) -- -- -- -- -- 23,250
---------- ---------- ----------- ---------- ---------- ------------
Income (loss) before (provision) benefit for
income taxes and extraordinary item $(5,840) $ 922 $ (3,387) $ 10,188 $ 8,067 $(23,613)
========== ========== =========== ========== ========== ============
Net income (loss) available to common
shareholders $(4,651) $(7,945) $ (2,740) $ 76 $ 1,131 $(17,877)
========== ========== =========== ========== ========== ============
Earnings (loss) per common share:
Net income (loss) before extraordinary item $ (0.16) $ -- $ (0.09) $ 0.15 $ 0.03 $ (0.46)
Extraordinary item -- (0.27) -- (0.15) -- --
---------- ---------- ----------- ---------- ---------- ------------
Net income (loss) per common share $ (0.16) $ (0.27) $ (0.09) $ -- $ 0.03 $ (0.46)
========== ========== =========== ========== ========== ============
Weighted average shares out-
standing (in thousands) 29,000 29,000 29,000 32,205 37,381 39,058
========== ========== =========== ========== ========== ============
OTHER DATA:
Broadcast cash flow(f) $28,019 $37,498 $ 67,519 $111,124 $189,216 $217,719
Broadcast cash flow margin(g) 45.9% 53.9% 56.9% 59.1% 54.6% 48.9%
Operating cash flow(h) $26,466 $35,406 $ 64,547 $105,750 $180,272 $206,469
Operating cash flow margin(g) 43.3% 50.9% 54.4% 56.3% 52.0% 46.4%
After tax cash flow(i) $15,865 $23,725 $ 42,223 $ 65,460 $ 92,500 $ 86,218
After tax cash flow per share(j) 0.55 0.82 1.46 2.03 2.47 2.21
After tax cash flow margin(g) 26.0% 34.1% 35.6% 34.8% 26.7% 19.4%
Program contract payments $10,427 $ 8,723 $ 14,262 $ 19,938 $ 30,451 $ 50,543
Capital expenditures 426 528 2,352 1,702 12,609 14,072
Corporate overhead expense 1,553 2,092 2,972 5,374 8,944 11,250
(continued on following page)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------
PRO FORMA
1992 1993 1994(A) 1995(A) 1996(A) 1996(B)
--------- --------- --------- --------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating cash flow to interest expense 2.0 x 2.8 x 2.5 x 2.7 x 2.1 x 2.0 x
Operating cash flow to interest expense plus
distributions made to outside investors of the Trust 2.0 x 2.8 x 2.5 x 2.7 x 2.1 x 1.6 x
Operating cash flow less capital expenditures to
interest expense plus distributions made to outside
investors of the Trust 2.0 x 2.7 x 2.4 x 2.7 x 2.0 x 1.5 x
Net debt to operating cash flow(k) 4.1 x 5.8 x 5.3 x 2.9 x 7.1 x 5.3 x
Net debt plus Company Obligated Mandatorily
Redeemable Security of Trust Holding Solely
KDSM Senior Debentures to operating cash flow 4.1 x 5.8 x 5.3 x 2.9 x 7.1 x 6.3 x
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,823 $ 18,036 $ 2,446 $112,450 $ 2,341 $ 41,341
Total assets 140,366 242,917 399,328 605,272 1,707,297 1,752,297
Total debt(l) 110,659 224,646 346,270 418,171 1,288,147 1,133,147
Company Obligated Mandatorily Redeemable
Security of Trust Holding Solely KDSM
Senior Debentures(m) -- -- -- -- -- 200,000
Total stockholders' equity (deficit) (3,127) (11,024) (13,723) 96,374 237,253 237,253
</TABLE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(a) The Company made acquisitions in 1994, 1995 and 1996 as described in the
footnotes to the Consolidated Financial Statements incorporated herein by
reference. The Statement of Operations and other data presented for periods
preceding the dates of acquisitions do not include amounts for these
acquisitions and therefore are not comparable to subsequent periods.
Additionally, the years in which the specific acquisitions occurred may not
be comparable to subsequent periods depending on when during the year the
acquisition occurred.
(b) The pro forma information in this table reflects the pro forma effect of the
completion of the Old Securities Offering (and the application of the net
proceeds thereof as set forth in "Use of Proceeds") and the 1996
Acquisitions as if such transactions had occurred on January 1, 1996.
(c) Net broadcast revenues are defined as broadcast revenues net of agency
commissions.
(d) Depreciation and amortization includes amortization of program contract
costs and net realizable value adjustments, depreciation and amortization
of property and equipment, and amortization of acquired intangible
broadcasting assets and other assets including amortization of deferred
financing costs and costs related to excess syndicated programming.
(e) Distributions made to outside investors of the Trust represents the
distributions on $200 million aggregate Liquidation Value of Preferred
Securities at a distribution rate of 11.625%.
(f) "Broadcast cash flow" is defined as broadcast operating income plus
corporate overhead expense, special bonuses paid to executive officers,
depreciation and amortization, (including film amortization and
amortization of deferred compensation and excess syndicated programming)
less cash payments for program contract rights. Cash program payments
represent cash payments made for current program payables and do not
necessarily correspond to program usage. Special bonuses paid to executive
officers are considered non-recurring expenses. The Company has presented
broadcast cash flow data, which the Company believes are comparable to the
data provided by other companies in the industry, because such data are
commonly used as a measure of performance for broadcast companies. However,
broadcast cash flow does not purport to represent cash provided by
operating activities as reflected in the Company's consolidated statements
of cash flows, is not a measure of financial performance under generally
accepted accounting principles and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
(g) "Broadcast cash flow margin" is defined as broadcast cash flow divided by
net broadcast revenues. "Operating cash flow margin" is defined as
operating cash flow divided by net broadcast revenues. "After tax cash flow
margin" is defined as after tax cash flow divided by net broadcast
revenues.
(h) "Operating cash flow" is defined as broadcast cash flow less corporate
overhead expense and is a commonly used measure of performance for
broadcast companies. Operating cash flow does not purport to represent cash
provided by operating activities as reflected in the Company's consolidated
statements of cash flows, is not a measure of financial performance under
generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(notes continued on following page)
25
<PAGE>
(i) "After tax cash flow" is defined as net income (loss) before extraordinary
items plus depreciation and amortization (including film amortization and
amortization of deferred compensation and excess syndicated programming)
plus special bonuses paid to executive officers, less program contract
payments. After tax cash flow is presented here not as a measure of
operating results and does not purport to represent cash provided by
operating activities. After tax cash flow should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(j) "After tax cash flow per share" is defined as after tax cash flow divided
by weighted average common and common equivalent shares outstanding.
(k) Net debt is defined as total debt less cash and cash equivalents.
(l) "Total debt" is defined as long-term debt, net of unamortized discount, and
capital lease obligations, including current portion thereof. In 1992 total
debt included warrants outstanding which were redeemable outside the
control of the Company. The warrants were purchased by the Company for
$10.4 million in 1993. Total debt as of December 31, 1993 included $100.0
million in principal amount of the 1993 Notes (as defined herein), the
proceeds of which were held in escrow to provide a source of financing for
acquisitions that were subsequently consummated in 1994 utilizing
borrowings under the Bank Credit Agreement. $100 million of the 1993 Notes
was redeemed from the escrow in the first quarter of 1994. Pro forma total
debt does not include the Preferred Securities.
(m) Company Obligated Mandatorily Redeemable Security of Trust Holding Solely
KDSM Senior Debentures represents $200 million aggregate Liquidation Value
of Preferred Securities which carry a mandatory redemption feature after
twelve years.
26
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, holders of
Old Preferred Securities should review carefully the following risks concerning
the New Preferred Securities, the Company and the broadcast industry before
purchasing the securities offered hereby.
SUBSTANTIAL LEVERAGE AND PREFERRED STOCK OUTSTANDING
The Company has consolidated indebtedness that is substantial in relation to
its total stockholders' equity. As of March 31, 1997, the Company had
outstanding long-term indebtedness (including current installments) of
approximately $1.1 billion. In addition, the New Parent Preferred, and any Old
Parent Preferred issued in connection with the Old Securities Offering that
remains outstanding after the Exchange Offer, which together will have an
aggregate Liquidation Amount of $200 million, must be redeemed by the Company in
2009. Furthermore, the portion of the Company's revolving credit facility under
the Bank Credit Agreement that was repaid from the proceeds of the Old
Securities Offering can be reborrowed, subject to certain conditions and
limitations included in the Bank Credit Agreement. The Company also has
outstanding 1,115,370 shares of Series B Convertible Preferred Stock with an
aggregate liquidation preference of $111.5 million as the date hereof, which
will be junior to the New Parent Preferred when issued but may become pari passu
in some circumstances. See "Description of Capital Stock--Preferred
Stock--Series B Convertible Preferred Stock." The Company also has significant
program contracts payable and commitments for future programming. Moreover,
subject to the restrictions contained in its debt instruments and preferred
stock, the Company may incur additional debt and issue additional preferred
stock in the future.
The Company has and will continue to have significant payments relating to
the Bank Credit Agreement, its 10% Senior Subordinated Notes due 2003 (the "1993
Notes"), the 10% Senior Subordinated Notes due 2005 (the "1995 Notes" and, with
the 1993 Notes, the "Existing Notes"), and the Parent Preferred, and a
significant amount of the Company's cash flow will be required to service these
obligations. The Company, on a consolidated basis, reported interest expense of
$84.3 million for the year ended December 31, 1996. After giving pro forma
effect to the 1996 Acquisitions and the Old Securities Offering as though they
occurred on January 1, 1996, and the use of the net proceeds therefrom, the
interest expense and payments related to the Preferred Securities would have
been $104.7 million and $23.3 million respectively, for the same period. The
weighted average interest rates accrued on the Company's indebtedness under the
Bank Credit Agreement during the year ended December 31, 1996 was 8.08%.
The $250 million revolving credit facility available to the Company under the
Bank Credit Agreement will be subject to reductions beginning March 31, 1999,
and will mature on November 30, 2003. Required repayment of portions of the $750
million in term loans under the Bank Credit Agreement began on December 31, 1996
and the term loans must be fully repaid by November 30, 2003. The 1993 Notes
mature in 2003 and the 1995 Notes mature in 2005. The Parent Preferred must be
redeemed in 2009. Required repayment of other indebtedness of the Company
totaling approximately $1.3 billion will occur at various dates through May 31,
2005.
The Company's current and future debt service obligations and obligations to
make distributions on and to redeem preferred stock could have adverse
consequences to holders of the New Preferred Securities, including the
following: (i) the Company's ability to obtain financing for future working
capital needs or additional acquisitions or other purposes may be limited; (ii)
a substantial portion of the Company's cash flow from operations will be
dedicated to the payment of principal and interest on its indebtedness and
payments related to the Preferred Securities, thereby reducing funds available
for operations; (iii) the Company may be vulnerable to changes in interest rates
under its credit facilities; and (iv) the Company may be more vulnerable to
adverse economic conditions than less leveraged competitors and, thus, may be
limited in its ability to withstand competitive pressures. If the Company is
unable to service or refinance its indebtedness or preferred stock, it may be
required to sell one or more of its stations to reduce debt service obligations.
The Company expects to be able to satisfy its future debt service and
dividend and other payment obligations and other commitments with cash flow from
operations. However, there can be no assurance that the future cash flow of the
Company will be sufficient to meet such obligations and commitments. If
27
<PAGE>
the Company is unable to generate sufficient cash flow from operations in the
future to service its indebtedness and to meet its other commitments, it may be
required to refinance all or a portion of its existing indebtedness or to obtain
additional financing. There can be no assurance that any such refinancing or
additional financing could be obtained on acceptable terms. If the Company is
unable to service or refinance its indebtedness, it may be required to sell one
or more of its stations to reduce debt service obligations.
SUBORDINATION OF NEW PARENT GUARANTEE, NEW PARENT DEBENTURE GUARANTEE AND NEW
PARENT PREFERRED
Sinclair's obligations under the New Parent Guarantee are, and its
obligations under the New Parent Debenture Guarantee, if effective, will be,
subordinated and junior in right of payment to all other liabilities of Sinclair
except any liabilities that may be made pari passu with or subordinate to the
New Parent Guarantee or New Parent Debenture Guarantee, as the case may be,
expressly by their terms. The New Parent Preferred, with respect to dividend
rights and rights on liquidation, winding-up and dissolution of Sinclair, ranks
(i) junior in right of payment to all indebtedness of Sinclair and its
Subsidiaries, (ii) senior in right of payment to all common stock of Sinclair
and (iii) senior to Sinclair's Series B Convertible Preferred Stock, except that
upon a "Series B Trigger Event" (as defined below), the New Parent Preferred
will rank pari passu with the Series B Convertible Preferred Stock in respect of
dividend rights and rights on distributions upon liquidation, dissolution and
winding-up of Sinclair. A "Series B Trigger Event" means the termination of
Barry Baker's employment with the Company prior to the expiration of the initial
five-year term of his employment agreement (i) by the Company for any reason
other than "for cause" (as defined in the Baker Employment Agreement) or (ii) by
Barry Baker under certain circumstances, including (a) on 60 days' prior written
notice given at any time within 180 days following a Change of Control; (b) if
Mr. Baker is not elected (and continued) as a director of Sinclair or SCI, as
President and Chief Executive Officer of SCI or as Executive Vice President of
Sinclair, or Mr. Baker shall be removed from any such board or office; (c) upon
a material breach by Sinclair or SCI of the Baker Employment Agreement which is
not cured; (d) if there shall be a material diminution in Mr. Baker's authority
or responsibility, or certain of his economic benefits are materially reduced,
or Mr. Baker shall be required to work outside Baltimore; or (e) the effective
date of his employment as contemplated by clause (b) shall not have occurred by
August 31, 1997. Mr. Baker cannot be appointed to the positions described in
clause (b) above until the occurrence of certain events with respect to WIIB,
WTTV and WTTK in Indianapolis and WTTE and WSYX in Columbus as described under
"--Dependence on Key Personnel; Employment Agreements with Key Personnel." There
can be no assurance as to when or whether these events will occur, although the
Company believes Mr. Baker does not presently intend to terminate his employment
agreement if he is not appointed to the positions with Sinclair or SCI by August
31, 1997. In addition, upon a Series B Trigger Event, dividends on the Series B
Convertible Preferred Stock are required to be paid in cash or additional shares
of Series B Convertible Preferred Stock at a rate of $3.75 per share per quarter
for the first year and $5.00 per share per quarter thereafter.
As of December 31, 1996, Sinclair had approximately $1.3 billion of
indebtedness which would have been senior to the New Parent Preferred, the New
Parent Guarantee and the New Parent Debenture Guarantee, if effective. As a
holding company, substantially all of Sinclair's assets consist of the capital
stock of its subsidiaries. Except to the extent that Sinclair may itself be a
creditor with recognized claims against its subsidiaries, the claims of the
holders of the New Parent Preferred, the New Parent Guarantee or any New Parent
Debenture Guarantee are effectively subordinated to the claims of the direct
creditors of the subsidiaries of Sinclair. Subject to compliance with certain
limitations in Sinclair's debt instruments, Sinclair and its subsidiaries may
incur additional indebtedness. See "Description of the New Parent
Guarantee--Status of the Parent Guarantee."
COVENANT RESTRICTIONS ON DIVIDENDS AND REDEMPTION
Certain covenants under the Existing Indentures (as defined in "Certain
Definitions") and the Bank Credit Agreement restrict the amount of dividends and
redemptions that may be declared and paid by Sinclair on its capital stock,
including the New Parent Preferred. Although Sinclair presently believes it will
be able to pay dividends on the New Parent Preferred as required, there can be
no assurance that
28
<PAGE>
Sinclair will be permitted under such restrictions to declare dividends
throughout the term of the New Parent Preferred. Sinclair may make other
restricted payments or Sinclair's consolidated operating performance may
decline, either of which could limit Sinclair's ability to declare dividends. In
addition, under the terms of the Bank Credit Agreement, the Company would not be
able to pay full cash dividends on the New Parent Preferred beginning December
31, 1998 unless Sinclair's Total Indebtedness Ratio (as defined in the Bank
Credit Agreement) improves from Sinclair's pro forma 1996 Total Indebtedness
Ratio. As of December 31, 1996, on a pro forma basis assuming completion on
January 1, 1996 of the 1996 Acquisitions and the Old Securities Offering (and
application of the proceeds of the Old Securities Offering as set forth in "Use
of Proceeds"), this limitation would have allowed the Company to pay up to $44.5
million in dividends on capital stock for fiscal 1996. The Company must also
satisfy other financial covenants to pay cash dividends under the Bank Credit
Agreement. See "Description of Indebtedness of Sinclair" and "Description of
Capital Stock of Sinclair--Preferred Stock--Series B Convertible Preferred
Stock."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Existing Indentures restrict, among other things, the Company's and its
Subsidiaries' (as defined in the Existing Indentures) ability to (i) incur
additional indebtedness, (ii) pay dividends, make certain other restricted
payments or consummate certain asset sales, (iii) enter into certain
transactions with affiliates, (iv) incur indebtedness that is subordinate in
priority and in right of payment to any senior debt and senior in right of
payment to the Existing Notes, (v) merge or consolidate with any other person,
or (vi) sell, assign, transfer, lease, convey, or otherwise dispose of all or
substantially all of the assets of the Company. In addition, the Bank Credit
Agreement contains certain other and more restrictive covenants, including
restrictions on redemption of capital stock, a limitation on the aggregate size
of future acquisitions undertaken without lender consent, a requirement that
certain conditions be satisfied prior to consummation of future acquisitions,
and a limitation on the amount of capital expenditures permitted by the Company
in future years without lender consent. The Bank Credit Agreement also requires
the Company to maintain specific financial ratios and to satisfy certain
financial condition tests. The Company's ability to meet these financial ratios
and financial condition tests can be affected by events beyond its control, and
there can be no assurance that the Company will meet those tests. The breach of
any of these covenants could result in a default under the Bank Credit Agreement
and/or the Existing Indentures. In the event of a default under the Bank Credit
Agreement or the Existing Indentures, the lenders and the noteholders could seek
to declare all amounts outstanding under the Bank Credit Agreement and the
Existing Notes, together with accrued and unpaid interest, to be immediately due
and payable. If the Company were unable to repay those amounts, the lenders
under the Bank Credit Agreement could proceed against the collateral granted to
them to secure that indebtedness. If the indebtedness under the Bank Credit
Agreement or the Existing Notes were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay in full
that indebtedness and the other indebtedness of the Company, all of which rank
senior in right of payment to the Parent Preferred, the Parent Guarantee and the
Parent Debenture Guarantee, if effective. Substantially all of the assets of the
Company and its Subsidiaries (other than the assets of KDSM, Inc.) are pledged
as security under the Bank Credit Agreement. The Subsidiaries (with the
exception of Cresap Enterprises, Inc., KDSM, Inc. and KDSM Licensee, Inc.) also
guarantee the indebtedness under the Bank Credit Agreement and the Existing
Indentures.
In addition to a pledge of substantially all of the assets of the Company and
its Subsidiaries, the Company's obligations under the Bank Credit Agreement are
secured by a pledge of the assets of certain non-Company entities (the
"Stockholder Affiliates") owned and controlled by the Controlling Stockholders,
including Cunningham Communications, Inc. ("CCI"), Gerstell Development
Corporation ("Gerstell"), Gerstell Development Limited Partnership ("Gerstell
LP") and Keyser Investment Group, Inc. ("KIG"). If the Company were to seek to
replace the Bank Credit Agreement, there can be no assurance that the assets of
these Stockholder Affiliates would be available to provide additional security
under a new credit agreement, or that a new credit agreement could be arranged
on terms as favorable as the terms of the Bank Credit Agreement without a pledge
of such Stockholder Affiliates' assets.
29
<PAGE>
CONFLICTS OF INTEREST
In addition to their respective interests in the Company, the Controlling
Stockholders have interests in various non-Company entities which are involved
in businesses related to the business of the Company, including, among others,
the operation of a television station in St. Petersburg, Florida since 1991 and
a television station in Bloomington, Indiana since 1990. In addition, the
Company leases certain real property and tower space from and engages in other
transactions with the Stockholder Affiliates, which are controlled by the
Controlling Stockholders. Although the Controlling Stockholders have agreed to
divest interests in the Bloomington station that are attributable to them under
applicable FCC regulations, the Controlling Stockholders and the Stockholder
Affiliates may continue to engage in the operation of the St. Petersburg,
Florida Station and other already existing businesses. However, under Maryland
law, generally a corporate insider is precluded from acting on a business
opportunity in his or her individual capacity if that opportunity is one which
the corporation is financially able to undertake, is in the line of the
corporation's business and of practical advantage to the corporation, and is one
in which the corporation has an interest or reasonable expectancy. Accordingly,
the Controlling Stockholders generally are required to engage in new business
opportunities of the Company only through the Company unless a majority of the
Company's disinterested directors decide under the standards discussed above,
that it is not in the best interests of the Company to pursue such
opportunities. Non-Company activities of the Controlling Stockholders such as
those described above could, however, present conflicts of interest with the
Company in the allocation of management time and resources of the Controlling
Stockholders, a substantial majority of which is currently devoted to the
business of the Company.
In addition, there have been and will be transactions between the Company and
Glencairn Ltd. (with its subsidiaries, "Glencairn"), a corporation in which
relatives of the Controlling Stockholders beneficially own a majority of the
equity interests. Glencairn is the owner-operator and licensee of WRDC in
Raleigh/Durham, WVTV in Milwaukee, WNUV in Baltimore and WABM in Birmingham. The
Company currently provides programming services to each of these stations
pursuant to an LMA. Glencairn also has exercised an option to acquire the
License Assets of WFBC in Greenville/Spartanburg, South Carolina and has
exercised an option to acquire the License Assets of KRRT in San Antonio, Texas
from a third party. The Non-License Assets of WFBC and KRRT were acquired by the
Company in the River City Acquisition, and the Company currently provides
programming services to each station pursuant to an LMA. The Company has also
agreed (subject to FCC approval) to sell the License Assets relating to WTTE in
Columbus, Ohio to Glencairn and to enter into an LMA with Glencairn pursuant to
which the Company will provide programming services for this station after the
acquisition of the License Assets by Glencairn. See "Business of
Sinclair--Broadcasting Acquisitions Strategy." The Company does not expect this
transfer to occur unless the Company acquires the assets of WSYX in Columbus,
Ohio.
Two persons who are expected to become directors of the Company, Barry Baker
(who is also expected to become an executive officer of the Company) and Roy F.
Coppedge, III, have direct and indirect interests in River City, from which the
Company purchased certain assets in the River City Acquisition. In addition, in
connection with the River City Acquisition, the Company has entered into various
ongoing agreements with River City, including options to acquire assets that
were not acquired at the time of the initial closing of the River City
Acquisition, and LMAs relating to stations for which River City continues to own
License Assets. See "Business--Broadcasting Acquisition Strategy." Messrs. Baker
and Coppedge were not officers or directors of the Company at the time these
agreements were entered into, but, upon their expected election to the board of
directors of the Company and upon Mr. Baker's expected appointment as an
executive officer of the Company, they may have conflicts of interest with
respect to issues that arise under any continuing agreements and any other
agreements with River City.
The Bank Credit Agreement, the Existing Indentures and the Parent Preferred
provide that transactions between the Company and its affiliates must be no less
favorable to the Company than would be available in comparable transactions in
arm's-length dealings with an unrelated third party. Moreover, the Existing
Indentures provide that any such transactions involving aggregate payments in
excess of $1.0 million must be approved by a majority of the members of the
board of directors of the Company and the Company's independent directors (or,
in the event there is only one independent director, by such director), and, in
30
<PAGE>
the case of any such transactions involving aggregate payments in excess of $5.0
million, the Company is required to obtain an opinion as to the fairness of the
transaction to the Company from a financial point of view issued by an
investment banking or appraisal firm of national standing.
VOTING RIGHTS; CONTROL BY CONTROLLING STOCKHOLDERS;
POTENTIAL ANTI-TAKEOVER EFFECT OF DISPROPORTIONATE VOTING RIGHTS
The Company's Common Stock has been divided into two classes, each with
different voting rights. The Class A Common Stock entitles a holder to one vote
per share on all matters submitted to a vote of the stockholders, whereas the
Class B Common Stock, 100% of which is beneficially owned by the Controlling
Stockholders, entitles a holder to ten votes per share, except for "going
private" and certain other transactions for which the holder is entitled to one
vote per share. The Class A Common Stock, the Class B Common Stock and the
Series B Convertible Preferred Stock vote together as a single class (except as
otherwise may be required by Maryland law) on all matters submitted to a vote of
stockholders, with each share of Series B Convertible Preferred Stock entitled
to 3.64 votes on all such matters. Holders of Class B Common Stock may at any
time convert their shares into the same number of shares of Class A Common Stock
and holders of Series B Convertible Preferred Stock may at any time convert each
share of Series B Convertible Preferred Stock into 3.64 Shares of Class A Common
Stock. The holders of the New Parent Preferred generally do not have the right
to vote on matters presented to stockholders of Sinclair. See "Description of
the Parent Preferred--Voting Rights."
The Controlling Stockholders own in the aggregate 71.6% of the outstanding
capital stock (including the Series B Convertible Preferred Stock) of the
Company and control approximately 96.2% of all voting rights associated with the
Company's capital stock. As a result, any three of the Controlling Stockholders
will be able to elect a majority of the members of the board of directors of
Sinclair and, thus, will have the ability to maintain control over the
operations and business of the Company.
The Controlling Stockholders have entered into a stockholders' agreement (the
"Stockholders' Agreement") pursuant to which they have agreed, for a period
ending in 2005, to vote for each other as candidates for election to the board
of directors. In addition, in connection with the River City Acquisition, the
Controlling Stockholders and Barry Baker and Boston Ventures IV Limited
Partnership and Boston Ventures IVA Limited Partnership (collectively, "Boston
Ventures") have entered into a voting agreement (the "Voting Agreement")
pursuant to which the Controlling Stockholders have agreed to vote in favor of
certain specified matters including, but not limited to, the appointment of Mr.
Baker and Mr. Coppedge (or another designee of Boston Ventures) to the Company's
Board of Directors at such time as they are allowed to become directors pursuant
to FCC rules. Mr. Baker and Boston Ventures, in turn, have agreed to vote in
favor of the reappointment of each of the Controlling Stockholders to the
Company's board of directors. The Voting Agreement will remain in effect with
respect to Mr. Baker for as long as he is a director of the Company and will
remain in effect with respect to Mr. Coppedge (or another designee of Boston
Ventures) until the first to occur of (a) the later of (i) May 31, 2001 and (ii)
the expiration of the initial five-year term of Mr. Baker's employment agreement
and (b) such time as Boston Ventures no longer owns directly or indirectly
through its interest in River City at least 721,115 shares of Class A Common
Stock (including shares that may be obtained on conversion of Series B
Convertible Preferred Stock). See "Management--Employment Agreements" in
Sinclair's Annual Report on Form 10-K (as amended) incorporated herein by
reference.
The disproportionate voting rights of the Class B Common Stock relative to
the Class A Common Stock and the Stockholders' Agreement and Voting Agreement
may make the Company a less attractive target for a takeover than it otherwise
might be or render more difficult or discourage a merger proposal, tender offer
or other transaction involving an actual or potential change of control of the
Company.
DEPENDENCE UPON KEY PERSONNEL; EMPLOYMENT AGREEMENTS WITH KEY PERSONNEL
The Company believes that its success will continue to be dependent upon its
ability to attract and retain skilled managers and other personnel, including
its present officers, regional directors and general managers. The loss of the
services of any of the present officers, especially its President and Chief
31
<PAGE>
Executive Officer, David D. Smith, or Barry Baker, who is currently a consultant
to the Company and is expected to become President and Chief Executive Officer
of Sinclair Communications, Inc. (a wholly owned subsidiary of the Company that
holds all of the broadcast operations of the Company, "SCI") and Executive Vice
President and a director of the Company as soon as permissible under FCC rules,
may have a material adverse effect on the operations of the Company. Each of the
Controlling Stockholders has entered into an employment agreement with the
Company, each of which terminates June 12, 1998, unless renewed for an
additional one year period according to its terms, and Barry Baker has entered
into an employment agreement that terminates in 2001. See
"Management--Employment Agreements" in Sinclair's Annual Report on Form 10-K (as
amended) incorporated herein by reference. The Company has key-man life
insurance for Mr. Baker, but does not currently maintain key personnel life
insurance on any of its executive officers.
Mr. Baker cannot be appointed as an executive officer or director of the
Company until such time as (i) either the Controlling Stockholders dispose of
their attributable interests (as defined by applicable FCC rules) in a
television station in the Indianapolis DMA or Mr. Baker no longer has an
attributable interest in WTTV or WTTK in Indianapolis; and (ii) either the
Company disposes of its attributable interest in WTTE in Columbus or Mr. Baker
no longer has an attributable interest in WSYX in Columbus. There can be no
assurance as to when or whether these events will occur. The failure of Mr.
Baker to become a director and officer of the Company on or before August 31,
1997, may allow Mr. Baker to terminate his employment agreement. See
"Subordination of New Parent Guarantee, New Parent Debenture Guarantee and New
Parent Preferred," above. The Company has no reason to believe Mr. Baker will
terminate his employment agreement in such event. However, if Mr. Baker did
terminate his employment agreement as a result of a Series B Trigger Event, the
Company could be required to pay cash or stock dividends to Mr. Baker and the
other holders of Series B Convertible Preferred Stock and the Series B
Convertible Preferred Stock would rank pari passu with the Parent Preferred. See
"Description of Capital Stock--Preferred Stock." In addition, if Mr. Baker's
employment agreement is terminated under certain specified circumstances
(including any event constituting a Series B Trigger Event), Mr. Baker will have
the right to purchase from the Company at fair market value either (i) the
Company's broadcast operations in either the St. Louis market or the
Asheville/Greenville/Spartanburg market or (ii) all of the Company's radio
operations, which may also have a material adverse effect on the operations of
the Company.
RECENT RAPID GROWTH; ABILITY TO MANAGE GROWTH; FUTURE ACCESS TO CAPITAL
Since the beginning of 1992, the Company has experienced rapid and
substantial growth primarily through acquisitions and the development of LMA
arrangements. In 1996, the Company completed the River City Acquisition and
other acquisitions, which increased the number of television stations owned or
provided programming services by the Company from 13 to 28 and increased the
number of radio stations owned or provided programming or sales services from
none to 26 radio stations. There can be no assurance that the Company will be
able to continue to locate and complete acquisitions on the scale of the River
City Acquisition or in general. In addition, acquisitions in the television and
radio industry have come under increased scrutiny from the Department of Justice
and the Federal Trade Commission. See "Business of Sinclair--Federal Regulation
of Television and Radio Broadcasting." Accordingly, there is no assurance that
the Company will be able to maintain its rate of growth or that the Company will
continue to be able to integrate and successfully manage such expanded
operations. Inherent in any future acquisitions are certain risks such as
increasing leverage and debt service requirements and combining company cultures
and facilities which could have a material adverse effect on the Company's
operating results, particularly during the period immediately following such
acquisitions. Additional debt or capital may be required in order to complete
future acquisitions, and there can be no assurance the Company will be able to
obtain such financing or raise the required capital.
DEPENDENCE ON ADVERTISING REVENUES; EFFECT OF LOCAL, REGIONAL AND NATIONAL
ECONOMIC CONDITIONS
The Company's operating results are primarily dependent on advertising
revenues which, in turn, depend on national and local economic conditions, the
relative popularity of the Company's programming, the demographic
characteristics of the Company's markets, the activities of competitors and
other
32
<PAGE>
factors which are outside the Company's control. Both the television and radio
industries are cyclical in nature, and the Company's revenues could be adversely
affected by a future local, regional or national recessionary environment.
RELIANCE ON TELEVISION PROGRAMMING
One of the Company's most significant operating cost components is television
programming. There can be no assurance that the Company will not be exposed in
the future to increased programming costs which may adversely affect the
Company's operating results. Acquisitions of program rights are usually made two
or three years in advance and may require multi-year commitments, making it
difficult to accurately predict how a program will perform. In some instances,
programs must be replaced before their costs have been fully amortized,
resulting in write-offs that increase station operating costs.
CERTAIN NETWORK AFFILIATION AGREEMENTS
All but two of the television stations owned or provided programming services
by the Company are affiliated with a network. Under the affiliation agreements,
the networks possess, under certain circumstances, the right to terminate the
agreement on prior written notice generally ranging between 15 and 45 days,
depending on the agreement. Ten of the stations currently owned or programmed by
the Company are affiliated with Fox and 39.0% of the Company's revenue in 1996
on a pro forma basis was from Fox affiliated stations. WVTV, a station to which
the Company provided programming services in Milwaukee, Wisconsin pursuant to an
LMA, WTTO, a station owned by the Company in Birmingham, Alabama, and WDBB, a
station to which the Company provides programming services in Tuscaloosa,
Alabama pursuant to an LMA, each of which was previously affiliated with Fox,
had their affiliation agreements with Fox terminated by Fox in December 1994,
September 1996 and September 1996, respectively. WVTV and WTTO are now operated
as WB affiliates. The affiliation agreements with WB have not been finalized
with respect to these stations and there can be no assurance that the agreements
will be finalized. In addition, the Company has been notified by Fox of Fox's
intention to terminate WLFL's affiliation with Fox in the Raleigh-Durham market
and WTVZ's affiliation with Fox in the Norfolk market, effective August 31,
1998. On August 20, 1996, the Company entered into an agreement with Fox
limiting Fox's rights to terminate the Company's affiliation agreements with Fox
in other markets, but there can be no assurance that the Fox affiliation
agreements will remain in place or that Fox will continue to provide programming
to affiliates on the same basis that currently exists. See "Business of
Sinclair--Television Broadcasting." The Company's UPN affiliation agreements
expire in January 1998. The non-renewal or termination of affiliations with Fox
or any other network could have a material adverse effect on the Company's
operations.
Each of the affiliation agreements relating to television stations involved
in the River City Acquisition (other than River City's ABC and Fox affiliates)
is terminable by the network upon transfer of the License Assets of the
stations. These stations are continuing to operate as network affiliates, but
there can be no assurance that the affiliation agreements will be continued, or
that they will be continued on terms favorable to the Company. If any
affiliation agreements are terminated, the affected station could lose market
share, may have difficulty obtaining alternative programming at an acceptable
cost, and may otherwise be adversely affected.
Eleven stations owned or programmed by the Company are affiliated with UPN, a
network that began broadcasting in January 1995. Two stations owned or
programmed by the Company are operated as affiliates with WB, a network that
began broadcasting in January 1995. There can be no assurance as to the future
success of UPN or WB programming or as to the continued operation of the UPN or
WB networks.
COMPETITION
The television and radio industries are highly competitive. Some of the
stations and other businesses with which the Company's stations compete are
subsidiaries of large, national or regional companies that may have greater
resources than the Company. Technological innovation and the resulting
33
<PAGE>
proliferation of programming alternatives, such as cable television, wireless
cable, in home satellite-to-home distribution services, pay-per-view and home
video and entertainment systems have fractionalized television viewing audiences
and have subjected free over-the-air television broadcast stations to new types
of competition. The radio broadcasting industry is also subject to competition
from new media technologies that are being developed or introduced, such as the
delivery of audio programming by cable television systems and by digital audio
broadcasting ("DAB"). In April 1997, the FCC awarded two licenses for DAB. DAB
may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and national audiences.
The Company's stations face strong competition for market share and
advertising revenues in their respective markets from other local free
over-the-air radio and television broadcast stations, cable television and
over-the-air wireless cable television as well as newspapers, periodicals and
other entertainment media. Some competitors are part of larger companies with
greater resources than the Company. In addition, the FCC has adopted rules which
permit telephone companies to provide video services to homes on a
common-carrier basis without owning or controlling the product being
distributed, and proposed legislation could relax or repeal the telephone-cable
cross-ownership prohibition for all systems. See "Business of
Sinclair--Competition."
In February 1996, the Telecommunications Act of 1996 (the "1996 Act") was
adopted by the Congress of the United States and signed into law by President
Clinton. The 1996 Act contains a number of sweeping reforms that are having an
impact on broadcasters, including the Company. While creating substantial
opportunities for the Company, the increased regulatory flexibility imposed by
the 1996 Act and the removal of previous station ownership limitations have
sharply increased the competition for and prices of stations. The 1996 Act also
frees telephone companies, cable companies and others from some of the
restrictions which have previously precluded them from involvement in the
provision of video services. The 1996 Act may also have other effects on the
competition the Company faces, either in individual markets or in making
acquisitions.
IMPACT OF NEW TECHNOLOGIES
The FCC has taken a number of steps to implement digital television ("DTV")
broadcasting service in the United States. In December 1996, the FCC adopted a
DTV broadcast standard and, in April 1997, made decisions in several pending
rulemaking proceedings that establish service rules and a plan for implementing
DTV. The FCC adopted a DTV Table of Allotments that provides all authorized
television stations with a second channel on which to broadcast a DTV signal.
The FCC has attempted to provide DTV coverage areas that are comparable to
stations' existing service areas. The FCC has ruled that television broadcast
licensees may use their digital channels for a wide variety of services such as
high-definition television, multiple standard definition television programming,
audio, data, and other types of communications, subject to the requirement that
each broadcaster provide at least one free video channel equal in quality to the
current technical standard.
Initially, DTV channels will be located in the range of channels from channel
2 through channel 51. The FCC is requiring that affiliates of ABC, CBS, Fox and
NBC in the top 10 television markets begin digital broadcasting by May 1, 1999
(the stations affiliated with these networks in the top 10 markets have
voluntarily committed to begin digital broadcasting within 18 months), and that
affiliates of these networks in markets 11 through 30 begin digital broadcasting
by November 1999. The FCC's plan calls for the DTV transition period to end in
the year 2006, at which time the FCC expects that (i) DTV channels will be
clustered either in the range of channels 2 through 46 or channels 7 through 51;
and (ii) television broadcasters will have ceased broadcasting on their
non-digital channels, allowing that spectrum to be recovered by the government
for other uses. The FCC has stated that it will open a separate proceeding to
consider the recovery of television channels 60 through 69 and how those
frequencies will be used after they are eventually recovered from television
broadcasters. Additionally, the FCC will open a separate proceeding to consider
to what extent the cable must-carry requirements will apply to DTV signals.
Implementation of digital television will improve the technical quality of
television signals received by viewers. Under certain circumstances, however,
conversion to digital operation may reduce a station's geographic coverage area
or result in some increased interference. The FCC's DTV allotment plan may
34
<PAGE>
also result in UHF stations having considerably less signal power within their
service areas than present VHF stations that move to DTV channels.
Implementation of digital television will also impose substantial additional
costs on television stations because of the need to replace equipment and
because some stations will need to operate at higher utility costs. The FCC is
also considering imposing new public interest requirements on television
licensees in exchange for their receipt of DTV channels. The Company cannot
predict what future actions the FCC might take with respect to DTV, nor can it
predict the effect of the FCC's present DTV implementation plan or such future
actions on the Company's business.
Further advances in technology may also increase competition for household
audiences and advertisers. The video compression techniques now under
development for use with current cable television channels or direct broadcast
satellites which do not carry local television signals (some of which commenced
operation in 1994) are expected to reduce the bandwidth which is required for
television signal transmission. These compression techniques, as well as other
technological developments, are applicable to all video delivery systems,
including over-the-air broadcasting, and have the potential to provide vastly
expanded programming to highly targeted audiences. Reduction in the cost of
creating additional channel capacity could lower entry barriers for new channels
and encourage the development of increasingly specialized "niche" programming.
This ability to reach a very defined audience may alter the competitive dynamics
for advertising expenditures. The Company is unable to predict the effect that
technological changes will have on the broadcast television industry or the
future results of the Company's operations. See "Business of
Sinclair--Competition."
GOVERNMENTAL REGULATIONS; NECESSITY OF MAINTAINING FCC LICENSES
The broadcasting industry is subject to regulation by the FCC pursuant to the
Communications Act. Approval by the FCC is required for the issuance, renewal
and assignment of station operating licenses and the transfer of control of
station licensees. In particular, the Company's business will be dependent upon
its continuing to hold broadcast licenses from the FCC. While in the vast
majority of cases such licenses are renewed by the FCC, there can be no
assurance that the Company's licenses or the licenses owned by the
owner-operators of the stations with which the Company has LMAs will be renewed
at their expiration dates. A number of federal rules governing broadcasting have
changed significantly in recent years and additional changes may occur,
particularly with respect to the rules governing digital television multiple
ownership and attribution. The Company cannot predict the effect that these
regulatory changes may ultimately have on the Company's operations. Additional
information regarding governmental regulation is set forth under "Business of
Sinclair--Federal Regulation of Television and Radio Broadcasting."
MULTIPLE OWNERSHIP RULES AND EFFECT ON LMAS
On a national level, FCC rules and regulations generally prevent an entity or
individual from having an attributable interest in television stations that
reach in excess of 35% of all U.S. television households (for purposes of this
calculation, UHF stations are credited with only 50% of the television
households in their markets). The Company currently reaches approximately 9% of
U.S. television households using the FCC's method of calculation. On a local
level, the "duopoly" rules prohibit attributable interests in two or more
television stations with overlapping service areas. There are no national limits
on ownership of radio stations, but on a local level no entity or individual can
have an attributable interest in more than five to eight stations (depending on
the total number of stations in the market), with no more than three to five
stations (depending on the total allowed) broadcasting in the same band (AM or
FM). There are limitations on the extent to which programming can be simulcast
through LMA arrangements, and LMA arrangements may be counted in determining the
number of stations that a single entity may control. FCC rules also impose
limitations on the ownership of a television and radio station in the same
market, though such cross-ownership is permitted on a limited basis in larger
markets.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other entity. In the case of
corporations holding broadcast licenses, the interests of officers, directors
and those who, directly or indirectly, have the right to vote 5% or more of the
corporation's voting stock (or 10% or more of such stock in the case of
insurance companies, certain
35
<PAGE>
regulated investment companies and bank trust departments that are passive
investors) are generally deemed to be attributable, as are positions as an
officer or director of a corporate parent of a broadcast licensee. The FCC has
proposed changes to these attribution rules. See "Business of Sinclair--Federal
Regulation of Television and Radio Broadcasting."
The FCC has initiated rulemaking proceedings to consider proposals to modify
its television ownership restrictions, including ones that may permit the
ownership, in some circumstances, of two television stations with overlapping
service areas. The FCC is also considering in these proceedings whether to adopt
restrictions on television LMAs. The "duopoly" rules currently prevent the
Company from acquiring the FCC licenses of television stations with which it has
LMAs in those markets where the Company owns a television station. In addition,
if the FCC were to decide that the provider of programming services under an LMA
should be treated as the owner of the television station and if it did not relax
the duopoly rules, or if the FCC were to adopt restrictions on LMAs without
grandfathering existing arrangements, the Company could be required to modify or
terminate certain of its LMAs. In such an event, the Company could be required
to pay termination penalties under certain of its LMAs. The 1996 Act provides
that nothing therein "shall be construed to prohibit the origination,
continuation, or renewal of any television local marketing agreement that is in
compliance with the regulations of the [FCC]." The legislative history of the
1996 Act reflects that this provision was intended to grandfather television
LMAs that were in existence upon enactment of the 1996 Act, and to allow
television LMAs consistent with the FCC's rules subsequent to enactment of the
1996 Act. In its pending rulemaking proceeding regarding the television duopoly
rule, the FCC has proposed to adopt a grandfathering policy providing that, in
the event that television LMAs become attributable interests, LMAs that are in
compliance with existing FCC rules and policies and were entered into before
November 5, 1996, would be permitted to continue in force until the original
term of the LMA expires. Under the FCC's proposal, television LMAs that are
entered into or renewed after November 5, 1996 would have to be terminated if
LMAs are made attributable interests and the LMA in question resulted in a
violation of the television multiple ownership rules. All of the Company's LMAs
were entered into prior to November 5, 1996, but six were entered into after
enactment of the 1996 Act. See "Business of Sinclair--Federal Regulation of
Television and Radio Broadcasting." The LMAs entered into after enactment of the
1996 Act have terms expiring May 31, 2006. Further, if the FCC were to find that
the owners/licensees of the stations with which the Company has LMAs failed to
maintain control over their operations as required by FCC rules and policies,
the licensee of the LMA station and/or the Company could be fined or could be
set for hearing, the outcome of which could be a fine or, under certain
circumstances, loss of the applicable FCC license.
Petitions have been filed with the FCC to deny the application for assignment
of the license for WFBC in Anderson, South Carolina from River City to Glencairn
and the application for assignment of the license of WLOS in Asheville, North
Carolina from River City to the Company. The Company currently provides
programming to WFBC pursuant to its LMA with River City and intends to provide
programming to WFBC pursuant to an LMA with Glencairn after acquisition of the
License Assets of WFBC by Glencairn. The petitions claim that the acquisition of
the license of WFBC by Glencairn would violate the FCC's cross-interest policy
in light of the Company's LMA with and option to acquire the License Assets of
WLOS in Asheville, North Carolina and in light of the equity interest in
Glencairn held by relatives of the Controlling Stockholders. In addition, an
informal objection has been made to the application to assign the license of
KRRT in Kerrville, Texas to Glencairn and a petition has been filed to deny the
application to assign the license of KABB in San Antonio to the Company.
Although the specific nature of the objection to the application to assign the
license to Glencairn is unclear, the objection generally raises questions
concerning the cross-interest policy as it relates to LMAs between Glencairn and
Sinclair. See "Business of Sinclair--Federal Regulation of
Broadcasting--Ownership Matters." The petition to deny the KABB application
claims that the acquisition of the license of KABB by the Company and the
acquisition of the license of KRRT by Glencairn would violate the FCC's
cross-interest policy in light of the Company's LMA with KRRT and in light of
the equity interest in Glencairn held by relatives of the Controlling
Stockholders. Additionally, a petition has been filed to deny the application to
assign WTTV and WTTK in the Indianapolis DMA from River City to the Company.
Although the petition to deny does not challenge the assignments of WTTV and
WTTK to the Company, it alleges that station WIIB in the Indianapolis DMA should
be deemed an attributable
36
<PAGE>
interest of the Controlling Stockholders (resulting in a violation of the FCC's
local television ownership restrictions when coupled with the Company's
acquisition of WTTV and WTTK) even though the Controlling Stockholders have
agreed to transfer their voting stock in WIIB to a third party.
The Company is unable to predict (i) the ultimate outcome of possible changes
to the FCC's LMA and multiple ownership rules or the resolution of the
above-described petitions to deny or (ii) the impact such factors may have upon
the Company's broadcast operations. Grant of the petitions to deny could draw
into question the regulatory treatment of the Company's LMAs in markets other
than those directly affected. As a result of either regulatory changes or grant
of the petitions, the Company could be required to modify or terminate some or
all of its LMAs, resulting in termination penalties and/or divestitures of
broadcast properties. In addition, the Company's competitive position in certain
markets could be materially adversely affected. Thus, no assurance can be given
that the changes to the FCC rules or the resolution of these petitions to deny
will not have a material adverse effect upon the Company.
LMAS--RIGHTS OF PREEMPTION AND TERMINATION
All of the Company's LMAs allow, in accordance with FCC rules, regulations
and policies, preemptions of the Company's programming by the owner-operator and
FCC licensee of each station with which the Company has an LMA. In addition,
each LMA provides that under certain limited circumstances the arrangement may
be terminated by the FCC licensee. Accordingly, the Company cannot be assured
that it will be able to air all of the programming expected to be aired on those
stations with which it has an LMA or that the Company will receive the
anticipated advertising revenue from the sale of advertising spots in such
programming. Although the Company believes that the terms and conditions of each
of its LMAs should enable the Company to air its programming and utilize the
programming and other non-broadcast license assets acquired for use on the LMA
stations, there can be no assurance that early terminations of the arrangements
or unanticipated preemptions of all or a significant portion of the programming
by the owner-operator and FCC licensee of such stations will not occur. An early
termination of one of the Company's LMAs, or repeated and material preemptions
of programming thereunder, could adversely affect the Company's operations. In
addition, the Company's LMAs expire on various dates from March 27, 2000 to May
31, 2006, unless extended or earlier terminated. There can be no assurance that
the Company will be able to negotiate extensions of its arrangements on terms
satisfactory to the Company.
In certain of its LMAs, the Company has agreed to indemnify the FCC licensee
against certain claims (including trademark and copyright infringement, libel or
slander and claims relating to certain FCC proceedings or investigations) that
may arise against the FCC licensee as a result of the arrangement.
NET LOSSES
The Company experienced net losses of $7.9 million and $2.7 million during
1993 and 1994, respectively, net income of $76,000 in 1995 and net income of
$1.1 million in 1996 (a net loss of $17.9 million in 1996 on a pro forma basis
reflecting the 1996 Acquisitions and the Offering). The losses include
significant interest expense as well as substantial non-cash expenses such as
depreciation, amortization and deferred compensation. Notwithstanding the slight
net income in 1995 and 1996, the Company expects to experience net losses in the
future, principally as a result of interest expense, amortization of programming
and intangibles and depreciation.
THE TRUST HAS NO INDEPENDENT BUSINESS OPERATIONS
The Trust has no independent business operations. Accordingly, the ability of
the Trust to pay amounts due on the New Preferred Securities is solely dependent
upon KDSM, Inc.'s making payments on the KDSM Senior Debentures as and when
required. The ability of KDSM, Inc. to make such payments is dependent on cash
flow and earnings from its operations (which consist of the operation of KDSM-TV
in Des Moines, Iowa) and Sinclair's payment of dividends on the Parent
Preferred. If KDSM, Inc.'s business operations result in net losses or negative
cash flow, KDSM, Inc. may not be able to pay
37
<PAGE>
interest on the KDSM Senior Debentures even if Sinclair makes payments on the
Parent Preferred because the dividend rate on the Parent Preferred is only one
percentage point higher than the interest rate on the KDSM Senior Debentures.
HIGH LEVERAGE OF KDSM, INC.
KDSM, Inc. has indebtedness (consisting of the KDSM Senior Debentures) that
is very substantial in relation to its total stockholder's equity. As of
December 31, 1996, and after giving pro forma effect to the Old Securities
Offering, KDSM, Inc. would have had outstanding long-term indebtedness of
approximately $200 million (consisting of KDSM Senior Debentures' and
stockholder's equity of $49.7 million. Under the KDSM Senior Debenture
Indenture, KDSM, Inc. will be able to incur additional indebtedness subject to
limitations contained therein. See "Description of the New KDSM Senior
Debentures--Certain Covenants--Limitation on Indebtedness." In addition, the
Company has received a third-party appraisal valuing KDSM, Inc.'s assets (other
than the Parent Preferred and the Common Securities) at $50.2 million.
Accordingly, it is unlikely that the value of the operating assets of KDSM, Inc.
will be sufficient to redeem the New KDSM Senior Debentures at maturity or to
make interest payments if Sinclair does not make the required payments on the
New Parent Preferred. Accordingly, if Sinclair does not redeem the New Parent
Preferred upon maturity in 2009, it is unlikely that KDSM, Inc. will be able to
redeem the New KDSM Senior Debentures at maturity. In addition, KDSM, Inc. will
rely in significant part on dividend payments on the Parent Preferred to fund
its interest payments under the KDSM Senior Debentures. If Sinclair elects not
to make such dividend payments, KDSM, Inc. may not be able to make such interest
payments and also properly fund its operations. Furthermore, the dividend rate
on the Parent Preferred is only one percentage point higher than the interest
rate on the KDSM Senior Debentures, and if KDSM, Inc.'s cash flow (other than
dividend payments on the Parent Preferred) is negative, then the dividend
payments may not be sufficient to cover the interest payments on the KDSM Senior
Debentures. As described under "--Tax Event, Investment Company Act Event," upon
the occurrence of a Tax Event, Sinclair will have the option to cause the
distribution of New KDSM Senior Debentures in exchange for New Preferred
Securities, which would be fully and unconditionally guaranteed by Sinclair on a
junior subordinated basis pursuant to the New Parent Debenture Guarantee. The
Bank Credit Agreement and the Existing Notes currently restrict Sinclair from
causing such a distribution.
RELIANCE ON TELEVISION OPERATIONS IN ONE MARKET
KDSM, Inc.'s only assets other than the Parent Preferred are the License
Assets and Non-License Assets used in the operation of television station
KDSM-TV in Des Moines, Iowa. KDSM, Inc.'s 1996 broadcast cash flow of $3.7
million was derived solely from its LMA with KDSM-TV. Accordingly, KDSM, Inc.'s
financial condition is highly dependent on the television industry, which can be
affected by the same risks referred to in this "Risk Factors" section, and on
the local economic conditions in Des Moines, Iowa. A recession in the Des
Moines, Iowa area could have a material adverse effect on the financial
condition of KDSM, Inc. and its ability to make payments on the KDSM Senior
Debentures.
ABILITY OF KDSM, INC. TO TRANSFER KDSM-TV
Pursuant to the KDSM Senior Debenture Indenture, KDSM, Inc. is permitted to
transfer the assets of KDSM-TV (the "KDSM Transferred Assets") whether or not
they constitute all or substantially all of its assets (without regard to the
Parent Preferred and the Common Securities), in exchange for properties or
assets that will be used in the business of operating one or more television or
radio broadcasting stations or assets related thereto (the "Received Assets")
without the transferee of such assets from KDSM, Inc. (the "Transferee")
becoming obligated under the New KDSM Senior Debentures, the KDSM Senior
Debenture Indenture or the Collateral Documents (as defined in "Certain
Definitions") provided that (i) KDSM, Inc. shall deliver to the Debenture
Trustee a written opinion from an investment banking firm of national standing
or other financial services firm experienced in such matters to the effect that
the Fair Market Value of the Received Assets is equal to at least the greater of
(a) 90% of the Fair Market Value of the KDSM Transferred Assets or (b) $50
million, (ii) both the
38
<PAGE>
Received Assets (if considered as a separate entity) and KDSM, Inc. after such
transaction on a pro forma basis would have had positive Operating Cash Flow for
at least its two prior fiscal years and any three, six or nine month interim
period on an actual and pro forma basis, and (iii) there shall have been no
material adverse change in the Received Assets since the latter of the end of
its last fiscal year or any subsequent three, six or nine month interim period.
Although the Received Assets will have a Fair Market Value at least equal to
90% of the Fair Market Value of the KDSM Transferred Assets based on a third
party market appraisal, there is no requirement that the cash flow or earnings
of KDSM, Inc. after such transaction be equal to or greater than the cash flow
or earnings of KDSM, Inc. prior to such transaction. In addition, although the
Received Assets are required to have a positive cash flow for the two prior
fiscal years, there can be no assurance that the Received Assets will have
positive cash flow after the transaction is completed. In addition, the
businesses underlying the Received Assets will likely be subject to the same
risks described in this "Risk Factors" section related to KDSM, Inc. and the
Company, and such risks may be significantly greater with respect to the
Received Assets. The Received Assets may also consist of radio broadcast
properties which may be subject to additional risks related to that business
including competitive risks of the radio industry and governmental regulations.
The Received Assets also may be subject to other significant business, legal and
other risks as to which KDSM, Inc. is not subject. See "Description of New KDSM
Senior Debentures--Certain Covenants of KDSM, Inc.--Merger, Consolidation and
Sale of Assets."
CLASSIFICATION AS DEBT; DEDUCTIBILITY OF INTEREST
Sinclair believes, based on the advice of its counsel, that the New KDSM
Senior Debentures will be treated as indebtedness for United States federal
income tax purposes, and that KDSM, Inc. will be able to deduct interest paid on
the New KDSM Senior Debentures. The IRS may, however, attempt to treat the New
KDSM Senior Debentures as equity rather than indebtedness for tax purposes. If
the IRS were successful in such an attempt, interest paid on the New KDSM Senior
Debentures would not be deductible, which would in turn give rise to a Tax
Event. Upon the occurrence of a Tax Event, KDSM, Inc. has the option to redeem
the New KDSM Senior Debentures for cash at a price of 105.813% of the aggregate
principal amount of the KDSM New Senior Debentures redeemed plus accrued but
unpaid interest or, in the circumstances described elsewhere in this Prospectus,
to cause the Trust to be dissolved with each holder of the New Preferred
Securities receiving its pro rata share of the New KDSM Senior Debentures held
by the Trust. See "--Tax Event; Investment Company Act Event."
WITHHOLDING TAX RISK FOR NON-U.S. HOLDERS
Classification of the New KDSM Senior Debentures as equity would result in
the imposition of a withholding tax on interest payments made by KDSM, Inc. to
the extent that such payments are allocable to Non-U.S. Holders (as defined in
"Certain Federal Income Tax Consequences--Consequences for Non-U.S. Holders") of
the New Preferred Securities. See "Certain Federal Income Tax
Consequences--Consequences for Non-U.S. Holders." In addition, IRS regulations
permit the IRS to recharacterize certain conduit financing transactions for
purposes of the United States federal withholding tax rules that apply to
Non-U.S. Holders of stock or securities. The Company believes, based on advice
of counsel, that these regulations should not apply to the New KDSM Senior
Debentures. If the IRS were successful in an attempt to apply such regulations
to the New KDSM Senior Debentures, interest on the New KDSM Senior Debentures
that would otherwise be exempt from United States federal withholding tax could
be treated as dividends subject to withholding tax at a 30 percent rate or such
lower rate as may be specified by an applicable income tax treaty. See "Certain
Federal Income Tax Consequences--Consequences for Non-U.S. Holders."
OPTION TO EXTEND DISTRIBUTION PAYMENT PERIODS
Sinclair has the right to defer the dividend payments on the New Parent
Preferred from time to time for up to three consecutive quarters. KDSM, Inc. has
a similar right to defer interest payments on the New KDSM Senior Debentures for
up to three consecutive quarters if Sinclair defers dividend
39
<PAGE>
payments on the New Parent Preferred and, in addition, also has the right to
defer such payments on the New KDSM Senior Debentures for one quarter even if
KDSM, Inc. receives dividends on the New Parent Preferred. During any such
Interest Extension Period, quarterly distributions on the New Preferred
Securities would be deferred by the Trust; provided, however, that additional
distributions would continue to accrue on such deferred distributions and would
compound quarterly. If the Trust, KDSM, Inc. and Sinclair exercise their
deferral rights or if the market for the New Preferred Securities perceives that
the Trust, KDSM, Inc. and Sinclair are likely to exercise such rights, then, the
market price of the New Preferred Securities may be materially adversely
affected. See "Description of the New Preferred Securities--Distributions" and
"Description of the New KDSM Senior Debentures--Option to Extend Interest
Payment Period."
LIMITED RIGHTS UNDER THE NEW PARENT GUARANTEE
The New Parent Guarantee does not guarantee payments under the New Preferred
Securities except to the extent the Trust has funds legally available to make
such payments. If KDSM, Inc. were to default on its obligations under the KDSM
Senior Debenture Indenture, the Trust would not be able to make distributions or
redeem the New Preferred Securities, and in such event holders of the New
Preferred Securities would not be able to rely upon the New Parent Guarantee for
payment of such amounts because Sinclair is not guaranteeing the payment of
amounts owing under the New Preferred Securities except to the extent the Trust
has legally available funds to make such payment. Instead, holders of the New
Preferred Securities would be required to rely on the enforcement by the
Property Trustee of its rights (i) as the registered holder of the New KDSM
Senior Debentures, against KDSM, Inc. pursuant to the terms of the KDSM Senior
Debenture Indenture and on their rights thereunder and (ii) under the Pledge
Agreement. Furthermore, if Sinclair is unable to make timely payments on the New
Parent Preferred there is a substantial likelihood that Sinclair would also be
unable to make timely payments under the New Parent Guarantee. See "Description
of the New Parent Guarantee--Status of the New Parent Guarantee."
TAX EVENT; INVESTMENT COMPANY ACT EVENT
The Trust may redeem the New Preferred Securities prior to their stated
maturity if a Tax Event or an Investment Company Act Event occurs.
Alternatively, the Trust may be dissolved and the New KDSM Senior Debentures
distributed in exchange for New Preferred Securities if a Tax Event occurs. The
Bank Credit Agreement and the Existing Notes currently prohibit Sinclair or its
subsidiaries from exercising any of the options described above. See
"--Classification of Debt; Deductibility of Interest" and "Certain United States
Federal Income Tax Consequences--Distribution of the New KDSM Senior Debentures"
for a description of the consequences related to the distribution of the New
KDSM Senior Debentures.
LIMITED VOTING RIGHTS; REMEDIES UPON DEFAULT UNDER NEW PARENT PREFERRED AND
NEW KDSM SENIOR DEBENTURES
Holders of New Preferred Securities will have limited voting rights and,
except upon the occurrence of an Event of Default under the Trust Agreement,
will not be entitled to vote to appoint, remove or replace the Property Trustee
or the Administrative Trustees (both defined as described under "Description of
the New Preferred Securities") or to increase or decrease the number of
Administrative Trustees. If an Event of Default under the Trust Agreement has
occurred and is continuing, the Property Trustee or the Administrative Trustees
may be removed by the holders of a majority in aggregate Liquidation Value of
the outstanding Preferred Securities. If any proposed amendment to the Trust
Agreement provides for, or the Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights of
the holders of the Preferred Securities, whether by way of amendment to the
Trust Agreement or otherwise, or (ii) the dissolution, winding-up or termination
of the Trust, other than pursuant to the Trust Agreement, then the holders of
outstanding Preferred Securities will be entitled to vote on such amendment or
proposal, and such amendment or proposal shall not be effective except with the
approval of the holders of at least a majority in aggregate Liquidation Value of
such outstanding Preferred Securities (100% of the holders in certain
circumstances).
40
<PAGE>
See "Description of the New Preferred Securities--Voting Rights." In addition,
pursuant to the Trust Agreement the holders of a majority in aggregate
Liquidation Value of the Preferred Securities (100% of the holders in certain
circumstances) are required to consent to (i) any amendment to the KDSM Senior
Debenture Indenture, (ii) any waiver of an Event of Default under the KDSM
Senior Debenture Indenture, (iii) the issuance by the Trust of any additional
Equity Interest (as defined in "Certain Definitions") or the incurrence by the
Trust of any Indebtedness (as defined in "Certain Definitions"), (iv) any
liquidation of the Trust in the event of the bankruptcy of Sinclair or its
subsidiaries which collectively own 50% or more of Sinclair's consolidated
assets, provided that under current bankruptcy law the holders of the Preferred
Securities may not be able to exercise this right and (v) (pursuant to the
Pledge Agreement) any action or waiver of any rights taken by KDSM, Inc. under
the Parent Preferred. In addition, the holders of a majority in aggregate
Liquidation Value of the Preferred Securities will have the right to cause the
Trust to be dissolved at the maturity of the Preferred Securities. However,
certain modifications may be made to the KDSM Senior Debenture Indenture without
the consent of the holders of the Preferred Securities. See "Description of the
New KDSM Senior Debentures--Modification of the KDSM Senior Debenture
Indenture."
Upon the occurrence of a Voting Rights Triggering Event under the Parent
Preferred, KDSM, Inc., as the holder of the Parent Preferred, will be entitled
to elect two directors to Sinclair's board of directors. KDSM, Inc. will agree
(pursuant to the Pledge Agreement) that it will elect the nominees of the Trust
which pursuant to the Trust Agreement will nominate the holders of a majority of
the aggregate Liquidation Value of outstanding Preferred Securities to such
directorships. The holders of the Parent Preferred will have no other remedies
upon a Voting Rights Triggering Event under the Parent Preferred. Accordingly,
since the Trust's ability to make payments on the Preferred Securities is highly
dependent on Sinclair's making payments under the Parent Preferred, the ultimate
remedy for the holders of the Preferred Securities upon an Event of Default
under the Preferred Securities will be to elect two directors to the board of
directors of Sinclair and the exercise of the Trust's rights as a creditor of
KDSM, Inc.
Upon the occurrence of an Event of Default under the KDSM Senior Debenture
Indenture, the Trust will have remedies as a creditor of KDSM, Inc. As described
under "--High Leverage of KDSM, Inc.," it is unlikely that the assets of KDSM,
Inc. (other than the Parent Preferred) will be sufficient to satisfy the
obligations of KDSM, Inc. under the KDSM Senior Debenture Indenture. Moreover,
as described above, the ultimate remedy of the holders of the Preferred
Securities upon a Voting Rights Triggering Event under the Parent Preferred will
be to elect two directors to Sinclair's board of directors.
NEW PARENT DEBENTURE GUARANTEE
The terms of Sinclair's indebtedness currently restrict the incurrence of
additional indebtedness and it is likely that on the date that the Company would
seek to cause the New Parent Debenture Guarantee to be declared effective upon a
Tax Event, Sinclair would be subject to restrictions on additional indebtedness.
The New Parent Debenture Guarantee may not be declared effective if such
effectiveness would result in a violation of the terms of the Existing Notes or
the Bank Credit Agreement.
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if a court were to find that at the
time of the effectiveness of the New Parent Debenture Guarantee (i) Sinclair was
insolvent or rendered insolvent by reason thereof, (ii) Sinclair was engaged, or
about to engage, in a business or transaction for which Sinclair's remaining
assets constitute unreasonably small capital, (iii) Sinclair intended to incur
or believed that it would incur debts beyond its ability to pay such debts as
they mature or (iv) was a defendant in an action for money damages, or had a
judgment for money damages docketed against it (if in either case, after final
judgment, the judgment is unsatisfied), then the court could avoid the
effectiveness of the New Parent Debenture Guarantee in whole or in part as a
fraudulent conveyance or take other action detrimental to the holders of any New
Parent Debenture Guarantee. In such case, the holders could be required to
return the New Parent Debenture Guarantee to or for the benefit of existing or
future creditors of Sinclair. The measure of insolvency for purposes of the
foregoing will vary depending on the law of the jurisdiction which is being
applied. Generally, an entity would be
41
<PAGE>
considered insolvent if, at the time it incurs any obligation (i) the sum of its
debts, including contingent liabilities, was greater than the fair salable value
of its assets at a fair valuation, (ii) the present fair salable value of its
assets was less than the amount that would be required to pay its probable
liability on its existing debts and liabilities, including contingent
liabilities, as they become absolute and mature, or (iii) it is incurring debt
beyond its ability to pay as such debt matures.
ABSENCE OF PUBLIC TRADING MARKET
There is no public market for the New Preferred Securities. The Trust has
been advised by the Initial Purchasers that the Initial Purchasers intend to
make a market in the New Preferred Securities; however, they are under no
obligation to do so and may discontinue any market-making activities at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the New Preferred Securities or that an active public market will
develop. If any active trading market does not develop or is not maintained, the
market price and liquidity of the New Preferred Securities may be adversely
affected. In addition, there is no public market for the New KDSM Senior
Debentures, the New Parent Preferred or the New Parent Debenture Guarantee that
may be issued to the holders of New Preferred Securities in certain
circumstances. No assurance can be given as to the liquidity of the trading
market for any such securities if they are issued to the holders of New
Preferred Securities for any reason. If an active public market does not develop
for such securities, the market price and liquidity of such securities may be
adversely affected. The Company does not intend to apply to list the New
Preferred Securities on any national securities exchange.
TRADING CHARACTERISTICS OF THE NEW PREFERRED SECURITIES
If the New Preferred Securities trade, they are expected to trade at a price
that takes into account the value, if any, of accrued and unpaid distributions;
thus, purchasers will not pay for, and sellers will not receive, any accrued and
unpaid distributions with respect to their undivided interests in the New KDSM
Senior Debentures owned through the New Preferred Securities that are not
included in the trading price of the New Preferred Securities.
The New Preferred Securities are fixed-income securities. Neither the stated
value nor the Liquidation Value of the New Preferred Securities is necessarily
indicative of the price at which the New Preferred Securities will actually
trade at or after the time of the issuance, and the New Preferred Securities may
trade at prices below their stated value or Liquidation Value. The market price
can be expected to fluctuate with changes in the fixed income markets and
economic conditions, the financial condition and prospects of the Company and
other factors that generally influence the market prices of debt and other
fixed-income securities.
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD PREFERRED SECURITIES
The Old Preferred Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Old Preferred
Securities which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Preferred
Securities that remain outstanding will not be entitled to any rights to have
such Old Preferred Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions as provided in the Registration Rights Agreement). See
"Description of the Old Securities." Neither the Company, KDSM nor the Trust
intends to register under the Securities Act any Old Preferred Securities that
remain outstanding after consummation of the Exchange Offer (subject to such
limited exceptions, if applicable).
To the extent that Old Preferred Securities are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Preferred Securities
could be adversely affected. In addition, although the Old Preferred Securities
have been designated for trading in the Private Offerings, Resale
42
<PAGE>
and Trading through Automatic Linkages ("PORTAL") market, to the extent that Old
Preferred Securities are tendered and accepted in connection with the Exchange
Offer, any trading market for Old Preferred Securities that remain outstanding
after the Exchange Offer could be adversely affected.
The New Preferred Securities and any Old Preferred Securities that remain
outstanding after consummation of the Exchange Offer will constitute a single
series of Preferred Securities under the Trust Agreement and, accordingly, will
vote together as a single class for purposes of determining whether holders of
the requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Amended and Restated Trust
Agreement. See "Description of the New Preferred Securities."
The Company, KDSM, Inc. and the Trust have agreed that cash penalty amounts
may be payable to the holders of the Old Preferred Securities if, among other
things, (i) the Registration Statement of which this Prospectus forms a part is
not filed with the Commission by May 11, 1997, (ii) the Commission does not
declare such Registration Statement effective by July 10, 1997 or (iii) the
Exchange Offer is not consummated by August 8, 1997. See "Description of The Old
Securities" and "The Exchange Offer."
EXCHANGE OFFER PROCEDURES
Issuance of the New Preferred Securities in exchange for Old Preferred
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Trust of such Old Preferred Securities, a properly completed and
duly executed Letter of Transmittal and all other required documents. Therefore,
holders of the Old Preferred Securities desiring to tender such Old Preferred
Securities in exchange for New Preferred Securities should allow sufficient time
to ensure timely delivery. The Trust is under no duty to give notification of
defects or irregularities with respect to the tenders of Old Preferred
Securities for exchange.
RATINGS
The Old Preferred Securities are rated b2 by Moody's and B by Standard &
Poor's. It is expected that the New Preferred Securities will be rated b2 by
Moody's and B by Standard & Poor's. There can be no assurance that any rating
will remain in effect for the New Preferred Securities for any given period of
time or that a rating will not be lowered or withdrawn by the assigning rating
agency if, in its judgment, circumstances so warrant. There can be no assurance
whether any other rating agency will rate the New Preferred Securities, or if
one does, what rating would be assigned by such rating agency. A security rating
is not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the assigning rating organization.
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements. Discussions containing
such forward-looking statements may be found in the material set forth under
"Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operation of KDSM-TV and KDSM, Inc." and "Business of Sinclair," as
well as within this Prospectus generally and in the materials incorporated
herein by reference. In addition, when used in this Prospectus, the words
"intends to," "believes," "anticipates," "expects" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
a number of risks and uncertainties. Actual results in the future could differ
materially and adversely from those described in the forward-looking statements
as a result of various important factors, including the impact of changes in
national and regional economies, successful integration of acquired television
and radio stations (including achievement of synergies and cost reductions),
pricing fluctuations in local and national advertising, volatility in
programming costs, the availability of suitable acquisitions on acceptable terms
and the other risk factors set forth above and the matters set forth in this
Prospectus generally. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements that may be made
to reflect any future events or circumstances.
43
<PAGE>
USE OF PROCEEDS
Neither the Company, KDSM, Inc. nor the Trust will receive any cash proceeds
from the issuance of the New Preferred Securities offered hereby. The New
Preferred Securities will be exchanged for Old Preferred Securities in like
Liquidation Values. Old Preferred Securities that are exchanged will be retired
and cancelled. The proceeds from the sale of the Old Preferred Securities were
used by the Trust to purchase $200 million of Old KDSM Senior Debentures issued
pursuant to the KDSM Senior Debenture Indenture. The proceeds from the sale of
the Old KDSM Senior Debentures were used by KDSM, Inc. to purchase the Old
Parent Preferred. The Company received approximately $194 million in net
proceeds from the sale of the Old Preferred Securities.
As required by the Bank Credit Agreement, a portion of the net proceeds
of the Old Securities Offering was used to reduce outstanding borrowings
thereunder, a portion of which may be reborrowed. As of March 31, 1997 (after
application of proceeds of the Old Securities Offering), the credit facilities
under the Bank Credit Agreement had an aggregate outstanding principal balance
of $703.1 million. Such amounts were borrowed to fund acquisitions and for
general corporate purposes. The Company used approximately $135 million of the
net proceeds of the Old Securities Offering to repay outstanding debt and will
use the remaining proceeds, approximately $59 million, for general corporate
purposes including acquisitions, which may include a portion of the financing
for the acquisition of KUPN-TV, or the repurchase of shares of Class A Common
Stock. The revolving credit facility under the Bank Credit Agreement was repaid
in full on March 12, 1997 and had no outstanding balance on March 31, 1997. The
interest rate on the revolving credit facility was variable and averaged 8.00%
per year for the month ended January 31, 1997. See "Description of
Indebtedness."
DIVIDEND POLICY
The Company generally has not paid a cash dividend on its Common Stock and
does not expect to pay cash dividends on its Common Stock in the foreseeable
future. The Bank Credit Agreement, the Existing Indentures and agreements
governing other indebtedness of the Company generally prohibit the Company from
paying cash dividends on common stock and limit payment of dividends relating to
its capital stock. See "Risk Factors--Covenant Restrictions on Dividends and
Redemptions."
44
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratios of earnings to fixed charges for each of
the periods indicated are set forth below:
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Income (loss) before provision
(benefit) for income taxes and
extraordinary items $(5,840) $ 922 $(3,387) $10,188 $ 8,067
Fixed charges(a) 12,997 12,852 25,418 39,253 84,314
-------- ------ - -------- ------- -------
Earnings available for fixed
charges 7,157 13,774 22,031 49,441 92,381
Fixed charges 12,997 12,852 25,418 39,253 84,314
-------- ------- -------- ------- -------
Ratio of earnings to fixed charges(b) -- 1.1 x -- 1.3 x 1.1 x
</TABLE>
- ----------
(a) Fixed charges consist of interest expense, which includes interest on all
debt and amortization of debt discount, and deferred financing costs.
(b) Earnings were inadequate to cover fixed charges in 1992 and 1994.
Additional earnings of $5,840,000 and $3,387,000 would have been required
to cover fixed charges in 1992 and 1994, respectively.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of Sinclair and, accordingly, the accounts of the Trust will be included in the
consolidated financial statements of Sinclair. The New Preferred Securities will
be presented as a separate line item in the consolidated balance sheet of
Sinclair under mandatorily redeemable preferred stock and appropriate
disclosures about the New Preferred Securities, the New Parent Preferred, the
New Parent Guarantee and the New KDSM Senior Debentures will be included in the
notes to the consolidated financial statements. See "Capitalization of
Sinclair." For financial reporting purposes, Sinclair will record dividends on
the New Preferred Securities as distributions made or to be made to outside
investors of the Trust.
In February 1997, the Financial Accounting Standard Board released SFAS 128
"Earnings per Share." The new statement is effective December 15, 1997 and early
adoption is not permitted. When adopted, SFAS 128 will require the restatement
of prior periods and disclosure of basic and diluted earnings per share and
related computations. At the present time, management believes that the adoption
of SFAS 128 will not materially affect the Company's consolidated financial
statements.
45
<PAGE>
CAPITALIZATION OF SINCLAIR
The following table sets forth, as of December 31, 1996, (a) the actual
capitalization of the Company, and (b) the pro forma capitalization of the
Company as adjusted to reflect the Old Securities Offering and application of
the estimated net proceeds therefrom as set forth in "Use of Proceeds" as if the
Old Securities Offering had occurred on December 31, 1996. The information set
forth below should be read in conjunction with the Pro Forma Consolidated
Financial Data of the Company located elsewhere in this Prospectus and the
historical Consolidated Financial Statements of the Company incorporated herein
by reference.
DECEMBER 31, 1996
-------------------------
(DOLLARS IN THOUSANDS)
AS
ACTUAL ADJUSTED
------------ ------------
Cash and cash equivalents $ 2,341 $ 41,341
============ ============
Current portion of long-term debt $ 63,962 $ 63,962
============ ============
Long-term debt:
Term loans $ 657,000 $ 657,000
Revolving credit facility 155,000 --
Notes and capital leases payable to affiliates 12,185 12,185
Senior subordinated notes 400,000 400,000
------------ ------------
1,224,185 1,069,185
------------ ------------
Company Obligated Mandatorily Redeemable Security
of Trust Holding Solely KDSM Senior Debentures -- 200,000
------------ ------------
Equity Put Options 8,938 8,938
------------ ------------
Stockholders' equity (deficit):
Preferred Stock, par value $.01 per share;
1,138,138 shares issued and outstanding 11 11
Class A Common Stock, par value $.01 per share;
6,911,880 shares issued and outstanding 70 70
Class B Common Stock, par value $.01 per share;
27,850,581 shares issued and outstanding 279 279
Additional paid-in capital 231,170 231,170
Accumulated deficit (18,932) (18,932)
Additional paid-in capital stock options 25,784 25,784
Deferred compensation (1,129) (1,129)
------------ ------------
Total stockholders' equity 237,253 237,253
------------ ------------
Total capitalization $1,470,376 $1,515,376
============ ============
Net debt to operating cash flow(a) 7.1x 5.3x
Net debt plus Company Obligated Mandatorily
Redeemable Security of Trust Holding Solely KDSM
Senior Debentures to operating cash flow(a) 7.1x 6.3x
- ----------
(a) Net debt is defined as total debt less cash and cash equivalents.
46
<PAGE>
SELECTED CONSOLIDATED HISTORICAL
AND PRO FORMA FINANCIAL INFORMATION OF SINCLAIR
The selected historical consolidated financial data for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996 have been derived from the
Company's audited Consolidated Financial Statements (the "Consolidated Financial
Statements"). The Consolidated Financial Statements for the years ended December
31, 1994, 1995 and 1996 are incorporated herein by reference. The summary pro
forma statement of operations data of the Company reflect the 1996 Acquisitions
and the application of the proceeds of the Old Securities Offering set forth in
"Use of Proceeds" as though they occurred at the beginning of the period
presented and are derived from the pro forma consolidated financial statements
of the Company included elsewhere in this Prospectus. See "Pro Forma
Consolidated Financial Data." Separate financial information for the Trust is
not provided since the Company believes it would not be material to investors.
The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Sinclair" and Sinclair's Consolidated Financial Statements in Sinclair's Annual
Report on Form 10-K (as amended) incorporated herein by reference.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
PRO FORMA
1992 1993 1994(A) 1995(A) 1996(A) 1996(B)
---------- ----------- ---------- ---------- ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcast revenues(c) $61,081 $69,532 $118,611 $187,934 $346,459 $445,008
Barter revenues 8,805 6,892 10,743 18,200 32,029 36,065
---------- ---------- ----------- ---------- ---------- ------------
Total revenues 69,886 76,424 129,354 206,134 378,488 481,073
---------- ---------- ----------- ---------- ---------- ------------
Operating expenses, excluding depreciation
and amortization, deferred compensation and
special bonuses paid to executive officers. 32,993 32,295 50,545 80,446 167,765 224,061
Depreciation and amortization(d) 30,943 22,486 55,587 80,410 121,081 153,705
Amortization of deferred compensation -- -- -- -- 739 933
Special bonuses paid to executive officers -- 10,000 3,638 -- -- --
---------- ---------- ----------- ---------- ---------- ------------
Broadcast operating income 5,950 11,643 19,584 45,278 88,903 102,374
---------- ---------- ----------- ---------- ---------- ------------
Interest and amortization of debt discount
expense 12,997 12,852 25,418 39,253 84,314 104,662
Interest and other income 1,207 2,131 2,447 4,163 3,478 1,925
Distributions made to outside investors of
the Trust(e) -- -- -- -- -- 23,250
---------- ---------- ----------- ---------- ---------- ------------
Income (loss) before (provision) benefit for
income taxes and extraordinary item $(5,840) $ 922 $ (3,387) $ 10,188 $ 8,067 $(23,613)
========== ========== =========== ========== ========== ============
Net income (loss) available to common
shareholders $(4,651) $(7,945) $ (2,740) $ 76 $ 1,131 $(17,877)
========== ========== =========== ========== ========== ============
Earnings (loss) per common share:
Net income (loss) before extraordinary
item $ (0.16) $ -- $ (0.09) $ 0.15 $ 0.03 $ (0.46)
Extraordinary item -- (0.27) -- (0.15) -- --
---------- ---------- ----------- ---------- ---------- ------------
Net income (loss) per common share $ (0.16) $ (0.27) $ (0.09) $ -- $ 0.03 $ (0.46)
========== ========== =========== ========== ========== ============
Weighted average shares out-
standing (in thousands) 29,000 29,000 29,000 32,205 37,381 39,058
========== ========== =========== ========== ========== ============
OTHER DATA:
Broadcast cash flow(f) $28,019 $37,498 $ 67,519 $111,124 $189,216 $217,719
Broadcast cash flow margin(g) 45.9% 53.9% 56.9% 59.1% 54.6% 48.9%
Operating cash flow(h) $26,446 $35,406 $ 64,547 $105,750 $180,272 $206,469
Operating cash flow margin(g) 43.3% 50.9% 54.4% 56.3% 52.0% 46.4%
After tax cash flow(i) $15,865 $23,725 $ 42,223 $ 65,460 $ 92,500 $ 86,218
After tax cash flow per share(j) $ 0.55 $ 0.82 $ 1.46 $ 2.03 $ 2.47 $ 2.21
After tax cash flow margin(g) 26.0% 34.1% 35.6% 34.8% 26.7% 19.4%
Program contract payments $10,427 $ 8,723 $ 14,262 $ 19,938 $ 30,451 $ 50,543
Capital expenditures 426 528 2,352 1,702 12,609 14,072
Corporate overhead expense 1,553 2,092 2,972 5,374 8,944 11,250
(Continued on following page)
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------------
PRO FORMA
1992 1993 1994(A) 1995(A) 1996(A) 1996(B)
--------- ---------- ---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating cash flow to interest expense 2.0x 2.8x 2.5x 2.7x 2.1x 2.0x
Operating cash flow to interest expense plus
distributions made to outside investors of
the Trust 2.0x 2.8x 2.5x 2.7x 2.1x 1.6x
Operating cash flow less capital expenditures
to interest expense plus distributions made
to outside investors of the Trust 2.0x 2.7x 2.4x 2.7x 2.0x 1.5x
Net debt to operating cash flow(k) 4.1x 5.8x 5.3x 2.9x 7.1x 5.3x
Net debt plus Company Obligated Mandatorily
Redeemable Security of Trust Holding Solely
KDSM Senior Debentures to operating cash
flow 4.1x 5.8x 5.3x 2.9x 7.1x 6.3x
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,823 $ 18,036 $ 2,446 $112,450 $ 2,341 $ 41,341
Total assets 140,366 242,917 399,328 605,272 1,707,297 1,752,297
Total debt(l) 110,659 224,646 346,270 418,171 1,288,147 1,133,147
Company Obligated Mandatorily Redeemable
Security of Trust Holding Solely KDSM Senior
Debentures(m) -- -- -- -- -- 200,000
Total stockholders' equity (deficit) (3,127) (11,024) (13,723) 96,374 237,253 237,253
</TABLE>
NOTES TO SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(a) The Company made acquisitions in 1994, 1995 and 1996 as described in the
footnotes to the consolidated financial statements incorporated herein by
reference. the statement of operations and other data presented for periods
preceding the dates of acquisitions do not include amounts for these
acquisitions and therefore are not comparable to subsequent periods.
additionally, the years in which the specific acquisitions occurred may not
be comparable to subsequent periods depending on when during the year the
acquisition occurred.
(b) The pro forma information in this table reflects the pro forma effect of
the completion of the Old Securities Offering (and the application of the
net proceeds thereof as set forth in "Use of Proceeds") and the 1996
Acquisitions as if such transactions had occurred on January 1, 1996.
(c) Net broadcast revenues are defined as broadcast revenues net of agency
commissions.
(d) Depreciation and amortization includes amortization of program contract
costs and net realizable value adjustments, depreciation and amortization
of property and equipment, and amortization of acquired intangible
broadcasting assets and other assets including amortization of deferred
financing costs and costs related to excess syndicated programming.
(e) Distributions made to outside investors of the Trust represents the
distributions on $200 million aggregate Liquidation Value of Preferred
Securities at a distribution rate of 11.625%.
(f) "Broadcast cash flow" is defined as broadcast operating income plus
corporate overhead expense, special bonuses paid to executive officers,
depreciation and amortization, (including film amortization and
amortization of deferred compensation and excess syndicated programming),
less cash payments for program contract rights. Cash program payments
represent cash payments made for current program payables and do not
necessarily correspond to program usage. Special bonuses paid to executive
officers are considered non-recurring expenses. The Company has presented
broadcast cash flow data, which the Company believes are comparable to the
data provided by other companies in the industry, because such data are
commonly used as a measure of performance for broadcast companies. However,
broadcast cash flow does not purport to represent cash provided by
operating activities as reflected in the Company's consolidated statements
of cash flow, is not a measure of financial performance under generally
accepted accounting principles and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
(g) "Broadcast cash flow margin" is defined as broadcast cash flow divided by
net broadcast revenues. "Operating cash flow margin" is defined as
operating cash flow divided by net broadcast revenues. "After tax cash flow
margin" is defined as after tax cash flow divided by net broadcast
revenues.
(h) "Operating cash flow" is defined as broadcast cash flow less corporate
overhead expense and is a commonly used measure of performance for
broadcast companies. Operating cash flow does not purport to represent cash
provided by operating activities as reflected in the Company's consolidated
statements of cash flows, is not a measure of financial performance under
generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(i) "After tax cash flow" is defined as net income (loss) before extraordinary
items plus depreciation and amortization (including film amortization and
amortization of deferred compensation and excess syndicated programming)
plus special bonuses paid to executive officers, less program contract
payments. After tax cash flow is presented here not as a measure of
operating results and does not purport to represent cash provided by
operating activities. After tax cash flow should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(j) "After tax cash flow per share" is defined as after tax cash flow divided
by weighted average shares outstanding.
(k) Net debt is defined as total debt less cash and cash equivalents.
(l) "Total debt" is defined as long-term debt, net of unamortized discount, and
capital lease obligations, including current portion thereof. In 1992 total
debt included warrants outstanding which were redeemable outside the
control of the Company. The warrants were purchased by the Company for
$10.4 million in 1993. Total debt as of December 31, 1993 included $100.0
million in principal amount of the 1993 Notes (as defined herein), the
proceeds of which were held in escrow to provide a source of financing for
acquisitions that were subsequently consummated in 1994 utilizing
borrowings under the Bank Credit Agreement. $100 million of the 1993 Notes
was redeemed from the escrow in the first quarter of 1994. Pro forma total
debt does not include the Preferred Securities.
(m) Company Obligated Mandatorily Redeemable Security of Trust Holding Solely
KDSM Senior Debentures represents $200 million aggregate Liquidation Value
of Preferred Securities which carry a mandatory redemption feature after
twelve years.
48
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF SINCLAIR
The following Pro Forma Consolidated Financial Data include the unaudited pro
forma consolidated balance sheet as of December 31, 1996 (the "Pro Forma
Consolidated Balance Sheet") and the unaudited pro forma consolidated statements
of operations for the year ended December 31, 1996 (the "Pro Forma Consolidated
Statements of Operations"). The unaudited Pro Forma Consolidated Balance Sheet
is adjusted to give effect to the Old Securities Offering as if it occurred on
December 31, 1996 and assuming application of the proceeds of the Old Securities
Offering as set forth in "Use of Proceeds." The unaudited Pro Forma Consolidated
Statements of Operations for the year ended December 31, 1996 are adjusted to
give effect to the 1996 Acquisitions and the Old Securities Offering as if each
occurred at the beginning of such period and assuming application of the
proceeds of the Old Securities Offering as set forth in "Use of Proceeds." The
pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The Pro Forma Consolidated
Financial Data should be read in conjunction with the Company's Consolidated
Financial Statements and related notes thereto, the Company's unaudited
consolidated financial statements for the year ended December 31, 1996 and notes
thereto, the financial statements and related notes of KDSM, Inc., the financial
statements and related notes of Superior, the financial statements and related
notes of KSMO and WSTR, and the financial statements and related notes of River
City, all of which are included elsewhere in this Prospectus or incorporated
herein by reference. The unaudited Pro Forma Consolidated Financial Data do not
purport to represent what the Company's results of operations or financial
position would have been had any of the above events occurred on the dates
specified or to project the Company's results of operations or financial
position for or at any future period or date.
49
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
OLD SECURITIES
CONSOLIDATED OFFERING AS
HISTORICAL ADJUSTMENTS(A) ADJUSTED
--------------- ---------------- ------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, including cash equivalents $ 2,341 $ 39,000 (b)$ 41,341
Accounts receivable, net of allowance for doubtful accounts 112,313 112,313
Current portion of program contract costs 44,526 44,526
Prepaid expenses and other current assets 3,704 3,704
Deferred barter costs 3,641 3,641
Deferred tax asset 1,245 1,245
--------------- ---------------- ------------
Total current assets 167,770 39,000 206,770
PROGRAM CONTRACT COSTS, less current portion 43,037 43,037
LOANS TO OFFICERS AND AFFILIATES 11,426 11,426
PROPERTY AND EQUIPMENT, net 154,333 154,333
NON-COMPETE AND CONSULTING AGREEMENTS, net 10,193 10,193
OTHER ASSETS 64,235 6,000 (c) 70,235
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net 1,256,303 1,256,303
--------------- ---------------- ------------
Total Assets $1,707,297 $ 45,000 $1,752,297
=============== ================ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,886 $ 11,886
Income taxes payable 730 730
Accrued liabilities 35,030 35,030
Current portion of long-term liabilities-
Notes payable and commercial bank financing 62,144 62,144
Capital leases payable 44 44
Notes and capital leases payable to affiliates 1,774 1,774
Program contracts payable 58,461 58,461
Deferred barter revenues 3,576 3,576
--------------- ---------------- ------------
Total current liabilities 173,645 173,645
LONG-TERM LIABILITIES:
Notes payable and commercial bank financing 1,212,000 $ (155,000)(d) 1,057,000
Notes and capital leases payable to affiliates 12,185 12,185
Program contracts payable 56,194 56,194
Deferred tax liability 463 463
Other long-term liabilities 2,739 2,739
--------------- ---------------- ------------
Total liabilities 1,457,226 (155,000) 1,302,226
--------------- ---------------- ------------
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES 3,880 3,880
--------------- ---------------- ------------
COMMITMENTS AND CONTINGENCIES
EQUITY PUT OPTIONS 8,938 8,938
--------------- ---------------- ------------
COMPANY OBLIGATED MANDATORILY REDEEMABLE SECURITY OF TRUST HOLDING
SOLELY KDSM SENIOR DEBENTURES -- 200,000 (e) 200,000
--------------- ---------------- ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 and 10,000,000 shares
authorized and -0- and 1,138,138 shares issued and outstanding.... 11 11
Class A Common stock, $.01 par value, 35,000,000 and 100,000,000
shares authorized and 5,750,000 and 6,911,880 shares issued and
outstanding 70 70
Class B Common stock, $.01 par value, 35,000,000 shares authorized
and 29,000,000 and 27,850,581 shares issued and outstanding 279 279
Additional paid-in capital 231,170 231,170
Accumulated deficit (18,932) (18,932)
Additional paid-in capital - stock options 25,784 25,784
Deferred compensation (1,129) (1,129)
--------------- ---------------- ------------
Total stockholders' equity 237,253 237,253
--------------- ---------------- ------------
Total Liabilities and Stockholders' Equity $1,707,297 $ 45,000 $1,752,297
=============== ================ ============
</TABLE>
(Continued on following page)
50
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) To reflect the proceeds of the Old Securities Offering of $200 million
aggregate Liquidation Value of Old Preferred Securities net of $6 million
of underwriting discounts and commission and estimated expenses of the Old
Securities Offering and the application of the proceeds therefrom as set
forth in "Use of Proceeds."
(b) To record proceeds of the Old Securities Offering after giving effect to
the repayment of the revolving credit facility under the Bank Credit
Agreement.
(c) To record underwriting discounts, commissions and estimated expenses of $6
million.
(d) To reflect the repayment of the revolving credit facility under the Bank
Credit Agreement as set forth in "Use of Proceeds."
(e) To reflect the issuance of $200 million aggregate Liquidation Value of Old
Preferred Securities at a distribution rate of 11.625%.
51
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Superior RIVER CITY(e)
Consolidated Flint TV, Communications -----------------
Historical Inc.(a) Group, Inc.(b) KSMO(c) WSTR(D) RIVER CITY WSYX
------------ ------- ---------------- ------- ------- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency
commissions $ 346,459 $ 1,012 $ 4,431 $ 7,694 $7,488 $86,869 $(10,783)
Revenues realized from station barter
arrangements 32,029 -- -- 2,321 1,715 -- --
------------ --------- --------------- ------ ------ ---------- ---------
Total revenues 378,488 1,012 4,431 10,015 9,203 86,869 (10,783)
------------ --------- --------------- ------ ------ ---------- ---------
OPERATING EXPENSES:
Program and production 66,652 101 539 1,550 961 10,001 (736)
Selling, general and administrative 75,924 345 2,002 2,194 2,173 39,786 (3,950)
Expenses realized from barter arrangements 25,189 2,276 1,715
Amortization of program contract costs and net
realizable value adjustments 47,797 125 736 601 1,011 9,721 (458)
Amortization of deferred compensation 739
Depreciation and amortization of property and
equipment 11,711 4 373 374 284 6,294 (1,174)
Amortization of acquired intangible
broadcasting assets, non-compete and
consulting agreements and other assets 58,530 -- 529 -- 39 14,041 (3,599)
Amortization of excess syndicated programming 3,043 -- -- -- -- -- --
------------ --------- --------------- ------- ------- ---------- ---------
Total operating expenses 289,585 575 4,179 6,995 6,183 79,843 (9,917)
------------ --------- --------------- ------- ------- ---------- ---------
Broadcast operating income (loss) 88,903 437 252 3,020 3,020 7,026 (866)
------------ --------- -------------- ------- ------- ---------- ---------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount
expense (84,314) -- (457) (823) (1,127 (12,352) --
Interest income 3,136 -- -- -- 15 195 --
Distributions made to outside investors of the
Trust -- -- -- -- -- -- --
Other income (expense) 342 19 4 7 -- (149) (8)
------------ --------- --------------- ------- ------- ---------- ---------
Income (loss) before provision (benefit) for
income taxes 8,067 456 (201) 2,204 1,908 (5,280) (874)
PROVISION (BENEFIT) FOR INCOME
TAXES 6,936 -- -- -- -- -- --
------------ --------- ------------- ------- ------- ---------- ---------
NET INCOME (LOSS) $ 1,131 $ 456 $ (201) $ 2,204 $ 1,908 $ (5,280) $ (874)
============ ========= ============= ======= ======= ========== =========
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS $ 1,131
============
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.03
============
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 37,381
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POST
OLD SECURITIES
OFFERING
1996 POST AND
ACQUISITIONS 1996 OFFERING 1996
WYZZ(f) ADJUSTMENTS ACQUISITIONS ADJUSTMENTS ACQUISITIONS
------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency
commissions $1,838 -- $445,008 -- $ 445,008
Revenues realized from station barter
arrangements -- -- 36,065 -- 36,065
Total revenues 1,838 -- 481,073 -- 481,073
------ ------------ ------------ ----------- -------------
OPERATING EXPENSES:
Program and production 214 -- 79,282 -- 79,282
Selling, general and administrative 702 $(3,577)(g) 115,599 -- 115,599
Expenses realized from barter arrangements 29,180 -- 29,180
Amortization of program contract costs and net
realizable value adjustments 123 -- 59,656 -- 59,656
Amortization of deferred compensation 194 (h) 933 -- 933
Depreciation and amortization of property and
equipment 6 (943)(i) 16,929 -- 16,929
Amortization of acquired intangible
broadcasting assets, non-compete and
consulting agreements and other assets 3 4,034 (j) 73,577 $ 500 (o) 74,077
Amortization of excess syndicated programming -- -- 3,043 -- 3,043
------ ------------ ------------ ----------- --------------
Total operating expenses 1,048 (292) 378,199 500 378,699
------ ------------ ------------ ----------- --------------
Broadcast operating income (loss) 790 292 102,874 (500) 102,374
------ ------------ ------------ ----------- --------------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount
expense -- (17,409)(k) (116,482) 11,820 (p) (104,662)
Interest income -- (1,636)(l) 1,710 1,710
Distributions made to outside investors of the
Trust -- -- -- (23,250)(q) (23,250)
Other income (expense) -- -- 215 -- 215
------ ------------ ------------ ----------- --------------
Income (loss) before provision (benefit) for
income taxes 790 (18,753) (11,683) (11,930) (23,613)
PROVISION (BENEFIT) FOR INCOME
TAXES -- (7,900)(m) (964) (4,772)(m) (5,736)
------ ------------ ------------ ----------- --------------
NET INCOME (LOSS) $ 790 $(10,853) $(10,719) $(7,158) $ (17,877)
====== ============ ============ =========== ==============
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS $(10,719) $ (17,877)
============ ==============
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE $ (0.27) $ (0.46)
============ ==============
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 39,058 (n) 39,058 (n)
============ ==============
</TABLE>
52
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) The Flint T.V., Inc. ("Flint-TV") column reflects the results of operations
for WSMH for the period from January 1, 1996 to February 28, 1996, the date
the Flint Acquisition was consummated.
(b) The Superior Communications Group, Inc. column reflects the results of
operations for Superior for the period from January 1, 1996 to May 7, 1996,
the date the Superior Acquisition was consummated.
(c) The KSMO column reflects the results of operations for the period from
January 1, 1996 to June 30, 1996 as the transaction was consummated in July
1996.
(d) The WSTR column reflects the results of operations for the period from
January 1, 1996 to July 31, 1996 as the transaction was consummated in
August 1996.
(e) The River City column reflects the results of operations for River City
(including KRRT, Inc.) for the period from January 1, 1996 to May 31, 1996,
the date the River City Acquisition was consummated. The WSYX column
removes the results of WSYX from the results of River City for the period.
(f) The WYZZ column reflects the results of operations for the period from
January 1, 1996 to June 30, 1996 as the purchase transaction was
consummated in July 1996.
(g) To adjust River City operating expenses for non-recurring LMA payments made
to KRRT, Inc. for KRRT, Inc. debt service and to adjust River City and
Superior Communications operating expenses for employment contracts and
other corporate overhead expenses not assumed at the time of the 1996
Acquisitions.
(h) To record compensation expense related to options granted under the
Long-Term Incentive Plan:
YEAR ENDED
DECEMBER 31,
1996
--------------
Compensation expense related to the Long-Term
Incentive Plan on a pro forma basis $ 933
Less: Compensation expense recorded by the Company
related to the Long-Term Incentive Plan (739)
--------------
$ 194
==============
(i) To record depreciation expense related to acquired tangible assets and
eliminate depreciation expense recorded by Flint-TV, Superior, KSMO, WSTR,
River City(e) and WYZZ from the period of January 1, 1996 through date of
acquisition. Tangible assets are to be depreciated over lives ranging from
5 to 29.5 years, calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
---------------------------------------------------------------------------
FLINT-TV SUPERIOR KSMO WSTR RIVER CITY WYZZ TOTAL
----------- ----------- --------- -------- ------------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Depreciation expense on acquired tangible assets $32 $ 315 $ 240 $ 507 $ 3,965 $159 $ 5,218
Less: Depreciation expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City(e) and WYZZ (4) (373) (374) (284) (5,120) (6) (6,161)
----------- ----------- --------- -------- ------------- ------- ----------
Pro forma adjustment $28 $ (58) $(134) $ 223 $(1,155) $153 $ (943)
=========== =========== ========= ======== ============= ======= ==========
</TABLE>
(j) To record amortization expense related to acquired intangible assets and
deferred financing costs and eliminate amortization expense recorded by
Flint-TV, Superior, KSMO, WSTR, River City(e) and WYZZ from the period of
January 1, 1996 through date of acquisition. Intangible assets are to be
amortized over lives ranging from 1 to 40 years, calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------------------------------------------------------------
FLINT-TV SUPERIOR KSMO WSTR RIVER CITY WYZZ TOTAL
----------- ---------- ------- ------- ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Amortization expense on acquired intangible assets $167 $ 827 $180 $285 $ 12,060 $99 $ 13,618
Deferred financing costs 1,429 1,429
Less: Amortization expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City(e) and WYZZ -- (529) -- (39) (10,442) (3) (11,013)
----------- ---------- ------- ------- ------------ ------- -----------
Pro forma adjustment $167 $ 298 $180 $246 $ 3,047 $96 $ 4,034
=========== ========== ======= ======= ============ ======= ===========
</TABLE>
53
<PAGE>
(k) To record interest expense for the year ended December 31, 1996 on
acquisition financing relating to Superior of $59,850 (under the Bank
Credit Agreement at 8.0% for four months), KSMO and WSTR of $10,425 and
$7,881, respectively (both under the Bank Credit Agreement at 8.0% for six
months), River City (including KRRT) of $868,300 (under the Bank Credit
Agreement at 8.0% for five months) and of $851 for hedging agreements
related to the River City financing and WYZZ of $20,194 (under the Bank
Credit Agreement at 8.0% for six months) and eliminate interest expense
recorded. No interest expense has been recorded for Flint-TV as it has been
assumed that the proceeds from the 1995 Notes were used to purchase
Flint-TV.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-------------------------------------------------------------------
SUPERIOR KSMO WSTR RIVER CITY WYZZ TOTAL
----------- --------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Interest expense adjustment as noted above $(1,596) $(417) $ (315) $(29,032) $(808) $(32,168)
Less: Interest expense recorded by, Superior, KSMO,
WSTR, River City (e) and WYZZ 457 823 1,127 12,352 -- 14,759
----------- --------- --------- ------------ --------- ------------
Pro forma adjustment $(1,139) $ 406 $ 812 $(16,680) $(808) $(17,409)
=========== ========= ========= ============ ========= ============
</TABLE>
(l) To eliminate interest income for the year ended December 31, 1996 on public
debt proceeds relating to Flint-TV, KSMO and WSTR and WYZZ of $34,400 (with
a commercial bank at 5.7% for two months), $10,425 and $7,881 (both with a
commercial bank at 5.7% for six months) and $20,194 (with a commercial bank
at 5.7% for six months), respectively due to assumed utilization of excess
cash for those acquisitions.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------------------------------------------------------
FLINT-TV KSMO WSTR RIVER CITY WYZZ TOTAL
----------- --------- -------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income adjustment as noted above $(327) $(297) $(226) $ -- $(576) $(1,426)
Less: Interest income recorded by Flint-TV, KSMO,
WSTR, River City(e) and WYZZ -- -- (15) (195) -- (210)
----------- --------- -------- ------------ --------- -----------
Pro forma adjustment $(327) $(297) $(241) $(195) $(576) $(1,636)
=========== ========= ======== ============ ========= ===========
</TABLE>
(m) To record tax provision (benefit) for the 1996 Acquisitions and the Old
Securities Offering adjustments at the applicable statutory tax rates.
(n) Weighted average shares outstanding on a pro forma basis assumes that the
1,150,000 shares of Series B Convertible Preferred Stock were converted to
4,181,818 shares of $.01 par value Class A Common Stock and the Incentive
Stock Options and Long-Term Incentive Plan Options were outstanding as of
the beginning of the period.
(o) Torecord amortization expense on other assets for one year ($6 million over
12 years).
(p) To record the net interest expense reduction for 1996 related to
application of the Old Securities Offering proceeds to the outstanding
balance under the revolving credit facility offset by an increase in
commitment fees for the available but unused portion of the revolving
credit facility for the year ended December 31, 1996.
Interest on adjusted borrowing on term loans $12,600
Commitment fee on available but unused borrowings
of $250,000 of revolving credit facility at 1/2
of 1% for 12 months (1,250)
Commitment fee on available borrowings recorded
by the Company 470
----------
Pro forma adjustment $11,820
==========
(q) To record distributions made to outside investors of the Trust for the year
ended December 31, 1996 ($200 million aggregate Liquidation Value of
Preferred Securities at a distribution rate of 11.625%).
54
<PAGE>
CAPITALIZATION OF KDSM, INC.
The following table sets forth, as of December 31, 1996, (a) the actual
capitalization of KDSM, Inc., and (b) the pro forma capitalization of KDSM, Inc.
as adjusted to reflect the Old Securities Offering as if it had occurred on
December 31, 1996. The information set forth below should be read in conjunction
with the Pro Forma Financial Data of KDSM, Inc. located elsewhere in this
Prospectus and the Historical Financial Statements of KDSM, Inc. and notes
thereto included elsewhere in this Prospectus.
DECEMBER 31, 1996
--------------------
(DOLLARS IN
THOUSANDS)
AS
ACTUAL ADJUSTED
--------- ----------
Cash and cash equivalents $ 3 $ 3
========= ==========
Indebtedness $ -- $ --
--------- ----------
Company Obligated Mandatorily Redeemable
Security of Trust Holding Solely KDSM
Senior Debentures -- 200,000
--------- ----------
Stockholders' equity:
Common stock, par value $.01 per share,
100 shares issued and outstanding -- --
Additional paid-in capital 36,811 49,011
Retained earnings 705 705
--------- ----------
Total stockholders' equity 37,516 49,716
--------- ----------
Total capitalization $37,516 $249,716
========= ==========
55
<PAGE>
SELECTED FINANCIAL INFORMATION OF
KDSM-TV AND KDSM, INC.
The selected historical financial information for the years ended December
31, 1992 and 1993 has been derived from the Predecessor's unaudited financial
statements of KDSM-TV (the "Predecessor"). The selected financial information
for the years ended December 31, 1994 and 1995, and for the five months ended
May 31, 1996, has been derived from the Predecessor's audited financial
statements and the selected financial statements for the seven months ended
December 31, 1996 have been derived from KDSM, Inc.'s audited financial
statements. The combined historical financial statements for, and as of, the
year ended December 31, 1996 are unaudited, but in the opinion of management,
such financial statements have been prepared on the same basis as the financial
statements included elsewhere herein and include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for that period. The statement of
operations for the five months ended May 31, 1996 and seven months ended
December 31, 1996 are required as a result of the acquisition of the station's
Non-License Assets of the Predecessor by KDSM, Inc.; thereby establishing a new
accounting basis beginning June 1, 1996. Accordingly, results of operations for
the periods prior to June 1, 1996 are not comparable to results for subsequent
periods. The selected pro forma financial information of KDSM, Inc. reflects the
application of the proceeds of the Old Securities Offering as set forth in "Use
of Proceeds" as though it occurred at the beginning of the period presented for
statement of operations data and as of the date of the balance sheet for balance
sheet data and are derived from the pro forma financial statements of KDSM, Inc.
included elsewhere in this Prospectus.
The information on the following page should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of KDSM-TV and KDSM, Inc." and KDSM-TV's and KDSM, Inc.'s
Consolidated Financial Statements included elsewhere in this Prospectus.
56
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF
KDSM-TV (THE "PREDECESSOR") AND KDSM, INC.
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR KDSM, INC.
PREDECESSOR ------------- --------------
YEARS ENDED DECEMBER 31, FIVE MONTHS SEVEN MONTHS
ENDED ENDED
------------------------------------- MAY 31, DECEMBER 31,
1992 1993 1994 1995 1996 1996
---------- -------- -------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcast revenues(b) $ 5,273 $ 6,172 $6,848 $7,478 $3,478 $ 4,740
Barter revenues -- -- -- -- 85 119
---------- -------- -------- -------- ------------- --------------
Total revenues 5,273 6,172 6,848 7,478 3,563 4,859
---------- -------- -------- -------- ------------- --------------
Operating expenses, excluding depreciation and amortization 3,021 3,161 3,347 3,489 1,928 2,071
Depreciation and amortization(c) 3,261 2,963 2,979 3,338 1,017 1,599
---------- -------- -------- -------- ------------- --------------
Broadcast operating income (1,009) 48 522 651 618 1,189
---------- -------- -------- -------- ------------- --------------
Distributions made to outside investors of the Trust(d) -- -- -- -- -- --
Dividend income -- -- -- -- -- --
Interest and other income (7) (45) -- 12 -- --
---------- -------- -------- -------- ------------- --------------
Income before allocation of consolidated federal income
taxes and state taxes $(1,016) $ 3 $ 522 $ 663 $ 618 $ 1,189
========== ======== ======== ======== ============= ==============
Net income $(1,016) $ 3 $ 522 $ 663 $ 618 $ 705
========== ======== ======== ======== ============= ==============
OTHER DATA:
Broadcast cash flow(e) $ 1,778 $ 2,233 $2,908 $2,922 $1,034 $ 2,692
Broadcast cash flow margin(f) 33.7% 36.2% 42.5% 39.1% 29.7% 56.8%
Operating cash flow(g) $ 1,623 $ 2,056 $2,551 $2,772 $ 744 $ 2,546
Operating cash flow margin(f) 30.8% 33.3% 37.3% 37.1% 21.4% 53.7%
After tax cash flow(h) $ 1,616 $ 2,011 $2,551 $2,784 $ 744 $ 2,062
After tax cash flow margin(f) 30.7% 32.6% 37.3% 37.2% 21.4% 43.5%
Program contract payments $ 629 $ 955 $ 950 $1,217 $ 891 $ 242
Capital expenditures 276 113 140 139 29 161
Corporate overhead expense 155 177 357 150 290 146
BALANCE SHEET DATA:
Cash and cash equivalents $ 6 $ 28 $ 56 $ 62 $ 31 $ 3
Total assets 13,010 11,466 9,688 8,344 7,260 40,674
Company Obligated Mandatorily Redeemable Security of Trust
Holding Solely KDSM Senior Debentures(i) -- -- -- -- -- --
Total equity of partnership 1992 to 1995, total stockholders
equity 1996 10,642 9,058 7,069 5,046 5,664 37,516
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMBINED
HISTORICAL PRO FORMA
1996 1996(A)
----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net broadcast revenues(b) $ 8,218 $ 8,218
Barter revenues 204 204
------------ -----------
Total revenues 8,422 8,422
------------ -----------
Operating expenses, excluding depreciation and amortization 3,999 3,999
Depreciation and amortization(c) 2,616 3,116
------------ -----------
Broadcast operating income 1,807 1,307
------------ -----------
Distributions made to outside investors of the Trust(d) -- 23,250
Dividend income -- 26,033
Interest and other income -- --
------------ -----------
Income before allocation of consolidated federal income
taxes and state taxes $ 1,807 $ 4,090
============ ===========
Net income $ 1,323 $ 2,693
============ ===========
OTHER DATA:
Broadcast cash flow(e) $ 3,726 $ 3,726
Broadcast cash flow margin(f) 45.3% 45.3%
Operating cash flow(g) $ 3,290 $ 3,290
Operating cash flow margin(f) 40.0% 40.0%
After tax cash flow(h) $ 2,806 $ 4,676
After tax cash flow margin(f) 34.1% 56.9%
Program contract payments $ 1,133 $ 1,133
Capital expenditures 190 190
Corporate overhead expense 436 436
BALANCE SHEET DATA:
Cash and cash equivalents $ 3 $ 3
Total assets 40,674 252,874
Company Obligated Mandatorily Redeemable Security of Trust
Holding Solely KDSM Senior Debentures(i) -- 200,000
Total equity of partnership 1992 to 1995, total stockholders
equity 1996 37,516 49,716
</TABLE>
(Footnotes on following page)
57
<PAGE>
NOTES TO SELECTED HISTORICAL FINANCIAL INFORMATION OF KDSM-TV AND KDSM, INC.
(a) The pro forma information in this table reflects the pro forma effect of
the completion of the Old Securities Offering (and the application of the
net proceeds thereof as set forth in "Use of Proceeds") as if it had
occurred on January 1, 1996.
(b) Net broadcast revenues are defined as broadcast revenues net of agency
commissions.
(c) Depreciation and amortization includes amortization of program contract
costs and net realizable value adjustments, depreciation and amortization
of property and equipment and amortization of acquired intangible
broadcasting assets and other assets.
(d) Distributions made to outside investors of the Trust represents the
distributions on $200 million aggregate Liquidation Value of Preferred
Securities at a distribution rate of 11.625%.
(e) "Broadcast cash flow" is defined as broadcast operating income plus
corporate overhead expense, depreciation and amortization, including both
tangible and intangible assets and program rights, less cash payments for
program contract rights. Cash program payments represent cash payments made
for current program payables and do not necessarily correspond to program
usage. KDSM, Inc. has presented broadcast cash flow data, which KDSM, Inc.
believes are comparable to the data provided by other companies in the
industry, because such data are commonly used as a measure of performance
for broadcast companies. However, broadcast cash flow does not purport to
represent cash provided by operating activities as reflected in KDSM,
Inc.'s statements of cash flows, is not a measure of financial performance
under generally accepted accounting principles and should not be considered
in isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(f) "Broadcast cash flow margin" is defined as broadcast cash flow divided by
net broadcast revenues. "Operating cash flow margin" is defined as
operating cash flow divided by net broadcast revenues. "After tax cash flow
margin" is defined as after tax cash flow divided by net broadcast
revenues.
(g) "Operating cash flow" is defined as broadcast cash flow less corporate
overhead expense and is a commonly used measure of performance for
broadcast companies. Operating cash flows does not purport to represent
cash provided by operating activities as reflected in KDSM, Inc.'s
statements of cash flow, is not a measure of financial performance under
generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(h) "After tax cash flow" is defined as net income (loss) before extraordinary
items plus depreciation and amortization (including film amortization),
less program contract payments. After tax cash flow is presented here not
as a measure of operating results and does not purport to represent cash
provided by operating activities. After tax cash flow should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
(i) Company Obligated Mandatorily Redeemable Security of Trust Holding Solely
KDSM Senior Debentures represents $200 million aggregate Liquidation Value
of Preferred Securities, which carry a mandatory redemption feature after
twelve years.
58
<PAGE>
PRO FORMA FINANCIAL INFORMATION OF KDSM-TV AND KDSM, INC.
The following pro forma consolidated financial data of the Predecessor and
KDSM, Inc. include the unaudited pro forma consolidated balance sheet of the
Predecessor and KDSM, Inc. as of December 31, 1996 (the "KDSM, Inc. Pro Forma
Consolidated Balance Sheet") and the unaudited pro forma consolidated statements
of operations for the year ended December 31, 1996 (the "KDSM, Inc. Pro Forma
Consolidated Statements of Operations"). The unaudited KDSM, Inc. Pro Forma
Consolidated Balance Sheet is adjusted to give effect to the Old Securities
Offering as if it occurred on December 31, 1996. The unaudited KDSM, Inc. Pro
Forma Statements of Operations are adjusted to give effect to the Old Securities
Offering as if it occurred on January 1, 1996. The pro forma adjustments are
based upon available information and certain assumptions that the Company
believes are reasonable. The KDSM, Inc. Pro Forma Consolidated Financial Data
should be read in conjunction with the financial statements of KDSM-TV, a
Division of River City Broadcasting, a limited partnership (the Predecessor) and
KDSM, Inc. and Subsidiary (the Company) for the five months ended May 31, 1996
and the seven months ended December 31, 1996 and the financial statements of
KDSM-TV for the years ended December 31, 1994 and 1995, each appearing elsewhere
in this Prospectus. The unaudited KDSM, Inc. Pro Forma Consolidated Financial
Data do not purport to represent what KDSM, Inc.'s results of operations or
financial position would have been had the Old Securities Offering occurred on
the dates specified or to project KDSM Inc.'s results of operations or financial
position for or at any future period or date.
59
<PAGE>
KDSM, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
OLD SECURITIES
CONSOLIDATED OFFERING AS
HISTORICAL ADJUSTMENTS(A) ADJUSTED
-------------- ---------------- ----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 3 $ 3
Accounts receivable, net of allowance for doubtful
accounts 2,052 2,052
Current portion of program contract costs 860 860
Deferred barter costs 50 50
Prepaid expenses and other current assets 86 86
-------------- ---------------- ----------
Total current assets 3,051 3,051
PROPERTY AND EQUIPMENT, net 2,803 2,803
PROGRAM CONTRACT COSTS, less current portion 794 794
DUE FROM PARENT 496 496
INVESTMENT IN PARENT $206,200(b) 206,200
ACQUIRED INTANGIBLE AND OTHER BROADCASTING ASSETS,
NET 33,530 6,000(c) 39,530
-------------- ---------------- ----------
Total Assets $40,674 $212,200 $252,874
============== ================ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 292 $ 292
Accrued liabilities 410 410
Current portion of program contracts payable 1,384 1,384
Deferred barter revenues 120 120
-------------- ---------------- ----------
Total current liabilities 2,206 2,206
LONG-TERM LIABILITIES:
Program contracts payable 879 879
Deferred state taxes 73 73
-------------- ---------------- ----------
Total liabilities 3,158 3,158
-------------- ---------------- ----------
COMMITMENTS AND CONTINGENCIES
COMPANY OBLIGATED MANDATORILY REDEEMABLE SECURITY OF
TRUST HOLDING SOLELY KDSM SENIOR DEBENTURES -- $200,000(d) 200,000
-------------- ---------------- ----------
STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share, 100 shares
issued and outstanding -- --
Additional paid-in capital 36,811 12,200(e) 49,011
Retained earnings 705 705
-------------- ---------------- ----------
Total stockholder's equity 37,516 12,200 49,716
-------------- ---------------- ----------
Total Liabilities and Stockholder's Equity $40,674 $212,200 $252,874
============== ================ ==========
</TABLE>
(Continued on following page)
60
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) To reflect the proceeds and other adjustments relating to the Old
Securities Offering of $200 million aggregate Liquidation Value of
Preferred Securities.
(b) To reflect the purchase of 2,062,000 shares of Old Parent Preferred for
$100 per share.
(c) To record Old Securities Offering costs including underwriter discounts,
commissions and other estimated expenses of approximately $6 million.
(d) To record the issuance of $200 million aggregate Liquidation Value of
Preferred Securities.
(e) To record capital contributions by Sinclair.
61
<PAGE>
KDSM-TV AND KDSM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PREDECESSOR KDSM, INC.
FIVE MONTHS SEVEN MONTHS
ENDED ENDED COMBINED OLD SECURITIES
MAY 31, DECEMBER 31, COMPANIES OFFERING AS
1996 1996 1996 ADJUSTMENTS ADJUSTED
------------- -------------- --------------------- ---------------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency
commissions $3,478 $4,740 $8,218 $ 8,218
Revenues realized from barter arrangements 85 119 204 204
------------- -------------- --------------------- ---------------- -----------
Total revenues 3,563 4,859 8,422 8,422
------------- -------------- --------------------- ---------------- -----------
OPERATING EXPENSES:
Programming and production 509 627 1,136 1,136
Selling, general and administrative 1,321 1,316 2,637 2,637
Expenses realized from barter arrangements 98 128 226 226
Amortization of program contract costs and net
realizable value adjustments 507 864 1,371 1,371
Depreciation and amortization of property and
equipment 233 191 424 424
Amortization of acquired intangible broadcast
assets and other assets 277 544 821 $ 500 (a) 1,321
------------- -------------- --------------------- ---------------- -----------
Total operating expenses 2,945 3,670 6,615 500 7,115
------------- -------------- --------------------- ---------------- -----------
Broadcast operating income (loss) 618 1,189 1,807 (500) 1,307
------------- -------------- --------------------- ---------------- -----------
OTHER INCOME (EXPENSE):
Dividend income -- -- -- 26,033 (b) 26,033
Distributions made to outside investors of the
Trust -- -- -- (23,250)(c) (23,250)
------------- -------------- --------------------- ---------------- -----------
Income before provision (benefit) for income
taxes 618 1,189 1,807 2,283 4,090
ALLOCATION OF CONSOLIDATED
FEDERAL INCOME TAXES -- (412) (412) (913)(d) (1,325)
STATE INCOME TAXES -- (72) (72) -- (72)
------------- -------------- --------------------- ---------------- -----------
NET INCOME $ 618 $ 705 $1,323 $ 1,370 $ 2,693
============= ============== ===================== ================ ===========
</TABLE>
- ----------
(a) To record amortization expense relating to offering costs for one year ($6
million over 12 years).
(b) To record dividend income relating to $206.2 million of aggregate
Liquidation Amount of Parent Preferred, at a dividend rate of 12.625%.
(c) To record distributions made to outside investors of the Trust relating to
$200 million of aggregate Liquidation Value of Preferred Securities, at a
distribution rate of 11.625%.
(d) To record tax provision for offering adjustments at the applicable
statutory tax rates.
62
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF KDSM-TV AND KDSM, INC.
INTRODUCTION
The following discussion and analysis should be read in conjunction with
"Selected Historical Financial Information of KDSM-TV and KDSM, Inc." and the
Financial Statements of KDSM-TV and KDSM, Inc. and related notes included
elsewhere herein.
The following discussion and analysis includes the combined unaudited 1996
financial information as a result of the acquisition of KDSM-TV's Non-License
Assets by KDSM, Inc. on May 31, 1996. As a result, a new accounting basis was
established beginning June 1, 1996. For purposes of the following discussion and
analysis with respect to 1996, the results of operations for the five months
ended May 31, 1996 and the seven months ended December 31, 1996 have been
combined.
RESULTS OF OPERATIONS
COMBINED PERIODS ENDED DECEMBER 31, 1996 AND YEAR ENDED DECEMBER 31, 1995
Station broadcast revenue increased to $8.2 million for the combined periods
ended December 31, 1996 from $7.5 million for the year ended December 31, 1995,
or 9.3%. The increase in broadcast revenues was primarily the result of an
increase in market revenue and improvements in programming.
Operating expenses excluding depreciation and amortization increased to $4.0
million for the combined periods ended December 31, 1996 from $3.5 million for
the year ended December 31, 1995, or 14.3%. The increase in expenses for the
combined periods ended December 31, 1996 as compared to the year ended December
31, 1995 was largely attributable to proportional expense increases for
increased sales.
Broadcast operating income increased to $1.8 million for the combined periods
ended December 31, 1996, from $0.7 million for the year ended December 31, 1995,
or 157.1%. The increase in broadcast operating income for the combined periods
ended December 31, 1996 as compared to the year ended December 31, 1995 was
primarily the result of an increase in market revenue, improvements in
programming and decreases in depreciation and amortization expenses as a result
of the acquisition of the Non-License Assets of KDSM-TV by Sinclair on May 31,
1996.
Net income increased to $1.3 million for the combined periods ended December
31, 1996 from $0.7 million for the year ended December 31, 1995, or 85.7%. The
increase in net income for the combined periods ended December 31, 1996 as
compared to the year ended December 31, 1995 was primarily the result of an
increase in market revenue, improvements in programming and decreases in
depreciation and amortization expenses as a result of the acquisition of the
Non-License Assets of KDSM-TV by Sinclair on May 31, 1996.
Broadcast cash flow increased to $3.7 million for the combined periods ended
December 31, 1996 from $2.9 million for the year ended December 31, 1995, or
27.6%. The increase in broadcast cash flow for the combined periods ended
December 31, 1996 as compared to the year ended December 31, 1995 was primarily
the result of an increase in market revenue and improvements in programming.
Operating cash flow increased to $3.3 million for the combined periods ended
December 31, 1996 from $2.8 million for the year ended December 31, 1995, or
17.9%. The increase in operating cash flow for the combined periods ended
December 31, 1996 as compared to the year ended December 31, 1995 was primarily
the result of an increase in market revenue and improvements in programming.
63
<PAGE>
YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Total revenues increased to $7.5 million for the year ended December 31, 1995
from $6.8 million for the year ended December 31, 1994, or 10.3%. The increase
in broadcast revenues was primarily the result of growth in market revenue and
improvements in programming.
Operating expenses excluding depreciation and amortization increased to $3.5
million for the year ended December 31, 1995 from $3.3 million for the year
ended December 31, 1994, or 6.1%. The increase in expenses for the year ended
December 31, 1995 as compared to the year ended December 31, 1994 was primarily
related to an increase in sales expenses associated with the increase in
revenues.
Broadcast operating income increased to $0.7 million for the year ended
December 31, 1995 from $0.5 million for the year ended December 31, 1994 or
24.7%. The increase in broadcast operating income for the year ended December
31, 1995, as compared to the year ended December 31, 1994 was primarily related
to growth in market revenue and improvements in programming.
Net income increased to $0.7 million for the year ended December 31, 1995
from $0.5 million for the year ended December 31, 1994, or 27.0%. The increase
in net income for the year ended December 31, 1995 as compared to the year ended
December 31, 1994 was primarily related to growth in market revenue and
improvements in programming.
Broadcast cash flow was unchanged when comparing the years ended December 31,
1995 and 1994 at $2.9 million. Operating cash flow increased to $2.8 million for
the year ended December 31, 1995 from $2.6 million for the year ended December
31, 1994, or 7.7%. The increase in operating cash flow for the year ended
December 31, 1995 as compared to the year ended December 31, 1994 was primarily
related to lower corporate expenses in 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, KDSM, Inc. had cash and working capital of
approximately $3,000. KDSM, Inc.'s primary source of liquidity is cash from
operations which management believes to be sufficient to meet operating cash
requirements. KDSM, Inc. will also receive dividend payments from Sinclair under
the Parent Preferred that will be sufficient to meet the interest payments
required under the KDSM Senior Debenture Indenture. KDSM, Inc. is currently
negotiating to acquire its station premises and building from the owner at a
purchase price of approximately $0.5 million. KDSM, Inc. intends to finance this
acquisition through a capital contribution from Sinclair.
Except for purchase of the station building, KDSM, Inc. does not anticipate
capital expenditures in the coming year to exceed historical capital
expenditures, which were $0.2 million in 1996. If KDSM, Inc. is required to make
capital expenditures to keep up with emerging technologies, management believes
it will be able to fund such expenditures from its cash flow and from the
proceeds of indebtedness or financing that is allowed to be incurred or obtained
under the KDSM Senior Debenture Indenture (as long as KDSM, Inc.'s debt to
operating cash flow ratio is 4 to 1 or less) or from capital contributions from
Sinclair to the extent permitted under Sinclair's debt instruments.
INCOME TAXES
Income tax expense for 1996 was $0.5 million. However, no income tax
provision was recorded prior to May 31, 1996 since profit and loss and the
related tax effects were deemed to be distributed to the partners of River City
(the owners) on their respective tax returns. The income tax provision for 1996
was recorded using a statutory rate of 40% in accordance with provisions of FASB
109 as described in the footnotes to the KDSM, Inc. Financial Statements
included elsewhere in this Prospectus.
64
<PAGE>
KDSM, INC.
KDSM, Inc. is an indirect wholly owned subsidiary of Sinclair, which owns all
of the License and Non-License Assets related to the operation of television
station KDSM-TV. KDSM, Inc. acquired the Non-License Assets of KDSM-TV as part
of the River City Acquisition in April 1996. KDSM was, at the time of the
acquisition, a Fox affiliate and currently maintains its Fox affiliation. KDSM
Licensee, Inc., a wholly-owned subsidiary of KDSM, Inc. acquired the License
Assets relating to the operation of KDSM-TV (including the affiliation agreement
with Fox) on April 22, 1997. See "Risk Factors--Certain Network Affiliation
Agreements," "--Multiple Ownership Rules and Effect on LMAs" and "--LMAs--Rights
of Preemption and Termination."
KDSM-TV is located in Des Moines, the state capital of Iowa. The Des Moines
DMA is the 72nd largest television market consisting of three counties (Dallas,
Polk and Warren Counties) within the state of Iowa. The area has a diversified
economy with major sectors in the financial services, food processing,
agricultural services, health care, retail and wholesale trades. The insurance
and financial sectors are important to the Des Moines economy. There are more
than 60 life, health and casualty insurance firms that are headquartered in Des
Moines, making the city the second largest insurance center behind Hartford,
Connecticut. In addition, the state of Iowa is the largest single employer in
the Des Moines area and government workers (federal, state and local) as a group
represent a significant percentage of total employment.
The Des Moines market is currently served by four commercial television
stations, all of which are network affiliated. KDSM-TV, the Fox affiliate, is
pursuing a counter-programming strategy against the other network affiliates
designed to attract additional audience share in demographic groups not served
by programming on competing stations. KDSM-TV also has a program license
agreement with UPN. KDSM-TV has exclusive rights in the Des Moines DMA to
broadcast Iowa Hawkeye basketball games through the 1997-1998 season and Big Ten
and Iowa football games through the 1997 season. KDSM-TV carries programming
from UPN including "Star Trek: Voyager" and such successful syndicated products
as "Home Improvement," "Mad About You," "The Simpsons," "Married with Children"
and "Baywatch." The Station has acquired syndicated rights to "Frasier"
beginning Fall 1997.
The following table sets forth certain market revenue, size and audience
share information for the Des Moines DMA:
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
--------- --------- ---------
(DOLLARS IN THOUSANDS)
Market revenue $ 35,314 $ 38,089 $ 41,988
Annual market revenue
growth 19.5% 7.9% 10.2%
Station rank within market 4 3 3
Television homes 364,980 369,410 373,630
KDSM audience share 8.0% 8.0% 8.3%
KDSM, Inc. and its predecessor had combined station broadcast revenues of
$8.2 million and combined broadcast cash flow of $3.7 million in 1996. The
Company has received a third-party appraisal valuing KDSM, Inc.'s assets (other
than the Parent Preferred and the Common Securities) at $50.2 million as of
February 18, 1997.
The principal office of KDSM, Inc. is located at 2000 W. 41st Street,
Baltimore, MD 21211 and its telephone number is 410-467-5005.
65
<PAGE>
SINCLAIR CAPITAL
Sinclair Capital is a special purpose statutory business trust created under
Delaware law pursuant to (i) a trust agreement executed by KDSM, Inc. as
depositor for the Trust, and First Union National Bank of Maryland, as Property
Trustee (the "Property Trustee"), and First Union Bank of Delaware as Delaware
Trustee (the "Delaware Trustee"), and (ii) the filing of a certificate of trust
with the Delaware Secretary of State on February 24, 1997. Such trust agreement
was amended and restated in its entirety prior to the closing of the Old
Securities Offering (as so amended and restated, the "Trust Agreement"). The
Property Trustee acts as sole trustee under the Trust Agreement for the purposes
of compliance with the Trust Indenture Act. The Trust exists for the exclusive
purposes of (i) issuing the Preferred Securities and the Common Securities,
representing undivided beneficial interests in the assets of the Trust, (ii)
purchasing the KDSM Senior Debentures with the proceeds from sale of the
Preferred Securities and the Common Securities and (iii) engaging in only those
other activities necessary or incidental thereto. All of the Common Securities
are owned by KDSM, Inc., and KDSM, Inc. has agreed in the KDSM Senior Debenture
Indenture to maintain such ownership. KDSM, Inc. has acquired Common Securities
having an aggregate liquidation amount equal to approximately 3% of the total
capital of the Trust. The Trust has a term expiring in 2015, but may terminate
earlier as provided in the Trust Agreement. The Trust's business affairs will be
conducted by the Property Trustee, the Delaware Trustee and the Administrative
Trustees. The holder of the Common Securities, or the holders of at least a
majority in the aggregate Liquidation Value of then outstanding Preferred
Securities if an Event of Default has occurred and is continuing, will be
entitled to appoint, remove or replace the Trustees of the Trust.
The duties and obligations of the Trustees are governed by the Trust
Agreement. David D. Smith and David B. Amy, each an officer of Sinclair, have
been appointed as administrative trustees of the Trust (in such capacity, the
"Administrative Trustees") pursuant to the terms of the Trust Agreement. Under
the Trust Agreement, the Administrative Trustees have certain duties and powers
including, but not limited to, the delivery of certain notices to the holders of
the Preferred Securities, the appointment of the Preferred Securities Paying
Agent (as defined under "Description of the New Preferred Securities--Redemption
Procedures") and the Preferred Securities Registrar (as defined under
"Description of the New Preferred Securities--Registrar and Transfer Agent"),
the registering of transfers of the Preferred Securities and the Common
Securities and preparing and filing on behalf of the Trust all United States
federal, state and local tax information and returns and reports required to be
filed by or in respect of the Trust. Under the Trust Agreement, the Property
Trustee will have certain duties and powers, including, but not limited to,
holding legal title to the KDSM Senior Debentures on behalf of the Trust, the
collection of payments in respect of the KDSM Senior Debentures, maintenance of
the Payment Account (as defined in the Trust Agreement), the sending of default
notices with respect to the Preferred Securities and the distribution of the
assets of the Trust in the event of a winding-up of the Trust. See "Description
of the New Preferred Securities."
66
<PAGE>
BUSINESS OF SINCLAIR
The Company is a diversified broadcasting company that owns or provides
programming services to more television stations than any other commercial
broadcasting group in the United States. The Company currently owns or provides
programming services to 28 television stations and has agreed to acquire one
additional television station. The Company believes it is also one of the top 20
radio groups in the United States, when measured by the total number of radio
stations owned, programmed or with which the Company has Joint Sales Agreements
(JSAs). The Company owns or provides programming services to 25 radio stations,
has a pending acquisition of one radio station, has a JSA with one additional
radio station and has options to acquire an additional seven radio stations.
The 28 television stations the Company owns or programs pursuant to LMAs are
located in 20 geographically diverse markets, with 23 of the stations in the top
51 television DMAs in the United States. The Company's television station group
is diverse in network affiliation with ten stations affiliated with Fox, 11 with
UPN, two with ABC, two with Warner Brothers and one with CBS. Two stations
operate as Independents.
The Company's radio station group is also geographically diverse with a
variety of programming formats including country, urban, news/talk/sports,
album/progressive rock and adult contemporary. Of the 26 stations owned,
programmed or with which the Company has a JSA, 12 broadcast on the AM band and
14 on the FM band. The Company owns or programs from two to seven stations in
all but one of the radio markets it serves.
The Company has undergone rapid and significant growth over the course of the
last six years. Beginning with the acquisition of WPGH in Pittsburgh in 1991,
the Company has increased the number of television stations it owns or programs
from three to 28. From 1991 to 1996, net broadcast revenues and operating cash
flow increased from $39.7 million to $346.5 million, and from $15.5 million to
$180.3 million. Pro forma for the acquisitions described below, 1996 net
broadcasting revenue and operating cash flow would have been $445.0 million and
$206.5 million, respectively.
67
<PAGE>
TELEVISION BROADCASTING
The Company owns and operates, provides programming services to, or has
agreed to acquire the following television stations:
<TABLE>
<CAPTION>
NUMBER OF
COMMERCIAL EXPIRATION
MARKET STATIONS IN STATION DATE OF
MARKET RANK(A) STATIONS STATUS(B) CHANNEL AFFILIATION THE MARKET(C) RANK(D) FCC LICENSE
- ----------------------- -------- ---------- ----------- --------- ------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pittsburgh, Pennsylvania 19 WPGH O&O 53 FOX 6 4 8/1/99
WPTT LMA 22 UPN 5 8/1/99
St. Louis, Missouri 20 KDNL LMA(e)(j) 30 ABC 7 5 2/1/98
Sacramento, California 21 KOVR O&O 13 CBS 8 3 2/1/99
Baltimore, Maryland 23 WBFF O&O 45 FOX 5 4 10/1/04
WNUV LMA 54 UPN 5 10/1/04
Indianapolis, Indiana 25 WTTV LMA(e) 4 UPN 8 4 8/1/97
WTTK LMA(e)(f) 29 UPN 4 (f) 8/1/97
Cincinnati, Ohio 29 WSTR O&O 64 UPN 5 5 10/1/97
Raleigh-Durham,
North Carolina 30 WLFL O&O 22 FOX 7 3 12/1/04
WRDC LMA 28 UPN 5 12/1/04
Milwaukee, Wisconsin 31 WCGV O&O 24 UPN 6 4 12/1/97
WVTV LMA 18 WB 5 12/1/97
Kansas City, Missouri 32 KSMO O&O 62 UPN 7 5 2/1/98
Columbus, Ohio 34 WTTE O&O 28 FOX 5 4 10/1/97
Asheville, North
Carolina and Greenville/
Spartanburg/Anderson,
South Carolina. 35 WFBC LMA(g) 40 IND(i) 6 5 12/1/04
WLOS LMA(e) 13 ABC 6 3 12/0/04
San Antonio, Texas 37 KABB LMA(e) 29 FOX 7 4 8/1/98
KRRT LMA(h) 35 UPN 6 8/1/98
Norfolk, Virginia 40 WTVZ O&O 33 FOX 6 4 10/1/04
Oklahoma City, Oklahoma 43 KOCB O&O 34 UPN 7 5 6/1/98
Birmingham, Alabama 51 WTTO O&O 21 WB 5 4 4/1/05
WABM LMA 68 UPN 5 4/1/05
Flint/Saginaw/Bay City,
Michigan 60 WSMH O&O 66 FOX 5 4 10/1/97
Las Vegas, Nevada 64 KUPN Pending 21 UPN 8 5 10/1/98
Lexington, Kentucky 68 WDKY O&O 56 FOX 5 4 8/1/97
Des Moines, Iowa 72 KDSM O&O 17 FOX 4 4 2/1/98
Peoria/Bloomington,
Illinois 109 WYZZ O&O 43 FOX 4 4 12/1/97
Tuscaloosa, Alabama 187 WDBB LMA 17 IND(i) 2 2 4/1/05
</TABLE>
- ----------
(a) Rankings are based on the relative size of a station's DMA among the 211
generally recognized DMAs in the United States as estimated by Nielsen.
(b) "O&O" refers to stations owned and operated by the Company, "LMA" refers to
stations to which the Company provides programming services pursuant to an
LMA and "Pending" refers to stations the Company has agreed to acquire. See
"--1997 Acquisitions."
(c) Represents the number of television stations designated by Nielsen as
"local" to the DMA, excluding public television stations and stations which
do not meet the minimum Nielsen reporting standards (weekly cumulative
audience of at least 2.5%) for the Sunday- Saturday, 6:00 a.m. to 2:00 a.m.
time period.
(Footnotes continued on following page)
68
<PAGE>
(d) The rank of each station in its market is based upon the November 1996
Nielsen estimates of the percentage of persons tuned to each station in the
market from 6:00 a.m. to 2:00 a.m., Sunday-Saturday.
(e) Non-License Assets acquired from River City and option exercised to acquire
License Assets. Will become owned and operated upon FCC approval of
transfer of License Assets and closing of acquisition of License Assets.
(f) WTTK currently simulcasts all of the programming aired on WTTV and the
station rank applies to the combined viewership of these stations.
(g) Non-License Assets acquired from River City. License Assets to be acquired
by Glencairn, Ltd., subject to the Company's LMA, upon FCC approval of
transfer of License Assets.
(h) River City provided programming to this station pursuant to an LMA. The
Company acquired River City's rights under the LMA from River City and the
Non-License Assets from the owners of this station. The License Assets are
to be transferred to Glencairn upon FCC approval of transfer of assets.
(i) "IND" or "Independent" refers to a station that is not affiliated with any
of ABC, CBS, NBC, Fox, UPN or Warner Brothers.
(j) The FCC has approved the Company's acquisition of the License Assets of
this station.
Operating Strategy
The Company's television operating strategy includes the following key
elements.
Attracting Viewership
Popular Programming. The Company believes that an important factor in
attracting viewership to its stations is their network affiliations with Fox,
UPN, ABC, CBS and WB. These affiliations enable the Company to attract viewers
by virtue of the quality first-run original programming provided by these
networks and the networks' promotion of such programming. The Company also seeks
to obtain, at attractive prices, popular syndicated programming that is
complementary to the station's network affiliation. Examples of popular
syndicated programming obtained by the Company for broadcast on its Fox, WB and
UPN affiliates and independent stations are "Mad About You," "Frasier," "The
Simpsons," "Home Improvement" and "Seinfeld." In addition to network
programming, the Company's ABC and CBS affiliates broadcast news magazine, talk
show, and game show programming such as "Hard Copy," "Entertainment Tonight,"
"Regis and Kathie Lee," "Wheel of Fortune" and "Jeopardy."
Children's Programming. The Company seeks to be a leader in children's
programming in each of its respective DMAs. The Company's nationally recognized
"Kids Club" was the forerunner and model for the Fox network-wide marketing
efforts promoting children's programming. Sinclair carries the Fox Children's
Network ("FCN") and UPN's childrens' programming, both of which include
significant amounts of animated programming throughout the week. In those
markets where the Company owns or programs ABC or CBS affiliates, the Company
broadcasts those networks' animated programming during weekends. In addition to
this animated programming, the Company broadcasts other forms of children's
programming, which may be produced by the Company or by an affiliated network.
Counter-Programming. The Company's programming strategy on its Fox, UPN and
Independent stations also includes "counter-programming," which consists of
broadcasting programs that are alternatives to the types of programs being shown
concurrently on competing stations. This strategy is designed to attract
additional audience share in demographic groups not served by concurrent
programming on competing stations. The Company believes that implementation of
this strategy enables its stations to achieve competitive rankings in households
in the 18-49 and 25-54 demographics and to offer greater diversity of
programming in each of its DMAs.
Local News. The Company believes that the production and broadcasting of
local news can be an important link to the community and an aid to the station's
efforts to expand its viewership. In addition, local news programming can
provide access to advertising sources targeted specifically to local news. The
Company carefully assesses the anticipated benefits and costs of producing local
news prior to introduction at a Company station because a significant investment
in capital equipment is required and substantial operating expenses are incurred
in introducing, developing and producing local news programming. The Company
currently provides local news programming at WBFF in Baltimore, WLFL in
Raleigh/Durham, KDNL in St. Louis, KABB in San Antonio, KOVR in Sacramento, WPGH
in Pittsburgh and WLOS in Asheville. The Company also broadcasts news programs
on WDKY in Lexington, which are produced in part by the Company and in part
through the purchase of production services from an independent third party and
on
69
<PAGE>
WTTV in Indianapolis, which are produced by a third party in exchange for a
limited number of advertising spots. River City provides the Company news
production services with respect to the production of news programming and on
air talent on WTTE. Pursuant to an agreement, River City provides certain
services to the Company in return for a fee equal to approximately $416,000 per
year. The possible introduction of local news at the other Company stations is
reviewed periodically. The Company's policy is to institute local news
programming at a specific station only if the expected benefits of local news
programming at the station are believed to exceed the associated costs after an
appropriate start-up period.
Popular Sporting Events. The Company attempts to capture a portion of
advertising dollars designated to sports programming in selected DMAs. The
Company's independent and UPN affiliated stations generally face fewer
restrictions on broadcasting live local sporting events than do their
competitors that are affiliates of the major networks and Fox since affiliates
of the major networks and Fox are subject to prohibitions against preemptions of
network programming. The Company has been able to acquire the local television
broadcast rights for certain sporting events, such as NBA basketball, Major
League Baseball, NFL football, NHL hockey, ACC basketball, Big Ten football and
basketball, and SEC football. The Company seeks to expand its sports
broadcasting in DMAs as profitable opportunities arise. In addition, the
Company's stations that are affiliated with Fox broadcast certain Major League
Baseball games, NFL football games and NHL hockey games.
Innovative Local Sales And Marketing
The Company believes that it is able to attract new advertisers to its
stations and increase its share of existing customers' advertising budgets by
creating a sense of partnership with those advertisers. The Company develops
such relationships by training its sales forces to offer new marketing ideas and
campaigns to advertisers. These campaigns often involve the sponsorship by
advertisers of local promotional events that capitalize on the station's local
identity and programming franchises. For example, several of the Company's
stations stage local Kids Fairs which allow station advertisers to reinforce
their on-air advertising with their target audience. Through its strong local
sales and marketing focus, the Company seeks to capture an increasing share of
its revenues from local sources, which are generally more stable than national
advertising.
Control Of Operating And Programming Costs
By employing a disciplined approach to managing programming acquisition and
other costs, the Company has been able to achieve operating margins that the
Company believes are among the highest in the television broadcast industry. The
Company has sought in the past and will continue to seek to acquire quality
programming for prices at or below prices paid in the past. As an owner or
provider of programming services to 28 stations in 20 DMAs reaching
approximately 14% of U.S. television households, the Company believes that it is
able to negotiate favorable terms for the acquisition of programming. Moreover,
the Company emphasizes control of each of its stations' programming and
operating costs through program-specific profit analysis, detailed budgeting,
tight control over staffing levels and detailed long-term planning models.
Attract And Retain High Quality Management
The Company believes that much of its success is due to its ability to
attract and retain highly skilled and motivated managers, both at the corporate
and local station levels. A portion of the compensation provided to general
managers, sales managers and other station managers is based on their achieving
certain operating results. The Company also provides its corporate and station
managers with deferred compensation plans offering options to acquire Class A
Common Stock.
Community Involvement
Each of the Company's stations actively participates in various community
activities and offers many community services. The Company's activities include
broadcasting programming of local interest and sponsorship of community and
charitable events. The Company also encourages its station employees to become
active members of their communities and to promote involvement in community and
charitable affairs. The Company believes that active community involvement by
its stations provides its stations with increased exposure in their respective
DMAs and ultimately increases viewership and advertising support.
70
<PAGE>
Establish LMAs
The Company believes that it can attain significant growth in operating cash
flow through the utilization of LMAs. By expanding its presence in a market in
which it owns a station, the Company can improve its competitive position with
respect to a demographic sector. In addition, by providing programming services
to an additional station in a market, the Company is able to realize significant
economies of scale in marketing, programming, overhead and capital expenditures.
The Company provides programming services pursuant to an LMA to an additional
station in seven of the 20 television markets in which the Company owns or
programs a station.
Programming And Affiliations
The Company continually reviews its existing programming inventory and seeks
to purchase the most profitable and cost-effective syndicated programs available
for each time period. In developing its selection of syndicated programming, the
Company balances the cost of available syndicated programs with their potential
to increase advertising revenue and the risk of their reduced popularity during
the term of the program contract. The Company seeks to purchase only those
programs with contractual periods that permit programming flexibility and which
complement a station's overall programming strategy and counter-programming
strategy. Programs that can perform successfully in more than one time period
are more attractive due to the long lead time and multi-year commitments
inherent in program purchasing.
Twenty-six of the 28 television stations owned or provided programming
services by the Company operate as affiliates of Fox (ten stations), UPN (eleven
stations), ABC (two stations), WB (two stations) and CBS (one station). The
networks produce and distribute programming in exchange for each station's
commitment to air the programming at specified times and for commercial
announcement time during the programming. In addition, networks other than Fox
and UPN pay each affiliated station a fee for each network-sponsored program
broadcast by the stations.
On August 21, 1996, the Company entered into an agreement with Fox (the "Fox
Agreement") which, among other things, provides that the affiliation agreements
between Fox and eight stations owned or provided programming services by the
Company (except as noted below) would be amended to have new five-year terms
commencing on the date of the Fox Agreement. Fox has the option to extend the
affiliation agreements for an additional five-year term and must extend all of
the affiliation agreements if it extends any (except that Fox may selectively
renew affiliation agreements if any station has breached its affiliation
agreement). The Fox Agreement also provides that the Company will have the right
to purchase, for fair market value, any station Fox acquires in a market
currently served by a Company owned Fox affiliate (other than the Norfolk and
Raleigh-Durham markets) if Fox determines to terminate the affiliation agreement
with the Company's station in that market and operate the station acquired by
Fox as a Fox affiliate. The agreement confirmed that the affiliation agreement
for WTTO (Birmingham, Alabama) would terminate on September 1, 1996, and that
affiliation agreements for WTVZ (Norfolk, Virginia) and WLFL (Raleigh, North
Carolina) will terminate August 31, 1998. The Fox Agreement also includes
provisions limiting the ability of the Company to preempt Fox programming except
where it has existing programming conflicts or where the Company preempts to
serve a public purpose.
The Company's affiliation agreements with ABC for KOVR, KDNL and WLOS in
Sacramento, St. Louis and Asheville, respectively, have 10-year terms expiring
in 2005, 2005 and 2004, respectively. Each of the Company's UPN affiliation
agreements is for three years, and expires in January 1998.
Each of the affiliation agreements relating to stations involved in the River
City Acquisition (other than River City's Fox and ABC affiliates) is terminable
by the network upon transfer of the License Assets of the station.
RADIO BROADCASTING
The following table sets forth certain information regarding the radio
stations (i) programmed by the Company, (ii) with which the Company has JSAs, or
(iii) which the Company has an option to acquire.
