SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/_/ Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SINCLAIR BROADCAST GROUP,INC.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
SINCLAIR BROADCAST GROUP,INC.
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.(1)
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
5) Total fee paid:
_____________________________________________________________________________
/_/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
_____________________________________________________________________________
2) Form, Schedule or Registration No.
_____________________________________________________________________________
3) Filing party:
_____________________________________________________________________________
4) Date filed:
_____________________________________________________________________________
___________
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
SBG
SINCLAIR BROADCAST GROUP
April 11, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Sinclair Broadcast Group, Inc. ("Sinclair") to be held on May 5, 1997 in the
Duncan Room of the Sheraton Baltimore North Hotel at 903 Dulaney Valley Road,
Towson, Maryland 21204 at 10:00 a.m., local time. As described in the enclosed
Proxy Statement, at the Annual Meeting, the stockholders of Sinclair will be
asked to (i) elect seven members of the Board of Directors of Sinclair; (ii)
approve, ratify and confirm the selection of Arthur Andersen LLP as Sinclair's
independent auditors for the fiscal year ended December 31, 1997; and (iii)
transact such other business as properly comes before the meeting.
THE BOARD OF DIRECTORS OF SINCLAIR RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ELECTION OF THE BOARD'S NOMINEES FOR DIRECTOR AND FOR APPROVAL OF EACH OTHER
PROPOSAL.
All stockholders of record at the close of business on April 8, 1997 (the
record date for the Annual Meeting) are entitled to notice of and to vote at the
Annual Meeting.
Your vote on these matters is very important. We urge you to review carefully
the enclosed materials and to return your Proxy promptly. Whether or not you
plan to attend the Annual Meeting, please sign and promptly return your Proxy
Card in the enclosed postage paid envelope. If you attend the meeting, you may
vote in person if you wish, even though you have previously returned your Proxy.
Sincerely,
David D. Smith
Chairman of the Board
and Chief Executive Officer
SINCLAIR BROADCAST GROUP, INC.
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211-1420
TEL: 410-467-5005 O FAX: 410-467-5043
<PAGE>
YOUR VOTE IS IMPORTANT -- PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE
SINCLAIR BROADCAST GROUP, INC. ANNUAL MEETING.
SINCLAIR BROADCAST GROUP, INC.
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211-1420
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1997
To the Stockholders of Sinclair Broadcast Group, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Sinclair Broadcast Group, Inc. ("Sinclair") will be held in the
Duncan Room of the Sheraton Baltimore North Hotel at 903 Dulaney Valley Road,
Towson, Maryland 21204 on May 5, 1997, commencing at 10:00 a.m., local time for
the following purposes:
1. To elect seven directors, each for a one-year term.
2. To ratify the appointment by the Board of Directors of the firm of Arthur
Andersen LLP as independent public accountants of Sinclair for the fiscal
year ending December 31, 1997.
3. To transact such other business as may properly come before the Annual
Meeting.
Accompanying this Notice is a Proxy Statement and a Proxy Card. Whether or
not you expect to be present at the Annual Meeting, please sign and date the
Proxy Card and return it in the enclosed envelope provided for that purpose
prior to the date of the Annual Meeting. A Proxy may be revoked at any time
prior to the time that it is voted at the Annual Meeting. April 8, 1997 was
fixed by the Board of Directors as the record date for determination of
stockholders entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. Only stockholders of record at the close of business on
April 8, 1997 will be entitled to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting, and you may vote in
person even though you have returned your Proxy Card.
BY ORDER OF THE BOARD OF DIRECTORS
J. Duncan Smith, Secretary
Baltimore, Maryland
April 11, 1997
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211-1420
-------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1997
-------------------
This Proxy Statement is being furnished to the stockholders of Sinclair
Broadcast Group, Inc. ("Sinclair" or the "Company") for use in connection with
the Annual Meeting of Stockholders (the "Annual Meeting") of Sinclair to be held
on May 5, 1997 in the Duncan Room of the Sheraton Baltimore North Hotel at 903
Dulaney Valley Road, Towson, Maryland 21204 at 10 a.m., local time, and any
adjournments or postponements thereof. This Proxy Statement is being used for
the solicitation of proxies by the Board of Directors of Sinclair. It is first
being mailed to the stockholders of Sinclair on or about April 11, 1997.
At the Annual Meeting, the stockholders of Sinclair at the close of business
on April 8, 1997 (the "Record Date") will be asked to (i) elect seven members of
the Board of Directors of Sinclair; (ii) approve, ratify and confirm the
selection of Arthur Andersen LLP as Sinclair's independent auditors for the
fiscal year ended December 31, 1997 (the "Auditor Ratification"); and (iii)
transact such other business as properly comes before the Annual Meeting.
THE BOARD OF DIRECTORS OF SINCLAIR RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
ELECTION OF THE BOARD'S NOMINEES FOR DIRECTOR AND FOR APPROVAL OF THE AUDITOR
RATIFICATION.
The Company's Annual Report for the year ended December 31, 1996 is being
mailed to stockholders with the mailing of this Notice and Proxy Statement.
Stockholders are encouraged to read this Proxy Statement and the Annual Report
in their entirety before determining how to vote at the Annual Meeting.
The principal executive offices of Sinclair are located at 2000 West 41st
Street, Baltimore, Maryland 21211-1420 and its telephone number is (410)
467-5005. Stockholders with questions regarding the matters described herein may
contact Sinclair representatives, David B. Amy, Chief Financial Officer, or
Patrick J. Talamantes, Director of Corporate Finance, at (410) 467-5005.
1
<PAGE>
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The close of business on April 8, 1997 has been fixed by the Sinclair Board
as the Record Date for determination of stockholders entitled to vote at the
Annual Meeting. On the Record Date, the shares entitled to vote at the Annual
Meeting consisted of 6,917,827 outstanding shares of Sinclair Class A Common
Stock, 27,850,581 outstanding shares of Sinclair Class B Common Stock and
1,115,370 outstanding shares of Series B Convertible Preferred Stock. The
presence, in person or by proxy, of stockholders entitled to cast a majority of
all the votes entitled to be cast at the Annual Meeting (144,739,765) is
necessary to constitute a quorum at the Annual Meeting. Directors will be
elected by a plurality of the votes cast at the Annual Meeting. The Auditor
Ratification will be approved by the affirmative vote of a majority of the votes
cast at the Annual Meeting. With respect to the election of Directors and the
Auditor Ratification, each share of Sinclair Class A Common Stock is entitled to
one vote, each share of Sinclair Class B Common Stock is entitled to ten votes
and each share of Series B Convertible Preferred Stock is entitled to
approximately 3.64 votes.
