FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 333-12257
SUBJECT TO COMPLETION DATED DECEMBER 5, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 5, 1997)
$150,000,000
[SBG
Sinclair Broadcast Group
Logo]
% SENIOR SUBORDINATED NOTES DUE 2007
------------
The % Senior Subordinated Notes due 2007 (the "Notes") are being offered
(the "Offering") by Sinclair Broadcast Group, Inc. (the "Company" or
"Sinclair"). The Notes will be guaranteed, jointly and severally (the
"Guarantees"), on a senior subordinated basis by substantially all of the
Company's subsidiaries (the "Guarantors"). A subsidiary may be released from
its Guarantee under certain circumstances. See "Description of the Notes --
Guarantees."
Interest on the Notes will be payable semiannually on and of
each year, commencing , 1998. The Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or after , 2002, at the
redemption prices set forth herein, together with accrued and unpaid interest,
if any, to the date of redemption. On or prior to , 2000, the Company may
redeem up to 25% of the original principal amount of Notes with the proceeds of
a Public Equity Offering (as defined) of the Company at % of the aggregate
principal amount, together with accrued and unpaid interest, if any, to the
date of redemption. Upon the occurrence of a Change of Control (as defined),
each holder of the Notes may require the Company to repurchase all or a portion
of such holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date of repurchase. Under the terms of the Company's Bank Credit Agreement
(as defined), a Change of Control constitutes an event of default thereunder
and the Company currently is prohibited or otherwise restricted from redeeming
or repurchasing the Notes. See "Description of the Notes."
The Notes will be unsecured senior subordinated obligations of the Company
and, as such, will be subordinated to all existing and future Senior
Indebtedness (as defined) of the Company and will be pari passu with all
existing and future unsecured senior subordinated obligations of the Company.
The Guarantees will be unsecured senior subordinated obligations of the
Guarantors and will be subordinated to all existing and future Guarantor Senior
Indebtedness (as defined). As of September 30, 1997, on a pro forma basis,
after giving effect to the Heritage Acquisition (as defined), the completion of
the Tender Offer (as defined) (assuming that 100% of the outstanding 1993 Notes
(as defined) are purchased in the Tender Offer and that the holders thereof
receive the Consent Payment (as defined)) and the sale of the Notes offered
hereby and the use of the estimated net proceeds thereof as set forth in "Use
of Proceeds," the aggregate amount of Senior Indebtedness that would have
ranked senior in right of payment to the Notes would have been $839.3 million,
the aggregate amount of Guarantor Senior Indebtedness that would have ranked
senior in right of payment to the Guarantees would have been $839.3 million
(including $832.6 million of outstanding indebtedness representing guarantees
of Senior Indebtedness) and the aggregate amount of indebtedness that would
have been pari passu in right of payment with the Notes would have been $500.0
million. Under the terms of the Indenture (as defined) with respect to the
Notes, the Company and the Guarantors are permitted to incur additional Senior
Indebtedness and Guarantor Senior Indebtedness, including certain indebtedness
incurred in connection with acquisitions.
There is no public market for the Notes and the Company does not intend to
apply for listing of the Notes on any national securities exchange or for
quotation of the Notes through the Nasdaq Stock Market. Following completion of
the Offering, the Underwriters (as defined herein) presently intend to make a
market in the Notes; however, they are under no obligation to do so and may
discontinue any market-making activities at any time without notice. See "Risk
Factors -- Absence of Public Trading" in the accompanying Prospectus.
------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SECURITIES OFFERED HEREBY.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EX-
CHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCU-
RACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PRO-
SPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------------------------
<TABLE>
<CAPTION>
================================================================================
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
THE PUBLIC(1) AND COMMISSIONS(2) THE COMPANY(3)
<S> <C> <C> <C>
Per Note % % %
Total $ $ $
================================================================================
</TABLE>
- ------------------------------------------------------
(1) Plus accrued interest, if any, from December , 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(3) Before deducting expenses of the Offering payable by the Company
estimated at $ .
------------
The Notes are offered by the several Underwriters subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery will be made on
or about December , 1997, against payment therefor in immediately available
funds.
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SALOMON SMITH BARNEY CHASE SECURITIES INC.
DECEMBER , 1997
Information contained herein is subject to completion or amendment. This
prospectus supplement shall not constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of securities in any State in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.
<PAGE>
[INSERT MAP]
THIS MAP REPRESENTS TELEVISION AND RADIO STATIONS (I) OWNED AND OPERATED BY THE
COMPANY, (II) PROGRAMMED BY THE COMPANY PURSUANT TO LMAS, (III) PROVIDED
SELLING SERVICES BY THE COMPANY PURSUANT TO JSAS, (IV) THAT THE COMPANY HAS
OPTIONS TO ACQUIRE AND (V) UNDER AGREEMENTS TO BE ACQUIRED BY THE COMPANY,
INCLUDING AGREEMENTS TO ACQUIRE RIGHTS TO PROGRAM STATIONS PURSUANT TO LMAS,
ALL AS SET FORTH UNDER "BUSINESS" IN THE COMPANY'S CURRENT REPORT ON FORM 8-K
DATED OCTOBER 8, 1997 INCORPORATED HEREIN BY REFERENCE AND IN "PROSPECTUS
SUPPLEMENT SUMMARY -- SINCLAIR" AND "-- RECENT DEVELOPMENTS." THE COMPANY PLANS
TO DIVEST TWO RADIO STATIONS IN THE NORFOLK MARKET AND THREE RADIO STATIONS IN
THE NEW ORLEANS MARKET IN ORDER TO COMPLY WITH FCC REGULATIONS AND TO OBTAIN
CERTAIN DEPARTMENT OF JUSTICE APPROVALS. IN ADDITION, THE COMPANY HAS ENTERED
INTO AGREEMENTS TO SELL OR EXCHANGE THREE RADIO STATIONS IN NASHVILLE AND ONE
RADIO STATION IN KANSAS CITY.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
PURCHASES OF THE NOTES TO STABILIZE THEIR MARKET PRICE AND PURCHASES OF THE
NOTES TO COVER ANY SHORT POSITION IN THE NOTES MAINTAINED BY THE UNDERWRITERS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary should be read in conjunction with the more detailed
information, financial statements and notes thereto appearing elsewhere in or
incorporated by reference into this Prospectus Supplement and the accompanying
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") and all references to the Tender Offer
assume that 100% of the outstanding 1993 Notes are purchased in the Tender
Offer and that the holders thereof receive the Consent Payment.
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 pursuant to Local Marketing Agreements ("LMAs") to 29
television stations, has pending acquisitions of 11 additional television
stations, and has pending acquisitions of the rights to provide programming to
five additional television stations. The Company believes it is also one of the
top ten radio groups in the United States, when measured by the total number of
radio stations owned or programmed pursuant to LMAs. The Company owns or
programs pursuant to LMAs 30 radio stations, two of which the Company has
options to acquire, has pending acquisitions of 37 radio stations and has
options to acquire two additional radio stations. The Company has entered into
an agreement to sell or exchange four of the radio stations it currently owns
or programs and the prospective buyer of three of the radio stations currently
programs such stations pursuant to an LMA.
The 29 television stations the Company owns or programs pursuant to LMAs
are located in 21 geographically diverse markets, with 23 of the stations in
the top 51 television designated market areas ("DMAs") in the United States.
The Company's television station group is diverse in network affiliation with
ten stations affiliated with Fox Broadcasting Company ("Fox"), 12 with United
Paramount Television Network Partnership ("UPN"), three with The WB Television
Network ("WB"), two with ABC and one with CBS. One station operates as an
independent. The Company has recently entered into an agreement with WB
pursuant to which eight of its stations would switch affiliations to, and one
independent station would become affiliated with, WB. In addition, the Company
has notified UPN of its non-renewal of affiliation with respect to three
additional stations, which will either operate as independents or enter into
new affiliation agreements with UPN or another network.
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 30 stations owned or provided
programming services by the Company, 12 broadcast on the AM band and 18 on the
FM band. The Company owns between two and eight stations in all but one of the
seven radio markets it serves.
The Company has undergone rapid and significant growth over the course of
the last six years. Since 1991, the Company has increased the number of
stations it owns or provides services to from three television stations to 29
television stations and 30 radio stations. From 1991 to 1996, net broadcast
revenues and Adjusted EBITDA (as defined herein) increased from $39.7 million
to $346.5 million, and from $15.5 million to $180.3 million, respectively. Pro
forma for the acquisitions completed in 1996 and the Heritage Acquisition
described below, 1996 net broadcast revenues and Adjusted EBITDA would have
been $532.4 million and $246.3 million, respectively.
The Company is a Maryland corporation 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.
S-1
<PAGE>
RECENT DEVELOPMENTS
AGREEMENT WITH THE WB NETWORK
On July 4, 1997, the Company entered into an agreement with WB (the "WB
Agreement"), pursuant to which the Company agreed that certain stations
currently affiliated with UPN would terminate their affiliations with UPN at
the end of the current affiliation term in January 1998, and would enter into
affiliation agreements with WB effective as of that date. The Company has
advised UPN that the following stations owned or provided programming services
by the Company will not renew their affiliation agreements with UPN when the
current agreements expire on January 15, 1998 (January 1999 with respect to
WTTV-TV/WTTK-TV): WPTT-TV, Pittsburgh, Pennsylvania, WNUV-TV, Baltimore,
Maryland, WSTR-TV, Cincinnati, Ohio, KRRT-TV, San Antonio, Texas, KOCB-TV,
Oklahoma City, Oklahoma, KSMO-TV, Kansas City, Missouri, KUPN-TV, Las Vegas,
Nevada, WCGV-TV, Milwaukee, Wisconsin, WABM-TV, Birmingham, Alabama, and
WTTV-TV/WTTK-TV, Indianapolis, Indiana. These stations (other than WCGV-TV,
KSMO-TV and WABM-TV, which will either operate as independents or enter into
new affiliation agreements with UPN or another network) will enter into
ten-year affiliation agreements with WB beginning on January 16, 1998 (other
than WTTV-TV/WTTK-TV, with respect to which the affiliation agreement will
begin January 11, 1999 and expire on the same date as the affiliation
agreements with the other stations). Pursuant to the WB Agreement, the WB
affiliation agreements of WVTV-TV, Milwaukee, Wisconsin, WDBB-TV, Tuscaloosa,
Alabama and WTTO-TV, Birmingham, Alabama have been extended to expire on the
same date as the affiliation agreements with the other stations. In addition,
WFBC-TV in the Asheville, North Carolina/Greenville/Spartanburg/Anderson, South
Carolina market will become affiliated with WB on November 1, 1999, when WB's
current affiliation with another station in that market expires. WTVZ-TV,
Norfolk, Virginia and WLFL-TV, Raleigh, North Carolina, will become affiliated
with WB when their affiliations with Fox expire. These Fox affiliations are
scheduled to expire on August 31, 1998. Under the terms of the WB Agreement, WB
has agreed to pay the Company $64 million aggregate amount in monthly
installments during the eight years commencing on January 16, 1998 in
consideration for entering into affiliation agreements with WB. In addition, WB
will be obligated to pay an additional $10 million aggregate amount in monthly
installments in each of the following two years provided that WB is in the
business of supplying programming as a television network during each of those
years.
In August 1997, UPN filed an action (the "California Action") in Los
Angeles Superior Court against the Company, seeking declaratory relief and
specific performance or, in the alternative, unspecified damages and alleging
that, with respect to certain stations covered by the WB Agreement, neither the
Company nor its affiliates provided proper notice of their intention not to
extend the current UPN affiliations beyond January 15, 1998. The Company filed
a cross complaint in the California Action seeking declaratory relief that the
notice was effective to terminate the affiliations on January 15, 1998. UPN has
sought a preliminary injunction, scheduled to be heard on December 15, 1997, to
prevent the termination of the affiliations on January 15, 1998. The court has
set a trial date for the California Action of July 1, 1998. Also in August
1997, certain subsidiaries of the Company filed an action (the "Baltimore
Action") in the Circuit Court for Baltimore City seeking declaratory relief
that their notice was effective to terminate the affiliations on January 15,
1998. UPN has responded to the Baltimore Action, and has filed a counterclaim
against the Company seeking the same remedies sought by UPN in the California
Action. Both the Company and UPN have filed motions for summary judgment in the
Baltimore Action, and the parties are awaiting a ruling from the court. See
"Risk Factors -- Certain Network Affiliation Agreements" in the accompanying
Prospectus and "Business of Sinclair -- Legal Proceedings" in the Company's
Current Report on Form 8-K filed on October 8, 1997, which is incorporated
herein by reference.
S-2
<PAGE>
PENDING ACQUISITIONS
On July 16, 1997, the Company entered into agreements (the "Heritage
Acquisition Agreements") with The News Corporation Limited, Heritage Media
Group, Inc. and certain subsidiaries of Heritage Media Corporation
(collectively, "Heritage"), pursuant to which the Company agreed to acquire
certain television and radio assets of such subsidiaries. Under the Heritage
Acquisition Agreements, the Company will acquire the assets of, or the right to
program pursuant to LMAs, six television stations in three markets and the
assets of 24 radio stations in seven markets (the "Heritage Acquisition"). The
television stations serve the following markets: Charleston-Huntington, West
Virginia; Mobile, Alabama/Pensacola, Florida; and Burlington,
Vermont/Plattsburgh, New York. The radio stations serve the following markets:
St. Louis, Missouri; Portland, Oregon; Kansas City, Missouri; Milwaukee,
Wisconsin; Norfolk, Virginia; New Orleans, Louisiana; and Rochester, New York.
The aggregate purchase price for the assets is $630 million payable in cash at
closing, less a deposit of $63 million paid at the time of signing the Heritage
Acquisition Agreements. The Heritage Acquisition Agreements also provide for
the acquisition of the assets of a television station in Oklahoma City,
Oklahoma; the Company is required by the Heritage Acquisition Agreements to
dispose of its interest in that station, and the Company has entered into a
letter of intent to sell that station for $60 million in cash. In addition, the
Company has agreed to dispose of two of the stations in New Orleans that the
Company is acquiring pursuant to the Heritage Acquisition and one of the
Company's current stations in New Orleans in order to obtain clearance for the
New Orleans portion of the Heritage Acquisition from the Department of Justice
(the "DOJ") under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"). The Company intends to finance the purchase price from
some combination of the funds available under the Third Amended and Restated
Credit Agreement dated as of May 20, 1997 with The Chase Manhattan Bank, as
agent (as amended from time to time, the "Bank Credit Agreement"), and the
anticipated $60 million in proceeds from the sale of the Company's interest in
the Oklahoma City television station. Closing of the Heritage Acquisition is
conditioned on, among other things, Federal Communications Commission ("FCC")
approval (which has been obtained with respect to the Charleston-Huntington,
West Virginia and Mobile, Alabama/Pensacola, Florida television stations) and,
in the case of the New Orleans station, is conditioned on the disposition of
certain radio stations in New Orleans as required by the DOJ and described
above. The Heritage Acquisition is anticipated to close in the first quarter of
1998.