71
<PAGE>
<TABLE>
<CAPTION>
RANKING OF STATION RANK EXPIRATION
GEOGRAPHIC STATION'S STATION PRIMARY IN PRIMARY DATE OF
MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC FCC
SERVED(A) REVENUE(B) FORMAT TARGET(C) TARGET(D) LICENSE
- ---------------- ------------ ------------------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Los Angeles 2
KBLA-AM(e) Korean NA N/A 12/1/97
St. Louis 17
KPNT-FM(m) Alternative Rock Adults 18-34 4 2/1/05
Modern Adult
WVRV-FM(m) Contemporary Adults 18-34 7 12/1/04
New Orleans 38
WLMG-FM Adult Contemporary Women 25-54 2 6/1/04
KMEZ-FM Urban Oldies Women 25-54 6 6/1/04
WWL-AM News/Talk/Sports Adults 35-64 1 6/1/04
WSMB-AM Talk/Sports Adults 35-64 19 6/1/04
Buffalo 40
WMJQ-FM Adult Contemporary Women 25-54 2 6/1/98
WKSE-FM Contemporary Hit Radio Women 18-49 1 6/1/98
WBEN-AM News/Talk/Sports Adults 35-64 1 6/1/98
WWKB-AM. Country Adults 35-64 16 6/1/98
WGR-AM Sports Adults 25-54 10 6/1/98
WWWS-AM Urban Oldies Women 25-54 12 6/1/98
Memphis 43
WRVR-FM Soft Adult Contemporary Women 25-54 3 8/1/04
WJCE-AM Urban Oldies Women 25-54 11 8/1/04
WOGY-FM Country Adults 25-54 10 8/1/04
Nashville 44
WLAC-FM Adult Contemporary Women 25-54 6 8/1/04
WJZC-FM Smooth Jazz Women 25-54 9 8/1/04
WLAC-AM News/Talk/Sports Adults 35-64 11 8/1/04
Greenville/Spartanburg 59
WFBC-FM (g) Contemporary Hit Radio Women 18-49 6 12/1/03
WORD-AM (g) News/Talk Adults 35-64 9 12/1/03
WFBC-AM (g) News/Talk Adults 35-64 9 12/1/03
WSPA-AM(g) Full Service/Talk Adults 35-64 15 12/1/03
WSPA-FM(g) Soft Adult Contemporary Women 25-54 2 12/1/03
WOLI-FM(g)(h) Oldies Adults 25-54 9 12/1/03
WOLT-FM(g)(i) Oldies Adults 25-54 10 12/1/03
Wilkes-Barre/Scranton 61
WKRZ-FM(n) Contemporary Hit Radio Adults 18-49 1 8/1/98
WGGY-FM Country Adults 25-54 3 8/1/98
WILK-AM (j) News/Talk/Sports Adults 35-64 6 8/1/98
WGBI-AM(j) News/Talk/Sports Adults 35-64 31 8/1/98
WWSH-FM Soft Hits Women 25-54 7 8/1/98
WILP-AM(k) News/Talk/Sports Adults 35-64 31 8/1/98
WWFH-FM(l) Soft Hits Women 25-54 17 8/1/98
WKRF-FM(f)(n) Contemporary Hit Radio Adults 18-49 26 8/1/98
</TABLE>
(Footnotes on following page)
72
<PAGE>
- ----------
(a) Actual city of license may differ from the geographic market served.
(b) Ranking of the principal radio market served by the station among all U.S.
radio markets by 1995 aggregate gross radio broadcast revenue according to
1996 Broadcasting & Cable Yearbook.
(c) Due to variations that may exist within programming formats, the primary
demographic target of stations with the same programming format may be
different.
(d) All information concerning ratings and audience listening information is
derived from the Fall 1996 Arbitron Metro Area Ratings Survey (the "Fall
1996 Arbitron"). Arbitron is the generally accepted industry source for
statistical information concerning audience ratings. Due to the nature of
listener surveys, other radio ratings services may report different
rankings; however, the Company does not believe that any radio ratings
service other than Arbitron is accorded significant weight in the radio
broadcast industry. "Station Rank in Primary Demographic Target" is the
ranking of the station among all radio stations in its market that are
ranked in its target demographic group and is based on the station's
average persons share in the primary demographic target in the applicable
Metro Survey Area. Source: Average Quarter Hour Estimates, Monday through
Sunday, 6:00 a.m. to midnight, Fall 1996 Arbitron.
(e) Programming is provided to this station by a third party pursuant to an
LMA.
(f) The Company has agreed to acquire this station, subject to FCC approval of
the transfer of the related licenses.
(g) The Company has an option to acquire Keymarket of South Carolina, Inc.,
("Keymarket"). Keymarket owns and operates WFBC-AM, WORD-AM and WFBC-FM,
has an option to acquire and provides programming services pursuant to an
LMA to WSPA-AM and WSPA-FM, and provides sales services pursuant to a JSA
and has an option to acquire WOLI-FM and WOLT-FM.
(h) WOLI-FM was formerly WXWX-FM.
(i) WOLT-FM was formerly WXWZ-FM.
(j) WILK-AM and WGBI-AM simulcast their programming.
(k) WILP-AM was formerly WXPX-AM.
(l) WWFH-FM was formerly WQEQ-FM.
(m) The Company owns the Non-License Assets of these stations and provides
programming to these stations pursuant to an LMA. The FCC has approved the
Company's acquisition of the License Assets of these stations.
(n) WKRZ-FM and WKRF-FM simulcast their programming.
73
<PAGE>
Radio Operating Strategy
The Company's radio strategy is to operate a cluster of radio stations in
each of a variety of geographic markets throughout the country. In each
geographic market, the Company employs broadly diversified programming formats
to appeal to a variety of demographic groups within the market. The Company
seeks to strengthen the identity of each of its stations through its programming
and promotional efforts, and emphasizes that identity to a far greater degree
than the identity of any local radio personality.
The Company believes that its strategy of appealing to diverse demographic
groups in a variety of geographic markets allows it to reach a larger share of
the overall advertising market while realizing economies of scale and avoiding
dependence on one demographic or geographic market. The Company realizes
economies of scale by combining sales and marketing forces, back office
operations and general management in each geographic market. At the same time,
the geographic diversity of its portfolio of radio stations helps lessen the
potential impact of economic downturns in specific markets and the diversity of
target audiences served helps lessen the impact of changes in listening
preferences. In addition, the geographic and demographic diversity allows the
Company to avoid dependence on any one or any small group of advertisers.
The Company's group of radio stations includes the top billing station group
in two markets and one of the top three billing station groups in each of its
markets other than Los Angeles, St. Louis and Nashville. Through ownership or
LMAs, the group also includes duopolies in six of its seven markets and, upon
exercise of options to acquire stations in the Greenville/Spartanburg market,
the Company will have duopolies in seven of its eight markets.
Depending on the programming format of a particular station, there are a
predetermined number of advertisements broadcast each hour. The Company
determines the optimum number of advertisements available for sale during each
hour without jeopardizing listening levels (and the resulting ratings). Although
there may be shifts from time to time in the number of advertisements available
for sale during a particular time of day, the total number of advertisements
available for sale on a particular station normally does not vary significantly.
Any change in net radio broadcasting revenue, with the exception of those
instances where stations are acquired or sold, is generally the result of
pricing adjustments made to ensure that the station effectively uses advertising
time available for sale, an increase in the number of commercials sold or a
combination of these two factors.
Large, well-trained local sales forces are maintained by the Company in each
of its radio markets. The Company's principal goal in its sales efforts is to
develop long-standing customer relationships through frequent direct contacts,
which the Company believes provides it with a competitive advantage.
Additionally, in some radio markets, duopolies permit the Company to offer
creative advertising packages to local, regional and national advertisers. Each
radio station programmed by the Company also engages a national independent
sales representative to assist it in obtaining national advertising revenues.
These representatives obtain advertising through national advertising agencies
and receive a commission from the radio station based on its gross revenue from
the advertising obtained.
BROADCASTING ACQUISITION STRATEGY
On February 8, 1996, the 1996 Act was signed into law. The 1996 Act
represents the most sweeping overhaul of the country's telecommunications laws
since the Communications Act. The 1996 Act relaxes the broadcast ownership rules
and simplifies the process for renewal of broadcast station licenses.
The Company believes that the enactment of the 1996 Act presents a unique
opportunity to build a larger and more diversified broadcasting company.
Additionally, the Company expects that the opportunity to act as one of the
consolidators of the industry will enable the Company to gain additional
influence with program suppliers, television networks, other vendors, and
alternative delivery media. The Company also believes that the additions to its
management team as a result of the River City Acquisition will give it
additional resources to take advantage of these developments.
74
<PAGE>
In implementing its acquisition strategy, the Company seeks to identify and
pursue favorable station or group acquisition opportunities primarily in the
15th to 75th largest DMAs and MSAs. In assessing potential acquisitions, the
Company examines opportunities to improve revenue share, audience share and/or
cost control. Additional factors considered by the Company in a potential
acquisition include geographic location, demographic characteristics and
competitive dynamics of the market.
In furtherance of its acquisition strategy, the Company routinely reviews,
and conducts investigations of, potential television and radio station
acquisitions. When the Company believes a favorable opportunity exists, the
Company seeks to enter into discussions with the owners of such stations
regarding the possibility of an acquisition by the Company. At any given time,
the Company may be in discussions with one or more such station owners.
Since the 1996 Act became effective, the Company has acquired, obtained
options to acquire or has acquired the right to program or provide sales
services to 16 television and 33 radio stations for an aggregate consideration
of approximately $1.3 billion. Certain terms of these acquisitions are described
below.
River City Acquisition. On May 31, 1996, pursuant to the Amended and Restated
Asset Purchase Agreement, the Company acquired all of the Non-License Assets of
River City other than the assets relating to WSYX-TV in Columbus, Ohio.
Simultaneously, the Company entered into a 10-year LMA with River City with
respect to all of River City's License Assets (with the exception of the License
Assets relating to WSYX) and was granted: (i) a 10-year option (the "License
Assets Option") to acquire River City's License Assets (with the exception of
the License Assets relating to WSYX); and (ii) a three-year option to acquire
the assets relating to WSYX-TV (both the License and Non-License Assets,
collectively the "Columbus Option"). The exercise price for the License Assets
Option is $20 million and the Company is required to pay an extension fee with
respect to the License Assets Option as follows: (1) 8% of $20 million for the
first year following the closing of the River City Acquisition; (2) 15% of $20
million for the second year following such closing; and (3) 25% of $20 million
for each following year. The Non-License Assets acquired from River City relate
to eight television stations and 21 radio stations owned and operated by River
City. In addition, the Company acquired from another party the Non-License
Assets relating to one additional television station (KRRT) to which River City
provided programming pursuant to an LMA. The Company assigned its option to
acquire the License Assets of one television station (WFBC) to Glencairn, and
Glencairn also acquired the option to acquire the License Assets of KRRT. The
Company also acquired River City's rights under LMAs with respect to KRRT and
four radio stations to which River City provided programming or sales services.
The Company has exercised the License Assets Option and has acquired the License
Assets of two of the television stations and all of the radio stations but the
two in the St. Louis market, and has received FCC approval to acquire one more
of the television stations and the two radio stations in the St. Louis market.
Acquisition of the remaining License Assets is now subject to FCC approval of
transfer of such License Assets. There can be no assurance that this approval
will be obtained. Applications for transfer of the License Assets were filed in
July and August 1996, except application for transfer of the License Assets
relating to WTTV and WTTK which was filed in November 1996. See "Risk
Factors--Multiple Ownership Rules and Effect on LMAs."
The Company paid an aggregate of approximately $1.0 billion for the
Non-License Assets and the License Assets Option consisting of $847.6 million in
cash and 1,150,000 shares of Series A Convertible Preferred Stock of the Company
and 1,382,435 stock options. The Series A Convertible Preferred Stock has been
exchanged for 1,150,000 shares of Series B Convertible Preferred Stock of the
Company, which at issuance had an aggregate liquidation value of $115 million,
and are convertible at any time, at the option of the holders, into an aggregate
of 4,181,818 shares of Class A Common Stock of the Company (which had a market
value on May 31, 1996 of approximately $125.1 million). The exercise price for
the Columbus Option is approximately $130 million plus the amount of
indebtedness secured by the WSYX assets on the date of exercise (not to exceed
the amount outstanding on the date of closing of $105 million) and the Company
is required to pay an extension fee with respect to the Columbus Option as
follows: (1) 8% of $130 million for the first year following the closing of the
River City Acquisition; (2) 15% of $130 million for the second year following
the closing; and (3) 25% of $130 million for each
75
<PAGE>
following year. The extension fee accrues beginning on the date of closing, and
is payable (beginning December 31, 1996) at the end of each calendar quarter
until such time as the option is exercised or River City sells WSYX to a third
party. The Company paid the extension fee due December 31, 1996. Pursuant to the
LMAs with River City and the owner of KRRT, the Company is required to provide
at least 166 hours per week of programming to each television and radio station
and, subject to certain exceptions, River City and the owner of KRRT are
required to broadcast all programming provided by the Company. The Company is
required to pay River City and the owner of KRRT monthly fees under the LMAs in
an amount sufficient to cover specified expenses of operating the stations,
which are currently approximately $150,000 per month for all River City
television and radio stations the Company programs (including KRRT). The Company
has the right to sell advertising time on the stations during the hours
programmed by the Company.
The Company and River City filed notification under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), with respect to
the Company's acquisition of all River City assets prior to closing the
acquisition. After the United States Justice Department ("DOJ") indicated that
it would request additional information regarding the antitrust implications of
the acquisition of WSYX by the Company in light of the Company's ownership of
WTTE, the Company and River City agreed to submit separate notifications with
respect to the WSYX assets and the other River City assets. The DOJ then granted
early termination of the waiting period with respect to the transfer of the
River City assets other than WSYX, permitting the acquisition of those assets to
proceed. The Company and River City agreed to notify the DOJ 30 days before
entering into an LMA or similar agreement with respect to WSYX and agreed not to
enter into such an agreement until 20 days after substantially complying with
any request for information from DOJ regarding the transaction. The Company is
in the process of preparing a submission to the DOJ regarding the competitive
effects of entering into an LMA arrangement in Columbus. The Company has agreed
to sell the License Assets of WTTE to Glencairn and to enter into an LMA with
Glencairn to provide programming services to WTTE, but the Company does not
believe that this transaction will be completed unless the Company acquires
WSYX. See "Risk Factors--Conflicts of Interest."
In the River City Acquisition, the Company also acquired an option held by
River City to purchase either (i) all of the assets of Keymarket of South
Carolina, Inc. ("KSC") for the forgiveness of debt held by the Company in an
aggregate principal amount of approximately $7.4 million as of August 22, 1996,
plus payment of approximately $1,000,000 less certain adjustments or (ii) all of
the stock of KSC for $1,000,000 less certain adjustments. KSC owns and operates
three radio stations in the Greenville/Spartanburg, South Carolina MSA (WFBC-FM,
WFBC-AM and WORD-AM). The options to acquire the assets and stock of KSC expire
on December 31, 1997. KSC also holds an option to acquire from Spartan
Radiocasting, Inc. certain assets relating to two additional stations (WSPA-AM
and WSPA-FM) in the Greenville/Spartanburg MSA and which KSC currently programs
pursuant to an LMA. KSC's option to acquire these assets is exercisable for
$5.15 million and expires in January 2000, subject to extension to the extent
the applicable LMA is extended beyond that date. KSC also has an option to
acquire assets of Palm Broadcasting Company, L.P., which owns two additional
stations in the Greenville/Spartanburg MSA (WOLI-FM and WOLT-FM) in an amount
equal to the outstanding debt of Palm Broadcasting Company, L.P. to the Company,
which was approximately $3.03 million as of March 31, 1997. This option expires
in April 2001. KSC has a JSA with Palm Broadcasting Company, L.P., but does not
provide programming for WOLI or WOLT.
Superior Acquisition. On May 8, 1996, the Company acquired WDKY-TV
(Lexington, Kentucky) and KOCB-TV (Oklahoma City, Oklahoma) by acquiring the
stock of Superior Communications Group, Inc. for approximately $63.5 million.
Flint Acquisition. On February 27, 1996 the Company acquired the assets of
WSMH-TV (Flint, Michigan) for approximately $35.8 million by exercising options
granted in 1995.
Cincinnati/Kansas City Acquisitions. On July 1, 1996, the Company acquired
the assets of KSMO-TV (Kansas City, Missouri) and on August 1, 1996, it acquired
the assets of WSTR-TV (Cincinnati, Ohio) for approximately $34.2 million.
76
<PAGE>
Peoria/Bloomington Acquisition. On July 1, 1996, the Company acquired the
assets of WYZZ-TV (Peoria/Bloomington, Illinois) for approximately $21.2
million.
1997 ACQUISITIONS
Since the end of 1996, the Company has entered into agreements to acquire one
television station and four radio stations, and has completed the acquisition of
two television stations and four radio stations. On January 30, 1997, the
Company entered into an agreement to acquire the assets of KUPN-TV, the UPN
affiliate in Las Vegas, Nevada, for $87.0 million. The FCC has approved this
acquisition. The Company also entered into an agreement on January 29, 1997 to
acquire the assets of WGR-AM and WWWS-AM in Buffalo, New York for $1.5 million.
The Company's acquisition of WGR-AM and WWWS-AM was consummated on April 18,
1997. On January 31, 1997, the Company completed the acquisition of the assets
of WWFH-FM and WILP-AM, each in Wilkes-Barre, Pennsylvania, for aggregate
consideration of approximately $773,000. On April 22, 1997, the Company
consummated its acquisition of the License Assets of KOVR-TV in Sacramento,
California and KDSM-TV in Des Moines, Iowa. The Company obtained the options
pursuant to which it acquired these assets in the River City Acquisition. On
March 12, 1997, the Company entered into an agreement to acquire the assets of
radio station WKRF-FM in the Wilkes-Barre/Scranton, Pennsylvania market. In
April 1997, the Company entered into an agreement to acquire the assets of radio
station WWSH-FM in the Wilkes-Barre/Scranton market.
LOCAL MARKETING AGREEMENTS
The Company generally enters into LMAs and similar arrangements with stations
located in markets in which the Company already owns and operates a station, and
in connection with acquisitions, pending regulatory approval of transfer of
License Assets. Under the terms of the LMAs the Company makes specified periodic
payments to the owner-operator in exchange for the grant to the Company of the
right to program and sell advertising on a specified portion of the station's
inventory of broadcast time. Nevertheless, as the holder of the FCC license, the
owner-operator retains full control and responsibility for the operation of the
station, including control over all programming broadcast on the station.
The Company currently has LMA arrangements with stations in five markets in
which it owns a television station: Pittsburgh, Pennsylvania (WPTT), Baltimore,
Maryland (WNUV), Raleigh/Durham, North Carolina (WRDC), Milwaukee, Wisconsin
(WVTV) and Birmingham, Alabama (WABM). The Company also has LMA arrangements in
two markets (San Antonio and Asheville/Greenville/Spartanburg) in which the
Company will own a station upon completion of the acquisition of License Assets
from River City. In addition, the Company has an LMA arrangement with a station
in the Tuscaloosa, Alabama market (WDBB), which is adjacent to Birmingham. In
each of these markets, other than Pittsburgh and Tuscaloosa, the LMA arrangement
is (or will be after transfer of License Assets from River City) with Glencairn
and the Company owns the Non-License Assets (as defined below) of the stations.
The Company owns the assets of one radio station (KBLA-AM in Los Angeles) which
an independent third party programs pursuant to an LMA.
The Company believes that it is able to increase its revenues and improve its
margins by providing programming services to stations in selected DMAs and MSAs
where the Company already owns a station. In certain instances, single station
operators and stations operated by smaller ownership groups do not have the
management expertise or the operating efficiencies available to the Company as a
multi-station broadcaster. The Company seeks to identify such stations in
selected markets and to provide such stations with programming services pursuant
to LMAs. In addition to providing the Company with additional revenue
opportunities, the Company believes that these LMA arrangements have assisted
certain stations whose operations may have been marginally profitable to
continue to air popular programming and contribute to diversity of programming
in their respective DMAs and MSAs.
In cases where the Company enters into LMA arrangements in connection with a
station whose acquisition by the Company is pending FCC approval, the Company
(i) obtains an option to acquire the station assets essential for broadcasting a
television or radio signal in compliance with regulatory guidelines, generally
consisting of the FCC license, transmitter, transmission lines, technical
equipment, call letters and trademarks, and certain furniture, fixtures and
equipment (the "License Assets") and (ii) acquires the remaining assets (the
"Non-License Assets") at the time it enters into the option. Follow-
77
<PAGE>
ing acquisition of the Non-License Assets, the License Assets continue to be
owned by the owner-operator and holder of the FCC license, which enters into an
LMA with the Company. After FCC approval for transfer of the License Assets is
obtained, the Company exercises its option to acquire the License Assets and
become the owner-operator of the station, and the LMA arrangement is terminated.
In connection with the River City Acquisition, the Company entered into an
LMA in the form of time brokerage agreements ("TBAs") with River City and the
owner of KRRT with respect to each of the nine television (including KDSM-TV)
and 21 radio stations with respect to which the Company acquired Non-License
Assets. The LMAs are for a ten-year term, which corresponds with the term of the
option the Company holds to acquire the related River City License Assets.
Pursuant to the LMAs, the Company pays River City and the owner of KRRT fees in
return for which the Company acquires all of the inventory of broadcast time of
the stations and the right to sell 100% of each station's inventory of
advertising time. The Company has filed applications with respect to the
transfer of the License Assets of seven of the nine television stations and the
21 radio stations with respect to which the Company acquired Non-License Assets
in the River City Acquisition. Such applications have been granted with respect
to three of the seven television stations and all 21 radio stations, and the
Company has acquired the license assets of two of the television stations and 19
of the radio stations. Upon grant of FCC approval of the transfer of License
Assets with respect to the remaining stations, the Company intends to acquire
the License Assets, and thereafter the LMAs will terminate and the Company will
operate the stations. With respect to the remaining two television stations,
Glencairn has applied for transfer of the License Assets of these stations, and
the Company intends to program these stations under LMAs with Glencairn upon FCC
approval of the transfer of the License Assets to Glencairn. Petitions to deny
or informal objections have been filed against these applications by third
parties. See "Risk Factors--Multiple Ownership Rules and Effect on LMAs."
In addition to its LMAs, the Company sells commercial air time for (but does
not provide programming to) one radio station pursuant to a JSA in an MSA in
which it has interests in other radio stations. Under the Company's JSA, the
Company has obtained the right, for a fee paid to the owner and operator of the
station, to sell substantially all of the commercial advertising on the station.
FEDERAL REGULATION OF TELEVISION AND RADIO BROADCASTING
The ownership, operation and sale of television and radio stations are
subject to the jurisdiction of the FCC, which acts under authority granted by
the Communications Act. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and operating
power of stations; issues, renews, revokes and modifies station licenses;
regulates equipment used by stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation and
employment practices of stations; and has the power to impose penalties for
violations of its rules or the Communications Act.
The following is a brief summary of certain provisions of the Communications
Act, the 1996 Act and specific FCC regulations and policies. Reference should be
made to the Communications Act, FCC rules and the public notices and rulings of
the FCC for further information concerning the nature and extent of federal
regulation of broadcast stations.
License Grant and Renewal. Television and radio stations operate pursuant to
broadcasting licenses that are granted by the FCC for maximum terms of eight
years.
Television and radio station licenses are subject to renewal upon application
to the FCC. During certain periods when renewal applications are pending,
competing applicants may file for the radio or television frequency being used
by the renewal applicant. During the same periods, petitions to deny license
renewal applications may be filed by interested parties, including members of
the public. Prior to the 1996 Act, the FCC was generally required to hold
hearings on renewal applications if a competing application against a renewal
application was filed, if the FCC was unable to determine that renewal of a
license would serve the public interest, convenience and necessity, or if a
petition to deny raised a "substantial and material question of fact" as to
whether the grant of the renewal application would be prima facie inconsistent
with the public interest, convenience and necessity.
78
<PAGE>
The 1996 Act does not prohibit either the filing of petitions to deny license
renewals or the filing of competing applications. Under the 1996 Act, the FCC is
still required to hold hearings on renewal applications if it is unable to
determine that renewal of a license would serve the public interest, convenience
or 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
prima facie inconsistent with the public interest, convenience and necessity.
Pursuant to the 1996 Act, however, the FCC is prohibited from considering
competing applications for a renewal applicant's frequency, and is required to
grant the renewal application, if the FCC finds (i) that the station has served
the public interest, convenience and necessity; (ii) that there have been no
serious violations by the licensee of the Communications Act or the rules and
regulations of the FCC; and (iii) there have been no other violations by the
licensee of the Communications Act or the rules and regulations of the FCC that,
when taken together, would constitute a pattern of abuse.
All of the stations that the Company (i) owns and operates; (ii) intends to
acquire pursuant to the River City Acquisition and other acquisitions; (iii)
currently provides programming services to pursuant to an LMA or (iv) currently
sells commercial air time on pursuant to a JSA, are presently operating under
regular licenses, which expire as to each station on the dates set forth under
"Television Broadcasting" and "Radio Broadcasting," above. Although renewal of
license is granted in the vast majority of cases even when petitions to deny are
filed, there can be no assurance that the licenses of such stations will be
renewed.
Ownership Matters
General
The Communications Act prohibits the assignment of a broadcast license or the
transfer of control of a broadcast licensee without the prior approval of the
FCC. In determining whether to permit the assignment or transfer of control of,
or the grant or renewal of, a broadcast license, the FCC considers a number of
factors pertaining to the licensee, including compliance with various rules
limiting common ownership of media properties, the "character" of the licensee
and those persons holding "attributable" interests therein, and compliance with
the Communications Act's limitations on alien ownership.
To obtain the FCC's prior 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 a period of approximately 30
days during which petitions to deny the application may be filed by interested
parties, including members of the public. 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. If the FCC grants an assignment or transfer
application, interested parties have approximately 30 days from public notice of
the grant to seek reconsideration of that grant. Generally, parties that do not
file initial petitions to deny or informal objections against the application
face difficulty in seeking reconsideration of the grant. The FCC normally has
approximately an additional 10 days to set aside such grant on its own motion.
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 to any party other than the assignee or transferee specified in the
application.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations holding, or through subsidiaries controlling, broadcast
licenses, the interests of officers, directors and those who, directly or
indirectly, have the right to vote 5% or more of the corporation's stock (or 10%
or more of such stock in the case of insurance companies, investment companies
and bank trust departments that are passive investors) are generally
attributable, except that, in general, no minority voting stock interest will be
attributable if there is a single holder of more than 50% of the outstanding
voting power of the corporation. The FCC has a pending rulemaking proceeding
that, among other things, seeks comment on whether the FCC should modify its
attribution rules by (i) raising the attribution stock benchmark from 5% to 10%;
(ii) raising the attribution stock benchmark for passive investors from 10% to
20%; (iii) restricting the availability of the single majority shareholder
exemption; and (iv) attributing certain interests such as
79
<PAGE>
non-voting stock, debt and certain holdings by limited liability corporations in
certain circumstances. More recently, the FCC has solicited comment on proposed
rules that would (i) treat an otherwise nonattributable equity or debt interest
in a licensee as an attributable interest where the interest holder is a program
supplier or the owner of a broadcast station in the same market and the equity
and/or debt holding is greater than a specified benchmark; (ii) treat a licensee
of a television station which, under an LMA, brokers more than 15% of the time
on another television station serving the same market, as having an attributable
interest in the brokered station; and (iii) in certain circumstances, treat the
licensee of a broadcast station that sells advertising time on another station
in the same market pursuant to a JSA as having an attributable interest in the
station whose advertising is being sold.
The Controlling Stockholders hold attributable interests in two entities
owning media properties, namely: Channel 63, Inc., licensee of WIIB-TV, a UHF
television station in Bloomington, Indiana, and Bay Television, Inc., licensee
of WTTA-TV, a UHF television station in St. Petersburg, Florida. All of the
issued and outstanding shares of Channel 63, Inc. are owned by the Controlling
Stockholders. All the issued and outstanding shares of Bay Television, Inc. are
owned by the Controlling Stockholders (75%) and Robert L. Simmons (25%), a
former stockholder of the Company. The Controlling Stockholders have agreed to
divest their attributable interests in Channel 63, Inc. and the Company believes
that, after doing so, such holdings will not materially restrict its ability to
acquire or program additional broadcast stations.
Under its "cross-interest" policy, the FCC considers certain "meaningful"
relationships among competing media outlets in the same market, even if the
ownership rules do not specifically prohibit the relationship. Under this
policy, the FCC may consider significant equity interests combined with an
attributable interest in a media outlet in the same market, joint ventures, and
common key employees among competitors. The cross-interest policy does not
necessarily prohibit all of these interests, but requires that the FCC consider
whether, in a particular market, the "meaningful" relationships between
competitors could have a significant adverse effect upon economic competition
and program diversity. Heretofore, the FCC has not applied its cross-interest
policy to LMAs and JSAs between broadcast stations. In its ongoing rulemaking
proceeding concerning the attribution rules, the FCC has sought comment on,
among other things, (i) whether the cross-interest policy should be applied only
in smaller markets, and (ii) whether non-equity financial relationships such as
debt, when combined with multiple business interrelationships such as LMAs and
JSAs, raise concerns under the cross-interest policy. Moreover, in its most
recent proposals in its ongoing attribution rulemaking proceeding, the FCC has
proposed treating television LMAs, JSAs, and debt or equity interests as
attributable interests in certain circumstances without regard to the
cross-interest policy.
The Communications Act prohibits the issuance of broadcast licenses to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by Aliens. The Company has been
advised that the FCC staff has interpreted this provision to require a finding
that such grant or holding would be in the public interest before a broadcast
license may be granted to or held by any such corporation and that the FCC staff
has made such a finding only in limited circumstances. The FCC has issued
interpretations of existing law under which these restrictions in modified form
apply to other forms of business organizations, including partnerships. As a
result of these provisions, the licenses granted to subsidiaries of the Company
by the FCC could be revoked if, among other restrictions imposed by the FCC,
more than 25% of the Company's stock were directly or indirectly owned or voted
by Aliens. The Company and the Subsidiaries are domestic corporations, and the
Controlling Stockholders are all United States citizens. The Amended and
Restated Articles of Incorporation of the Company (the "Amended Certificate")
contain limitations on Alien ownership and control that are substantially
similar to those contained in the Communications Act. Pursuant to the Amended
Certificate, the Company has the right to repurchase Alien-owned shares
80
<PAGE>
at their fair market value to the extent necessary, in the judgment of the Board
of Directors, to comply with the Alien ownership restrictions. See "Description
of Capital Stock--Foreign Ownership."
Television
National Ownership Rule. Prior to the 1996 Act, FCC rules generally
prohibited an individual or entity from having an attributable interest in more
than 12 television stations nationwide, or in television stations reaching more
than 25% of the national television viewing audience. Pursuant to the 1996 Act,
the FCC has modified its rules to eliminate any limitation on the number of
television stations an individual or entity may own nationwide, subject to the
restriction that no individual or entity may have an attributable interest in
television stations reaching more than 35% of the national television viewing
audience. Historically, VHF stations have shared a larger portion of the market
than UHF stations. Therefore, only half of the households in the market area of
any UHF station are included when calculating whether an entity or individual
owns television stations reaching more than 35% of the national television
viewing audience. All but three of the stations owned and operated by the
Company, or to which the Company provides programming services, are UHF.
Duopoly Rule. On a local level, the television "duopoly" rule generally
prohibits a single individual or entity from having an attributable interest in
two or more television stations with overlapping Grade B service areas. While
the 1996 Act has not eliminated the TV duopoly rule, it does direct the FCC to
initiate a rulemaking proceeding to determine whether to retain, modify, or
eliminate the rule. The FCC has pending a rulemaking proceeding in which it has
proposed to modify the television duopoly rule to permit the common ownership of
television stations in different DMAs, so long as the Grade A signal contours of
the stations do not overlap. Pending resolution of its rulemaking proceeding,
the FCC has adopted an interim waiver policy that permits the common ownership
of television stations in different DMAs with no overlapping Grade A signal
contours, conditioned on the final outcome of the rulemaking proceeding. The FCC
has also sought comment on whether common ownership of two television stations
in a market should be permitted (i) where one or more of the commonly owned
stations is UHF, (ii) where one of the stations is in bankruptcy or has been off
the air for a substantial period of time and (iii) where the commonly owned
stations have very small audience or advertising shares, are located in a very
large market, and/or a specified number of independently owned media voices
would remain after the acquisition.
Local Marketing Agreements. Over the past few years, a number of television
stations, including certain of the Company's stations, have entered into what
have commonly been referred to as LMAs. While these agreements may take varying
forms, pursuant to a typical LMA, separately owned and licensed television
stations agree to enter into cooperative arrangements of varying sorts, subject
to compliance with the requirements of antitrust laws and with the FCC's rules
and policies. Under these types of arrangements, separately-owned stations could
agree to function cooperatively in terms of programming, advertising sales,
etc., subject to the requirement that the licensee of each station shall
maintain independent control over the programming and operations of its own
station. One typical type of LMA is a programming agreement between two
separately-owned television stations serving a common service area, whereby the
licensee of one station programs substantial portions of the broadcast day on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the latter licensee, and sells advertising time during such
program segments. Such arrangements are an extension of the concept of "time
brokerage" agreements, under which a licensee of a station sells blocks of time
on its station to an entity or entities which program the blocks of time and
which sell their own commercial advertising announcements during the time
periods in question. Over the past few years, the staff of the FCC's Mass Media
Bureau has held that LMAs are not contrary to the Communications Act, provided
that the licensee of the station which is being substantially programmed by
another entity maintains complete responsibility for and control over
programming and operations of its broadcast station and assures compliance with
applicable FCC rules and policies.
At present, FCC rules permit television station LMAs, and the licensee of a
television station brokering time on another television station is not
considered to have an attributable interest in the brokered station. However, in
connection with its ongoing rulemaking proceeding regarding the television
duopoly rule, the FCC has proposed to adopt rules providing that the licensee of
a television station
81
<PAGE>
which brokers more than 15% of the time on another television station serving
the same market would be deemed to have an attributable interest in the brokered
station for purposes of the national and local multiple ownership rules.
The 1996 Act provides that nothing therein "shall be construed to prohibit
the origination, continuation, or renewal of any television local marketing
agreement that is in compliance with the regulations of the [FCC]." The
legislative history of the 1996 Act reflects that this provision was intended to
grandfather television LMAs that were in existence upon enactment of the 1996
Act, and to allow television LMAs consistent with the FCC's rules subsequent to
enactment of the 1996 Act. In its pending rulemaking proceeding regarding the
television duopoly rule, the FCC has proposed to adopt a grandfathering policy
providing that, in the event that television LMAs become attributable interests,
LMAs that are in compliance with existing FCC rules and policies and were
entered into before November 5, 1996, would be permitted to continue in force
until the original term of the LMA expires. Under the FCC's proposal, television
LMAs that are entered into or renewed after November 5, 1996 would have to be
terminated if LMAs are made attributable interests and the LMA in question
resulted in a violation of the television multiple ownership rules. The
Company's LMAs with television stations WPTT in Pittsburgh, Pennsylvania, WNUV
in Baltimore, Maryland, WVTV in Milwaukee, Wisconsin, WRDC in Raleigh/Durham,
North Carolina, WABM in Birmingham, Alabama, and WDBB in Tuscaloosa, Alabama,
were in existence on both the date of enactment of the 1996 Act and November 5,
1996. The Company's LMAs with television stations KDNL in St. Louis, Missouri,
WTTV and WTTK in Indianapolis, Indiana, WLOS in Asheville, North Carolina, WFBC
in Greenville-Spartanburg, South Carolina, and KABB in San Antonio, Texas, were
entered into subsequent to the date of enactment of the 1996 Act but prior to
November 5, 1996. The Company's LMA with television station KRRT in Kerrville,
Texas was in existence on the date of enactment of the 1996 Act, but was assumed
by the Company subsequent to that date but prior to November 5, 1996.
The TV duopoly rule currently prevents the Company from acquiring the
licenses of television stations with which it has LMAs in those markets where
the Company owns a television station. As a result, if the FCC were to decide
that the provider of programming services under a television LMA should be
treated as having an attributable interest in the brokered station, and if it
did not relax its television duopoly rule, the Company could be required to
modify or terminate those of its LMAs that were not in existence on the date of
enactment of the 1996 Act or on November 5, 1996. Furthermore, if the FCC adopts
its present proposal with respect to the grandfathering of television LMAs, the
Company could be required to terminate even those LMAs that were in effect prior
to the date of enactment of the 1996 Act or prior to November 5, 1996, after the
initial term of the LMA or upon assignment of the LMA. In such an event, the
Company could be required to pay termination penalties under certain of such
LMAs. Further, if the FCC were to find, in connection with any of the Company's
LMAs, that the owners/licensees of the stations with which the Company has LMAs
failed to maintain control over their operations as required by FCC rules and
policies, the licensee of the LMA station and/or the Company could be fined or
set for hearing, the outcome of which could be a monetary forfeiture or, under
certain circumstances, loss of the applicable FCC license. The Company is unable
to predict the ultimate outcome of possible changes to these FCC rules and the
impact such FCC rules may have on its broadcasting operations.
On June 1, 1995, the Chief of the FCC's Mass Media Bureau released a Public
Notice concerning the processing of television assignment and transfer of
control applications proposing LMAs. Due to the pendency of the ongoing
rulemaking proceeding concerning attribution of ownership, the Mass Media Bureau
has placed certain restrictions on the types of television assignment and
transfer of control applications involving LMAs that it will approve during the
pendency of the rulemaking. Specifically, the Mass Media Bureau has stated that
it will not approve arrangements where a time broker seeks to finance a station
acquisition and hold an option to purchase the station in the future. The
Company believes that none of the Company's LMAs or TBAs fall within the ambit
of this Public Notice.
Radio
National Ownership Rule. Prior to the 1996 Act, the FCC's rules limited an
individual or entity from holding attributable interests in more than 20 AM and
20 FM radio stations nationwide. Pursuant to the
82
<PAGE>
1996 Act, the FCC has modified its rules to eliminate any limitation on the
number of radio stations a single individual or entity may own nationwide.
Local Ownership Rule. Prior to the 1996 Act, the FCC's rules generally
permitted an individual or entity to hold attributable interests in no more than
four radio stations in a local market (no more than two of which could be in the
same service (AM or FM)), and then only if the aggregate audience share of the
commonly owned stations did not exceed 25%. In markets with fewer than 15
commercial radio stations, an individual or entity could hold an attributable
interest in no more than three radio stations in the market (no more than two of
which could be in the same service), and then only if the number of the commonly
owned stations did not exceed 50% of the total number of commercial radio
stations in the market.
Pursuant to the 1996 Act, the limits on the number of radio stations one
entity may own locally have been increased as follows: (i) in a market with 45
or more commercial radio stations, an entity may own up to eight commercial
radio stations, not more than five of which are in the same service (AM or FM);
(ii) in a market with between 30 and 44 (inclusive) commercial radio stations,
an entity may own up to seven commercial radio stations, not more than four of
which are in the same service; (iii) in a market with between 15 and 29
(inclusive) commercial radio stations, an entity may own up to six commercial
radio stations, not more than four of which are in the same service; and (iv) in
a market with 14 or fewer commercial radio stations, an entity may own up to
five commercial radio stations, not more than three of which are in the same
service, except that an entity may not own more than 50% of the stations in such
market. These numerical limits apply regardless of the aggregate audience share
of the stations sought to be commonly owned. FCC ownership rules continue to
permit an entity to own one FM and one AM station in a local market regardless
of market size. Irrespective of FCC rules governing radio ownership, however,
the Department of Justice and the Federal Trade Commission have the authority to
determine, and in certain recent radio transactions not involving the Company
have determined, that a particular transaction presents antitrust concerns.
Local Marketing Agreements. As in television, a number of radio stations have
entered into LMAs. The Company has entered into LMAs with certain radio stations
in connection with the River City Acquisition.
The FCC's multiple ownership rules specifically permit radio station LMAs to
be entered into and implemented, so long as the licensee of the station which is
being programmed under the LMA maintains complete responsibility for and control
over programming and operations of its broadcast station and assures compliance
with applicable FCC rules and policies. For the purposes of the multiple
ownership rules, in general, a radio station being programmed pursuant to an LMA
by an entity is not considered an attributable ownership interest of that entity
unless that entity already owns a radio station in the same market. However, a
licensee that owns a radio station in a market, and brokers more than 15% of the
time on another station serving the same market, is considered to have an
attributable ownership interest in the brokered station for purposes of the
FCC's multiple ownership rules. As a result, in a market in which the Company
owns a radio station, the Company would not be permitted to enter into an LMA
with another local radio station which it could not own under the local
ownership rules, unless the Company's programming constituted 15% or less of the
other local station's programming time on a weekly basis. The FCC's rules also
prohibit a broadcast licensee from simulcasting more than 25% of its programming
on another station in the same broadcast service (i.e., AM-AM or FM-FM) through
a time brokerage or LMA arrangement where the brokered and brokering stations
serve substantially the same area.
Joint Sales Agreements. Over the past few years, a number of radio (and
television) stations have entered into cooperative arrangements commonly known
as joint sales agreements, or JSAs. While these agreements may take varying
forms, under the typical JSA, a station licensee obtains, for a fee, the right
to sell substantially all of the commercial advertising on a separately-owned
and licensed station in the same market. The typical JSA also customarily
involves the provision by the selling licensee of certain sales, accounting, and
"back office" services to the station whose advertising is being sold. The
typical JSA is distinct from an LMA in that a JSA (unlike an LMA) normally does
not involve programming.
83
<PAGE>
The FCC has determined that issues of joint advertising sales should be left
to enforcement by antitrust authorities, and therefore does not generally
regulate joint sales practices between stations. Currently, stations for which a
licensee sells time under a JSA are not deemed by the FCC to be attributable
interests of that licensee. However, in connection with its ongoing rulemaking
proceeding concerning the attribution rules, the FCC is considering whether JSAs
should be considered attributable interests or within the scope of the FCC's
cross-interest policy, particularly when JSAs contain provisions for the supply
of programming services and/or other elements typically associated with LMAs. If
JSAs become attributable interests as a result of changes in the FCC rules, the
Company may be required to terminate any JSA it might have with a radio station
which the Company could not own under the FCC's multiple ownership rules.
Other Ownership Matters
There remain in place after the 1996 Act a number of additional
cross-ownership rules and prohibitions pertaining to licensees of television and
radio stations. FCC rules, the Communications Act, or both generally prohibit an
individual or entity from having an attributable interest in both a television
station and a radio station, a daily newspaper, or a cable television system
that is located in or serves the same market area.
Antitrust Regulation. The Department of Justice and the Federal Trade
Commission have recently increased their scrutiny of the television and radio
industry, and have indicated their intention to review matters related to the
concentration of ownership within markets (including LMAs and JSAs) even when
the ownership or LMA or JSA in question is permitted under the laws administered
by the FCC or by FCC rules and regulations.
Radio/Television Cross-Ownership Rule. The FCC's radio/television
cross-ownership rule (the "one to a market" rule) generally prohibits a single
individual or entity from having an attributable interest in a television
station and a radio station serving the same market. However, in each of the 25
largest local markets in the United States, provided that there are at least 30
separately owned stations in the particular market, the FCC has traditionally
employed a policy that presumptively allows waivers of the one to a market rule
to permit the common ownership of one AM, one FM and one TV station in the
market. The 1996 Act directs the FCC to extend this policy to each of the top 50
markets. Moreover, the FCC has pending a rulemaking proceeding in which it has
solicited comment on whether the one to a market rule should be eliminated
altogether.
However, the FCC does not apply its presumptive waiver policy in cases
involving the common ownership of one television station, and two or more radio
stations in the same service (AM or FM), in the same market. Pending its ongoing
rulemaking proceeding to reexamine the one to a market rule, the FCC has stated
that it will consider waivers of the rule in such instances on a case-by-case
basis, considering (i) the public service benefits that will arise from the
joint operation of the facilities such as economies of scale, cost savings and
programming and service benefits; (ii) the types of facilities involved; (iii)
the number of media outlets owned by the applicant in the relevant market; (iv)
the financial difficulties of the stations involved; and (v) the nature of the
relevant market in light of the level of competition and diversity after joint
operation is implemented. The FCC has stated that it expects that any such
waivers that are granted will be conditioned on the outcome of the rulemaking
proceeding. See "Risk Factors--Multiple Ownership Rules and Effect on LMAs."
In its ongoing rulemaking proceeding to reexamine the one to a market rule,
the FCC has proposed the following options for modifying the rule in the event
it is not eliminated: (i) extending the presumptive waiver policy to any
television market in which a specified number of independently owned voices
would remain after common ownership of a television station and one or more
radio stations is effectuated; (ii) extending the presumptive waiver policy to
entities that seek to own more than one FM and/or one AM radio station; (iii)
reducing the minimum number of independently owned voices that must remain after
a transaction is effectuated; and (iv) modifying the five-factor case-by-case
test for waivers.
Local Television/Cable Cross-Ownership Rule. While the 1996 Act eliminates a
previous statutory prohibition against the common ownership of a television
broadcast station and a cable system that
84
<PAGE>
serve the same local market, the 1996 Act leaves the current FCC rule in place.
The legislative history of the Act indicates that the repeal of the statutory
ban should not prejudge the outcome of any FCC review of the rule.
Broadcast Network/Cable Cross-Ownership Rule. The 1996 Act directs the FCC to
eliminate its rules which formerly prohibited the common ownership of a
broadcast network and a cable system, subject to the provision that the FCC
revise its rules as necessary to ensure carriage, channel positioning, and
non-discriminatory treatment of non-affiliated broadcast stations by cable
systems affiliated with a broadcast network. In March 1996, the FCC issued an
order implementing this legislative change.
Broadcast/Daily Newspaper Cross-Ownership Rule. The FCC's rules prohibit the
common ownership of a radio or television broadcast station and a daily
newspaper in the same market. The 1996 Act does not eliminate or modify this
prohibition. In October 1996, however, the FCC initiated a rulemaking proceeding
to determine whether it should liberalize its waiver policy with respect to
cross-ownership of a daily newspaper and one or more radio stations in the same
market.
Dual Network Rule. The 1996 Act directs the FCC to repeal its rule which
formerly prohibited an entity from operating more than one television network.
In March 1996, the FCC issued an order implementing this legislative change.
Under the modified rule, a network entity is permitted to operate more than one
television network, provided, however, that ABC, CBS, NBC, and/or Fox are
prohibited from merging with each other or with another network television
entity such as UPN or Warner Brothers.
Expansion of the Company's broadcast operations on both a local and national
level will continue to be subject to the FCC's ownership rules and any changes
the FCC or Congress may adopt. Concomitantly, any further relaxation of the
FCC's ownership rules may increase the level of competition in one or more of
the markets in which the Company's stations are located, more specifically to
the extent that any of the Company's competitors may have greater resources and
thereby be in a superior position to take advantage of such changes.
Must-carry/retransmission Consent
Pursuant to the Cable Act of 1992, television broadcasters are required to
make triennial elections to exercise either certain "must-carry" or
"retransmission consent" rights in connection with their carriage by cable
systems in each broadcaster's local market. By electing the must-carry rights, a
broadcaster demands carriage on a specified channel on cable systems within its
Area of Dominant Influence, in general as defined by the Arbitron 1991-92
Television Market Guide. These must-carry rights are not absolute, and their
exercise is dependent on variables such as (i) the number of activated channels
on a cable system; (ii) the location and size of a cable system; and (iii) the
amount of programming on a broadcast station that duplicates the programming of
another broadcast station carried by the cable system. Therefore, under certain
circumstances, a cable system may decline to carry a given station.
Alternatively, if a broadcaster chooses to exercise retransmission consent
rights, it can prohibit cable systems from carrying its signal or grant the
appropriate cable system the authority to retransmit the broadcast signal for a
fee or other consideration. In October 1996, the Company elected must-carry or
retransmission consent with respect to each of its markets based on its
evaluation of the respective markets and the position of the Company's station
within the market. The Company's stations continue to be carried on all
pertinent cable systems, and the Company does not believe that its election has
resulted in the shifting of its stations to less desirable cable channel
locations. Certain of the Company's stations affiliated with Fox are required to
elect retransmission consent, because Fox's retransmission consent negotiations
on behalf of the Company resulted in agreements which extend into 1998.
Therefore, the Company will need to negotiate retransmission consent agreements
for these Fox-affiliated stations to attain carriage on those relevant cable
systems for the balance of this triennial period (i.e., through December 31,
1999). For subsequent elections beginning with the election to be made by
October 1, 1999, the must-carry market will be the station's DMA, in general as
defined by the Nielsen DMA Market and Demographic Rank Report of the prior year.
The must-carry rules have been subject to judicial scrutiny. In April 1993,
the United States District Court for the District of Columbia summarily upheld
the constitutionality of the legislative must-carry provisions under a First
Amendment challenge. However, in June 1994, the Supreme Court remanded the case
to the lower court with instructions to test the constitutionality of the
must-carry rules under an
85
<PAGE>
"intermediate scrutiny" standard. In a decision issued in December 1995, a
closely divided three-judge District Court panel ruled that the record showed
that there was substantial evidence before Congress from which it could draw the
reasonable inferences that (1) the must-carry rules were necessary to protect
the local broadcast industry; and (2) the burdens on cable systems with rapidly
increasing channel capacity would be quite small. Accordingly, the District
Court panel ruled that Congress had not violated the First Amendment in enacting
the "must-carry" provisions. In March 1997, the Supreme Court, by a 5-4
majority, affirmed the District Court's decision and thereby let stand the
must-carry rules.
Syndicated Exclusivity/Territorial Exclusivity
The FCC has imposed syndicated exclusivity rules and expanded existing
network nonduplication rules. The syndicated exclusivity rules allow local
broadcast television stations to demand that cable operators black out
syndicated non-network programming carried on "distant signals" (i.e., signals
of broadcast stations, including so-called "superstations," which serve areas
substantially removed from the cable system's local community). The network
non-duplication rules allow local broadcast network television affiliates to
require that cable operators black out duplicating network programming carried
on distant signals. However, in a number of markets in which the Company owns or
programs stations affiliated with a network, a station that is affiliated with
the same network in a nearby market is carried on cable systems in the Company's
market. This is not in violation of the FCC's network nonduplication rules.
However, the carriage of two network stations on the same cable system could
result in a decline of viewership adversely affecting the revenues of the
Company owned or programmed station.
Restrictions On Broadcast Advertising
Advertising of cigarettes and certain other tobacco products on broadcast
stations has been banned for many years. Various states restrict the advertising
of alcoholic beverages. Congressional committees have recently examined
legislation proposals which may eliminate or severely restrict the advertising
of beer and wine. Although no prediction can be made as to whether any or all of
the present proposals will be enacted into law, the elimination of all beer and
wine advertising would have an adverse effect upon the revenues of the Company's
stations, as well as the revenues of other stations which carry beer and wine
advertising.
The FCC has imposed commercial time limitations in children's television
programming pursuant to legislation. In television programs designed for viewing
by children of 12 years of age and under, commercial matter is limited to 12
minutes per hour on weekdays and 10.5 minutes per hour on weekends. In granting
renewal of the license for WBFF-TV, the FCC imposed a fine of $10,000 on the
Company alleging that the station had exceeded these limitations.
The Communications Act and FCC rules also place restrictions on the
broadcasting of advertisements by legally qualified candidates for elective
office. Among other things, (i) stations must provide "reasonable access" for
the purchase of time by legally qualified candidates for federal office; (ii)
stations must provide "equal opportunities" for the purchase of equivalent
amounts of comparable broadcast time by opposing candidates for the same
elective office; and (iii) during the 45 days preceding a primary or primary
run-off election and during the 60 days preceding a general or special election,
legally qualified candidates for elective office may be charged no more than the
station's "lowest unit charge" for the same class of advertisement, length of
advertisement, and daypart.
Programming And Operation
General. The Communications Act requires broadcasters to serve the "public
interest." The FCC gradually has relaxed or eliminated many of the more
formalized procedures it had developed in the past to promote the broadcast of
certain types of programming responsive to the needs of a station's community of
license. FCC licensees continue to be required, however, to present programming
that is responsive to their communities' issues, and to maintain certain records
demonstrating such responsiveness. Complaints from viewers concerning a
station's programming may be considered by the FCC when it evaluates renewal
applications of a licensee, although such complaints may be filed at any time
and
86
<PAGE>
generally may be considered by the FCC at any time. Stations also must pay
regulatory and application fees, and follow various rules promulgated under the
Communications Act that regulate, among other things, political advertising,
sponsorship identifications, the advertisement of contests and lotteries,
obscene and indecent broadcasts, and technical operations, including limits on
radiofrequency radiation. In addition, licensees must develop and implement
affirmative action programs designed to promote equal employment opportunities,
and must submit reports to the FCC with respect to these matters on an annual
basis and in connection with a renewal application. Failure to observe these or
other rules and policies can result in the imposition of various sanctions,
including monetary forfeitures, or the grant of a "short" (i.e., less than the
full) license renewal term or, for particularly egregious violations, the denial
of a license renewal application or the revocation of a license.
Children's Television Programming. Pursuant to legislation enacted in 1991,
all television stations have been required to broadcast some television
programming designed to meet the educational and informational needs of children
16 years of age and under. In August 1996, the FCC adopted new rules setting
forth more stringent children's programming requirements. Specifically, as of
September 1, 1997, television stations will be required to broadcast a minimum
of three hours per week of "core" children's educational programming, which the
FCC defines as programming that (i) has serving the educational and
informational needs of children 16 years of age and under as a significant
purpose; (ii) is regularly scheduled, weekly and at least 30 minutes in
duration; and (iii) is aired between the hours of 7:00 a.m. and 10:00 p.m.
Furthermore, as of January 2, 1997, "core" children's educational programs, in
order to qualify as such, are required to be identified as educational and
informational programs over the air at the time they are broadcast, and are
required to be identified in the children's programming reports required to be
placed in stations' public inspection files. Additionally, as of January 2,
1997, television stations are required to identify and provide information
concerning "core" children's programming to publishers of program guides and
listings.
Television Violence. The 1996 Act contains a number of provisions relating to
television violence. First, pursuant to the 1996 Act, the television industry
has developed a ratings system, and the FCC has recently solicited public
comment on that system. Furthermore, the 1996 Act provides that all television
sets larger than 13 inches that are manufactured one year after enactment of the
1996 Act must include the so-called "V-chip," a computer chip that allows
blocking of rated programming. In addition, the 1996 Act requires that all
television license renewal applications filed after May 1, 1995 contain
summaries of written comments and suggestions received by the station from the
public regarding violent programming.
Closed Captioning. The 1996 Act directs the FCC to adopt rules requiring
closed captioning of all broadcast television programming, except where
captioning would be "economically burdensome." The FCC has recently instituted a
rulemaking proceeding to implement such rules.
Digital Television
The FCC has taken a number of steps to implement digital television ("DTV")
broadcasting service in the United States. In December 1996, the FCC adopted a
DTV broadcast standard and, in April 1997, adopted decisions in several pending
rulemaking proceedings that establish service rules and a plan for implementing
DTV. The FCC adopted a DTV Table of Allotments that provides all authorized
television stations with a second channel on which to broadcast a DTV signal.
The FCC has attempted to provide DTV coverage areas that are comparable to
stations' existing service areas. The FCC has ruled that television broadcast
licensees may use their digital channels for a wide variety of services such as
high-definition television, multiple standard definition television programming,
audio, data, and other types of communications, subject to the requirement that
each broadcaster provide at least one free video channel equal in quality to the
current technical standard.
Initially, DTV channels will be located in the range of channels from channel
2 through channel 51. The FCC is requiring that affiliates of ABC, CBS, Fox and
NBC in the top 10 television markets begin digital broadcasting by May 1, 1999
(the stations affiliated with these networks in the top 10 markets have
voluntarily committed to begin digital broadcasting within 18 months), and that
affiliates of these networks in markets 11 through 30 begin digital broadcasting
by November 1999. The FCC's plan calls
87
<PAGE>
for the DTV transition period to end in the year 2006, at which time the FCC
expects that (i) DTV channels will be clustered either in the range of channels
2 through 46 or channels 7 through 51; and (ii) television broadcasters will
have ceased broadcasting on their non-digital channels, allowing that spectrum
to be recovered by the government for other uses. The FCC has stated that it
will open a separate proceeding to consider the recovery of television channels
60 through 69 and how those frequencies will be used after they are eventually
recovered from television broadcasters. Additionally, the FCC will open a
separate proceeding to consider to what extent the cable must-carry requirements
will apply to DTV signals.
Implementation of digital television will improve the technical quality of
television signals received by viewers. Under certain circumstances, however,
conversion to digital operation may reduce a station's geographic coverage area
or result in some increased interference. The FCC's DTV allotment plan may also
result in UHF stations having considerably less signal power within their
service areas than present VHF stations that move to DTV channels.
Implementation of digital television will also impose substantial additional
costs on television stations because of the need to replace equipment and
because some stations will need to operate at higher utility costs. The FCC is
also considering imposing new public interest requirements on television
licensees in exchange for their receipt of DTV channels. The Company cannot
predict what future actions the FCC might take with respect to DTV, nor can it
predict the effect of the FCC's present DTV implementation plan or such future
actions on the Company's business.
Proposed Changes
The Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation, ownership
and profitability of the Company's broadcast stations, result in the loss of
audience share and advertising revenues for the Company's broadcast stations,
and affect the ability of the Company to acquire additional broadcast stations
or finance such acquisitions. In addition to the changes and proposed changes
noted above, such matters may include, for example, the license renewal process,
spectrum use fees, political advertising rates, potential restrictions on the
advertising of certain products (beer, wine and hard liquor, for example), and
the rules and policies to be applied in enforcing the FCC's equal employment
opportunity regulations. Other matters that could affect the Company's broadcast
properties include technological innovations and developments generally
affecting competition in the mass communications industry, such as direct radio
and television broadcast satellite service, the continued establishment of
wireless cable systems and low power television stations, digital television and
radio technologies, and the advent of telephone company participation in the
provision of video programming service.
Other Considerations
The foregoing summary does not purport to be a complete discussion of all
provisions of the Communications Act or other congressional acts or of the
regulations and policies of the FCC. For further information, reference should
be made to the Communications Act, other congressional acts, and regulations and
public notices promulgated from time to time by the FCC. There are additional
regulations and policies of the FCC and other federal agencies that govern
political broadcasts, public affairs programming, equal employment opportunity,
and other matters affecting the Company's business and operations.
ENVIRONMENTAL REGULATION
Prior to the Company's ownership or operation of its facilities (including
KDSM-TV), substances or waste that are or might be considered hazardous under
applicable environmental laws may have been generated, used, stored or disposed
of at certain of those facilities. In addition, environmental conditions
relating to the soil and groundwater at or under the Company's (including KDSM,
Inc.'s) facilities may be affected by the proximity of nearby properties that
have generated, used, stored or disposed of hazardous substances. As a result,
it is possible that the Company or KDSM, Inc. could become subject to
environmental liabilities in the future in connection with these facilities
under applicable environmental laws and regulations. Although the Company and
KDSM, Inc. believe that they are in substantial
88
<PAGE>
compliance with such environmental requirements, and have not in the past been
required to incur significant costs in connection therewith, there can be no
assurance that the Company's or KDSM, Inc.'s costs to comply with such
requirements will not increase in the future. The Company presently believes
that none of its properties have any condition that is likely to have a material
adverse effect on the Company's financial condition or results of operations.
COMPETITION
The Company's television and radio stations (including KDSM-TV) compete for
audience share and advertising revenue with other television and radio stations
in their respective DMAs, as well as with other advertising media, such as
newspapers, magazines, outdoor advertising, transit advertising, yellow page
directories, direct mail and local cable and wireless cable systems. Some
competitors are part of larger organizations with substantially greater
financial, technical and other resources than the Company.
Television Competition. Competition in the television broadcasting industry
occurs primarily in individual DMAs. Generally, a television broadcasting
station in one DMA does not compete with stations in other DMAs. The Company's
television stations are located in highly competitive DMAs. In addition, certain
of the Company's DMAs are overlapped by both over-the-air and cable carriage of
stations in adjacent DMAs, which tends to spread viewership and advertising
expenditures over a larger number of television stations.
Broadcast television stations compete for advertising revenues primarily with
other broadcast television stations, radio stations and cable system operators
serving the same market. Major Network programming generally achieves higher
household audience levels than Fox, UPN and WB programming and syndicated
programming aired by independent stations. This can be attributed to a
combination of factors, including the Major Networks' efforts to reach a broader
audience, generally better signal carriage available when broadcasting over VHF
channels 2 through 13 versus broadcasting over UHF channels 14 through 69 and
the higher number of hours of Major Network programming being broadcast weekly.
However, greater amounts of advertising time are available for sale during Fox,
UPN and WB programming and non-network syndicated programming, and as a result
the Company believes that the Company's programming typically achieves a share
of television market advertising revenues greater than its share of the market's
audience.
Television stations compete for audience share primarily on the basis of
program popularity, which has a direct effect on advertising rates. A large
amount of the Company's prime time programming (including KDSM-TV's) is supplied
by Fox and to a lesser extent UPN, WB, ABC and CBS. In those periods, the
Company's affiliated stations are totally dependent upon the performance of the
networks' programs in attracting viewers. Non-network time periods are
programmed by the station primarily with syndicated programs purchased for cash,
cash and barter, or barter-only, and also through self-produced news, public
affairs and other entertainment programming.
Television advertising rates are based upon factors which include the size of
the DMA in which the station operates, a program's popularity among the viewers
that an advertiser wishes to attract, the number of advertisers competing for
the available time, the demographic makeup of the DMA served by the station, the
availability of alternative advertising media in the DMA (including radio and
cable), the aggressiveness and knowledge of sales forces in the DMA and
development of projects, features and programs that tie advertiser messages to
programming. The Company believes that its sales and programming strategies
allow it to compete effectively for advertising within its DMAs.
Other factors that are material to a television station's competitive
position include signal coverage, local program acceptance, network affiliation,
audience characteristics and assigned broadcast frequency. Historically, the
Company's UHF broadcast stations have suffered a competitive disadvantage in
comparison to stations with VHF broadcast frequencies. This historic
disadvantage has gradually declined through (i) carriage on cable systems, (ii)
improvement in television receivers, (iii) improvement in television
transmitters, (iv) wider use of all channel antennae, (v) increased availability
of programming, and (vi) the development of new networks such as Fox, UPN and
WB.
89
<PAGE>
The broadcasting industry is continuously faced with technical changes and
innovations, the popularity of competing entertainment and communications media,
changes in labor conditions, and governmental restrictions or actions of Federal
regulatory bodies, including the FCC, any of which could possibly have a
material effect on a television station's operations and profits. There are
sources of video service other than conventional television stations, the most
common being cable television, which can increase competition for a broadcast
television station by bringing into its market distant broadcasting signals not
otherwise available to the station's audience, serving as a distribution system
for national satellite-delivered programming and other non-broadcast programming
originated on a cable system and selling advertising time to local advertisers.
Other principal sources of competition include home video exhibition,
direct-to-home broadcast satellite television ("DBS") entertainment services and
multichannel multipoint distribution services ("MMDS"). Moreover, technology
advances and regulatory changes affecting programming delivery through fiber
optic telephone lines and video compression could lower entry barriers for new
video channels and encourage the development of increasingly specialized "niche"
programming. The 1996 Act permits telephone companies to provide video
distribution services via radio communication, on a common carrier basis, as
"cable systems" or as "open video systems," each pursuant to different
regulatory schemes. The Company is unable to predict the effect that
technological and regulatory changes will have on the broadcast television
industry and on the future profitability and value of a particular broadcast
television station.
The FCC authorizes DBS services throughout the United States. Currently, two
FCC permitees, DirecTV and United States Satellite Broadcasting, provide
subscription DBS services via high-power communications satellites and small
dish receivers, and other companies provide direct-to-home video service using
lower powered satellites and larger receivers. Additional companies are expected
to commence direct-to-home operations in the near future. DBS and MMDS, as well
as other new technologies, will further increase competition in the delivery of
video programming.
The Company cannot predict what other matters might be considered in the
future, nor can it judge in advance what impact, if any, the implementation of
any of these proposals or changes might have on its business.
The Company is exploring ways in which it might take advantage of new
technology, including the delivery of additional content and services via the
broadcast spectrum. There can be no assurance that any such efforts will result
in the development of technology or services that are commercially successful.
The Company also competes for programming, which involves negotiating with
national program distributors or syndicators that sell first-run and rerun
packages of programming. The Company's stations compete for exclusive access to
those programs against in-market broadcast station competitors for syndicated
products. Cable systems generally do not compete with local stations for
programming, although various national cable networks from time to time have
acquired programs that would have otherwise been offered to local television
stations. Public broadcasting stations generally compete with commercial
broadcasters for viewers but not for advertising dollars.
Historically, the cost of programming had increased because of an increase in
the number of new Independent stations and a shortage of quality programming.
However, the Company believes that over the past five years program prices have
stabilized and, in some instances, have declined as a result of recent increases
in the supply of programming and the failure of some Independent stations.
The Company believes it competes favorably against other television stations
because of its management skill and experience, the ability of the Company
historically to generate revenue share greater than its audience share, the
network affiliations and its local program acceptance. In addition, the Company
believes that it benefits from the operation of multiple broadcast properties,
affording it certain nonquantifiable economies of scale and competitive
advantages in the purchase of programming.
Radio Competition. Radio broadcasting is a highly competitive business, and
each of the radio stations operated by the Company competes for audience share
and advertising revenue directly with other radio stations in its geographic
market, as well as with other media, including television, cable television,
newspapers, magazines, direct mail and billboard advertising. The audience
ratings and advertising revenue of each of such stations are subject to change,
and any adverse change in a particular
90
<PAGE>
market could have a material adverse effect on the revenue of such radio
stations located in that market. There can be no assurance that any one of the
Company's radio stations will be able to maintain or increase its current
audience ratings and radio advertising revenue market share.
The Company will attempt to improve each radio station's competitive position
with promotional campaigns designed to enhance and reinforce its identities with
the listening public. Extensive market research is conducted in order to
identify specific demographic groups and design a programming format for those
groups. The Company seeks to build a strong listener base composed of specific
demographic groups in each market, and thereby attract advertisers seeking to
reach these listeners. Aside from building its stations' identities and
targeting its programming at specific demographic groups, management believes
that the Company also obtains a competitive advantage by operating duopolies or
multiple stations in the nation's larger mid-size markets.
The radio broadcasting industry is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems and by digital audio broadcasting
("DAB"). DAB may provide a medium for the delivery by satellite or terrestrial
means of multiple new audio programming formats to local and national audiences.
Historically, the radio broadcasting industry has grown in terms of total
revenues despite the introduction of new technologies for the delivery of
entertainment and information, such as television broadcasting, cable
television, audio tapes and compact disks. There can be no assurance, however,
that the development or introduction in the future of any new media technology
will not have an adverse effect on the radio broadcast industry.
EMPLOYEES
As of December 31, 1996, the Company had approximately 2,359 employees. With
the exception of certain of the employees of KOVR-TV, KDNL-TV, WBEN-AM and
WWL-AM, none of the employees are represented by labor unions under any
collective bargaining agreement. No significant labor problems have been
experienced by the Company, and the Company considers its overall labor
relations to be good.
LEGAL PROCEEDINGS
The Company (including KDSM, Inc.) currently and from time to time is
involved in litigation incidental to the conduct of its business. The Company is
not party to any lawsuit or proceeding that, in the opinion of the Company, will
have a material adverse effect on the Company or KDSM, Inc.
91
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
In connection with the Old Securities Offering, the Company, KDSM, Inc. and
the Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company, KDSM, Inc. and the Trust agreed,
among other things, (i) to use their best efforts to file under the Securities
Act a registration statement with respect to the exchange of the Old Preferred
Securities, the Old KDSM Senior Debentures, the Old Parent Preferred, the Old
Parent Guarantee and the Old Parent Debenture Guarantee (collectively, the "Old
Securities") for new securities with terms identical in all material respects
(except as described below) to the terms of the Old Securities and (ii) to use
their best efforts to cause such registration statement to become effective. A
copy of the Registration Rights Agreement has been filed as an Exhibit to the
Registration Statement of which this Prospectus is a part. The Exchange Offer is
being made to satisfy the contractual obligations of the Company, KDSM, Inc. and
the Trust under the Registration Rights Agreement.
The Old Preferred Securities provide, among other things, that, if the
Exchange Offer is not consummated by August 8, 1997, additional interest (the
"Registration Default Interest") will become payable in respect of the Old KDSM
Senior Debentures, and corresponding additional distributions (the "Registration
Default Distributions", and, together with the Registration Default Interest,
the "Penalty Amounts") will become payable on the Old Parent Preferred and the
Old Preferred Securities, at the rate of .50% per annum for 60 days starting on
the 31st day after August 8, and increasing by an additional .25% per annum at
the beginning of each subsequent 90-day period; provided that such Penalty
Amounts will cease to accrue upon consummation of the Exchange Offer; and
provided further that the Penalty Amounts rate may not exceed 1.5% per annum.
See "Risk Factors--Consequences of a Failure to Exchange Old Preferred
Securities" and "Description of the Old Securities." The form and terms of the
New Preferred Securities are identical in all material respects to the form and
terms of the Old Preferred Securities except that the New Preferred Securities
have been registered under the Securities Act and therefore will not contain
terms with respect to transfer restrictions and will not provide for Penalty
Amounts for future periods.
The Exchange Offer is not being made to, nor will the Company, KDSM, Inc. or
the Trust accept tenders for exchange from, holders of Old Preferred Securities
in any jurisdiction in which the Exchange Offer or the acceptance thereof would
not be in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Old Preferred Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Preferred Securities are held of record by The Depository Trust Company who
desires to deliver such Old Preferred Securities by book-entry transfer at The
Depository Trust Company.
Pursuant to the Exchange Offer, the Company, KDSM, Inc. and the Trust, as
applicable, will exchange as soon as practicable after the date hereof, the Old
Parent Guarantee for the New Parent Guarantee, the Old KDSM Senior Debentures,
for the New KDSM Senior Debentures, the Old Parent Preferred for the New Parent
Preferred, and the Old Parent Debenture Guarantee for the New Parent Debenture
Guarantee . The New Parent Preferred, the New KDSM Senior Debentures, the New
Parent Guarantee, and the New Parent Debenture Guarantee have been registered
under the Securities Act.
TERMS OF THE EXCHANGE
The Company, KDSM, Inc. and the Trust hereby offer, upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal, to exchange up to $200,000,000 aggregate liquidation
amount of New Preferred Securities for a like aggregate Liquidation Value of Old
Preferred Securities properly tendered on or prior to the Expiration Date (as
defined below) and not properly withdrawn in accordance with the procedures
described below. The Trust will issue, promptly after the Expiration Date, an
aggregate Liquidation Value of up to $200,000,000 of New
92
<PAGE>
Preferred Securities in exchange for a like principal amount of outstanding Old
Preferred Securities tendered and accepted in connection with the Exchange
Offer. Holders may tender their Old Preferred Securities in any integral
multiple of $1,000. The Exchange Offer is not conditioned upon any minimum
Liquidation Value of Old Preferred Securities being tendered. As of the date of
this Prospectus $200,000,000 aggregate Liquidation Value of the Old Preferred
Securities is outstanding.
Holders of Old Preferred Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Preferred Securities that are
not tendered for, or are tendered but not accepted in connection with the
Exchange Offer, will remain outstanding and be entitled to the benefits of the
Amended and Restated Trust Agreement, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to Exchange
Old Preferred Securities" and "Description of the Old Securities." If any
tendered Old Preferred Securities are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Preferred Securities will be
returned, without expense, to the tendering holder thereof promptly after the
Expiration Date, or, if such unaccepted securities are uncertificated, such
securities will be returned, without expense to the tendering holder thereof
promptly after the Expiration Date via book entry transfer.
Holders who tender Old Preferred Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Preferred Securities in connection with the Exchange Offer.
The Company will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
NONE OF THE BOARD OF DIRECTORS OF THE COMPANY, THE BOARD OF DIRECTORS OF
KDSM, INC. OR THE TRUSTEES OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF
OLD PREFERRED SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL
OR ANY PORTION OF THEIR OLD PREFERRED SECURITIES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS
OF OLD PREFERRED SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER
PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD PREFERRED
SECURITIES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL
AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL
POSITION AND REQUIREMENTS.
AMENDMENT OF PARENT PREFERRED ARTICLES SUPPLEMENTARY
In connection with the Exchange Offer, the Company is proposing to make
a technical amendment to the Parent Preferred Articles Supplementary in order to
clarify the ability of Sinclair to issue the New Parent Preferred in connection
with the Exchange Offer and to ensure that shares of New Parent Preferred issued
in the Exchange Offer are validly issued. The "Redemption" section of the Parent
Preferred Articles Supplementary provides that "Shares of Series C Preferred
Stock issued and reacquired . . . may not be reissued or sold as shares of
Series C Preferred Stock." In order to rule out the possibility that this
provision could be interpreted to prohibit the Company from issuing shares of
New Parent Preferred in exchange for shares of Old Parent Preferred, the Company
is proposing to append the following clause to the provision set out above:
; provided however, that nothing in these Articles Supplementary shall be
deemed to prevent the Company from exchanging shares of Series C Preferred
Stock for like shares that have been registered under the Securities Act of
1933 pursuant to the Company's obligations under the Registration Rights
Agreement.
The consent of holders of a majority in aggregate Liquidation Value of the
Preferred Securities will be required to effect this amendment. The vote of
Preferred Securities holders is required because KDSM, which holds the Parent
Preferred, agreed in the Pledge Agreement that it would not consent to
93
<PAGE>
any actions under the Parent Preferred without the approval of the holders of a
majority in principal amount of the KDSM Senior Debentures. The KDSM Senior
Debentures are held by the Trust, which agreed in the Pledge Agreement that
while it held the KDSM Senior Debentures it would not provide such approval
without the consent of the holders of a majority in aggregate Liquidation Value
of the outstanding Preferred Securities. Submission of a Letter of Transmittal
in connection with the Exchange Offer will constitute consent to the proposed
amendment unless the holder indicates otherwise on the Letter of Transmittal.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on _______
__, 1997 unless the Exchange Offer is extended by the Company, KDSM, Inc. and
the Trust (in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended). The Company, KDSM, Inc. and
the Trust expressly reserve the right in their sole and absolute discretion,
subject to applicable law, at any time and from time to time, (i) to delay the
acceptance of the Old Preferred Securities for exchange, (ii) to terminate the
Exchange Offer (whether or not any Old Preferred Securities have theretofore
been accepted for exchange) if the Company, KDSM, Inc. and the Trust determine,
in their sole and absolute discretion, that any of the events or conditions
referred to under "--Conditions to the Exchange Offer" have occurred or exist or
have not been satisfied, (iii) to extend the Expiration Date of the Exchange
Offer and retain all Old Preferred Securities tendered pursuant to the Exchange
Offer, subject, however, to the right of holders of Old Preferred Securities to
withdraw their tendered Old Preferred Securities as described under
"--Withdrawal Rights," and (iv) to waive any condition or otherwise amend the
terms of the Exchange Offer in any respect. If the Exchange Offer is amended in
a manner determined by the Company, KDSM, Inc. and the Trust to constitute a
material change, or if the Company, KDSM, Inc. and the Trust waive a material
condition of the Exchange Offer, the Company, KDSM, Inc. or the Trust will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders of the Old Preferred Securities, and
the Company, KDSM, Inc. and the Trust will extend the Exchange Offer to the
extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company, KDSM, Inc. or the Trust may choose to make any
public announcement and subject to applicable law, none of the Company, KDSM,
Inc. or the Trust shall have any obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to an
appropriate news agency.
ACCEPTANCE OR EXCHANGE AND ISSUANCE OF NEW PREFERRED SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company, KDSM, Inc. and the Trust will exchange, and will issue to the Exchange
Agent, New Preferred Securities for Old Preferred Securities validly tendered
and not withdrawn (pursuant to the withdrawal rights described under
"--Withdrawal Rights") promptly after the Expiration Date. In all cases,
delivery of New Preferred Securities in exchange for Old Preferred Securities
tendered and accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of (i) Old Preferred Securities
or a book-entry confirmation of a book-entry transfer of Old Preferred
Securities into the Exchange Agent's account at The Depositary Trust Company
("DTC"), (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, and (iii)
any other documents required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Preferred Securities into the Exchange Agent's
account at DTC.
Subject to the terms and conditions of the Exchange Offer, the Company and
the Trust will be deemed to have accepted for exchange, and thereby exchanged,
Old Preferred Securities validly tendered and not withdrawn as, if and when the
Company or the Trust gives oral or written notice to the
94
<PAGE>
Exchange Agent of the Company's and the Trust's acceptance of such Old Preferred
Securities for exchange pursuant to the Exchange Offer. The Exchange Agent will
act as agent for the Company, KDSM, Inc. and the Trust for the purpose of
receiving tenders of Old Preferred Securities, Letters of Transmittal and
related documents, and as agent for tendering holders for the purpose of
receiving Old Preferred Securities, Letters of Transmittal and related documents
and transmitting New Preferred Securities to validly tendering holders. Such
exchange will be made promptly after the Expiration Date. If for any reason
whatsoever, acceptance for exchange or the exchange of any Old Preferred
Securities tendered pursuant to the Exchange Offer is delayed (whether before or
after the Company's, KDSM, Inc.'s and the Trust's acceptance for exchange of Old
Preferred Securities) or the Company, KDSM, Inc. or the Trust extends the
Exchange Offer or is unable to accept for exchange or exchange Old Preferred
Securities tendered pursuant to the Exchange Offer, then, without prejudice to
the Company's, KDSM, Inc.'s or the Trust's rights set forth herein, the Exchange
Agent may, nevertheless, on behalf of the Company, KDSM, Inc. and the Trust and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Preferred
Securities and such Old Preferred Securities may not be withdrawn except to the
extent tendering holders are entitled to withdrawal rights as described under
"--Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Old Preferred Securities
will warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Old Preferred
Securities, that the Trust will acquire good, marketable and unencumbered title
to the tendered Old Preferred Securities, free and clear of all liens,
restrictions, charges and encumbrances, and the Old Preferred Securities
tendered for exchange are not subject to any adverse claims or proxies. The
holder also will warrant and agree that it will, upon request, execute and
deliver any additional documents deemed by the Company, KDSM, Inc., the Trust or
the Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the Old Preferred Securities tendered pursuant to
the Exchange Offer.
PROCEDURES FOR TENDERING OLD PREFERRED SECURITIES
Valid Tender. Except as set forth below, in order for Old Preferred
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at its address set forth under "--Exchange
Agent," and either (i) tendered Old Preferred Securities must be received by the
Exchange Agent, or (ii) such Old Preferred Securities must be tendered pursuant
to the procedures for book-entry transfer set forth below and a book-entry
confirmation must be received by the Exchange Agent, in each case on or prior to
the Expiration Date, or (iii) the guaranteed delivery procedures set forth below
must be complied with.
If less than all of the Old Preferred Securities are tendered, a tendering
holder should fill in the amount of Old Preferred Securities being tendered in
the appropriate box on the Letter of Transmittal. The entire amount of Old
Preferred Securities delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book Entry Transfer. The Exchange Agent will establish an account with
respect to the Old Preferred Securities at DTC for purposes of the Exchange
Offer within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Preferred Securities by causing DTC to
transfer such Old Preferred Securities into the Exchange Agent's account at DTC
in accordance with DTC's procedures for transfers. However, although delivery of
Old Preferred Securities may be effected through
95
<PAGE>
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, must in any
case be delivered to and received by the Exchange Agent at its address set forth
under "--Exchange Agent" on or prior to the Expiration Date, or the guaranteed
delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Old Preferred Securities need not
be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Old Preferred Securities is
registered in a name other than that of the person surrendering the certificate
or (b) such registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (a) or (b) above, such certificates for Old Preferred Securities
must be duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the Letter of Transmittal
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (an "Eligible Institution"), unless surrendered
on behalf of such Eligible Institution. See Instruction 1 to the Letter of
Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Preferred Securities
pursuant to the Exchange Offer and the certificates for such Old Preferred
Securities are not immediately available or time will not permit all required
documents to reach the Exchange Agent on or before the Expiration Date, or the
procedures for book-entry transfer cannot be completed on a timely basis, such
Old Preferred Securities may nevertheless be tendered, provided that all of the
following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is
received by the Exchange Agent, as provided below, on or prior to
Expiration Date; and
(iii)the certificates (or a book-entry confirmation) representing all
tendered Old Preferred Securities, in proper form for transfer,
together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature
guarantees and any other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three Nasdaq
Stock Market trading days after the date of execution of such Notice
of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by
facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Preferred
Securities in exchange for Old Preferred Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Preferred Securities, or of a
book-entry confirmation with respect to such Old Preferred Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery of
New Preferred Securities might not be made to all tendering holders at the same
time, and will depend upon when Old Preferred Securities, book-entry
confirmations with respect to Old Preferred Securities and other required
documents are received by the Exchange Agent.
The acceptance by the Company, KDSM, Inc. and the Trust for exchange of Old
Preferred Securities tendered pursuant to any of the procedures described above
will constitute a binding agreement between the tendering holder, the Company,
KDSM, Inc. and the Trust upon the terms and subject to the conditions of the
Exchange Offer.
96
<PAGE>
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Preferred Securities will be determined by the Trust, in its
sole discretion, whose determination shall be final and binding on all parties.
The Company, KDSM, Inc. and the Trust reserve the absolute right, in their sole
and absolute discretion, to reject any and all tenders determined by them not to
be in proper form or the acceptance of which, or exchange for, may, in the view
of counsel to the Company, KDSM, Inc. and the Trust, be unlawful. The Company,
KDSM, Inc. and the Trust also reserve the absolute right, subject to applicable
law, to waive any of the conditions of the Exchange Offer as set forth under
"--Conditions to the Exchange Offer" or any condition or irregularity in any
tender of Old Preferred Securities of any particular holder whether or not
similar conditions or irregularities are waived in the case of other holders.
The Company's, KDSM, Inc.'s and the Trust's interpretation of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Old Preferred
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. None of the Company,
KDSM, Inc., the Trust, any affiliates or assigns of the Company, KDSM, Inc. or
the Trust, the Exchange Agent or any other person shall be under any duty to
give any notification of any irregularities in tenders or incur any liability
for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and unless waived by the Company, KDSM, Inc. or
the Trust, proper evidence satisfactory to the Company, KDSM, Inc. or the Trust,
in its sole discretion, of such person's authority to so act must be submitted.
A beneficial owner of Old Preferred Securities that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
or custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF NEW PREFERRED SECURITIES
The Company, KDSM, Inc. and the Trust are making the Exchange Offer for the
Old Preferred Securities in reliance on the position of the staff of the
Division of Corporation Finance of the Commission (the "Staff") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, none of the Company, KDSM, Inc. or the Trust sought its own
interpretive letter and there can be no assurance that the Staff would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff, and subject to the two immediately following sentences, the Company,
KDSM, Inc. and the Trust believe that New Preferred Securities issued pursuant
to this Exchange Offer in exchange for Old Preferred Securities may be offered
for resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Preferred Securities are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such New Preferred Securities. However, any
holder of Old Preferred Securities who is an "affiliate" of the Company, KDSM,
Inc. or the Trust or who intends to participate in the Exchange Offer for the
purpose of distributing New Preferred Securities, or any broker-dealer who
purchased Old Preferred Securities from the Trust to resell pursuant to Rule
144A or any other available exemption under the Securities Act, (a) will not be
able to rely on the interpretations of the Staff set out in the above-mentioned
interpretive letters, (b) will not be permitted or entitled to tender such Old
Preferred Securities in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Preferred Securities
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Old Preferred
Securities acquired for its own account as a result of market-making or other
trading activities and exchanges such Old Preferred Securities for New Preferred
Securities, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such New
Preferred Securities.
97
<PAGE>
Each holder of Old Preferred Securities who wishes to exchange Old Preferred
Securities for New Preferred Securities in the Exchange Offer will be required
to represent that (i) it is not an "affiliate" of the Company, KDSM, Inc. or the
Trust, (ii) any New Preferred Securities to be received by it are being acquired
in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Preferred Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such New Preferred Securities. In addition, the Company, KDSM, Inc. and the
Trust may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Company, KDSM, Inc. and the
Trust (or an agent thereof) in writing information as to the number of
"beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act) on
behalf of whom such holder holds the Preferred Securities to be exchanged in the
Exchange Offer. Each broker-dealer that receives New Preferred Securities for
its own account pursuant to the Exchange Offer must acknowledge that it acquired
the Old Preferred Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Preferred Securities. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. Based on the position taken by the Staff in the interpretive letters
referred to above, the Company and the Trust believe that broker-dealers who
acquired Old Preferred Securities for their own accounts as a result of
market-making activities or other trading activities ("Participating
Broker-Dealers") may fulfill their prospectus delivery requirements with respect
to the New Preferred Securities received upon exchange of such Old Preferred
Securities (other than Old Preferred Securities which represent an unsold
allotment from the original sale of the Old Preferred Securities) with a
prospectus meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains a description
of the plan of distribution with respect to the resale of such New Preferred
Securities. Accordingly, this Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer during the
period referred to below in connection with resales of New Preferred Securities
received in exchange for Old Preferred Securities where such Old Preferred
Securities were acquired by such Participating Broker-Dealer for its own account
as a result of market-making or other trading activities. Subject to certain
provisions set forth in the Preferred Securities Registration Rights Agreement,
the Company and the Trust have agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
in connection with resales of such New Preferred Securities for a period ending
180 days after the Expiration Date or, if earlier, when all such New Preferred
Securities have been disposed of by such Participating Broker-Dealer. See "Plan
of Distribution." Any Participating Broker-Dealer who is an "affiliate" of the
Company, KDSM, Inc. or the Trust may not rely on such interpretive letters and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Preferred
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that, upon receipt of notice from the
Company, KDSM, Inc. or the Trust of the occurrence of any event or the discovery
of any fact which makes any statement contained or incorporated by reference in
this Prospectus untrue in any material respect or which causes this Prospectus
to omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreements, such Participating
Broker-Dealer will suspend the sale of New Preferred Securities (or the New KDSM
Senior Debentures or the New Parent Guarantee or the New Parent Debenture
Guarantee, as applicable) pursuant to this Prospectus until the Company, KDSM,
Inc. or the Trust has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or supplemented
Prospectus to such Participating Broker-Dealer or the Company or KDSM, Inc. or
the Trust has given notice that the sale of the New Preferred Securities (or the
New KDSM Senior Debentures or the New Parent Guarantee or the New Parent
Debenture Guarantee, as applicable) may be resumed, as the case may be.
98
<PAGE>
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Preferred Securities may
be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its addresses set forth under "--Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Preferred Securities to be withdrawn,
the aggregate principal amount of Old Preferred Securities to be withdrawn, and
(if certificates for such Old Preferred Securities have been tendered) the name
of the registered holder of the Old Preferred Securities as set forth on the Old
Preferred Securities, if different from that of the person who tendered such Old
Preferred Securities. If Old Preferred Securities have been delivered or
otherwise identified to the Exchange Agent, then prior to the physical release
of such Old Preferred Securities, the tendering holder must submit the serial
numbers shown on the particular Old Preferred Securities to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Old Preferred Securities tendered for the
account of an Eligible Institution. If Old Preferred Securities have been
tendered pursuant to the procedures for book-entry transfer set forth in
"--Procedures for Tendering Old Preferred Securities," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawal of Old Preferred Securities, in which case a notice of withdrawal
will be effective if delivered to the Exchange Agent by written, telegraphic,
telex or facsimile transmission. Withdrawals of tenders of Old Preferred
Securities may not be rescinded. Old Preferred Securities properly withdrawn
will not be deemed validly tendered for purposes of the Exchange Offer, but may
be retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under "--Procedures for
Tendering Old Preferred Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, KDSM,
Inc. and the Trust, in their sole discretion, whose determination shall be final
and binding on all parties. None of the Company, KDSM, Inc., the Trust, any
affiliates or assigns of the Company, KDSM, Inc. or the Trust, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Preferred Securities which have
been tendered but which are withdrawn will be returned to the holder thereof
promptly after withdrawal.
DISTRIBUTIONS ON THE NEW PREFERRED SECURITIES
Holders of Old Preferred Securities whose Old Preferred Securities are
accepted for exchange will not receive accumulated distributions on such Old
Preferred Securities for any period from and after the last distribution date
with respect to such Old Preferred Securities prior to the original issue date
of the New Preferred Securities or, if no such distributions have been made,
will not receive any accumulated distributions on such Old Preferred Securities,
and will be deemed to have waived the right to receive any distributions on such
Old Preferred Securities accumulated from and after such distribution date or,
if no such distributions have been made, from and after March 12, 1997. However,
because distributions on the New Preferred Securities will accumulate from March
12, 1997, the amount of the distributions received by holders whose Old
Preferred Securities are accepted for exchange will not be affected by the
exchange.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Trust will not be required to accept for exchange, or
to exchange, any Old Preferred Securities for any New Preferred Securities, and
may terminate the Exchange Offer (whether or not any Old Preferred Securities
have theretofore been accepted for exchange) or may waive any conditions to or
amend the Exchange Offer, if, in the opinion of legal counsel to the Company,
KDSM, Inc. or the Trust, the consummation of the Exchange Offer or any portion
thereof would violate any applicable law or any applicable interpretation of the
Commission or its staff. In such event, if the Company, KDSM, Inc. and the Trust
determine to amend the Exchange Offer and such amendment constitutes a material
change to
99
<PAGE>
the Exchange Offer, the Company, KDSM, Inc. and the Trust will promptly disclose
such amendment by means of a prospectus supplement that will be distributed to
the registered holders of the Old Preferred Securities, and the Company, KDSM,
Inc. and the Trust will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act. Holders of Old Securities are entitled to certain
rights under the Registration Rights Agreement in the event the Company, KDSM,
Inc. and the Trust are unable to consummate the Exchange Offer. See "Description
of the Old Securities."
EXCHANGE AGENT
First Union National Bank of Maryland has been appointed as Exchange Agent
for the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
First Union National Bank of Maryland
901 E. Cary Street, 2nd Floor
Richmond, VA 23219
Phone: (804) 788-9663
Facsimile: (804) 788-9661
Attention: Ms. Patricia A. Welling
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Preferred Securities, and in handling or
tendering for their customers.
Holders who tender their Old Preferred Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Preferred Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Preferred Securities
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Preferred Securities in connection with the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered holder or
any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
None of the Company, KDSM, Inc. or the Trust will make any payment to
brokers, dealers or others soliciting acceptances of the Exchange Offer.
100
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company currently has two classes of Common Stock, each having a par
value of $.01 per share, and, including the Old Parent Preferred, two classes of
issued and outstanding Preferred Stock, also with a par value of $.01 per share.
The Controlling Stockholders, by virtue of their beneficial ownership of 100% of
the shares of the Class B Common Stock, with its super voting rights as
described below, maintain control over the Company's business and operations.
The following summary of the Company's capital stock does not purport to be
complete and is subject to detailed provisions of, and is qualified in its
entirety by reference to, the Company's Amended and Restated Articles of
Incorporation (the "Amended Certificate"). The Amended Certificate is an exhibit
to the registration statement of which this Prospectus is a part and is
available as set forth under "Available Information."
The Amended Certificate authorizes the Company to issue up to 100,000,000
shares of Class A Common Stock, par value $.01 per share, 35,000,000 shares of
Class B Common Stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, par value $.01 per share. Following the Old Securities
Offering, there are 2,000,000 shares of Series C Preferred Stock issued and
outstanding.
COMMON STOCK
The rights of the holders of the Class A Common Stock and Class B Common
Stock are substantially identical in all respects, except for voting rights and
the right of Class B Common Stock to convert into Class A Common Stock. The
holders of the Class A Common Stock are entitled to one vote per share. The
holders of the Class B Common Stock are entitled to ten votes per share except
as described below. The holders of all classes of Common Stock entitled to vote
will vote together as a single class on all matters presented to the
stockholders for their vote or approval except as otherwise required by the
general corporation laws of the State of Maryland ("Maryland General Corporation
Law"). Except for transfers to a "Permitted Transferee" (generally, related
parties of a Controlling Stockholder), any transfer of shares of Class B Common
Stock held by any of the Controlling Stockholders will cause such shares to be
automatically converted to Class A Common Stock. In addition, if the total
number of shares of Common Stock held by the Controlling Stockholders falls to
below 10% of the total number of shares of Common Stock outstanding, all of the
outstanding shares of Class B Common Stock automatically will be classified as
Class A Common Stock. In any merger, consolidation or business combination, the
consideration to be received per share by the holders of the Class A Common
Stock must be identical to that received by the holders of the Class B Common
Stock, except that in any such transaction in which shares of a third party's
common stock are distributed in exchange for the Company's Common Stock, such
shares may differ as to voting rights to the extent that such voting rights now
differ among the classes of Common Stock.
The holders of Class A Common Stock and Class B Common Stock will vote as a
single class, with each share of each class entitled to one vote per share, with
respect to any proposed (a) "Going Private" transaction; (b) sale or other
disposition of all or substantially all of the Company's assets; (c) sale or
transfer which would cause a fundamental change in the nature of the Company's
business; or (d) merger or consolidation of the Company in which the holders of
the Company's Common Stock will own less than 50% of the Common Stock following
such transaction. A "Going Private" transaction is any "Rule 13e-3 transaction,"
as such term is defined in Rule 13e-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") between the Company and (i) the
Controlling Stockholders, (ii) any affiliate of the Controlling Stockholders, or
(iii) any group of which the Controlling Stockholders are an affiliate or of
which the Controlling Stockholders are a member. An "affiliate" is defined as
(i) any individual or entity who or that, directly or indirectly, controls, is
controlled by, or is under the common control of the Controlling Stockholders;
(ii) any corporation or organization (other than the Company or a majority-owned
subsidiary of the Company) of which any of the Controlling Stockholders is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of voting securities or in which any of the Controlling
Stockholders has a substantial beneficial
101
<PAGE>
interest; (iii) a voting trust or similar arrangement pursuant to which the
Controlling Stockholders generally control the vote of the shares of Common
Stock held by or subject to any such trust or arrangement; (iv) any other trust
or estate in which any of the Controlling Stockholders has a substantial
beneficial interest or as to which any of the Controlling Stockholders serves as
a trustee or in a similar fiduciary capacity; or (v) any relative or spouse of
the Controlling Stockholders or any relative of such spouse who has the same
residence as any of the Controlling Stockholders.
Under the Maryland General Corporation Law, the holders of Common Stock are
entitled to vote as a separate class with respect to any amendment of the
Amended Certificate that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or modify or change the powers, preferences or special
rights of the shares of such class so as to affect such class adversely.
For a discussion of the effects of disproportionate voting rights upon the
holders of the Class A Common Stock, see "Risk Factors--Voting Rights; Control
by Controlling Stockholders; Potential Anti-Takeover Effect of Disproportionate
Voting Rights."
Stockholders of the Company have no preemptive rights or other rights to
subscribe for additional shares, except that the Class B Common Stock is
convertible into Class A Common Stock by the holders thereof. Except as
described in the prior sentence, no shares of any class of Common Stock have
conversion rights or are subject to redemption. Subject to the rights of any
outstanding preferred stock which may be hereafter classified and issued,
holders of Common Stock are entitled to receive dividends, if any, as may be
declared by the Company's Board of Directors out of funds legally available
therefore and to share, regardless of class, equally on a share-for-share basis
in any assets available for distribution to stockholders on liquidation,
dissolution or winding-up of the Company. Under the Bank Credit Agreement, the
Existing Indentures and certain other debt of the Company, the Company's ability
to declare Common Stock dividends is restricted. See "Dividend Policy."
PREFERRED STOCK
Series B Convertible Preferred Stock. As partial consideration for the
acquisition of assets from River City in 1996, the Company issued 1,150,000
shares of Series A Preferred Stock to River City which has since been converted
into 1,150,000 shares of Series B Convertible Preferred Stock. Each share of
Series B Convertible Preferred Stock has a liquidation preference of $100 and,
after payment of this preference (plus all accrued and unpaid dividends through
the determination date), is entitled to share in distributions made to holders
of shares of Common Stock. Each holder of a share of Series B Convertible
Preferred Stock is entitled to receive the amount of liquidating distributions
received with respect to approximately 3.64 shares of Common Stock (subject to
adjustment) less the amount of the liquidation preference. The liquidation
preference of Series B Convertible Preferred Stock is payable in preference to
Common Stock of the Company, but may rank equal to or below other classes of
capital stock of the Company and will rank junior to Parent Preferred except
upon a Series B Trigger Event as described in the next sentence. After a Series
B Trigger Event (as defined below), the Series B Convertible Preferred Stock
ranks senior to all classes of capital stock of the Company as to liquidation
preference, except that the Company may issue up to $400 million of capital
stock ("Series B Convertible Preferred Stock Senior Securities"), as to which
the Series B Convertible Preferred Stock will have the same rank. The Company
has designated the Parent Preferred to be Series B Convertible Preferred Stock
Senior Securities for this purpose. A "Series B Trigger Event" means the
termination of the Baker Employment Agreement with the Company prior to the
expiration of its initial five-year term (i) by the Company for any reason other
than "for cause" (as defined in the Baker Employment Agreement) or (ii) by Barry
Baker under certain circumstances, including (a) on 60 days' prior written
notice given at any time within 180 days following a Change of Control; (b) if
Mr. Baker is not elected (and continued) as a director of Sinclair or SCI, as
President and Chief Executive Officer of SCI or as Executive Vice President of
Sinclair, or if Mr. Baker shall be removed from any such board or office; (c)
upon a material breach by Sinclair or SCI of the Baker Employment Agreement
which is not cured; (d) if there shall be a material diminution in Mr. Baker's
authority or responsibility, or certain of his economic benefits are materially
reduced, or Mr. Baker shall be required to work outside Baltimore or (e) the
effective date of his employment as contemplated by clause (b) shall not have
occurred by August 31, 1997. Mr. Baker
102
<PAGE>
cannot be appointed to such positions with the Company or SCI until the
occurrence of certain events with respect to WIIB, WTTV and WTTK in Indianapolis
and WTTE and WSYX in Columbus as described under "Risk Factors--Dependence on
Key Personnel; Employment Agreements with Key Personnel." There can be no
assurance as to when or whether these events will occur, although the Company
believes Mr. Baker does not presently intend to terminate the Baker Employment
Agreement if he is not appointed to the positions with Sinclair or SCI by August
31, 1997. See "Risk Factors--Subordination of New Parent Guarantee, New Parent
Debenture Guarantee and New Parent Preferred."
The holders of Series B Convertible Preferred Stock do not initially receive
dividends, except to the extent that dividends are paid to the holders of Common
Stock. A holder of shares of Series B Convertible Preferred Stock is entitled to
share in any dividends paid to holders of Common Stock, with each share of
Series B Convertible Preferred Stock allocated the amount of dividends allocated
to approximately 3.64 shares of Common Stock (subject to adjustment). In
addition, after the occurrence of a Trigger Event, holders of shares of Series B
Convertible Preferred Stock are entitled to quarterly dividends in the amount of
$3.75 per share per quarter for the first year, and in the amount of $5.00 per
share per quarter after the first year. Dividends are payable either in cash or
in additional shares of Series B Convertible Preferred Stock at the rate of $100
per share. Dividends on Series B Convertible Preferred Stock are payable in
preference to the holders of any other class of capital stock of the Company,
except for Series B Convertible Preferred Stock Senior Securities, which will
rank senior to the Series B Convertible Preferred Stock as to dividends until a
Series B Trigger Event, after which Series B Convertible Preferred Stock Senior
Securities will have the same rank as Series B Convertible Preferred Stock as to
dividends.
The Company may redeem shares of Series B Convertible Preferred Stock for an
amount equal to $100 per share plus any accrued and unpaid dividends at any time
beginning 180 days after a Trigger Event, but holders have the right to retain
their shares in which case the shares will automatically be converted into
shares of Class A Common Stock on the proposed redemption date.
Each share of Series B Convertible Preferred Stock is entitled to
approximately 3.64 votes (subject to adjustment) on all matters with respect to
which Class A Common Stock has a vote, and the Series B Convertible Preferred
Stock votes together with the Class A Common Stock as a single class, except
that the Series B Convertible Preferred Stock is entitled to vote as a separate
class (and approval of a majority of such votes is required) on certain matters,
including changes in the authorized amount of Series B Convertible Preferred
Stock and actions affecting the rights of holders of Series B Convertible
Preferred Stock.
Shares of Series B Convertible Preferred Stock are convertible at any time
into shares of Class A Common Stock, with each share of Series B Convertible
Preferred Stock convertible into approximately 3.64 shares of Class A Common
Stock. The conversion rate is subject to adjustment if the Company undertakes a
stock split, combination or stock dividend or distribution or if the Company
issues Common Stock or securities convertible into Common Stock at a price less
than $27.50 per share. Shares of Series B Convertible Preferred Stock issued as
payment of dividends are not convertible into Class A Common Stock and become
void at the time of conversion of a shareholder's other shares of Series B
Convertible Preferred Stock. All shares of Series B Convertible Preferred Stock
remaining outstanding on May 31, 2001 (other than shares issued as a dividend)
automatically convert into Class A Common Stock on that date.
Series C Preferred Stock. The terms of the Series C Preferred Stock of the
Company are set forth under "Description of the New Parent Preferred," below.
Additional Preferred Stock. The Amended Certificate authorizes the Board of
Directors to issue, without any further action by the stockholders, additional
preferred stock in one or more series, to establish from time to time the number
of shares to be included in each series, and to fix the designations, powers,
preferences and rights of the shares of each series and the qualifications,
limitations or restrictions thereof. Although the ability of the Board of
Directors to designate and issue preferred stock provides desirable flexibility,
including the ability to engage in future public offerings to raise additional
capital, issuance of preferred stock may have adverse effects on the holders of
Common Stock
103
<PAGE>
including restrictions on dividends on the Common Stock if dividends on the
preferred stock have not been paid; dilution of voting power of the Common Stock
to the extent the preferred stock has voting rights; or deferral of
participation in the Company's assets upon liquidation until satisfaction of any
liquidation preference granted to holders of the preferred stock. In addition,
issuance of preferred stock could make it more difficult for a third party to
acquire a majority of the outstanding voting stock and accordingly may be used
as an "anti-takeover" device. The Board of Directors, however, is not aware of
any pending transactions that would be affected by such issuance.
CERTAIN STATUTORY AND CHARTER PROVISIONS
The following paragraphs summarize certain provisions of the Maryland General
Corporation Law and the Company's Amended Certificate and by-laws. The summary
does not purport to be complete and reference is made to Maryland law and the
Company's Amended Certificate and by-laws for complete information.
Business Combinations
Under the Maryland General Corporation Law, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance of equity securities) between a
Maryland corporation and any person who beneficially owns 10% or more of the
corporation's stock (an "Interested Stockholder") must be (a) recommended by the
corporation's board of directors; and (b) approved by the affirmative vote of at
least (i) 80% of the corporation's outstanding shares entitled to vote and (ii)
two-thirds of the outstanding shares entitled to vote which are not held by the
Interested Stockholder with whom the business combination is to be effected,
unless, among other things, the corporation's common stockholders receive a
minimum price (as defined in the statute) for their shares and the consideration
is received in cash or in the same form as previously paid by the Interested
Stockholder for his shares. In addition, an Interested Stockholder or any
affiliate thereof may not engage in a "business combination" with the
corporation for a period of five (5) years following the date he becomes an
Interested Stockholder. These provisions of Maryland law do not apply, however,
to business combinations that are approved or exempted by the board of directors
of a Maryland corporation. It is anticipated that the Company's Board of
Directors will exempt from the Maryland statute any business combination with
the Controlling Stockholders, any present or future affiliate or associate of
any of them, or any other person acting in concert or as a group with any of the
foregoing persons.
Control Share Acquisitions
The Maryland General Corporation Law provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" may not be voted
except to the extent approved by a vote of two-thirds of the votes entitled to
be cast by stockholders excluding shares owned by the acquirer, officers of the
corporation and directors who are employees of the corporation. "Control shares"
are shares which, if aggregated with all other shares previously acquired which
the person is entitled to vote, would entitle the acquirer to vote (i) 20% or
more but less than one-third of such shares, (ii) one-third or more but less
than a majority of such shares, or (iii) a majority of the outstanding shares.
Control shares do not include shares the acquiring person is entitled to vote
because stockholder approval has previously been obtained. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share acquisition and who
has obtained a definitive financing agreement with a responsible financial
institution providing for any amount of financing not to be provided by the
acquiring person may compel the corporation's board of directors to call a
special meeting of stockholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders meeting.
Subject to certain conditions and limitations, the corporation may redeem any
or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or of any meeting
of
104
<PAGE>
stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquirer is entitled to vote a majority of the shares entitled
to vote, all other stockholders may exercise appraisal rights. The fair value of
the shares as determined for purposes of such appraisal rights may not be less
than the highest price per share paid in the control share acquisition, and
certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or excepted by or pursuant to the
articles of incorporation or by-laws of the corporation.
Effect Of Business Combination And Control Share Acquisition Statutes
The business combination and control share acquisition statutes could have
the effect of discouraging offers to acquire any such offer.
Limitation On Liability Of Directors And Officers
The Company's Amended Certificate provides that, to the fullest extent that
limitations on the liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of the Company shall
have any liability to the Company or its stockholders for monetary damages. The
Maryland General Corporation Law provides that a corporation's charter may
include a provision which restricts or limits the liability of its directors or
officers to the corporation or its stockholders for money damages except (1) to
the extent that it is proved that the person actually received an improper
benefit or profit in money, property or services, for the amount of the benefit
or profit in money, property or services actually received or (2) to the extent
that a judgment or other final adjudication adverse to the person is entered in
a proceeding based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. In situations to
which the Amended Certificate provision applies, the remedies available to the
Company or a stockholder are limited to equitable remedies such as injunction or
rescission. This provision would not, in the opinion of the Commission,
eliminate or limit the liability of directors and officers under the federal
securities laws.
Indemnification
The Company's Amended Certificate and by-laws provide that the Company may
advance expenses to its currently acting and its former directors to the fullest
extent permitted by Maryland General Corporation Law, and that the Company shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law. The Maryland
General Corporation Law provides that a corporation may indemnify any director
made a party to any proceeding by reason of service in that capacity unless it
is established that (1) the act or omission of the director was material to the
matter giving rise to the proceeding and (a) was committed in bad faith or (b)
was the result of active and deliberate dishonesty, or (2) the director actually
received an improper personal benefit in money, property or services, or (3) in
the case of an criminal proceeding, the director had reasonable cause to believe
that the act or omission was unlawful. The statute permits Maryland corporations
to indemnify its officers, employees or agents to the same extent as its
directors and to such further extent as is consistent with law.
The Company has also entered into indemnification agreements with certain
officers and directors which provide that the Company shall indemnify and
advance expenses to such officers and directors to the fullest extent permitted
by applicable law in effect on the date of the agreement, and to such greater
extent as applicable law may thereafter from time to time permit. Such
agreements provide for the advancement of expenses (subject to reimbursement if
it is ultimately determined that the officer or director is not entitled to
indemnification) prior to the final disposition of any claim or proceeding.
FOREIGN OWNERSHIP
Under the Amended Certificate, and to comply with FCC rules and regulations,
the Company is not permitted to issue or transfer on its books any of its
capital stock to or for the account of any Alien if after giving effect to such
issuance or transfer, the capital stock held by or for the account of any Alien
105
<PAGE>
or Aliens would exceed, individually or in the aggregate, 25% of the Company's
capital stock at any time outstanding. Pursuant to the Amended Certificate, the
Company will have the right to repurchase alien-owned shares at their fair
market value to the extent necessary, in the judgment of the Board of Directors,
to comply with the alien ownership restrictions. Any issuance or transfer of
capital stock in violation of such prohibition will be void and of no force and
effect. The Amended Certificate also provides that no Alien or Aliens shall be
entitled to vote, direct or control the vote of more than 25% of the total
voting power of all the shares of capital stock of the Company outstanding and
entitled to vote at any time and from time to time. Such percentage, however, is
20% in the case of the Company's subsidiaries which are direct holders of FCC
licenses. In addition, the Amended Certificate provides that no Alien shall be
qualified to act as an officer of the Company and no more than 25% of the total
number of directors of the Company at any time may be Aliens. The Amended
Certificate further gives the Board of Directors of the Company all power
necessary to administer the above provisions. See "Business of Sinclair--Federal
Regulation of Television and Radio Broadcasting."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Class A Common Stock is
The First National Bank of Boston.
106
<PAGE>
DESCRIPTION OF THE NEW PARENT PREFERRED
GENERAL
Pursuant to the Parent Preferred Articles Supplementary, up to 2,062,000
shares of New Parent Preferred with a Liquidation Amount of $100.00 per share
(the "Liquidation Amount") will be issued. The Parent Preferred will rank junior
in right of payment to all liabilities and obligations (whether or not for
borrowed money) of Sinclair (other than common stock of Sinclair, any Old Parent
Preferred that remains outstanding after the Exchange Offer, as to which it will
have the same rank, and any preferred stock of Sinclair which by its terms is on
parity with or junior to the New Parent Preferred). In addition, creditors and
stockholders of Sinclair's Subsidiaries will also have priority over the New
Parent Preferred with respect to claims on the assets of such Subsidiaries. The
New Parent Preferred will, when issued, be fully paid and non-assessable and
holders thereof will have no preemptive rights in connection therewith. The
following description contains all material information concerning the New
Parent Preferred but does not purport to be complete and is qualified in its
entirety by reference to the Parent Preferred Articles Supplementary which are
filed as an exhibit to the registration statement of which this Prospectus is a
part and which is available as set forth under "Available Information." Certain
capitalized terms used herein are defined under "Certain Definitions
RANKING
The New Parent Preferred will, with respect to dividend rights and rights on
liquidation, winding-up and dissolution of Sinclair, rank (i) senior to all
classes of common stock of Sinclair, each other class of capital stock or series
of preferred stock established after the date the New Parent Preferred is issued
(the "New Parent Preferred Issue Date") by the board of directors of Sinclair,
the terms of which do not expressly provide that it ranks senior to or on a
parity with the New Parent Preferred as to dividend rights and rights on
liquidation, winding-up and dissolution of Sinclair (collectively referred to
with all classes of common stock of Sinclair as "Junior Securities"); (ii) on a
parity with the Old Parent Preferred (to the extent any remains outstanding
after the Exchange Offer) and any class of capital stock or series of preferred
stock established after the New Parent Preferred Issue Date, the terms of which
expressly provides that such class or series will rank on a parity with the New
Parent Preferred as to dividend rights and rights on liquidation, winding-up and
dissolution (collectively, "Parity Securities"); and (iii) junior to each class
of capital stock or series of preferred stock issued by Sinclair established
after the New Parent Preferred Issue Date by the board of directors of Sinclair,
the terms of which expressly provide that such series will rank senior to the
New Parent Preferred as to dividend rights and rights on liquidation, winding-up
and dissolution (collectively referred to as "Senior Securities"). Sinclair will
not be able to authorize any new class of Senior Securities without the approval
of the holders of at least a majority of the Liquidation Amount of Parent
Preferred then outstanding, voting or consenting, as the case may be, and,
pursuant to the Pledge Agreement, KDSM, Inc. as holder of the New Parent
Preferred will not be able to take any such action without the consent of the
Trust which will be required to obtain the consent of holders of a majority of
the Liquidation Value of the Preferred Securities. The New Parent Preferred will
rank (i) junior in right of payment to all indebtedness of Sinclair and its
Subsidiaries; (ii) senior in right of payment to all common stock of Sinclair;
and (iii) senior to Sinclair's Series B Convertible Preferred Stock ($111.5
million liquidation value as of the date hereof) except that upon the
termination of Barry Baker's employment agreement with Sinclair prior to May 31,
2001 by Sinclair for any reason other than "for cause" (as defined in the
employment agreement) or by Mr. Baker under certain circumstances described
under "Description of Capital Stock--Preferred Stock--Series B Convertible
Preferred Stock," then the Parent Preferred will rank pari passu with the Series
B Convertible Preferred Stock in respect of dividends and distributions upon
liquidation, dissolution and winding-up of Sinclair. See "Description of Capital
Stock."
DIVIDENDS
Holders of Parent Preferred will be entitled to receive, when, as and if
declared by the board of directors of Sinclair, out of funds legally available
therefor, cash dividends on the Parent Preferred, at an annual rate equal to 12
5/8 % of the then stated Liquidation Amount per share of Parent Preferred.
107
<PAGE>
Holders of New Parent Preferred will be entitled to receive cumulative cash
dividends from the most recent distribution date on the Old Parent Preferred
surrendered in exchange for such New Preferred Securities, or, if no
distribution has been paid on such Old Preferred Securities, from March 12,
1997. Dividends will accrue from the date of issuance and will be payable
quarterly in arrears on March 15, June 15, September 15 and December 15 of each
year (each a "Dividend Payment Date"), commencing on June 15, 1997 to holders of
record on the March 1, June 1, September 1 and December 1 next preceding each
such Dividend Payment Date. Dividends, whether or not declared, will cumulate
with additional dividends on unpaid dividends compounding quarterly until
declared and paid. Sinclair will have the right, at any time and from time to
time, to defer dividend payments on the New Parent Preferred for up to three
consecutive quarters during a Dividend Extension Period; provided that Sinclair
will be required to pay all dividends due and owing on the New Parent Preferred
at least once every four quarters and on March 15, 2009. See "Description of New
Preferred Securities--Distributions."
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid (or are
deemed declared and paid) in full or declared and, a sum in cash sufficient for
full payment of the dividends set apart for such payment on the New Parent
Preferred. If full dividends are not so paid, the New Parent Preferred shall
share dividends pro rata with the Parity Securities. No dividends may be paid or
set apart for such payment on Junior Securities (except dividends on Junior
Securities in additional shares of Junior Securities) and no Junior Securities
may be repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full cumulative dividends have not been paid in
full (or deemed paid) on the New Parent Preferred. Accumulated unpaid dividends
will bear additional dividends compounding quarterly at a rate of 12 5/8 % per
annum. Dividends on account of arrears for any past dividend period and
dividends in connection with any optional redemption may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to holders of
record of the New Parent Preferred on such date, not more than forty-five (45)
days prior to the payment thereof, as may be fixed by the board of directors of
Sinclair. So long as any shares of the New Parent Preferred are outstanding,
Sinclair shall not make any payment on account of, or set apart for payment
money for a sinking or other similar fund for, the purchase, redemption or other
retirement of, any of the Parity Securities or Junior Securities or any
warrants, rights, calls or options exercisable for or convertible into any of
the Parity Securities or Junior Securities, and shall not permit any corporation
or other entity directly or indirectly controlled by Sinclair to purchase or
redeem any of the Parity Securities or Junior Securities or any such warrants,
rights, calls or options unless full cumulative dividends determined in
accordance herewith on the New Parent Preferred have been paid (or are deemed
paid) in full, except in the case of Parity Securities if the New Parent
Preferred shall share in such payments on a pro rata basis. See "Description of
Capital Stock--Preferred Stock--Series B Convertible Preferred Stock."
In the event that dividends on the Parent Preferred are in arrears in an
amount equal to or exceeding four quarterly dividend payments, and until all
such arrearages are repaid in full, holders of Parent Preferred will be entitled
to elect two directors to the board of directors of Sinclair pursuant to the
Pledge Agreement and the Trust Agreement. See "--Voting Rights."
The terms of the Existing Notes and the Bank Credit Agreement limit
Sinclair's ability to pay cash dividends on its capital stock, including the New
Parent Preferred; and future agreements may provide the same. See "Risk
Factors--Covenant Restrictions on Dividends and Distributions."
In addition, if the Trust would be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any taxing authority, then in any such
case, the dividend rate on the New Parent Preferred shall be increased such that
the amount payable to the holder of the New Parent Preferred will include an
amount equal to the Additional Interest Attributable to Taxes as defined herein,
in addition to the dividends on the New Parent Preferred otherwise payable to
such holder as provided herein.
TERM OF NEW PARENT PREFERRED
The New Parent Preferred will have a maturity of 12 years from issuance of
the Old Parent Preferred. The terms of the Bank Credit Agreement currently limit
Sinclair's ability to redeem any capital stock, including the New Parent
Preferred.
108
<PAGE>
OPTIONAL REDEMPTION
The New Parent Preferred may be redeemed (subject to contractual and other
restrictions with respect thereto and to the legal availability of funds
therefor) at any time on or after March 15, 2002, in whole or in part, in cash
at the option of Sinclair, at the redemption prices (expressed as a percentage
of such shares' Liquidation Amount) set forth below, if redeemed during the
12-month period beginning March 15 of each of the years set forth below:
REDEMPTION
YEAR PRICE
------- ------------
2002 105.813%
2003 104.650
2004 103.488
2005 102.325
2006 101.163
and thereafter at 100% of such shares' Liquidation Amount, together with accrued
and unpaid dividends, if any, to the redemption date (including an amount equal
to a prorated dividend from the last payment date to the redemption date).
In addition, up to 33 1/3 % of the aggregate Liquidation Amount of the Parent
Preferred may be redeemed, in cash at the option of Sinclair, at any time on or
prior to March 15, 2000, at a redemption price per share equal to 111.625% of
the Liquidation Amount thereof, together with accrued and unpaid dividends, if
any, out of the net proceeds of one or more Public Equity Offerings of Sinclair,
provided, that, after any such redemption, the number of shares of Parent
Preferred outstanding must equal at least 66 2/3 % of the number of shares of
Parent Preferred originally issued.
REDEMPTION UPON A TAX EVENT OR AN INVESTMENT COMPANY ACT EVENT
Upon a Tax Event or Investment Company Act Event, Sinclair will have the
option to redeem the New Parent Preferred, in whole or in part, in cash at a
redemption price of 105.813% in the case of a Tax Event, or 101% in the case of
an Investment Company Act Event, in each case of the aggregate Liquidation
Amount of the New Parent Preferred redeemed, plus accrued and unpaid dividends,
if any; provided that at the time of redemption in the case of a Tax Event
triggered by an amendment, clarification or change, such amendment,
clarification or change remains in effect.
The terms of Bank Credit Agreement and the Existing Notes currently restrict
Sinclair's ability to exercise this option.
"Tax Event" is defined generally as the receipt by the Trust of an opinion of
independent counsel to the Trust experienced in such matters to the effect that,
as a result of (i) any amendment to, clarification of, or change (including any
announced prospective change) in the laws or treaties (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein affecting taxation, (ii) any Administrative Action
or (iii) any amendment to, clarification of, or change in the official position
or the interpretation of such Administrative Action or judicial decision or any
interpretation or pronouncement that provides for a position with respect to
such Administrative Action or judicial decision that differs from the
theretofore generally accepted position, in each case, by any legislative body,
court, governmental authority or regulatory body, irrespective of the manner in
which such amendment, clarification or change is made known, which amendment,
clarification, or change is effective or such pronouncement or decision is
announced on or after the Issue Date, there is more than an insubstantial risk
that (a) the Trust is, or will be, subject to United States federal income tax
with respect to interest received on the New KDSM Senior Debentures, (b)
interest payable by KDSM, Inc. on the New KDSM Senior Debentures is not, or will
not be, fully deductible for United States federal income tax purposes, or (c)
the Trust is, or will be, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
"Investment Company Act Event" means the receipt by the Trust or KDSM, Inc.
of an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940 (the "1940 Act"), to the
effect that as a result of a change in law or regulation or a change in
109
<PAGE>
official interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority (a "Change in 1940 Act
Law"), the Trust or KDSM, Inc. is or will be considered an "investment company"
which is required to be registered under the 1940 Act which Change in 1940 Act
Law becomes effective on or after the Issue Date.
CHANGE OF CONTROL
The Parent Preferred Articles Supplementary provide that, upon a Change of
Control of Sinclair, each holder of New Parent Preferred will have the right to
require Sinclair to purchase all or a portion of such holder's New Parent
Preferred in cash pursuant to the Change of Control Offer, in whole or in part,
in integral multiples of $100, at a purchase price (the "Change of Control
Purchase Price") in cash in an amount equal to 101% of such shares' Liquidation
Amount, plus accrued and unpaid dividends, if any, to the date of purchase (the
"Change of Control Purchase Date"), pursuant to the Change of Control Offer and
the other procedures set forth in the Parent Preferred Articles Supplementary.
Notwithstanding the foregoing, the holders of the New Preferred Securities, the
New KDSM Senior Debentures and the New Parent Preferred will not have the right
to require the issuers of such securities to redeem or repurchase, as the case
may be, such securities upon a Change of Control under any circumstances unless
all of the Existing Notes and all indebtedness under the Bank Credit Agreement
are repaid, redeemed or repurchased, all of the commitments and letters of
credit issued under the Bank Credit Agreement are terminated and all interest
rate protection agreements entered into between Sinclair and any lenders under
the Bank Credit Agreement are terminated as a result of such Change of Control
or the holders of such instruments have consented to a Change of Control Offer,
in which case the date on which all Existing Notes and all Indebtedness under
the Bank Credit Agreement are so repaid, redeemed or repurchased and such
commitments, letters of credit and interest rate protection agreements are
terminated or the holders of such instruments have consented to a Change of
Control Offer shall be deemed to be the date on which such Change of Control
shall have occurred. If Sinclair does not make and consummate a Change of
Control Offer upon a Change of Control, the holders of the Parent Preferred
shall have the right to elect two directors to the board of directors of
Sinclair but will not have a right of redemption.
Within 30 days following any Change of Control, Sinclair shall give written
notice of such Change of Control to the holders of New Parent Preferred, by
first-class mail, postage prepaid, at their addresses appearing in the security
register, stating, among other things, that it is making the Change of Control
Offer, the Change of Control Purchase Price and that the Change of Control
Purchase Date shall be a Business Day no earlier than 30 days nor later than 60
days from the date such notice is mailed, or such later date as is necessary to
comply with requirements under the Exchange Act; that any shares of New Parent
Preferred not tendered will continue to accrue dividends; that, unless Sinclair
defaults in the payment of the Change of Control Purchase Price, any shares of
New Parent Preferred accepted for payment pursuant to the Change of Control
Offer shall cease to accrue dividends after the Change of Control Purchase Date;
and certain other procedures that a holder of New Parent Preferred must follow
to accept a Change of Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that Sinclair
will have available funds sufficient to pay the Change of Control Purchase Price
for all of the New Parent Preferred that may be tendered by holders of the New
Parent Preferred seeking to accept the Change of Control Offer. A Change of
Control will also result in an event of default under the Bank Credit Agreement
and the Existing Indentures and could result in the acceleration of all
indebtedness under the Bank Credit Agreement or the Existing Indentures, as the
case may be, and, in such case, the holders of the New Parent Preferred will not
have the right to have the New Parent Preferred redeemed. See "Description of
Indebtedness of Sinclair." Moreover, the Bank Credit Agreement prohibits the
redemption of the New Parent Preferred by Sinclair. The remedy of a holder of
New Parent Preferred if Sinclair fails to make or consummate the Change of
Control Offer upon a Change of Control or pay the Change of Control Purchase
Price when due will be the right to elect two directors to the board of
directors of Sinclair.
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under Maryland law (which is the governing law
of the Parent Preferred Articles Supple
110
<PAGE>
mentary) to represent a specific quantitative test. As a consequence, in the
event the holders of the New Parent Preferred elected to exercise their rights
under the Parent Preferred Articles Supplementary related to the New Parent
Preferred and Sinclair elected to contest such election, there could be no
assurance as to how a court interpreting Maryland law would interpret the term.
The existence of a holder's right to require Sinclair to repurchase such
holder's New Parent Preferred upon a Change of Control may deter a third party
from acquiring Sinclair in a transaction which constitutes a Change of Control.
The Parent Preferred Articles Supplementary do not afford holders of New
Parent Preferred the right to require Sinclair to repurchase the New Parent
Preferred in the event of a highly leveraged transaction or certain transactions
with Sinclair's management or its affiliates, including a reorganization,
restructuring, merger or similar transaction (including, in certain
circumstances, an acquisition of Sinclair by management or its Affiliates)
involving Sinclair that may adversely affect holders of the New Parent
Preferred, if such transaction is not a transaction defined as a Change of
Control. In addition, Sinclair does not have to redeem the New Parent Preferred
upon a Change of Control if the Existing Notes or any indebtedness, commitments,
letters of credit or interest rate protection agreements under the Bank Credit
Agreement are outstanding. A transaction involving Sinclair's management or its
Affiliates, or a transaction involving a recapitalization of Sinclair, will
result in a Change of Control if it is the type of transaction specified by such
definition.
Sinclair will comply with the applicable securities laws or regulations in
connection with a Change of Control Offer.
USE OF REDEMPTION PROCEEDS
If Sinclair elects to redeem the New Parent Preferred held by KDSM, Inc.,
KDSM, Inc. will use the proceeds of such redemption to redeem New KDSM Senior
Debentures. The Trust will use the proceeds of such redemption to redeem New
Preferred Securities.
PROCEDURE FOR REDEMPTION
On and after a redemption date, unless Sinclair defaults in the payment of
the applicable redemption price, dividends will cease to accrue on shares of New
Parent Preferred called for redemption and all rights of holders of such shares
will terminate except for the right to receive the redemption price without
interest. If a notice of redemption shall have been given as provided in the
succeeding sentence and the funds necessary for redemption (including an amount
in respect of all dividends that will accrue to the redemption date) shall have
been segregated and irrevocably set apart by Sinclair, in trust for the benefit
of the holders of the shares called for redemption, then dividends shall cease
to accrue on the redemption date on the shares of New Parent Preferred to be
redeemed and, at the close of business on the date or when such funds were
segregated and set apart, the holders of the shares to be redeemed shall cease
to be stockholders of Sinclair and shall be entitled only to receive the
redemption price for such shares. Sinclair will send a written notice of
redemption by first class mail to each holder of record of shares of New Parent
Preferred, not fewer than 30 days nor more than 60 days prior to the date fixed
for such redemption at such holder's registered address. Shares of New Parent
Preferred issued and reacquired will, upon compliance with the applicable
requirements of Maryland law, have the status of authorized but unissued shares
of preferred stock of Sinclair undesignated as to series and may with any and
all other authorized but unissued shares of preferred stock of Sinclair be
designated or redesignated and issued or reissued, as the case may be, as part
of any series of preferred stock of Sinclair, except that any issuance or
reissuance of shares of preferred stock must be in compliance with the Parent
Preferred Articles Supplementary and except that such shares may not be reissued
or sold as shares of New Parent Preferred. In connection with the Exchange
Offer, Sinclair is seeking approval of an amendment to the Parent Preferred
Articles Supplementary to clarify that Sinclair may issue New Parent Preferred
in connection with the Exchange Offer. See "The Exchange Offer--Amendment of
Parent Preferred Articles Supplementary."
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
Sinclair, holders of New Parent Preferred will be entitled to be paid out of the
assets of Sinclair available for distribution $100.00 per share, plus any
accrued and unpaid dividends thereon to the date fixed for liquidation,
111
<PAGE>
dissolution or winding-up (including an amount equal to a prorated dividend
(including additional dividends compounded quarterly with respect to any overdue
dividends) from the last dividend payment date to the date fixed for
liquidation, dissolution or winding-up), before any distribution is made on any
Junior Securities, including, without limitation, any common stock of Sinclair.
If upon any voluntary or involuntary liquidation, dissolution or winding-up of
Sinclair, the amounts payable with respect to the New Parent Preferred and all
other Parity Securities are not paid in full, the holders of the New Parent
Preferred and the Parity Securities will share equally and ratably in any
distribution of assets of Sinclair in proportion to the full liquidation
preferences to which each is entitled. After payment of the full amount of the
liquidation preferences to which they are entitled, the holders of shares of New
Parent Preferred will not be entitled to any further participation in any
distribution of assets of Sinclair. However, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of Sinclair
nor the consolidation or merger of Sinclair with one or more corporations shall
be deemed to be a liquidation, dissolution or winding-up of Sinclair.
The Parent Preferred Articles Supplementary do not contain any provision
requiring funds to be set aside to protect the liquidation preference of the New
Parent Preferred, although such liquidation preference will be substantially in
excess of the par value of such shares of New Parent Preferred. In addition,
Sinclair is not aware of any provision of Maryland law or any controlling
decision of the courts of the State of Maryland (the state of incorporation of
Sinclair) that requires a restriction upon the surplus of Sinclair solely
because the liquidation preference of the New Parent Preferred will exceed its
par value. Consequently, there will be no restriction upon the surplus of
Sinclair solely because the liquidation preference of the New Parent Preferred
will exceed the par value thereof and there will be no remedies available to
holders of the New Parent Preferred before or after the payment of any dividend,
other than in connection with the liquidation of Sinclair, solely by reason of
the fact that such dividend would reduce the surplus of Sinclair to an amount
less than the difference between the liquidation preference of the New Parent
Preferred and its par value.
VOTING RIGHTS
Holders of the New Parent Preferred will have no voting rights, except as
provided by law or as set forth in the Parent Preferred Articles Supplementary.
The Parent Preferred Articles Supplementary provide that if (i) cash dividends
on the Parent Preferred are in arrears and unpaid for four or more quarterly
dividend payments (whether or not pursuant to an Extension Period) (a "Dividend
Default"); (ii) Sinclair shall fail to make and consummate a Change of Control
Offer upon the occurrence of a Change of Control; (iii) Sinclair fails to
discharge any redemption obligation with respect to the Parent Preferred; or
(iv) a breach or violation of any of the provisions described in the next
paragraph or under the caption "--Certain Covenants" occurs and such breach or
violation continues for a period of 30 days or more, then in any such case the
holders of a majority of the Liquidation Amount of the then outstanding Parent
Preferred, voting separately as a class, will have the right to elect two
directors to the board of directors of Sinclair pursuant to the Pledge Agreement
and the Trust Agreement. Such voting rights will continue until such time as, in
the case of a Dividend Default, all dividends in arrears on the Parent Preferred
are paid in full in cash and, in all other cases, any failure, breach or default
is remedied or waived by the holders of a majority of the Liquidation Amount of
the Parent Preferred then outstanding, at which time the terms of any directors
elected pursuant to the provisions of this paragraph shall terminate. Each such
event described in clauses (i) through (iv) above is referred to herein as a
"Voting Rights Triggering Event." The voting rights provided herein shall be the
holder's exclusive remedy at law or in equity for holders of New Parent
Preferred. KDSM, Inc. (which at the consummation of the Exchange Offer will be
the sole holder of the New Parent Preferred) will covenant in the Pledge
Agreement that it will elect the nominees of the Trust who will elect the
nominees of the holders of a majority of the Liquidation Value of the Preferred
Securities then outstanding to such directorships.
The Parent Preferred Articles Supplementary provide that Sinclair will not
authorize any class of Senior Securities without the affirmative vote or consent
of the holders of a majority of the Liquidation Amount of Parent Preferred then
outstanding, voting or consenting. The Parent Preferred Articles Supplementary
also provide, that Sinclair may not amend its Amended Certificate of
Incorporation or
112
<PAGE>
the Parent Preferred Articles Supplementary so as to affect adversely the
specified rights, preferences, privileges or voting rights of the holders of the
Parent Preferred or the holders of the Preferred Securities, or authorize the
issuance of any additional shares of Parent Preferred, without the affirmative
vote or consent of the holders of a majority of the Liquidation Amount of
outstanding shares of Parent Preferred or a majority of the Liquidation Value of
then outstanding Preferred Securities pursuant to the Pledge Agreement, voting
or consenting, as the case may be, as separate classes except that certain
amendments require 100% consent. The holders of a majority of the Liquidation
Amount of outstanding shares of Parent Preferred and the holders of a majority
of the Liquidation Value of the Preferred Securities then outstanding, pursuant
to the Pledge Agreement and the Trust Agreement, voting or consenting, as the
case may be, as a single class, may also waive compliance with any provision of
the Parent Preferred Articles Supplementary except for certain waivers which
require 100% consent. KDSM, Inc. will covenant in the Pledge Agreement that it
will not provide any such consents described in this paragraph without the
requisite consent of the holders of the Preferred Securities.
CERTAIN COVENANTS
Limitation on Indebtedness. The Parent Preferred Articles Supplementary will
provide that Sinclair will not, and will not permit any Restricted Subsidiary
to, create, incur, assume or directly or indirectly guarantee or in any other
manner become directly or indirectly liable for ("incur") any Indebtedness
(including Acquired Indebtedness), except that Sinclair may incur Indebtedness
and a Restricted Subsidiary may incur Permitted Subsidiary Indebtedness if, in
each case, the Debt to Operating Cash Flow Ratio of Sinclair and its Restricted
Subsidiaries at the time of the incurrence of such Indebtedness, after giving
pro forma effect thereto, is 7:1 or less.
The foregoing limitation will not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"):
(i) Indebtedness of Sinclair under the Bank Credit Agreement in an
aggregate principal amount at any one time outstanding not to exceed $300
million under any revolving credit facility thereunder;
(ii) Indebtedness of Sinclair pursuant to the Existing Notes and
Indebtedness of any Subsidiary of Sinclair pursuant to a guarantee of the
Existing Notes;
(iii) Indebtedness of any Subsidiary of Sinclair consisting of a
guarantee of Sinclair's Indebtedness under the Bank Credit Agreement;
(iv) Indebtedness of Sinclair or any Restricted Subsidiary outstanding
on the date the Old Parent Preferred was issued and listed therein;
(v) Indebtedness of Sinclair owing to a Restricted Subsidiary;
provided that any disposition, pledge or transfer of any such Indebtedness
to a Person (other than a disposition, pledge or transfer to a Wholly Owned
Restricted Subsidiary or a pledge to or for the benefit of the lenders
under the Bank Credit Agreement) shall be deemed to be an incurrence of
such Indebtedness by the obligor not permitted by this clause (v);
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary owing to
Sinclair or another Wholly Owned Restricted Subsidiary; provided that (a)
any disposition, pledge or transfer of any such Indebtedness to a Person
(other than a disposition, pledge or transfer to Sinclair or a Wholly Owned
Restricted Subsidiary or pledge to or for the benefit of the lenders under
the Bank Credit Agreement) shall be deemed to be an incurrence of such
Indebtedness by the obligor not permitted by this clause (vi) and (b) any
transaction pursuant to which any Wholly Owned Restricted Subsidiary, which
has Indebtedness owing to Sinclair or any other Wholly Owned Restricted
Subsidiary, ceases to be a Wholly Owned Restricted Subsidiary shall be
deemed to be the incurrence of Indebtedness by such Wholly Owned Restricted
Subsidiary that is not permitted by this clause (vi);
(vii) guarantees by any Restricted Subsidiary of Indebtedness of
Sinclair or another Restricted Subsidiary which, if any Existing Notes are
outstanding, are made in accordance with the Existing Indentures and
guarantees by Sinclair or any Subsidiary of the KDSM Senior Debentures;
113
<PAGE>
(viii) obligations of Sinclair entered into in the ordinary course of
business pursuant to Interest Rate Agreements designed to protect Sinclair
against fluctuations in interest rates in respect of Indebtedness of
Sinclair as long as such obligations at the time incurred do not exceed the
aggregate principal amount of such Indebtedness then outstanding or in good
faith anticipated to be outstanding within 90 days of such occurrence;
(ix) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (ii), (iii), (iv) and (v) above, including any
successive refinancings so long as the aggregate principal amount of
Indebtedness represented thereby is not increased by such refinancing plus
the lesser of (I) the stated amount of any premium or other payment
required to be paid in connection with such a refinancing pursuant to the
terms of the Indebtedness being refinanced or (II) the amount of premium or
other payment actually paid at such time to refinance the Indebtedness,
plus, in either case, the amount of expenses of Sinclair incurred in
connection with such refinancing; and
(x) Indebtedness of Sinclair in addition to that described in clauses
(i) through (ix) above, and any renewals, extensions, substitutions,
refinancings, or replacements of such Indebtedness, so long as the
aggregate principal amount of all such Indebtedness shall not exceed
$10,000,000.
Limitation on Restricted Payments. (a) Sinclair will not, and will not
permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any of Sinclair's Junior Securities or Parity Securities (as
defined in the Parent Preferred Articles Supplementary) (other than
dividends or distributions payable solely in its Junior Securities or
Parity Securities);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any Junior Securities or Parity Securities or
warrants, rights or options to acquire shares of Junior Securities or
Parity Securities (except Junior Securities or Parity Securities held by
Sinclair or a Wholly Owned Restricted Subsidiary);
(iii) declare or pay any dividend or distribution on any Equity
Interests of any Subsidiary to any Person (other than Sinclair or any of
its Wholly Owned Restricted Subsidiaries);
(iv) incur, create or assume any guarantee of Indebtedness of any
Affiliate (other than a Wholly Owned Restricted Subsidiary of Sinclair); or
(v) make any Investment in any Person (other than any Permitted
Investments)
(any of the foregoing payments described in clauses (i) through (v), other than
any such action that is a Permitted Payment, collectively, "Restricted
Payments") unless, after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
board of directors of Sinclair, whose determination shall be conclusive and
evidenced by a board resolution), (1) no Voting Rights Triggering Event shall
have occurred and be continuing or would occur as a consequence thereof; (2) all
dividends on the Parent Preferred payable on any Dividend Payment Date prior to
the date of the Restricted Payment have been declared and paid in cash and (3)
the aggregate amount of all such Restricted Payments declared or made after the
Issue Date does not exceed the sum of:
(A) an amount equal to Sinclair's Cumulative Operating Cash Flow
less 1.4 times Sinclair's Cumulative Consolidated Interest Expense;
and
(B) the aggregate Net Cash Proceeds received on or after the
Issue Date by Sinclair from capital contributions (other than from a
Restricted Subsidiary) or from the issuance or sale (other than to any
of its Restricted Subsidiaries) of its Qualified Equity Interests
(except, in each case, to the extent such Net Cash Proceeds are used
to purchase, redeem or otherwise retire Equity Interests as set forth
below); and
(C) the aggregate Net Cash Proceeds from the sale of the Old
Parent Preferred.
114
<PAGE>
(b) Notwithstanding the foregoing, and in the case of clause (ii) below, so
long as no Voting Rights Triggering Event is continuing, the foregoing
provisions shall not prohibit the following actions (clauses (i) through (iii)
being referred to as "Permitted Payments"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would be
permitted by the provisions of paragraph (a) of this Section and such
payment shall be deemed to have been paid on such date of declaration for
purposes of the calculation required by paragraph (a) of this Section;
(ii) any transaction with an officer or director of Sinclair entered
into in the ordinary course of business (including compensation or employee
benefit arrangements with any officer or director of Sinclair); or
(iii) the repurchase, redemption, or other acquisition or retirement
of any Junior Securities in exchange for (including any such exchange
pursuant to the exercise of a conversion right or privilege if in
connection therewith cash is paid in lieu of the issuance of fractional
shares or scrip), or out of the Net Cash Proceeds of, a substantially
concurrent issue and sale for cash (other than to a Subsidiary) of other
Qualified Junior Securities (as defined in the Parent Preferred Articles
Supplementary) of Sinclair; provided that the Net Cash Proceeds from the
issuance of such Qualified Junior Securities are excluded from clause (3)
(B) of paragraph (a) of this Section.
Merger, Consolidation and Sale of Assets. The Parent Preferred Articles
Supplementary provide that, without the affirmative vote of the holders of a
majority of the Liquidation Amount of the issued and outstanding shares of
Parent Preferred, voting or consenting, as the case may be, as a separate class,
Sinclair may not, in a single transaction or a series of related transactions,
consolidate with or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its assets to, another
Person or adopt a plan of liquidation unless (i) either (a) Sinclair is the
survivor of such merger or consolidation or (b) the Person (if other than
Sinclair) formed by such consolidation or into which Sinclair is merged or the
Person that acquires by conveyance, transfer or lease the properties and assets
of Sinclair substantially as an entirety or, in the case of a plan of
liquidation, the Person to which assets of Sinclair have been transferred shall
be a corporation, partnership or trust organized and existing under the laws of
the United States or any State thereof or the District of Columbia; (ii) the
Parent Preferred shall be converted into or exchanged for and shall become
shares of such successor, transferee or resulting Person, having in respect of
such successor, transferee or resulting Person the same powers, preferences and
relative participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the Parent Preferred had immediately
prior to such transaction; (iii) immediately after giving effect to such
transaction and the use of proceeds therefrom (on a pro forma basis, including
any Indebtedness incurred or anticipated to be incurred in connection with such
transaction), Sinclair or the surviving or transferee Person is able to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "--Limitation on Indebtedness" covenant; (iv) immediately
after giving effect to such transaction, no Voting Rights Triggering Event shall
have occurred or be continuing; and (v) Sinclair has delivered to the transfer
agent prior to the consummation of the proposed transaction an officers'
certificate and an opinion of counsel, each stating that such consolidation,
merger or transfer complies with the Parent Preferred Articles Supplementary and
that all conditions precedent contained therein relating to such transaction
have been satisfied. For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties and assets of one or
more Subsidiaries, the Capital Stock of which constitutes all or substantially
all of the properties or assets of Sinclair, will be deemed to be the transfer
of all or substantially all of the properties and assets of Sinclair.
Limitation on Transactions with Affiliates. Sinclair will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, enter into
or suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of Sinclair (other than Sinclair or a Wholly Owned
Restricted Subsidiary of Sinclair) unless (a) such transaction or series of
transactions is in writing on terms that are no less favorable to Sinclair or
such Restricted Subsidiary, as the case may be, than would be available in a
comparable transaction in arm's-length dealings with an unrelated third party
and (b) (i) with respect to
115
<PAGE>
any transaction or series of transactions involving aggregate payments in excess
of $1,000,000, Sinclair delivers an officers' certificate to the transfer agent
or the holders of the New Parent Preferred certifying that such transaction or
series of related transactions complies with clause (a) above and such
transaction or series of related transactions has been approved by a majority of
the members of the board of directors of Sinclair (and approved by a majority of
Independent Directors or, in the event there is only one Independent Director,
by such Independent Director) and (ii) with respect to any transaction or series
of transactions involving aggregate payments in excess of $5,000,000, an opinion
as to the fairness to Sinclair or such Restricted Subsidiary from a financial
point of view issued by an investment banking firm of national standing.
Notwithstanding the foregoing, this provision will not apply to (A) any
transaction with an officer or director of Sinclair entered into in the ordinary
course of business (including compensation or employee benefit arrangements with
any officer or director of Sinclair), (B) any transaction entered into by
Sinclair or one of its Wholly Owned Restricted Subsidiaries with a Wholly Owned
Restricted Subsidiary of Sinclair, and (C) transactions in existence on the date
the Old Parent Preferred was initially issued.
Limitation on Sale of Assets. (a) Sinclair will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset
Sale unless (i) at least 80% of the consideration from such Asset Sale is
received in cash and (ii) Sinclair or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the shares or assets sold (other than in the case of an involuntary
Asset Sale, as determined by the board of directors of Sinclair and evidenced in
a board resolution or in connection with an Asset Swap as determined in writing
by a nationally recognized investment banking or appraisal firm); provided,
however, that in the event Sinclair or any Restricted Subsidiary engages in an
Asset Sale with any third party and receives in consideration therefor, or
simultaneously with such Asset Sale enters into, a Local Marketing Agreement
with such third party or any affiliate thereof, the Fair Market Value of such
Local Marketing Agreement (as determined in writing by a nationally recognized
investment banking or appraisal firm) shall be deemed cash and considered when
determining whether such Asset Sale complies with the foregoing clauses (i) and
(ii). Notwithstanding the foregoing, clause (i) of the preceding sentence shall
not be applicable to any Asset Swap.
(b) Sinclair and its Restricted Subsidiaries consummating such an Asset Sale
shall apply the Net Cash Proceeds thereof to the permanent prepayment of
Indebtedness or within 12 months of the Asset Sale to the purchase of properties
and assets that (as determined by the board of directors of Sinclair) replace
the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in the businesses of Sinclair or its
Restricted Subsidiaries existing on the Issue Date or in businesses reasonably
related thereto.
Limitation on Unrestricted Subsidiaries. Sinclair will not make, and will not
permit any of its Restricted Subsidiaries to make, any Investments in
Unrestricted Subsidiaries if, at the time thereof, the aggregate amount of such
Investments would exceed the amount of Restricted Payments then permitted to be
made pursuant to the "--Limitation on Restricted Payments" covenant. Any
Investments in Unrestricted Subsidiaries permitted to be made pursuant to this
covenant (i) will be treated as the payment of a Restricted Payment in
calculating the amount of Restricted Payments made by Sinclair and (ii) may be
made in cash or property. For all purposes under the New Parent Preferred, KDSM,
Inc. and any of its Subsidiaries shall be deemed to be Unrestricted Subsidiaries
and any Investment by Sinclair in KDSM, Inc. shall not be deemed a Restricted
Payment.
Provision of Financial Statements. Whether or not Sinclair is subject to
Section 13(a) or 15(d) of the Exchange Act, Sinclair will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which Sinclair would have been required to
file with the Commission pursuant to such Section 13(a) or 15(d) if Sinclair
were so subject, such documents to be filed with the Commission to the extent
permitted under the Exchange Act on or prior to the respective dates (the
"Required Filing Dates") by which Sinclair would have been required so to file
such documents if Sinclair were so subject. Sinclair will also in any event (x)
within 15 days of each Required Filing Date transmit by mail to all holders of
New Parent Preferred, as their names and addresses appear in Sinclair's stock
register, without cost to such holders, copies of the annual reports,
116
<PAGE>
quarterly reports and other documents which Sinclair would have been required to
file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
if Sinclair were subject to such Sections and (y) if filing such documents by
Sinclair with the Commission is not permitted under the Exchange Act, promptly
upon written request and payment of the reasonable cost of duplication and
delivery, supply copies of such documents to any prospective holder of New
Parent Preferred at Sinclair's cost.
TRANSFER AGENT AND REGISTRAR
First Union National Bank of Maryland is the transfer agent and registrar for
the New Parent Preferred.
117
<PAGE>
DESCRIPTION OF THE NEW KDSM SENIOR DEBENTURES
Set forth below is a description of the specific terms of the New KDSM Senior
Debentures, which KDSM, Inc. is offering to exchange for the Old KDSM Senior
Debentures. The Trust purchased the Old KDSM Senior Debentures with the proceeds
of the issuance and sale of the Common Securities and the Preferred Securities.
The following description contains all material information concerning the New
KDSM Senior Debentures but does not purport to be complete and is qualified in
its entirety by reference to the description in the KDSM Senior Debenture
Indenture, to be dated as of March 12, 1997, between KDSM, Inc. and First Union
National Bank of Maryland, as trustee with respect to the New KDSM Senior
Debentures (the "Debenture Trustee"), which is filed as an exhibit to the
registration statement of which this Prospectus is a part and is available as
set forth under "Available Information." Whenever particular sections or defined
terms in the KDSM Senior Debenture Indenture are referred to herein, such
sections or defined terms are incorporated by reference herein. Section
references used herein are references to provisions of the KDSM Senior Debenture
Indenture unless otherwise noted. Certain capitalized terms used herein are
defined under "Certain Definitions."
GENERAL
The New KDSM Senior Debentures will be limited in aggregate principal amount
to $206.2 million. The New KDSM Senior Debentures will be senior obligations of
KDSM, Inc., secured by a pledge of the New Parent Preferred.
(Section 1401).
The entire outstanding principal amount of the New KDSM Senior Debentures
will become due and payable, together with any accrued and unpaid interest
thereon, including any Additional Interest (as defined in "--Additional
Interest"), on March 15, 2009.
Payments by KDSM, Inc. on the New KDSM Senior Debentures, if made in
accordance with the terms of the KDSM Senior Debenture Indenture, will provide
funds sufficient to enable the Trust to make distributions and pay other amounts
on the New Preferred Securities. KDSM, Inc. will be substantially dependent on
the receipt of dividend payments on the New Parent Preferred and/or generating
cash from its operations to make payments on the New KDSM Senior Debentures.
KDSM, Inc.'s assets will initially consist of the Parent Preferred, the Common
Securities and the License Assets and Non-License Assets used in the operation
of KDSM-TV in Des Moines, Iowa. See "Risk Factors--High Leverage of KDSM, Inc.,"
"--Reliance on Television Operations in One Market" and "--Ability of KDSM, Inc.
to Transfer KDSM-TV" and "Relationship Among the New Preferred Securities, the
New KDSM Senior Debentures, the New Parent Preferred and the New Parent
Guarantee."
INTEREST
The KDSM Senior Debentures bear interest at the rate of 11 5/8 % per annum
payable quarterly in arrears on March 15, June 15, September 15 and December 15
of each year (each, an "Interest Payment Date") to the Person in whose name each
KDSM Senior Debenture is registered as of the March 1, June 1, September 1 and
December 1 next preceding each such Interest Payment Date. Interest on the Old
KDSM Senior Debentures accrues from March 12, 1997, the date of original
issuance. The first Interest Payment Date with respect to the Old KDSM Senior
Debentures is June 15, 1997. Interest on the New KDSM Senior Debentures will
accrue from the most recent Interest Payment Date of the Old KDSM Senior
Debentures surrendered in exchange for such New KDSM Senior Debentures, or, if
no interest has been paid on such Old KDSM Senior Debentures, from March 12,
1997. It is anticipated that the New KDSM Senior Debentures will be held in the
name of the Trust and will be held by the Property Trustee for the benefit of
the holders of the New Preferred Securities.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. (Section 312). In the event that any
date on which interest is payable on the New KDSM Senior Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), with the same force and effect as
if made on the date the payment was originally payable.
118
<PAGE>
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Sinclair will have the right, at any time and from time to time, to defer any
dividend payments on the New Parent Preferred for up to three consecutive
quarters during an Interest Extension Period; provided that Sinclair will be
required to pay all dividends due and owing on the New Parent Preferred at least
once every four quarters and must pay all dividends due and owing on March 15,
2009. Similarly, KDSM, Inc. shall have the right, at any time and from time to
time, to defer any interest payments on the New KDSM Senior Debentures during
any Interest Extension Period for (i) up to three consecutive quarters for any
period for which it does not receive dividends on the New Parent Preferred and
(ii) one quarter even if KDSM, Inc. receives dividends on the New Parent
Preferred; provided that KDSM, Inc. will be required to pay all interest due and
owing on the New KDSM Senior Debentures at least once every four quarters and
must pay all interest due and owing on the maturity date of the New KDSM Senior
Debentures. At the end of any such Interest Extension Period, KDSM, Inc. must
pay all interest then accrued and unpaid together with Additional Interest.