All proxies submitted on the enclosed form of proxy that are properly
executed and returned to Sinclair prior to commencement of voting at the Annual
Meeting will be voted at the Annual Meeting or any adjournment or postponement
thereof in accordance with the instructions thereon. Sinclair has named David D.
Smith and Frederick G. Smith, or either of them, as attorneys-in-fact on the
proxy cards. All executed but unmarked proxies will be voted FOR the Board's
nominees for Director and FOR approval of the Auditor Ratification. Any proxy
may be revoked by any stockholder who attends the Annual Meeting and gives
notice of his or her intention to vote in person without compliance with any
other formalities. In addition, any Sinclair stockholder may revoke a proxy at
any time before it is voted by executing and delivering a subsequent proxy or by
delivering a written notice stating that the proxy is revoked to Sinclair at
2000 W. 41st Street, Baltimore, Maryland 21211, Attention: J. Duncan Smith,
Secretary. At the Annual Meeting, stockholder votes will be tabulated by persons
appointed by the Chairman of the Board to act as inspectors of election.
Abstentions and broker non-votes will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum at the
Annual Meeting, but will not be counted as a vote cast; only votes cast for the
Board's nominees for Director and in favor of the Auditor Ratification and
executed and unmarked proxies shall be counted toward the number needed to reach
approval.
Management of Sinclair does not know of any matters other than those set
forth herein that may come before the Annual Meeting. If any other matters are
properly presented to the Annual Meeting for action, it is intended that the
persons named in the proxy will vote in accordance with their best judgment on
such matters.
The expense of preparing and printing this Proxy Statement and the proxies
solicited hereby, and any filing fees incurred in connection with this Proxy
Statement, will be borne by Sinclair. In addition to the use of the mails,
proxies may be solicited by officers and directors and regular employees of
Sinclair, without additional remuneration, by personal interviews, telephone,
telegraph, letter or otherwise. Sinclair may also request brokerage firms,
nominees, custodians and fiduciaries to forward proxy materials to beneficial
owners of shares of Sinclair and will provide reimbursement for the cost of
forwarding the material in accordance with customary charges.
THE BOARD OF DIRECTORS OF SINCLAIR RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ELECTION OF THE BOARD'S NOMINEES FOR DIRECTOR AND FOR THE AUDITOR RATIFICATION.
2
<PAGE>
ELECTION OF DIRECTORS
It is proposed to elect seven directors of the Company to hold office for
terms of one year and until their successors shall be elected and shall qualify.
At the Annual Meeting, the persons named in the enclosed form of proxy will vote
the shares covered by the proxy for the election of the nominees named below to
the Board of Directors of the Company unless instructed to the contrary. Each
nominee is currently a director of the Company. Each nominee has indicated his
willingness to serve, if elected; however, if any nominee should be unwilling to
serve, the proxies may be voted for a substitute nominee designated by the Board
of Directors.
Set forth below for each nominee is the director's name, age, length of
service as a director, his principal occupation and business experience of the
past five years, and the names of any other publicly held companies for which he
serves as a director.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
NOMINEE AGE SINCE DURING THE PAST FIVE YEARS
- -------------------- ----- ---------- -------------------------------------------------------
<S> <C> <C> <C>
David D. Smith ..... 46 1986 President, Chief Executive Officer, Director and
Chairman of the Board of the Company since 1990.
Frederick G. Smith 47 1986 Vice President of the Company since 1990.
J. Duncan Smith ... 43 1986 Vice President and Secretary of the Company since 1988.
Robert E. Smith ... 33 1986 Vice President and Treasurer of the Company since 1988.
Basil A. Thomas ... 81 1993 Of counsel to the Baltimore law firm of Thomas &
Libowitz, P.A. since 1983.
William E. Brock .. 66 1995 Chairman of Intellectual Development Systems since
1996; Consultant from 1995 to 1996; Chairman of the
Brock Group from 1989 to 1994.
Lawrence E. McCanna 53 1995 Managing partner of the accounting firm of Gross,
Mendelsohn & Associates, P.A. since 1982.
</TABLE>
Messrs. David, Frederick, Duncan and Robert Smith (the "Controlling
Stockholders") have entered into a stockholders agreement pursuant to which they
have agreed, for a period of 10 years commencing June 12, 1995, to vote for each
other as candidates for election to the Board of Directors of the Company.
In connection with the acquisition (the "River City Acquisition") of assets
of River City Broadcasting, L.P. ("River City"), the Company has agreed to
increase the size of the Board of Directors from seven to nine directors and to
cause each of Barry Baker and Roy F. Coppedge to be appointed as members of the
Board of Directors as soon as permissible under the rules of the Federal
Communications Commission (the "FCC") and applicable laws. As of the date of
mailing of this Proxy Statement, this condition had not been satisfied. If it is
satisfied prior to the date of the Annual Meeting, Mr. Baker and/or Mr. Coppedge
will be appointed to the Board of Directors and will be nominated for an annual
term as director at the Annual Meeting. If the condition is not satisfied prior
to the Annual Meeting, in accordance with the Company's bylaws, the Board of
Directors will appoint Mr. Baker and Mr. Coppedge to serve as directors until
the next Annual Meeting of Stockholders as soon as the condition is satisfied.
The Controlling Stockholders have agreed to vote for the election of Mr. Baker
to the Board of Directors for so long as he is an employee of the Company
pursuant to the terms of the Baker Employment Agreement (as defined and
described below under "Executive Compensation and Related Matters -- Employment
Agreements") and to vote for Mr. Coppedge (or another designee of Boston
Ventures Limited Partnership IV and Boston Ventures Limited Partnership IVA (the
two foregoing parties collectively "Boston Ventures")) to the Board of Directors
for a period ending on the earlier of (a) five years after the beginning of Mr.
Baker's employment with Sinclair under the Baker Employment Agreement and (b)
such time as Boston Ventures no longer owns 721,115 shares of the Class A Common
Stock (or preferred stock convertible into that number of shares of Class A
Common Stock).
3
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
The Board of Directors had a total of 24 meetings during 1996 (including 5
consents in lieu of meetings and 9 informal actions). Each director attended at
least 96% of the aggregate number of meetings of the Board of Directors and all
committees of the Board on which he served.
The Board of Directors of the Company currently consists of seven members.
The committees of the Board of Directors include an Audit Committee, a
Compensation Committee and an Incentive Stock Option Committee. The members of
each of these respective committees are Messrs. Thomas, Brock and McCanna. The
Audit Committee is charged with the responsibility of reviewing the Company's
internal auditing procedures and accounting controls and will consider the
selection and independence of the Company's outside auditors. The Audit
Committee met three times during the year ended December 31, 1996. The
Compensation Committee is charged with the responsibility for setting executive
compensation, including the granting of options under the Company's long-term
incentive plan, reviewing certain of the Company's compensation programs and
making recommendations to the Board of Directors in the interval between
meetings. The Compensation Committee met six times during the year ended
December 31, 1996. The Incentive Stock Option Committee is charged with the
responsibility for reviewing the formulation and implementation of the Company's
incentive stock option plans. The Incentive Stock Option Committee met six times
during the fiscal year ended December 31, 1996.