On November 14, 1997, the Company entered into a definitive agreement to
acquire 100% of the stock of Lakeland Group Television, Inc. (the "Lakeland
Acquisition"). In the Lakeland Acquisition, the Company will acquire television
station KLGT in Minneapolis, Minnesota. The purchase price is $50 million in
cash and the Company is assuming $2.5 million in debt. KLGT-TV, Channel 23, is
the WB affiliate in Minneapolis, the nation's 14th largest market. The Company
intends to finance the purchase price from borrowings under the Bank Credit
Agreement. Closing of the Lakeland Acquisition is conditioned on, among other
things, FCC approval and the expiration of the applicable waiting period under
the HSR Act. The Lakeland Acquisition is anticipated to close by the second
quarter of 1998.
On December 2, 1997, the Company entered into agreements to acquire,
directly or indirectly, all of the equity interests of Max Media Properties,
L.L.C. ("Max Media"). As a result of this transaction, the Company will
acquire, or acquire the right to program pursuant to LMAs, nine television
stations and eight radio stations in eight markets (the "Max Media
Acquisition"). The television stations serve the following markets: Dayton,
Ohio; Syracuse, New York; Paducah, Kentucky/Cape Girardeau, Missouri;
Tri-Cities, Tennessee/Virginia; Tyler-Longview, Texas; and Charleston, South
Carolina. The radio stations serve the following markets: Norfolk-Virginia
Beach-Newport News, Virginia and Greensboro-Winston Salem-High Point, North
Carolina. The aggregate purchase price is $255 million payable in cash at
closing (less a deposit of $12.75 million paid at the time of signing the
acquisition agreement), a portion of which will be used to retire existing debt
of Max Media at closing. Max Media's television station WKEF-TV in Dayton, Ohio
has an overlapping service area with the Company's television stations WTTE-TV
in Columbus, Ohio and WSTR-TV in Cincinnati, Ohio. In
S-3
<PAGE>
addition, Max Media's television station WEMT-TV in Tri-Cities,
Tennessee/Virginia has an overlapping service area with the Company's
television station WLOS-TV in Asheville, North Carolina and Max Media's
television KBSI-TV in Paducah, Kentucky/Cape Girardeau, Missouri has an
overlapping service area with the Company's television station KDNL-TV in St.
Louis, Missouri. Furthermore, the Company owns a television station (and
proposes to acquire a radio station from Heritage) in the Norfolk-Virginia
Beach-Newport News, Virginia market, where four of Max Media's radio stations
are located. Consequently, the Company intends to apply for waivers from the
FCC to allow the Company to complete the Max Media Acquisition. There can be no
assurance that such waivers will be granted. As a result of the Max Media
Acquisition and the Heritage Acquisition, the Company intends to dispose of two
of the FM radio stations in the Norfolk-Virginia Beach-Newport News, Virginia
radio market that it has agreed to acquire from Heritage and Max Media in order
to be in compliance with the FCC regulations that limit the number of radio
stations that can be owned in a market. The Max Media Acquisition is subject to
FCC and DOJ approval and certain other conditions, and is anticipated to be
completed in the second quarter of 1998. The transaction is expected to be
financed through borrowings under the Company's Bank Credit Agreement.
In connection with the Company's 1996 acquisition of the radio and
television broadcasting assets of River City Broadcasting, L.P. ("River City"),
the Company acquired a three-year option to purchase the assets of WSYX-TV in
Columbus, Ohio (the "Columbus Option"). The exercise price for the Columbus
Option is approximately $100 million plus the amount of indebtedness secured by
the WSYX-TV assets on the date of exercise (such indebtedness not to exceed
$135 million). The exercise price is expected to be financed through borrowings
under the Company's Bank Credit Agreement. Due to the Company's ownership of
another television station in the Columbus, Ohio market, the Antitrust Division
of the DOJ is currently reviewing the Company's acquisition of the right to
operate WSYX-TV pursuant to an LMA. The Company expects a decision from the DOJ
on or about December 15, 1997.
In furtherance of its acquisition strategy, the Company routinely reviews
and conducts investigations of potential television and radio station
acquisitions, dispositions and station swaps. 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,
disposition or station swap. At any given time, the Company may be in
discussions with one or more such station owners. The Company is in serious
negotiations with various parties relating to the disposition of television and
radio properties which would be disposed of for aggregate consideration of
approximately $200 million. There can be no assurance that any of these or
other negotiations will lead to definitive agreements or if agreements are
reached that any transactions would be consummated.
PREFERRED STOCK AND COMMON STOCK OFFERINGS
On September 23, 1997, the Company completed a public offering of $172.5
million aggregate liquidation value (including shares sold on September 30,
1997 pursuant to the exercise of an over-allotment option) of its Series D
Convertible Exchangeable Preferred Stock, par value $.01 per share (the "Series
D Preferred Stock") (the offering of the Series D Preferred Stock, the
"Preferred Stock Offering"). The Series D Preferred Stock has a liquidation
preference of $50 per share and a stated annual dividend of $3.00 per share
payable quarterly out of legally available funds. The Series D Preferred Stock
is convertible into shares of the Company's Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), at the option of the holders
thereof at a conversion price of $45.625 per share. The Series D Preferred
Stock is exchangeable beginning December 15, 2000, at the option of the Company
for Convertible Subordinated Debentures of the Company due 2012 and is
redeemable at the option of the Company beginning September 20, 2000 at
specified prices plus accrued dividends. Except under certain limited
circumstances, shares of Series D Preferred Stock will not have the right to
vote on matters on which shares of Class A Common Stock have a vote, prior to
their conversion into Class A Common Stock. For additional terms of the Series
D Convertible Exchangeable Preferred Stock, see "Description of Capital Stock
- -- Existing Preferred Stock" in the accompanying Prospectus.
S-4
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Concurrently with the Preferred Stock Offering, the Company and certain
stockholders of the Company (the "Selling Stockholders") completed a public
offering of 4,345,000 shares and 1,750,000 shares (each including shares sold
September 30, 1997 pursuant to the exercise of an over-allotment option) of
Class A Common Stock, respectively (the "Common Stock Offering").
The Company received net proceeds from the Preferred Stock Offering and
the Common Stock Offering of approximately $167.5 million and $151.6 million,
respectively. Contemporaneously with the Preferred Stock Offering and the
Common Stock Offering, the Company and the lenders under the Bank Credit
Agreement entered into an amendment to the Bank Credit Agreement, the effect of
which was to recharacterize $275 million of indebtedness from the Tranche A
term loan under the Bank Credit Agreement to amounts owing under the revolving
credit facility under the Bank Credit Agreement, increasing the total
commitment under the revolving credit facility to $675 million. The Company
used $285.7 million of the net proceeds from the Common Stock Offering and the
Preferred Stock Offering to repay outstanding borrowings under the revolving
credit facility, $8.9 million to repay outstanding amounts under the Tranche A
term loan and the remaining net proceeds of approximately $24.5 million for
general corporate purposes. Borrowings under the Tranche A term loan were used
to finance acquisitions, and the weighted average interest rate of the
borrowings thereunder was 6.73% on the date as of which the $275 million was
recharacterized. Borrowings under the revolving credit facility (other than the
recharacterized $275 million) were used for general corporate purposes. As of
September 30, 1997, there were no amounts outstanding under the revolving
credit facility. The Company may reborrow amounts under the revolving credit
facility until December 31, 2004. In addition, the Bank Credit Agreement
provides for a Tranche C term loan in the amount of up to $400 million which
can be utilized upon approval by the agent bank and the raising of sufficient
commitments from banks to fund the additional loans. See "Description of
Indebtedness -- Bank Credit Agreement."
THE TENDER OFFER
On November 17, 1997, the Company commenced a tender offer (the "Tender
Offer") for all of its outstanding 10% Senior Subordinated Notes due 2003 (the
"1993 Notes") and a solicitation of consents ("Consents") from the holders of
the 1993 Notes to eliminate or modify certain covenants and other provisions
contained in the indenture relating to the 1993 Notes. The consummation of the
Tender Offer is conditioned on, among other things, the valid tender of a
majority of the outstanding 1993 Notes, the Company having obtained the
requisite financing for payment of the tendered 1993 Notes and the Company
having obtained consent from lenders under the Bank Credit Agreement to the
purchase of the 1993 Notes. The Tender Offer will expire on December 16, 1997,
unless extended, at which time the Company expects to purchase all of the 1993
Notes validly tendered with a portion of the net proceeds of the Offering or
funds available under the Bank Credit Agreement. If all of the 1993 Notes are
accepted for purchase pursuant to the Tender Offer and if 100% of the 1993
Notes are entitled to receive payments (the "Consent Payment") to be made in
connection with the timely giving of Consents, the total consideration and
expenses payable in connection with the Tender Offer are expected to be
approximately $108.3 million and $0.3 million, respectively.
S-5
<PAGE>
THE OFFERING
NOTES OFFERED........... $150,000,000 aggregate principal amount of %
Senior Subordinated Notes due 2007.
MATURITY DATE............ , 2007.
INTEREST PAYMENT DATES.. and , of each year, commencing , 1998.
OPTIONAL REDEMPTION..... The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or
after , 2002, at the redemption prices set forth
herein, together with accrued and unpaid interest,
if any, to the date of redemption. On or prior to ,
2000, the Company may redeem up to 25% of the
original principal amount of the Notes with the
proceeds of a Public Equity Offering at % of the
aggregate principal amount, together with accrued
and unpaid interest, if any, to the date of
redemption. Under the terms of the Company's Bank
Credit Agreement, the Company currently is
prohibited or otherwise restricted from redeeming
the Notes. See "Description of the Notes -- Optional
Redemption."
CHANGE OF CONTROL...... Upon the occurrence of a Change of Control, each
holder of the Notes may require the Company to
repurchase all or a portion of such holder's Notes
at a purchase price in cash equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest, if any, to the date of repurchase.
Under the terms of the Company's Bank Credit
Agreement, the Company currently is prohibited or
otherwise restricted from repurchasing the Notes. In
addition, certain highly leveraged transactions and
certain transactions with the Company's management
and its affiliates that may adversely affect holders
of the Notes do not constitute a Change of Control.
A Change of Control will result in an event of
default under the Company's Bank Credit Agreement
and such an event of default could result in the
acceleration of all indebtedness under the Bank
Credit Agreement (which constitutes Senior
Indebtedness and Guarantor Senior Indebtedness). See
"Description of the Notes -- Certain Covenants --
Purchase of Notes Upon a Change of Control."
RANKING.................. The Notes will be unsecured senior subordinated
obligations of the Company and, as such, will be
subordinated to all existing and future Senior
Indebtedness of the Company. The Notes will rank
pari passu with all senior subordinated indebtedness
of the Company. As of September 30, 1997, on a pro
forma basis, after giving effect to the Heritage
Acquisition, to the completion of the Tender Offer
and to the sale of the Notes offered hereby and the
use of the estimated net proceeds therefrom as set
forth in "Use of Proceeds," the aggregate amount of
Senior Indebtedness that would have ranked senior in
right of payment to the Notes would have been $839.3
million and the aggregate amount of indebtedness
that would have been pari passu in right of payment
with the Notes would have been $500.0 million. See
"Description of the Notes -- Subordination."
S-6
<PAGE>
GUARANTEES............... The Notes will be guaranteed, jointly and severally,
on a senior subordinated basis by each of the
Guarantors, which consist of all of the Company's
existing Subsidiaries other than Cresap Enterprises,
Inc., KDSM, Inc., KDSM Licensee, Inc. and Sinclair
Capital (the "Trust"). As of September 30, 1997, on
a pro forma basis, after giving effect to the
Heritage Acquisition, to the completion of the
Tender Offer and to the sale of the Notes offered
hereby and the use of the estimated net proceeds
therefrom as set forth in "Use of Proceeds," the
aggregate amount of Guarantor Senior Indebtedness
that would have ranked senior in right of payment to
the Guarantees would have been $839.3 million
(including $832.6 million of outstanding
indebtedness representing guarantees of Senior
Indebtedness). See "Description of the Notes --
Guarantees."
Under the terms of the Indenture, the Company has
the right to form or acquire Subsidiaries in the
future that will not be required to be guarantors
of the Notes. Under the terms of the Indenture, a
Subsidiary is not permitted to guarantee Senior
Indebtedness, including indebtedness under the Bank
Credit Agreement, or assume or become liable with
respect to indebtedness of the Company unless such
Subsidiary becomes a Guarantor and any Guarantor
which no longer guarantees any indebtedness under
the Bank Credit Agreement or any other indebtedness
of the Company may be released from any Guarantee
created after the date of the Supplemental
Indenture. See "Description of the Notes -- Certain
Covenants -- Limitation on Restricted Payments,"
"-- Limitation on Unrestricted Subsidiaries" and
"-- Limitation on Issuance of Guarantees of and
Pledges for Indebtedness."
CERTAIN COVENANTS....... The Indenture will contain certain covenants,
including, but not limited to, covenants with
respect to the following matters: (i) limitation on
indebtedness; (ii) limitation on restricted
payments; (iii) limitation on transactions with
affiliates; (iv) limitation on senior subordinated
indebtedness; (v) limitation on liens; (vi)
limitation on sale of assets; (vii) limitation on
issuances of guarantees of and pledges for
indebtedness; (viii) restriction on transfer of
assets; (ix) limitation on subsidiary equity
interests; (x) limitation on dividends and other
payment restrictions affecting subsidiaries; (xi)
limitation on unrestricted subsidiaries; and (xii)
restrictions on mergers, consolidations and the
transfer of all or substantially all of the assets
of the Company to another person. See "Description
of the Notes -- Certain Covenants."
S-7
<PAGE>
USE OF PROCEEDS........ The net proceeds to the Company from the Offering
are estimated to be approximately $146.4 million.
Approximately $108.6 million of the net proceeds
will be used to acquire the 1993 Notes purchased in
the Tender Offer and pay the expenses thereof, with
the remainder retained for general corporate
purposes. Depending on the timing of the
consummation of the Tender Offer, the Company may
fund the Tender Offer with borrowings under the Bank
Credit Agreement, in which case a portion of the net
proceeds of the Offering will be used to repay such
borrowings. See "Use of Proceeds."
ABSENCE OF PUBLIC TRADING
MARKET FOR THE NOTES.... There is no public market for the Notes and the
Company does not intend to apply for listing of the
Notes on any national securities exchange or for
quotation of the Notes through the Nasdaq Stock
Market ("Nasdaq"). The Company has been advised by
Salomon Brothers Inc and Chase Securities Inc.
(together, the "Underwriters") that, following the
completion of the Offering, the Underwriters
presently intend to make a market in the Notes;
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 Notes or
that an active public market will develop. If an
active public market does not develop or is not
maintained, the market price and liquidity of the
Notes may be adversely affected. See "Risk Factors
-- Absence of Public Trading Market" in the
accompanying Prospectus.