During any such Interest Extension Period, KDSM, Inc. covenants that it will not
declare or pay any dividend or distribution (other than a dividend or
distribution in its Capital Stock) on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its Capital Stock, or make any
guarantee payments with respect to the foregoing or repurchase, or cause any
subsidiary to repurchase, any security of KDSM, Inc. ranking pari passu with or
subordinate to the KDSM Senior Debentures. Except for Additional Interest
Attributable to Taxes (as defined under "--Additional Interest"), no interest
shall be due and payable during an Interest Extension Period, until the end of
such period. KDSM, Inc. must issue a press release in a normal commercial manner
which may be joint with the Trust and Sinclair and give the Property Trustee,
the Administrative Trustees and the Debenture Trustee notice of its election of
any Interest Extension Period at least ten Business Days prior to the earlier of
(i) the record date for interest payments on the New KDSM Senior Debentures or
(ii) the date the Administrative Trustees are required to give notice to any
applicable self-regulatory organization or security exchange or to holders of
the New Preferred Securities of the record date for the payment of such
distribution or the date such distributions are payable. The Debenture Trustee
will be required to give notice promptly of KDSM, Inc.'s election of such
Interest Extension Period. If the Property Trustee shall not be the sole holder
of record of the New KDSM Senior Debentures, KDSM, Inc. shall give all holders
of the New KDSM Senior Debentures notice at the time described in the prior
sentence.
In addition, the Parent Preferred Articles Supplementary will provide that,
during any period in which Sinclair defers dividends during a Dividend Extension
Period, Sinclair will not declare or pay any dividend or distribution (other
than a dividend or distribution in Common Stock of Sinclair or other security
junior in right of payment to the New Parent Preferred) on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its Capital Stock,
or make any guarantee payments with respect to the foregoing (other than
payments under the Parent Guarantee) or repurchase, or cause any Subsidiary to
repurchase, any security of Sinclair ranking pari passu with or subordinate to
the New Parent Preferred. The payment of the principal of and interest on the
New KDSM Senior Debentures will rank pari passu in right of payment to all
senior indebtedness of KDSM, Inc. and senior to all junior indebtedness of KDSM,
Inc. As of December 31, 1996 on a pro forma basis, KDSM, Inc. would have had no
long-term indebtedness outstanding other than the KDSM Senior Debentures.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any interest on
distributions in arrears in respect of the New Preferred Securities pursuant to
the terms thereof, KDSM, Inc. will in effect be required to pay as interest to
the Trust as the holder of the New KDSM Senior Debentures an amount of
additional interest ("Additional Interest Attributable to Deferral") equal to
such interest on distributions in arrears. Accordingly, in such circumstances
KDSM, Inc. will, to the fullest extent permitted by applicable law, pay interest
upon interest in order to provide for quarterly compounding on the New KDSM
Senior Debentures. In addition, if the Trust would be required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States or any other taxing authority,
then, in any such case, KDSM, Inc. will also be required to pay such amounts and
any other amounts as shall be required so that the net amounts received and
retained by the Trust after
119
<PAGE>
paying such taxes, duties, assessments or governmental charges whenever paid
will be not less than the amounts the Trust would have received had no such
taxes, duties, assessments or governmental charges been imposed ("Additional
Interest Attributable to Taxes" and, together with Additional Interest
Attributable to Deferral, "Additional Interest").
SET-OFF
Notwithstanding anything to the contrary in the KDSM Senior Debenture
Indenture, Sinclair shall have the right to cause KDSM, Inc. to set-off any
payment it is otherwise required to make under the New KDSM Senior Debentures to
the extent Sinclair has theretofore made, or is concurrently on the date of such
payment making, a payment under the New Parent Guarantee.
OPTIONAL REDEMPTION
KDSM, Inc. has the right (a) at any time on or after March 15, 2002, to
redeem the New KDSM Senior Debentures, in whole or in part, in cash at the
following redemption prices expressed as a percentage of the principal amount,
if redeemed during the 12-month period beginning March 15 of the years indicated
below:
REDEMPTION
YEAR PRICE
------- ------------
2002 105.813%
2003 104.650
2004 103.488
2005 102.325
2006 101.163
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date or (b) at any time
on or prior to March 15, 2000, in whole or in part, to redeem up to 33 1/3 % of
the aggregate principal amount of the KDSM Senior Debentures at 111.625% of
their principal amount, with the proceeds of one or more redemptions of the
Parent Preferred held by KDSM, Inc. (which Parent Preferred will have been
redeemed from the proceeds of one or more Public Equity Offerings of Sinclair);
provided that after such redemption at least 66 2/3 % of the aggregate principal
amount of KDSM Senior Debentures originally issued in respect of the Preferred
Securities remains outstanding. Such redemption in the case of clause (b) must
be made within 180 days of such Public Equity Offerings. Upon a redemption
pursuant to clause (a) or (b), the Preferred Securities to be redeemed from the
proceeds of the redemption of KDSM Senior Debentures shall be redeemed at a
percentage of their Liquidation Value equal to the percentage of principal
amount for which such KDSM Senior Debentures were redeemed.
REDEMPTION UPON A TAX EVENT OR AN INVESTMENT COMPANY ACT EVENT
KDSM, Inc. will have the option (a) upon a Tax Event or an Investment Company
Act Event, to redeem, in whole or in part, the New KDSM Senior Debentures for
cash at a redemption price of 105.813% in the case of a Tax Event, or 101% in
the case of an Investment Company Act Event, in each case of the aggregate
principal amount of the New KDSM Senior Debentures redeemed, plus all accrued
and unpaid interest, and to require Sinclair to redeem the New Parent Preferred
for cash pursuant to the terms thereof at the same redemption prices; provided
that at the time of redemption in the case of a Tax Event triggered by an
amendment, clarification or change, such amendment, clarification or change
remains in effect or (b) upon a Tax Event, as the holder of all the Common
Securities of the Trust, to cause the Trust to be dissolved with each holder of
New Preferred Securities receiving New KDSM Senior Debentures in a principal
amount equal to the Liquidation Value of their New Preferred Securities. If
KDSM, Inc. exercises the option in clause (a) above, KDSM, Inc. will use the
cash proceeds from the redemption of the New Parent Preferred to redeem New KDSM
Senior Debentures held by the Trust at a price that is a percentage above their
principal amount equal to the same percentage above the Liquidation Amount, if
any, for which Sinclair redeems the New Parent Preferred. The Trust
120
<PAGE>
would then promptly redeem New Preferred Securities with the proceeds it
received from KDSM, Inc. If KDSM, Inc. exercises the option in clause (b) above,
(i) pursuant to the KDSM Senior Debenture Indenture, Sinclair has agreed,
effective at the time of such distribution, to fully and unconditionally
guarantee the payment of the New KDSM Senior Debentures on a junior subordinated
basis (the "New Parent Debenture Guarantee"); provided that Sinclair confirms
the effectiveness of the New Parent Debenture Guarantee at the time of
distribution which it may not do if such New Parent Debenture Guarantee is not
then permitted under the terms of the Existing Indentures or the Bank Credit
Agreement and (ii) the Trust may not be dissolved unless the New Parent
Debenture Guarantee is effective. KDSM, Inc. will also be required to deliver a
tax opinion to the Trust to the effect that the dissolution of the Trust and the
distribution of the New KDSM Senior Debentures will not be a taxable event for
U.S. federal income tax purposes to the holders of the New Preferred Securities.
Sinclair is currently prohibited from taking any of the prospective actions
referred to above by the Bank Credit Agreement and the Existing Notes.
CHANGE OF CONTROL
Upon a Change of Control of Sinclair, each holder of the New KDSM Senior
Debentures will have the right to require KDSM, Inc. to redeem all or a portion
of such holder's New KDSM Senior Debentures in cash at a redemption price (the
"Change of Control Purchase Price") equal to 101% of principal amount plus
accrued and unpaid interest, if any, to the date of repurchase. Under the Trust
Agreement, each holder of New Preferred Securities, upon a Change of Control,
will have the right to require the Trust to redeem all or a portion of such
holder's New Preferred Securities at a cash purchase price equal to 101% of such
New Preferred Securities' Liquidation Value plus accrued and unpaid
distributions, if any, to the date of repurchase (the "Change of Control
Purchase Date"). Under the terms of the New Parent Preferred, upon a Change of
Control, Sinclair will be required to redeem sufficient shares of New Parent
Preferred to enable KDSM, Inc. to redeem the appropriate aggregate principal
amount of New KDSM Senior Debentures. See "Description of New Parent
Preferred--Change of Control." Notwithstanding the foregoing, the holders of the
New Preferred Securities, the New KDSM Senior Debentures and the New Parent
Preferred will not have the right to require the issuers of such securities to
redeem or repurchase such securities upon a Change of Control under any
circumstances unless all of the Existing Notes and all indebtedness under the
Bank Credit Agreement are repaid, redeemed or repurchased, all of the
commitments and letters of credit issued under the Bank Credit Agreement are
terminated and all interest rate protection agreements entered into between
Sinclair and any lenders under the Bank Credit Agreement are terminated as a
result of such Change of Control, or the holders of such instruments have
consented to a Change of Control Offer, in which case the date on which all
Existing Notes and all indebtedness under the Bank Credit Agreement are so
repaid, redeemed or repurchased and said commitments, letters of credit and
interest rate protection agreements are terminated or the holders of such
instruments have consented to a Change of Control Offer, shall be deemed to be
the date on which such Change of Control shall have occurred; provided that,
notwithstanding the foregoing, if Sinclair does not make and consummate a Change
of Control Offer upon a Change of Control, the holders of the Preferred
Securities will effectively have the right to elect two directors to the board
of directors of Sinclair but will not have any right of redemption.
Within 30 days following any Change of Control, KDSM, Inc. shall notify all
holders of the New KDSM Senior Debentures by first-class mail, postage prepaid,
at their addresses appearing in the security register, stating among other
things: that it is making the Change of Control Offer; the price (the "Change of
Control Purchase Price") at which it is offering to purchase the New KDSM Senior
Debentures; that the Change of Control Purchase Date shall be a Business Day not
earlier than 30 days nor later than 60 days from the date such notice is mailed,
or such later date as is necessary to comply with requirements under the
Exchange Act; that any New KDSM Senior Debenture not tendered will continue to
accrue interest; that, unless KDSM, Inc. does not make the payment of the Change
of Control Purchase Price, any New KDSM Senior Debentures accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Purchase Date; and certain other procedures that a holder of
New KDSM Senior Debentures must follow to accept a Change of Control Offer or to
withdraw such acceptance.
121
<PAGE>
If a Change of Control Offer is made, there can be no assurance that KDSM,
Inc. will have available funds sufficient to pay the Change of Control Purchase
Price for all of the New KDSM Senior Debentures that may be delivered by holders
of the New KDSM Senior Debentures seeking to accept the Change of Control Offer.
KDSM, Inc.'s assets are limited initially to the assets related to the
programming or operation of KDSM-TV and the New Parent Preferred and it will
have funds to redeem the New KDSM Senior Debentures only to the extent it has
funds relating to the operation of KDSM-TV and receives funds from Sinclair upon
a redemption of the New Parent Preferred. Under the terms of the New Parent
Preferred, Sinclair will not be required to redeem shares of the New Parent
Preferred upon a "Change of Control" under the New Parent Preferred if the
Existing Notes or any indebtedness under the Bank Credit Agreement are
outstanding; provided that KDSM, Inc. would have the right to elect two
directors to Sinclair's board of directors if Sinclair does not so redeem shares
of the New Parent Preferred. The failure of KDSM, Inc. to make and consummate
the Change of Control Offer when required may also result in an Event of Default
under the KDSM Senior Debenture Indenture. A Change of Control will result in an
event of default under the Bank Credit Agreement and the Existing Notes and
could result in the acceleration of all indebtedness under the Bank Credit
Agreement or the Existing Indentures, as the case may be. See "Description of
Indebtedness of Sinclair."
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York, Delaware or Maryland law
(which are the governing laws of the various operative governing documents) to
represent a specific quantitative test. As a consequence, in the event the
holders of the KDSM Senior Debentures elected to exercise their rights and the
Trust, KDSM, Inc. or Sinclair elected to contest such election, there could be
no assurance as to how a court interpreting New York, Delaware or Maryland law
would interpret the term.
The existence of a holder's right to require the repurchase of the New KDSM
Senior Debentures upon a Change of Control may deter a third party from
acquiring Sinclair in a transaction which constitutes a Change of Control.
FUNDING OF REDEMPTIONS
KDSM, Inc. will finance any of the redemptions of the New KDSM Senior
Debentures described above by causing Sinclair to redeem shares of the New
Parent Preferred having a Liquidation Amount equal to the principal amount of
the New KDSM Senior Debentures being so redeemed. The terms of the New Parent
Preferred provide that KDSM, Inc. may cause Sinclair to make such redemptions
except to the extent provided herein. See "Description of New Parent
Preferred--Optional Redemption" and "--Redemption Upon a Tax Event or an
Investment Company Act Event."
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
For so long as the Trust is the holder of all the outstanding KDSM Senior
Debentures, the proceeds of any redemption of the KDSM Senior Debentures will be
used by the Trust to redeem Preferred Securities first and then the Common
Securities in accordance with their terms. KDSM, Inc. may not redeem the KDSM
Senior Debentures in part unless all accrued and unpaid interest (including any
Additional Interest) has been paid in full on all outstanding KDSM Senior
Debentures for all quarterly interest periods terminating on or prior to the
date of redemption and no Interest Extension Period is in effect. (Section
1101).
Any optional redemption of the New KDSM Senior Debentures shall be made upon
not less than 30 nor more than 60 days' notice to the holders thereof, as
provided in the KDSM Senior Debenture Indenture. (Section 1105).
122
<PAGE>
CERTAIN COVENANTS OF KDSM, INC.
Limitation on Restricted Payments. KDSM, Inc. will not, and will not permit
any of its Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any securities of KDSM, Inc. that are junior in right of
payment to the New KDSM Senior Debentures ("Junior Securities") (other than
dividends or distributions payable solely in Junior Securities);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any Junior Securities or warrants, rights or
options to acquire shares of Junior Securities (except Junior Securities
held by KDSM, Inc. or a Wholly Owned Subsidiary of KDSM, Inc.);
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, sinking fund or maturity, any subordinated Indebtedness;
(iv) declare or pay any dividend or distribution or any Equity
Interests of any Subsidiary to any Person (other than KDSM, Inc., or a
Wholly Owned Subsidiary of KDSM, Inc.);
(v) incur, create or assume any guarantee of Indebtedness of any
Affiliate (other than a Wholly Owned Subsidiary of KDSM, Inc.); or
(vi) make any Investment in any Person (other than any Permitted
Investments)
(any of the foregoing payments described in clauses (i) through (vi),
collectively, "Restricted Payments") unless, after giving effect to the proposed
Restricted Payment (the amount of any such Restricted Payment, if other than
cash, as determined by the board of directors of Sinclair, whose determination
shall be conclusive and evidenced by a board resolution), (i) there shall not
have occurred any event that with the giving of notice or the lapse of time, or
both, would constitute an Event of Default under the KDSM Senior Debenture
Indenture, (ii) KDSM, Inc. shall not have given notice of its election of an
Interest Extension Period as provided in the KDSM Senior Debenture Indenture
(which notice shall not have been rescinded) and such Interest Extension Period
shall be continuing and KDSM, Inc. shall not have failed to make any interest
payment on the New KDSM Senior Debentures (whether or not as a result of an
Interest Extension Period) and such failure shall be continuing and (iii) the
aggregate amount of all Restricted Payments made after the date of the KDSM
Senior Debenture Indenture does not exceed an amount equal to KDSM, Inc.'s
Cumulative Operating Cash Flow, plus, to the extent not included in the
Cumulative Operating Cash Flow, Cumulative Parent Preferred Dividends, less
KDSM, Inc.'s Cumulative Consolidated Interest Expense. Notwithstanding the
foregoing, the foregoing provisions shall not prohibit an Asset Transfer
Transaction; provided that any Restricted Payment made in connection with an
Asset Transfer Transaction shall be considered in making the calculation of
Restricted Payments in the prior sentence with respect to any future
transaction. (Section 1008).
Limitation on Indebtedness. KDSM, Inc. will not, and will not permit any of
its Subsidiaries to, create, issue, incur, assume, or directly or indirectly
guarantee or otherwise in any manner become directly or indirectly liable for
("incur") any Indebtedness (including Acquired Indebtedness) except that KDSM,
Inc. may incur Indebtedness if the Debt to Operating Cash Flow Ratio of KDSM,
Inc. and its Subsidiaries at the time of the incurrence of such Indebtedness,
after giving pro forma effect thereto, is 4 to 1 or less. The foregoing
limitation will not apply to the incurrence of (i) debt pursuant to the issuance
of the KDSM Senior Debentures, (ii) trade credit incurred in the ordinary course
of business, (iii) Indebtedness of the Company represented by Capital Lease
Obligations or Purchase Money Obligations or Indebtedness incurred for working
capital purposes in an aggregate principal amount at any one time outstanding
not to exceed $5 million and (iv) guarantees by any Subsidiary of KDSM, Inc.
made in accordance with "--Limitation on Issuances of Guarantees of
Indebtedness." (Section 1009).
Limitation on Issuances of Guarantees of Indebtedness. KDSM, Inc. will not
permit any Subsidiary, directly or indirectly, to guarantee, assume or in any
other manner become liable with respect to any Indebtedness unless such
Subsidiary simultaneously executes and delivers a supplemental indenture to the
KDSM Senior Debenture Indenture providing for a guarantee of the New KDSM Senior
Deben
123
<PAGE>
tures, on the same terms as the guarantee of such Indebtedness except that if
such Indebtedness is by its terms expressly subordinated to the New KDSM Senior
Debentures any such assumption, guarantee or other liability of such Subsidiary
with respect to such Indebtedness shall be subordinated to such Subsidiary's
guarantee of the New KDSM Senior Debentures at least to the same extent as such
Indebtedness is subordinated to the New KDSM Senior Debentures. (Section 1010).
Merger, Consolidation and Sale of Assets. KDSM, Inc. may not, in a single
transaction or a series of related transactions, consolidate with or merge with
or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets (with and without giving effect to the Parent
Preferred) to, another Person or adopt a plan of liquidation unless (i) either
(a) KDSM, Inc. is the survivor of such merger or consolidation or (b) the Person
(if other than KDSM, Inc.) formed by such consolidation or into which KDSM, Inc.
is merged or the Person that acquires by conveyance, transfer or lease the
properties and assets of KDSM, Inc. substantially as an entirety or, in the case
of a plan of liquidation, the Person to which assets of KDSM, Inc. have been
transferred, shall be a corporation, partnership or trust organized and existing
under the laws of the United States or any State thereof or the District of
Columbia; (ii) the New KDSM Senior Debentures shall be converted into or
exchanged for and shall become obligations of such successor, transferee or
resulting Person, having in respect of such successor, transferee or resulting
Person the same powers, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions
thereon, that the New KDSM Senior Debentures had immediately prior to such
transaction; (iii) immediately after giving effect to such transaction and the
use of proceeds therefrom (on a pro forma basis, including any Indebtedness
incurred or anticipated to be incurred in connection with such transaction), the
Consolidated Net Worth of the surviving entity shall equal or exceed the
Consolidated Net Worth of KDSM, Inc. immediately prior to such transaction; (iv)
immediately after giving effect to such transaction on a pro forma basis, the
Cumulative Operating Cash Flow for the four most recently completed fiscal
quarters for the surviving entity shall equal or exceed the Cumulative Operating
Cash Flow of KDSM, Inc. for such four-quarter period; and (v) KDSM, Inc. has
delivered to the Debenture Trustee prior to the consummation of the proposed
transaction an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger or transfer complies with the KDSM Senior
Debenture Indenture and that all conditions precedent in the KDSM Senior
Debenture Indenture relating to such transaction have been satisfied; provided
that the foregoing clauses (i) through (v) shall not apply to any Asset Transfer
Transaction. For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related transactions) of
all or substantially all of the properties and assets of one or more
Subsidiaries of KDSM, Inc., the Capital Stock of which constitutes all or
substantially all of the properties or assets of KDSM, Inc., will be deemed to
be the transfer of all or substantially all of the properties and assets of
KDSM, Inc. (Section 801).
Limitation on Transactions with Affiliates. KDSM, Inc. will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter into or suffer
to exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of KDSM, Inc. (other than KDSM, Inc. or a Wholly
Owned Subsidiary of KDSM, Inc.) unless (a) such transaction or series of
transactions is in writing on terms that are no less favorable to KDSM, Inc. or
such Subsidiary, as the case may be, than would be available in a comparable
transaction in arm's-length dealings with an unrelated third party and (b) (i)
with respect to any transaction or series of transactions involving aggregate
payments in excess of $500,000, KDSM, Inc. delivers an officers' certificate to
the Debenture Trustee certifying that such transaction or series of related
transactions complies with clause (a) above and such transaction or series of
related transactions has been approved by a majority of the members of the Board
of Directors of KDSM, Inc. (and approved by a majority of Independent Directors
of KDSM, Inc. or, in the event there is only one such Independent Director, by
such Independent Director) and (ii) with respect to any transaction or series of
transactions involving aggregate payments in excess of $1,000,000, an opinion as
to the fairness to KDSM, Inc. or such Subsidiary from a financial point of view
issued by an investment banking firm of national standing. Notwithstanding the
foregoing, this provision will not apply to (A) any transaction with an officer
or director of KDSM, Inc. entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any officer or
director of KDSM, Inc.), (B) any
124
<PAGE>
transaction entered into by KDSM, Inc. or one of its Wholly Owned Subsidiaries
with a Wholly Owned Subsidiary of KDSM, Inc., (C) transactions in existence on
the date of the KDSM Senior Debenture Indenture, and (D) any Asset Transfer
Transactions. (Section 1011).
Limitation on Liens. KDSM, Inc. will not, and will not permit any Subsidiary
of KDSM, Inc. to, directly or indirectly, create, incur or, affirm any Lien of
any kind upon any of its property or assets (including any intercompany notes),
now owned or acquired after the date of the KDSM Senior Debenture Indenture, or
any income or profits therefrom, excluding, however, from the operation of the
foregoing any of the following:
(a) any Lien existing as of the date of the KDSM Senior Debenture
Indenture ;
(b) any Lien arising by reason of (1) any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired; (2) taxes not yet delinquent or which are being contested in good
faith; (3) security for payment of workers' compensation or other
insurance; (4) good faith deposits in connection with tenders, leases or
contracts (other than contracts for the payment of money); (5) zoning
restrictions, easements, licenses, reservations, provisions, covenants,
conditions, waivers, restrictions on the use of property or minor
irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created,
assumed or permitted to exist and arising by, through or under a landlord
or owner of the leased property, with or without consent of the lessee),
none of which materially impairs the use of any parcel of property material
to the operation of the business of KDSM, Inc. or any Subsidiary thereof or
the value of such property for the purpose of such business; (6) deposits
to secure public or statutory obligations, or in lieu of surety or appeal
bonds; and (7) operation of law in favor of mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary course of
business for sums which are not yet delinquent or are being contested in
good faith by negotiations or by appropriate proceedings which suspend the
collection thereof;
(c) any Liens securing Purchase Money Obligations or Capital Lease
Obligations incurred in accordance with the KDSM Senior Debenture
Indenture; and
(d) any extension, renewal, refinancing or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through (c) so
long as the amount of security is not increased thereby. (Section 1012).
Limitation on Sale of Assets. KDSM, Inc. will not, and will not permit any of
its Subsidiaries to, directly or indirectly, consummate an Asset Sale unless
KDSM, Inc. or such Subsidiary receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the Equity Interests or assets
sold as determined in good faith by the board of directors of KDSM, Inc. and
evidenced in a board resolution, except in connection with an Asset Transfer
Transaction. (Section 1013).
Impairment of Security Interest. KDSM, Inc. will not, and will not permit any
Subsidiary of KDSM, Inc., to take or omit to take any action which would have
the result of adversely affecting or impairing the security interests with
respect to the Collateral in contravention of the KDSM Senior Debenture
Indenture, except as required by applicable law and except that Collateral may
be released simultaneously with the payment for the redemption of any shares of
Parent Preferred, and KDSM, Inc. shall not (and shall cause its Subsidiaries not
to) grant to, or suffer to exist in favor of, any Person, any interest
whatsoever in the Collateral except as permitted by the Collateral Documents or
the KDSM Senior Debenture Indenture. KDSM, Inc. will not, and will not permit
any of its Subsidiaries to, enter into any agreement or instrument that by its
terms expressly requires that the proceeds received from the sale of any
Collateral by KDSM, Inc. be applied to repay, redeem or otherwise retire any
Indebtedness of any Person other than the KDSM Senior Debenture Indenture.
(Section 1014).
Provision of Financial Statements. Whether or not Sinclair or KDSM, Inc. is
subject to Section 13(a) or 15(d) of the Exchange Act, KDSM, Inc. will send to
the holders of New KDSM Senior Debentures copies of the annual reports,
quarterly reports and other documents which Sinclair would have been
125
<PAGE>
required to file with the Commission pursuant to such Section 13(a) or 15(d) if
Sinclair were so subject, such documents to be filed with the Commission to the
extent permitted under the Exchange Act on or prior to the respective dates (the
"Required Filing Dates") by which Sinclair would have been required so to file
such documents if Sinclair were so subject. KDSM, Inc. will also in any event
(x) within 15 days of each Required Filing Date transmit by mail to all holders
of the New KDSM Senior Debentures, as their names and addresses appear in the
register, without cost to such holders, copies of the annual reports, quarterly
reports and other documents which Sinclair would have been required to file with
the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if
Sinclair were subject to such Sections and (y) if filing such documents by
Sinclair with the Commission is not permitted under the Exchange Act, promptly
upon written request and payment of the reasonable cost of duplication and
delivery, supply copies of such documents to any prospective holder at KDSM,
Inc.'s cost. Any such documents sent to the holders of New KDSM Senior
Debentures shall also include financial information regarding KDSM, Inc. to the
extent information regarding KDSM, Inc. would be required to be included in a
registration statement relating to the New Preferred Securities or New KDSM
Senior Debentures, if such securities were being issued to the public. If the
Trust is the sole holder of the New KDSM Senior Debentures, the Trustees will
cause the reports delivered to the Trust pursuant to this paragraph to be
promptly delivered to the holders of the New Preferred Securities. (Section
1015).
Other Covenants. KDSM, Inc. has also covenanted in the KDSM Senior Debenture
Indenture (i) to maintain 100% ownership of the Common Securities of the Trust
and that all of its Capital Stock will be directly or indirectly owned by
Sinclair; (ii) not to voluntarily dissolve, wind-up or terminate the Trust,
except in certain circumstances permitted by the Trust Agreement; (iii) to use
its reasonable efforts, consistent with the terms and provisions of the Trust
Agreement, to cause the Trust to remain a business trust and otherwise not to be
classified as an association taxable as a corporation for United States federal
income tax purposes; (iv) to promptly (a) redeem the New KDSM Senior Debentures
from the proceeds of any redemption of the New Parent Preferred and (b) make
interest payments on the New Preferred Securities if the Company receives
dividend payments on the New Parent Preferred, except to the extent that KDSM,
Inc. is permitted to defer interest payments for one quarterly period even if it
receives dividends on the New Parent Preferred; (v) that upon a Change of
Control and a resulting Change of Control Offer only if a Change of Control
Offer is required, to elect to have shares of the New Parent Preferred redeemed
by Sinclair with a Liquidation Amount equal to the Liquidation Value of the New
Preferred Securities which holders of New Preferred Securities elect to tender
for redemption to the Trust as a result of such Change of Control; and (vi) that
KDSM, Inc. may not sell, offer to sell, grant any option with respect to, pledge
or incur any Liens with respect to, the New Parent Preferred other than as
permitted by the Collateral Documents.
EVENTS OF DEFAULT
The KDSM Senior Debenture Indenture will provide that any one or more of the
following described events that has occurred and is continuing constitutes an
"Event of Default" with respect to the New KDSM Senior Debentures:
(a) failure for 30 days to pay any interest on the KDSM Senior Debentures,
including any Additional Interest in respect thereof, when due (subject to the
deferral of any due date in the case of an Interest Extension Period); or
(b) failure to pay any principal on the KDSM Senior Debentures when due,
whether at maturity, upon redemption by declaration or otherwise; or
(c) the occurrence of a Voting Rights Triggering Event under the Parent
Preferred, which Voting Rights Triggering Event shall be continuing; or
(d) (i) there shall be a default in the performance, or breach, of any
covenant or agreement of KDSM, Inc. or any guarantor under the KDSM Senior
Debenture Indenture (other than a default in the performance or breach of a
covenant or agreement which is specifically dealt with in clause (a) or (b) or
in clause (ii) or (iii) of this clause (d)) and such default or breach shall
continue for a period of 30 days after written notice has been given, by
certified mail, (1) to the holder or holders of KDSM Senior
126
<PAGE>
Debentures by the Debenture Trustee or (2) to KDSM, Inc. and the Debenture
Trustee by the holders of at least 25% in aggregate principal amount of the
outstanding KDSM Senior Debentures; (ii) there shall be a default in the
performance or breach of the provisions described under "--Certain Covenants of
KDSM, Inc.--Merger, Consolidation and Sale of Assets"; or (iii) KDSM, Inc. shall
have failed to promptly redeem the New KDSM Senior Debentures from the proceeds
of any redemption of the New Parent Preferred or shall make and consummate a
Change of Control Offer, if required in accordance with the provisions described
under "--Change of Control"; or
(e) the occurrence of an Event of Default under the Expense Agreement; or
(f) any of the Collateral Documents shall for any reason cease to be, or be
asserted in writing by KDSM, Inc. or any Subsidiary, as applicable, not to be,
in full force and effect and enforceable in accordance with its terms, or any
security interest purported to be created by any Collateral Document shall cease
to be valid and perfected first security interest in any Collateral or there
shall be an Event of Default under the Pledge Agreement, except in each case to
the extent contemplated by the KDSM Senior Debenture Indenture or such
Collateral Document; or
(g) the New Parent Debenture Guarantee, after initial effectiveness, shall
for any reason cease to be, or be asserted in writing by Sinclair not to be, in
full force and effect, enforceable in accordance with its terms, except to the
extent contemplated by the KDSM Senior Debenture Indenture and the New Parent
Debenture Guarantee; or
(h) certain events in bankruptcy, insolvency or reorganization of Sinclair
or KDSM, Inc. or any Significant Subsidiary of Sinclair or KDSM, Inc. (Section
501).
The holders of a majority in outstanding principal amount of the KDSM Senior
Debentures have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee upon an Event of
Default under the KDSM Senior Debenture Indenture. (Section 512). If an Event of
Default (other then as specified in clause (h)) has occurred and is continuing,
the Debenture Trustee, the holders of at least 25% in aggregate outstanding
principal amount of the outstanding KDSM Senior Debentures or the Trustees under
the Trust on their own behalf or pursuant to the Trust Agreement at the
direction of the holders of at least 25% in aggregate Liquidation Value of
outstanding Preferred Securities (if the Trust holds at least 25% in aggregate
principal amount of the KDSM Senior Debentures) may declare the principal and
interest, including Additional Interest, due and payable on the KDSM Senior
Debentures immediately upon an Event of Default. If an Event of Default
specified in clause (h) has occurred and is continuing, then all of the KDSM
Senior Debentures together with all accrued and unpaid interest, including
Additional Interest, shall become and immediately be due and payable, without
any declaration or other act on the part of any Trustee or any holder. The
holders of a majority in aggregate outstanding principal amount of the KDSM
Senior Debentures may annul such declaration and waive the default if the
default has been cured or waived and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration and
any Additional Interest has been deposited with the Debenture Trustee.
The holders of a majority in principal amount of the outstanding KDSM Senior
Debentures affected thereby may, on behalf of the holders of all the KDSM Senior
Debentures, waive any past default, except a default in the payment of principal
or interest, including Additional Interest (unless such default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration and any Additional Interest has been
deposited with the Debenture Trustee) or a default in respect of a covenant or
provision which under the KDSM Senior Debenture Indenture cannot be modified or
amended without the consent of the holder of each outstanding KDSM Senior
Debenture; provided that the Trustees of the Trust will not provide such waiver
if the Trust owns any of the KDSM Senior Debentures without the consent of the
holders of at least a majority in aggregate Liquidation Value of the outstanding
Preferred Securities. (Section 513). KDSM, Inc. is required to file annually
with the Debenture Trustee a certificate as to whether or not KDSM, Inc. is in
compliance with all the conditions and covenants applicable to it under the KDSM
Senior Debenture Indenture. (Section 1023).
127
<PAGE>
In case any Event of Default shall occur and be continuing, the Property
Trustee will have the right to declare the principal of and the interest on the
New KDSM Senior Debentures (including any Additional Interest) and any other
amounts payable under the KDSM Senior Debenture Indenture to be forthwith due
and payable and to enforce its other rights as a creditor with respect to the
New KDSM Senior Debentures. (Section 502).
An involuntary dissolution of the Trust prior to redemption or maturity of
the New KDSM Senior Debentures would not constitute an Event of Default with
respect to the KDSM Senior Debenture Indenture. If the Trust is dissolved, any
of the following, among other things, could occur: (i) a distribution of the New
KDSM Senior Debentures to the holders of the New Preferred Securities after
satisfaction of liabilities to creditors of the Trust, (ii) a cash distribution
to the holders of the New Preferred Securities out of the sale of assets of the
Trust, after satisfaction of liabilities to creditors of the Trust or (iii) a
permitted redemption of the New KDSM Senior Debentures, and a consequent
redemption of a Like Amount of the Preferred Securities, at the option of KDSM,
Inc. under the circumstances described under "--Optional Redemption."
SECURITY
KDSM, Inc.'s obligations to pay the principal of, premium, if any, and
interest on the New KDSM Senior Debentures will be secured by a first priority
security interest in the Parent Preferred (the "Collateral"). First Union
National Bank of Maryland is the Collateral Agent under the Pledge Agreement.
The Collateral Documents provide that no Person may share in the security
created under the Collateral Documents or receive any distributions of
Collateral or proceeds thereof upon the exercise of remedies under the
Collateral Documents.
Upon delivery of a notice to the Collateral Agent by the Debenture Trustee
(or Trustee under the Preferred Securities in certain circumstances) with
respect to the KDSM Senior Debenture Indenture, stating that the obligations
under the KDSM Senior Debentures have not been paid in full when due (taking
into account any applicable grace period) upon maturity, acceleration, any event
resulting in automatic acceleration or otherwise (each, a "Payment Default"),
the Pledge Agreement provides for the foreclosure upon the Collateral by the
Collateral Agent. Under the Collateral Documents the Debenture Trustee may
provide the Collateral Agent with instructions directing the Collateral Agent to
exercise or refrain from exercising the Collateral Agent's rights under the
Collateral Documents on behalf of the holders of the KDSM Senior Debentures.
Upon any foreclosure upon the Collateral, cash or other property realized by
the Collateral Agent will be applied by the Collateral Agent first to pay the
expenses of such foreclosure and fees and other amounts then payable to the
Collateral Agent and the Trustee under the Pledge Agreement or the KDSM Senior
Debenture Indenture then for the equal and ratable benefit of the holders of the
KDSM Senior Debentures that are not Affiliates of Sinclair, first to the payment
of all interest due and payable, second to the payment of principal, pro rata
based upon the aggregate principal amount of Indebtedness held by the holders of
the KDSM Senior Debentures and thereafter for the equal and ratable benefit of
the holders of KDSM Senior Debentures that are Affiliates of Sinclair, first to
the payment of interest due and payable and, second to the payment of principal,
pro rata based upon the aggregate principal amount of KDSM Senior Debentures
held by the holders of KDSM Senior Debentures that are Affiliates of Sinclair.
The Debenture Trustee may, in its sole discretion and without the consent of
the holders of the KDSM Senior Debentures, but subject to the KDSM Senior
Debenture Indenture, take all actions it deems necessary or appropriate in order
to (a) enforce the Collateral Documents and (b) collect and receive any and all
amounts payable in respect of the Indenture Obligations of KDSM, Inc. under the
KDSM Senior Debenture Indenture, in each case in accordance with and to the
extent provided in the Collateral Documents. Subject to the provisions of the
Collateral Documents, the Debenture Trustee shall have power to institute and to
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of the Collateral Documents or the KDSM Senior Debenture Indenture, and to
preserve or protect its interest
128
<PAGE>
and the interests of the holders of the New KDSM Senior Debentures in the
Collateral. The Debenture Trustee is authorized to receive any funds for the
benefit of holders of the New KDSM Senior Debentures distributed under the
Collateral Documents, and to make further distributions of such funds to the
holders of the KDSM Senior Debentures according to the provisions of the KDSM
Senior Debenture Indenture.
The Pledge Agreement may not be amended or waived without the requisite
consent (as set forth in the relevant instrument governing the relevant
indebtedness) of the holders of a majority of the aggregate principal amount of
KDSM Senior Debentures outstanding which, while the Trust holds the KDSM Senior
Debentures, will not be provided without the consent of the holders of a
majority in aggregate Liquidation Value of the outstanding Preferred Securities.
So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions in the KDSM Senior Debenture Indenture
and the Collateral Documents, KDSM, Inc. will be entitled to receive all
dividends and other payments made upon or with respect to the Collateral. Upon
the occurrence and during the continuance of an Event of Default: (a) all rights
of KDSM, Inc. to receive all dividend and other payments made upon or with
respect to the Collateral will cease and such interest and other payments will
be required to be paid to the Collateral Agent and (b) the Collateral Agent may
sell the Collateral or any part thereof in accordance with the terms of the
Collateral Documents.
The Pledge Agreement will prohibit KDSM, Inc. from providing any consents to
any action under the Parent Preferred without the consent of the holders of the
majority in aggregate principal amount of the KDSM Senior Debentures which,
while the Trust holds the KDSM Senior Debentures, will not, pursuant to the
Pledge Agreement, be provided without the consent of holders of a majority in
aggregate Liquidation Value of the outstanding Preferred Securities and will
require KDSM, Inc. to elect the nominees of the holders of the majority in
aggregate principal amount of the KDSM Senior Debentures, which, while the Trust
holds the KDSM Senior Debentures, will, pursuant to the Pledge Agreement, elect
the nominees of the holders of a majority in aggregate Liquidation Value of the
Preferred Securities to Sinclair's Board of Directors if KDSM, Inc. has that
right.
DISPOSITIONS AND RELEASES OF COLLATERAL
Under the terms of the Collateral Documents, the Collateral Agent, acting as
required pursuant to the Collateral Documents, will determine the circumstances
and manner in which the Collateral shall be disposed of, including but not
limited to the determination of whether to release all or any portion of the
Collateral from the Liens created by the Collateral Documents and whether to
foreclose on the Collateral following an Event of Default. In addition, if
Sinclair redeems a portion of the Parent Preferred, such Parent Preferred and
the proceeds thereof will be released from the security interest created under
the Pledge Agreement so long as the proceeds thereof are used simultaneously to
redeem the KDSM Senior Debentures. Upon release of any Collateral, the holders
of the KDSM Senior Debentures will not have perfected security interests in such
Collateral or the proceeds thereof. Any release of such Collateral will comply
with the Trust Indenture Act to the extent required.
FORM, EXCHANGE, AND TRANSFER
The New KDSM Senior Debentures will initially be issuable to the Trust in
certificated registered form, without coupons and only in denominations of $100
and integral multiples thereof. (Section 302).
The New KDSM Senior Debentures, if distributed to holders of New Preferred
Securities pursuant to the dissolution of the Trust, will be issued as a
registered security in global form (a "Global Security") registered in the name
of the DTC or its nominees if permitted under the rules of the DTC except that
New KDSM Senior Debentures issued to institutional accredited investors may be
issued in certificated form. In the event that New KDSM Senior Debentures are
issued in certificated form, such New KDSM Senior Debentures will be in
denominations of $100 and integral multiples thereof and may be transferred or
exchanged at the offices described below.
129
<PAGE>
Subject to the terms of the KDSM Senior Debenture Indenture, New KDSM Senior
Debentures may be presented for registration of transfer or exchange (duly
endorsed or accompanied by satisfactory instruments of transfer) at the office
of the security registrar of the New KDSM Senior Debentures (the "Debenture
Registrar") or at the office of any transfer agent designated by KDSM, Inc. for
such purpose. No service charge will be made for any registration of transfer or
exchange of New KDSM Senior Debentures, but, in the case of a transfer, KDSM,
Inc. may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Such transfer or exchange
will be effected when the Debenture Registrar or such transfer agent, as the
case may be, is satisfied with the documents of transfer, title and identity of
the person making the request. KDSM, Inc. has appointed the Debenture Trustee as
the initial Debenture Registrar. (Section 306). KDSM, Inc. may at any time
designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent acts.
(Section 1002).
If the New KDSM Senior Debentures are to be redeemed in part, KDSM, Inc. will
not be required to issue, register the transfer of, or exchange any New KDSM
Senior Debentures that are going to be redeemed during a period beginning at the
opening of business 15 days before the day of mailing of a notice of redemption
of any such New KDSM Senior Debentures and ending at the close of business on
the day of such mailing. (Section 306).
PAYMENT AND PAYING AGENTS
Payment of interest on the New KDSM Senior Debentures on any Interest Payment
Date will be made to the Person in whose name such New KDSM Senior Debenture (or
one or more predecessor securities) is registered at the close of business on
the Regular Record Date (as defined in the KDSM Senior Debenture Indenture) for
such interest. (Section 309). Payments on New KDSM Senior Debentures issued as a
Global Security will be made to DTC, as the depositary for the New KDSM Senior
Debentures.
The principal of and any interest (including Additional Interest) on the New
KDSM Senior Debentures will be payable at the office of such paying agent or
paying agents (the "Debenture Paying Agent") as KDSM, Inc. may designate for
such purpose from time to time, except that at the option of KDSM, Inc. payment
of any interest may be made by check mailed to the address of the Person
entitled thereto as such address appears in the Security Register or by wire
transfer. (Section 301). The corporate trust office of the Debenture Trustee is
designated as KDSM, Inc.'s sole Debenture Paying Agent for payments with respect
to the New KDSM Senior Debentures. KDSM, Inc. may at any time designate
additional Debenture Paying Agents or rescind the designation of any Debenture
Paying Agent or approve a change in the office through which any Debenture
Paying Agent acts. (Section 1003).
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee, other than during the occurrence and continuance of a
default by KDSM, Inc. in performance of the KDSM Senior Debenture Indenture,
undertakes to perform only such duties as are specifically set forth in the KDSM
Senior Debenture Indenture and, after an Event of Default under the KDSM Senior
Debenture Indenture, must exercise the same degree of care and skill as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs. Subject to this provision, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the KDSM
Senior Debenture Indenture at the request of any holder of New Preferred
Securities or New KDSM Senior Debentures unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby. (Section 602).
Sinclair and certain of its Subsidiaries maintain deposit accounts and
conduct other banking transactions with the Debenture Trustee in the ordinary
course of their businesses.
MODIFICATION OF THE KDSM SENIOR DEBENTURE INDENTURE
From time to time, KDSM, Inc. and the Debenture Trustee may, without the
consent of the holders of the New KDSM Senior Debentures, amend, waive or
supplement the KDSM Senior Debenture Indenture for specified purposes of (i)
evidencing the succession of another Person to KDSM, Inc. and
130
<PAGE>
the assumption by such successor of KDSM, Inc.'s obligations under the KDSM
Senior Debenture Indenture and the New KDSM Senior Debentures; (ii) adding to
the covenants of KDSM, Inc. for the benefit of the holders of the New KDSM
Senior Debentures or surrendering any right or power conferred upon KDSM, Inc.
by the KDSM Senior Debenture Indenture or the New KDSM Senior Debentures; (iii)
evidencing and providing the acceptance of the appointment of a successor
Debenture Trustee; (iv) curing ambiguities, defects or inconsistencies; (v)
qualifying, or maintaining the qualification of, the KDSM Senior Debenture
Indenture under the Trust Indenture Act; or (vi) making any other change that
does not adversely affect the rights of any holder of New KDSM Senior
Debentures. (Section 901). The KDSM Senior Debenture Indenture shall contain
provisions permitting KDSM, Inc. and the Debenture Trustee, with the consent of
the holders of not less than a majority in aggregate principal amount of the
outstanding KDSM Senior Debentures, to modify the KDSM Senior Debenture
Indenture in a manner affecting the rights of the holders of the KDSM Senior
Debentures; provided that no such modification may, without the consent of the
holder of each outstanding KDSM Senior Debenture, (i) change the fixed maturity
of the KDSM Senior Debentures, or reduce the principal amount thereof, or reduce
the rate or extend the time of payment of interest thereon, (ii) change the
place or currency of payment of principal or interest on the KDSM Senior
Debentures, (iii) change the subordination provisions in a manner adverse to the
holders of the KDSM Senior Debentures or the Preferred Securities, (iv) change
the date on which the KDSM Senior Debentures may be redeemed at the option of
KDSM, Inc. to an earlier date, (v) reduce the percentage of principal amount of
KDSM Senior Debentures, the holders of which are required to consent to any such
modification of the KDSM Senior Debenture Indenture or (vi) modify certain
provisions of the KDSM Senior Debenture Indenture relating to the waiver of past
defaults or compliance by KDSM, Inc. with the covenants therein; provided that
under the Trust Agreement the Trustees of the Trust will not provide such
consent to any such amendment if the Trust owns any KDSM Senior Debentures
without the consent of the holders of at least the same percentage of aggregate
Liquidation Value of the outstanding Preferred Securities that would be required
to approve an amendment to the KDSM Senior Debenture Indenture if they held such
KDSM Senior Debentures directly. As described herein, the Pledge Agreement also
requires the consent of the holders of the Preferred Securities to any action
taken by KDSM, Inc. regarding the Parent Preferred. (Sections 901 and 902).
SATISFACTION AND DISCHARGE
Under the terms of the KDSM Senior Debenture Indenture, KDSM, Inc. will be
discharged from any and all obligations in respect of the KDSM Senior Debentures
(except in each case for certain obligations to register the transfer or
exchange of KDSM Senior Debentures, pay Additional Interest, compensate,
indemnify and reimburse the Debenture Trustee, replace stolen, lost or mutilated
KDSM Senior Debentures and hold moneys for payment in trust) if all
authenticated and delivered KDSM Senior Debentures (other than certain stolen,
lost, or mutilated KDSM Senior Debentures and KDSM Senior Debentures for which
payment money was segregated and then discharged) have been delivered to the
Debenture Trustee for cancellation or if KDSM, Inc. deposits with the Debenture
Trustee, in trust, moneys in an amount sufficient to pay all the principal of,
premium, if any, and interest on, the KDSM Senior Debentures on the dates such
payments are due in accordance with the terms of the KDSM Senior Debentures.
(Section 1201).
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
KDSM, Inc. may, at its option, at any time, elect to have the obligations of
KDSM, Inc. and any other obligor upon New KDSM Senior Debentures discharged with
respect to the outstanding New KDSM Senior Debentures ("defeasance"). Such
defeasance means that KDSM, Inc. and any other obligor under the KDSM Senior
Debenture Indenture shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding KDSM Senior Debentures, except for
(i) the rights of holders of outstanding KDSM Senior Debentures to receive
payments in respect of the principal of, premium, if any, and interest on such
KDSM Senior Debentures when such payments are due, (ii) KDSM, Inc.'s obligations
with respect to the KDSM Senior Debentures concerning issuing temporary KDSM
Senior Debentures, registration of KDSM Senior Debentures, mutilated, destroyed,
131
<PAGE>
lost or stolen KDSM Senior Debentures, and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and (iv) the
defeasance provisions of the KDSM Senior Debenture Indenture. In addition, KDSM,
Inc. may, at its option and at any time, elect to have the obligations of KDSM,
Inc. and any other obligor released with respect to certain covenants that are
described in the KDSM Senior Debenture Indenture ("covenant defeasance") and any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the KDSM Senior Debentures. In the event
covenant defeasance occurs, certain events (not including non-payment,
enforceability of any guarantee, bankruptcy and insolvency events) described
under "--Events of Default" will no longer constitute an Event of Default with
respect to the KDSM Senior Debentures. (Sections 401, 402 and 403)
In order to exercise either defeasance or covenant defeasance, (i) KDSM, Inc.
must irrevocably deposit with the Debenture Trustee, in trust, for the benefit
of the holders of the KDSM Senior Debentures, cash in United States dollars,
U.S. Government Obligations (as defined in the KDSM Senior Debenture Indenture),
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants or a
nationally recognized investment banking firm expressed in a written
certification thereof delivered to the Debenture Trustee, to pay and discharge
the principal of, premium, if any, and interest on the outstanding KDSM Senior
Debentures on the Stated Maturity of such principal or installment of principal
or interest (or on any date after March 15, 2002 (such date being referred to as
the "Defeasance Redemption Date"), if when exercising either defeasance or
covenant defeasance, KDSM, Inc. has delivered to the Debenture Trustee an
irrevocable notice to redeem all of the outstanding KDSM Senior Debentures on
the Defeasance Redemption Date; (ii) in the case of defeasance, KDSM, Inc. shall
have delivered to the Debenture Trustee an opinion of independent counsel in the
United States stating that (A) KDSM, Inc. has received from, or there has been
published by, the IRS a ruling or (B) since the date of the KDSM Senior
Debenture Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such opinion of
independent counsel in the United States shall confirm that, the holders of the
outstanding KDSM Senior Debentures will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance had not occurred; (iii) in
the case of covenant defeasance, KDSM, Inc. shall have delivered to the Trustee
an opinion of independent counsel in the United States to the effect that the
holders of the outstanding KDSM Senior Debentures will not recognize income,
gain or loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such covenant
defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as clause (h)
under the first paragraph under "--Events of Default" is concerned, at any time
during the period ending on the 91st day after the date of deposit; (v) such
defeasance or covenant defeasance shall not cause the Debenture Trustee to have
a conflicting interest with respect to any securities of KDSM, Inc. or any
guarantor; (vi) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, the KDSM Senior Debenture
Indenture or any other material agreement or instrument to which KDSM, Inc. or
any guarantor is a party or by which it is bound; (vii) KDSM, Inc. shall have
delivered to the Debenture Trustee an opinion of independent counsel to the
effect that after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (viii)
KDSM, Inc. shall have delivered to the Debenture Trustee an officers'
certificate stating that the deposit was not made by KDSM, Inc. with the intent
of preferring the holders of the KDSM Senior Debentures or any guarantee thereof
over the other creditors of KDSM, Inc. or any guarantor with the intent of
defeating, hindering, delaying or defrauding creditors of KDSM, Inc., any
guarantor or others; (ix) no event or condition shall exist that would prevent
KDSM, Inc. from making payments of the principal of, premium, if any, and
interest on the KDSM Senior Debentures on the date of such deposit or at any
time ending on the 91st day after the date of such deposit; and (x) KDSM, Inc.
shall have delivered to the Debenture Trustee an officers' certificate and an
opinion of independent counsel, each stating that all conditions precedent
provided for relating to either the defeasance or the covenant defeasance, as
the case may be, have been complied with. (Section 404)
132
<PAGE>
GOVERNING LAW
The KDSM Senior Debenture Indenture and the New KDSM Senior Debentures will
be governed by, and construed in accordance with, the laws of the State of New
York. (Section 113).
MISCELLANEOUS
All covenants and agreements of KDSM, Inc. contained in the KDSM Senior
Debenture Indenture will bind its successors and assigns. (Section 110).
As long as payments of dividends and other payments are made when due on the
Parent Preferred, such payments will be sufficient to cover interest and other
payments due on the KDSM Senior Debentures, primarily because (i) the aggregate
stated Liquidation Amount of the Parent Preferred will be equal to the sum of
the aggregate stated principal amount of the KDSM Senior Debentures and the
Common Securities, (ii) the dividend rate and the Dividend Payment Dates and
other payment dates on the Parent Preferred will match the interest rate and the
Interest Payment Dates and other payment dates for the KDSM Senior Debentures
and (iii) the dividend rate on the Parent Preferred will be 1 percentage point
higher than the interest rate on the KDSM Senior Debentures. See "Risk
Factors--High Leverage of KDSM, Inc."
THE EXPENSE AGREEMENT
Pursuant to the Expense Agreement entered into by KDSM, Inc. under the Trust
Agreement (the "Expense Agreement"), KDSM, Inc. will irrevocably and
unconditionally guarantee to each Person to whom the Trust becomes indebted or
liable, the full payment of any indebtedness, expenses or liabilities of the
Trust, as incurred, other than obligations of the Trust to pay to the holders of
any Common Securities being held by KDSM, Inc. or New Preferred Securities being
issued pursuant to this Prospectus the amounts due such holders pursuant to the
terms of such securities. Failure to make any payments under the Expense
Agreement will result in an Event of Default under the KDSM Senior Debenture
Indenture.
133
<PAGE>
DESCRIPTION OF THE NEW PREFERRED SECURITIES
The Trust Agreement among KDSM, Inc., as Depositor (the "Depositor"), First
Union National Bank of Maryland as the "Property Trustee," First Union Bank of
Delaware as the "Delaware Trustee," and the two "Administrative Trustees" named
in the Trust Agreement (together with the Property Trustee and the Delaware
Trustee, the "Trustees"), authorizes the issuance of the Preferred Securities
and the Common Securities (together, the "Issuer Securities") by the Trust. The
Old Preferred Securities were issued, and the New Preferred Securities will be
issued by the Administrative Trustees on behalf of the Trust pursuant to the
terms of the Trust Agreement. The New Preferred Securities will represent
undivided beneficial interests in the assets of the Trust and entitle the
holders thereof to a preference in certain circumstances with respect to
distributions and amounts payable on redemption or liquidation over the Common
Securities, as well as other benefits as described in the Trust Agreement. The
following summaries contain the material information concerning the Trust
Agreement but do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the Trust
Agreement, including the definitions therein of certain terms. The Trust
Agreement is filed as an exhibit to the registration statement of which this
Prospectus is a part and is available as set forth in "Available Information."
Wherever particular sections or defined terms of the Trust Agreement are
referred to, such sections or defined terms are incorporated herein by
reference. Section references used herein are references to provisions of the
Trust Agreement unless otherwise stated. Certain capitalized terms used herein
are defined under "Certain Definitions."
GENERAL
All of the Common Securities are owned by KDSM, Inc. The Common Securities
will rank junior in right of payment to the Preferred Securities except as
described under "--Subordination of Common Securities." (Section 4.03). The
ability of the Trust to make distributions and pay other amounts on the New
Preferred Securities will be solely dependent upon KDSM, Inc. making interest
payments on the New KDSM Senior Debentures as and when required. Such payments,
if made in accordance with the terms of the KDSM Senior Debenture Indenture,
will provide sufficient funds to enable the Trust to make distributions and pay
other amounts on the New Preferred Securities. The ability of KDSM, Inc. to pay
interest on the New KDSM Senior Debentures will be dependent on its receipt of
dividends on the New Parent Preferred and its ability to generate cash from its
operations which will initially consist of the License Assets and Non-License
Assets of KDSM-TV in Des Moines, Iowa. See "Risk Factors--Ability of KDSM, Inc.
to Transfer KDSM-TV."
Subject to applicable law (including, without limitation, United States
federal securities law), Sinclair or its Subsidiaries may at any time and from
time to time purchase outstanding New Preferred Securities by tender, in the
open market or by private agreement.
DISTRIBUTIONS
The distributions payable on each New Preferred Security will be entitled to
a preference fixed at a rate per annum of 11 5/8 % of the stated Liquidation
Value of $100 per New Preferred Security. Distributions that are in arrears will
accrue additional distributions on the amount thereof at the rate per annum of
11 5/8 % (the same rate as the preference rate described above), compounded
quarterly. The term "distributions" as used herein includes any such additional
distributions payable, unless otherwise stated, and shall also include, unless
duplicative, any Additional Amounts with respect to the New Preferred
Securities. "Additional Amounts" means the amount of Additional Interest
Attributable to Deferral (as defined under "Description of the New KDSM Senior
Debentures--Additional Interest") paid by KDSM, Inc. on the New KDSM Senior
Debentures. See "Description of the New KDSM Senior Debentures--Additional
Interest." The amount of distributions payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. (Section 4.01(a) and
4.01(b)).
Distributions on the New Preferred Securities will be cumulative, will accrue
from the Issue Date, March 12, 1997, and will be payable quarterly in arrears,
on March 15, June 15, September 15 and December 15 of each year, commencing on
June 15, 1997, to holders of record on the March 1, June 1, September 1 and
December 1 next preceding such distribution date, except as otherwise described
134
<PAGE>
below. Holders of the New Preferred Securities will be entitled to receive
cumulative cash distributions from the most recent distribution date of the Old
Preferred Securities surrendered in exchange for such New Preferred Securities,
or, if no distributions have been paid on such Old Preferred Securities, from
March 12, 1997. In the event that any date on which distributions are otherwise
payable on the New Preferred Securities is not a Business Day, payment of the
distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay) (each date on which distributions are payable in accordance with the
foregoing, a "Distribution Payment Date"). (Section 4.01(a)).
As described under "Description of the New KDSM Senior Debentures--Option to
Extend Interest Payment Period," Sinclair will have the right, at any time and
from time to time, to defer dividend payments on the New Parent Preferred for up
to three consecutive quarters during a Dividend Extension Period; provided that
Sinclair will be required to pay all dividends due and owing on the New Parent
Preferred at least once every four quarters and must pay all dividends due and
owing on March 15, 2009. Similarly, KDSM, Inc. will have the right, at any time
and from time to time, to defer any interest payments on the New KDSM Senior
Debentures during an Interest Extension Period for (i) up to three consecutive
quarters for any period for which it does not receive dividends on the New
Parent Preferred, and (ii) one quarter even if KDSM, Inc. receives dividends on
the New Parent Preferred provided that KDSM, Inc. will be required to pay all
interest due and owing on the KDSM Senior Debentures at least once every four
quarters and must pay all interest due and owing on the maturity date of the New
KDSM Senior Debentures. The New Preferred Securities will provide that quarterly
distributions thereon may similarly be deferred for up to three consecutive
quarters (but additional distributions would continue to accrue on such amounts,
including additional distributions payable on any unpaid distributions at the
rate per annum set forth above, compounded quarterly) by the Trust during any
Interest Extension Period in which KDSM, Inc. does not pay interest on the New
KDSM Senior Debentures; provided that the Trust will be required to pay all
distributions due and owing on the New Preferred Securities at least once every
four quarters and the Trust must pay all distributions due and owing on the
maturity date of the New Preferred Securities. If the Trust does not make
distributions on the Preferred Securities for four consecutive quarters, the
holders of the Preferred Securities will be entitled to elect new Trustees to
the Trust. The Trust must make partial distributions to the extent KDSM, Inc.
makes partial interest payments on the New KDSM Senior Debentures. KDSM, Inc.,
the Trust and Sinclair may exercise such deferral options only by issuing a
press release at least ten Business Days prior to the record date for any
distribution, interest payment or dividend payment which is being deferred. In
the event that KDSM, Inc. or Sinclair exercises any deferral right, during such
period KDSM, Inc. or Sinclair, as the case may be, may not declare or pay any
dividend or distribution (other than a dividend or distribution in common stock)
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock, or make any guarantee payments with respect to the
foregoing (other than payments under the New Parent Guarantee), or repurchase or
cause any subsidiary to repurchase any security of KDSM, Inc. or Sinclair, as
the case may be, ranking pari passu with or subordinate to the New KDSM Senior
Debentures in the case of KDSM, Inc. or the New Parent Preferred in the case of
Sinclair (except on a ratable basis with securities ranking pari passu with the
New KDSM Senior Debentures or New Parent Preferred, as the case may be). In
addition, if dividends on the Parent Preferred are not paid for four consecutive
quarters, KDSM, Inc. shall be entitled, as the holder of the Parent Preferred,
to elect two directors to Sinclair's board of directors. KDSM, Inc. has agreed
in the Pledge Agreement to elect the nominees of the Trust who will elect the
holders of a majority in aggregate Liquidation Value of the outstanding
Preferred Securities to such directorships. Upon the termination of any such
deferral period and the payment of all amounts then due, KDSM, Inc., the Trust
and Sinclair may select a new deferral period, subject to the foregoing
requirements. See "Description of the New KDSM Senior Debentures--Interest" and
"--Option to Extend Interest Payment Period."
It is anticipated that the income of the Trust available for distribution to
the holders of the New Preferred Securities will be limited to payments under
the New KDSM Senior Debentures. See "Description of the New KDSM Senior
Debentures." If KDSM, Inc. does not make interest payments on the New KDSM
Senior Debentures, the Property Trustee will not have funds available to pay
distributions on the New Preferred Securities. If Sinclair does not pay
dividends on the New Parent Preferred and KDSM, Inc. does not generate
sufficient cash from its operations, KDSM, Inc. will not have funds
135
<PAGE>
available to pay interest on the New KDSM Senior Debentures. The payment of
distributions (if and to the extent the Trust has funds sufficient to make such
payments) shall be guaranteed on a junior subordinated basis by Sinclair to the
limited extent set forth herein under "Description of the New Parent
Guarantee--Status of the New Parent Guarantee." See "Risk Factors--High
Leverage of KDSM, Inc."
OPTIONAL REDEMPTION
Upon the repayment of the New KDSM Senior Debentures held by the Trust,
whether at maturity or upon earlier redemption as provided in the KDSM Senior
Debenture Indenture, the proceeds from such repayment shall be applied by the
Property Trustee to redeem a Like Amount of Issuer Securities, upon not less
than 30 nor more than 60 days' notice of the date of such redemption, at $100
per New Preferred Security plus accumulated and unpaid distributions to the
Redemption Date, whether or not earned or declared (the "Redemption Price");
provided that if the New KDSM Senior Debentures are redeemed at a price in
excess of their principal amount, the New Preferred Securities will be redeemed
at the same higher percentage of their Liquidation Value. Such payment in
redemption shall be made to the extent that the Trust has funds available for
such payment. KDSM, Inc. may not redeem the New KDSM Senior Debentures in part
unless all accrued and unpaid interest (including any Additional Interest) has
been paid in full on all outstanding KDSM Senior Debentures for all quarterly
interest periods terminating on or prior to the date of redemption. The maturity
date of the New KDSM Senior Debentures is March 15, 2009. See "Description of
the New KDSM Senior Debentures--Optional Redemption."
KDSM, Inc. has the right (a) at any time on or after March 15, 2002, to
redeem the New KDSM Senior Debentures in whole or in part, in cash at the
following redemption prices expressed as a percentage of the principal amount,
if redeemed during the 12-month period beginning March 15 of the years indicated
below:
REDEMPTION
YEAR PRICE
------- ------------
2002 105.813%
2003 104.650
2004 103.488
2005 102.325
2006 101.163
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date or (b) at any time
on or prior to March 15, 2000, to redeem up to 33 1/3 % of the aggregate
principal amount of the KDSM Senior Debentures at 111.625% of the principal
amount, with the proceeds of one or more redemptions of the Parent Preferred
held by KDSM, Inc. (and if the Parent Preferred will have been redeemed from the
proceeds of one or more Public Equity Offerings of Sinclair); and provided
further that after such redemption at least 66 2/3 % of the aggregate principal
amount of the KDSM Senior Debentures originally issued remain outstanding. Such
redemption in the case of clause (b) must be made within 180 days of such Public
Equity Offerings. Upon a redemption pursuant to clause (a) or (b), the New
Preferred Securities to be redeemed from the proceeds of a redemption of the New
KDSM Senior Debentures shall be redeemed at a percentage of their Liquidation
Value equal to the percentage of principal amount at which such New KDSM Senior
Debentures were redeemed.
REDEMPTION UPON A TAX EVENT OR AN INVESTMENT COMPANY ACT EVENT
KDSM, Inc. will have the option (a) upon a Tax Event or an Investment Company
Act Event, to redeem the New KDSM Senior Debentures for cash at a redemption
price of 105.813% in the case of a Tax Event, or 101% in the case of an
Investment Company Act Event, in each case of the aggregate principal amount of
the New KDSM Senior Debenture redeemed, plus all accrued and unpaid interest,
and to require Sinclair to redeem the New Parent Preferred for cash pursuant to
the terms thereof at the same redemption prices; provided that at the time of
redemption in the case of a Tax Event triggered by
136
<PAGE>
an amendment, clarification or change, such amendment, clarification or change
remains in effect, or (b) upon a Tax Event, as the holder of all the Common
Securities of the Trust, to cause the Trust to be dissolved with each holder of
New Preferred Securities receiving New KDSM Senior Debentures in a principal
amount equal to the Liquidation Value of their New Preferred Securities. If
KDSM, Inc. exercises the option in clause (a) above, KDSM, Inc. will use the
cash proceeds from the redemption of the New Parent Preferred to redeem New KDSM
Senior Debentures held by the Trust at a price that is a percentage above their
principal amount equal to the same percentage above the Liquidation Amount, if
any, for which Sinclair redeems the New Parent Preferred. The Trust would then
promptly redeem New Preferred Securities with the proceeds it received from
KDSM, Inc. If KDSM, Inc. exercises the option in clause (b) above, (i) pursuant
to the KDSM Senior Debenture Indenture, Sinclair has agreed, effective at the
time of such distribution, to fully and unconditionally guarantee the New KDSM
Senior Debentures on a junior subordinated basis (the "New Parent Debenture
Guarantee"); provided that Sinclair confirms the effectiveness of the Parent
Debenture Guarantee at the time of distribution which it may not do if such
guarantee is not then permitted under the terms of the Existing Notes or the
Bank Credit Agreement and (ii) the Trust may not be dissolved unless the New
Parent Debenture Guarantee is effective. KDSM, Inc. will also be required to
deliver a tax opinion to the effect that the dissolution of the Trust and the
distribution of the New KDSM Senior Debentures will not be a taxable event to
the holders of the New Preferred Securities. Sinclair is currently prohibited
from taking any of the prospective actions referred to above by the Bank Credit
Agreement and the Existing Indentures.
FUNDING OF REDEMPTIONS
KDSM, Inc. will finance any of the redemptions of the New KDSM Senior
Debentures described under "--Optional Redemption" or "--Redemption Upon a Tax
Event or an Investment Company Act Event" by causing Sinclair to redeem New
Parent Preferred having a Liquidation Amount equal to the principal amount of
the New KDSM Senior Debentures being so redeemed. The redemption premiums (as a
percentage of principal amount or Liquidation Amount, as the case may be) will
be the same for the New KDSM Senior Debentures and New Parent Preferred. The
terms of the Parent Preferred will provide that KDSM, Inc. may require Sinclair
to make such redemptions. See "Description of the New Parent Preferred--Optional
Redemption" and "--Redemption Upon a Tax Event or an Investment Company Act
Event."
ADDITIONAL INFORMATION REGARDING REDEMPTIONS
For so long as the Trust is the holder of all the outstanding KDSM Senior
Debentures, the proceeds of any redemption of the KDSM Senior Debentures will be
used by the Trust to redeem Preferred Securities first and then the Common
Securities in accordance with their respective terms. KDSM, Inc. may not redeem
the KDSM Senior Debentures in part unless all accrued and unpaid interest
(including any Additional Interest) has been paid in full on all outstanding
KDSM Senior Debentures for all quarterly interest periods terminating on or
prior to the date of redemption and no Interest Extension Period is in effect.
(Section 1101).
Any optional redemption of the KDSM Senior Debentures shall be made upon not
less than 30 nor more than 60 days' notice to the holders thereof, as will be
provided in the KDSM Senior Debenture Indenture. (Section 1105).
CHANGE OF CONTROL
Upon a Change of Control of Sinclair, each holder of the New Preferred
Securities will have the right to require the Trust to redeem all or a portion
of such holder's New Preferred Securities in cash from the proceeds of the
redemption by KDSM, Inc. of New KDSM Senior Debentures held by the Trust at a
cash redemption price of 101% of such New Preferred Securities' Liquidation
Value plus accrued and unpaid distributions, if any (the "Change of Control
Purchase Price"), to the date of repurchase (the "Change of Control Purchase
Date"). Under the terms of the New Parent Preferred, upon a Change of Control,
Sinclair will be required to redeem sufficient shares of New Parent Preferred to
enable KDSM, Inc. to redeem the appropriate aggregate principal amount of New
KDSM Senior
137
<PAGE>
Debentures. See "Description of the New Parent Preferred--Change of Control."
Notwithstanding the foregoing, the holders of the New Preferred Securities, the
New KDSM Senior Debentures and the New Parent Preferred will not have the right
to require the issuers of such securities to redeem or repurchase, as the case
may be, such securities upon a Change of Control under any circumstances unless
all of the Existing Notes and all indebtedness under the Bank Credit Agreement
are repaid, redeemed or repurchased, all of the commitments and letters of
credit issued under the Bank Credit Agreement are terminated, and all interest
rate protection agreements entered into between Sinclair and any lenders under
the Bank Credit Agreement are terminated as a result of such Change of Control
or the holders of such instruments have consented to a Change of Control Offer,
in which case the date on which all Existing Notes and all indebtedness under
the Bank Credit Agreement are so repaid, redeemed or repurchased and such
commitments, letters of credit and interest rate protection agreements are
terminated or the holders of such instruments have consented to a Change of
Control Offer shall be deemed to be the date on which such Change of Control
shall have occurred. If Sinclair does not make and consummate a Change of
Control Offer upon a Change of Control, the holders of the New Preferred
Securities will effectively have the right to elect two directors to the board
of directors of Sinclair but will not have a right of redemption.
Within 30 days following any Change of Control, the Trust shall give written
notice to the holders of the New Preferred Securities by first-class mail,
postage prepaid, at their addresses appearing in the register for the New
Preferred Securities, stating, among other things, that it is making the Change
of Control Offer, the Change of Control Purchase Price and that the Change of
Control Purchase Date shall be a Business Day not earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such later date as is
necessary to comply with requirements under the Exchange Act; that any New
Preferred Security not tendered will continue to accrue distributions; that,
unless the Trust defaults in the payment of the Change of Control Purchase
Price, any New Preferred Securities accepted for payment pursuant to the Change
of Control Offer shall cease to accrue distributions after the Change of Control
Purchase Date; and certain other procedures that a holder of New Preferred
Securities must follow to accept a Change of Control Offer or to withdraw such
acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Trust will have available funds sufficient to pay the Change of Control Purchase
Price for all of the New Preferred Securities that may be delivered by holders
of New Preferred Securities seeking to accept the Change of Control Offer. The
Trust will have the funds to redeem the New Preferred Securities only to the
extent KDSM, Inc. redeems a sufficient number of New KDSM Senior Debentures upon
such Change of Control. KDSM, Inc. will have funds to redeem the New KDSM Senior
Debentures only to the extent it receives funds from Sinclair upon a redemption
of the New Parent Preferred. Under the New Parent Preferred, Sinclair will not
be required to redeem the New Parent Preferred tendered to it by KDSM, Inc. upon
a Change of Control unless the conditions set forth in the preceding paragraph
relating to the Existing Notes and the Bank Credit Agreement are satisfied. The
failure of KDSM, Inc. to make or consummate the Change of Control Offer when
required will result in an Event of Default under the KDSM Senior Debenture
Indenture. A Change of Control will result in an event of default under
Sinclair's Bank Credit Agreement and the Existing Notes and could result in the
acceleration of all indebtedness under the Bank Credit Agreement or the Existing
Indentures, as the case may be, and in such case the holders of the New Parent
Preferred and New Preferred Securities will not have any right to have the New
Parent Preferred or New Preferred Securities redeemed. See "Description of
Indebtedness of Sinclair."
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York, Delaware or Maryland law
(which are the governing laws of the various applicable documents) to represent
a specific quantitative test. As a consequence, in the event the holders of the
Preferred Securities elected to exercise their rights and the Trust, KDSM, Inc.
or Sinclair elected to contest such election, there could be no assurance as to
how a court interpreting New York, Delaware or Maryland law would interpret the
term.
The existence of a holder's right to require the repurchase of the New
Preferred Securities upon a Change of Control may deter a third party from
acquiring Sinclair in a transaction which constitutes a Change of Control.
138
<PAGE>
REDEMPTION PROCEDURES
New Preferred Securities redeemed on each date fixed for redemption (the
"Redemption Date") shall be redeemed at the Redemption Price with the proceeds
from the contemporaneous redemption of New KDSM Senior Debentures. Redemptions
of the New Preferred Securities will be made and the Redemption Price will be
payable on each Redemption Date only to the extent that the Trust has funds
sufficient for the payment of such Redemption Price. (Section 4.02(d)).
If the Property Trustee gives a notice of redemption in respect of New
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the Redemption Date, the Property Trustee will, so long as the
New Preferred Securities are in book-entry-only form and to the extent that the
Trust has funds immediately available for payment of the applicable Redemption
Price, irrevocably deposit with DTC funds or securities, as the case may be,
sufficient to pay the Redemption Price and will give DTC irrevocable
instructions and authority to pay the Redemption Price to the holders of the New
Preferred Securities. See "--Book-Entry Securities; The Depository Trust
Company; Delivery and Form." If the New Preferred Securities are no longer in
book-entry-only form, the Property Trustee, to the extent that the Trust has
funds immediately available for the payment of the Redemption Price, will
irrevocably deposit with the paying agent for the New Preferred Securities (the
"New Preferred Securities Paying Agent") funds or securities, as the case may
be, sufficient to pay the applicable Redemption Price and will give the New
Preferred Securities Paying Agent irrevocable instructions and authority to pay
the Redemption Price to the holders thereof upon surrender of their certificates
evidencing such New Preferred Securities. Notwithstanding the foregoing,
distributions payable on or prior to the Redemption Date for any New Preferred
Securities called for redemption shall be payable to the holders of such New
Preferred Securities on the relevant record dates for the related Distribution
Payment Dates. If notice of redemption shall have been given and funds or
securities, as the case may be, deposited as required, then upon the date of
such deposit, all rights of holders of such New Preferred Securities so called
for redemption will cease, except the right of the holders of such New Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such New Preferred Securities will cease to be
outstanding. In the event that any date fixed for redemption of New Preferred
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
Redemption Price in respect of New Preferred Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by Sinclair
pursuant to the New Parent Guarantee described herein under "Description of the
New Parent Guarantee," distributions on such New Preferred Securities will
continue to accrue from the original Redemption Date to the date of payment, in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price. (Section 4.02(e)).
If less than all the outstanding Issuer Securities are to be redeemed on a
Redemption Date, then the aggregate Redemption Price to be paid shall be
allocated first to the Preferred Securities and then to the Common Securities.
The particular Preferred Securities to be redeemed will be selected not more
than 60 days prior to the Redemption Date by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $100 or integral
multiples thereof) of the aggregate Liquidation Value of Preferred Securities
then-outstanding. The Property Trustee shall promptly notify the Preferred
Securities Registrar (as defined under "--Registrar and Transfer Agent"), in
writing, of the Preferred Securities selected for redemption and, in the case of
any Preferred Securities selected for partial redemption, the Liquidation Value
thereof to be redeemed. For purposes of the Trust Agreement, unless the context
otherwise requires, all provisions relating to the redemption of Preferred
Securities will relate, in the case of any Preferred Securities redeemed or to
be redeemed only in part, to the portion of the aggregate Liquidation Value of
Preferred Securities that has been or is to be redeemed. (Section 4.02(f)).
139
<PAGE>
SUBORDINATION OF COMMON SECURITIES
Payment of distributions (including Additional Amounts, if applicable) on,
and the Redemption Price of, the Issuer Securities, as applicable, shall be made
pro rata based on the aggregate liquidation value of the Issuer Securities;
provided, however, that no payment of any distribution (including Additional
Amounts, if applicable) on, or Redemption Price of, any Common Security and no
other payment on account of the redemption, liquidation or other acquisition of
any Common Security, shall be made unless payment in full in cash of all
accumulated and unpaid distributions (including Additional Amounts, if
applicable) on all outstanding Preferred Securities for all distribution periods
terminating on or prior thereto (whether or not such distributions have been
properly deferred), or in the case of payment of the Redemption Price the full
amount of such Redemption Price on all outstanding Preferred Securities called
for redemption, shall have been made or provided for, and all funds legally
available to the Property Trustee shall first be applied to the payment in full
in cash of all distributions (including Additional Amounts, if applicable) on,
or the Redemption Price of, Preferred Securities then due and payable. (Section
4.03(a)).
If there is any Event of Default under the Trust Agreement, the holders of
Common Securities will be deemed to have waived any right to act with respect to
any such Event of Default under the Trust Agreement until the effect of all such
Events of Default with respect to the Preferred Securities have been cured,
waived or otherwise eliminated. Until any such Events of Default under the Trust
Agreement with respect to the Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of the Preferred Securities and not the holder of the Common Securities,
and only the holders of the Preferred Securities will have the right to direct
the Property Trustee to act on their behalf.
(Section 4.03(b)).
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust shall dissolve and be liquidated
by the Trustees on the first to occur of: (i) March 15, 2015, the expiration of
the term of the Trust; (ii) subject to the condition described in the following
paragraph, the bankruptcy, insolvency, dissolution, winding-up or liquidation of
Sinclair or one or more of its subsidiaries which in the aggregate own directly
or indirectly more than 50% of Sinclair's consolidated assets; (iii) the
occurrence of a Tax Event or an Investment Company Act Event and a related
redemption of the New Preferred Securities for cash or (in the case of a Tax
Event) the distribution of New KDSM Senior Debentures to holders of Issuer
Securities as described herein; (iv) the redemption of all of the Preferred
Securities; and (v) upon the entry of a decree of judicial dissolution of the
Trust. (Sections 9.01 and 9.02).
The Trust may only be dissolved pursuant to an event described in clause (ii)
of the prior paragraph with the consent of the holders of a majority in
Liquidation Value of the Preferred Securities then outstanding; provided that
under current bankruptcy laws the holders of the Preferred Securities may not be
able to exercise this right to dissolve the Trust. If, upon the occurrence of a
Tax Event, KDSM, Inc. chooses to cause (i) the liquidation of the Trust and (ii)
the Trust to distribute the KDSM Senior Debentures to the holders of the Issuer
Securities, the Trust shall be liquidated by the Trustees as expeditiously as
the Trustees determine to be appropriate by causing the Property Trustee to
distribute to each holder of Preferred Securities and Common Securities, after
satisfaction of liabilities to creditors of the Trust, a Like Amount of KDSM
Senior Debentures, including any rights attached thereto. If the Trust is
terminated other than as a result of a Tax Event as described in the prior
sentence, the Trust shall be liquidated and the holders of the Preferred
Securities will be entitled to receive, out of the assets of the Trust available
for distribution to holders of the Issuer Securities after satisfaction of
liabilities to creditors of the Trust, an amount equal to, in the case of
holders of Preferred Securities, the aggregate of the stated Liquidation Value
of $100 per Preferred Security plus accrued and unpaid distributions thereon to
the date of payment, whether or not earned or declared (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution only after the holders of the Preferred Securities have been paid in
full. (Sections 4.02 and 9.04).
140
<PAGE>
EVENTS OF DEFAULT; NOTICE
The "Events of Default" under the Trust Agreement with respect to the New
Preferred Securities issued thereunder will be (a) the failure to obtain the
consent of the holders of the Preferred Securities as required under the Trust
Agreement and as described under "--Voting Rights", (b) the failure to make
distributions on the Preferred Securities for any period for which KDSM, Inc.
pays interest on the KDSM Senior Debentures, (c) the occurrence of any Event of
Default under the KDSM Senior Debenture Indenture and (d) the failure of the
Trust to perform its obligations under the Trust Agreement. Events of Default
under the KDSM Senior Debenture Indenture are set forth under "Description of
the New KDSM Senior Debentures--Events of Default."
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of Preferred Securities, the
Administrative Trustees and the Depositor, unless such Event of Default shall
have been cured or waived. (Section 8.02).
Unless an Event of Default shall have occurred and be continuing, any Trustee
may be removed at any time by act of the holder of the Common Securities. If
such an Event of Default has occurred and is continuing, any Trustee may be
removed at such time by written act of the holders of a majority in aggregate
Liquidation Value of the outstanding Preferred Securities, delivered to such
Trustee (in its individual capacity and on behalf of the Trust). No registration
or removal of a Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor Trustee in
accordance with the provisions of the Trust Agreement. (Section 8.10).
The Preferred Securities shall have a preference over the Common Securities
in certain circumstances upon dissolution of the Trust as described above. See
"--Liquidation Distribution Upon Dissolution."
MERGER OR CONSOLIDATION OF A TRUSTEE
Any Person into which the Property Trustee or, if not a natural person, the
Delaware Trustee or any Administrative Trustee may be merged or with which it
may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which any such Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of any such
Trustee, shall be the successor to such Trustee under the Trust Agreement,
provided such Person is otherwise qualified and eligible. (Section 8.12).
VOTING RIGHTS
Except as provided below and as described under "Description of the New
Parent Guarantee--Amendments and Assignment" and as otherwise required by law,
the holders of the New Preferred Securities will have no voting rights.
(Section 6.01(a)).
Subject to the provisions described below under "--Modification of the Trust
Agreement Without Consent," if any proposed amendment to the Trust Agreement
provides for, or the Trustees otherwise propose to effect, any action that would
adversely affect the powers, preferences or special rights of the holders of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise, or the dissolution, winding-up or termination of the Trust, other
than pursuant to the Trust Agreement, then the holders of outstanding Preferred
Securities will be entitled to vote on such amendment or proposal, and such
amendment or proposal shall not be effective except with the approval of the
holders of at least a majority in aggregate Liquidation Value of outstanding
Preferred Securities; provided that no such modification may, without the
consent of the holder of each outstanding Preferred Security (i) change the
amount, timing, place of payment or currency of any distribution on the
Preferred Securities or otherwise adversely affect the amount of any
distribution required to be made in respect of the Preferred Securities as of a
specified date, (ii) restrict the right of any holder of the Preferred
Securities to institute suit for the enforcement of any payment under the Trust
Agreement, (iii) modify the purposes of the Trust, (iv) authorize or issue any
interest in the Trust other than as currently contemplated by the Trust
Agreement, (v) change the Redemption Price or modify the redemption procedures
with
141
<PAGE>
respect to Issuer Securities or (vi) affect the limited liability of any holder
of Preferred Securities. In addition, the Trust Agreement will provide that the
Trust may not issue any additional Equity Interests or incur debt without the
approval of a majority in aggregate Liquidation Value of outstanding Preferred
Securities.
So long as any KDSM Senior Debentures are held in the name of the Property
Trustee for the benefit of the holders of the Preferred Securities, the Property
Trustee shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or execute any
trust or power conferred on the Debenture Trustee with respect to the KDSM
Senior Debentures, (ii) waive any past default under the KDSM Senior Debenture
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the KDSM Senior Debentures shall be due and payable, (iv)
consent to any amendment, modification or termination of the KDSM Senior
Debenture Indenture or the KDSM Senior Debentures, where such consent shall be
required, or (v) exercise any right with respect to the Parent Preferred
without, in each case, obtaining the prior approval of the holders of at least a
majority in aggregate Liquidation Value of the outstanding Preferred Securities;
provided, however, that where a consent under the KDSM Senior Debenture
Indenture would require the consent of each holder of KDSM Senior Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior consent of each holder of Preferred Securities. The Property Trustee
shall not revoke any action previously authorized or approved by a vote of the
holders of the outstanding Preferred Securities except by subsequent vote of
such holders. The Property Trustee shall notify all holders of the Preferred
Securities of any notice of default received from the Debenture Trustee. In
addition to obtaining the foregoing approvals of the holders of the Preferred
Securities, prior to taking any of the foregoing actions, the Trustees shall
obtain, at the expense of KDSM, Inc., an opinion of independent counsel
experienced in such matters to the effect that the Trust will not be classified
as an association taxable as a corporation for United States federal income tax
purposes on account of such action. (Section 6.01 (b)).
In addition, upon an Event of Default under the Preferred Securities, the
holders of a majority of the aggregate Liquidation Value of the outstanding
Preferred Securities will have the right to replace any or all of the Trustees
of the Trust. Additionally, upon a Voting Rights Triggering Event under the
Parent Preferred, KDSM, Inc. will have the right to elect two directors of
Sinclair. KDSM, Inc. will also agree in the Pledge Agreement that it will elect
the nominees of the holders of a majority of the Liquidation Value of
outstanding Preferred Securities to such directorships.
Any required approval of holders of Preferred Securities may be given at a
separate meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Administrative Trustees will cause a notice of
any meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be given to each holder of record of Preferred Securities in the manner set
forth in the Trust Agreement. (Sections 6.02 and 6.06).
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel Preferred Securities in accordance with the
Trust Agreement.
For purposes of any vote of the holders of the Preferred Securities, any
Preferred Securities that are held by Sinclair, any Trustee or any affiliate of
Sinclair or any Trustee, shall, for purposes of such vote or consent, be treated
as if they were not outstanding.
CO-PROPERTY TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default under the Trust Agreement shall have occurred and
be continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property (as defined in the Trust Agreement) may at the time be
located, the holder of the Common Securities and the Administrative Trustees
shall have power to appoint, and upon the written request of the Administrative
Trustees, KDSM, Inc., as depositor (the "Depositor"), shall for such purpose
join with the Administrative Trustees in the execution, delivery and performance
of all instruments and agreements necessary or proper to appoint, one or more
Persons
142
<PAGE>
approved by the Property Trustee either to act as co-property trustee, jointly
with the Property Trustee, of all or any part of such Trust Property, or to act
as separate trustee of any such property, in either case with such powers as may
be provided in the instrument of appointment, and to vest in such Person or
persons in such capacity, any property, title, right or power deemed necessary
or desirable, subject to the provisions of the Trust Agreement. If KDSM, Inc.,
as Depositor, does not join in such appointment within 15 days after the receipt
by it of a request so to do, or in case an Event of Default under the KDSM
Senior Debenture Indenture has occurred and is continuing, the Property Trustee
alone shall have the power to make such appointment. (Section 8.09).
PAYMENT AND PAYING AGENT
Payments in respect of the Global Security shall be made to DTC, which shall
credit the relevant accounts at DTC on the applicable Distribution Payment Dates
or, if the New Preferred Securities are not held by DTC, such payments shall be
made at the office or agency of the New Preferred Securities Paying Agent
maintained for such purpose, or at the option of the Property Trustee, by check
mailed to the address of the holder entitled thereto as such address shall
appear on the New Preferred Securities Register. The New Preferred Securities
Paying Agent shall initially be First Union National Bank of Maryland. The New
Preferred Securities Paying Agent shall be permitted to resign as New Preferred
Securities Paying Agent upon 30 days' written notice to the Administrative
Trustees, the Property Trustee, KDSM, Inc. and Sinclair. In the event that First
Union National Bank of Maryland chooses no longer to be the New Preferred
Securities Paying Agent, the Administrative Trustees shall appoint a successor
(which shall be a bank or trust company) acceptable to the Property Trustee and
Sinclair to act as New Preferred Securities Paying Agent. (Sections 4.04 and
5.09).
BOOK-ENTRY SECURITIES; THE DEPOSITORY TRUST COMPANY; DELIVERY AND FORM
DTC will act as securities depository for the New Preferred Securities.
Except as described in the next paragraph, the New Preferred Securities
initially will be represented by a Global Security. The Global Security will be
deposited on the date of initial issuance with, or on behalf of DTC and
registered in the name of Cede & Co. (DTC's nominee).
The New Preferred Securities issued to institutional Accredited Investors
will be issued as Certificated Securities. Upon the transfer to a QIB of any
Certificated Security initially issued to a Non-Global Securities holder, such
Certificated Security will, unless the Global Security has previously been
exchanged in whole for Certificated Securities, be exchanged for an interest in
the Global Security.
The laws of certain jurisdictions require that certain purchases of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to own, transfer or pledge beneficial interests in the
global Preferred Securities as represented by a global certificate.
DTC has informed the Trust, KDSM, Inc. and Sinclair that it is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC holds
securities that its participants ("Participants") deposit with DTC. DTC also
facilitates the settlement of securities transactions among Participants through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers (including the Initial
Purchasers), banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
143
<PAGE>
Exchanges of Preferred Securities that are represented by a Global Security
within the DTC system must be made by or through Direct Participants, which will
receive a credit for the New Preferred Securities on DTC's records. The
ownership interest of each actual owner of each New Preferred Security
("Beneficial Owner") is in turn to be recorded on the Direct Participants and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their holdings, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct Participants or Indirect
Participants through which the Beneficial Owners hold New Preferred Securities.
Transfers of ownership interests in the New Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in New Preferred Securities, except as described
below.
DTC will have no knowledge of the actual Beneficial Owners of the New
Preferred Securities; DTC's records will reflect only the identity of the Direct
Participants to whose accounts such Preferred Securities will be credited, which
may or may not be the Beneficial Owners. The Participants will be responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the New
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such New Preferred Securities in
accordance with its procedures.
Although voting with respect to the New Preferred Securities is limited in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to New Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the New Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
Distribution payments on the New Preferred Securities will be made by the
Trust to DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payments
on such payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of each such Participant and not of DTC, the Trust, Sinclair or
any Trustee, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to DTC is the responsibility
of the Trust, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Security will not be entitled to receive physical delivery of New Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the New Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the New Preferred Securities at any time by giving reasonable notice
to the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Certificated Securities representing the New
Preferred Securities will be printed and delivered. If an Event of Default
occurs under the KDSM Senior Debenture Indenture or if the Trust decides to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary), Certificated Securities representing the New Preferred
Securities will be printed and delivered.
The New Preferred Securities will be delivered in certificated form if (i)
DTC ceases to be registered as a clearing agency under the Exchange Act or is no
longer willing or able to provide securities depository services with respect to
the New Preferred Securities, (ii) Sinclair so determines, or (iii) there
144
<PAGE>
shall have occurred an Event of Default or an event which, with the giving of
notice or the lapse of time or both, would constitute an Event of Default with
respect to the Preferred Securities represented by such Global Security and such
Event of Default or event continues for a period of 90 days.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Sinclair, KDSM, Inc. and the Trust believe
to be reliable. Neither the Trust nor any Trustee has any responsibility for the
accuracy of such information or performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
If the New Parent Preferred, New KDSM Senior Debenture or New Parent
Debenture Guarantee are issued to the public, the issuing entity will also seek
to have such securities represented by a global certificate or certificates
registered in the name of DTC or its nominees if permitted under the rules of
DTC.
REGISTRAR AND TRANSFER AGENT
The First Union National Bank of Maryland will act as registrar and transfer
agent for the New Preferred Securities (the "Preferred Securities Registrar").
(Section 5.05).
As described under "--Book-Entry Securities; The Depository Trust Company;
Delivery and Form," so long as the New Preferred Securities are in book-entry
form, registration of transfers and exchanges of New Preferred Securities will
be made through Direct Participants and Indirect Participants in DTC. If
physical certificates representing the New Preferred Securities are issued,
registration of transfers and exchanges of New Preferred Securities will be
effected without charge by or on behalf of the Trust, but, in the case of a
transfer, upon payment (with the giving of such indemnity as the Trust or
Sinclair may require) in respect of any tax or other governmental charges which
may be imposed in relation to it. (Section 5.04).
The Trust will not be required to register or cause to be registered any
transfer of New Preferred Securities during a period beginning 15 days prior to
the mailing of notice of redemption of New Preferred Securities and ending on
the day of such mailing. (Section 5.05).
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of a
default by Sinclair in performance of the Trust Agreement, undertakes to perform
only such duties as are specifically set forth in the Trust Agreement and, after
an Event of Default under the Trust Agreement, must exercise the same degree of
care and skill as a prudent person would exercise or use under the circumstances
in the conduct of his or her own affairs. Subject to this provision, the
Property Trustee is under no obligation to exercise any of the powers vested in
it by the Trust Agreement at the request of any holder of Issuer Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
MODIFICATION OF THE TRUST AGREEMENT WITHOUT CONSENT
From time to time, KDSM, Inc., as the holder of the Common Securities, and
the Trustees may, without the consent of any holders of the New Preferred
Securities, amend the Trust Agreement for specified purposes, including, among
other things, (i) to cure ambiguities, correct or supplement any provision of
the Trust Agreement which may be inconsistent with any other provision thereof
or to make any other provisions with respect to matters or questions arising
under the Trust Agreement, which shall not be inconsistent with the other
provisions of the Trust Agreement, or (ii) to ensure that the Trust will not be
classified for United States federal income tax purposes as an association
taxable as a corporation and will not be required to register as an "investment
company" under the 1940 Act; provided, however, that such amendment or action in
the case of clause (i) or (ii) shall not adversely affect the rights of any
holder of the Issuer Securities.
145
<PAGE>
GOVERNING LAW
The Trust Agreement will be governed by, and construed in accordance with,
the laws of the State of Delaware. (Section 11.05).
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of the Trust and to operate the Trust so that (i) the Trust will not be
deemed to be an "investment company" required to be registered under the 1940
Act or taxed as a corporation for United States federal income tax purposes and
(ii) the New KDSM Senior Debentures will be treated as indebtedness of Sinclair
for United States federal income tax purposes. In this connection KDSM, Inc., as
the holder of the Common Securities, and the Administrative Trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the Trust Agreement that Sinclair or any of
the Administrative Trustees determines in their discretion to be necessary or
desirable or convenient for such purposes, as long as such action does not
adversely affect the interests of the holders of the New Preferred Securities.
(Section 2.07(d)).
The Property Trustee will act as sole trustee under the Trust Agreement for
the purposes of compliance with the Trust Indenture Act.
The New Preferred Securities will, upon issuance, be validly issued, fully
paid and non-assessable. Holders of the New Preferred Securities have no
preemptive rights.
146
<PAGE>
DESCRIPTION OF THE NEW PARENT GUARANTEE
Set forth below is a summary of information concerning the New Parent
Guarantee that will be executed and delivered by Sinclair for the benefit of the
holders from time to time of New Preferred Securities. The New Parent Guarantee
will be issued under an agreement (the "Parent Guaranty Agreement"). First Union
National Bank of Maryland will act as "Guarantee Trustee" under the New Parent
Guarantee. This summary contains all material information concerning the New
Parent Guarantee but does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference to,
the New Parent Guarantee. The Guarantee Trustee will hold the New Parent
Guarantee for the benefit of the holders of the New Preferred Securities. The
New Parent Guarantee will not run to the benefit of the creditors of the Trust.
Certain capitalized terms used herein are defined under "Certain Definitions."
For a description of certain registration rights with respect to the New Parent
Guarantee, see "Description of the New Preferred Securities--Registration
Rights."
GENERAL
Sinclair will unconditionally guarantee, on a junior subordinated basis, the
payment in full under the New Preferred Securities of (i) any accrued and unpaid
distributions on the New Preferred Securities that have been theretofore
properly declared on the New Preferred Securities from funds of the Trust
legally available therefor in accordance with the Trust Agreement, (ii) the
Redemption Price payable with respect to any New Preferred Securities called for
redemption by the Trust, from funds legally available therefor in accordance
with the terms of the Trust Agreement and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with a redemption of all of the Preferred Securities), the payment of an amount
if, when, and to the extent holders of the New Preferred Securities are lawfully
entitled to payment thereof from the Trust equal to the lesser of (a) the full
liquidation preference plus accumulated and unpaid dividends to which the
holders of the New Preferred Securities are lawfully entitled, and (b) the
amount of the Trust's legally available assets remaining after satisfaction of
all claims of other parties which, as a matter of law, are prior to those of the
holders of the New Preferred Securities. The Trust Agreement provides that
distributions on the New Preferred Securities are not properly declarable, and
funds are not legally available for redemption of New Preferred Securities,
unless the Trust has funds sufficient to pay such distributions or make such
redemption, as the case may be. If Sinclair fails to make any such Guarantee
Preferred Security Payment, as required, such failure will result in an Event of
Default under the New Parent Guarantee. See "Risk Factors--Limited Rights Under
the New Parent Guarantee."
The New Parent Guarantee will be an irrevocable guarantee on a junior
subordinated basis of the Trust's obligations under the New Preferred
Securities, but will apply only to the extent that the Trust has funds
sufficient to make such payments under the Trust Agreement, and is not a
guarantee of collection. If KDSM, Inc. does not make interest payments on the
New KDSM Senior Debentures held by the Trust, it is unlikely that the Trust will
pay distributions on the New Preferred Securities and the New Parent Guarantee
will not require any payments in such situation. Such interest payments, if made
in accordance with the terms of the KDSM Senior Debenture Indenture, will
provide sufficient funds to enable the Trust to make distributions and pay other
amounts on the New Preferred Securities. Sinclair's obligations under the New
Parent Guarantee are subordinated and junior in right of payment to all other
liabilities of Sinclair except the Old Parent Guarantee any liabilities that may
be made pari passu with or subordinate to the New Parent Guarantee expressly by
their terms. See "--Status of the New Parent Guarantee."
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights of
holders of New Preferred Securities (in which case no consent of holders of New
Preferred Securities will be required), the terms of the New Parent Guarantee
may be changed only with the prior approval of the holders of not less than a
majority in aggregate Liquidation Value of the outstanding New Preferred
147
<PAGE>
Securities. All guarantees and agreements contained in the New Parent Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
Sinclair and shall inure to the benefit of the holders of the New Preferred
Securities then outstanding.
HOLDERS' ABILITY TO TAKE ACTION
An event of default under the New Parent Guarantee will occur upon the
failure of Sinclair to perform any of its payment obligations thereunder. The
holders of a majority in aggregate Liquidation Value of the outstanding
Preferred Securities will thereupon have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the New Parent Guarantee or to direct the exercise of any
trust or other power conferred upon the Guarantee Trustee under the New Parent
Guarantee.
If the Guarantee Trustee fails to enforce the New Parent Guarantee, any
holder of New Preferred Securities may institute a legal proceeding directly
against Sinclair to enforce its rights under the New Parent Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee or
any other person or entity.
Sinclair will be required to provide annually to the Guarantee Trustee a
statement as to the performance by Sinclair of certain of its obligations under
the New Parent Guarantee and as to any default in such performance. Sinclair
will also be required to file annually with the Guarantee Trustee an officer's
certificate as to Sinclair's compliance with all conditions under the New Parent
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by Sinclair in performance of the New Parent Guarantee, undertakes to
perform only such duties as are specifically set forth in the New Parent
Guarantee and, after default with respect to the New Parent Guarantee, must
exercise the same degree of care and skill as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs. Subject to
this provision, the Guarantee Trustee shall be under no obligation to exercise
any of the powers vested in it by the New Parent Guarantee at the request of any
holder of New Preferred Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE NEW PARENT GUARANTEE
The New Parent Guarantee will terminate and be of no further force and effect
upon full payment of the Redemption Price of all Preferred Securities or the
distribution of KDSM Senior Debentures to holders of Preferred Securities upon
liquidation of the Trust. Upon the distribution of the New KDSM Senior
Debentures, Sinclair will be obligated to fully and unconditionally guarantee
the New KDSM Senior Debentures on a junior subordinated basis in certain
circumstances. See "Risk Factors--New Parent Debenture Guarantee."
Notwithstanding the foregoing, the New Parent Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of New Preferred Securities must restore payment of any sums paid under the New
Preferred Securities or the New Parent Guarantee.
STATUS OF THE NEW PARENT GUARANTEE
The New Parent Guarantee will constitute an unsecured obligation of Sinclair
and will rank (i) subordinate and junior in right of payment to all Indebtedness
of Sinclair (excluding trade payables and other liabilities that may be made
pari passu with or subordinate to the New Parent Guarantee expressly by their
terms), and (ii) senior to Sinclair's Series B Convertible Preferred Stock, the
Parent Preferred and Sinclair's Common Stock. The Trust Agreement provides that
each holder of New Preferred Securities by acceptance thereof will agree to the
subordination provisions and other terms of the New Parent Guarantee. Because
Sinclair is a holding company whose assets consist
148
<PAGE>
substantially of the stock of its subsidiaries, Sinclair's obligations under the
New Parent Guarantee shall effectively be subordinated to the claims of the
direct creditors of its subsidiaries. See "Risk Factors--Subordination of New
Parent Guarantee, New Parent Debenture Guarantee and New Parent Preferred."
The New Parent Guarantee will constitute a guarantee of payment, not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against Sinclair to enforce its rights under the New Parent Guarantee without
first instituting a legal proceeding against any other person or entity) and not
of performance of non-payment covenants.
GOVERNING LAW
The New Parent Guarantee will be governed by and construed in accordance with
the laws of the State of New York.
149
<PAGE>
DESCRIPTION OF THE NEW PARENT DEBENTURE GUARANTEE
Upon a Tax Event, KDSM, Inc., as the holder of all the Common Securities of
the Trust, will have the right to cause the Trust to be dissolved with each
holder of New Preferred Securities receiving New KDSM Senior Debentures in a
principal amount equal to the Liquidation Value of their New Preferred
Securities. If KDSM, Inc. exercises this option, pursuant to the KDSM Senior
Debenture Indenture, Sinclair has agreed, effective at the time of such
distribution, to fully and unconditionally guarantee the New KDSM Senior
Debentures on a junior subordinated basis pursuant to the New Parent Debenture
Guarantee; provided that (i) Sinclair confirms the effectiveness of the New
Parent Debenture Guarantee at the time of distribution which it may not do if
such guarantee is not then permitted under the terms of the Existing Notes or
the Bank Credit Agreement and (ii) the Trust may not be dissolved unless the New
Parent Debenture Guarantee is effective.
SUBORDINATION OF NEW PARENT DEBENTURE GUARANTEE
Payments under the New Parent Debenture Guarantee, if effective, will be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness (as defined herein) of Sinclair in cash or cash equivalents or in
any other form acceptable to the holders of Senior Indebtedness. The New Parent
Debenture Guarantee, if effective, will be junior subordinated indebtedness of
Sinclair ranking pari passu with all other existing and future subordinated
indebtedness of Sinclair and senior to all existing and future junior
indebtedness of Sinclair and to all Capital Stock of Sinclair.
During the continuance of any default in the payment of any Designated Senior
Indebtedness, no payment (other than payments previously made pursuant to
certain defeasance provisions described in the New KDSM Senior Debenture
Indenture) or distribution of any assets of Sinclair of any kind or character
(excluding certain permitted equity interests or subordinated securities) shall
be made under the New Parent Debenture Guarantee or on account of the purchase,
redemption, defeasance or other acquisition of, the New Parent Debenture
Guarantee unless and until such default has been cured, waived or has ceased to
exist or the holders of such Designated Senior Indebtedness shall have been
discharged or paid in full in cash or cash equivalents or in any other form
acceptable to the holders of Senior Indebtedness.
During the continuance of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated (a "Non-payment Default") and after the receipt by the Debenture
Trustee from a representative of the holder of any Designated Senior
Indebtedness of a written notice of such default, no payment (other than
payments previously made pursuant to certain defeasance provisions described in
the KDSM Senior Debenture Indenture) or distribution of any assets of Sinclair
of any kind or character (excluding certain permitted equity or subordinated
securities) may be made by Sinclair under the New Parent Debenture Guarantee or
on account of the purchase, redemption, defeasance or other acquisition of, the
New Parent Debenture Guarantee for the period specified below (the "Payment
Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of the
Non-payment Default by the Debenture Trustee and Sinclair from a representative
of the holder of any Designated Senior Indebtedness and shall end on the
earliest of (i) the first date on which more than 179 days shall have elapsed
since the receipt of such written notice (provided such Designated Senior
Indebtedness as to which notice was given shall not theretofore have been
accelerated), (ii) the date on which such Non-payment Default (and all
Non-payment Defaults as to which notice is given after such Payment Blockage
Period is initiated) are cured, waived or ceased to exist or on which such
Designated Senior Indebtedness is discharged or paid in full in cash or cash
equivalents or in any other form acceptable to the holders of Designated Senior
Indebtedness or (iii) the date on which such Payment Blockage Period (and all
Non-payment Defaults as to which notice is given after such Payment Blockage
Period is initiated) shall have been terminated by written notice to Sinclair or
the Debenture Trustee from the representatives of holders of Designated Senior
Indebtedness initiating such Payment Blockage Period, after which, in the case
of clauses (i), (ii) and (iii), Sinclair shall promptly resume making any and
all required payments in respect of the New Parent Debenture Guarantee,
including any missed payments. In no event will a Payment Blockage Period extend
beyond 179 days from the date of the receipt by Sinclair or the Debenture
Trustee of the notice initiating such Payment Blockage Period (such 179-day
period referred to as the "Initial Period"). Any number of notices of
Non-payment
150
<PAGE>
Defaults may be given during the Initial Period; provided that during any
365-day consecutive period only one Payment Blockage Period during which payment
of principal of, or interest on, the New KDSM Senior Debentures may not be made
may commence and the duration of the Payment Blockage Period may not exceed 179
days. No Non-payment Default with respect to Designated Senior Indebtedness
which existed or was continuing on the date of the commencement of any Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 365
consecutive days, unless such default has been cured or waived for a period of
not less than 90 consecutive days.
The KDSM Senior Debenture Indenture will provide that, in the event of any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case proceeding in connection therewith,
relative to Sinclair or its assets, or any liquidation, dissolution or other
winding up of Sinclair, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy, or any assignment for the benefit of
creditors or any other marshaling of assets or liabilities of Sinclair, all
Senior Indebtedness must be paid in full in cash or cash equivalents or in any
other manner acceptable to the holders of Senior Indebtedness, or provision made
for such payment, before any payment or distribution (excluding distributions of
certain permitted equity or subordinated securities) is made under the New
Parent Debenture Guarantee.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of Sinclair who are holders of Senior Indebtedness may recover more,
ratably, than the holders of the New Parent Debenture Guarantee, and funds which
would be otherwise payable to the holders of the New Parent Debenture Guarantee
will be paid to the holders of the Senior Indebtedness to the extent necessary
to pay the Senior Indebtedness in full in cash or cash equivalents or in any
other manner acceptable to the holders of Senior Indebtedness, and Sinclair may
be unable to meet its obligations fully with respect to the New Parent Debenture
Guarantee.
"Senior Indebtedness" is defined as the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceeding under any state, federal or foreign bankruptcy law whether or not
allowable as a claim in such proceeding) on any indebtedness of Sinclair (other
than as otherwise provided in this definition), whether outstanding on the date
of the New Parent Debenture Guarantee or thereafter created, incurred or
assumed, and whether at any time owing, actually or contingent, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the New Parent Debenture
Guarantee. Without limiting the generality of the foregoing, "Senior
Indebtedness" shall include (i) the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition initiating any
proceeding under any state, federal or foreign bankruptcy law whether or not
allowable as a claim in such proceeding) and all other obligations of every
nature of Sinclair from time to time owed to the lenders (or their agent) under
the Bank Credit Agreement; provided, however, that any Indebtedness under any
refinancing, refunding or replacement of the Bank Credit Agreement shall not
constitute Senior Indebtedness to the extent that the Indebtedness thereunder is
by its express terms subordinate to any other Indebtedness of Sinclair, (ii)
Indebtedness outstanding under the Founders' Notes, (iii) Indebtedness under the
Existing Notes and (iv) Indebtedness under Interest Rate Agreements.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the KDSM Senior Debentures, (ii) Indebtedness which
when incurred and without respect to any election under Section 1111(b) of Title
11 United States Code, is without recourse to Sinclair, (iii) Indebtedness which
is represented by Disqualified Equity Interests, (iv) any liability for foreign,
federal, state, local or other taxes owed or owing by Sinclair, (v) Indebtedness
of Sinclair to the extent such liability constitutes Indebtedness to a
Subsidiary or any other Affiliate of Sinclair or any of such Affiliate's
Subsidiaries, (vi) that portion of any Indebtedness which at the time of
issuance is issued in violation of the KDSM Senior Debenture Indenture, (vii)
Indebtedness owed by Sinclair for compensation to employees or for services and
(viii) Indebtedness outstanding under the Minority Note.
"Designated Senior Indebtedness" is defined as (i) all Senior Indebtedness
outstanding under the Bank Credit Agreement and (ii) any other Senior
Indebtedness which is incurred pursuant to an agreement (or series of related
agreements simultaneously entered into) providing for indebtedness, or
commitments to
151
<PAGE>
lend, of at least $25,000,000 at the time of determination and is specifically
designated in the instrument evidencing such Senior Indebtedness or the
agreement under which such Senior Indebtedness arises as "Designated Senior
Indebtedness" by Sinclair.
Substantially all of the operations of Sinclair are conducted through its
subsidiaries. Claims of creditors of such subsidiaries, including trade
creditors and creditors holding guarantees issued by such subsidiaries, will
have priority with respect to the assets and earnings of such subsidiaries
(other than KDSM, Inc.) over the claims of creditors of Sinclair, including
holders of the New Parent Debenture Guarantee, even though such obligations do
not constitute Senior Indebtedness.
As of December 31, 1996 on a pro forma basis, after giving effect to the Old
Securities Offering and the application of the estimated net proceeds thereof,
the aggregate amount of Senior Indebtedness that would have ranked senior in
right of payment to the New Parent Debenture Guarantee if effective would have
been $1.3 billion, and there would have been no Indebtedness that would have
been pari passu or junior in right of payment with the New KDSM Senior
Debentures. Any Indebtedness which can be incurred by Sinclair in the future may
constitute additional Senior Indebtedness.
152
<PAGE>
DESCRIPTION OF THE OLD SECURITIES
The terms of the Old Securities are identical in all material respects to
those of the New Securities, except that the Old Securities (i) have not been
registered under the Securities Act, and, accordingly, contain terms with
respect to transfer restrictions, (ii) are entitled to certain registration
rights under the Registration Rights Agreement (which rights will terminate upon
consummation of the Exchange Offer, except under limited circumstances), and
(iii) are entitled under the Registration Rights Agreement to an increase in the
rate of interest payments or distributions thereon (as applicable) in the event
that the Company, KDSM, Inc. and the Trust fail to comply with certain terms of
the Registration Rights Agreement relating to the Exchange Offer. Certain
relevant terms of the Registration Rights Agreement are described more fully
below.
The Registration Rights Agreement provides that in the event that (i) due to
a change in applicable law or current interpretations by the Commission, the
Company, KDSM, Inc. and the Trust are not permitted to effect the Exchange Offer
for all of the Old Securities, (ii) the Exchange Offer is not for any other
reason consummated by August 9, 1997, (iii) any holder of the Old Securities
shall, within 30 days after consummation of the Exchange Offer, notify the
Company that such holder (x) is prohibited by applicable law or Commission
policy from participating in the Exchange Offer, (y) may not resell New
Securities acquired by it in the Exchange Offer to the public without delivering
a prospectus and that the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
holder or (z) is a broker-dealer and holds Old Preferred Securities acquired
directly from the Company, KDSM, Inc. or the Trust or an "affiliate" of the
Company, KDSM, Inc. or the Trust, or (iv) at the request of either Smith Barney,
Inc. or Chase Securities, Inc. (the "Initial Purchasers"), then in addition to
or in lieu of conducting the Exchange Offer, the Company, KDSM, Inc. and the
Trust will be required to file a registration statement (a "Shelf Registration
Statement") covering resales (a) by the holders of the Old Securities in the
event the Company, KDSM, Inc. and the Trust are not permitted to effect the
Exchange Offer pursuant to the foregoing clause (i) or the Exchange Offer is not
consummated by August 9, 1997 pursuant to the foregoing clause (i) or (ii) or
(b) by the holders of Old Securities with respect to which the Company receives
notice pursuant to the foregoing clauses (iii) or (iv), and will use their best
efforts to cause any such Shelf Registration Statement to become effective and
to keep such Shelf Registration Statement continuously effective for two years
from the effective date thereof or such shorter period that will terminate when
all of the Old Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement. The Company, KDSM, Inc. and
the Trust shall, if they file a Shelf Registration Statement, provide to each
holder of the Old Securities a copy of the related prospectus and notify each
such holder when the Shelf Registration Statement has become effective. A holder
that sells Old Securities pursuant to a Shelf Registration Statement generally
will be required to be named as a selling securityholder in the related
prospectus and to deliver a current prospectus to purchasers, and will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales.
Under the Registration Rights Agreement, the Company, KDSM, Inc. and the
Trust have agreed to use their best efforts to: (i) file the Exchange Offer
Registration Statement or a Shelf Registration Statement with the Commission as
soon as practicable after March 12, 1997 (the "Closing Date") or notice from
holders in the event of clauses (iii) or (iv) of the prior paragraph, (ii) have
such Exchange Offer Registration Statement or Shelf Registration Statement
declared effective by the Commission as soon as practicable after the filing
thereof, and (iii) commence the Exchange Offer and issue the New Securities in
exchange for all Old Securities validly tendered in accordance with the terms of
the Exchange Offer prior to the close of the Exchange Offer, or, in addition or
in the alternative, cause such Shelf Registration Statement to remain
continuously effective for two years from the effective date thereof or such
shorter period that will terminate when all of the Old Securities covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement. Although the Company, KDSM, Inc. and the Trust intend to file an
Exchange Offer Registration Statement and, if applicable, a Shelf Registration
Statement as described above, there can be no assurance that any such
registration statement will be filed or, if filed, that it will become effective
with respect to each of the Old Securities. Each holder of the Old Securities,
by virtue of becoming a holder, is bound by the provisions of the Registration
Rights Agreement that may require the holder to furnish notice or other
153
<PAGE>
information to the Company, KDSM, Inc. or the Trust as a condition to certain
obligations of the Company, KDSM, Inc. and the Trust to file a Shelf
Registration Statement by a particular date or to maintain its effectiveness for
the prescribed two-year period.
If the Company, KDSM, Inc. and the Trust fail to comply with the above
provisions, additional dividends will be required on the Old Parent Preferred,
additional interest will be assessed on the Old KDSM Senior Debentures and
additional distributions will be required under the Old Preferred Securities (in
any case "Penalty Amounts") as follows:
(i) (A) if an Exchange Offer Registration Statement (or, in the event of a
change in applicable law or due to current interpretations by the Commission,
the Company, KDSM, Inc. and the Trust are not permitted to effect the Exchange
Offer, a Shelf Registration Statement) is not filed within 60 days following the
Closing Date, (B) in the event that within the 30 days after consummation of the
Exchange Offer, any holder of Old Securities shall notify the Company that such
holder (x) is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, (y) may not resell New Securities acquired
by it in the Exchange Offer to the public without delivering a prospectus and
that the prospectus contained in the Exchange Offer Registration Statement is
not appropriate or available for such resales by such holder or (z) is a
broker-dealer and holds Old Securities acquired directly from the Company or an
"affiliate" of the Company or (C) upon the request of an Initial Purchaser, a
Shelf Registration Statement is not filed within 60 days after such request,
then commencing on either the 61st day after the Closing Date or the expiration
of either of the time periods set forth in clauses (B) and (C) above (either a
"prescribed time period"), as the case may be, Penalty Amounts shall be accrued
on the Old Parent Preferred, the Old KDSM Senior Debentures and the Old
Preferred Securities over and above the stated payment rates thereon at a rate
of .50% per annum for the first 90 days immediately following either the 61st
day after the Closing Date or the expiration of the prescribed time period, as
the case may be, such Penalty Amount rate increasing by an additional .25% per
annum at the beginning of each subsequent 90-day period;
(ii) if an Exchange Offer Registration Statement or a Shelf Registration
Statement is filed pursuant to clause (i) of the preceding full paragraph and is
not declared effective within 120 days following either the Closing Date or the
expiration of the prescribed time period, as the case may be, then commencing on
the 121st day after either the Closing Date or the expiration of a prescribed
time period, as the case may be, Penalty Amounts shall be accrued on the Old
Securities over and above the accrued stated payment rates thereon at a rate of
.50% per annum for the first 90 days immediately following the 121st day after
either the Closing Date or the expiration of the prescribed time period, as the
case may be, such Penalty Amounts rate increasing by an additional .25% per
annum at the beginning of each subsequent 90-day period; and
(iii) if either (A) the Company, KDSM, Inc. and the Trust have not exchanged
New Securities for all Old Securities validly tendered in accordance with the
terms of the Exchange Offer on or prior to 150 days after the Closing Date or
the expiration of the prescribed time period, or (B) if applicable, a Shelf
Registration Statement has been declared effective and such Shelf Registration
Statement ceases to be effective prior to two years from its original effective
date or such shorter period that will terminate when all of the Old Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement, then, subject to certain exceptions, Penalty Amounts
shall be accrued on the Old Securities over and above the stated payment rates
at a rate of .50% per annum for the first 60 days immediately following (x) the
31st day after such effective date, in the case of (A) above, or (y) the day
such Shelf Registration Statement ceases to be effective in the case of (B)
above, such Penalty Amounts rate increasing by an additional .25% per annum at
the beginning of each subsequent 90-day period; provided, however, that the
Penalty Amounts rate on the applicable Old Securities may not exceed 1.5% per
annum; and provided further that (1) upon the filing of the Exchange Offer
Registration Statement or a Shelf Registration Statement (in the case of (i)
above), (2) upon the effectiveness of the Exchange Offer Registration Statement
or a Shelf Registration Statement (in the case of (ii) above), or (3) upon the
exchange of New Securities for all Old Securities tendered in the Exchange Offer
or upon the effectiveness of the Shelf Registration Statement which had ceased
to remain effective prior to two years from its original effective date (in the
case of (iii) above), Penalty Amounts as a result of such clause (i), (ii) or
(iii) shall cease to accrue.
154
<PAGE>
Any Penalty Amounts due pursuant to clause (i), (ii) or (iii) above will be
payable in cash on the various payment dates related to the respective
securities. The Penalty Amounts will be determined by multiplying the applicable
Penalty Amounts rate by the Liquidation Value of the Old Preferred Securities,
the Liquidation Amount of the Old Parent Preferred or principal amount of the
Old KDSM Senior Debentures, as the case may be, multiplied by a fraction, the
numerator of which is the number of days such Penalty Amount rate was applicable
during such period, and the denominator of which is 360.
The foregoing summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the provisions of the Registration Rights
Agreement. Copies of the Registration Rights Agreement are available from the
Company or the Trust upon request. Holders of Old Preferred Securities should
review the information set forth under "Risk Factors--Certain Consequences of a
Failure to Exchange Old Preferred Securities" and "Description of the New
Preferred Securities."
155
<PAGE>
CERTAIN DEFINITIONS
Set forth below are certain defined terms relating to the descriptions of the
Parent Preferred, KDSM Senior Debentures, the Preferred Securities, the Parent
Guarantee, and the Parent Debenture Guarantee and which are also used elsewhere
in this Prospectus. Whenever used in this Prospectus, the terms "Change of
Control Offer," "Change of Control Purchase Price," "Default," "Event of
Default," "Junior Securities," "Senior Indebtedness" or "Senior Securities"
refer to such terms as defined for the purpose of the particular security being
discussed in such security's relevant governing document. Other definitions are
contained in the Glossary of Defined Terms.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or the
date the acquired Person becomes a Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person, (ii) any other Person that owns,
directly or indirectly, 5% or more of such Person's Equity Interests or any
officer or director of any such Person or other Person or, with respect to any
natural Person, any Person having a relationship with such Person or other
Person by blood, marriage or adoption not more remote than first cousin or (iii)
any other Person 10% or more of the voting Equity Interests of which are
beneficially owned or held directly or indirectly by such specified Person. For
the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Asset Sale" means with respect to any Person any sale, issuance, conveyance,
transfers, lease or other disposition (including, without limitation, by way of
merger, consolidation or Sale and Leaseback Transaction) (collectively, a
"transfer"), directly or indirectly, in one or a series of related transactions,
of (i) any Equity Interest of any Restricted Subsidiary of such Person; (ii) all
or substantially all of the properties and assets of any division or line of
business of such Person or of its Restricted Subsidiaries; or (iii) any other
properties or assets of such Person or any of its Restricted Subsidiaries, other
than in the ordinary course of business. For the purposes of this definition,
the term "Asset Sale" shall not include any transfer of properties and assets
(A) that is governed by the provisions described under "Certain
Covenants--Consolidation, Merger and Sale of Assets" of the relevant document,
(B) that is by such Person to any Wholly Owned Restricted Subsidiary, or by any
Restricted Subsidiary to any Person or any Wholly Owned Restricted Subsidiary in
accordance with the terms of the operative document or (C) that aggregates not
more than $1,000,000 in gross proceeds.
"Asset Swap" means an Asset Sale by any Person or any Restricted Subsidiary
in exchange for properties or assets that will be used in the business of
Sinclair and its Restricted Subsidiaries existing on the date of the operative
document or reasonably related thereto.
"Asset Transfer Transaction" means the sale, transfer or conveyance, or other
disposition, directly or indirectly, in one or a series of related transactions
of any properties or assets of KDSM, Inc. or any of its Subsidiaries (the "KDSM
Transferred Assets") to any Person in exchange for properties or assets that
will be used in the operations of one or more television or radio broadcasting
stations or assets reasonably related thereto (the "Received Assets"), provided
that (i) KDSM, Inc. shall deliver to the Debenture Trustee a written opinion
from an investment banking firm of national standing or other financial services
firm experienced in such matters and reasonably acceptable to the Debenture
Trustee to the effect that the Fair Market Value of the Received Assets is at
least equal to the greater of (a) 90% of the Fair Market Value of the KDSM
Transferred Assets immediately prior to the proposed Asset Transfer Transaction
or (b) $50 million, (ii) both the Received Assets (if considered as a separate
entity) and KDSM, Inc., after giving effect to the Asset Transfer Transaction,
would have had positive Operating Cash Flow (as defined in the KDSM Senior
Debenture Indenture) for at least two prior fiscal years (based on audited
financial statements) and any subsequent three, six or nine month interim period
(on an unaudited basis) on an actual and pro forma
156
<PAGE>
basis (without giving effect to dividends under the Parent Preferred and
interest payments on the KDSM Senior Debentures) prepared in accordance with
Rule 11-02 of Regulation S-X as if such entity were making a public equity
offering under the Securities Act as of the closing date of the Asset Transfer
Transaction; (iii) there has been no material adverse change in the condition
(financial or otherwise), business, prospects, or results of operations of the
Received Assets since the latter of the end of the last fiscal year or any
subsequent three, six or nine month interim period; (iv) such transaction does
not result in a violation of the Trust Indenture Act; and (v) KDSM, Inc. shall
have delivered to the KDSM Debenture Trustee simultaneously with the
consummation of the Asset Transfer Transaction an officers' certificate and an
opinion of counsel, each to the effect that the transaction complies with this
definition and that all conditions precedent to such Asset Transfer Transaction
have been satisfied.
"Bank Credit Agreement" means the Second Amended and Restated Credit
Agreement, dated as of May 31, 1996, between Sinclair, the Subsidiaries of
Sinclair identified on the signature pages thereof under the caption "Subsidiary
Guarantors," the lenders named therein, and The Chase Manhattan Bank, N.A., as
agent, as such agreement may be amended, renewed, extended, substituted,
refinanced, restructured, replaced, supplemented or otherwise modified from time
to time (including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing). For all purposes under the Parent
Preferred, "Bank Credit Agreement" shall include any amendments, renewals,
extensions, substitutions, refinancings, restructurings, replacements,
supplements or any other modifications that increase the principal amount of the
Indebtedness or the commitments to lend thereunder and have been made in
compliance with the "--Certain Covenants--Limitation on Indebtedness;" covenant
of the relevant document, if applicable, provided, that, for purposes of the
definition of "Permitted Indebtedness," no such increase may result in the
principal amount of Indebtedness of Sinclair under the Bank Credit Agreement
exceeding the amount permitted by clause (i) of the definition of "Permitted
Indebtedness," of the relevant document.
"Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a
day on which banking institutions in Maryland or The City of New York are
authorized or obligated by law or executive order to close or (iii) a day on
which the office of the trustee or transfer agent, as the case may be, or an
affiliate or agent thereof at which at any particular time the corporate trust
business for the purposes of the Parent Preferred, the KDSM Senior Debenture
Indenture or the Preferred Securities shall be principally administered is
closed for business.
"Capital Lease Obligation" means any obligation under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
"Change of Control" means the occurrence of any of the following events: (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), other than Permitted Holders (as defined below), is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have beneficial ownership
of all shares that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total outstanding Voting Stock of Sinclair,
provided that the Permitted Holders "beneficially own" (as so defined) a lesser
percentage of such Voting Stock than such other Person and do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of Sinclair; (ii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the board of directors of Sinclair (together with any new directors
whose election to such board of directors or whose nomination for election by
the shareholders of Sinclair, was approved by a vote of 66 2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of such board of directors then in
office; (iii) Sinclair consolidates with or merges with or into any Person or
conveys, transfers or leases all or substantially all of its assets to any
Person, or any corporation consolidates with or merges into or with Sinclair, in
any such event pursuant to a transaction in which the outstanding Voting Stock
of Sinclair is changed into or ex-
157
<PAGE>
changed for cash, securities or other property, other than any such transaction
where the outstanding Voting Stock of Sinclair is not changed or exchanged at
all (except to the extent necessary to reflect a change in the jurisdiction of
incorporation of Sinclair) or where (A) the outstanding Voting Stock of Sinclair
is changed into or exchanged for (x) Voting Stock of the surviving corporation
which is not Disqualified Equity Interests or (y) cash, securities and other
property (other than Equity Interests of the surviving corporation) in an amount
which could be paid by Sinclair as a Restricted Payment under the Parent
Preferred (and such amount shall be treated as a Restricted Payment) and (B) no
"person" or "group" other than Permitted Holders owns immediately after such
transaction, directly or indirectly, more than the greater of (1) 40% of the
total outstanding Voting Stock of the surviving corporation and (2) the
percentage of the outstanding Voting Stock of the surviving corporation owned,
directly or indirectly, by Permitted Holders immediately after such transaction;
or (iv) Sinclair is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the provisions
described under "Description of the Parent Preferred--Certain Covenants--Merger,
Consolidation, Sale of Assets."
"Collateral" means the pledge and first priority security interest in the
Parent Preferred and any proceeds thereof granted pursuant to the Pledge
Agreement.
"Collateral Documents" means the Pledge Agreement and any related UCC
financing statements or similar instruments.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
issuance of the Securities such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Consolidated Interest Expense" means, for any Person without duplication,
for any period, the sum of (a) the interest expense of such Person and its
Consolidated Restricted Subsidiaries for such period, on a Consolidated basis,
(provided that for purposes of the KDSM Senior Debenture Indenture, the interest
expense related to the KDSM Senior Debenture shall be deemed interest expense of
KDSM, Inc. and its Subsidiaries on a Consolidated basis) including, without
limitation, (i) amortization of debt discount, (ii) the net cost under Interest
Rate Agreements (including amortization of discounts), (iii) the interest
portion of any deferred payment obligation and (iv) accrued interest, plus (b)
the interest component of the Capital Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by such Person during such period, and all
capitalized interest of such Person and its Consolidated Restricted
Subsidiaries, in each case as determined in accordance with GAAP consistently
applied.
"Consolidated Net Income (Loss)" means, for any period, for any Person, the
Consolidated net income (or loss) of such Person and its Consolidated Restricted
Subsidiaries for such period as determined in accordance with GAAP consistently
applied, adjusted, to the extent included in calculating such net income (or
loss), by excluding, without duplication, (i) all extraordinary gains but not
losses (less all fees and expenses relating thereto), (ii) the portion of net
income (or loss) of such Person and its Consolidated Restricted Subsidiaries
allocable to interests in unconsolidated Persons or Unrestricted Subsidiaries,
except to the extent of the amount of dividends or distributions actually paid
to such Person or its Consolidated Restricted Subsidiaries by such other Person
during such period, (iii) net income (or loss) of any Person combined with such
Person or any of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (v) net gains but not losses (less all fees and expenses relating
thereto) in respect of disposition of assets other than in the ordinary course
of business, or (vi) the net income of any Restricted Subsidiary to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its shareholders.
"Consolidated Net Worth" of any Person means the Consolidated equity of the
holders of Equity Interests (excluding Disqualified Equity Interests) of such
Person and its Restricted Subsidiaries, as determined in accordance with GAAP
consistently applied.
158
<PAGE>
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries (other than any
Unrestricted Subsidiaries) if and to the extent the accounts of such Person and
each of its Subsidiaries (other than any Unrestricted Subsidiaries) would
normally be consolidated with those of such Person, all in accordance with GAAP
consistently applied. The term "Consolidated" shall have a similar meaning.
"Cumulative Consolidated Interest Expense" means, as of any date of
determination, Consolidated Interest Expense from the Issue Date to the end of
such Person's most recently ended full fiscal quarter prior to such date, taken
as a single accounting period.
"Cumulative Operating Cash Flow" means, as of any date of determination,
Operating Cash Flow from the Issue Date to the end of such Person's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"Cumulative Parent Preferred Dividends" means, as of any date of
determination, the amount of dividends under the Parent Preferred from the Issue
Date to the end of such Person's most recently ended full fiscal quarter prior
to such date, taken as a single accounting period.
"Debt to Operating Cash Flow Ratio" means, for any Person as of any date of
determination, the ratio of (a) the aggregate principal amount of all
outstanding Indebtedness of such Person and its Restricted Subsidiaries as of
such date on a Consolidated basis (provided, that for purposes of the KDSM
Senior Debenture Indenture, the KDSM Senior Debentures shall be deemed
Indebtedness of KDSM, Inc. and its Subsidiaries on a Consolidated basis) plus
the aggregate liquidation preference or redemption amount of all Disqualified
Equity Interests of such Person (excluding any such Disqualified Equity
Interests held by such Person or a Wholly Owned Restricted Subsidiary of such
Person), to (b) Operating Cash Flow of such Person and its Restricted
Subsidiaries on a Consolidated basis for the four most recent full fiscal
quarters ending immediately prior to such date, determined on a pro forma basis
(and after giving pro forma effect to (i) the incurrence of such Indebtedness
and (if applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness were incurred, and the
application of such proceeds had occurred, at the beginning of such four-quarter
period; (ii) the incurrence, repayment or retirement of any other Indebtedness
by such Person and its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness were incurred, repaid or retired at
the beginning of such four-quarter period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average balance of such Indebtedness at the end
of each month during such four-quarter period); (iii) in the case of Acquired
Indebtedness, the related acquisition as if such acquisition had occurred at the
beginning of such four-quarter period; and (iv) any acquisition or disposition
by such Person and its Restricted Subsidiaries of any company or any business or
any assets out of the ordinary course of business, or any related repayment of
Indebtedness, in each case since the first day of such four-quarter period,
assuming such acquisition or disposition had been consummated on the first day
of such four-quarter period).
"Default" means any event which is, or after notice or passage of any time or
both would be, an Event of Default.
"Disqualified Equity Interests" means any Equity Interests that, either by
their terms or by the terms of any security into which they are convertible or
exchangeable or otherwise, are or upon the happening of an event or passage of
time would be required to be redeemed prior to any Stated Maturity of the
principal of the applicable security or are redeemable at the option of the
holder thereof at any time prior to any such Stated Maturity, or are convertible
into or exchangeable for debt securities at any time prior to any such Stated
Maturity at the option of the holder thereof.
"Equity Interest" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
159
<PAGE>
"Existing Notes" means the 1993 Notes and Sinclair's 10% Senior Subordinated
Notes due 2005.
"Existing Indentures" means the Indentures relating to the Existing Notes and
guarantees by Sinclair or any Subsidiary of the Existing Notes.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"Film Contract" means contracts with suppliers that convey the right to
broadcast specified films, videotape motion pictures, syndicated television
programs or sports or other programming.
"Founders' Notes" means the term notes, dated September 30, 1990, made by
Sinclair to Julian S. Smith and to Carolyn C. Smith pursuant to a stock
redemption agreement, dated June 19, 1990, among Sinclair, certain of its
Subsidiaries, Julian S. Smith, Carolyn C. Smith, David D. Smith, Frederick G.
Smith, J. Duncan Smith and Robert E. Smith.
"Generally Accepted Accounting Principles" or "GAAP" means generally accepted
accounting principles in the United States, consistently applied, which are in
effect on the date of the 1993 Notes.
"Guaranteed Debt" of any Person means, without duplication, all Indebtedness
of any other Person referred to in the definition of Indebtedness contained in
this Section guaranteed directly or indirectly in any manner by such Person, or
in effect guaranteed directly or indirectly by such Person through an agreement
(i) to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (iii) to supply funds to, or in
any other manner invest in, the debtor (including any agreement to pay for
property or services without requiring that such property be received or such
services be rendered), (iv) to maintain working capital or equity capital of the
debtor, or otherwise to maintain the net worth, solvency or other financial
condition of the debtor or (v) otherwise to assure a creditor against loss;
provided that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Equity Interests of such Person, or any warrants, rights or options to
acquire such Equity Interests, now or hereafter outstanding, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (iv) all obligations under Interest Rate Agreements of such Person,
(v) all Capital Lease Obligations of such Person, (vi) all Indebtedness referred
to in clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness, (vii) all
Guaranteed Debt of such Person, (viii) all Disqualified Equity Interests valued
at the greater of their voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends, and (ix) any amendment, supplement,
modification, deferral, renewal, extension, refunding or refinancing of any
liability of the types referred to in clauses (i) through (viii) above;
provided, however, that the term Indebtedness shall not include any obligations
of such Person and its Restricted Subsidiaries with respect to Film Contracts
entered into in the ordinary course of business. The amount of Indebtedness of
any Person at any date shall be, without duplication, the principal amount that
would be shown on a balance
160
<PAGE>
sheet of such Person prepared as of such date in accordance with GAAP and the
maximum determinable liability of any Guaranteed Debt referred to in clause
(vii) above at such date. The Indebtedness of any Person and its Restricted
Subsidiaries shall not include any Indebtedness of Unrestricted Subsidiaries so
long as such Indebtedness is non-recourse to such Person and its Restricted
Subsidiaries. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Equity Interests which do not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Equity Interests
as if such Disqualified Equity Interests were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the KDSM Senior
Debenture Indenture, or in respect of the Parent Preferred and if such price is
based upon, or measured by, the Fair Market Value of such Disqualified Equity
Interests, such Fair Market Value to be determined in good faith by the Board of
Directors of the relevant entity.
"Indenture Obligations" means the obligations of KDSM, Inc. and any other
obligor under the KDSM Senior Debenture Indenture to pay principal, premium, if
any, and interest when due and payable, and all other amounts due or to become
due under or in connection with the KDSM Senior Debentures or the KDSM Senior
Debenture Indenture and the performance of all other obligations to the Trustee
and the holders under the KDSM Senior Debentures or the KDSM Senior Debenture
Indenture, according to the terms thereof.
"Independent Director" means a director of Sinclair or KDSM, Inc., as the
case may be, other than a director (i) who (apart from being a director of
Sinclair, KDSM, Inc. or any Subsidiary thereof) is an employee, insider,
associate or Affiliate of Sinclair or a Subsidiary or has held any such position
during the previous five years or (ii) who is a director, an employee, insider,
associate or Affiliate of another party to the transaction in question.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
"Investments" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees), or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase, acquisition or ownership by such Person of any Equity Interests,
bonds, notes, debentures or other securities or assets issued or owned by any
other Person and all other items that would be classified as investments on a
balance sheet prepared in accordance with GAAP.
"Issue Date" means the date on which the relevant security was issued.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind (including any conditional sale or other
title retention agreement, any leases in the nature thereof, and any agreement
to give any security interest), real or personal, movable or immovable, now
owned or hereafter acquired.
"Like Amount" means (i) with respect to a redemption of Issuer Securities for
cash, Issuer Securities having an aggregate Liquidation Amount equal to the
principal amount of KDSM Senior Debentures to be contemporaneously redeemed in
accordance with the KDSM Senior Debenture Indenture and (ii) with respect to a
distribution of KDSM Senior Debentures to holders of Issuer Securities in
connection with a Tax Event, KDSM Senior Debentures having a principal amount
equal to the aggregate Liquidation Amount of the Preferred Securities of the
holder to whom such KDSM Senior Debentures are distributed.
"Local Marketing Agreement" or "LMA" means a local marketing arrangement,
sale agreement, time brokerage agreement, management agreement or similar
arrangement pursuant to which a Person (i) obtains the right to sell at least a
majority of the advertising inventory of a television station on behalf of a
third party, (ii) purchases at least a majority of the air time of a television
station to exhibit programming and sell advertising time, (iii) manages the
selling operations of a television station with respect to at least a majority
of the advertising inventory of such station, (iv) manages the acquisition of
programming for a television station, (v) acts as a program consultant for a
television station, or (vi) manages the operation of a television station
generally.
161
<PAGE>
"Maturity," when used with respect to the KDSM Senior Debentures, means the
date on which the principal of such the KDSM Senior Debentures becomes due and
payable as provided in the KDSM Senior Debentures or as provided in the the KDSM
Senior Debenture Indenture.
"Minority Note" means the promissory note, dated December 26, 1986, made by
Sinclair to Frederick M. Himes, B. Stanley Resnick and Edward A. Johnston, as
representatives, pursuant to a stock purchase agreement, dated December 22,
1986, among Sinclair, Commercial Radio Institute, Inc., Chesapeake Television,
Inc. and certain individuals.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any Person,
the proceeds thereof in the form of cash or Temporary Cash Investments including
payments in respect of deferred payment obligations when received in the form
of, or stock or other assets when disposed of for, cash or Temporary Cash
Investments (except to the extent that such obligations are financed or sold
with recourse to Sinclair or any Restricted Subsidiary) net of (i) brokerage
commissions and other reasonable fees and expenses (including fees and expenses
of counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all taxes payable as a result of such Asset Sale, (iii) payments made to
retire Indebtedness where payment of such Indebtedness is secured by the assets
or properties the subject of such Asset Sale, (iv) amounts required to be paid
to any Person (other than such Person or any of its Restricted Subsidiaries)
owning a beneficial interest in the assets subject to the Asset Sale and (v)
appropriate amounts to be provided by such Person or any of its Restricted
Subsidiaries, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by such Person or
any of its Restricted Subsidiaries, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an officers' certificate delivered to the Trustee and (b) with
respect to any issuance or sale of Equity Interests, or debt securities or
Equity Interests that have been converted into or exchanged for Equity
Interests, as referred to under the "--Certain Covenants--Limitation on
Restricted Payments" provisions of the relevant operative governing document,
the proceeds of such issuance or sale in the form of cash or Temporary Cash
Investments, including payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when disposed for, cash or
Temporary Cash Investments (except to the extent that such obligations are
financed or sold with recourse to such Person or any of its Restricted
Subsidiaries), net of attorney's fees, accountant's fees and brokerage,
consultation, underwriting and other fees and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"1993 Notes" means Sinclair's 10% Senior Subordinated Notes due 2003.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Operating Cash Flow" for any Person means, for any period, the Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period, plus
(a) extraordinary net losses and net losses on sales of assets outside the
ordinary course of business during such period, to the extent such losses were
deducted in computing Consolidated Net Income, plus (b) provision for taxes
based on income or profits, to the extent such provision for taxes was included
in computing such Consolidated Net Income, and any provision for taxes utilized
in computing the net losses under clause (a) hereof, plus (c) Consolidated
Interest Expense of such Person and its Restricted Subsidiaries for such period,
plus (d) depreciation, amortization and all other non-cash charges, to the
extent such depreciation, amortization and other non cash charges were deducted
in computing such Consolidated Net Income (including amortization of goodwill
and other intangibles, including Film Contracts and write-downs of Film
Contracts, minus (f) any cash payments contractually required to be made with
respect to Film Contracts (to the extent not previously included in computing
such Consolidated Net Income).
"Permitted Holders" means as of the date of determination (i) any of David D.
Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith; (ii) family
members or the relatives of the Persons described in clause (i), (iii) any
trusts created for the benefit of any of the Persons described in clauses (i),
(ii) or (iv) or any trust for the benefit of any such trust, or (iv) in the
event of the incompetence or death of any of the
162
<PAGE>
Persons described in clauses (i) and (ii), such Person's estate, executor,
administrator, committee or other personal representative or beneficiaries, who,
in each case, at any particular date shall beneficially own or have the right to
acquire, directly or indirectly, Equity Interests of Sinclair.
"Permitted Investment" for purposes of the Parent Preferred means (i)
Investments in any Restricted Subsidiary, (ii) Indebtedness of Sinclair or a
Restricted Subsidiary described under clauses (vi) and (vii) of the definition
of "Permitted Indebtedness," (iii) Temporary Cash Investments, (iv) Investments
acquired by Sinclair or any Restricted Subsidiary in connection with an Asset
Sale permitted under "Description of the Parent Preferred--Certain
Covenants--Limitation on Sale of Assets" to the extent such Investments are
non-cash proceeds as permitted under such covenant, (v) guarantees of
Indebtedness permitted by clause (iii) of the definition of "Permitted
Indebtedness," (vi) Investments in existence on the date of the issuance of the
Parent Preferred, (vii) loans up to an aggregate of $1,000,000 outstanding at
any one time to employees pursuant to benefits available to the employees of
Sinclair or any Restricted Subsidiary from time to time in the ordinary course
of business, (viii) any Investments in the Existing Notes or the Preferred
Securities, (ix) any guarantee given by a Guarantor of any Indebtedness of
Sinclair given in accordance with the terms of the Parent Preferred, (x)
Investments by Sinclair or any Restricted Subsidiary in a Person, if as a result
of such Investment (I) such Person becomes a Restricted Subsidiary or (II) such
Person is merged or consolidated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, Sinclair or a
Restricted Subsidiary and (xi) other Investments in businesses reasonably
related to the Company's businesses as of the Issue Date that do not exceed
$100,000,000 at any time outstanding KDSM Senior Debentures.
"Permitted Investment" for purposes of the KDSM Senior Debentures means (i)
any Investments in any Subsidiary, (ii) Temporary Cash Investments, (iii)
Investments in existence on the date the KDSM Senior Debentures are issued, (iv)
loans up to an aggregate of $100,000 outstanding at any one time to employees
pursuant to benefits available to the employees of KDSM, Inc. and its
Subsidiaries from time to time in the ordinary course of business, (v) any
Investments in the Parent Preferred or the Common Securities, (vi) any guarantee
of Indebtedness incurred in accordance with the KDSM Senior Debenture Indenture,
and (vii) investments by KDSM, Inc. or any Subsidiary in any Person if as a
result of such Investment (I) such Person becomes a Subsidiary or (II) such
Person is merged, consolidated with or into, or transfers or conveys
substantially all of its assets to or is liquidated into KDSM, Inc. or any of
its Subsidiaries.
"Permitted Subsidiary Indebtedness" means:
(i) Indebtedness of any Subsidiary under Capital Lease Obligations
incurred in the ordinary course of business; and
(ii) Indebtedness of any Subsidiary (a) issued to finance or refinance
the purchase or construction of any assets of such Subsidiary or (b)
secured by a Lien on any assets of such Subsidiary where the lender's sole
recourse is to the assets so encumbered, in either case (x) to the extent
the purchase or construction prices for such assets are or should be
included in "property and equipment" in accordance with GAAP and (y) if the
purchase or construction of such assets is not part of any acquisition of a
Person or business unit.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Preferred Equity Interest," as applied to the Equity Interest of any Person,
means an Equity Interest of any class or classes (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Equity Interests of any other class of such
Person.
"Public Equity Offering" means, with respect to any Person, an underwritten
public offering by such Person of some or all of its Equity Interests (other
than Disqualified Equity Interests), the net proceeds of which (after deducting
any underwriting discounts and commissions) exceed $10,000,000.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of KDSM, Inc. and any additions and accessions
thereto, which are purchased by KDSM, Inc. or any Subsidiary thereof at any time
after the KDSM Senior Debentures are issued; provided that (i) the
163
<PAGE>
security agreement or condition sales or other title retention contract pursuant
to which the Lien on such assets is created (collectively a "Purchase Money
Security Agreement") shall be entered into within 90 days after the purchase or
substantial completion of the construction of such assets and shall at all times
be confined solely to the assets so purchased or acquired, any additions and
accessions thereto and any proceeds therefrom, (ii) at no time shall the
aggregate principal amount of the outstanding Indebtedness secured thereby be
increased, except in connection with the purchase of additions and accessions
thereto and except in respect of fees and other obligations in respect of such
Indebtedness and (iii) (A) the aggregate outstanding principal amount of
Indebtedness secured thereby (determined on a per asset basis in the case of any
additions and accessions) shall not at the time such Purchase Money Security
Agreement is entered into exceed 100% of the purchase price to KDSM, Inc. of the
assets subject thereto or (B) the Indebtedness secured thereby shall be with
recourse solely to the assets so purchased or acquired, any additions and
accessions thereto and any proceeds therefrom.
"Qualified Equity Interests" of any Person means any and all Equity Interests
of such Person other than Disqualified Equity Interests.
"Restricted Subsidiary" of any Person means a Subsidiary of such Person other
than an Unrestricted Subsidiary. For the purposes of the KDSM Senior Debentures,
all references to a "Restricted Subsidiary" in this Prospectus shall be deemed
to refer to a Subsidiary.
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which any Person sells or transfers any property or
asset in connection with the leasing, or the resale against installment
payments, of such property or asset to the seller or transferor.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Subsidiary of a Person that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Sinclair" means Sinclair Broadcast Group, Inc., a corporation incorporated
under the laws of Maryland.
"Stated Maturity," when used with respect to any Indebtedness or any
installment of interest thereon, means the date specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subsidiary" of any Person means any Person a majority of the equity
ownership or the Voting Stock of which is at the time owned, directly or
indirectly, by such Person or by one or more other Subsidiaries of such Person,
or by such Person and one or more other Subsidiaries.
"Temporary Cash Investments" means (i) any evidence of Indebtedness, maturing
not more than one year after the date of acquisition, issued by the United
States of America, or an instrumentality or agency thereof and guaranteed fully
as to principal, premium, if any, and interest by the United States of America,
(ii) any certificate of deposit, maturing not more than one year after the date
of acquisition, issued by, or time deposit of, a commercial banking institution
(including the applicable trustee) that is a member of the Federal Reserve
System and that has combined capital and surplus and undivided profits of not
less than $500,000,000, whose debt has a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's Investors
Service, Inc. ("Moody's") or any successor rating agency or "A-1" (or higher)
according to Standard & Poor's Rating Group, a division of McGraw-Hill, Inc.
("S&P"), or any successor rating agency, (iii) commercial paper, maturing not
more than one year after the date of acquisition, issued by a corporation (other
than an Affiliate or Subsidiary of Sinclair) organized and existing under the
laws of the United States of America with a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P and (iv) any money market deposit accounts issued
or offered by a domestic commercial bank (including the applicable trustee)
having capital and surplus in excess of $500,000,000.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
164
<PAGE>
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of such Person, as provided below) and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of such
Person may designate any Subsidiary of such Person (including any newly acquired
or newly formed Subsidiary) to be an Unrestricted Subsidiary if all of the
following conditions apply: (a) such Subsidiary is not liable, directly or
indirectly, with respect to any Indebtedness other than Unrestricted Subsidiary
Indebtedness and (b) any Investment in such Subsidiary made as a result of
designating such Subsidiary an Unrestricted Subsidiary shall not, in the case of
the Parent Preferred, violate the provisions of the "Description of Parent
Preferred--Certain Covenants--Limitation on Unrestricted Subsidiaries" covenant
of the relevant document. Any such designation by the Board of Directors of such
Person shall be evidenced to the Trustee by filing with the Trustee a board
resolution giving effect to such designation and an officers' certificate
certifying that such designation complies with the foregoing conditions. The
Board of Directors of such Person may designate any Unrestricted Subsidiary as a
Restricted Subsidiary; provided that immediately after giving effect to such
designation, Sinclair could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the restrictions under the "Description of
Parent Preferred--Certain Covenants--Limitation on Indebtedness" covenant. For
purposes of the Parent Preferred, KDSM, Inc., and any of its Subsidiaries will
be deemed Unrestricted Subsidiaries of Sinclair.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary of any
Person means Indebtedness of such Unrestricted Subsidiary (i) as to which
neither such Person nor any of its Restricted Subsidiaries is directly or
indirectly liable (by virtue of such Person or any such Restricted Subsidiary
being the primary obligor on, guarantor of, or otherwise liable in any respect
to, such Indebtedness), except Guaranteed Debt of such Person or any Restricted
Subsidiary to any Affiliate, in which case (unless the incurrence of such
Guaranteed Debt resulted in a Restricted Payment at the time of incurrence) such
Person shall be deemed to have made a Restricted Payment equal to the principal
amount of any such Indebtedness to the extent guaranteed at the time such
Affiliate is designated an Unrestricted Subsidiary and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of such Person or any Restricted Subsidiary to
declare, a default on such Indebtedness of such Person or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency).
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary all the Equity Interest of which are owned by such Person or another
Wholly Owned Restricted Subsidiary of such Person. For purposes of the KDSM
Senior Debentures, all references to "Wholly Owned Restricted Subsidiary" shall
be deemed to refer to a "Wholly Owned Subsidiary."
165
<PAGE>
RELATIONSHIP AMONG THE NEW PREFERRED SECURITIES,
THE NEW KDSM SENIOR DEBENTURES, THE NEW
PARENT PREFERRED AND THE NEW PARENT GUARANTEE
As long as payments of interest and other payments are made when due on the
KDSM Senior Debentures, such payments will be sufficient to cover distributions
and other payments due on the Preferred Securities, because (i) the aggregate
principal amount of KDSM Senior Debentures will be equal to the sum of the
aggregate stated Liquidation Value of the Preferred Securities and the Common
Securities; (ii) the interest rate and the Interest Payment Dates and other
payment dates on the KDSM Senior Debentures will match the distribution rate and
the Distribution Payment Dates and other payment dates for the Preferred
Securities; (iii) the Expense Agreement entered into by KDSM, Inc. pursuant to
the Trust Agreement provides that KDSM, Inc. shall pay for all, and the Trust
shall not be obligated to pay, directly or indirectly, for any costs, expenses
and liabilities of the Trust, including any income taxes, duties and other
governmental charges, and all costs and expenses with respect thereto, to which
the Trust may become subject, except for United States withholding taxes and the
Trust's obligations to holders of the Preferred Securities under the Trust
Agreement and the Preferred Securities; and (iv) the Trust Agreement further
provides that the Trustees shall not cause or permit the Trust to, among other
things, engage in any activity that is not consistent with the limited purposes
of the Trust without consent.