COMPENSATION OF DIRECTORS
Directors of the Company who also are employees of the Company serve without
additional compensation. Independent directors receive $15,000 annually. These
independent directors also receive $1,000 for each meeting of the Board of
Directors attended and $500 for each committee meeting attended. In addition,
the independent directors are reimbursed for any expenses incurred in connection
with their attendance at such meetings.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16 OF THE SECURITIES
EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers (as defined in regulations
promulgated by the U.S. Securities & Exchange Commission (the "SEC") and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on a review of copies of such reports of ownership furnished to
the Company, or written representations that no forms were necessary, the
Company believes that during the past fiscal year all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, with the concurrence of the Audit Committee, has
selected Arthur Andersen LLP as its independent auditors for 1997. If the
stockholders do not ratify the appointment of Arthur Andersen LLP, the
engagement of independent auditors will be reevaluated by the Board of
Directors. Even if the appointment is ratified, the Board of Directors in its
discretion may nevertheless appoint another firm of independent auditors at any
time during the year if the Board determines that such a change would be in the
best interests of the shareholders and the Company.
A representative of Arthur Andersen LLP is expected to attend the Annual
Meeting, and will have the opportunity to make a statement if he desires to do
so and will be able to respond to appropriate questions from shareholders.
The Board of Directors recommends a vote FOR ratification of the appointment
of Arthur Andersen LLP.
4
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of April 1, 1997,
regarding the beneficial ownership of the Company's common stock (or preferred
stock convertible into a class of common stock) by (i) each person who is known
to Sinclair to own more than 5% of the Company's common stock (or preferred
stock convertible into a class of common stock), (ii) each director and
executive officer of Sinclair and (iii) all directors and executive officers as
a group. The information on beneficial ownership in the table and the footnotes
thereto is based on Sinclair's records and the most recent Schedule 13D or 13G
filed by each such person or entity. Unless otherwise indicated, each person has
sole voting power and sole investment power with respect to the shares shown.
Except as noted below, the business address of each person identified is 2000 W.
41st Street, Baltimore, Maryland 21211.
<TABLE>
<CAPTION>
SHARES OF SERIES B
SHARES OF CLASS B CONVERTIBLE SHARES OF CLASS A
COMMON STOCK PREFERRED STOCK COMMON STOCK PERCENT OF
BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED TOTAL
-------------------- ----------------------- --------------------- VOTING
NAME NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT POWER (A)
- --------------------------------- ------------ ---------- --------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
David D. Smith (b) 7,249,999 26.0% 7,259,999 51.2% 25.0%
Frederick G. Smith (b)(c) 6,864,944 24.6% 6,868,944 49.8% 23.7%
J. Duncan Smith (b)(d) 6,999,994 25.1% 6,999,994 50.3% 24.2%
Robert E. Smith (b)(e) 6,735,644 24.2% 6,735,644 49.4% 23.3%
David B. Amy (f) 34,700 * *
Basil A. Thomas 2,000 * *
Lawrence E. McCanna 300 * *
William E. Brock 2,500 * *
Barry Baker (g)(h) 72,016 6.3% 1,644,311 19.2% *
Putnam Investments, Inc 2,175,000 31.5% *
One Post Office Square
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc.(i) 425,000 6.1% *
100 East Pratt Street
Baltimore, Maryland 21202
FMR Corp. 593,400 8.6% *
82 Devonshire Street
Boston, Massachusetts 02109
Better Communications, Inc. (h) 134,858 11.8% 490,883 6.6% *
1215 Cole Street
St. Louis, Missouri 63106
BancBoston Investments (h) 150,335 13.2% 547,219 7.3% *
150 Royal Street
Canton, Massachusetts 02021
Pyramid Ventures, Inc. (h) 152,995 13.4% 556,902 7.4% *
1215 Cole Street
St. Louis, Missouri 63106
Boston Ventures Limited
Partnership IV (h) 253,800 22.3% 923,832 11.8% *
21 Custom House Street
10th Floor
Boston, Massachusetts 02110
Boston Ventures Limited
Partnership IVA (h) 142,745 12.5% 519,592 7.0% *
21 Custom House Street
10th Floor
Boston, Massachusetts 02110
All directors and executive
officers as a group (8 persons) 27,850,581 100.0% 27,904,081 80.2% 96.2%
</TABLE>
5
<PAGE>
- ----------
* Less than 1%
(a) Holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to ten votes per share except
for votes relating to "going private" and certain other transactions. 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 presented for a vote, with each
share of Series B Convertible Preferred Stock entitled to approximately
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.
(b) Shares of Class A Common Stock beneficially owned includes shares of Class
B Common Stock beneficially owned, each of which is convertible into one
share of Class A Common Stock.
(c) Includes 532,645 shares held in irrevocable trusts established by Frederick
G. Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(d) Includes 521,695 shares held in irrevocable trusts established by J. Duncan
Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(e) Includes 1,009,745 shares held in irrevocable trusts established by Robert
E. Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(f) Includes 32,500 shares of Class A Common Stock that may be acquired upon
exercise of options granted in 1995 and 1996 pursuant to the Incentive
Stock Option Plan and Long Term Incentive Plan.
(g) Consists of 1,382,435 shares of Class A Common Stock that may be acquired
upon exercise of options granted in 1996 pursuant to the Long Term
Incentive Plan.
(h) Shares of Class A Common Stock beneficially owned includes 3.64 shares for
each share of Series B Convertible Preferred Stock beneficially owned as
each share of Series B Convertible Preferred Stock is immediately
convertible into approximately 3.64 shares of Class A Common Stock.
(i) These securities are owned by various individual and institutional
investors to which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment advisor with power to direct investments and/or sole
voting power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, beneficial owner of
such securities.
6
<PAGE>
PRICE RANGE OF COMMON STOCK
The Class A Common Stock has been traded on the NASDAQ National Market under
the symbol "SBGI" since June 13, 1995. The following table sets forth the high
and low closing sale prices for the Class A Common Stock for the periods
indicated. The information does not include certain transaction costs.
High Low
1995 -------- --------
Second Quarter (from June 13) $ 29.00 $ 23.50
Third Quarter 31.00 27.375
Fourth Quarter 27.75 16.25
1996
First Quarter 26.50 16.875
Second Quarter 43.50 25.50
Third Quarter 46.50 36.125
Fourth Quarter 43.75 23.00
On April 7, 1997, the last sale price of the Class A Common Stock as reported
by NASDAQ was $25.125 per share. As of April 7, 1997, there were approximately
66 record holders of the Class A Common Stock.