S-8
<PAGE>
SINCLAIR BROADCAST GROUP, INC. -- SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL DATA
(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 contained in the Company's Annual
Report on Form 10-K (as amended) for the year ended December 31, 1996, which is
incorporated herein by reference. The summary historical consolidated financial
data for the nine months ended September 30, 1996 and 1997 and as of September
30, 1996 and 1997 are unaudited, but in the opinion of management, such
financial data have been prepared on the same basis as the Consolidated
Financial Statements incorporated herein by reference 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. Results for the nine months ended September 30, 1996 and 1997 are not
necessarily indicative of the results for a full year. The summary pro forma
statement of operations data and other data of the Company reflect the 1996
Acquisitions (as defined in "Business of Sinclair -- Broadcasting Acquisition
Strategy" in the Company's Report on Form 8-K filed on October 8, 1997, which
is incorporated herein by reference), the Heritage Acquisition, and the
application of the proceeds of the issuance of $200,000,000 in principal amount
of the Company's 9% Senior Subordinated Notes due 2007 (the "1997 Notes")
issued on July 2, 1997 (the "July Debt Issuance"), the issuance of $200,000,000
in liquidation amount of the Company's 11 5/8% High Yield Trust Offered
Preferred Securities (the "HYTOPS") issued on March 14, 1997 (the "HYTOPS
Issuance"), the Preferred Stock Offering, the Common Stock Offering, the
completion of the Tender Offer and the Offering and the application of the net
proceeds as set forth in "Use of Proceeds" as though such transactions occurred
at the beginning of the periods presented. The pro forma statement of
operations for the 12 months ended September 30, 1997 includes the unaudited
pro forma consolidated statement of operations for the three months ended
December 31, 1996 and the nine months ended September 30, 1997. The pro forma
balance sheet data as of September 30, 1997 reflects the Heritage Acquisition,
the Tender Offer and the Offering as if such transactions occurred on September
30, 1997. The pro forma consolidated financial data are derived from the pro
forma consolidated financial statements of the Company included in the
Company's Current Report on Form 8-K filed on December 5, 1997 which is
incorporated herein by reference. 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) for the period
ended December 31, 1996 and Sinclair's Quarterly Report on Form 10-Q for the
period ended September 30, 1997, each of which is incorporated herein by
reference.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1992 1993 1994(a) 1995(a) 1996(a)
------------ ----------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net broadcast revenues(d) ............... $ 61,081 $ 69,532 $118,611 $187,934 $346,459
Barter revenues ........................ 8,805 6,892 10,743 18,200 32,029
-------- ------- -------- -------- --------
Total revenues ........................ 69,886 76,424 129,354 206,134 378,488
-------- ------- -------- -------- --------
Operating expenses, excluding deprecia-
tion and amortization, deferred com-
pensation and special bonuses paid to
executive officers ..................... 32,993 32,295 50,545 80,446 167,765
Depreciation and amortization(e) ...... 30,943 22,486 55,587 80,410 121,081
Amortization of deferred compensation.... -- -- -- -- 739
Special bonuses paid to executive offic-
ers..................................... -- 10,000 3,638 -- --
-------- ------- -------- -------- --------
Broadcast operating income ............ 5,950 11,643 19,584 45,278 88,903
-------- ------- -------- -------- --------
Interest and amortization of debt dis-
count expense 12,997 12,852 25,418 39,253 84,314
Interest and other income ............... 1,207 2,131 2,447 4,163 3,478
Subsidiary trust minority interest ex-
pense(f)................................ -- -- -- -- --
-------- ------- -------- -------- --------
Income (loss) before (provision) benefit
for income taxes and extraordinary
item ................................. $ (5,840) $ 922 $ (3,387) $ 10,188 $ 8,067
======== ======= ======== ======== ========
Net income (loss) available to common
stockholders ........................... $ (4,651) $(7,945) $ (2,740) $ 76 $ 1,131
======== ======= ======== ======== ========
Earnings (loss) per common share:
Net income (loss) before extraordi-
nary item ............................ $ (0.16) $ -- $ (0.09) $ 0.15 $ 0.03
======== ======= ======== ======== ========
Extraordinary item ..................... $ -- $ (0.27) $ -- $ (0.15) $ --
======== ======= ======== ======== ========
Net income (loss) available to com-
mon stockholders....................... $ (0.16) $ (0.27) $ (0.09) $ -- $ 0.03
======== ========== ======== ======== ========
Weighted average shares outstanding
(in thousands) ........................ 29,000 29,000 29,000 32,205 37,381
======== ========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA NINE MONTHS ENDED 12 MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
DECEMBER 31, -------------------------- SEPTEMBER 30,
1996(b) 1996(a) 1997(a) 1997(c)
-------------- ------------ ------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net broadcast revenues(d) ............... $ 532,357 $219,352 $ 333,028 $ 553,913
Barter revenues ........................ 40,179 17,837 31,289 50,297
--------- -------- --------- ---------
Total revenues ........................ 572,536 237,189 364,317 604,210
--------- -------- --------- ---------
Operating expenses, excluding deprecia-
tion and amortization, deferred com-
pensation and special bonuses paid to
executive officers ..................... 274,073 106,068 173,692 288,146
Depreciation and amortization(e) ...... 177,286 81,892 111,572 174,609
Amortization of deferred compensation.... 933 623 350 466
Special bonuses paid to executive offic-
ers ................................... -- -- -- --
--------- -------- --------- ---------
Broadcast operating income ............ 120,244 48,606 78,703 140,989
--------- -------- --------- ---------
Interest and amortization of debt dis-
count expense ......................... 139,369 56,647 77,342 127,276
Interest and other income ............... 7,753 3,824 1,400 10,128
Subsidiary trust minority interest ex-
pense(f) ............................... 23,250 -- 12,852 23,250
--------- -------- --------- ---------
Income (loss) before (provision) benefit
for income taxes and extraordinary
item ................................. $ (34,622) $ (4,217) $ (10,091) $ 591
========= ======== ========= =========
Net income (loss) available to common
stockholders ........................... $ (42,995) $ (1,817) $ (6,096) $ (18,050)
========= ======== ========= =========
Earnings (loss) per common share:
Net income (loss) before extraordi-
nary item.............................. $ (0.60) $ (0.05) $ (0.15) $ (0.03)
========= ======== ========= =========
Extraordinary item ..................... $ (0.15) $ -- $ -- $ (0.15)
========= ======== ========= =========
Net income (loss) available to com-
mon stockholders....................... $ (0.99) $ (0.05) $ (0.16) $ (0.42)
========= ======== ========= =========
Weighted average shares outstanding
(in thousands) ........................ 43,405 36,840 38,929 43,295
========= ======== ========= =========
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1992 1993 1994(A) 1995(A) 1996(A)
------------ ------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Broadcast cash flow(g)...................... $ 28,019 $ 37,498 $ 67,519 $ 111,124 $ 189,216
Broadcast cash flow margin(h)............... 45.90% 53.90% 56.90% 59.10% 54.60%
Adjusted EBITDA(i).......................... $ 26,466 $ 35,406 $ 64,547 $ 105,750 $ 180,272
Adjusted EBITDA margin(h)................... 43.30% 50.90% 54.40% 56.30% 52.00%
After tax cash flow(j)...................... $ 9,398 $ 17,950 $ 24,948 $ 51,288 $ 77,484
After tax cash flow margin(h)............... 15.40% 25.80% 21.00% 27.30% 22.40%
Program contract payments................... $ 10,427 $ 8,723 $ 14,262 $ 19,938 $ 30,451
Capital expenditures........................ 426 528 2,352 1,702 12,609
Corporate overhead expense.................. 1,553 2,092 2,972 5,374 8,944
Adjusted EBITDA to interest expense......... 2.0 x 2.8 x 2.5 x 2.7 x 2.1 x
Adjusted EBITDA to interest expense
plus HYTOPS minority interest ex-
pense and preferred dividends.............. 2.0 x 2.8 x 2.5 x 2.7 x 2.1 x
Adjusted EBITDA less capital expendi-
tures to interest expense plus HYTOPS
minority interest expense and preferred
dividends ................................. 2.0 x 2.7 x 2.4 x 2.7 x 2.0 x
Net debt to Adjusted EBITDA(k) ............ 4.1 x 5.8 x 5.3 x 2.9 x 7.1 x
Net debt plus HYTOPS and Series
D Preferred Stock to Adjusted
EBITDA(k)(l) .............................. 4.1 x 5.8 x 5.3 x 2.9 x 7.1 x
Cash flows from operating activities(m)..... 5,235 11,230 20,781 55,909 68,970
Cash flows from investing activities(m)..... (1,051) 1,521 (249,781) (119,243) (1,011,897)
Cash flows from financing activities(m)..... (3,741) 3,462 213,410 173,338 832,818
<CAPTION>
PRO FORMA
PRO FORMA NINE MONTHS ENDED 12 MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
DECEMBER 31, --------------------------- SEPTEMBER 30,
1996(B) 1996(A) 1997(A) 1997(C)
-------------- ------------- ------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OTHER DATA:
Broadcast cash flow(g)...................... $ 257,528 $ 117,855 $ 162,937 $ 277,410
Broadcast cash flow margin(h)............... 48.40% 53.70% 48.90% 50.10%
Adjusted EBITDA(i).......................... $ 246,278 $ 111,820 $ 152,491 $ 264,043
Adjusted EBITDA margin(h)................... 46.30% 51.00% 45.80% 47.70%
After tax cash flow(j)...................... $ 82,385 $ 41,095 $ 54,006 $ 103,661
After tax cash flow margin(h)............... 15.50% 18.70% 16.20% 18.70%
Program contract payments................... $ 52,185 $ 19,301 $ 38,134 $ 52,021
Capital expenditures........................ 18,512 3,949 13,240 25,319
Corporate overhead expense.................. 11,250 6,035 10,446 13,367
Adjusted EBITDA to interest expense......... 1.8 x 2.0 x 2.0 x 2.1 x
Adjusted EBITDA to interest expense
plus HYTOPS minority interest ex-
pense and preferred dividends.............. 1.4 x 2.0 x 1.7 x 1.6 x
Adjusted EBITDA less capital expendi-
tures to interest expense plus HYTOPS
minority interest expense and preferred
dividends ................................. 1.3 x 1.9 x 1.5 x 1.5 x
Net debt to Adjusted EBITDA(k) ............ -- -- -- 5.5 x
Net debt plus HYTOPS and Series
D Preferred Stock to Adjusted
EBITDA(k)(l) .............................. -- -- -- 6.9 x
Cash flows from operating activities(m)..... -- 34,419 65,369 --
Cash flows from investing activities(m)..... -- (995,688) (194,022) --
Cash flows from financing activities(m)..... -- 850,484 136,648 --
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1997
------------------------------------------------------------- --------------------------
1992 1993 1994(A) 1995(A) 1996(A) ACTUAL(A) PRO FORMA(N)
----------- ------------ ------------ ---------- ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET:
Cash and cash equivalents ............ $ 1,823 $ 18,036 $ 2,446 $112,450 $ 2,341 $ 10,336 $ 48,090
Total assets ........................ 140,366 242,917 399,328 605,272 1,707,297 1,880,776 2,433,856
Total debt(o) ........................ 110,659 224,646 346,270 418,171 1,288,147 939,179 1,496,179
HYTOPS(l) ........................... -- -- -- -- -- 200,000 200,000
Total stockholders' equity (deficit). (3,127) (11,024) (13,723) 96,374 237,253 551,549 545,391
</TABLE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(a) The Company made acquisitions in 1994, 1995, 1996 and the first nine months
of 1997 as described in the footnotes to the historical consolidated
financial statements incorporated herein by reference. The statement of
operations data 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 HYTOPS Issuance, the July Debt Issuance, the 1996 Acquisitions, the
Preferred Stock Offering, the Common Stock Offering, the Heritage
Acquisition, the completion of the Tender Offer and the Offering and the
application of the net proceeds thereof as set forth in "Use of Proceeds"
as if such transactions occurred on January 1, 1996. See "Pro Forma
Consolidated Financial Information of Sinclair" included in the Company's
Report on Form 8-K filed on December 5, 1997, which is incorporated herein
by reference. The Heritage Acquisition is subject to a number of conditions
customary for acquisitions of broadcasting properties. See "-- Recent
Developments."
(c) For purposes of the pro forma adjusted financial information (i) the
unaudited consolidated statement of operations of the Company for the three
months ended December 31, 1996 has been combined with the unaudited
consolidated statement of operations of the Company for the nine months
ended September 30, 1997, the unaudited consolidated statement of
operations of Heritage for the three months ended December 31, 1996 and the
unaudited consolidated statement of operations of Heritage for the nine
months ended September 30, 1997 and (ii) effect has been given to the
HYTOPS Issuance, the July Debt Issuance, the 1996 Acquisitions, the
Heritage Acquisition, the Common Stock Offering, the Preferred Stock
Offering, the completion of the Tender Offer and the Offering and the
application of the net proceeds thereof as set forth in "Use of Proceeds"
as if such transactions occurred on October 1, 1996. For a more complete
description of the pro forma impact on the Company's results of operations
see "Unaudited Pro Forma Consolidated Statement of Operations" for the year
ended December 31, 1996 and for the nine months ended September 30, 1997
included in the Company's Report on Form 8-K filed December 5, 1997, which
is incorporated herein by reference.
(d) Net broadcast revenues are defined as broadcast revenues net of agency
commissions.
(e) 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.
S-10
<PAGE>
(f) Subsidiary trust minority interest expense represents the distributions on
the HYTOPS.
(g) "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.
(h) "Broadcast cash flow margin" is defined as broadcast cash flow divided by
net broadcast revenues. "Adjusted EBITDA margin" is defined as Adjusted
EBITDA divided by net broadcast revenues. "After tax cash flow margin" is
defined as after tax cash flow divided by net broadcast revenues.
(i) "Adjusted EBITDA" is defined as broadcast cash flow less corporate overhead
expense and is a commonly used measure of performance for broadcast
companies. Adjusted EBITDA 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.
(j) "After tax cash flow" is defined as net income (loss) before extraordinary
items, less preferred stock dividends plus depreciation and amortization of
intangibles (excluding film amortization), amortization of deferred
compensation, amortization of excess syndicated programming, special
bonuses paid to executive officers, and the deferred tax provision (or
minus the deferred tax benefit). 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.
(k) Net debt is defined as total debt less cash and cash equivalents.
(l) HYTOPS represents Company Obligated Mandatorily Redeemable Security of
Subsidiary Trust Holding Solely KDSM Senior Debentures representing
$200,000 aggregate liquidation value.
(m) These items are financial statement disclosures in accordance with
generally accepted accounting principles and are also presented in the
Company's Consolidated Financial Statements contained in the Company's
Annual Reports on Form 10-K for the respective years.