Similarly, as long as payments of dividends and other payments are made when
due on the Parent Preferred, such payments will be sufficient to cover interest
and other payments due on the KDSM Senior Debentures, primarily because (i) the
aggregate Liquidation Amount of Parent Preferred will be equal to the aggregate
principal amount of the KDSM Senior Debentures and the Common Securities; (ii)
the dividend rate on the Parent Preferred will be one percentage point higher
than the interest rate on the KDSM Senior Debentures and (iii) the Dividend
Payment Dates and other payment dates on the Parent Preferred will match the
Interest Payment Dates and other payment dates for the KDSM Senior Debentures.
A holder of a New Preferred Security may institute a legal proceeding
directly against Sinclair to enforce its rights under the New Parent Guarantee
without first instituting a legal proceeding against the Trust or any other
person or entity.
The New Preferred Securities evidence the rights of the holders thereof to
the assets of the Trust, a trust that exists for the sole purpose of issuing the
Issuer Securities and investing the proceeds thereof in debt securities of KDSM,
Inc., while the New KDSM Senior Debentures represent indebtedness of KDSM, Inc.
A principal difference between the rights of the holders of the New Preferred
Securities and the holders of New KDSM Senior Debentures is that the holders of
the New KDSM Senior Debentures will accrue, and are entitled to receive,
interest on the principal amount of New KDSM Senior Debentures held, while the
holders of New Preferred Securities are only entitled to receive distributions
if and to the extent the Trust has funds sufficient for the payment of such
distributions.
Should certain Events of Default under the KDSM Senior Debenture Indenture
occur and be continuing, the holders of at least 25% in aggregate Liquidation
Value of the outstanding Preferred Securities may, in certain circumstances,
cause the Debenture Trustee on behalf of the Trust to accelerate the maturity of
the KDSM Senior Debentures. Should certain Events of Default relating to a
bankruptcy or similar event occur, the maturity of the KDSM Senior Debentures
will automatically accelerate. The holders of the Preferred Securities would not
be able to exercise directly any other remedies available to the holders of the
KDSM Senior Debentures unless the Property Trustee or the Debenture Trustee,
acting for the benefit of the Property Trustee, fails to do so. In such event,
the holders of at least 25% in aggregate Liquidation Value of the outstanding
Preferred Securities would have the right to elect new Trustees. At any time,
the holders of a majority of the aggregate Liquidation Value of the outstanding
Preferred Securities may direct the Property Trustee to enforce rights of the
holders of the KDSM Senior Debentures under the KDSM Senior Debenture Indenture.
In addition, holders of Preferred Securities may, in certain circumstances,
institute a legal proceeding directly against Sinclair to
166
<PAGE>
enforce their rights under the Parent Guarantee. In addition, upon an Event of
Default under the Preferred Securities, the holders of a majority in aggregate
Liquidation Value of the outstanding Preferred Securities will have the right to
elect new Trustees of the Trust.
If an early termination event (as described in "Description of the New
Preferred Securities--Liquidation Distribution Upon Dissolution") with respect
to the Trust occurs, thereby giving rise to the dissolution and liquidation of
the Trust, any of the following, among other things, could occur: (i) a
distribution of the New KDSM Senior Debentures to the holders of the New
Preferred Securities after satisfaction of liabilities to creditors of the
Trust, (ii) a cash distribution to the holders of the New Preferred Securities
out of the sale of assets of the Trust, after satisfaction of liabilities to
creditors of the Trust or (iii) a permitted redemption of the New KDSM Senior
Debentures, and a consequent redemption of a Like Amount of the New Preferred
Securities, at the option of KDSM, Inc. under the circumstances described under
"Description of the New KDSM Senior Debentures--Optional Redemption." If the New
KDSM Senior Debentures are distributed, the holders will be able to exercise
directly rights of the holders of New KDSM Senior Debentures under the KDSM
Senior Debenture Indenture.
Upon a Voting Rights Triggering Event under the New Parent Preferred, the
only remedy of the holders of the New Parent Preferred is the right of such
holders to elect two directors to the board of directors of Sinclair. Such
rights will be passed to the holders of the New Preferred Securities pursuant to
the Pledge Agreement and the Trust Agreement.
DESCRIPTION OF INDEBTEDNESS OF SINCLAIR
BANK CREDIT AGREEMENT
Since January 1, 1996, the Company, in connection with the River City
Acquisition, amended and restated the Bank Credit Agreement. The terms of the
Bank Credit Agreement as amended and restated are summarized below. The summary
set forth below does not purport to be complete and is qualified in its entirety
by reference to the provisions of the Bank Credit Agreement. The Bank Credit
Agreement is available upon request from the Company. In addition, not all
indebtedness of the Company is described below, only that that has been incurred
since January 1, 1996. The terms of other indebtedness of the Company are set
forth in other documents previously filed by the Company with the Commission.
See "Available Information."
The Company entered into the Bank Credit Agreement with The Chase Manhattan
Bank, N.A., as Agent, and certain lenders (collectively, the "Banks"). The Bank
Credit Agreement is comprised of three components, consisting of (i) a reducing
revolving credit facility in the amount of $250 million (the "Revolving Credit
Facility"), (ii) a term loan in the amount of $550 million (the "Tranche A Term
Loan"), and (iii) a term loan in the amount of $200 million (the "Tranche B Term
Loan" and, together with the Tranche A Term Loan, the "Term Loans"). Beginning
March 31, 1999, the commitment under the Revolving Credit Facility is subject to
mandatory quarterly reductions to the following percentages of the initial
amount: 90% at December 31, 1999, 80% at December 31, 2000, 65% at December 31,
2001, 50% at December 31, 2002 and 0% at November 30, 2003. The Term Loans are
required to be repaid by the Company in equal quarterly installments beginning
on December 31, 1996 with the quarterly payment escalating annually through the
final maturity date of December 31, 2002 for the Tranche A Term Loan and
November 30, 2003 for the Tranche B Term Loan.
The Company is entitled to prepay the outstanding amounts under the Revolving
Credit Facility and the Term Loans subject to certain prepayment conditions and
certain notice provisions at any time and from time to time. Partial prepayments
of the Term Loans are applied in the inverse order of maturity to the
outstanding loans on a pro rata basis. Prepaid amounts of the Term Loans may not
be reborrowed. In addition, the Company is required commencing on June 30, 1996,
to pay an amount equal to (i) 100% of the net proceeds from the sale of assets
(other than in the ordinary course of business), (ii) insurance recoveries and
condemnation proceeds not promptly applied toward the repair or replacement of
the damaged properties, (iii) 80% of net Equity Issuance (as defined in the Bank
Credit Agreement), net of prior approved uses and certain other exclusions, and
(iv) 66 2/3% of Excess
167
<PAGE>
Cash Flow (as defined in the Bank Credit Agreement), to the Banks for
application first to prepay the Term Loans, pro rata in inverse order of
maturity, and then to prepay outstanding amounts under the Revolving Credit
Facility with a corresponding reduction in commitment. The proceeds of the Old
Securities Offering will be used to repay a portion of the amounts due under the
Bank Credit Agreement. See "Use of Proceeds."
In addition to the Revolving Credit Facility and the Term Loans, the Bank
Credit Agreement provides that the Banks may, but are not obligated to, loan the
Company up to an additional $200 million at any time prior to September 29, 1997
(the "Incremental Facility"). This additional loan, if agreed to by the Agent
and a majority of the Banks, would be in the form of a senior secured standby
multiple draw term loan. The Incremental Facility would be available to fund the
acquisition of WSYX and certain other acquisitions and would be repayable in
equal quarterly installments beginning September 30, 1997, with the quarterly
payment escalating annually through the final maturity date of November 30,
2003.
The Company's obligations under the Bank Credit Agreement are secured by a
pledge of substantially all of the Company's assets, including the stock of all
of the Company's subsidiaries other than KDSM, Inc., KDSM Licensee, Inc. and
Cresap Enterprises, Inc. The subsidiaries of the Company (other than KDSM, Inc.,
KDSM Licensee, Inc. and Cresap Enterprises, Inc.) as well as Gerstell
Development Corporation, Keyser Investment Group, Inc. and Cunningham
Communications (each a "Stockholder Affiliate"), have guaranteed the obligations
of the Company. In addition, all subsidiaries of the Company (other than Cresap
Enterprises, Inc., KDSM, Inc. and KDSM Licensee, Inc.) and Gerstell Development
Corporation, Keyser Investment Group, Inc. and Cunningham Communications have
pledged, to the extent permitted by law, all of their assets to the Banks.
The Company has caused the FCC license for each television station (to the
extent such license has been transferred or acquired) or the option to acquire
such licenses to be held in a single-purpose entity utilized solely for such
purpose (the "TV License Subsidiaries") with the exception of the options for
WTTV and WTTK in the Indianapolis DMA, both of which are held by a single
entity. The TV License Subsidiaries are in all instances owned by wholly-owned
indirect subsidiaries of the Company. Additionally, the Company has caused the
FCC licenses of the radio stations in each local market to be held by a single
purpose entity utilized solely for that purpose (the "Radio License
Subsidiaries"). The Radio License Subsidiaries are in all instances owned by
wholly-owned indirect subsidiaries of the Company.
Interest on amounts drawn under the Bank Credit Agreement is, at the option
of Company, equal to (i) the London Interbank Offered Rate plus a margin of
1.25% to 2.50% for the Revolving Credit Facility and 2.75% for the Term Loans,
or (ii) the Base Rate, which equals the Federal Funds Rate plus 1/2 of 1% of the
Prime Rate of Chase, plus a margin of zero to 1.25% for the Revolving Credit
Facility and 1.75% for the Term Loans. The Company must maintain interest rate
hedging arrangements or instruments for at least 50% of the principal amount of
the facilities.
The Bank Credit Agreement contains a number of covenants which restrict the
operations of the Company and its subsidiaries, including the ability to: (i)
merge, consolidate, acquire or sell assets; (ii) create additional indebtedness
or liens; (iii) pay dividends on the Parent Preferred provided at the time for
making such dividend payment the Total Indebtedness Ratio (as defined in the
Bank Credit Agreement) does not exceed 5.8x for fiscal year 1996 and 1997, 5.5x
for fiscal year 1998, 5.0x for fiscal year 1999 and 4.0x for each fiscal year
thereafter (on a pro forma basis the Company's Total Indebtedness Ratio for 1996
would have been approximately 5.4x); (iv) enter into certain arrangements with
or investments in affiliates; (v) incur corporate expenses in excess of
specified limits; and (vi) change the business or ownership of the Company. The
Company and its subsidiaries are also prohibited under the Bank Credit Agreement
from incurring obligations relating to the acquisition of programming if, as a
result of such acquisition, the cash payments on such programming exceed
specified amounts set forth in the Bank Credit Agreement.
In addition, the Company must comply with certain other financial covenants
in the Bank Credit Agreement which includes: (i) Fixed Charges Ratio (as defined
in the Bank Credit Agreement) of no less than 1.05 to 1 at any time; (ii)
Interest Coverage Ratio (as defined in the Bank Credit Agreement)
168
<PAGE>
of no less than 2.00 to 1 for the fiscal year ending December 31, 1997 and 2.20
to 1 for the fiscal year ending December 31, 1998, and thereafter; and (iii) a
Senior Indebtedness Ratio (as defined in the Bank Credit Agreement) of no
greater than 4.0x at December 31, 1997, declining to 2.50x by fiscal year end
1999.
The Events of Default under the Bank Credit Agreement include, among others:
(i) the failure to pay principal, interest or other amounts when due; (ii) the
making of untrue representations and warranties in connection with the Bank
Credit Agreement: (iv) a default by the Company or the subsidiaries in the
performance of its obligations under the Bank Credit Agreement or certain
related security documents; (v) certain events of insolvency or bankruptcy, (vi)
the rendering of certain money judgments against the Company or its
subsidiaries; (vii) the incurrence of certain liabilities to certain plans
governed by the Employee Retirement Income Security Act of 1974; (viii) a change
of control or ownership of the Company or its subsidiaries; (ix) the security
documents being terminated and ceasing to be in full force and effect; (x) any
broadcast license (other than a non-material license) being terminated,
forfeited or revoked or failing to be renewed for any reason whatsoever or for
any reason a subsidiary shall at any time cease to be a licensee under any
broadcast license (other than a non-material broadcast license); (xi) any LMA or
options to acquire License Assets being terminated for any reason whatsoever;
(xii) any amendment, modification, supplement or waiver of the provisions of the
Indenture without the prior written consent of the majority lenders; and (xiii)
a payment default on any other indebtedness of the Company if the principal
amount of such indebtedness exceeds $5 million.
DESCRIPTION OF EXISTING NOTES UNDER EXISTING INDENTURES
The Existing Notes were issued under Indentures dated December 9, 1993 as
amended, modified or supplemented from time to time (the "1993 Indenture") and
August 28, 1995 (the "1995 Indenture" and as amended, modified, or supplemented
from time to time together with the 1993 Indenture, the "Existing Indentures").
Pursuant to the terms of the Existing Indentures, the Existing Notes are
guaranteed, jointly and severally, on a senior subordinated unsecured basis by
all of the Subsidiaries, except Cresap Enterprises, Inc., KDSM, Inc. and KDSM
Licensee, Inc.
The 1993 Notes mature on December 15, 2003 and the 1995 Notes mature on
September 30, 2005, and are unsecured senior subordinated obligations of the
Company. The 1993 Indenture limited the aggregate principal amount of the 1993
Notes to $200.0 million and the 1995 Indenture limited the aggregate principal
amount of the 1995 Notes to $300.0 million. The 1993 Notes bear interest at the
rate of 10% per annum and are payable semi-annually on June 15 and December 15
of each year, commencing June 15, 1994, and the 1995 Notes bear interest at a
rate of 10% per annum and are payable semi-annually on September 30 and March 30
of each year, commencing March 30, 1996.
The Company issued $200.0 million of the 1993 Notes on December 9, 1993.
$100.0 million of these Notes were subsequently redeemed by the Company in March
1994 with proceeds from the sale of the original 1993 Notes that had been held
in escrow pending their expected use in connection with certain acquisitions of
the Company that were instead financed through drawings under the Bank Credit
Agreement. As of the date hereof, $100.0 million of the 1993 Notes remain
outstanding. The Company issued $300.0 million of the 1995 Notes on August 28,
1995. As of the date hereof, $300.0 million of the 1995 Notes remain
outstanding.
The 1993 Notes are redeemable in whole or in part prior to maturity at the
option of the Company on or after December 15, 1998 at certain redemption prices
specified in the 1993 Indenture, and the 1995 Notes are redeemable in whole or
in part prior to maturity at the option of the Company on or after September 30,
2000 at certain redemption prices specified in the 1995 Indenture.
The Existing Notes are general unsecured obligations of the Company and
subordinated in right of payment to all senior debt (as defined in the Existing
Indentures), including all indebtedness of the Company under the Bank Credit
Agreement.
Upon a change of control (as defined in the Existing Indentures), each holder
of the Existing Notes will have the right to require the Company to repurchase
such holder's Existing Notes at a price equal to 101% of the principal amount
plus accrued interest through the date of repurchase. In addition, the Company
will be obligated to offer repurchase Existing Notes at 100% of their principal
amount plus accrued interest through the date of repurchase in the event of
certain asset sales.
169
<PAGE>
The Existing Indentures impose certain limitations on the ability of the
Company and its Subsidiaries to, among other things, incur additional
indebtedness, pay dividends, or make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with affiliates,
incur indebtedness that is subordinate in right to the payment of any senior
debt and senior in right of payment to the Existing Notes, incur liens, impose
restrictions on the ability of the subsidiary to pay dividends or make any
payments to the Company, or merge or consolidate with any other person or sell,
assign, transfer, lease, convey, or otherwise dispose of all or substantially
all of the assets of the Company.
170
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of ownership of the New Preferred Securities. The summary is based
on the Internal Revenue Code of 1986, as amended (the "Code"), and regulations,
rulings, and judicial decisions as of the date hereof, all of which may be
repealed, revoked, or modified so as to result in federal income tax
consequences different from those described below. Such changes could be applied
retroactively in a manner that could adversely affect a holder of the New
Preferred Securities. In addition, the authorities on which this summary is
based are subject to various interpretations. It is therefore possible that the
federal income tax treatment of the purchase, ownership, and disposition of the
New Preferred Securities may differ from the treatment described below.
Unless otherwise stated, this summary applies only to New Preferred
Securities held as capital assets, and does not deal with special situations,
such as those of dealers in securities or currencies, financial institutions,
insurance companies, persons holding New Preferred Securities as part of a
hedging or conversion transaction or a straddle, persons whose "functional
currency" is not the U.S. dollar, and certain U.S. expatriates. Unless otherwise
stated, the discussion only addresses the tax consequences to holders that
acquired the Preferred Securities in their original issue at their original
offering price.
This summary is for general information only. It does not address all aspects
of U.S. federal income taxation that may be relevant to holders of the New
Preferred Securities in light of their particular circumstances, nor does it
address any tax consequences arising under the laws of any state, local, or
foreign taxing jurisdiction. Prospective holders should consult their tax
advisors about the particular United States federal income tax consequences to
them of holding and disposing of the New Preferred Securities, as well as any
tax consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
CLASSIFICATION OF THE NEW KDSM SENIOR DEBENTURES
Sinclair believes, based on the advice of its counsel, that the New KDSM
Senior Debentures will be treated as indebtedness for United States federal
income tax purposes, and that KDSM, Inc. will be able to deduct interest paid on
the New KDSM Senior Debentures. Holders of the New Preferred Securities should
be aware, however, that the IRS may attempt to treat the New KDSM Senior
Debentures as equity rather than indebtedness for tax purposes. If the IRS were
successful in such attempt, interest paid on the New KDSM Senior Debentures
would not be deductible and the New Preferred Securities may be subject to
redemption at the option of KDSM, Inc. as described in "Description of the New
Preferred Securities--Redemption Upon a Tax Event or an Investment Company Act
Event." Moreover, classification of the New KDSM Senior Debentures as equity
could have certain adverse consequences for Non-U.S. Holders (as defined below)
of the New Preferred Securities.
CLASSIFICATION OF THE TRUST
The Trust has received an opinion from Wilmer, Cutler & Pickering that, under
current law and assuming compliance with the terms of the Trust Agreement and
certain other documents, the Trust will be classified as a grantor trust and not
as an association taxable as a corporation for United States federal income tax
purposes. As a result, each beneficial owner of the New Preferred Securities
will be treated as owning an undivided pro rata interest in the New KDSM Senior
Debentures.
CONSEQUENCES FOR U.S. HOLDERS
As used herein, a "U.S. Holder" means a holder that is a citizen or resident
of the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, an estate, the income of which is subject to United States federal
income taxation regardless of its source or a "U.S. Trust." A U.S. Trust is any
trust if (i) a court within the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more U.S.
trustees have the authority to control all substantial decisions of the trust. A
non-U.S. citizen is considered a resident alien, and hence a U.S. Holder, if
that person is present in the United
171
<PAGE>
States at least 31 days in the calendar year and for an aggregate of at least
183 days during a three-year period, counting for such purposes all of the days
present in the current year, one-third of the days present in the immediately
preceding year, and one-sixth of the days present in the second preceding year.
Each U.S. Holder that is a cash basis taxpayer will be required to include in
its gross income its pro rata share of any interest payments on the New KDSM
Senior Debentures that are received by the Trust, whether or not distributions
are made by the Trust to the holders of the New Preferred Securities. U.S.
Holders that are accrual basis taxpayers must include in gross income their pro
rata share of interest payable on the New KDSM Senior Debentures in accordance
with their method of accounting. The New KDSM Senior Debentures should not be
considered debt instruments that are subject to the original issue discount
("OID") rules. No amount included in income with respect to the New Preferred
Securities will be eligible for the dividends received deduction.
Gain or loss will be recognized by a U.S. Holder on a sale or exchange of the
New Preferred Securities, including a redemption for cash, in an amount equal to
the difference between the amount realized and the U.S. Holder's tax basis in
the New Preferred Securities sold or so redeemed. Except to the extent
attributable to accrued but unpaid interest, gain or loss recognized by a U.S.
Holder on New Preferred Securities held for more than one year will generally be
taxable as long-term capital gain or loss.
Failure of the Company to register the Old Preferred Securities pursuant to
an effective registration statement will cause Penalty Amounts to accrue on the
Old KDSM Senior Debentures and the Old Preferred Securities as provided in the
Registration Rights Agreement. It is not expected that such a failure by the
Company would materially affect the U.S. federal income tax consequences of the
ownership of the Preferred Securities by U.S. Holders, except that U.S. Holders
of Old Preferred Securities, including those using the cash method of
accounting, may be required thereafter to accrue interest on the Old KDSM Senior
Debentures in accordance with the OID rules.
CONSEQUENCES OF EXCHANGE OFFER
Pursuant to the Exchange Offer by the Company contemplated herein, an
exchange of Old Preferred Securities for New Preferred Securities will not be a
taxable event for U.S. federal income tax purposes. A U.S. Holder will have the
same tax basis and holding period in the New Preferred Securities as the Old
Preferred Securities.
CONSEQUENCES FOR NON-U.S. HOLDERS
As used herein, a "Non-U.S. Holder" is any holder of the New Preferred
Securities that is not a U.S. Holder and is not subject to United States federal
income taxation on a net basis with respect to the New Preferred Securities.
Under present United States federal income tax law, payments by the Trust or
any of its paying agents to any Non-U.S. Holder will not be subject to United
States federal withholding tax, provided that (1) the beneficial owner of the
New Preferred Securities does not actually or constructively own ten percent or
more of the total combined voting power of all classes of stock of KDSM, Inc.
that is entitled to vote; (2) the beneficial owner of the New Preferred
Securities is not a controlled foreign corporation for U.S. federal income tax
purposes that is related to KDSM, Inc. through stock ownership; and (3) either
(a) the beneficial owner of the New Preferred Securities certifies to the Trust
or its agent, under penalties of perjury, that it is a Non-U.S. Holder and
provides its name or address or (b) a securities clearing organization, bank, or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") and holds the New
Preferred Securities certifies to the Trust or its agent under penalties of
perjury that such statement has been received from the beneficial owner and
furnishes the Trust or its agent a copy thereof. A Non-U.S. Holder of the New
Preferred Securities will generally not be subject to United States federal
withholding tax on any gain realized upon the sale or other disposition of the
New Preferred Securities unless such holder is present in the United States for
183 days or more in the taxable year of sale or other disposition and certain
other conditions are met.
172
<PAGE>
If the IRS were successful in an attempt to classify the New KDSM Senior
Debentures as equity, interest payments on the New KDSM Senior Debentures would
be treated as dividends, and would generally be subject to withholding tax at a
30 percent rate or such lower rate as may be specified by an applicable income
tax treaty.
In addition, the Company believes, based on advice of counsel, that IRS
regulations that permit the IRS to recharacterize certain conduit financing
transactions for purposes of the withholding tax rules should not apply to the
New KDSM Senior Debentures. If the IRS were successful in an attempt to apply
such regulations to the New KDSM Senior Debentures, interest on the New KDSM
Senior Debentures could be treated as dividends for withholding tax purposes.
DISTRIBUTION OF THE NEW KDSM SENIOR DEBENTURES
Upon the occurrence of a Tax Event, the New KDSM Senior Debentures may be
distributed to holders in exchange for New Preferred Securities provided
Sinclair guarantees the New KDSM Senior Debentures. Under current United States
federal income tax law, Sinclair's placement of such guarantee and subsequent
distribution by the Trust of the New KDSM Senior Debentures will be non-taxable
and will result in each holder receiving directly its pro rata share of the New
KDSM Senior Debentures previously held indirectly through the Trust, with a
holding period and aggregate tax basis equal to the holding period and aggregate
tax basis such U.S. Holder had in its New Preferred Securities before such
distribution. A U.S. Holder will include interest in respect of the New KDSM
Senior Debentures received from the Trust in the manner described above under
"--Consequences for U.S. Holders."
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting will apply to interest received with
respect to the New Preferred Securities by U.S. Holders (other than corporations
and other exempt U.S. Holders). Backup withholding at a rate of 31 percent will
apply to payments of interest to non-exempt U.S. Holders unless the U.S. Holder
furnishes its taxpayer identification number in the manner prescribed in
applicable Treasury Regulations, certifies that such number is correct,
certifies as to no loss of exemption from backup withholding, and meets certain
other conditions.
Payment of the proceeds from the sale by a Non-U.S. Holder of the New
Preferred Securities made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding, except that if the
broker is a United States person, a "controlled foreign corporation" for United
States tax purposes, or a foreign person 50 percent or more of whose gross
income is effectively connected with a United States trade or business for a
specified three-year period, information reporting (but not backup withholding)
may apply to those payments. Payment of the proceeds from the sale of New
Preferred Securities to or through the United States office of a broker is
subject to information reporting and backup withholding unless the holder or
beneficial owner certifies as to its non-United States status or otherwise
establishes an exemption from information reporting and backup withholding.
The IRS has issued proposed regulations which, if finalized in their current
form, would require backup withholding on payments made with respect to the New
Preferred Securities that are made outside the United States if the payor has
actual knowledge that the recipient is a U.S. Holder. The proposed regulations
are proposed to be effective for payments made after December 31, 1997, and
current law would remain in effect until then. U.S. Holders should consult with
their tax advisors as to compliance with the new rules so as to avoid possible
backup withholding on payments after 1997.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against a holder's United States federal income tax
liability, provided that the required information is furnished to the IRS.
POSSIBLE TAX LAW CHANGES
The Clinton Administration's balanced budget proposal released in February
1997 includes a proposal that would deny interest deductions on certain debt
instruments if, among other things, the instrument is nonrecourse to the issuer
and secured principally by stock of the issuer or a related party. If the
173
<PAGE>
proposal were enacted and the KDSM Senior Debentures were issued on or after the
effective date, the proposal might be construed to apply to the KDSM Senior
Debentures, with the result that KDSM, Inc. would be unable to deduct interest
on the KDSM Senior Debentures. The proposal is, however, proposed to be
effective for instruments issued on or after the date of first action by the
appropriate Congressional committees. Nevertheless, there can be no assurance
that current or future legislative or administrative proposals or final
legislation will not affect the ability of KDSM, Inc. to deduct interest on the
New KDSM Senior Debentures. Such a change would give rise to a Tax Event, which
would permit the Trust to cause a redemption of the New Preferred Securities or
to distribute the New KDSM Senior Debentures in exchange for the New Preferred
Securities, provided that Sinclair is able to provide a full and unconditional
guarantee of the New KDSM Senior Debentures. A tax law change in the form set
forth in the Proposal would not, however, alter the United States federal income
tax consequences of the purchase, ownership, or disposition of the New Preferred
Securities.
174
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Preferred Securities for its own account
in connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Preferred Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by Participating Broker-Dealers during the period referred to below in
connection with resales of New Preferred Securities received in exchange for Old
Preferred Securities if such Old Preferred Securities were acquired by such
Participating Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities. The Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such New
Preferred Securities for a period ending 180 days after the Registration
Statement of which this Prospectus constitutes a part is declared effective. See
"The Exchange Offer--Resales of New Preferred Securities." None of the Company,
KDSM, Inc. or the Trust will receive any cash proceeds from the issuance of the
New Preferred Securities offered hereby. New Preferred Securities received by
broker-dealers for their own accounts in connection with the Exchange Offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the New
Preferred Securities or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such New Preferred Securities. Any broker-dealer that resells
New Preferred Securities that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates in
a distribution of such New Preferred Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Preferred Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
None of the Company, KDSM, Inc., the Trust or the Trustees shall be liable
for any delay by the Depository or any Participant or Indirect Participant in
identifying the beneficial owners of the related New Preferred Securities and
each such person may conclusively rely on, and shall be protected in relying on,
instructions from the Depository for all purposes (including with respect to the
registration and delivery, and the respective principal amounts, of the New
Preferred Securities to be issued).
This Prospectus also relates to the resale of Preferred Securities by certain
holders who may have the right pursuant to the Registration Rights Agreement to
require the Company and the Trust to register the resale of the Preferred
Securities because such holders are not eligible to rely on the registration of
the New Preferred Securities to resell the New Preferred Securities. If any
holders of Preferred Securities seek to resell their Preferred Securities
pursuant to this Prospectus, such holders, as well as the plan of distribution
for such resales will be identified in a Prospectus Supplement.
LEGAL MATTERS
The validity of the New KDSM Senior Debentures, the New Parent Preferred, the
New Parent Guarantee and the New Parent Debenture Guarantee will be passed upon
by Thomas & Libowitz, P.A., Baltimore, Maryland, counsel to the Company, KDSM,
Inc. and the Trust and by Wilmer, Cutler & Pickering, Baltimore, Maryland,
special securities counsel to the Company, KDSM, Inc. and the Trust. Certain
matters of Delaware law relating to the validity of the New Preferred
Securities, the validity of the Trust Agreement and the formation of the Trust
are being passed upon by Richards, Layton & Finger, Wilmington, Delaware,
special Delaware counsel to the Company, KDSM, Inc. and the Trust.
EXPERTS
The Consolidated Financial Statements and schedules of the Company as of
December 31, 1995 and 1996 and for each of the years ended December 31, 1994,
1995 and 1996, incorporated by reference in
175
<PAGE>
this Prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated herein in reliance upon the
authority of said firm as experts in giving said reports.
The Consolidated Financial Statements of KDSM, Inc. and subsidiary as of
December 31, 1996 and for the seven months then ended and KDSM-TV (the
Predecessor) for the five months ended May 31, 1996 included in this Prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
The financial statements of KDSM-TV and the consolidated financial statements
of River City, L.P. included in this Prospectus have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, to the extent and for the
periods indicated in their reports thereon. Such financial statements have been
included in reliance upon the reports of KPMG Peat Marwick LLP.
The financial statements of Paramount Stations Group of Kerrville, Inc. as of
December 31, 1994 and August 3, 1995 and for the year ended December 31, 1994
and the period from January 1, 1995 through August 3, 1995, incorporated by
reference in this Prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said reports.
The financial statements of KRRT, Inc. as of December 31, 1995 and for the
period from July 25, 1995 through December 31, 1995, incorporated by reference
in this Prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated herein in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated financial statements of Superior Communications Group, Inc.
at December 31, 1995 and 1994, and for each of the two years in the period ended
December 31, 1995, incorporated by reference in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon incorporated by reference herein, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Kansas City TV 62 Limited Partnership and
Cincinnati TV 64 Limited Partnership as of and for the year ended December 31,
1995, incorporated in this Prospectus by reference to the Form 8-K of Sinclair
Broadcast Group, Inc. dated May 9, 1996 (filed May 17, 1996), related to, have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
176
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
-------
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, A LIMITED
PARTNERSHIP (THE PREDECESSOR) AND KDSM, INC. AND SUBSIDIARY
(THE COMPANY)(BUSINESS ACQUIRED)
Report of Independent Public Accountants F-2
Balance Sheet as of December 31, 1996 F-3
Statements of Operations for the Five Months Ended May 31,
1996 and the Seven Months Ended December 31, 1996 F-4
Statements of Changes in Undistributed Earnings and
Stockholder's Equity for the Five Months Ended May 31, 1996
and the Seven Months Ended December 31, 1996 F-5
Statements of Cash Flows for the Five Months Ended May 31,
1996 and the Seven Months Ended December 31, 1996 F-6
Notes to Financial Statements F-7
KDSM-TV (BUSINESS ACQUIRED)
Audited Financial Statements
Independent Auditors' Report F-13
Balance Sheets as of December 31, 1995 and 1994 F-14
Statements of Earnings for the Years Ended December 31, 1995
and 1994 F-15
Statements of Equity of Partnership for Years Ended December
31, 1995 and 1994 F-16
Statements of Cash Flows for the Years Ended December 31,
1995 and 1994 F-17
Notes to Financial Statements F-18
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sinclair Broadcast Group, Inc.:
We have audited the accompanying balance sheet of KDSM, Inc. and subsidiary (the
Company) as of December 31, 1996, and the related statements of operations,
stockholder's equity and cash flows of KDSM, Inc. and subsidiary for the seven
months ended December 31, 1996, and the statements of operations, changes in
undistributed earnings and cash flows of KDSM-TV, a Division of River City
Broadcasting, a limited partnership, (the Predecessor) for the five months ended
May 31, 1996. These financial statements are the responsibility of the Company's
and the Predecessor's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of KDSM, Inc. and subsidiary (the
Company) as of December 31, 1996, and the results of its operations and its cash
flows for the seven months ended December 31, 1996, and the results of
operations and cash flows of KDSM-TV, a Division of River City Broadcasting, a
limited partnership, (the Predecessor) for the five months ended May 31, 1996,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
February 14, 1997
F-2
<PAGE>
KDSM, INC. AND SUBSIDIARY
BALANCE SHEET
AS OF DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash $ 2,614
Accounts receivable, net of allowance for doubtful
accounts of $39,111 2,051,983
Current portion of program contract costs 860,247
Deferred barter costs 50,438
Prepaid expenses and other current assets 85,875
-------------
Total current assets 3,051,157
PROPERTY AND EQUIPMENT, net 2,802,838
PROGRAM CONTRACT COSTS, less current portion 793,534
DUE FROM PARENT 495,643
ACQUIRED INTANGIBLE AND OTHER BROADCASTING ASSETS, net 33,530,193
-------------
Total assets $40,673,365
=============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 291,705
Accrued liabilities 409,772
Current portion of program contracts payable 1,384,105
Deferred barter revenues 120,142
-------------
Total current liabilities 2,205,724
PROGRAM CONTRACTS PAYABLE 879,235
DEFERRED STATE TAXES 72,694
-------------
Total liabilities 3,157,653
-------------
STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share, 1,000 shares
authorized; 100 shares issued and outstanding 1
Additional paid-in capital 36,810,925
Retained earnings 704,786
-------------
Total stockholder's equity 37,515,712
-------------
Total liabilities and stockholder's equity $40,673,365
=============
The accompanying notes are an integral part of this balance sheet.
F-3
<PAGE>
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, L.P., AND
KDSM, INC. AND SUBSIDIARY
STATEMENTS OF OPERATIONS
FOR THE FIVE MONTHS ENDED MAY 31, 1996
AND THE SEVEN MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- -------------
MAY 31, DECEMBER 31,
1996 1996
------------- -------------
<S> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions of
$493,547 and $731,348, respectively $3,478,067 $4,740,489
Revenues realized from station barter arrangements 84,650 118,507
------------- -------------
Total revenues 3,562,717 4,858,996
------------- -------------
OPERATING EXPENSES:
Programming and production 509,411 626,740
Selling, general and administrative 1,321,123 1,316,508
Expenses realized from barter arrangements 97,361 127,641
Amortization of program contract costs and net realizable value
adjustments 507,110 863,607
Depreciation and amortization of property and equipment 232,991 190,777
Amortization of intangibles, broadcast assets and other assets 276,780 544,461
------------- -------------
Total Operating Expenses 2,944,776 3,669,734
------------- -------------
Broadcast Operating Income 617,941 1,189,262
OTHER INCOME -- 150
------------- -------------
INCOME BEFORE ALLOCATION OF CONSOLIDATED FEDERAL INCOME TAXES
AND STATE INCOME TAXES 617,941 1,189,412
ALLOCATION OF CONSOLIDATED FEDERAL INCOME TAXES -- 411,932
STATE INCOME TAXES -- 72,694
------------- -------------
NET INCOME $ 617,941 $ 704,786
============= =============
PRO FORMA NET INCOME AFTER IMPUTING AN INCOME TAX PROVISION:
Net income, as reported $ 617,941
Imputed income tax provision 247,176
-------------
Pro forma net income $ 370,765
=============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, L.P., AND
KDSM, INC. AND SUBSIDIARY
STATEMENTS OF CHANGES IN UNDISTRIBUTED EARNINGS
AND STOCKHOLDER'S EQUITY
FOR THE FIVE MONTHS ENDED MAY 31, 1996 AND
THE SEVEN MONTHS ENDED DECEMBER 31, 1996
TOTAL
UNDISTRIBUTED
PREDECESSOR EARNINGS
- -------------------------- ---------------
BALANCE, December 31, 1995 $5,045,595
Net income 617,941
---------------
BALANCE, May 31, 1996 $5,663,536
===============
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
COMPANY STOCK CAPITAL EARNINGS EQUITY
- -------------------------- -------- ------------- ---------- ---------------
BALANCE, June 1, 1996 $ 1 $36,810,925 $ -- $36,810,926
Net income -- -- 704,786 704,786
-------- ------------- ---------- ---------------
BALANCE, December 31,
1996 $ 1 $36,810,925 $704,786 $37,515,712
======== ============= ========== ===============
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, L.P., AND
KDSM, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
FOR THE FIVE MONTHS ENDED MAY 31, 1996
AND THE SEVEN MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------- --------------
MAY 31, DECEMBER 31,
1996 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 617,941 $ 704,786
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 232,991 190,777
Amortization of intangibles and other assets 276,780 544,461
Amortization of program contracts 507,110 863,607
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 20,837 (2,052,848)
Decrease (increase) in prepaid expenses and other current
assets 82,257 (67,225)
Increase in accounts payable and accrued expenses 78,652 635,983
Increase in deferred state taxes -- 72,694
Net effect of change in deferred barter revenues and change in
deferred barter costs 60,571 9,133
Payments on program contracts payable (890,589) (242,095)
-------------- --------------
Net cash provided by operating activities 986,550 659,273
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (29,076) (161,016)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due from parent, net (772,585) (495,643)
Prepayment of excess syndicated contract liabilities (216,000) --
-------------- --------------
Net cash flows used in financing activities (988,585) (495,643)
-------------- --------------
Net (decrease) increase in cash (31,111) 2,614
CASH, beginning of period 61,963 --
-------------- --------------
CASH, end of period $ 30,852 $ 2,614
============== ==============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Program contract costs acquired $ 61,000 $ 943,966
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, L.P. AND
KDSM, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
KDSM, Inc. and subsidiary, a Maryland corporation (the Company) is a television
broadcaster serving the Des Moines, Iowa, area through station KDSM on Channel
17, a Fox affiliate. This station was wholly owned and operated by River City
Broadcasting (RCB), a limited partnership, through its ownership in KDSM-TV, a
division of RCB (the Predecessor) through May 31, 1996. The Company and the
Predecessor are collectively referred to as "the Company" or "KDSM" herein.
Sinclair Broadcast Group, Inc. (the Parent) purchased of all of the non-license
assets of KDSM from RCB limited partnership on May 31, 1996. KDSM owns all of
the issued and outstanding stock of KDSM Licensee, Inc. All intercompany amounts
are eliminated in consolidation.
The accompanying December 31, 1996, consolidated balance sheet and related
statements of operations and cash flows for the seven-month period ended
December 31, 1996, are presented on a new basis of accounting. The accompanying
financial statements for the five-month period ended May 31, 1996, are presented
as "predecessor" financial statements (see Note 9).
Use Of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Programming
The Company has agreements with distributors for the rights to television
programming over contract periods which generally run from one to seven years.
Contract payments are made in installments over terms that are generally shorter
than the contract period. Each contract is recorded as an asset and a liability
when the license period begins and the program is available for its first
showing. The portion of the program contracts payable within one year is
reflected as a current liability in the accompanying consolidated balance sheet.
The rights to program materials are reflected in the accompanying consolidated
balance sheet at the lower of unamortized cost or estimated net realizable
value. Estimated net realizable values are based upon management's expectation
of future advertising revenues net of sales commissions to be generated by the
program material. Amortization of program contract costs is generally computed
under either a four year accelerated method or based on usage, whichever yields
the greater amortization for each program. Program contract costs, estimated by
management to be amortized in the succeeding year, are classified as current
assets. Payments of program contract liabilities are not affected by adjustments
for amortization or estimated net realizable value.
Barter Arrangements
The Company broadcasts certain customers' advertising in exchange for equipment,
merchandise and services. The estimated fair value of the equipment, merchandise
or services received is recorded as deferred barter costs, and the corresponding
obligation to broadcast advertising is recorded as deferred barter revenues. The
deferred barter costs are expensed or capitalized as they are used, consumed or
received. Deferred barter revenues are recognized as the related advertising is
aired.
F-7
<PAGE>
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, L.P. AND
KDSM, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-Continued)
Certain program contracts provide for the exchange of advertising air time in
lieu of cash payments for the rights to such programming. These contracts are
recorded as the programs are aired at the estimated fair value of the
advertising air time given in exchange for the program rights. Network
programming is excluded from these calculations.
ACQUIRED INTANGIBLE AND OTHER BROADCASTING ASSETS
Acquired intangible broadcasting assets are being amortized over periods of 15
to 40 years. These amounts result from the acquisition of the non-license assets
of KDSM by the Parent from RCB in May 1996. The Company monitors and evaluates
the realizability of its intangible broadcast assets and the existence of any
impairment to recoverability based on its projected undiscounted cash flows.
Intangible assets consist of the following as of December 31, 1996:
AMORTIZATION
PERIOD
------------
Fox television network affiliation agreement,
net of amortization of $39,274 $ 1,643,883 25 years
Decaying advertising base, net of amortization
of $56,481 1,395,888 15 years
Purchase options 3,390,000 --
Goodwill, net of amortization of $448,706 27,100,422 40 years
------------
$33,530,193
============
REVENUES
Broadcasting revenues are derived principally from the sale of program time and
spot announcements to local, regional and national advertisers. Advertising
revenue is recognized in the period during which the program time and spot
announcements are broadcast.
2. INCOME TAXES
No income tax provision has been included in the Predecessor's financial
statements for the five months ended May 31, 1996, since profit and loss and the
related tax attributes are deemed to be distributed to, and reportable by, the
partners of RCB Limited Partnership on their respective income tax returns.
A pro forma income tax provision, along with the related pro forma effect on net
income, is presented in the accompanying statement of operations. These pro
forma income taxes are the product of multiplying the estimated blended federal
and state statutory rate of 40% by net income as reported in the statement of
operations.
The Company's Parent files a consolidated federal tax return, and separate state
tax returns for each of its subsidiaries. It is the Parent's policy to charge
KDSM for its federal income tax provision through intercompany charges, and KDSM
is directly responsible for its current state tax liabilities. The accompanying
financial statements have been prepared in accordance with the separate return
method of FASB 109, whereby the allocation of the federal tax provision due to
the Parent is based on what the subsidiary's current and deferred federal tax
provision would have been had the subsidiary filed a federal income tax return
outside its consolidated group. Given that KDSM is required to reimburse its
Parent for its federal tax provision, the federal income tax provision is
recorded as an intercompany charge and included as a reduction of the due from
Parent amount in the accompanying consolidated balance sheet as a current
obligation. Accordingly, KDSM has no federal deferred income taxes. Since KDSM
is directly responsible for its state taxes all deferred tax assets or
liabilities are related to state income taxes. The federal and state tax
provision was calculated based on pretax income plus permanent book to tax
differences of approximately $22,000 times the statutory tax rate of 40%. The
Company had no alternative minimum tax credit carryforwards as of December 31,
1996.
F-8
<PAGE>
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, L.P. AND
KDSM, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-Continued)
The allocation of consolidated income taxes consists of the following for the
seven months ended December 31, 1996:
Current
Federal $411,932
State
----------
411,932
----------
Deferred
Federal
State 72,694
----------
$484,626
==========
The following table summarizes the tax effects of the significant types of
temporary differences between financial reporting basis and tax basis which were
generated during the seven months ended December 31, 1996.
Film amortization $(237,876)
Goodwill
amortization (261,155)
Other 14,405
------------
$(484,626)
============
The deferred state tax liability represents the state tax benefit related to the
temporary differences listed above.
3. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed under the straight-line method over the estimated
useful lives. Property and equipment and their estimated useful lives are as
follows as of December 31, 1996:
ESTIMATED
USEFUL LIVES
IN YEARS
--------------
Buildings and improvements. $ 95,080 31.5
Transmission towers and equipment 1,191,906 5-15
Studio equipment 1,442,636 5
Vehicles, office equipment and
furniture 261,748 5
Leasehold improvements 2,245 15
------------
2,993,615
Less: Accumulated depreciation (190,777)
------------
$2,802,838
============
F-9
<PAGE>
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, L.P. AND
KDSM, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-Continued)
4. PROGRAM CONTRACTS
The Company purchases the right to broadcast programs through fixed term license
agreements. Broadcast rights consist of the following as of December 31, 1996:
Aggregate cost $2,517,388
Less-Accumulated
amortization (863,607)
------------
1,653,781
Less-Current portion (860,247)
------------
$ 793,534
============
Contractual obligations incurred in connection with the acquisition of broadcast
rights are $2,263,340 as of December 31, 1996. Future payments, by year, for
program contract rights payable, are as follows:
YEAR ENDING
DECEMBER 31,
1996
--------------
1997 $1,384,105
1998 617,158
1999 217,908
2000 43,859
2001 310
2002 and thereafter --
--------------
$2,263,340
==============
The Company has entered into noncancelable commitments for future program rights
of approximately $498,000 as of December 31, 1996.
The Company has estimated the fair value of its program contract payables and
noncancelable commitments at approximately $1.9 million as of December 31, 1996
based on future cash flows discounted at the Company's current borrowing rate.
5. LEASES
The Company leases certain property and equipment under noncancellable
operating lease agreements. Rental expense charged to income for the five months
ended May 31, 1996, and the seven months ended December 31, 1996, was
approximately $5,000 and $7,000, respectively. Future minimum lease payments
under noncancellable operating leases are approximately:
YEAR ENDING
DECEMBER 31,
1996
--------------
1997 $ 88,000
1998 88,000
1999 84,000
2000 85,000
2001 92,000
2002 and thereafter 640,000
--------------
$1,077,000
==============
F-10
<PAGE>
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, L.P. AND
KDSM, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-Continued)
6. RELATED PARTY TRANSACTIONS
The Predecessor's financial statements of KDSM-TV are included in the
consolidated financial statements of RCB, limited partnership. RCB corporate
expenses are allocated to KDSM-TV and each of RCB's stations to cover the
salaries and expenses of senior management. Total management fees and expenses,
including allocated corporate expenses, for the five months ended May 31, 1996,
totaled approximately $289,000.
The Company's financial statements of KDSM, Inc. and subsidiary are included in
the consolidated financial statements of Sinclair Broadcast Group, Inc. (the
Parent). Parent corporate expenses are allocated to KDSM, and each of the
Parent's subsidiaries to cover the salaries and expenses of senior management.
Total management fees and expenses, including allocated corporate expenses, for
the seven months ended December 31, 1996, totaled approximately $146,000. The
Parent also provides and receives short-term cash advances to and from the
Company through a central cash management system. No interest is charged or
received for these advances. The total amount due from Parent as of December 31,
1996, amounted to approximately $496,000.
In connection with the acquisition of KDSM's Non-License Assets by the Parent,
on May 31, 1996, the Parent entered into a local marketing agreement (LMA) with
RCB limited partnership to provide programming services. The Parent makes
specified periodic payments to RCB limited partnership in exchange for the right
to program and sell advertising. During the seven months ended December 31,
1996, the Parent made payments of approximately $172,000 to RCB in connection
with the LMA. These payments are included in the accompanying statement of
operations as programming and production expenses for the seven months ended
December 31, 1996. KDSM reimburses the Parent for these payments, and any
amounts due to the Parent have been included in the net due from Parent amount
in the accompanying Consoldiated Balance Sheet.
7. EMPLOYEE BENEFITS
Substantially all employees of KDSM, as of May 31, 1996, were covered under a
qualified profit-sharing plan administered by RCB, which includes a thrift
provision qualifying under Section 401(k) of the Internal Revenue Code. The
provision allows the participants to contribute up to 12% of their compensation
in the plan year, subject to statutory limitations.
As of May 31, 1996, KDSM participates in the Parent Company's retirement savings
plan under Section 401(k) of the Internal Revenue Code. This plan covers
substantially all employees of the Company who meet minimum age or service
requirements and allows participants to defer a portion of their annual
compensation on a pre-tax basis. Contributions from the Company are made on a
monthly basis in an amount equal to 50% of the participating employee
contributions, to the extent such contributions do not exceed 6% of the
employees' eligible compensation during the month.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in certain litigation matters arising in the normal
course of business. In the opinion of management, these matters are not
significant and will not have a material adverse effect on the Company's
financial position.
F-11
<PAGE>
KDSM-TV, A DIVISION OF RIVER CITY BROADCASTING, L.P. AND
KDSM, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS-Continued)
9. ACQUISITION OF BUSINESS
On May 31, 1996, the Parent acquired all of the non-license assets of the
Company from RCB limited partnership for approximately $36.8 million. In
connection with this purchase, the Company purchased an option to acquire the
license assets of KDSM for approximately $3.4 million, with an option exercise
price of $1.6 million and entered into an LMA with RCB as described in Note 6.
None of the current assets of KDSM were acquired. The acquisition was accounted
for under the purchase method of accounting whereby the purchase price was
allocated to property and programming assets, acquired intangible broadcasting
assets, other intangible assets and purchase options of $2.8 million, $3.1
million, $27.5 million and $3.4 million, respectively.
10. PREPAYMENT OF SYNDICATED PROGRAM CONTRACT LIABILITIES
In connection with the acquisition described in Note 9, the Company prepaid
certain syndicated program contracts payable for which the underlying value of
the associated syndicated program assets was determined to be of little or no
value. KDSM made cash payments of $216,000 relating to these syndicated program
contracts payable. The related assets had been written down to their net
realizable value prior to the prepayment.
11. UNAUDITED PRO FORMA SUMMARY RESULTS OF OPERATIONS
The unaudited pro forma summary results of operations for the year ended
December 31, 1996, assuming the 1996 acquisition had been consummated on January
1, 1996, is as follows:
1996
------------
(UNAUDITED)
Net broadcast revenues $8,421,713
============
Income before allocation of consolidated income
taxes $1,791,954
============
Net income available to common shareholders $1,075,172
============
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
KDSM-TV:
We have audited the accompanying balance sheets of KDSM-TV as of December 31,
1995 and 1994, and the related statements of earnings, equity of partnership,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of KDSM-TV as of December 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
years then ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
February 7, 1997
F-13
<PAGE>
KDSM-TV
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash $ 61,963 $ 55,684
Accounts receivable, net of allowance for doubtful accounts
of approximately $12,000 in 1995 and $23,000 in 1994 1,700,083 1,621,812
Current portion of program rights 914,783 777,754
Prepaid and other current assets 177,762 229,824
------------- -------------
Total current assets 2,854,591 2,685,074
Property and equipment, net of accumulated depreciation 1,628,463 2,392,938
Program rights, less current portion 881,856 694,366
Intangible assets, net 2,979,140 3,915,860
------------- -------------
Total assets $8,344,050 $9,688,238
============= =============
Liabilities and Equity of Partnership
Current liabilities:
Current installments of program rights payable $1,339,882 $ 943,390
Accrued expenses 534,880 491,904
Accounts payable 100,945 77,293
------------- -------------
Total current liabilities 1,975,707 1,512,587
Program rights payable, less current installments 1,322,748 1,106,826
------------- -------------
Total liabilities 3,298,455 2,619,413
Equity of partnership 5,045,595 7,068,825
------------- -------------
Total liabilities and equity of partnership $8,344,050 $9,688,238
============= =============
</TABLE>
See accompanying notes to financial statements.
F-14
<PAGE>
KDSM-TV
STATEMENTS OF EARNINGS
DECEMBER 31, 1995 AND 1994
1995 1994
------------- -------------
Net operating revenues:
Local time sales $4,327,637 $4,031,018
National time sales 2,844,380 2,390,900
Other revenues 306,137 425,633
------------- -------------
Total operating revenues 7,478,154 6,847,551
------------- -------------
Operating costs:
Station operating expenses 1,822,370 1,831,230
Selling expenses 1,516,619 1,158,874
Program amortization expense 1,504,520 907,135
Corporate expenses 150,000 356,816
Depreciation 897,220 876,865
Amortization of intangible
assets 936,720 1,194,523
------------- -------------
Total operating costs 6,827,449 6,325,443
------------- -------------
Operating income 650,705 522,108
Other income 12,041 --
------------- -------------
Net earnings $ 662,746 $ 522,108
============= =============
See accompanying notes to financial statements.
F-15
<PAGE>
KDSM-TV
STATEMENTS OF EQUITY OF PARTNERSHIP
DECEMBER 31, 1995 AND 1994
Balance at December 31, 1993 $ 9,058,289
Net earnings 522,108
Partnership transfers, net (2,511,572)
-------------
Balance at December 31, 1994 7,068,825
Net earnings 662,746
Partnership transfers, net (2,685,976)
-------------
Balance at December 31, 1995 $ 5,045,595
=============
See accompanying notes to financial statements.
F-16
<PAGE>
KDSM-TV
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities -- net earnings $ 662,746 $ 522,108
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Program amortization expense 1,504,520 907,135
Depreciation 897,220 876,865
Gain on disposal of property and equipment (12,041) --
Amortization of intangible assets 936,720 1,194,523
Retirement of program rights payable (1,216,625) (949,538)
Change in assets and liabilities:
Accounts receivable, net (78,271) 7,202
Prepaid and other current assets 52,062 (48,317)
Accounts payable and accrued expenses 66,628 169,487
------------- -------------
Net cash provided by operating activities 2,812,959 2,679,465
------------- -------------
Cash flows from investing activities:
Additions to property and equipment (139,169) (140,270)
Proceeds from disposal of property and equipment 18,465 --
------------- -------------
Net cash used in investing activities (120,704) (140,270)
------------- -------------
Cash flows from financing activities -- net transfers to
partnership (2,685,976) (2,511,572)
------------- -------------
Net increase in cash and cash equivalents 6,279 27,623
Cash, beginning of year 55,684 28,061
------------- -------------
Cash, end of year $ 61,963 $ 55,684
============= =============
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
KDSM-TV
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. BUSINESS DESCRIPTION
KDSM-TV (the Company) is a television broadcaster serving the Des Moines, Iowa
area through station KDSM on Channel 17, a Fox affiliate. This station is fully
owned and operated by River City Broadcasting (RCB), a limited partnership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Use Of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Program Rights
Program rights and related liabilities are recorded at cost when the program
right is available for broadcasting. Agreements define the lives of the program
rights and frequently the number of showings. The cost of program rights is
charged against earnings using straight-line and accelerated methods.
Program rights, representing the cost of those rights available for broadcasting
and expected to be broadcast in the succeeding fiscal year, are shown as a
current asset. Program rights payable are classified as current based on those
payments of the various contracts due within the next 12 months.
Program rights are stated at the lower of cost or estimated net realizable
value.
Property And Equipment
Property and equipment is recorded at cost. Maintenance and repairs are charged
against earnings, while improvements which extend useful lives are capitalized.
Depreciation expense is computed using primarily the straight-line method over
the estimated useful lives of the related assets.
Intangible Assets
Intangible assets consist principally of broadcasting licenses, covenants not to
compete, and going-concern values. Amortization expense is computed on a
straight-line basis over the estimated lives of the assets, which generally
range from 5-20 years.
The Company assesses the recoverability of these intangible assets by
determining whether the amortization of the remaining balances over their
remaining lives can be recovered through projected undiscounted future results.
The amount of impairment, if any, is measured based on projected discounted
future results using a discount rate reflecting the Company's average cost of
funds. The methodology that management used to project results of operations
forward was based on the historical trend line of actual results.
Income Taxes And Distributions For Taxes
No income tax provision has been included in the Company's financial statements
since profit and loss and the related tax attributes are deemed to be
distributed to, and to be reportable by, the partners of RCB Limited Partnership
on their respective income tax returns. Accordingly, based on the tax attributes
to be passed through to the partners, RCB Partnership records a distribution
payable for amounts expected to be distributed to the partners for their
estimated tax liability.
F-18
<PAGE>
KDSM-TV
NOTES TO FINANCIAL STATEMENTS-(Continued)
Revenues
Broadcasting revenues are derived principally from the sale of program time and
spot announcements to local, regional, and national advertisers. Advertising
revenue is recognized in the period during which the program time and spot
announcements are broadcast.
Barter Transactions
Barter transactions are recorded at the estimated fair values of the products
and services received. Barter revenues are recognized when commercials are
broadcast.
3. INTANGIBLE ASSETS
Intangible assets include the following:
<TABLE>
<CAPTION>
ASSET
LIVES IN
1995 1994 YEARS
------------ ------------ ----------
<S> <C> <C> <C>
Broadcasting licenses, net of amortization of approximately
$168,000 and $130,000 in 1995 and 1994, respectively $ 577,571 $ 614,834 20
Covenants not to compete, net of amortization of
approxi-mately $1,800,000 and $1,400,000 in 1995 and 1994,
respectively 200,004 600,000 5
Going-concern value, net of amortization of approximately
$80,000 and $62,000 in 1995 and 1994, respectively 276,755 294,607 20
Other intangible assets, net of amortization of
approximately $3,470,000 and $2,989,000 in 1995 and 1994,
respectively 1,924,810 2,406,419 2-20
------------ ------------ ==========
$2,979,140 $3,915,860
============ ============
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment include the following:
LIVES
1995 1994 IN YEARS
------------ ------------ ----------
Buildings and improvements $ 320,029 $ 305,382 31.5
Equipment, furniture, and
fixtures 5,140,515 5,045,645 5-15
------------ ------------ ==========
5,460,544 5,351,027
Less accumulated depreciation 3,832,081 2,958,089
------------ ------------
$1,628,463 $2,392,938
============ ============
F-19
<PAGE>
KDSM-TV
NOTES TO FINANCIAL STATEMENTS-(Continued)
5. LEASES
The Company leases certain property and equipment under noncancellable operating
lease agreements. Rental expense charged to earnings for the years ended
December 31, 1995 and 1994 was approximately $97,000 and $96,000, respectively.
Future minimum lease payments under noncancellable operating leases are
approximately:
Year ending December 31:
1996.................... $ 89,000
1997.................... 88,000
1998.................... 88,000
1999.................... 84,000
2000 ................... 84,000
----------
$433,000
==========
6. SUPPLEMENTAL CASH FLOW AND OTHER FINANCIAL INFORMATION
The Company purchased program rights, on an installment basis, amounting to
approximately $1,829,000 and $992,000 in 1995 and 1994, respectively. Amounts
reflected as retirements of program rights payable represent amounts paid to
vendors under various program rights agreements.
Based on certain events, management performed a review of program rights to
determine projected usage and revenue streams. Based on this review, the Company
wrote off certain programming and recognized a charge to operations of
approximately $189,000 for the year ended December 31, 1995. This amount is
included in program amortization expense.
7. RELATED PARTY TRANSACTIONS
The financial statements of KDSM-TV are included in the consolidated financial
statements of River City Broadcasting. RCB corporate expenses are allocated to
KDSM-TV and each of RCB's stations to cover the salaries and expenses of senior
management. Total management fees and expenses, including corporate expenses,
for the years ended December 31, 1995 and 1994 totaled approximately $150,000
and $357,000, respectively. The Company has an interest in the equity of the
partnership which represents the net of the initial investment of RCB in
KDSM-TV, cash which has been transferred by KDSM-TV to RCB, expenses which have
been allocated from RCB to KDSM-TV and accumulated earnings of KDSM-TV since the
initial investment of RCB.
8. EMPLOYEE BENEFITS
Substantially all employees of the Company are covered under a qualified
profit-sharing plan, administered by RCB, which includes a thrift provision
qualifying under Section 401(k) of the Internal Revenue Code. The provision
allows the participants to contribute up to 12% of their compensation in the
plan year, subject to statutory limitations. The Company contributed
approximately $21,000 and $10,000 for the years ended December 31, 1995 and
1994, respectively, to the plan.
F-20
<PAGE>
KDSM-TV
NOTES TO FINANCIAL STATEMENTS-(Continued)
9. COMMITMENTS AND CONTINGENCIES
In conjunction with the Company's commitment to obtain new programming, the
Company has purchased for the period subsequent to December 31, 1995
approximately $1,349,000 of future program rights, including $856,000 of sports
rights, of which approximately $37,000 will become payable in 1996. These rights
are generally for a period ranging from one to four years. Program rights and
related obligations in the accompanying financial statements do not include
these future commitments.
The Company is involved in certain litigation matters arising in the normal
course of business. In the opinion of management, these matters are not
significant and will not have a material adverse effect on the Company's
financial position.
10. SUBSEQUENT EVENT
On May 31, 1996, substantially all of the assets of KDSM-TV were sold to
Sinclair Broadcast Group, Inc. (SBG). River City Broadcasting retained ownership
of the FCC license assets, but issued an option to acquire the FCC license
assets to SBG which expires on April 10, 2006. Concurrently, RCB entered into a
time brokerage agreement with Sinclair Communications, Inc. (SCI) whereby SCI
will broadcast programming of its selection on KDSM-TV for consideration paid to
RCB. RCB has and will retain full authority, power, and control over the
management and operations of KDSM-TV during the term of the time brokerage
agreement which expires upon exercise of the option to acquire the FCC license
assets by SBG.
F-21
<PAGE>
GLOSSARY OF DEFINED TERMS
"ABC" means Capital Cities/ABC, Inc.
"Amended Certificate" means the Amended and Restated Articles of
Incorporation of the Company.
"Arbitron" means Arbitron, Inc.
"ATV" means advanced television service.
"Banks" means The Chase Manhattan Bank, N.A., as agent under the Bank Credit
Agreement and certain lenders named in the Bank Credit Agreement.
"Boston Ventures" means Boston Ventures IV, Limited Partnership and Boston
Ventures IVA, Limited Partnership collectively.
"Broadcast Cash Flow" means operating income plus corporate overhead
expenses, special bonuses paid to executive officers, non-cash deferred
compensation, depreciation and amortization, including both tangible and
intangible assets and program rights, less cash payment for program rights. Cash
program payments represent cash payments made for current program payables and
sports rights and do not necessarily correspond to program usage. Special
bonuses paid to executive officers are considered unusual and non-recurring. The
Company has presented broadcast cash flow data, which the Company believes are
comparable to the data provided by other companies in the industry, because such
data are commonly used as a measure of performance for broadcast companies.
However, broadcast cash flow (i) does not purport to represent cash provided by
operating activities as reflected in the Company's consolidated statements of
cash flow, (ii) is not a measure of financial performance under generally
accepted accounting principles and (iii) should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
"Broadcast cash flow margin" means broadcast cash flow divided by net
broadcast revenues.
"CBS" means CBS, Inc.
"CCI" means Cunningham Communications, Inc.
"Cincinnati/Kansas City Acquisitions" means the Company's acquisition of the
assets and liabilities of WSTR-TV (Cincinnati, OH) and KSMO-TV (Kansas City,
MO).
"Class A Common Stock" means the Company's Class A Common Stock, par value
$.01 per share.
"Class B Common Stock" means the Company's Class B Common Stock, par value
$.01 per share.
"Columbus Option" means the Company's option to purchase both the Non-License
Assets and the License Assets relating to WSYX-TV (ABC), Columbus, OH.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Common Stock and the Class B Common Stock.
"Communications Act" means the Communications Act of 1934, as amended.
"Company" means Sinclair Broadcast Group, Inc. and its wholly owned
subsidiaries.
"Controlling Stockholders" means David D. Smith, Frederick G. Smith, J.
Duncan Smith and Robert E. Smith.
"DAB" means digital audio broadcasting.
"DBS" means direct-to-home broadcast satellite television.
"Designated Market Area" or "DMA" means one of the 211 generally-recognized
television market areas.
"DOJ" means the United States Justice Department.
G-1
<PAGE>
"DTV" means digital television.
"EDGAR" means the Commission's Electronic Data Gathering, Analysis and
Retrieval System.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indentures" means the indentures relating to the Notes.
"FCC" means the Federal Communications Commission.
"FCN" means the Fox Children's Network.
"Flint Acquisition" means the Company's acquisition of the assets of WSMH-TV
(Flint, Michigan).
"Fox" means Fox Broadcasting Company.
"FSFA" means FSF Acquisition Corporation, the parent of the owner and
operator of WRDC-TV in Raleigh, Durham, acquired by the Company in August 1994.
"Gerstell" means Gerstell Development Corporation.
"Gerstell LP" means Gerstell Development Limited Partnership.
"Glencairn" means Glencairn, Ltd. and its subsidiaries.
"Greenville Stations" means radio stations WFBC-FM, WORD-AM, WFBC-AM,
WSPA-AM, WSPA-FM, WOLI-FM, and WOLT-FM located in the Greenville/Spartanburg,
South Carolina area.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act, as amended.
"Incremental Facility" means the loan by the Banks of up to an additional
$200.0 million to the Company pursuant to the Bank Credit Agreement at any time
prior to September 29, 1997.
"Independent" means a station that is not affiliated with any of ABC, CBS,
NBC, FOX, UPN or Warner Brothers.
"JSAs" means joint sales agreements pursuant to which an entity has the
right, for a fee paid to the owner and operator of a station, to sell
substantially all of the commercial advertising on the station.
"KIG" means Keyser Investment Group.
"KSC" means Keymarket of South Carolina, Inc.
"License Assets" means the television and radio station assets essential for
broadcasting a television or radio signal in compliance with regulatory
guidelines, generally consisting of the FCC license, transmitter, transmission
lines, technical equipment, call letters and trademarks, and certain furniture,
fixtures and equipment.
"License Assets Option" means the Company's option to purchase the License
Assets of KDNL-TV (ABC), St. Louis, MO; KOVR-TV (CBS), Sacramento, CA; WTTV-TV
(UPN) and WTTK-TV (UPN), Indianapolis, IN; WLOS-TV (ABC), Asheville, NC;
KABB-TV(Fox), San Antonio, TX; and KDSM-TV (Fox), Des Moines, IA.
"LMAs" means program services agreements, time brokerage agreements or local
marketing agreements pursuant to which an entity provides programming services
to television or radio stations that are not owned by the entity.
"Major Networks" means each of ABC, CBS or NBC, singly or collectively.
"Maryland General Corporation Law" means the general corporation laws of the
State of Maryland.
"MSA" means the Metro Survey Area as defined by Arbitron.
"NASD" means National Association of Securities Dealers, Inc.
"MMDS" means multichannel multipoint distribution services.
G-2
<PAGE>
"NBC" means the National Broadcasting Company.
"Nielsen" means the A.C. Nielsen Company Station Index dated May, 1996.
"1995 Notes" means the Company's 10% Senior Subordinated Notes due in
2005.
"1996 Act" means the Telecommunications Act of 1996.
"1993 Notes" means the Company's 10% Senior Subordinated Notes due in
2003.
"Non-License Assets" means the assets relating to operation of a television
or radio station other than License Assets.
"Operating cash flow margin" means the operating cash flow divided by net
broadcast revenues.
"Peoria/Bloomington Acquisition" means the acquisition by the Company of the
assets of WYZZ-TV on July 1, 1996.
"Permitted Transferee" means (i) any Controlling Stockholder, (ii) the estate
of a Controlling Stockholder, (iii) the spouse or former spouse of a Controlling
Stockholder, (iv) any lineal descendant of a Controlling Stockholder, any spouse
of any such lineal descendant, a Controlling Stockholder's grandparent, parent,
brother or sister, or a Controlling Stockholder's spouse's brother or sister,
(v) any guardian or custodian (including a custodian for purposes of the Uniform
Gift to Minors Act or Uniform Transfers to Minors Act) for, or any conservator
or other legal representative of, one or more Permitted Transferees, (vi) any
trust or savings or retirement account, including an individual retirement
account for purposes of federal income tax laws, whether or not involving a
trust, principally for the benefit of one or more Permitted Transferees,
including any trust in respect of which a Permitted Transferee has any general
or special testamentary power of appointment or general or special
non-testamentary power of appointment which is limited to any other Permitted
Transferee, (vii) the Company, (viii) any employee benefit plan or trust
thereunder sponsored by the Company or any of its subsidiaries, (ix) any trust
principally for the benefit of one or more of the persons referred to in (i)
through (iii) above, (x) any corporation, partnership or other entity if all of
the beneficial ownership is held by one or more of the persons referred to in
(i) through (iv) above, and (xi) any broker or dealer in securities, clearing
house, bank, trust company, savings and loan association or other financial
institution which holds Class B Common Stock for the benefit of a Controlling
Stockholder or Permitted Transferee thereof.
"Revolving Credit Facility" means the reducing revolving credit facility
under the Bank Credit Agreement in the principal amount of $250.0 million.
"River City" means River City Broadcasting, L.P.
"River City Acquisition" means the Company's acquisition from River City and
the owner of KRRT of certain Non-License Assets, options to acquire certain
License and Non-License Assets and rights to provide programming or sales and
marketing for certain stations, which was completed May 31, 1996.
"SCI" means Sinclair Communications, Inc., a wholly owned subsidiary of the
Company that will hold all of the broadcast operations of the Company.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Securities" means up to $400.0 million of stock that may be issued by
the Company, as to which the Series B Convertible Preferred Stock will have the
same rank except in certain circumstances.
"Series A Preferred Stock" means the Company's Series A Exchangeable
Preferred Stock, par value $.01, each share of which has been exchanged for a
share of the Company's Series B Convertible Preferred Stock.
"Series B Convertible Preferred Stock" means the Company's Series B
Convertible Preferred Stock, par value $.01.
"Series C Preferred Stock" means the Company's Series C Preferred Stock, par
value $.01.
"Sinclair" means Sinclair Broadcast Group, Inc. and its wholly owned
subsidiaries.
G-3
<PAGE>
"Sinclair Capital" means Sinclair Capital, a Delaware Business Trust, 100% of
the common securities of which are held by KDSM, Inc., an indirect wholly owned
subsidiary of the Company.
"Stockholder Affiliates" means certain non-Company entities owed and
controlled by the Controlling Stockholders, including CCI, Gerstell, Gerstell LP
and KIG.
"Stockholders' Agreement" means the stockholders agreement by and among the
Controlling Stockholders.
"Superior Acquisition" means the Company's acquisition of the stock of
Superior Communications, Inc.
"TBAs" means time brokerage agreements; see definition of "LMAs."
"Term Loans" means the Tranche A Term Loan and the Tranche B Term Loan
collectively.
"Tranche A Term Loan" means the term loan under the Bank Credit Agreement in
the principal amount of $550.0 million.
"Tranche B Term Loan" means the term loan under the Bank Credit Agreement in
the principal amount of $200.0 million.
"UHF" means ultra-high frequency.
"UPN" means United Paramount Television Network Partnership.
"VHF" means very-high frequency.
"Voting Agreement" means the voting agreement dated as of April 10, 1996 by
and among the Controlling Stockholders, Barry Baker and Boston Ventures.
"WB" or "Warner Brothers" means Warner Brothers, Inc.
G-4
<PAGE>
================================================================================
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFER MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, KDSM, INC. OR THE TRUST. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE NEW PREFERRED SECURITIES OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
PAGE
NO.
------
Summary ............................................................... 1
Risk Factors .......................................................... 27
Use of Proceeds ....................................................... 44
Dividend Policy ....................................................... 44
Ratio of Earnings to Fixed Charges .................................... 45
Accounting Treatment .................................................. 45
Capitalization of Sinclair ............................................ 46
Selected Consolidated Historical and Pro Forma
Financial Information of Sinclair ..................................... 47
Pro Forma Consolidated Financial Information of
Sinclair .............................................................. 49
Capitalization of KDSM, Inc. .......................................... 55
Selected Financial Information of KDSM-TV and KDSM,
Inc. .................................................................. 56
Pro Forma Financial Information of KDSM-TV and KDSM,
Inc ................................................................... 59
Management's Discussion and Analysis of Financial
Condition and Results of Operations of KDSM-TV and
KDSM, Inc. ............................................................ 63
KDSM, Inc ............................................................. 65
Sinclair Capital ...................................................... 66
Business of Sinclair .................................................. 67
The Exchange Offer .................................................... 92
Description of Capital Stock .......................................... 101
Description of the New Parent Preferred ............................... 107
Description of the New KDSM Senior Debentures ......................... 118
Description of the New Preferred Securities ........................... 134
Description of the New Parent Guarantee ............................... 147
Description of the New Parent Debenture Guarantee ..................... 150
Description of the Old Securities ..................................... 153
Certain Definitions ................................................... 156
Relationship Among the New Preferred Securities, the
New KDSM Senior Debenture, the New Parent Preferred
and the New Parent Guarantee .......................................... 166
Description of Indebtedness of Sinclair ............................... 167
Certain Federal Income Tax Consequences ............................... 171
Plan of Distribution .................................................. 175
Legal Matters ......................................................... 175
Experts ............................................................... 175
Index to Financial Statements ......................................... F-1
Glossary of Defined Terms ............................................. G-1
Until ____ __, 1997 (180 days after the date of this Prospectus) all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
================================================================================
<PAGE>
OFFER FOR ALL OUTSTANDING
11 5/8 % HIGH YIELD TRUST OFFERED PREFERRED SECURITIES
(LIQUIDATION AMOUNT $100 PER PREFERRED SECURITY)
IN EXCHANGE FOR
11 5/8 % HIGH YIELD TRUST OFFERED PREFERRED SECURITIES
(LIQUIDATION AMOUNT $100 PER PREFERRED SECURITY)
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OF
SINCLAIR CAPITAL
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
SBG
SINCLAIR BROADCAST GROUP
---------------
P R O S P E C T U S
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Amendment and Restatement and By-Laws of the Company state
that the Company shall indemnify, and advance expenses to, its directors and
officers whether serving the Company or at the request of another entity to the
fullest extent permitted by and in accordance with Section 2-418 of the Maryland
General Corporation Law. Section 2-418 contains certain provisions which
establish that a Maryland corporation may indemnify any director or officer made
party to any proceeding by reason of service in that capacity, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by the director or officer in connection with such proceeding unless it
is established that the director's or officer's act or omission was material to
the matter giving rise to the proceeding and the director or officer (i) acted
in bad faith or with active and deliberate dishonesty; (ii) actually received an
improper personal benefit in money, property or services; or (iii) in the case
of a criminal proceeding, had reasonable cause to believe that his act was
unlawful. However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made if the director or officer is
adjudged to be liable to the corporation. The statute also provides for
indemnification of directors and officers by court order.
Section 12 of Article II of the Amended By-Laws of Sinclair Broadcast Group,
Inc. provides as follows:
A director shall perform his duties as a director, including his duties as a
member of any Committee of the Board upon which he may serve, in good faith, in
a manner he reasonably believes to be in the best interests of the Corporation,
and with such care as an ordinarily prudent person in a like position would use
under similar circumstances. In performing his duties, a director shall be
entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, in each case prepared or
presented by:
(a) one or more officers or employees of the Corporation whom the director
reasonably believes to be reliable and competent in the matters
presented;
(b) counsel, certified public accountants, or other persons as to matters
which the director reasonably believes to be within such person's
professional or expert competence; or
(c) a Committee of the Board upon which he does not serve, duly designated
in accordance with a provision of the Articles of Incorporation or the
By-Laws, as to matters within its designated authority, which
Committee the director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted. A person who performs his duties in
compliance with this Section shall have no liability by reason of being or
having been a director of the Corporation.
The Company has also entered into indemnification agreements with certain
officers and directors which provide that the Company shall indemnify and
advance expenses to such officers and directors to the fullest extent permitted
by applicable law in effect on the date of the agreement, and to such greater
extent as applicable law may thereafter from time to time permit. Such
agreements provide for the advancement of expenses (subject to reimbursement if
it is ultimately determined that the officer or director is not entitled to
indemnification) prior to the disposition of any claim or proceeding.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- ------------------------------------------------------------------------------------ --------
<S> <C> <C>
3.1 Amended and Restated Trust Agreement, dated as of March 12, 1997
among KDSM, Inc., First Union National Bank of Maryland, First
Union Bank of Delaware, David D. Smith and David B. Amy
3.2 Amended and Restated Articles of Incorporation of Sinclair
Broadcast Group, Inc., as amended as of March 11, 1997
3.3 Amended By-Laws of Sinclair Broadcast Group, Inc., as amended as
of May 31, 1995 (1)
3.4 Articles of Incorporation of KDSM, Inc. as of April 22, 1996
3.5 By-Laws of KDSM, Inc.
4.1 Indenture, dated as of March 12, 1997 among KDSM, Inc., Sinclair
Broadcast Group, Inc. and First Union National Bank of Maryland
4.2 Registration Rights Agreement, dated as of March 5, 1997 among
Sinclair Broadcast Group, Inc., KDSM, Inc., Sinclair Capital,
Smith Barney Inc. and Chase Securities Inc.
4.3 Pledge and Security Agreement dated as of March 12, 1997 between
KDSM, Inc. and First Union National Bank of Maryland
4.4* Form of 11 5/8 % High Yield Trust Offered Preferred Securities of
Sinclair Capital
4.5 Form of 11 5/8 % Senior Debentures due 2009 of KDSM, Inc.
(included in Exhibit 4.1)
4.6* Form of Parent Guarantee Agreement between Sinclair Broadcast
Group, Inc. and First Union National Bank of Maryland
5.1* Opinion of Wilmer, Cutler & Pickering as to the legality of the
11 5/8 % Senior Debentures due 2009 of KDSM, Inc., the 12 5/8 %
Series C Preferred Stock of Sinclair Broadcast Group, Inc., and
Parent Guarantee and the Parent Debenture Guarantee of Sinclair
Broadcast Group, Inc.
5.2* Opinion of Thomas & Libowitz as to the legality of the 11 5/8 %
Senior Debentures due 2009 of KDSM, Inc., the 12 5/8 % Series C
Preferred Stock of Sinclair Broadcast Group, Inc., and the Parent
Guarantee and the Parent Debenture Guarantee of Sinclair
Broadcast Group, Inc.
5.3* Opinion of Richards, Layton & Finger, as to the legality of the
11 5/8 % High Yield Trust Offered Preferred Securities of
Sinclair Capital
8.1* Opinion of Wilmer, Cutler & Pickering as to certain federal
income tax matters
12.1* Calculation of Ratio of Earnings to Fixed Charges of Sinclair
Broadcast Group, Inc.
23.1* Consent of Arthur Andersen LLP, independent certified public
accountants
23.2* Consent of KPMG Peat Marwick LLP, independent certified public
accountants
23.3* Consent of Price Waterhouse, independent accountants, relating to
financial statements of Kansas City TV 62 Limited Partnership
23.4* Consent of Price Waterhouse, independent accountants, relating to
financial statements of Cincinnati TV 64 Limited Partnership
23.5* Consent of Ernst & Young LLP, independent certified public
accountants
II-2
<PAGE>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- ------------------------------------------------------------------------------------ --------
24 Powers of Attorney (Included in the signature pages to the
Registration Statement)
25.1* Form T-1 Statement of Eligibility of First Union National Bank of
Maryland to act as trustee under the Amended and Restated Trust
Agreement
25.2* Form T-1 Statement of Eligibility of First Union National Bank of
Maryland to act as trustee under the Indenture
25.3* Form T-1 Statement of Eligibility of First Union National Bank of
Maryland to act as trustee under the Parent Guarantee Agreement
27* Financial Data Schedule of KDSM, Inc.
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
99.3* Form of Exchange Agent Agreement
</TABLE>
- ----------
* To be filed by amendment.
(1) Incorporated by reference from the Company's Registration Statement on Form
S-1, No. 33-90682.
ITEM 22. UNDERTAKINGS
Each of the undersigned registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Each of the undersigned registrants also hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
Each of the undersigned registrants hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Each of the undersigned registrants hereby undertakes:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
II-3
<PAGE>
424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Each of the undersigned registrants hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuers undertake that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
Each of the registrants undertakes that every prospectus (i) that is
filed pursuant to the immediately preceding paragraph, or (ii) that
purports to meet the requirements of section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
certify that they have reasonable grounds to believe that they meet all of the
requirements for filing on Form S-4 and have duly caused this registration
statement to be signed on their behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, Maryland on the 30th day of April, 1997.
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David D. Smith
-------------------------------------
David D. Smith
Chief Executive Officer and President
KDSM, INC.
By: /s/ David D. Smith
-------------------------------------
David D. Smith
President and Director
SINCLAIR CAPITAL
By: /s/ David D. Smith
-------------------------------------
David D. Smith
Administrative Trustee
We, the undersigned officers and directors of Sinclair Broadcast Group, Inc.
and KDSM, Inc. and administrative trustees of Sinclair Capital hereby severally
constitute David B. Amy our true and lawful attorney with full power to sign for
us and in our name in the capacities indicated below, any and all amendments to
this registration statement on Form S-4 filed by Sinclair Broadcast Group, Inc.,
KDSM, Inc. and Sinclair Capital with the Securities and Exchange Commission, and
generally to do all such things in our name and behalf in such capacities to
enable Sinclair Broadcast Group, Inc., KDSM, Inc. and Sinclair Capital to comply
with the provision of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, and we hereby ratify and
confirm our signatures as they may be signed by our said attorney to any and all
such amendments.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- -------------------------------------------- ------------------
/s/ DAVID D. SMITH Chairman Of The Board, April 30, 1997
- -------------------------- Chief Executive Officer, President And
David D. Smith Director (Principal Executive Officer),
Sinclair Broadcast Group, Inc.
President and Director
(Principal Executive Officer),
KDSM, Inc.
Administrative Trustee
(Principal Executive Officer),
Sinclair Capital
II-5
<PAGE>
SIGNATURE TITLE DATE
- --------------------------- -------------------------------------------- ------------------
<S> <C> <C>
/s/ DAVID B. AMY Chief Financial Officer April 30, 1997
- --------------------------- (Principal Financial and Accounting
David B. Amy Officer), Sinclair Broadcast Group, Inc.
Vice President and Director
(Principal Financial and Accounting
Officer), KDSM, Inc.
Administrative Trustee
(Principal Financial and Accounting
Officer), Sinclair Capital
/s/ FREDERICK G. SMITH Director, Sinclair Broadcast Group, Inc. April 30, 1997
- ---------------------------
Frederick G. Smith.
/s/ J. DUNCAN SMITH Director, Sinclair Broadcast Group, Inc. April 30, 1997
- ---------------------------
J. Duncan Smith
/s/ ROBERT E. SMITH Director, Sinclair Broadcast Group, Inc. April 30, 1997
- ---------------------------
Robert E. Smith
/s/ BASIL A. THOMAS Director, Sinclair Broadcast Group, Inc. April 30, 1997
- ---------------------------
Basil A. Thomas
/s/ WILLIAM E. BROCK Director, Sinclair Broadcast Group, Inc. April 30, 1997
- ---------------------------
William E. Brock
/s/ LAWRENCE E. MCCANNA Director, Sinclair Broadcast Group, Inc. April 30, 1997
- ---------------------------
Lawrence E. McCanna
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- ------------------------------------------------------------------------------------ --------
<S> <C> <C>
3.1 Amended and Restated Trust Agreement, dated as of March 12, 1997
among KDSM, Inc., First Union National Bank of Maryland, First
Union Bank of Delaware, David D. Smith and David B. Amy
3.2 Amended and Restated Articles of Incorporation of Sinclair
Broadcast Group, Inc., as amended as of March 11, 1997
3.3 Amended By-Laws of Sinclair Broadcast Group, Inc., as amended as
of May 31, 1995 (1)
3.4 Articles of Incorporation of KDSM, Inc. as of April 22, 1996
3.5 By-Laws of KDSM, Inc.
4.1 Indenture, dated as of March 12, 1997 among KDSM, Inc., Sinclair
Broadcast Group, Inc. and First Union National Bank of Maryland
4.2 Registration Rights Agreement, dated as of March 5, 1997 among
Sinclair Broadcast Group, Inc., KDSM, Inc., Sinclair Capital,
Smith Barney Inc. and Chase Securities Inc.
4.3 Pledge and Security Agreement dated as of March 12, 1997 between
KDSM, Inc. and First Union National Bank of Maryland
4.4* Form of 11 5/8 % High Yield Trust Offered Preferred Securities of
Sinclair Capital
4.5 Form of 11 5/8 % Senior Debentures due 2009 of KDSM, Inc.
(included in Exhibit 4.1)
4.6* Form of Parent Guarantee Agreement between Sinclair Broadcast
Group, Inc. and First Union National Bank of Maryland
5.1* Opinion of Wilmer, Cutler & Pickering as to the legality of the
11 5/8 % Senior Debentures due 2009 of KDSM, Inc., the 12 5/8 %
Series C Preferred Stock of Sinclair Broadcast Group, Inc., and
Parent Guarantee and the Parent Debenture Guarantee of Sinclair
Broadcast Group, Inc.
5.2* Opinion of Thomas & Libowitz as to the legality of the 11 5/8 %
Senior Debentures due 2009 of KDSM, Inc., the 12 5/8 % Series C
Preferred Stock of Sinclair Broadcast Group, Inc., and the Parent
Guarantee and the Parent Debenture Guarantee of Sinclair
Broadcast Group, Inc.
5.3* Opinion of Richards, Layton & Finger, as to the legality of the
11 5/8 % High Yield Trust Offered Preferred Securities of
Sinclair Capital
8.1* Opinion of Wilmer, Cutler & Pickering as to certain federal
income tax matters
12.1* Calculation of Ratio of Earnings to Fixed Charges of Sinclair
Broadcast Group, Inc.
23.1* Consent of Arthur Andersen LLP, independent certified public
accountants
23.2* Consent of KPMG Peat Marwick LLP, independent certified public
accountants
23.3* Consent of Price Waterhouse, independent accountants, relating to
financial statements of Kansas City TV 62 Limited Partnership
23.4* Consent of Price Waterhouse, independent accountants, relating to
financial statements of Cincinnati TV 64 Limited Partnership
23.5* Consent of Ernst & Young LLP, independent certified public
accountants
24 Powers of Attorney (Included in the signature pages to the
Registration Statement)
<PAGE>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- ------------------------------------------------------------------------------------ --------
25.1* Form T-1 Statement of Eligibility of First Union National Bank of
Maryland to act as trustee under the Amended and Restated Trust
Agreement
25.2* Form T-1 Statement of Eligibility of First Union National Bank of
Maryland to act as trustee under the Indenture
25.3* Form T-1 Statement of Eligibility of First Union National Bank of
Maryland to act as trustee under the Parent Guarantee Agreement
27* Financial Data Schedule of KDSM, Inc.
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
99.3* Form of Exchange Agent Agreement
</TABLE>
- ----------
* To be filed by amendment.
(1) Incorporated by reference from the Company's Registration Statement on Form
S-1, No. 33-90682.
Exhibit 3.1
AMENDED AND RESTATED
TRUST AGREEMENT
among
KDSM, INC., as Depositor,
and
First Union National Bank of Maryland, as Property Trustee,
First Union Bank of Delaware, as Delaware Trustee,
and
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
Dated as of March 12, 1997
SINCLAIR CAPITAL
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I Defined Terms.................................................2
Section 1.01. Definitions...................................................2
ARTICLE II Establishment of the Trust...................................16
Section 2.01. Name.........................................................16
Section 2.02. Principal Place of Business of the
Trust and the Delaware Trustee...............................16
Section 2.03. Initial Contribution of Trust Property;
Organizational Expenses......................................16
Section 2.04. Issuance of the Preferred Securities.........................16
Section 2.05. Issuance of the Common Securities;
Subscription and Purchase of the
KDSM Senior Debentures.......................................16
Section 2.06. Declaration of Trust.........................................17
Section 2.07. Authorization to Enter into Certain
Transactions.................................................17
Section 2.08. Assets of Trust..............................................23
Section 2.09. Title to Trust Property......................................23
ARTICLE III Payment Account..............................................23
Section 3.01. Payment Account..............................................23
ARTICLE IV Distributions; Redemption....................................24
Section 4.01. Distributions; Rights of Holders of
Preferred Securities.........................................24
Section 4.02. Redemption...................................................25
Section 4.03. Subordination of Common Securities...........................27
Section 4.04. Payment Procedures...........................................28
Section 4.05. Tax Returns and Reports......................................28
Section 4.06 Payment of Taxes, Duties, Etc. of the Trust..................29
Section 4.07. Payments under Indenture.....................................29
Section 4.08. Change of Control............................................29
ARTICLE V Trust Securities Certificates................................33
Section 5.01. Initial Ownership............................................33
Section 5.02. The Trust Securities Certificates............................33
Section 5.03. Delivery of Trust Securities Certificates....................34
Section 5.04. Global Securities............................................34
Section 5.05. Registration, Registration of Transfer and Exchange..........35
Section 5.06. Mutilated, Destroyed, Lost or Stolen Trust
Securities Certificates......................................39
Section 5.07. Persons Deemed Securityholders...............................40
- i -
<PAGE>
Page
----
Section 5.08. Access to List of Securityholders' Names
and Addresses................................................40
Section 5.09. Maintenance of Office or Agency..............................41
Section 5.10. Appointment of Paying Agent..................................41
Section 5.11. Ownership of Common Securities by Depositor..................42
Section 5.12. Notices to Clearing Agency...................................42
Section 5.13. Rights of Securityholders....................................42
ARTICLE VI Acts of Securityholders; Meetings; Voting....................42
Section 6.01. Limitations on Voting Rights.................................42
Section 6.02. Notice of Meetings...........................................44
Section 6.03. Meetings of Preferred Securityholders........................45
Section 6.04. Voting Rights................................................45
Section 6.05. Proxies, Etc.................................................45
Section 6.06. Securityholder Action by Written Consent.....................46
Section 6.07. Record Date for Voting and Other Purposes....................46
Section 6.08. Acts of Securityholders......................................46
Section 6.09. Inspection of Records........................................47
ARTICLE VII Representations and Warranties of the
Property Trustee, the Administrative
Trustees and the Delaware Trustee............................48
ARTICLE VIII The Trustees.................................................50
Section 8.01. Certain Duties and Responsibilities..........................50
Section 8.02. Notice of Defaults...........................................51
Section 8.03. Certain Rights of Property Trustee...........................51
Section 8.04. Not Responsible for Recitals or Issuance of
Securities...................................................52
Section 8.05. May Hold Securities..........................................52
Section 8.06. Compensation; Fees; Indemnity................................52
Section 8.07. Corporate Property Trustee Required;
Eligibility of Trustees......................................53
Section 8.08. Conflicting Interests........................................54
Section 8.09. Co-Trustees and Separate Trustee.............................54
Section 8.10. Resignation and Removal; Appointment of
Successor....................................................56
Section 8.11. Acceptance of Appointment by Successor.......................57
Section 8.12. Merger, Conversion, Consolidation or
Succession to Business.......................................58
Section 8.13. Preferential Collection of Claims Against
Depositor or Trust...........................................58
Section 8.14. Reports by Property Trustee..................................58
Section 8.15. Reports to the Property Trustee..............................59
Section 8.16. Evidence of Compliance with Conditions
Precedent....................................................59
- ii -
<PAGE>
Page
----
Section 8.17. Number of Trustees...........................................59
Section 8.18. Delegation of Power..........................................60
Section 8.19. Outside Business.............................................60
ARTICLE IX Dissolution and Liquidation..................................60
Section 9.01. Dissolution Upon Expiration Date.............................60
Section 9.02. Early Dissolution............................................61
Section 9.03. Dissolution..................................................61
Section 9.04. Liquidation..................................................61
ARTICLE X Miscellaneous Provisions.....................................64
Section 10.01. Limitation of Rights of Securityholders......................64
Section 10.02. Amendment....................................................64
Section 10.03. Agreement to be Bound........................................65
Section 10.04. Separability.................................................66
Section 10.05. Governing Law................................................66
Section 10.06. Successors...................................................66
Section 10.07. Headings.....................................................66
Section 10.08. Notice and Demand............................................66
Section 10.09. Agreement Not to Petition....................................67
Section 10.10. Trust Indenture Act; Conflict with Trust
Indenture Act................................................67
Section 10.11. Reports......................................................67
Section 10.12. Counterparts.................................................68
Section 10.13. Third Party Beneficiaries....................................69
- iii -
<PAGE>
Exhibit A Certificate of Trust
Exhibit B Form of DTC Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
Exhibit F Form of Restricted Securities Transfer Certificate
- iv -
<PAGE>
Sinclair Capital
Reconciliation and tie between Trust Agreement
and the Trust Indenture Act of 1939, as Amended
relating to:
Trust Indenture Trust Agreement
Act Section Section
---------------- -----------------
Section 310(a)(1) ................ 8.07
(a)(2) ................ 8.07
(a)(3) ................ 8.09
(a)(4) ................ Not Applicable
(b) ................ 8.08, 8.10
Section 311(a) ................ 8.13
(b) ................ 8.13
Section 312(a) ................ 5.08
(b) ................ 5.08
(c) ................ 5.08
Section 313(a) ................ 8.14(a)
(b) ................ 8.14(b)
(c) ................ 8.14(a), 8.14(b)
(d) ................ 8.14(c)
Section 314(a) ................ 8.15
(b) ................ Not Applicable
(c)(1) ................ 8.16
(c)(2) ................ 8.16
(c)(3) ................ 8.16
(d) ................ Not Applicable
(e) ................ 1.01
Section 315(a) ................ 8.01
(b) ................ 8.02, 8.14(b)
(c) ................ 8.01(a)
(d) ................ 8.01, 8.03
Section 316(a)
(a)(1)(A) ................ Not Applicable
(a)(1)(B) ................ Not Applicable
(a)(2) ................ Not Applicable
(b) ................ Not Applicable
(c) ................ Not Applicable
Section 317(a)(1) ................ Not Applicable
(a)(2) ................ Not Applicable
(b) ................ 5.10
Section 318(a) ................ 10.10
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Trust Agreement.
- v -
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of March 12,
1997, among (i) KDSM, Inc., a Maryland corporation, as depositor (the
"Depositor" or "KDSM, Inc."), (ii) First Union National Bank of Maryland, a
national banking association, as trustee (the "Property Trustee" and, in its
separate corporate capacity, and not in its capacity as Property Trustee, the
Bank"), (iii) First Union Bank of Delaware, a Delaware banking corporation as
Delaware trustee (the "Delaware Trustee"), and (iv) David D. Smith, an
individual, and David B. Amy, an individual, each of whose address is 2000 W.
41st Street, Baltimore, Maryland 21211 (each an "Administrative Trustee" and
referred to collectively as the "Administrative Trustees") (the Property
Trustee, the Delaware Trustee and the Administrative Trustees referred to
collectively as the "Trustees") and (v) the several Holders, as hereinafter
defined.
WITNESSETH:
WHEREAS, the Depositor, the Property Trustee and the Delaware
Trustee have heretofore duly declared and established a business trust pursuant
to the Delaware Business Trust Act by the entering into of that certain Trust
Agreement, dated as of February 24, 1997 (the "Original Trust Agreement"), and
by the execution and filing by the Property Trustee, the Delaware Trustee and
David B. Amy with the Secretary of State of the State of Delaware of the
Certificate of Trust, filed on February 24, 1997, attached as Exhibit A; and
WHEREAS, the Depositor, the Property Trustee and the Delaware
Trustee desire to amend and restate the Original Trust Agreement as set forth
herein to provide for, among other things, (i) the acquisition by the Trust from
the Depositor of all of the right, title and interest in the KDSM Senior
Debentures (as defined herein), (ii) the issuance and sale of the Common
Securities (as defined herein) by the Trust to the Depositor, (iii) the issuance
and sale of the Preferred Securities (as defined herein) by the Trust pursuant
to the Purchase Agreement (as defined herein) and (iv) the appointment of the
Administrative Trustees;
NOW THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, each party, for the
benefit of the other party and for the benefit of the Securityholders (as
defined herein), hereby amends and restates the Original Trust Agreement in its
entirety and agrees as follows:
<PAGE>
ARTICLE I
Defined Terms
Section 1.01. Definitions. For all purposes of this Trust
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act (as defined herein), either directly or by reference
therein, have the meanings assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Trust Agreement as a whole and
not to any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.08.
"Accredited Investors" means institutional "accredited
investors" as defined in Rule 501(a) (1), (2), (3) or (7) under the Securities
Act who are not QIBs.
"Additional Amount" means, with respect to Trust Securities of
a given Liquidation Value (as defined herein) and/or a given period, the amount
of Additional Interest Attributable to Deferral paid by the Depositor on a Like
Amount of the KDSM Senior Debentures for such period (which shall accrue
additional Distributions at a rate of 11 5/8% per annum compounded quarterly)
and Additional Interest Attributable to Taxes (as defined in the Indenture), if
applicable.
"Additional Amounts Attributable to Deferral" has the meaning
ascribed to such term in the Indenture.
"Administrative Trustee" means each of the individuals
identified as an "Administrative Trustee" in the preamble to this Trust
Agreement solely in his or her capacity as Administrative Trustee of the Trust
heretofore formed and continued hereunder and not in his or her individual
capacity, or such Administrative
- 2 -
<PAGE>
Trustee's successor in interest in such capacity, or any successor
Administrative Trustee appointed as herein provided.
"Affiliate" means, with respect to any specified Person, (i)
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person, (ii) any other
Person that owns, directly or indirectly, 5% or more of such Person's Equity
Interests or any officer or director of any such Person or other Person or, with
respect to any natural Person, any Person having a relationship with such Person
or other Person by blood, marriage or adoption not more remote than first cousin
or (iii) any other Person 10% or more of the voting Equity Interests of which
are beneficially owned or held directly or indirectly by such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent Members" has the meaning specified in Section 5.04(a).
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bank Credit Agreement" means the Second Amended and Restated
Credit Agreement, dated as of May 31, 1996, as amended, between Sinclair, the
Subsidiaries (as defined in the Parent Preferred Articles Supplementary) of
Sinclair identified on the signature pages thereof under the caption "Subsidiary
Guarantors," the lenders named therein, and The Chase Manhattan Bank, N.A., as
agent, as such agreement may be amended, renewed, extended, substituted,
refinanced, restructured, replaced, supplemented or otherwise modified from time
to time (including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing). The term "Bank Credit Agreement" shall
include any amendments, renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplements or any other modifications that
increase the principal amount of the Indebtedness or the commitments to lend
thereunder.
"Bankruptcy Event" means, with respect to any Person:
(i) a decree or order is entered by a court having competent
jurisdiction in the premises (a) for relief in respect of such Person in an
involuntary case or proceeding under the applicable Bankruptcy Laws or (b)
adjudging such Person a
- 3 -
<PAGE>
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of such Person under any applicable federal or
state law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of such Person or of any substantial
part of any of its properties, or ordering the winding up or liquidation of any
of its affairs, and any such decree or order for relief shall continue to be in
effect, or any such other decree or order shall be unstayed and in effect, for a
period of 60 consecutive days; or
(ii) (a) such Person institutes a voluntary case or proceeding under
any applicable Bankruptcy Laws or any other case or proceeding to be adjudicated
a bankrupt or insolvent, (b) such Person consents to the entry of a decree or
order for relief in respect of such Person in any involuntary case or proceeding
under any applicable Bankruptcy Laws or to the commencement of bankruptcy or
insolvency proceedings against such Person, (c) such Person files a petition or
answer or consent seeking reorganization or relief under any applicable federal
or state law, (d) such Person (x) consents to the filing of any such petition or
to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of any such Person
or of any substantial part of its property, (y) makes an assignment for the
benefit of creditors or (z) admits in writing its inability to pay its debts
generally as they become due or (e) takes corporate action in furtherance of any
such action.
"Bankruptcy Laws" has the meaning specified in Section 10.09.
"Business Day" means a day other than (x) a Saturday or a
Sunday, (y) a day on which banking institutions in the State of Maryland or The
City of New York are authorized or obligated by law or executive order to remain
closed or (z) a day on which the Property Trustee's Corporate Trust Office or
the Debenture Trustee's principal corporate trust office is closed for business.
"Capital Lease Obligation" means any obligation of the Trust
under any capital lease of real or personal property which, in accordance with
GAAP, has been recorded as a capitalized lease obligation.
"Certificate of Trust" means the Certificate of Trust referred
to in the recitals to this Trust Agreement.
"Change of Control" has the meaning specified in the Parent
Preferred Articles Supplementary as of the date hereof.
- 4 -
<PAGE>
"Change of Control Offer" has the meaning specified in Section
4.08(a).
"Change of Control Purchase Date" has the meaning specified in
Section 4.08(a).
"Change of Control Purchase Notice" has the meaning specified
in Section 4. 08 (b)
"Change of Control Purchase Price" has the meaning specified
in the Parent Preferred Articles Supplementary as of the date hereof.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with the Clearing Agency.
"Closing Date" means the Closing Date as defined in the
Purchase Agreement (as defined herein), which date is also the date of execution
and delivery of this Trust Agreement.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Security" means an undivided beneficial interest in
the assets of the Trust, having a Liquidation Value in ordinary circumstances of
$100 and having the rights provided therefor in this Trust Agreement, including
the right to receive Distributions and a Liquidation Distribution as provided
herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached as Exhibit C.
"Corporate Trust Office" means the principal office of the
Property Trustee located at First Union National Bank of Maryland, 901 East Cary
Street, 2nd Floor, Richmond, Virginia 23219. Attention: Patricia Welling.
"Debenture Event of Default" means an "Event of Default" as
defined in the Indenture.
- 5 -
<PAGE>
"Debenture Redemption Date" means "Redemption Date" as defined
in the Indenture.
"Debenture Trustee" means First Union National Bank of
Maryland, a national banking association.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of
the Delaware Code, 12 Del. C. REWRITE Section 3801, et seq., as it may be
amended from time to time.
"Delaware Trustee" means the Person identified as the
"Delaware Trustee" in the preamble to this Trust Agreement solely in its
capacity as Delaware Trustee of the Trust continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor Delaware Trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble.
"Disqualified Equity Interests" means any Equity Interests
that, either by their terms or by the terms of any security into which they are
convertible or exchangeable or otherwise, are or upon the happening of an event
or passage of time would be required to be redeemed prior to any Stated Maturity
of the principal of the Securities or are redeemable at the option of the holder
thereof at any time prior to any such Stated Maturity, or are convertible into
or exchangeable for debt securities at any time prior to any such Stated
Maturity at the option of the holder thereof.
"Distribution Payment Date" has the meaning specified in
Section 4.01(a).
"Distribution Rate" has the meaning specified in Section
4.01(a).
"Distributions" means amounts payable in respect of the
Securities as provided in Section 4.01.
"DTC" means The Depository Trust Company.
"DTC Agreement" means the agreement among the Trust, the
Property Trustee and DTC, as the initial Clearing Agency, dated as of the
Closing Date, relating to the Trust Securities Certificates, substantially in
the form attached as Exhibit B, as the same may be amended and supplemented from
time to time.
"Early Dissolution Event" has the meaning specified in Section
9.02.
- 6 -
<PAGE>
"Equity Interest" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock or other
equity participations, including partnership interests, whether general or
limited, of such Person, including any Preferred Equity Interests.
"Event of Default" means (a) the occurrence of a Debenture
Event of Default, (b) the failure to obtain the consent of the Holders of the
Outstanding Preferred Securities with respect to any action by the Trust which
cannot be taken without such consent under this Trust Agreement, (c) the failure
to make Distributions for any period for which KDSM, Inc. pays interest on the
KDSM Senior Debentures, or (d) failure of the Trust to perform its obligations
under this Agreement.
"Existing Notes" means the 1993 Notes and the 1995 Notes.
"Existing Indentures" means (i) the Indenture, dated as of
December 9, 1993, among Sinclair, the Guarantors (as defined therein) and First
Union National Bank of North Carolina, as amended and (ii) the Indenture, dated
as of August 28, 1995, among Sinclair Broadcast Group, Inc., the Guarantors (as
defined therein) and the United States Trust Company of New York as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Expense Agreement" means the Agreement as to Expenses and
Liabilities between KDSM, Inc. and the Trust, substantially in the form attached
as Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 9. 01.
"Extension Period" has the meaning specified in Section 4. 01.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11
of the United States Code, as amended from time to time.
"GAAP" means generally accepted accounting principles in the
United States, consistently applied, as in effect on the date the 1993 Notes
were issued.
"Global Security" means a security in global form evidencing
all or a part of the Preferred Securities to be issued as book-entry securities
issued to DTC in accordance with Section 5. 04.
- 7 -
<PAGE>
"Guarantee Agreement" means the Parent Guarantee Agreement
executed and delivered by Sinclair and the First Union National Bank of
Maryland, a national banking association, contemporaneously with the execution
and delivery of this Trust Agreement, for the benefit of the Holders of the
Preferred Securities, as amended from time to time.
"Guarantee Trustee" means First Union National Bank of
Maryland, as trustee with respect to the Parent Guarantee Agreement.
"Guaranteed Debt" of any Person means, without duplication,
all Indebtedness of any other Person referred to in the definition of
Indebtedness contained in this Section guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (ii)
to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make payment
of such Indebtedness or to assure the holder of such Indebtedness against loss,
(iii) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services without requiring that
such property be received or such services be rendered), (iv) to maintain
working capital or equity capital of the debtor, or otherwise to maintain the
net worth, solvency or other financial condition of the debtor or (v) otherwise
to assure a creditor against loss; provided that the term "guarantee" shall not
include endorsements for collection or deposit, in either case in the ordinary
course of business.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit issued under
letter of credit facilities, acceptance facilities or other similar facilities
and in connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Equity Interests of such Person, or any
warrants, rights or options to acquire such Equity Interests, now or hereafter
outstanding, (ii) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, (iii) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the
- 8 -
<PAGE>
event of default are limited to repossession or sale of such property), but
excluding trade payables arising in the ordinary course of business, (iv) all
obligations under Interest Rate Agreements of such Person, (v) all Capital Lease
Obligations of such Person, (vi) all Indebtedness referred to in clauses (i)
through (v) above of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien, upon or
with respect to property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, (vii) all Guaranteed Debt of such
Person, (viii) all Disqualified Equity Interests valued at the greater of their
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends, and (ix) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any liability of the types referred to in
clauses (i) through (viii) above.
"Indemnified Person" has the meaning specified in Section
8.06.
"Indenture" means the Indenture, dated as of March 12, 1997,
among Sinclair, KDSM, Inc. and the Debenture Trustee, as amended or supplemented
from time to time.
"Interest Rate Agreements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
interest rate protection agreements (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time.
"Initial Purchasers" means Smith Barney Inc. and Chase
Securities Inc.
"Investment Company Act Event" means the receipt by the Trust
or the Depositor of an opinion of nationally recognized independent counsel
experienced in practice under the Investment Company Act of 1940, as amended
(the "1940 Act"), to the effect that as a result of the occurrence of a change
in law or regulation or a change in official interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), the Trust or KDSM, Inc. is or
will be considered an "investment company" which is required to be registered
under the 1940 Act, which Change in 1940 Act Law becomes effective on or after
the date of issuance of the Preferred Securities.
"Investments" means, with respect to any Person,
- 9 -
<PAGE>
directly or indirectly, any advance, loan (including guarantees), or other
extension of credit or capital contribution to (by means of any transfer of cash
or other property to others or any payment for property or services for the
account or use of others), or any purchase, acquisition or ownership by such
Person of any Equity Interests, bonds, notes, debentures or other securities or
assets issued or owned by any other Person and all other items that would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"KDSM Inc." has the meaning specified in the preamble.
"KDSM Senior Debentures" means the $206,200,000 aggregate
principal amount of the Depositor's 11 5/8% Senior Debentures due 2009, issued
pursuant to the Indenture.
"Lien" means any lien (statutory or otherwise), pledge,
charge, mortgage, privilege, hypothecation, security interest or other
encumbrance upon or with respect to any property of any kind (including any
conditional sale or other title retention agreement, any leases in the nature
thereof, and any agreement to give any security interest), real or personal,
movable or immovable, now owned or hereafter acquired.
"Like Amount" means (i) with respect to a redemption of Trust
Securities for cash, Trust Securities having an aggregate Liquidation Value
equal to the principal amount of the KDSM Senior Debentures to be
contemporaneously redeemed in accordance with the Indenture and (ii) with
respect to a distribution of the KDSM Senior Debentures to Holders of Trust
Securities in connection with a Tax Event, the KDSM Senior Debentures having a
principal amount equal to the aggregate Liquidation Value of the Trust
Securities of the Holder to whom such KDSM Senior Debentures are distributed and
(iii) with respect to Additional Amounts, Trust Securities having an aggregate
Liquidation Value equal to the principal amount of KDSM Senior Debentures.
"Liquidation Value" means the stated liquidation amount of
$100 per Trust Security.
"Liquidation Date" means the date on which the KDSM Senior
Debentures are to be distributed to Holders of Trust Securities in connection
with a dissolution and liquidation of the Trust pursuant to Section 9.04(a).
"Liquidation Distribution" has the meaning specified in
Section 9.04(a).
"1995 Notes" mean Sinclair's 10% Senior Subordinated Notes due
2005.
- 10 -
<PAGE>
"1993 Notes" mean Sinclair's 10% Senior Subordinated Notes due
2003.
"Offering Memorandum" has the meaning specified in Section
2.07(a)
"Officers' Certificate" means a certificate signed by (i) the
Chairman, a Vice Chairman, the President, a Vice President or the Treasurer of
the Depositor and (ii) the Secretary or an Assistant Secretary of the Depositor,
and delivered to the appropriate Trustee; provided, however, that such
certificate may be signed by two of the officers or directors listed in clause
(i) above in lieu of being signed by one of such officers or directors listed in
such clause (i) and one of the officers listed in clause (ii) above. One of the
officers signing an Officers' Certificate given pursuant to Section 8.15 shall
be the principal executive, financial or accounting officer of the Depositor.
Any Officers' Certificate delivered with respect to compliance with a condition
or covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering
the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Trust, the Property Trustee or the Depositor, and who
shall be reasonably acceptable to the Property Trustee.
"Original Trust Agreement" has the meaning specified in the
recitals to this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities,
means, as of the date of determination, all Preferred Securities theretofore
authenticated and delivered under this Trust Agreement, except:
- 11 -
<PAGE>
(i) Preferred Securities theretofore canceled by the
Administrative Trustees or delivered to the Administrative Trustees for
cancellation;
(ii) Preferred Securities for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Property Trustee or any Paying Agent for the Holders of such Preferred
Securities; provided that, if such Preferred Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Trust Agreement;
(iii) Preferred Securities which have been issued in exchange
for or in lieu of which other Preferred Securities have been
authenticated and delivered pursuant to this Trust Agreement; and
(iv) Preferred Securities exchanged for the KDSM Senior
Debentures pursuant to Section 9.04;
provided, however, that in determining whether the Holders of the requisite
aggregate Liquidation Value of the Outstanding Preferred Securities have given
any request, demand, authorization, direction, notice, consent. or waiver
hereunder, Preferred Securities owned by the Depositor, any of the Trustees or
any Affiliate of the Depositor or any of the Trustees shall be disregarded and
deemed not to be Outstanding, except that (a) in determining whether any Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Preferred Securities which such
Trustee knows to be so owned shall be so disregarded and (b) the foregoing shall
not apply at any time when all of the Outstanding Preferred Securities are owned
by the Depositor, one or more of the Trustees and/or any such Affiliate.
Preferred Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Administrative Trustees the pledgee's right so to act with respect to such
Preferred Securities and that the pledgee is not the Depositor or any Affiliate
of the Depositor.
"Owner" means each Person who is the beneficial owner of a
book-entry interest as reflected in the records of the Clearing Agency or, if a
Clearing Agency Participant is not the owner, then as reflected in the records
of a Person maintaining an account with such Clearing Agency (directly or
indirectly, in accordance with the rules of such Clearing Agency)
"Parent Debenture Guarantee" means the guarantee by Sinclair
of the KDSM Senior Debentures included in the Indenture which may become
effective in certain circumstances.
- 12 -
<PAGE>
"Parent Preferred" means the Series C Preferred Stock, par
value $.01 per share of Sinclair, having a liquidation amount of $100 per share.
"Parent Preferred Articles Supplementary" means the operative
document pursuant to which the Parent Preferred were issued.
"Paying Agent" means any paying agent or co-paying agent
appointed pursuant to Section 5.10 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing
corporate trust account maintained by the Property Trustee with the Bank in its
trust department for the benefit of the Securityholders in which all amounts
paid in respect of the KDSM Senior Debentures will be held and from which the
Property Trustee shall make payments to the Securityholders in accordance with
Section 4.01.
"Person" means any individual, corporation, partnership, joint
venture, trust, company, including without limitation, a limited liability
company, association, joint stock company, business trust or corporation,
unincorporated organization or government or any agency or political subdivision
thereof.
"Physical Securities" has the meaning specified in Section
5.04(b).
"Pledge Agreement" means the Pledge and Security Agreement,
dated March 12, 1997, between the Depositor and First Union National Bank of
Maryland, as Collateral Agent.
"Preferred Equity Interest," as applied to the Equity Interest
of any Person, means an Equity Interest of any class or classes (however
designated) which is preferred as to the payment of dividends or distributions,
or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over Equity Interests of any other
class of such Person.
"Preferred Rate" has the meaning specified in Section 4.01(a)
"Preferred Security" or "Security" means an undivided
beneficial interest in the assets of the Trust, having a Liquidation Value under
ordinary circumstances of $100 and having the rights provided therefor in this
Trust Agreement, including the right to receive Distributions and a Liquidation
Distribution as provided herein.
- 13 -
<PAGE>
"Preferred Securities Certificate" means a certificate
evidencing ownership of Preferred Securities, substantially in the form attached
as Exhibit E.
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Trust Agreement
solely in its capacity as Property Trustee of the Trust heretofore formed and
continued hereunder and not in its individual capacity, or its successor in
interest in such capacity, or any successor Property Trustee appointed as herein
provided.
"Purchase Agreement" means the Purchase Agreement, dated as of
March 5, 1997, among the Trust, the Depositor, Sinclair and the Initial
Purchasers.
"QIBs" means "qualified institutional buyers" as defined
pursuant to Rule 144A under the Securities Act of 1933, as amended.
"Qualified Institutional Buyer" means a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act.
"Redemption Date" means, with respect to any Trust Security to
be redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the KDSM Senior Debentures shall be a Redemption Date for a Like Amount of
Trust Securities without any further action of the Trust.
"Redemption Price" means, with respect to any Redemption Date
of any Trust Security, (i) the Liquidation Value of such Trust Security,
multiplied by the sum of (a) 100% plus (b) the percentage premium, if any, paid
by the Depositor upon the concurrent redemption of a bike Amount of the KDSM
Senior Debentures, plus (ii) accumulated and unpaid Distributions to such date,
whether or not earned or declared.
"Registration Default" has the meaning specified in Section
2(d) of the Registration Rights Agreement.
"Registration Default Distributions" has the meaning specified
in Section 2(d) of the Registration Rights Agreement.
"Registration Rights Agreement" means the registration rights
agreements dated as of March 5, 1997, among the Trust, the Depositor, Sinclair
and Smith Barney Inc. and Chase Securities Inc. as initial purchasers.
"Relevant Trustee" has the meaning specified in Section 8.10.
- 14 -
<PAGE>
"Required Filing Dates" has the meaning specified in Section
10.11.
"Restricted Preferred Security" has the meaning specified in
Section 5.05.
"Restricted Preferred Securities Certificate" means a
certificate substantially in the form set forth in Exhibit E bearing the
Restrictive Preferred Securities Legend set forth therein.
"Restricted Preferred Securities Legend" means the restricted
securities legend set forth in the certificate in Exhibit E.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 5.05.
"Securityholder" or "Holder" means a Person in whose name a
Trust Security or Securities is registered in the Securities Register; any such
Person shall be deemed to be a beneficial owner within the meaning of the
Delaware Business Trust Act.
"Sinclair" means Sinclair Broadcast Group, Inc., a Maryland
corporation.
"Stated Maturity" when used with respect to any Indebtedness
or any installment of interest thereon, means the date specified in such
Indebtedness as the fixed date on which the principal of such Indebtedness or
such installment of interest is due and payable.
"Tax Event" means the receipt by the Trust or the Depositor,
as the case may be, of an Opinion of Counsel experienced in such matters to the
effect that, as a result of (i) any amendment to, clarification of, or change
(including any announced prospective change) in, the laws or treaties (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or (ii) any judicial
decision, official administrative pronouncement, ruling, regulatory procedure,
notice or announcement (including any notice or announcement of intent to adopt
such procedures or regulations) ("Administrative Action"), or (iii) any
amendment to, clarification of, or change in the official position or the
interpretation of such Administrative Action or judicial decision or any
interpretation or pronouncement that provides for a position with respect to
such Administrative Action or judicial decision that differs from the
- 15 -
<PAGE>
theretofore generally accepted position, in each case, by any legislative body,
court, governmental authority or regulatory body, irrespective of the manner in
which such amendment, clarification or change is made known, which amendment,
clarification, or change is effective or such pronouncement or decision is
announced on or after the Closing Date, there is more than an insubstantial risk
that (i) the Trust is, or will be, subject to United States federal income tax
with respect to interest received on the KDSM Senior Debentures, (ii) interest
payable by the Depositor on the KDSM Senior Debentures is not, or will not be,
fully deductible for United States federal income tax purposes, or (iii) the
Trust is, or will be, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Trust" means the Delaware business trust created and
continued hereby and identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust
Agreement, as the same may be modified, amended or supplemented in accordance
with the applicable provisions hereof, including all exhibits hereto, including,
for all purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trustees" has the meaning specified in the preamble to this
Trust Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (i) the KDSM Senior Debentures, (ii)
any cash on deposit in, or owing to, the Payment Account and (iii) all proceeds
and rights in respect of the foregoing and any other property and assets for the
time being held or deemed to be held by the Property Trustee pursuant to the
terms of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common
Securities Certificates or the Preferred Securities Certificates.
- 16 -
<PAGE>
"Voting Rights Triggering Event" has the meaning specified in
the Parent Preferred Articles Supplementary.
- 17 -
<PAGE>
ARTICLE II
Establishment of the Trust
Section 2.01. Name. The Trust created and continued hereby
shall be known as "Sinclair Capital," as such name may be modified from time to
time by the Administrative Trustees following written notice to the Holders of
Trust Securities and the other Trustees, in which name the Trustees may conduct
the business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
Section 2.02. Principal Place of Business of the Trust and the
Delaware Trustee. The principal place of business of the Trust is c/o Sinclair
Broadcast Group, Inc., 2000 West 41st Street, Baltimore, Maryland 21211. The
address of the Delaware Trustee is One Rodney Square, First Floor, 920 King
Street, Wilmington, Delaware 19801.
Section 2.03. Initial Contribution of Trust Property:
Organizational Expenses. The Property Trustee acknowledges receipt from the
Depositor in connection with the Original Trust Agreement of the sum of $10,
which constituted the initial Trust Property. The Depositor hereby agrees to pay
organizational expenses of the Trust as they arise or shall, upon request of any
Trustee, promptly reimburse such Trustee for any such expenses paid by such
Trustee. The Depositor shall make no claim upon the Trust Property for the
payment of such expenses.
Section 2.04. Issuance of the Preferred Securities. On March
5, 1997, the Depositor, on behalf of the Trust and pursuant to the Original
Trust Agreement, executed and delivered the Purchase Agreement.
Contemporaneously with the execution and delivery of this Trust Agreement, the
Administrative Trustees, on behalf of the Trust, shall execute and deliver
Preferred Securities Certificates, registered in the name of the nominee of the
initial Clearing Agency, in an aggregate amount of 2,000,000 Preferred
Securities having an aggregate Liquidation Value of $200,000,000 against receipt
of the aggregate purchase price of such Preferred Securities of $200,000,000,
which amount the Administrative Trustees shall promptly deliver to the Property
Trustee.
Section 2.05. Issuance of the Common Securities: Subscription
and Purchase of the KDSM Senior Debentures. Contemporaneously with the execution
and delivery of this Trust Agreement, (x) the Administrative Trustees, on behalf
of the Trust, shall execute and deliver to the Depositor Common Securities
Certificates, registered in the name of the Depositor, in an aggregate amount of
62,000 Common Securities for the purchase price of $6,200,000 and (y) the
Administrative Trustees,
- 18 -
<PAGE>
on behalf of the Trust, shall subscribe to and purchase from the Depositor, the
KDSM Senior Debentures, registered in the name of the Trust and having an
aggregate principal amount equal to $206,200,000, and, in satisfaction of the
purchase price for such KDSM Senior Debentures, the Property Trustee, on behalf
of the Trust, shall deliver to the Depositor the sum of $206,200,000.
Section 2.06. Declaration of Trust. The exclusive purposes of
the Trust are (a) to issue and sell Trust Securities, (b) to purchase the KDSM
Senior Debentures with the proceeds from the sale of the Preferred Securities
and Common Securities, (c) if applicable, exchange the Trust Securities pursuant
to the Registration Rights Agreement and (d) to engage in those activities
necessary or incidental thereto. The Depositor hereby appoints the Trustees, as
trustees of the Trust, to have all the rights, powers and duties to the extent
set forth herein, and the Trustees hereby accept such appointment. The Property
Trustee hereby declares that it will hold the Trust Property in trust upon, and
subject to, the conditions set forth herein for the benefit of the Trust and the
Securityholders. The Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. Notwithstanding any other provision of this Trust
Agreement, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities or
liabilities, of the Property Trustee or the Administrative Trustees set forth
herein. The Delaware Trustee shall be one of the Trustees of the Trust for the
sole and limited purpose of fulfilling the requirements of Section 3807 of the
Delaware Business Trust Act.
Section 2.07. Authorization to Enter into Certain
Transactions.
(a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the limitations
set forth in paragraph (b) of this Section, and in accordance with the following
provisions (A) and (B), the Administrative Trustees and the Property Trustee
shall have the authority to enter into all transactions and agreements
determined by such Trustees to be appropriate in exercising the authority,
express or implied, otherwise granted to such Trustees under this Trust
Agreement, and to perform all acts in furtherance thereof, including without
limitation, the following:
(A) As among the Trustees, the Administrative Trustees shall
have the power, duty and authority to act on behalf of the Trust with respect to
the following matters:
(i) the issuance and sale of the Trust Securities;
- 19 -
<PAGE>
(ii) to cause the Trust to enter into, and to
execute, deliver and perform on behalf of the Trust, the Expense
Agreement, the DTC Agreement and such other agreements as may be
necessary or desirable in connection with the purposes and function of
the Trust;
(iii) to prepare an offering memorandum (the
"Offering Memorandum") in relation to the offering and sale of
Preferred Securities to QIBs in reliance on Rule 144A under the
Securities Act and to certain institutional Accredited Investors; and
to execute, file with the Commission and cause to become effective, at
such time as determined by the Registration Rights Agreement, a
registration statement or registration statements filed on Form 5-1,
Form 5-3 or Form 5-4, as the case may be, including any amendments
thereto in relation to the Preferred Securities;
(iv) to cause the Trust to enter into, and to
execute, deliver and perform on behalf of the Trust, the Registration
Rights Agreement, assist in the registration of the Preferred
Securities under the Securities Act of 1933, as amended (the
"Securities Act"), including the preparation of a registration
statement related thereto, and under state securities or blue sky laws,
and the qualification of this Trust Agreement to the extent required as
a trust indenture under the Trust Indenture Act and take all other
actions required to be taken by or on behalf of the Trust pursuant to
the Registration Rights Agreement;
(v) to execute and file any documents, or take any
acts as determined in accordance with the Registration Rights Agreement
to be necessary in order to qualify or register all or part of the
Preferred Securities in any state or foreign jurisdiction;
(vi) to assist in the listing of the Preferred
Securities upon such securities exchange or exchanges as shall be
determined by the Depositor or as required under the Registration
Rights Agreement and the registration of the Preferred Securities under
the Exchange Act and the preparation and filing of all periodic and
other reports and other documents pursuant to the foregoing;
(vii) to send notices and other information regarding
the Trust Securities, the KDSM Senior Debentures, the Parent Preferred,
the Trust, KDSM, Inc. or Sinclair to the Securityholders in accordance
with this Trust Agreement;
(viii) to issue press releases announcing an
Extension Period (as defined herein);
- 20 -
<PAGE>
(ix) to appoint a Paying Agent, authenticating agent
and Securities Registrar in accordance with this Trust Agreement;
(x) to register transfers of the Trust Securities in
accordance with this Trust Agreement;
(xi) to the extent provided in this Trust Agreement,
to wind up the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of cancellation
with the Secretary of State of the State of Delaware;
(xii) to execute on behalf of the Trust (either
acting alone or together with any or all of the Administrative
Trustees) any documents that the Administrative Trustees have the power
to execute pursuant to this Trust Agreement;
(xiii) to execute and file an application (which may
be prepared by the Depositor) to the Private Offerings, Resale and
Trading through Automated Linkages ("PORTAL") Market and, at such time
as determined in accordance with the Registration Rights Agreement or
by the Depositor, of the holders of the Preferred Securities to the New
York Stock Exchange or any other national stock exchange or the NASDAQ
National Market for listing or quotation of the Preferred Securities;
(xiv) to execute and deliver letters, documents, or
instruments with DTC relating to the Preferred Securities;
(xv) to execute and file with the Commission, at such
time as required in accordance with the Registration Rights Agreement
or applicable law, a registration statement on Form 8-A, including any
amendments thereto, relating to the registration of the Preferred
Securities under Section 12(b) of the Exchange Act;
(xvi) to execute, enter into or confirm the Purchase
Agreement, Registration Rights Agreement and other related agreements
providing for the sale of the Preferred Securities;
(xvii) the taking of all actions reasonably necessary
to enable the holders of Preferred Securities to vote on any matters
which require the consent of all or some of the Securityholders under
this Trust Agreement and taking all actions reasonably necessary to
effectuate such vote; and
- 21 -
<PAGE>
(xviii) the taking of any action incidental to the
foregoing as the Administrative Trustees and the Property Trustee may
from time to time determine is necessary, advisable or convenient to
give effect to the terms of this Trust Agreement for the benefit of the
Securityholders (without consideration of the effect of any such action
on any particular Securityholder)
(B) As among the Trustees, the Property Trustee shall have the
power, duty and authority to act on behalf of the Trust with respect to the
following matters:
(i) the establishment and maintenance of the Payment
Account;
(ii) to the extent necessary, assisting in the
registration of the Preferred Securities under the Securities Act,
including the preparation of a registration statement related thereto,
and under state securities or blue sky laws, and the qualification of
the Trust Agreement as a trust indenture under this Trust Indenture
Act;
(iii) to the extent necessary, assisting in the
preparation of an offering memorandum (the "Offering Memorandum") in
relation to the offering and sale of Preferred Securities to QIBs in
reliance on Rule 144A under the Securities Act and to certain
institutional Accredited Investors and to execute, file with the
Commission and cause to become effective, at such time as determined by
the Registration Rights Agreement, a registration statement or
registration statements filed on Form 5-1, Form 5-3 or Form 5-4, as the
case may be, including any amendments thereto in relation to the
Preferred Securities;
(iv) the receipt and safekeeping of the KDSM Senior
Debentures;
(v) executing and filing any documents prepared by
the Depositor, or take any acts as determined by the Depositor to be
necessary in order to qualify or register all or part of the Preferred
Securities in any State or foreign jurisdiction in which the Depositor
has determined to qualify or register such Preferred Securities for
sale;
(vi) the collection of interest, principal and any
other payments made in respect of the KDSM Senior Debentures in the
Payment Account;
(vii) the distribution of amounts owed to the
securityholders in respect of the Trust Securities pursuant to this
Trust Agreement;
- 22 -
<PAGE>
(viii) the sending of notices of default and other
information regarding the Trust Securities and the KDSM Senior
Debentures to the Securityholders in accordance with this Trust
Agreement;
(ix) the sending of notices of default under the
Pledge Agreement;
(x) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(xi) to the extent provided in this Trust Agreement,
the winding up of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of cancellation
with the Secretary of State of the State of Delaware;
(xii) executing and delivering letters, documents, or
instruments with DTC relating to the Preferred Securities;
(xiii) upon the occurrence of a Change of Control,
cause the KDSM Senior Debentures held by the Trust to be redeemed in
accordance with Section 4.08 if the Trust has the right to cause such
redemption;
(xiv) the taking of any action reasonably necessary
to enable the holders of Trust Securities to vote on any matters which
require the consent of all or some of the Securityholders under the
Trust Agreement and taking all actions reasonably necessary to
effectuate such vote; and
(xv) the taking of any action incidental to the
foregoing (including sending certain information, notices and reports
to the holders of the Preferred Securities) as the Property Trustee may
from time to time determine is necessary or advisable to give effect to
the terms of this Trust Agreement and protect and conserve the Trust
Property for the benefit of the Securityholders (without consideration
of the effect of any such action on any particular Securityholder).
(b) So long as this Trust Agreement remains in effect, the
Trust (or the Trustees acting on behalf of the Trust) shall not undertake any
business, activities or transaction except as expressly provided herein or
contemplated hereby. In particular, the Administrative Trustees and the Property
Trustee shall not (i) acquire any Investments (other than KDSM Senior Debentures
as provided herein) or engage in any activities not authorized by this Trust
Agreement, (ii) sell, assign, transfer, exchange, pledge, set-off or otherwise
dispose of any of the Trust Property
- 23 -
<PAGE>
or interests therein, including to Securityholders, except as expressly provided
herein, (iii) take any action that would cause the Trust to be deemed an
"investment company" required to be registered under the Investment Company Act
of 1940, as amended, or treated as an association taxable as a corporation for
United States federal income tax purposes, (iv) incur any Indebtedness, (v) take
or consent to any action that would result in the placement of a Lien on any of
the Trust Property or (vi) declare Distributions on the Preferred Securities
that are not properly declarable, or redeem Preferred Securities where funds are
not legally available for such redemption of such Preferred Securities.
Notwithstanding anything herein, Distributions on the Preferred Securities are
not properly declarable, and funds are not legally available for redemption of
Securities unless the Trust has cash sufficient to pay such Distributions or
make such redemption, as the case may be. The Administrative Trustees and the
Property Trustee shall defend all claims and demands of all Persons at any time
claiming any Lien on any of the Trust Property adverse to the interest of the
Trust or the Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the right and responsibility to assist the
Trust with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects as
actions of the Trust)
(i) preparing, if necessary, an offering memorandum
(the "Offering Memorandum") in preliminary and final form prepared by
the Depositor, in relation to the offering and sale of Preferred
Securities to QIBs in reliance on Rule 144A under the Securities Act
and to certain institutional Accredited Investors and to execute and
file with the Commission, at such time as determined by the Depositor,
a registration statement or registration statements filed on Form 5-1,
Form 5-3 or Form 5-4, as the case may be, prepared by the Depositor,
including any amendments thereto in relation to the Preferred
Securities;
(ii) executing and filing any documents prepared by
the Depositor, or take any acts as determined by the Depositor to be
necessary in order to qualify or register all or part of the Preferred
Securities in any State or foreign jurisdiction in which the Depositor
has determined to qualify or register such Preferred Securities for
sale;
(iii) executing and filing an application, prepared
by the Depositor, to the Private Offerings, Resale and Trading through
Automated Linkages ("PORTAL") Market
- 24 -
<PAGE>
and, at such time as determined by the Depositor to the New York Stock
Exchange or any other national stock exchange or the NASDAQ National
Market for listing or quotation of the Preferred Securities;
(iv) executing and delivering letters, documents, or
instruments with DTC relating to the Preferred Securities;
(v) executing and filing with the Commission, at such
time as determined by the Depositor, a registration statement on Form
8-A, including any amendments thereto, prepared by the Depositor
relating to the registration of the Preferred Securities under Section
12(b) of the Exchange Act;
(vi) executing and entering into the Purchase
Agreement, Registration Rights Agreement and other related agreements
providing for the sale of the Preferred Securities; and
(vii) any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees and the Property Trustee, in their respective role set
forth in this Trust Agreement, are authorized and directed to conduct the
affairs of the Trust and to operate the Trust so that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act of 1940, as amended, or taxed as a corporation for United
States federal income tax purposes and so that the KDSM Senior Debentures will
be treated as indebtedness of the Depositor for United States federal income tax
purposes. In this connection, the Depositor and the Administrative Trustee and
the Property Trustee are authorized to take any action, not inconsistent with
applicable law, the Certificate of Trust or this Trust Agreement, that the
Depositor or any of the Administrative Trustees and the Property Trustee
determines in its discretion to be necessary, desirable or convenient for such
purposes, as long as such action does not adversely affect the interests of the
holders of the Preferred Securities.
Section 2.08. Assets of Trust. The assets of the Trust shall
consist of the Trust Property.
Section 2.09. Title to Trust Property. Legal title to all
Trust Property shall be vested at all times in the Property Trustee (in its
capacity as such) and shall be held and administered by the Property Trustee for
the benefit of the Trust and the Securityholders in accordance with this Trust
Agreement.
- 25 -
<PAGE>
ARTICLE III
Payment Account
Section 3.01. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee
shall establish the Payment Account. The Property Trustee and any agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits in and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment Account for the
exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal or interest on, and any other
payments or proceeds with respect to, the KDSM Senior Debentures. Amounts held
in the Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
ARTICLE IV
Distributions; Redemption
Section 4.01. Distributions: Rights of Holders of Preferred
Securities.
(a) Distributions on the Trust Securities shall be cumulative,
and will accumulate whether or not there are funds of the Trust available for
the payment of Distributions. Distributions payable as a preference on the
Preferred Securities shall be fixed at a rate of 11 5/8% per annum (the
"Distribution Rate") of the Liquidation Value of the Preferred Securities,
subject to any increase provided for below (the "Preference Rate"). Any overdue
Distributions (including Additional Amounts Attributable to Deferral) shall
accrue additional preferred Distributions that will compound quarterly at the
Preference Rate. Distributions shall accrue from March 12, 1997, and, except in
the event that the Depositor exercises its right to extend the interest payment
period for the KDSM Senior Debentures pursuant to Section 301 of the Indenture,
shall be payable quarterly in arrears on March 15, June 15, September 15, and
December 15 of each year, commencing on June 15, 1997 to the holders of record
of Securities as of the March 1, June 1, September 1, and December 1 of each
year preceding such payment
- 26 -
<PAGE>
date. In the event that (i) Sinclair elects to defer a payment period pursuant
to its rights under the Parent Preferred and (ii) KDSM, Inc. concurrently defers
the interest payment period on the KDSM Senior Debentures (and/or elects to
defer interest payments for one quarter even if Sinclair is paying dividends on
the Parent Preferred), then preferred Distributions on the outstanding Preferred
Securities may be properly deferred for a maximum of three consecutive quarters
(an "Extension Period") but preferred Distributions would continue to accrue on
such amounts, including additional preferred Distributions on Additional Amounts
Attributable to Deferral payable on any unpaid amounts at a rate per annum of 11
5/8%, compounded quarterly. The Trust may exercise such deferral options only by
issuing a press release at least ten Business Days prior to the record date for
any Distribution which is being deferred. The Trust shall make partial
Distributions to the extent KDSM, Inc. makes partial interest payments of the
KDSM Senior Debentures. The failure of the Trust to pay in full all
Distributions in arrears (i) for any period for which Distributions were not
properly deferred or at least once every four quarters, or (ii) on March 15,
2009, shall be deemed an Event of Default hereunder. If any date on which
Distributions are otherwise payable on the Trust Securities is not a Business
Day, then the payment of such Distribution shall be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay) (each date on which Distributions are payable in
accordance with this Section 4.01(a) a "Distribution Payment Date").
Notwithstanding the foregoing, in the event of a Registration Default which
shall be promptly notified to the Trustees by the Depositor in an Officers'
Certificate, Registration Default Distributions shall be payable as a preference
on the Preferred Securities in the amount and on the terms provided in the
Registration Rights Agreement and any unpaid Registration Default Distributions
shall accrue additional preferred Distributions at 11 5/8% per annum compounded
quarterly. All references hereinto accrued or accumulated and unpaid
Distributions shall be deemed to include a reference to (a) any accumulated or
additional Distributions on any such accrued and unpaid dividends, (b)
Registration Default Distributions and any additional Distributions thereon and
(c) Additional Amounts and any additional preferred Distributions thereon, if
applicable. The Preferred Securities and Common Securities are solely payable by
the Trust from the Trust Property.
(b) The Trust Securities represent undivided beneficial
interests in the assets of the Trust, subject to Section 4.03 hereof, and all
Distributions will be made by the Trust first to the Holders of the Preferred
Securities and then, second, to the extent the Trust has funds available
pursuant to Section 4.01(c) to Holders of Common Securities subject to
- 27 -
<PAGE>
Section 4.03 hereof. The amount of Distributions payable for any full quarterly
period shall be computed on the basis of twelve 30-day months and a 360-day year
and, for any period shorter than a full monthly period, shall be computed on the
basis of the actual number of days elapsed in such period. The amount of
Distributions payable for any period shall include Additional Amounts and
Registration Default Distributions, if any.
(c) For all purposes hereunder, including with respect to
Liquidation Distributions, the holders of the Preferred Securities shall not be
deemed to be creditors of the Trust.
Section 4.02. Redemption.
(a) On each Debenture Redemption Date with respect to a cash
redemption, the Trust is required to redeem a Like Amount of Trust Securities in
cash at the Redemption Price and the Trustees shall take all actions reasonably
necessary to accomplish such redemption.
(b) Notice of redemption shall be given by the Property
Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date to each Holder of Trust Securities to
be redeemed, at such Holder's address appearing in the Security Register. All
notices of redemption shall identify the Trust Securities to be redeemed
(including CUSIP number) and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the place of payment where such Trust Securities are to
be surrendered for payment of the Redemption Price; and
(iv) that on the Redemption Date the Redemption Price will
become due and payable upon each such Trust Security to be redeemed and
that interest thereon will cease to accrue on and after said date.
(c) The Trust Securities redeemed on each Redemption Date
shall be redeemed at the Redemption Price with the proceeds from the
contemporaneous redemption of the KDSM Senior Debentures. Redemptions of the
Trust Securities shall be made and the Redemption Price shall be deemed payable
on each Redemption Date only to the extent that the Trust has funds legally and
immediately available in the Payment Account for the payment of such Redemption
Price.
(d) If the Property Trustee gives a notice of
- 28 -
<PAGE>
redemption in respect of any Preferred Securities (which notice will be
irrevocable), then, by 12:00 noon, New York time, on the Redemption Date,
subject to Section 4.02(c), the Property Trustee shall, so long as the Preferred
Securities are in book-entry-only form, irrevocably deposit with the Clearing
Agency for the Preferred Securities funds sufficient to pay the applicable
Redemption Price and, at the direction of the Depositor, shall give such
Clearing Agency irrevocable instructions and authority to pay the Redemption
Price to the Holders thereof. If the Preferred Securities are no longer in
book-entry-only-form, the Property Trustee, subject to Section 4.02(c), shall
irrevocably deposit with the Paying Agent funds sufficient to pay the applicable
Redemption Price and shall give the Paying Agent irrevocable instructions to pay
the Redemption Price to the Holders thereof upon surrender of their Preferred
Securities Certificates. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date for any Trust Securities called for redemption
shall be payable to the Holders of such Trust Securities as they appear on the
Securities Register for the Trust Securities on the relevant record dates for
the related Distribution Payment Dates. If notice of redemption shall have been
given and funds or securities, as the case may be, deposited as required, then
upon the redemption date, all rights of Securityholders holding Trust Securities
so called for redemption will cease, except the right of such Securityholders to
receive the Redemption Price, but without the right to additional preferred
Distributions or other payments (including Additional Amounts) on such
Redemption Price, and such Securities will cease to be Outstanding. In the event
that any date on which any Redemption Price is payable is not a Business Day,
then payment of the Redemption Price payable on such date shall be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, payment of such Redemption Price shall be
made on the immediately preceding Business Day, in each case, with the same
force and effect as if made on such date. In the event that payment of the
Redemption Price in respect of any Trust Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by Sinclair
pursuant to the Guarantee Agreement, Distributions on such Trust Securities will
continue to accrue at the Distribution Rate from the Redemption Date originally
established by the Trust for such Trust Securities to the date such Redemption
Price is actually paid, in which case the actual payment date will be the date
fixed for redemption for purposes of calculating the Redemption Price.
(e) If less than all the Outstanding Trust Securities are to
be redeemed on a Redemption Date, then the aggregate Redemption Price to be paid
shall be allocated to the Holders of
- 29 -
<PAGE>
Outstanding Preferred Securities in priority over the Holders of Outstanding
Common Securities, and, after all Preferred Securities have been redeemed in
accordance with this Trust Agreement to the extent sufficient cash or other
assets are available, to the Holder of Common Securities. If less than all of
the Preferred Securities are to be redeemed on a Redemption Date, then the
particular Preferred Securities to be redeemed shall be selected not more than
60 days prior to the Redemption Date by the Property Trustee from the
Outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $100 or any
integral multiple thereof) of the aggregate Liquidation Value of Preferred
Securities of a denomination larger than $100. The Property Trustee shall
promptly notify the Securities Registrar in writing of the Preferred Securities
selected for redemption and, in the case of any Preferred Securities selected
for partial redemption, the Liquidation Value thereof to be redeemed. For all
purposes of this Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part, to
the portion of the aggregate Liquidation Value of Preferred Securities which has
been or is to be redeemed.
Section 4.03. Subordination of Common Securities.
(a) Payment of Distributions (including Additional Amounts and
Registration Default Distributions, if applicable) on, and the Redemption Price
of, the Trust Securities, as applicable, shall be made pro rata based on the
aggregate Liquidation Value of the Trust Securities; provided, however, that no
payment of any Distribution (including Additional Amounts, if applicable) on, or
Redemption Price of, any Common Security, and no other payment on account of the
redemption, liquidation or other acquisition of Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions
(including Additional Amounts and Registration Default Distributions, if
applicable) payable as a preference on all Outstanding Preferred Securities for
all distribution periods terminating on or prior thereto (whether or not such
Distributions have been properly deferred), or in the case of payment of the
Redemption Price, the full amount of such Redemption Price on all Outstanding
Preferred Securities called for redemption in accordance with 4.02(e), shall
have been made or provided for, and all funds legally available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions (including Additional Amounts and Registration Default
Distributions, if applicable) on, or Redemption Price of, Preferred Securities
then due and payable.
- 30 -
<PAGE>
(b) In the case of the occurrence of any Event of Default, the
Holders of Common Securities will be deemed to have waived any right to act with
respect to any such Event of Default until the effect of all such Events of
Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated. Until any such Events of Default under this Trust
Agreement with respect to the Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee and the Administrative Trustees under
the Trust Agreement shall act solely on behalf of the Holders of the Preferred
Securities and not the Holder or Holders of the Common Securities, and only the
Holders of the Preferred Securities will have the right to direct the Property
Trustee and the Administrative Trustees to act on their behalf.
Section 4.04. Payment Procedures. Payments in respect of the
Preferred Securities shall be payable to the Holders as they appear on the
Securities Register for the Trust Securities on the relevant record date at the
office or agency of the Paying Agent in maintained for such purpose and at any
other office or agency maintained by the Paying Agent for such purpose;
provided, however, that at the option of the Property Trustee, Distributions may
be made by check mailed to the address of the Person entitled thereto as such
address shall appear on the Securities Register; provided further, if the
Preferred Securities are held by DTC, payments shall be made to DTC, which shall
credit the relevant accounts at DTC on the applicable Distribution Payment
Dates. Payments in respect of the Common Securities shall be made in such manner
as shall be mutually agreed between the Property Trustee and the holders of the
Common Securities.
Section 4.05. Tax Returns and Reports. The Administrative
Trustees shall prepare (or cause to be prepared), at the Depositor's expense,
and file all United States federal, state and local tax and information returns
and reports required to be filed by or in respect of the Trust. In this regard,
the Administrative Trustees shall (a) prepare and file (or cause to be prepared
or filed) the Internal Revenue Service Form 1041 (or any successor form) or any
other tax forms required to be filed in respect of the Trust in each taxable
year of the Trust and (b) prepare and furnish (or cause to be prepared and
furnished) to each Securityholder all Internal Revenue Service forms required to
be provided by the Trust. The Administrative Trustees shall provide the
Depositor and the Property Trustee with a copy of all such returns, reports and
schedules promptly after such filing or furnishing. The Administrative Trustees
and the Property Trustee, in their respective capacities, shall comply with
United States federal withholding and backup withholding tax laws and
information reporting requirements with respect to any payments to
Securityholders under the Trust Securities.
- 31 -
<PAGE>
Section 4.06. Payment of Taxes, Duties, Etc. of the Trust.
Upon receipt under the KDSM Senior Debentures of Additional Interest
Attributable to Taxes (as defined in the Indenture), the Property Trustee, at
the direction of the Administrative Trustee if so directed, shall promptly pay
any taxes, duties, assessments or governmental charges of whatsoever nature
(other than withholding taxes) imposed on the Trust by the United States or any
other taxing authority.
Section 4.07. Payments under Indenture. Any amount payable
hereunder to any Holder of Preferred Securities (and any Owner with respect
thereto) shall be reduced by the amount of any corresponding payment such Holder
(and Owner) has directly received pursuant to Section 508 of the Indenture.
Notwithstanding the provisions hereunder to the contrary, Securityholders and
Owners acknowledge that any Holder of Preferred Securities (and Owner with
respect thereto) that receives payment under Section 508 of the Indenture may
receive amounts greater than the amount such Holder or Owner may be entitled to
receive pursuant to the other provisions of this Trust Agreement.
Section 4.08. Change of Control. (a) Subject to the next
sentence, if a Change of Control shall occur at any time, then each Holder of
Preferred Securities shall have the right to require that the Trust purchase
such Holder's Preferred Securities in whole or in part, at a purchase price (the
"Change of Control Purchase Price") in cash in an amount equal to 101% of the
Liquidation Value of such Preferred Securities, plus accrued and unpaid
Distributions, if any, to the date of purchase (the "Change of Control Purchase
Date"), pursuant to the offer described in subsection (c) of this Section (the
"Change of Control Offer") and in accordance with the procedures set forth in
Subsections (b), (c), (d) and (e) of this Section. Notwithstanding the
foregoing, the holders of the Preferred Securities will not have the right to
require the Trust to redeem or repurchase, as the case may be, such securities
upon a Change of Control under any circumstances unless all of the Existing
Notes and all indebtedness under the Bank Credit Agreement are repaid, redeemed
or repurchased, all of the commitments and letters of credit issued under the
Bank Credit Agreement are terminated, and all Interest Rate Agreements entered
into between Sinclair and any lenders under the Bank Credit Agreement are
terminated as a result of such Change of Control or the holders of such
instruments have consented to a Change of Control Offer, in which case the date
on which all Existing Notes and all indebtedness under the Bank Credit Agreement
are so repaid, redeemed or repurchased and such commitments, letters of credit
and Interest Rate Agreements are terminated or the holders of such instruments
have consented to a Change of Control Offer shall be deemed to be the date on
which such Change of Control
- 32 -
<PAGE>
shall have occurred.
(b) Within 5 days following any Change of Control, the
Depositor shall notify the Property Trustee thereof and, if the holders of the
Preferred Securities shall have the right to cause the Trust to redeem or
repurchase the Preferred Securities upon a Change of Control, the Administrative
Trustees and the Property Trustee shall, within 30 days following a Change of
Control, cause written notice (a "Change of Control Purchase Notice") of such
Change of Control to be provided to each Holder of Outstanding Preferred
Securities by first-class mail, postage prepaid, at his address appearing in the
Security Register stating or including:
(1) that a Change of Control has occurred, the date
of such event, and that such Holder has the right to require
the Trust to repurchase such Holder's Preferred Securities at
the Change of Control Purchase
Price;
(2) the circumstances and relevant facts regarding
such Change of Control (including but not limited to
information with respect to pro forma historical income, cash
flow and capitalization after giving effect to such Change of
Control);
(3) that the Change of Control Offer is being made
pursuant to this Section 4.08 of the Trust Agreement and that
all Preferred Securities properly tendered pursuant to the
Change of Control Offer will be accepted for payment at the
Change of Control Purchase Price;
(4) the Change of Control Purchase Date which shall
be a Business Day no earlier than 30 days nor later than 60
days from the date such notice is mailed, or such later date
as is necessary to comply with requirements under the Exchange
Act;
(5) the Change of Control Purchase Price;
(6) the name and address of the Paying Agent;
(7) that Preferred Securities must be surrendered on
or prior to the Change of Control Purchase Date to the Paying
Agent at the office of the Paying Agent to collect payment;
(8) that the Change of Control Purchase Price for any
Preferred Security which has been properly tendered and not
withdrawn will be paid promptly following the
- 33 -
<PAGE>
Change of Control Offer Purchase Date;
(9) the procedures for withdrawing a tender of
Preferred Securities and Change of Control Purchase Notice;
(10) that any Preferred Security not tendered will
continue to accrue preferred Distributions; and
(11) that, unless the Trust defaults in the payment
of the Change of Control Purchase Price, any Preferred
Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue preferred Distributions
after the Change of Control Purchase Date.
(c) If the holders of the Preferred Securities shall have the
right to cause the Trust to redeem or repurchase the Preferred Securities upon a
Change of Control, immediately upon receipt by the Trust of the final
information regarding participation in the Change of Control Offer of Preferred
Securities, the Property Trustee, on behalf of the Trust, shall cause KDSM, Inc.
to redeem such portion of the KDSM Senior Debentures held by the Trust in an
amount sufficient to pay each Holder of Preferred Securities, in respect of
which such proper tender was made (unless the tender of such Preferred Security
is properly withdrawn), the Change of Control Purchase Price with respect to
such Preferred Security. Upon surrender of any such Preferred Security for
purchase in accordance with the foregoing provisions, such Preferred Security
shall be paid by the Trust at the Change of Control Purchase Price.