EXECUTIVE COMPENSATION AND RELATED MATTERS
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
consists entirely of non-employee directors. The Committee determines all
compensation paid or awarded to the Company's key executive officers.
The Committee's goal is to attract, motivate, and retain an executive
management team that can take full advantage of the Company's opportunities and
achieve long-term success in an increasingly competitive business environment,
thereby increasing stockholder value. In deciding on initial compensation for an
individual, the Committee considers determinants of the individual's market
value, including experience, education, accomplishments, and reputation, as well
as the level of responsibility to be assumed. Retention and compensation
decisions are sometimes made in the context of an acquisition, and the Committee
considers the overall terms of the acquisition and the individual's relationship
to the acquired business in those cases. In deciding whether to increase the
compensation of an individual or whether to award bonuses or stock options
initially or upon subsequent performance reviews, the Committee considers the
contributions of the individual to the Company's progress on its business plan
and against its competitors, to growth of the Company and its opportunities and
to achievement of other aims the Committee deems valuable to shareholders.
Applying these factors to each individual's case is a judgment process,
exercised by the Committee with the advice of management. There is no intent to
relate compensation to the Company's stock price performance, either absolute or
relative to peer groups, except as that relationship is implicit in the
stock-based compensation plans.
The Committee's annual performance evaluation of certain executive officers
may, in some cases, be subjective, and may not typically be based upon an exact
formula for determining the relative importance of each of the factors
considered, nor, in some cases, is there a precise measure of how each of the
individual factors relates to the Committee's recommendation with respect to
each executive officer's ultimate annual compensation.
Executive officers' compensation consists primarily of three components: (i)
base salary, (ii) cash bonus, and (iii) stock options.
7
<PAGE>
Base Salary. The Committee establishes base salaries and may offer employment
agreements after considering a variety of factors that make up value and
usefulness to the Company, including the individual's knowledge, experience, and
accomplishments, his level of responsibility, his role in an acquired business,
and the typical compensation levels for individuals with similar credentials.
The Committee may increase the salary of an individual on the basis of its
judgment for any reason, including the performance of the individual or the
Company and changes in the market for an executive with similar credentials.
Cash Bonus. For bonuses paid during 1996 with respect to the fiscal year
ended December 31, 1995, the Committee determined each individual's cash bonus
under the Sinclair Broadcast Group, Inc. Executive Bonus Plan. Bonuses were paid
based upon the attainment of performance targets established by the Committee.
Performance targets were based on percentage increases in "equalized broadcast
cash flow." For bonuses paid to date to certain Named Executive Officers during
1997 with respect to the fiscal year ended December 31, 1996, the Committee
determined such individuals' cash bonuses after considering subjective factors
related to the Company's performance in 1996, including the large increase in
the size of the Company's operations in connection with the River City
Acquisition.
Stock Options. The Committee believes achievement of the Company's goals may
be fostered by stock option programs that are tailored to employees who
significantly enhance the value of the Company. In that regard, during the
fiscal year ended December 31, 1996, the Committee granted employees options to
purchase 522,350 shares of Class A common stock. Named Executive Officers (as
defined below) received options with respect to 25,000 shares of Class A Common
Stock.
Chief Executive Officer's Compensation. As one of the Company's largest
stockholders, David D. Smith's financial well-being is directly tied to the
overall performance of the Company as reflected in the price per share of common
stock. For his services as the Company's president and chief executive officer,
David D. Smith's compensation has been determined in accordance with the
compensation policies outlined herein. During the fiscal year ended December 31,
1996, the Committee awarded Mr. Smith a bonus of $317,913 relating to the
Company's performance for the fiscal year ended December 31, 1995. During the
first quarter of the fiscal year ending December 31, 1997, the Committee awarded
and paid Mr. Smith a bonus of $98,224 relating to the Company's performance for
the fiscal year ended December 31, 1996. In addition, effective July 1, 1996,
Mr. Smith's base salary was increased from $450,000 to $1,200,000 per year. The
bonus awards and increase in salary are based on the Committee's assessment of
Mr. Smith's role in the Company's performance in 1995 and 1996 and on the
continuing growth in his responsibilities and also reflect the large increase in
the size of the Company's operations in connection with the River City
Acquisition.
Compensation Deduction Limit. The Committee has considered the $1 million
limit on deductible executive compensation that is not performance-based. The
Committee believes that substantially all executive compensation expenses paid
in 1996 will be deductible by the Company. The Committee believes, however, that
compensation exceeding this limit should not be ruled out where such
compensation is justified on the basis of the executive's value to the Company
and its shareholders. In any event, there appears to be little evidence that tax
deductibility is having much impact on the market for managerial talent, in
which the Company must remain competitive.
Compensation Committee
Basil A. Thomas
William E. Brock
Lawrence E. McCanna
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SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding the annual and
long-term compensation by the Company for services rendered in all capacities
during the years ended December 31, 1994, 1995 and 1996 by the Chief Executive
Officer and the four other executive officers of the Company as to whom the
total annual salary and bonus exceeded $100,000 (the "Named Executive Officers")
in 1996:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(a) OPTIONS GRANTED (#) COMPENSATION (b)
- ------------------------------------ ------ ---------- ----------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
David D. Smith,
President and Chief Executive
Officer 1996 $767,308 $ 317,913 -- $ 6,748
1995 450,000 343,213 -- 4,592
1994 317,913 1,300,000 -- 3,841
Frederick G. Smith,
Vice President 1996 260,000 233,054 -- 6,704
1995 260,000 258,354 -- 20,361
1994 233,054 900,000 -- 18,960
J. Duncan Smith,
Secretary 1996 270,000 243,485 -- 18,494
1995 270,000 268,354 -- 21,467
1994 243,485 900,000 -- 16,418
Robert E. Smith,
Treasurer 1996 250,000 233,054 -- 6,300
1995 250,000 258,354 -- 4,592
1994 233,054 900,000 -- 13,238
David B. Amy,
Chief Financial Officer 1996 173,582 31,000 25,000 7,766
1995 132,310 20,000 7,500 7,868
1994 122,400 20,000 -- 5,011
</TABLE>
- ----------
(a) The bonuses reported in this column represent amounts awarded and paid
during the fiscal years noted but relate to the fiscal year immediately
prior to the year noted. In addition, David D. Smith and David B. Amy have
received $98,224 and $50,000, respectively, in 1997 with respect to 1996.
(b) All other compensation consists of income deemed received for personal use
of Company-leased automobiles, the Company's 401 (k) contribution, life
insurance and long-term disability coverage.