(n) The pro forma balance sheet information gives effect to the Heritage
Acquisition, the completion of the Tender Offer and the Offering and the
application of the net proceeds thereof as set forth in "Use of Proceeds"
as if such transactions occurred on September 30, 1997.
(o) "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
$10,400 in 1993. Total debt as of December 31, 1993 included $100,000 in
principal amount of the 1993 Notes, 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. $100,000 of the 1993 Notes was redeemed from the escrow in the
first quarter of 1994. Total debt does not include the HYTOPS or the
Company's preferred stock.
S-11
<PAGE>
HISTORICAL AND PRO FORMA RATIOS OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
The Company's consolidated ratios of earnings to fixed charges for each of
the periods indicated are set forth below:
<TABLE>
<CAPTION>
NINE MONTHS PRO FORMA
ENDED 12 MONTHS
YEARS ENDED DECEMBER 31, SEPTEMBER 30, ENDED
------------------------------------- ------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1996 1997 1997
------ ------- ------ ------- ------- ------ ------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL
Ratio of earnings to fixed charges(a)........ -- 1.1 x -- 1.3 x 1.1 x -- --
PRO FORMA
Ratio of earnings to fixed charges(b)........ -- -- 1.0x
---- ------
</TABLE>
- ----------
(a) Earnings were inadequate to cover fixed charges for the years ended
December 31, 1992 and 1994, and for the nine months ended September 30,
1996 and 1997. Additional earnings of $5,840, $3,387, $4,217, and $10,091
would have been required to cover fixed charges in the years ended
December 31, 1992 and 1994, and the nine months ended September 30, 1996
and 1997, respectively.
(b) Earnings were inadequate to cover fixed charges for the pro forma year
ended December 31, 1996 and the pro forma nine months ended September 30,
1997 after giving effect to the 1996 Acquisitions, the HYTOPS Issuance,
the July Debt Issuance, the Heritage Acquisition, the Preferred Stock
Offering, the Common Stock Offering, the completion of the Tender Offer
and the Offering and the application of the net proceeds thereof as set
forth in "Use of Proceeds" as if each transaction had occurred on January
1, 1996 and 1997, respectively; additional earnings of $34,622 and $9,364
would have been required to cover fixed charges for the pro forma year
ended December 31, 1996 and the pro forma nine months ended September 30,
1997, respectively.
S-12
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the sale of the Notes offered hereby (net
of underwriting discounts and commissions and the estimated expenses of the
Offering) are estimated to be approximately $146.4 million. Net proceeds of the
Offering of approximately $108.6 million will be used to pay the consideration
payable by the Company for acquisition of the 1993 Notes in the Tender Offer
and to pay the expenses of the Tender Offer. Depending on the timing of the
consummation of the Tender Offer, the Company may fund the Tender Offer with
borrowings under the Bank Credit Agreement, in which case a portion of the net
proceeds of the Offering will be used to repay such borrowings. The remaining
net proceeds will be used for general corporate purposes, including funding the
Company's pending acquisitions and other acquisitions if suitable acquisitions
can be identified on acceptable terms.
S-13
<PAGE>
CAPITALIZATION
The following table sets forth, as of September 30, 1997, (a) the actual
capitalization of the Company, (b) the pro forma capitalization of the Company
as adjusted to reflect the Heritage Acquisition as if such transaction had
occurred on September 30, 1997 and (c) the pro forma capitalization of the
Company as adjusted to reflect the Heritage Acquisition, the completion of the
Tender Offer and the Offering and the application of the estimated net proceeds
thereof as set forth in "Use of Proceeds" as if such transactions had occurred
on September 30, 1997. The information set forth below should be read in
conjunction with the historical Consolidated Financial Statements of the
Company and the pro forma consolidated financial data of the Company included
the Company's Annual Report on Form 10-K (as amended) for the period ended
December 31, 1996 and the Company's Current Report on Form 8-K filed on
December 5, 1997, respectively, which are incorporated herein by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------------------------------
(DOLLARS IN THOUSANDS)
PRO FORMA
FOR THE
HERITAGE
PRO FORMA ACQUISITION,
FOR THE THE OFFERING
HERITAGE AND THE
ACTUAL ACQUISITION TENDER OFFER
-------------- -------------- -------------
<S> <C> <C> <C>
Cash and cash equivalents .................................... $ 10,336 $ 10,336 $ 48,090
========== ========== ==========
Current portion of long-term debt ........................... $ 37,825 $ 37,825 $ 37,825
========== ========== ==========
Long-term debt:
Commercial bank financing ................................. $ 280,719 $ 787,719 $ 787,719
Notes and capital leases payable to affiliates ............ 20,635 20,635 20,635
Senior subordinated notes ................................. 600,000 600,000 650,000
---------- ---------- ----------
Total long-term debt .................................... 901,354 1,408,354 1,458,354
---------- ---------- ----------
Company Obligated Mandatorily Redeemable Security of Subsid-
iary Trust Holding Solely KDSM Senior Debentures ........... 200,000 200,000 200,000
---------- ---------- ----------
Stockholders' equity:
Series B Preferred Stock, par value $.01 per share; 1,085,983
shares issued and outstanding ........................... 11 11 11
Series D Preferred Stock, par value $.01 per share; 3,450,000
shares issued and outstanding ........................... 35 35 35
Class A Common Stock, par value $.01 per share; 13,351,183
shares issued and outstanding ........................... 134 134 134
Class B Common Stock, par value $.01 per share; 25,760,581
shares issued and outstanding ........................... 258 258 258
Additional paid-in capital ................................. 553,801 553,801 553,801
Accumulated deficit ....................................... (25,028) (25,028) (31,186)
Additional paid-in capital - equity put options ............ 23,117 23,117 23,117
Additional paid-in capital - deferred compensation ......... (779) (779) (779)
---------- ---------- ----------
Total stockholders' equity .............................. 551,549 551,549 545,391
---------- ---------- ----------
Total capitalization .................................... $1,652,903 $2,159,903 $2,203,745
========== ========== ==========
Net debt to Adjusted EBITDA(a) .............................. 4.2x(b) 5.4x(c) 5.5x(c)
Net debt plus Company Obligated Mandatorily Redeemable
Security of Subsidiary Trust Holding Solely KDSM Senior
Debentures and Series D Preferred Stock to Adjusted
EBITDA(a) ................................................... 5.9x(b) 6.8x(c) 6.9x(c)
</TABLE>
- ----------
(a) Net debt is defined as total debt less cash and cash equivalents.
(b) Adjusted EBITDA is based on actual results for the 12 months ended
September 30, 1997.
(c) Adjusted EBITDA is based on pro forma results for the 12 months ended
September 30, 1997. See "Summary Historical and Pro Forma Consolidated
Financial Data" and notes thereto.
S-14
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes
supplements, and to the extent inconsistent therewith, replaces, the
description of the general terms and provisions set forth in the Prospectus, to
which description reference is hereby made. See "Description of Debt
Securities" in the accompanying Prospectus. The Notes will constitute
Subordinated Debt Securities as described in the Prospectus.
The Notes offered hereby will be issued under an Indenture (the "Base
Indenture") to be entered into among the Company and First Union National Bank,
as trustee (the "Trustee"), as supplemented by the First Supplemental Indenture
thereto to be entered into among the Company, the Guarantors and the Trustee
(the "Supplemental Indenture" and, together with the Base Indenture, the
"Indenture"). The following summary of the material provisions of the Indenture
does not purport to be complete, and where reference is made to particular
provisions of the Indenture, such provisions, including the definitions of
certain terms, are qualified in their entirety by reference to all of the
provisions of the Indenture and those terms made a part of the Indenture by
reference to the Trust Indenture Act. For definitions of certain capitalized
terms used in the following summary, see "Certain Definitions." Section
references herein are to the Indenture. A form of the Base Indenture has been
filed as an exhibit to the registration statement of which this Prospectus
Supplement is a part and the Base Indenture and the form of Supplemental
Indenture will be filed as an exhibit to a report incorporated by reference
herein prior to the issuance of the Notes.
GENERAL
The Notes will mature on , 2007, will be limited to $150,000,000
aggregate principal amount, and will be unsecured senior subordinated
obligations of the Company. Each Note will bear interest at % per annum from
its date of issuance or from the most recent interest payment date to which
interest has been paid, payable semiannually on and each year,
commencing , 1998, to the Person in whose name the Note (or any predecessor
Note) is registered at the close of business on the or next preceding
such interest payment date.
Payment of the Notes is guaranteed by the Guarantors, jointly and
severally, on a senior subordinated basis. The Guarantors are comprised of all
of the Subsidiaries of the Company other than Cresap Enterprises, Inc., KDSM,
Inc., KDSM Licensee, Inc. and the Trust. The Guarantors represented
approximately 97.9% of total tangible assets as of September 30, 1997 and 98.3%
of pro forma broadcast cash flow (giving effect to the 1996 Acquisitions, the
HYTOPS Issuance, the July Debt Issuance, the Heritage Acquisition, the
Preferred Stock Offering, the Common Stock Offering, the completion of the
Tender Offer and the Offering and the application of the net proceeds thereof
as set forth in "Use of Proceeds") and 85.3% of income before provision or
benefit for income taxes for the year ended December 31, 1996 of the Company in
each case on a consolidated basis. See "Guarantees."
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Company maintained for such purposes (which initially will be the Trustee);
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the Person entitled thereto as shown on the security
register. The Notes will be issued only in fully registered form without
coupons, in denominations of $1,000 and any integral multiple thereof. (Section
302) See "-- Book-Entry Securities; The Depository Trust Company; Delivery and
Form." No service charge will be made for any registration of transfer,
exchange or redemption of Notes, except in certain circumstances for any tax or
other governmental charge that may be imposed in connection therewith. (Section
306)
S-15
<PAGE>
OPTIONAL REDEMPTION
The Notes will be subject to redemption at any time on or after ,
2002, at the option of the Company, in whole or in part, on not less than 30
nor more than 60 days' prior notice by first-class mail in amounts of $1,000 or
an integral multiple thereof at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ------------------------------ -----------
<S> <C>
2002 %
2003
2004
</TABLE>
and thereafter at 100% of the principal amount, 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).
In addition, at any time on or prior to , 2000, the Company may
redeem up to 25% of the original principal amount of Notes with the net
proceeds of a Public Equity Offering of the Company at % 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).
If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed pro rata, by lot or by any other
method the Trustee shall deem fair and reasonable. (Sections 1101, 1105 and
1107)
SINKING FUND
There will be no sinking fund.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on, the
Notes will be subordinated in right of payment, as set forth in the Indenture,
to the prior payment in full of all Senior Indebtedness in cash or cash
equivalents or in any other form as acceptable to the holders of Senior
Indebtedness. The Notes will be senior subordinated indebtedness of the Company
ranking pari passu with all other existing and future senior subordinated
indebtedness of the Company and senior to all existing and future Subordinated
Indebtedness of the Company. (Section 1201)
During the continuance of any default in the payment of any Designated
Senior Indebtedness no payment (other than payments previously made pursuant to
the provisions described under "-- Defeasance or Covenant Defeasance of
Indenture") or distribution of any assets of the Company of any kind or
character (excluding certain permitted equity interests or subordinated
securities) shall be made on account of the principal of, premium, if any, or
interest on, the Notes or on account of the purchase, redemption, defeasance or
other acquisition of, the Notes unless and until such default has been cured,
waived or has ceased to exist or such Designated Senior Indebtedness shall have
been discharged or paid in full in cash or cash equivalents or in any other
form as acceptable to the holders of Senior Indebtedness after which the
Company shall resume making any and all required payments in respect of the
Notes, including any missed payments.
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 Trustee from
a representative of the holder of any Designated Senior Indebtedness of a
written notice of such Non-payment Default, no payment (other than payments
previously made pursuant to the provisions described under "-- Defeasance or
Covenant Defeasance of Indenture") or distribution of any assets of the Company
of any kind or character (excluding certain permitted equity
S-16
<PAGE>
or subordinated securities) may be made by the Company on account of the
principal of, premium, if any, or interest on, the Notes or on account of the
purchase, redemption, defeasance or other acquisition of, the Notes 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 Trustee and the Company 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 as 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 the Company or the
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), the Company shall promptly resume making any and all
required payments in respect of the Notes, including any missed payments. In no
event will a Payment Blockage Period extend beyond 179 days from the date of
the receipt by the Company or the 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 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 Notes
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. (Section 1203)
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See "-- Events of Default."
The Indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company or
its assets, or any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or any assignment for the benefit of creditors or any other
marshalling of assets or liabilities of the Company, 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 on account of the
principal of, premium, if any, or interest on the Notes. (Section 1202)
By reason of such subordination, in the event of liquidation or
insolvency, creditors of the Company who are holders of Senior Indebtedness may
recover more, ratably, than the holders of the Notes, and funds which would be
otherwise payable to the holders of the Notes 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 the Company may be unable to meet its
obligations fully with respect to the Notes.
Each Guarantee of a Guarantor will be an unsecured senior subordinated
obligation of such Guarantor, ranking pari passu with, or senior in right of
payment to, all other existing and future Indebtedness of such Guarantor that
is expressly subordinated to Guarantor Senior Indebtedness. The Indebtedness
evidenced by the Guarantees will be subordinated to Guarantor Senior
Indebtedness to the same extent as the Notes are subordinated to Senior
Indebtedness and during any period when payment on the Notes is blocked by
Designated Senior Indebtedness, payment on the Guarantees is similarly blocked.
S-17
<PAGE>
"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 the Company
(other than as otherwise provided in this definition), whether outstanding on
the date of the 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 Notes. 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 the Company 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 the Company, (ii)
Indebtedness outstanding under the Founders' Notes and (iii) Indebtedness under
Interest Rate Agreements. Notwithstanding the foregoing, "Senior Indebtedness"
shall not include (i) Indebtedness evidenced by the Notes, (ii) Indebtedness
that is subordinate or junior in right of payment to any Indebtedness of the
Company, (iii) Indebtedness which when incurred and without respect to any
election under Section 1111(b) of Title 11 United States Code, is without
recourse to the Company, (iv) Indebtedness which is represented by Disqualified
Equity Interests, (v) any liability for foreign, federal, state, local or other
taxes owed or owing by the Company, (vi) Indebtedness of the Company to the
extent such liability constitutes Indebtedness to a Subsidiary or any other
Affiliate of the Company or any of such Affiliate's subsidiaries, (vii) that
portion of any Indebtedness which at the time of issuance is issued in
violation of the Indenture, (viii) Indebtedness owed by the Company for
compensation to employees or for services and (ix) Indebtedness outstanding
under the Minority Note.