(d) If the holders of the Preferred Securities shall have the
right to cause the Trust to redeem or repurchase the Preferred Securities upon a
change of Control, the Trust shall (i) not later than the Change of Control
Purchase Date, accept for redemption Preferred Securities or portions thereof
tendered pursuant to the Change of Control Offer, (ii) not later than 11:00 a.m.
(New York City time) on the Change of Control Purchase Date, deposit with the
Paying Agent an amount of cash sufficient to pay the aggregate Change of Control
Purchase Price of all the Preferred Securities or portions thereof which are to
be purchased as of the Change of Control Purchase Date and (iii) not later than
the Change of Control Purchase Date, deliver to the Paying Agent an Officers'
Certificate stating the Preferred Securities or portions thereof accepted for
payment by the Trust. The Paying Agent shall promptly mail or deliver to Holders
of Securities so accepted payment in an amount equal to the Change of Control
Purchase Price of the Preferred Securities purchased from each such Holder, and
the Trust shall execute and the Property Trustee shall promptly authenticate and
mail or deliver
- 34 -
<PAGE>
to such Holders a new Preferred Security equal in principal amount to any
unpurchased portion of the Preferred Security surrendered. Any Preferred
Securities not so accepted shall be promptly mailed or delivered by the Paying
Agent at the Company's expense to the Holder thereof.
(e) If the holders of the Preferred Securities shall have the
right to cause the Trust to redeem or repurchase the Preferred Securities upon a
Change of Control, a Change of Control Purchase Notice may be withdrawn before
or after delivery by the Holder to the Paying Agent at the office of the Paying
Agent of the Preferred Security to which such Change of Control Purchase Notice
relates, by means of a written notice of withdrawal delivered by the Holder of
the Preferred Security to the Paying Agent at the office of the Paying Agent to
which the related Change of Control Purchase Notice was delivered not later than
one Business Day prior to the Change of Control Purchase Date specifying, as
applicable:
(1) the name of the Holder;
(2) the certificate number of the Preferred Security
in respect of which such notice of withdrawal is being
submitted;
(3) the Liquidation Value of the Preferred Security
(which shall be $100 or an integral multiple thereof)
delivered for purchase by the Holder as to which such notice
of withdrawal is being submitted; and
(4) the Liquidation Value, if any, of such Preferred
Security (which shall be $100 or an integral multiple thereof)
that remains subject to the original Change of Control
Purchase Notice and that has been or will be delivered for
purchase by the Trust.
(f) If the holders of the Preferred Securities shall have the
right to cause the Trust to redeem or repurchase the Preferred Securities upon a
Change of Control, subject to applicable escheat laws, as provided in the
Preferred Securities, the Property Trustee and the Paying Agent shall return to
the Trust any cash that remains unclaimed, together with interest or dividends,
if any, thereon, held by them for the payment of the Change of Control Purchase
Price; provided, however, that (x) to the extent that the aggregate amount of
cash deposited by the Trust pursuant to clause (ii) of paragraph (d) above
exceeds the aggregate Change of Control Purchase Price of the Preferred
Securities or portions thereof to be purchased, then the Property Trustee shall
hold such excess for the Trust and (y) unless otherwise directed by the Trust in
writing, promptly after the Business Day following the Change of Control
Purchase Date the
- 35 -
<PAGE>
Property Trustee shall return any such excess to the Trust together with
interest, if any, thereon.
(g) If the holders of the Preferred Securities shall have the
right to cause the Trust to redeem or repurchase the Preferred Securities upon a
Change of Control, the Trust shall comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, and any other applicable
securities laws or regulations in connection with a Change of Control Offer.
No failure of the Property Trustee to give the Change of
Control Notice shall limit any Holder's right to exercise its rights.
Exercise of the Change of Control rights by a Holder of
Preferred Securities will be irrevocable. In the event that the Trust does not
have sufficient funds to redeem all outstanding Preferred Securities, the
provisions of Section 4.02(e) shall apply to this Section 4.08.
ARTICLE V
Trust Securities Certificates
Section 5.01. Initial Ownership. Until the issuance of the
Trust Securities, and at any time during which no Trust Securities are
outstanding, the Depositor shall be the sole beneficial owner of the Trust.
Section 5.02. The Trust Securities Certificates. (a) Initial
Holders shall purchase Preferred Securities in minimum denominations of $100
(based on Liquidation Value) and integral multiples of $100 in excess thereof,
and the Common Securities Certificates shall be issued in denominations of $100
Liquidation Value and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual signature of at
least one Administrative Trustee. Trust Securities Certificates bearing the
manual signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Securities Certificates or did
not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
securityholder, and shall be entitled to the rights and subject to the
obligations of a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to Section 5.05.
- 36 -
<PAGE>
(b) Except as described in clause (c) below, upon their
original issuance, Preferred Securities Certificates shall be issued in
book-entry form of one or more book-entry certificates registered in the name of
DTC, as Clearing Agency, or its nominee and deposited with DTC for credit by DTC
to the respective accounts of the Owners thereof (or such other accounts as they
may direct).
(c) Upon the original issuance of Preferred Securities to
institutional Accredited Investors the Preferred Securities Certificates shall
not be issued in the form of a book-entry Preferred Securities Certificate or in
any other form intended to facilitate book-entry trading in beneficial interests
of such Preferred Securities.
(d) A single Common Securities Certificate representing the
Common Securities shall be issued to the Depositor in the form of a definitive
Common Securities Certificate.
Section 5.03. Delivery of Trust Securities Certificates. On
the Closing Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Value as provided in Sections 2.04 and
2.05, to be executed on behalf of the Trust and delivered to or upon the written
order of the Depositor signed by its Chairman, its Vice Chairman, its Chief
Executive Officer, its President or any Vice President, without further
corporate action by the Depositor, in authorized denominations.
Section 5.04. Global Securities. (a) Except as described in
the next paragraph, upon their original issuance, the Preferred Securities shall
be issued as a book-entry global security ("Global Security"), which Global
Security initially shall (i) be registered in the name of the DTC for such
Global Security or the nominee of such DTC, (ii) be deposited with, or on behalf
of, DTC and (iii) bear the applicable legends set forth in Exhibit E.
The Preferred Securities purchased by Accredited Investors
will be issued in registered certificated form ("Certificate of Security") and
will bear the applicable restrictive legends set forth in Exhibit E.
Members of, or participants in, DTC ("Agent Members") shall
have no rights under this Trust Agreement with respect to any Global Security
held on their behalf by DTC, or the Property Trustee as its custodian, or under
the Global Security, and DTC may be treated by the Security Registrar, the
Administrative Trustees and the Property Trustee and any agent of the Security
Registrar or such Administrative Trustees and the Property
- 37 -
<PAGE>
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Security Registrar, the Administrative Trustees and the Property Trustee or any
agent of the Security Registrar from giving effect to any written certification,
proxy or other authorization furnished by DTC or shall impair, as between DTC
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Preferred Security.
(b) Transfers of the Global Security shall be limited to
transfers of such Global Security in whole, but not in part, to DTC, its
successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the rules and procedures
of DTC and the provisions of Section 5.05. Except as provided for below,
beneficial owners may not obtain physical Preferred Securities Certificates.
Physical Preferred Securities Certificates ("Physical Securities") in the form
set forth in Exhibit E and bearing the applicable legend as set forth therein,
shall be issued to all beneficial owners in exchange for their beneficial
interests in a Global Security only if (i) DTC notifies the Property Trustee
that it is unwilling or unable to continue as depositary for a Global Security
and a successor depositary is not appointed by the Property Trustee within 90
days of such notice, (ii) an Event of Default has occurred and is continuing and
the Security Registrar has received a request from DTC and (iii) the
Administrative Trustees decide to discontinue use of the system of book-entry
transfers through DTC. Institutional Accredited Investors can only transfer
Physical Securities as set forth in Section 5.05.
(c) In connection with any transfer of a portion of the
beneficial interest in a Global Security pursuant to subsection (b) of this
Section to beneficial owners who are required to hold Physical Securities, the
Security Registrar shall reflect on its books and records the date and a
decrease in the Liquidation Value of the Global Security in an amount equal to
the Liquidation Value of the beneficial interest in the Global Security to be
transferred, and the Administrative Trustees shall execute, and the Property
Trustee shall authenticate and deliver, one or more Physical Securities of like
tenor and amount.
(d) In connection with the transfer of the entire Global
Security to beneficial owners pursuant to subsection (b) of this Section, a
Global Security shall be deemed to be surrendered to the Property Trustee for
cancellation, and the Administrative Trustees shall execute, and the Property
Trustee shall authenticate and deliver, to each beneficial owner identified by
the Depositary in exchange for its beneficial interest in a Global Security, an
equal aggregate Liquidation
- 38 -
<PAGE>
Value of the Physical Securities of authorized denominations.
(e) Any Physical Security delivered in exchange for an
interest in Global Securities pursuant to subsection (c) or subsection (d) of
this Section shall, except as otherwise provided by paragraph (a) (i) (x) and
paragraph (c) of Section S..Os, bear the Restricted Preferred Securities Legend.
(f) The registered holder of a Global Security shall grant
proxies and otherwise authorize any person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Trust Agreement or the Preferred Securities.
Section 5.05. Registration. Registration of Transfer and
Exchange. The Property Trustee shall keep or cause to be kept, at the Corporate
Trust Office of the Property Trustee, or such other office as the Property
Trustee may designate, a register (the register maintained in such office or in
any other office or agency designated pursuant to Section 5.09 being herein
sometimes referred to as the "Security Registrar") in which, the registrar
designated by the Property Trustee (the "Securities Registrar") with the
reasonable consent of the Administrative Trustees, subject to such reasonable
regulations as the Security Registrar may prescribe, shall provide for the
registration of Preferred Securities Certificates and Common Securities
Certificates and of transfers of Preferred Securities Certificates and Common
Securities Certificates. The Property Trustee shall initially be the "Security
Registrar" for the purpose of registering Preferred Securities Certificates and
Common Securities Certificates and transfers of the Preferred Securities
Certificates and Common Securities Certificates as herein provided.
Upon surrender for registration of transfer of any Preferred
Securities Certificate at the office or agency maintained pursuant to Section
5.09, the Administrative Trustees shall execute, and the Property Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Preferred Securities Certificates of the same
series of any authorized denomination or denominations, of a like aggregate
Liquidation Value.
Furthermore, any Holder of a Global Security shall, by
acceptance of such Global Security, agree that transfers of beneficial interest
in such Global Security may be effected only through a book-entry system
maintained by the Holder of such Global Security (or its agent), and that
ownership of a beneficial interest in the Preferred Securities Certificate shall
be required to be reflected in a book entry.
- 39 -
<PAGE>
At the option of the Holder, Preferred Securities Certificates
may be exchanged for other Preferred Securities Certificates of any authorized
denomination or denominations, of a like aggregate Liquidation Value, upon
surrender of the Preferred Securities Certificates to be exchanged at such
office or agency. Whenever any Preferred Securities Certificates are so
surrendered for exchange, the Administrative Trustees shall execute, and the
Property Trustee shall authenticate and deliver, the Preferred Securities
Certificate of the same series which the Holder making the exchange is entitled
to receive; provided that no exchange of Preferred Securities pursuant to the
Exchange Offer shall occur until an Exchange Offer Registration Statement (as
both terms are defined in the Registration Rights Agreement) shall have been
declared effective by the Commission and that the tendered Preferred Securities
shall be canceled.
Every Preferred Security Certificate presented or surrendered
for registration of transfer, or for exchange or redemption shall (if so
required by the Property Trustee) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Security Registrar,
duly executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder of Preferred
Securities for any registration of transfer or exchange or redemption of
Preferred Securities Certificates, but the Securities Registrar may require
payment of a sum sufficient to pay all documentary, stamp or similar issue or
transfer taxes or other governmental charges that may be imposed in connection
with any registration of transfer or exchange of the Preferred Securities
Certificates.
The Securities Registrar may but shall not be required (a) to
issue, register the transfer of or exchange any Preferred Securities
Certificates during a period beginning at the opening of business 15 days before
the mailing of a notice of redemption of the Preferred Securities selected for
redemption and ending at the close of business on the day of such mailing, or
(b) to register the transfer of or exchange any Preferred Securities so selected
for redemption in whole or in part, except the unredeemed portion of Preferred
Securities being redeemed in part.
Every Restricted Preferred Security shall be subject to the
restrictions on transfer provided in the legend required to be set forth on the
face of such Preferred Securities as set forth in Exhibit E and the restrictions
set forth in this Section 5.05, and the Holder of each Restricted Preferred
Security, by such Holder's acceptance thereof (or interest therein), agrees to
be bound by such restrictions on transfer.
- 40 -
<PAGE>
The restrictions imposed by this Section 5.05 upon the
transferability of any particular Restricted Preferred Security shall cease and
terminate on (a) the later of two years from their date of issuance or two years
after the last date on which the Trust or any Affiliate of the Trust was the
owner of such Restricted Preferred Security (or any predecessor of such
Restricted Preferred Security) or (b) (if earlier) if and when such Restricted
Preferred Security has been sold or transferred or exchanged pursuant to an
effective registration statement under the Securities Act or transferred
pursuant to Rule 144 under the Securities Act (or any successor provision),
unless the Holder thereof is an affiliate of the Trust within the meaning of
Rule 144 (or such successor provisions) . Any Restricted Preferred Security as
to which such restrictions on transfer shall have expired in accordance with
their terms or shall have terminated may, upon surrender of such Restricted
Preferred Security for exchange to the Security Registrar in accordance with the
provision of this Section 5.05 (accompanied, in the event that such restrictions
on transfer have terminated pursuant to Rule 144 (or any successor provision),
by an Opinion of Counsel satisfactory to the Property Trustee, to the effect
that the transfer of such Restricted Preferred Security has been made in
compliance with Rule 144 (or any such successor provision), be exchanged for a
new Preferred Security, of like tenor and aggregate Liquidation Value, which
shall not bear the Restricted Preferred Securities Legend. The Depositor shall
inform the Property Trustee of the effective date of any registration statement
registering the Preferred Securities under the Securities Act no later than two
business Days after such effective date.
Unless and until (i) a Preferred Security is sold under an
effective Shelf Registration Statement, or (ii) a Preferred Security is
exchanged in connection with the Exchange Offer under an Exchange Offer
Registration Statement, in each case pursuant to, and as such terms are defined
in, the Registration Rights Agreement, the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of any
proposed transfer of a Preferred Security to an Accredited Investor which is not
a QIB:
(i) The Security Registrar shall register the transfer of any
Preferred Security whether or not such Preferred Security bears the
Restricted Preferred Securities Legend, if (x) the requested transfer
is at least two years after the original issue date of the Preferred
Securities or (y) the proposed transferee has delivered to the Security
Registrar a certificate substantially in the form set forth in Exhibit
F.
- 41 -
<PAGE>
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Global Security, upon receipt by the
Security Registrar of (x) the documents, if any, required by paragraph
(i) and (y) instructions given in accordance with DTC's and the
Security Registrar's procedures therefor, the Security Registrar shall
reflect on its books and records the date and a decrease in the
Liquidation Value of the Global Security in an amount equal to the
Liquidation Value of the beneficial interest in the Global Security
transferred, and Administrative Trustees shall execute, and the
Property Trustee shall authenticate and deliver, one or more Physical
Securities of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Preferred
Security to a QIB:
(i) If the Preferred Security to be transferred consists of
Physical Securities, the Security Registrar shall register the transfer
if such transfer is being made by a proposed transferor who has advised
the Property Trustee and the Security Registrar in writing, that the
sale has been made in compliance with the provisions of Rule 144A to
the transferee who has signed the certification provided for on the
form of Preferred Security stating, or has otherwise advised the
Property Trustee and the Security Registrar in writing, that it is
purchasing the Preferred Security for its own account or an account
with respect to which it exercises sole investment discretion and that
it, or the person on whose behalf it is acting with respect to any such
account, is a QIB within the meaning of Rule 144A, and is aware that
the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Trust as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the
Preferred Security to be transferred consists of Physical Securities,
upon receipt by the Security Registrar of instructions given in
accordance with DTC's and the Security Registrar's procedures therefor,
the Security Registrar shall reflect on its books and records the date
and an increase in the Liquidation Value of the Global Security in an
amount equal to the Liquidation Value of the Physical Securities, to be
transferred, and the Property Trustee shall cancel the Physical
Security so transferred.
- 42 -
<PAGE>
(c) Restricted Preferred Securities Legend. Upon the
registration of transfer, exchange or replacement of Preferred Securities not
bearing the Restricted Preferred Securities Legend, the Security Registrar shall
deliver Preferred Securities that do not bear the Restricted Preferred
Securities Legend. Upon the registration of transfer, exchange or replacement of
Preferred Securities bearing the Restricted Preferred Securities Legend (a
"Restricted Preferred Security"), the Security Registrar shall deliver only
Preferred Securities that bear the Restricted Preferred Securities Legend unless
either (i) the circumstances contemplated by paragraph (a) (i) (x) of this
Section 5.05 exist or (ii) there is delivered to the Security Registrar an
Opinion of Counsel reasonably satisfactory to the Property Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any Preferred Security
bearing the Restricted Preferred Securities Legend, each Holder of such a
Preferred Security acknowledges the restrictions on transfer of such Preferred
Security set forth in this Trust Agreement and in the Restricted Preferred
Securities Legend and agrees that it will transfer such Preferred Security only
as provided in this Trust Agreement.
The Security Registrar shall retain copies of all letters,
notices and other written communications received pursuant to Section 5.04 or
this Section 5.05. The Depositor shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Security Registrar.
Section 5.06. Mutilated. Destroyed. Lost or Stolen Trust
Securities Certificates. If (a) any mutilated, destroyed, lost or stolen Trust
Securities Certificate shall be surrendered to the Securities Registrar, or if
the Securities Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Trust Securities Certificate and (b) there
shall be delivered to the Securities Registrar and the Administrative Trustees
such security or indemnity as may be required by them to save each of them
harmless, then in the absence of notice that such Trust Securities Certificate
shall have been acquired by a bona fide purchaser, the Administrative Trustees
or any one of them on behalf of the Trust shall execute and make available for
delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Trust Securities Certificate, a new Trust Securities Certificate of like
class, tenor and denomination. In connection with the issuance of any new Trust
Securities Certificate under this Section, the Administrative Trustees or the
Securities Registrar may require the payment of a
- 43 -
<PAGE>
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Trust Securities Certificate issued
pursuant to this Section 5.06 shall constitute conclusive evidence of an
undivided beneficial interest in the assets of the Trust, as if originally
issued, whether or not the mutilated, lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
The provisions of this Section 5.06 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Trust
Securities.
Section 5.07. Persons Deemed Securityholders. Prior to due
presentation of a Trust Securities Certificate for registration of transfer, the
Administrative Trustees and Property Trustee or the Securities Registrar shall
treat the Person in whose name any Trust Securities Certificate shall be
registered in the Securities Register as the owner of such Trust Securities
Certificate for the purpose of receiving distributions and for all other
purposes whatsoever, and neither such Trustees nor the Securities Registrar
shall be bound by any notice to the contrary.
Section 5.08. Access to List of Securityholders' Names and
Addresses. The Securities Registrar shall furnish or cause to be furnished (x)
to the Depositor, within 15 days after receipt by the Securities Registrar of a
request there for from the Depositor in writing and (y) to the Property Trustee,
quarterly, and at such other times as the Property Trustee may request in
writing promptly after receipt by the Securities Registrar of any such request,
a list, in such form as the Depositor or the Property Trustee (as applicable)
may reasonably require, of the names and addresses of the Securityholders as of
the most recent record date. If three or more Holders of Trust Securities
Certificates apply in writing to the Securities Registrar, and such application
states that the applicants desire to communicate with other Securityholders with
respect to their rights under this Trust Agreement or under the Trust Securities
Certificates and such application is accompanied by a copy of the communication
that such applicants propose to transmit, then the Securities Registrar shall,
within five Business Days after the receipt of such application, afford such
applicants access during normal business hours to the current list of
Securityholders. Each Holder, by receiving and holding a Trust Securities
Certificate, shall be deemed to have agreed not to hold either the Depositor or
the Securities Registrar accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
Section 5.09. Maintenance of Office or Agency. The
- 44 -
<PAGE>
Administrative Trustees shall maintain an office or offices or agency or
agencies where Preferred Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustees in respect of the Trust Securities Certificates may be served. The
Administrative Trustees initially designate the Bank, First Union National Bank
of Maryland, 901 East Cary Street, Richmond, Virginia 23219, Attention: Pat
Welling, for such purposes. The Administrative Trustees shall give prompt
written notice to the Depositor and to the Securityholders of any change in the
location of the Securities Register or any such office or agency.
Section 5.10. Appointment of Paying Agent. A paying agent (the
"Paying Agent") appointed hereby shall make Distributions to Securityholders
from the Payment Account and shall report the amounts of such Distributions to
the Property Trustee and the Administrative Trustees. Any Paying Agent shall
have the revocable power to withdraw funds from the Payment Account for the
purpose of making the Distributions referred to above. The Administrative
Trustees may revoke such power and remove the Paying Agent if such Trustees
determine in their sole discretion that the Paying Agent shall have failed to
perform its obligations under this Agreement in any material respect. The Paying
Agent shall initially be the Property Trustee, and the Paying Agent may choose
any co-paying agent that is acceptable to the Administrative Trustees, the
Property Trustee and the Depositor. Any Person acting as a Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the
Administrative Trustees, the Property Trustee and the Depositor.' In the event
that the Property Trustee shall no longer be the Paying Agent or a successor
Paying Agent shall resign or its authority to act be revoked, the Administrative
Trustees shall appoint a successor that is acceptable to the Property Trustee
and the Depositor to act as Paying Agent (which shall be a bank or trust
company) . The Administrative Trustees shall cause such successor Paying Agent
or any co-paying agent appointed by the Paying Agent to execute and deliver to
the Administrative Trustees and the Property Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the
Administrative Trustees and the Property Trustee that as Paying Agent, such
successor Paying Agent or additional Paying Agent will hold all sums, if any,
held by it' for payment to the Securityholders in trust for the benefit of the
Securityholders entitled thereto until such sums shall be paid to such
Securityholders. The Paying Agent shall return all unclaimed funds to the
Property Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Property Trustee. The provisions of
Sections 8.01, 8.03 and 8.06 shall apply to the Property Trustee also in its
role as Paying Agent, for so long as the Property Trustee shall act as Paying
Agent and, to the extent applicable, to any
- 45 -
<PAGE>
other paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
Section 5.11. Ownership of Common Securities by Depositor. On
the Closing Date and on each other date provided for in Section 2.05, the
Depositor shall acquire, and thereafter retain, beneficial and record ownership
of the Common Securities. Any attempted transfer of the Common Securities shall
be void; provided, however, that any permitted successor of the Depositor
pursuant to Article Six of the Indenture may succeed to the Depositor's
ownership of the Common Securities. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NOT TRANSFERABLE."
Section 5.12. Notices to Clearing Agency. To the extent a
notice or other communication to the Owners is required under this Trust
Agreement, unless and until definitive Preferred Securities Certificates shall
have been issued to Owners, pursuant to Section 5.13, the Administrative Trustee
and the Property Trustee shall give all such notices and communications
specified herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners.
Section 5.13. Rights of Securityholders. The legal title to
the Trust Property is vested exclusively in the Property Trustee (in its
capacity as such) in accordance with Section 2.09, and the Securityholders shall
not have any right or title therein other than the undivided beneficial interest
in the assets of the Trust conferred by their Trust Securities and they shall
have no right to call for any partition or division of property, profits or
rights of the Trust. The Trust Securities shall be personal property giving only
the rights specifically set forth therein and in this Trust Agreement, but are
not interests in specific trust property. The Trust Securities shall have no
preemptive rights and when issued and delivered to Securityholders against
payment of the purchase price there for will be fully paid and nonassessable
undivided beneficial interests in the assets of the Trust. The Holders of the
Preferred Securities, in their capacities as such, shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
ARTICLE VI
Acts of Securityholders; Meetings; Voting
Section 6.01. Limitations on Voting Rights.
- 46 -
<PAGE>
(a) Except as provided in this Section, in Sections 8.10, 9.02
and 10.02 hereof and as otherwise required by law, no Holder of Preferred
Securities shall have any right to vote whatsoever or in any manner otherwise
control to any extent tb administration, operation and management of the Trust
or the obligations of the parties hereto, nor shall anything herein set forth,
or contained in the terms of the Trust Securities Certificates, be construed so
as to constitute the Securityholders from time to time as partners or members of
an association.
(b) So long as any KDSM Senior Debentures are held by the
Property Trustee on behalf of the Trust, the Property Trustee or any other
Trustee shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Debenture Trustee with respect to such KDSM
Senior Debentures or the Indenture, (ii) waive any past default under the
Indenture, (iii) exercise any right to, or rescind or annul a declaration that,
the principal of all KDSM Senior Debentures shall be due and payable, (iv)
consent to any amendment, modification or termination of the Indenture, the KDSM
Senior Debentures or the Pledge and Security Agreement where such consent shall
be required, (v) liquidate the Trust pursuant to Section 9.02(i) or (vi)
exercise any right with respect to the Parent Preferred pursuant to the Pledge
and Security Agreement, or otherwise, without, in each case, obtaining the prior
approval of the Holders of at least a majority in aggregate Liquidation Value of
the Outstanding Preferred Securities and the Property Trustee shall take such
action on behalf of the Trust upon such approval; provided, however, that where
a consent, waiver or exercise of rights under the Indenture would require the
consent of each holder of the KDSM Senior Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior written consent
of each Holder of Outstanding Preferred Securities. The Property Trustee shall
not revoke any action previously authorized or approved by a vote of the
Preferred Securities, except pursuant to a subsequent vote of the Holders of the
Preferred Securities. The Property Trustee shall notify all Holders of the
Preferred Securities of any notice of default received from the Debenture
Trustee with respect to the KDSM Senior Debentures or as to receipt of any
notice related to the Parent Preferred or as to which a vote of the Preferred
Securities may be required. In addition to obtaining the foregoing approvals of
the Holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Property Trustee shall, at the expense of the Depositor, obtain an
Opinion of Counsel experienced in such matters to the effect that the Trust will
not be classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
- 47 -
<PAGE>
(c) So long as the Pledge Agreement is in full force and
effect, the Property Trustee or any other Trustee shall not exercise any of the
approval, consent, waiver or any other of the rights of the Trust provided to
the Trust pursuant to the Pledge Agreement, without, in each case, obtaining the
prior approval of the Holders of at least a majority in aggregate Liquidation
Value of the Outstanding Preferred Securities and the Property Trustee shall
take such action on behalf of the Trust upon such approval; provided, however,
that where a consent, waiver or exercise of rights provided through the Pledge
and Security Agreement would require the consent of each Holder of the Preferred
Securities affected thereby since it relates to a right which requires the
consent of each holder of the KDSM Senior Debentures, no such consent shall be
given by the Property Trustee without the prior written consent of each Holder
of Outstanding Preferred Securities. The Property Trustee shall not revoke any
action previously authorized or approved by a vote of the Preferred Securities,
except pursuant to a subsequent vote of the Holders of the same required
percentage of Preferred Securities. In addition to obtaining the foregoing
approvals of the Holders of the Preferred Securities, prior to taking any of the
foregoing actions, the Property Trustee shall, at the expense of the Depositor,
obtain an Opinion of Counsel experienced in such matters to the effect that the
Trust will not be classified as an association taxable as a corporation for
United States federal income tax purposes on account of such action.
(d) Subject to Section 10.02(c) hereof, if any proposed
amendment to this Trust Agreement provides for, or the Administrative Trustee
and the Property Trustee otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Preferred
Securities, whether by way of amendment to this Trust Agreement or otherwise, or
(ii) the dissolution, winding-up or termination of the Trust, other than
pursuant to the terms of this Trust Agreement, then the Holders of Outstanding
Preferred Securities as a class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of the Holders of at least a majority in aggregate Liquidation Value of
the Outstanding Preferred Securities. No amendment to this Trust Agreement may
be made if, as a result of such amendment, the Trust would be classified as an
association taxable as a corporation for United States federal income tax
purposes.
(e) Upon an Event of Default, the Holders of a majority of the
aggregate Liquidation Value of the Outstanding Preferred Securities shall have
the right to replace any or all of the Trustees of the Trust. So long as such
Event of Default shall be continuing, any Trustee selected by the holders of
Preferred Securities may only be removed or replaced by the Holders of
- 48 -
<PAGE>
Preferred Securities and the Holders of the Common Securities shall have no
right to select any Trustees. Upon the termination of waiver of such an Event of
Default, the holders of Common Securities shall have the right to replace any or
all of the Trustees selected by the holders of Preferred Securities.
Section 6.02. Notice of Meetings. Notice of all meetings of
the Holders of the Preferred Securities, stating the time, place and purpose of
the meeting, shall be given by the Administrative Trustees in the manner
provided by Section 10.08 to each Holder of Preferred Securities of record, at
his registered address, at least 30 days and not more than 90 days before the
meeting or as otherwise set forth herein. At any such meeting, any business
properly before the meeting may be so considered whether or not stated in the
notice of the meeting. Any adjourned meeting may be held as adjourned without
further notice.
Any and all notices to which any Holders of Preferred
Securities hereunder may be entitled and any and all communications shall be
deemed duly served or given if mailed, postage prepaid, addressed to any Holder
of Preferred Securities of record at his last known address as recorded on the
Securities Register.
Section 6.03. Meetings of Preferred Securityholders. No annual
meeting of Securityholders is required to be held. The Administrative Trustees,
however, shall call a meeting of Securityholders to vote on any matter upon the
written request of the Holders of Preferred Securities of record of 25% of the
Outstanding Preferred Securities (based upon their aggregate Liquidation Value)
and the Administrative Trustees or the Property Trustee may, at any time in
their discretion, call a meeting of Holders of Preferred Securities to vote on
any matters as to the which Holders of Preferred Securities are entitled to
vote.
Securityholders of record of 50% of the Outstanding Preferred
Securities (based upon their aggregate Liquidation Value), present in person or
by proxy, shall constitute a quorum at any meeting of Holders of Preferred
Securities.
If a quorum is present at a meeting, an affirmative vote by
the Securityholders of record present, in person or by proxy, holding more than
a majority of the Preferred Securities (based upon their Liquidation Value) held
by the Securityholders of record present, either in person or by proxy, at such
meeting shall constitute the action of the Holders of Preferred Securities,
unless this Trust Agreement requires a greater number of affirmative votes.
- 49 -
<PAGE>
Section 6.04. Voting Rights. Securityholders shall be entitled
to one vote for each $100 of Liquidation Value represented by their Trust
Securities in respect of any matter as to which such Securityholders are
entitled to vote.
Section 6.05. Proxies. Etc. At any meeting of Securityholders,
any Securityholder entitled to vote thereat may vote by proxy, that no proxy
shall be voted at any meeting unless it shall have been placed on file with the
Administrative Trustees, or with such other officer or agent of the Trust as the
Administrative Trustees may direct, for verification prior to the time at which
such vote shall be taken. Pursuant to a resolution of the Property Trustee,
proxies may be solicited in the name of the Property Trustee or one or more
officers of the Property Trustee. Only Securityholders of record shall be
entitled to vote. When Trust Securities are held jointly by several Persons, any
one of them may vote at any meeting in Person or by proxy in respect of such
Trust Securities, but if more than one of them shall be present at such meeting
in Person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Trust Securities. A proxy purporting to be executed by or on behalf of a
Securityholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger.
Section 6.06. Securityholder Action by Written Consent. Any
action which may be taken by Securityholders at a meeting may be taken without a
meeting if Securityholders holding more than a majority of all Outstanding Trust
Securities (based upon their Liquidation Value) entitled to vote in respect of
such act ion (or such larger proportion thereof as shall be required by any
express provision of this Trust Agreement) shall consent to the action in
writing.
Section 6.07. Record Date for Voting and Other Purposes. The
Administrative Trustees may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Administrative
Trustees prior to the first solicitation of a Holder made by any such vote,
prior to such vote, the record date for any such action or vote shall be the
30th day (or, if later, the date of the most recent list of Holders required to
be provided pursuant to Section 5.08 hereof) prior to such first solicitation or
vote, as the case may be; provided, however, that in no event shall any such
record date be prior to the date on which the notice of such vote or other
action is given. With regard to any record date, only the
- 50 -
<PAGE>
Holders on such date (or their duly designated proxies) shall be entitled to
give or take, or vote on, the relevant action.
Section 6.08. Acts of Securityholders. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Trust Agreement to be given, made or taken by Securityholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Securityholders in person or by an agent duly
appointed in writing; and, except as otherwise expressly provided herein, such
action shall become effective when such instrument or instruments are delivered
to an Administrative Trustee. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Securityholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Trust Agreement and (subject to Section
8.01) conclusive in favor of the Trustees, if made in the manner provided in
this Section 6.08.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which any Trustee receiving the same deems sufficient.
In determining whether the Holders of the requisite
Liquidation Value of outstanding Trust Securities have acted in connection with
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Trust Agreement, then for purposes of such
determination, if the Trust Securities are registered in the form of one or more
global certificates, the Holders entitled to act thereon shall mean the Owners
of such Trust Securities.
Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Securityholder of any Trust Security shall
bind every future Securityholder of the same Trust Security and the
Securityholder of every Trust Security issued upon the registration of transfer
thereof or in exchange there for or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustees or the Trust in reliance
- 51 -
<PAGE>
thereon, whether or not notation of such action is made upon such Trust
Security.
Without limiting the foregoing, a Securityholder entitled
hereunder to take any action hereunder with regard to any particular Trust
Security may do so with regard to all or any part of the Liquidation Value of
such Trust Security or by one or more duly appointed agents each of which may do
so pursuant to such appointment with regard to all or any part of such
Liquidation Value.
If any dispute shall arise between the Securityholders and the
Administrative Trustees or among such Securityholders or Trustees with respect
to the authenticity, validity or binding nature of any request, demand,
authorization, direction, notice, consent, waiver or other Act of such
Securityholder or Trustee under this Article VI, then the determination of such
matter by the Property Trustee shall be conclusive with respect to such matter.
This Section 6.08 shall not be deemed to supersede, or to
impose obligations in addition to, Section 6.05.
Section 6.09. Inspection of Records. Subject to Section 5.08
concerning access to the list of Securityholders, upon reasonable notice to the
Administrative Trustees and the Property Trustee, the other records of the Trust
shall be open to inspect ion by Securityholders during normal business hours for
any purpose reasonably related to such Securityholder's interest as a
Securityholder.
ARTICLE VII
Representations and Warranties of the Property Trustee,
the Administrative Trustees and the Delaware Trustee
The Property Trustee, the Administrative Trustees and the
Delaware Trustee, each severally on behalf of and as to only itself or himself,
as the case may be, hereby represents and warrants for the benefit of the
Depositor and the Securityholders that:
(a) the Property Trustee is a national banking association
duly organized and validly existing and is in good standing under the
laws of the United States;
(b) the Property Trustee has full corporate power, authority
and legal right to execute, deliver and perform its obligations under
this Trust Agreement and has taken all necessary action to authorize
the execution, delivery and performance by it of this Trust Agreement;
- 52 -
<PAGE>
(c) this Trust Agreement has been duly authorized, executed
and delivered by the Property Trustee and constitutes the valid and
legally binding agreement of the Property Trustee, enforceable against
the Property Trustee in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(d) this Trust Agreement has been duly executed and delivered
by each of the Delaware Trustee and the Administrative Trustees and
constitutes the valid and legally binding agreement of the Delaware
Trustee and the Administrative Trustees, enforceable against the
Delaware Trustee and the Administrative Trustees in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(e) the execution, delivery and performance by the Property
Trustee of this Trust Agreement have been duly authorized by all
necessary corporate action on the part of the Property Trustee and do
not require any approval of stockholders of the Property Trustee and
such execution, delivery and performance will not (i) violate the
Property Trustee's charter or by-laws, (ii) violate any provision of,
or constitute, with or without notice or lapse of time, a default
under, or result in the creation or imposition of, any Lien on any
properties included in the Trust Property pursuant to the provisions
of, any indenture, mortgage, credit agreement, license or other
agreement or instrument to which the Property Trustee is a party or by
which it is bound, or (iii) violate any law, governmental rule or
regulation of the United States, governing the banking or trust powers
of the Property Trustee (as appropriate in context) or any order,
judgment or decree applicable to the Property Trustee;
(f) the execution, delivery and performance by the Delaware
Trustee and the Administrative Trustees of this Trust Agreement will
not (i) violate any provision of, or constitute, with or without notice
or lapse of time, a default under, or result in the creation or
imposition of, any Lien on any properties included in the Trust
Property pursuant to the provisions of any indenture, mortgage or
credit agreement, license or other agreement or instrument to which the
Delaware Trustee or any of the Administrative Trustees is a party or by
which the Delaware Trustee or any of the Administrative Trustees is
bound or (ii) violate any
- 53 -
<PAGE>
law, governmental rule or regulation of the State of Delaware governing
the banking or trust powers of the Delaware Trustee or violate any law,
governmental rule or regulation of the United States or the State of
Delaware, as the case may be, governing any of the Administrative
Trustees, or any order, judgment or decree applicable to the Delaware
Trustee or the Administrative Trustees;
(g) neither the authorization, execution or delivery by the
Property Trustee, the Delaware Trustee or the Administrative Trustees
of this Trust Agreement nor the consummation of any of the transactions
by the Property Trustee, the Delaware Trustee or the Administrative
Trustees (as appropriate in each context) contemplated herein or
therein pursuant to this Trust Agreement require the consent or
approval of, the giving of notice to, the registration with or the
taking of any other action with respect to any governmental authority
or agency under any existing federal law governing the banking or trust
powers of the Property Trustee, Delaware Trustee or any of the
Administrative Trustees or under the laws of the State of Delaware
(excluding securities laws); and
(h) there are no proceedings pending or, to the best of each
of the Property Trustee's, the Administrative Trustees' and the
Delaware Trustee's knowledge, threatened against or affecting the
Property Trustee, the Administrative Trustees or the Delaware Trustee
in any court or before any governmental authority, agency or
arbitration board or tribunal which, individually or in the aggregate,
would materially and adversely affect the Trust or would question the
right, power and authority of the Property Trustee, any of the
Administrative Trustees or the Delaware Trustee to enter into or
perform its obligations as one of the Trustees under this Trust
Agreement.
The Administrative Trustees each severally hereby represents
and warrants for the benefit of the Depositor and the Securityholders that:
(a) the Trust Securities Certificates issued on the Closing
Date on behalf of the Trust have been, duly authorized, and will have
been, as of each such date, duly and validly executed, issued and
delivered by the Administrative Trustees pursuant to the terms and
provisions of, and in accordance with the requirements of, this Trust
Agreement and the Securityholders will be, as of each such date,
entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges
payable by the Trust (or the Trustees on behalf of
- 54 -
<PAGE>
the Trust) under the laws of the State of Delaware or any political
subdivision thereof in connection with the execution, delivery and
performance by the Property Trustee, the Delaware Trustee or the
Administrative Trustees, as the case may be, of this Trust Agreement.
ARTICLE VIII
The Trustees
Section 8.01. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Trustees shall be
as provided by this Trust Agreement and, in the case of the Property Trustee, to
the extent applicable by the Trust Indenture Act. Notwithstanding the foregoing,
no provision of this Trust Agreement shall require the Trustees to expend or
risk their own funds or otherwise incur any financial liability in the
performance of any of their duties hereunder, or in the exercise of any of their
rights or powers, if they shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to them. Whether or not therein expressly so provided,
every provision of this Trust Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustees shall be subject to the
provisions of this Section.
(b) All payments made by the Property Trustee or a Paying
Agent in respect of the Trust Securities shall be made only from the income and
proceeds from the Trust Property. Each Securityholder, by its acceptance of a
Trust Security, agrees that it will look solely to the income and proceeds from
the Trust Property to the extent legally available for distribution to it as
herein provided and that the Trustees are not personally liable to it for any
amount distributable in respect of any Trust Security or for any other liability
in respect of any Trust Security. This Section 8.01(b) does not limit the
liability of the Trustees expressly set forth elsewhere in this Trust Agreement,
including without limitation as set forth under Article VII, or, in the case of
the Property Trustee, to the extent applicable in the Trust Indenture Act, or
limit the rights of Owners pursuant to Section 508 of the Indenture.
Section 8.02. Notice of Defaults. Within five Business Days
after the occurrence of any Event of Default actually known to the Property
Trustee, the Property Trustee shall transmit, in the manner provided in Section
10.08, notice of such default to the Securityholders, the Administrative
Trustees and the Depositor, unless such default shall have been cured or waived.
For the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of
- 55 -
<PAGE>
time or both would become, an Event of Default.
Section 8.03. Certain Rights of Property Trustee. Subject to
the provisions of Section 8.01 and except as provided by law:
(i) the Property Trustee may conclusively rely upon and shall
be protected in acting or refraining from acting in good faith upon any
resolution, Opinion of Counsel, certificate, written representation of
a Holder or transferee, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties;
(ii) if (A) in performing its duties under this Trust
Agreement the Property Trustee is required to decide between
alternative courses of action or (B) in construing any of the
provisions in this Trust Agreement the Property Trustee finds the same
ambiguous or inconsistent with any other provisions contained herein or
(C) the Property Trustee is unsure of the application of any provision
of this Trust Agreement, then, except as to any matter as to which the
Preferred Securityholders are entitled to vote to any extent under the
terms of this Trust Agreement, the Property Trustee shall deliver a
notice to the Depositor requesting written instructions of the
Depositor as to the course of action to be taken. The Property Trustee
shall take such action, or refrain from taking such action, as the
Property Trustee shall be instructed in writing to take, or to refrain
from taking, by the Depositor and shall have no liability whatsoever
for such action or inaction; provided, however, that if the Property
Trustee does not receive such instructions of the Depositor within ten
Business Days after it has delivered such notice, or such reasonably
shorter period of time set forth in such notice (which to the extent
practicable shall not be less than two Business Days), it may, but
shall be under no duty to, take or refrain from taking such action not
inconsistent with this Trust Agreement as it shall deem advisable and
in the best interests of the Securityholders, in which event the
Property Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
(iii) the Property Trustee may consult with counsel of its
selection and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon;
- 56 -
<PAGE>
(iv) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Trust
Agreement at the request or direction of any of the Securityholders
pursuant to this Trust Agreement, unless such Securityholders shall
have offered to the Property Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(v) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or document; and
(vi) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, provided that the Property Trustee
shall be responsible for its own negligence or recklessness with
respect to selection of any agent or attorney appointed by it
hereunder.
Section 8.04. Not Responsible for Recitals or Issuance of
Securities. Except as provided in Article VII, the recitals contained herein and
in the Trust Securities Certificates shall be taken as the statements of the
Trust, and the Trustees do not assume any responsibility for their correctness.
Section 8.05. May Hold Securities. Except as provided in the
definition of the term "Outstanding" in Article I, any Trustee or any other
agent of any Trustee or the Trust, in its individual or any other capacity, may
become the owner or pledgee of Trust Securities and may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
Section 8.06. Compensation; Fees: Indemnity. The Depositor
agrees:
(1) to pay to the Trustees from time to time such compensation
as the Depositor and the Trustees shall from time to time agree in
writing for all services rendered by the Trustees hereunder (which
compensation shall not be limited by any provision of law with regard
to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustees upon request for all reasonable expenses,
disbursements and advances incurred or made by the Trustees in
accordance with any provision of this Trust Agreement (including the
reasonable compensation and the
- 57 -
<PAGE>
expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its bad
faith, negligence in the case of the Property Trustee, gross negligence
in the case of the Administrative Trustees and the Delaware Trustee or
willful misconduct; and
(3) (a) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) each Trustee, its Affiliates, officers,
directors, shareholders, employees, representatives and agents and (ii)
any employee or agent of the Trust or its Affiliates (referred to
herein as an "Indemnified Person") from and against any loss, damage,
liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the
creation, operation or termination of the Trust or any act or omission
performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of authority conferred on such
Indemnified Person by this Trust Agreement, except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Indemnified Person by reason of
negligence in the case of the Property Trustee, gross negligence in the
case of the Administrative Trustees and the Delaware Trustee or willful
misconduct with respect to such acts or omissions.
(b) to the fullest extent permitted by applicable law, to
advance, from time to time, prior to the final disposition of any
claim, demand, action, suit or proceeding for which indemnification is
authorized pursuant to subsection (a) above, any expenses (including
reasonable legal fees) incurred by an Indemnified Person in defending
such claim, demand, action, suit or proceeding upon receipt by the
Depositor of an undertaking by or on behalf of the Indemnified Person
to repay such amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified as authorized in subsection
(a) above. This indemnification shall survive the termination of this
Trust Agreement.
Section 8.07. Corporate Property Trustee Required; Eligibility
of Trustees.
(a) There shall at all times be a Property Trustee hereunder
with respect to the Trust Securities which is eligible to act as a trustee under
the Trust Indenture Act Section 310(a) (1) and which has (a) a combined capital
and surplus of at least $250,000,000 and (b) an unsecured or deposit rating of
at least investment grade by each of Standard & Poor's Ratings Group and
- 58 -
<PAGE>
Moody's Investors Service, Inc. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative
Trustees hereunder with respect to the Trust Securities. Each Administrative
Trustee shall be either a natural person who is at least 21 years of age or a
legal entity that shall act through one or more persons authorized to bind such
entity.
(c) There shall at all times be a Delaware Trustee with
respect to the Trust Securities. The Delaware Trustee shall either be (i) a
natural person who is at least 21 years of age :and a resident of the State of
Delaware or (ii) a legal entity with its principal place of business in the
State of Delaware and that otherwise meets the requirements of applicable
Delaware law, including the Delaware Business Trust Act.
Section 8.08. Conflicting Interests. The Property Trustee
shall comply with the provisions of Section 310(b) of the Trust Indenture Act
whether or not the Trust Indenture Act is then applicable to this Trust
Agreement, and such provisions are hereby incorporated by reference herein. The
Property Trustee shall not be deemed to have a conflicting interest by virtue of
the Guarantee Agreement or the Indenture.
Section 8.09. Co-Trustees and Separate Trustee. Unless an
Event of Default shall have occurred and be continuing, at any time or times,
for the purpose of meeting the legal requirements of the Trust Indenture Act, if
applicable, or of any jurisdiction in which any part of the Trust Property may
at the time be located, the Holder of the Common Securities and the
Administrative Trustees, by agreed action of the majority of such Trustees,
shall have power to appoint, and upon the written request of the Administrative
Trustees, the Depositor shall for such purpose join with the Administrative
Trustees in the execution, delivery, and performance of all instruments and
agreements necessary or proper to appoint, one or more Persons approved by the
Property Trustee either to act as co-trustee, jointly with the Property Trustee,
of all or any part of such Trust Property, or to act as separate trustee of any
such property, in either case with such powers as may be provided in
- 59 -
<PAGE>
the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Depositor
does not join in such appointment within 15 days after the receipt by it of a
request so to do, or in case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section shall satisfy the requirements of Section 8.07.
Should any written instrument from the Depositor be required
by any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right, or power, any
and all such instruments shall, on request, be executed, acknowledged, and
delivered by the Depositor.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms, namely:
(1) The Trust Securities shall be executed and delivered and
all rights, powers, duties, and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Trustees specified
hereunder, shall be exercised, solely by such Trustees.
(2) The rights, powers, duties, and obligations hereby
conferred or imposed upon the Property Trustee in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by the Property Trustee or by the Property
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Property Trustee shall
be incompetent or unqualified to perform such act, in which event such
rights, powers, duties, and obligations shall be exercised and
performed by such co-trustee or separate trustee.
(3) The Property Trustee at any time, by an instrument in
writing executed by it, with the written concurrence of the Depositor,
may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, in case a Debenture Event of
Default has occurred and is continuing, the Property Trustee shall have
power to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of the Depositor.
- 60 -
<PAGE>
Upon the written request of the Property Trustee, the Depositor shall
join with the Property Trustee in the execution, delivery, and
performance of all instruments and agreements necessary or proper to
effectuate such resignation or removal. A successor to any co-trustee
or separate trustee so resigned or removed may be appointed in the
manner provided in this Section.
(4) Any Act of Holders delivered to the Property Trustee shall
be deemed to have been delivered to each such co-trustee and separate
trustee. Upon receipt of such Act of Holders, the Property Trustee
shall promptly deliver a copy thereof to each such co-trustee and
separate trustee.
Section 8.10. Resignation and Removal; Appointment of
Successor. No resignation or removal of any Trustee (the "Relevant Trustee") and
no appointment of a successor Relevant Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor Relevant
Trustee in accordance with the applicable requirements of Section 8.11.
The Relevant Trustee may resign at any time with respect to
the Trust Securities by giving written notice thereof to the Securityholders. If
the instrument of acceptance by a successor Relevant Trustee required by Section
8.11 shall not have been delivered to the Relevant Trustee within 30 days after
the giving of such notice of resignation, the resigning Relevant Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Relevant Trustee with respect to the Trust Securities.
Unless an Event of Default shall have occurred and be
continuing, the Relevant Trustee may be removed at any time by Act of the Holder
of the Common Securities. If an Event of Default shall have occurred and be
continuing, the Relevant Trustee may be removed at such time by Act of the
Holders of a majority in aggregate Liquidation Value of the Outstanding
Preferred Securities, delivered to the Relevant Trustee (in its individual
capacity and on behalf of the Trust).
If the Relevant Trustee shall resign, be removed or become
incapable of continuing to act as Relevant Trustee at a time when no Event of
Default shall have occurred and be continuing, the Holder of the Common
Securities, by Act of the Holder of the Common Securities delivered to the
retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee
or Trustees with respect to the Trust Securities and the Trust, and the retiring
Relevant Trustee shall comply with the applicable requirements of Section 8.11.
If the Relevant Trustee shall resign, be removed or become incapable of
continuing to act as the Relevant Trustee at a time when an Event of Default
shall
- 61 -
<PAGE>
have occurred and be continuing, the Holders of the Preferred Securities, by Act
of the Securityholders of a majority in Liquidation Value of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees with respect to the
Trust Securities and the Trust, and the Relevant Trustee shall comply with the
applicable requirements of Section 8.11. If no successor Relevant Trustee with
respect to the Trust Securities shall have been so appointed by the Holders of
the Common Securities or the Preferred Securities and accepted appointment in
the manner required by Section 8.11, any Securityholder who has been a
Securityholder of Trust Securities for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee with respect to
the Trust Securities.
The retiring Relevant Trustee shall give notice of each
resignation and each removal of the Relevant Trustee with respect to the Trust
Securities and the Trust and each appointment of a successor Relevant Trustee
with respect to the Trust Securities and the Trust to all Securityholders in the
manner provided in Section 10.08 and to the Depositor. Each notice shall include
the name of the successor Relevant Trustee with respect to the Trust Securities
and the Trust and the address of its Corporate Trust Office.
In the event any Administrative Trustee or a Delaware Trustee
who is a natural person dies or becomes incompetent or incapacitated, the
vacancy created by such death, incompetence or incapacity may be filled by (i)
the unanimous act of remaining Administrative Trustees if there are at least two
of them or (ii) otherwise by the Depositor (with the successor satisfying the
eligibility requirement for an Administrative Trustee or a Delaware Trustee, as
the case may be, set forth in Section 8.07 hereof). Additionally,
notwithstanding the foregoing or any other provision of this Trust Agreement, in
the event the Depositor believes that any Administrative Trustee or the Delaware
Trustee, as the case may be, has become incompetent or incapacitated, the
Depositor, by notice to the remaining Trustees, may terminate the status of such
Person as an Administrative Trustee or the Delaware Trustee, as the case may be,
(in which case the vacancy so created will be filled in accordance with the
preceding sentence)
Section 8.11. Acceptance of Appointment by Successor. In the
case of the appointment hereunder of a successor Relevant Trustee with respect
to Trust Securities and the Trust, the retiring Relevant Trustee and each
successor Relevant Trustee so appointed shall execute and deliver an amendment
hereto, together with such other instrument or instruments as may be necessary,
- 62 -
<PAGE>
wherein each successor Relevant Trustee shall accept such appointment and which
amendment (1) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and to vest in, each successor Relevant Trustee all
the rights, powers, trusts and duties of the retiring Relevant Trustee with
respect to the Trust Securities and the Trust and (2) shall add to or change any
of the provisions of this Trust Agreement as shall be necessary to provide for
or facilitate the administration of the trusts hereunder by more than one
Relevant Trustee, it being understood that nothing herein or in such 1=
amendment shall constitute such Relevant Trustees co-trustees of the same trust
and that each such Relevant Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Relevant Trustee; and upon the request of the Depositor, the
Trust or any successor Relevant Trustee, such retiring Relevant Trustee shall,
upon payment of all amounts due to it hereunder, duly assign, transfer and
deliver to such successor Relevant Trustee all Trust Property (including legal
title thereto, in the case of a retiring Property Trustee), all proceeds thereof
and money held by such retiring Relevant Trustee hereunder with respect to the
Trust Securities and the Trust; and upon execution and delivery of such
amendment and instrument, the resignation or removal of the retiring Relevant
Trustee shall become effective to the extent provided therein and each such
successor Relevant Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Relevant Trustee with respect to the Trust Securities and the Trust.
Upon request of any such successor Relevant Trustee, the
Administrative Trustees on behalf of the Trust shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Relevant Trustee all such rights, powers and trusts referred to in the
preceding paragraph.
No successor Relevant Trustee shall accept its appointment
unless at the time of such acceptance such successor Relevant Trustee shall be
qualified and eligible under this Article VIII.
Section 8.12. Merger, Conversion, Consolidation or Succession
to Business. Any Person into which the Property Trustee or, if not a natural
person, the Delaware Trustee or any Administrative Trustee may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Relevant Trustee shall be a
party, or any Person succeeding to all or substantially all the corporate trust
business of such Relevant Trustee, shall be the successor of such Relevant
Trustee hereunder, without the execution or filing of any paper or any further
act on the part
- 63 -
<PAGE>
of any of the parties hereto; provided such Person shall be otherwise qualified
and eligible under this Article.
Section 8.13. Preferential Collection of Claims Against
Depositor or Trust. If and when the Property Trustee shall be or become a
creditor of the Depositor or the Trust (or any other obligor upon the KDSM
Senior Debentures or the Trust Securities), the Property Trustee shall be
subject to the provisions of the Trust Indenture Act (whether or not then
applicable to the Trust Agreement) regarding the collection of claims against
the Depositor or the Trust (or any such other obligor).
Section 8.14. Reports by Property Trustee.
(a) Within 60 days after May 15 of each year commencing with
May 15, 1997, the Property Trustee shall transmit by mail to all
Securityholders, as their names and addresses appear in the Securities Register,
(i) as provided in Trust Indenture Act Section 313 (c), and to the Depositor, a
brief report dated as of such May 15 in accordance with and to the extent
required by Trust Indenture Act Section 313(a) and (ii) a statement that the
Property Trustee has complied with all of its obligations under this Trust
Agreement during the twelve-month period (or, in the case of the initial report,
the period since the Closing Date) ending with such May 15 or, if the Property
Trustee has not complied in any material respect with such obligations, a
description of such non-compliance.
(b) In addition, the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and its actions
under this Trust Agreement as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with each stock
exchange upon which the Trust Securities are listed, with the Commission and
with the Depositor.
Section 8.15. Reports to the Property Trustee. The Depositor
and the Administrative Trustees on behalf of the Trust shall provide to the
Property Trustee such documents, reports and information as required by Section
314 of the Trust Indenture Act (if any) (whether or not then applicable to the
Trust Agreement) and the compliance certificate required by Section 314 of the
Trust Indenture Act (whether or not then applicable to the Trust Agreement) in
the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act (whether or not then applicable to the Trust Agreement).
- 64 -
<PAGE>
Section 8.16. Evidence of Compliance with Conditions
Precedent. Each of the Depositor and the Administrative Trustees on behalf of
the Trust shall provide to the Property Trustee evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act
(whether or not then applicable to the Trust Agreement). Any certificate or
opinion required to be given by an officer pursuant to Section 314(c) of the
Trust Indenture Act shall comply with Section 314(e) of the Trust Indenture Act.
Section 8.17. Number of Trustees.
(a) The number of Trustees shall be four and shall consist of
one Delaware Trustee, one Property Trustee and two Administrative Trustees
(provided that the Depositor (or the holders of a majority in Liquidation Amount
of the Preferred Securities upon an Event of Default), by written instrument may
increase or decrease the number of Administrative Trustees)
(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to Section 8.17(a), or
if the number of Trustees is increased pursuant to Section 8.17(a), a vacancy
shall occur. The vacancy shall be filled with a Trustee appointed in accordance
with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to annul the Trust. Whenever a vacancy in the number of Administrative Trustees
shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
Section 8.18. Delegation of Power.
(a) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her power for the purpose of executing any documents
contemplated in Section 2. 07 (a), including any registration statement or
amendment thereto filed with the Commission, or making any other governmental
filing; and
(b) the Administrative Trustees shall have power to delegate
from time to time to such of their number the doing of such things and the
execution of such instruments either in the
- 65 -
<PAGE>
name of the Trust or the names of the Administrative Trustees or otherwise as
the Administrative Trustees may deem expedient, to the extent such delegation is
not prohibited by applicable law or contrary to the provisions of the Trust, as
set forth herein.
Section 8.19. Outside Business. Any Trustee may engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders of Securities shall have no rights by
virtue of this Trust Agreement in and to such independent ventures or the income
or profits derived therefrom and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. No Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Trustee shall
have the right to take for its own account (individually as a partner or
fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Trustee may engage or be interested in any financial or other
transaction with the Depositor or any Affiliate of the Depositor, or may act on
any committee or body of holders of, securities or other obligations of the
Depositor or its Affiliates.
ARTICLE IX
Dissolution and Liquidation
Section 9.01. Dissolution Upon Expiration Date. The Trust
shall automatically dissolve and its affairs be wound up on March 15, 2015 (the
"Expiration Date") following the distribution of the Trust Property in
accordance with Section 9.04.
Section 9.02. Early Dissolution. Upon the first to occur of
any of the following events (such first occurrence, an "Early Dissolution
Event")
(i) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, Sinclair or one or more of its
Subsidiaries which in the aggregate own more than 50% of Sinclair's
consolidated assets;
(ii) the occurrence of a Tax Event or Investment Company Act
Event and a related required redemption of the Preferred Securities for
cash or (in the case of a Tax Event) the distribution of the KDSM
Senior Debentures to Securityholders upon confirmation of the Parent
Debenture Guarantee by Sinclair and in accordance with Section 4.02, as
the case may be;
- 66 -
<PAGE>
(iii) the redemption of all of the Preferred Securities
whether for cash or property; and
(iv) an order for dissolution of the Trust shall have been
entered by a court of competent jurisdiction.
then the Administrative Trustee and the Property Trustee shall take such action
as is required by Section 4.02 or Section 9.04, as applicable. The Trust may
only be dissolved pursuant to an Early Dissolution Event described in Section
9.02(i) with the consent of the Holders of a Majority in Liquidation Value of
the Outstanding Preferred Securities.
Section 9.03. Dissolution. The respective obligations and
responsibilities of the Trustees and the Trust created and continued hereby
shall dissolve upon the latest to occur of the following: (i) the distribution
by the Property Trustee to Securityholders upon the liquidation of the Trust
pursuant to Section 9.04, or upon the redemption of all of the Trust Securities
pursuant to Section 4.02, of all amounts required to be distributed hereunder
upon the final payment of the Trust Securities; (ii) the payment of any expenses
owed by the Trust; (iii) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders; and (iv) the
filing with Delaware Secretary of State of a certificate of cancellation for the
Trust upon the completion of winding up following the dissolution of the Trust.
Section 9.04. Liquidation.
(a) (i) If an Early Dissolution Event (other than a Tax Event
covered by clause (ii)) occurs or due to the Expiration Date, the Depositor, as
holder of the Common Securities, chooses to cause the liquidation of the Trust,
the Trust Property shall be liquidated, and the Trust shall be dissolved and its
affairs be wound-up by the Property Trustee in such manner as the Property
Trustee determines. In such event, on the date of the dissolution and winding-up
of the Trust and its affairs (the "Liquidation Date"), the Securityholders will
be entitled to receive out of the assets of the Trust available for distribution
to Securityholders, after satisfaction of all liabilities to creditors, an
amount equal to the Liquidation Value per Trust Security plus accrued and unpaid
Distributions thereon to the date of payment whether or not earned or declared
(such amount, and the amount described as being paid in clause (d) below, being
the "Liquidation Distribution"). If, upon any such dissolution and winding-up,
the Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then, the amounts available to be paid by the Trust on the
Preferred Securities
- 67 -
<PAGE>
shall be paid first to the Holders of Outstanding Preferred Securities on a pro
rata basis (based upon Liquidation Values); and second, to the extent assets are
available, to the Holders of Outstanding Common Securities upon any such
dissolution, winding-up or termination on a pro rata basis.
(ii) If a Tax Event occurs and the Depositor as holder of the
Common Securities elects to have the Trust liquidated, the Trust shall be
liquidated by the Administrative and Property Trustee as expeditiously as such
Trustees determine to be appropriate by distributing to each Securityholder,
after satisfaction of liabilities to creditors, and confirmation that the Parent
Debenture Guarantee is effective, a Like Amount of the KDSM Senior Debentures
(and Additional Amounts and Registration Default Distributions if applicable),
subject to Section 9.04(d) provided, however, that the Administrative Trustee
and the Property Trustee shall be permitted to follow the direction of the
holders of a majority of the Common Securities to dissolve the Trust and
distribute the KDSM Senior Debentures to Holders of Trust Securities in
accordance with this Section 9.04 only if (1) Sinclair confirms that its full
and unconditional Parent Debenture Guarantee of the KDSM Senior Debentures will
be effective upon such distribution of KDSM Senior Debentures and (2) the Trust
shall have received an opinion of independent legal counsel experienced in such
matters to the effect that the Holders of Preferred Securities will not
recognize any gain or loss for United States federal income tax purposes as a
result of such distribution. Notice of liquidation shall be given by the
Administrative Trustees by first-class mail, postage prepaid, mailed not later
than 30 nor more than 60 days prior to the Liquidation Date to each Holder of
Trust Securities at such Holder's address appearing in the Securities Register.
All notices of liquidation shall:
(A) state the Liquidation Date;
(B) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent the assets to be paid to the holders of Trust Securities upon
liquidation of the Trust; and
(C) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for the KDSM
Senior Debentures, or receive a Liquidation Distribution, as the case
may be, as the Administrative Trustees or the Property Trustee shall
deem appropriate.
(b) Except where Section 9.04(d) applies, in order to
- 68 -
<PAGE>
effect the liquidation of the Trust and distribution of the KDSM Senior
Debentures to Securityholders, the Property Trustee shall establish such
procedures as it shall deem appropriate to effect the distribution of the KDSM
Senior Debentures in exchange for the Outstanding Trust Securities Certificates.
(c) Except where Section 9.04(d) applies, after the
Liquidation Date, (i) the Trust Securities will no longer be deemed to be
Outstanding, (ii) if the Trust holds the KDSM Senior Debentures, certificates
representing the KDSM Senior Debentures will be issued pro rata to Holders of
Trust Securities Certificates, upon surrender of such certificates to the
Administrative Trustees or their agent for exchange, (iii) KDSM, Inc. shall use
its reasonable efforts to (x) have the KDSM Senior Debentures listed on the New
York Stock Exchange or on such other exchange (if any) as the Preferred
Securities are then listed, (y) have the KDSM Senior Debentures held through the
Depositary and (z) take any reasonable action necessary to effect the
distribution of the KDSM Senior Debentures, (iv) any Trust Securities
Certificates not so surrendered for exchange will be deemed to represent the pro
rata share of KDSM Senior Debentures or other assets to be distributed upon
surrender of the Trust Securities, accruing interest (to the extent applicable)
from the last Distribution Payment Date on which a Distribution was made on such
Trust Certificates until such certificates are so surrendered (and until such
certificates are so surrendered, no payments or interest or principal will be
made to Holders of Trust Securities Certificates with respect to such KDSM
Senior Debentures) and (v) all rights of Securityholders holding Trust
Securities will cease, except the right of such Securityholders to receive the
KDSM Senior Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of
this Section 9.04, whether because of an order for dissolution entered by a
court of competent jurisdiction or otherwise, distribution of the KDSM Senior
Debentures in the manner provided herein is determined by the Property Trustee
not to be practical, the Trust Property shall be liquidated, and the Trust shall
be dissolved, and its affairs be wound-up, by the Property Trustee in such
manner as the Property Trustee determines. In such event, on the date of the
dissolution and winding-up of the Trust and its affairs, the Securityholders
will be entitled to receive out of the assets of the Trust available for
distribution to Securityholders, after satisfaction of liabilities to creditors,
an amount equal to the Liquidation Value per Trust Security plus accrued and
unpaid Distributions thereon to the date of payment whether or not earned or
declared. If, upon any such dissolution and winding-up, the Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate
- 69 -
<PAGE>
Liquidation Distribution, then, the amounts available to be paid by the Trust on
the Preferred Securities shall be paid first to the Holders of Outstanding
Preferred Securities on a pro rata basis (based upon Liquidation Values); and
second, to the extent amounts remain, to the Holders of Outstanding Common
Securities upon any such dissolution, winding-up or termination on a pro rata
basis.
ARTICLE X
Miscellaneous Provisions
Section 10.01. Limitation of Rights of Securityholders. The
death or incapacity of any person having an interest, beneficial or otherwise,
in a Trust Security shall not operate to terminate this Trust Agreement, nor
entitle the legal representatives or heirs of such person or any Securityholder
for such person, to claim an accounting, take any action or bring any proceeding
in any court for a partition or winding up of the arrangements contemplated
hereby, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
Section 10.02. Amendment.
(a) This Trust Agreement may be amended from time to time by
the Administrative Trustees and the Depositor, without the consent of any
Securityholders, (i) to cure any ambiguity, correct or supplement any provision
herein or therein which may be inconsistent with any other provision herein or
therein, or to make any other provisions with respect to matters or questions
arising under this Trust Agreement, which shall not be inconsistent with the
other provisions of this Trust Agreement or (ii) to modify, eliminate or add to
any provisions of this Trust Agreement to such extent as shall be necessary to
ensure that the Trust will not be classified for United States federal income
tax purposes as an association taxable as a corporation at any time that any
Trust Securities are outstanding or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company Act
of 1940, as amended; provided, however, that such amendment or action shall not
adversely affect the rights of any Securityholder and, in the case of clause
(i), any amendments of this Trust Agreement shall become effective when notice
thereof is given to the Securityholders.
(b) Except as provided in Section 10.02(c) hereof, any
provision of this Trust Agreement may be amended by the Administrative Trustees
and the Depositor with (i) the consent of Trust Securityholders representing not
less than a majority (based upon Liquidation Values) of the Trust Securities
then Outstanding and (ii) receipt by the Trustees of an Opinion of
- 70 -
<PAGE>
Counsel to the effect that such amendment or the exercise of any power granted
to the Trustees in accordance with such amendment will not affect the Trust's
status as a grantor trust for federal income tax purposes or cause the Trust to
fail or cease to qualify for an exemption from the status of an "investment
company" under the Investment Company Act of 1940, as amended.
(c) In addition to and notwithstanding any other provision in
this Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 6.03 or 6.06 hereof), this
Trust Agreement may not be amended to (i) change the amount, timing, place of
payment or currency of any Distribution or Liquidation Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution or
Liquidation Distribution required to be made in respect of the Trust Securities
as of a specified date, (ii) restrict the right of a Securityholder to institute
suit for the enforcement of any such payment on or after such date, (iii) modify
the first sentence of Section 2.06 hereof, (iv) authorize or issue any interest
in the Trust other than as contemplated by this Agreement as of the date hereof,
(v) change the Redemption Price or modify the provisions of Section 4.02 hereof
or (vi) affect the limited liability of any holder of Preferred Securities;
notwithstanding any other provision herein, without the unanimous consent of the
Securityholders (such consent being obtained in accordance with Section 6.03 or
6.06 hereof), the proviso in the first sentence of Section 6.01(b) hereof and
paragraphs (b), (c) and (d) of this Section 10.02 may not be amended.
(d) Notwithstanding any other provisions of this Trust
Agreement, no Trustee shall enter into or consent to any amendment to this Trust
Agreement which would cause the Trust to fail or cease to qualify for an
exemption from status of an "investment company" under the Investment Company
Act of 1940, as amended.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the written consent of the Depositor, the Property Trustee or
the Delaware Trustee, as the case may be, this Trust Agreement may not be
amended in a manner which imposes any additional obligation on, or effects any
rights, liabilities or indemnifications of, the Depositor, the Property Trustee
or the Delaware Trustee, as the case may be.
(f) In the event that any amendment to this Trust Agreement is
made, the Administrative Trustees shall promptly provide to the Depositor, the
Property Trustee and the Delaware Trustee, a copy of such amendment.
Section 10.03. Agreement to be Bound. Each Person, by
- 71 -
<PAGE>
virtue of having become a Securityholder or an Owner in accordance with the
terms of this Trust Agreement, without any signature or further manifestation of
assent, shall be deemed to have expressly and unconditionally assented and
agreed to the terms of, and shall be bound by, this Trust Agreement, the
Guarantee Agreement and the Indenture.
Section 10.04. Separability. In case any provision in this
Trust Agreement or in the Trust Securities Certificates shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.05. GOVERNING LAW. THIS TRUST AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE
TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Section 10.06. Successors. This Trust Agreement shall be
binding upon and shall inure to the benefit of any successor to the Trust or the
Relevant Trustee or both, including any successor by operation of law.
Section 10.07. Headings. The Article and Section headings are
for convenience only and shall not affect the construction of this Trust
Agreement.
Section 10.08. Notice and Demand. Any notice, demand or other
communication which by any provision of this Trust Agreement is required or
permitted to be given or served to or upon any Securityholder or the Depositor
may be given or served in writing by deposit thereof, postage prepaid, in the
United States mail, hand delivery or facsimile transmission, in each case,
addressed, (i) in the case of a Holder of Preferred Securities, to such Holder
of Preferred Securities as such Securityholder's name and address may appear on
the Securities Register and (ii) in the case of the Holder of Common Securities
or the Depositor, to KDSM, Inc. c/o Sinclair Broadcast Group, Inc., 2000 West
41st Street, Baltimore, Maryland 21211 Attention: Treasurer. Such notice, demand
or other communication to or upon a Securityholder shall be deemed to have been
sufficiently given or made, for all purposes, upon hand delivery, mailing or
transmission.
Any notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon the Trust, the Property Trustee , the Delaware Trustee or the
Administrative Trustees shall be given in writing addressed (until another
address is published by the Trust) as follows: (i) with respect to the Property
Trustee,
- 72 -
<PAGE>
First Union National Bank of Maryland, 901 East Cary Street, Richmond, Virginia
23219, Attention: Corporate Trust Department; (ii) with respect to the Delaware
Trustee, First Union Bank of Delaware, One Rodney Square, 1st Floor, 920 King
Street, Wilmington, DE 19801, Attention: Corporate Trust Administration, and
(iii) with respect to the Administrative Trustees, David D. Smith and David B.
Amy, 2000 W. 41st Street, Baltimore, Maryland 21211. Such notice, demand or
other communication to or upon the Trust or any Trustee shall be deemed to have
been sufficiently given or made only upon actual receipt of the writing by the
Trust or any Trustee.
Section 10.09. Agreement Not to Petition. Each of the Trustees
and the Depositor agree for the benefit of the Securityholders that, until at
least one year and one day after the Trust has been terminated in accordance
with Article IX, they shall not file, or join in the filing of, a petition
against the Trust under any bankruptcy, reorganization, arrangement, insolvency,
liquidation or other similar law (including, without limitation, the Federal
Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the
commencement of any proceeding against the Trust under any Bankruptcy Law. In
the event the Depositor takes action in violation of this Section 10.09, the
Property Trustee agrees, for the benefit of Securityholders, that at the expense
of the Depositor it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Trust
or the commencement of such action and raise the defense that the Depositor has
agreed in writing not to take such action and should be stopped and precluded
there from and such other defenses, if any, as counsel for the Property Trustee
or the Trust may assert. The provisions of this Section 10.09 shall survive the
termination of this Trust Agreement.
Section 10.10. Trust Indenture Act; Conflict with Trust
Indenture Act. As of the date hereof:
(a) this Trust Agreement shall as a matter of contract be
subject to the provisions of the Trust Indenture Act that are required
to be part of this Trust Agreement and shall, to the extent applicable,
be governed by such provisions; and
(b) if and to the extent that any provision of this Trust
Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
Section 10.11. Reports. Whether or not Sinclair or the Trust
is subject to Section 13(a) or 15(d) of the Exchange Act, the Depositor shall
send to the Holders of Preferred
- 73 -
<PAGE>
Securities copies of the annual reports, quarterly reports and other documents
which Sinclair would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) if Sinclair were so subject, such documents to be
filed with the Commission to the extent permitted under the Exchange Act on or
prior to the respective dates (the "Required Filing Dates") by which Sinclair
would have been required so to file such documents if Sinclair were so subject.
KDSM, Inc. will also in any event (x) within 15 days of each Required Filing
Date transmit by mail to all holders of the Outstanding Preferred Securities, as
their names and addresses appear in the register, without cost to such holders,
copies of the annual reports, quarterly reports and other documents which
Sinclair would have been required to file with the Commission pursuant to
Section 13(a) or 15(d) of the Exchange Act if Sinclair were subject to such
Sections and (y) if filing such documents by Sinclair with the Commission is not
permitted under the Exchange Act, promptly upon written request and payment of
the reasonable cost of duplication and delivery, supply copies of such documents
to any prospective holder at the Trust's cost. Any such documents sent to the
holders of Outstanding Preferred Securities shall also include financial
information regarding KDSM, Inc. and the Trust to the extent information
regarding KDSM, Inc. and the Trust would be required to be included in a
registration statement relating to the Preferred Securities and the KDSM Senior
Debentures if such securities were being issued to the public.
Section 10.12. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
- 74 -
<PAGE>
Section 10.13. Third Party Beneficiaries. The banks under the
Bank Credit Agreement and all holders of the Existing Notes are third party
beneficiaries of Section 4.08 of this Trust Agreement and are entitled to rely
thereon as if a party thereto.
KDSM, INC,
as Depositor
By: /s/ David D. Smith
-----------------------------
Name: David D. Smith
Title: President
FIRST UNION NATIONAL BANK OF
MARYLAND,
as Property Trustee
By: /s/ Patricia A. Welling
-----------------------------
Name: Patricia A. Welling
Title: Property Trustee
FIRST UNION BANK OF DELAWARE,
as Delaware Trustee
By:
----------------------------
Name:
Title:
\s\ David D. Smith
--------------------------------
David D. Smith
as Administrative Trustee
\s\ David B. Amy
--------------------------------
David B. Amy,
as Administrative Trustee
- 75 -
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF SINCLAIR CAPITAL
THIS Certificate of Trust of Sinclair Capital (the "Trust"),
dated as of February 24, 1997, is being duly executed and filed by the
undersigned, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del.C. Section.3801, et seq.).
1. Name. The name of the business trust formed hereby is Sinclair Capital.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware are First
Union Bank of Delaware, One Rodney Square, 920 King Street, Wilmington, DE
19801, Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned trustees of the Trust have
executed this Certificate of Trust as of the date first-above written.
FIRST UNION NATIONAL BANK OF MARYLAND,
as trustee
By: /s/ Patricia A. Welling
---------------------------------------
Name: Patricia A. Welling
Title: Vice President
FIRST UNION BANK OF DELAWARE, as trustee
By: /s/ Stephen J. Kaba
--------------------------------------
Name: Stephen J. Kaba
Title: Vice President
DAVID B. AMY, as trustee
/s/ David B. Amy
------------------------------------------
<PAGE>
EXHIBIT B
BOOK-ENTRY-ONLY CORPORATE EQUITY ISSUES
Letter of Representations
Sinclair Capital
[Name of Issuer]
First Union National Bank of Maryland
[Name of Agent]
March 12, 1997
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: $200,000,000 11 5/8% High Yield Trust Offered Preferred
Securities ("HYTOPS"); CUSIP number: 829230200
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain
matters relating to the above-referenced issue (the "Securities"). Issuer is
selling the Securities to Smith Barney Inc. and Chase Securities Inc.
(collectively, the "Initial Purchasers") pursuant to a Purchase Agreement dated
March 5, 1997 (the "Document"). Initial Purchasers will take delivery of the
Securities through The Depository Trust Company ("DTC"). First Union National
Bank of Maryland, the property trustee of the Issuer, is acting as transfer
agent, paying agent and registrar with respect to the Securities (the "Trustee"
or the "Agent").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Agent make the following
<PAGE>
representations to DTC:
1. Prior to closing on the Securities on March 12, 1997, there shall be
deposited with DTC one Security certificate registered in the name of DTC's
nominee, Cede & Co., for each of the Securities with the offering value set
forth on Schedule A hereto, the total of which represents 100% of the offering
value of such Securities. If, however, the offering value of any Security
exceeds $200 million, one certificate will be issued with respect to each $200
million of offering value and an additional certificate will be issued with
respect to any remaining offering value. If the Securities will be held by a DTC
FAST Agent, as custodian for DTC, such Security certificate shall remain in
Agent's custody pursuant to the provisions of the FAST Balance Certificate
Agreement currently in effect between Agent and DTC. Each Security certificate
shall bear the legend below:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to Issuer or its agent for registration of transfer, exchange,
or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such
other entity as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede
& Co., has an interest herein.
2. Issuer (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificate(s) by virtue of submission of such certificate(s) to DTC.
3. In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Agent shall establish a record date for
such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall send notice of such record date to DTC not less
than 15 calendar days in advance of such record date. Notices to DTC pursuant to
this Paragraph by telecopy shall be sent to DTC's Reorganization Department
(212) 709-6896 or (212) 709-6897, and receipt of such notices shall be confirmed
by telephoning (212) 709-6870. Notices to DTC pursuant to this Paragraph by mail
or by any other means shall be sent to DTC's Reorganization Department as
indicated in Paragraph 7.
4. In the event of a stock split, recapitalization, conversion, or any
similar transaction resulting in the cancellation of all or any part of the
Securities represented thereby, the Agent shall send DTC a notice of such event
as soon as practicable, but in no event less than five business days prior to
the effect date of such transaction.
5. In the event of a full or partial redemption, Issuer or Agent shall
send a notice to
-2-
<PAGE>
DTC specifying: (a) the amount of the redemption or refunding; (b) in the case
of a refunding, the maturity date(s) established under the refunding; and (c)
the date such notice is to be distributed to Security holders or published (the
"Publication Date"). Such notice shall be sent to DTC by a secure means (E.G.
legible telecopy, registered or certified mail, overnight delivery) in a timely
manner designed to assure that such notice is in DTC's possession no later than
the close business on the business day before or, if possible, two business days
before the Publication Date. Issuer or Agent shall forward such notice either in
a separate secure transmission for each CUSIP number or in a secure transmission
for multiple CUSIP numbers (if applicable) which includes a manifest or list of
each CUSIP number submitted in that transmission. (The party sending such notice
shall have a method to verify subsequently the use of such means and the
timeliness of such notice.) The Publication Date shall not be less than 30 days
nor more than 60 days prior to the redemption date or, in the case of an advance
refunding, the date that the proceeds are deposited in escrow. Notices to DTC
pursuant to this Paragraph by telecopy shall be sent to DTC's Call Notification
Department at (516) 227-4039 or (516) 227-4190. If the party sending the notice
does not receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (516) 227-4070. Notices to DTC pursuant to
this Paragraph by mail or by any other means shall be sent to:
Manager, Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
6. In the event of an offering or issuance of rights with respect to
the Securities outstanding, Agent shall send DTC a notice specifying: (a) the
amount of and conditions, if any, applicable to such rights offering or
issuance; any applicable expiration or deadline date, or any date by which any
action on the part of holders of such Securities is required; and (c) the
Publication Date of such notice.
The Publication Date will be as soon as practicable after the
announcement by the Company of any such offering or issuance of rights with
respect to the Securities represented thereby. DTC requires that the Publication
Date be not less than 30 days nor more than 60 days prior to the related payment
date, distribution date, or issuance date, respectively.
7. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Agent to
Security holders specifying the terms of the tender and the Publication Date of
such notice shall be sent to DTC by a secure means in the manner set forth in
Paragraph 5. Notices to DTC pursuant to this Paragraph and notices of other
corporate actions by telecopy shall be sent to DTC's Reorganization Department
at (212) 709-1093 or (212) 709- 1094, and receipt of such notices shall be
confirmed by telephoning (212) 709-6884. Notices to DTC pursuant to the above by
mail or by any other means shall be sent to:
-3-
<PAGE>
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
8. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities (listed on Schedule A hereto) and the accompanying
description of such Securities, which, as of the date of this letter, is
"Sinclair Capital 11 5/8% High Yield Trust Offered Preferred Securities
("HYTOPS").
9. Issuer or Agent shall provide written notice to a standard dividend
announcement service subscribed to by DTC. In the event that no such service
exists, Issuer or Agent shall provide such notice directly to DTC
electronically, as previously arranged by Issuer or Agent and DTC, as soon as
the payment information is available. If electronic transmission has not been
arranged, absent any other arrangements between Issuer or Agent and DTC, such
information should be sent by telecopy to DTC's Dividend Department at (212)
709-1723 or (212) 709-1686, and receipt of such notices shall be confirmed by
telephoning (212) 709-1270. Notices to DTC pursuant to the above by mail or by
any other means shall be sent to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, NY 10004-2695
After establishing the dollar payment to be made on the Securities in
question, agent will notify DTC's Dividend Department of the payment and payment
date preferably five, but not less than two, business days prior to the
effective date for such transaction.
10. Issuer or Agent shall provide no later than noon (Eastern Time)
automated notification of CUSIP-level detail for dividend payments to DTC on the
payment date.
11. Dividend payments and cash distributions shall be received by Cede
& Co. as nominee as of DTC, or its registered assigns, in same-day funds or the
equivalent no later than 2:30 p.m. (Eastern Time) on each payment date. Absent
any other arrangements between Issuer or Agent and DTC, such funds shall be
wired as follows:
The Chase Manhattan Bank
ABA #021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Dividend Deposit Account #066-026776
-4-
<PAGE>
12. Redemption payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns, in same-day funds by 2:30 p.m. (Eastern Time) on
payment date. Absent any other arrangements between Agent and DTC, such funds
shall be wired as follows:
The Chase Manhattan Bank
BA #021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Redemption Deposit Account #066-027306
13. Reorganization payments resulting from corporate actions (such as
tender offers or mergers) shall be received by Cede & Co., a nominee of DTC, or
its registered assigns, in same- day funds by 2:30 p.m. (Eastern Time) on
payment date. Absent any other arrangements between Agent and DTC, such funds
shall be wired as follows:
The Chase Manhattan Bank
BA #021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Reorganization Deposit Account #066-027608
14. DTC may direct Issuer or Agent to use any other number or address
as the number or address to which notices or payments of dividends,
distributions, or redemption proceeds may be sent.
15. In the event of a redemption, acceleration, or any other similar
transaction (E.G., tender made and accepted in response to Issuer's or Agent's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding, DTC, in its discretion: (a) may request Issuer or Agent to issue
and authenticate a new Security certificate; or (b) may make an appropriate
notation on the Security certificate indicating the date and amount of such
reduction in the number of Securities outstanding, except in the case of final
redemption, in which case the certificate will be presented to Issuer or Agent
prior to payment, if required.
16. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certified Securities, Issuer or Agent shall
notify DTC of the availability of certificates. In such event, Issuer or Agent
shall issue, transfer, and exchange certificates in appropriate amounts, as
required by DTC and others.
17. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to issuer
or Agent (at which time DTC will confirm with Issuer or Agent the aggregate
principal amount of Securities outstanding). Under such circumstances, DTC's
request Issuer and Agent shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing
-5-
<PAGE>
Securities to any DTC Participant having Securities credited to its DTC
accounts.
18. Nothing herein shall be deemed to require Agent to advance funds on
behalf of Issuer.
19. Issuer represents that at the time of initial registration in the
name of DTC's nominee, Cede & Co., the Securities were Legally and Contractually
Restricted Securities,(1) eligible for transfer under Rule 144A under the
Securities Act of 1993, as amended (the "Securities Act"), and identified by a
CUSIP or CINS identification number that was different from any CUSIP or CINS
number assigned to any securities of the same class that were not Legally or
Contractually Restricted Securities. Issuer shall ensure that a CUSIP or CINS
identification number is obtained for all unrestricted securities of the same
class that is different from any CUSIP or CINS identification number assigned to
a Legally or Contractually Restricted Security of such class, and shall notify
DTC promptly in the event that it is unable to do so. Issuer represents that it
has agreed to comply with all applicable information requirements of Rule 144A.
20. Issuer represents that the Securities are included within the
Private Offerings, Resales and Trading through Automated Linkages Market, a
Self-Regulatory Organization system approved by the Securities Exchange
Commission for the reporting quotation and trade information of securities
eligible for transfer pursuant to Rule 144A (an "SRO Rule 144A System").
21. Issuer and Agent acknowledge that if the Securities cease to be
included in an SRO Rule 144A System during any period in which the Securities
are Legally or Contractually Restricted Securities, the Securities shall no
longer be eligible for DTC's services. Furthermore, DTC may discontinue
providing its services as securities depository with respect to the Securities
at any time by giving reasonable notice to Issuer or Agent. Under any of the
aforementioned circumstances, at DTC's request, Issuer and Agent shall cooperate
fully with DTC by taking appropriate action to make available one or more
separate certificates evidencing Securities to any Participant having Securities
credited to its DTC accounts.
22. Issuer and Agent acknowledge that so long as Cede & Co. is a record
owner of
- --------
(1) "Legally Restricted Security" is a restricted security, as defined in Rule
144(a)(3). A "Contractually Restricted Security" is a security that upon
issuance and continually thereafter can only be sold pursuant to Regulation
S under the Securities Act, Rule 144A, Rule 144 or in a transaction exempt
from the registration requirements of the Securities Act pursuant to
Section 4 of the Securities Act and not involving any public offering;
PROVIDED, HOWEVER, that once the security is sold pursuant to the
provisions of Rule 144, including Rule 144(k), it will thereby cease to be
a "Contractually Restricted Security." For purposes of this definition, in
order for a depository receipt to be considered a "Legally or Contractually
Restricted Security," the underlying security must also be a "Legally or
Contractually Restricted Security."
-6-
<PAGE>
the Securities, Cede & Co. shall be entitled to all applicable voting rights and
to receive the full amount of all distributions payable with respect thereto.
Issuer and Agent acknowledge that DTC shall treat any DTC Participant
("Participant") having Securities credited to its DTC accounts as entitled to
the full benefits of ownership of such Securities. Without limiting the
generality of the preceding sentence, Issuer and Agent acknowledge that DTC
shall treat any Participant having Securities credited to its DTC accounts as
entitled to receive distributions (and voting rights, if any) in respect of
Securities, and to receive from DTC certificates evidencing Securities. Issuer
and Agent recognize that DTC does not in any way undertake to, and shall not
have any responsibility to, monitor or ascertain the compliance of any
transactions in the Securities with any of the provisions: (a) of Rule 144A;
(b)of other exemptions from registration under the Securities Act or of any
other state or federal securities laws; or (c) of the offering documents.
23. The Security certificate(s) shall remain in Agent's custody as a
"Balance Certificate" subject to the provisions of the Balance Certificate
Agreement between Agent and DTC currently in effect.
24. On each day on which Agent is open for business and on which it
receives an instruction originated by a Participant through DTC's
Deposit/Withdrawal at Custodian ("DWAC") system to increase the Participant's
account by a specified number of shares, units or obligations (a "Deposit
Instruction"), Agent shall, before 6:30 p.m. (Eastern Time) that day, either
approve or cancel the Deposit Instruction through the DWAC system.
25. On each day on which Agent is open for business and on which it
receives an instruction originated by a Participant through the DWAC systems to
decrease the Participant's account by a specified number of shares, units, or
obligations (a "Withdrawal Instruction"), Agent shall, before 6:30 p.m. (Eastern
Time) that day, either approve or cancel the Withdrawal Instruction through the
DWAC system.
26. Agent agrees that its approval of a Deposit or Withdrawal
Instruction shall be deemed to be the receipt by DTC of a new, reissued or
reregistered certificated security on registration of transfer to the name of
Cede & Co. for the quantity of Securities evidenced by the Balance Certificate
after the Deposit or Withdrawal Instruction is effected.
27. It is understood that if the holders of the Securities shall at any
time have the right to tender the Securities to Issuer and require that issuer
repurchase such holders' Securities pursuant to the Document and Cede & Co., as
nominee of DTC, or its registered assigns, as the record owner, is entitled to
tender the Securities, such tenders will be effected by means of DTC's Repayment
Option Procedures. Under the Repayment Option Procedures, DTC will receive
during the applicable tender period instructions from its Participants to tender
Securities for purchase. The undersigned agree that such tender for purchase may
be made by DTC by means of a book-entry credit of such Securities to the account
of Trustee, as agent for Issuer, provided that such credit is made on or before
the final day of the applicable tender period. DTC agrees that promptly after
the recording of any such book-entry credit, it will provide to Trustee,
-7-
<PAGE>
as agent for Issuer, an Agent Receipt ad Confirmation or the equivalent in
accordance with the Repayment Option Procedures; identifying the Securities and
the aggregate principal amount thereof as to which such tender for purchase has
been made.
28. Trustee or Issuer shall send DTC a notice regarding such optional
tender by hand or by a secure means (e.g., legible facsimile transmission,
registered or certified mail, overnight delivery) in a timely manner designed to
assure that such notice is in DTC's possession no later than the close of
business two business days before the Publication Date. The Publication Date
shall not be less than 15 days prior to the expiration date of the applicable
tender period. Such notice shall state whether any partial redemption of the
Securities is scheduled to occur during the applicable optional tender period.
29. If delivered by hand or sent by mail or overnight delivery, such
notice shall be sent to:
Supervisor, Put Bond Unit
Reorganization Department
The Depository Trust Company
7 Hanover Square - 23rd Floor
New York, NY 10004-2695
If sent by facsimile transmission, such notice shall be sent to (212) 709-6895.
Trustee or Issuer shall confirm DTC's receipt of such facsimile transmission by
telephoning (212) 709-1470.
[Signatures Begin on Following Page]
-8-
<PAGE>
Very truly yours,
SINCLAIR CAPITAL
(Issuer)
By: /s/ David B. Amy
--------------------------------
(Authorized Trustee's Signature)
FIRST UNION NATIONAL BANK OF
MARYLAND
(Agent)
By: /s/ Patricia A. Welling
--------------------------------
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By: /s/ Richard B. Nesson
-----------------------
cc: Underwriter
Underwriter's Counsel
-10-
<PAGE>
SCHEDULE A
Sinclair Capital $200,000,000 11 5/8% High Yield Trust Preferred
Securities (Describe Issue)
CUSIP Number Share Total Offering ($) Value
829230200 2,000,000 $200,000,000
<PAGE>
SCHEDULE B
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
-----------------------------------
(PREPARED BY DTC--BRACKETED MATERIAL MAY BE APPLICABLE ONLY TO CERTAIN ISSUES)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities will
be issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully-registered Security certificate will be
issued for [each issue of] the Securities, [each] in the aggregate amount of
such issue, and will be deposited with DTC. [If, however, the aggregate
principal amount of [any] issue exceeds $200 million, one certificate will be
issued with respect to each $200 million of principal amount and an additional
certificate will be issued with respect to any remaining principal amount of
such issue.]
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participant's accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participant's records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
-i-
<PAGE>
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Securities; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may nor may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, to Indirect Participants, and by Direct and Indirect Participants
to Beneficial Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
[6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest if each Direct Participant in such issue to be
redeemed.]
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts in
the Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the
Securities will be made to Cede & Co., as nominee of DTC. DTC's practice is to
credit Direct Participants' accounts on payable date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe that
it will not receive payment on payable date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC, Agent, or Issuer, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, a and dividends t DTC is the responsibility
of Issuer or Agent, disbursement of such payments to Direct Participants shall
be the responsibility of Cede & Co., and disbursement of such payments to Direct
Participants shall be the responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its
Securities purchased or tendered, through its Participant, to
[Tender/Remarketing Agent, and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in the
Securities, on DTC's records, to [Tender/Remarketing] Agent. The requirement for
physical delivery of Securities in connection with an optional tender or a
mandatory purchase will be deemed satisfied when the ownership rights in the
Securities are transferred by Direct Participants on DTC's records and followed
by a book-entry credit of tendered securities to [Tender/Remarketing Agent's DTC
account.]
-ii-
<PAGE>
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Agent. Under such circumstances, in the event that a successor securities
depository is not obtained, Security certificates are required to be printed and
delivered.
11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.
-iii-
<PAGE>
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
Certificate Number Number of Common Securities
C-1 62,000
Certificate Evidencing Common Securities
of
SINCLAIR CAPITAL
Common Securities
(liquidation amount U.S. $100 per Common Security)
Sinclair Capital, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that KDSM, Inc.
(the "Holder") is the registered owner of 62,000 common securities of the Trust
representing beneficial interests in the assets of the Trust and designated the
Common Securities (liquidation amount U.S. $100 per Common Security) (the
"Common Securities"). In accordance with, and except as provided by, Section
5.11 of the Trust Agreement (as defined below) the Common Securities are not
transferable and any attempted transfer hereof shall be void. The designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Common Securities are set forth in, and this certificate and the Common
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of March 12, 1997, as the same may be amended from time to time
(the "Trust Agreement"), including the designation of the terms of the Common
Securities as set forth therein. The Common Securities are solely payable by the
Trust from the Trust Property (as defined in the Trust Agreement). The Trust
will furnish a copy of the Trust Agreement to the Holder without charge upon
written request to the Trust at its principal place of business or registered
office.
Upon receipt of this certificate, the Holder hereof is bound
by the Trust Agreement and is entitled to the benefits thereunder.
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the
Trust has executed this certificate this 12th day of March, 1997.
SINCLAIR CAPITAL
By: \s\ David B. Amy
--------------------------
David B. Amy
Administrative Trustee
Registered and Countersigned by
FIRST UNION NATIONAL BANK OF MARYLAND
as Securities Registrar
By: \s\ Patricia A. Welling
-------------------------------
Patricia A. Welling
<PAGE>
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of March 12, 1997, between KDSM, Inc., a
Maryland corporation ("KDSM, Inc.") and Sinclair Capital, a Delaware business
trust (the "Trust")
WHEREAS, the Trust intends to issue and sell its Common
Securities (the "Common Securities") to and receive the KDSM Senior Debentures
from KDSM, Inc. and to issue and sell Sinclair Capital 11 5/8% High Yield Trust
Originated Preferred Securities (the "Preferred Securities") with such powers,
preferences and special rights and restrictions as are set forth in the Amended
and Restated Trust Agreement of the Trust dated as of March 12, 1997 as the same
may be amended from time to time (the "Trust Agreement");
WHEREAS, KDSM, Inc. is the issuer of the KDSM Senior
Debentures;
NOW, THEREFORE, in consideration of the purchase by each
holder of the Preferred Securities, which purchase Sinclair and KDSM, Inc.
hereby agree shall benefit Sinclair and KDSM, Inc. and which purchase Sinclair
and KDSM, Inc. acknowledge will be made in reliance upon the execution and
delivery of this Agreement, Sinclair, KDSM, Inc. and the Trust hereby agree as
follows:
ARTICLE I
Section 1.01. Guarantee by KDSM Inc. Subject to the terms and
conditions hereof, KDSM, Inc. hereby irrevocably and unconditionally guarantees
to each person or entity to whom the Trust is now or hereafter becomes indebted
or liable (the "Creditors") the full payment, when and as due, of any and all
Obligations (as hereinafter defined) to such Creditors. As used herein,
"Obligations" means any indebtedness, expenses or liabilities, whether
contingent or actual, of the Trust, other than obligations of the Trust to pay
to holders of any Preferred Securities or Common Securities (as defined in the
Trust Agreement) in the Trust the amounts due such holders pursuant to the terms
of the Preferred Securities or Common Securities, as the case may be. This
Agreement is intended to be for the benefit of, and to be enforceable by, the
holders of Preferred Securities and all such Creditors, whether or not such
Creditors have received notice hereof.
Section 1.02. Term of Agreement. This Agreement shall
terminate and be of no further force and effect upon the date on which the Trust
terminates and there are no Creditors remaining;
<PAGE>
provided, however, that this Agreement shall continue to be effective or shall
be reinstated, as the case may be, if at any time any Creditor must restore
payment of any sums paid under any Obligation for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
Section 1.03. Waiver of Notice. KDSM, Inc. hereby waives
notice of acceptance of this Agreement and of any Obligation to which it applies
or may apply, and Sinclair hereby waives presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
Section 1.04. No Impairment. The obligations, covenants,
agreements and duties of KDSM, Inc. under this Agreement shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the extension of time for the payment by the Trust of all
or any portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the
part of the Creditors to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Creditors with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt, or other similar proceedings affecting, the Trust or any of the assets
of the Trust.
There shall be no obligation of the Creditors to give notice
to, or obtain the consent of, KDSM, Inc. with respect to the happening of any of
the foregoing.
Section 1.05. Enforcement. A Creditor may enforce this
Agreement directly against KDSM, Inc. and KDSM, Inc. waives any right or remedy
to require that any action be brought against the Trust or any other person or
entity before proceeding against KDSM, Inc.
ARTICLE II
Section 2.01. Binding Effect. All guarantees and agreements
contained in this Agreement shall bind the successors, assigns, receivers,
trustees and representatives of KDSM, Inc.
<PAGE>
and shall inure to the benefit of the Creditors.
Section 2.02. Amendment. So long as there remains any Creditor
or any Preferred Securities of any series are outstanding, this Agreement shall
not be modified or amended in any manner adverse to such Creditor or to the
holders of the Preferred Securities.
Section 2.03. Third Party Beneficiaries. The Creditors and the
holders of Preferred Securities shall be third party beneficiaries of this
Agreement, including, but not limited to, the provisions of Section 1.01 and
this Section 2.03 and shall be entitled to rely thereon as if a party thereto.
Section 2.04. Notices. Any notice, request or other
communication required or permitted to be given hereunder shall be given in
writing by delivering the same against receipt therefor by facsimile
transmission (confirmed by mail), telex or by registered or certified mail,
addressed as follows (and if so given, shall be deemed given when mailed or upon
receipt of an answer-back, if sent by telex), to wit:
To: KDSM, Inc.
c/o Sinclair Broadcast Group, Inc.
2000 West 41st Street
Baltimore, Maryland 21211
Attention: Treasurer
With a copy to:
Thomas & Libowitz, P.A.
USF&G Tower, 100 Light Street, Suite 1100
Baltimore,Maryland 21202
Attention: Wayne C. Davis, Esq.
With a copy to:
Wilmer Cutler & Pickering
100 Light Street
Baltimore,Maryland 21202
Attention: John B. Watkins, Esq.
To: Property Trustee
First Union National Bank of Maryland
901 East Cary Street
Richmond, Virginia 23219
Facsimile No. : 804-788-9661
Attention: Corporate Trust Department
<PAGE>
With a copy to:
Administrative Trustees
2000 West 41st Street
Baltimore, Maryland
Section 2.04 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
THIS AGREEMENT is executed as of the day and year first above
written.
KDSM, Inc.
By: \s\ David D. Smith
--------------------
Name: David D. Smith
Title: President
SINCLAIR CAPITAL
By: \s\ David B. Amy
--------------------
Name: David B. Amy
Title: President
<PAGE>
EXHIBIT E
IF THIS IS A GLOBAL SECURITY, INSERT - - THIS SECURITY IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE TRUST AGREEMENT HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE TRUST AGREEMENT AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE.DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED TN THE TRUST AGREEMENT.
IF DTC IS ACTING AS THE DEPOSITARY, INSERT - - UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
[IF THE SECURITY IS A RESTRICTED PREFERRED SECURITY, INSERT -THIS SECURITY HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR"), (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE PROPERTY TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE PROPERTY TRUSTEE), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
<PAGE>
Certificate Number Number of Preferred Securities
2,000,000
CUSIP NO.
( )
Certificate Evidencing Preferred Securities
of
SINCLAIR CAPITAL
11 5/8% High Yield Trust Originated Preferred Securities
(liquidation amount U.S. $100 per Preferred Security)
Sinclair Capital, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of 2,000,000 preferred securities of the
Trust representing a beneficial interest in the assets of the Trust and
designated the Sinclair Capital 11 5/8% High Yield Trust Originated Preferred
Securities (liquidation amount U.S. $100 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in Section
5.05 of the Trust Agreement (as defined below). The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Preferred Securities are set forth in, and this certificate and the Preferred
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of March 12, 1997, as the same may be amended from time to time
(the "Trust Agreement"), including the designation of the terms of Preferred
Securities as set forth therein. The Preferred Securities are solely payable by
the Trust from the Trust Property (as defined in the Trust Agreement). The
holder of this certificate is entitled to the benefits of the Parent Guarantee
Agreement entered into by Sinclair Broadcast Group, Inc., a Maryland
corporation, and First Union National Bank of Maryland, as guarantee trustee,
dated as of March 12, 1997 (the "Guarantee") to the extent provided therein. The
Trust will furnish a copy of the Trust Agreement and the Guarantee Agreement to
the Holder of this certificate without charge upon written request to the Trust
at its principal place of business or registered office.
Upon receipt of this certificate, the holder of this
certificate is bound by the Trust Agreement and is entitled to the benefits
thereunder.
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the
Trust has executed this certificate this 12th day of March, 1997.
Sinclair Capital
By: \s\ David B. Amy
---------------------
David B. Amy
Administrative Trustee
Registered and Countersigned by
First Union National Bank of Maryland,
as Securities Registrar
By: \s\ Patricia A. Welling
---------------------------
Patricia A. Welling
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:___________________
Signature: ____________________________
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
<PAGE>
EXHIBIT F
[Form of Restricted Securities Transfer Certificate]
RESTRICTED SECURITIES TRANSFER CERTIFICATE
(For transfers pursuant to Section 5.05 of
the Trust Agreement referred to below)
First Union National Bank of Maryland,
as Securities Registrar
901 East Cary Street
Richmond, Virginia 23219
Re: 11 5/8% High Yield Trust Originated Preferred
Securities (the "Securities")
Reference is made to the Amended and Restated Trust Agreement, dated as
of March 12, 1997 (the "Trust Agreement"), among KDSM, Inc., as Depositor, First
Union National Bank of Maryland, as Property Trustee, First Union Bank of
Delaware, as Delaware Trustee and the Administration Trustees named therein.
Terms used herein and defined in the Trust Agreement or in Rule 144A or Rule 144
under the U.S. Securities Act of 1933 (the "Securities Act") are used herein as
so defined.
This certificate relates to $______________ aggregate liquidation
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities")
CUSIP No(s). _________________________
CERTIFICATE No(s). ___________________
CURRENTLY IN BOOK-ENTRY FORM: Yes ___ No ___ (check one)
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner."
If the Specified Securities are represented by a Global Security, they are held
through a Depositary (except in the name of "DTC") or an Agent Member in the
name of the Undersigned, as or on behalf of the Owner. If the Specified
Securities are not represented by a Global Security, they are registered in the
name of the Undersigned, as or on behalf of the Owner.
<PAGE>
The Owner has requested that the Specified Securities be transferred to
a person (the "Transferee") who will take delivery in the form of a Restricted
Security. In connection with such transfer, the Owner hereby certifies that,
unless such transfer is being effected pursuant to an effective registration
statement under the Securities Act, it is being effected in accordance with Rule
144A or Rule 144 under the Securities Act and all applicable securities laws of
the states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as:
(1) Rule 144A Transfers. If the transfer is being effected in accordance
with Rule 144A:
(A) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably
believe is a "qualified institutional buyer" within the
meaning of Rule 144A, acquiring for its own account or for the
account of a qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that
the Owner may be relying on Rule 144A in connection with the
transfer; and
(2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule
144:
(A) the transfer is occurring after a holding period of at least
two years (computed in accordance with paragraph (d) of Rule
144) has elapsed since the date the Specified Securities were
acquired from the Company or from an affiliate (as such term
is defined in Rule 144) of the Company, whichever is later,
and is being effected in accordance with the applicable
amount, manner of sale and notice requirements of paragraphs
(e), (f) and (h) of Rule 144;
(B) the transfer is occurring after a holding period by the Owner
of at least two years has elapsed since the date the Specified
Securities were acquired from the Company or from an affiliate
(as such term is defined in Rule 144) of the Company,
whichever is later, and the Owner is not, and during the
preceding three months has not been, an affiliate of the
Company; or
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the "Initial Purchaser" (as
defined in the Trust Agreement relating to the Trust to which the Securities
were initially issued).
Dated: _______________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By: ___________________________________
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.
SINCLAIR BROADCAST GROUP, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
(as amended through July 9, 1996)
FIRST: Name. The name of the Corporation is:
SINCLAIR BROADCAST GROUP, INC.
SECOND: Purpose. The purpose for which the Corporation is formed and the
business or object to be carried on and promoted by it are as follows:
(a) to own, operate, acquire, sell, and transfer television stations and
television programming;
(b) to do anything permitted by Section 2-103 of the Corporations and
Associations Article of the Annotated Code of Maryland, as amended from time to
time; and
(c) to engage in any other lawful purpose and business.
THIRD: Capital Structure. The total number of shares of all classes of
stock which the Corporation has authority to issue is one hundred forty-five
million (145,000,000) shares, having an aggregate par value of one million four
hundred fifty thousand dollars ($1,450,000), consisting of one hundred million
(100,000,000) shares of Class A Common Stock with a par value of one cent ($.01)
per share (the "Class A Common Stock"), thirty-five million (35,000,000) shares
of Class B Common Stock with a par value of one cent ($.01) per share (the
"Class B Common Stock"), and ten million (10,000,000) shares of Preferred Stock
with a par value of one cent ($.01) per share (the "Preferred Stock"). Class A
Common Stock and Class B Common Stock are hereinafter collectively referred to
as "Common Shares."
FOURTH: Voting Rights. (a) Holders of Class A Common Stock are entitled to
one (1) vote per share of such stock held and, except as provided below, holders
of Class B Common Stock are entitled to ten (10) votes per share of such stock
held with respect to matters properly submitted for the vote of holders of
Common Shares at any duly constituted meeting of stockholders. The holders of
Common Shares will vote together as a single class on all matters properly
presented to the stockholders for their vote unless otherwise required by law.
The holders of the Common Shares are not entitled to cumulate votes in the
election of any directors.
- 1 -
<PAGE>
(b) Notwithstanding the foregoing, holders of Class B Common Stock shall be
entitled to one (1) vote per share with respect to: (i) any proposed "Rule 13e-3
transaction," as that term is defined in Rule 13e-3 promulgated under the
Securities Exchange Act of 1934, as amended, between the Corporation and any
person who held stock in the Corporation as of January 1, 1995 (the "Controlling
Stockholders"), any Affiliate (as such term is defined below) of the Controlling
Stockholders, or any group which the Controlling Stockholders are an Affiliate
or which the Controlling Stockholders are a member; (ii) any disposition of all
or substantially all of the Corporation's assets; (iii) any sale or transfer or
other disposition of assets which would cause a fundamental change in the nature
of the Corporation's business; and (iv) a merger or a consolidation of the
Corporation subsequent to which the holders of the Common Shares will own less
than 50% of the common stock of the Corporation following such transaction.
For the purpose of paragraph (b) above, an "Affiliate" is defined as: (i)
any individual or entity that, directly or indirectly, controls, is controlled
by, or is under the common control of the Controlling Stockholders; (ii) any
corporation or organization (other than the Corporation or a majority owned
subsidiary of the Corporation) of which any of the Controlling Stockholders is
an owner or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of voting securities or in which any of the
Controlling Stockholders has a substantial beneficial interest; (iii) a voting
trust or similar arrangement pursuant to which any of the Controlling
Stockholders serves as a trustee or in a similar fiduciary capacity; or (v) any
relative or spouse of the Controlling Stockholders or any relative of such
spouse provided such spouse has the same residence as the Controlling
Stockholder.
FIFTH: Conversion of Class B Common Stock.
(a) In the event that the number of shares of the Corporation's Common
Shares held in the aggregate by Controlling Stockholders falls to below ten
percent (10%) of the total number of Common Shares outstanding, each share of
Class B Common Stock shall at that time be automatically converted to one (1)
fully paid and non-assessable share of Class A Common Stock.
(b) Upon the sale or other transfer by a holder of Class B Common Stock to
a person or entity other than a Permitted Transferee (as such term is defined
below), such shares of Class B Common Stock shall be automatically converted
into an equal number of shares of Class A Common Stock. Promptly upon such sale
or other transfer, the holder of Class B Common Stock therefor, duly endorsed in
blank or accompanied by proper instruments of transfer, at the office of the
Corporation or of any transfer agent for the Class A Common Stock, and shall
give written notice to the Corporation at such office: (i) stating that the
shares are being converted pursuant to this paragraph, (ii) identifying the
number of shares of Class B Common Stock being converted, and (iii)
- 2 -
<PAGE>
setting out the name or names (with addresses) and denominations in which the
certificate or certificates for Class A Common Stock shall be issued and shall
include instructions for delivery thereof. Delivery of such notice together with
the certificates representing the Class B Common Stock shall obligate the
Corporation or its transfer agent to issue and deliver at such stated address to
such stated transferee a certificate or certificates for the number of Class A
Common Stock to which such transferee is entitled, registered in the name of
such transferee. In the event of a sale or other transfer of less than all of
the Class B Common Stock evidenced by a certificate surrendered to the
Corporation in the accordance with the above procedures, the Corporation shall
execute and deliver to the transferor, without charge, a new certificate
evidencing the number of shares of Class B Common Stock not sold or otherwise
transferred.
For the purpose of paragraph (b) above, a "Permitted Transferee" is defined
as:
(i) (A) any Controlling Stockholder; (B) the estate of a Controlling
Stockholder; (C) the spouse or former spouse of a Controlling Stockholder; (D)
any lineal descendent of a Controlling Stockholder, any spouse of such lineal
descendent, a Controlling Stockholder's grandparent, parent, brother or sister
or a Controlling Stockholder's spouse's brother or sister; (E) any guardian or
custodian (including a custodian for purposes of the Uniform Gift to Minors Act
or Uniform Transfers to Minors Act) for, or any conservator or other legal
representative of, one or more Permitted Transferees; or (F) any trust or
savings or retirement account, including an individual retirement account for
purposes of federal income tax laws, whether or not involving a trust,
principally for the benefit of one or more Permitted Transferees, including any
trust in respect of which a Permitted Transferee has any general or special
testamentary power of appointment or general or special non-testamentary power
of appointment which is limited to any other Permitted Transferee;
(ii) the Corporation;
(iii) any employee benefit plan or trust thereunder sponsored by the
Corporation or any of its subsidiaries;
(iv) any trust principally for the benefit of one or more of the
individuals, persons, firms or entities ("Persons") referred to in (i) through
(iii) above;
(v) any corporation, partnership, or other entity if all of the beneficial
ownership is held by one or more of the Persons referred to in (i) through (iv)
above;
(vi) any voting trust for the benefit of one or more of the Persons
referred to in (i) through (iv) above; and
- 3 -
<PAGE>
(vii) any broker or dealer in securities, clearing house, bank, trust
company, savings and loan association or other financial institution which holds
the Class B Common Stock for the benefit of a Controlling Stockholder or
Permitted Transferee thereof.
(c) Notwithstanding anything to the contrary set forth herein, any holder
of Class B Common Stock may pledge his shares of Class B Common Stock to a
pledgee pursuant to a bona fide pledge of such shares as collateral security for
indebtedness due to the pledgee without causing an automatic conversion of such
shares into Class A Common Stock, provided that such shares may not be
transferred to or registered in the name of the pledgee unless such pledgee is a
Permitted Transferee. In the event of foreclosure or other similar action by a
pledgee who is not a Permitted Transferee, such pledged shares of Class B Common
Stock shall be converted automatically, without any act or deed on the part of
the Corporation or any other person, into shares of Class A Common Stock as
provided above.
(d) Each share of Class B Common Stock shall be convertible, at the option
of its holder, into one fully paid and non-assessable share of Class A Common
Stock at any time. In the event of such voluntary conversion, the procedures set
forth in paragraph (a) above shall be followed.
(e) Shares of Class B Common Stock that are converted into shares of Class
A Common Stock due to a sale, transfer, or voluntary conversion shall continue
to be authorized shares of Class B Common Stock and available for reissue by the
Corporation as determined by the Board of Directors.
(f) The Corporation hereby reserves and shall at all times reserve and keep
available, out of its authorized and unissued Class A Common Stock, for the
purpose of effecting the conversions provided for herein, a sufficient number of
shares of Class A Common stock to effect the conversion of all Class B Common
Stock. All of the Common Stock so issuable shall, when issued be duly and
validly issued, fully paid and non-assessable, and free from liens and charges
with respect to the issue. The Corporation will take such action as may be
necessary to ensure that all such Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirements of any
stock exchange or market on which any of the Common Shares are listed or quoted.
(g) In any merger, consolidation, or business combination, the
consideration to be received per share by the holders of Class A Common Stock
and Class B Common Stock must be identical for each class of stock, except that
in any such transaction in which shares of common stock are to be distributed,
such shares may differ as to voting rights to the extent that voting rights
differ among Class A Common Stock and Class B Common Stock as provided herein.
- 4 -
<PAGE>
SIXTH: Preferred Stock. The Board of Directors shall have authority to
classify and reclassify any of the unissued shares of Preferred Stock from time
to time by setting or changing in any one or more respects the liquidation or
dividend preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of the Preferred Stock; provided, however, that the Board of Directors shall not
classify or reclassify any such shares into Common Shares, or into any class or
series of stock which has the same or lower liquidation priority as the Common
Shares; provided further, that nothing herein shall prevent the Board of
Directors from classifying or reclassifying any such shares as Preferred Stock
convertible into Common Shares that have already been authorized pursuant to
Article Third hereof. Any and all shares issued and for which full consideration
has been paid or delivered shall be deemed fully paid stock, and the holder
thereof shall not be liable for any further payment thereon. Notwithstanding
anything in these Articles to the contrary, as long as any of the Common Shares
shall be listed and quoted on the NASDAQ National Market System, no Preferred
Stock may be issued pursuant to the provisions of this ARTICLE SIXTH which would
violate the applicable Voting Rights Policy of the NASDAQ National Market
System, as the same may be amended from time to time.
SEVENTH: Other Stock Rights.
(a) Except as provided hereinabove, each of the Common Shares issued and
outstanding shall be identical in all respects, and no dividends shall be paid
on any of the common Shares unless the same dividend is paid on all of the
Common Shares at the time of such payment. Except for and subject to those
special voting rights expressly granted herein to the holders of the Class B
Common Stock, the holders of the Common Stock shall have exclusively all other
rights of stockholders including, but not limited to, (i) the right to receive
dividends, when and as declared by the Board of Directors out of assets lawfully
available therefor, and (ii) in the event of any distribution of assets upon
liquidation, dissolution or winding up of the Corporation or otherwise, the
right to receive ratably all of the assets and funds of the Corporation
remaining after the payment to the creditors of the Corporation.
(b) Stock Splits and Combinations. If the Corporation shall in any manner
subdivide (by stock split, reclassification, stock dividend, recapitalization,
or otherwise) or combine (by reverse stock split or otherwise) the outstanding
shares of Class A Common Stock or Class B Common Stock, then the outstanding
shares of each other class of Common Shares shall be subdivided or combined, as
the case may be, to the same extent, share and share alike.
(c) As long as any of the Common Shares shall be listed and quoted on the
NASDAQ National Market, the Board of Directors of the Corporation shall ensure,
and shall have all powers necessary to ensure, that the membership of the Board
of Directors
- 5 -
<PAGE>
shall at all times include such number of "Independent Directors" (as such term
is defined in Part III, Section 6(c) of Schedule D to the By-Laws of the
National Association of Securities Dealers, Inc. ("NASD"), as the same may be
amended from time to time as shall be required by the By-Laws of the NASD for
the Common Shares to be eligible for listing and quotation of the NASDAQ
National Market. In the event that the Common Shares shall cease to be listed
and quoted on the NASDAQ National Market, and subsequently are listed and quoted
on an exchange or other trading system, the Board of Directors of the
Corporation shall ensure, and shall have all powers necessary to ensure, that
the membership of the Board of Directors shall at all times be consistent with
the applicable rules and regulations, if any, for the Common Shares to be
eligible for listing and quotation on such exchange or other trading system.
(d) No holder of Common Shares or Preferred Shares shall be entitled to
preemptive or subscription rights.
EIGHTH: Principal Office & Registered Agent. The post office address of the
principal office of the Corporation in this State is 2000 W. 41st Street,
Baltimore, Maryland 21211. The name and post office address of the resident
agent of the Corporation in this State is Steven A. Thomas, Esquire, Thomas &
Libowitz, P.A., 100 Light Street, Suite 1100 Baltimore, Maryland 21202.
NINTH: Participation of Non-Citizens. The following provisions are included
for the purpose of ensuring that control and management of the Corporation
remains with citizens of the United States and/or corporations formed under the
laws of the United States or any of the states of the United States, as required
by the Communications Act of 1934, as the same may be amended from time to time:
(a) The Corporation shall not issue to (i) a person who is a citizen of a
country other than the United States; (ii) any entity organized under the laws
of a government other than the government of the United States or any state,
territory, or possession of the United States; (iii) a government other than the
government of the United States or of any state, territory, or possession of the
United States; (iii) a government other than the government of the United States
or of any state, territory, or possession of the United States; or (iv) a
representative of, or an individual or entity controlled by, any of the
foregoing (individually, an "Alien"; collectively, "Aliens") any shares of
capital stock of the Corporation if such issuance would result in the total
number of shares of such capital stock held or voted by Aliens exceeding 25% of
(i) the total number of all shares of such capital stock outstanding at any time
and from time to time, or (ii) the total voting power of all shares of such
capital stock outstanding and entitled to vote at any time and from time to time
and shall not permit the transfer on the books of the Corporation of any capital
stock to any Alien that would result in the total number of shares of such
capital stock held or voted by Aliens exceeding such 25% limits
- 6 -
<PAGE>
as such limits greater or lesser than 25% may subsequently be imposed by statute
or regulation.
(b) No Alien or Aliens, individually or collectively, shall be entitled to
vote or direct or control the vote of more than 25% of (i) the total number of
all shares of capital stock of the Corporation outstanding at any time and from
time to time, or (ii) the total voting power of all shares of capital stock of
the Corporation outstanding and entitled to vote at any time and from time to
time as such limits greater or lesser than 25% may subsequently be imposed by
statute or regulation.
(c) No Alien shall be qualified to act as an officer of the Corporation and
no more than one-fourth of the total number of directors of the Corporation at
any time may be Aliens except as may be permitted by law or regulation.
(d) The Board of Directors shall have all powers necessary to implement the
provisions of this ARTICLE NINTH and to ensure compliance with the alien
ownership restrictions (the "Alien Ownership Restrictions") of the
Communications Act of 1934, as amended, and the rules and regulations
promulgated thereunder, as the same may be amended from time to time
(collectively, the "Communications Act"), including, without limitation, the
power to prohibit the transfer of any shares of capital stock of the Corporation
to any Alien and to take or cause to be taken such action as it deems
appropriate to implement such prohibition.
(e) Without limiting the generality of the foregoing and notwithstanding
any other provision of these Amended and Restated Articles of Incorporation to
the contrary, any shares of capital stock of the Corporation determined by the
Board of Directors to be owned beneficially by an Alien or Aliens shall always
be subject to redemption by the Corporation by action of the Board of Directors,
pursuant to Section 2-310 of the Maryland General Corporation Law, or any other
applicable provision of law, to the extent necessary in the judgment of the
Board of Directors to comply with the Alien Ownership Restrictions. The terms
and conditions of such redemption shall be as follows:
(i) the redemption price of the shares to be redeemed pursuant to this
ARTICLE NINTH shall be equal to the fair market value of the shares to be
redeemed, as determined by reference to the closing price of such shares on the
last business day before the date of redemption if the shares are traded on a
national exchange or as determined by the Board of Directors in good faith if
the shares are not then being traded on a national exchange;
(ii) the redemption price of such shares may be paid in cash,
securities or any combination thereof;
- 7 -
<PAGE>
(iii) if less than all the shares held by Aliens are to be redeemed,
the shares to be redeemed shall be selected in any manner determined by the
Board of Directors to be fair and equitable;
(iv) at least 10 days' written notice of the redemption date shall be
given to the record holders of the shares selected to be redeemed (unless waived
in writing by any such holder), provided that the redemption date may be the
date on which written notice shall be given to record holders if the cash or
securities necessary to effect the redemption shall have been deposited in trust
for the benefit of such record holders and subject to immediate withdrawal by
them upon surrender of the stock certificates for their shares to be redeemed;
(v) from and after the redemption date, the shares to be redeemed
shall cease to be regarded as outstanding and any and all rights of the holders
in respect of the shares to be redeemed or attaching to such shares of whatever
nature (including, without limitation, any rights to vote or participate in
dividends declared on stock of the same class or series as such shares) shall
cease and terminate, and the holders thereof thenceforth shall be entitled only
to receive the cash or securities payable upon redemption; and
(vi) such other terms and conditions as the Board of Directors shall
determine.
For purposes of this ARTICLE NINTH, the determination of beneficial
ownership of shares of capital stock of the Corporation shall be made pursuant
to Rule 13d-3, 17 C.F.R. ss. 240.13d-3, as amended from time to time,
promulgated under the Securities Exchange Act of 1934, as amended.
TENTH: Directors.
(a) The number of directors of the Corporation which shall constitute
the whole Board shall be not less than three (3) nor more than nine (9)
directors. The exact number of directors shall be fixed from time to time by the
Board of Directors pursuant to a Resolution adopted by a majority of the entire
Board of Directors. Directors shall hold office for a term of one (1) year or
until the first annual meeting of stockholders following their election. Each
director elected shall hold office until his successor shall be elected and
shall qualify.
(b) Newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office, or other cause shall be filled by a majority vote of the remaining
directors, though less than a quorum,
- 8 -
<PAGE>
and the directors so chosen shall hold office for a term expiring at the next
annual meeting of stockholders at which the successors shall be elected and
shall qualify.
(c) At any meeting of the stockholders called for the purpose, any
director may, by a majority vote of all of the shares of stock outstanding and
entitled to vote, be removed from office, but only for cause.
(d) Notwithstanding anything contained in these Amended and Restated
Articles of Incorporation to the contrary, the affirmative vote of stockholders
holding a majority of the votes entitled to be cast for election of directors
shall be required to amend or repeal or adopt any provision inconsistent with
this ARTICLE TENTH.
ELEVENTH: Indemnification. The Corporation shall indemnify (a) its
directors and officers, whether serving the Corporation or at the request of
another entity, and advance expenses to a director or officer of the Corporation
to the fullest extent permitted by and in accordance with Section 2-418 of the
Corporations and Associations Article of the Annotated Code of Maryland, as
amended, and (b) its other employees and agents to such extent as shall be
authorized by the Board of Directors and permitted by law. No amendment of the
Charter of the Corporation shall limit or eliminate the right to indemnification
provided hereunder with respect to acts or omissions occurring prior to such
amendment or repeal.
TWELFTH: Duration. The duration of the Corporation shall be perpetual.
- 9 -
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
ARTICLES SUPPLEMENTARY
SERIES A EXCHANGEABLE PREFERRED STOCK
Sinclair Broadcast Group, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the Maryland State Department of Assessments and Taxation (the
"SDAT") as follows:
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article Sixth of the Charter of the Corporation (the
"Charter"), the Board of Directors has duly divided and classified 1,500,000
shares of the Preferred Stock of the Corporation into a series designated
"Series A Exchangeable Preferred Stock" and has provided for the issuance of
such series.
SECOND: The terms of the Series A Exchangeable Preferred Stock, par
value of $.01 per share, as set by the Board of Directors are as follows:
1. Designation and Amount. The shares of such series shall be
designated as Series A Exchangeable Preferred Stock (the "Series A Preferred
Stock") and the number of shares constituting such series shall initially be
1,500,000, subject to increase by action of the Board of Directors effectuated
by further Articles Supplementary in order to provide for the issuance of
Dividend Shares (as defined herein).
2. Conversion. Each share of the Series A Preferred Stock will
automatically be exchanged for and converted into one share of Series B
Convertible Preferred Stock (the "Series B Preferred Stock") effective at the
time of filing with the SDAT of an amendment to the Charter authorizing the
issuance of Series B Preferred Stock, which shall be filed promptly following
approval of the amendment by the stockholders. The Series B Preferred Stock
shall have the terms, conditions and preferences set forth in Annex A attached
to these Articles Supplementary; provided, however, that such Series B Preferred
Stock shall be effective and may be issued only upon and after the filing of
such amendment with the SDAT. Upon the filing of the amendment with the SDAT and
surrender of a certificate representing shares of Series A Preferred Stock, the
Corporation will issue a certificate representing the same number of shares of
Series B Preferred Stock.
- 10 -
<PAGE>
3. Trigger Event.
(i) Upon the date that is 180 days after the occurrence of
a Trigger Event (as defined below), subject to paragraph 8 hereof, the holders
of shares of Series A Preferred Stock, in preference to the holders of any other
class of capital stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
cumulative quarterly dividends payable in cash or, at the Corporation's option,
additional shares of Series A Preferred Stock ("Dividend Shares") on the last
day of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the date that is 180 days after the
occurrence of the Trigger Event, in an amount per share (rounded to the nearest
cent) equal to (a) with respect to the first four Quarterly Dividend Payment
Dates, Three Dollars and Seventy-Five Cents ($3.75) and (b) with respect to the
fifth and each succeeding Quarterly Dividend Payment Date, Five Dollars ($5.00).
In the event a quarterly dividend is paid (in whole or in part) in Dividend
Shares, the number of Dividend Shares to be issued in respect of such dividend
payment for each share of Series A Preferred Stock then outstanding shall equal
(x) that portion of the quarterly dividend paid in Dividend Shares (expressed in
Dollars) divided by (y) 100.
(ii) Whether or not declared, dividends shall begin to
accrue and be cumulative on initially outstanding shares of Series A Preferred
Stock from the 180th day following the Trigger Event. Whether or not declared,
dividends shall begin to accrue and be cumulative on Dividend Shares from the
date of the applicable Quarterly Dividend Payment Date. All dividends shall
accrue on each share on a daily basis, whether or not there are unrestricted
funds legally available for the payment of such dividends and whether or not
declared, from and after the date such dividends are payable and be rounded to
the nearest cent. Any dividends that become payable for any partial dividend
period shall be computed on the basis of the actual days elapsed in such period.
Dividends paid on the shares of Series A Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated equally among all such shares at the time outstanding.
If a portion of a dividend is paid in cash and a portion is paid in Dividend
Shares, then the proportion paid in cash and the proportion paid in Dividend
Shares shall be the same for each share. The Board of Directors may fix a record
date for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date fixed for the
payment thereof.
(iii) At any time after the occurrence of a Trigger Event,
the Corporation shall have the right to purchase all of the shares of Series A
Preferred Stock then held by a holder at a purchase price per share equal to (a)
One Hundred Dollars ($100.00) plus (b) the amount of any accrued and unpaid
dividends and distributions on such share, whether or not declared, to the date
of such payment. If the Corporation elects to exercise its right to repurchase
pursuant to this paragraph, the Corporation shall fix the date for redemption
and shall give notice of such redemption not less than 30 nor more than 60 days
prior to the date fixed for redemption; provided, however, that the redemption
date shall not be sooner than 180 days after the Trigger Event Notice, and the
- 11 -
<PAGE>
Corporation may give notice of a redemption to occur on such 180th day at any
time after the Trigger Event Notice and before the 30th day preceding such 180th
day. The notice given under this Section 3(iii) should state (i) the time and
place at which the redemption will occur; (ii) the redemption price; and (iii)
the procedure for giving a Retention Notice and the Conversion Price applicable
to the Series B Stock into which a holder's shares of Series A Preferred Stock
will be exchanged if such holder gives a Retention Notice.
(iv) At any time following issuance of a notice of
redemption and prior to the date of redemption set forth therein, any holder of
Series A Preferred Stock may deliver a notice (a "Retention Notice") of its
intent to retain the shares of Series A Preferred Stock held by such holder, and
such holder's shares shall not be redeemed but, as of the redemption date, will
have only such rights as such holder would have if its shares of Series A
Preferred Stock were exchanged for Series B Preferred Stock on the redemption
date and converted on such date into shares of Class A Common Stock. Each share
of Series A Preferred Stock held by a holder who gives a Retention Notice will
automatically be exchanged for and converted into one share of Series B
Preferred Stock effective at the time of filing with the SDAT of an amendment to
the Charter authorizing the issuance of Series B Preferred Stock and such shares
of Series B Preferred Stock shall on such date automatically be converted into
Class A Common Stock on the terms set forth in Annex A hereto as if such
conversion had occurred on the redemption date.
(v) A "Trigger Event" means the termination of Barry
Baker's employment with the Corporation prior to the expiration of the initial
five-year Agreement Term under the Employment Agreement dated as of April 10,
1996 between Barry Baker and the Corporation (the "Employment Agreement") (x) by
the Corporation for any reason other than "for cause" under Section 9 of the
Employment Agreement, or (y) by Barry Baker under Section 10.3.1 of the
Employment Agreement.
(vi) The Corporation shall give each holder of Series A
Preferred Stock notice of the occurrence of a Trigger Event (the "Trigger Event
Notice") within 30 days following the occurrence of the Trigger Event. The
Trigger Event Notice shall advise the holders of Series A Preferred Stock of the
type of Trigger Event that has occurred and the date on which such Trigger Event
occurred.
4. Dividends. Subject to paragraph 8 hereof, so long as any
shares of Series A Preferred Stock remain outstanding, the Corporation shall not
declare or pay dividends on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration (whether cash, securities or
property) any shares of capital stock except as permitted with respect to the
Series A Preferred Stock under Paragraph 3 of this Article Second.
- 12 -
<PAGE>
5. Preference Upon Liquidation, Dissolution or Winding Up.
(i) Subject to the provisions of paragraph 8 hereof, upon
any liquidation, dissolution or winding up of the Corporation, the holders of
Series A Preferred Stock shall be entitled to receive from assets available for
distribution to stockholders, in priority over any other class of capital stock
of the Corporation, an amount in cash (and, to the extent sufficient cash is not
available for such payment, property at its fair market value), per share, equal
to the Liquidation Price of the Series A Preferred Stock as of the date of
payment or distribution. In addition, after the payment of the Liquidation
Price, holders of Series A Preferred Stock shall be entitled to receive from
assets available for distribution to stockholders, on a pari passu basis and
concurrent with payments or distributions made upon liquidation, dissolution or
winding-up to the holders of the Corporation's Common Stock (as defined in the
Charter), an amount per share equal to the excess, if any, of (i) the amount
that would have been payable with respect to such share if it had been exchanged
for Series B Preferred Stock and converted into Common Stock on the terms set
forth in Annex A immediately prior to such payment or distribution (assuming for
such purposes that the Liquidation Price in respect of shares of Series A
Preferred Stock had not been previously paid) over (ii) the Liquidation Price
paid with respect to such share.
(ii) The "Liquidation Price" of any share of Series A
Preferred Stock will be the sum of (i) the Agreed Value of such share plus (ii)
all accrued and unpaid dividends on such share through and including the
determination date. The Agreed Value of any share of Series A Preferred Stock
will be One Hundred Dollars ($100.00).
(iii) A merger or consolidation of the Corporation in
which the holders of shares of capital stock of the Corporation immediately
prior to the merger or consolidation hold less than 50% of the votes of capital
stock immediately after the merger or consolidation, or a sale of all or
substantially all of the Corporation's assets, shall be deemed to be a
"liquidation, dissolution or winding-up of the Corporation" for purposes of this
paragraph 5.
6. Voting Rights. (i) The holders of Series A Preferred Stock
shall be entitled to vote on all matters as to which holders of the
Corporation's Class A Common Stock (as defined in the Charter) are entitled to
vote, with each share of Series A Preferred Stock being entitled to one vote and
with the holders of Series A Preferred Stock voting together with the holders of
Class A Common Stock as a single class. In addition, holders of Series A
Preferred Stock will be entitled to notice of, and to attend, all meetings of
stockholders of the Corporation and to vote as a separate class on all matters
submitted to the Corporation's stockholders with respect to which holders of
stock are required to vote as a separate class under Maryland law.
(ii) Without the consent of the holders of a majority of
the Series A Preferred Stock, voting separately as a single class, the
Corporation will not:
(a) increase, decrease or effect a subdivision,
combination or consolidation of the authorized amount of Series A Preferred
Stock or issue or authorize the issuance
- 13 -
<PAGE>
of authorized but unissued shares of Series A Preferred Stock (in each case,
other than for the payment of Dividend Shares pursuant to Section 3(i) hereof);
(b) amend, alter or repeal any provision of its
Charter or bylaws so as to effect any change in the rights, privileges, powers
or preferences of the holders of the Series A Preferred Stock (provided that
such separate class voting right shall not apply with respect to an amendment,
alteration or repeal of any provision that solely effects a change in the terms
of the Corporation's Class A Common Stock, as to which the holders of Series A
Preferred Stock will vote together with the holders of Common Stock); or
(c) amend, alter or repeal any resolution of the
Corporation's Board of Directors or any other instrument establishing and
designating the Series A Preferred Stock or any other capital stock of the
Corporation, and determining the relative rights and preferences thereof, so as
to effect any change in the rights, privileges, powers or preferences of the
holders of the Series A Preferred Stock (provided that such separate class
voting right shall not apply with respect to an amendment, alteration or repeal
of any provision that solely effects a change in the terms of the Corporation's
Class A Common Stock, as to which the holders of Series A Preferred Stock will
vote together with the holders of Common Stock).
7. Preemptive Rights. None.
8. Priority and Ranking of New Securities Offering.
Notwithstanding any other provision of these Articles Supplementary, (i) the
Corporation shall have the right to issue additional equity securities (the "New
Securities") in order to raise up to $400,000,000 and (ii) the New Securities
may bear dividends payable in cash or other consideration, be exchangeable for
or convertible into other securities of the Corporation, and will be senior to
and have priority over the Series A Preferred Stock in all respects (including
without limitation with respect to dividends and distributions upon liquidation,
dissolution and winding up of the Corporation), except that upon and after the
occurrence of a Trigger Event, the New Securities will rank pari passu with the
Series A Preferred Stock in respect of dividends, distributions upon
liquidation, dissolution and winding up of the Corporation; provided, however,
that the New Securities shall not be issued prior to the Closing Date under the
Asset Purchase Agreement by and between River City Broadcasting, L.P. and the
Corporation dated as of April 10, 1996 without the consent of the Seller
thereunder.
9. Miscellaneous
(a) All notices from the Corporation to the holders shall be
given by one of the methods specified in paragraph 9(b).
(b) All notices and other communications hereunder shall be
deemed given (i) on the first business day following the date received, if
delivered personally, (ii) on the business day following timely deposit with an
overnight courier service, if sent by overnight courier specifying next day
delivery and (iii) on the first business day that is five days following deposit
in the mails,
- 14 -
<PAGE>
if sent by first class mail to (x) a holder at its last address as it appears on
the transfer records oregistry for the Series A Preferred Stock and (y) the
Corporation at the following address (or at such other address as the
Corporation shall specify in a notice pursuant to this paragraph 9(b)): Sinclair
Broadcast Group, Inc., 2000 West 41st Street, Baltimore, Maryland 21211;
Attention: Corporate Secretary.
(c) The Corporation shall establish and maintain a register,
or cause a transfer agent to establish and maintain a register, identifying the
holders of shares of Series A Preferred Stock and shall, upon presentation of
certificates endorsed for transfer or accompanied by duly executed powers of
transfer, register the transfer of shares as evidenced by such certificates or
powers of transfer.
(d) Any shares of Series A Preferred Stock which have been
converted, redeemed, exchanged or otherwise acquired by the Corporation shall,
after such conversion, redemption, exchange or acquisition, as the case may be,
be retired and promptly canceled and the Corporation shall take all appropriate
action to cause such shares to obtain the status of authorized but unissued
shares of Preferred Stock without designation as to series, until such shares
are once more designated as part of a particular series by the Board of
Directors. The Corporation may cause a certificate setting forth a resolution
adopted by the Board of Directors that none of the authorized shares of Series A
Preferred Stock are outstanding to be filed with the Maryland State Department
of Assessments and Taxation. When such certificate becomes effective, all
references to Series A Preferred Stock shall be eliminated from the Charter and
the shares of Preferred Stock designated hereby as Series A Preferred Stock
shall have the status of authorized and unissued shares of Preferred Stock and
may be reissued as part of any new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
(e) The Corporation shall be entitled to recognize the
exclusive right of a holder registered according to the Corporation's register
as the holder of shares of Series A Preferred Stock, and such record holder
shall be deemed the holder of such shares for all purposes.
(f) Any registered holder of Series A Preferred Stock may
proceed to protect and enforce its rights by any available remedy by proceeding
at law or in equity to protect and enforce any such rights, whether for the
specific enforcement of any provision in these Articles Supplementary or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
- 15 -
<PAGE>
ANNEX A TO
ARTICLES SUPPLEMENTARY
Terms of Series B Preferred Stock
---------------------------------
1. Designation and Amount. The series shall be designated
Series B Convertible Preferred Stock (the "Series B Preferred Stock"). The
number of authorized shares of Series B Preferred Stock shall initially be
1,500,000 subject to increase by action of the Board of Directors effectuated by
further Articles Supplementary in order to provide for the issuance of Dividend
Shares (as defined herein).
2. Par Value. The Series B Preferred Stock shall have a par
value of $.01 per share.
3. Conversion. (a) Subject to the terms and conditions of this
paragraph 3, each holder of Series B Preferred Stock (a "Convertible Holder")
shall have the right (a "Conversion Right"), at its option at any time, to
convert any or all shares of Series B Preferred Stock held by such Convertible
Holder into such number of fully paid and nonassessable shares of Class A Common
Stock, par value $.01 per share, of the Corporation as is obtained by (i)
multiplying the number of shares of Series B Preferred Stock to be converted by
$100.00 per share and (ii) dividing the result by the conversion price of $27.50
or, in case an adjustment of such price has taken place pursuant to the
provisions of paragraph 4, then by the conversion price as last adjusted and in
effect at the date any share or shares of Series B Preferred Stock are
surrendered for conversion (such prices, or such price as last adjusted, being
referred to individually as a "Conversion Price" and collectively as the
"Conversion Prices"). After the occurrence of a Trigger Event (as defined
herein), each Convertible Holder shall be required to convert all shares if the
Holder elects to convert any shares. Such Conversion Rights shall be exercised
by a Convertible Holder by giving written notice that such Convertible Holder
elects to convert its shares of Series B Preferred Stock into Class A Common
Stock and by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the Convertible Holders) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or names
(with address) in which the certificate or certificates for shares of Class A
Common Stock shall be issued.
(b) All shares of Series B Preferred Stock shall
automatically convert into shares of Class A Common Stock on May 31, 2001 at the
Conversion Price then in effect.
(c) Notwithstanding anything herein to the contrary, with
respect to (i) shares of Series B Preferred Stock which the Corporation has
called for redemption pursuant to
- 1 -
<PAGE>
paragraph 5 and redeemed, Conversion Rights shall terminate at the close of
business on the redemption date, (ii) a liquidation of the Corporation,
Conversion Rights shall terminate at the close of business on the business day
fixed for payment of the amount distributable on the Series B Preferred Stock
and (iii) Dividend Shares (as hereinafter defined), no conversion to Class A
Common Stock shall be permitted and any such Dividend Shares shall be deemed to
have been surrendered for cancellation as of the effective time of the
conversion of the other shares of Series B Preferred Stock held by the holder of
such Dividend Shares.
(d) Promptly after surrender of the certificate or
certificates for the share or shares of Series B Preferred Stock to be
converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such holder may
direct, a certificate or certificates for the number of whole shares of the
applicable class of Class A Common Stock issuable upon the conversion of such
share or shares of Series B Preferred Stock. No fractional shares of Class A
Common Stock will be issued, and a cash payment will be made in lieu of any
fractional share in an amount equal to the same fraction of the Conversion
Price. To the extent permitted by law, such conversion shall be deemed to have
been effected as of the close of business on the date a certificate or
certificates are delivered pursuant to paragraph (a) above or on the date of
automatic conversion pursuant to paragraph (b) above (whether or not such
certificate or certificates for such share or shares shall have been surrendered
on such date) and at such time the rights of the Convertible Holder shall cease,
and the person or persons in whose name or names any certificate or certificates
for shares of Class A Common Stock shall be issuable upon such conversion shall
be deemed to have become the holder or holders of record of the shares
represented thereby. If any certificate or certificates for Series B Preferred
Shares shall have been lost, stolen or destroyed, the holder shall, in lieu of
delivering such certificate or certificates, deliver to the Corporation or its
transfer agent or agents therefor an affidavit of lost certificate or any other
document reasonably satisfactory to the Corporation.
(e) If any Convertible Holder shall deliver shares for
conversion after the Corporation gives a Redemption Notice pursuant to paragraph
5(iii), below, and the Corporation fails to redeem all shares subject to such
Redemption Notice and not converted, then the Corporation shall give all
converting shareholders notice of its failure to redeem and each converting
Convertible Holder may, for a period of 30 days after such notice of failure to
redeem, withdraw its conversion and receive back shares of Series B Preferred
Stock together with any dividends paid on Series B Preferred Stock (or which
would have been paid on Series B Preferred Stock) during the period such
Convertible Holder held shares of Class A Common Stock (less any dividends
received with respect to such shares of Class A Common Stock).
4. Adjustment to Conversion Price. The Conversion Price is
subject to adjustment after April 10, 1996 from time to time as follows:
(a) Adjustment to Conversion Price for Stock Splits and
Combinations and Dividends and Distributions of Common Stock. If the Corporation
(i) pays a dividend or makes a distribution, without consideration, on Common
Stock in shares of Common Stock or in any right
- 2 -
<PAGE>
to acquire Common Stock, (ii) subdivides (by stock split, reclassification or
otherwise) its outstanding shares of Common Stock into a greater number of
shares or (iii) combines (by reverse stock split, reclassification or otherwise)
its outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such action will be adjusted so
that the holder of any Series B Preferred Stock thereafter surrendered for
conversion will be entitled to receive the number of shares of Common Stock
which such holder would have been entitled to receive immediately following such
action had the holder's Series B Preferred Stock been converted immediately
prior thereto. An adjustment made pursuant to this Section 4(a) will become
effective immediately after the record date in the case of a dividend or
distribution and will become effective immediately after the effective date in
the case of a subdivision or combination.
(b) Adjustments to Conversion Price for Certain Diluting
Issues.
(i) No Adjustment of Conversion Price. Any provision
herein to the contrary notwithstanding, no adjustment in the Conversion Price
will be made in respect of the issuance of additional shares of Common Stock (A)
unless the issue price for the additional shares of Common Stock issued by the
Corporation is less than the Conversion Price in effect on the date of, and
immediately prior to, such issue; (B) if the issuance of shares of Class A
Common Stock is upon conversion of Series B Preferred Stock; (C) if the issuance
of Class A Common Stock is upon the conversion of Class B Common Stock (as
defined in the Charter); or (D) if the issuance is of shares of Class A Common
Stock that have been reserved for issuance to employees of the Corporation
pursuant to stock options that have been granted or which are available to be
granted under the Corporation's existing stock option plans and stock options to
be granted pursuant to the terms of the Employment Agreement.
(ii) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In case the Corporation issues or sells
additional shares of Common Stock, including but not limited to deemed issuances
as provided in paragraph 4(b)(iii), for a consideration per share less than the
then applicable Conversion Price of the Series B Preferred Stock, then, and in
each such case, the Conversion Price of the Series B Preferred Stock will be
adjusted so that the adjusted Conversion Price is equal to:
C*O + N*P + A
O + N
where:
C = the then current Conversion Price;
O = the number of shares of Common Stock outstanding on the record
date for the issuance (including all shares issuable on
conversion of the Series B Preferred Stock
- 3 -
<PAGE>
and all other shares issuable pursuant to options or
convertible securities outstanding immediately prior to the
issuance);
N = the total number of additional shares of Common Stock issued
in the issuance, or issuable upon the exercise or conversion
of options or convertible securities;
P = the offering price per share of shares of Common Stock issued
in the issuance or the price per share of Common Stock payable
upon the exercise or conversion of options or convertible
securities, in each case minus the amount per share of any
expenses payable by the Corporation and any underwriting or
similar commissions, compensations or concessions paid or
allowed by the Corporation in connection with the issuance;
and
A = the aggregate consideration, if any, paid to the Corporation
upon the issuance for the issuance of options or convertible
securities minus the amount of any expenses payable by the
Corporation and any underwriting or similar commissions,
compensations or concessions paid or allowed by the
Corporation in connection with the issuance.
(iii) Options and Convertible Securities Deemed Additional
Shares of Common Stock. If the Corporation at any time or from time to time
after April 10, 1996 shall issue any options or convertible securities (other
than in a transaction resulting in an adjustment under paragraph 4(a) or a
transaction described in paragraph 4(b)(i)), then, subject to clause (E) below,
the maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein designed to protect against
dilution) of Common Stock issuable upon the exercise of such options, or, in the
case of convertible securities and options therefor, the conversion or exchange
of such convertible securities and options therefor, shall be deemed to be
additional shares of Common Stock issued as of the time such options or
convertible securities are issued or, in case a record date shall have been
fixed for the determination of holders of any class of securities then entitled
to receive any such options or convertible securities, as of the close of
business on such record date, provided that in any such case in which additional
shares of Common Stock are deemed to be issued:
(A) no further adjustments in the Conversion Price
shall be made upon the subsequent issue of convertible securities or shares of
Common Stock upon the exercise of such options or conversion or exchange of such
convertible securities;
(B) if such options or convertible securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or decrease or
increase in the number of shares of Common Stock issuable upon the exercise,
conversion or exchange thereof, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective,
- 4 -
<PAGE>
be recomputed to reflect such increase or decrease insofar as it affects such
options or the rights of conversion or exchange under such convertible
securities (provided, however, that no such adjustment of the Conversion Price
shall affect Common Stock previously issued upon conversion of the Series B
Preferred Stock);
(C) upon the expiration of any such options or any
rights of conversion or exchange under such convertible securities which shall
not have been exercised, the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(i) in the case of convertible securities
or options for Common Stock, the only additional
shares of Common Stock issued were the shares of
Common Stock, if any, actually issued upon the
exercise of such options or the conversion or
exchange of such convertible securities and the
consideration received therefor was the
consideration actually received by the
Corporation (x) for the issue of all such
options, whether or not exercised, plus the
consideration actually received by the
Corporation upon such exercise, or (y) for the
issue of all such convertible securities which
were actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Corporation upon such conversion
or exchange; and
(ii) in the case of options for convertible
securities, only the convertible securities, if
any, actually issued upon the exercise thereof
were issued at the time of issue of such
options, and the consideration received by the
Corporation for the additional shares of Common
Stock deemed to have been then issued was the
consideration actually received by the
Corporation for the issue of all such options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation
upon the issue of the convertible securities
with respect to which such options were actually
exercised:
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price in effect immediately prior
to the original adjustment, or (ii) the Conversion Price that would have
resulted from any issuance of additional shares of Common Stock between the
original adjustment date and such readjustment date if the original adjustment
had not been made;
(E) in the case of any options which expire by their
terms not more than 30 days after the date of issue thereof, no adjustment of
the Conversion Price shall be made
- 5 -
<PAGE>
until the expiration or exercise of all such
options, whereupon such adjustment shall be made in the same manner provided in
clause (C) above.
For purposes of this paragraph 4(b)(iii), options means options, warrants or
other rights to subscribe for, purchase or otherwise acquire shares of Common
Stock or convertiblesecurities, and convertible securities means any evidences
of indebtedness, shares (other than the Series A Exchangeable Preferred Stock
and the Series B Preferred Stock) or other securities convertible into or
exchangeable for shares of Common Stock.
(iv) Value of Consideration. For purposes of this
paragraph 4(b), the value of the consideration received by the Corporation for
the issuance of any additional shares of Common Stock will be computed as
follows:
(A) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Corporation, excluding amounts paid
or payable for accrued interest or accrued dividends;
(B) insofar as it consists of publicly traded
securities, be computed based upon the average closing price of such securities
for the 10 consecutive trading days immediately preceding the day on which the
Corporation receives such consideration; and
(C) insofar as it consists of property other than
cash or publicly traded securities, be computed at the fair value thereof at the
time of such issue, as determined in good faith by the Board of Directors.
In the event that additional shares of Common Stock are issued together with
other shares or securities or other assets of the Corporation for consideration
which covers both, the value of such consideration so received that is allocable
to such additional shares of Common Stock will be determined in good faith by
the Board.