In addition to the foregoing, Mr. Barry Baker and Mr. Kerby Confer have
agreed to serve as executive officers and/or directors of the Company as soon as
permissible under the rules of the FCC and applicable laws and received
consulting fees during the fiscal year ended December 31, 1996 of $527,976 and
$162,500, respectively.
STOCK OPTIONS
The following table sets forth information concerning each grant of stock
options made during 1996 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF VALUE OF OPTIONS
SECURITIES TOTAL OPTIONS AT DATE OF GRANT
UNDERLYING GRANTED TO EXERCISE BASED ON BLACK-
OPTIONS EMPLOYEES IN PRICE EXPIRATION SCHOLES OPTION
NAME GRANTED(#) FISCAL YEAR PER SHARE DATE PRICING MODEL
- ------------------ ------------ --------------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
David D. Smith -- --% $ -- -- $ --
Frederick G.
Smith -- -- -- -- --
J. Duncan Smith -- -- -- -- --
Robert E. Smith -- -- -- -- --
David B. Amy 10,000 * 37.75 5/31/2006 160,419
15,000 * 30.11 5/31/2006 287,319
</TABLE>
- ----------
* Less than one percent.
9
<PAGE>
The following table shows the number of stock options exercised during 1996
and the 1996 year-end value of the stock options held by the Named Executive
Officers:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS "IN-THE-MONEY" OPTIONS
SHARES AT DECEMBER 31, 1996 AT DECEMBER 31, 1996(a)
ACQUIRED VALUE ---------------------- ------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- --------------- ---------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David D. Smith -- $ -- -- -- $ -- $ --
Frederick G. Smith -- -- -- -- -- --
J. Duncan Smith -- -- -- -- -- --
Robert E. Smith -- -- -- -- -- --
David B. Amy -- -- 3,750 28,750 -- 37,500
</TABLE>
- ----------
(a) An "In-the-Money" option is an option for which the option price of the
underlying stock is less than the market price at December 31, 1996, and
all of the value shown reflects stock price appreciation since the granting
of the option.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with David D. Smith,
President and Chief Executive Officer of the Company. David Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. Pursuant to this
agreement, Mr. Smith's total annual compensation is $1,200,000. Mr. Smith is
also entitled to participate in the Company's Executive Bonus Plan based upon
the performance of the Company during the year. The employment agreement
provides that the Company may terminate Mr. Smith's employment prior to
expiration of the agreement's term as a result of (i) a breach by Mr. Smith of
any material covenant, promise or agreement contained in the employment
agreement; (ii) a dissolution or winding up of the Company; (iii) the disability
of Mr. Smith for more than 210 days in any twelve month period (as determined
under the employment agreement); or (iv) for cause, which includes conviction of
certain crimes, breach of a fiduciary duty to the Company or the stockholders,
or repeated failure to exercise or undertake his duties as an officer of the
Company (each, a "Termination Event").
In June 1995, the Company entered into an employment agreement with Frederick
G. Smith, Vice President of the Company. Frederick Smith's employment agreement
has an initial term of three years and is renewable for additional one-year
terms, unless either party gives notice of termination not less than 60 days
prior to the expiration of the then current term. Under the agreement, Mr. Smith
receives a base salary of $260,000 and is also entitled to participate in the
Company's Executive Bonus Plan based upon the performance of the Company and Mr.
Smith during the year. The employment agreement provides that the Company may
terminate Mr. Smith's employment prior to expiration of the agreement's term as
a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with J. Duncan
Smith, Vice President and Secretary of the Company. J. Duncan Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. Under the agreement, Mr.
Smith receives a base salary of $270,000 and is also entitled to participate in
the Company's Executive Bonus Plan based upon the performance of the Company and
Mr. Smith during the year. The employment agreement provides that the Company
may terminate Mr. Smith's employment prior to expiration of the agreement's term
as a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with Robert E.
Smith, Vice President and Treasurer of the Company. Robert E. Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. Under the agreement, Mr.
Smith receives a base salary of $250,000 and is also entitled to participate in
the Company's Executive
10
<PAGE>
Bonus Plan based upon the performance of the Company and Mr. Smith during the
year. The employment agreement provides that the Company may terminate Mr.
Smith's employment prior to expiration of the agreement's term as a result of a
Termination Event.
In connection with the River City Acquisition, the Company entered into an
employment agreement (the "Baker Employment Agreement") with Barry Baker
pursuant to which Mr. Baker will become President and Chief Executive Officer of
Sinclair Communications, Inc. ("SCI") and Executive Vice President of the
Company at such time as Mr. Baker is able to hold those positions consistent
with applicable FCC regulations. Until such time as Mr. Baker is able to become
an officer of the Company, he serves as a consultant to the Company pursuant to
a consulting agreement and receives compensation that he would be entitled to as
an officer under the Baker Employment Agreement. While Mr. Baker acts as
consultant to the Company he will not direct employees of Sinclair in the
operation of its television stations and will not perform services relating to
any shareholder, bank financing or regulatory compliance matters with respect to
the Company. In addition, Mr. Baker will remain the Chief Executive Officer of
River City and will devote a substantial amount of his business time and
energies to those services. Pursuant to the Baker Employment Agreement, Mr.
Baker's annual base salary would have been approximately $1,056,000 for the year
ended December 31, 1996. Mr. Baker's annual base salary under the Baker
Employment Agreement is subject to annual increases of 7-1/2% on January 1 of
each year beginning January 1, 1997. Mr. Baker is also entitled to receive a
bonus equal to 2% of the amount by which the Broadcast Cash Flow (as defined in
the Baker Employment Agreement) of SCI for a year exceeds the Broadcast Cash
Flow for the immediately preceding year. Pursuant to the Baker Employment
Agreement, Mr. Baker has received options to acquire 1,382,435 shares of the
Class A Common Stock (or approximately 3.33% of the common equity of Sinclair
determined on a fully diluted basis). The option became exercisable with respect
to 50% of the shares upon closing of the River City Acquisition, and becomes
exercisable with respect to 25% of the shares on the first anniversary of the
closing of the River City Acquisition, and 25% on the second anniversary of the
River City Acquisition. The exercise price of the option is approximately $30.11
per share. The term of the Baker Employment Agreement extends until May 31,
2001, and is automatically extended to the third anniversary of any Change of
Control (as defined in the Baker Employment Agreement). If the Baker Employment
Agreement is terminated as a result of a Series B Trigger Event (as defined
below), then Mr. Baker shall be entitled to a termination payment equal to the
amount that would have been paid in base salary for the remainder of the term of
the agreement plus bonuses that would be paid for such period based on the
average bonus paid to Mr. Baker for the previous three years, and all options
shall vest immediately upon such termination. In addition, upon such a
termination, Mr. Baker shall have the option to purchase from the Company for
the fair market value thereof either (i) all broadcast operations of Sinclair in
the St. Louis, Missouri demographic market area ("DMA") or (at the option of Mr.