"Guarantor 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 laws whether or not allowable as a claim in such proceeding) on any
Indebtedness of any Guarantor (other than as otherwise provided in this
definition), whether outstanding on the date of the 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 any Guarantee. Without limiting the generality of the foregoing,
"Guarantor 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 any Guarantor 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 Guarantor Senior Indebtedness to the
extent that the Indebtedness thereunder is by its express terms subordinate to
any other Indebtedness of any Guarantor, (ii) Indebtedness evidenced by any
guarantee of the Founders' Notes and (iii) Indebtedness under Interest Rate
Agreements. Notwithstanding the foregoing, "Guarantor Senior Indebtedness"
shall not include (i) Indebtedness evidenced by the Guarantees, (ii)
Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of any Guarantor, (iii) Indebtedness which when incurred and
without respect to any election under Section 1111(b) of Title 11 United States
Code, is without recourse to any Guarantor, (iv) Indebtedness which is
represented by Disqualified Equity Interests, (v) any liability for foreign,
federal, state, local or other taxes owed or owing by any Guarantor to the
extent such liability constitutes Indebtedness, (vi) Indebtedness of any
Guarantor to a Subsidiary or any other Affiliate of the Company or any of such
Affiliate's subsidiaries, (vii) Indebtedness evidenced by any guarantee of any
Subordinated Indebtedness or Pari Passu Indebtedness, (viii) that portion of
any Indebtedness which at the time of issuance is issued in violation of the
Indenture, (ix) Indebtedness owed by any Guarantor for compensation to
employees or for services and (x) any guarantee of the Minority Note.
S-18
<PAGE>
"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 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 the Company.
As of September 30, 1997, on a pro forma basis, after giving effect to the
Heritage Acquisition, the completion of the Tender Offer and the Offering and
the application of the net proceeds thereof as set forth in "Use of Proceeds,"
the aggregate amount of Senior Indebtedness that would have ranked senior in
right of payment to the Notes would have been $839.3 million, and the aggregate
amount of indebtedness that is pari passu in right of payment with the Notes
would have been $500 million. See "Risk Factors -- Subordination of the
Subordinated Debt Guarantees and the Related Guarantees; Asset Encumbrances" in
the accompanying Prospectus. The Company's and its Subsidiaries' ability to
incur additional Indebtedness is restricted as set forth under "Certain
Covenants -- Limitation on Indebtedness." Any Indebtedness which can be
incurred may constitute additional Senior Indebtedness or Guarantor Senior
Indebtedness.
GUARANTEES
The Guarantors will, jointly and severally, unconditionally guarantee the
due and punctual payment of principal of, premium, if any, and interest on, the
Notes. Such Guarantees will be subordinated to the Guarantor Senior
Indebtedness. See "-- Subordination." As of September 30, 1997, on a pro forma
basis, after giving effect to the Heritage Acquisition, the completion of the
Tender Offer and the Offering and the application of the net proceeds thereof
as set forth in "Use of Proceeds," the aggregate amount of Guarantor Senior
Indebtedness that would have ranked senior in right of payment to the
Guarantees would have been $839.3 million (including $832.6 million of
outstanding indebtedness representing guarantees of Senior Indebtedness). In
addition, under certain circumstances described under "-- Certain Covenants --
Limitation on Issuances of Guarantees of and Pledges for Indebtedness," the
Company is required to cause the execution and delivery of additional
Guarantees by Restricted Subsidiaries. (Section 1014)
In addition, upon any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Equity Interest in, or all or
substantially all of the assets of, any Guarantor, which is in compliance with
the Indenture, such Guarantor shall be released from all its obligations under
its Guarantee.
The Guarantors consist of all of the Company's existing Subsidiaries other
than Cresap Enterprises, Inc., KDSM, Inc., KDSM Licensee Inc. and the Trust
which are: Chesapeake Television, Inc., a Maryland corporation, Chesapeake
Television Licensee, Inc., a Delaware corporation, FSF-TV, Inc., a North
Carolina corporation, KABB Licensee, Inc., a Delaware corporation, KDNL
Licensee, Inc., a Delaware corporation, KSMO, Inc., a Maryland corporation,
KSMO Licensee, Inc., a Delaware corporation, KUPN Licensee, Inc., a Maryland
corporation, SCI-Indiana Licensee, Inc., a Delaware corporation, SCI-Sacramento
Licensee, Inc., a Delaware corporation, Sinclair Communications, Inc., a
Maryland corporation, Sinclair Radio of Albuquerque, Inc., a Maryland
corporation, Sinclair Radio of Albuquerque Licensee, Inc., a Delaware
corporation, Sinclair Radio of Buffalo, Inc., a Maryland corporation, Sinclair
Radio of Buffalo Licensee, Inc., a Delaware corporation, Sinclair Radio of
Greenville, Inc., a Maryland corporation, Sinclair Radio of Greenville
Licensee, Inc., a Delaware corporation, Sinclair Radio of Los Angeles, Inc., a
Maryland corporation, Sinclair Radio of Los Angeles Licensee, Inc., a Delaware
corporation, Sinclair Radio of Memphis, Inc., a Maryland corporation, Sinclair
Radio of Memphis Licensee, Inc., a Delaware corporation, Sinclair Radio of
Nashville, Inc., a Maryland corporation, Sinclair Radio of Nashville Licensee,
Inc., a Delaware corporation, Sinclair Radio of New Orleans, Inc., a Maryland
corporation, Sinclair Radio of New Orleans Licensee, Inc., a Delaware
corporation, Sinclair Radio of St. Louis, Inc., a Maryland corporation,
Sinclair Radio of St. Louis Licensee, Inc., a Delaware corporation, Sinclair
Radio of Wilkes-Barre, Inc., a Maryland corporation, Sinclair Radio of Wilkes-
Barre Licensee, Inc., a Delaware corporation, Superior Communications of
Kentucky, Inc., a Delaware
S-19
<PAGE>
corporation, Superior Communications of Oklahoma, Inc., an Oklahoma
corporation, Superior KY License Corp., a Delaware corporation, Superior OK
License Corp., a Delaware corporation, Tuscaloosa Broadcasting, Inc., a
Maryland corporation, WCGV, Inc., a Maryland corporation, WCGV Licensee, Inc.,
a Delaware corporation, WDBB, Inc., a Maryland corporation, WLFL, Inc., a
Maryland corporation, WLFL Licensee, Inc., a Delaware corporation, WLOS
Licensee, Inc., a Delaware corporation, WPGH, Inc., a Maryland corporation,
WPGH Licensee, Inc., a Maryland corporation, WSMH, Inc., a Maryland
corporation, WSMH Licensee, Inc., a Delaware corporation, WSTR, Inc., a
Maryland corporation, WSTR Licensee, Inc., a Maryland corporation, WSYX, Inc.,
a Maryland corporation, WTTE, Channel 28, Inc., a Maryland corporation, WTTE,
Channel 28 Licensee, Inc., a Maryland corporation, WTTO, Inc., a Maryland
corporation, WTTO Licensee, Inc., a Delaware corporation, WTVZ, Inc., a
Maryland corporation, WTVZ Licensee, Inc., a Maryland corporation, WYZZ, Inc.,
a Maryland corporation, WYZZ Licensee, Inc., a Delaware corporation, WEAR
Licensee, Inc., a Maryland corporation, Sinclair Radio of Kansas City Licensee,
Inc., a Maryland corporation, Tuscaloosa Broadcasting Licensee, Inc., a
Maryland corporation, WPTZ Licensee, Inc., a Maryland corporation, WNNE
Licensee, Inc., a Maryland corporation, WCHS Licensee, Inc., a Maryland
corporation, Sinclair Radio of Norfolk Licensee, Inc., a Maryland corporation,
Sinclair Radio of Milwaukee Licensee, Inc., a Maryland corporation, Sinclair
Radio of Portland Licensee, Inc., a Maryland corporation, and Sinclair Radio of
Rochester, Inc., a Maryland corporation.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. 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 Guarantor 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.
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 $50.0
million under any revolving credit facility thereunder;
(ii) Indebtedness of the Company pursuant to the Notes and Indebtedness
of any Guarantor pursuant to a Guarantee;
(iii) Indebtedness of any Guarantor 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 of the Supplemental Indenture and listed on a
schedule thereto;
(v) Indebtedness of the Company owing to a Restricted Subsidiary;
provided that any Indebtedness of the Company owing to a Restricted
Subsidiary that is not a Guarantor is made pursuant to an intercompany note
in the form attached to the Supplemental Indenture and is subordinated in
right of payment from and after such time as the Notes shall become due and
payable (whether at Stated Maturity, acceleration or otherwise) to the
payment and performance of the Company's obligations under the Notes;
provided, further, 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);
S-20
<PAGE>
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary owing to the
Company or another Wholly Owned Restricted Subsidiary; provided that, with
respect to Indebtedness owing to a Wholly Owned Subsidiary that is not a
Guarantor, (x) any such Indebtedness is made pursuant to an intercompany
note in the form attached to the Supplemental Indenture and (y) any such
Indebtedness shall be subordinated in right of payment from and after such
time as the obligations under the Guarantee by such Wholly Owned Restricted
Subsidiary shall become due and payable to the payment and performance of
such Wholly Owned Restricted Subsidiary's obligations under its Guarantee;
provided, further, 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 of any Restricted Subsidiary made in accordance with
the provisions of " -- Limitation on Issuances of Guarantees of and Pledges
for Indebtedness";
(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), (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 the Company incurred in
connection with such refinancing and, in the case of Pari Passu or
Subordinated Indebtedness, such refinancing does not reduce the Average
Life to Stated Maturity or the Stated Maturity of such Indebtedness; 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 Indebtedness shall not exceed
$25,000,000. (Section 1008)
Limitation on Restricted Payments. (a) 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 Equity Interests (other than dividends or
distributions payable solely in its Qualified Equity Interests);
(ii) purchase, redeem or otherwise acquire or retire for value, directly
or indirectly, any Equity Interest of the Company or any Affiliate thereof
(except Equity Interests held by the Company or a Wholly Owned Restricted
Subsidiary);
(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 Restricted Subsidiaries);
S-21
<PAGE>
(v) incur, create or assume any guarantee of Indebtedness of any
Affiliate (other than a Wholly Owned Restricted Subsidiary of the Company);
or
(vi) make any Investment in any Person (other than any Permitted
Investments)
(any of the foregoing payments described in clauses (i) through (vi), 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 the Company, whose determination shall be conclusive and
evidenced by a Board resolution), (1) no Default or Event of Default shall have
occurred and be continuing and such Restricted Payment shall not be an event
which is, or after notice or lapse of time or both, would be, an "event of
default" under the terms of any Indebtedness of the Company or its Restricted
Subsidiaries; and (2) the aggregate amount of all such Restricted Payments
declared or made after the date of the Indenture 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;
(B) the aggregate Net Cash Proceeds received after December 9, 1993
by the Company from capital contributions (other than from a Subsidiary)
or from the issuance or sale (other than to any of its Subsidiaries) of
its Qualified Equity Interests (except, in each case, to the extent such
proceeds are used to purchase, redeem or otherwise retire Equity
Interests or Subordinated Indebtedness as set forth below); and
(C) to the extent that any Investment constituting a Restricted
Payment (including an Investment in an Unrestricted Subsidiary) that was
made after the date of the Supplemental Indenture is sold or is
otherwise liquidated or repaid, 100% of the amount (to the extent not
included in Cumulative Operating Cash Flow) equal to the Net Cash
Proceeds or Fair Market Value of marketable securities received with
respect to such Investment (less the cost of the disposition of such
Investment and net of taxes).
(b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(v) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions shall not prohibit the following actions (clauses (i)
through (v) 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 the Company entered
into in the ordinary course of business (including compensation or employee
benefit arrangements with any officer or director of the Company);
(iii) the repurchase, redemption, or other acquisition or retirement of
any Equity Interests of the Company 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
Qualified Equity Interests of the Company; provided that the Net Cash
Proceeds from the issuance of such Qualified Equity Interests are excluded
from clause (2)(B) of paragraph (a) of this Section;
(iv) any repurchase, redemption, defeasance, retirement, refinancing or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or out of the net proceeds of, a
substantially concurrent issuance and sale for cash (other than to any
Subsidiary of the Company) of any Qualified Equity Interests of the
Company, provided that the Net Cash Proceeds from the issuance of such
Qualified Equity Interests are excluded from clause (2)(B) of paragraph (a)
of this Section; and
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(v) the repurchase, redemption, defeasance, retirement, refinancing or
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Disqualified Equity Interests) (a "refinancing")
through the issuance of new Subordinated Indebtedness of the Company, as
the case may be, provided that any such new Indebtedness (1) shall be in a
principal amount that does not exceed the principal amount so refinanced
or, if such Subordinated Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration or
acceleration thereof, then such lesser amount as of the date of
determination), plus the lesser of (I) the stated amount of any premium,
interest 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, interest 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; (2)
has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the Notes; (3) has a Stated Maturity for its
final scheduled principal payment later than the Stated Maturity for the
final scheduled principal payment of the Notes; and (4) is expressly
subordinated in right of payment to the Notes at least to the same extent
as the Indebtedness to be refinanced. (Section 1009)
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 Affiliate of the Company (other than the
Company or a Wholly Owned Restricted Subsidiary) unless (a) such transaction or
series of 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 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 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 of the
Supplemental Indenture. (Section 1010)
Limitation on Senior Subordinated Indebtedness. The Company will not, and
will not permit any Guarantor to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise in any manner become directly or indirectly
liable for or with respect to or otherwise permit to exist any Indebtedness
that is subordinate in right of payment to any Indebtedness of the Company or
such Guarantor, as the case may be, unless such Indebtedness is also pari passu
with the Notes or the Guarantee of such Guarantor, or subordinate in right of
payment to the Notes or such Guarantee to at least the same extent as the Notes
or such Guarantee are subordinate in right of payment to Senior Indebtedness or
Guarantor Senior Indebtedness, as the case may be, as set forth in the
Indenture. (Section 1011)
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, affirm or
suffer to exist 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
Supplemental Indenture, or any income or profits therefrom, except if the Notes
are directly secured equally and ratably with (or prior to in the case of Liens
with respect to Subordinated Indebtedness) the obligation or liability secured
by such Lien, excluding, however, from the operation of the foregoing any of
the following:
(a) any Lien existing as of the date of the Supplemental Indenture and
listed on a schedule thereto;
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(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, 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 the Company or any Subsidiary 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; (7) surveys, exceptions,
title defects, encumbrances, reservations of, or rights of others for, rights
of way, sewers, electric lines, telegraph or telephone lines and other similar
purposes or zoning or other restrictions as to the use of real property not
interfering with the ordinary conduct of the business of the Company or any of
its Subsidiaries; or (8) 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 Lien now or hereafter existing on property of the Company or any
of its Restricted Subsidiaries securing Senior Indebtedness or Guarantor Senior
Indebtedness, in each case which Indebtedness is permitted under the provisions
of "-- Limitation on Indebtedness" and provided that the provisions described
under "-- Limitation on Issuances of Guarantees of and Pledges for
Indebtedness" are complied with;
(d) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Subsidiary, in each case which Indebtedness
is permitted under the provisions of "-- Limitation on Indebtedness"; provided
that any such Lien only extends to the assets that were subject to such Lien
securing such Acquired Indebtedness prior to the related transaction by the
Company or its Subsidiaries;
(e) any Lien securing Permitted Subsidiary Indebtedness; and
(f) any extension, renewal, refinancing or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through (e) so long as
the amount of security is not increased thereby. (Section 1012)
Limitation on Sale of Assets. (a) The Company 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 (exclusive of assumed Senior Indebtedness to which the Company and
its Restricted Subsidiaries have received a full and unconditional release from
such liability in connection with such Asset Sale) is received in cash and (ii)
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 of the Company 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 (i) and (ii).