(c) Minimum Adjustment. No adjustment in the Conversion Price will be
required unless such adjustment (plus any adjustments not previously made by
reason of this paragraph 4) would require an increase or decrease of at least 1%
in the Conversion Price; provided, that any adjustments which by reason of this
paragraph 4 are not required to be made will be carried forward and taken into
account in any subsequent adjustment. All calculations under this paragraph 4
will be made to the nearest cent.
(d) Certificate of Adjustment. Upon the occurrence of each adjustment
or readjustment of the Conversion Price of the Series B Preferred Stock pursuant
to this paragraph 4, the Corporation will promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of such Series B Preferred Stock a certificate, signed by the Chairman of
the Board, the Chief Executive Officer, the Treasurer/Chief Financial Officer or
any
- 6 -
<PAGE>
other officer of the Corporation of equivalent seniority setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustments or readjustment is based.
(e) Dividends and Distributions Payable in Securities of the Company
other than Shares of Common Stock. In case the Corporation makes or issues, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
(other than shares of Common Stock or rights to acquire Common Stock), then and
in each such event provision will be made so that the holders of Series B
Preferred Stock will receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Company which they would have received had their Series B Preferred Stock been
converted into Common Stock on the date of, and immediately prior to such event
and had they thereafter retained such securities (together with any
distributions paid thereon) until the conversion date.
(f) Consolidation, Merger or Sale of Assets. Except as provided in
paragraph 7, if any transaction occurs, including without limitation (i) any
recapitalization or reclassification of shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination of the Common Stock),
(ii) any consolidation or merger of the Corporation with or into another person
or any merger of another person into the Corporation (other than a merger in
which the Corporation is the surviving corporation and that does not result in a
reclassification, conversion, exchange or cancellation of Common Stock), (iii)
any sale, lease or transfer of all or substantially all of the assets of the
Corporation, or (iv) any compulsory share exchange, pursuant to any of which
holders of Common Stock will be entitled to receive other securities, cash or
other property, then appropriate provision will be made so that the holder of
each share of Series B Preferred Stock then outstanding will have the right
thereafter to convert such share only into the kind and amount of the
securities, cash or other property that would have been receivable upon such
recapitalization, reclassification, consolidation, merger, sale, lease,
transfer, or share exchanges by a holder of the number of shares or Common Stock
issuable upon conversion of such share of Series B Preferred Stock immediately
prior to such recapitalization, reclassification, consolidation, merger, sale,
lease, transfer or share exchange, and the Corporation will not enter into any
such merger, consolidation, sale, lease, transfer or share exchange unless the
company formed by such consolidation or resulting from such merger or that
acquires such assets or that acquires the Corporation's shares, as the case may
be, makes appropriate provisions to establish such right.
5. Trigger Event.
(i) Upon the date that is 180 days after the occurrence of
a Trigger Event (as defined below), subject to paragraph 10 hereof, the holders
of shares of Series B Preferred Stock, in preference to the holders of any other
class of capital stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash or, at the Corporation's option, additional
shares of Series B Preferred Stock ("Dividend Shares") on the last day of March,
June, September and December in each year
- 7 -
<PAGE>
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the date
that is 180 days after the occurrence of the Trigger Event, in an amount per
share (rounded to the nearest cent) equal to (a) with respect to the first four
Quarterly Dividend Payment Dates, Three Dollars and Seventy-Five Cents ($3.75)
and (b) with respect to the fifth and each succeeding Quarterly Dividend Payment
Date, Five Dollars ($5.00). In the event a quarterly dividend is paid (in whole
or in part) in Dividend Shares, the number of Dividend Shares to be issued in
respect of such dividend payment for each share of Series B Preferred Stock then
outstanding shall equal (x) that portion of the quarterly dividend paid in
Dividend Shares (expressed in Dollars) divided by (y) 100.
(ii) Whether or not declared, dividends shall begin to
accrue and be cumulative on initially outstanding shares of Series B Preferred
Stock from the 180th day following the Trigger Event. Whether or not declared,
dividends shall begin to accrue and be cumulative on Dividend Shares from the
date of the applicable Quarterly Dividend Payment Date. All dividends shall
accrue on each share on a daily basis, whether or not there are unrestricted
funds legally available for the payment of such dividends and whether or not
declared, from and after the date such dividends are payable and be rounded to
the nearest cent. Any dividends that become payable for any partial dividend
period shall be computed on the basis of the actual days elapsed in such period.
Dividends paid on the shares of Series B Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated equally among all such shares at the time outstanding.
If a portion of a dividend is paid in cash and a portion is paid in Dividend
Shares, then the proportion of the dividend paid in cash and the proportion paid
in Dividend Shares shall be the same for each share. The Board of Directors may
fix a record date for the determination of holders of shares of Series B
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
(iii) At any time after the occurrence of a Trigger Event,
the Corporation shall have the right to purchase all of the shares of Series B
Preferred Stock then held by a holder at a purchase price per share equal to (a)
One Hundred Dollars ($100.00) plus (b) the amount of any accrued and unpaid
dividends and distributions on such share, whether or not declared, to the date
of such payment. If the Corporation elects to exercise its right to repurchase
pursuant to this paragraph, the Corporation shall fix the date for redemption
and shall give notice of such redemption (the "Redemption Notice") not less than
30 nor more than 60 days prior to the date fixed for redemption; provided,
however, that the redemption date shall not be sooner than 180 days after the
Trigger Event Notice, and the Corporation may give notice of a redemption to
occur on such 180th day at any time after the Trigger Event Notice and before
the 30th day preceding such 180th day. The Redemption Notice shall specify (i)
the time and date on which the redemption will occur; (ii) the redemption price;
(iii) that the holders of shares of Series B Preferred Stock have the right to
convert such shares into shares of Common Stock at any time prior to the
redemption date; and (iv) the Conversion Price on the date of the Redemption
Notice.
- 8 -
<PAGE>
(iv) A "Trigger Event" means the termination of Barry
Baker's employment with the Corporation prior to the expiration of the initial
five-year Agreement Term set forth in the Employment Agreement dated as of April
10, 1996 between Barry Baker and the Corporation (the "Employment Agreement")
(x) by the Corporation for any reason other than "for cause" under Section 9 of
the Employment Agreement, or (y) by Barry Baker under Section 10.3.1 of the
Employment Agreement.
(v) The Corporation shall give each Convertible Holder
notice of the occurrence of a Trigger Event (the "Trigger Event Notice") within
30 days following the occurrence of the Trigger Event. The Trigger Event Notice
shall advise the Convertible Holders of the type of Trigger Event that has
occurred and the date on which such Trigger Event occurred.
6. Dividends. Prior to the date that is 180 days after the
occurrence of a Trigger Event, the Series B Preferred Stock shall not be
entitled to receive any preference with respect to dividends. Notwithstanding
the preceding sentence, prior to the date that is 180 days after the occurrence
of a Trigger Event, the holders of Series B Preferred Stock shall be entitled to
share ratably (with each share of Series B Preferred Stock equivalent to the
number of shares of Class A Common Stock into which such share can be converted
pursuant to paragraphs 3 and 4 hereof), in the payments of any dividends or
other distributions made with respect to Common Stock, including dividends or
distributions made in the form of (i) cash, (ii) securities other than Common
Stock, (iii) other assets, or (iv) warrants or rights to subscribe for
securities other than Common Stock or for other assets.
7. Liquidation Dissolution or Winding Up. (i) Prior to the
occurrence of a Trigger Event, subject to the provisions of paragraph 10 hereof,
upon any liquidation, dissolution or winding up of the Corporation, the holders
of Series B Preferred Stock shall be entitled to receive from assets available
for distribution to stockholders, in priority over the Class A Common Stock and
the Class B Common Stock and after distributions to any other class of capital
stock of the Corporation, an amount in cash (and, to the extent sufficient cash
is not available for such payment, property at its fair market value), per
share, equal to the Liquidation Price of the Series B Preferred Stock as of the
date of payment or distribution. In addition, after the payment of the
Liquidation Price, holders of Series B Preferred Stock shall be entitled to
receive from assets available for distribution to stockholders, on a pari passu
basis and concurrent with payments or distributions made upon liquidation,
dissolution or winding-up to the holders of the Corporation's Class A Common
Stock and Class B Common Stock, an amount per share equal to the excess, if any,
of (i) the amount that would have been payable with respect to such share if it
had been converted into shares of Common Stock pursuant to the conversion
provisions in Paragraph 3 and Paragraph 4 hereof immediately prior to such
payment or distribution (assuming for such purposes that the Liquidation Price
in respect of shares of Series B Preferred Stock had not been previously paid)
over (ii) the Liquidation Price paid with respect to such share.
(ii) After the occurrence of a Trigger Event, subject to the
provisions of paragraph 10 hereof, upon any liquidation, dissolution or winding
up of the Corporation, the holders of Series
- 9 -
<PAGE>
B Preferred Stock shall be entitled to receive from assets available for
distribution to stockholders, in priority over any other class of capital stock
of the Corporation, an amount in cash (and, to the extent sufficient cash is not
available for such payment, property at its fair market value), per share, equal
to the Liquidation Price (as defined below) of the Series B Preferred Stock as
of the date of payment or distribution.
(iii) The Liquidation Price of any share of Series B Preferred
Stock will be the sum of (i) the Agreed Value of such share plus (ii) all
accrued and unpaid dividends on such share through and including the
determination date. The Agreed Value of any share of Series B Preferred Stock
will be One Hundred Dollars ($100.00).
(iv) A merger or consolidation of the Corporation in which the
holders of shares of capital stock of the Corporation immediately prior to the
merger or consolidation hold less than 50% of the votes of capital stock
immediately after the merger or consolidation, or a sale of all or substantially
all of the Corporation's assets, shall be deemed to be a "liquidation,
dissolution or winding-up of the Corporation" for purposes of this paragraph 7.
8. Voting Rights. (a) The holders of Series B Preferred Stock
shall be entitled to vote on all matters as to which holders of the
Corporation's Class A Common Stock are entitled to vote, with each share of
Series B Preferred Stock being entitled to a number of votes equal to the number
of shares of Class A Common Stock into which the share could be converted
pursuant to paragraphs 3 and 4 hereof, and with the holders of Series B
Preferred Stock voting together with the holders of Class A Common Stock as a
single class. In addition, holders of Series B Preferred Stock will be entitled
to notice of, and to attend, all meetings of stockholders of the Corporation and
to vote as a separate class on all matters submitted to the Corporation's
stockholders with respect to which holders of stock are required to vote as a
separate class under Maryland law.
(b) Without the consent of the holders of a majority of
the Series B Preferred Stock, voting separately as a single class, the
Corporation will not:
(i) increase, decrease or effect a subdivision,
combination or consolidation of the authorized amount of Series B Preferred
Stock or issue or authorize the issuance of authorized but unissued shares of
Series B Preferred Stock (in each case, other than for the payment of Dividend
Shares pursuant to Section 5(i) hereof);
(ii) amend, alter or repeal any provision of its
Charter or bylaws so as to effect any change in the rights, privileges, powers
or preferences of the holders of the Series B Preferred Stock (provided that
such separate class voting right shall not apply with respect to an amendment,
alteration or repeal of any provision that solely effects a change in the terms
of the Corporation's Class A Common Stock, as to which the holders of Series B
Preferred Stock will vote together with the holders of Common Stock); or
- 10 -
<PAGE>
(iii) amend, alter or repeal any resolution of the
Corporation's Board of Directors or any other instrument establishing and
designating the Series B Preferred Stock or any other capital stock of the
Corporation, and determining the relative rights and preferences thereof, so as
to effect any change in the rights, privileges, powers or preferences of the
holders of the Series B Preferred Stock (provided that much separate class
voting right shall not apply with respect to an amendment, alteration or repeal
of any provision that solely effects a change in the terms of the Corporation's
Class A Common Stock, as to which the holders of Series B Preferred Stock will
vote together with the holders of Common Stock).
9. Preemptive Rights. None.
10. Priority and Ranking of New Securities Offering.
Notwithstanding any other provisions of these Articles Supplementary, (i) the
Corporation shall have the right to issue additional equity securities (the "New
Securities") in order to raise up to $400,000,000 and (ii) the New Securities
may bear dividends payable in cash or other consideration, be exchangeable for
or convertible into other securities of the Corporation, and will be senior to
and have priority over the Series B Preferred Stock in all respects (including
without limitation with respect to dividends and distributions upon liquidation,
dissolution and winding up of the Corporation), except that upon and after the
occurrence of a Trigger Event, the New Securities will rank pari passu with the
Series B Preferred Stock in respect of dividends, distributions upon
liquidation, dissolution and winding up of the Corporation; provided, however,
that the New Securities shall not be issued prior to the Closing Date under the
Asset Purchase Agreement by and between River City Broadcasting, L.P. and the
Corporation dated as of April 10, 1996 without the consent of the Seller
thereunder.
11. Miscellaneous.
(a) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
stock, for the purpose of effecting the conversion of the shares of Series B
Preferred Stock, such number of its duly authorized shares of Class A Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series B Preferred Stock into such Class A Common Stock at
any time (assuming that, at the time of the computation of such number of
shares, all such Class A Common Stock would be held by a single holder);
provided, however, that nothing contained herein shall preclude the Corporation
from satisfying its obligations in respect of the conversion of the shares by
delivery of purchased shares of Class A Common Stock that are held in the
treasury of the Corporation. All shares of Class A Common Stock which shall be
deliverable upon conversion of the shares of Series B Preferred Stock shall be
duly and validly issued, fully paid and nonassessable. For purposes of this
paragraph 11(a), any shares of Class A Common Stock at any time outstanding
shall not include shares held in the treasury of the Corporation.
(b) The Corporation shall pay any and all issue or other taxes
that may be payable in respect of any issue or delivery of shares of Class A
Common Stock on conversion (or pursuant to redemption or exchange) of shares of
Series B Preferred Stock pursuant hereto. The Corporation
- 11 -
<PAGE>
shall not, however, be required to pay any tax which is payable in respect of
any transfer involved in the issue or delivery of Class A Common Stock in a name
other than that in which the shares of Series B Preferred Stock so converted
were registered, and no such issue or delivery shall be made unless and until
the Convertible Holder requesting such issue has paid to the Corporation the
amount of such tax, or has established, to the satisfaction of the Corporation,
that such tax has been paid.
(c) All notices from the Corporation to the holders shall be
given by one of the methods specified in paragraph 11(d).
(d) All notices and other communications hereunder shall be
deemed given (i) on the first business day following the date received, if
delivered personally, (ii) on the business day following timely deposit with an
overnight courier service, if sent by overnight courier specifying next day
delivery and (iii) on the first business day that is five days following deposit
in the mails, if sent by first class mail to (x) a holder at its last address as
it appears on the transfer records or registry for the Series B Preferred Stock
and (y) the Corporation at the following address (or at such other address as
the Corporation shall specify in a notice pursuant to this paragraph 11(d)):
Sinclair Broadcast Group, Inc., 2000 West 41st Street, Baltimore, Maryland
21211; Attention: Corporate Secretary.
(e) The Corporation shall establish and maintain a register,
or cause a transfer agent to establish and maintain a register, identifying the
holders of shares of Series B Preferred Stock and shall, upon presentation of
certificates endorsed for transfer or accompanied by a duly executed power of
transfer, register the transfer of shares as endorsed by such certificates or
powers of transfer.
(f) Any shares of Series B Preferred Stock which have been
converted, redeemed, exchanged or otherwise acquired by the Corporation shall,
after such conversion, redemption, exchange or acquisition, as the case may be,
be retired and promptly canceled and the Corporation shall take all appropriate
action to cause such shares to obtain the status of authorized but unissued
shares of Preferred Stock without designation as to series, until such shares
are once more designated as part of a particular series by the Board of
Directors; provided, however, that the Corporation shall retain as authorized
but unissued shares of Series B Preferred Stock a sufficient number of such
shares to allow exchange of shares of Class A Common Stock into Series B
Preferred Stock pursuant to paragraph 3(e) hereof or upon the occurrence of a
Trigger Event to the extent holders of Class A Common Stock have the right to
exchange their Common Stock for Series B Preferred Stock. The Corporation may
cause a certificate setting forth a resolution adopted by the Board of Directors
that none of the authorized shares of Series B Preferred Stock are outstanding
to be filed with the Secretary of State of the State of Maryland. When such
certificate becomes effective, all references to Series B Preferred Stock shall
be eliminated from the Charter and the shares of Preferred Stock designated
hereby as Series B Preferred Stock shall have the status of authorized and
unissued shares of Preferred Stock and may be reissued as part of any new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors.
- 12 -
<PAGE>
(g) The Corporation shall be entitled to recognize the
exclusive right of a Convertible Holder registered according to the
Corporation's register as the holder of shares of Series B Preferred Stock, and
such record holder shall be deemed the holder of such shares for all purposes.
(h) Any registered holder of Series B Preferred Stock may
proceed to protect and enforce its rights by any available remedy by proceeding
at law or in equity to protect and enforce any such rights, whether for the
specific enforcement of any provision in these Articles Supplementary or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
- 13 -
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
ARTICLES SUPPLEMENTARY
SERIES C PREFERRED STOCK
Sinclair Broadcast Group, Inc., a Maryland corporation, having
its principal office in Baltimore City, Maryland (the "Company"), hereby
certifies to the Maryland State Department of Assessments and Taxation as
follows:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Company (the "Board of Directors") by Article Sixth of the
Charter of the Company, the Board of Directors has duly divided and classified
2,062,000 shares of the Preferred Stock of the Corporation into a series
designated "Series C Preferred Stock" and has provided for the issuance of such
series.
SECOND: The terms of the Series C Preferred Stock, par value
of $.01 per share, as set by the Board of Directors are as follows:
1. Designation and Amount. The shares of such series shall be
designated as Series C Preferred Stock and the number of shares constituting
such series shall initially be 2,062,000 subject to increase or decrease by
action of the Board of Directors effectuated by further Articles Supplementary.
The liquidation preference of the Series C Preferred Stock shall be $100 per
share (the "Liquidation Amount"). The Stated Maturity of the Series C Preferred
Stock is March 15, 2009.
2. Ranking. The Series C Preferred Stock will, with respect to
dividend rights and rights on liquidation, winding-up and dissolution, rank (i)
senior to all classes of common stock of the Company, each other class of
capital stock or series of preferred stock established after the date the Series
C Preferred Stock is issued (the "Series C Preferred Stock Issue Date") by the
Board of Directors the terms of which do not expressly provide that it ranks
senior to or on a parity with the Series C Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution of the Company
(collectively referred to with all classes of common stock of the Company as
"Junior Securities"); (ii) on a parity with any class of capital stock or series
of preferred stock established after the Series C Preferred Stock Issue Date,
the terms of which expressly provide that such class or series will rank on a
parity with the Series C Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution (collectively, "Parity Securities"); and
(iii) junior to each class of capital stock or series of preferred stock issued
by the Company established after the Series C Preferred Stock Issue Date by
<PAGE>
the Board of Directors the terms of which expressly provide that such series
will rank senior to the Series C Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution (collectively referred to as
"Senior Securities"); provided that the Company's Series B Convertible Preferred
Stock shall be deemed to be Junior Securities, except that upon the termination
of Mr. Barry Baker's ("Mr. Baker's") employment agreement with the Company prior
to May 31, 2001, the expiration date of the initial five-year agreement term
under the Employment Agreement dated as of April 10, 1996, between Mr. Baker and
the Company (the "Employment Agreement"), (i) by the Company for any reason
other than "for cause" as defined in the Employment Agreement, or (ii) by Mr.
Baker under Section 10.3.1 of the Employment Agreement, then the Series C
Preferred Stock shall be deemed Parity Securities and will rank PARI PASSU with
the Series B Convertible Preferred Stock in respect of dividend and
distributions upon liquidation, dissolution and winding-up of the Company. The
Company hereby declares the Series C Preferred Stock to be "New Securities" and
the Company shall not declare more than $400 million of equity securities,
including the Series C Preferred Stock, as New Securities under the Series B
Convertible Preferred Stock for purposes of the Series B Convertible Preferred
Stock.
3. Dividends.
(a) Beginning on the date of issuance of the Series C
Preferred Stock, Holders of Series C Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, cash dividends on the Series C Preferred Stock, at
an annual rate equal to 12 5/8% of the then stated Liquidation Amount per share
of Series C Preferred Stock as long as the Series C Preferred Stock is
outstanding. Dividends will accrue from the date of issuance and will be payable
quarterly in arrears on March 15, June 15, September 15, and December 15 of each
year (each a "Dividend Payment Date"), commencing on June 15, 1997 to holders of
record on the March 1, June 1, September 1, and December 1 next preceding each
such Dividend Payment Date, respectively. In the event that any date on which
dividends are otherwise payable on the Series C Preferred Stock is not a
Business Day, payment of the dividends payable will be made on the next
succeeding day that is a Business Day (and without any dividends or other
payment in respect of any such delay). Dividends, whether or not declared and
whether or not deferred pursuant to an Extension Period, will cumulate and
accrue additional cash dividends on unpaid dividends, compounding quarterly at
an annual rate equal to 12 5/8%, until declared and paid. Dividend payments may
be deferred on the Series C Preferred Stock for up to three consecutive
quarters; provided, that the Company pay all dividends due and owing (including
any accrued dividends and additional dividends on such dividends, compounded
quarterly) in full at least once every four quarters and on March 15, 2009 (each
an "Extension Period"). All references in this Articles Supplementary to accrued
and unpaid dividends shall be deemed to include a reference to (a) any
accumulated or additional dividends on any such accrued and unpaid
- 2 -
<PAGE>
dividends, (b) Registration Default Distributions and any additional dividends
thereon and (c) Additional Amounts Attributable to Taxes. Except for Additional
Amounts Attributable to Taxes, no amount shall be due and payable during an
Extension Period until the end of such period.
(b) No full dividends may be declared or paid or funds set
apart for the payment of dividends on any Parity Securities for any period
unless full cumulative dividends without regard to any Extension Period shall
have been or contemporaneously are declared and paid (or are deemed declared and
paid) in full or declared and a sum in cash sufficient for full payment of the
dividends set apart for such payment on the Series C Preferred Stock. If full
dividends are not so paid, the Series C Preferred Stock shall share dividends
PRO RATA with the Parity Securities. No dividends may be paid or set apart for
such payment on Junior Securities (except dividends on Junior Securities in
additional shares of Junior Securities) and no Junior Securities may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full cumulative dividends have not been paid in
full (or deemed paid in full) on the Series C Preferred Stock. Dividends on
account of arrearages for any past dividend period (whether or not as a result
of an Extension Period) and dividends in connection with any optional redemption
may be declared and paid at any time, without reference to any regular Dividend
Payment Date, to holders of record of the Series C Preferred Stock on such date,
not more than forty-five (45) days prior to the payment thereof, as may be fixed
by the Board of Directors. So long as any shares of the Series C Preferred Stock
are outstanding, the Company shall not make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the purchase,
redemption or other retirement of, any of the Parity Securities or Junior
Securities or any warrants, rights, calls or options exercisable for or
convertible into any of the Parity Securities or Junior Securities, and shall
not permit any corporation or other entity directly or indirectly controlled by
the Company to purchase or redeem any of the Parity Securities or Junior
Securities or any such warrants, rights, calls or options unless full cumulative
dividends determined in accordance herewith on the Series C Preferred Stock have
been paid (or are deemed paid) in full except in the case of Parity Securities
if the Series C Preferred Stock shall share in such payments equally and ratably
in any distribution of assets of the Company in proportion to the full
liquidation preferences to which each is entitled.
(c) Dividends payable on shares of the Series C Preferred
Stock for any period less than a year shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days elapsed in
the period for which dividends are payable.
(d) If the Trust is required to pay any taxes, duties,
assessment or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any taxing authority, then in any such
case, the dividend rate on the
- 3 -
<PAGE>
Series C Preferred Stock shall be increased such that the holders of the Parent
Preferred will receive an amount as additional preferred dividends equal to the
amount of Additional Amounts Attributable to Taxes as defined herein, in
addition to the dividends on the Series C Preferred Stock as provided herein.
(e) Notwithstanding the foregoing, in the event of a
Registration Default which shall be promptly notified to the transfer agent by
the Company in an officers' certificate, Registration Default Distributions
shall be payable as additional preferred dividends on the Series C Preferred
Stock in the amount and on the terms provided in the Registration Rights
Agreement, which dividends if unpaid shall accrue additional dividends
compounded quarterly.
4. Redemption Provisions.
(a) Optional Redemption. The Series C Preferred Stock may be
redeemed at any time on or after March 15, 2002, in whole or in part, in cash at
the option of the Company, at the redemption prices (expressed as a percentage
of such shares' Liquidation Amount) set forth below, if redeemed during the 12-
month period beginning March 15 of each of the years set forth below:
REDEMPTION
YEAR PRICE
---- ----------
2002 ........................... 105.813%
2003 ........................... 104.650%
2004 ........................... 103.488%
2005 ........................... 102.325%
2006 ........................... 101.163%
and thereafter at 100% of such shares' Liquidation Amount, together with accrued
and unpaid dividends, if any, to the redemption date (including an amount equal
to a prorated dividend from the last payment date to the redemption date).
In addition, up to $66,666,666 of the aggregate Liquidation
Amount of the Series C Preferred Stock may be redeemed, at the option of the
Company at any time on or prior to March 15, 2000 in cash at a redemption price
per share equal to 111.625% of the Liquidation Amount thereof, plus accrued and
unpaid dividends, if any, out of the net proceeds of one or more Public Equity
Offerings of the Company, provided, that, after any such redemption, the number
of shares of Series C Preferred Stock outstanding must equal at least 1,395,334.
The Series C Preferred Stock may be redeemed pursuant to this
clause (a) even though, pursuant to clause (b) below, a Tax Event or an
Investment Company Act
- 4 -
<PAGE>
Event has occurred. In such circumstances, redemption can be effected pursuant
to either this clause (a) or clause (b) below.
(b) Redemption Upon a Tax Event or an Investment Company Act
Event. In addition, upon the occurrence of a Tax Eve t or Investment Company Act
Event, the Company has the option to redeem the Series C Preferred Stock, in
whole or in part, in cash at a redemption price of 105.813% in the case of a Tax
Event or 101% in the case of an Investment Company Act Event, in each case of
the aggregate Liquidation Amount of the Series C Preferred Stock redeemed plus
accrued and unpaid dividends, if any; provided, that at the time of redemption
in the case of a Tax Event triggered by an amendment, clarification, or change
of laws, treaties or regulations thereunder, such amendment, clarification or
change remains in effect.
(c) Change of Control.
(1) Subject to the following sentence, upon the occurrence of
a Change of Control, each holder of Series C Preferred Stock will have the right
to require the Company to purchase all or a portion of such holder's Series C
Preferred Stock in cash pursuant to the Change of Control Offer described below,
in whole or in part, in integral multiples of $100, at a purchase price (the
"Change of Control Purchase Price") in cash in an amount equal to 101% of such
shares' Liquidation Amount of such Series C Preferred Stock, plus, without
duplication, all accrued and unpaid dividends, if any, to the date of purchase
(the "Change of Control Purchase Date"), pursuant to the offer described below
(the "Change of Control Offer") and the other procedures set forth in these
Articles Supplementary. Notwithstanding the foregoing, prior to the redemption
or repurchase of all of the Existing Notes, the repayment in full of the
Indebtedness under the Bank Credit Agreement, the termination of the commitments
and letters of credit issued under the Bank Credit Agreement, and the
termination of interest rate protection agreements entered into between the
Company and any lenders under the Bank Credit Agreement, the holders of the
Series C Preferred Stock may not require the Company to redeem or repurchase
such securities as a result of such a Change of Control under any circumstances
unless all of the Existing Notes and all indebtedness under the Bank Credit
Agreement are repaid, redeemed or repurchased, all of the commitments and
letters of credit issued under the Bank Credit Agreement are terminated and all
interest rate protection agreements entered into between the Company and any
lenders under the Bank Credit Agreement are terminated as a result of such
Change of Control, or the holders of such instruments have consented to a Change
of Control Offer in which case the date on which all Existing Notes and all
indebtedness under the Bank Credit Agreement are so repaid, redeemed or
repurchased and such commitments, letters of credit and interest rate protection
agreements are terminated or the holders of such instruments have consented to a
Change of Control Offer, shall be deemed to be the date on which such Change of
Control shall have occurred.
- 5 -
<PAGE>
(2) Within 30 days following any Change of Control, the
Company shall, if the holders of Series C Preferred Stock have any right to
require the repurchase of such Series C Preferred Stock, give written notice of
such Change of Control to the holders of Series C Preferred Stock, by
first-class mail, postage prepaid, at their addresses appearing in the security
register, stating, among other things, that it is making a Change of Control
Offer, the Change of Control Purchase Price and that the Change of Control
Purchase Date shall be a Business Day no earlier than 30 days nor later than 60
days from the date such notice is mailed, or such later date as is necessary to
comply with requirements under the Exchange Act; that any shares of Series C
Preferred Stock not tendered will continue to accrue dividends; that, unless the
Company defaults in the payment of the Change of Control Purchase Price, any
Series C Preferred Stock accepted for payment pursuant to the Change of Control
Offer shall cease to accrue dividends after the Change of Control Purchase Date;
and certain other procedures that a holder of Series C Preferred Stock must
follow to accept a Change of Control Offer or to withdraw such acceptance.
(3) On the Change of Control Payment Date, (A) the Company
shall, to the extent lawful, (i) accept for payment shares of Series C Preferred
Stock tendered pursuant to the Change of Control Offer and (ii) promptly mail
(or deliver by wire transfer) to each holder of shares of Series C Preferred
Stock so accepted payment in an amount equal to the purchase price for such
shares and (B) unless the Company defaults in the payment for the shares of
Series C Preferred Stock tendered pursuant to the Change of Control Offer,
dividends will cease to accrue with respect to the shares of Series C Preferred
Stock tendered and all rights of holders of such tendered shares will terminate,
except for the right to receive payment therefor, on the Change of Control
Payment Date. The Company shall, if the Series C Preferred Stock is held by any
Person other than KDSM, Inc. (or any successor thereof), publicly announce by
press release issued in a normal commercial fashion the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
(4) A tender made in response to a Change of Control Offer may
be withdrawn if the Company receives, not later than one business day prior to
the Change of Control Purchase Date, a telegram, telex, facsimile transmission
or letter, specifying, as applicable, (A) the name of the holder; (B) the
certificate number of the Series C Preferred Stock in respect of which such
notice of withdrawal is being submitted; (C) the principal amount of the Series
C Preferred Stock (which shall be $100 or an integral multiple thereof)
delivered for purchase by the holder as to which such notice of withdrawal is
being submitted; (D) a statement that such holder is withdrawing his election to
have such principal amount of such Series C Preferred Stock purchased; and (E)
the principal amount, if any, of such Series C Preferred Stock (which shall be
$100 or an integral multiple thereof) that remains subject to the original
Change of Control Purchase Notice and that has been or will be delivered for
purchase by the Company.
- 6 -
<PAGE>
(d) Procedure for Redemption. On and after a redemption date,
unless the Company defaults in the payment of the applicable redemption price,
dividends will cease to accrue on shares of Series C Preferred Stock called for
redemption and all rights of holders of such shares will terminate except for
the right to receive the redemption price without dividends. If a notice of
redemption shall have been given as provided in the succeeding sentence, and the
funds necessary for redemption (including an amount in respect of all dividends
that will accrue to the redemption date) shall have been segregated and
irrevocably set apart by the Company, in trust for the benefit of the holders of
the shares called for redemption, then dividends shall cease to accrue on the
redemption date on the shares to be redeemed and, at the close of business on
the date on, or when, such funds were segregated and set apart, the holders of
the shares to be redeemed shall cease to be stockholders of the Company and
shall be entitled only to receive the redemption price for such shares. The
Company will send a written notice of redemption by first class mail to each
holder of record of shares of Series C Preferred Stock, not fewer than 30 days
nor more than 60 days prior to the date fixed for such redemption at its
registered address. Shares of Series C Preferred Stock issued and reacquired
will, upon compliance with the applicable requirements of Maryland law, have the
status of authorized but unissued shares of preferred stock of the Company
undesignated as to series and may with any and all other authorized but unissued
shares of preferred stock of the Company be designated or redesignated and
issued or reissued, as the case may be, as part of any series of preferred stock
of the Company, except that any issuance or reissuance of shares of preferred
stock must be in compliance with these Articles Supplementary and except that
such shares may not be reissued or sold as shares of Series C Preferred Stock.
(e) Mandatory Redemption. On March 15, 2009, the Company shall
redeem from any source of funds legally available therefor, in the manner
provided above, all of the shares of the Series C Preferred Stock then
outstanding at a redemption price equal to 100% of the Liquidation Amount per
share, plus, without duplication, an amount in cash equal to all accrued and
unpaid dividends per share to the date of redemption.
5. Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of Series C
Preferred Stock will be entitled to be paid out of the assets of the Company
available for distribution $100 per share, plus any accrued and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend from the last dividend payment date to
the date fixed for liquidation, dissolution or winding-up), before any
distribution is made on any Junior Securities, including, without limitation,
any common stock of the Company. If upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the amounts payable with
respect to the Series C Preferred Stock and all other Parity Securities are not
paid in
- 7 -
<PAGE>
full, the holders of the Series C Preferred Stock and the Parity Securities will
share equally and ratably in any distribution of assets of the Company in
proportion to the full liquidation preferences to which each is entitled. After
payment of the full amount of the liquidation preferences to which they are
entitled, the holders of shares of Series C Preferred Stock will not be entitled
to any further participation in any distribution of assets of the Company.
However, neither the sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with one or more corporations shall be deemed to be a liquidation, dissolution
or winding-up of the Company.
6. Voting Rights.
(a) Holders of the Series C Preferred Stock, except as
provided by applicable law or as set forth in p ragraphs (i), (ii), (iii) and
(iv) below, and in Sections 6(b) and (d) and in Section 9(c), shall not be
required or permitted to vote on any matter required or permitted to be voted
upon by the stockholders of the Company. Notwithstanding the previous sentence,
if (i) cash dividends on the Series C Preferred Stock (including any accrued
dividends thereon) are in arrears and unpaid for four or more quarterly dividend
payments (whether or not pursuant to an Extension Period) (a "Dividend
Default"), (ii) the Company shall fail to make and consummate a Change of
Control Offer upon the occurrence of a Change of Control whether or not the
Company is required to make or consummate a Change of Control Offer pursuant to
Section 4(c), (iii) the Company fails to discharge any redemption obligation
with respect to the Series C Preferred Stock; or (iv) a breach or violation of
any of the provisions described in the next paragraph or under Section 9 occurs
and such breach or violation continues for a period of 30 days or more, then in
any such case, the holders of a majority of the Liquidation Amount of the then
outstanding Series C Preferred Stock, voting separately as a single class, shall
have the right, at a meeting of the holders of Series C Preferred Stock or by
such holders' written consent or at any annual or special meeting of the
stockholders of the Company for the election of directors, to elect, by vote of
the holders of a majority of the Liquidation Amount of then outstanding Series C
Preferred Stock present (in person or by proxy), two (2) directors ("Preferred
Directors") of the Corporation. The two directorships positions promptly will be
made available as a result of (A) vacancies on the Board of Directors at the
time the holder's right to vote arose, (B) two resignations from the Board of
Directors, submitted by current directors to permit the Preferred Directors to
join the Board of Directors, (C) permitting the holders of a majority of the
Liquidation Amount of the then outstanding Series C Preferred Stock, voting
separately as a class, to declare that the number of directors constituting the
full Board of Directors shall be increased by two or (D) a combination of the
factors described in (A), (B), or (C). Such voting rights will continue until
such time as, in the case of a Dividend Default, all dividends in arrears on the
Series C Preferred Stock are paid in full in cash, in the case of
- 8 -
<PAGE>
a Change of Control, the Company consummates a Change of Control Offer and, in
all other cases, any failure, breach or default is remedied or waived by the
holders of a majority of the Liquidation Amount of Series C Preferred Stock then
outstanding, at which time the terms of any directors elected pursuant to the
provisions of this paragraph shall terminate. Each such event described in
clauses (i) through (iv) above is hereby referred to herein as a "Voting Rights
Triggering Event," and such voting rights will be the exclusive sole remedy at
law or in equity of the holders of the Series C Preferred Stock.
(b) Each Preferred Director elected by the holders of shares
of the Series C Preferred Stock pursuant to Section 6(a) shall continue to serve
as director for a term of one year, except that upon termination of the right of
holders of the Series C Preferred Stock as a class to elect two directors as
provided herein, the term of office of such directors shall automatically
terminate. The Preferred Directors may be removed by, and except as provided in
the immediately preceding sentence shall not be removed except by, the vote of
the holders of record of a majority of the outstanding Liquidation Amount of the
Series C Preferred Stock present (in person or by proxy) and voting separately
as a single class at a meeting of such stockholders, or at any meeting of the
holders of the Series C Preferred Stock called for that purpose, or by written
consent signed by the holders of a majority of the outstanding Liquidation
Amount of the Series C Preferred Stock. In the event that one or both of the
Preferred Director positions are vacant for any reason other than the
termination of the right of the holders of Series C Preferred Stock to elect the
Preferred Directors, the holders of a majority of the outstanding Liquidation
Amount of Series C Preferred Stock shall be permitted to elect a sufficient
number of directors to fill such vacancies.
(c) So long as the right of the holders of Series C Preferred
Stock described in this Section 6 to vote for directors continues, the Secretary
of the Company or the person performing the functions of the secretary of the
Company shall call, upon the written request of any holder of record of the
Series C Preferred Stock addressed to him or her at the principal office of the
Company or, if such a request is not made, upon his or her own motion, a special
meeting of the holders of such shares for the election of such directors, as
provided herein. Such meeting shall be held not less than 20 or more than 45
days after the accrual of such voting rights, at the place and upon the notice
provided by law and in the by-laws of the Company for the holding of meetings of
shareholders.
(d) No class of Senior Securities may be authorized by the
Company without the affirmative vote or consent of the holders of at least a
majority in Liquidation Amount of Series C Preferred Stock then outstanding,
voting or consenting. These Articles Supplementary and the Amended and Restated
Articles of Incorporation of the Company may not be amended so as to affect
adversely the specified rights, preferences,
- 9 -
<PAGE>
privileges or voting rights of holders of Series C Preferred Stock or Preferred
Securities nor may the issuance of any additional shares of Series C Preferred
Stock be authorized, without the affirmative vote or consent of the holders of
at least a majority of the outstanding Liquidation Amount of Series C Preferred
Stock, voting or consenting, as the case may be, as separate classes, provided
that without the approval by the vote or written consent of the holders of all
outstanding Series C Preferred Stock, the Company may not, and may not permit
any Person to, amend, repeal or change the dividend amounts provided in Section
3, the Liquidation Amount, the provisions of Section 4(a), (b) and (e) providing
for redemption, the provisions in Section 4(c) regarding actions which may, in
certain circumstances, be taken upon a Change of Control, or in any case, the
definitions related thereto. The holders of at least a majority of the
outstanding Liquidation Amount of Series C Preferred Stock, voting or
consenting, as the case may be, as a single class, may also waive compliance
with any provision of these Articles Supplementary except that a default upon
any provision that would require 100% consent of the holders of Series C
Preferred Stock to amend such provision may not be waived without the approval
by the vote or written consent of the holders of all of the outstanding shares
of Series C Preferred Stock.
(e) If entitled to voting rights, each holder of Series C
Preferred Stock will be entitled to one vote for each $100 aggregate Liquidation
Amount of Series C Preferred Stock
held by such holder.
7. Preemptive Rights. No shares of Series C Preferred Stock
shall have any rights of preemption whatsoever as to any securities of the
Company, or any warrants, rights or options issued or granted with respect
thereto, regardless of how such securities or such warrants, rights or options
may be designated, issued or granted.
8. Conversion or Exchange. The holders of shares of Series C
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Company.
9. Covenants.
(a) Limitation on Indebtedness. (I) The Company will not, and
will not permit any Restricted Subsidiary to, create, incur, assume or directly
or indirectly guarantee or in any other manner become directly or indirectly
liable for ("incur") any Indebtedness (including Acquired Indebtedness), except
that the Company may incur Indebtedness and a Restricted Subsidiary may incur
Permitted Subsidiary Indebtedness if, in each case, the Debt to Operating Cash
Flow Ratio of the Company and its Restricted Subsidiaries at the time of the
incurrence of such Indebtedness, after giving pro forma effect thereto, is 7:1
or less.
- 10 -
<PAGE>
(II) The foregoing limitation will not apply to the incurrence
of any of the following (collectively, "Permitted Indebtedness"):
(i) Indebtedness of the Company under the Bank Credit
Agreement in an aggregate principal amount at any one time outstanding not to
exceed $300 million under any revolving credit facility thereunder;
(ii) Indebtedness of the Company pursuant to the Existing
Notes and Indebtedness of any Subsidiary of the Company pursuant to a guarantee
of the Existing Notes;
(iii) Indebtedness of any Subsidiary of the Company consisting
of a guarantee of the Company's Indebtedness under the Bank Credit Agreement;
(iv) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the date the Series C Preferred Stock is issued and listed on
Schedule I to these Articles Supplementary;
(v) Indebtedness of the Company owing to a Restricted
Subsidiary; provided, that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer to a
Wholly Owned Restricted Subsidiary or a pledge to or for the benefit of the
lenders under the Bank Credit Agreement) shall be deemed to be an incurrence of
such Indebtedness by the obligor not permitted by this clause (v);
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary
owing to the Company or another Wholly Owned Restricted Subsidiary; provided,
that (a) any disposition, pledge or transfer of any such Indebtedness to a
Person (other than a disposition, pledge or transfer to the Company or a Wholly
Owned Restricted Subsidiary or pledge to or for the benefit of the lenders under
the Bank Credit Agreement) shall be deemed to be an incurrence of such
Indebtedness by the obligor not permitted by this clause (vi) and (b) any
transaction pursuant to which any Wholly Owned Restricted Subsidiary, which has
Indebtedness owing to the Company or any other Wholly Owned Restricted
Subsidiary, ceases to be a Wholly Owned Restricted Subsidiary shall be deemed to
be the incurrence of Indebtedness by such Wholly Owned Restricted Subsidiary
that is not permitted by this clause (vi);
(vii) guarantees by any Restricted Subsidiary of Indebtedness
of the Company or another Restricted Subsidiary which, if any Existing Notes are
outstanding, are made in accordance with the Existing Indentures and guarantees
by the Company or any Subsidiary of the KDSM Senior Debentures;
- 11 -
<PAGE>
(viii) obligations of the Company entered into in the ordinary
course of business pursuant to Interest Rate Agreements designed to protect the
Company against fluctuations in interest rates in respect of Indebtedness of the
Company as long as such obligations at the time incurred do not exceed the
aggregate principal amount of such Indebtedness then outstanding or in good
faith anticipated to be outstanding within 90 days of such occurrence;
(ix) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (ii), (iii), and (iv) above, including any successive
refinancings so long as the aggregate principal amount of Indebtedness
represented thereby is not increased by such refinancing plus the lesser of (I)
the stated amount of any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of the Indebtedness
being refinanced or (II) the amount of premium or other payment actually paid at
such time to refinance the Indebtedness, plus, in either case, the amount of
expenses of the Company incurred in connection with such refinancing; and
(x) Indebtedness of the Company in addition to that described
in clauses (i) through (ix) above, and any renewals, extensions, substitutions,
refinancings, or replacements of such Indebtedness, so long as the aggregate
principal amount of all such additional Indebtedness shall not exceed
$10,000,000.
(b) Limitation on Restricted Payments. (I) The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution
to holders of, any of the Company's Junior Securities or Parity Securities
(other than dividends or distributions payable solely in its Junior Securities
or Parity Securities);
(ii) purchase, redeem or otherwise acquire or retire for
value, directly or indirectly, any Junior Securities or Parity Securities or
warrants, rights or options to acquire shares of Junior Securities or Parity
Securities (except Junior Securities or Parity Securities held by the Company or
a Wholly Owned Restricted Subsidiary);
(iii) declare or pay any dividend or distribution on any
Equity Interests of any Subsidiary to any Person (other than the Company or any
of its Wholly Owned Restricted Subsidiaries);
(iv) incur, create or assume any guarantee of Indebtedness of
any Affiliate (other than a Wholly Owned Restricted Subsidiary of the Company);
or
(v) make any Investment in any Person (other than any
Permitted Investments)
- 12 -
<PAGE>
(any of the foregoing payments described in clauses (i) through (v), other than
any such action that is a Permitted Payment, collectively, "Restricted
Payments") unless, after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors, whose determination shall be conclusive and evidenced by a
board resolution), (1) no Voting Rights Triggering Event shall have occurred and
be continuing or would occur as a consequence thereof, (2) all accrued and
unpaid dividends on the Series C Preferred Stock payable on any Dividend Payment
Date prior to the date of the Restricted Payment have been declared and paid in
cash and (3) the aggregate amount of all such Restricted Payments declared or
made after the Issue Date does not exceed the sum of:
(A) an amount equal to the Company's Cumulative Operating Cash
Flow less 1.4 times the Company's Cumulative Consolidated Interest Expense; and
(B) the aggregate Net Cash Proceeds received after the Issue
Date by the Company from capital contributions (other than from a Restricted
Subsidiary) or from the issuance or sale (other than to any of its Restricted
Subsidiaries) of its Qualified Equity Interests (except, in each case, to the
extent such Net Cash Proceeds are used to purchase, redeem or otherwise retire
Equity Interests as set forth in Section (9)(b)(II)(iii)); and
(C) the aggregate Net Cash Proceeds from the sale of the
Series C Preferred Stock to KDSM, Inc. on the Issue Date.
(II) Notwithstanding the foregoing, and in the case of clause
(ii) below, so long as no Voting Rights Triggering Event is continuing, the
foregoing provisions shall not prohibit the following actions (clauses (i)
through (iii) being referred to as "Permitted Payments"):
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at such date of declaration such payment would be
permitted by the provisions of paragraph (I) of this Section and such payment
shall be deemed to have been paid on such date of declaration for purposes of
the alculation required by paragraph (I) of this Section;
(ii) any transaction with an officer or director of the
Company entered into in the ordinary course of business (including compensation
or employee benefit arrangements with any officer or director of the Company);
or
(iii) the repurchase, redemption, or other acquisition or
retirement of any Junior Securities in exchange for (including any such exchange
pursuant to the exercise of a conversion right or privilege in connection
therewith cash is paid in lieu of the issuance of fractional shares or scrip),
or out of the Net Cash Proceeds of, a substantially concurrent issue and sale
for cash (other than to a Subsidiary) of other Junior Securities
- 13 -
<PAGE>
which are Qualified Equity Interests of the Company; provided that the Net Cash
Proceeds from the issuance of such Junior Securities which are Qualified Equity
Interests of the Company are excluded from clause (3)(B) of paragraph (I) of
this Section.
(c) Merger, Consolidation and Sale of Assets. Without the
affirmative vote of the holders of a majority of the Liquidation Amount of the
issued and outstanding shares of Series C Preferred Stock, voting or consenting,
as the case may be, as a separate class, the Company may not in a single
transaction or a series of related transactions, consolidate with or merge with
or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another Person or adopt a plan of
liquidation unless (i) either (a) the Company is the survivor of such merger or
consolidation or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person that acquires by
conveyance, transfer or lease the properties and assets of the Company
substantially as an entirety or, in the case of a plan of liquidation, the
Person to which assets of the Company have been transferred shall be a
corporation, partnership or trust organized and existing under the laws of the
United States or any State thereof or the District of Columbia; (ii) the Series
C Preferred Stock shall be converted into or exchanged for and shall become
shares of such successor, transferee or resulting Person, having in respect of
such successor, transferee or resulting Person, the same powers, preferences and
relative participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the Series C Preferred Stock had
immediately prior to such transaction; (iii) immediately after giving effect to
such transaction and the use of proceeds therefrom (on a PRO FORMA basis,
including any Indebtedness incurred or anticipated to be incurred in connection
with such transaction), the Company or the surviving or transferee Person is
able to incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with Section 9(a); (iv) immediately after giving
effect to such transaction, no Voting Rights Triggering Event shall have
occurred or be continuing; and (v) the Company has delivered to the transfer
agent prior to the consummation of the proposed transaction an officers'
certificate and an opinion of counsel, each stating that such consolidation,
merger, or transfer complies with these Articles Supplementary and that all
conditions precedent contained herein relating to such transaction have been
satisfied. For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related transactions) of
all or substantially all of the properties and assets of one or more
Subsidiaries, the Capital Stock of which constitutes all or substantially all of
the properties or assets of the Company, will be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
(d) Limitation on Transactions with Affiliates. The Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any
- 14 -
<PAGE>
Affiliate of the Company (other than the Company or a Wholly Owned Restricted
Subsidiary) unless (a) such transaction or series of related transactions is in
writing on terms that are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than would be available in a comparable
transaction in arm's- length dealings with an unrelated third party and (b)(i)
with respect to any transaction or series of transactions involving aggregate
payments in excess of $1,000,000, the Company delivers an officers' certificate
to the transfer agent of, or the holders of, the Series C Preferred Stock
certifying that such transaction or series of related transactions complies with
clause (a) above and such transaction or series of related transactions has been
approved by a majority of the members of the Board of Directors (and approved by
a majority of Independent Directors or, in the event there is only one
Independent Director, by such Independent Director) and (ii) with respect to any
transaction or series of transactions involving aggregate payments in excess of
$5,000,000, an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an investment banking firm
of national standing. Notwithstanding the foregoing, this provision will not
apply to (A) any transaction with an officer or director of the Company entered
into in the ordinary course of business (including compensation or employee
benefit arrangements with any officer or director of the Company), (B) any
transaction entered into by the Company or one of its Wholly Owned Restricted
Subsidiaries with a Wholly Owned Restricted Subsidiary of the Company, and (C)
transactions in existence on the date Series C Preferred Stock is initially
issued.
(e) Limitation on Sale of Assets. (i) The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, consummate an Asset Sale unless (A) at least 80% of the
consideration from such Asset Sale is received in cash and (B) the Company or
such Restricted Subsidiary receives consideration at the time of such Asset Sale
at least equal to the Fair Market Value of the shares or assets sold (other than
in the case of an involuntary Asset Sale, as determined by the Board of
Directors and evidenced in a board resolution or in connection with an Asset
Swap as determined in writing by a nationally recognized investment banking or
appraisal firm); provided however, that in the event the Company or any
Restricted Subsidiary engages in an Asset Sale with any third party and receives
in consideration therefor, or simultaneously with such Asset Sale enters into, a
Local Marketing Agreement with such third party or any affiliate thereof, the
Fair Market Value of such Local Marketing Agreement (as determined in writing by
a nationally recognized investment banking or appraisal firm) shall be deemed
cash and considered when determining whether such Asset Sale complies with the
foregoing clauses (A) and (B). Notwithstanding the foregoing, clause (A) of the
preceding sentence shall not be applicable to any Asset Swap.
(ii) The Company and its Restricted Subsidiaries consummating
such an Asset Sale shall apply the Net Cash Proceeds thereof to the permanent
prepayment of Indebtedness, or within 12 months of the Asset Sale, to the
purchase of properties and
- 15 -
<PAGE>
assets that (as determined by the Board of Directors) replace the properties and
assets that were the subject of the Asset Sale or in properties and assets that
will be used in the businesses of the Company or its Restricted Subsidiaries
existing on the Issue Date or in businesses reasonably related thereto.
(f) Limitation on Unrestricted Subsidiaries. The Company will
not make, and will not permit any of its Restricted Subsidiaries to make, any
Investments in Unrestricted Subsidiaries if, at the time thereof, the aggregate
amount of such Investments would exceed the amount of Restricted Payments then
permitted to be made pursuant to Section 9(b). Any Investments in Unrestricted
Subsidiaries permitted to be made pursuant to this covenant (i) will be treated
as the payment of a Restricted Payment in calculating the amount of Restricted
Payments made by the Company and (ii) may be made in cash or property. For all
purposes under these Articles Supplementary, KDSM, Inc. and all of its
Subsidiaries are deemed to be Unrestricted Subsidiaries but any Investment by
the Company in KDSM, Inc. shall not be deemed a Restricted Payment.
(g) Provision of Financial Statements. Whether or not the
Company is subject to Section 13(a) or 15(d) of the Exchange Act, the Company
will, to the extent permitted under the Exchange Act, file with the Commission
the annual reports, quarterly reports and other documents which the Company
would have been required to file with the Commission pursuant to such Section
13(a) or 15(d) if the Company were so subject, such documents to be filed with
the Commission to the extent permitted under the Exchange Act on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each Required Filing Date
transmit by mail to all holders, as their names and addresses appear in the
stock register of the Company, without cost to such holders of the Series C
Preferred Stock, copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company were
subject to such Sections and (y) if filing such documents by the Company with
the Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder at the Company's cost.
10. Definitions. As used in these Articles Supplementary, the
terms below shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person becomes a Subsidiary or (ii) assumed in
connection with the acquisition
- 16 -
<PAGE>
of assets from such Person, in each case, other than Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary or
such acquisition. Acquired Indebtedness shall be deemed to be incurred on the
date of the related acquisition of assets from any Person or the date the
acquired Person becomes a Subsidiary.
"Additional Amounts Attributable to Taxes" means, if the Trust
is required to pay any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the United States or
any other taxing authority, such additional amounts as shall be required to be
paid under the KDSM Senior Debentures so that the net amounts received by the
Trust under the KDSM Senior Debentures and available for distribution to holders
of the Preferred Securities and the Common Securities by the Trust after paying
such taxes, duties, assessments or governmental charges shall not be less than
the amounts the Trust would have received had no such taxes, duties, assessments
or governmental charges been imposed.
"Affiliate" means, with respect to any specified Person, (i)
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person, (ii) any other
Person that owns, directly or indirectly, 5% or more of such Person's Equity
Interest or any officer or director of any such Person or other Person or, with
respect to any natural Person, any person having a relationship with such Person
or other Person by blood, marriage or adoption not more remote than first cousin
or (iii) any other Person 10% or more of the voting Equity Interests of which
are beneficially owned or held directly or indirectly by such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Asset Sale" means with respect to any Person any sale,
issuance, conveyance, transfer, lease or other disposition (including, without
limitation, by way of merger, consolidation or Sale and Leaseback Transaction)
(collectively, a "transfer"), directly or indirectly, in one or a series of
related transactions, of (i) any Equity Interest of any Restricted Subsidiary of
such Person; (ii) all or substantially all of the properties and assets of any
division or line of business of such Person or any of its Restricted
Subsidiaries; or (iii) any other properties or assets of such Person or any of
its Restricted Subsidiaries, other than in the ordinary course of business. For
the purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties and assets (A) that is governed by the provisions
described under Section 9(c), (B) that is by such Person to any Wholly Owned
Restricted Subsidiary, or by any Restricted Subsidiary to any Person or any
Wholly Owned Restricted Subsidiary in accordance with the terms of
- 17 -
<PAGE>
the operative document or (C) that aggregates not more than $1,000,000 in gross
proceeds.
"Asset Swap" means an Asset Sale by any Person or any
Restricted Subsidiary in exchange for properties or assets that will be used in
the business of the Company and its Restricted Subsidiaries existing on the date
of the operative document or reasonably related thereto.
"Bank Credit Agreement" means the Second Amended and Restated
Credit Agreement, dated as of May 31, 1996, as amended, among the Company, the
Subsidiaries of the Company identified on the signature pages thereof under the
caption "Subsidiary Guarantors," the lenders named therein, and The Chase
Manhattan Bank, N.A., as agent, as such agreement may be amended, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified from time to time (including, without limitation, any
successive renewals, extensions, substitutions, refinancings, restructuring,
replacements, supplementations or other modifications of the foregoing). The
term "Bank Credit Agreement" shall include any amendments, renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplements or any
other modifications that increase the principal amount of the Indebtedness or
the commitments to lend thereunder and have been made in compliance with Section
9(a); provided that, for purposes of the definition of "Permitted Indebtedness,"
no such increase may result in the principal amount of Indebtedness of the
Company under the Bank Credit Agreement exceeding the amount permitted by clause
(i) of the definition of "Permitted Indebtedness," of these Articles
Supplementary.
"Business Day" means any day other than (x) a Saturday or a
Sunday or (y) a day on which banking institutions in Maryland or the City of New
York are authorized or obligated by law or executive order to remain closed or
(z) a day on which the office of the transfer agent or an agent or affiliate
thereof at which any particular time the transfer agency business for the
purposes of the Series C Preferred Stock shall be principally administered is
closed for business.
"Capital Lease Obligation" means any obligation under any
capital lease of real or personal property which, in accordance with GAAP, has
been recorded as a capitalized lease obligation.
"Capital Stock" means any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock.
"Change of Control" means the occurrence of any of the
following events: (i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is
or becomes the "beneficial owner" (as
- 18 -
<PAGE>
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have beneficial ownership of all shares that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 40% of the
total outstanding Voting Stock of the Company, provided that the Permitted
Holders "beneficially own" (as so defined) a lesser percentage of such Voting
Stock than such other Person and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority of
the Board of Directors ; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election to such board of
directors or whose nomination for election by the shareholders of the Company,
was approved by a vote of 66 2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of such board of directors then in office; (iii) the Company
consolidates with or merges with or into any Person or conveys, transfers or
leases all or substantially all of its assets to any Person, or any corporation
consolidates with or merges into or with the Company, in any such event pursuant
to a transaction in which the outstanding Voting Stock of the Company is changed
into or exchanged for cash, securities or other property, other than any such
transaction where the outstanding Voting Stock of the Company is not changed or
exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company) or where (A) the outstanding
Voting Stock of the Company is changed into or exchanged for (x) Voting Stock of
the surviving corporation which is not Disqualified Equity Interests or (y)
cash, securities and other property (other than Equity Interests of the
surviving corporation) in an amount which could be paid by the Company as a
Restricted Payment under Section 9(b) (and such amount shall be treated as a
Restricted Payment) and (B) no "person" or "group" other than Permitted Holders
owns immediately after such transaction, directly or indirectly, more than the
greater of (1) 40% of the total outstanding Voting Stock of the surviving
corporation and (2) the percentage of the outstanding Voting Stock of the
surviving corporation owned, directly or indirectly, by Permitted Holders
immediately after such transaction; or (iv) the Company is liquidated or
dissolved or adopts a plan of liquidation or dissolution other than in a
transaction which complies with the provisions of Section 9(c).
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the issuance of the Series C Preferred Stock, the Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Securities" means the common stock of the Trust.
- 19 -
<PAGE>
"Consolidated Interest Expense" means, for any Person without
duplication, for any period, the sum of (a) the interest expense of such Person
and its Consolidated Restricted Subsidiaries for such period, on a Consolidated
basis, including, without limitation, (i) amortization of debt discount, (ii)
the net cost under interest rate contracts (including amortization of
discounts), (iii) the interest portion of any deferred payment obligation and
(iv) accrued interest, plus (b) the interest component of the Capital Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
during such period, and all capitalized interest of such Person and its
Consolidated Restricted Subsidiaries, in each case as determined in accordance
with GAAP consistently applied.
"Consolidated Net Income (Loss)" means, for any period, for
any Person, the Consolidated net income (or loss) of such Person and its
Consolidated Restricted Subsidiaries for such period as determined in accordance
with GAAP consistently applied, adjusted, to the extent included in calculating
such net income (or loss), by excluding, without duplication, (i) all
extraordinary gains but not losses (less all fees and expenses relating
thereto), (ii) the portion of net income (or loss) of such Person and its
Consolidated Restricted Subsidiaries allocable to interests in unconsolidated
Persons or Unrestricted Subsidiaries, except to the extent of the amount of
dividends or distributions actually paid to such Person or its Consolidated
Restricted Subsidiaries by such other Person during such period, (iii) net
income (or loss) of any Person combined with such Person or any of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (iv) any gain or loss, net of taxes,
realized upon the termination of any employee pension benefit plan, (v) net
gains but not losses (less all fees and expenses relating thereto) in respect of
disposition of assets other than in the ordinary course of business, or (vi) the
net income of any Restricted Subsidiary to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time permitted, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or its
shareholders.
"Consolidation" means, with respect to any Person, the
consolidation of the accounts of such Person and each of its subsidiaries (other
than any Unrestricted Subsidiaries) if and to the extent the accounts of such
Person and each of its subsidiaries (other than any Unrestricted Subsidiaries)
would normally be consolidated with those of such Person, all in accordance with
GAAP consistently applied. The term "Consolidated" shall have a similar meaning.
"Cumulative Consolidated Interest Expense" means, as of any
date of determination, Consolidated Interest Expense from the Issue Date to the
end of such Person's most recently ended full fiscal quarter prior to such date,
taken as a single accounting period.
- 20 -
<PAGE>
"Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow from the Issue Date to the end of such
Person's most recently ended full fiscal quarter prior to such date, taken as a
single accounting period.
"Debt to Operating Cash Flow Ratio" means, for any Person as
of any date of determination, the ratio of (a) the aggregate principal amount of
all outstanding Indebtedness of such Person and its Restricted Subsidiaries as
of such date on a Consolidated basis plus the aggregate liquidation preference
or redemption amount of all Disqualified Equity Interests of the Company
(excluding any such Disqualified Equity Interests held by such Person or a
Wholly Owned Restricted Subsidiary of such Person), to (b) Operating Cash Flow
of such Person and its Restricted Subsidiaries on a Consolidated basis for the
four most recent full fiscal quarters ending immediately prior to such date,
determined on a pro forma basis (and after giving pro forma effect to (i) the
incurrence of such Indebtedness and (if applicable) the application of the net
proceeds therefrom, including to refinance other Indebtedness, as if such
Indebtedness were incurred, and the application of such proceeds had occurred,
at the beginning of such four-quarter period; (ii) the incurrence, repayment or
retirement of any other Indebtedness by such Person and its Restricted
Subsidiaries since the first day of such four-quarter period as if such
Indebtedness were incurred, repaid or retired at the beginning of such
four-quarter period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average balance of such Indebtedness at the end of each month during such
four-quarter period); (iii) in the case of Acquired Indebtedness, the related
acquisition as if such acquisition had occurred at the beginning of such
four-quarter period; and (iv) any acquisition or disposition by such Person and
its Restricted Subsidiaries of any company or any business or any assets out of
the ordinary course of business, or any related repayment of Indebtedness, in
each case since the first day of such four-quarter period, assuming such
acquisition or disposition had been consummated on the first day of such
four-quarter period).
"Disqualified Equity Interests" means any Equity Interests
that, either by their terms or by the terms of any security into which they are
convertible or exchangeable or otherwise, are or upon the happening of an event
or passage of time would be required to be redeemed prior to any Stated Maturity
of the principal of the applicable security or are redeemable at the option of
the holder thereof at any time prior to any such Stated Maturity, or are
convertible into or exchangeable for debt securities at any time prior to any
such Stated Maturity at the option of the holder thereof.
"Equity Interest" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock or other
equity participations, including partnership interests, whether general or
limited, of such Person, including any Preferred Equity Interests.
- 21 -
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Notes" means the Company's 10% Senior Subordinated
Notes due 2003 and the Company's 10% Senior Subordinated Notes due 2005.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's- length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
"Film Contract" means contracts with suppliers that convey the
right to broadcast specified films, videotape motion pictures, syndicated
television programs or sports or other programming.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in the United States, consistently
applied, which are in effect on the date of the 1993 Notes.
"Guaranteed Debt" of any Person means, without duplication,
all Indebtedness of any other person referred to in the definition of
Indebtedness contained herein and guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (ii)
to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make payment
of such Indebtedness or to assure the holder of such Indebtedness against loss,
(iii) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services without requiring that
such property be received or such services be rendered), (iv) to maintain
working capital or equity capital of the debtor, or otherwise to maintain the
net worth, solvency or other financial condition of the debtor or (v) otherwise
to assure a creditor against loss; provided that the term "guarantee" shall not
include endorsements for collection or deposit, in either case in the ordinary
course of business.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit issued under
letter of credit facilities, acceptance facilities or other similar facilities
and in connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Equity Interests of such Person, or any
warrants, rights or
- 22 -
<PAGE>
options to acquire such Equity Interests, now or hereafter outstanding, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (iv) all obligations under Interest Rate Agreements of such Person,
(v) all Capital Lease Obligations of such Person, (vi) all Indebtedness referred
to in clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness, (vii) all
Guaranteed Debt of such Person, (viii) all Disqualified Equity Interests valued
at the greater of their voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends, and (ix) any amendment, supplement,
modification, deferral, renewal, extension, refunding or refinancing of any
liability of the types referred to in clauses (i) through (viii) above;
provided, however, that the term Indebtedness shall not include any obligations
of the Company and its Restricted Subsidiaries with respect to Film Contracts
entered into in the ordinary course of business. The amount of Indebtedness of
any Person at any date shall be, without duplication, the principal amount that
would be shown on a balance sheet of such Person prepared as of such date in
accordance with GAAP and the maximum determinable liability of any Guaranteed
Debt referred to in clause (vii) above at such date. The Indebtedness of any
Person and its Restricted Subsidiaries shall not include any Indebtedness of
Unrestricted Subsidiaries so long as such Indebtedness is non-recourse to the
Company and its Restricted Subsidiaries. For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Equity Interests which do not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Equity Interests as if such Disqualified Equity Interests were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to these Articles Supplementary, and if such price is based upon, or
measured by, the Fair Market Value of such Disqualified Equity Interests, such
Fair Market Value to be determined in good faith by the Board of Directors of
the Company.
"Independent Director" means a director of the Company other
than a director (i) who (apart from being a director of the Company or any
Subsidiary thereof) is an employee, insider, associate or Affiliate of the
Company or a Subsidiary or has held any such position during the previous five
years or (ii) who is a director, an employee, insider, associate or Affiliate of
another party to the transaction in question.
- 23 -
<PAGE>
"Interest Rate Agreements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
interest rate protection agreements (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time.
"Investment Company Act Event" means the receipt by the Trust
or KDSM, Inc. of an opinion of nationally recognized independent counsel
experienced in practice under the Investment Company Act of 1940, as amended
(the "1940 Act"), to the effect that as a result of the occurrence of a change
in law or regulation or a change in official interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), the Trust or KDSM, Inc. is or
will be considered an "investment company" which is required to be registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), which
Change in 1940 Act Law becomes effective on or after the Issue Date.
"Investments" means, with respect to any Person, directly or
indirectly, any advance, loan (including guarantees), or other extension of
credit or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase, acquisition or ownership by such Person of any
Equity Interests, bonds, notes, debentures or other securities or assets issued
or owned by any other Person and all other items that would be classified as
investments on a balance sheet prepared in accordance with GAAP.
"Issue Date" means the date the Preferred Securities are
initially issued by the Sinclair Capital and the Series C Preferred Stock is
issued to KDSM, Inc.
"KDSM, Inc." means KDSM, Inc., a Maryland corporation.
"KDSM Senior Debentures" means the 11 5/8 Senior Debentures
due 2009 issued by the KDSM, Inc.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind (including any conditional sale
or other title retention agreement, any leases in the nature thereof, and any
agreement to give any security interest), real or personal, movable or
immovable, now owned or hereafter acquired.
"Liquidation Amount" has the meaning set forth in Section
1.
"Local Marketing Agreement" means a local marketing
arrangement, sale agreement, time brokerage agreement, management agreement or
similar arrangement pursuant to which a Person (i) obtains the right to sell at
least a majority of the advertising
- 24 -
<PAGE>
inventory of a television station on behalf of a third party, (ii) purchases at
least a majority of the air time of a television station to exhibit programming
and sell advertising time, (iii) manages the selling operations of a television
station with respect to at least a majority of the advertising inventory of such
station, (iv) manages the acquisition of programming for a television station,
(v) acts as a program consultant for a television station, or (vi) manages the
operation of a television station generally.
"Net Cash Proceeds" means (a) with respect to any Asset Sale
by any Person, the proceeds thereof in the form of cash or Temporary Cash
Investments including payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when disposed of for, cash or
Temporary Cash Investments (except to the extent that such obligations are
financed or sold with recourse to the Company or any Restricted Subsidiary) net
of (i) brokerage commissions and other reasonable fees and expenses (including
fees and expenses of counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale, (iii)
payments made to retire Indebtedness where payment of such Indebtedness is
secured by the assets or properties the subject of such Asset Sale, (iv) amounts
required to be paid to any Person (other than such Person or any of its
Restricted Subsidiaries) owning a beneficial interest in the assets subject to
the Asset Sale and (v) appropriate amounts to be provided by such Person or any
of its Restricted Subsidiaries, as the case may be, as a reserve, in accordance
with GAAP, against any liabilities associated with such Asset Sale and retained
by such Person or any of its Restricted Subsidiaries, as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an officers' certificate delivered to the
Trustee and (b) with respect to any issuance or sale of Equity Interests, or
debt securities or Equity Interests that have been converted into or exchanged
for Equity Interests, as referred to under Section 9(b), the proceeds of such
issuance or sale in the form of cash or Temporary Cash Investments, including
payments in respect of deferred payment obligations when received in the form
of, or stock or other assets when disposed for, cash or Temporary Cash
Investments (except to the extent that such obligations are financed or sold
with recourse to such Person or any of its Restricted Subsidiaries), net of
attorney's fees, accountant's fees and brokerage, consultation, underwriting and
other fees and expenses actually incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.
"Operating Cash Flow" for any Person means, for any period,
the Consolidated Net Income of such Person and its Restricted Subsidiaries for
such period, plus (a) extraordinary net losses and net losses on sales of assets
outside the ordinary course of business during such period, to the extent such
losses were deducted in computing Consolidated Net Income, plus (b) provision
for taxes based on income or
- 25 -
<PAGE>
profits, to the extent such provision for taxes was included in computing such
Consolidated Net Income, and any provision for taxes utilized in computing the
net losses under clause (a) hereof, plus (c) Consolidated Interest Expense of
such Person and its Restricted Subsidiaries for such period, plus (d)
depreciation, amortization and all other non-cash charges, to the extent such
depreciation, amortization and other non cash charges were deducted in computing
such Consolidated Net Income (including amortization of goodwill and other
intangibles, including Film Contracts and write-downs of Film Contracts, minus
(f) any cash payments contractually required to be made with respect to Film
Contracts (to the extent not previously included in computing such Consolidated
Net Income).
"Parity Securities" has the meaning set forth in Section 3
hereto.
"Permitted Holders" means as of the date of determination (i)
any of David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith;
(ii) family members or the relatives of the Persons described in clause (i);
(iii) any trusts created for the benefit of the Persons described in clauses
(i), (ii) or (iv) or any trust for the benefit of any such trust; or (iv) in the
event of the incompetence or death of any of the Persons described in clauses
(i) and (ii), such Person's estate, executor, administrator, committee or other
personal representative or beneficiaries, in each case, who at any particular
date shall beneficially own or have the right to acquire, directly or
indirectly, Equity Interests of the Company.
"Permitted Indebtedness" has the meaning set forth in Section
9(a)(II).
"Permitted Investment" means (i) Investments in any Restricted
Subsidiary, (ii) Indebtedness of the Company or a Restricted Subsidiary
described under clauses (v), (vi) and (vii) of the definition of "Permitted
Indebtedness," (iii) Temporary Cash Investments, (iv) Investments acquired by
the Company or any Restricted Subsidiary in connection with an Asset Sale
permitted under Section 9(e) to the extent such Investments are non-cash
proceeds as permitted under such covenant, (v) guarantees of Indebtedness
permitted by clause (iii) of the definition of "Permitted Indebtedness", (vi)
Investments in existence on the Preferred Stock Issue Date, (vii) loans up to an
aggregate of $1,000,000 outstanding at any one time to employees pursuant to
benefits available to the employees of the Company or any Restricted Subsidiary
from time to time in the ordinary course of business, (viii) any Investments in
the Existing Notes or the Preferred Securities, (ix) any guarantee given by a
Guarantor of any Indebtedness of the Company given in accordance with the terms
of the Series C Preferred Stock, (x) Investments by the Company or any
Restricted Subsidiary in a Person, if as a result of such Investment (I) such
Person becomes a Restricted Subsidiary or (II) such person is merged,
consolidated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary, and
(xi) other Investments
- 26 -
<PAGE>
in businesses reasonably related to the Company's businesses as of the Preferred
Stock Issue Date that do not exceed $100,000,000 at any time
outstanding.
"Permitted Subsidiary Indebtedness" means:
(i) Indebtedness of any Subsidiary under Capital Lease
Obligations incurred in the ordinary course of business; and
(ii) Indebtedness of any Subsidiary (a) issued to finance or
refinance the purchase or construction of any assets of such Subsidiary or (b)
secured by a Lien on any assets of such Subsidiary where the lender's sole
recourse is to the assets so encumbered, in either case (x) to the extent the
purchase or construction prices for such assets are or should be included in
"property and equipment" in accordance with GAAP and (y) if the purchase or
construction of such assets is not part of any acquisition of a Person or
business unit.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Preferred Equity Interest," as applied to the Equity Interest
of any Person, means an Equity Interest of any class or classes (however
designated) which is preferred as to the payment of dividends or distributions,
or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such person, over Equity Interests of any other
class of such Person.
"Preferred Securities" means the 11 5/8% Highly Yield Trust
Offered Preferred Securities of Sinclair Capital.
"Public Equity Offering" means, with respect to any Person, an
underwritten public offering by such Person of some or all of its Equity
Interests (other than Disqualified Equity Interests), the net proceeds of which
(after deducting any underwriting discounts and commissions) exceed $10,000,000.
"Qualified Equity Interests" of any Person means any and all
Equity Interests of such Person other than Disqualified Equity Interests.
"Registration Default" has the meaning specified in Section
2(d) of the Registration Rights Agreement.
"Registration Default Distributions" has the meaning specified
in Section 2(d) of the Registration Rights Agreement.
- 27 -
<PAGE>
"Registration Rights Agreement" means the registration rights
agreement dated as of March 5, 1997, among the Trust, KDSM, Inc., the Company
and Smith Barney, Inc. and Chase Securities Inc. as initial purchasers.
"Restricted Subsidiary" of any Person means a Subsidiary of
such Person other than an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any transaction or
series of related transactions pursuant to which any Person sells or transfers
any property or asset in connection with the leasing, or the resale against
installment payments, of such property or asset to the seller or transferor.
"Securities Act" means the Securities Act of 1933, as amended.
"Stated Maturity," when used with respect to any Indebtedness
or any installment of interest thereon, means the date specified in such
Indebtedness as the fixed date on which the principal of such Indebtedness or
such installment of interest is due and payable.
"Subsidiary" of any Person means any Person a majority of the
equity ownership or the Voting Stock of which is at the time owned, directly or
indirectly, by such Person or by one or more other Subsidiaries of such Person,
or by such Person and one or more other Subsidiaries.
"Tax Event" means the receipt by the Trust of an Opinion of
Counsel experienced in such matters to the effect that, as a result of (a) any
amendment to, clarification of, or change (including any announced prospective
change) in the laws or treaties (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, or (b) any judicial decision, official administrative
pronouncement, ruling, regulatory procedure, notice or announcement (including
any notice or announcement of intent to adopt such procedures or regulations)
("Administrative Action"), or (c) any amendment to, clarification of, or change
in the official position or the interpretation of such Administrative Action or
judicial decision or any interpretation or pronouncement that provides for a
position with respect to such Administrative Action or judicial decision that
differs from the therefore generally accepted position, in each case, by any
legislative body, court, governmental authority or regulatory body, irrespective
of the manner in which such amendment, clarification or change is made known,
which amendment, clarification, or change is effective or such pronouncement or
decision is announced on or after the Issue Date, there is more than an
insubstantial risk that (i) the Trust is, or will be, subject to United States
federal income tax with respect to interest received on the KDSM Senior
Debentures, (ii) interest payable by KDSM, Inc. on the KDSM Senior Debentures is
not, or will not be, fully deductible
- 28 -
<PAGE>
for United States federal income tax purposes, (iii) the Trust is, or will be,
subject to more than a DE MINIMIS amount of other taxes, duties or other
governmental charges.
"Temporary Cash Investments" means (i) any evidence of
Indebtedness, maturing not more than one year after the date of acquisition,
issued by the United States of America, or an instrumentality or agency thereof
and guaranteed fully as to principal, premium, if any, and interest by the
United States of America, (ii) any certificate of deposit, maturing not more
than one year after the date of acquisition, issued by, or time deposit of, a
commercial banking institution that is a member of the Federal Reserve System
and that has combined capital and surplus and undivided profits of not less than
$500,000,000, whose debt has a rating, at the time as of which any investment
therein is made, of "P-1" (or higher) according to Moody's Investors Service,
Inc. ("Moody's") or any successor rating agency or "A-1" (or higher) according
to Standard & Poor's Rating Group, a division of McGraw-Hill, Inc. ("S&P") or
any successor rating agency, (iii) commercial paper, maturing not more than one
year after the date of acquisition, issued by a corporation (other than an
Affiliate or Subsidiary of the Company) organized and existing under the laws of
the United States of America with a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P and (iv) any money market deposit accounts issued
or offered by a domestic commercial bank having capital and surplus in excess of
$500,000,000.
"Trust" means Sinclair Capital, a Delaware business trust.
"Unrestricted Subsidiary" of any Person means (i) any
Subsidiary of such Person that at the time of determination shall be an
Unrestricted Subsidiary (as designated by the Board of Directors of such Person,
as provided below) and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors of such Person may designate any Subsidiary of such Person
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary if all of the following conditions apply: (a) such Subsidiary is not
liable, directly or indirectly, with respect to any Indebtedness other than
Unrestricted Subsidiary Indebtedness and (b) any Investment in such Subsidiary
made as a result of designating such Subsidiary an Unrestricted Subsidiary shall
not, in the case of the Series C Preferred Stock, violate the provisions of
Section 9(f). Any such designation by the board of directors of such Person
shall be evidenced to the Trustee by filing with the Trustee a board resolution
giving effect to such designation and an officers' certificate certifying that
such designation complies with the foregoing conditions. The board of directors
of such Person may designate any Unrestricted Subsidiary as a Restricted
Subsidiary; provided that immediately after giving effect to such designation,
the Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the restrictions under Section 9(a). For purposes of
this definition, KDSM, Inc. and its Subsidiaries shall be considered
Unrestricted Subsidiaries
- 29 -
<PAGE>
and any Investment by the Company and any of its Subsidiaries in KDSM, Inc. or
its Subsidiaries shall not be deemed a Restricted Payment.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted
Subsidiary of any Person means Indebtedness of such Unrestricted Subsidiary (i)
as to which neither such Person nor any of its Restricted Subsidiaries is
directly or indirectly liable (by virtue of such Person or any such Restricted
Subsidiary being the primary obligor on, guarantor of, or otherwise liable in
any respect to, such Indebtedness), except Guaranteed Debt of such Person or any
Restricted Subsidiary to any Affiliate, in which case (unless the incurrence of
such Guaranteed Debt resulted in a Restricted Payment at the time of incurrence)
such Person shall be deemed to have made a Restricted Payment equal to the
principal amount of any such Indebtedness to the extent guaranteed at the time
such Affiliate is designated an Unrestricted Subsidiary and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of such Person or any Restricted Subsidiary to
declare, a default on such Indebtedness of such Person or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Voting Stock" means stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether or not at the time stock
of any other class or classes shall have or might have voting power by reason of
the happening of any contingency).
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary all the Equity Interest of which is owned by such Person
or another Wholly Owned Restricted Subsidiary of such Person.
- 30 -
<PAGE>
IN WITNESS WHEREOF, Sinclair Broadcast Group, Inc. has caused
these presents to be signed in its name and on its behalf by its President and
witnessed by its Secretary on March 12 1997.
WITNESS: SINCLAIR BROADCAST
GROUP, INC.
/s/ J. Duncan Smith By:/s/ David D. Smith
- ------------------------------ -------------------------------
J. Duncan Smith, Secretary David D. Smith, President
THE UNDERSIGNED, President of SINCLAIR BROADCAST GROUP, INC.,
who executed on behalf of the Corporation these Articles Supplementary of which
this certificate is made a part, hereby acknowledges in the name and on behalf
of the Corporation the foregoing Articles Supplementary to be the corporate act
of the Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ David D. Smith
-------------------------------
David D. Smith, President
<PAGE>
SCHEDULE I
EXISTING INDEBTEDNESS OF
SINCLAIR BROADCAST GROUP, INC. AUDITS SUBSIDIARIES
AS OF MARCH 12,1997
Balance
Bank Credit Agreement, Tranche A Term Loan $ 520,000,000
Bank Credit Agreement, Tranche B Term Loan 198,500,000
Bank Credit Agreement, Revolving Credit Commitment 135,000,000
Senior Subordinated notes due 2003, interest at 10% 100,000,000
Senior Subordinated notes due 2005, interest at 10% 300,000,000
Subordinated installment notes payable to former majority
owners interest at 8.75%, principal payments in varying
amounts due annually beginning October 1991, with a
balloon payment due at maturity in May 2005 10,447,566
Capital lease for building, interest at 17.5% 1,347,353
Capital lease for broadcasting tower facilities, interest
rates averaging 10% 179,906
Capital leases for building and tower, interest at 8.25% 1,823.687
---------------
Total Debt $1,267,298,513
===============
ARTICLES OF INCORPORATION
OF
KDSM, INC.
FIRST: I, Charles A. Borek, whose post office address is 100
Light Street, Suite 1100, Baltimore, Maryland 21202, being at least 18 years of
age, hereby form a corporation under and by virtue of the general laws of the
State of Maryland.
SECOND: The name of the corporation (which is hereafter
referred to as the "Corporation") is:
KDSM, INC.
THIRD: The purpose for which the Corporation is formed is to
engage in the ownership and operation of television and radio broadcasting
stations, to acquire, hold, own, license, sell, and otherwise deal in licenses
and grants of authority issued by state and federal agencies, and the
trademarks, tradenames, and call letters regarding same; and to engage in any
other lawful business and to do anything permitted by the Maryland General
Corporation Law.
FOURTH: The post office address of the principal office of the
Corporation in this State is 2000 W. 41st Street, Baltimore, Maryland 21211. The
name and post office address of the Resident Agent of the Corporation in this
State is Steven A. Thomas, Esquire, 100 Light Street, Suite 1100, Baltimore,
Maryland 21202. Said resident agent is an individual actually residing in this
state.
FIFTH: The total number of shares of capital stock which the
Corporation has authority to issue is one thousand (1,000) shares of common
stock, par value $.01 per share, for an aggregate par value of ten dollars
($10.00), all of one class of stock.
SIXTH: The number of directors shall be three (3) or such
other number, but not less than three (3) nor more than seven (7), as may be
designated from time to time by resolution of a majority of the entire Board of
Directors. Provided, however, that (a) it at any time there is no stock
outstanding, the Corporation may have less than three (3) but not less than one
(1) director; and (b) if there is stock outstanding and there are less than
three (3) stockholders, the number of directors may be less than three (3) but
not less than the number of stockholders. Directors need not be stockholders.
The name of the directors who shall act until the first annual meeting or until
their successor or successors are duly elected and qualified are David D. Smith
and David B. Amy.
<PAGE>
SEVENTH: No director or officer of the Corporation shall be
liable to the Corporation or its stockholders for money damages except (i) to
the extent that it is proved that such director or officer actually received an
improper benefit or profit in money, property, or services for the amount of the
benefit or profit in money, property, or services actually received, or (ii) to
the extent that a judgment or other final adjudication adverse to such director
or officer is entered in a proceeding based on a finding in the proceeding that
such director's or officer's action, or failure to act, was (a) the result of
active and deliberate dishonesty, or (b) that intentionally wrongful, willful,
or malicious end, in each such case, was material to the cause of action
adjudicated in the proceeding.
IN WITNESS WHEREOF, I have signed these Articles of
Incorporation on this 22nd day of April, 1996, and I acknowledge the same to be
my act.
/s/ Charles A. Borek
--------------------
Charles A. Borek
- 2 -
BY-LAWS
OF
KDSM, INC.
ARTICLE I
STOCKHOLDERS
1. ANNUAL MEETING. The annual meeting of the stockholders of
the Corporation shall be held at such time during May of each year as the Board
of Directors shall, in their discretion, fix or on a date in such other month as
the Board of Directors shall determine. The business to be transacted at the
annual meeting shall include the election of directors, consideration and action
upon the report of the President, and any other business which may properly come
before the meeting.
2. SPECIAL MEETING. At any time in the intervals between
annual meetings, a special meeting of the stockholders may be called by the
President, the Chairman of the Board, or by the majority vote of the Board of
Directors.
3. NOTICE OF SPECIAL MEETING. Not less than ten (10) days nor
more than ninety (90) days before the date of every stockholders meeting, the
Secretary shall give to each stockholder entitled to vote at such meeting
written notice stating the time and place of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called, either
by mail or by presenting it to the stockholder personally or by leaving it at
the stockholder's residence or usual place of business. No business shall be
transacted at a special meeting except that specially named in the notice.
4. QUORUM. The presence in person or by proxy of the holders
of record of a majority of the shares of the capital stock of the Corporation
issued and outstanding and entitled to vote threat shall constitute a quorum at
all meetings of the stockholders, except as otherwise provided by law, the
Articles of Incorporation, or by these By-Laws. If less than a quorum shall be
in attendance at the time for which the meeting shall have been called, the
meeting may be adjourned from time to time by a majority vote of the
stockholders present or represented without any notice other than by
announcement at the meeting until a quorum shall attend. At any adjourned
meeting at which a quorum shall attend, any business may be transacted which
might have been transacted if the meeting had been held as originally called.
<PAGE>
5. VOTING. Each share of common stock will be entitled to one
vote. The Corporation may issue other classes of stock from time to time with
special or limited voting rights if so authorized by the Corporation's Charter.
6. PROXIES. At all meetings of stockholders, a stockholder may
vote the shares owned of record by him or her either in person or by proxy
executed in writing by the stockholder or by his or her duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy.
7. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Maryland, as the place of meeting
for any annual or special meeting of the stockholders. If no designation is
made, the place of the meeting shall be in Baltimore, Maryland.
8. INFORMAL ACTION BY STOCKHOLDERS. Any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if there is filed with the records of stockholders meetings a written
consent which sets forth the action and which is signed by all of the
stockholders entitled to vote.
ARTICLE II
DIRECTORS
1. GENERAL POWERS. The property and business of the
Corporation shall be managed by the Board of Directors of the Corporation.
2. NUMBER AND TERM OF OFFICE. The number of directors shall be
three (3) or such other number, but not less than three (3) nor more than seven
(7), as may be designated from time to time by resolution of a majority of the
entire Board of Directors. Provided, however, that (a) if at any time there is
no stock outstanding, the Corporation may have less than three (3) but not less
than one (1) director; and (b) if there is stock outstanding and there are less
than three (3) stockholders, the number of directors may be less than three (3)
but not less than the number of stockholders. Directors need not be
stockholders. The directors shall be elected each year at the annual meeting of
stockholders, except as hereinafter provided, and each director shall serve
until his or her successor shall be elected and shall qualify.
- 2 -
<PAGE>
3. FILLINGS OF VACANCIES. In the case of any vacancy in the
Board of Directors through death, resignation, disqualification, removal or
other cause, the remaining directors, by affirmative vote of the majority
thereof, may elect a successor to hold office for the unexpired portion of the
term of a director whose place shall be vacant, and until the election of his or
her successor, or until he or she shall be removed, prior thereto by an
affirmative vote of the holders of a majority of the stock.
Similarly and in the event of the number of directors being
increased as provided in these By-laws, the additional directors so provided for
shall be elected by the directors already in office, and shall hold office until
the next annual meeting of stockholders and thereafter until his, her or their
successors shall be elected.
Any director may be removed from office with or without cause
by the affirmative vote of the holders of the majority of the stock issued and
outstanding and entitled to vote at any meeting of stockholders called for that
purpose or at the annual meeting of stockholders.
4. PLACE OF MEETING. The Board of Directors may hold their
meetings and have one or more offices, and keep the books of the Corporation,
either within or outside the State of Maryland, at such place or places as they
may from time to time determine by resolution or by written consent of all the
directors. The Board of Directors may hold their meetings by conference
telephone or other similar electronic communications equipment in accordance
with the provisions of the Maryland General Corporation Law.
5. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by resolution of the Board, provided that notice of every
resolution of the Board fixing or changing the time or place for the holding of
regular meetings of the Board shall be mailed to each director at least three
(3) days before the first meeting held in pursuance thereof. The annual meeting
of the Board of Directors shall be held immediately following the annual
stockholders' meeting at which a Board of Directors is elected. Any business may
be transacted at any regular meeting of the Board.
6. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by direction of the Chairman of the
Board, the President or any Vice President and must be called by the President
or the Secretary upon written request of a majority of the Board of Directors,
by mailing the same at least two (2) days prior to the meeting, or by personal
delivery, facsimile transmission, telegraphing or telephoning the same on the
day before the meeting, to each director; but such notice may be waived by any
director. Unless otherwise indicated in the notice thereof, any and all business
may be transacted at any special meetings. At any meeting at which every
director is present,
- 3 -
<PAGE>
even though without notice, any business may be transacted and any director may
in writing waive notice of the time, place and objects of any special meeting.
7. QUORUM. A majority of the whole number of directors shall
constitute a quorum for the transaction of business at all meetings of the Board
of Directors, but, if at any meeting less than a quorum is present, a majority
of those present may adjourn the meeting from time to time, and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law or by the Corporation's Charter or by these
By-laws.
8. COMPENSATION OF DIRECTORS. Directors may receive reasonable
compensation for their services as such, as may be set from time to time by the
Board, and each director shall be entitled to receive from the Corporation
reimbursement of the expenses incurred by him or her in attending any regular or
special meeting of the Board. In lieu of regular compensation, by resolution of
the Board of Directors, a fixed sum may be allowed for attendance at each
regular or special meeting of the Board and such reimbursement and compensation
shall be payable whether or not there is an adjournment because of the absence
of a quorum. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor, although the Board, by a majority vote thereof, may
determine that director's fees provided for in this paragraph shall not be paid
to directors who are also officers or other employees of the Corporation or may
limit the director's fees paid to such officers or employees.
9. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation, which,
to the extent provided in the resolution, shall have and may exercise the powers
of the Board of Directors. Such committee or committees shall have such names as
may be determined from time to time by resolution adopted by the Board of
Directors.
10. LIABILITY OF DIRECTORS. A director shall perform his or
her duties as a director, including his or her duties as a member of any
Committee of the Board upon which he or she may serve, in good faith, in a
manner he or she reasonably believes to be in the best interests of the
Corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances. In performing his or her duties,
a director shall be entitled to rely on information, opinions, reports, or
statements, including financial statements and other financial data, in each
case prepared or presented by:
- 4 -
<PAGE>
(a) one or more officers or employees of the
Corporation whom the director reasonably believes to be reliable and competent
in the matters presented;
(b) counsel, certified public accountants, or other
persons as to matters which the director reasonably believes to be within such
person's professional or expert competence; or
(c) a Committee of the Board upon which he or she
does not serve, duly designate in accordance with a provision of the Articles of
Incorporation or the By-Laws, as to matters within its designated authority,
which Committee the director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith
if the director has knowledge concerning the matter in question that would cause
such reliance described above to be unwarranted. A person who performs his or
her duties in compliance with this Section shall have no liability by reason of
being or having been a director of the Corporation.
ARTICLE III
OFFICERS
1. NUMBER. The officers of the Corporation shall be President,
Secretary, and Treasurer, and such additional other officers, including, but not
limited to, a Chairman of the Board, a Chief Executive Officer, an Executive
Vice President, and one or more Vice Presidents, as the Board of Directors, from
time to time, may elect. More than one or all of the offices may be held by the
same person; provided, however, that the same person shall not act as both
President and Vice President. All officers shall serve until their successors
are chosen and qualified or until their earlier resignation, removal from
office, or death.
2. ELECTION AND TENURE. The officers of the Corporation shall
be elected by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the stockholders or as soon after
such first meeting as may be convenient. Each officer shall hold office for such
period, as the Board of Directors may fix or until his or her successor shall
have been duly elected and shall have qualified. The Chairman of the Board and
President shall be directors.
3. REMOVAL. Any officer or agent of the Corporation may be
removed by the Board of Directors whenever, in its judgment, the best interests
of the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if
- 5 -
<PAGE>
any, of the person so removed.
4. VACANCIES. A vacancy in any office may be filled by the
Board of Directors for the unexpired portion of the term.
5. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The
Chairman of the Board shall preside at all meetings of the Board of Directors
unless, in his or her absence, the Board of Directors shall by majority vote of
a quorum thereof elect a Chairman other than the Chairman of the Board to
preside at such meeting. The Chairman of the Board may sign and execute all
authorized bonds, contracts, or other obligations in the name of the
Corporation, and he or she shall be an ex officio member of all standing
committees.
6. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation under the direction and subject to the control of the
Board of Directors (which direction shall be such as is customarily exercised
over a chief executive officer). The President shall be responsible for the
business, affairs, properties and operations of the Corporation and shall have
general executive charge, management and control of the Corporation, with all
such power and authority with respect to such business, affairs, properties and
operations as may be reasonably incident to such duties and responsibilities.
The President may delegate any and all of his or her powers or responsibilities
to his or her fellow officers.
7. VICE PRESIDENT. The Vice Presidents shall have such powers
and perform such duties as may be assigned to them by the Board of Directors or
the President. In the absence or disability of the President, the Executive Vice
President may perform the duties and exercise the powers of the President. In
the absence or disability of the President or the Executive Vice President, any
Vice President may perform the duties and exercise the powers of the President.
A Vice President may sign and execute contracts and other obligations pertaining
to the regular course of his or her duties.
8. SECRETARY. The Secretary shall, in general, have all powers
and perform all duties incident to the office of Secretary as may from time to
time be prescribed by the Board of Directors.
9. TREASURER. The Treasurer shall have general charge of the
financial affairs of the Corporation. The Treasurer shall, in general, have all
powers and perform all duties incident to the office of Treasurer as may from
time to time be prescribed by the Board of Directors.
- 6 -
<PAGE>
10. OTHER OFFICERS. Such other officers as may be elected by
the Board of Directors shall have such powers and perform such duties as the
Board may from time to time prescribe.
11. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary for services performed as an officer by reason of the fact
that he or she is also a director of the Corporation.
12. SPECIAL APPOINTMENTS. In the absence or incapacity of any
officer, or in the event of a vacancy in any office, the Board of Directors may
designate any person to fill any such office pro tempore or for any particular
purpose.
ARTICLE IV
ISSUE AND TRANSFER OF STOCK
1. ISSUE. Certificates representing shares of the Corporation
shall be in such form as shall be determined by the Board of Directors. Each
certificate shall be signed by the President or Vice President and countersigned
by the Secretary or Treasurer, and shall be sealed with the corporate seal. All
certificates surrendered to the Corporation for transfer shall be canceled, and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except that in case
of lost, stolen, destroyed, or mutilated certificate, a new one may be issued
therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
2. TRANSFER OF SHARES. Transfer of shares of the Corporation
shall be made only on its stock transfer books by the holder of record thereof
or by his or her attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation and on surrender for
cancellation of the certificate for such shares. The person in whose name shares
stand on the books of the Corporation shall be deemed to be the owner thereof
for all purposes.
3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS RIGHTS. The
Board of Directors may fix in advance a date as the record date for the purpose
of determining stockholders entitled to notice of or to vote at any meeting of
stockholders or stockholders entitled to receive payment of any dividend or the
allotment of any rights or in order to make a determination of stockholders for
any other proper purpose. Only stockholders of record on such date shall be
entitled to notice of and to vote at such meeting or to receive such dividends
or rights, as the case may be, and notwithstanding any transfer of
- 7 -
<PAGE>
any stock on the books of the Corporation after such record date fixed as
aforesaid.
4. STOCK LEDGER. The Corporation shall maintain a stock ledger
which contains the name and address of each stockholder and the number of shares
of stock of each class which the stockholder holds. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate of the
stock ledger shall be kept at the offices of a transfer agent for the particular
class of stock within or without the State of Maryland or, if none, at the
principal office or the principal executive offices of the Corporation in the
State of Maryland.
ARTICLE V
FISCAL POLICIES
1. RECEIPT OF FUNDS. All funds received as gifts,
contributions, or grants from individual or private or public corporations or
governmental units shall be accepted by a majority vote of the directors and
shall be deposited in appropriate banking accounts maintained by the
Corporation.
2. RECEIPT OF REVENUES. All sums collected for sales and
services by the Corporation shall be deposited in appropriate banking accounts
of the Corporation.
3. FISCAL YEAR. The Board of Directors shall have the power to
fix and from time to time change the fiscal year of the Corporation.
ARTICLE VI
SUNDRY PROVISIONS
1. VOTING UPON SHARES IN OTHER CORPORATIONS. Stock of other
corporations or associations registered in the name of the Corporation may be
voted by the President or the Chairman of the Board or a proxy appointed by
either of them. The Board of Directors, however, may by resolution appoint some
other person to vote such shares.
2. EXECUTION OF DOCUMENTS. A person who holds more than one
office in the Corporation may act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer, unless the Board of
Directors expressly prohibits a person holding more than one office to act in
more than one capacity.
- 8 -
<PAGE>
3. AMENDMENTS. The Board of Directors shall have the power to
make, amend, and repeal the By-Laws of the Corporation by vote of a majority of
all the directors at any regular or special meeting of the Board at which a
quorum is present.
END OF BY-LAWS
- 9 -
Exhibit 4.1
KDSM, INC., as Issuer,
SINCLAIR BROADCAST GROUP, INC., as Guarantor in certain circumstances
and
FIRST UNION NATIONAL BANK OF MARYLAND, as Trustee
----------
INDENTURE
Dated as of March 12, 1997
----------
$206,200,000
11 5/8% Senior Debentures due 2009
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of March 12, 1997
Trust Indenture Indenture
Act Section Section
--------------- ----------
Section 310 (1) ............... 610, 611
(a)(1) ............... 608
(a)(2) ............... 608
(b) ............... 607, 609
Section 311 (a) ............... 612
Section 312 (c) ............... 702
Section 313 (a) ............... 703
(c) ............... 703, 704
Section 314 (a) ............... 704
(a)(4) ............... 1015
(b) ............... 1402
(c)(1) ............... 103
(c)(2) ............... 103
(d) ............... 1403, 1404
(e) ............... 103
Section 315 (a) ............... 602, 903
(b) ............... 601, 602, 903
(c) ............... 602, 903
(d) ............... 602, 903
Section 316 (a) (last sentence) ............... 101 ("Outstanding")
(a)(1)(A) ............... 502, 512
(a)(1)(B) ............... 513
(b) ............... 508
(c) ............... 105
Section 317 (a)(1) ............... 503
(a)(2) ............... 504
Section 318 (c) ............... 108
- --------------
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be part of this Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
----
PARTIES....................................................................... 1
RECITALS...................................................................... 1
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION........................................ 2
Section 101. Definitions.................................................... 2
"Accredited Investor"........................................... 3
"Acquired Indebtedness"......................................... 3
"Additional Interest"........................................... 3
"Additional Interest Attributable to Deferral".................. 3
"Additional Interest Attributable to Taxes"..................... 3
"Administrative Trustee"........................................ 3
"Affiliate"..................................................... 3
"Agent Member".................................................. 4
"Applicable Procedures"......................................... 4
"Articles Supplementary"........................................ 4
"Asset Sale".................................................... 4
"Asset Transfer Transaction".................................... 4
"Bank Credit Agreement"......................................... 5
"Bankruptcy Law"................................................ 5
"Board of Directors"............................................ 5
"Board Resolution".............................................. 5
"Business Day".................................................. 5
"Capital Lease Obligation"...................................... 6
"Capital Stock"................................................. 6
"Cash Equivalents".............................................. 6
"Change of Control"............................................. 6
"Code".......................................................... 7
"Collateral".................................................... 7
"Collateral Documents".......................................... 7
"Commission".................................................... 7
"Common Securities"............................................. 7
"Company"....................................................... 7
- ----------
Note: This table of contents shall not, for any purposes, be deemed to be a part
of this Indenture.
- i -
<PAGE>
"Company Request" or "Company Order"............................ 8
"Consolidated".................................................. 8
"Consolidated Interest Expense"................................. 8
"Consolidated Net Income (Loss)"................................ 8
"Consolidated Net Worth"........................................ 9
"Corporate Trust Office"........................................ 9
"Cumulative Consolidated Interest Expense"...................... 9
"Cumulative Operating Cash Flow"................................ 9
"Cumulative Parent Preferred Dividends"......................... 9
"Debt to Operating Cash Flow Ratio"............................. 9
"Default"....................................................... 10
"Depositary".................................................... 10
"Designated Sinclair Senior Indebtedness"....................... 10
"Disqualified Equity Interests"................................. 10
"Equity Interest"............................................... 10
"Event of Default".............................................. 10
"Exchange Act".................................................. 10
"Exchange Offer"................................................ 11
"Exchange Offer Registration Statement"......................... 11
"Existing Indentures"........................................... 11
"Existing Notes"................................................ 11
"Fair Market Value"............................................. 11
"Film Contract"................................................. 11
"Founders' Notes"............................................... 11
"GAAP".......................................................... 11
"Global Security"............................................... 11
"Guarantee"..................................................... 11
"Guaranteed Debt"............................................... 12
"Holder"........................................................ 12
"Indebtedness".................................................. 12
"Indenture Obligations"......................................... 13
"Independent Director".......................................... 13
"Initial Purchasers"............................................ 13
"Interest Payment Date"......................................... 13
"Interest Rate Agreements"...................................... 13
"Investment Company Act Event".................................. 13
"Investments"................................................... 14
"Issue Date".................................................... 14
"Junior Securities"............................................. 14
"KDSM Senior Debentures" or "KDSM Senior Debenture"............. 14
"Lien".......................................................... 14
"Liquidation Value"............................................. 14
"Maturity Date"................................................. 14
- ii -
<PAGE>
"Minority Note"................................................. 14
"Moody's"....................................................... 15
"1993 Notes".................................................... 15
"1995 Notes".................................................... 15
"Non-payment Default"........................................... 15
"Officers' Certificate"......................................... 15
"Operating Cash Flow"........................................... 15
"Opinion of Counsel"............................................ 15
"Opinion of Independent Counsel"................................ 15
"Outstanding"................................................... 15
"Parent Preferred Extension Period"............................. 16
"Paying Agent".................................................. 16
"Payment Default"............................................... 17
"Permitted Holders"............................................. 17
"Permitted Investment".......................................... 17
"Permitted Sinclair Junior Securities".......................... 17
"Person"........................................................ 17
"Pledge Agreement".............................................. 18
"Predecessor Securities"........................................ 18
"Preferred Equity Interest"..................................... 18
"Property Trustee".............................................. 18
"Prospectus".................................................... 18
"Public Equity Offering"........................................ 18
"Purchase Money Obligation"..................................... 18
"QIB"........................................................... 19
"Redemption Date"............................................... 19
"Redemption Price".............................................. 19
"Registration Rights Agreement"................................. 19
"Registration Statement"........................................ 19
"Regular Record Date"........................................... 19
"Responsible Officer"........................................... 19
"Restricted Securities Legend".................................. 20
"Restricted Securities Transfer Certificate".................... 20
"Restricted Security"........................................... 20
"Rule 144A Information"......................................... 20
"S&P"........................................................... 20
"Sale and Leaseback Transaction"................................ 20
"Securities Act"................................................ 20
"Security Register" and "Security Registrar".................... 20
"Shelf Registration Statement".................................. 20
"Significant Subsidiary"........................................ 20
"Sinclair"...................................................... 21
"Sinclair Capital".............................................. 21
- iii -
<PAGE>
"Sinclair Senior Indebtedness".................................. 21
"Special Record Date"........................................... 21
"Stated Maturity"............................................... 21
"Subordinated Indebtedness"..................................... 22
"Subsidiary".................................................... 22
"Successor Security"............................................ 22
"Tax Event"..................................................... 22
"Temporary Cash Investments".................................... 23
"Trust" or "Sinclair Capital"................................... 23
"Trust Indenture Act"........................................... 23
"Trustee"....................................................... 23
"UCC"........................................................... 23
"Voting Rights Triggering Event"................................ 23
"Voting Stock".................................................. 23
"Wholly Owned Subsidiary"....................................... 23
Section 102. Other Definitions.............................................. 23
Section 103. Compliance Certificates and Opinions........................... 24
Section 104. Form of Documents Delivered to Trustee......................... 25
Section 105. Acts of Holders................................................ 26
Section 106. Notices, etc., to Trustee, the Company and Sinclair............ 27
Section 107. Notice to Holders; Waiver...................................... 28
Section 108. Conflict with Trust Indenture Act.............................. 29
Section 109. Effect of Headings and Table of Contents....................... 29
Section 110. Successors and Assigns......................................... 29
Section 111. Separability Clause............................................ 29
Section 112. Benefits of Indenture.......................................... 29
Section 113. Governing Law.................................................. 29
Section 114. Non-Business Days.............................................. 30
Section 115. Schedules and Exhibits......................................... 30
Section 116. Counterparts................................................... 30
ARTICLE TWO KDSM SENIOR DEBENTURE FORMS............................ .... 30
Section 201. Forms Generally................................................ 30
Section 202. Form of Face of KDSM Senior Debenture.......................... 31
Section 203. Form of Reverse of KDSM Senior Debentures...................... 42
Section 204. Additional Provisions Required in Global Security.............. 51
Section 205. Form of Trustee's Certificate of Authentication................ 52
ARTICLE THREE THE KDSM SENIOR DEBENTURES.................................. 53
Section 301. Title and Terms................................................ 53
Section 302. Denominations.................................................. 54
- iv -
<PAGE>
Section 303. Execution, Authentication, Delivery and Dating................. 54
Section 304. Temporary KDSM Senior Debentures............................... 55
Section 305. Global Securities.............................................. 56
Section 306. Registration, Registration of Transfer and Exchange............ 58
Section 307. Special Transfer Provisions.................................... 60
Section 308. Mutilated, Destroyed, Lost and Stolen KDSM Senior Debentures... 61
Section 309. Payment of Interest; Interest Rights Preserved................. 62
Section 310. Persons Deemed Owners.......................................... 63
Section 311. Cancellation................................................... 64
Section 312. Computation of Interest........................................ 64
Section 313. Right of Set-Off............................................... 64
Section 314. CUSIP Numbers.................................................. 65
Section 315. Agreed Tax Treatment........................................... 65
ARTICLE FOUR DEFEASANCE AND COVENANT DEFEASANCE.......................... 65
Section 401. Company's Option to Effect Defeasance or Covenant Defeasance... 65
Section 402. Defeasance and Discharge....................................... 65
Section 403. Covenant Defeasance............................................ 66
Section 404. Conditions to Defeasance or Covenant Defeasance................ 66
Section 405. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions........................ 69
Section 406. Reinstatement.................................................. 69
ARTICLE FIVE REMEDIES.................................................... 70
Section 501. Events of Default.............................................. 70
Section 502. Acceleration of Maturity; Rescission and Annulment............. 72
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee...................................................... 73
Section 504. Trustee May File Proofs of Claim............................... 74
Section 505. Trustee May Enforce Claims without Possession of KDSM
Senior Debentures............................................ 75
Section 506. Application of Money Collected................................. 75
Section 507. Limitation on Suits............................................ 75
Section 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest............................................. 76
Section 509. Restoration of Rights and Remedies............................. 77
Section 510. Rights and Remedies Cumulative................................. 77
Section 511. Delay or Omission Not Waiver................................... 77
Section 512. Control by Holders............................................. 77
Section 513. Waiver of Past Defaults........................................ 77
Section 514. Undertaking for Costs.......................................... 78
Section 515. Waiver of Stay; Extension or Usury Laws........................ 78
- v -
<PAGE>
ARTICLE SIX THE TRUSTEE................................................. 79
Section 601. Notice of Defaults............................................. 79
Section 602. Certain Rights of Trustee...................................... 79
Section 603. Trustee Not Responsible for Recitals, Dispositions of
KDSM Senior Debentures or Application of Proceeds Thereof.... 80
Section 604. Trustee and Agents May Hold Securities; Collections; etc....... 81
Section 605. Money Held in Trust............................................ 81
Section 606. Compensation and Indemnification of Trustee and Its Prior
Claim........................................................ 81
Section 607. Conflicting Interests.......................................... 82
Section 608. Corporate Trustee Required; Eligibility........................ 82
Section 609. Resignation and Removal; Appointment of Successor Trustee...... 83
Section 610. Acceptance of Appointment by Successor......................... 84
Section 611. Merger, Conversion, Consolidation or Succession to Business.... 85
Section 612. Preferential Collection of Claims Against Company.............. 86
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY........... 86
Section 701. Company to Furnish Trustee Names and Addresses of Holders...... 86
Section 702. Disclosure of Names and Addresses of Holders................... 86
Section 703. Reports by Trustee............................................. 86
Section 704. Reports by Company and Sinclair................................ 87
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR
LEASE....................................................... 87
Section 801. Company May Consolidate, etc., Only on Certain Terms........... 87
Section 802. Successor Substituted.......................................... 90
ARTICLE NINE SUPPLEMENTAL INDENTURES..................................... 90
Section 901. Supplemental Indentures and Agreements without Consent
of Holders................................................... 90
Section 902. Supplemental Indentures and Agreements with Consent of
Holders...................................................... 91
Section 903. Execution of Supplemental Indentures and Agreements............ 93
Section 904. Effect of Supplemental Indentures.............................. 93
Section 905. Conformity with Trust Indenture Act............................ 93
Section 906. Reference in KDSM Senior Debentures to Supplemental
Indentures................................................... 93
ARTICLE TEN COVENANTS................................................... 93
Section 1001. Payment of Principal, Premium and Interest.................... 94
Section 1002. Maintenance of Office or Agency............................... 94
- vi -
<PAGE>
Section 1003. Money for Security Payments to Be Held in Trust............... 94
Section 1004. Corporate Existence........................................... 96
Section 1005. Payment of Taxes and Other Claims............................. 96
Section 1006. Maintenance of Properties..................................... 96
Section 1007. Insurance..................................................... 97
Section 1008. Limitation on Restricted Payments............................. 97
Section 1009. Limitation on Indebtedness.................................... 98
Section 1010. Limitation on Issuances of Guarantees of Indebtedness......... 98
Section 1011. Limitation on Transactions with Affiliates.................... 99
Section 1012. Limitation on Liens........................................... 99
Section 1013. Limitation on Sale of Assets..................................100
Section 1014. Impairment of Security Interest...............................100
Section 1015. Provision of Financial Statements and Reports.................101
Section 1016. Purchase of KDSM Senior Debentures upon a Change of Control...101
Section 1017. Ownership and Existence of Trust..............................105
Section 1018. Ownership of the Company......................................106
Section 1019. Application of Dividends and Redemption Proceeds..............106
Section 1020. Change of Control Offer under Parent Preferred................106
Section 1021. Limitation on Liens on Parent Preferred.......................106
Section 1022. Statement by Officers as to Default...........................106
Section 1023. Waiver of Certain Covenants...................................107
ARTICLE ELEVEN REDEMPTION OF KDSM SENIOR DEBENTURES.......................107
Section 1101. Rights of Redemption..........................................107
Section 1102. Applicability of Article......................................108
Section 1103. Election to Redeem; Notice to Trustee.........................108
Section 1104. Selection by Trustee of KDSM Senior Debentures to Be
Redeemed....................................................108
Section 1105. Notice of Redemption..........................................109
Section 1106. Deposit of Redemption Price...................................110
Section 1107. KDSM Senior Debentures Payable on Redemption Date.............110
Section 1108. KDSM Senior Debentures Redeemed or Purchased in Part..........110
ARTICLE TWELVE SATISFACTION AND DISCHARGE.................................111
Section 1201. Satisfaction and Discharge of Indenture.......................111
Section 1202. Application of Trust Money....................................112
ARTICLE THIRTEEN GUARANTEE..................................................112
Section 1301. Sinclair's Guarantee..........................................112
Section 1302. Continuing Guarantee; No Right of Set-Off; Independent
Obligation..................................................113
Section 1303. Guarantee Absolute............................................114
- vii -
<PAGE>
Section 1304. Right to Demand Full Performance..............................116
Section 1305. Waivers.......................................................116
Section 1306. Sinclair Remains Obligated in Event the Company Is No Longer
Obligated to Discharge Indenture Obligations.............117
Section 1307. Fraudulent Conveyance; Subrogation............................117
Section 1308. Guarantee Is in Addition to Other Security....................117
Section 1309. Release of Security Interests.................................118
Section 1310. No Bar to Further Actions.....................................118
Section 1311. Failure to Exercise Rights Shall Not Operate as a Waiver;
No Suspension of Remedies................................118
Section 1312. Trustee's Duties; Notice to Trustee...........................118
Section 1313. Successors and Assigns........................................119
Section 1314. Release of Guarantee..........................................119
Section 1315. Guarantee Subordinate to Sinclair Senior Indebtedness........119
Section 1316. Payment Over of Proceeds upon Dissolution of Sinclair, etc....120
Section 1317. Suspension of Payment When Senior Indebtedness in Default.....121
Section 1318. Payment Permitted by Sinclair if No Default...................123
Section 1319. Subrogation to Rights of Holders of Sinclair Senior
Indebtedness................................................123
Section 1320. Provisions Solely to Define Relative Rights...................123
Section 1321. Trustee to Effectuate Subordination...........................124
Section 1322. No Waiver of Subordination Provisions.........................124
Section 1323. Notice to Trustee by Sinclair.................................125
Section 1324. Reliance on Judicial Order or Certificate of Liquidating
Agent.......................................................126
Section 1325. Rights of Trustee as a Holder of Sinclair Senior
Indebtedness; Preservation of Trustee's Rights..............126
Section 1326. Article Applicable to Paying Agents...........................126
Section 1327. No Suspension of Remedies.....................................126
Section 1328. Trustee's Relation to Sinclair Senior Indebtedness............127
ARTICLE FOURTEEN SECURITY..................................................127
Section 1401. Collateral Documents..........................................127
Section 1402. Recording, Deposit of Pledged Securities, Opinion of
Counsel, etc................................................128
Section 1403. Release of Collateral.........................................128
Section 1404. Trust Indenture Act Requirements..............................128
Section 1405. Authorization of Actions to Be Taken by the Trustee Under
the Collateral Documents.................................129
Section 1406. Authorization of Receipt of Funds by the Trustee Under the
Collateral Documents.....................................129
Section 1407. Release upon Termination of the Company's Obligations.........129
TESTIMONIUM.....................................................................
- viii -
<PAGE>
SIGNATURES AND SEALS
ACKNOWLEDGEMENTS
EXHIBIT A Restricted Securities Transfer Certificate
- ix -
<PAGE>
INDENTURE, dated as of March 12, 1997 (this "Indenture"), among KDSM,
Inc., a Maryland corporation (the "Company"), Sinclair Broadcast Group, Inc., a
Maryland corporation (the "Guarantor" or "Sinclair"), and First Union National
Bank of Maryland, a Maryland corporation, as trustee (the "Trustee"). Unless
otherwise defined herein, all capitalized terms used herein shall have the
meanings ascribed to them in the Amended and Restated Trust Agreement, dated as
of March 12, 1997 (the "Trust Agreement"), among the Company, as Depositor,
First Union National Bank of Maryland, as the property trustee thereunder (the
"Property Trustee"), First Union Bank of Delaware, as the Delaware trustee
thereunder, and the administrative trustees named therein (collectively, the
"Administrative Trustees"), as in effect on the date hereof.
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the creation of an issue of
11 5/8% Senior Debentures due 2009, Series A (the "Initial KDSM Senior
Debentures" or the "Series A KDSM Senior Debentures"), and an issue of 11 5/8%
Senior Debentures due 2009, Series B (the "Series B KDSM Senior Debentures" and,
together with the Series A KDSM Senior Debentures, the "KDSM Senior
Debentures"), of substantially the tenor and amount hereinafter set forth, and
to provide therefor the Company has duly authorized the execution and delivery
of this Indenture and the KDSM Senior Debentures.
WHEREAS, Sinclair has duly authorized the issuance of a guarantee (the
"Guarantee") of the KDSM Senior Debentures, of substantially the tenor
hereinafter set forth, and to provide therefor, Sinclair has duly authorized the
execution and delivery of this Indenture and the Guarantee.
WHEREAS, all acts and things necessary have been done to make (i) the
KDSM Senior Debentures, when executed by the Company and authenticated and
delivered hereunder and duly issued by the Company, the valid obligations of the
Company, and (ii) this Indenture a valid agreement of the Company and Sinclair
in accordance with the terms of this Indenture.
WHEREAS, Sinclair Capital (as defined below) may, pursuant to the
Purchase Agreement, dated as of March 5, 1997, among Sinclair, Sinclair Capital
and the Initial Purchasers named therein, issue $200,000,000 aggregate
liquidation preference of its 11 5/8% High Yield Trust Offered Preferred
Securities (the "Preferred Securities") with a liquidation amount of $100 per
Preferred Security;
WHEREAS, Sinclair, in certain circumstances, is guaranteeing, on a
junior subordinated basis, the payment of distributions on the Preferred
Securities, and payment of the Redemption Price (as defined below) and payments
on liquidation with respect to the Preferred Securities, subject to the terms
and conditions of the Parent Guarantee Agreement, dated March 12, 1997 (as
amended, modified or supplemented from time to time, the "Parent Guarantee"),
between Sinclair and First Union National Bank of Maryland, as guarantee
trustee, for the benefit of the holders of the Preferred Securities;
<PAGE>
WHEREAS, the Company wishes to sell to Sinclair Capital, and Sinclair
Capital wishes to purchase from the Company, KDSM Senior Debentures in an
aggregate principal amount equal to $206,200,000, and in satisfaction of the
purchase price for such KDSM Senior Debentures, the Administrative Trustees of
Sinclair Capital, on behalf of Sinclair Capital, will deliver (or cause to be
delivered) to the Company the sum of $206,200,000.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the KDSM
Senior Debentures by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the KDSM Senior
Debentures, as follows:
ARTICLE ONE
-----------
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(Heart)
(e) all references to $, US$, dollars or United States dollars shall
refer to the lawful currency of the United States of America.
"Accredited Investor" means an institutional "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act.
- 2 -
<PAGE>
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at
the time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or the
date the acquired Person becomes a Subsidiary.
"Additional Interest" or "Additional Amounts" means the sum of
Additional Interest Attributable to Deferral and Additional Interest
Attributable to Taxes.
"Additional Interest Attributable to Deferral" means interest that
shall accrue on any interest on the KDSM Senior Debentures that is in arrears
for any period or not paid during an Extension Period (as defined below), which
in either case shall accrue at the rate of 11 5/8% per annum compounded
quarterly.
"Additional Interest Attributable to Taxes" means, if Sinclair Capital
is required to pay any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the United States or
any other taxing authority, such additional amounts as shall be required so that
the net amounts received by Sinclair Capital under the KDSM Senior Debentures
and available for distribution to holders of the Preferred Securities and the
Common Securities by Sinclair Capital after paying such taxes, duties,
assessments or governmental charges shall not be less than the amounts Sinclair
Capital would have received under the KDSM Senior Debentures had no such taxes,
duties, assessments or governmental charges been imposed.
"Administrative Trustee" means the Person or Persons named as the
"Administrative Trustees" in the first paragraph of this instrument, solely in
its capacity as Administrative Trustees of Sinclair Capital under the Trust
Agreement and not in its individual capacity, or its successor in interest in
such capacity, or any successor administrative trustee appointed as provided in
the Trust Agreement.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any other Person that
owns, directly or indirectly, 5% or more of such Person's Equity Interests or
any officer or director of any such Person or other Person or, with respect to
any natural Person, any Person having a relationship with such Person or other
Person by blood, marriage or adoption not more remote than first cousin or (iii)
any other Person 10% or more of the voting Equity Interests of which are
beneficially owned or held directly or indirectly by such specified Person. For
the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
- 3 -
<PAGE>
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such KDSM Senior Debenture, in each
case to the extent applicable to such transaction and as in effect from time to
time.
"Articles Supplementary" means the operative document under which the
Parent Preferred were issued.
"Asset Sale" means, with respect to any Person, any sale, issuance,
conveyance, transfer, lease or other disposition (including, without limitation,
by way of merger, consolidation or Sale and Leaseback Transaction)
(collectively, a "transfer"), directly or indirectly, in one or a series of
related transactions, of (i) any Equity Interest of any Subsidiary; (ii) all or
substantially all of the properties and assets of any division or line of
business of the Company or its Subsidiaries; or (iii) any other properties or
assets of the Company or any Subsidiary, other than in the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include any transfer of properties and assets (A) that is governed by Section
801(a), (B) that is by the Company to any Wholly Owned Subsidiary, or by any
Subsidiary to the Company or any Wholly Owned Subsidiary in accordance with the
terms of this Indenture or (C) that aggregates not more than $1,000,000 in gross
proceeds.
"Asset Transfer Transaction" means the sale, transfer or conveyance,
or other disposition, directly or indirectly, in one of a series of related
transactions of any properties or assets of the Company or any of its
Subsidiaries (the "KDSM Transferred Assets") to any Person in exchange for
properties or assets that will be used in the operations of one or more
television or radio broadcasting stations or assets reasonably related thereto
(the "Received Assets"), provided that (i) the Company shall deliver to the
Trustee a written opinion from an investment banking firm of national standing
or other financial services firm experienced in such matters and reasonably
acceptable to the Trustee to the effect that the Fair Market Value of the
Received Assets is at least equal to the greater of (a) 90% of the Fair Market
Value of the KDSM Transferred Assets immediate prior to the proposed Asset
Transfer Transaction or (b) $50 million, (ii) both the Received Assets (if
considered as a separate entity) and the Company, after giving effect to the
Asset Transfer Transaction, would have had positive Operating Cash Flow (as
defined in the Indenture) for at least two prior fiscal years (based on audited
financial statements) and any subsequent three, six or nine-month interim period
(on an unaudited basis) on an actual and pro forma basis (without giving effect
to dividends under the Parent Preferred and interest payments on the KDSM Senior
Debentures) prepared in accordance with Rule 11-02 of Regulation S-X as if such
entity were making a public equity offering under the Securities Act as of the
closing date of the Asset Transfer Transaction; (iii) there has been no material
adverse change in the condition (financial or otherwise), business, prospects,
or results of operations of the Received Assets
- 4 -
<PAGE>
since the latter of the end of the last fiscal year or any subsequent three, six
or nine-month interim period; (iv) such transaction does not result in a
violation of the Trust Indenture Act; and (v) the Company shall have delivered
to the Trustee simultaneously with the consummation of the Asset Transfer
Transaction an Officers' Certificate and an Opinion of Counsel, each to the
effect that the transaction complies with this definition and that all
conditions precedent to such Asset Transfer Transaction have been satisfied.
"Bank Credit Agreement" means the Second Amended and Restated Credit
Agreement, dated as of May 31, 1996, between Sinclair, the subsidiaries of
Sinclair identified on the signature pages thereof under the caption "SUBSIDIARY
GUARANTORS," the lenders named therein and The Chase Manhattan Bank, N.A., as
agent, as such agreement has been amended through the date hereof and may be
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing). For all purposes under this Indenture, "Bank Credit Agreement" shall
include any amendments, renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplements or any other modifications that
increase the principal amount of the Indebtedness or the commitments to lend
thereunder that have been made in compliance with Section 1009, if applicable.
"Bankruptcy Law" means Title 11 of the United States Code, as amended,
or any successor statute, or any similar United States federal or state law
relating to bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization or relief of debtors or any amendment to, succession to or change
in any such law.
"Board of Directors" means the board of directors of the Company or
Sinclair, as the case may be, or any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or Sinclair, as the case may
be, to have been duly adopted by the Board of Directors of such entity and to be
in full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than (i) a Saturday or a Sunday,
(ii) a day on which banking institutions in Maryland or The City of New York are
authorized or obligated by law or executive order to close or (iii) a day on
which the Corporate Trust Office is closed for business.
"Capital Lease Obligation" means any obligation under any capital
lease of real or personal property which, in accordance with GAAP, has been
recorded as a capitalized lease obligation.
- 5 -
<PAGE>
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock.
"Cash Equivalents" means: (i) any evidence of Indebtedness with a
maturity of one year or less from the date of acquisition issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of one year or less from the date of acquisition
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$500,000,000; (iii) commercial paper with a maturity of one year or less from
the date of acquisition issued by a corporation that is not an Affiliate of the
Company organized under the laws of any state of the United States or the
District of Columbia and rated A-1 (or higher) according to S&P or P-1 (or
higher) according to Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; (iv) any money market
deposit accounts issued or offered by a domestic commercial bank having capital
and surplus in excess of $500,000,000; and (v) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of America or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one year from the date of
acquisition; provided that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985.
"Change of Control" means the occurrence of any of the following
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 40% of the total outstanding Voting Stock of Sinclair, provided that the
Permitted Holders "beneficially own" (as so defined) a lesser percentage of such
Voting Stock than such other Person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors of Sinclair; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of Sinclair (together with any new directors whose
election to such Board of Directors or whose nomination for election by the
shareholders of Sinclair, was approved by a vote of 66-2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of such Board of Directors then in
office; (iii) Sinclair consolidates with or merges with or into any Person or
conveys, transfers or leases all or substantially all of its assets to
- 6 -
<PAGE>
any Person, or any corporation consolidates with or merges into or with
Sinclair, in any such event pursuant to a transaction in which the outstanding
Voting Stock of Sinclair is changed into or exchanged for cash, securities or
other property, other than any such transaction where the outstanding Voting
Stock of Sinclair is not changed or exchanged at all (except to the extent
necessary to reflect a change in the jurisdiction of incorporation of Sinclair)
or where (A) the outstanding Voting Stock of Sinclair is changed into or
exchanged for (x) Voting Stock of the surviving corporation which is not
Disqualified Equity Interests or (y) cash, securities and other property (other
than Equity Interests of the surviving corporation) in an amount which could be
paid by Sinclair as a Restricted Payment under the Parent Preferred (and such
amount shall be treated as a Restricted Payment under the Parent Preferred) and
(B) no "person" or "group" other than Permitted Holders owns immediately after
such transaction, directly or indirectly, more than the greater of (1) 40% of
the total outstanding Voting Stock of the surviving corporation and (2) the
percentage of the outstanding Voting Stock of the surviving corporation owned,
directly or indirectly, by Permitted Holders immediately after such transaction;
or (iv) Sinclair is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with Article 9(c) of the
Articles Supplementary and Article Eight of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means the pledge and first priority security interest in
the Parent Preferred and any proceeds thereof granted pursuant to the Pledge
Agreement.
"Collateral Documents" means the Pledge Agreement and any related UCC
financing statements or similar instruments.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the issuance of the KDSM Senior Debentures such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Securities" means the common securities of Sinclair Capital.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Vice Chairman, its President or a Vice President (regardless of vice
presidential designation), and by any one of
- 7 -
<PAGE>
its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary,
and delivered to the Trustee.
"Consolidated" means, with respect to any Person, the consolidation of
the accounts of such Person and each of its subsidiaries if and to the extent
the accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP consistently
applied.
"Consolidated Interest Expense" means, for any Person, without
duplication, for any period, the sum of (a) the interest expense of the Company
and its Consolidated Subsidiaries for such period, on a Consolidated basis
(provided that for purposes of this Indenture, the interest expense related to
the KDSM Senior Debentures shall be deemed to be interest expense of the Company
and its Subsidiaries on a Consolidated basis), including, without limitation,
(i) amortization of debt discount, (ii) the net cost under Interest Rate
Agreements (including amortization of discounts), (iii) the interest portion of
any deferred payment obligation and (iv) accrued interest, plus (b) the interest
component of the Capital Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company during such period, and all capitalized interest
of the Company and its Consolidated Subsidiaries, in each case as determined in
accordance with GAAP consistently applied.
"Consolidated Net Income (Loss)" means, for any period, for any
Person, the Consolidated net income (or loss) of such Person and its
Consolidated Subsidiaries for such period as determined in accordance with GAAP
consistently applied, adjusted, to the extent included in calculating such net
income (or loss), by excluding, without duplication, (i) all extraordinary gains
but not losses (less all fees and expenses relating thereto), (ii) the portion
of net income (or loss) of such Person and its Consolidated Subsidiaries
allocable to interests in unconsolidated Persons, except to the extent of the
amount of dividends or distributions actually paid to such Person or its
Consolidated Subsidiaries by such other Person during such period, (iii) net
income (or loss) of any Person combined with such Person or any of its
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (iv) any gain or loss, net of taxes, realized upon
the termination of any employee pension benefit plan, (v) net gains but not
losses (less all fees and expenses relating thereto) in respect of disposition
of assets other than in the ordinary course of business, or (vi) the net income
of any Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its shareholders.
"Consolidated Net Worth" of any Person means the Consolidated equity
of the holder of Equity Interests (including Disqualified Equity Interests) of
such Person and its Subsidiaries, as determined in accordance with GAAP
consistently applied.
- 8 -
<PAGE>
"Corporate Trust Office" means the office of the Trustee or an
affiliate or agent thereof at which at any particular time the corporate trust
business for the purposes of this Indenture shall be principally administered,
which office at the date of execution of this Indenture is located at First
Union National Bank of Maryland, 901 East Cary Street, 2nd floor, Richmond,
Virginia 23219, Attention: Patricia Welling.
"Cumulative Consolidated Interest Expense" means, as of any date of
determination, Consolidated Interest Expense from the Issue Date to the end of
the Company's most recently ended full fiscal quarter prior to such date, taken
as a single accounting period.
"Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow from the Issue Date to the end of the
Company's most recently ended full fiscal quarter prior to such date, taken as a
single accounting period.
"Cumulative Parent Preferred Dividends" means, as of any date of
determination, the amount of dividends under the Parent Preferred from the Issue
Date to the end of the Company's most recently ended full fiscal quarter prior
to such date, taken as a single accounting period.
"Debt to Operating Cash Flow Ratio" means, as of any date of
determination, the ratio of (a) the aggregate principal amount of all
outstanding Indebtedness of the Company and its Subsidiaries as of such date on
a Consolidated basis (provided that for purposes of this Indenture, the KDSM
Senior Debentures shall be deemed to be Indebtedness of the Company and its
Subsidiaries on a Consolidated basis) plus the aggregate liquidation preference
or redemption amount of all Disqualified Equity Interests of the Company
(excluding any such Disqualified Equity Interests held by the Company or a
Wholly Owned Subsidiary of the Company), to (b) Operating Cash Flow of the
Company and its Subsidiaries on a Consolidated basis for the four most recent
full fiscal quarters ending immediately prior to such date, determined on a pro
forma basis (and after giving pro forma effect to (i) the incurrence of such
Indebtedness and (if applicable) the application of the net proceeds therefrom,
including to refinance other Indebtedness, as if such Indebtedness were
incurred, and the application of such proceeds had occurred, at the beginning of
such four-quarter period; (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company and its Subsidiaries since the first day of
such four-quarter period as if such Indebtedness were incurred, repaid or
retired at the beginning of such four-quarter period (except that, in making
such computation, the amount of Indebtedness under any revolving credit facility
shall be computed based upon the average balance of such Indebtedness at the end
of each month during such four-quarter period); (iii) in the case of Acquired
Indebtedness, the related acquisition, as if such acquisition had occurred at
the beginning of such four-quarter period; and (iv) any acquisition or
disposition by the Company and its Subsidiaries of any company or any business
or any assets out of the ordinary course of business, or any related repayment
of Indebtedness, in each case since the first day of such
- 9 -
<PAGE>
four-quarter period, assuming such acquisition or disposition had been
consummated on the first day of such four-quarter period).
"Default" means any event which is, or after notice or passage of any
time or both would be, an Event of Default.
"Depositary" means, with respect to the KDSM Senior Debentures issued
in the form of Global Securities, if any, The Depository Trust Company, a New
York limited purpose corporation, its nominees and successors, or any other
Person designated as the Depositary by the Company pursuant to Section 305(b),
in each case registered as a "clearing agency" under the Exchange Act and
maintaining a book-entry system that qualifies for treatment as "registered
form" under Section 163(f) of the Code.
"Designated Sinclair Senior Indebtedness" means (i) all Sinclair
Senior Indebtedness Outstanding under the Bank Credit Agreement and (ii) any
other Sinclair Senior Indebtedness which is incurred pursuant to an agreement
(or series of related agreements simultaneously entered into) providing for
indebtedness, or commitments to lend, of at least $25,000,000 at the time of
determination and is specifically designated in the instrument evidencing such
Sinclair Senior Indebtedness or the agreement under which such Sinclair Senior
Indebtedness arises as "Designated Sinclair Senior Indebtedness" by Sinclair.
"Disqualified Equity Interests" means any Equity Interests that,
either by their terms or by the terms of any security into which they are
convertible or exchangeable or otherwise, are or upon the happening of an event
or passage of time would be required to be redeemed prior to any Stated Maturity
of the principal of the KDSM Senior Debentures or are redeemable at the option
of the holder thereof at any time prior to any such Stated Maturity, or are
convertible into or exchangeable for debt securities at any time prior to any
such Stated Maturity at the option of the holder thereof.
"Equity Interest" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such Person, including any Preferred Equity Interests.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the exchange offer by the Company of Series B
KDSM Senior Debentures for Series A KDSM Senior Debentures to be effected
pursuant to Section 2.1 of the Registration Rights Agreement.
- 10 -
<PAGE>
"Exchange Offer Registration Statement" means the registration
statement under the Securities Act contemplated by Section 2.1 of the
Registration Rights Agreement.
"Existing Indentures" means (i) the Indenture, dated as of December 9,
1993, among Sinclair, the Guarantors (as defined therein) and First Union
National Bank of North Carolina, as amended and (ii) the Indenture, dated as of
August 28, 1995, among Sinclair, the Guarantors (as defined therein) and the
United States Trust Company of New York as amended.
"Existing Notes" means, collectively the 1993 Notes and the 1995
Notes. "Expense Agreement" means the Agreement, dated as of March 12, 1997,
entered into by the Company to pay all of the expenses of the Trust.
"Fair Market Value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"Film Contract" means contracts with suppliers that convey the right
to broadcast specified films, videotape motion pictures, syndicated television
programs or sports or other programming.
"Founders' Notes" means the term notes, dated September 30, 1990, as
amended, made by Sinclair to Julian S. Smith and to Carolyn C. Smith pursuant to
a stock redemption agreement, dated June 19, 1990, among Sinclair, certain of
its Subsidiaries, Julian S. Smith, Carolyn C. Smith, David D. Smith, Frederick
G. Smith, J. Duncan Smith and Robert E. Smith.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied, which are in effect on the date the 1993 Notes
were issued.
"Global Security" means a KDSM Senior Debenture in book-entry form in
the form prescribed in Sections 202 through 205 evidencing all or part of the
KDSM Senior Debentures, issued to the Depositary or its nominee and registered
in the name of the Depositary or such nominee.
"Guarantee" means the guarantee by any Person of the Indenture
Obligations pursuant to a guarantee given in accordance with this Indenture,
including, without limitation, the guarantee by Sinclair which may become
effective pursuant to the provisions of Article Thirteen of this Indenture and
any guarantee delivered pursuant to Section 1010.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
contained in this Section guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed
- 11 -
<PAGE>
directly or indirectly by such Person through an agreement (i) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (iii) to supply funds to, or in any other
manner invest in, the debtor (including any agreement to pay for property or
services without requiring that such property be received or such services be
rendered), (iv) to maintain working capital or equity capital of the debtor, or
otherwise to maintain the net worth, solvency or other financial condition of
the debtor or (v) otherwise to assure a creditor against loss; provided that the
term "guarantee" shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.
"Holder" means a Person in whose name a KDSM Senior Debenture is
registered in the Security Register.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit issued under letter of credit
facilities, acceptance facilities or other similar facilities and in connection
with any agreement to purchase, redeem, exchange, convert or otherwise acquire
for value any Equity Interests of such Person, or any warrants, rights or
options to acquire such Equity Interests, now or hereafter outstanding, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (iv) all obligations under Interest Rate Agreements of such Person,
(v) all Capital Lease Obligations of such Person, (vi) all Indebtedness referred
to in clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness, (vii) all
Guaranteed Debt of such Person, (viii) all Disqualified Equity Interests valued
at the greater of their voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends, and (ix) any amendment, supplement,
modification, deferral, renewal, extension, refunding or refinancing of any
liability of the types referred to in clauses (i) through (viii) above;
provided, however, that the term Indebtedness shall not include any obligations
of the Company and its Subsidiaries with respect to Film Contracts entered into
in the ordinary course of business. The amount of Indebtedness of any Person at
any date shall be, without duplication, the principal amount
- 12 -
<PAGE>
that would be shown on a balance sheet of such Person prepared as of such date
in accordance with GAAP and the maximum determinable liability of any Guaranteed
Debt referred to in clause (vii) above at such date. For purposes hereof, the
"maximum fixed repurchase price" of any Disqualified Equity Interests which do
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Equity Interests as if such Disqualified Equity
Interests were purchased on any date on which Indebtedness shall be required to
be determined pursuant to this Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Disqualified Equity Interests, such
Fair Market Value to be determined in good faith by the Board of Directors of
the issuer of such Disqualified Equity Interests.
"Indenture Obligations" means the obligations of the Company and any
other obligor under this Indenture or under the KDSM Senior Debentures
(including, in accordance with the terms and conditions of the Guarantee, if the
Guarantee is then effective, Sinclair), to pay principal, premium, if any, and
interest when due and payable, and all other amounts due or to become due under
or in connection with the KDSM Senior Debentures or this Indenture and the
performance of all other obligations to the Trustee and the Holders under the
KDSM Senior Debentures or this Indenture according to the terms hereof and
thereof.
"Independent Director" means a director of the Company other than a
director (i) who (apart from being a director of the Company or any Subsidiary
thereof) is an employee, insider, associate or Affiliate of the Company or a
Subsidiary or has held any such position during the previous five years or (ii)
who is a director, an employee, insider, associate or Affiliate of another party
to the transaction in question.
"Initial Purchasers" shall mean Smith Barney Inc. and Chase Securities
Inc. as initial purchasers of the Preferred Securities.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the KDSM Senior Debentures.
"Interest Rate Agreements" means one or more of the following
agreements which shall be entered into with one or more financial institutions:
interest rate protection agreements (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time.
"Investment Company Act Event" means the receipt by Sinclair Capital
or the Company of an opinion of nationally recognized independent counsel
experienced in the practice of law under the Investment Company Act of 1940, as
amended (the "1940 Act") to the effect that as a result of the occurrence of a
change in law or regulation or a change in official interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), Sinclair Capital or
the Company is or will be considered an "investment company" which is required
to be
- 13 -
<PAGE>
registered under the 1940 Act which Change in 1940 Act Law becomes effective on
or after the date of issuance of the Preferred Securities.
"Investments" means, with respect to any Person, directly or
indirectly, any advance, loan (including guarantees), or other extension of
credit or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase, acquisition or ownership by such Person of any
Equity Interests, bonds, notes, debentures or other securities or assets issued
or owned by any other Person and all other items that would be classified as
investments on a balance sheet prepared in accordance with GAAP.
"Issue Date" means March 12, 1997.
"Junior Securities" means any securities of the Company that are
junior in right of payment to the KDSM Senior Debentures.
"KDSM Senior Debentures" or "KDSM Senior Debenture" means any debt
securities or debt security, as the case may be, authenticated and delivered
under this Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind (including any conditional sale
or other title retention agreement, any leases in the nature thereof, and any
agreement to give any security interest), real or personal, movable or
immovable, now owned or hereafter acquired.
"Liquidation Value" means, with respect to the Preferred Securities, a
liquidation preference of $100 plus accrued and unpaid distributions thereon,
whether or not earned or declared, to the date of payment, subject to certain
limitations set forth in the Trust Agreement.
"Maturity Date" means the date on which the principal of such KDSM
Senior Debenture becomes due and payable as provided in the KDSM Senior
Debentures or as provided in this Indenture.
"Minority Note" means the promissory note, dated December 26, 1986,
made by Sinclair to Frederick M. Himes, B. Stanley Resnick and Edward A.
Johnston, as representatives, pursuant to a stock purchase agreement, dated
December 22, 1986, among Sinclair, Commercial Radio Institute, Inc., Chesapeake
Television, Inc. and certain individuals.
"Moody's" means Moody's Investors Service, Inc. or any successor
rating agency.
"1993 Notes" means Sinclair's 10% Senior Subordinated Notes due 2003.
- 14 -
<PAGE>
"1995 Notes" means Sinclair's 10% Senior Subordinated Notes due 2005.
"Non-payment Default" means any event (other than a Payment Default)
the occurrence of which entitles one or more Persons to accelerate maturity of
any Designated Sinclair Senior Indebtedness.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Vice Chairman, the President or a Vice President (regardless of vice
presidential designation), and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company or Sinclair, as the case may
be, and delivered to the Trustee.
"Operating Cash Flow" means, for any Person, for any period, the
Consolidated Net Income of such Person and its Subsidiaries for such period,
plus (a) extraordinary net losses and net losses on sales of assets outside the
ordinary course of business during such period, to the extent such losses were
deducted in computing Consolidated Net Income, plus (b) provision for taxes
based on income or profits, to the extent such provision for taxes was included
in computing such Consolidated Net Income, and any provision for taxes utilized
in computing the net losses under clause (a) hereof, plus (c) Consolidated
Interest Expense of such Person and its Subsidiaries for such period, plus (d)
depreciation, amortization and all other non-cash charges, to the extent such
depreciation, amortization and other non-cash charges were deducted in computing
such Consolidated Net Income (including amortization of goodwill and other
intangibles, including Film Contracts and write-downs of Film Contracts, minus
(e) any cash payments contractually required to be made with respect to Film
Contracts (to the extent not previously included in computing such Consolidated
Net Income).
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, Sinclair or the Trustee, unless an Opinion of
Independent Counsel is required pursuant to the terms of this Indenture, and who
shall be acceptable to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel
issued by someone who is not an employee or consultant of the Company or
Sinclair and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to KDSM Senior Debentures, means
as of the date of determination, all KDSM Senior Debentures theretofore
authenticated and delivered under this Indenture, except:
(a) KDSM Senior Debentures theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;(b) KDSM Senior Debentures, or
portions thereof, for whose payment or redemption money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent (other than
the Company or any Affiliate thereof) in trust or set aside and segregated in
trust by the Company or such Affiliate (if the Company or such Affiliate shall
act as the Paying Agent) for the Holders; provided that if such KDSM Senior
- 15 -
<PAGE>
Debentures are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor reasonably satisfactory to the
Trustee has been made; (c) KDSM Senior Debentures, except to the extent provided
in Sections 402 and 403 of this Indenture, with respect to which the Company has
effected defeasance or covenant defeasance as provided in Article Four; and(d)
KDSM Senior Debentures in exchange for or in lieu of which other KDSM Senior
Debentures have been authenticated and delivered pursuant to this Indenture,
other than any such KDSM Senior Debentures in respect of which there shall have
been presented to the Trustee proof reasonably satisfactory to it that such KDSM
Senior Debentures are held by a bona fide purchaser in whose hands the KDSM
Senior Debentures are valid obligations of the Company; provided, however, that
in determining whether the Holders of the requisite principal amount of
Outstanding KDSM Senior Debentures have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, KDSM Senior
Debentures owned by the Company, Sinclair, or any other obligor upon the KDSM
Senior Debentures or any Affiliate of the Company, Sinclair, or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only KDSM
Senior Debentures which the Trustee knows to be so owned shall be so
disregarded. KDSM Senior Debentures so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
reasonable satisfaction of the Trustee the pledgee's right so to act with
respect to such KDSM Senior Debentures and that the pledgee is not the Company,
Sinclair or any other obligor upon the KDSM Senior Debentures or any Affiliate
of the Company, Sinclair or such other obligor."Parent Preferred" means the
Series C Preferred Stock, Liquidation Amount $100 per share, of Sinclair
initially issued on the date of this Indenture.
"Parent Preferred Extension Period" means any period for which
Sinclair exercises its right, pursuant to the terms of the Parent Preferred, to
extend the dividend payment period for the Parent Preferred from time to time
for up to three consecutive quarters, during which periods dividends thereunder
will compound quarterly and Sinclair shall have the right to make partial
payments of dividends on any dividend payment date; provided that Sinclair shall
be required to pay all dividends due and payable on the Parent Preferred at
least once every four quarters and must pay all dividends due and owing on the
date of maturity of the Parent Preferred.
"Paying Agent" means any Person authorized by the Company to pay the
principal of, premium, if any, or interest on any KDSM Senior Debentures on
behalf of the Company.
"Payment Default" means any default in payment of principal of,
premium, if any, or interest, on any Designated Sinclair Senior Indebtedness.
- 16 -
<PAGE>
"Permitted Holders" means as of the date of determination: (i) any of
David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith; (ii)
family members or the relatives of the Persons described in clause (i) above;
(iii) in the event of the incompetence or death of any of the Persons described
in clauses (i) and (ii) above, such Person's estate, executor, administrator,
committee or other personal representative or beneficiaries; or (iv) any trusts
created for the benefit of the Persons described in clause (i), (ii) or (iii)
above or any trust for the benefit of any such trust, who, in each case at any
particular date shall beneficially own or have the right to acquire, directly or
indirectly, Equity Interests of Sinclair.
"Permitted Investment" means: (i) any Investments in any Subsidiary,
(ii) Temporary Cash Investments, (iii) Investments in existence on the date the
KDSM Senior Debentures are issued, (iv) loans up to an aggregate of $100,000
outstanding at any one time to employees pursuant to benefits available to the
employees of the Company and its Subsidiaries from time to time in the ordinary
course, (v) any Investment in the Parent Preferred or the Common Securities,
(vi) any guarantee of Indebtedness incurred in accordance with this Indenture
and (vii) investments by the Company or any Subsidiary in any Person if as a
result of such Investment (I) such Person becomes a Subsidiary or (II) such
Person is merged, consolidated with or into, or transfers or conveys
substantially all of its assets to or is liquidated into the Company or any of
its Subsidiaries.
"Permitted Sinclair Junior Securities" means (so long as the effect of
any exclusion employing this definition is not to cause the Guarantee to be
treated in any case or proceeding or similar event described in clause (a), (b)
or (c) of Section 1316 as part of the same class of claims as Sinclair Senior
Indebtedness or any class of claims pari passu with, or senior to, Sinclair
Senior Indebtedness) for any payment or distribution, debt or equity securities
of Sinclair or any successor corporation provided for by a plan of
reorganization or readjustment that are subordinated at least to the same extent
that the Guarantee is subordinated to the payment of all Sinclair Senior
Indebtedness then outstanding; provided that (1) if a new corporation results
from such reorganization or readjustment, such corporation assumes Sinclair
Senior Indebtedness not paid in full in cash or Cash Equivalents in connection
with such reorganization or readjustment and (2) the rights of the holders of
such Sinclair Senior Indebtedness are not, without the consent of such holders,
altered by such reorganization or readjustment.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Pledge Agreement" means the Pledge and Security Agreement, dated as
of March 12, 1997, among the Company and First Union National Bank of Maryland
as collateral agent providing for a pledge and first priority security interest
in the Parent Preferred.
- 17 -
<PAGE>
"Predecessor Securities" of any particular KDSM Senior Debenture means
every previous security issued before, and evidencing all or a portion of the
same debt as that evidenced by, such particular KDSM Senior Debenture. For the
purposes of this definition, any KDSM Senior Debenture authenticated and
delivered under Section 308 in lieu of a mutilated, destroyed, lost or stolen
KDSM Senior Debenture shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen KDSM Senior Debenture.
"Preferred Equity Interest", as applied to the Equity Interest of any
Person, means an Equity Interest of any class or classes (however designated)
which is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such person, over Equity Interests of any other class of such
Person.
"Property Trustee" means the Person named as the "Property Trustee" in
the first paragraph of this instrument, solely in its capacity as Property
Trustee of Sinclair Capital under the Trust Agreement and not in its individual
capacity, or its successor in interest in such capacity, or any successor
property trustee appointed as provided in the Trust Agreement.
"Prospectus" means the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including any such
prospectus supplement with respect to the terms of the offering of any portion
of the Series A KDSM Senior Debentures covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all material
incorporated by reference therein.
"Public Equity Offering" means, with respect to any Person, an
underwritten public offering by such Person of some or all of its Equity
Interests (other than Disqualified Equity Interests), the net proceeds of which
(after deducting any underwriting discounts and commissions) exceed $10,000,000.
"Purchase Money Obligation" means any Indebtedness secured by a Lien
on assets related to the business of the Company and additions and accessions
thereto, which are purchased by the Company or any Subsidiary thereof at any
time after the KDSM Senior Debentures are issued, provided that: (i) the
security agreement or condition sales or other title retention contract pursuant
to which the Lien on such assets is created (collectively a "Purchase Money
Security Agreement") shall be entered into within 90 days after the purchase or
substantial completion of the construction of such assets and shall at all times
be confined solely to the assets so purchased or acquired, any additions and
accessions thereto and any proceeds therefrom, (ii) at no time shall the
aggregate principal amount of the outstanding Indebtedness secured thereby be
increased, except in connection with the purchase of additions and accessions
thereto and except in respect of fees and other
- 18 -
<PAGE>
obligations in respect of such Indebtedness, and (iii) either (A) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Purchase Money Security Agreement is entered into exceed 100% of the
purchase price to the Company of the assets subject thereto or (B) the
Indebtedness secured thereby shall be with recourse solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom.
"QIB" means a "qualified institutional buyer" within the meaning of
Rule 144A under the Securities Act.