Baker) the Asheville-Greenville-Spartanburg, South Carolina DMA or (ii) all of
the Company's radio broadcast operations. Mr. Baker shall also have the right
following such a termination to receive quarterly payments (which may be paid
either in cash or, at the Company's option, in additional shares of Class A
Common Stock) equal to 5.00% of the fair market value (on the date of each
payment) of all stock options and common stock issued pursuant to exercise of
such stock options or pursuant to payments of this obligation in shares and held
by him at the time of such payment (except that the first such payment shall be
3.75% of such value). The fair market value of unexercised options for such
purpose shall be equal to the market price of underlying shares less the
exercise price of the options. Following termination of the Baker Employment
Agreement, the Company shall have the option to purchase the options and shares
from Mr. Baker at their market value. 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 the Baker 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 (as defined in the Baker Employment Agreement);
(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.
11
<PAGE>
Baker cannot be appointed to such positions with the Company or SCI until the
Company or SCI takes certain actions with respect to television stations WTTV
and WTTK in Indianapolis, Indiana and WSYX and WTTE in Columbus, Ohio.
COMPARATIVE STOCK PERFORMANCE
The following line graph compares the yearly percentage change in the
cumulative total stockholder return on the Company's Class A Common Stock with
the cumulative total return of the NASDAQ Stock Market Index and the cumulative
total return of the NASDAQ Telecommunications Index (an index containing
performance data of radio, telephone, telegraph, television, and cable
television companies) from June 7, 1995, the effective date of the Company's
initial public offering, through December 31, 1996. The performance graph
assumes that an investment of $100 was made in the Class A Common Stock and in
each index on June 7, 1995, and that all dividends were reinvested. Total
stockholder return is measured by dividing total dividends (assuming dividend
reinvestment) plus share price change for a period by the share price at the
beginning of the measurement period.
[GRAPHIC OMITTED]
7 JUNE 31 DEC. 31 DEC.
1995 1995 1996
-------- -------- ---------
NASDAQ Stock Market Index 100 120.28 147.96
NASDAQ Telecommunications Index 100 124.09 126.85
Sinclair 100 71.5 107.77
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Other than as follows, no Named Executive Officer is a director of a
corporation that has a director or executive officer who is also a director of
the Company. Each of the Controlling Stockholders (all of whom are directors of
the Company and Named Executive Officers) is a director and/or executive officer
of each of various other corporations controlled by the Controlling
Stockholders.
During 1996, none of the Named Executive Officers participated in any
deliberations of the Company's Board of Directors or the Compensation Committee
relating to compensation of the Named Executive Officers.
12
<PAGE>
As described more fully below, Mr. Thomas, a member of the Compensation
Committee, is of counsel to the law firm of Thomas & Libowitz, which has
provided legal services to the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since December 31, 1995, the Company has engaged in the following
transactions with persons who are, or are members of the immediate family of,
directors, persons expected to become a director, officers or beneficial owners
of 5% or more of the Company's issued and outstanding common stock (or preferred
stock convertible into a class of common stock), or with entities in which such
persons or certain of their relatives have interests.
WPTT NOTE
In connection with the sale of television station WPTT in Pittsburgh,
Pennsylvania by the Company to WPTT, Inc., WPTT, Inc., issued to the Company a
15-year senior secured term note of $6.0 million (the "WPTT Note"). The Company
subsequently sold the WPTT Note to the late Julian S. Smith and Carolyn C.
Smith, the parents of the Controlling Stockholders and both former stockholders
of the Company, in exchange for the payment of $50,000 and the issuance of a
$6.6 million note, which bears interest at 7.21% per annum and requires payments
of interest only through September 2001. Monthly principal payments of $109,317
plus interest are payable with respect to this note commencing in November 2001
and ending in September 2006, at which time the remaining principal balance plus
accrued interest, if any, is due. During the year ended December 31, 1996, the
Company received $473,000 in interest payments on this note. At December 31,
1996, the balance on this note was $6,559,000.
WIIB NOTE
In September 1990, the Company sold all the stock of Channel 63, Inc., the
owner of television station WIIB in Bloomington, Indiana, to the Controlling
Stockholders for $1.5 million. The purchase price was delivered in the form of a
note issued to the Company which was refinanced in June 1992 (the "WIIB Note").
The WIIB Note bears interest at 6.88% per annum, is payable in monthly principal
and interest payments of $16,000 until September 30, 2000, at which time a final
payment of approximately $431,000 is due. Principal and interest paid in 1996 on
the WIIB Note was $174,000. At December 31, 1996, $1.0 million in principal
amount of the WIIB Note remained outstanding.
BAY CREDIT FACILITY
In connection with the capitalization of Bay Television, Inc., the Company
agreed on May 17, 1990 to loan the Controlling Stockholders up to $3.0 million
(the "Bay Credit Facility"). Each of the loans to the Controlling Stockholders
pursuant to the Bay Credit Facility is evidenced by an amended and restated
secured note totaling $2.6 million due December 31, 1999 accruing interest at a
fixed rate equal to 6.88%. Principal and interest are payable over six years
commencing on March 31, 1994, and are required to be repaid quarterly and
$480,000 was paid in 1996. $600,000 is payable in 1997, $660,000 is payable in
1998 and $718,000 is payable in 1999. As of December 31, 1996, approximately
$1.8 million in principal amount was outstanding under this note.
AFFILIATED LEASES
From 1987 to 1992, the Company entered into five lease transactions with
Cunningham Communications, Inc. ("CCI"), a corporation wholly owned by the
Controlling Stockholders, to lease certain facilities from CCI. Four of these
leases are 10-year leases for rental space on broadcast towers, two of which are
capital leases having renewable terms of 10 years. The other lease is a
month-to-month lease for a portion of studio and office space at which certain
satellite dishes are located. Aggregate annual rental payments related to these
leases were $498,000 in 1996. The aggregate annual rental payments related to
these leases are scheduled to be $454,000 in 1997 and $474,000 in 1998.
In January 1991, Chesapeake Television, Inc. ("CTI") (a subsidiary of the
Company), entered into a 10-year capital lease with Keyser Investment Group
("KIG") (a corporation wholly owned by the Controlling Stockholders), pursuant
to which CTI leases both an administrative facility and studios for
13
<PAGE>
television station WBFF and the Company's present corporate offices.
Additionally, in June 1991, CTI entered into a one-year renewable lease with KIG
pursuant to which CTI leases parking facilities at the administrative facility.