Notwithstanding the foregoing, clause (i) of the preceding sentence shall not
be applicable to any Asset Swap.
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness then
outstanding as required by the terms thereof, or the
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Company determines not to apply such Net Cash Proceeds to the permanent
prepayment of such Senior Indebtedness or if no such Senior Indebtedness is
then outstanding, then the Company may within 12 months of the Asset Sale,
invest the Net Cash Proceeds in properties and 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 date
of the Indenture or reasonably related thereto. The amount of such Net Cash
Proceeds neither used to permanently repay or prepay Senior Indebtedness nor
used or invested as set forth in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $5,000,000 or
more, the Company shall apply the Excess Proceeds to the repayment of the Notes
and any Pari Passu Indebtedness required to be repurchased under the instrument
governing such Pari Passu Indebtedness as follows: (a) the Company shall make
an offer to purchase (an "Offer") from all holders of the Notes in accordance
with the procedures set forth in the Indenture in the maximum principal amount
(expressed as a multiple of $1,000) of Notes that may be purchased out of an
amount (the "Note Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding principal
amount of the Notes, and the denominator of which is the sum of the outstanding
principal amount of the Notes and such Pari Passu Indebtedness (subject to
proration in the event such amount is less than the aggregate Offered Price of
all Notes tendered) and (b) to the extent required by such Pari Passu
Indebtedness to permanently reduce the principal amount of such Pari Passu
Indebtedness, the Company shall make an offer to purchase or otherwise
repurchase or redeem Pari Passu Indebtedness (a "Pari Passu Offer") in an
amount (the "Pari Passu Debt Amount") equal to the excess of the Excess
Proceeds over the Note Amount; provided that in no event shall the Pari Passu
Debt Amount exceed the principal amount of such Pari Passu Indebtedness plus
the amount of any premium required to be paid to repurchase such Pari Passu
Indebtedness. The offer price shall be payable in cash in an amount equal to
100% of the principal amount of the Notes plus accrued and unpaid interest, if
any, to the date (the "Offer Date") such Offer is consummated (the "Offered
Price"), in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate Offered Price of the Notes tendered pursuant to the
Offer is less than the Note Amount relating thereto or the aggregate amount of
Pari Passu Indebtedness that is purchased is less than the Pari Passu Debt
Amount (the amount of such shortfall, if any, constituting a "Deficiency"), the
Company shall use such Deficiency in the business of the Company and its
Restricted Subsidiaries. Upon completion of the purchase of all the Notes
tendered pursuant to an Offer and repurchase of the Pari Passu Indebtedness
pursuant to a Pari Passu Offer, the amount of Excess Proceeds, if any, shall be
reset at zero.
(d) Whenever the Excess Proceeds received by the Company exceed
$5,000,000, such Excess Proceeds shall be set aside by the Company in a
separate account pending (i) deposit with the depositary or a paying agent of
the amount required to purchase the Notes or Pari Passu Indebtedness tendered
in an Offer or a Pari Passu Offer, (ii) delivery by the Company of the Offered
Price to the holders of the Notes or Pari Passu Indebtedness tendered in an
Offer or a Pari Passu Offer and (iii) application, as set forth above, of
Excess Proceeds in the business of the Company and its Restricted Subsidiaries.
Such Excess Proceeds may be invested in Temporary Cash Investments, provided
that the maturity date of any such investment made after the amount of Excess
Proceeds exceeds $5,000,000 shall not be later than the Offer Date. The Company
shall be entitled to any interest or dividends accrued, earned or paid on such
Temporary Cash Investments, provided that the Company shall not withdraw such
interest from the separate account if an Event of Default has occurred and is
continuing.
(e) If the Company becomes obligated to make an Offer pursuant to clause
(c) above, the Notes shall be purchased by the Company, at the option of the
holder thereof, in whole or in part in integral multiples of $1,000, on a date
that is not earlier than 45 days and not later than 60 days from the date the
notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act, subject to
proration in the event the Note Amount is less than the aggregate Offered Price
of all Notes tendered.
(f) 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 an Offer.
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(g) The Company will not, and will not permit any Restricted Subsidiary
to, create or permit to exist or become effective any restriction (other than
restrictions existing under (i) Indebtedness as in effect on the date of the
Supplemental Indenture and listed on a schedule thereto as such Indebtedness
may be refinanced from time to time, provided that such restrictions are no
less favorable to the holders of the Notes than those existing on the date of
the Indenture or (ii) any Senior Indebtedness and any Guarantor Senior
Indebtedness) that would materially impair the ability of the Company to make
an Offer to purchase the Notes or, if such Offer is made, to pay for the Notes
tendered for purchase. (Section 1013)
Limitation on Issuances of Guarantees of and Pledges for Indebtedness. (a)
The Company will not permit any Restricted Subsidiary, other than the
Guarantors, directly or indirectly, to secure the payment of any Senior
Indebtedness of the Company and the Company will not, and will not permit any
Restricted Subsidiary to, pledge any intercompany notes representing
obligations of any Restricted Subsidiary (other than the Guarantors) to secure
the payment of any Senior Indebtedness unless in each case such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to the
Indenture providing for a guarantee of payment of the Notes by such Restricted
Subsidiary, which guarantee shall be on the same terms as the guarantee of the
Senior Indebtedness (if a guarantee of Senior Indebtedness is granted by any
such Restricted Subsidiary) except that the guarantee of the Notes need not be
secured and shall be subordinated to the claims against such Restricted
Subsidiary in respect of Senior Indebtedness to the same extent as the Notes
are subordinated to Senior Indebtedness of the Company under the Indenture.
(b) The Company will not permit any Restricted Subsidiary, other than the
Guarantors, directly or indirectly, to guarantee, assume or in any other manner
become liable with respect to any Indebtedness of the Company (other than
guarantees in existence on the date of the Supplemental Indenture) unless such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for a guarantee of the Notes on the same
terms as the guarantee of such Indebtedness except that if the Notes are
subordinated in right of payment to such Indebtedness, the guarantee under the
supplemental indenture shall be subordinated to the guarantee of such
Indebtedness to the same extent as the Notes are subordinated to such
Indebtedness under the Indenture.
(c) Each guarantee created pursuant to the provisions described in the
foregoing paragraph is referred to as a "Guarantee" and the issuer of each such
Guarantee is referred to as a "Guarantor." Notwithstanding the foregoing, any
Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms
that it shall be automatically and unconditionally released and discharged upon
(i) any sale, exchange or transfer, to any Person not an Affiliate of the
Company, of all of the Company's Equity Interest in, or all or substantially
all the assets of, such Restricted Subsidiary, which is in compliance with the
Indenture or (ii) (with respect to any Guarantees created after the date of the
Supplemental Indenture) the release by the holders of the Indebtedness of the
Company described in clauses (a) and (b) above of their security interest or
their guarantee by such Restricted Subsidiary (including any deemed release
upon payment in full of all obligations under such Indebtedness), at a time
when (A) no other Indebtedness of the Company has been secured or guaranteed by
such Restricted Subsidiary, as the case may be, or (B) the holders of all such
other Indebtedness which is secured or guaranteed by such Restricted Subsidiary
also release their security interest in, or guarantee by, such Restricted
Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness). (Section 1014)
Restriction on Transfer of Assets. The Company and the Guarantors will not
sell, convey, transfer or otherwise dispose of their respective assets or
property to any of the Company's Restricted Subsidiaries (other than any
Guarantor), except for sales, conveyances, transfers or other dispositions made
in the ordinary course of business and except for capital contributions to any
Restricted Subsidiary, the only material assets of which are broadcast
licenses. For purposes of this provision, any sale, conveyance, transfer, lease
or other disposition of property or assets, having a Fair Market Value in
excess of (a) $1,000,000 for any sale, conveyance, transfer, leases or
disposition or series of related sales, conveyances, transfers, leases and
dispositions and (b) $5,000,000 in the aggregate for all such sales,
conveyances, transfers, leases or dispositions in any fiscal year of the
Company shall not be considered "in the ordinary course of business." (Section
1015)
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Purchase of Notes Upon a Change of Control. If a Change of Control shall
occur at any time, then each holder of Notes shall have the right to require
that the Company purchase such holder's Notes in whole or in part in integral
multiples of $1,000, at a purchase price (the "Change of Control Purchase
Price") in cash in an amount equal to 101% of the principal amount of such
Notes, plus accrued and unpaid interest, 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 the Indenture.
Within 30 days following any Change of Control, the Company shall notify
the Trustee thereof and give written notice of such Change of Control to each
holder of Notes, by first-class mail, postage prepaid, at his address appearing
in the security register, stating, among other things, the purchase price and
that the 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 Note
not tendered will continue to accrue interest; that, unless the Company
defaults in the payment of the purchase price, any Notes 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 Notes 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
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes 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 could
result in the acceleration of all indebtedness under the Bank Credit Agreement.
See "Description of Indebtedness -- Bank Credit Agreement." Moreover, the Bank
Credit Agreement prohibits the repurchase of the Notes by the Company. The
failure of the Company to make or consummate the Change of Control Offer or pay
the Change of Control Purchase Price when due will result in an Event of
Default under the Indenture.
The term "all or substantially all" as used in the definition of "Change
of Control" has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the holders of the Notes elected to exercise their
rights under the Indenture and the Company elected to contest such election,
there could be no assurance as to how a court interpreting New York law would
interpret the phrase.
The existence of a holder's right to require the Company to repurchase
such holder's Notes upon a Change of Control may deter a third party from
acquiring the Company in a transaction which constitutes a Change of Control.
"Change of Control" means the occurrence of either 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 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 of the Company; (ii) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election to such Board or whose nomination for election by the
shareholders of the Company, was approved by a vote of at least 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
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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 as
described under "-- Limitation on Restricted Payments" (and such amount shall
be treated as a Restricted Payment subject to the provisions in the Indenture
described under "-- Limitation on Restricted Payments") 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
described under "-- Consolidation, Merger, Sale of Assets."
"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.
The provisions of the Indenture will not afford holders of Notes the right
to require the Company to repurchase the Notes in the event of a highly
leveraged transaction or certain transactions with the Company's management or
its affiliates, including a reorganization, restructuring, merger or similar
transaction (including, in certain circumstances, an acquisition of the Company
by management or its Affiliates) involving the Company that may adversely
affect holders of the Notes, if such transaction is not a transaction defined
as a Change of Control. A transaction involving the Company's management or its
Affiliates, or a transaction involving a recapitalization of the Company, will
result in a Change of Control if it is the type of transaction specified by
such definition.
The Company will 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 1016)
Limitation on Subsidiary Equity Interests. The Company will not permit any
Restricted Subsidiary of the Company to issue any Equity Interests, except for
(i) Equity Interests issued to and held by the Company or a Wholly Owned
Restricted Subsidiary, and (ii) Equity Interests issued by a Person prior to
the time (A) such Person becomes a Restricted Subsidiary, (B) such Person
merges with or into a Restricted Subsidiary or (C) a Restricted Subsidiary
merges with or into such Person; provided that such Equity Interests were not
issued or incurred by such Person in anticipation of the type of transaction
contemplated by subclause (A), (B) or (C). (Section 1017)
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company to (i) pay dividends or make any other
distribution on its Equity Interests, (ii) pay any Indebtedness owed to the
Company or a Restricted Subsidiary of the Company, (iii) make any Investment in
the Company or a Restricted Subsidiary of the Company or (iv) transfer any of
its properties or assets to the Company or any Restricted Subsidiary, except
(a) any encumbrance or restriction pursuant to an agreement in effect on the
date of the Supplemental Indenture and listed on a schedule thereto; (b) any
encumbrance or restriction, with respect to a Restricted Subsidiary that is not
a Subsidiary of the Company on the date of the Indenture, in existence at the
time such Person becomes a Restricted Subsidiary of the Company and not
incurred in connection with, or in contempla-
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tion of, such Person becoming a Restricted Subsidiary; (c) any encumbrance or
restriction existing under any agreement that extends, renews, refinances or
replaces the agreements containing the encumbrances or restrictions in the
foregoing clauses (a) and (b), or in this clause (c), provided that the terms
and conditions of any such encumbrances or restrictions are not materially less
favorable to the holders of the Notes than those under or pursuant to the
agreement evidencing the Indebtedness so extended, renewed, refinanced or
replaced or are not more restrictive than those set forth in the Indenture; and
(d) any encumbrance or restriction created pursuant to an asset sale agreement,
stock sale agreement or similar instrument pursuant to which on Asset Sale
permitted under "-- Limitation on Sale of Assets" is to be consummated, so long
as such restriction or encumbrance shall be effective only for a period from
the execution and delivery of such agreement or instrument through a
termination date not later than 270 days after such execution and delivery.
(Section 1018)
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 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 the Company and (ii) may
be made in cash or property. (Section 1019)
Provision of Financial Statements. The Indenture provides that, 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 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 (i) transmit by mail to all
holders, as their names and addresses appear in the Note register, without cost
to such holders and (ii) file with the Trustee 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. (Section 1020)
Additional Covenants. The Indenture also contains covenants with respect
to the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency; (iii) arrangements regarding the handling
of money held in trust; (iv) maintenance of corporate existence; (v) payment
of taxes and other claims; (vi) maintenance of properties; and (vii)
maintenance of insurance.