"Redemption Date", when used with respect to any KDSM Senior Debenture
to be redeemed pursuant to any provision in this Indenture, means the date fixed
for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any KDSM Senior
Debenture to be redeemed pursuant to any provision in this Indenture, means the
price at which it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 12, 1997, among Sinclair, the Company, Sinclair
Capital and the Initial Purchasers.
"Registration Statement" means any registration statement of the
Company which covers any of the Series A KDSM Senior Debentures or Series B KDSM
Senior Debentures pursuant to the provisions of the Registration Rights
Agreement, and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Regular Record Date" or "Record Date" for the interest payable on any
Interest Payment Date means the March 1, June 1, September 1 and December 1
(whether or not a Business Day) next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee, means
any officer assigned to the Corporate Trust Office or the agent of the Trustee
appointed hereunder, including any vice president, assistant vice president,
assistant secretary, or any other officer or assistant officer of the Trustee or
the agent of the Trustee appointed hereunder to whom any corporate trust matter
is referred because of his or her knowledge of and familiarity with the
particular subject.
- 19 -
<PAGE>
"Restricted Securities Legend" means a legend substantially in the
form of the legend required in the form of KDSM Senior Debenture set forth in
Section 202 to be placed upon a Restricted Security.
"Restricted Securities Transfer Certificate" means a certificate
substantially in the form set forth in Exhibit A.
"Restricted Security" means each KDSM Senior Debenture required
pursuant to Section 306 to bear a Restricted Securities Legend.
"Rule 144A Information" shall be such information with respect to the
Company and Sinclair as is specified pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto).
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which any Person sells or transfers any
property or asset in connection with the leasing, or the resale against
installment payments, of such property or asset to the seller or transferor.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Shelf Registration Statement" means a "shelf" registration statement
of the Company pursuant to Section 2.2 of the Registration Rights Agreement,
which covers all or a portion of the Registrable Securities (as defined in the
Registration Rights Agreement) on an appropriate form under Rule 415 under the
Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Significant Subsidiary" means any Subsidiary of a Person that would
be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect
on the date hereof.
"Sinclair" means the Person named as "Sinclair" in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Sinclair" shall
mean such successor Person.
- 20 -
<PAGE>
"Sinclair Capital" or the "Trust" means Sinclair Capital, a Delaware
business trust formed pursuant to the Trust Agreement.
"Sinclair Senior Indebtedness" means the principal of, premium, if
any, and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on any Indebtedness of
Sinclair (other than as otherwise provided in this definition), whether
outstanding on the date of this Indenture or thereafter created, incurred or
assumed, and whether at any time owing, actually or contingent, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Guarantee. Without
limiting the generality of the foregoing, "Sinclair Senior Indebtedness" shall
include (i) the principal of, premium, if any, and interest (including interest
accruing after the filing of a petition initiating any proceeding under any
state, federal or foreign bankruptcy laws whether or not allowable as a claim in
such proceeding) and all other obligations of every nature of Sinclair from time
to time owed to the lenders (or their agent) under the Bank Credit Agreement;
provided, however, that any Indebtedness under any refinancing, refunding or
replacement of the Bank Credit Agreement shall not constitute Sinclair Senior
Indebtedness to the extent that the Indebtedness thereunder is by its express
terms subordinate to any other Indebtedness of Sinclair; (ii) Indebtedness
outstanding under the Founders' Notes, (iii) Indebtedness outstanding under the
Existing Notes and (iv) Indebtedness under Interest Rate Agreements.
Notwithstanding the foregoing, "Sinclair Senior Indebtedness" shall not include
(i) Indebtedness evidenced by the KDSM Senior Debentures, (ii) Indebtedness
which when incurred and without respect to any election under Section 1111(b) of
Title 11 of the United States Code, is without recourse to Sinclair, (iii)
Indebtedness which is represented by Disqualified Equity Interests, (iv) any
liability for foreign, federal, state, local or other taxes owed or owing by
Sinclair to the extent such liability constitutes Indebtedness, (v) Indebtedness
of Sinclair to the extent such liability constitutes Indebtedness to a
Subsidiary or any other Affiliate of the Company or any of such Affiliate's
subsidiaries, (vi) that portion of any Indebtedness which at the time of
issuance is issued in violation of this Indenture, (vii) Indebtedness owed by
Sinclair for compensation to employees or for services and (viii) Indebtedness
outstanding under the Minority Note.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 309.
"Stated Maturity", when used with respect to the KDSM Senior
Debentures or interest thereon, means the date specified pursuant to the terms
of the KDSM Senior Debentures as the fixed date on which the principal or
interest, as applicable, is due and payable, and, in the case of any installment
of interest, subject to the deferral of any such date in the case of any
Extension Period. When used with respect to any other Indebtedness or any
installment of interest thereon, means the date specified in such Indebtedness
as the
- 21 -
<PAGE>
fixed date on which the principal of such Indebtedness or such installment of
interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or
Sinclair subordinated in right of payment to the KDSM Senior Debentures or the
Guarantees, as the case may be.
"Subsidiary" means any Person a majority of the equity ownership or
the Voting Stock of which is at the time owned, directly or indirectly, such
Person or by one or more other Subsidiaries, or by such Person and one or more
other Subsidiaries.
"Successor Security" of any particular KDSM Senior Debenture means
every KDSM Senior Debenture issued after, and evidencing all or a portion of the
same debt as that evidenced by, such particular KDSM Senior Debenture. For the
purposes of this definition, any KDSM Senior Debenture authenticated and
delivered under Section 308 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen KDSM Senior Debenture shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen KDSM Senior Debenture.
"Tax Event" means the receipt by Sinclair Capital or the Company of an
Opinion of Independent Counsel experienced in such matters to the effect that,
as a result of (i) any amendment to, clarification of, or change (including any
announced prospective change) in the laws or treaties (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein affecting taxation, (ii) any judicial decision,
official administrative pronouncement, ruling, regulatory procedure, notice or
announcement (including any notice or announcement of intent to adopt such
procedures or regulations) ("Administrative Action") or (iii) any amendment to,
clarification of, or change in the official position or the interpretation of
such Administrative Action or judicial decision or any interpretation or
pronouncement that provides for a position with respect to such Administrative
Action or judicial decision that differs from the therefore generally accepted
position, in each case, by any legislative body, court, governmental authority
or regulatory body, irrespective of the manner in which such amendment,
clarification or change is made known, which amendment, clarification, or change
is effective or such pronouncement or decision is announced on or after the
first date of issuance of the Preferred Securities, there is more than an
insubstantial risk that (a) Sinclair Capital is, or will be, subject to United
States federal income tax with respect to interest received on the KDSM Senior
Debentures, (b) interest payable by the Company on the KDSM Senior Debentures is
not, or will not be, fully deductible for United States federal income tax
purposes, or (c) Sinclair Capital is, or will be, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or
- 22 -
<PAGE>
an instrumentality or agency thereof and guaranteed fully as to principal,
premium, if any, and interest by the United States of America, (ii) any
certificate of deposit, maturing not more than one year after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
(including the Trustee) that is a member of the Federal Reserve System and that
has combined capital and surplus and undivided profits of not less than
$500,000,000, whose debt has a rating, at the time as of which any investment
therein is made, of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P, (iii) commercial paper, maturing not more than one year after
the date of acquisition, issued by a corporation (other than an Affiliate or
Subsidiary of Sinclair) organized and existing under the laws of the United
States of America with a rating, at the time as of which any investment therein
is made, of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P and (iv) any money market deposit accounts issued or offered by
a domestic commercial bank (including the Trustee) having capital and surplus in
excess of $500,000,000.
"Trust" or "Sinclair Capital" means Sinclair Capital, a Delaware
business trust formed pursuant to the Trust Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument, solely in its capacity as such and not in its
individual capacity, until a successor Trustee shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean or include each Person who is then a Trustee hereunder.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York from time to time.
"Voting Rights Triggering Event" shall have the meaning given to such
term in the Parent Preferred.
"Voting Stock" means stock of the class or classes pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
a corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interest
of which is owned by the Company or another Wholly Owned Subsidiary.
Section 102. Other Definitions.
Defined in
Term Section
---- -----------
- 23 -
<PAGE>
"Act" 105
"Change of Control Offer" 1016
"Change of Control Purchase Date" 1016
"Change of Control Purchase Notice" 1016
"Change of Control Purchase Price" 1016
"covenant defeasance" 403
"Defaulted Interest" 309
"defeasance" 402
"Defeasance Redemption Date" 404
"Defeased Securities" 401
"Extension Period" 202
"Guarantor" Preamble
"Indenture" Preamble
"Initial Brokerage Period" 1317
"Initial Securities" Recitals
"Liquidation Distribution" 201
"Parent Guarantee" Recitals
"Payment Blockage Period" 1317
"Penalty Interest" 202
"Physical Securities" 305
"Preferred Securities" Recitals
"Prescribed Time Periods" 202
"Restricted Payments" 1008
"Required Filing Date" 1015
"Senior Representative" 1317
"Series A KDSM Senior Debentures" Recitals
"Series B KDSM Senior Debentures" Recitals
"Sinclair Senior Representative" 1323
"Trust Agreement" Recitals
"U.S. Government Obligations" 404
Section 103. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company, Sinclair (if the
Guarantee is effective) and any other obligor on the KDSM Senior Debentures
shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this
- 24 -
<PAGE>
Indenture (including any covenants compliance with which constitutes a condition
precedent) relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents,
certificates and/or opinions is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.Every certificate or Opinion of Counsel
with respect to compliance with a condition or covenant provided for in this
Indenture shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.Any
certificate or opinion of an officer of the Company, Sinclair or other obligor
of the KDSM Senior Debentures may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer knows that the certificate or opinion or representations
with respect to the matters upon which his or her certificate or opinion is
based are erroneous. Any such certificate or opinion may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or representations
by, an officer or officers of the Company, Sinclair or other obligor of the KDSM
Senior Debentures stating that the information with respect to such factual
matters is in the possession of the Company, Sinclair or other obligor of the
KDSM Senior Debentures, unless such counsel knows that the certificate or
opinion or representations with respect to such matters are erroneous. Opinions
of Counsel required to be delivered to the Trustee may have qualifications
customary for opinions of the type required and counsel delivering such Opinions
of Counsel may rely on certificates of the Company or government or other
officials customary for opinions of the type required, including certificates
certifying as to matters of fact, including that various
- 25 -
<PAGE>
financial covenants have been complied with.Where any Person is required to
make, give or execute two or more applications, requests, consents,
certificates, statements, opinions or other instruments under this Indenture,
they may, but need not, be consolidated and form one instrument.
Section 105. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture, if made in the manner provided in this Section. The fact and date of
the execution by any person of any such instrument or writing or the authority
of the person executing the same, may also be proved in any other manner which
the Trustee deems sufficient in accordance with such reasonable rules as the
Trustee may determine.
- 26 -
<PAGE>
(b) The ownership of KDSM Senior Debentures shall be proved by the
Security Register.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any KDSM Senior Debenture shall bind
every future Holder of the same KDSM Senior Debenture or the Holder of every
KDSM Senior Debenture issued upon the transfer thereof or in exchange therefor
or in lieu thereof, in respect of anything done, suffered or omitted to be done
by the Trustee, any Paying Agent or the Company or Sinclair in reliance thereon,
whether or not notation of such action is made upon such KDSM Senior Debenture.
(d) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. Notwithstanding Trust Indenture Act
Section 316(c), any such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not more than 30 days
prior to the first solicitation of Holders generally in connection therewith and
no later than the date such solicitation is completed.
In the absence of any such record date fixed by the Company,
regardless as to whether a solicitation of the Holders is occurring on behalf of
the Company or any Holder, the Trustee may, at its option, fix in advance a
record date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Trustee shall have no obligation to do so. Any such record date shall be a date
not more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than a date such solicitation is completed.If
such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such record
date, but only the Holders of record at the close of business on such record
date shall be deemed to be Holders for purposes of determining whether Holders
of the requisite proportion of KDSM Senior Debentures then Outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the KDSM
Senior Debentures then Outstanding shall be computed as of such record date;
provided that no such request, demand, authorization, direction, notice,
consent, waiver or other Act by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
Section 106. Notices, etc., to Trustee, the Company and Sinclair.
- 27 -
<PAGE>
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company or Sinclair or any
other obligor of the KDSM Senior Debentures shall be sufficient for every
purpose hereunder if in writing and mailed, first-class postage prepaid, or
delivered by recognized overnight courier, to or with the Trustee at the
Corporate Trust Office, Attention: Corporate Trust Division, or at any other
address previously furnished in writing to the Holders, the Company, Sinclair,
any other obligor of the KDSM Senior Debentures or a Sinclair Senior
Representative or holder of Sinclair Senior Indebtedness by the Trustee; or
(b) the Company or Sinclair shall be sufficient for every purpose
(except as provided in Section 501(d)) hereunder if in writing and mailed,
first-class postage prepaid, or delivered by recognized overnight courier, to
the Company addressed to it at KDSM, Inc. c/o Sinclair Broadcast Group, Inc.,
2000 West 41st Street, Baltimore, Maryland 21211, Attention: President, or at
any other address previously furnished in writing to the Trustee by the Company
and to Sinclair at 2000 West 41st Street, Baltimore, Maryland 21211, Attention:
President, or at any other address previously furnished in writing to the
Trustee by Sinclair, with a copy to Thomas & Libowitz, P.A., 100 Light Street,
Suite 1100, Baltimore, Maryland 21202, Attention: Steven A. Thomas, Esq., and a
copy to Wilmer, Cutler & Pickering, 100 Light Street, 13th Floor, Baltimore,
Maryland 21202, Attention:
John B. Watkins, Esq.
Section 107. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice when mailed to a Holder in the aforesaid manner shall
be conclusively deemed to have been received by such Holder whether or not
actually received by such Holder. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.In case by reason of the
suspension of regular mail service or by reason of any other cause, it shall be
impracticable to mail notice of any event as required by any provision of this
- 28 -
<PAGE>
Indenture, then any method of giving such notice as shall be reasonably
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
Section 108. Conflict with Trust Indenture Act.
Except as otherwise expressly provided herein, whether or not the
Trust Indenture Act shall apply as a matter of law, the Trust Indenture Act
shall apply as a matter of contract to this Indenture for purposes of
interpretation, construction and defining the rights and obligations hereunder,
and this Indenture, the Company, Sinclair and the Trustee shall be deemed for
all purposes hereof to be subject to and governed by the Trust Indenture Act to
the same extent as would be the case if this Indenture were qualified under that
Act on the date hereof. Except as otherwise provided herein, if and to the
extent that any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control.
Section 109. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and
Sinclair shall bind their successors and assigns, whether so expressed or not.
Section 111. Separability Clause.
In case any provision in this Indenture or in the KDSM Senior
Debentures shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 112. Benefits of Indenture.
Nothing in this Indenture, the KDSM Senior Debentures or the
Guarantees, express or implied, shall give to any Person, other than the parties
hereto and their successors and assigns, the holders of Sinclair Senior
Indebtedness, the Holders of the KDSM Senior Debentures and the Guarantees
endorsed thereon and, to the extent expressly provided in Sections 501, 502,
508, 509, 511, 513, 901 and 902, the holders of Preferred Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 113. Governing Law.
- 29 -
<PAGE>
THIS INDENTURE AND THE KDSM SENIOR DEBENTURES AND HE GUARANTEE, IF
EFFECTIVE, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF).
Section 114. Non-Business Days.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any KDSM Senior Debenture shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the KDSM Senior
Debentures) payment of principal, premium, if any, or interest need not be made
on such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date or Redemption Date or
at the Stated Maturity and no interest shall accrue with respect to such payment
for the period from and after such Interest Payment Date, Redemption Date or
Stated Maturity, as the case may be, to the next succeeding Business Day.
Section 115. Schedules and Exhibits.
All schedules and exhibits attached hereto are by this reference made
a part hereof with the same effect as if herein set forth in full.
Section 116. Counterparts.
This Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.
ARTICLE TWO
KDSM SENIOR DEBENTURE FORMS
Section 201. Forms Generally.
The KDSM Senior Debentures and the Trustee's certificate of
authentication shall be in substantially the forms set forth in this Article,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange,
any organizational document or governing instrument or applicable law or as may,
consistently herewith, be determined by the officers executing such KDSM Senior
Debentures, as evidenced by their execution of the KDSM Senior Debentures. Any
portion of the text of any KDSM Senior Debenture may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the KDSM Senior
Debenture.The definitive
- 30 -
<PAGE>
KDSM Senior Debentures shall be printed, lithographed or engraved or produced by
any combination of these methods or may be produced in any other manner
permitted by the rules of any securities exchange on which the KDSM Senior
Debentures may be listed, all as determined by the officers executing such KDSM
Senior Debentures, as evidenced by their execution of such KDSM Senior
Debentures.The KDSM Senior Debentures shall be initially issued to Sinclair
Capital by the Company in certificated form substantially as set forth in
Section 202 until such time, if any, as the KDSM Senior Debentures are
distributed to Holders of the Preferred Securities and the Common Securities in
connection with a dissolution and liquidation of the Trust pursuant to Section
9.04(a) of the Trust Agreement (the "Liquidation Distribution") or for any other
reason. Upon a Liquidation Distribution, if any QIBs hold the KDSM Senior
Debentures, beneficial interests in a Global Security shall be (to the extent
permitted by the Depository) transferred to the Holders of the Preferred
Securities upon exchange of the certificated KDSM Senior Debentures pursuant to
the Applicable Procedures and pursuant to Sections 305, 306 and 307.The terms
and provisions contained in the form of KDSM Senior Debentures set forth in
Sections 202 through 205 shall constitute, and are expressly made, a part of
this Indenture and, to the extent applicable, the Company, Sinclair and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Section 202. Form of Face of KDSM Senior Debenture.
(a) The form of the face of any Series A KDSM Senior Debentures
authenticated and delivered hereunder shall be substantially as follows:
Unless and until (i) an Initial KDSM Senior Debenture is sold under an
effective Registration Statement or (ii) a Series A KDSM Senior Debenture is
exchanged for a Series B KDSM Senior Debenture in connection with an effective
Registration Statement, in each case pursuant to the Registration Rights
Agreement, then each Restricted Security shall bear the legend set forth below
(the "Restricted Securities Legend") on the face thereof:
KDSM, INC.
11 5/8% Senior Debentures Due 2009, Series A
[IF THE SECURITY IS A RESTRICTED SECURITY, INSERT -- THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR"),
- 31 -
<PAGE>
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND.
No. _____________ $________
CUSIP No. ___________
KDSM, INC., a corporation duly organized and existing under the laws of the
State of Maryland (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ________________, or registered assigns, the
principal sum of ________ UNITED STATES DOLLARS ($________) on March 15, 2009
and to pay interest on said principal sum from March 12, 1997 or from the most
recent interest payment date (each such date, an "Interest Payment Date") to
which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on March 15, June 15, September 15, and
December 15 of each year, commencing June 15, 1997, at the rate of 11 5/8% per
annum plus Additional Interest and Penalty Interest, if any, until the principal
hereof shall have become due and payable, and at a rate of 11 5/8% per annum, on
any overdue principal or interest (including Additional Interest Attributable to
Deferral and Penalty Interest). The amount of interest payable for any period
will be computed on the basis of twelve 30-day months and a 360-day year. In the
event that any date on which interest is payable on this KDSM Senior Debenture
is not a Business Day, then a payment of the interest payable on such date will
be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on the date the payment was originally payable. A "Business
Day" shall mean any day other than (x) a Saturday or a
- 32 -
<PAGE>
Sunday, (y) a day on which banking institutions in Maryland or The City of New
York are authorized or obligated by law or executive order to close or (z) a day
on which the Corporate Trust Office or the principal corporate trust office of
the Property Trustee is closed for business. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in the Indenture, be paid to the Person in whose name this
KDSM Senior Debenture (or one or more Predecessor Securities, as defined in the
Indenture) is registered at the close of business on the Regular Record Date for
such interest installment, which shall be the March 1, June 1, September 1 and
December 1 next preceding such Interest Payment Date. Any such interest
installment not so punctually paid or duly provided for shall forthwith cease to
be payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name this security (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of KDSM Senior Debentures not less than 10 days prior to such
Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the KDSM
Senior Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
The Holder of this Series A KDSM Senior Debenture is entitled to the
benefits of the Registration Rights Agreement, dated as of March 5, 1997, among
Sinclair, the Company, Sinclair Capital and the Initial Purchasers, pursuant to
which, subject to the terms and conditions thereof, the Company is obligated,
among other things, to consummate the Exchange Offer pursuant to which the
Holder of this KDSM Senior Debenture shall have the right to exchange this KDSM
Senior Debenture for 11 5/8% Senior Debentures due 2009, Series B (herein called
the "Series B KDSM Senior Debentures") in like principal amount as provided
therein. The Series A KDSM Senior Debentures and the Series B KDSM Senior
Debentures are together referred to as the "KDSM Senior Debentures." The Series
A KDSM Senior Debentures rank pari passu in right of payment with the Series B
KDSM Senior Debentures.
Additional interest ("Penalty Interest") will be assessed on the
Series A KDSM Senior Debentures as follows:
(i) (A) if an Exchange Offer Registration Statement (or, in the event
of a change in applicable law or due to current interpretations by the
Commission, the Company is not permitted to effect the Exchange Offer, a Shelf
Registration Statement) is not filed within 60 days following the Closing Date,
(B) in the event that within 30 days after consummation of the Exchange Offer,
any Holder shall notify the Company that such Holder (x) is prohibited by
applicable law or Commission policy from participating in the Exchange Offer,
(y) may not resell Exchange Securities acquired by it in the Exchange Offer to
the public without delivering a prospectus and that the prospectus contained in
the Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder or (z) is a broker-
- 33 -
<PAGE>
dealer and holds KDSM Senior Debentures acquired directly from the Company or an
"affiliate" of the Company or (C) upon the request of an Initial Purchaser, a
Shelf Registration Statement is not filed within 60 days after such request then
commencing on either the 61st day after the Closing Date or the expiration of
either of the time periods set forth in clauses (B) or (C) above (either a
"Prescribed Time Period"), as the case may be, Penalty Interest shall be accrued
on the Series A KDSM Senior Debentures over and above the stated payment rates
thereon at a rate of .50% per annum for the first 90 days immediately following
either the 61st day after the Closing Date or the expiration of the applicable
Prescribed Time Period, as the case may be, such Penalty Interest rate
increasing by an additional .25% per annum at the beginning of each subsequent
90-day period;
(ii) if an Exchange Offer Registration Statement or a Shelf
Registration Statement is filed pursuant to clause (i) of the preceding full
paragraph and is not declared effective within 120 days following either the
Closing Date or the expiration of the applicable Prescribed Time Period, as the
case may be, then commencing on the 121st day after either the Closing Date or
the expiration of the applicable Prescribed Time Period, as the case may be,
Penalty Interest shall be accrued on the Series A KDSM Senior Debentures over
and above the accrued stated payment rates thereon at a rate of .50% per annum
for the first 90 days immediately following the 121st day after either the
Closing Date or the expiration of the applicable Prescribed Time Period, as the
case may be, such Penalty Interest rate increasing by an additional .25% per
annum at the beginning of each subsequent 90-day period; and
(iii) if either (A) the Company has not exchanged the Exchange
Securities (as defined in the Registration Rights Agreement) for all of the
Series A KDSM Senior Debentures validly tendered in accordance with the terms of
the Exchange Offer on or prior to 150 days after the Closing Date or the
expiration of the Prescribed Time Period, or (B) if applicable, a Shelf
Registration Statement has been declared effective and such Shelf Registration
Statement ceases to be effective prior to two years from its original effective
date or such shorter period that will terminate when all of the Series A KDSM
Senior Debentures covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement, then Penalty Interest shall be
accrued on the Series A KDSM Senior Debentures over and above the stated payment
rates at a rate of .50% per annum for the first 60 days immediately following
the (x) 31st day after such effective date, in the case of (A) above, or (y) the
day such Shelf Registration Statement ceases to be effective in the case of (B)
above, such Penalty Interest rate increasing by an additional .25% per annum at
the beginning of each subsequent 90-day period;
provided, however, that the Penalty Interest rate on the Series A KDSM Senior
Debentures may not exceed 1.5% per annum; and provided, further, that (1) upon
the filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of (i) above), (2) upon the effectiveness of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
(ii) above), or (3) upon the exchange of Exchange Securities for all Series A
KDSM Senior Debentures tendered in the Exchange Offer or upon
- 34 -
<PAGE>
the effectiveness of the Shelf Registration Statement which had ceased to remain
effective prior to two years from its original effective date (in the case of
(iii) above), Penalty Interest as a result of such clause (i), (ii) or (iii)
shall cease to accrue.
Any Penalty Interest due pursuant to clause (i), (ii) or (iii) above
will be payable in cash on the Interest Payment Date related to the Series A
KDSM Senior Debentures. The Penalty Interest will be determined by multiplying
the applicable Penalty Interest rate by the principal amount of the Series A
KDSM Senior Debentures, multiplied by a fraction the numerator of which is the
number of days such Penalty Interest rate was applicable during such period, and
the denominator of which is 360. The Company shall have the right, (i) during
any period when the Company does not receive dividends on the Parent Preferred
held by it due to a Parent Preferred Extension Period, at any time during the
term of this KDSM Senior Debenture, from time to time, to extend the interest
payment period of the KDSM Senior Debentures for up to three consecutive
quarters, and (ii) regardless of whether it receives dividends on the Parent
Preferred, at any time during the term of the KDSM Senior Debentures, to extend
the interest payment period of the KDSM Senior Debentures for one quarterly
period (each, an "Extension Period"), during which Extension Periods interest
will accrue and compound quarterly and the Company shall have the right to make
partial payments of interest on any Interest Payment Date, and at the end of
each Extension Period the Company shall pay all interest then accrued and unpaid
(together with Additional Interest thereon); provided that: (x) the Company
shall be required to pay all interest, including Additional Interest, due and
payable on the KDSM Senior Debentures at least once every four quarters and must
pay all interest due and owing on the Maturity Date of the KDSM Senior
Debentures; (y) the Company shall not defer the interest payment period with
respect to Additional Interest Attributable to Taxes; and (z) that during any
such Extension Period, the Company shall not declare or pay any dividend or
distribution (other than a dividend or distribution in Capital Stock) on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its outstanding Capital Stock, or make any guarantee payments with respect to
the foregoing or repurchase, or cause any Subsidiaries to repurchase, any
security of the Company ranking pari passu with or subordinate to this KDSM
Senior Debenture. Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period; provided that such
Extension Period together with all such previous and further extensions thereof
shall not exceed three consecutive quarters or extend beyond the Maturity Date
of the KDSM Senior Debentures. Upon the termination of any such Extension Period
and upon the payment of all accrued and unpaid interest and any Additional
Interest then due, the Company may select a new Extension Period, subject to the
foregoing requirements. Except for Additional Interest Attributable to Taxes, no
interest shall be due and payable during an Extension Period, until the end of
such period. The Company shall issue a press release in a normal commercial
manner which may be joint with the Trust and Sinclair and shall give the
Trustee, the Property Trustee and the Administrative Trustees notice of its
election of an Extension Period at least ten Business Days prior to the earlier
of (i) the Record Date for interest payments on the KDSM Senior Debentures or
(ii) the date the Administrative Trustees are
- 35 -
<PAGE>
required to give notice to any applicable self-regulatory organization or
security exchange or to holders of the Preferred Securities on the Record Date
or the date such distributions are payable. If the Property Trustee is the sole
Holder of the KDSM Senior Debentures, the Trustee shall promptly notify the
holders of the Preferred Securities of the Company's election of such an
Extension Period. If the Property Trustee ceases to be the sole Holder of the
KDSM Senior Debentures, the Company shall give the Holders of the KDSM Senior
Debentures notice of its election of such Extension Period.
Payment of the principal of, premium, if any, and interest on this
KDSM Senior Debenture will be made at the office or agency of the Company
maintained for that purpose in the United States, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register or (ii) by wire transfer in immediately available funds to an account
specified (not later than one Business Day prior to the applicable Payment Date)
by the Holder hereof. If any of the KDSM Senior Debentures are held by the
Depository, payments of interest to the Depository may be made by wire transfer
to the Depository.
This KDSM Senior Debenture may in certain circumstances be entitled to
the benefits of a Guarantee (on a junior subordinated basis) by Sinclair of the
punctual payment when due of the Indenture Obligations made in favor of the
Trustee for the benefit of the Holders, subject to the terms and conditions set
forth in such Guarantee and in the Indenture. Reference is hereby made to
Article Thirteen of the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations under the Guarantee which may be
effective under certain circumstances but which is not effective on the date of
this Indenture.
As provided in the Indenture, the obligations of the Company under the
KDSM Senior Debentures and the Indenture are secured by a Lien on the Collateral
granted in favor of Trustee for the benefit and on behalf of the Holders. The
rights of the Trustee in and to the Collateral are governed by the terms of the
Indenture.
All references in this Series A KDSM Senior Debenture or in the
Indenture to accrued and unpaid interest shall be deemed to include, to the
extent applicable, a reference to Penalty Interest and Additional Amounts.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature, this KDSM Senior
Debenture shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
- 36 -
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
Dated: KDSM, INC.
By:_________________________________
Attest:
_____________________________
Secretary
(b) The form of the face of any Series B KDSM Senior Debentures
authenticated and delivered hereunder shall be substantially as follows:
KDSM, INC.
11 5/8% Senior Debentures Due 2009, Series B
No. _____________ $________
CUSIP No. ___________
KDSM, INC., a corporation duly organized and existing under the laws
of the State of Maryland (herein called the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to ________________, or registered assigns, the
principal sum of ________ UNITED STATES DOLLARS ($________) on March 15, 2009
and to pay interest on said principal sum from March 12, 1997 or from the most
recent interest payment date (each such date, an "Interest Payment Date") to
which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on March 15, June 15, September 15, and
December 15 of each year, commencing June 15, 1997, at the rate of 11 5/8% per
annum plus Additional Interest and Penalty Interest, if any, until the principal
hereof shall have become due and payable, and at a rate of 11 5/8% per annum, on
any overdue principal or interest (including Additional Interest Attributable to
Deferral and Penalty Interest). The amount of interest payable for any period
will be computed on the basis of twelve 30-day months and a 360-day year. In the
event that any date on which interest is payable on this KDSM Senior Debenture
is not a Business Day, then a payment of the interest payable on such date will
be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on the date the payment was originally payable. A "Business
Day" shall mean any day other than (x) a Saturday or a Sunday, (y) a day on
which banking institutions in Maryland or The City of New York are authorized or
obligated by law or executive order to close or (z) a day on which the
- 37 -
<PAGE>
Corporate Trust Office or the principal corporate trust office of the Property
Trustee is closed for business. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this KDSM Senior
Debenture (or one or more Predecessor Securities, as defined in the Indenture)
is registered at the close of business on the Regular Record Date for such
interest installment, which, shall be the March 1, June 1, September 1, and
December 1 as the next preceding such Interest Payment Date. Any such interest
installment not so punctually paid or duly provided for shall forthwith cease to
be payable to the Holder on such Regular Record Date and may either be paid to
the Person in whose name this security (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date for the payment
of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of KDSM Senior Debentures not less than 10 days prior to such
Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the KDSM
Senior Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
This Series B KDSM Senior Debenture was issued pursuant to the
Exchange Offer pursuant to which the 11 5/8% Senior Debentures due 2009, Series
A (herein called the "Series A KDSM Senior Debentures") in like principal amount
were exchanged for the Series B KDSM Senior Debentures. The Series B KDSM Senior
Debentures rank pari passu in right of payment with the Series A KDSM Senior
Debentures.
In addition, pursuant to a Registration Rights Agreement, for any
period in which the Series A Security exchanged for this Series B KDSM Senior
Debenture was outstanding, (i) (A) if an Exchange Offer Registration Statement
(or, in the event of a change in applicable law or due to current
interpretations by the Commission, the Company is not permitted to effect the
Exchange Offer, a Shelf Registration Statement) is not filed within 60 days
following the Closing Date, (B) in the event that within 30 days after
consummation of the Exchange Offer, any Holder shall notify the Company that
such Holder (x) is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, (y) may not resell Exchange Securities
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (z)
is a broker-dealer and holds KDSM Senior Debentures acquired directly from the
Company or an "affiliate" of the Company or (C) upon the request of an Initial
Purchaser, a Shelf Registration Statement is not filed within 60 days after such
request then commencing on either the 61st day after the Closing Date or the
expiration of either of the time periods set forth in clauses (B) or (C) above
(either a "Prescribed Time Period"), as the case may be, Penalty Interest shall
be accrued on the Series A KDSM Senior Debentures over and above the stated
payment rates thereon at a rate of .50% per annum for the first 90 days
immediately following either the 61st day after the Closing Date or the
expiration of the
- 38 -
<PAGE>
applicable Prescribed Time Period, as the case may be, such Penalty Interest
rate increasing by an additional .25% per annum at the beginning of each
subsequent 90-day period;
(ii) if an Exchange Offer Registration Statement or a Shelf
Registration Statement is filed pursuant to clause (i) of the preceding full
paragraph and is not declared effective within 120 days following either the
Closing Date or the expiration of the applicable Prescribed Time Period, as the
case may be, then commencing on the 121st day after either the Closing Date or
the expiration of the applicable Prescribed Time Period, as the case may be,
Penalty Interest shall be accrued on the Series A KDSM Senior Debentures over
and above the accrued stated payment rates thereon at a rate of .50% per annum
for the first 90 days immediately following the 121st day after either the
Closing Date or the expiration of the applicable Prescribed Time Period, as the
case may be, such Penalty Interest rate increasing by an additional .25% per
annum at the beginning of each subsequent 90-day period; and
(iii) if either (A) the Company has not exchanged the Exchange
Securities (as defined in the Registration Rights Agreement) for all of the KDSM
Senior Debentures validly tendered in accordance with the terms of the Exchange
Offer on or prior to 150 days after the Closing Date or the expiration of the
Prescribed Time Period or (B) if applicable, a Shelf Registration Statement has
been declared effective and such Shelf Registration Statement ceases to be
effective prior to two years from its original effective date or such shorter
period that will terminate when all of the Series A KDSM Senior Debentures
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement, then Penalty Interest shall be accrued on the Series A
KDSM Senior Debentures over and above the stated payment rates at a rate of .50%
per annum for the first 60 days immediately following the (x) 31st day after
such effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective in the case of (B) above, such
Penalty Interest rate increasing by an additional .25% per annum at the
beginning of each subsequent 90-day period;
provided, however, that the Penalty Interest rate on the Series A KDSM Senior
Debentures may not exceed 1.5% per annum; and provided, further, that (1) upon
the filing of the Exchange Offer Registration Statement or a Shelf Registration
Statement (in the case of (i) above), (2) upon the effectiveness of the Exchange
Offer Registration Statement or a Shelf Registration Statement (in the case of
(ii) above) or (3) upon the exchange of Exchange Securities for all Series A
KDSM Senior Debentures tendered in the Exchange Offer or upon the effectiveness
of the Shelf Registration Statement which had ceased to remain effective prior
to two years from its original effective date (in the case of (iii) above),
Penalty Interest as a result of such clause (i), (ii) or (iii) shall cease to
accrue.
Any Penalty Interest due pursuant to clause (i), (ii) or (iii) above
will be payable in cash on the Interest Payment Date related to the Series A
KDSM Senior Debentures. The Penalty Interest will be determined by multiplying
the applicable Penalty Interest rate by the principal amount of the Series A
KDSM Senior Debentures, multiplied by a fraction the
- 39 -
<PAGE>
numerator of which is the number of days such Penalty Interest rate was
applicable during such period, and the denominator of which is 360.
The Company shall have the right, (i) during any period when the
Company does not receive dividends on the Parent Preferred held by it due to a
Parent Preferred Extension Period, at any time during the term of this KDSM
Senior Debenture, from time to time, to extend the interest payment period of
the KDSM Senior Debentures for up to three consecutive quarters, and (ii)
regardless of whether it receives dividends on the Parent Preferred, at any time
during the term of the KDSM Senior Debentures, to extend the interest payment
period of the KDSM Senior Debentures for one quarterly period (each, an
"Extension Period"), during which Extension Periods interest will compound
quarterly and the Company shall have the right to make partial payments of
interest on any Interest Payment Date, and at the end of each Extension Period
the Company shall pay all interest then accrued and unpaid (together with
Additional Interest thereon); provided that: (x) the Company shall be required
to pay all interest, including Additional Interest, due and payable on the KDSM
Senior Debentures at least once every four quarters and must pay all interest
due and owing on the Maturity Date of the KDSM Senior Debentures; (y) the
Company shall not defer the interest payment period with respect to Additional
Interest Attributable to Taxes; and (z) that during any such Extension Period,
the Company shall not declare or pay any dividend or distribution (other than a
dividend or distribution in Capital Stock) on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its outstanding Capital
Stock, or make any guarantee payments with respect to the foregoing or
repurchase, or cause any Subsidiaries to repurchase, any security of the Company
ranking pari passu with or subordinate to this KDSM Senior Debenture. Prior to
the termination of any such Extension Period, the Company may further extend the
interest payment period; provided that such Extension Period together with all
such previous and further extensions thereof shall not exceed three consecutive
quarters or extend beyond the Maturity Date of the KDSM Senior Debentures. Upon
the termination of any such Extension Period and upon the payment of all accrued
and unpaid interest and any Additional Interest then due, the Company may select
a new Extension Period, subject to the foregoing requirements. Except for
Additional Interest Attributable to Taxes, no interest shall be due and payable
during an Extension Period, until the end of such period. The Company shall
issue a press release in a normal commercial manner and shall give the Trustee,
the Property Trustee and the Administrative Trustees notice of its election of
an Extension Period at least ten Business Days prior to the earlier of (i) the
Record Date for interest payments on the KDSM Senior Debentures or (ii) the date
the Administrative Trustees are required to give notice to any applicable
self-regulatory organization or security exchange or to holders of the Preferred
Securities on the Record Date or the date such distributions are payable. If the
Property Trustee is the sole Holder of the KDSM Senior Debentures, the Trustee
shall promptly notify the holders of the Preferred Securities of the Company's
election of such an Extension Period. If the Property Trustee ceases to be the
sole Holder of the KDSM Senior Debentures, the Company shall give the Holders of
the KDSM Senior Debentures notice of its election of such Extension Period.
- 40 -
<PAGE>
Payment of the principal of, premium, if any, and interest on this
KDSM Senior Debenture will be made at the office or agency of the Company
maintained for that purpose in the United States, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register or (ii) by wire transfer in immediately available funds to an account
specified (not later than one Business Day prior to the applicable Payment Date)
by the Holder hereof. If all of the securities are held by the Depository,
payments of interest may be made by wire transfer to the Depository.
This KDSM Senior Debenture may, in certain circumstances, be entitled
to the benefits of a Guarantee (on a junior subordinated basis) by Sinclair of
the punctual payment when due of the Indenture Obligations made in favor of the
Trustee for the benefit of the Holders, subject to the terms and conditions set
forth in such Guarantee and in the Indenture. Reference is hereby made to
Article Thirteen of the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations under the Guarantee which may be
effective under certain circumstances but which is not effective on the date of
this Indenture.
As provided in the Indenture, the obligations of the Company under the
KDSM Senior Debentures and the Indenture are secured by a Lien on the Collateral
granted in favor of Trustee for the benefit and on behalf of the Holders. The
rights of the Trustee in and to the Collateral are governed by the terms of the
Indenture.
All references in this Series B KDSM Senior Debenture or in the
Indenture to accrued and unpaid interest shall be deemed to include, to the
extent applicable, a reference to Penalty Interest and Additional Amounts.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature, this KDSM Senior
Debenture shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
- 41 -
<PAGE>
Dated: KDSM, INC.
By:_________________________________
Attest:
____________________________
Secretary
Section 203. Form of Reverse of KDSM Senior Debentures.
(a) The form of the reverse of the Series A KDSM Senior Debentures
shall be substantially as follows:
KDSM, INC.
11 5/8% Senior Debentures Due 2009, Series A
This KDSM Senior Debenture is one of a duly authorized issue of KDSM
Senior Debentures of the Company designated as its 11 5/8% Senior Debentures due
2009, Series A (herein called the "Series A KDSM Senior Debentures"), limited
(except as otherwise provided in the Indenture referred to below) in aggregate
principal amount to $206,200,000, which may be issued under an indenture (herein
called the "Indenture") dated as of March 12, 1997, among the Company, Sinclair
and First Union National Bank of Maryland, as trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, Sinclair, the Trustee and
the Holders of the KDSM Senior Debentures, and of the terms upon which the KDSM
Senior Debentures and the Guarantees are, and are to be, authenticated and
delivered.
The Indenture contains provisions for defeasance at any time of (a)
the entire Indebtedness on the KDSM Senior Debentures and (b) certain
restrictive covenants and related Defaults and Events of Default, in each case
upon compliance or noncompliance with certain conditions set forth therein.
The Indenture provides, under certain circumstances, for the sale,
transfer or conveyance, or other disposition, directly or indirectly, in one of
a series of related transactions of all or substantially all of the properties
or assets of the Company or any of its Subsidiaries to any Person in exchange
for properties or assets that will be used in the operations of one or more
television or radio broadcasting stations or assets reasonably related thereto
without such Person assuming the obligations of the Company under the Indenture.
- 42 -
<PAGE>
The KDSM Senior Debentures are subject to redemption at the option of
the Company (a) at any time on or after March 15, 2002, in whole or in part, in
cash at the following Redemption Prices expressed as a percentage of the
principal amount, if redeemed during the 12-month period beginning March 15 of
the years indicated below:
Redemption
Year Price
---- -----
2002 105.813%
2003 104.650
2004 103.488
2005 102.325
2006 101.163
and thereafter at a Redemption Price equal to 100% of the principal amount
hereof, in each case together with accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on relevant Record
Dates to receive interest due on an Interest Payment Date) or (b) at any time on
or prior to March 15, 2000, in an amount of up to $66,666,666 of the aggregate
original principal amount of KDSM Senior Debentures, with the net proceeds of
one or more redemptions of the Parent Preferred (which Parent Preferred will
have been redeemed from the proceeds of one or more Public Equity Offerings of
Sinclair) held by the Company, at 111.625% of the aggregate principal amount,
together with accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on relevant Record Dates to receive
interest due on an Interest Payment Date); provided that (x) after such
redemption at least $139,533,334 aggregate principal amount of KDSM Senior
Debentures remains outstanding and (y) that such redemption is made within 180
days of such a Public Equity Offering of Sinclair. If the KDSM Senior Debentures
are only partially redeemed by the Company, the KDSM Senior Debentures will be
redeemed pro rata, by lot or in such other manner as the Trustee shall deem
appropriate and fair in its discretion.
The Company may (a) upon a Tax Event or an Investment Company Act
Event, redeem the KDSM Senior Debentures for cash at a Redemption Price of
105.813% of principal in the case of a Tax Event, or 101% in the case of an
Investment Company Act Event, in each case of the aggregate principal amount of
the KDSM Senior Debentures redeemed, plus all accrued and unpaid interest, and
to require Sinclair to redeem the Parent Preferred for cash pursuant to the
terms thereof at the same redemption prices; provided, that at the time of
redemption in the case of a Tax Event triggered by an amendment, clarification
or change in laws, treaties or the regulations thereunder, such amendment,
clarification or change remains in effect or (b) upon a Tax Event, as holder of
all of the Common Securities of the Trust, cause the Trust to be dissolved with
each Holder of Preferred Securities receiving KDSM Senior Debentures in
principal amount equal to the Liquidation Value of
- 43 -
<PAGE>
their Preferred Securities. If KDSM, Inc. exercises the option in clause (b)
above, (i) pursuant to the KDSM Senior Debenture Indenture, Sinclair shall,
effective at the time of distribution of the KDSM Senior Debentures, fully and
unconditionally guarantee the payment of the KDSM Senior Debentures on a junior
subordinated basis (the "Guarantee"); provided that Sinclair confirms the
effectiveness of such Guarantee at the time of distribution which it may not do
if such Guarantee is not permitted under the terms of the Existing Indentures or
the Bank Credit Agreement and (ii) the Trust may not be dissolved unless such
Guarantee is effective. The Company may not exercise its rights pursuant to the
above provisions unless simultaneously therewith it delivers a tax opinion to
the Trust to the effect that the dissolution of the Trust and the distribution
of the KDSM Senior Debentures will not be a taxable event for U.S. federal
income tax purposes to the holders of the Preferred Securities. If less than all
the KDSM Senior Debentures are to be redeemed, the particular KDSM Senior
Debentures or portions thereof to be redeemed shall be selected not more than 30
days prior to the Redemption Date by the Trustee, from the Outstanding KDSM
Senior Debentures not previously called for redemption, pro rata, by lot or such
other method as the Trustee shall deem fair and reasonable, and the amounts to
be redeemed may be equal to $100 or any integral multiple thereof.
In the case of any redemption of KDSM Senior Debentures, interest
installments the Stated Maturity of which is on or prior to the Redemption Date
will be payable to the Holders of such KDSM Senior Debentures of record as of
the close of business on the relevant record date referred to on the face
hereof. KDSM Senior Debentures (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to bear
interest from and after the date of redemption.
In the event of redemption of this KDSM Senior Debenture in part only,
a new KDSM Senior Debenture or KDSM Senior Debentures for the unredeemed portion
hereof shall be issued in the name of the Holder hereof upon the cancellation
hereof.
Upon the occurrence of a Change of Control, each Holder may require
the Company to repurchase all or a portion of such Holder's KDSM Senior
Debentures, in cash at a purchase price in cash equal to 101% of the principal
amount thereof, together with accrued and unpaid interest (compounded
quarterly), if any, to the date of repurchase; provided that if the Existing
Notes or any Indebtedness, commitments, letters of credit or interest rate
protection agreements under the Bank Credit Agreement are outstanding, such
Holders will not have such right to cause the Company to repurchase the KDSM
Senior Debentures or to be determined due and payable in any manner.
If an Event of Default shall occur and be continuing, the principal
amount of all the KDSM Senior Debentures may be declared due and payable in the
manner and with the effect provided in the Indenture.
- 44 -
<PAGE>
If this KDSM Senior Debenture is in certificated form, then as
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this KDSM Senior Debenture is registrable on the Security
Register of the Company, upon surrender of this KDSM Senior Debenture for
registration of transfer at the office or agency of the Company maintained for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or its attorney duly authorized in writing, and
thereupon one or more new KDSM Senior Debentures, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
If this KDSM Senior Debenture is a Restricted Security in certificated
form, then as provided in the Indenture and subject to certain limitations
therein set forth, the Holder, provided it is a "qualified institutional buyer"
within the meaning of Rule 144A under the KDSM Senior Debentures Act (a "QIB"),
may exchange this KDSM Senior Debenture for an interest in a Global Security by
instructing the Trustee (by completing the Restricted Securities Transfer
Certificate in the form in Exhibit A to the Indenture) to arrange for such KDSM
Senior Debenture to be represented by a beneficial interest in a Global Security
in accordance with the customary procedures of the Depositary, unless the
Company has elected not to issue a Global Security.
If this KDSM Senior Debenture is a Global Security, except as
described below, it is not exchangeable for a KDSM Senior Debenture or KDSM
Senior Debentures in certificated form. The KDSM Senior Debentures will be
delivered in certificated form if (i) the Depositary ceases to be registered as
a clearing agency under the Exchange Act or is no longer willing or able to
provide securities depository services with respect to the KDSM Senior
Debentures, (ii) the Company so determines and (iii) there shall have occurred
an Event of Default or an event which, with the giving of notice or lapse of
time or both, would constitute an Event of Default with respect to the KDSM
Senior Debentures represented by such Global Security and such Event of Default
or event continues for a period of 90 days Upon any such issuance, the Trustee
is required to register such certificated KDSM Senior Debenture in the name of,
and cause the same to be delivered to, such Person or Persons (or the nominee of
any thereof). All such certificated Securities would be required to include the
Restricted Securities Legend.
At any time when the Company is not subject to Sections 13 or 15(d) of
the Exchange Act, upon the written request of a Holder of a KDSM Senior
Debenture, the Company will promptly furnish or cause to be furnished Rule 144A
Information to such Holder or to a prospective purchaser of such KDSM Senior
Debenture who such Holder informs the Company is reasonably believed to be a
QIB, as the case may be, in order to permit compliance by such Holder with Rule
144A under the Securities Act.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof
- 45 -
<PAGE>
and the modification of the rights and obligations of the Company and Sinclair
and the rights of the Holders under the Indenture and the Guarantee at any time
by the Company, Sinclair and the Trustee with the consent of the Holders of a
specified percentage in aggregate principal amount of the KDSM Senior Debentures
at the time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in aggregate principal amount of the KDSM
Senior Debentures at the time Outstanding, on behalf of the Holders of all the
KDSM Senior Debentures, to waive compliance by the Company and Sinclair with
certain provisions of the Indenture and the Guarantee and certain past Defaults
under the Indenture and the Guarantee and their consequences. Any such consent
or waiver by or on behalf of the Holder of this KDSM Senior Debenture shall be
conclusive and binding upon such Holder and upon all future Holders of this KDSM
Senior Debenture and of any KDSM Senior Debenture issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent or waiver is made upon this KDSM Senior Debenture.
No reference herein to the Indenture and no provision of this KDSM
Senior Debenture or of the Indenture shall alter or impair the obligation of the
Company, Sinclair (to the extent it has guaranteed the obligations of the
Company under the Indenture) or any other obligor upon the KDSM Senior
Debentures (in the event such other obligor is obligated to make payments in
respect of the KDSM Senior Debentures), which is absolute and unconditional, to
pay the principal of, premium, if any, and interest on this KDSM Senior
Debenture at the times, place, and rate, and in the coin or currency, herein
prescribed, subject to the subordination provisions of the Indenture.
The KDSM Senior Debentures if issued in certificated form are issuable
only in registered form without coupons in denominations of $100 and any
integral multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the KDSM Senior Debentures are exchangeable for a
like aggregate principal amount of KDSM Senior Debentures of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange or redemption of KDSM Senior Debentures, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to and at the time of due presentment of this KDSM Senior
Debenture for registration of transfer, the Company, the Trustee and any agent
of the Company or -the Trustee may treat the Person in whose name this KDSM
Senior Debenture is registered as the owner hereof for all purposes (subject to
provisions with respect to record dates for the payment of interest), whether or
not this KDSM Senior Debenture is overdue, and neither the Company, the Trustee
nor any agent shall be affected by notice to the contrary.
- 46 -
<PAGE>
THIS KDSM SENIOR DEBENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF).
The Company and, by its acceptance of this KDSM Senior Debenture or a
beneficial interest herein, the Holder of, and any Person that acquires a
beneficial interest in, this KDSM Senior Debenture agree for United States
federal, state and local tax purposes it is intended that this KDSM Senior
Debenture constitutes indebtedness.
All terms used in this KDSM Senior Debenture which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
(a) The form of the reverse of the Series B KDSM Senior Debentures
shall be substantially as follows:
KDSM, INC.
11 5/8% Senior Debentures Due 2009, Series B
This KDSM Senior Debenture is one of a duly authorized issue of KDSM
Senior Debentures of the Company designated as its 11 5/8% Senior Debentures due
2009, Series B (herein called the "KDSM Senior Debentures"), limited (except as
otherwise provided in the Indenture referred to below) in aggregate principal
amount to $206,200,000, which may be issued under an indenture (herein called
the "Indenture") dated as of March 12, 1997, among the Company, Sinclair and
First Union National Bank of Maryland, as trustee (herein called the "Trustee,"
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties, obligations
and immunities thereunder of the Company, Sinclair, the Trustee and the Holders
of the KDSM Senior Debentures, and of the terms upon which the KDSM Senior
Debentures and the Guarantees are, and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time of (a)
the entire Indebtedness on the KDSM Senior Debentures and (b) certain
restrictive covenants and related Defaults and Events of Default, in each case
upon compliance or noncompliance with certain conditions set forth therein.
The Indenture provides, under certain circumstances, for the sale,
transfer or conveyance, or other disposition, directly or indirectly, in one of
a series of related transactions of all or substantially all of the properties
or assets of the Company or any of its Subsidiaries to any Person in exchange
for properties or assets that will be used in the operations of one or more
television or radio broadcasting stations or assets reasonably
- 47 -
<PAGE>
related thereto without such Person assuming the obligations of the Company
under the Indenture.
The KDSM Senior Debentures are subject to redemption at the option of
the Company (a) at any time on or after March 15, 2002, in whole or in part, in
cash at the following Redemption Prices expressed as a percentage of the
principal amount, if redeemed during the 12-month period beginning March 15 of
the years indicated below:
Redemption
Year Price
---- -----
2002 105.813%
2003 104.650
2004 103.488
2005 102.325
2006 101.163
and thereafter at a Redemption Price equal to 100% of the principal amount
hereof, in each case together with accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on relevant Record
Dates to receive interest due on an Interest Payment Date) or (b) at any time on
or prior to March 15, 2000, in an amount of up to $66,666,666 of the aggregate
original principal amount of KDSM Senior Debentures, with the net proceeds of
one or more redemptions of the Parent Preferred (which Parent Preferred will
have redeemed from the proceeds of one or more Public Equity Offerings of
Sinclair) held by the Company, at 111.625% of the aggregate principal amount,
together with accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on relevant Record Dates to receive
interest due on an Interest Payment Date); provided that (x) after such
redemption at least $139,533,334 aggregate principal amount of KDSM Senior
Debentures issued remains outstanding and (y) that such redemption be made
within 180 days of such a Public Equity Offering of Sinclair. If the KDSM Senior
Debentures are only partially redeemed by the Company, the KDSM Senior
Debentures will be redeemed pro rata, by lot or in such other manner as the
Trustee shall deem appropriate and fair in its discretion.
The Company may (a) upon a Tax Event or an Investment Company Act
Event, redeem the KDSM Senior Debentures for cash at a Redemption Price of
105.813% in the case of a Tax Event, or 101% in the case of an Investment
Company Act Event, in each case of the aggregate principal amount of the KDSM
Senior Debentures redeemed, plus all accrued and unpaid interest, and to require
Sinclair to redeem the Parent Preferred for cash pursuant to the terms thereof
at the same redemption prices; provided, that at the time of redemption in the
case of a Tax Event triggered by an amendment, clarification or change in laws,
treaties or the regulations thereunder, such amendment, clarification or change
remains in effect or (b) upon a Tax Event, as holder of all of the Common
Securities of the Trust, cause the Trust to be dissolved with each Holder of
Preferred Securities receiving KDSM
- 48 -
<PAGE>
Senior Debentures in principal amount equal to the Liquidation Value of their
Preferred Securities. If KDSM, Inc. exercises the option in clause (b) above,
(i) pursuant to the KDSM Senior Debenture Indenture, Sinclair shall, effective
at the time of distribution of the KDSM Senior Debentures (the "Distribution"),
fully and unconditionally guarantee the payment of the KDSM Senior Debentures on
a junior subordinated basis (the "Guarantee"); provided that Sinclair confirms
the effectiveness of the Guarantee at the time of Distribution which it may not
do if such Guarantee is not permitted under the terms of the Existing Indentures
or the Bank Credit Agreement and (ii) the Trust may not be dissolved unless such
Guarantee is effective. The Company may not exercise its rights pursuant to the
above provisions unless simultaneously therewith it delivers a tax opinion to
the Trust to the effect that the dissolution of the Trust and the distribution
of the KDSM Senior Debentures will not be a taxable event for U.S. federal
income tax purposes to the holders of the Preferred Securities. If less than all
the KDSM Senior Debentures are to be redeemed, the particular KDSM Senior
Debentures or portions thereof to be redeemed shall be selected not more than 30
days prior to the Redemption Date by the Trustee, from the Outstanding KDSM
Senior Debentures not previously called for redemption, pro rata, by lot or such
other method as the Trustee shall deem fair and reasonable, and the amounts to
be redeemed may be equal to $100 or any integral multiple thereof.
In the case of any redemption of KDSM Senior Debentures, interest
installments the Stated Maturity of which is on or prior to the Redemption Date
will be payable to the Holders of such KDSM Senior Debentures of record as of
the close of business on the relevant record date referred to on the face
hereof. KDSM Senior Debentures (or portions thereof) for whose redemption and
payment provision is made in accordance with the Indenture shall cease to bear
interest from and after the date of redemption.
In the event of redemption of this KDSM Senior Debenture in part only,
a new KDSM Senior Debenture or KDSM Senior Debentures for the unredeemed portion
hereof shall be issued in the name of the Holder hereof upon the cancellation
hereof.
Upon the occurrence of a Change of Control, each Holder may require
the Company to repurchase all or a portion of such Holder's KDSM Senior
Debentures, in cash at a purchase price in cash equal to 101% of the principal
amount thereof, together with accrued and unpaid interest (compounded
quarterly), if any, to the date of repurchase; provided that if the Existing
Notes or any Indebtedness, commitments, letters of credit or interest rate
protection agreements under the Bank Credit Agreement are outstanding, such
Holders will not have such right to cause the Company to repurchase the KDSM
Senior Debentures or otherwise cause the KDSM Senior Debentures to be declared
due and payable in any manner.
If an Event of Default shall occur and be continuing, the principal
amount of all the KDSM Senior Debentures may be declared due and payable in the
manner and with the effect provided in the Indenture.
- 49 -
<PAGE>
If this KDSM Senior Debenture is in certificated form, then as
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this KDSM Senior Debenture is registrable on the Security
Register of the Company, upon surrender of this KDSM Senior Debenture for
registration of transfer at the office or agency of the Company maintained for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or its attorney duly authorized in writing, and
thereupon one or more new KDSM Senior Debentures, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
If this KDSM Senior Debenture is a Global Security, except as
described below, it is not exchangeable for a KDSM Senior Debenture or KDSM
Senior Debentures in certificated form. The KDSM Senior Debentures will be
delivered in certificated form if (i) the Depositary ceases to be registered as
a clearing agency under the Exchange Act or is no longer willing or able to
provide securities depository services with respect to the KDSM Senior
Debentures, (ii) the Company so determines and (iii) there shall have occurred
an Event of Default or an event which, with the giving of notice or lapse of
time or both, would constitute an Event of Default with respect to the KDSM
Senior Debentures represented by such Global Security and such Event of Default
or event continues for a period of 90 days Upon any such issuance, the Trustee
is required to register such certificated KDSM Senior Debenture in the name of,
and cause the same to be delivered to, such Person or Persons (or the nominee of
any thereof).
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and Sinclair and the rights of the Holders under the Indenture and the
Guarantee at any time by the Company, Sinclair and the Trustee with the consent
of the Holders of a specified percentage in aggregate principal amount of the
KDSM Senior Debentures at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
principal amount of the KDSM Senior Debentures at the time Outstanding, on
behalf of the Holders of all the KDSM Senior Debentures, to waive compliance by
the Company and Sinclair with certain provisions of the Indenture and the
Guarantee and certain past Defaults under the Indenture and the Guarantee and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this KDSM Senior Debenture shall be conclusive and binding upon such Holder and
upon all future Holders of this KDSM Senior Debenture and of any KDSM Senior
Debenture issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent or waiver is made upon
this KDSM Senior Debenture.
No reference herein to the Indenture and no provision of this KDSM
Senior Debenture or of the Indenture shall alter or impair the obligation of the
Company, Sinclair (to the extent it has guaranteed the obligations of the
Company under the Indenture) or any
- 50 -
<PAGE>
other obligor upon the KDSM Senior Debentures (in the event such other obligor
is obligated to make payments in respect of the KDSM Senior Debentures), which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this KDSM Senior Debenture at the times, place, and rate, and in the
coin or currency, herein prescribed, subject to the subordination provisions of
the Indenture.
The KDSM Senior Debentures are issuable only in registered form
without coupons in denominations of $100 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the KDSM Senior Debentures are exchangeable for a like aggregate principal
amount of KDSM Senior Debentures of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange or redemption of KDSM Senior Debentures, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to and at the time of due presentment of this KDSM Senior
Debenture for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name this KDSM
Senior Debenture is registered as the owner hereof for all purposes (subject to
provisions with respect to record dates for the payment of interest), whether or
not this KDSM Senior Debenture is overdue, and neither the Company, the Trustee
nor any agent shall be affected by notice to the contrary.
THIS KDSM SENIOR DEBENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF).
The Company and, by its acceptance of this KDSM Senior Debenture or a
beneficial interest herein, the Holder of, and any Person that acquires a
beneficial interest in, this KDSM Senior Debenture agree for United States
federal, state and local tax purposes it is intended that this KDSM Senior
Debenture constitutes indebtedness.
All terms used in this KDSM Senior Debenture which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
Section 204. Additional Provisions Required in Global Security.
Any Global Security issued hereunder shall, in addition to the
provisions contained in Sections 202 and 203, bear a legend in substantially the
following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
- 51 -
<PAGE>
OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
If The Depository Trust Company is acting as the Depositary, insert --
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Section 205. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authorization shall be included on the
KDSM Senior Debentures and shall be substantially in the form as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the KDSM Senior Debentures referred to in the within
mentioned Indenture.
FIRST UNION NATIONAL BANK OF MARYLAND,
As Trustee
By:_________________________________________
Authorized Signatory
- 52 -
<PAGE>
ARTICLE THREE
THE KDSM SENIOR DEBENTURES
Section 301. Title and Terms.
The aggregate principal amount of KDSM Senior Debentures which may be
authenticated and delivered under this Indenture is limited to $206,200,000 in
principal amount of KDSM Senior Debentures, except for KDSM Senior Debentures
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other KDSM Senior Debentures pursuant to Section 303, 304,
305, 306, 307, 308, 906, 1016 or 1108.
The KDSM Senior Debentures shall be known and designated as the "11
5/8% Senior Debentures due 2009" in the case of either Series A or Series B, as
the case may be, of the Company. The Stated Maturity of the KDSM Senior
Debentures shall be March 15, 2009 Series A or Series B, as the case may be, and
the KDSM Senior Debentures shall each bear interest at the rate of 11 5/8% per
annum plus Additional Interest and Penalty Interest, if any, from March 12, 1997
or from the most recent Interest Payment Date to which interest has been paid,
as the case may be, payable beginning on June 15, 1997 and quarterly thereafter
on March 15, June 15, September 15, and December 15, in each year, until the
principal thereof is paid or duly provided for, and at a rate of 11 5/8% per
annum on any overdue principal or interest.
Unless otherwise specified herein, the Series A KDSM Senior Debentures
and the Series B KDSM Senior Debentures will be treated as one class and are
together referred to as the "KDSM Senior Debentures." The Series A KDSM Senior
Debentures rank pari passu in right of payment with the Series B KDSM Senior
Debentures.
The Company shall have the right to extend the interest payment period
on the KDSM Senior Debentures in accordance with the terms of the KDSM Senior
Debentures as set forth in Section 202.
Payment of the principal of, premium, if any, and interest on the KDSM
Senior Debentures shall be made at the office or agency of the Paying Agent
maintained for that purpose in the United States, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Company payment of interest may be made (i) by check mailed to addresses of
the Persons entitled thereto as such addresses shall appear on the Security
Register or (ii) by wire transfer in immediately available funds to an account
specified (not later than one Business Day prior to the applicable Payment Date)
by the Holder thereof. If any of the KDSM Senior Debentures are held by the
Depository, payments of interest may be made by wire transfer to the Depository.
The Trustee is hereby initially designated as the Paying Agent under this
Indenture.
- 53 -
<PAGE>
The KDSM Senior Debentures shall be redeemable as provided in Article
Eleven.
At the election of the Company, the entire Indebtedness on the KDSM
Senior Debentures or certain of the Company's obligations and covenants and
certain Events of Default thereunder may be defeased as provided in Article
Four.
Section 302. Denominations.
The KDSM Senior Debentures shall be issuable only in registered form
without coupons and only in denominations of $100 and any integral multiple
thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The KDSM Senior Debentures shall be executed on behalf of the Company
by one of its Chairman of the Board, its President or one of its Vice Presidents
under its corporate seal reproduced thereon attested by its Secretary or one of
its Assistant Secretaries.
KDSM Senior Debentures bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such KDSM Senior
Debentures or did not hold such offices on the date of such KDSM Senior
Debentures.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver KDSM Senior Debentures executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such KDSM Senior Debentures; and the Trustee in
accordance with such Company Order shall authenticate and deliver such KDSM
Senior Debentures as provided in this Indenture and not otherwise.
Each KDSM Senior Debenture shall be dated the date of its
authentication.
No KDSM Senior Debenture shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
KDSM Senior Debenture a certificate of authentication substantially in the form
provided for herein duly executed by the Trustee by manual signature of an
authorized officer, and such certificate upon any KDSM Senior Debenture shall be
conclusive evidence, and the only evidence, that such KDSM Senior Debenture has
been duly authenticated and delivered hereunder.
Except in connection with an Asset Transfer Transaction, in case the
Company or Sinclair, pursuant to Article Eight, shall be consolidated, merged
with or into any other Person or shall sell, assign, convey, transfer or lease
substantially all of its properties and assets to any Person, and the successor
Person resulting from such consolidation, or
- 54 -
<PAGE>
surviving such merger, or into which the Company or such Sinclair shall have
been merged, or the Person which shall have received a sale, assignment,
conveyance, transfer or lease as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Article Eight, any of the KDSM
Senior Debentures authenticated or delivered prior to such consolidation,
merger, sale, assignment, conveyance, transfer or lease may, from time to time,
at the request of the successor Person, be exchanged for other KDSM Senior
Debentures executed in the name of the successor Person with such changes in
phraseology and form as may be appropriate, but otherwise in substance of like
tenor as the KDSM Senior Debentures surrendered for such exchange and of like
principal amount; and the Trustee, upon Company Request of the successor Person,
shall authenticate and deliver KDSM Senior Debentures as specified in such
request for the purpose of such exchange. If KDSM Senior Debentures shall at any
time be authenticated and delivered in any new name of a successor Person
pursuant to this Section in exchange or substitution for or upon registration of
transfer of any KDSM Senior Debentures, such successor Person, at the option of
the Holders but without expense to them, shall provide for the exchange of all
KDSM Senior Debentures at the time Outstanding for KDSM Senior Debentures
authenticated and delivered in such new name.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate KDSM Senior Debentures on behalf of the Trustee. Unless
limited by the terms of such appointment, an authenticating agent may
authenticate KDSM Senior Debentures whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as any
KDSM Senior Debenture Registrar or Paying Agent to deal with the Company and its
Affiliates.
Section 304. Temporary KDSM Senior Debentures.
Pending the preparation of definitive KDSM Senior Debentures, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary KDSM Senior Debentures which are printed, lithographed,
typewritten or otherwise produced, in any authorized denomination, substantially
of the tenor of the definitive KDSM Senior Debentures in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such KDSM Senior Debentures may determine,
as conclusively evidenced by their execution of such KDSM Senior Debentures.
After the preparation of definitive KDSM Senior Debentures, the
temporary KDSM Senior Debentures shall be exchangeable for definitive KDSM
Senior Debentures upon surrender of the temporary KDSM Senior Debentures at the
office or agency of the Company designated for such purpose pursuant to Section
1002, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary KDSM Senior Debentures the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a
- 55 -
<PAGE>
like principal amount of definitive KDSM Senior Debentures of authorized
denominations. Until so exchanged the temporary KDSM Senior Debentures shall in
all respects be entitled to the same benefits under this Indenture as definitive
KDSM Senior Debentures.
Section 305. Global Securities.
(a) In the event that the Trust is not the sole holder of the KDSM
Senior Debentures, with respect to transfers of QIBs, a Global Security shall,
if the Depositary permits, (i) be registered in the name of the Depositary for
such Global Security or the nominee of such Depositary, (ii) be deposited with,
or on behalf of, the Depositary and (iii) bear legends as set forth in Sections
202 and 204; provided, however, the KDSM Senior Debentures are eligible to be in
the form of a Global Security.
Transfers made to Accredited Investors shall be made only in
certificated form and not as a beneficial interest in a Global Security.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or shall impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a holder of any KDSM Senior Debenture.
(b) Transfers of the Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the rules and procedures
of the Depositary and the provisions of Section 307. Under the circumstances
described in clause (a) above, and in this clause (b) below, beneficial owners
shall obtain physical securities in the form set forth in Sections 202, 203, 204
(if applicable) and 205 ("Physical Securities") in exchange for their beneficial
interests in a Global Security in accordance with the Depositary's and the
Security Registrar's procedures. In connection with the execution,
authentication and delivery of such Physical Securities, the Security Registrar
shall reflect on its books and records a decrease in the principal amount of the
Global Security equal to the principal amount of such Physical Securities and
the Company shall execute and the Trustee shall authenticate and deliver one or
more Physical Securities having an equal aggregate principal amount. The KDSM
Senior Debentures will be delivered in certificated form if (i) the Depositary
ceases to be registered as a clearing agency under the Exchange Act or is not
willing or no longer willing or able to provide securities depository services
with respect to the KDSM Senior Debentures, (ii) the
- 56 -
<PAGE>
Company so determines or (iii) there shall have occurred an Event of Default or
an event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default with respect to the KDSM Senior Debentures
represented by such Global Security and such Event of Default or event continues
for a period of 90 days.
(c) In connection with any transfer of a portion of the beneficial
interest in a Global Security pursuant to subsection (b) of this Section to
beneficial owners who are required to hold Physical Securities, the Security
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of a Global Security in an amount equal to the principal amount
of the beneficial interest in the Global Security to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one or
more Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire Global Security to
beneficial owners pursuant to subsection (b) of this Section, a Global Security
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
owner identified by the Depositary in exchange for its beneficial interest in a
Global Security, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(e) Any Physical Security delivered in exchange for an interest in
Global Securities pursuant to subsection (c) or subsection (d) of this Section
shall, except as otherwise provided by paragraph (a)(i)(x) and paragraph (c) of
Section 307, bear the Restricted Securities Legend.
(f) The registered holder of a Global Security may grant proxies and
otherwise authorize any person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the KDSM Senior Debentures.
(g) KDSM Senior Debentures distributed to holders of Preferred
Securities which are held in book-entry form shall be distributed upon the
dissolution of Sinclair Capital in the form of one or more Global Securities
registered in the name of the Depositary or its nominee, and deposited with the
Depositary, or with the Depositary, for credit by the Depositary to the
respective accounts of the beneficial owners of the KDSM Senior Debentures
represented thereby (or such other accounts as they may direct). KDSM Senior
Debentures distributed to holders of Preferred Securities not held in book-entry
form, shall not be issued in the form of a Global Security or any other form
intended to facilitate book-entry trading in beneficial interests in such KDSM
Senior Debentures.
- 57 -
<PAGE>
Section 306. Registration, Registration of Transfer and Exchange.
The Company shall direct the Trustee to keep, so long as it is the
Security Registrar, at the Corporate Trust Office of the Trustee, or such other
office as the Trustee may designate, a register (the register maintained in such
office or in any other office or agency designated pursuant to Section 1002
being herein sometimes referred to as the "Security Register") in which, subject
to such reasonable regulations as the Security Registrar may prescribe, the
Company shall provide for the registration of KDSM Senior Debentures and of
transfers of KDSM Senior Debentures. The Trustee shall initially be the
"Security Registrar" for the purpose of registering KDSM Senior Debentures and
transfers of KDSM Senior Debentures as herein provided.
Upon surrender for registration of transfer of any KDSM Senior
Debenture at the office or agency of the Company designated pursuant to Section
1002, the Company shall execute, and the Trustee shall authenticate and deliver,
in the name of the designated transferee or transferees, one or more new KDSM
Senior Debentures of the same series of any authorized denomination or
denominations, of a like aggregate principal amount.
Furthermore, any Holder of a Global Security shall, by acceptance of
such Global Security, agree that transfers of beneficial interest in such Global
Security may be effected only through a book-entry system maintained by the
Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in the KDSM Senior Debentures shall be required to be
reflected in a book entry.
At the option of the Holder, KDSM Senior Debentures may be exchanged
for other KDSM Senior Debentures of any authorized denomination or
denominations, of a like aggregate principal amount, upon surrender of the KDSM
Senior Debentures to be exchanged at such office or agency. Whenever any KDSM
Senior Debentures are so surrendered for exchange, the Company shall execute,
and the Trustee shall authenticate and deliver, the KDSM Senior Debentures of
the same series which the Holder making the exchange is entitled to receive;
provided that no exchange of Series A KDSM Senior Debentures for Series B KDSM
Senior Debentures shall occur until an Exchange Offer Registration Statement
shall have been declared effective by the Commission and that the Series A KDSM
Senior Debentures exchanged for the Series B KDSM Senior Debentures shall be
cancelled.
All KDSM Senior Debentures issued upon any registration of transfer or
exchange of KDSM Senior Debentures shall be the valid obligations of the
Company, evidencing the same Indebtedness, and entitled to the same benefits
under this Indenture, as the KDSM Senior Debentures surrendered upon such
registration of transfer or exchange.
Every KDSM Senior Debenture presented or surrendered for registration
of transfer, or for exchange or redemption shall (if so required by the Company
or the Trustee) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the
- 58 -
<PAGE>
Company and the Security Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of KDSM Senior Debentures, but the Company
may require payment of a sum sufficient to pay all documentary, stamp or similar
issue or transfer taxes or other governmental charges that may be imposed in
connection with any registration of transfer or exchange of KDSM Senior
Debentures, other than exchanges pursuant to Section 303, 304, 305, 306, 307,
308, 906, 1016 or 1108 not involving any transfer.
The Company shall not be required (a) to issue, register the transfer
of or exchange any KDSM Senior Debenture during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of the
KDSM Senior Debentures selected for redemption under Section 1104 and ending at
the close of business on the day of such mailing, or (b) to register the
transfer of or exchange any KDSM Senior Debenture so selected for redemption in
whole or in part, except the unredeemed portion of KDSM Senior Debentures being
redeemed in part.
Every Restricted Security shall be subject to the restrictions on
transfer provided in the legend required to be set forth on the face of each
Restricted Security pursuant to Section 202, and the restrictions set forth in
this Section 306, and the Holder of each Restricted Security, by such Holder's
acceptance thereof (or interest therein), agrees to be bound by such
restrictions on transfer.
The restrictions imposed by this Section 306 upon the transferability
of any particular Restricted Security shall cease and terminate on (a) the later
of two years from their date of issuance or two years after the last date on
which the Company or any Affiliate of the Company was the owner of such
Restricted Security (or any predecessor of such Restricted Security) or (b) (if
earlier) if and when such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act or transferred
pursuant to Rule 144 or under the Securities Act (or any successor provision),
unless the Holder thereof is an affiliate of the Company within the meaning of
Rule 144 (or such successor provisions). Any Restricted Security as to which
such restrictions on transfer shall have expired in accordance with their terms
or shall have terminated may, upon surrender of such Restricted Security for
exchange to the Security Registrar in accordance with the provision of this
Section 306 (accompanied, in the event that such restrictions on transfer have
terminated pursuant to Rule 144 (or any successor provision), by an Opinion of
Counsel satisfactory to the Company and the Trustee, to the effect that the
transfer of such Restricted Security has been made in compliance with Rule 144
(or any such successor provision)), be exchanged for a new KDSM Senior
Debenture, of like tenor and aggregate principal amount, which shall not bear
the Restricted Securities Legend. The Company shall inform the Trustee of the
effective date of any Registration Statement registering the KDSM Senior
Debentures under the Securities Act no later than two Business Days after such
effective date.
- 59 -
<PAGE>
Except as provided in the preceding paragraph, any KDSM Senior
Debenture authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, any Global Security, whether pursuant to this
Section, Section 304, 308, 906 or 1108 or otherwise, shall also be a Global
Security and bear the legend specified in Section 202.
Section 307. Special Transfer Provisions.
Unless and until (i) a KDSM Senior Debenture is sold under an
effective Registration Statement, or (ii) a KDSM Senior Debenture is exchanged
for a Series B KDSM Senior Debenture in connection with the Exchange Offer, in
each case pursuant to the Registration Rights Agreement, the following
provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial KDSM Senior Debenture to an "Accredited
Investor" which is not a QIB:
(i) The Security Registrar shall register the transfer of any
Initial KDSM Senior Debenture whether or not such Initial KDSM Senior
Debenture bears the Restricted Securities Legend, if (x) the requested
transfer is at least two years after the original issue date of the
Initial KDSM Senior Debentures or (y) the proposed transferee has
delivered to the Security Registrar a certificate substantially in the
form set forth in Exhibit A.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Global Security, upon receipt by the
Security Registrar of (x) the documents, if any, required by paragraph
(i) and (y) instructions given in accordance with the Depositary's and
the Security Registrar's procedures therefor, the Security Registrar
shall reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the
principal amount of the beneficial interest in the Global Security
transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Securities of like
tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial KDSM Senior
Debenture to a QIB:
(i) If the KDSM Senior Debenture to be transferred consists of
Physical Securities, the Security Registrar shall register the
transfer if such transfer is being made by a proposed transferor who
has advised the Company and the Security Registrar in writing, that
the sale has been made in compliance with the provisions of Rule 144A
to the transferee who has signed the certification provided for on the
form of Initial KDSM Senior Debenture stating, or has otherwise
advised the Company and the Security Registrar in writing, that it is
purchasing the Initial
- 60 -
<PAGE>
KDSM Senior Debenture for its own account or an account with respect
to which it exercises sole investment discretion and that it, or the
person on whose behalf it is acting with respect to any such account,
is a QIB within the meaning of Rule 144A, and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the
Initial KDSM Senior Debenture to be transferred consists of Physical
Securities, upon receipt by the Security Registrar of instructions
given in accordance with the Depositary's and the Security Registrar's
procedures therefor, the Security Registrar shall reflect on its books
and records the date and an increase in the principal amount of the
Global Security in an amount equal to the principal amount of the
Physical Securities, to be transferred, and the Trustee shall cancel
the Physical Security so transferred.
(c) Restricted Securities Legend. Upon the registration of transfer,
exchange or replacement of KDSM Senior Debentures not bearing the Restricted
Securities Legend, the Security Registrar shall deliver KDSM Senior Debentures
that do not bear the Restricted Securities Legend. Upon the registration of
transfer, exchange or replacement of KDSM Senior Debentures bearing the
Restricted Securities Legend, the Security Registrar shall deliver only KDSM
Senior Debentures that bear the Restricted Securities Legend unless either (i)
the circumstances contemplated by paragraph (a)(i)(x) of this Section 307 exist
or (ii) there is delivered to the Security Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) General. By its acceptance of any KDSM Senior Debenture bearing
the Restricted Securities Legend, each Holder of such a KDSM Senior Debenture
acknowledges the restrictions on transfer of such KDSM Senior Debenture set
forth in this Indenture and in the Restricted Securities Legend and agrees that
it will transfer such KDSM Senior Debenture only as provided in this Indenture.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 306 or this Section
307. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Security Registrar.
Section 308. Mutilated, Destroyed, Lost and Stolen KDSM Senior
Debentures.
- 61 -
<PAGE>
If (a) any mutilated KDSM Senior Debenture is surrendered to the
Trustee, or (b) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any KDSM Senior Debenture, and
there is delivered to the Company, Sinclair and the Trustee, such security or
indemnity, in each case, as may be required by them to save each of them
harmless, then, in the absence of notice to the Company, Sinclair or the Trustee
that such KDSM Senior Debenture has been acquired by a bona fide purchaser, the
Company shall execute and upon its written request the Trustee shall
authenticate and deliver, in exchange for any such mutilated KDSM Senior
Debenture or in lieu of any such destroyed, lost or stolen KDSM Senior
Debenture, a replacement KDSM Senior Debenture of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen KDSM Senior
Debenture has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a replacement KDSM Senior Debenture, pay such
KDSM Senior Debenture.
Upon the issuance of any replacement KDSM Senior Debentures under this
Section, the Company may require the payment of a sum sufficient to pay all
documentary, stamp or similar issue or transfer taxes or other governmental
charges that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every replacement KDSM Senior Debenture issued pursuant to this
Section in lieu of any destroyed, lost or stolen KDSM Senior Debenture shall
constitute an original additional contractual obligation of the Company and
Sinclair, whether or not the destroyed, lost or stolen KDSM Senior Debenture
shall be at any time enforceable by anyone, and shall be entitled to all
benefits of this Indenture equally and proportionately with any and all other
KDSM Senior Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen KDSM Senior Debentures.
Section 309. Payment of Interest; Interest Rights Preserved.
Interest on any KDSM Senior Debenture which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that KDSM Senior Debenture is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any KDSM Senior Debenture which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date and interest
on such defaulted interest at the then applicable interest rate borne by the
KDSM Senior Debentures, to the extent lawful (such defaulted interest and
interest thereon herein collectively called
- 62 -
<PAGE>
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
Regular Record Date; and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in Subsection (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the KDSM Senior Debentures are
registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each KDSM
Senior Debenture and the date (not less than 30 days after such
notice) of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this Subsection provided.
Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and
not less than 10 days prior to the date of the proposed payment and
not less than 10 days after the receipt by the Trustee of the notice
of the proposed payment. The Trustee shall promptly notify the Company
in writing of such Special Record Date. In the name and at the expense
of the Company, the Trustee shall cause notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at his address as
it appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose
names the KDSM Senior Debentures are registered on such Special Record
Date and shall no longer be payable pursuant to the following
Subsection (ii).
(ii) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the KDSM Senior Debentures may at such
time be listed, and upon such notice as may be required by such
exchange, if, after written notice given by the Company to the Trustee
of the proposed payment pursuant to this Subsection, such payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each KDSM Senior
Debenture delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other KDSM Senior Debenture shall carry the
rights to interest accrued and unpaid, and to accrue (including in each such
case Additional Interest), which were carried by such other KDSM Senior
Debenture.
Section 310. Persons Deemed Owners.
- 63 -
<PAGE>
The Company, Sinclair, the Trustee and any agent of the Company,
Sinclair, or the Trustee may treat the Person in whose name any KDSM Senior
Debenture is registered as the owner of such KDSM Senior Debenture for the
purpose of receiving payment of principal of, premium, if any, and (subject to
Section 309) interest on such KDSM Senior Debenture and for all other purposes
whatsoever, whether or not such KDSM Senior Debenture is overdue, and none of
the Company, Sinclair, the Trustee nor any agent of the Company, Sinclair or the
Trustee shall be affected by notice to the contrary. No holder of any beneficial
interest in any Global Security held on its behalf by a Depositary shall have
any rights under this Indenture with respect to such Global Security, and such
Depositary may be treated by the Company, Sinclair, the Trustee and any agent of
the Company, Sinclair or the Trustee as the owner of such Global Security for
all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee, Sinclair or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and such holders of beneficial interests, the operation of customary practices
governing the exercise of the rights of the Depositary (or its nominee) as
Holder of any KDSM Senior Debenture.
Section 311. Cancellation.
All KDSM Senior Debentures surrendered for payment, purchase,
redemption, registration of transfer or exchange shall be delivered to the
Trustee and, if not already cancelled, shall be promptly cancelled by it. The
Company and Sinclair may at any time deliver to the Trustee for cancellation any
KDSM Senior Debentures previously authenticated and delivered hereunder which
the Company or such Sinclair may have acquired in any manner whatsoever, and all
KDSM Senior Debentures so delivered shall be promptly cancelled by the Trustee.
No KDSM Senior Debentures shall be authenticated in lieu of or in exchange for
any KDSM Senior Debentures cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled KDSM Senior Debentures held
by the Trustee shall be destroyed and certification of their destruction
delivered to the Company unless by a Company Order the Company shall direct that
the cancelled KDSM Senior Debentures be returned to it. The Trustee shall
provide the Company a list of all KDSM Senior Debentures that have been
cancelled from time to time as requested by the Company.
Section 312. Computation of Interest.
Interest on the KDSM Senior Debentures shall be computed on the basis
of a 360- day year of twelve 30-day months.
Section 313. Right of Set-Off.
Notwithstanding anything to the contrary in the Indenture, the Company
shall have the right to set-off any payment it is otherwise required to make
thereunder to the extent
- 64 -
<PAGE>
Sinclair has theretofore made, or is concurrently on the date of such payment
making, a payment under the Parent Guarantee.
Section 314. CUSIP Numbers.
The Company in issuing the KDSM Senior Debentures may use "CUSIP"
numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the KDSM Senior Debentures or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the KDSM Senior Debentures, and any such
redemption shall not be affected by any defect in or omission of such numbers.
Section 315. Agreed Tax Treatment.
Each KDSM Senior Debenture issued hereunder shall provide that the
Company and, by its acceptance of a KDSM Senior Debenture or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, such KDSM Senior Debenture agree that for United States federal,
state and local tax purposes it is intended that such KDSM Senior Debenture
constitutes indebtedness.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution, at any time, with
respect to the KDSM Senior Debentures, elect to have either Section 402 or
Section 403 be applied to all of the Outstanding KDSM Senior Debentures (the
"Defeased Securities"), upon compliance with the conditions set forth below in
this Article Four.
Section 402. Defeasance and Discharge.
Upon the Company's exercise under Section 401 of the option applicable
to this Section 402, the Company, Sinclair and any other obligor upon the KDSM
Senior Debentures, if any, shall be deemed to have been discharged from its
obligations with respect to the Defeased Securities on the date the conditions
set forth below are satisfied (hereinafter, "defeasance"). For this purpose,
such defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the Defeased Securities, which
shall thereafter be deemed to be "Outstanding" only for the purposes of Section
405 and the other Sections of this Indenture referred to in (a) and (b) below,
and to have satisfied
- 65 -
<PAGE>
all its other obligations under such KDSM Senior Debentures and this Indenture
insofar as such KDSM Senior Debentures are concerned (and the Trustee, at the
expense of the Company, and, upon written request, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of Defeased Securities to receive, solely from the trust fund described
in Section 404 and as more fully set forth in such Section, payments in respect
of the principal of, premium, if any, and interest on such KDSM Senior
Debentures when such payments are due, (b) the Company's obligations with
respect to such Defeased Securities under Sections 304, 305, 306, 307, 1002 and
1003, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder, including, without limitation, the Trustee's rights under Section
606, and (d) this Article Four. Subject to compliance with this Article Four,
the Company may exercise its option under this Section 402 notwithstanding the
prior exercise of its option under Section 403 with respect to the KDSM Senior
Debentures.
Section 403. Covenant Defeasance.
Upon the Company's exercise under Section 401 of the option applicable
to this Section 403, the Company and Sinclair shall be released from its
obligations under any covenant or provision contained or referred to in Sections
1006 through 1014, 1016 and 1018 through 1021, and the provisions of Sections
1316 through 1328 shall not apply, with respect to the Defeased Securities on
and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Defeased Securities shall thereafter be deemed
to be not "Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with such covenants and the provisions of Sections 1316 through 1328,
but shall continue to be deemed "Outstanding" for all other purposes hereunder.
For this purpose, such covenant defeasance means that, with respect to the
Defeased Securities, the Company and Sinclair may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such Section or Article, whether directly or indirectly, by reason of any
reference elsewhere herein to any such Section or Article or by reason of any
reference in any such Section or Article to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 501(d), but, except as specified above, the
remainder of this Indenture and such Defeased Securities shall be unaffected
thereby.
Section 404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
402 or Section 403 to the Defeased Securities:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 608 who shall agree to comply with the provisions of this Article Four
applicable to it) as trust funds in trust for the
- 66 -
<PAGE>
purpose of making the following payments, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of such KDSM Senior
Debentures, (i) United States dollars in an amount, or (ii) U.S. Government
Obligations which through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (iii) a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants or a nationally recognized investment banking
firm expressed in a written certification thereof delivered to the Trustee, to
pay and discharge and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge the principal of, premium, if any, and interest on
the Defeased Securities on the Stated Maturity of such principal or installment
of principal or interest (or on any date after March 15, 2002 (such date being
referred to as the "Defeasance Redemption Date"), if when exercising under
Section 401 either its option applicable to Section 402 or its option applicable
to Section 403, the Company shall have delivered to the Trustee an irrevocable
notice to redeem all of the Outstanding KDSM Senior Debentures on the Defeasance
Redemption Date); provided that the Trustee shall have been irrevocably
instructed to apply such United States dollars or the proceeds of such U.S.
Government Obligations to said payments with respect to the KDSM Senior
Debentures, and provided, further, that the United States dollars or U.S.
Government Obligations deposited shall not be subject to rights of the holders
of Sinclair Senior Indebtedness pursuant to the provisions of Article Thirteen.
For this purpose, "U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian with respect
to any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
(b) In the case of an election under Section 402, the Company shall
have delivered to the Trustee an Opinion of Independent Counsel in the United
States stating that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (ii) since the date of
this Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Independent Counsel in the United States shall confirm that, the holders of the
Outstanding KDSM Senior Debentures will not recognize income, gain or loss for
federal income tax
- 67 -
<PAGE>
purposes as a result of such defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred.
(c) In the case of an election under Section 403, the Company shall
have delivered to the Trustee an Opinion of Independent Counsel in the United
States to the effect that the holders of the Outstanding KDSM Senior Debentures
will not recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred.
(d) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Sections 501(h) and (i) are
concerned, at any time during the period ending on the 91st day after the date
of deposit.
(e) Such defeasance or covenant defeasance shall not cause the Trustee
for the KDSM Senior Debentures to have a conflicting interest with respect to
any securities of the Company or any Sinclair.
(f) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, this Indenture or any
other material agreement or instrument to which the Company or any Sinclair is a
party or by which it is bound.
(g) The Company shall have delivered to the Trustee an Opinion of
Independent Counsel to the effect that (i) the trust funds will not be subject
to any rights of holders of Sinclair Senior Indebtedness, including, without
limitation, those arising under this Indenture and (ii) after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(h) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the holders of the KDSM Senior Debentures or any Guarantee over
the other creditors of the Company or any Sinclair with the intent of defeating,
hindering, delaying or defrauding creditors of the Company, any Sinclair or
others.
(i) No event or condition shall exist that would prevent the Company
from making payments of the principal of, premium, if any, and interest on the
KDSM Senior Debentures on the date of such deposit or at any time ending on the
91st day after the date of such deposit.
(j) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel, each stating that all
conditions precedent provided for
- 68 -
<PAGE>
relating to either the defeasance under Section 402 or the covenant defeasance
under Section 403 (as the case may be) have been complied with as contemplated
by this Section 404.
Opinions of Counsel or Opinions of Independent Counsel required to be
delivered under this Section may have qualifications customary for opinions of
the type required and counsel delivering such opinions may rely on certificates
of the Company or government or other officials customary for opinions of the
type required, including certificates certifying as to matters of fact,
including that various financial covenants have been complied with.
Section 405. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee or other qualifying trustee as permitted
under Section 404(a) (collectively for purposes of this Section 405, the
"Trustee") pursuant to Section 404 in respect of the Defeased Securities shall
be held in trust and applied by the Trustee, in accordance with the provisions
of such KDSM Senior Debentures and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Holders of such KDSM Senior
Debentures of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 404 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Defeased Securities.
Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any United States dollars or U.S. Government Obligations held by it as
provided in Section 404 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect defeasance or covenant defeasance.
Section 406. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 402 or 403, as
the case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's and Sinclair's
- 69 -
<PAGE>
obligations under this Indenture and the KDSM Senior Debentures and the
provisions of Article Twelve and Thirteen hereof shall be revived and reinstated
as though no deposit had occurred pursuant to Section 402 or 403, as the case
may be, until such time as the Trustee or Paying Agent is permitted to apply all
such United States dollars or U.S. Government Obligations in accordance with
Section 402 or 403, as the case may be; provided, however, that if the Company
makes any payment to the Trustee or Paying Agent of principal of, premium, if
any, or interest on any KDSM Senior Debenture following the reinstatement of its
obligations, the Trustee or Paying Agent shall promptly pay any such amount to
the Holders of the KDSM Senior Debentures and the Company shall be surrogated to
the rights of the Holders of such KDSM Senior Debentures to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
"Event of Default" means any one or more of the following events which
has occurred and is continuing:
(a) failure for 30 days to pay any interest on the KDSM Senior
Debentures (including any Additional Interest or Penalty Interest in respect
thereof) when due (subject to the deferral of any due date in the case of an
Extension Period); or
(b) failure to pay any principal on the KDSM Senior Debentures when
due, whether at maturity, upon redemption by declaration or otherwise; or
(c) the occurrence of a Voting Rights Triggering Event under the
Parent Preferred (other than pursuant to Section 6(a)(ii) of the Articles
Supplementary), which Voting Rights Triggering Event shall be continuing; or
(d) (i) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or Sinclair under this Indenture (other
than a default in the performance or breach of a covenant or agreement which is
specifically addressed in clause (a) or (b) or in clause (ii) or (iii) of this
clause (d)) and such default or breach shall continue for a period of 30 days
after written notice has been given, by certified mail, (A) to the Holder or
Holders of the KDSM Senior Debentures by the Trustee or (B) to the Company and
the Trustee by the Holders of at least 25% in aggregate principal amount of the
Outstanding KDSM Senior Debentures (or by the Trustees under the Trust if the
Trust owns at least 25% in aggregate principal amount of the Outstanding KDSM
Senior Debentures); (ii) there shall be a default in the performance or breach
of the provisions of Article Eight; or (iii) the Company shall have failed to
promptly redeem the KDSM Senior
- 70 -
<PAGE>
Debentures from the proceeds of any redemption of the Parent Preferred or shall
fail to make or consummate a Change of Control Offer in accordance with Section
1016; or
(e) the occurrence of an "Event of Default" under, and as defined in,
the Expense Agreement; or
(f) any of the Collateral Documents shall for any reason cease to be,
or be asserted in writing by the Company of any Subsidiary, as applicable, not
to be, in full force and effect and enforceable in accordance with its terms, or
any security interest purported to be created by the Collateral Document shall
cease to be valid and perfected first security interest in any Collateral or
there shall be a material default under the Pledge Agreement, except in each
case to the extent contemplated by this Indenture or such Collateral Document;
or
(g) the Guarantee, after becoming effective in accordance with Article
Thirteen, shall for any reason cease to be, or be asserted in writing by
Sinclair not to be, in full force and effect, enforceable in accordance with its
terms, except to the extent contemplated by this Indenture and the Guarantee; or
(h) there shall have been the entry by a court of competent
jurisdiction of (i) a decree or order for relief in respect of the Company,
Sinclair or any Significant Subsidiary of the Company or Sinclair in an
involuntary case or proceeding under any applicable Bankruptcy Law or (ii) a
decree or order adjudging the Company, Sinclair or any Significant Subsidiary
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, Sinclair or any Significant
Subsidiary under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company, Sinclair or any Significant Subsidiary or of any
substantial part of their respective properties, or ordering the winding up or
liquidation of their affairs, and any such decree or order for relief shall
continue to be in effect, or any such other decree or order shall be unstayed
and in effect, for a period of 60 consecutive days; or
(i) (i) the Company, Sinclair or any Significant Subsidiary commences
a voluntary case or proceeding under any applicable Bankruptcy Law or any other
case or proceeding to be adjudicated bankrupt or insolvent, (ii) the Company,
Sinclair or any Significant Subsidiary consents to the entry of a decree or
order for relief in respect of the Company, Sinclair or such Significant
Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy
Law or to the commencement of any bankruptcy or insolvency case or proceeding
against it, (iii) the Company, Sinclair or any Significant Subsidiary files a
petition or answer or consent seeking reorganization or relief under any
applicable federal or state law, (iv) the Company, Sinclair or any Significant
Subsidiary (1) consents to the filing of such petition or the appointment of, or
taking possession by, a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company, Sinclair or such
Significant Subsidiary or of any substantial part of its respective properties,
(2) makes
- 71 -
<PAGE>
an assignment for the benefit of creditors or (3) admits in writing its
inability to pay its debts generally as they become due, or (v) the Company,
Sinclair or any Subsidiary takes any corporate action authorizing any such
actions in this paragraph (i).
The Company shall deliver to the Trustee within five days after the
occurrence thereof, written notice, in the form of an Officers' Certificate, of
any Event of Default or Default, its status and what action the Company is
taking or proposes to take with respect thereto. Unless the Corporate Trust
Office of the Trustee has received written notice of an Event of Default or
Default of the nature described in this Section, the Trustee shall not be deemed
to have knowledge of such Event of Default for the purposes of Article Five or
for any other purpose.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Sections 501(h) and (i)), shall occur and be continuing, the Trustee or the
Holders of not less than 25% in aggregate principal amount of the KDSM Senior
Debentures outstanding or (if the Trust holds at least 25% in aggregate
principal amount of the KDSM Senior Debentures) the Property Trustee on its own
behalf or pursuant to the Trust Agreement, at the direction of the holders of at
least 25% in aggregate Liquidation Value of outstanding Preferred Securities
may, and the Trustee at the request of the Holders of not less than 25% in
aggregate principal amount of the Outstanding KDSM Senior Debentures, shall,
declare all unpaid principal of, premium, if any, and accrued interest on all
the KDSM Senior Debentures to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by the Holders of the KDSM
Senior Debentures). If an Event of Default specified in clause (h) or (i) of
Section 501 occurs and is continuing, then all the KDSM Senior Debentures shall
ipso facto become and be immediately due and payable, in an amount equal to the
principal amount of the KDSM Senior Debentures, together with accrued and unpaid
interest, if any, and any Additional Interest, to the date the KDSM Senior
Debentures become due and payable, without any declaration or other act on the
part of the Trustee or any Holder.
At any time after such declaration of acceleration has been made but
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Outstanding KDSM Senior Debentures or the
Property Trustee on its own behalf or, pursuant to the Trust Agreement, at the
direction of the holders of at least a majority in aggregate Liquidation Value
of the Outstanding Preferred Securities, by written notice to the Company and
the Trustee, may rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
- 72 -
<PAGE>
(i) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel,
(ii) all overdue interest (including any Additional Interest) on
all KDSM Senior Debentures,
(iii) the principal of and premium, if any, on any KDSM Senior
Debentures which have become due otherwise than by such declaration of
acceleration and interest thereon at a rate borne by the KDSM Senior
Debentures, and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the KDSM Senior
Debentures; and
(b) all Events of Default, other than the non-payment of principal of
the KDSM Senior Debentures which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon provided in Section 513.
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(a) default is made in the payment of any interest on any KDSM
Senior Debenture when such interest becomes due and payable and such
default continues for a period of 30 days, or
(b) default is made in the payment of the principal of or
premium, if any, on any KDSM Senior Debenture at the Stated Maturity
thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such KDSM Senior Debentures, the whole amount then due and payable on
such KDSM Senior Debentures for principal and premium, if any, and interest,
with interest upon the overdue principal and premium, if any, and, to the extent
that payment of such interest shall be legally enforceable, upon overdue
installments of interest, at the rate borne by the KDSM Senior Debentures; and,
in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the
- 73 -
<PAGE>
collection of the sums so due and unpaid and may prosecute such proceeding to
judgment or final decree, and may enforce the same against the Company or any
other obligor upon the KDSM Senior Debentures and collect the moneys adjudged or
decreed to be payable in the manner provided by law out of the property of the
Company or any other obligor upon the KDSM Senior Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture by such appropriate private or judicial proceedings
as the Trustee shall deem most effectual to protect and enforce such rights,
including, seeking recourse against Sinclair pursuant to the terms of any
Guarantee, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, including
Sinclair, upon the KDSM Senior Debentures or the property of the Company or of
such other obligor or their creditors, the Trustee (irrespective of whether the
principal of the KDSM Senior Debentures shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of overdue principal
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(a) to file and prove a claim for the whole amount of principal,
and premium, if any, and interest owing and unpaid in respect of the
KDSM Senior Debentures and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(b) subject to Articles Twelve and Thirteen, to collect and
receive any moneys, securities or other property payable or
deliverable upon any conversion or exchange of KDSM Senior Debentures
or upon any such claims and to distribute the same;
and any custodian, in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
- 74 -
<PAGE>
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the KDSM Senior
Debentures or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 505. Trustee May Enforce Claims without Possession of KDSM
Senior Debentures.
All rights of action and claims under this Indenture or the KDSM
Senior Debentures may be prosecuted and enforced by the Trustee without the
possession of any of the KDSM Senior Debentures or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name and as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the KDSM Senior
Debentures in respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article or
otherwise on behalf of the Holders or the Trustee pursuant to this Article or
through any proceeding or any arrangement or restructuring in anticipation or in
lieu of any proceeding contemplated by this Article shall be applied, subject to
applicable law, in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal,
premium, if any, or interest, upon presentation of the KDSM Senior Debentures
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
606;
SECOND: To the payment of the amounts then due and unpaid upon the
KDSM Senior Debentures for principal, premium, if any, and interest, in respect
of which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such KDSM Senior Debentures for principal, premium, if any, and
interest; and
THIRD: The balance, if any, to the Person or Persons entitled thereto,
including the Company, provided that all sums due and owing to the Holders and
the Trustee have been paid in full as required by this Indenture.
- 75 -
<PAGE>
Section 507. Limitation on Suits.
No Holder of any KDSM Senior Debentures shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding KDSM Senior Debentures shall have made written request to
the Trustee to institute proceedings in respect of such Event of
Default in its own name as trustee hereunder;
(c) such Holder or Holders have offered to the Trustee an
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding KDSM Senior
Debentures;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or the Guarantee to affect, disturb or prejudice the rights of
any other Holders, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner provided in this Indenture or the Guarantee and for the equal and ratable
benefit of all the Holders.
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any KDSM Senior Debenture shall have the right on the terms stated herein, which
is absolute and unconditional, to receive payment of the principal of, premium,
if any, and (subject to Section 309) interest on such KDSM Senior Debenture on
the respective Stated Maturities expressed in such KDSM Senior Debenture (or, in
the case of redemption or repurchase, on the Redemption Date or repurchase date)
and to institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
- 76 -
<PAGE>
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or the Guarantee and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case the
Company, Sinclair, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
Section 510. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any KDSM
Senior Debenture to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
Section 512. Control by Holders.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding KDSM Senior Debentures shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, provided
that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture or expose the Trustee to personal liability;
and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
- 77 -
<PAGE>
The Holders of not less than a majority in aggregate principal amount
of the Outstanding KDSM Senior Debentures (or if the Trust holds a majority of
the aggregate principal amount of the KDSM Senior Debentures, the Property
Trustee on behalf of a majority in aggregate Liquidation Value of Outstanding
Preferred Securities) may on behalf of the Holders of all the KDSM Senior
Debentures waive any past Default hereunder and its consequences, except a
Default
(a) in the payment of the principal of, premium, if any, or
interest (including Additional Interests or Penalty Interest) on any
KDSM Senior Debenture (unless such Default has been cured and a sum
sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration and any Additional Interest or
Penalty Interest has been deposited with the Trustee); or
(b) in respect of a covenant or a provision hereof which under
Article Nine cannot be modified or amended without the consent of each
Holder of the Outstanding Securities affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any KDSM
Senior Debenture by his acceptance thereof shall be deemed to have agreed, that
any court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding KDSM Senior
Debentures, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of, premium, if any, or interest on any KDSM Senior
Debenture on or after the respective Stated Maturities expressed in such KDSM
Senior Debenture (or, in the case of redemption, on or after the Redemption
Date).
Section 515. Waiver of Stay; Extension or Usury Laws.
Each of the Company and Sinclair covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or
- 78 -
<PAGE>
take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive the Company or Sinclair from paying all or any portion of
the principal of, premium, if any, or interest on the KDSM Senior Debentures
contemplated herein or in the KDSM Senior Debentures or which may affect the
covenants or the performance of this Indenture; and each of the Company and
Sinclair (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults.
Within 15 days after the occurrence of any Default, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of, premium, if any, or
interest on any KDSM Senior Debenture, the Trustee shall be protected in
withholding such notice if and so long as a trust committee of Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders.
Section 602. Certain Rights of Trustee.
Subject to the provisions of Trust Indenture Act Sections 315(a)
through 315(d):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of Indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) the Trustee may consult with counsel and any written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of
- 79 -
<PAGE>
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity satisfactory to the Trustee against
the costs, expenses and liabilities which might be incurred therein or thereby
in compliance with such request or direction;
(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture other than any liabilities
arising out of the negligence of the Trustee;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document;
provided that the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may deem fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers;
(i) the Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company, except as
otherwise provided herein; and
(j) money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law, except as otherwise provided
herein.
Section 603. Trustee Not Responsible for Recitals, Dispositions of
KDSM Senior Debentures or Application of Proceeds Thereof.
The recitals contained herein and in the KDSM Senior Debentures,
except the Trustee's certificates of authentication, shall be taken as the
statements of the Company, and
- 80 -
<PAGE>
the Trustee assumes no responsibility for their correctness. The Trustee makes
no representations as to the validity or sufficiency of this Indenture or of the
KDSM Senior Debentures, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the KDSM Senior
Debentures and perform its obligations hereunder and that the statements made by
it in a Statement of Eligibility and Qualification on Form T-1 supplied to the
Company are true and accurate subject to the qualifications set forth therein.
The Trustee shall not be accountable for the use or application by the Company
of KDSM Senior Debentures or the proceeds thereof.
Section 604. Trustee and Agents May Hold Securities; Collections; etc.
The Trustee, any Paying Agent, Security Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Trust Indenture Act Sections 310 and 311, may otherwise deal with the Company
and receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
Section 605. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Four, the Trustee may invest all moneys received by
the Trustee, until used or applied as herein provided, in Temporary Cash
Investments in accordance with the written directions of the Company. The
Trustee shall not be liable for any losses incurred in connection with any
investments made in accordance with this Section 605, unless the Trustee acted
with gross negligence or in bad faith. With respect to any losses on investments
made under this Section 605, the Company is liable for the full extent of any
such loss.
Section 606. Compensation and Indemnification of Trustee and Its Prior
Claim.
The Company and Sinclair (if the Guarantee pursuant to Article 13 is
effective) covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to, reasonable compensation for all services rendered
by it hereunder (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) and the Company covenants and
agrees to pay or reimburse the Trustee and each predecessor Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by or on behalf of it in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all agents and other persons not regularly in its employ) except
any such
- 81 -
<PAGE>
expense, disbursement or advance as may arise from its negligence or bad faith.
The Company also covenants to indemnify the Trustee and each predecessor Trustee
for, and to hold it harmless against, any loss, liability, tax, assessment or
other governmental charge (other than taxes applicable to the Trustee's
compensation hereunder) or expense incurred without negligence or bad faith on
such Trustee's part, arising out of or in connection with the acceptance or
administration of this Indenture or the trusts hereunder and such Trustee's
duties hereunder, including enforcement of this Indenture and also including any
liability which the Trustee may incur as a result of failure to withhold, pay or
report any tax, assessment or other governmental charge, and the costs and
expenses of defending itself against or investigating any claim of liability
(whether asserted by any Holder, the Company or any other Person) in connection
with the exercise or performance of any of its powers or duties under this
Indenture. The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute an additional obligation hereunder and shall survive the
satisfaction and discharge of this Indenture.
All payments and reimbursements pursuant to this Section 606 shall be
made with interest at the rate borne by the KDSM Senior Debentures.
As security for the performance of the obligations of the Company
under this Section 606, the Trustee shall have a Lien prior to the KDSM Senior
Debentures upon all property and funds held or collected by the Trustee, except
funds held in trust for the payment of principal of (and premium, if any) or
interest on particular KDSM Senior Debentures. The Trustee's right to receive
payment of any amounts due under this Section 606 shall not be subordinate to
any other liability or indebtedness of the Company and the KDSM Senior
Debentures shall be subordinate to the Trustee's right to receive such payment.
Section 607. Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act.
Section 608. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as trustee under Trust Indenture Act Section 310(a)(1) and which
shall have a combined capital and surplus of at least $250,000,000, to the
extent there is an institution eligible and willing to serve. The Trustee shall
be a participant in the Depository Trust Company and FAST distribution systems.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of federal, state, territorial or District of
Columbia supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and
- 82 -
<PAGE>
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect hereinafter specified in this Article. The Corporate Trust
Office shall initially be located at First Union National Bank of Maryland, 901
East Cary Street, Richmond, Virginia 23219.
Section 609. Resignation and Removal; Appointment of Successor Trustee.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor trustee under Section 610.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice thereof to the Company. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument executed by authority of the Board of
Directors of the Company, a copy of which shall be delivered to the resigning
Trustee and a copy to the successor trustee. If an instrument of acceptance by a
successor trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may, or
any Holder who has been a bona fide Holder of a KDSM Senior Debenture for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper, appoint a successor trustee.
(c) The Trustee may be removed at any time by an Act of the Holders of
not less than a majority in aggregate principal amount of the Outstanding KDSM
Senior Debentures, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
Trust Indenture Act Section 310(b) after written request therefor by
the Company or by any Holder who has been a bona fide Holder of a KDSM
Senior Debenture for at least six months, or
(2) the Trustee shall cease to be eligible under Section 608 and
shall fail to resign after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a KDSM Senior
Debenture for at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
- 83 -
<PAGE>
then, in any case, (i) the Company by a Board Resolution may remove the Trustee,
or (ii) subject to Section 514, the Holder of any KDSM Senior Debenture who has
been a bona fide Holder of a KDSM Senior Debenture for at least six months may,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding KDSM Senior
Debentures delivered to the Company and the retiring Trustee, the successor
trustee so appointed shall, forthwith upon its acceptance of such appointment,
become the successor trustee and supersede the successor trustee appointed by
the Company. If no successor trustee shall have been so appointed by the Company
or the Holders of the KDSM Senior Debentures and accepted appointment in the
manner hereinafter provided, the Holder of any KDSM Senior Debenture who has
been a bona fide Holder for at least six months may, subject to Section 514, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
KDSM Senior Debentures as their names and addresses appear in the Security
Register. Each notice shall include the name of the successor trustee and the
address of its Corporate Trust Office or agent hereunder.
Section 610. Acceptance of Appointment by Successor.
Every successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee as if originally named as Trustee hereunder;
but, nevertheless, on the written request of the Company or the successor
trustee, upon payment of its charges then unpaid, such retiring Trustee shall,
pay over to the successor trustee all moneys at the time held by it hereunder
and shall execute and deliver an instrument transferring to such successor
trustee all such rights, powers, duties and obligations. Upon request of any
such successor trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor trustee all
such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such Trustee or such
successor
- 84 -
<PAGE>
trustee to secure any amounts then due such Trustee pursuant to the provisions
of Section 606.
No successor trustee with respect to the KDSM Senior Debentures shall
accept appointment as provided in this Section 610 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Trust Indenture Act Section 310(a) and this Article Sixth and
shall have a combined capital and surplus of at least $250,000,000 and have a
Corporate Trust Office or an agent selected in accordance with Section 608.
Upon acceptance of appointment by any successor trustee as provided in
this Section 610, the Company shall give notice thereof to the Holders of the
KDSM Senior Debentures, by mailing such notice to such Holders at their
addresses as they shall appear on the Security Register. If the acceptance of
appointment is substantially contemporaneous with the resignation, then the
notice called for by the preceding sentence may be combined with the notice
called for by Section 609. If the Company fails to give such notice within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be given at the expense of the Company.
Section 611. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be eligible under Trust Indenture Act Section
310(a) and this Article Sixth and shall have a combined capital and surplus of
at least $250,000,000 and have a Corporate Trust Office or an agent selected in
accordance with Section 608 without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the KDSM Senior Debentures shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and deliver
such KDSM Senior Debentures so authenticated; and, in case at that time any of
the KDSM Senior Debentures shall not have been authenticated, any successor to
the Trustee may authenticate such KDSM Senior Debentures either in the name of
any predecessor hereunder or in the name of the successor trustee; and in all
such cases such certificate shall have the full force which it is anywhere in
the KDSM Senior Debentures or in this Indenture provided that the certificate of
the Trustee shall have; provided that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Securities in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
- 85 -
<PAGE>
Section 612. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or other obligor under the KDSM Senior Debentures), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection of
claims against the Company (or any such other obligor). A Trustee who has
resigned or been removed shall be subject to the Trust Indenture Act Section
311(a) to the extent indicated therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 15 days after the Regular Record Date,
a list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may request in writing, within
30 days after receipt by the Company of any such request, a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished;
provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
Every Holder of KDSM Senior Debentures, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
the disclosure of any information as to the names and addresses of the Holders
in accordance with Trust Indenture Act Section 312, regardless of the source
from which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
Trust Indenture Act Section 312.
Section 703. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first May
15 after the first issuance of KDSM Senior Debentures, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, as provided in Trust
- 86 -
<PAGE>
Indenture Act Section 313(c), a brief report dated as of such May 15 in
accordance with and to the extent required by Trust Indenture Act Section
313(a).
Section 704. Reports by Company and Sinclair.
(a) File with the Trustee, within 15 days after the Company or
Sinclair, as the case may be, is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company or Sinclair
may be required to file with the Commission pursuant to Section 13 or Section
15(d) of the Exchange Act; or, if the Company or Sinclair, as the case may be,
is not required to file information, documents or reports pursuant to either of
said Sections, then it shall file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Exchange Act in
respect of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by the
Company or Sinclair, as the case may be, with the conditions and covenants of
this Indenture as may be required from time to time by such rules and
regulations; and
(c) transmit or cause to be transmitted by mail to all Holders, as
their names and addresses appear in the Security Register, within 30 days after
the filing thereof with the Trustee, in the manner and to the extent provided in
Trust Indenture Act Section 313(c), such summaries of any information, documents
and reports required to be filed by the Company or Sinclair, as the case may be,
pursuant to Subsections (a) and (b) of this Section as may be required by rules
and regulations prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER,
CONVEYANCE, TRANSFER OR LEASE
Section 801. Company May Consolidate, etc., Only on Certain Terms.
(I) The Company shall not, in a single transaction or a series of
transactions, consolidate with or merge into any other Person or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
assets (with or without giving effect to the Parent Preferred) to any Person or
adopt a plan of liquidation, and the Company shall not, in
- 87 -
<PAGE>
a single transaction or a series of transactions, permit any Person to
consolidate with, merge into or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its assets (with or without
giving effect to the Parent Preferred) to the Company unless:
(a) either (i) the Company is the survivor of such merger or
consolidation or (ii) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person that acquires by
sale, assignment, conveyance, transfer or lease the properties and assets of the
Company substantially as an entirety or in the case of a plan of liquidation,
the Person to which assets of the Company have been transferred, shall be a
corporation, partnership, limited liability corporation or trust organized and
existing under the laws of the United States or any State thereof or the
District of Columbia; and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal of and interest
(including any Additional Interest) on all the KDSM Senior Debentures and the
performance or observance of every covenant of this Indenture, on the part of
the Company to be performed or observed;
(b) the KDSM Senior Debentures shall be converted into or exchanged
for and shall become obligations of such successor, transferee or resulting
Person, having in respect of such successor, transferee or resulting Person the
same powers, preferences and relative participating, optional or other special
rights and the qualifications, limitations or restrictions thereon, that the
KDSM Senior Debentures had immediately prior to such transaction;
(c) immediately after giving effect to such transaction and the use of
proceeds therefrom (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), the
Consolidated Net Worth of the surviving entity shall equal or exceed the
Consolidated Net Worth of the Company immediately prior to such transaction;
(d) immediately after giving effect to such transaction on a pro forma
basis, the Cumulative Operating Cash Flow for the four most recently completed
fiscal quarters for the surviving entity shall equal or exceed the Cumulative
Operating Cash Flow for the Company for such four-quarter period; and
(e) the Company has delivered to the Trustee prior to the consummation
of the proposed transaction an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer complies with this
Indenture and that all conditions precedent in this Indenture relating to such
transaction have been satisfied; provided that the restrictions set forth in (I)
above shall not apply to any Asset Transfer Transaction, which transaction shall
be permitted under this Indenture.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties
- 88 -
<PAGE>
and assets of one or more Subsidiaries of the Company, the Capital Stock of
which constitutes all or substantially all of the properties or assets of the
Company, will be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
(II) If the Guarantee has become effective pursuant to Article
Thirteen, Sinclair shall not, in a single transaction or series of transactions,
consolidate with or merge into any other Person or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its assets
(with or without giving effect to the Parent Preferred) to any Person or adopt a
plan of liquidation, and Sinclair shall not, in a single transaction or a series
of transactions, permit any Person to consolidate with, merge into or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its assets (with or without giving effect to the Parent Preferred) to the
Company, unless:
(a) either (i) Sinclair is the survivor of such merger or
consolidation or (ii) the Person (if other than Sinclair) formed by such
consolidation or into which Sinclair is merged or the Person that acquires by
sale, assignment, conveyance, transfer or lease the properties and assets of
Sinclair substantially as an entirety or in the case of a plan of liquidation,
the Person to which assets of Sinclair have been transferred, shall be a
corporation, partnership, limited liability company or trust organized and
existing under the laws of the United States or any State thereof or the
District of Columbia; and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to the
Trustee, the obligations of Sinclair, if any, under this Indenture;
(b) the Guarantee, if any, shall be converted into or exchanged for
and shall become obligations of such successor, transferee or resulting Person,
having in respect of such successor, transferee or resulting Person the same
powers, preferences and relative participating, optional or other special rights
and the qualifications, limitations or restrictions thereon, that the KDSM
Senior Debentures had immediately prior to such transaction;
(c) immediately after giving effect to such transaction and the use of
proceeds therefrom (on a pro forma basis, including any Indebtedness incurred or
anticipated to be incurred in connection with such transaction), the
Consolidated Net Worth of the surviving entity shall equal or exceed the
Consolidated Net Worth of Sinclair immediately prior to such transaction;
(d) immediately after giving effect to such transaction on a pro forma
basis, the Cumulative Operating Cash Flow for the four most recently completed
fiscal quarters for the surviving entity shall equal or exceed the Cumulative
Operating Cash Flow for Sinclair for such four-quarter period; and
(e) Sinclair has delivered to the Trustee prior to the consummation of
the proposed transaction an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer complies with this
Indenture and that all conditions
- 89 -
<PAGE>
precedent in this Indenture relating to such transaction have been satisfied.For
purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of related transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries of
Sinclair, the Capital Stock of which constitutes all or substantially all of the
properties or assets of Sinclair, will be deemed to be the transfer of all or
substantially all of the properties and assets of Sinclair.
Section 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company or Sinclair in accordance with Section 801, the successor
Person formed by such consolidation or into which the Company or Sinclair, as
the case may be, is merged or the successor Person to which such sale,
assignment, conveyance, transfer, lease or disposition is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
or Sinclair, as the case may be, under this Indenture, the KDSM Senior
Debentures and/or such Guarantee, as the case may be, with the same effect as if
such successor had been named as the Company or Sinclair, as the case may be,
herein, in the KDSM Senior Debentures and/or in such Guarantee, as the case may
be. When a successor assumes all the obligations of its predecessor under this
Indenture, the KDSM Senior Debentures or the Guarantees, as the case may be, the
predecessor shall be released from those obligations; provided that in the case
of a transfer by lease, the predecessor shall not be released from the payment
of principal and interest on the KDSM Senior Debentures or the Guarantees, as
the case may be.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent of
Holders.
Without the consent of any Holders, the Company and Sinclair, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto or agreements or
other instruments with respect to this Indenture, in form and substance
satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company,
Sinclair or any other obligor upon the KDSM Senior Debentures, and the
assumption by any such successor of the covenants of the Company or Sinclair or
obligor herein and in the KDSM Senior Debentures and in any Guarantee, in each
case in compliance with the provisions of this Indenture;
- 90 -
<PAGE>
(b) to add to the covenants of the Company, Sinclair or any other
obligor upon the KDSM Senior Debentures for the benefit of the Holders, or to
surrender any right or power herein conferred upon the Company, Sinclair or any
other obligor upon the KDSM Senior Debentures, as applicable, herein, in the
KDSM Senior Debentures or in any Guarantee;
(c) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein or
in any Guarantee, or to make any other provisions with respect to matters or
questions arising under this Indenture, the KDSM Senior Debentures or any
Guarantee; provided that, in each case, such provisions shall not adversely
affect the interests of the Holders;
(d) to comply with the requirements of the Commission in order to
effect (if necessary) or maintain the qualification of this Indenture under the
Trust Indenture Act, as contemplated by Section 905 or otherwise;
(e) to add a guarantor pursuant to the requirements of Section 1010;
(f) to evidence and provide the acceptance of the appointment of a
successor trustee hereunder;
(g) to mortgage, pledge, hypothecate or grant a security interest in
favor of the Trustee for the benefit of the Holders as additional security for
the payment and performance of the Indenture Obligations, in any property or
assets, including any which are required to be mortgaged, pledged or
hypothecated, or in which a security interest is required to be granted to the
Trustee pursuant to this Indenture or otherwise;
(h) to provide for uncertificated KDSM Senior Debentures in place of
or in addition to certificated KDSM Senior Debentures; or(i) to cause the
Guarantee provided for in Article Thirteen to become effective if the conditions
to effectiveness have been met.
Section 902. Supplemental Indentures and Agreements with Consent of
Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding KDSM Senior Debentures, by Act of
said Holders delivered to the Company, and the Trustee, the Company, and
Sinclair (if a party thereto) when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto or
agreements or other instruments with respect to this Indenture in form and
substance satisfactory to the Trustee for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders under this
Indenture, the KDSM Senior Debentures or any Guarantee; provided, however, that
no such supplemental indenture, agreement or instrument shall, without the
consent of the Holder of each Outstanding KDSM Senior Debenture affected
thereby:
- 91 -
<PAGE>
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any KDSM Senior Debenture, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or extend the time of payment of interest thereon or change
the place or coin or currency in which the principal of any KDSM Senior
Debenture or any premium or the interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date);
(b) amend, change or modify the obligation of the Company (i) to make
and consummate a Change of Control Offer under certain circumstances in the
event of a Change of Control in accordance with Section 1016, (ii) to cause the
Parent Preferred to be redeemed in accordance with Section 1020, (iii) to use
the proceeds of a redemption of the Parent Preferred to redeem a Like Amount of
(as defined in the Articles Supplementary) KDSM Senior Debentures, or (iv) not
to grant any Liens with respect to the Parent Preferred in accordance with
Section 1021, including, in the case of (i), (ii), (iii) or (iv), amending,
changing or modifying any definitions with respect thereto;
(c) reduce the percentage in principal amount of the Outstanding KDSM
Senior Debentures, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver or compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture or with
respect to any Guarantee;
(d) modify any of the provisions of this Section or Sections 513 or
1023, except to increase the percentage in principal amount of the Outstanding
KDSM Senior Debentures, the consent of whose Holders is required for any such
actions or to provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each KDSM Senior
Debenture affected thereby;
(e) except as otherwise permitted under Article Eight, consent to the
assignment or transfer by the Company or Sinclair of any of its rights and
obligations under this Indenture; or(f) amend or modify any of the provisions of
this Indenture relating to the subordination of the KDSM Senior Debentures or
any Guarantee in any manner adverse to the Holders of the KDSM Senior Debentures
or any Guarantee.
Upon the written request of the Company and Sinclair, accompanied by a
copy of a Board Resolution authorizing the execution of any such supplemental
indenture or Guarantee, and upon the filing with the Trustee of evidence of the
consent of Holders as aforesaid, the Trustee shall, subject to Section 903, join
with the Company and each Sinclair in the execution of such supplemental
indenture or Guarantee.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture or Guarantee
or agreement or
- 92 -
<PAGE>
instrument relating to any such Guarantee, but it shall be sufficient if such
Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement or instrument permitted by this Article or the
modifications thereby of the trusts created by this Indenture, the Trustee shall
be entitled to receive, and (subject to Trust Indenture Act Section 315(a)
through 315(d) and Section 602 hereof) shall be fully protected in relying upon,
an Opinion of Counsel and an Officers' Certificate stating that the execution of
such supplemental indenture, agreement or instrument is authorized or permitted
by this Indenture. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture, agreement or instrument which affects the
Trustee's own rights, duties or immunities under this Indenture, the Guarantees
or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of KDSM Senior Debentures theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in KDSM Senior Debentures to Supplemental
Indentures.
KDSM Senior Debentures authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall so
determine, new KDSM Senior Debentures so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any such supplemental indenture
may be prepared and executed by the Company and Sinclair and authenticated and
delivered by the Trustee in exchange for Outstanding KDSM Senior Debentures.
ARTICLE TEN
COVENANTS
- 93 -
<PAGE>
Section 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of, premium, if
any, and interest on the KDSM Senior Debentures in accordance with the terms of
the KDSM Senior Debentures and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company will maintain an office or agency where KDSM Senior
Debentures may be presented or surrendered for payment. The Company also will
maintain an office or agency where KDSM Senior Debentures may be surrendered for
registration of transfer, redemption or exchange and where notices and demands
to or upon the Company in respect of the KDSM Senior Debentures and this
Indenture may be served. The Company hereby designates the Corporate Trust
Office of the Trustee as such office for purposes of the prior two sentences.
The Company will give prompt written notice to the Trustee of the location and
any change in the location of any such offices or agencies. If at any time the
Company shall fail to maintain any such required offices or agencies or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the office of the agent
of the Trustee described above and the Company hereby appoints such agent as its
agent to receive all such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices
or agencies where the KDSM Senior Debentures may be presented or surrendered for
any or all such purposes, and may from time to time rescind such designation.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such office or
agency.
Section 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of, premium, if any, or interest on
any of the KDSM Senior Debentures, segregate and hold in trust for the benefit
of the Holders entitled thereto a sum sufficient to pay the principal, premium,
if any, or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided, and will promptly notify
the Trustee of its action or failure so to act. If the Company is not acting as
Paying Agent, the Company will, before each due date of the principal of,
premium, if any, or interest on any KDSM Senior Debentures, deposit with a
Paying Agent a sum in same day funds sufficient to pay the principal, premium,
if any, or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of such action or any failure so to act. If the Company is not acting as
Paying Agent, the Company will cause each Paying Agent other than the Trustee to
execute and
- 94 -
<PAGE>
deliver to the Trustee an instrument in which such Paying Agent shall agree with
the Trustee, subject to the provisions of this Section, that such Paying Agent
will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on KDSM Senior Debentures in trust for the benefit
of the Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company or Sinclair
(or any other obligor upon the KDSM Senior Debentures) in the making of any
payment of principal, premium, if any, or interest;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and disabilities of
such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, including each
Sinclair, upon the KDSM Senior Debentures or the property of the Company or of
such other obligor or their creditors, the Trustee shall serve as the Paying
Agent.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any KDSM Senior Debenture and remaining unclaimed for two years
after such principal and premium, if any, or interest has become due and payable
shall promptly be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such KDSM
Senior Debenture shall thereafter, as an unsecured general creditor, look only
to the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Company
as trustee thereof, shall thereupon cease; provided, however, that the Trustee
or such Paying Agent, before being required to make any such repayment, may at
the expense of the Company cause to be published once, in The New York Times and
The Wall Street
- 95 -
<PAGE>
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will promptly be repaid to the Company.
Section 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence and related rights and franchises (charter and statutory) of the
Company and each Subsidiary; provided, however, that the Company shall not be
required to preserve any such right or franchise or the corporate existence of
any such Subsidiary if the Board of Directors of the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the loss
thereof would not reasonably be expected to have a material adverse effect on
the ability of the Company to perform its obligations hereunder; and provided,
further, that the foregoing shall not prohibit a sale, transfer or conveyance of
a Subsidiary or any of its assets in compliance with the terms of this
Indenture.
Section 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
on or before the date the same shall become due and payable, (a) all taxes,
assessments and governmental charges levied or imposed upon the Company or any
Subsidiary shown to be due on any return of the Company or any Subsidiary or
otherwise assessed or upon the income, profits or property of the Company or any
Subsidiary if failure to pay or discharge the same could reasonably be expected
to have a material adverse effect on the ability of the Company to perform its
obligations hereunder and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, would by law become a Lien upon the property of the
Company or any Subsidiary, except for any Lien permitted to be incurred under
Section 1012 if failure to pay or discharge the same could reasonably be
expected to have a material adverse effect on the ability of the Company to
perform its obligations hereunder; provided, however, that the Company shall not
be required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings properly instituted and
diligently conducted and in respect of which appropriate reserves (in the good
faith judgment of management of the Company) are being maintained in accordance
with generally accepted accounting principles consistently applied.
Section 1006. Maintenance of Properties.
The Company will cause all material properties owned by the Company or
any Subsidiary or used or held for use in the conduct of its business or the
business of any
- 96 -
<PAGE>
Subsidiary to be maintained and kept in good condition, repair and working order
(ordinary wear and tear excepted) and supplied with all necessary equipment and
will cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company may be
consistent with sound business practice and necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section shall prevent the
Company from discontinuing the maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not reasonably expected to
have a material adverse effect on the ability of the Company to perform its
obligations hereunder.
Section 1007. Insurance.
The Company will at all times keep all of its and its Subsidiaries'
properties which are of an insurable nature insured, with insurers believed by
the Company to be responsible, against loss or damage to the extent that
property of similar character is usually so insured by corporations similarly
situated and owning like properties.
Section 1008. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any of the Company's Junior Securities (other than
dividends or distributions payable solely in Junior Securities);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any Junior Securities or warrants, rights or
options to acquire Junior Securities (except Junior Securities held by
the Company or a Wholly Owned Subsidiary of the Company); or
(iii) make any principal payment on, or repurchase, redeem,
defease, retire or otherwise acquire for value, prior to any scheduled
principal payment, sinking fund or maturity, any Subordinated
Indebtedness;
(iv) declare or pay any dividend or distribution on any Equity
Interests of any Subsidiary to any Person (other than the Company or
any of its Wholly Owned Subsidiary of the Company);
(v) incur, create, assume any guarantee of Indebtedness of any
Affiliate (other than a Wholly Owned Subsidiary of the Company);
- 97 -
<PAGE>
(vi) make any Investment in any Person (other than any Permitted
Investments).
(any of the foregoing payments described in clauses (i) through (vi),
collectively, "Restricted Payments") unless, after giving effect to the proposed
Restricted Payment (the amount of any such Restricted Payment, if other than
cash, as determined by the Board of Directors of Sinclair, whose determination
shall be conclusive and evidenced by a board resolution), (i) there shall not
have occurred any event that with the giving of notice or the lapse of time, or
both, would constitute an Event of Default under this Indenture, (ii) the
Company shall not have given notice of its election of an Extension Period as
provided in this Indenture (which notice shall not have been rescinded) and such
Extension Period shall be continuing and the Company shall not have failed to
make any interest payment on the KDSM Senior Debentures (whether or not as a
result of an Extension Period) and such failure shall be continuing and (iii)
the aggregate amount of all Restricted Payments made after the date of this
Indenture does not exceed an amount equal to the Company's Cumulative Operating
Cash Flow, plus, to the extent not included in the Cumulative Operating Cash
Flow, Cumulative Parent Preferred Dividends, less the Company's Cumulative
Consolidated Interest Expense. Notwithstanding the foregoing, the foregoing
provisions shall not prohibit an Asset Transfer Transaction; provided that any
Restricted Payment made in connection with an Asset Transfer Transaction shall
be considered in making the calculation of Restricted Payments in the prior
sentence with respect to any future transaction.
Section 1009. Limitation on Indebtedness.
The Company will not and will not permit any of its Subsidiaries to
create, issue, incur, assume, or directly or indirectly to guarantee or
otherwise in any manner become directly or indirectly liable for ("incur") any
Indebtedness (including Acquired Indebtedness) except that the Company may incur
Indebtedness if the Debt to Operating Cash Flow Ratio of the Company and its
Subsidiaries at the time of the incurrence of such Indebtedness after giving pro
forma effect thereto, is 4 to 1 or less. The foregoing limitation will not apply
to the incurrence of (i) Indebtedness pursuant to the KDSM Senior Debentures,
(ii) trade credit incurred in the ordinary course of business, (iii)
Indebtedness of the Company represented by Capital Lease Obligations or Purchase
Money Obligations or Indebtedness incurred for working capital purposes in an
aggregate principal amount at any one time outstanding not to exceed $5 million,
(iv) guarantees by any Subsidiary of the Company made in accordance with Section
1010, and (v) obligations under the Expense Agreement.
Section 1010. Limitation on Issuances of Guarantees of Indebtedness.
The Company will not permit any Subsidiary, directly or indirectly, to
guarantee, assume or in any other manner become liable with respect to any
Indebtedness unless such Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for a Guarantee of the KDSM
Senior Debentures, on the same terms as the
- 98 -
<PAGE>
guarantee of such Indebtedness except that if such Indebtedness is by its terms
expressly subordinated to the KDSM Senior Debentures, any such assumption,
guarantee or other liability of such Subsidiary with respect to such
Indebtedness shall be subordinated to such Subsidiary's Guarantee of the KDSM
Senior Debentures at least to the same extent as such Indebtedness is
subordinated to the KDSM Senior Debentures.
Section 1011. Limitation on Transactions with Affiliates.
The Company will not and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate of the
Company (other than the Company or a Wholly Owned Subsidiary of the Company)
unless (a) such transaction or series of transactions is in writing on terms
that are no less favorable to the Company or such Subsidiary, as the case may
be, than would be available in a comparable transaction in arm's-length dealings
with an unrelated third party and (b) (i) with respect to any transaction or
series of transactions involving aggregate payments in excess of $500,000, the
Company delivers an Officers' Certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (a) above and
such transaction or series of related transactions has been approved by a
majority of the members of the Board of Directors of the Company (and approved
by a majority of Independent Directors of the Company or, in the event there is
only one such Independent Director, by such Independent Director) and (ii) with
respect to any transaction or series of transactions involving aggregate
payments in excess of $1,000,000, an opinion as to the fairness to the Company
or such Subsidiary from a financial point of view issued by an investment
banking or appraisal firm of national standing. Notwithstanding the foregoing,
this provision will not apply to (A) any transaction with an officer or director
of the Company entered into in the ordinary course of business (including
compensation or employee benefit arrangements with any officer or director of
the Company), (B) any transaction entered into by the Company or one of its
Wholly Owned Subsidiaries with a Wholly Owned Subsidiary of the Company, (C)
transactions in existence on the date of this Indenture and (D) any Asset
Transfer Transaction.
Section 1012. Limitation on Liens.
The Company will not, and will not permit any Subsidiary of the
Company to, directly or indirectly, create, incur or affirm any Lien of any kind
upon any of its property or assets (including any intercompany notes), now owned
or acquired after the date of this Indenture, or any income or profits
therefrom, excluding, however, from the operation of the foregoing any of the
following:
(a) any Lien existing as of the date of this Indenture;
- 99 -
<PAGE>
(b) any Lien arising by reason of: (i) any judgment, decree or order
of any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired; (ii)
taxes not yet delinquent or which are being contested in good faith; (iii)
security for payment of workers' compensation or other insurance; (iv) good
faith deposits in connection with tenders, leases, or contracts (other than
contracts for the payment of money); (v) zoning restrictions, easements,
licenses, reservations, provisions, covenants, conditions, waivers, restrictions
on the use of property or minor irregularities of title (and with respect to
leasehold interests, mortgages, obligations, liens and other encumbrances
incurred, created, assumed or permitted to exist and arising by, through or
under a landlord or owner of the leased property, with or without consent of the
lessee), none of which materially impairs the use of any parcel of property
material to the operation of the business of the Company or any Subsidiary
thereof or the value of such property for the purpose of such business; (vi)
deposits to secure public or statutory obligations, or in lieu of surety or
appeal bonds; and (vii) operation of law in favor of mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary course of business
for sums which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection thereof;
(c) any Liens securing Purchase Money Obligations or Capital Lease
Obligations incurred in accordance with this Indenture; and
(d) any extension, renewal, refinancing or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through (c) so long as
the amount of security is not increased thereby.
Section 1013. Limitation on Sale of Assets.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, consummate an Asset Sale unless the Company or such
Subsidiary receives consideration at the time of such Asset Sale at least equal
to the Fair Market Value of the Equity Interests or assets sold as determined in
good faith by the Board of Directors of the Company and evidenced in a board
resolution, except in connection with an Asset Transfer Transaction.
Section 1014. Impairment of Security Interest.
The Company will not, and will not permit any of its Subsidiaries to,
take or omit to take any action which would have the result of adversely
affecting or impairing the security interests with respect to the Collateral in
contravention of this Indenture, except as required by applicable law and except
that, in accordance with the Pledge Agreement, Collateral consisting of shares
of Parent Preferred may be released simultaneously with the payment to
- 100 -
<PAGE>
the holders of Parent Preferred in connection with the redemption of shares of
Parent Preferred, and the Company shall not (and shall cause its Subsidiaries
not to) grant to, or suffer to exist in favor of, any Person, any interest
whatsoever in the Collateral except as permitted by the Collateral Documents or
this Indenture. The Company will not, and will not permit any of its
Subsidiaries to, enter into any agreement or instrument that by its terms
expressly requires that the proceeds received from the sale of any Collateral by
the Company be applied to repay, redeem or otherwise retire any Indebtedness of
any Person other than this Indenture.
Section 1015. Provision of Financial Statements and Reports.
Whether or not Sinclair or the Company is subject to Section 13(a) or
15(d) of the Exchange Act, the Company will send (or will cause to be sent) to
the holders of the KDSM Senior Debentures copies of the annual reports,
quarterly reports and other documents which Sinclair would have been required to
file with the Commission pursuant to such Sections 13(a) or 15(d) if Sinclair
were so subject, such documents to be filed with the Commission to the extent
permitted under the Exchange Act on or prior to the respective dates (the
"Required Filing Dates") by which Sinclair would have been required so to file
such documents if Sinclair were so subject. The Company will also in any event
(x) within 15 days of each Required Filing Date transmit by mail to all Holders
of the KDSM Senior Debentures, as their names and addresses appear in the
register, without cost to such holders copies of the annual reports, quarterly
reports and other documents which Sinclair would have been required to file with
the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if
Sinclair were subject to such Sections and (y) if filing such documents by
Sinclair with the Commission is not permitted under the Exchange Act, promptly
upon written request and payment of the reasonable cost of duplication and
delivery, supply copies of such documents to any prospective holder at the
Company's cost. Any such documents sent to the holders of the KDSM Senior
Debentures shall also include financial information regarding the Company to the
extent information regarding the Company would be required to be included in a
registration statement relating to the Preferred Securities or the KDSM Senior
Debentures, if such securities were being issued to the public. If the Trust is
the sole holder of the KDSM Senior Debentures, the Trustees of the Trust will
cause the reports delivered to the Trust pursuant to this paragraph to be
promptly delivered to the holders of the Preferred Securities.
Section 1016. Purchase of KDSM Senior Debentures upon a Change of
Control.
(a) Subject to the following sentence, if a Change of Control shall
occur at any time, then each Holder shall have the right to require that the
Company purchase such Holder's KDSM Senior Debentures in whole or in part in
integral multiples of $100, at a redemption price (the "Change of Control
Purchase Price") in cash in an amount equal to 101% of the principal amount of
such KDSM Senior Debentures, plus accrued and unpaid interest, if any, to the
date of purchase (the "Change of Control Purchase Date"), pursuant to
- 101 -
<PAGE>
the offer described in subsection (c) of this Section (the "Change of Control
Offer") and in accordance with the procedures set forth in Subsections (b), (c),
(d) and (e) of this Section. Notwithstanding the foregoing, the Holders of KDSM
Senior Debentures shall not have the right to cause the Company to redeem or
repurchase KDSM Senior Debentures upon a Change of Control under any
circumstances unless all of the Existing Notes and all Indebtedness under the
Bank Credit Agreement is repaid, redeemed as repurchased and all Indebtedness
under the Bank Credit Agreement is repaid, redeemed or repurchased, all of the
commitments and letters of credit issued under the Bank Credit Agreement are
terminated and all interest rate protection agreements entered into between
Sinclair and any lenders under the Bank Credit Agreement are terminated as a
result of such Change of Control, or holders of such instruments have consented
to a Change of Control Offer, in which case the date on which all Existing Notes
and all indebtedness under the Bank Credit Agreement are so repaid, redeemed or
repurchased and said commitments, letters of credit and interest rate protection
agreements are terminated or holders of such instruments have consented to a
Change of Control Offer, shall be deemed to be the date on which such Change of
Control shall have occurred.
(b) If the Holders shall have the right to cause the Company to redeem
or repurchase KDSM Senior Debentures upon a Change of Control, within 30 days
following any Change of Control, the Company shall notify the Trustee thereof
and give written notice (a "Change of Control Purchase Notice") of such Change
of Control to each Holder by first-class mail, postage prepaid, at his address
appearing in the Security Register stating or including:
(1) that a Change of Control has occurred, the date of such
event, and that such Holder has the right to require the Company to
repurchase such Holder's KDSM Senior Debentures at the Change of
Control Purchase Price;
(2) the circumstances and relevant facts regarding such Change
of Control (including but not limited to information with respect to
pro forma historical income, cash flow and capitalization after giving
effect to such Change of Control);
(3) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the Company
and Sinclair, the most recent subsequently filed Quarterly Report on
Form 10-Q, as applicable, and any Current Report on Form 8-K of the
Company filed subsequent to such Quarterly Report (or in the event the
Company is not required to prepare any of the foregoing Forms, the
comparable information required to be prepared by the Company and
Sinclair pursuant to Section 1015), (ii) a description of material
developments in the Company's and Sinclair's business subsequent to
the date of the latest of such reports and (iii) such other
information, if any, concerning the business of the Company and
Sinclair which the Company in good faith believes will enable such
Holders to make an informed investment decision;
- 102 -
<PAGE>
(4) that the Change of Control Offer is being made pursuant to
this Section 1016(a) and that all KDSM Senior Debentures properly
tendered pursuant to the Change of Control Offer will be accepted for
payment at the Change of Control Purchase Price;
(5) the Change of Control Purchase Date which shall be a
Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed, or such later date as is necessary to
comply with requirements under the Exchange Act;
(6) the Change of Control Purchase Price;
(7) the names and addresses of the Paying Agent and the offices
or agencies referred to in Section 1002;
(8) that KDSM Senior Debentures must be surrendered on or prior
to the Change of Control Purchase Date to the Paying Agent at the
office of the Paying Agent or to an office or agency referred to in
Section 1002 to collect payment;
(9) that the Change of Control Purchase Price for any KDSM
Senior Debenture which has been properly tendered and not withdrawn
will be paid promptly following the Change of Control Offer Purchase
Date;
(10) the procedures for withdrawing a tender of KDSM Senior
Debentures and Change of Control Purchase Notice;
(11) that any KDSM Senior Debenture not tendered will continue
to accrue interest; and
(12) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any KDSM Senior Debenture accepted
for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date.
(c) If the Holders shall have the right to cause the Company to redeem
or repurchase KDSM Senior Debentures upon a Change of Control, upon receipt by
the Company of the proper tender of KDSM Senior Debentures, the Holder of the
KDSM Senior Debenture in respect of which such proper tender was made shall
(unless the tender of such KDSM Senior Debenture is properly withdrawn)
thereafter be entitled to receive solely the Change of Control Purchase Price
with respect to such KDSM Senior Debenture. Upon surrender of any such KDSM
Senior Debenture for purchase in accordance with the foregoing provisions, such
KDSM Senior Debenture shall be paid by the Company at the Change of Control
Purchase Price; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Change of Control Purchase Date shall be payable
to the
- 103 -
<PAGE>
Holders of such KDSM Senior Debentures, or one or more Predecessor Securities,
registered as such on the relevant Regular Record Dates according to the terms
and the provisions of Section 309. If any KDSM Senior Debenture tendered for
purchase shall not be so paid upon surrender thereof, the principal thereof (and
premium, if any, thereon) shall, until paid, bear interest from the Change of
Control Purchase Date at the rate borne by such KDSM Senior Debenture. Holders
electing to have KDSM Senior Debentures purchased will be required to surrender
such KDSM Senior Debentures to the Paying Agent at the address specified in the
Change of Control Purchase Notice at least two Business Days prior to the Change
of Control Purchase Date. Any KDSM Senior Debenture that is to be purchased only
in part shall be surrendered to a Paying Agent at the office of such Paying
Agent (with, if the Company, the Security Registrar or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Security Registrar or the Trustee, as the case may be, duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such KDSM Senior Debenture, without service charge, one
or more new KDSM Senior Debentures of any authorized denomination as requested
by such Holder in an aggregate principal amount equal to, and in exchange for,
the portion of the principal amount of the KDSM Senior Debenture so surrendered
that is not purchased.
(d) If the Holders shall have the right to cause the Company to redeem
or repurchase KDSM Senior Debentures upon a Change of Control, the Company shall
(i) not later than the Change of Control Purchase Date, accept for payment
Securities or portions thereof tendered pursuant to the Change of Control Offer,
(ii) not later than 11:00 a.m. (New York City time) on the Change of Control
Purchase Date, deposit with the Paying Agent an amount of cash sufficient to pay
the aggregate Change of Control Purchase Price of all the KDSM Senior Debentures
or portions thereof which are to be purchased as of the Change of Control
Purchase Date and (iii) not later than the Change of Control Purchase Date,
deliver to the Paying Agent an Officers' Certificate stating the KDSM Senior
Debentures or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail or deliver to Holders of Securities so accepted
payment in an amount equal to the Change of Control Purchase Price of the KDSM
Senior Debentures purchased from each such Holder, and the Company shall execute
and the Trustee shall promptly authenticate and mail or deliver to such Holders
a new KDSM Senior Debenture equal in principal amount to any unpurchased portion
of the KDSM Senior Debenture surrendered. Any KDSM Senior Debentures not so
accepted shall be promptly mailed or delivered by the Paying Agent at the
Company's expense to the Holder thereof. The Company will publicly announce the
results of the Change of Control Offer on the Change of Control Purchase Date.
For purposes of this Section 1016, the Company shall choose a Paying Agent which
shall not be the Company.
(e) If the Holders shall have the right to cause the Company to redeem
or repurchase KDSM Senior Debentures upon a Change of Control, a Change of
Control
- 104 -
<PAGE>
Purchase Notice may be withdrawn before or after delivery by the Holder to the
Paying Agent at the office of the Paying Agent of the KDSM Senior Debenture to
which such Change of Control Purchase Notice relates, by means of a written
notice of withdrawal delivered by the Holder to the Paying Agent at the office
of the Paying Agent or to the office or agency referred to in Section 1002 to
which the related Change of Control Purchase Notice was delivered not later than
three Business Days prior to the Change of Control Purchase Date specifying, as
applicable:
(1) the name of the Holder;
(2) the certificate number of the KDSM Senior Debenture in
respect of which such notice of withdrawal is being submitted;
(3) the principal amount of the KDSM Senior Debenture (which
shall be $100 or an integral multiple thereof) delivered for purchase
by the Holder as to which such notice of withdrawal is being
submitted; and
(4) the principal amount, if any, of such KDSM Senior Debenture
(which shall be $100 or an integral multiple thereof) that remains
subject to the original Change of Control Purchase Notice and that has
been or will be delivered for purchase by the Company.
(f) If the Holders shall have the right to cause the Company to redeem
or repurchase KDSM Senior Debentures upon a Change of Control, subject to
applicable escheat laws, as provided in the KDSM Senior Debentures, the Trustee
and the Paying Agent shall return to the Company any cash that remains
unclaimed, together with interest or dividends, if any, thereon, held by them
for the payment of the Change of Control Purchase Price; provided, however, that
(x) to the extent that the aggregate amount of cash deposited by the Company
pursuant to clause (ii) of paragraph (d) above exceeds the aggregate Change of
Control Purchase Price of the KDSM Senior Debentures or portions thereof to be
purchased, then the Trustee shall hold such excess for the Company and (y)
unless otherwise directed by the Company in writing, promptly after the Business
Day following the Change of Control Purchase Date the Trustee shall return any
such excess to the Company together with interest, if any, thereon.
(g) If the Holders shall have the right to cause the Company to redeem
or repurchase KDSM Senior Debentures upon a Change of Control, the Company shall
comply with the applicable tender offer rules, including Rule 14e-1 under the
Exchange Act, and any other applicable securities laws or regulations in
connection with a Change of Control Offer.
Section 1017. Ownership and Existence of Trust.
- 105 -
<PAGE>
Subject to Article Eight, the Company shall at all times own 100% of
the Common Securities of the Trust. The Company shall not voluntarily dissolve,
wind-up or terminate the Trust, except in the circumstances permitted by the
Trust Agreement. The Company shall use its reasonable efforts, consistent with
the terms and provisions of the Trust Agreement, to cause the Trust to remain a
business trust and otherwise not to be classified a.s an association taxable as
a corporation for United States federal income tax purposes.
Section 1018. Ownership of the Company.
Subject to Article Eight, the Company hereby covenants that Sinclair
shall at all times, directly or indirectly, own all of the Capital Stock of the
Company.
Section 1019. Application of Dividends and Redemption Proceeds.
(a) The Company shall promptly, but in no event later than the
applicable Interest Payment Date make interest payments on the KDSM Senior
Debentures if the Company receives payments on the Parent Preferred to the
extent necessary to pay any and all amounts due and owing under the KDSM Senior
Debentures whether or not an Extension Period is continuing, except that the
Company may defer interest payments for one quarterly period regardless of its
receipt of dividends on the Parent Preferred.
(b) The Company shall promptly apply the proceeds received as a result
of the redemption of the Parent Preferred to the redemption of the KDSM Senior
Debentures.
Section 1020. Change of Control Offer under Parent Preferred.
Upon the occurrence of a Change Of Control with respect to Sinclair
resulting in Sinclair making a Change of Control Offer under the terms of the
Parent Preferred to purchase the Parent Preferred, the Company shall timely
elect to have redeemed, and shall tender for redemption, an aggregate amount of
Parent Preferred equal to the Liquidation Value of the Preferred Securities
which holders of Preferred Securities elect to tender for redemption to the
Trust as a result of such Change of Control.