Payments under these leases with KIG were $559,300 in 1996. The aggregate annual
rental payments related to the administrative facility are scheduled to be
$616,400 in 1997 and $636,400 in 1998. During 1996, the Company chartered
airplanes owned by certain companies controlled by the Controlling Stockholders
and incurred expenses of approximately $336,000 related to these charters.
TRANSACTIONS WITH GERSTELL
Gerstell LP, an entity wholly owned by the Controlling Stockholders, was
formed in April 1993 to acquire certain personal and real property interests of
the Company in Pennsylvania. In a transaction that was completed in September
1993, Gerstell LP acquired the office/studio, transmitter and tower site for
television station WPGH for an aggregate purchase price of $2.2 million. The
purchase price was financed in part by a $2.1 million note from Gerstell LP
bearing interest at 6.18% with principal payments beginning on November 1, 1994
and a final maturity date of October 1, 2013. Principal and interest paid in
1996 on the note was $188,000. At December 31, 1996, $2.0 million in principal
amount of the note remained outstanding. Following the acquisition, Gerstell LP
leased the office/studio, transmitter and tower site to WPGH, Inc. (a subsidiary
of the Company) for $14,875 per month and $25,000 per month, respectively. The
leases have terms of seven years, with four seven-year renewal periods.
Aggregate annual rental payment related to these leases was $534,000 in 1996.
Gerstell LP has arranged for a $2.0 million loan (the "Gerstell Loan") from a
bank lender to provide for construction at the studio/transmitter site of an
expansion to the existing office building/television studio located there and
for construction of a new tower having an aggregate estimated cost of $1.5
million. The Company has guaranteed the Gerstell Loan. As of December 31, 1996,
$885,000 was outstanding under the Gerstell Loan. The completed office
building/television studio and the new tower is leased from Gerstell LP by WPGH,
Inc. The Company believes that the leases with Gerstell LP are on terms and
conditions customary in similar leases with independent third parties.
STOCK REDEMPTIONS
On September 30, 1990, the Company issued certain notes (the "Founders'
Notes") maturing on May 31, 2005, payable to the late Julian S. Smith and
Carolyn C. Smith, former majority owners of the Company and the parents of the
Controlling Stockholders. The Founders' Notes, which were issued in
consideration for stock redemptions equal to 72.65% of the then outstanding
stock of the Company, have principal amounts of $7.5 million and $6.7 million,
respectively. The Founders' Notes include stated interest rates of 8.75%, which
were payable annually from October 1990 until October 1992, then payable monthly
commencing April 1993 to December 1996, and then semiannually thereafter until
maturity. The effective interest rate approximates 9.4%. The Founders' Notes are
secured by security interests in substantially all of the assets of the Company
and its Subsidiaries, and are personally guaranteed by the Controlling
Stockholders.
Principal and interest payments on the Founders' Note issued to the estate of
Julian S. Smith are payable, in various amounts, each April and October,
beginning October 1991 until October 2004, with a balloon payment due at
maturity in the amount of $5.0 million. Additionally, monthly interest payments
commenced on April 1993 and continued until December 1996. Principal and
interest paid in 1996 on this Founders' Note was $860,000 At December 31, 1996,
$6.0 million in principal amount of this Founders' Note remained outstanding.
Principal payments on the Founders' Note issued to Carolyn C. Smith are
payable, in various amounts, each April and October, beginning October 1991
until October 2002. Principal and interest paid in 1996 on this Founders' Note
was $1.1 million. At December 31, 1996, $4.5 million in principal amount of this
Founders' Note remained outstanding.
RELATIONSHIP WITH GLENCAIRN
Glencairn. Ltd. ("Glencairn") is a corporation owned by (i) Edwin L. Edwards,
Sr. (3%), (ii) Carolyn C. Smith, the mother of the Controlling Stockholders
(7%), and (iii) certain trusts established by Carolyn C. Smith for the benefit
of her grandchildren (the "Glencairn Trusts") (90%). The 90%
14
<PAGE>
equity interest in Glencairn owned by the Glencairn Trusts is held through the
ownership of non-voting common stock. The 7% equity interest in Glencairn owned
by Carolyn C. Smith is held through the ownership of common stock that is
generally non- voting, except with respect to certain specified extraordinary
corporate matters as to which this 7% equity interest has the controlling vote.
Edwin L. Edwards, Sr. owns a 3% equity interest in Glencairn through ownership
of all of the issued and outstanding voting stock of Glencairn and is Chairman
of the Board, President and Chief Executive Officer of Glencairn.
There have been, and the Company expects that in the future there will be,
transactions between the Company and Glencairn. Glencairn is the owner-operator
and FCC licensee of television stations WNUV in Baltimore, Maryland, WVTV in
Milwaukee, Wisconsin, WRDC in Raleigh/Durham, North Carolina and WABM in
Birmingham, Alabama. The Company has entered into local marketing agreements
("LMAs") with Glencairn relating to television stations WNUV, WVTV, WRDC and
WABM pursuant to which the Company provides programming to Glencairn for airing
on television stations WNUV, WVTV, WRDC and WABM, respectively, during the hours
of 6:00 a.m. to 2:00 a.m. each day and has the right to sell advertising during
this period, all in exchange for the payment by the Company to Glencairn of a
monthly fees totaling $446,000.
In June 1995, the Company acquired options from certain stockholders of
Glencairn (the "Glencairn Options") which grant to the Company the right to
acquire, subject to applicable FCC rules and regulations, stock comprising up to
a 97% equity interest in Glencairn. Of the stock subject to the Glencairn
Options, a 90% equity interest is non-voting and the remaining 7% equity
interest is non-voting, except with respect to certain extraordinary matters as
to which this 7% equity interest has the controlling vote. Each Glencairn Option
was purchased by the Company for $1,000 ($5,000 in the aggregate) and is
exercisable only upon the Company's payment of an option exercise price
generally equal to the optionor's proportionate share of the aggregate
acquisition cost of all stations owned by Glencairn on the date of exercise
(plus interest at a rate of 10% from the respective acquisition date). The
Company estimates that the aggregate option exercise price for the Glencairn
Options, if currently exercised, would be approximately $9.7 million.
In connection with the River City Acquisition, the Company assigned to
Glencairn its option to purchase certain assets relating to television station
WFBC in Anderson, South Carolina, one of the River City stations. In addition,
the Company has agreed (subject to FCC approval) to sell to Glencairn for
$2,000,000 certain assets related to the FCC license (the "License Assets") of
television station WTTE in Columbus, Ohio, which the Company currently owns. The
Company has applied with the FCC to acquire the License Assets of a television
station from River City located in the same market as television station WFBC.