CONSOLIDATION, MERGER, SALE OF ASSETS
The Company shall not, in a single transaction or a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially
all of its properties and assets to any Person or group of affiliated Persons,
or permit any of its Subsidiaries to enter into any such transaction or
transactions if such transaction or transactions, in the aggregate, would
result in a sale, assignment, conveyance, transfer, lease or disposition of all
or substantially all of the properties and assets of the Company and its
Subsidiaries on a Consolidated basis to any other Person or group of affiliated
Persons, unless at the time and after giving effect thereto: (i) either (1) the
Company shall be the continuing corporation or (2) the Person (if other than
the Company) formed by such consolidation or into which the Company is merged
or the Person which acquires by sale, assignment, conveyance, transfer, lease
or disposition of all or substantially all of the properties and assets of the
Company and its Subsidiaries on a Consolidated basis (the "Surviving Entity")
shall be a corporation duly organized and validly existing under the laws of
the United States of America, any
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state thereof or the District of Columbia and such Person assumes, by a
supplemental indenture in a form reasonably satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture, and the
Indenture shall remain in full force and effect; (ii) immediately before and
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Consolidated Net Worth of
the Company (or the Surviving Entity if the Company is not the continuing
obligor under the Indenture) is equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction; (iv) immediately
before and immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred on the first day of the
four-quarter period immediately prior to the consummation of such transaction
with the appropriate adjustments with respect to the transaction being included
in such pro forma calculation), the Company (or the Surviving Entity if the
Company is not the continuing obligor under the Indenture) could incur $1.00 of
additional Indebtedness under the provisions of "-- Certain Covenants --
Limitation on Indebtedness" (other than Permitted Indebtedness); (v) each
Guarantor, if any, unless it is the other party to the transactions described
above, shall have by supplemental indenture confirmed that its Guarantee shall
apply to such Person's obligations under the Indenture and the Notes; (vi) if
any of the property or assets of the Company or any of its Subsidiaries would
thereupon become subject to any Lien, the provisions of "-- Certain Covenants
- -- Limitation on Liens" are complied with; and (vii) the Company or the
Surviving Entity shall have delivered, or caused to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, lease or other transaction
and the supplemental indenture in respect thereto comply with the provisions of
the Indenture and that all conditions precedent provided for in the Indenture
relating to such transaction have been complied with.
Each Guarantor will not, and the Company will not permit a Guarantor to,
in a single transaction or series of related transactions merge or consolidate
with or into any other corporation (other than the Company or any other
Guarantor) or other entity, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets on a
Consolidated basis to any entity (other than the Company or any other
Guarantor) unless at the time and giving effect thereto: (i) either (1) such
Guarantor shall be the continuing corporation or (2) the entity (if other than
such Guarantor) formed by such consolidation or into which such Guarantor is
merged or the entity which acquires by sale, assignment, conveyance, transfer,
lease or disposition the properties and assets of such Guarantor shall be a
corporation duly organized and validly existing under the laws of the United
States, any state thereof or the District of Columbia and shall expressly
assume by a supplemental indenture, executed and delivered to the Trustee, in a
form reasonably satisfactory to the Trustee, all the obligations of such
Guarantor under the Notes and the Indenture; (ii) immediately before and
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iii) such Guarantor shall
have delivered to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, conveyance, transfer, lease
or disposition and such supplemental indenture comply with the Indenture, and
thereafter all obligations of the predecessor shall terminate. The provisions
of this paragraph shall not apply to any transaction (including an Asset Sale
made in accordance with "-- Certain Covenants -- Limitation on Sale of Assets")
with respect to any Guarantor if the Guarantee of such Guarantor is released in
connection with such transaction in accordance with paragraph (c) of
"-- Certain Covenants -- Limitation on Issuances of Guarantees of and Pledges
for Indebtedness." (Section 801)
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which the Company or any Guarantor is not the continuing corporation, the
successor Person formed or remaining shall succeed to, and be substituted for,
and may exercise every right and power of, the Company or such Guarantor, as
the case may be, and the Company or such Guarantor, as the case may be, would
be discharged from its obligations under the Indenture, the Notes or its
Guarantee, as the case may be. (Section 802)
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EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any Note
when it becomes due and payable, and such default shall continue for a
period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note at its Maturity (upon acceleration, optional
or mandatory redemption, required repurchase or otherwise);
(iii) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under the Indenture
(other than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with in clause (i) or (ii) or in
clause (b), (c) or (d) of this clause (iii)) and such default or breach
shall continue for a period of 30 days after written notice has been given,
by certified mail, (x) to the Company by the Trustee or (y) to the Company
and the Trustee by the holders of at least 25% in aggregate principal
amount of the outstanding Notes; (b) there shall be a default in the
performance or breach of the provisions described in "-- Consolidation,
Merger, Sale of Assets"; (c) the Company shall have failed to make or
consummate an Offer in accordance with the provisions of "-- Certain
Covenants -- Limitation on Sale of Assets"; or (d) the Company shall have
failed to make or consummate a Change of Control Offer in accordance with
the provisions of "-- Certain Covenants -- Purchase of Notes Upon a Change
of Control;"
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company, any Guarantor or any
Restricted Subsidiary then has outstanding Indebtedness in excess of
$5,000,000 in the aggregate and, if not already matured at its final
maturity in accordance with its terms, such Indebtedness shall have been
accelerated;
(v) any Guarantee shall for any reason cease to be, or be asserted in
writing by any Guarantor or the Company not to be, in full force and
effect, enforceable in accordance with its terms, except to the extent
contemplated by the Indenture and any such Guarantee;
(vi) one or more judgments, orders or decrees for the payment of money
in excess of $5,000,000, either individually or in the aggregate (net of
amounts covered by insurance, bond, surety or similar instrument) shall be
entered against the Company, any Guarantor or any Restricted Subsidiary or
any of their respective properties and shall not be discharged and either
(a) any creditor shall have commenced an enforcement proceeding upon such
judgment, order or decree or (b) there shall have been a period of 60
consecutive days during which a stay of enforcement of such judgment or
order, by reason of an appeal or otherwise, shall not be in effect;
(vii) any holder or holders of at least $5,000,000 in aggregate
principal amount of Indebtedness of the Company, any Guarantor or any
Restricted Subsidiary after a default under such Indebtedness shall notify
the Trustee of the intended sale or disposition of any assets of the
Company, any Guarantor or any Restricted Subsidiary that have been pledged
to or for the benefit of such holder or holders to secure such Indebtedness
or shall commence proceedings, or take any action (including by way of
set-off), to retain in satisfaction of such Indebtedness or to collect on,
seize, dispose of or apply in satisfaction of Indebtedness, assets of the
Company or any Restricted Subsidiary (including funds on deposit or held
pursuant to lock-box and other similar arrangements);
(viii) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Guarantor or any Restricted Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or (b) a decree or order
adjudging the Company, any Guarantor or any Restricted Subsidiary bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, any Guarantor or any
Restricted Subsidiary under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company, any Guarantor or
any Restricted 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
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(ix) (a) the Company, any Guarantor or any Restricted Subsidiary
commences a voluntary case or proceeding under any applicable Bankruptcy
Law or any other case or proceeding to be adjudicated bankrupt or
insolvent, (b) the Company, any Guarantor or any Restricted Subsidiary
consents to the entry of a decree or order for relief in respect of the
Company, any Guarantor or such Restricted 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, (c) the
Company, any Guarantor or any Restricted Subsidiary files a petition or
answer or consent seeking reorganization or relief under any applicable
federal or state law, (d) the Company, any Guarantor or any Restricted
Subsidiary (x) 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, any
Guarantor or such Restricted Subsidiary or of any substantial part of their
respective 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) the Company, any Guarantor or any Restricted Subsidiary
takes any corporate action in furtherance of any such actions in this
paragraph (ix). (Section 501)
If an Event of Default (other than as specified in clauses (viii) and (ix)
of the prior paragraph) shall occur and be continuing, the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes
outstanding may, and the Trustee at the request of such holders shall, declare
all unpaid principal of, premium, if any, and accrued interest on, all the
Notes 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 Notes); provided that so
long as the Bank Credit Agreement is in effect, such declaration shall not
become effective until the earlier of (a) five business days after receipt of
such notice of acceleration from the holders or the Trustee by the agent under
the Bank Credit Agreement or (b) acceleration of the Indebtedness under the
Bank Credit Agreement. Thereupon the Trustee may, at its discretion, proceed to
protect and enforce the rights of the holders of Notes by appropriate judicial
proceeding. If an Event of Default specified in clause (viii) or (ix) of the
prior paragraph occurs and is continuing, then all the Notes shall ipso facto
become and be immediately due and payable, in an amount equal to the principal
amount of the Notes, together with accrued and unpaid interest, if any, to the
date the Notes become due and payable, without any declaration or other act on
the part of the Trustee or any holder. The Trustee or, if notice of
acceleration is given by the holders of the Notes, the holders of the Notes
shall give notice to the agent under the Bank Credit Agreement of such
acceleration.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Notes outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration if (a)
the Company has paid or deposited with the Trustee a sum sufficient to pay (i)
all sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (ii) all overdue interest on all Notes, (iii) the principal of and
premium, if any, on any Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at a rate borne by the Notes
and (iv) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the Notes; and (b) all Events of Default,
other than the non-payment of principal of the Notes which have become due
solely by such declaration of acceleration, have been cured or waived. (Section
502)
The holders of not less than a majority in aggregate principal amount of
the Notes outstanding may on behalf of the holders of all the Notes waive any
past default under the Indenture and its consequences, except a default in the
payment of the principal of, premium, if any, or interest on any Note, or in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each Note outstanding. (Section
513)
The Company is also required to notify the Trustee within five business
days of the occurrence of any Default. (Section 501) The Company is required to
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 fiscal
year, a written statement as to compliance with the Indenture, including
whether or not any default has occurred. (Section 1021) The Trustee is under no
obligation to exercise any of the rights or powers
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vested in it by the Indenture at the request or direction of any of the holders
of the Notes unless such holders offer to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities which
might be incurred thereby. (Section 602)
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, to obtain payment
of claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions, provided that if it acquires any conflicting
interest it must eliminate such conflict upon the occurrence of an Event of
Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option, at any time, elect to have the obligations
of the Company, each of the Guarantors and any other obligor upon the Notes
discharged with respect to the outstanding Notes ("defeasance"). Such
defeasance means that the Company, each of the Guarantors and any other obligor
under the Indenture shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for (i) the rights of
holders of outstanding Notes to receive payments in respect of the principal
of, premium, if any, and interest on such Notes when such payments are due,
(ii) the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen
Notes, 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 Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and any Guarantor released with respect to certain
covenants that are described in the 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 Notes. 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
Notes. (Sections 401, 402 and 403)
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the 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 Trustee, to
pay and discharge the principal of, premium, if any, and interest on the
outstanding Notes on the Stated Maturity of such principal or installment of
principal or interest (or on any date after , 2002 (such date being
referred to as the "Defeasance Redemption Date"), if when exercising either
defeasance or covenant defeasance, the Company has delivered to the Trustee an
irrevocable notice to redeem all of the outstanding Notes on the Defeasance
Redemption Date); (ii) in the case of defeasance, the Company shall have
delivered to the Trustee an opinion of independent counsel in the United States
stating that (A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (B) since the date of the 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 Notes
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,
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
Notes 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 (vii) or (viii) under the first paragraph under
"-- Events of Default" are 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
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Trustee for the Notes to have a conflicting interest with respect to any
securities of the Company or any Guarantor; (vi) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a
Default under, the Indenture or any other material agreement or instrument to
which the Company or any Guarantor is a party or by which it is bound; (vii)
the Company shall have delivered to the Trustee an opinion of independent
counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior Indebtedness or Guarantor Senior Indebtedness,
including, without limitation, those arising under the Indenture and (B) 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) 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 Notes or any
Guarantee over the other creditors of the Company or any Guarantor with the
intent of defeating, hindering, delaying or defrauding creditors of the
Company, any Guarantor or others; (ix) 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 Notes on the date of such deposit or at any time
ending on the 91st day after the date of such deposit; and (x) 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
relating to either the defeasance or the covenant defeasance, as the case may
be, have been complied with. (Section 404)
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of Notes, as expressly provided
for in the Indenture) as to all outstanding Notes when (a) either (i) all the
Notes theretofore authenticated and delivered (except lost, stolen or destroyed
Notes which have been replaced or paid) have been delivered to the Trustee for
cancellation or (ii) all Notes not theretofore delivered to the Trustee for
cancellation (x) have become due and payable, or (y) will become due and
payable at their Stated Maturity within one year, or (z) are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company and the Company or any Guarantor has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, including principal of,
premium, if any, and accrued interest at such Stated Maturity or redemption
date; (b) the Company or any Guarantor has paid or caused to be paid all other
sums payable under the Indenture relating to the Notes by the Company or any
Guarantor; and (c) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that (i) all conditions precedent
under the Indenture relating to the satisfaction and discharge of the Indenture
relating to the Notes have been complied with and (ii) such satisfaction and
discharge will not result in a breach or violation of, or constitute a default
under, the Indenture relating to the Notes or any other material agreement or
instrument to which the Company or any Guarantor is a party or by which the
Company or any Guarantor is bound. (Section 1301)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture relating to the Notes may be
made by the Company, any Guarantor and the Trustee with the consent of the
holders of not less than a majority in aggregate principal amount of the
outstanding Notes; provided, however, that no such modification or amendment
may, without the consent of the holder of each outstanding Note affected
thereby: (i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption thereof, or change
the coin or currency in which the principal of any Note 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) (other than provisions
relating to the covenants set forth under "-- Certain Covenants -- Limitation
on Sale of Assets); (ii) amend, change or modify the obligation of the Company
to make and consummate a Change of Control Offer in the event of a Change of
Control in accordance with "-- Certain Covenants -- Purchase of Notes Upon a
Change of Control," including amending, changing or modifying any
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definitions with respect thereto; (iii) reduce the percentage in principal
amount of outstanding Notes, the consent of whose holders is required for any
supplemental indenture, or the consent of whose holders is required for any
waiver or compliance with certain provisions of the Indenture or certain
defaults or with respect to any Guarantee; (iv) modify any of the provisions
relating to supplemental indentures requiring the consent of holders or
relating to the waiver of past defaults or relating to the waiver of certain
covenants, except to increase the percentage of outstanding Notes required for
such actions or to provide that certain other provisions of the Indenture
relating to the Notes cannot be modified or waived without the consent of the
holder of each Note affected thereby; (v) except as otherwise permitted under
"-- Consolidation, Merger, Sale of Assets," consent to the assignment or
transfer by the Company or any Guarantor of any of its rights and obligations
under the Indenture; or (vi) amend or modify any of the provisions of the
Indenture relating to the subordination of the Notes or any Guarantee in any
manner adverse to the holders of the Notes or any Guarantee; provided further,
that no such modification or amendment may, without the consent of the holders
of 66 2/3% of the outstanding Notes affected thereby, amend, change or modify
the obligation of the Company to make and consummate an Offer with respect to
any Asset Sale or Asset Sales in accordance with "-- Certain Covenants --
Limitation on Sale of Assets" including amending, changing or modifying any
definitions with respect thereto. (Section 902)
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture relating to the Notes. (Section 1022)
GOVERNING LAW
The Indenture, the Notes and the Guarantees will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof.
PAYMENT AND PAYING AGENT
Payments in respect of the Notes shall be made to The Depository Trust
Company ("DTC"), which shall credit the relevant accounts at DTC on the
applicable payment dates or, if the Notes are not held by DTC, such payments
shall be made at the office or agency of the Paying Agent maintained for such
purpose, or at the option of the Company, by check mailed to the address of the
holder entitled thereto as such address shall appear on the Notes Register. The
Paying Agent shall initially be First Union National Bank. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to
the Company. In the event that First Union National Bank chooses no longer to
be the Paying Agent, the Company shall appoint a successor (which shall be a
bank or trust company) acceptable to the Company to act as Paying Agent.