Section 1021. Limitation on Liens on Parent Preferred.
The Company shall not, directly or indirectly, sell, offer to sell,
grant any option with respect to, pledge or incur any Liens with respect to, the
Parent Preferred other than as permitted by the Collateral Documents.
Section 1022. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, on or before a date not
more than 60 days after the end of each fiscal quarter and not more than 120
days after the end of each
- 106 -
<PAGE>
fiscal year of the Company ending after the date hereof, a written statement
signed by two executive officers of the Company, one of whom shall be the
principal executive officer, principal financial officer or principal accounting
officer of the Company, stating whether or not, after a review of the activities
of the Company during such year or such quarter and of the Company's performance
under this Indenture, to the best knowledge, based on such review, of the
signers thereof, the Company has fulfilled all its obligations and is in
compliance with all conditions and covenants under this Indenture throughout
such year or quarter, as the case may be, and, if there has been a Default
specifying each Default and the nature and status thereof.
(b) When any Default or Event of Default has occurred and is
continuing, or if the Trustee or any Holder or the trustee for or the holder of
any other evidence of Indebtedness of the Company or any Subsidiary gives any
notice or takes any other action with respect to a claimed default, the Company
shall deliver to the Trustee by registered or certified mail or by telegram,
telex or facsimile transmission followed by hard copy an Officers' Certificate
specifying such Default, Event of Default, notice or other action within five
Business Days of its occurrence.
Section 1023. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1006 through 1015, 1019(a) and 1021,
if, before or after the time for such compliance, the Holders of not less than a
majority in aggregate principal amount of the KDSM Senior Debentures at the time
Outstanding shall, by Act of such Holders, waive such compliance in such
instance with such covenant or condition, but no such waiver shall extend to or
affect such covenant or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such covenant or condition shall remain
in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF KDSM SENIOR DEBENTURES
Section 1101. Rights of Redemption.
(a) At any time on or after March 15, 2002, the KDSM Senior Debentures
may be redeemed at the election of the Company, in whole or in part, subject to
the conditions, and at the Redemption Price, specified in the form of KDSM
Senior Debenture set forth in Section 203, together with accrued and unpaid
interest, if any, to the Redemption Date.
- 107 -
<PAGE>
(b) At any time on or prior to March 15, 2000, the Company may redeem
up to $66,666,666 of the original principal amount of KDSM Senior Debentures
with the net proceeds of one or more redemptions of the Parent Preferred (which
will have been redeemed from the proceeds of one or more Public Equity Offerings
of Sinclair) subject to the conditions specified in the form of KDSM Senior
Debenture set forth in Section 203, at a Redemption Price of 111.625% of the
aggregate principal amount, together with accrued and unpaid interest, if any,
to the Redemption Date; provided, that after any such redemption at least
$139,333,334 principal amount of the KDSM Senior Debentures remains outstanding.
(c) If a Tax Event or Investment Company Act Event shall occur and be
continuing, the Company may redeem the KDSM Senior Debentures, in whole or in
part, subject to the conditions and at the Redemption Price specified in the
form of KDSM Senior Debenture in Section 203, together with accrued and unpaid
interest, if any, to the Redemption Date.
Section 1102. Applicability of Article.
Redemption of KDSM Senior Debentures at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
Section 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any KDSM Senior Debentures
pursuant to Section 1101 shall be evidenced by a Company Order and an Officers'
Certificate. In case of any redemption at the election of the Company, the
Company shall, not less than 45 nor more than 60 days prior to the Redemption
Date fixed by the Company (unless a shorter notice period shall be satisfactory
to the Trustee), notify the Trustee in writing of such Redemption Date and of
the principal amount of KDSM Senior Debentures to be redeemed.
Section 1104. Selection by Trustee of KDSM Senior Debentures to Be
Redeemed.
If less than all the KDSM Senior Debentures are to be redeemed, the
particular KDSM Senior Debentures or portions thereof to be redeemed shall be
selected not more than 30 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities not previously called for redemption, pro rata, by
lot or such other method as the Trustee shall deem fair and reasonable, and the
amounts to be redeemed may be equal to $100 or any integral multiple thereof.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the KDSM Senior Debentures selected for redemption and,
in the case of any KDSM Senior Debentures selected for partial redemption, the
principal amount thereof to be redeemed.
- 108 -
<PAGE>
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of KDSM Senior Debentures shall
relate, in the case of any KDSM Senior Debenture redeemed or to be redeemed only
in part, to the portion of the principal amount of such KDSM Senior Debenture
which has been or is to be redeemed.
Section 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of KDSM Senior Debentures to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding KDSM Senior Debentures are to be
redeemed, the identification of the particular KDSM Senior Debentures to be
redeemed;
(d) in the case of a KDSM Senior Debenture to be redeemed in part, the
principal amount of such KDSM Senior Debenture to be redeemed and that after the
Redemption Date upon surrender of such KDSM Senior Debenture, new KDSM Senior
Debenture or KDSM Senior Debentures in the aggregate principal amount equal to
the unredeemed portion thereof will be issued;
(e) that KDSM Senior Debentures called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such KDSM Senior Debenture or portion thereof, and that
(unless the Company shall default in payment of the Redemption Price) interest
thereon shall cease to accrue on and after said date;
(g) the place or places where such KDSM Senior Debentures are to be
surrendered for payment of the Redemption Price; and
(h) the CUSIP number, if any, relating to such KDSM Senior Debentures.
Notice of redemption of KDSM Senior Debentures to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
written request, by the Trustee in the name and at the expense of the Company.
- 109 -
<PAGE>
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice to any Holder of any KDSM
Senior Debenture designated for redemption as a whole or in part, or any defect
in any such notice, shall not affect the validity of the proceedings for the
redemption of any other KDSM Senior Debenture.
Section 1106. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money in same day funds sufficient to pay the Redemption Price of and (except if
the Redemption Date shall be an Interest Payment Date) accrued interest on, all
the KDSM Senior Debentures or portions thereof which are to be redeemed on that
date. When the Redemption Date falls on an Interest Payment Date, payments of
interest due on such date are to be paid as provided hereunder as if no such
redemption were occurring.
Section 1107. KDSM Senior Debentures Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the KDSM Senior
Debentures so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such KDSM Senior Debentures shall cease to bear interest. Upon
surrender of any such KDSM Senior Debenture for redemption in accordance with
said notice, such KDSM Senior Debenture shall be paid by the Company at the
Redemption Price together with accrued interest to the Redemption Date;
provided, however, that installments of interest whose Stated Maturity is on or
prior to the Redemption Date shall be payable to the Holders of such KDSM Senior
Debentures, or one or more Predecessor Securities, registered as such on the
relevant Regular Record Dates according to the terms and the provisions of
Section 309.If any KDSM Senior Debenture called for redemption shall not be so
paid upon surrender thereof for redemption, the principal and premium, if any,
shall, until paid, bear interest from the Redemption Date at the rate borne by
such KDSM Senior Debenture.
Section 1108. KDSM Senior Debentures Redeemed or Purchased in Part.
Any KDSM Senior Debenture which is to be redeemed or purchased only in
part shall be surrendered to the Paying Agent at the office or agency maintained
for such purpose pursuant to Section 1002 (with, if the Company, the Security
Registrar or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company, the Security
Registrar or the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such KDSM Senior
Debenture without
- 110 -
<PAGE>
service charge, a new KDSM Senior Debenture or KDSM Senior Debentures, of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to, and in exchange for, the unredeemed portion of the principal of
the KDSM Senior Debenture so surrendered that is not redeemed or purchased.
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of KDSM Senior
Debentures herein, rights to payment including Additional Interest and Penalty
Interest and rights to replacement of stolen, lost or mutilated KDSM Senior
Debentures expressly provided for) and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) all the KDSM Senior Debentures theretofore authenticated and
delivered (other than (i) KDSM Senior Debentures which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section 308 or
(ii) all KDSM Senior Debentures for whose payment United States dollars have
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee for cancellation;
(b) the Company or Sinclair has paid or caused to be paid all other
sums payable hereunder by the Company or Sinclair; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel stating that (i) all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with and (ii) such satisfaction and discharge will not result in a
breach or violation of or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or Sinclair is a
party or by which the Company or Sinclair is bound.
Opinions of Counsel required to be delivered under this Section may
have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
- 111 -
<PAGE>
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if United
States dollars shall have been deposited with the Trustee pursuant to subclause
(2) of Subsection (a) of this Section, the obligations of the Trustee under
Section 1202 and the last paragraph of Section 1003 shall survive.
Section 1202. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars deposited with the Trustee pursuant to Section 1201 shall
be held in trust and applied by it, in accordance with the provisions of the
KDSM Senior Debentures and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own Paying Agent)
as the Trustee may determine, to the Persons entitled thereto, of the principal
of, premium, if any, and interest on the KDSM Senior Debentures for whose
payment such United States dollars have been deposited with the Trustee.
ARTICLE THIRTEEN
GUARANTEE
Section 1301. Sinclair's Guarantee.
(a) Sinclair's Guarantee and the terms and conditions thereof as set
forth in this Article Thirteen are expressly conditioned upon Sinclair's
confirmation of the effectiveness of the Guarantee pursuant to Section 1301(b)
and under no circumstances shall Sinclair be bound by any terms of this Article
Thirteen and this Guarantee until the requirements of the provisions of Section
1301(b) have been fully satisfied.
(b) Sinclair, simultaneously with the dissolution of the Trust
following a Tax Event, upon effectiveness, absolutely, unconditionally and
irrevocably guarantees, to the Trustee and the Holders, as if Sinclair were the
principal debtor, the punctual payment on a junior subordinated basis as
described in this Article Thirteen when due of all Indenture Obligations (which
for purposes of this Guarantee shall also be deemed to include all commissions,
fees, charges, costs and other expenses (including reasonable legal fees and
disbursements of one counsel in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances) arising out of or incurred by the Trustee
or the Holders in connection with the enforcement of this Guarantee); provided,
Sinclair confirms the effectiveness of the Guarantee at the time of distribution
by way of a supplemental indenture to this Indenture (which it shall not do if
such guarantee is not permitted under the terms of the Existing Notes or the
Bank Credit Agreement). Notwithstanding anything to the contrary, this Guarantee
does not constitute a guarantee of performance of any non-payment covenants
under this Indenture.
- 112 -
<PAGE>
Section 1302. Continuing Guarantee; No Right of Set-Off; Independent
Obligation.
Subject to the Guarantee provided by this Article Thirteen being
deemed effective pursuant to Section 1301:
(a) This Guarantee shall (upon effectiveness) be a continuing
guarantee of the payment and performance of all Indenture Obligations and shall
remain in full force and effect until the payment in full of all of the
Indenture Obligations and shall apply to and secure any ultimate balance due or
remaining unpaid to the Trustee or the Holders; and this Guarantee shall not be
considered as wholly or partially satisfied by the payment or liquidation at any
time or from time to time of any sum of money for the time being due or
remaining unpaid to the Trustee or the Holders. Sinclair covenants and agrees to
comply with all obligations, covenants, agreements and provisions applicable to
it in this Indenture (upon the Guarantee's effectiveness). Without limiting the
generality of the foregoing, Sinclair's liability shall extend to all amounts
which constitute part of the Indenture Obligations and would be owed by the
Company under this Indenture and the KDSM Senior Debentures but for the fact
that they are unenforceable, reduced, limited, impaired, suspended or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Company.
(b) Sinclair hereby guarantees (upon the Guarantee's effectiveness)
that the Indenture Obligations will be paid on a junior subordinated basis to
the Trustee without set-off or counterclaim or other reduction whatsoever
(whether for taxes, withholding or otherwise) in lawful currency of the United
States of America.
(c) Sinclair guarantees (upon the Guarantee's effectiveness) that the
Indenture Obligations shall be paid strictly in accordance with their terms
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the holders of the
KDSM Senior Debentures.
(d) Sinclair's liability to pay or perform or cause the performance of
the Indenture Obligations under this Guarantee (upon the Guarantee's
effectiveness) shall arise forthwith after demand for payment or performance by
the Trustee has been given to Sinclair in the manner prescribed in Section 106
hereof.
(e) Except as provided herein, the provisions of this Article Thirteen
cover all agreements between the parties hereto relative to this Guarantee and
none of the parties shall be bound by any representation, warranty or promise
made by any Person relative thereto which is not embodied herein; and it is
specifically acknowledged and agreed that this Guarantee upon the Guarantee's
effectiveness, is delivered by Sinclair free of any conditions whatsoever and
that no representations, warranties or promises have been made to Sinclair
affecting its liabilities hereunder, and that the Trustee shall not be bound by
any
- 113 -
<PAGE>
representations, warranties or promises now or at any time hereafter made by th
Company to Sinclair.
Section 1303. Guarantee Absolute.
Upon the Guarantee's effectiveness, the obligations of Sinclair
hereunder are independent of the obligations of the Company under the KDSM
Senior Debentures and this Indenture and a separate action or actions may be
brought and prosecuted against Sinclair whether or not an action or proceeding
is brought against the Company and whether or not the Company is joined in any
such action or proceeding. Subject to the Guarantee provided by this Article
Thirteen being deemed effective in accordance with Section 1301, the liability
of Sinclair hereunder is irrevocable, absolute and unconditional and (to the
extent permitted by law) the liability and obligations of Sinclair hereunder
shall not be released, discharged, mitigated, waived, impaired or affected in
whole or in part by:
(a) any defect or lack of validity or enforceability in respect of any
Indebtedness or other obligation of the Company or any other Person under this
Indenture or the KDSM Senior Debentures, or any agreement or instrument relating
to any of the foregoing;
(b) any grants of time, renewals, extensions, indulgences, releases,
discharges or modifications which the Trustee or the Holders may extend to, or
make with, the Company, Sinclair or any other Person, or any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Indenture Obligations, or any other amendment or waiver of, or any consent to or
departure from, this Indenture or the KDSM Senior Debentures, including any
increase or decrease in the Indenture Obligations;
(c) the taking of security from the Company, Sinclair or any other
Person, and the release, discharge or alteration of, or other dealing with, such
security;
(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any of the
Indenture Obligations and the obligations of Sinclair hereunder;
(e) the abstention from taking security from the Company, Sinclair or
any other Person or from perfecting, continuing to keep perfected or taking
advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any
security received from the Company, Sinclair or any other Person, and including
any other guarantees received by the Trustee;
(g) any other dealings with the Company, Sinclair or any other Person,
or with any security;
- 114 -
<PAGE>
(h) the Trustee's or the Holders' acceptance of compositions from the
Company or Sinclair;
(i) the application by the Holders or the Trustee of all monies at any
time and from time to time received from the Company, Sinclair or any other
Person on account of any indebtedness and liabilities owing by the Company or
Sinclair to the Trustee or the Holders, in such manner as the Trustee or the
Holders deem best and the changing of such application in whole or in part and
at any time or from time to time, or any manner of application of collateral, if
any, or proceeds thereof, to all or any of the Indenture Obligations, or the
manner of sale of any such collateral;
(j) the release or discharge of the Company or Sinclair of the KDSM
Senior Debentures or of any Person liable directly as surety or otherwise by
operation of law or otherwise for the KDSM Senior Debentures, other than an
express release in writing given by the Trustee, on behalf of the Holders, of
the liability and obligations of Sinclair hereunder;
(k) any change in the name, business, capital structure or governing
instrument of the Company or Sinclair or any refinancing or restructuring of any
of the Indenture Obligations;
(l) the sale of the Company's or Sinclair's business or any part
thereof;
(m) subject to Section 1314, any merger or consolidation, arrangement
or reorganization of the Company, Sinclair, any Person resulting from the merger
or consolidation of the Company or Sinclair with any other Person or any other
successor to such Person or merged or consolidated Person or any other change in
the corporate existence, structure or ownership of the Company or Sinclair;
(n) the insolvency, bankruptcy, liquidation, winding-up, dissolution,
receivership or distribution of the assets of the Company or its assets or any
resulting discharge of any obligations of the Company (whether voluntary or
involuntary) or of Sinclair or the loss of corporate existence;
(o) subject to Section 1314, any arrangement or plan of reorganization
affecting the Company or Sinclair;
(p) any other circumstance (including any statute of limitations) that
might otherwise constitute a defense available to, or discharge of, the Company
or Sinclair; or
(q) any modification, compromise, settlement or release by the
Trustee, or by operation of law or otherwise, of the Indenture Obligations or
the liability of the Company or any other obligor under the KDSM Senior
Debentures, in whole or in part, and any refusal
- 115 -
<PAGE>
of payment by the Trustee, in whole or in part, from any other obligor or other
guarantor in connection with any of the Indenture Obligations, whether or not
with notice to, or further assent by, or any reservation of rights against,
Sinclair.
Section 1304. Right to Demand Full Performance.
In the event of any demand for payment or performance by the Trustee
from Sinclair hereunder (after the Guarantee's effectiveness), the Trustee or
the Holders shall have the right to demand its full claim and to receive all
dividends or other payments in respect thereof until the Indenture Obligations
have been paid in full, and Sinclair shall continue to be liable hereunder for
any balance which may be owing to the Trustee or the Holders by the Company
under this Indenture and the KDSM Senior Debentures. The retention by the
Trustee or the Holders of any security, prior to the realization by the Trustee
or the Holders of its rights to such security upon foreclosure thereon, shall
not, as between the Trustee and Sinclair, be considered as a purchase of such
security, or as payment, satisfaction or reduction of the Indenture Obligations
due to the Trustee or the Holders by the Company or any part thereof.
Section 1305. Waivers.
(a) Upon the Guarantee's effectiveness, Sinclair expressly waives (to
the extent permitted by law) notice of the acceptance of this Guarantee and
notice of the existence, renewal, extension or the non-performance, non-payment,
or non-observance on the part of the Company of any of the terms, covenants,
conditions and provisions of this Indenture or the KDSM Senior Debentures or any
other notice whatsoever to or upon the Company or Sinclair with respect to the
Indenture Obligations. Upon the Guarantee's effectiveness, Sinclair acknowledges
communication to it of the terms of this Indenture and the KDSM Senior
Debentures and all of the provisions therein contained and consents to and
approves the same. Upon the Guarantee's effectiveness, Sinclair expressly waives
(to the extent permitted by law) diligence, presentment, protest and demand for
payment.
(b) Without prejudice to any of the rights or recourses which the
Trustee or the Holders may have against the Company, upon the Guarantee's
effectiveness, Sinclair expressly waives (to the extent permitted by law) any
right to require the Trustee or the Holders to:
(i) initiate or exhaust any rights, remedies or recourse against
the Company, Sinclair or any other Person;
(ii) value, realize upon, or dispose of any security of the
Company or any other Person held by the Trustee or the Holders; or
- 116 -
<PAGE>
(iii) initiate or exhaust any other remedy which the Trustee or
the Holders may have in law or equity;before requiring or becoming
entitled to demand payment from Sinclair under this Guarantee.
Section 1306. Sinclair Remains Obligated in Event the Company Is No
Longer Obligated to Discharge Indenture Obligations.
It is the express intention of the Trustee and Sinclair that if for
any reason the Company has no legal existence, is or becomes under no legal
obligation to discharge the Indenture Obligations owing to the Trustee or the
Holders by the Company or if any of the Indenture Obligations owing by the
Company to the Trustee or the Holders becomes irrecoverable from the Company by
operation of law or for any reason whatsoever, this Guarantee and the covenants,
agreements and obligations of the Sinclair contained in this Article Thirteen
shall nevertheless be binding upon the Sinclair (upon the Guarantee's
effectiveness), as principal debtor, until such time as all such Indenture
Obligations have been paid in full to the Trustee and all Indenture Obligations
owing to the Trustee or the Holders by the Company have been discharged, or such
earlier time as Section 402 shall apply to the KDSM Senior Debentures and
Sinclair (upon the Guarantee's effectiveness) shall be responsible for the
payment thereof to the Trustee or the Holders upon demand.
Section 1307. Fraudulent Conveyance; Subrogation.
(a) Any term or provision of this Guarantee to the contrary
notwithstanding, the aggregate amount of the Indenture Obligations guaranteed
hereunder shall be reduced to the extent necessary to prevent this Guarantee
from violating or becoming voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
(b) Sinclair hereby waives all rights of subrogation or contribution,
whether arising by contract or operation of law (including, without limitation,
any such right arising under federal bankruptcy law) or otherwise by reason of
any payment by it pursuant to the provisions of this Article Thirteen.
Section 1308. Guarantee Is in Addition to Other Security.
This Guarantee to the extent effective shall be in addition to and not
in substitution for any other guarantees or other security which the Trustee may
now or hereafter hold in respect of the Indenture Obligations owing to the
Trustee or the Holders by the Company and (except as may be required by law) the
Trustee shall be under no obligation to marshal in favor of Sinclair any other
guarantees or other security or any moneys or other assets which the Trustee may
be entitled to receive or upon which the Trustee or the Holders may have a
claim.
- 117 -
<PAGE>
Section 1309. Release of Security Interests.
Without limiting the generality of the foregoing and except as
otherwise provided in this Indenture, Sinclair, upon the Guarantee's
effectiveness, consents and agrees, to the fullest extent permitted by
applicable law, that the rights of the Trustee hereunder, and the liability of
Sinclair hereunder, if any, shall not be affected by any and all releases for
any purpose of any collateral, if any, from the Liens and security interests
created by any collateral document (including the Collateral Documents) and that
this Guarantee shall continue to be effective, or be reinstated, as the case may
be, in accordance with its terms if at any time any payment of any of the
Indenture Obligations is rescinded or must otherwise be returned by the Trustee
upon the insolvency, bankruptcy or reorganization of the Company or otherwise,
all as though such payment had not been made.
Section 1310. No Bar to Further Actions.
Except as provided by law, no action or proceeding brought or
instituted under Article Thirteen and this Guarantee and no recovery or judgment
in pursuance thereof shall be a bar or defense to any further action or
proceeding which may be brought under Article Thirteen and this Guarantee by
reason of any further default or defaults under Article Thirteen and this
Guarantee or in the payment of any of the Indenture Obligations owing by the
Company.
Section 1311. Failure to Exercise Rights Shall Not Operate as a
Waiver; No Suspension of Remedies.
(a) No failure to exercise and no delay in exercising, on the part of
the Trustee or the Holders, any right, power, privilege or remedy under this
Article Thirteen and this Guarantee shall operate as a waiver thereof, nor shall
any single or partial exercise of any rights, power, privilege or remedy
preclude any other or further exercise thereof, or the exercise of any other
rights, powers, privileges or remedies. The rights and remedies herein provided
for are cumulative and not exclusive of any rights or remedies provided in law
or equity.
(b) Nothing contained in this Article Thirteen shall limit the right
of the Trustee or the Holders to take any action to accelerate the maturity of
the KDSM Senior Debentures pursuant to Article Five or to pursue any rights or
remedies hereunder or under applicable law.
Section 1312. Trustee's Duties; Notice to Trustee.
(a) Any provision in this Article Thirteen or elsewhere in this
Indenture allowing the Trustee to request any information or to take any action
authorized by, or on behalf of Sinclair, shall be permissive and shall not be
obligatory on the Trustee except as the Holders
- 118 -
<PAGE>
may direct in accordance with the provisions of this Indenture or where the
failure of the Trustee to request any such information or to take any such
action arises from the Trustee's negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into the existence,
powers or capacities of the Company, Sinclair or the officers, directors or
agents acting or purporting to act on their respective behalf.
Section 1313. Successors and Assigns.
All terms, agreements and conditions of this Article Thirteen shall
extend to and be binding upon Sinclair and its successors and permitted assigns
and shall inure to the benefit of and may be enforced by the Trustee and its
successors and assigns; provided, however, that Sinclair may not assign any of
its rights or obligations hereunder other than in accordance with Article Eight.
Section 1314. Release of Guarantee.
Concurrently with the payment in full of all of the Indenture
Obligations, Sinclair shall be released from and relieved of its obligations
under this Article Thirteen, if any. Upon the delivery by the Company to the
Trustee of an Officers' Certificate and, if requested by the Trustee, an Opinion
of Counsel to the effect that the transaction giving rise to the release of this
Guarantee was made by the Company in accordance with the provisions of this
Indenture and the KDSM Senior Debentures, the Trustee shall execute any
documents reasonably required in order to evidence the release of Sinclair from
their obligations under this Guarantee. If any of the Indenture Obligations are
revived and reinstated after the termination of this Guarantee (if such
Guarantee was ever deemed effective), then all of the obligations of Sinclair
under this Guarantee shall be revived and reinstated as if this Guarantee had
not been terminated until such time as the Indenture Obligations are paid in
full, and Sinclair shall enter into an amendment to this Guarantee, reasonably
satisfactory to the Trustee, evidencing such revival and reinstatement.
Section 1315. Guarantee Subordinate to Sinclair Senior Indebtedness.
Sinclair covenants and agrees, and each Holder of a Guarantee, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the Indebtedness represented
by the Guarantee (if effective) is hereby made subordinate and subject in right
of payment as provided in this Article to the prior payment in full in cash or
Cash Equivalents or in any other form as acceptable to the holders of Sinclair
Senior Indebtedness of all Sinclair Senior Indebtedness; provided, however, that
the Indebtedness represented by this Guarantee in all respects shall rank
equally with, or prior to, all existing and future Indebtedness of Sinclair
which by its terms is pari passu with this Guarantee.
- 119 -
<PAGE>
This Article Thirteen shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue to
hold Sinclair Senior Indebtedness; and such provisions are made for the benefit
of the holders of Sinclair Senior Indebtedness; and such holders are made
obligees hereunder and they or each of them may enforce such provisions.
With respect to the relative rights of Holders and holders of Sinclair
Senior Indebtedness and for the purpose of Section 1307(a), each Holder of a
KDSM Senior Debenture by his acceptance thereof acknowledges that all Sinclair
Senior Indebtedness and any guarantee by Sinclair of such Sinclair Senior
Indebtedness shall be deemed to have been incurred prior to the incurrence by
Sinclair of its liability under its Guarantee.
Section 1316. Payment Over of Proceeds upon Dissolution of Sinclair,
etc.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to Sinclair or to its creditors, as
such, or to its assets, or (b) any liquidation, dissolution or other winding up
of Sinclair, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets or liabilities of Sinclair, then and in any such
event:
(i) the holders of Sinclair Senior Indebtedness shall be
entitled to receive payment in full in cash or Cash Equivalents or in
any other form as acceptable to the holders of Sinclair Senior
Indebtedness of all amounts due on or in respect of all Sinclair
Senior Indebtedness, before the Holders of the KDSM Senior Debentures
are entitled to receive any payment or distribution of any kind or
character (excluding Permitted Sinclair Junior Securities) on account
of the Guarantee; and
(ii) any payment or distribution of assets of Sinclair of any
kind or character, whether in cash, property or securities (excluding
Permitted Sinclair Junior Securities), by set-off or otherwise, to
which the Holders or the Trustee would be entitled but for the
provisions of this Article shall be paid by the liquidating trustee or
agent or other Person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the holders of Sinclair Senior Indebtedness or their
representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing any of such
Sinclair Senior Indebtedness may have been issued, ratably according
to the aggregate amounts remaining unpaid on account of the Senior
Sinclair Indebtedness held or represented by each, to the extent
necessary to make payment in full in cash or Cash Equivalents or in
any other form as acceptable to the holders of Sinclair Senior
Indebtedness of all Sinclair Senior Indebtedness remaining unpaid,
after
- 120 -
<PAGE>
giving effect to any concurrent payment or distribution to the holders
of such Sinclair Senior Indebtedness; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of any KDSM
Senior Debenture shall have received any payment or distribution of
assets of Sinclair of any kind or character, whether in cash, property
or securities, in respect of the Guarantee before all Sinclair Senior
Indebtedness is paid in full, then and in such event such payment or
distribution (excluding Permitted Sinclair Junior Securities) shall be
paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other
person making payment or distribution of assets of Sinclair for
application to the payment of all Sinclair Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Sinclair Senior
Indebtedness in full in cash or Cash Equivalents or in any other form
as acceptable to the holders of Sinclair Senior Indebtedness after
giving effect to any concurrent payment or distribution to or for the
holders of Sinclair Senior Indebtedness.
The consolidation of Sinclair with, or the merger of Sinclair with or
into, another Person or the liquidation or dissolution of Sinclair following the
sale, assignment, conveyance, transfer, lease or other disposal of all or
substantially all of Sinclair's properties or assets to another Person upon the
terms and conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshaling of assets and liabilities of such Sinclair for the
purposes of this Section if the Person formed by such consolidation or the
surviving entity of such merger or the Person which acquires by sale,
assignment, conveyance, transfer, lease or other disposal of all or
substantially all of Sinclair's properties and assets, as the case may be,
shall, as a part of such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposal comply with the conditions set forth in
Article Eight.
Section 1317. Suspension of Payment When Senior Indebtedness in
Default.
(a) Unless Section 1316 shall be applicable, upon the occurrence of a
Payment Default, no payment (other than any payments previously made pursuant to
the provisions described in Article Four) or distribution of any assets of the
Company of any kind or character (excluding Permitted Sinclair Junior
Securities) shall be made by the Company on account of principal of, premium, if
any, or interest on, the KDSM Senior Debentures or any other Indenture
Obligations or on account of the purchase, redemption, defeasance (whether under
Section 402 or 403) or other acquisition of or in respect of the KDSM Senior
Debentures unless and until such Payment Default shall have been cured or waived
or shall have ceased to exist or the Designated Sinclair Senior Indebtedness
with respect to which such Payment Default shall have occurred shall have been
discharged or paid in full in cash or Cash Equivalents or in any other form as
acceptable to the Holders of Sinclair Senior
- 121 -
<PAGE>
Indebtedness, after which the Company shall resume making any and all required
payments in respect of the Securities, including any missed payments.
(b) Unless Section 1316 shall be applicable, upon (1) the occurrence
of a Nonpayment Default and (2) receipt by the Trustee and the Company from the
representative of the holders of Designated Sinclair Senior Indebtedness (a
"Senior Representative") of written notice of such occurrence, no payment (other
than any payments previously made pursuant to the provisions described in
Article Four) or distribution of any assets of the Company of any kind or
character (excluding Permitted Sinclair Junior Securities) shall be made by the
Company on account of any principal of, premium, if any, or interest on, the
KDSM Senior Debentures Securities or any other Indenture Obligations or on
account of the purchase, redemption, defeasance or other acquisition of or in
respect of KDSM Senior Debentures for a period ("Payment Blockage Period")
commencing on the date of receipt by the Trustee of such notice unless and until
the earliest of (subject to any blockage of payments that may then or thereafter
be in effect under subsection (a) of this Section 1317) (x) 179 days having
elapsed since receipt of such written notice by the Trustee (provided any
Designated Sinclair Senior Indebtedness as to which notice was given shall
theretofore have not been accelerated), (y) the date such Non-payment Default
and all other Non-payment Defaults as to which notice is also given after such
period is initiated shall have been cured or waived or shall have ceased to
exist or the Sinclair Senior Indebtedness related thereto shall have been
discharged or paid in full in cash or Cash Equivalents or in any other form as
acceptable to the Holders of Sinclair Senior Indebtedness, or (z) the date on
which such Payment Blockage Period (and all Non-payment Defaults as to which
notice is given after such Payment Blockage Period is initiated) shall have been
terminated by written notice to the Company or the Trustee from the Senior
Representative or the holders of at least a majority of the Designated Sinclair
Senior Indebtedness that initiated such Payment Blockage Period, after which, in
each such case, the Company shall resume making any and all required payments in
respect of the KDSM Senior Debentures, including any missed payments.
Notwithstanding any other provision of this Indenture, in no event shall a
Payment Blockage Period extend beyond 179 days from the date of the receipt by
the Company or the Trustee of the notice referred to in clause (2) of this
paragraph (b) (the "Initial Blockage Period"). Any number of notices of
Non-payment Defaults may be given during the Initial Blockage Period; provided
that during any 365-day consecutive period only one Payment Blockage Period
during which payment of principal of, or interest on, the KDSM Senior Debentures
may not be made may commence and the duration of the Payment Blockage Period may
not exceed 179 days. No Non-payment Default with respect to Designated Sinclair
Senior Indebtedness which existed or was continuing on the date of the
commencement of any Payment Blockage Period will be, or can be, made the basis
for the commencement of a second Payment Blockage Period, whether or not within
a period of 365 consecutive days, unless such default shall have been cured or
waived for a period of not less than 90 consecutive days.
- 122 -
<PAGE>
(c) In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any KDSM Senior Debenture
prohibited by the foregoing provisions of this Section, then and in such event
such payment shall be paid over and delivered forthwith to a Senior
Representative of the holders of the Designated Senior Indebtedness or as a
court of competent jurisdiction shall direct.
Section 1318. Payment Permitted by Sinclair if No Default.
Nothing contained in this Article, elsewhere in this Indenture or in
any of the KDSM Senior Debentures shall prevent Sinclair, at any time except
during the pendency of any case, proceeding, dissolution, liquidation or other
winding up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of Sinclair referred to in Section 1316 or under the
conditions described in Section 1317, from making payments at any time of
principal of, premium, if any, or interest on the KDSM Senior Debentures.
Section 1319. Subrogation to Rights of Holders of Sinclair Senior
Indebtedness.
Subject to the payment in full of all Sinclair Senior Indebtedness in
cash or Cash Equivalents or in any other form acceptable to the holders of
Sinclair Senior Indebtedness, the Holders of the KDSM Senior Debentures shall be
subrogated to the rights of the holders of such Sinclair Senior Indebtedness to
receive payments and distributions of cash, property and securities applicable
to Sinclair Senior Indebtedness until the principal of, premium, if any, and
interest on the KDSM Senior Debentures shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of Sinclair Senior
Indebtedness of any cash, property or securities to which the Holders of the
KDSM Senior Debentures or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to the holders of Sinclair Senior Indebtedness by Holders of the
KDSM Senior Debentures or the Trustee, shall, as among Sinclair, its creditors
other than holders of Sinclair Senior Indebtedness, and the Holders of the KDSM
Senior Debentures, be deemed to be a payment or distribution by such Sinclair to
or on account of Sinclair Senior Indebtedness.
Section 1320. Provisions Solely to Define Relative Rights.
The provisions of Sections 1315 through 1328 of this Indenture are
intended solely for the purpose of defining the relative rights of the Holders
of the KDSM Senior Debentures on the one hand and the holders of Sinclair Senior
Indebtedness on the other hand. Nothing contained in this Article or elsewhere
in this Indenture or in the KDSM Senior Debentures is intended to or shall (a)
impair, as among Sinclair, its creditors other than holders of Sinclair Senior
Indebtedness and the Holders of the KDSM Senior Debentures, the obligation of
Sinclair, which is absolute and unconditional, to pay to the Holders of the KDSM
Senior Debentures the principal of, premium, if any, and interest on the KDSM
Senior Debentures as and when the same shall become due and payable in
accordance with their terms; or
- 123 -
<PAGE>
(b) affect the relative rights against Sinclair of the Holders of the KDSM
Senior Debentures and creditors of Sinclair other than the holders of Sinclair
Senior Indebtedness; or (c) prevent the Trustee or the Holder of any KDSM Senior
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Sinclair Senior Indebtedness (1) in any case,
proceeding, dissolution, liquidation or other winding up, assignment for the
benefit of creditors or other marshaling of assets and liabilities of Sinclair
referred to in Section 1316, to receive, pursuant to and in accordance with such
Section, cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 1317,
to prevent any payment prohibited by such Section or enforce their rights
pursuant to Section 1320(b).
Section 1321. Trustee to Effectuate Subordination.
Each Holder of a KDSM Senior Debenture by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article and appoints the Trustee his attorney-in-fact for any and all such
purposes, including, in the event of any dissolution, winding-up, liquidation or
reorganization of Sinclair whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of Sinclair owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved.
Section 1322. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of Sinclair Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
Sinclair or by any act or failure to act by any such holder, or by any
non-compliance by Sinclair with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of Subsection (a) of this Section
and notwithstanding any other provision contained herein, the holders of
Sinclair Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the KDSM Senior
Debentures, without incurring responsibility to the Holders of the KDSM Senior
Debentures and without impairing or releasing the subordination provided in this
Article or the obligations hereunder of the Holders of the KDSM Senior
Debentures to the holders of Sinclair Senior Indebtedness, do any one or more of
the following: (1) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Sinclair Senior Indebtedness or any
instrument evidencing the same or any agreement under which Sinclair Senior
Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise
- 124 -
<PAGE>
securing Sinclair Senior Indebtedness; (3) release any Person liable in any
manner for the collection or payment of Sinclair Senior Indebtedness; and (4)
exercise or refrain from exercising any rights against any of the Sinclairs and
any other Person; provided, however, that in no event shall any such actions
limit the right of the Holders of the KDSM Senior Debentures to take any action
to accelerate the maturity of the KDSM Senior Debentures in accordance with the
provisions set forth in Article 5 or to pursue any rights or remedies under this
Indenture or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article.
Section 1323. Notice to Trustee by Sinclair.
(a) Sinclair shall give prompt written notice to the Trustee of any
fact known to Sinclair which would prohibit the making of any payment to or by
the Trustee in respect of the Guarantee. Notwithstanding the provisions of this
Article or any provision of this Indenture, the Trustee shall not be charged
with knowledge of the existence of any facts which would prohibit the making of
any payment to or by the Trustee in respect of the KDSM Senior Debentures unless
and until the Trustee shall have received written notice thereof from Sinclair
or a holder of Sinclair Senior Indebtedness or any trustee, fiduciary or agent
therefor; and, prior to the receipt of any such written notice, the Trustee
shall be entitled in all respects to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of, premium, if any, or interest on any KDSM Senior Debenture or
any other Indenture Obligations), then, anything herein contained to the
contrary notwithstanding but without limiting the rights and remedies of the
holders of Sinclair Senior Indebtedness or any trustee, fiduciary or agent
thereof, the Trustee shall have full power and authority to receive such money
and to apply the same to the purpose for which such money was received and shall
not be affected by any notice to the contrary which may be received by it after
such date; nor shall the Trustee be charged with knowledge of the curing of any
such default or the elimination of the act or condition preventing any such
payment unless and until the Trustee shall have received an Officers'
Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee and Sinclair by a Person representing himself to
be a representative of one or more holders of Designated Sinclair Senior
Indebtedness (a "Sinclair Senior Representative") or a holder of Sinclair Senior
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such
notice has been given by a Sinclair Senior Representative or a holder of
Sinclair Senior Indebtedness (or a trustee, fiduciary or agent therefor);
provided, however, that failure to give such notice to the Company shall not
affect in any way the ability of the Trustee to rely on such notice. In the
event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Sinclair Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the
- 125 -
<PAGE>
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Sinclair Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 1324. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of Sinclair referred to in
this Article, the Trustee and the Holders of the KDSM Senior Debentures shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of KDSM Senior Debentures, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of Sinclair Senior
Indebtedness and other indebtedness of Sinclair, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article; provided that the foregoing shall apply
only if such court has been fully apprised of the provisions of this Article.
Section 1325. Rights of Trustee as a Holder of Sinclair Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to Sinclair Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Sinclair Senior Indebtedness, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article shall apply
to claims of, or payments to, the Trustee under or pursuant to Section 606.
Section 1326. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting under this Indenture, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1325 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
Section 1327. No Suspension of Remedies.
- 126 -
<PAGE>
Nothing contained in this Article shall limit the right of the Trustee
or the Holders of KDSM Senior Debentures to take any action to accelerate the
maturity of the KDSM Senior Debentures pursuant to the provisions described
under Article Five and as set forth in this Indenture or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article of the holders, from time to time, of Sinclair Senior Indebtedness
to receive the cash, property or securities receivable upon the exercise of such
rights or remedies.
Section 1328. Trustee's Relation to Sinclair Senior Indebtedness.
With respect to the holders of Sinclair Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article, and no implied
covenants or obligations with respect to the holders of Sinclair Senior
Indebtedness shall be read into this Article against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Sinclair Senior
Indebtedness and the Trustee shall not be liable to any holder of Sinclair
Senior Indebtedness if it shall mistakenly in the absence of gross negligence or
willful misconduct pay over or deliver to Holders, the Company or any other
Person moneys or assets to which any holder of Sinclair Senior Indebtedness
shall be entitled by virtue of this Article or otherwise.If an officer whose
signature is on this Indenture no longer holds that office at the time the
Trustee authenticates a KDSM Senior Debenture on which a Guarantee is endorsed,
such Guarantee shall be valid nevertheless.
ARTICLE FOURTEEN
SECURITY
Section 1401. Collateral Documents.
(a) In order, among other things, to secure the due and punctual
payment of the Indenture Obligations, the Company, and the Collateral Agent have
entered into, or will enter into, the Pledge Agreement, to create the security
interests thereunder and for related matters. The Company represents that it has
full corporate power and authority to grant a security interest in the property
owned by it constituting the Collateral, as and to the extent contemplated by
such Collateral Documents. The Company agrees to execute, acknowledge and
deliver to the Trustee such further instruments and to do or cause to be done
all such other acts and things, in each case as the Trustee may reasonably
request, so as to render the Collateral owned by it available for the security
and benefit of this Indenture and of the KDSM Senior Debentures, as and to the
extent contemplated by the Collateral Documents.
(b) Each Holder, by accepting a KDSM Senior Debenture, agrees to all
of the terms and provisions of the Collateral Documents, as the same may be
amended, modified or
- 127 -
<PAGE>
waived from time to time pursuant to the provisions of the Collateral Documents
and this Indenture, authorizes and directs the Trustee to enter into each of the
Collateral Documents to which it is a party and to perform its obligations and
exercise its rights thereunder in accordance therewith and herewith.
(c) In the event of a conflict between the provisions of any of the
Collateral Documents and the provisions of the Trust Indenture Act, the
provisions of the Trust Indenture Act will control.
(d) As amongst the Holders, the Collateral as now or hereafter
constituted shall be held for the equal and ratable benefit of the Holders
without preference, priority or distinction of any thereof over any other by
reason of difference in time of issuance, sale or otherwise, as security for the
Indenture Obligations.
Section 1402. Recording, Deposit of Pledged Securities, Opinion of
Counsel, etc.
The Company will cause, at its own expense, this Indenture, the KDSM
Senior Debentures, the Collateral Documents, and all amendments or supplements
thereto, to be executed and delivered and registered, recorded and filed and/or
re-recorded and/or re-filed and/or renewed in such manner and in such place or
places, if any, as may be required by law or that is reasonably requested by the
Trustee or the Holders in order to preserve and protect the Liens of the
Collateral Documents and all parts of the Collateral and effectuate, preserve
and protect the security of the Holders and all rights of the Trustee and
provide the Trustee with a valid, legal and perfected security interest in favor
of the Trustee, in respect of the Collateral.
The Company shall furnish to the Trustee the opinions required by
Section 314 (b) of the Trust Indenture Act.
Section 1403. Release of Collateral.
To the extent applicable, without limitation, in connection with any
release of Collateral under the Collateral Documents, the Company shall deliver
to the Trustee the certificate or opinion, if any, required by Trust Indenture
Act ss. 314 (d) relating to the release of property or securities from the Liens
of this Indenture and the Collateral Documents dated as of a date not more than
60 calendar days prior to the date of release.
Section 1404. Trust Indenture Act Requirements.
The release of any Collateral from the terms of any of the Collateral
Documents or the release of, in whole or in part, the Liens created by any of
the Collateral Documents, will not be deemed to impair the security under this
Indenture and the Collateral Documents in contravention of the provisions of
this Indenture if and to the extent the Collateral or Liens
- 128 -
<PAGE>
are released pursuant to, and in accordance with, the applicable Collateral
Documents and pursuant to, and in accordance with, the terms hereof, including
in the event shares of Parent Preferred are released under the Collateral
Documents simultaneously with the payment to the holders of Parent Preferred in
connection with the redemption of shares of Parent Preferred. As set forth in
Section 1403, to the extent applicable, without limitation, the Company and each
obligor on the KDSM Senior Debentures shall cause Trust Indenture Act Section
314 (d) relating to the release of property or securities from the Liens of the
Collateral Documents to be complied with. Any certificate or opinion required by
Trust Indenture Act Section 314 (d) may be made by two officers of the Company,
except as otherwise provided herein or in cases in which the Trust Indenture Act
Section 314 (d) requires that such certificate or opinion be made by an
independent person.
Section 1405. Authorization of Actions to Be Taken by the Trustee
Under the Collateral Documents.
(a) The Trustee may, in its sole discretion and without the consent of
the Holders, but subject to Section 1406 and Article Six hereof, take all
actions it deems necessary or appropriate in order to (i) enforce the Collateral
Documents and (ii) collect and receive any and all amounts payable in respect of
the Indenture Obligations of the Company hereunder, in each case in accordance
with and to the extent provided in the Collateral Documents. Such actions shall
include, but not be limited to, advising, instructing or otherwise directing the
Collateral Agent in accordance with and connection with enforcing any term or
provision of the Collateral Documents.
(b) Subject to the provisions of the Collateral Documents, the Trustee
shall have power to institute and to maintain such suits and proceedings as it
may deem expedient to prevent any impairment of the Collateral by any acts which
may be unlawful or in violation of any of the Collateral Documents or this
Indenture and to preserve or protect its interests and the interests of the
Holders of the Senior Debentures in the Collateral.
Section 1406. Authorization of Receipt of Funds by the Trustee Under
the Collateral Documents.
The Trustee is authorized to receive any funds for the benefit of
Holders distributed under the Collateral Documents, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture.
Section 1407. Release upon Termination of the Company's Obligations.
(a) In the event that the Company delivers an Officers' Certificate
certifying that all of the Indenture Obligations have been satisfied and
discharged by complying with the provisions of Article Eleven, Section 402 or
Section 403, the Trustee shall deliver to the Company a notice stating that the
Trustee, on behalf of the Holders, disclaims and gives up
- 129 -
<PAGE>
any and all rights it has in or to the Collateral, and any rights it has under
the Collateral Documents, and, upon and after the receipt by the Company of such
notice, the Trustee shall not be deemed to hold the security interests in the
Collateral for the benefit of the Holders.
(b) Any release of any portion of the Collateral made in compliance
with the provisions of this Section 1407 shall not be deemed to impair the
security interests in the Collateral created by the Collateral Documents in
contravention of the provisions of this Indenture.
- 130 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
KDSM, INC.
By: /s/ David D. Smith
-----------------------------
Name: David D. Smith
Title: President
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
-----------------------------
Name: David B. Amy
Title: President
FIRST UNION NATIONAL BANK OF
MARYLAND, as Trustee
By: /s/ Patricia A. Welling
-----------------------------
Name: Patricia A. Welling
Title:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the th day of April, 1997, before me personally came David
B. Amy, to me known, who, being by me duly sworn, did depose and say that he
resides at 2000 W.41st Street, Baltimore, MD 21211; that he is the CFO of
Sinclair Broadcast Group, Inc., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto pursuant to
authority of the Board of Directors of such corporation.
(NOTARIAL
SEAL)
-----------------------------------------
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the th day of April, 1997, before me personally came David
D. Smith, to me known, who, being by me duly sworn, did depose and say that he
resides at 2000 W.41st Street, Baltimore, MD 21211; that he is the President of
KDSM, Inc., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto pursuant to authority of the
Board of Directors of such corporation.
(NOTARIAL
SEAL)
-----------------------------------------
<PAGE>
EXHIBIT A
[Form of Restricted Securities Transfer Certificate]
RESTRICTED SECURITIES TRANSFER CERTIFICATE
(For transfers pursuant to Section 307(a) of
the Indenture referred to below)
First Union National Bank of Maryland,
as Securities Registrar
[ ]
[ ]
Re: 11 5/8% Senior Debentures Due 2009 (the "KDSM Senior
Debentures")
Reference is made to the Indenture, dated as of March 7, 1997
(the "Indenture"), among KDSM, Inc., a Maryland corporation, Sinclair Broadcast
Group, Inc., a Maryland corporation, and First Union National Bank of Maryland,
as Trustee. Terms used herein and defined in the Indenture Rule 144A or Rule 144
under the U.S. Securities Act of 1933 (the "Securities Act") are used herein as
so defined.
A-1
<PAGE>
This certificate relates to $_____________ aggregate principal
amount of KDSM Senior Debentures, which are evidenced by the following
certificate(s) (the "Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
CURRENTLY IN BOOK-ENTRY FORM: Yes ___ No ___ (check one)
The person in whose name this certificate is executed below
(the "Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them to
do so. Such beneficial owner or owners are referred to herein collectively as
the "Owner". If the Specified Securities are represented by a Global Security,
they are held through a Depositary (except in the name of "The Depository Trust
Company") or an Agent Member in the name of the Undersigned, as or on behalf of
the Owner. If the Specified Securities are not represented by a Global Security,
they are registered in the name of the Undersigned, as or on behalf of the
Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 144A or Rule 144 under the Securities Act and all
applicable securities laws of the states of the United States. Accordingly, the
Owner hereby further certifies as:
(1) Rule 144A Transfers. If the transfer is being effected in accordance with
Rule 144A:
(A) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably
believe is a "qualified institutional
A-2
<PAGE>
buyer" within the meaning of Rule 144A, acquiring for its own
account or for the account of a qualified institutional buyer;
and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that
the Owner may be relying on Rule 144A in connection with the
transfer; and
(2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144:
(A) the transfer is occurring after a holding period of at least
two years (computed in accordance with paragraph (d) of Rule
144) has elapsed since the date the Specified Securities were
acquired from the Company or from an affiliate (as such term
is defined in Rule 144) of the Company, whichever is later,
and is being effected in accordance with the applicable
amount, manner of sale and notice requirements of paragraphs
(e), (f) and (h) of Rule 144;
(B) the transfer is occurring after a holding period by the Owner
of at least two years has elapsed since the date the Specified
Securities were acquired from the Company or from an affiliate
(as such term is defined in Rule 144) of the Company,
whichever is later, and the Owner is not, and during the
preceding three months has not been, an affiliate of the
Company; or
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the "Initial Purchaser" (as defined
in the Trust Agreement relating to the Trust to which the KDSM Senior Debentures
were initially issued).
Dated:________________
(Print the name of the Undersigned, as such
term is defined in the second paragraph of this
certificate.)
A-3
<PAGE>
By:__________________________________
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
A-4
REGISTRATION RIGHTS AGREEMENT
Among
Sinclair Broadcast Group, Inc.,
KDSM, Inc.,
Sinclair Capital,
Smith Barney Inc. and
Chase Securities Inc.
Dated as of March 5, 1997
<PAGE>
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of March
5, 1997, among Sinclair Broadcast Group, Inc., a Maryland corporation
("Sinclair" or the "Company"), KDSM, Inc., a Maryland corporation and indire t
wholly owned subsidiary of Sinclair ("KDSM, Inc."), Sinclair Capital, a Delaware
statutory business trust (the "Trust"), and Smith Barney Inc. and Chase
Securities Inc., as the initial purchasers (the "Initial Purchasers") of the 11
5/8% High Yield Trust Offered Preferred Securities of the Trust, which are
guaranteed by the Company.
This Agreement is made pursuant to the Purchase Agreement dated March
5, 1997, among the Trust and the Initial Purchasers (the "Purchase Agreement"),
which provides for the sale by the Trust to the Initial Purchasers of the
Preferred Securities (as defined below). The Preferred Securities are to be
issued by the Trust pursuant to the provisions of Trust Agreement (as defined
below).
In order to induce the Initial Purchasers to enter into the Purchase
Agreement, Sinclair, KDSM, Inc. and the Trust have agreed to provide to the
Initial Purchasers and its direct and indirect transferees the registration
rights with respect to the Preferred Securities and certain other securities as
set forth in this Agreement. The execution of this Agreement is a condition to
the closing under the Purchase Agreement.
1. Definitions.
------------
As used in this Agreement, the following capitalized defined terms shall have
the following meanings:
"Administrative Trustees" shall mean the Administrative Trustees named
under the Trust Agreement.
"Business Day" means any day other than (i) a Saturday or a Sunday,
(ii) a day on which banking institutions in Maryland or The City of New York are
authorized or obligated by law or executive order to close or (iii) a day on
which the office of the trustee or transfer agent, as the case may be, or an
affiliate or agent thereof at which at any particular time the corporate trust
business for the purposes of the Parent Preferred, the Indenture or the
Preferred Securities shall be principally administered is closed for business.
"Closing Date" shall mean the date on which the Preferred Securities
are initially issued by the Trust to the Initial Purchasers.
<PAGE>
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
"Company" shall have the meaning set forth in the preamble.
"Debentures" shall mean the 11 5/8% Senior Debentures due 2009 Series
A, of KDSM, Inc. in the aggregate principal amount of $206,200,000 to be issued
under the In enture, and securities issued in exchange therefor or in lieu
thereof pursuant to the Indenture.
"Debenture Trustee" shall mean the trustee under the Indenture.
"Delaware Trustee" shall mean the person so designated pursuant to the
Trust Agreement.
"Effective Time", in the case of (i) an Exchange Offer, shall mean the
time and date as of which the Commission declares the Exchange Offer
Registration Statement effective or as of which the Exchange Offer Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall mean
the time and date as of which the Commission declares the Shelf Registration
effective or as of which the Shelf Registration otherwise becomes effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, and the rules, regulations and forms promulgated thereunder,
all as the same shall be amended from time to time.
"Exchange Date" shall have the meaning set forth in Section 2(a)(ii).
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form) and all amendments and supplements to such registration statement, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
-2-
<PAGE>
"Holder" shall mean the holders of the Preferred Securities, the
Debentures or the Parent Preferred, as the case may be, for so long as it owns
any Registrable Securities, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Securities;
provided, that for purposes of Sections 4 and 5 of this Agreement, the term
"Holder" shall include Participating Broker-Dealers (as defined in Section
4(a)).
"Indenture" shall mean the Indenture, dated as of March 12, 1997, among
Sinclair, KDSM, Inc. and First Union National Bank of Maryland, as Debenture
Trustee, as the same shall be amended from time to time.
"Initial Purchasers" shall have the meaning set forth in the preamble.
"Issuers" shall mean Sinclair, KDSM, Inc. and the Trust.
"KDSM, Inc." shall have the meaning set forth in the preamble.
"Liquidation Amount" shall mean the stated amount of $100 per share of
the Parent Preferred.
"Liquidation Value" shall mean the stated amount of $100 per Preferred
Security.
"Majority Holders" shall mean the Holders of a majority of the (i)
aggregate principal amount in the case of the Debentures, (ii) the Liquidation
Value in the case of the Preferred Securities or (iii) the Liquidation Amount in
the case of the Parent Preferred, of outstanding Registrable Securities;
provided that, for purposes of Section 6(b), whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company, its subsidiaries or the
Trust or any of their respective affiliates (as such term is defined in Rule 405
under the Securities Act) (other than the Initial Purchasers or subsequent
Holders of Registrable Securities if such subsequent Holders are deemed to be
such affiliates solely by reason of their holding of such Registrable
Securities) shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage or amount.
"Offer Termination Date" shall have the meaning set forth in Section
2(a)(iii).
"Parent Guarantee" shall mean the guarantee by Sinclair of certain
obligations of the Trust pursuant to the Preferred Securities.
-3-
<PAGE>
"Parent Debenture Guarantee" shall mean the guarantee by Sinclair of
the obligations of KDSM, Inc. under the Debentures and the Indenture which may
become effective in certain circumstances.
"Parent Preferred" shall mean the 12 5/8% Series C Preferred Stock, par
value $.01 per share, of Sinclair, Liquidation Amount of $100 per share, to be
issued by Sinclair to KDSM, Inc.
"Participating Broker-Dealer" shall have the meaning set forth in
Section 4(a) hereof.
"Penalty Amount" shall have the meaning assigned thereto in Section
2(c) hereof.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Preferred Securities" shall mean the 11 5/8% High Yield Trust Offered
Preferred Securities, of the Trust, Liquidation Value $100 per Preferred
Security, to be issued under the Trust Agreement and sold to the Initial
Purchasers, and securities issued in exchange therefor or in lieu thereof
pursuant to the Trust Agreement.
"Prescribed Time Period" shall have the meaning set forth in Section
2(d)(i).
"Property Trustee" shall mean the person so designated pursuant to the
Trust Agreement.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to such prospectus, and in each case including
all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble.
"Registrable Securities" shall mean each of the Preferred Securities,
the Debentures, the Parent Preferred, the Parent Guarantee and the Parent
Debenture Guarantee (if effective); provided, however, that any such Securities
shall cease to be Registrable Securities (i) when a Registration Statement with
respect to such Registrable Securities shall have been declared effective under
the Securities Act and such Securities shall have been disposed of or exchanged
pursuant to such Registration Statement, (ii) upon the expiration of the
Exchange Offer period with respect to any Exchange Offer
-4-
<PAGE>
Registration Statement if all Registrable Securities validly tendered in
connection with such Exchange Offer shall have been exchanged for Exchange
Securities, (iii) when such Securities have been sold or are eligible for sale
to the public pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the Securities Act or (iv) when such Securities shall
have ceased to be outstanding; provided, however, that if an opinion of counsel
as described in Section 2(d)(i)(B) is delivered to the Company, then such
Securities held by the Initial Purchasers shall not cease to be Registrable
Securities solely by reason of clause (ii) above.
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Default Interest" shall have the meaning assigned thereto
in Section 2(c) hereof.
"Registration Default Distributions" shall have the meaning assigned
thereto in Section 2(c).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company, KDSM, Inc. and the Trust with this
Agreement, including without limitation: (i) all Commission, stock exchange or
National Association of Securities Dealers, Inc. registration and filing fees,
(ii) all fees and expenses incurred in connection with compliance with state
securities or blue sky laws, (iii) all expenses of any Person in preparing or
assisting in preparing, word processing, printing and distributing, at the
request of the Company, any Registration Statement, any Prospectus, any
amendments or supplements thereto, (iv) all fees and disbursements relating to
the qualification of the Indenture under applicable securities laws, (v) the
fees and disbursements of the Debenture Trustee, the Property Trustee, the
Administrative Trustees and their respective counsels and of any escrow agent as
custodian, (vi) the fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the Holders in connection
with an Exchange Offer Registration Statement and a Shelf Registration
Statement, (vii) the fees and disbursements of the independent public
accountants of the Company, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, but excluding underwriting discounts, if any, and commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable
Securities by a Holder, (viii) fees, disbursements and expenses of any
"qualified independent underwriter" engaged, if any.
"Registration Statement" shall mean any registration statement of the
Issuers that covers any of the Exchange Securities or Registrable Securities
pursuant to the provisions of this Agreement and all amendments and supplements
to any such
-5-
<PAGE>
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Resale Period" shall have the meaning assigned thereto in Section 2(a)
hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
Sinclair, KDSM, Inc., or the Trust within the meaning of Rule 405, (ii) a holder
who acquires Exchange Securities outside the ordinary course of such holder's
business or (iii) a holder who has arrangements or understandings with any
person to participate in the Exchange Offer for the purpose of distributing
Exchange Securities.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act.
"Securities" shall mean, collectively, the Preferred Securities, the
Debentures, the Parent Preferred, the Parent Guarantee and the Parent Debenture
Guarantee (if effective).
"Shelf Registration" shall have the meaning assigned thereto in Section
2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Issuers pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the Registrable Securities on an appropriate form
under Rule 415 under the Securities Act, or any similar rule that may be adopted
by the Commission, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Trust" shall have the meaning set forth in the preamble.
"Trust Agreement" shall mean the Amended and Restated Trust Agreement,
dated as of March 12, 1997, among KDSM, Inc. as Depositor, First Union National
Bank of Maryland, as Property Trustee, First Union Bank of Delaware, as Delaware
Trustee, the Administrative Trustees named therein and the holders from time to
time of beneficial interests in the Trust.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
-6-
<PAGE>
"Trust Securities" shall mean, collectively, the Preferred Securities
and the Common Securities to be issued under the Trust Agreement to KDSM, Inc.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Agreement, and the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision. Unless the context otherwise requires, any
reference to a statute, rule or regulation shall be deemed to be a statute, rule
or regulation (including any successor statute, rule or regulation thereto) as
it may be amended from time to time.
2. Registration under the Securities Act.
--------------------------------------
(a) Except as set forth in Section 2(b) below, the Issuers
agree to use their best efforts to file under the Securities Act as soon as
practicable after the Closing Date, but in no event later than 60 days, an
Exchange Offer Registration Statement relating to an offer by the Trust, KDSM,
Inc. and the Company, as the case may be, to exchange (the "Exchange Offer") (i)
any and all of the Preferred Securities, the Debentures, and the Parent
Preferred for a like aggregate amount of such securities issued by the Trust,
KDSM, Inc. and Sinclair, respectively, which securities are identical in all
material respects to the Preferred Securities, the Debentures and the Parent
Preferred, respectively, except that the Preferred Securities, the Debentures
and the Parent Preferred have been registered pursuant to an effective
registration statement under the Securities Act, do not contain restrictions on
transfers (except as they may be held by Restricted Holders) and provide for the
additional interest and additional distributions contemplated in Section 2(d)
below for any periods before such exchange and (ii) the Parent Guarantee and the
Parent Debenture Guarantee (if effective) for like guarantees by Sinclair of the
obligations of the Trust under the Preferred Securities and of the obligations
of KDSM, Inc. under the Debentures, respectively, which guarantees are identical
to the Parent Guarantee and the Parent Debenture Guarantee (if effective),
except that it has been registered pursuant to an effective registration
statement under the Securities Act and does not contain restrictions on
transfers (such new Preferred Securities, Debentures, Parent Preferred, Parent
Guarantee and Parent Debenture Guarantee (if effective) hereinafter called
collectively "Exchange Securities"). The Issuers agree to use their best efforts
to cause the Exchange Offer Registration Statement to become effective under the
Securities Act as soon as practicable after the filing of the Exchange Offer
Registration Statement but in no event later than 120 days after the Closing
Date. The Exchange Offer will be registered under the Securities Act on the
appropriate form and will comply with all applicable tender offer and other
rules and regulations under the Exchange Act. The Issuers further agree to use
their best efforts to commence and consummate the Exchange Offer promptly after
the Exchange Offer Registration Statement has become effective, hold the
Exchange Offer open for
-7-
<PAGE>
not less than 20 Business Days (or longer if required by applicable law) after
the date notice of the Exchange Offer has been mailed to Holders and Exchange
Securities for all Securities that have been properly tendered and not withdrawn
on or prior to the expiration of the Exchange Offer and to consummate such
Exchange Offer within 150 days after the Closing Date. In connection with any
Debenture or Parent Debenture Guarantee (if effective) properly tendered and not
withdrawn pursuant to an Exchange Offer, KDSM, Inc. agrees, pursuant to the
provisions of Section 306 of the Indenture, to exchange the certificate
representing the related Debentures for a certificate not bearing legends
related to restrictions on transfers. The Exchange Offer will be deemed to have
been completed, as the case may be, only if the Exchange Securities received by
holders other than Restricted Holders in the Exchange Offer are, upon receipt,
transferable by each such holder without restriction under the Securities Act
and the Exchange Act and without material restrictions under the blue sky or
securities laws of the States of the United States of America. The Exchange
Offer shall be deemed to have been completed upon Sinclair, KDSM, Inc. and the
Trust having exchanged, pursuant to the Exchange Offer, the Exchange Securities
for all outstanding Preferred Securities, Debentures, Parent Preferred, the
Parent Guarantee and Parent Debenture Guarantee (if effective), as the case may
be, pursuant to the Exchange Offer, properly tendered and not withdrawn before
the expiration of the Exchange Offer, which shall be on a date that is not less
than 20 Business Days following the commencement of the Exchange Offer. The
Issuers shall commence the Exchange Offer by mailing the related exchange offer
Prospectus and accompanying documents to each Holder stating, in addition to
such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Registrable Securities validly tendered will be
accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a
period of at least 20 Business Days from the date such notice is
mailed) (each such date being an "Exchange Date");
(iii) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address specified in the
notice prior to the close of business on the last Exchange Date (the
"Offer Termination Date"); and
(iv) that Holders will be entitled to withdraw their election,
not later than the close of business on the Offer Termination Date, by
sending to the institution and at the address specified in the notice a
telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount, Liquidation Value or
Liquidation Amount of Registrable Securities delivered for
-8-
<PAGE>
exchange and a statement that such Holder is withdrawing its election
to have such Registration Securities exchanged.
As soon as practicable after the Offer Termination Date, the Issuers shall:
(A) accept for exchange Registrable Securities or
portions thereof tendered and not validly withdrawn pursuant
to the Exchange Offer; and
(B) deliver, or cause to be delivered, to the
applicable trustee for cancellation all Registrable Securities
or portions thereof so accepted for exchange by the Issuers
and issue, and cause the applicable trustee to promptly
authenticate and mail to each Holder, an Exchange Security
equal in aggregate principal, Liquidation Value or Liquidation
Amount to the aggregate principal amount, Liquidation Value or
Liquidation Amount, as the case may be, of the Registrable
Securities surrendered by such Holder. The Company shall use
its best efforts to complete the Exchange Offer as provided
above and shall comply with the applicable requirements of the
Securities Act, the Exchange Act and other applicable laws and
regulations in connection with the Exchange Offer. The
Exchange Offer shall not be subject to any conditions, other
than that the Exchange Offer does not violate applicable law
or any applicable interpretation of the staff of the
Commission. The Company shall inform the Initial Purchasers of
the names and addresses of the Holders to whom the Exchange
Offer is made, and the Initial Purchasers shall have the
right, subject to applicable law, to contact such Holders and
otherwise facilitate the tender of Registrable Securities in
the Exchange Offer.
Each Holder of the Preferred Securities participating in the Exchange
Offer shall be required to represent to the Company that at the time of the
consummation of the Exchange Offer (i) such Holder is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act, (ii) the
Exchange Securities being acquired by it pursuant to the Exchange Offer are
being obtained in the ordinary course of the business of the person receiving
such Exchange Securities and (iii) that the Holder has no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Securities. If such Holder is a Participating Broker-Dealer that will receive
Exchange Securities for its own account in exchange for the Registrable
Securities that were acquired as a result of market-making activities or other
trading activities, it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities.
(b) In the event that (i) due to a change in applicable law or current
interpretations by the Commission, the Issuers are not permitted to effect the
Exchange Offer for all of the Securities, (ii) the Exchange Offer for all of the
Securities is not for any other reason consummated within 150 days after the
Closing Date, or (iii) any
-9-
<PAGE>
Holder shall, within 30 days after consummation of the Exchange Offer, notify
the Issuers that such Holder (x) is prohibited by applicable law or Commission
policy from participating in the Exchange Offer, (y) may not resell Exchange
Securities acquired by it in the Exchange Offer to the public without delivering
a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder or (z) is a broker-dealer and holds Preferred Securities acquired
directly from the Issuers or an "affiliate" of the Issuers, then in addition to
or in lieu of conducting the Exchange Offer contemplated by Section 2(a) or (iv)
at the request of either of the Initial Purchasers, the Issuers will be required
to file a "shelf" registration statement (a "Shelf Registration Statement")
covering resales (a) by the holders of the Registrable Securities in the event
the Issuers are not permitted to effect the Exchange Offer pursuant to the
foregoing clause (i) or the Exchange Offer is not consummated within 150 days
after the Closing Date pursuant to the foregoing clauses (i) or (ii) or (b) by
the Holders of Securities with respect to which the Company receives notice
pursuant to the foregoing clauses (iii) or (iv). The Administrative Trustees
will promptly deliver to the Holders, the Property Trustee and the Delaware
Trustee, or KDSM, Inc. will promptly deliver to the holders of the Debentures,
if not the Trust, written notice that the Issuers will be complying with the
provisions of this Section 2(b). The Issuers agree to use their best efforts to
cause the Shelf Registration to become or be declared effective and to keep such
Shelf Registration continuously effective for a period ending on the second
anniversary of the Effective Time (the "Effective Period") or such shorter
period that will terminate when all of the Registrable Securities covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement. The Issuers shall, if they file a Shelf Registration Statement,
provide to each holder of the Registrable Securities copies of the prospectus
and notify each such holder when the Shelf Registration Statement has become
effective. The Issuers further agree to supplement or make amendments to the
Shelf Registration, as and when required by the rules, regulations or
instructions applicable to the registration form used by the Issuers for such
Shelf Registration or by the Securities Act or rules and regulations thereunder
for shelf registration (including, without limitation, updating the Shelf
Registration Statement upon the distribution of the Debentures as a result of
the liquidation of the Trust pursuant to the terms of the Trust Agreement), and
Sinclair, KDSM, Inc. and the Trust agree to furnish to the holders of the
Registrable Securities copies of any such supplement or amendment prior to its
being used or promptly following its filing with the Commission.
(c) The Company and KDSM, Inc. shall, jointly and severally,
pay all Registration Expenses in connection with the registration pursuant to
Section 2(a) or Section 2(b). Each Holder shall pay all underwriting discounts,
if any, and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the Exchange
Offer Registration Statement or a Shelf Registration Statement, as the case may
be.
-10-
<PAGE>
(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the Commission; provided, however, that, if, after it has been
declared effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the Commission or any other governmental agency or
court, such Registration Statement will be deemed not to have been effective
during the period of such interference until the offering of Registrable
Securities pursuant to such Registration Statement may legally resume. If the
Issuers shall fail to comply with this Agreement or if the Exchange Offer
Registration Statement or the Shelf Registration fails to become effective (any
such event a "Registration Default"), then, as liquidated damages, registration
default Distributions (the "Registration Default Distributions"), shall become
payable on the Parent Preferred and the Preferred Securities and registration
default interest (the "Registration Default Interest") shall become payable in
respect of the Debentures as follows (the Registration Default Distributions and
the Registration Default Interest are hereinafter referred to as "Penalty
Amounts"):
(i) (A) if an Exchange Offer Registration Statement or, in the
event of a change in applicable law or due to current interpretations
by the Commission the Issuers are not permitted to effect the Exchange
Offer, a Shelf Registration Statement is not filed within 60 days
following the Closing Date, (B) in the event that within the 30 days
after consummation of the Exchange Offer, any Holder of the Registrable
Securities shall notify the Issuers that such Holder (x) is prohibited
by applicable law or Commission policy from participating in the
Exchange Offer, (y) may not resell Exchange Securities acquired by it
in the Exchange Offer to the public without delivering a prospectus and
that the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such
holder or (z) is a broker-dealer and holds Securities acquired directly
from the Issuers or an "affiliate" of the Issuers or (C) upon the
request of an Initial Purchaser, a Shelf Registration Statement is not
filed within 60 days after such request, then commencing on either the
61st day after the Closing Date or the expiration of either the time
periods set forth in clauses (B) and (C) above (either a "Prescribed
Time Period"), as the case may be, Penalty Amounts shall be accrued on
the Parent Preferred, the Debentures and the Preferred Securities over
and above the stated payment rates thereon at a rate of .50% per annum
for the first 90 days immediately following either the 61st day after
the Closing Date or the expiration of the Prescribed Time Period, as
the case may be, such Penalty Amount rate increasing by an additional
.25% per annum at the beginning of each subsequent 90-day period;
-11-
<PAGE>
(ii) if an Exchange Offer Registration Statement or a Shelf
Registration Statement is filed pursuant to clause (i) of the preceding
full paragraph and is not declared effective within 120 days following
either the Closing Date or the expiration of the Prescribed Time
Period, as the case may be, then commencing on the 121st day after
either the Closing Date or the expiration of the Prescribed Time
Period, as the case may be, Penalty Amounts shall be accrued on the
applicable Securities over and above the accrued stated payment rates
thereon at a rate of .50% per annum for the first 90 days immediately
following the 121st day after either the Closing Date or the expiration
of the Prescribed Time Period, as the case may be, such Penalty Amounts
rate increasing by an additional .25% per annum at the beginning of
each subsequent 90-day period; and
(iii) if either (A) the Issuers have not exchanged Exchange
Securities for all applicable Securities validly tendered in accordance
with the terms of the Exchange Offer on or prior to 150 days after the
Closing Date or the expiration of the Prescribed Time Period, or (B) if
applicable, a Shelf Registration Statement has been declared effective
and such Shelf Registration Statement ceases to be effective prior to
the end of the Effective Period, or such shorter period that will
terminate when all of the Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement,
then, subject to certain exceptions, Penalty Amounts shall be accrued
on the Securities over and above the stated payment rates at a rate of
.50% per annum for the first 60 days immediately following the (x) the
31st day after such effective date, in the case of (A) above, or (y)
the day such Shelf Registration Statement ceases to be effective in the
case of (B) above, such Penalty Amounts rate increasing by an
additional .25% per annum at the beginning of each subsequent 90-day
period;provided, however, that the Penalty Amounts rate on any of the
applicable Securities may not exceed 1.5% per annum; and provided
further, that (1) upon the filing of the Exchange Offer Registration
Statement or a Shelf Registration Statement (in the case of (i) above),
(2) upon the effectiveness of the Exchange Offer Registration Statement
or a Shelf Registration Statement (in the case of (ii) above), or (3)
upon the exchange of Exchange Securities for all Securities tendered
into the Exchange Offer or upon the effectiveness of the Shelf
Registration Statement which had ceased to remain effective prior to
the end of the Effective Period (in the case of (iii) above), Penalty
Amounts as a result of such clause (i), (ii) or (iii) shall cease to
accrue.
Any Penalty Amounts due pursuant to Clause (i), (ii) or (iii) above
will be payable in cash on the various payment dates related to the respective
Securities. The Penalty Amounts will be determined by multiplying the applicable
Penalty Amounts rate by the Liquidation Value of the Preferred Securities, the
Liquidation Amount of the Parent Preferred or principal amount of the
Debentures, as the case may be, multiplied
-12-
<PAGE>
by a fraction, the numerator of which is the number of days such Penalty Amount
rate was applicable during such period, and the denominator of which is 360.
If the Company effects the Exchange Offer, the Company will be entitled
to close the Exchange Offer provided that it has accepted all Registrable
Securities theretofore validly tendered in accordance with the terms of the
Exchange Offer. Registrable Securities not tendered in the Exchange Offer shall
bear interest at the same rate as in effect at the time of issuance of the
Registrable Securities.
(e) without limiting the remedies available to the Initial
Purchasers and the Holders, each Issuer acknowledges that any failure by such
Issuer to comply with its obligations under Section 2(a) and Section 2(b) hereof
may result in material irreparable injury to the Holders for which there is no
adequate remedy at law, that it will not be possible to measure damage for such
injuries precisely and that, in the event of any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's obligations under Section 2(a) and Section
2(b) hereof.
3. Registration Procedures.In connection with the obligations of the
Issuers with respect to the Registration Statements pursuant to Section 2(a) and
Section 2(b) hereof, the Issuers shall promptly as practicable:
(a) prepare and file with the Commission a Registration
Statement on the appropriate form under the Securities Act, which form shall (x)
be selected by the Issuers, (y) in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling Holders
thereof and (z) comply as to form in all material respects with the requirements
of the applicable form and include all financial statements required by the
Commission to be filed therewith or incorporated by reference therein, as the
case may be, and use their best efforts to cause such Registration Statement to
become effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the Commission such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement effective for the applicable period and cause
each Prospectus to be supplemented by any required prospectus supplement and, as
so supplemented, to be filed pursuant to Rule 424 under the Securities Act or,
in the case of a Shelf Registration, file, or cause to be filed, promptly all
reports required to be filed pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act required to be incorporated by reference therein; and keep each
Prospectus current during the period described under Section 4(3) and Rule 174
under the Securities Act that is applicable to transactions by brokers or
dealers with respect to the Registrable Securities or Exchange Securities;
-13-
<PAGE>
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities to which such Shelf Registration Statement
relates, to counsel for the Initial Purchasers and to counsel for the Holders,
without charge, one copy of the Registration Statement and exhibits thereto and
as many copies of each Prospectus, including each preliminary Prospectus and any
amendment or supplement thereto, reasonably requested to facilitate the public
sale or other disposition of the Registrable Securities; and the Issuers consent
to the use of such Prospectus and any amendment or supplement thereto in
accordance with applicable law by each of the selling Holders of Registrable
Securities in connection with the offering and sale of the Registrable
Securities covered by and in the manner described in such Prospectus or any
amendment or supplement thereto in accordance with applicable law;
(d) use their best efforts (i) to register or qualify the
Registrable Securities under all applicable state securities or blue sky laws or
such jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in writing by the time the
applicable Registration Statement is declared effective by the Commission, (ii)
keep such registrations or qualifications in effect and comply with such laws so
as to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Shelf Registration is required to remain
effective under Section 2(b) above and for so long as may be necessary to enable
any such Holder, agent or underwriter to complete its distribution of Securities
pursuant to such Registration Statement but in no event longer than two years
and (iii) to cooperate with such Holders in connection with any filings required
to be made with the National Association of Securities Dealers, Inc. and do any
and all other acts and things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such jurisdiction of
such Registrable Securities owned by such Holder; provided, however, that the
Company shall not be required to (A) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where they would not otherwise be
required to qualify but for this Section 3(d), (B) file any general consent to
service of process or (C) subject themselves to taxation in any such
jurisdiction if they are not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and for the Initial Purchasers
(or, if applicable, separate counsel for the Holders) and, if requested by such
Persons, confirm such advice in writing, (i) when a Registration Statement has
become effective and when any post-effective amendment thereto has been filed
and becomes effective, (ii) of any request by the Commission or any state
securities authority for amendments and supplements to a Registration Statement
and Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the Commission or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
-14-
<PAGE>
purpose, (iv) if the Issuers receive any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v) of the
happening of any event during the period a Shelf Registration Statement is
effective which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material respect or which requires the making
of any changes in such Registration Statement or document incorporated by
reference therein in order to make the statements therein not misleading or
which requires the making of any changes in the Prospectus or documents
incorporated by reference therein in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and (vi)
of any determination by the Issuers that a post-effective amendment to a
Registration Statement would be appropriate;
(f) use their best efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide prompt notice to each Holder of the withdrawal of
any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one conformed copy of
each Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends (unless required by applicable securities
laws) and enable such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture, the Trust Agreement or the
Articles Supplementary with respect to the Parent Preferred, as the case may be)
with and registered in such names as the selling Holders may reasonably request
at least two business days prior to the closing of any sale of Registrable
Securities;
(i) in the case of a Shelf Registration, upon the occurrence
of any event contemplated by Section 3(e)(v) hereof, use their best efforts to
prepare a supplement or post-effective amendment to a Registration Statement or
the related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided that the Issuers agree to notify the Holders to
suspend use of the Prospectus as promptly as practicable after the occurrence of
such an event, and the Holders hereby agree to suspend use of the Prospectus
until the Issuers
-15-
<PAGE>
have amended or supplemented the Prospectus or any document incorporated by
reference therein to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document incorporated by
reference therein, provide copies of such document to the Initial Purchasers and
their counsel (and, in the case of a Shelf Registration Statement, counsel for
the Holders) and make such of the representatives of the Issuers as shall be
reasonably requested by the Initial Purchasers or their counsel (and, in the
case of a Shelf Registration Statement, counsel for the Holders) available for
discussion of such document, and shall not at any time file or make any
amendment to the Registration Statement, any Prospectus or any amendment of or
supplement to a Registration Statement or a Prospectus, of which the Initial
Purchasers and their counsel (and, in the case of a Shelf Registration
Statement, counsel for the Holders) shall not have previously been advised and
furnished a copy or to which the Initial Purchasers or their counsel (and, in
the case of a Shelf Registration Statement, counsel for the Holders) shall
reasonably object promptly in light of the circumstances in which made;
(k) obtain a CUSIP number for all Exchange Securities or
Registrable Securities (if applicable), as the case may be, not later than the
Effective Time;
(l) cause the Indenture, the Trust Agreement, the Parent
Guarantee or the Parent Debenture Guarantee (if effective) to be qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), in
connection with the registration of the applicable Exchange Securities or
applicable Registrable Securities, as the case may be, cooperate with the
applicable trustees and the Holders to effect such changes to the Indenture, the
Trust Agreement, the Parent Guarantee or the Parent Debenture Guarantee (if
effective) as may be required for the Indenture, the Trust Agreement, the Parent
Guarantee or the Parent Debenture Guarantee (if effective), as the case may be,
to be so qualified in accordance with the terms of the Trust Indenture Act and
execute, and use their best efforts to cause the applicable trustees to execute,
all documents as may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable the Indenture, the
Trust Agreement, the Parent Guarantee or the Parent Debenture Guarantee (if
effective), as the case may be, to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make reasonably
available for inspection by one representative of the Holders of the Registrable
Securities, counsel for the Holders and accountants designated by the Holders
and reasonably acceptable to the Issuers, at reasonable times and in a
reasonable manner and subject to the execution of customary confidentiality
agreements, all financial and other records, pertinent
-16-
<PAGE>
documents and properties of the Issuers, and cause the respective officers,
directors and employees of the Issuers to supply all information reasonably
requested, and as is customary for similar due diligence examinations, by any
such representative, attorney or accountant in connection with a Shelf
Registration Statement;
(n) if requested by any Holder of Registrable Securities
covered by a Registration Statement, (i) promptly include in a Prospectus
supplement or post-effective amendment or document incorporated by reference in
such Prospectus such information with respect to such Holder as such Holder
requests to be included therein and (ii) make all required filing of such
Prospectus supplement or such post-effective amendment as soon as the Issuers
have received notification of the matters to be included in such filing; and
(o) in the case of a Shelf Registration or an Exchange Offer
Registration, if the Initial Purchasers on behalf of the Holders shall so
request, enter into such customary agreements and take all such other reasonable
actions in connection therewith (including, those reasonably requested by
counsel for the Holders) in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection, (i) to the extent possible,
make such representations and warranties to the Holders of such Registrable
Securities with respect to the business of the Company and its subsidiaries and
the Trust, the Registration Statement, Prospectus and documents deemed
incorporated by reference, if any, in each case, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested, (ii) use their best efforts to obtain
opinions of counsel to the Issuers (which counsel and opinions, in form, scope
and substance, shall be reasonably satisfactory to counsel to the Holders)
addressed to each selling Holder of Registrable Securities, covering the matters
customarily covered in opinions requested in underwritten offerings, (iii) use
their best efforts to obtain "cold comfort" letters from the independent
certified public accountants of the Company (and, if necessary, any other
certified public accountant of any subsidiary of the Company, or the Trust or
any business acquired by the Company for which financial statements and
financial data are or are required to be included or incorporated by reference
in the Registration Statement) addressed to each selling Holder of Registrable
Securities, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
underwritten offerings, and (iv) deliver such documents and certificates as may
be reasonably requested by counsel for the Holders to evidence the continued
validity of the representations and warranties of the Issuers made pursuant to
clause (i) above and to evidence compliance with any customary conditions in an
underwriting agreement.
In the case of a Shelf Registration Statement, the Issuers may require
each Holder of Registrable Securities to promptly furnish to the Issuers such
information regarding
-17-
<PAGE>
the Holder and the proposed distribution by such Holder of such Registrable
Securities as the Company may from time to time reasonably request in writing
and the Company may exclude from such registration the Registrable Securities of
any Holder that unreasonably fails to furnish such information within a
reasonable time after receiving such request.
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Issuers of the happening of any event of the
kind described in Section 3(e)(ii) through (v) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Issuers (at its
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. Each Holder agrees to indemnify
the Company, KDSM, Inc., the Trust, the Initial Purchasers and the other selling
Holders and each of their respective officers and directors who sign the
Registration Statement and each person, if any, who controls any such person for
any losses, claims, damages and liabilities caused by the failure of such Holder
to discontinue disposition of Registrable Securities after receipt of the notice
referred to in the preceding sentence or the failure of such Holder to comply
with applicable prospectus delivery requirements with respect to any Prospectus
(including, but not limited to, any amended or supplemented Prospectus) provided
by the Issuers for such use.
(p) comply, as to all matters within the Issuers' control,
with the provisions of the Securities Act with respect to the disposition of all
of the Registrable Securities covered by such Registration Statement in
accordance with the intended methods of disposition by the Holders thereof
provided for in such Registration Statement;
(q) use their best efforts to obtain the consent or approval
of each governmental agency or authority, whether federal, state or local, which
may be required to be obtained by the Issuers to effect the Shelf Registration
or the offering or sale in connection therewith or to enable the selling Holder
or Holders to offer, or to consummate the disposition of, their Registrable
Securities;
(r) notify in writing each Holder of Registrable Securities of
any proposal by Sinclair, KDSM, Inc. and/or the Trust to amend or waive any
provision of this Agreement pursuant to Section 7(b) hereof and of any amendment
or waiver effected pursuant thereto, each of which notices shall contain the
text of the amendment or waiver proposed or effected, as the case may be;
-18-
<PAGE>
(s) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as a
member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Conduct Rules and the By-Laws of the
National Association of Securities Dealers, Inc. ("NASD") or any successor
thereto, as amended from time to time) thereof, whether as a Holder of such
Registrable Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, assist such broker-dealer in
complying with the requirements of such Rules and By-Laws, including by (A) if
such Rules shall so require, permitting a "qualified independent underwriter"
(as defined in such Rules (or any successor thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereto and,
if any portion of the offering contemplated by such Registration Statement is an
underwritten offering or is made through a placement or sales agent, to
recommend the yield of such Registrable Securities, (B) indemnifying any such
qualified independent underwriter to the extent of the indemnification of
underwriters provided in Section 5 hereof, and (C) providing such information to
such broker-dealer as may be required in order for such broker-dealer to comply
with the requirements of the Conduct Rules of the NASD; and
(t) make generally available to its security holders as soon
as practicable but in any event not later than eighteen months after the
effective date of such registration statement, an earning statement of Sinclair
and its subsidiaries complying with Section 11(a) of the Securities Act
(including, at the option of Sinclair, Rule 158 thereunder).
4. Participation of broker-dealers in exchange offer.
--------------------------------------------------
(a) Each of the Issuers understands that the staff of the
Commission has taken the position that any broker-dealer that receives Exchange
Securities for its own account in the Exchange Offer in exchange for Securities
that were acquired by such broker-dealer as a result of market-making or other
trading activities (a "Participating Broker-Dealer"), may be deemed to be an
"underwriter" within the meaning of the Securities Act in connection with any
resale of such Exchange Securities and, therefore, must deliver a Prospectus
meeting the requirements of the Securities Act in connection with any resales of
the Exchange Securities received by it in the Exchange Offer.
Each of the Issuers understands that it is the staff's position that if
the Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
which Participating Broker- Dealers may resell the Exchange Securities, without
naming the Participating Broker- Dealers or specifying the amount of Exchange
Securities owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus
-19-
<PAGE>
delivery obligation under the Securities Act in connection with resales of
Exchange Securities for their own accounts, so long as the Prospectus otherwise
meets the requirements of the Securities Act.
(b) In light of the above, notwithstanding the other
provisions of this Agreement, the Issuers agree: to cause the Exchange Offer
Registration Statement to remain effective for a period 180 days after the Offer
Termination Date (or such earlier date as each Participating Broker-Dealer shall
have notified the Issuers in writing that such Participating Broker-Dealer has
resold all such Exchange Securities received in the Exchange Offer) and shall
amend or supplement the Prospectus or document incorporated by reference
therein, as the case may be, contained in the Exchange Offer Registration
Statement, as would otherwise be contemplated by Section 3(i) for such a period,
and Participating Broker-Dealers shall not be authorized by the Company to
deliver and shall not deliver such Prospectus after such period in connection
with the resales contemplated by this Section 4.
(c) The Initial Purchasers shall have no liability to the
Company, KDSM, Inc., the Trust or any Holder for costs and expenses of the
Exchange Offer Registration with respect to any request that they make pursuant
to Section 4(b) above.
5. Indemnification and Contribution.
--------------------------------
(a) The Issuers, jointly and severally, agree to indemnify and
hold harmless the Initial Purchasers, each Holder and each Person, if any who
controls the Initial Purchasers or any Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and expenses (including
the reasonable fees and expenses of counsel and other expenses in connection
with investigating, defending or settling such action or claim) arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment or supplement
thereto) pursuant to which Exchange Securities or Registrable Securities were
registered under the Securities Act (including all documents incorporated
therein by reference) or arising out of or based upon any omissions or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if the Issuers shall
have furnished any amendments or supplements thereto), or arising out of or
based upon any omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made
-20-
<PAGE>
therein or omitted therefrom in reliance upon and in conformity with the
information furnished in writing to the Company by or on behalf of any Holder
expressly for use in connection therewith ("Holders' Information"); provided,
however, that the indemnification contained in this paragraph (a) with respect
to any preliminary prospectus shall not inure to the benefit of the Holders (or
to the benefit of any person controlling the Holders) on account of any such
loss, claim, damage, liability or expense arising from the sale of such
Registrable or Exchange Securities by the Holders to any person if a copy of
such preliminary prospectus shall not have been delivered or sent to such person
at or prior to written confirmation of such sale, and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in the preliminary prospectus was corrected in the Prospectus,
provided that the Company has delivered the Prospectus in requisite quantity on
a timely basis to permit delivering and sending. The foregoing indemnity
agreement shall be in addition to any liability which the Issuers may otherwise
have.
(b) If any action, suit or proceeding shall be brought against
the Holders or any person controlling the Holders in respect of which indemnity
may be sought against the Issuers, such Holders or such controlling person shall
promptly notify the parties against whom indemnification is being sought (the
"indemnifying parties"), and such indemnifying parties shall assume the defense
thereof, including the employment of counsel and payment of all fees and
expenses. Such Holders or any such controlling person shall have the right to
employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Holders or such controlling person unless (i)
the indemnifying parties have agreed in writing to pay such fees and expenses,
(ii) the indemnifying parties have failed to assume the defense and employ
counsel, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both such Holders or such controlling
person and the indemnifying parties and such Holders or such controlling person
shall have been advised by its counsel that representation of such indemnified
party and any indemnifying party by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or potential
differing interests between them (in which case the indemnifying party shall not
have the right to assume the defense of such action, suit or proceeding on
behalf of such Holders or such controlling person). It is understood, however,
that the indemnifying parties shall, in connection with any one such action,
suit or proceeding or separate but substantially similar or related actions,
suits or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
only one separate firm of attorneys (in addition to any local counsel) at any
time for such Holders and controlling persons not having actual or potential
differing interests with such Holder or among themselves, which firm shall be
designated in writing by Smith Barney Inc., and
-21-
<PAGE>
that all such fees and expenses shall be reimbursed as they are incurred. The
indemnifying parties shall not be liable for any settlement of any such action,
suit or proceeding effected without their written consent, but if settled with
such written consent, or if there be a final judgment for the plaintiff in any
such action, suit or proceeding, the indemnifying parties agree to indemnify and
hold harmless any Holders, to the extent provided in the preceding paragraph,
and any such controlling person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
(c) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, each of their respective directors and
officers, and any person who controls such Issuers within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act, to the same
extent as the foregoing indemnity from the Issuers to each Holder, but only with
respect to the Holders' Information. If any action, suit or proceeding shall be
brought against the Issuers, any of their respective directors or officers, or
any such controlling persons based on any Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto),
and in respect of which indemnity may be sought against any Holder pursuant to
this paragraph (c), such Holder shall have the rights and duties given to the
Issuers by paragraph (b) above (except that if the Issuers shall have assumed
the defense thereof such Holder shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof, but the fees
and expenses of such counsel shall be at such Holder's expense), and the
Issuers, their respective directors and officers, and any such controlling
persons shall have the rights and duties given to the Holders by paragraph (b)
above. The foregoing indemnity agreement shall be in addition to any liability
which any Holders may otherwise have.
(d) If the indemnification provided for in this Section 5 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits of the Issuers on
the one hand, the Holders on another hand, and the Initial Purchasers on another
hand, from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuers on the one hand, the Holders on
another hand, and the Initial Purchasers on another hand, in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company from the offering of the
Securities included in such offering shall in each case be deemed to
-22-
<PAGE>
include the proceeds received by the Company in connection with the offering of
the Securities pursuant to the Purchase Agreement. The parties hereto agree that
any underwriting discount or commission or reimbursement of fees paid to the
Initial Purchasers pursuant to the Purchase Agreement shall not be deemed to be
a benefit received by the Initial Purchasers in connection with the offering of
the Securities included in such offering. The relative fault of the Issuers on
the one hand, the Holders on another hand, and the Initial Purchasers on another
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Issuers
on the one hand, by the Holders on another hand, and the Initial Purchasers on
another hand, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(e) The Issuers and each Holder agree that it would not be
just or equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, no Holder shall be required to
indemnify or contribute any amount in excess of the amount by which the total
price at which Registrable Securities were sold by such Holder exceeds the
amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 5 are several in proportion
to the number of Preferred Securities purchased by such Holder and not joint.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement (i) includes an unconditional
release of such indemnified party from all liability or claims that are the
subject matter of such action, suit or proceeding and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act by
or on behalf of any indemnified party.
-23-
<PAGE>
(g) Any losses, claims, damages, liabilities or expenses
(including counsel fees pursuant to paragraph (b) above) for which an
indemnified party is entitled to indemnification or contribution under this
Section 5 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 5 shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of any Holder or any person controlling any Holder, the Issuers'
respective directors or officers or any person controlling the Issuers, (ii)
acceptance of any Exchange Securities and (iii) any sale of Registrable
Securities pursuant to a Shelf Registration Statement.
6. Underwritten Offerings; Rule 144.
--------------------------------
(a) Selection of Underwriters. If any of the Registrable
Securities covered by the Shelf Registration are to be sold pursuant to an
underwritten offering, the managing underwriter or underwriters thereof shall be
designated by the Holders of at least a majority in aggregate principal amount
the Liquidation Value, or the Liquidation Amount, as the case may be, of the
Registrable Securities to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Company.
(b) Participation by Holders. Each Holder of Registrable
Securities hereby agrees with each other such Holder that no such Holder may
participate in any underwritten offering hereunder unless such Holder (i) agrees
to sell such Holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
(c) Rule 144. For so long as the Company is subject to the
reporting requirements of Section 13 or 15 of the Exchange Act, the Issuers
covenant to the Holders of Registrable Securities that the Company shall timely
file the reports required to be filed by it under the Exchange Act or the
Securities Act (including the reports under Sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations adopted by
the Commission thereunder, that if it ceases to be so required to file such
reports, it will upon the request of any Holder of Registrable Securities (i)
make publicly available such information as is necessary to permit sales
pursuant to Rule 144 under the Securities Act, (ii) deliver such information to
a prospective purchaser as is necessary to permit sales pursuant to Rule 144
under the Securities Act and it will take such further action as any Holder of
Registrable Securities may
-24-
<PAGE>
reasonably request, and shall take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar or successor rule or regulation hereafter adopted
by the Commission. Upon the request of any Holder of Registrable Securities in
connection with that Holder's sale pursuant to Rule 144, the Company shall
deliver to such Holder a written statement as to whether it has complied with
such requirements.
7. Miscellaneous.
--------------
(a) No Inconsistent Agreements. The Issuers have not entered
into, and on or after the date of this Agreement will not enter into, any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
(b) Entire Agreement; Amendments and Waivers. This Agreement
and the other writings referred to herein (including the Trust Agreement, the
Parent Guarantee, the Indenture and the Parent Debenture Guarantee (if
effective)) or delivered pursuant hereto which form a part hereof contain the
entire understanding of the parties with respect to its subject matter. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to its subject matter. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Issuers have obtained the written consent of the Majority
Holders of whatever Securities are publicly held; provided, however, that no
departure from the provisions of Section 5 hereof shall be effective as against
any Holder of Registrable Securities unless consented to in writing by such
Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 7(c), which address initially is, with respect to the Initial
Purchasers, the address set forth in the Purchase Agreement; and (ii) if to the
Company, KDSM, Inc. or the Trust, initially at the Company's address set forth
in the Purchase Agreement and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 7(c).
-25-
<PAGE>
All such notices and communications shall be deemed to have been duly
given at the time delivered, if personally delivered; five business days after
being deposited in the mail, postage pre-paid, if mailed; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and on the next business
day if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the applicable trustees,
at the address specified in the Indenture, the Trust Agreement, the Parent
Guarantee and the Parent Debenture Guarantee (if effective).
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment or assumption, subsequent Holders; provided that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Registrable Securities in violation of the terms of the Purchase Agreement.
If any transferees of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities,
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement and such person shall be entitled to receive the benefits hereof.
The Initial Purchasers shall have no liability or obligation to the Issuers with
respect to any failure by a Holder (other than the Initial Purchasers) to comply
with, or any breach by any Holder of, the obligations of such Holder under this
Agreement.
(e) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Issuers and the
Initial Purchasers and shall have the right to enforce such agreement directly
to the extent it deems such enforcement necessary or advisable to protect its
rights or the rights of Holders hereunder.
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law. This Agreement shall be governed by laws of
the State of New York.
-26-
<PAGE>
(i) Severability. In the event that one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
-27-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SINCLAIR CAPITAL
By: /s/ David B. Amy
------------------------------
Name: David B. Amy
Title: Administrative Trustee
KDSM, INC.
By: /s/ David D. Smith
------------------------------
Name: David D. Smith
Title: President
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
------------------------------
Name: David B. Amy
Title: Chief Financial Officer
Confirmed and accepted as of
the date first above written:
SMITH BARNEY INC.
CHASE SECURITIES INC.
By: Smith Barney Inc.
By: /s/ Douglas Hust
------------------------
Douglas Hust
-28-
Exhibit 4.3
PLEDGE AND SECURITY AGREEMENT
-----------------------------
PLEDGE AND SECURITY AGREEMENT, dated as of March 12, 1997,
between KDSM, INC., a Maryland corporation (the "Company") and First Union
National Bank of Maryland, as collateral agent (in such capacity, the
"Collateral Agent"), for First Union National Bank of Maryland, as Debenture
Trustee (together with any successor thereto in such capacity, the "Debenture
Trustee") under the Indenture (as defined herein) for the benefit of the holders
(the "Debentureholders") of the Company's 11 5/8% Senior Debentures due 2009
(the "Debentures") to be issued under the Indenture.
W I T N E S E T H:
------------------
WHEREAS, the Company, Sinclair Broadcast Group, Inc.
("Sinclair") and the Debenture Trustee have, as of the date hereof, entered into
the Indenture, dated as of the date hereof (as the same may be amended, modified
or supplemented from time to time, the "Indenture"), pursuant to which the
Company will issue the Debentures; and
WHEREAS, the Company has agreed to secure the Company's
obligations under the Debentures and the Indenture by pledging to the Collateral
Agent, for the equal and ratable benefit of the Debentureholders, the Collateral
(as defined below).
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. Definitions. (a) Generally. Unless otherwise
defined herein, terms defined in the Indenture are used herein as defined
therein. Terms not expressly defined herein or in the Indenture but which are
defined in the UCC shall have the same meanings herein as in the UCC.
(b) Other Terms. In addition, the following terms shall have
the meanings ascribed to them below or in the Sections of this Agreement
indicated below:
"Affiliate" means, with respect to any specified Person, (i)
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person, (ii) any other
Person that owns, directly or indirectly, 5% or more of such Person's Equity
Interests (as defined in the Indenture) or any officer or director of any such
Person or other Person or, with respect to any natural Person, any Person having
a relationship with such Person or other Person by blood, marriage or adoption
not more remote than first cousin or (iii) any other Person 10% or more of the
voting Equity Interests of which are beneficially owned or held directly or
<PAGE>
indirectly by such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Affiliated Debentureholders" shall mean Debentureholders that
are Affiliates of Sinclair or its direct and indirect subsidiaries.
"Articles Supplementary" means the operative document pursuant
to which the Series C Preferred Stock was issued.
"Collateral" shall have the meaning ascribed thereto in
Section 3 hereof.
"Collateral Documents" shall mean this Agreement and any
related UCC financing statements, if any, and similar instruments delivered
pursuant hereto.
"Debentureholders" shall have the meaning ascribed thereto in
the preamble.
"Debentures" shall have the meaning ascribed thereto in the
preamble.
"Default" shall mean an Event of Default not cured within the
applicable grace periods as set forth in Article V of the Indenture.
"Enforcement Event" shall have the meaning ascribed thereto in
Section 5.03 hereof.
"Event of Default" shall mean an Event of Default as defined
in Article V of the Indenture.
"Financing Documents" shall mean any agreements or instruments
entered into by the Company governing its obligations under the Debentures and
the Indenture.
"Investments" shall have the meaning ascribed thereto in
Section 4.10 hereof.
"Lien" shall mean any mortgage, charge, pledge, lien
(statutory or otherwise), privilege security interest, hypothecation or other
encumbrance upon or with respect to the Collateral.
"Like Amount" means (i) with respect to a redemption of Series
C Preferred Stock, shares of Series C Preferred Stock
- 2 -
<PAGE>
having an aggregate Liquidation Amount equal to the principal amount of
Debentures to be contemporaneously redeemed in accordance with the Indenture and
(ii) with respect to a distribution of Debentures to Holders of Preferred
Securities in connection with a Tax Event, Debentures having a principal amount
equal to the aggregate Liquidation Value of the Preferred Securities of the
holder to whom such Debentures are distributed.
"Liquidation Value" of the Preferred Securities shall have the
meaning set forth in the Trust Agreement.
"Liquidation Amount" shall have the meaning set forth in the
Articles Supplementary.
"Majority Debentureholders" shall mean, at any time,
Debentureholders holding at least a majority in aggregate principal amount of
the Debentures then Outstanding.
"Majority Preferred Securities Holders" shall mean, at any
time, Holders of at least a majority of the aggregate Liquidation Value of the
Preferred Securities.
"Notice of Default" shall have the meaning ascribed thereto in
Section 5.01 hereof.
"Outstanding", when used with respect to Preferred Securities,
the Debentures or the Series C Preferred Stock (the "Securities"), means as of
the date of determination, all Securities theretofore authenticated and
delivered under the applicable operative agreement, except:
(a) Securities theretofore cancelled by the applicable trustee
or transfer agent, as the case may be, or delivered to the applicable trustee or
transfer agent for cancellation;
(b) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited with the
applicable trustee or transfer agent or any Paying Agent (other than the Company
or any Affiliate thereof) in trust or set aside and segregated in trust by the
Company or such Affiliate (if the Company or such Affiliate shall act as the
Paying Agent) for the Holders; provided that if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to the
applicable operative agreement or provision therefor reasonably satisfactory to
the applicable trustee or transfer agent, as the case may be, has been made;
(c) Debentures, except to the extent provided in Sections 402
and 403, with respect to which the Company has effected defeasance or covenant
defeasance as provided in Article Four of the Indenture; and
- 3 -
<PAGE>
(d) Securities have been authenticated and delivered pursuant
to the applicable operative agreement, other than any such Securities in respect
of which there shall have been presented to the applicable trustee or transfer
agent proof reasonably satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands the Securities are valid obligations of the
Company; provided, however, that in determining whether the Holders of the
requisite principal amount or Liquidation Value or Liquidation Amount, as the
case may be, of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company, Sinclair, or any other obligor upon the Securities or any
Affiliate of the Company, Sinclair, or such other obligor shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
applicable trustee or transfer agent, as the case may be, shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent
or waiver, only Securities which the applicable trustee or transfer agent, as
the case may be, knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the reasonable satisfaction of the applicable trustee
or transfer agent, as the case may be, the pledgee's right so to act with
respect to such Securities and that the pledgee is not the Company, Sinclair or
any other obligor upon the Securities or any Affiliate of the Company, Sinclair
or such other obligor.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust, unincorporated
organization or government (or any agency, instrumentality or political
subdivision thereof).
"Pledged Stock" shall have the meaning ascribed thereto in
Section 3(b) hereof.
"Pledgor" shall mean the Company.
"Preferred Securities" shall have the meaning set forth in the
Trust Agreement.
"Property Trustee" means First Union National Bank of
Maryland, the property trustee of the Trust.
"Representative" of any Secured Party, shall mean in relation
to any Debenture holder, the Debenture Trustee.
"Secured Obligations" shall mean in the case of the Company,
any and all obligations of the Company to the Debenture Trustee and the
Debentureholders under or in connection with the Debentures, the Indenture and
the Collateral Documents.
- 4 -
<PAGE>
"Secured Party" shall mean any Debentureholder from time to
time.
"Series C Preferred Stock" means the 2,062,000 shares of
Sinclair's Series C Preferred Stock, par value $.01 per share.
"Stock Collateral" shall have the meaning ascribed thereto in
Section 3(c) hereof.
"Subsidiary" of any Person means any Person a majority of the
equity ownership or the Voting Stock of which is at the time owned, directly or
indirectly, by such Person or by one or more other Subsidiaries of such Person,
or by such Person and one or more other Subsidiaries.
"Temporary Cash Investments" means (i) any evidence of
Indebtedness, maturing not more than one year after the date of acquisition,
issued by the United States of America, or an instrumentality or agency thereof
and guaranteed fully as to principal, premium, if any, and interest by the
United States of America, (ii) any certificate of deposit, maturing not more
than one year after the date of acquisition, issued by, or time deposit of, a
commercial banking institution (including the Debenture Trustee) that is a
member of the Federal Reserve System and that has combined capital and surplus
and undivided profits of not less than $500,000,000, whose debt has a rating, at
the time as of which any investment therein is made, of "P-1" (or higher)
according to Moody's Investors Service, Inc. ("Moody's") or any successor rating
agency or "A-1" (or higher) according to Standard & Poor's Corporation ("S&P")
or any successor rating agency, (iii) commercial paper, maturing not more than
one year after the date of acquisition, issued by a corporation (other than an
Affiliate or Subsidiary of Sinclair) organized and existing under the laws of
the United States of America with a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P and (iv) any money market deposit accounts issued
or offered by a domestic commercial bank (including the Debenture Trustee)
having capital and surplus in excess of $500,000,000.
"Trust" means Sinclair Capital, a Delaware business trust
formed pursuant to the Trust Agreement.
"Trust Agreement" means the Amended and Restated Trust
Agreement, dated as of March 12, 1997, among the Company, as Depositor, First
Union National Bank of Maryland, as property trustee, First Union Bank of
Delaware, as Delaware trustee and the administrative trustees named therein.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York from time to time.
- 5 -
<PAGE>
"Voting Stock" means stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether at the time stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
Section 2. Representations and Warranties. The Company
represents and warrants to, and agrees with, the Secured Parties that:
(a) the Company is the sole beneficial owner of the
Collateral, and no Lien, directly or indirectly, exists or will exist upon any
of the Collateral at any time (and no right or option to acquire the same,
directly or indirectly, exists or will exist in favor of any other Person),
except for the pledge and security interest in favor of the Collateral Agent for
the benefit of the Secured Parties created or provided for herein, which pledge
and security interest constitutes a first priority perfected pledge of, and
security interest in and to, all of the Collateral;
(b) the Company has all requisite corporate power and
authority to execute, deliver and perform their obligations under this Agreement
and to grant the security interest granted hereby in the Collateral to the
Collateral Agent for the equal and ratable benefit of the Secured Parties, and
all of the transactions contemplated hereby have been duly authorized by all
necessary corporate action of the Company;
(c) the execution, delivery and performance hereof by the
Company, including the pledge of, and the grant of a security interest in, the
Collateral by the Company in the manner and for the purpose contemplated by this
Agreement, do not and will not result in any breach or violation of any of the
terms or provisions of any of the charters or bylaws of the Company and do not
and will not conflict with, or result in a breach of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any Lien upon any property or assets of the Company under (1) any contract,
indenture, mortgage, deed of trust, loan or credit agreement, bond, debenture,
note, lease or other agreement or instrument to which the Company or Sinclair is
a party or by which it may be bound or to which any of its properties or assets
is subject, other than (A) the Liens created pursuant to this Agreement, (B)
conflicts, defaults, breaches or violations which have been cured or waived or
(C) conflicts, defaults, breaches or violations that would not have a material
adverse effect on the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company, and its Subsidiaries considered as
one enterprise, (2) any existing applicable law, statute, rule or regulation or
- 6 -
<PAGE>
(3) any judgment, order, writ or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or operations;
(d) this Agreement constitutes the valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforcement, may be limited by bankruptcy, insolvency,
reorganization, fraudulent transfer, fraudulent conveyance or other similar laws
relating to or affecting creditors, rights generally or by general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law);
(e) no financing statement or security agreement covering any
of the Collateral is now on file in any public office, other than such financing
statements and security agreements in favor of the Collateral Agent for the
ratable benefit of the Secured Parties hereunder;
(f) no registration, recordation or filing with, or consent or
approval of, any governmental body, agency or official or any other Person is
required in connection with the authorization, execution, delivery or
performance of this Agreement by the Company or necessary for the enforcement of
the security interest in the Collateral granted hereby by the Company, other
than the filing of financing statements and other filings in favor of the
Collateral Agent for the ratable benefit of the Secured Parties hereunder which
filings will have been recorded prior to the execution of this Agreement if
required and appropriate for the Secured Parties to obtain a first priority
perfected pledge of, or security interest in and to, all of the Collateral;
(g) any officer, agent or representative acting for or on
behalf of the Company in connection with this Agreement or any aspect hereof, or
entering into or executing this Agreement on behalf of the Company, has been
duly authorized to do so, and is fully empowered to act for and represent the
Company, in connection with this Agreement and all matters related thereto or in
connection therewith;
(h) the Pledged Stock evidenced by the certificate identified
in Annex 1 hereto is, and all other Pledged Stock will be, duly authorized,
validly issued, fully paid and nonassessable, and none of such Pledged Stock is
or will be subject to any contractual restriction, or any restriction under the
charters or bylaws of the issuer of such Pledged Stock, upon the transfer of
such Pledged Stock (except for any such restrictions contained herein or in the
Indenture);
- 7 -
<PAGE>
(i) the Pledged Stock evidenced by the certificates identified
in Annex 1 hereto constitutes all of the issued and outstanding Series C
Preferred Stock beneficially owned by the Company on the date hereof, whether or
not registered in the name of the Company and said Annex 1 correctly lists all
the Pledged Stock as of the date hereof and identifies the respective class and
par value of the shares comprising such Pledged Stock and the respective number
of shares (and registered owner thereof) evidenced by each such certificate; and
(j) by virtue of the execution and delivery by the Company of
this Agreement and the delivery by the Company of the certificates, instruments
or other documents representing or evidencing the Pledged Stock to the
Collateral Agent, in each case in accordance with this Agreement, assuming
continuing possession by the Collateral Agent of such certificates, instruments
and other documents, the Collateral Agent will obtain and have a valid and
perfected Lien upon and security interest under the UCC in such Pledged Stock as
security for the repayment of the Secured Obligations, prior to any other Liens
thereon and security interests therein.
Section 3. The Collateral. For valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and (i) to induce (A)
the record and beneficial Debentureholders to purchase the Debentures, and (B)
the Debenture Trustee to undertake its obligations under the Indenture, and (ii)
as collateral security for the prompt payment in full when due (whether at
stated maturity, by acceleration or otherwise) of the Secured Obligations, the
Company hereby pledges and grants to the Collateral Agent, for the equal and
ratable benefit of the Secured Parties as hereinafter provided, a pledge of, and
security interest in, and agrees and acknowledges that the Collateral Agent, for
the equal and ratable benefit of the Secured Parties, has, and shall continue to
have, a pledge of, and security interest in, all of the Company's right, title
and interest in the following property, whether now owned by the Company or
hereafter acquired, whether now existing or hereafter coming into existence, and
wherever located (all being collectively referred to herein as the
"Collateral"):
(a) all the issued and outstanding Series C Preferred Stock of
Sinclair evidenced by the certificate identified in Annex I hereto, now owned by
the Company, together with, in each case, the certificates evidencing the same
(the "Existing Pledged Stock");
(b) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under any Financing Documents in
the event of any consolidation or merger in which Sinclair is not the surviving
corporation, all shares of each class of the Capital Stock of the successor
- 8 -
<PAGE>
corporation into which the Series C Preferred Stock is converted as a result of
such consolidation or merger (the "Successor Stock" and together with the
Existing Pledged Stock, the "Pledged Stock");
(c) all shares or securities representing a dividend on any of
the Pledged Stock or resulting from a stock split, revision, reclassification or
other like change of the Pledged Stock or otherwise received in exchange
therefor, and any subscription warrants, rights or options issued to the holders
of, or otherwise in respect of, the Pledged Stock (the Pledged Stock, together
with all other certificates, shares or securities, as may, from time to time,
being pledged hereunder pursuant to clauses (a) and (b) above and this clause
(c) being herein collectively called the "Stock Collateral"); and
(d) all uncertificated securities, moneys or property
representing a dividend on any of the Stock Collateral, or representing a
distribution or return of capital upon or in respect of the Stock Collateral, or
otherwise received in exchange therefor.
Section 4. Covenants; Remedies; Indemnification. In
furtherance of the pledge of the Collateral and the grant of the security
interest herein pursuant to Section 3 hereof, the Company hereby agrees with the
Collateral Agent as follows:
4.01 Delivery and Other Perfection. The Company shall (and in
the case of clause (c)(2) of this Section 4.01, does):
(a) cause the Collateral consisting of Stock Collateral or the
products, proceeds, and accessions thereof which are also Stock Collateral to be
evidenced by certificates to the fullest extent possible and delivered, together
with stock powers duly executed in blank, to and held in the possession of the
Collateral Agent (the Series C Preferred Stock will not be deposited with The
Depository Trust Company but will be issued in registered certificated form and
held in the possession of the Collateral Agent).
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may be
necessary or desirable (in the reasonable judgment of the Collateral Agent) to
create, preserve, perfect or validate any security interest granted pursuant
hereto or to enable the Collateral Agent to exercise and enforce its rights
hereunder with respect to such security interest, including, without limitation,
during the continuance of a Event of Default, causing any or all of the Stock
Collateral to be transferred of record into the name of the Collateral Agent or
its nominee (and the Collateral Agent agrees that if any Stock Collateral is
transferred into its name or the name of its
- 9 -
<PAGE>
nominee, the Collateral Agent will thereafter promptly give to the Company
copies of any notices and communications received by it with respect to the
Stock Collateral);
(c) notwithstanding clause (b) of this Section 4.01, (1)
authorize the Collateral Agent, in cooperation with the Company, to file, in
jurisdictions where this authorization will be given effect, a financing
statement signed only by the Collateral Agent covering the Collateral, if
appropriate, (2) hereby appoint the Collateral Agent as its attorney-in-fact to
sign and file any such financing statements (including any copies of this
Agreement) covering the Collateral, if appropriate, (3) at the request of the
Collateral Agent, join the Collateral Agent in executing such documents referred
to in clause (b) of this Section 4.01, and (4) pay the costs of filing or
recording any such documents, in all public offices at any time and from time to
time, whenever filing or recording of any such documents is reasonably deemed by
the Collateral Agent to be necessary or desirable; provided that nothing
contained in this clause (c) shall be construed to relieve the Company from
obligations described in clause (b) of this Section 4.01;
(d) give the Collateral Agent at least 20 days' prior notice
of any proposed change in the address set forth in Section 6.04 hereto;
(e) take all action reasonably necessary or appropriate by a
debtor to maintain and preserve all security interests granted hereunder in the
Collateral at all times as valid, subsisting and perfected as to all the
property affected and covered thereby and to maintain the priority and validity
of the security interest granted hereunder for such Collateral as against the
rights, claims and interests of all other persons;
(f) not, and shall not permit any of its Subsidiaries to, take
or omit to take any action which would have the result of adversely affecting or
impairing the security interests with respect to the Collateral in contravention
of this Pledge and Security Agreement, except as required by applicable law, and
the Company shall not (and shall cause its Subsidiaries not to) grant to, or
suffer to exist in favor of, any Person, any interest whatsoever in the
Collateral except as permitted by the Collateral Documents or the Pledge and
Security Agreement. The Company will not, and will not permit any of its
Subsidiaries to, enter into any agreement (other than this Pledge and Security
Agreement) or instrument that by its terms expressly requires that the proceeds
received from the sale of any Collateral by the Company be applied to repay,
redeem or otherwise retire any Indebtedness of any Person other than the
Debentures.
(g) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and
- 10 -
<PAGE>
records in such manner as the Collateral Agent may reasonably require in order
to reflect the security interest granted by this Agreement;
(h) take all actions and do all things reasonably necessary or
appropriate to defend its right, title and interest in and to the Collateral
against all actions and proceedings arising from any adverse claims and demands
of all Persons at any time claiming the same or any interest therein, and take
all actions reasonably required or appropriate so that, at all times, the
Collateral will be and remain free of all such adverse claims and demands;
(i) permit representatives of the Collateral Agent, upon
reasonable notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, and permit
such representatives to be present at the Company's place of business to receive
copies of all communications and remittances relating to the Collateral, and
upon the request of the Collateral Agent during the continuance of a Default
forward copies of any notices or communications received by the Company with
respect to the Collateral, all in such manner as the Collateral Agent may
reasonably require; and
4.02 Other Financing Statements and Liens. The Company shall
not file or suffer to be on file, or authorize or permit to be filed or to be on
file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Collateral Agent is not named as the sole
secured party for the benefit of the Secured Parties without the prior written
consent of the Collateral Agent.
4.03 Preservation of Rights. The Collateral Agent shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.
4.04 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.01 hereof are
insufficient to cover the reasonable costs and reasonable expenses of such sale,
collection or other realization and the payment in full of the Secured
Obligations, the Company shall remain liable for any deficiency.
4.05 Other Rights and obligations of the Collateral Agent, and
the Debenture Trustee.
(a) In the event that any action taken by the Company or the
Collateral Agent with respect to the Collateral shall be subject to the
certification, documentary or other requirements of Section 314(d) of the Trust
Indenture Act relating to the release of Collateral from the security interest
hereunder, then
- 11 -
<PAGE>
the Collateral Agent shall cooperate with the Company to the extent necessary to
enable the Company to comply with such requirements.
(b) The Collateral Agent shall never be under any obligation
to collect, attempt to collect, protect or enforce the Collateral or any
security thereof, which the Company agrees and undertake to do at its expense,
but the Collateral Agent may do so in its discretion at any time after the
occurrence of an Event of Default and the delivery of a Notice of Default in
accordance with Section 5.01 (and so long as such Event of Default shall be
continuing), and at such time, the Collateral Agent shall have the right to take
any steps by judicial process or otherwise that it may deem proper to effect the
collection of all or any portion of the Collateral or to protect or to enforce
the Collateral or any security therefor. All reasonable expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred or paid by
the Collateral Agent in connection with or incident, to any such collection or
attempt to collect the Collateral or actions to protect or enforce the
Collateral or any security therefor shall be borne by the Company or reimbursed
by the Company to the Collateral Agent upon demand, subject to reasonable
documentation and demand. The proceeds received by the Collateral Agent as a
result of any such actions in collecting or enforcing or protecting the
Collateral shall be held by the Collateral Agent without liability for interest
thereon and shall (after the payment of costs and expenses) be applied by the
Collateral Agent toward payment of any of the Secured Obligations in accordance
with Section 5.04 below, provided that the Collateral Agent shall account for
and pay over to the Company any such proceeds remaining after payment in full of
the Secured Obligations then outstanding. All actions taken by the Collateral
Agent pursuant to this Section 4.05(b) shall be in a manner consistent with
Section 9-207 of the UCC (or any successor provision).
(c) In the event the Collateral Agent shall pay any taxes,
assessments, interests, costs, penalties or expenses incident to or in
connection with the collection of the Collateral or protection or enforcement of
the Collateral or any security therefor upon demand of the Collateral Agent, the
Company shall pay to the Collateral Agent the full amount thereof and so long as
the Collateral Agent shall be entitled to any such payment, this Agreement shall
operate as security therefor as fully and to the same extent as it operates as
security for payment of the Secured Obligations, and for the enforcement of such
repayment the Collateral Agent shall have every right and remedy provided for
the enforcement of the payment of the Secured Obligations.
(d) The Debenture Trustee shall have the power (but not the
obligation) to institute and to maintain such suits and
- 12 -
<PAGE>
proceedings as it may deem expedient (x) to prevent any impairment of the
Collateral by any act which may be unlawful, in violation of this Agreement, the
Indenture, any other Financing Document or the Trust Indenture Act, and (y) to
preserve and protect its interest and the interests of the Debentureholders in
the Collateral.
(e) The Company agrees to give notice to the Collateral Agent
in the event that the Company shall fail timely to perform any covenant
hereunder required to be performed by it hereunder. The Collateral Agent is
hereby authorized to take all action reasonably necessary to cause such covenant
to be performed. The Collateral Agent will give notice to the Debenture Trustee
of its receipt of any such notice from the Company or the Sinclair.
(f) The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which the Collateral Agent accords its own property. It being understood that
the Collateral Agent shall not have any responsibility for ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relating to the Collateral, whether or not the Collateral Agent
has or is deemed to have knowledge of such matters.
4.06 Voting Rights of Company. Notwithstanding any other
provision in this Agreement or any other agreements, so long as this Agreement
is in full force and effect and regardless whether or not an Event of Default
shall have occurred and be continuing, the Company, as holder of the Series C
Preferred Stock (a) shall not exercise any of its voting approval, consent,
waiver or any other voting rights attributable to the Series C Preferred Stock,
without, in each case, obtaining the prior approval of the Majority
Debentureholders; provided, that if such Debentures are held by the Trust, the
Company shall instead obtain prior approval of the Trust which is required to
obtain the prior approval of the Majority Preferred Securities Holders;
provided, further, however, that where a consent, waiver or exercise of rights
under the Series C Preferred Stock would require the consent of each holder of
the Series C Preferred Securities affected thereby, no such consent shall be
given by the Company without the prior written consent of each Holder of
Outstanding Debentures or Preferred Securities, as the case may be, and (b) in
the event that, under the terms of the Series C Preferred Stock, the holders of
the Series C Preferred Stock have the right to elect two directors to the board
of directors of Sinclair, the Company shall elect the nominees of the Majority
Debentureholders; provided, that if such Debentures are held by the Trust, the
Company shall elect the nominees of the Trust which is required to elect the
nominees of the Majority Preferred
- 13 -
<PAGE>
Securities Holders to fill those two board of director positions. The Company
shall not revoke any action previously authorized or approved by a vote of the
Preferred Securities, except pursuant to a subsequent vote of the Holders of the
Debentures or the Preferred Securities, as the case may be.
4.07 Change of Name. The Company shall not change its
corporate name, or the name under which it does business, from the name shown on
the signature pages hereto without at least 30 days' prior written notice to the
Collateral Agent and without filing such new or additional financing statements
or security documents, making such other filings and recordings and taking such
other actions as are necessary to maintain the security interest in the
Collateral granted hereby, and providing such additional opinions and documents
as the Collateral Agent shall reasonably deem necessary.
4.08 Private Sale. The Secured Parties shall incur no
liability as a result of the sale of the Collateral, or any part thereof, at any
private sale pursuant to Section 5.01 or 5.02 hereof conducted in a commercially
reasonable manner. The Company hereby waives any claims against the Secured
Parties arising by reason of the fact that the price at which the Collateral may
have been sold at such a private sale was less than the price which might have
been obtained at a public sale or was less than the aggregate amount of the
Secured Obligations, even if the Collateral Agent accepts the first offer
received and does not offer the Collateral to more than one offeree.
4.09 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Collateral Agent while no Event of Default has
occurred and is continuing, the Collateral Agent is hereby appointed the
attorney-in-fact of the Company for the purpose, upon the occurrence and during
the continuance of any Event of Default, of carrying out the provisions of this
Section 4 and such acts as they may deem necessary or advisable to accomplish
the purposes hereof, which appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, so
long as the Collateral Agent shall be entitled under Sections 5 and 6 to make
collections in respect of the Collateral, the Collateral Agent shall have the
right and power to receive, endorse and collect all instruments made payable to
the order of the Company representing any dividend, payment, or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
4.10 Investment of Cash. (a) Funds collected from
Distributions or otherwise by the Collateral Agent shall be invested by the
Collateral Agent from time to time in Temporary Cash Investments ("Investments")
if such Collateral Agent is not otherwise required to make payments with respect
to the
- 14 -
<PAGE>
Debentures. All Investments shall be made in the name of the Collateral Agent or
a nominee of the Collateral Agent and in a manner, determined by the Collateral
Agent in its reasonable discretion, that preserves the Collateral Agent's
perfected, first priority security interest in such Investments.
(b) The Collateral Agent shall have no obligation to invest
collected funds during the first night after their collection but shall do so as
soon as practicable but in no event later than 3 business days after collection.
(c) The Collateral Agent shall have no responsibility to the
Company for any loss or liability arising in respect of any investment in
Temporary Cash Investments made pursuant to this Agreement (including, without
limitation, as a result of the liquidation of any thereof before maturity),
except to the extent that such loss or liability arises from the Collateral
Agent's gross negligence or willful misconduct.
(d) The Company will pay or reimburse the Collateral Agent for
any and all out-of-pocket costs, expenses and liabilities of the Collateral
Agent incurred in connection with this Agreement, the maintenance and operation
of the Collateral and the investment of any cash held therein, including,
without limitation, any investment, brokerage or placement commissions and fees
incurred by the Collateral Agent in connection with the investment or
reinvestment of such cash.
4.11 Dispositions and Releases of Collateral. Acting in
accordance with Sections 5 and 6 hereof, the Collateral Agent will determine the
circumstances and manner in which the Collateral shall be disposed of,
including, without limitation, determining whether to release all or any portion
of the Collateral from the security interest granted hereby; provided, however,
in the event that all or a portion of the Series C Preferred Stock are to be
redeemed, the Collateral Agent shall, simultaneously with the receipt of cash as
payment for the redemption of shares of Series C Preferred Stock and
simultaneously with the redemption of a Like Amount of Debentures, release and
deliver to the Company such amount of the Pledged Stock as may be redeemed for
such cash payment; provided, that any release of such Pledged Stock shall comply
with the Trust Indenture Act to the extent required; provided, further, that in
no event shall the Company be required to pledge Pledged Stock having a
Liquidation Amount in excess of the outstanding principal amount of the
Debentures.
4.12 Expenses. The Company agrees to pay to the Collateral
Agent all out-of-pocket expenses (including reasonable expenses for legal
services of any kind) of, or incident to, the enforcement of any of the
provisions of this Agreement and the Financing Documents, or performance by the
Collateral Agent of
- 15 -
<PAGE>
any obligations of the Company or the Sinclair in respect of the Collateral
which the Company have failed or refused to perform, or any actual or attempted
sale, or any exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the Collateral and
defending or asserting rights and claims of the Collateral Agent in respect
thereof, by litigation or otherwise, including expenses of insurance, and all
such expenses shall be Secured Obligations to the Collateral Agent secured under
Section 3 hereof.
4.13 Further Assurances. The Company agrees that it will, from
time to time upon the written request of the Collateral Agent, execute and
deliver such further documents and do such other acts and things as the
Collateral Agent may reasonably request in order fully to effect the purposes of
this Agreement.
4.14 Indemnification of Collateral Agent. The Company agrees
to indemnify the Collateral Agent from and against any and all liabilities,
obligations, losses, claims, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Collateral Agent in its capacity
as such in any way relating to or arising out of this Agreement or any Financing
Document, or any action taken or omitted to be taken by the Collateral Agent
hereunder or thereunder; provided, that the Company shall not be liable for any
portion of such liabilities, obligations, losses, claims, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements that have resulted
from the gross negligence, willful misconduct, or fraud of the Collateral Agent.
Such indemnification shall survive the termination of this Agreement and the
resignation or removal of the Collateral Agent.
4.15 Successor Agents. The Collateral Agent may resign at any
time by giving 30 days' prior written notice thereof to the Secured Parties (or,
as to any Secured Parties for which a Representative is acting, to such
Representative), with a copy of such notice to the Company. The Collateral Agent
may be removed at any time for cause by the Majority Debentureholders by written
notice thereof to the Collateral Agent and the other Secured Parties at least 10
business days prior to the effective date of such removal. Upon any such
resignation or removal, the Majority Debentureholders shall have the right to
appoint a successor to the Collateral Agent with the prior written consent of
the Company (which consent shall not be unreasonably withheld). If no successor
Collateral Agent shall have been so appointed by the Majority Debentureholders
or shall have accepted such appointment within 30 days after the notice of
resignation or notice of removal, as the case may be, then the resigning or
removed Collateral Agent may, on behalf of the Secured Parties with the prior
written consent of the Company (which consent
- 16 -
<PAGE>
shall not be unreasonably withheld), appoint a successor Collateral Agent. If
the resigning or removed Collateral Agent does not appoint a successor
Collateral Agent, the Company may appoint a successor Collateral Agent. Any
successor Collateral Agent shall be a commercial bank or trust company organized
or licensed under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $250,000,000. The
Collateral Agent may be, but is not required to be, the Debenture Trustee under
the Indenture. Upon the acceptance of its appointment as Collateral Agent, such
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights and duties of the resigning or removed Collateral Agent, and the
resigning or removed Collateral Agent shall be discharged from its duties and
obligations hereunder (and under the other Financing Documents, if applicable).
After any resigning or removed Collateral Agent's resignation or removal
hereunder as Collateral Agent, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was a
Collateral Agent.
4.16 Appointment of Co-Agents. At any time or times, in order
to comply with any legal requirement in any jurisdiction, the Collateral Agent
may appoint another bank or trust company or one or more other persons, either
to act as a co-agents, jointly with the Collateral Agent, or to act as a
separate agent or agents on behalf of the Secured Parties with such power and
authority to act under this Agreement as may be necessary for the effectual
operation of the provisions hereof and as may be specified in the instrument of
appointment.
4.17 Liability of Agents: Consultation with Experts. (a)
Neither the Collateral Agent nor any of its directors, officers, employees or
agents shall be liable for any action taken or omitted to be taken by any of
them hereunder or under any other Financing Document, except for its own gross
negligence or willful misconduct. Nothing in this Agreement or the other
Financing Documents shall be deemed to constitute the Collateral Agent a trustee
within the meaning of the Trust Indenture Act.
(b) The Collateral Agent may consult with legal counsel,
independent public accounts and any other experts selected by it. Neither the
Collateral Agent nor any of its directors, officers, employees or agents shall
be liable for any action taken or omitted to be taken by any of it in good faith
reliance upon the advice of such counsel, independent public accountants or
other experts selected by the Collateral Agent.
(c) The Collateral Agent shall be entitled to rely on any
notice, consent, certificate, statement or other document (including any
telegram, cable, telex, facsimile or telephone transmission) believed by it to
be genuine and correct and to have been signed and/or sent by the proper
Persons, and shall not
- 17 -
<PAGE>
be liable for any of the consequences of such reliance. Without limiting any
obligation of any Secured Party or Representative to confirm in writing such
telephonic notice permitted by this Agreement, the Collateral Agent may act
without liability upon the basis of any telephonic notice believed in good faith
by it to be from an authorized officer of any Secured Party, any Representative
or any agent thereof prior to receipt of such written confirmation.
(d) As to any matters not expressly provided for herein or in
the other Financing Documents (including without limitation the timing and the
methods of realization upon the Collateral and amendments of the provisions
thereof), the Collateral Agent shall act or refrain from acting until it has
received instructions from the Debenture Trustee or the Majority
Debentureholders in its own discretion. The Collateral Agent shall not be
obligated to follow any such written directions to the extent that it shall
reasonably determine, based on the written opinion of its counsel, that such
directions are in conflict with any provision of any applicable law or
regulation or any Financing Document.
Section 5. Events of Default; Application of Proceeds;
Termination, Etc.
5.01 Events of Default. If an Event of Default shall have
occurred and be continuing, and the Majority Debentureholders (unless the
Debentures are held by the Trust, in which case the Majority Preferred
Securities Holders through the Property Trustee acting on behalf thereof may
also constitute the Majority Debentureholders) or the Debenture Trustee acting
on behalf thereof shall have delivered to the Collateral Agent and the Company a
written notice or notices of such Event of Default (a "Notice of Default"):
(i) The Collateral Agent may, by written notice to
the Company, direct the Company to and thereupon the Company
shall, receive all moneys, checks, notes, drafts and other
payments relating to or constituting proceeds of Collateral in
trust for the Collateral Agent for the benefit of the Secured
Parties, not commingle the same with any other property or
funds of the Company and Sinclair and, unless the Collateral
Agent shall have otherwise instructed the Company, promptly
deliver or cause to be delivered all such payments in the
exact form received, together with any necessary endorsements,
to the Collateral Agent or to such Person or Persons as the
Collateral Agent may designate.
(ii) The Collateral Agent may take possession
or control of any proceeds of the Collateral.
- 18 -
<PAGE>
(iii) [The Collateral Agent may transfer any of
the Collateral into the name of the Collateral Agent or
its nominee.
(iv) The Collateral Agent shall have and may exercise
with respect to the Collateral and the Secured obligations any
or all of the rights and remedies of a secured party under the
UCC or under any other applicable law, and as otherwise
granted, to the extent lawful, herein or under any other
agreement now or hereafter in effect executed by the Company
in favor of the Collateral Agent, including, without
limitation, the right and power to sell, at public or private
sale or sales, or otherwise dispose of, or otherwise utilize
the Collateral and any part or parts thereof in any manner
authorized or permitted under the UCC after default by a
debtor, and to apply the proceeds thereof toward payment of
any costs and expenses and reasonable attorneys' fees and
expenses thereby incurred by the Collateral Agent and toward
payment of the Secured Obligations, in accordance herewith.
Specifically, and without limiting the foregoing, the
Collateral Agent shall have the right to take possession of
all or any part of the Collateral or any security therefor and
of all books, records, papers and documents of the Company and
Sinclair or in the Company's and Sinclair's possession or
control relating to the Collateral which are not already in
the Collateral Agent's possession, and for such purpose may
enter upon any premises upon which any of the Collateral or
any security therefor or any of said books, records, papers
and documents are situated and remove the same therefrom
without any liability (other than as a result of gross
negligence, fraud or willful misconduct) for damages
occasioned by the reasonable exercise of such authority;
provided, that the Collateral Agent shall not remove and take
possession of any books and records which are required by
applicable law to be retained or maintained by the Company, in
which case the Company shall make copies of all such books and
records and deliver said copies to the Collateral Agent;
provided, further that the Collateral Agent shall make
available to the Company copies of any books, records, papers
and documents which it shall take possession of pursuant
hereto. To the extent permitted by the UCC, (x) the Company
expressly waives any notice of the sale or other disposition
of the Collateral and all other rights or remedies of the
Company or formalities prescribed by law relative to the sale
or disposition of the Collateral or exercise of any other
right or remedy of the Collateral Agent existing after default
hereunder; and (y) to the extent any such notice is required
and
- 19 -
<PAGE>
cannot be waived, the Company agrees that if such notice is
given in the manner provided in Section 7.04 hereof (with a
copy to the Representative) at least five (5) business days
before the time of the sale or disposition, such notice shall
be deemed reasonable and shall fully satisfy any requirement
for the giving of said notice. The Collateral Agent shall not
be obligated to make any sale of Collateral regardless of any
notice of sale having been given. The Collateral Agent may
adjourn any public or private sale.
(v) Upon written notice by the Collateral Agent to
the Company, the Collateral Agent or its nominee or nominees
shall have the sole and exclusive right to exercise all voting
and consensual powers pertaining to the Collateral or any part
thereof and may exercise such powers in such manner as the
Collateral Agent may elect.
5.02 Special Provisions Relating to Stock Collateral. (a) So
long as no Event of Default shall have occurred and be continuing, the Company
shall have the right to the rights and powers of ownership (other than voting
rights as provided in Section 4.06 or as otherwise provided in this Agreement)
pertaining to its Stock Collateral for all purposes not inconsistent with the
terms of this Agreement, the Indenture or any other Financing Document; and the
Collateral Agent shall execute and deliver to such Pledgor or cause to be
executed and delivered to such Pledgor all such proxies, powers of attorney,
dividend and other orders and all such instruments, without recourse, as the
Pledgor may reasonably request for the purpose of enabling such Pledgor to
exercise the rights and powers which it is entitled to exercise pursuant to this
Section 5.02(a); provided, however, that any non-cash distributions (including
stock dividends) shall be delivered immediately to Collateral Agent as
additional Collateral. The foregoing shall not obligate any Pledgor to violate
any fiduciary duty owed to its stockholders or take any action in violation of
any state or federal law.
(b) If any Event of Default shall have occurred, then so long
as such Event of Default shall continue, and whether or not the Collateral Agent
exercises any available right to declare any Secured Obligation due and payable
or seeks or pursues any other relief or remedy available to it under applicable
law or under this Agreement, the Indenture or any other agreement relating to
such Secured Obligation, all dividends and other distributions on the Stock
Collateral shall be paid directly to the Collateral Agent and retained by it as
part of the Collateral, subject to the terms of this Agreement, and, if the
Collateral Agent shall so request in writing, the Company agrees to execute and
deliver to the Collateral Agent appropriate
- 20 -
<PAGE>
instruments to that end; provided that if such Event of Default is cured, any
such cash dividend or distribution theretofore paid to the Collateral Agent
shall (except to the extent theretofore applied to the Secured Obligations) be
returned by the Collateral Agent to the Company.
(c) The Company hereby acknowledges that the sale by the
Collateral Agent of any Stock Collateral pursuant to the terms hereof in
compliance with the 1933 Act, as well as applicable "Blue Sky" or other state
securities laws, may require strict limitations as to the manner in which the
Collateral Agent or any subsequent transferee of the Stock Collateral may
dispose of the same. The Company understands that in order to protect the
Collateral Agent's interest it may be necessary to sell the Stock Collateral at
a price less than the maximum price attainable if a sale were delayed or were
made in another manner, such as a public offering registered under the 1933 Act.
The Company consents to sale in such a manner and agrees that the Collateral
Agent shall have no obligation, provided that the Collateral Agent conducts such
sale in accordance with applicable law, to obtain the maximum possible price for
the Stock Collateral.
(d) The Company agrees that, if an Event of Default shall have
occurred and be continuing and a Notice of Default shall have been delivered, if
for any reason the Collateral Agent desires to sell any of the Stock Collateral
at a public or private sale and in connection with such sale, in the reasonable
opinion of the Collateral Agent, no exemption from the registration provisions
of the 1933 Act is available, the Company will upon the written request of the
Collateral Agent:
(i) use its best efforts to cause such Stock
Collateral to be registered under the provisions of the 1933
Act, and to cause one or more registration statements relating
thereto to become effective and to remain effective for such
period as prospectuses are required by law or regulation to be
furnished with respect to the offering and sale of such Stock
Collateral, and to make all amendments and supplements such
Stock Collateral and to the related prospectus which, in the
reasonable opinion of the Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the 1933
Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto;
(ii) indemnify, defend and hold harmless the
Collateral Agent and any underwriter from and against all
liabilities, obligations, losses, claims, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever
- 21 -
<PAGE>
(including the costs of investigation) which may be imposed
on, incurred by or asserted against the Collateral Agent or
any such underwriter insofar as such liabilities, obligations,
losses, claims, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements arise out of or are based
upon (A) any alleged untrue statement of a material fact
contained in any prospectus or registration statement (or any
amendment or supplement thereto) or in any notification or
offering circular or (B) any alleged omission to state a
material fact required to be stated therein or necessary to
make the statements in any thereof not misleading, except
insofar as the same may have been caused by any untrue
statement or omission based upon information furnished in
writing to either the Company by the Collateral Agent or, in
the case of any underwriter, by any underwriter, expressly for
use therein;
(iii) endeavor to qualify such Stock Collateral under
any applicable state securities or "Blue Sky" laws and to
obtain all necessary governmental approvals for the sale of
such Stock Collateral, as reasonably requested by the
Collateral Agent;
(iv) endeavor to cause each such issuer of such Stock
Collateral to enter into one or more underwriting agreements
in form and substance customary for similar transactions,
obtain customary legal opinions and accountants comfort
letters, and make available to its security holders, as soon
as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of
the 1933 Act and Rule 158 thereunder;
(v) bear all reasonable costs and reasonable
expenses of carrying out its respective obligations
under this Section 5.02(d); and
(vi) use reasonable efforts to do or cause to be done
all such other acts and things as may be reasonably necessary
to make such sale of Stock Collateral or any part thereof
valid and binding and in compliance with all applicable law.
The Company acknowledges that there is no adequate remedy at law for failure by
any of them to comply with the provisions of this Section 5.02 and that such
failure would not be adequately compensable in damages, and therefore each
agrees that its agreements contained in this Section 5.02 may be specifically
enforced.
- 22 -
<PAGE>
5.03 Payments. (a) If at any time the Collateral Agent shall
realize any cash or other property as a result of the exercise of any of its
rights and remedies under Section 5.01 or Section 5.02 (an "Enforcement Event"),
the Collateral Agent shall hold all such amounts as Collateral pending
distribution in
accordance with Section 5.04.
(b) All amounts held by the Collateral Agent in accordance
with Section 5.03(a) shall be subject to sharing in accordance herewith.
(c) Upon the occurrence of an Enforcement Event, the
Collateral Agent shall within a reasonable time thereafter distribute any
amounts held, realized or received by the Collateral Agent for the benefit of
the Secured Parties in accordance with Section 5.04.
5.04 Distributions. (a) All amounts to be distributed pursuant
to Section 5.03 shall be applied, in the following order of priority:
(i) to pay any fees and expenses due and owing to the
Collateral Agent according to the respective amounts due and
owing to such Person;
(ii) to indemnify the Collateral Agent in accordance
with Section 4.14;
(iii) to indemnify the Debenture Trustee in
accordance with the indemnification provisions set forth in
the Indenture;
(iv) to pay all interest due to the Debentureholders
that are not Affiliated Debentureholders under the Debentures
(provided that the Trust shall not be deemed an Affiliated
Debentureholder for this purpose);
(v) to pay any other fees, expenses, indemnities and
premiums outstanding under the Secured obligations, ratably
among the non-Affiliate Debentureholders;
(vi) to repay principal amounts outstanding under the
Secured Obligations ratably among the Debentureholders that
are not Affiliated Debentureholders (provided that the Trust
shall not be deemed an Affiliated Debentureholder for this
purpose);
(vii) to pay all interest, fees, expenses,
indemnities and premiums due to the Affiliated
Debentureholders under the Debentures;
- 23 -
<PAGE>
(viii) to repay Principal amounts outstanding under
the Secured Obligations, ratably among the Affiliated
Debentureholders; and
(ix) to pay all remaining amounts to the Company or
to their successors and assigns, or as directed by a court of
competent jurisdiction.
(b) The Collateral Agent's obligations under this Section 5.04
shall be satisfied upon the payment of such amounts to the Debenture Trustee for
the benefit of the Debentureholders, which Debenture Trustee is authorized to
receive such funds and make further distributions to the Debentureholders.
5.05 Assignees. (a) No provision of this Agreement shall
restrict in any manner the assignment, participation or other transfer in
accordance with the terms of the applicable Financing Documents by any Secured
Party of all or any part of its right, title or interest under any such
Financing Documents or the Indebtedness owing to it thereunder (including its
right, title and interest with respect to this Agreement and the other
Collateral Documents).
5.06 Termination, Etc. When all Secured Obligations shall have
been paid in full or (ii) the Company shall have deposited or caused to be
deposited in trust with the Debenture Trustee and/or such other Representative
an amount or amounts in United States dollars sufficient to pay and discharge
all of the Secured Obligations, in each case, in a manner sufficient to
discharge all of such Secured Obligations in accordance with the Indenture, this
Agreement shall terminate, and the Collateral Agent shall forthwith cause to be
assigned, transferred and delivered, against receipt but without any recourse,
warranty and representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of the Company. The Collateral
Agent shall also execute and deliver to the Company upon such termination such
UCC termination statements and such other documentation and take such other
actions as shall be reasonably requested by the Company to effect the
termination and release of the Liens on the Collateral.
Section 6. Miscellaneous.
6.01 Obligations Hereunder Not Affected. All rights and
interests of the Collateral Agent, the Secured Parties and the Debenture Trustee
hereunder, and all agreements and obligations of each such Person under this
Agreement, shall, to the extent permitted by law, remain in full force and
effect irrespective of:
- 24 -
<PAGE>
(i) any lack of validity or enforceability of
any Financing Document, any Collateral Document or any
other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of
payment of, the security for, or in any other term of, all or
any of the Secured Obligations, or any other extension,
renewal, amendment, waiver, refinancing, replacement or
restructuring of or any consent to departure from any
Financing Document or any Collateral Document;
(iii) any exchange, release or non-perfection of any of
the Collateral or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of
the Secured Obligations; or
(iv) any other circumstances that might otherwise
constitute a defense available to or a discharge of, the
Company a creditor or a secured creditor.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded or
must otherwise be returned by the Collateral Agent, or any other Person upon the
insolvency, bankruptcy or reorganization of the Company, the Sinclair or
otherwise, all as though such payment had not been made.
6.02 No Waiver. No failure on the part of the Collateral Agent
or any of its agents to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Collateral Agent
or any of its agents of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
6.03 GOVERNING LAW, THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK,
6.04 Notices. All notices, requests, consents, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand, sent by a recognized nationwide courier
service, sent by certified or registered mail, postage prepaid and return
receipt requested, or sent by facsimile with a confirmation copy simultaneously
delivered or sent by one of the foregoing means, and shall be addressed (i) if
to Sinclair or the Company, at the
- 25 -
<PAGE>
office of the Sinclair at 2000 West 41st Street, Baltimore, Maryland 21211,
Attention: David D. Smith, President, with a copy to Thomas & Libowitz, P.A.,
100 Light Street, Suite 1100, Baltimore, Maryland 21202, Attention: Steven A.
Thomas, Esq. and a copy to Wilmer, Cutler & Pickering, 100 Light Street, 13th
Floor, Baltimore, Maryland 21202, Attention: John B. Watkins, Esq.; (ii) if to
the Collateral Agent, at the office of the Debenture Trustee at 901 East Cary
Street, 2nd floor, Richmond, Virginia 23219, Attention: Patricia Welling. The
Collateral Agent shall deliver a copy of each notice document received by it
pursuant to this section to the Debenture Trustee at its address provided to the
Collateral Agent. All notices shall be deemed to have been given at the time of
delivery thereof to any officer or employee of the Person entitled to receive
such notice at the address of such Person for purposes of this Section 6.04 or,
if mailed, at the completion of the fifth full day following the time of such
mailing thereof to such address, as the case may be.
6.05 Amendments and Waivers. (a) Subject to paragraph (b)
below, any provision of this Agreement may be amended or waived if, and only if,
(i) such amendment or waiver is in writing and signed by the Company and the
Collateral Agent, (ii) the Collateral Agent receives an opinion of counsel to
the Company to the effect that the amendment or waiver complies with the
provisions of this Agreement and (iii) pursuant to Section 4.06, is consented to
in writing by the Majority Debentureholders, unless the Debentures are held by
the Trust, in which case, such amendment or waiver is instead consented to by
the Trust (which is required to obtain written consent from the Majority
Preferred Securities Holders) (or such higher requisite percentage if the
subject waiver or amendment would require such higher requisite percentage if
such waiver or amendment was to be made under the Indenture).
(b) Notwithstanding subsection (a) above, any provision of
this Agreement may be amended or waived if such amendment or waiver is in
writing, is signed by the Company and the Collateral Agent and is for any of the
following purposes:
(i) to evidence the succession of another Person to
the Company and the assumption by any such successor of the
covenants of the Company herein;
(ii) to add to the covenants of the Company for the
benefit of the Secured Parties, or to surrender any right or
power herein conferred upon the Company, as applicable;
(iii) pledge additional assets or property or rights
therein as Collateral for the benefit of the Secured Parties;
- 26 -
<PAGE>
(iv) to cure any ambiguity herein, or to correct or
supplement any provision herein which may be defective or
inconsistent with any other provision herein or in any other
Financing Document;
(v) to comply with the requirements of the Securities
and Exchange Commission in order to effect or maintain the
qualification under the Trust Indenture Act of the Indenture;
(vi) to evidence and provide the acceptance of the
appointment of a successor to a Collateral Agent hereunder;
(vii) to confirm, as further assurance, any pledge or
security interest created or to be created hereunder; and
(viii) to include any other provisions with respect
to matters or questions arising hereunder, or any other
amendment or waiver hereto or hereof, provided, that, in each
case, such provisions, amendment or waiver shall not adversely
affect the interests of the Secured Parties.
6.06 Trust Indenture Act. Subject to the limitations contained
in the Indenture if any provision of this Agreement limits, qualifies or
conflicts with the duties imposed by any provisions of the Trust Indenture Act,
such provisions of the Trust Indenture Act shall control if the Trust Indenture
Act is applicable to this Agreement.
6.07 Standard of Conduct. In exercising any voting rights of
the Series C Preferred Stock in accordance with the terms of this Agreement, the
Company shall exercise such rights according to a fiduciary standard of care and
trust for the benefits of the parties that the counterparties of the obligations
of the Company contained in Section 4.06.
6.08 Counterparts. This Agreement may be executed in any
number of counterparts, all of which together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.09 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible and (ii) the invalidity or unenforceability of any
- 27 -
<PAGE>
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
6.10 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation of any provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
THE COMPANY
------------
KDSM, INC.
By: /s/ David D. Smith
------------------------------
Name: David D. Smith
Title: President
THE COLLATERAL AGENT
FIRST UNION NATIONAL BANK OF
MARYLAND
By: /s/ Patricia A. Welling
-------------------------------
Name: Patricia A. Welling
Title:
Acknowledgment:
Sinclair hereby acknowledges that the Company is granting a first priority
security interest in the Series C Preferred Stock to the Collateral Agent for
the benefit of the Secured Parties.
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
-----------------------------------
Name: David B. Amy
Title: Chief Financial Officer
- 28 -
<PAGE>
ANNEX 1
PLEDGED STOCK
Certificate No. 1 representing 2,062,000 shares of Series C Preferred Stock of
Sinclair Broadcast Group, Inc.