In addition, the Company has an option to acquire from River City the assets of
television station WSYX, which is in the same market as WTTE. The Company
intends to enter into LMAs with Glencairn relating to television stations WFBC
and WTTE pursuant to which the Company will supply programming to Glencairn,
obtain the right to sell advertising during the periods covered by the supplied
programming and make payments to Glencairn in amounts to be negotiated.
Also in connection with the River City Acquisition, Glencairn has been
granted an option to acquire from their current owner the License Assets of
television station KRRT in Kerrville, Texas, which is in the same market as a
station the Company will acquire from River City. The Company will acquire
certain assets, other than the License Assets, related to the operation of KRRT,
and is expected to enter into an LMA with Glencairn with respect to KRRT
pursuant to which the Company will supply programming to Glencairn, obtain the
right to sell advertising during the periods covered by the supplied programming
and make payments to Glencairn in amounts to be negotiated.
RIVER CITY TRANSACTIONS
Roy F. Coppedge, who will become a director of the Company upon satisfaction
of certain conditions, and Barry Baker, who will become a director and executive
officer of the Company as soon as permissible under the rules of the FCC and
applicable laws, each have a direct or indirect equity interest in River City.
Therefore, Messrs. Coppedge and Baker each have an interest in the River City
Acquisition. During 1996, the Company made LMA payments of $1.4 million to River
City. In September 1996,
15
<PAGE>
the Company entered into a five-year agreement with River City pursuant to which
River City will provide to the Company certain production services. Pursuant to
this agreement, River City will provide certain services to the Company in
return for an annual fee of $416,000, subject to certain adjustments on each
anniversary date.
KEYMARKET OF SOUTH CAROLINA
Kerby Confer, who is expected to become an executive officer of the Company
as soon as permissible under the rules of the FCC and applicable laws, is the
owner of 100% of the common stock of Keymarket of South Carolina, Inc. ("KSC"),
and the Company has an option to acquire either (i) all of the assets of KSC for
forgiveness of debt in an aggregate principal amount of approximately $7.4
million, plus payment of approximately $1.0 million, less certain adjustments or
(ii) all of the stock of KSC for $1.0 million, less certain adjustments. In
addition, the Company leases two properties from Mr. Confer, pursuant to which
the Company paid Mr. Confer $144,000 in 1996. The Company is required to
purchase each of the properties during the term of the applicable lease for an
aggregate purchase price of approximately $1.75 million.
BEAVER DAM LIMITED LIABILITY COMPANY
In May 1996, the Company, along with the Controlling Stockholders, formed
Beaver Dam Limited Liability Company ("BDLLC"), of which the Company owns a 45%
interest. BDLLC was formed for the purpose of constructing and owning a building
which may be the site for the Company's corporate headquarters. BDLLC no longer
plans to proceed with this project and it is anticipated that the Controlling
Stockholders will purchase the Company's interest in BDLLC by collectively
paying the Company its capital contributions to BDLLC in 1996 of approximately
$380,000.
HERITAGE AUTOMOTIVE GROUP
In January 1997, David D. Smith, the Company's President and Chief Executive
Officer and one of the Controlling Shareholders, made a substantial investment
in, and became a member of the board of directors of, Summa Holdings, Ltd.
which, through wholly owned subsidiaries, owns the Heritage Automotive Group
("Heritage") and Allstate Leasing ("Allstate"). Mr. Smith is not an officer, nor
does he actively participate in the management, of Summa Holdings, Ltd.,
Heritage, or Allstate. Heritage owns and operates new and used car dealerships
in the Baltimore metropolitan area. Allstate owns and operates an automobile and
equipment leasing business with offices in the Baltimore, Richmond, Houston, and
Atlanta metropolitan areas. The Company sells Heritage and Allstate advertising
time on WBFF and WNUV, the television stations operated by the Company serving
the Baltimore DMA. The Company believes that the terms of the transactions
between the Company and Heritage and the Company and Allstate are and will be
comparable to those prevailing in similar transactions with or involving
unaffiliated parties.
CERTAIN BUSINESS RELATIONSHIPS
During 1996, Thomas & Libowitz, P.A., counsel to the Company, billed the
Company approximately $900,000 in fees and expenses for legal services. Basil A.
Thomas, a director of the Company, is of counsel to Thomas & Libowitz, P.A., and
is the father of Steven A. Thomas, a senior attorney and founder of Thomas &
Libowitz, P.A.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of Sinclair
does not know of any other matters to be presented for action by the
stockholders at the Annual Meeting. However, if any other matters not now known
are properly brought before the Annual Meeting, the proxy holders will vote upon
the same according to their discretion and best judgment.
16
<PAGE>
STOCKHOLDER PROPOSALS
Any proposal intended to be presented by any stockholder for action at the
1998 Annual Meeting of Stockholders of Sinclair must be received by the
Secretary of Sinclair at 2000 West 41st Street, Baltimore, Maryland 21211-1420
not later than December 12, 1997 in order for the proposal to be considered for
inclusion in Sinclair's Notice and Proxy Statement relating to
the 1998 Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
J. Duncan Smith, Secretary
Baltimore, Maryland
April 11, 1997
17
<PAGE>
<TABLE>
<CAPTION>
SINCLAIR BROADCAST GROUP, INC.
PROXY FOR ANNUAL MEETING OF MAY 5, 1997
<S> <C>
1. Election of seven directors for a term expiring in 1998 as set forth in the Proxy Statement
Nominees: David D. Smith, Frederick G. Smith, J. Duncan Smith, Robert E. Smith, Basil A. Thomas, William E. Brock, Lawrence E.
McCanna
For: [ ] Withheld: [ ]For all except: [ ]
2. Ratification of the Appointment of Independent Auditors IDENTIFY NOMINEES EXCEPTED:
For: [ ] Against: [ ] Abstain: [ ] ___________________________
___________________________
Please mark, sign and date, and
return the proxy card promptly
using the enclosed envelope.
Dated:__________________________
Signature(s):___________________
________________________________
Please sign exactly as name
appears to the left. When
shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
</TABLE>
PROXY
SINCLAIR BROADCAST GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints David D. Smith and Frederick G. Smith, or
either of them, as attorneys-in-fact, with full power of substitution, to vote
in the manner indicated on the reverse side, and with discretionary authority as
to any other matters that may properly come before the meeting, all shares of
capital stock of Sinclair Broadcast Group, Inc. which the undersigned is
entitled to vote at the annual meeting of stockholders of Sinclair Broadcast
Group, Inc. to be held on May 5, 1997 in the Duncan Room of the Sheraton
Baltimore North Hotel at 903 Dulaney Valley Road, Towson, Maryland 21204 at
10:00 a.m., local time or any adjournment thereof.
NOT VALID UNLESS DATED AND SIGNED ON THE REVERSE SIDE
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the nominees for directors and FOR each other proposal.