BOOK-ENTRY SECURITIES; THE DEPOSITORY TRUST COMPANY; DELIVERY AND FORM
DTC will act as notes depositary for the Notes.
Except as described in the next paragraph, the Notes initially will be
represented by a Global Note. The Global Note 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 laws of certain jurisdictions require that certain purchasers 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 Note as represented by a global certificate.
DTC has informed the Company 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 com-
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puterized 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 Underwriters), 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.
Exchanges of Notes that are represented by a Global Note within the DTC
system must be made by or through Direct Participants, which will receive a
credit for the Notes on DTC's records. The ownership interest of each actual
owner of each Note ("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
Notes. Transfers of ownership interests in the Notes 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 Notes, except as described below.
DTC will have no knowledge of the actual Beneficial Owners of the Notes;
DTC's records will reflect only the identity of the Direct Participants to
whose accounts such Notes 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 Notes are
being redeemed, DTC will reduce the amount of the interest of each Direct
Participant in such Notes in accordance with its procedures.
Although voting with respect to the Notes is limited in those cases where
a vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Notes. Under its usual procedures, DTC would mail an Omnibus Proxy
to the Company 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 Notes are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Distribution payments on the Notes will be made by the Company 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 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 Company,
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
Note will not be entitled to receive physical delivery of Notes. Accordingly,
each Beneficial Owner must rely on the procedures of DTC to exercise any rights
under the Notes.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the Company.
Under such circumstances, in the event that a successor securities depositary
is not obtained, Certificated Securities representing the Notes will be printed
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and delivered. If an Event of Default occurs under the Indenture or if the
Company decides to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary), Certificated Securities representing
the Notes will be printed and delivered.
The Notes 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 Notes,
(ii) the Company so determines, or (iii) there 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 Notes
represented by such Global Note 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 the Company believe to be reliable. Neither the
Company 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.
REGISTRAR AND TRANSFER AGENT
First Union National Bank will act as registrar and transfer agent for the
Notes (the "Notes Registrar").
As described under "-- Book-Entry Securities; The Depository Trust
Company; Delivery and Form," so long as the Notes are in book-entry form,
registration of transfers and exchanges of Notes will be made through Direct
Participants and Indirect Participants in DTC. If physical certificates
representing the Notes are issued, registration of transfers and exchanges of
Notes will be effected without charge by or on behalf of the Company, but, in
the case of a transfer, upon payment (with the giving of such indemnity as the
Company may require) in respect of any tax or other governmental charges which
may be imposed in relation to it.
The Company will not be required to register or cause to be registered any
transfer of Notes during a period beginning 15 days prior to the mailing of
notice of redemption of Notes and ending on the day of such mailing.
CERTAIN DEFINITIONS
"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 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
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any Restricted Subsidiary; (ii) all or substantially all of the properties and
assets of any division or line of business of the Company or its Restricted
Subsidiaries; or (iii) any other properties or assets of the Company or any
Restricted 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 the provisions
described under "-- Consolidation, Merger, Sale of Assets," (B) that is by the
Company to any Wholly Owned Restricted Subsidiary, or by any Restricted
Subsidiary to the Company or any Wholly Owned Restricted Subsidiary in
accordance with the terms of the Indenture or (C) that aggregates not more than
$1,000,000 in gross proceeds.
"Asset Swap" means an Asset Sale by the Company 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 Indenture or reasonably related thereto.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to
the date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by
(ii) the sum of all such principal payments.
"Bank Credit Agreement" means the Third Amended and Restated Credit
Agreement, dated as of May 20, 1997, 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
as agent, as amended and as such agreement may be further 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 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 and
have been made in compliance with "-- Certain Covenants -- Limitation on
Indebtedness;" 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."
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, 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.
"Capital Lease Obligation" means any obligation of the Company and its
Restricted Subsidiaries on a Consolidated basis under any capital lease of real
or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"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 the Indenture 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.
"Company" means Sinclair Broadcast Group, Inc., a corporation incorporated
under the laws of the State of Maryland, until a successor Person shall have
become such pursuant to the applicable provisions of the Indenture, and
thereafter "Company" shall mean such successor Person.
"Consolidated Interest Expense" means, without duplication, for any
period, the sum of (a) the interest expense of the Company 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
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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 Restricted Subsidiaries, in each case as determined in accordance
with GAAP consistently applied.
"Consolidated Net Income (Loss)" means, for any period, the Consolidated
net income (or loss) of the Company 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 the Company 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 the Company or its Consolidated Restricted Subsidiaries by such other Person
during such period, (iii) net income (or loss) of any Person combined with the
Company 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 dispositions 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" means the Consolidated equity of the holders of
Equity Interests (excluding Disqualified Equity Interests) of the Company and
its Restricted Subsidiaries, as determined in accordance with GAAP consistently
applied.
"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 September 30, 1993 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 September 30, 1993 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 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 the Company or a
Wholly Owned Restricted Subsidiary of the Company) to (b) Operating Cash Flow
of the Company 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 was incurred, and the application of such proceeds occurred, at
the beginning of such four-quarter period; (ii) the incurrence, repayment or
retirement of any other Indebtedness by the Company and its Restricted
Subsidiaries since the first day of such four-quarter period as if such
Indebtedness was 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
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Company 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 Notes 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.
"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
the Company to Julian S. Smith and to Carolyn C. Smith pursuant to a stock
redemption agreement, dated June 19, 1990, among the Company, 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 Indenture.
"Guarantee" means the guarantee by any Guarantor of the Company's
Indenture Obligations pursuant to a guarantee given in accordance with the
Indenture.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
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.
"Guarantor" means the Subsidiaries listed as guarantors in the Indenture
or any other guarantor of the Indenture Obligations. The Guarantors currently
consist of all the Company's Subsidiaries other than Cresap Enterprises, Inc.,
KDSM, Inc., KDSM Licensee Inc. and the Trust.
"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 includ-
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ing, 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 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 the Company and its Restricted Subsidiaries shall not include
any Indebtedness of Unrestricted Subsidiaries so long as such Indebtedness is
non-recourse to the Company and the 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 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 the Indenture or under the Notes, including any Guarantor, 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 Indenture, the
Notes and the performance of all other obligations to the Trustee and the
holders under the Indenture and the Notes, according to the terms 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)
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.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into from time to time by one or more financial
institutions: interest rate protection agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements)
and any obligations in respect of any Hedging Agreements (as defined in the
Bank Credit Agreement).
"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.
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"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.
"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 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.
"Maturity," when used with respect to any Note, means the date on which
the principal of such Note becomes due and payable as provided in the Note or
as provided in the Indenture, whether at Stated Maturity, the offer date, or
the redemption date and whether by declaration of acceleration, Offer in
respect of excess proceeds, Change of Control, call for redemption or
otherwise.
"Minority Note" means the promissory note, dated December 26, 1986, made
by the Company to Frederick M. Himes, B. Stanley Resnick and Edward A.
Johnston, as representatives, pursuant to a stock purchase agreement, dated
December 22, 1986, among the Company, 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 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 the Company or any
Restricted Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, 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 "-- Certain Covenants -- Limitation on
Restricted Payments," 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 the Company or any
Restricted Subsidiary), 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" means, for any period, the Consolidated Net Income
(Loss) of the Company 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 (Loss), 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 (Loss), and any provision for taxes
utilized in computing the net losses under clause (a) hereof, plus (c)
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Consolidated Interest Expense of the Company 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 (Loss)
(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) (Loss).
"Pari Passu Indebtedness" means any Indebtedness of the Company or any
Guarantor that is pari passu in right of payment to the Notes or any
Guarantees, as the case may be.
"Permitted Investment" means (i) Investments in any Wholly Owned
Restricted Subsidiary; (ii) Indebtedness of the Company or a Restricted
Subsidiary described under clauses (vi) and (vii) of the definition of
"Permitted Indebtedness" set forth in "-- Certain Covenants -- Limitation on
Indebtedness"; (iii) Temporary Cash Investments; (iv) Investments acquired by
the Company or any Restricted Subsidiary in connection with an Asset Sale
permitted under Section 1013 to the extent such Investments are non-cash
proceeds as permitted under such covenant; (v) guarantees of Indebtedness
otherwise permitted by the Indenture; (vi) Investments in existence on the date
of this Indenture; (vii) loans up to an aggregate of $1,000,000 outstanding at
any 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 Securities; (ix) a Guarantee by any
Guarantor and any other guarantee given by a Guarantor of any Indebtedness of
the Company in accordance with this Indenture; (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 that do not exceed $5,000,000 at any time outstanding.
"Permitted Subsidiary Indebtedness" means:
(i) Indebtedness of any Guarantor under Capital Lease Obligations
incurred in the ordinary course of business; and
(ii) Indebtedness of any Guarantor (a) issued to finance or refinance
the purchase or construction of any assets of such Guarantor or (b) secured
by a Lien on any assets of such Guarantor 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 Interests 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.
"Qualified Equity Interests" of any Person means any and all Equity
Interests of such Person other than Disqualified Equity Interests.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which the Company or a Restricted Subsidiary
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.
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"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.
"Subordinated Indebtedness" means Indebtedness of the Company or any
Guarantor subordinated in right of payment to the Notes or any Guarantee, 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, by the
Company or by one or more other Subsidiaries, or by the Company 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 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 ("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 Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (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 violate the
provisions of the "Certain Covenants -- Limitation on Unrestricted
Subsidiaries" covenant. Any such designation by the Board of Directors of the
Company 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 the Company 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 the "Certain
Covenants -- Limitation on Indebtedness" covenant. Cresap Enterprises, Inc.,
KDSM, Inc., KDSM Licensee, Inc. and the Trust are Unrestricted Subsidiaries.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary
means Indebtedness of such Unrestricted Subsidiary (i) as to which neither the
Company nor any Restricted Subsidiary is directly or indirectly liable (by
virtue of the Company 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 the Company 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) the
Company 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 the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
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"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" means a Restricted Subsidiary all the
Equity Interest of which is owned by the Company or another Wholly Owned
Restricted Subsidiary. The Wholly Owned Restricted Subsidiaries of the Company
currently consist of all the Company's Subsidiaries other than Cresap
Enterprises, Inc., KDSM, Inc. and KDSM Licensee, Inc.
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DESCRIPTION OF INDEBTEDNESS
Capitalized terms used herein without definition have the meaning given
them in the Bank Credit Agreement or the Existing Indentures (as defined), as
the case may be. 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 following sets forth the material terms of indebtedness of the
Company:
BANK CREDIT AGREEMENT
On May 20, 1997, the Company 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, a copy of which is incorporated by reference as an exhibit to
the Registration Statement of which this Prospectus Supplement is a part.
The Bank Credit Agreement is comprised of two components, consisting of
(i) the $675 million Revolving Credit Facility and (ii) the $325 million term
loan (the "Tranche A Term Loan"). An additional term loan (the "Tranche C Term
Loan" and, together with the Tranche A Term Loan, the "Term Loans") in the
amount of $400 million is available to the Company under the Bank Credit
Agreement pursuant to the Incremental Facility (as defined) under certain
circumstances described below. The Company has borrowed no funds with respect
to the Tranche C Term Loan. The commitment under the Revolving Credit Facility
is subject to mandatory quarterly reductions to the following percentages of
the initial amount: 97.7% at December 31, 1997, 93.3% at December 31, 1998,
88.6% at December 31, 1999, 76.6% at December 31, 2000, and 58.1% at December
31, 2004. The Tranche A Term Loan is required to be repaid by the Company in
equal quarterly installments beginning September 30, 1997 with the quarterly
payments escalating annually through the final maturity date of December 31,
2004.
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 to pay
an amount equal to (i) 100% of the net proceeds in excess of $5 million from
the sale of assets (other than in the ordinary course of business) not used
within 270 days unless the Company has a contract to reinvest the proceeds
within 90 days of the 270 days, (ii) insurance recoveries and condemnation
proceeds not used for permitted uses within 270 days, (iii) 80% of Equity
Issuances, net of prior approved uses and certain other exclusions not used
within 270 days unless the Company has a contract to reinvest the proceeds
within 90 days of the 270 days, and (iv) 50% of Excess Cash Flow so long as
Total Debt/Adjusted EBITDA is greater than or equal to 5.0x, 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.
In addition to the Revolving Credit Facility and the Tranche A Term Loan,
the Bank Credit Agreement provides that the Banks may, but are not obligated
to, loan the Company up to an additional $400 million (the "Incremental
Facility") at any time prior to September 29, 1998 pursuant to the Tranche C
Term Loan. The Tranche C Term Loan, if agreed to by the Agent and funded by 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, 1998, with the quarterly payment
escalating annually through the final maturity date of December 31, 2004.
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.,
Cresap Enterprises, Inc. and the Trust. The subsidiaries of the Company (other
than KDSM, Inc., KDSM Licensee, Inc., Cresap Enterprises, Inc. and the Trust)
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
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<PAGE>
than Cresap Enterprises, Inc., KDSM, Inc., KDSM Licensee, Inc. and the Trust)
have pledged, to the extent permitted by law, all of their assets to the Banks
and Gerstell Development Corporation, Keyser Investment Group, Inc. and
Cunningham Communications have pledged certain real property 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 separate
single purpose entities 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 .50%
to 1.875% for the Revolving Credit Facility and for the Tranche A Term Loan, or
(ii) the Base Rate, which equals the higher of the Federal Funds Rate plus 1/2
of 1% or the Prime Rate of Chase, plus a margin of zero to .625% for the
Revolving Credit Facility and the Tranche A Term Loan. The Company must maintain
interest rate hedging arrangements or instruments for at least 60% of the
principal amount of the facilities until May 20, 1999.
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; and (iv) enter into certain arrangements with or
investments in affiliates. 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 include: (i) Fixed Charges Ratio of no less
than 1.05 to 1 at any time; (ii) Interest Coverage Ratio of no less than 1.8 to
1 from the Restatement Effective Date to December 30, 1998 and increasing each
fiscal year to 2.20 to 1 from December 31, 2000 and thereafter; and (iii) a
Senior Indebtedness Ratio of no greater than 5.0x from the Restatement Effective
Date declining to 4.0x by December 31, 2001 and at all times thereafter and (iv)
a Total Indebtedness Ratio of no greater than 6.75 to 1 from the Restatement
Effective Date declining to 6.50 to 1 on December 31, 1997 and thereafter
declining over time to 4.00 to 1 by December 31, 2001 and at all times
thereafter.
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; (iii) a default by the Company or the subsidiaries in the
performance of its obligations under the Bank Credit Agreement or certain
related security documents; (iv) certain events of insolvency or bankruptcy, (v)
the rendering of certain money judgments against the Company or its
subsidiaries; (vi) the incurrence of certain liabilities to certain plans
governed by the Employee Retirement Income Security Act of 1974; (vii) a change
of control or ownership of the Company or its subsidiaries; (viii) the security
documents being terminated and ceasing to be in full force and effect; (ix) 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); (x) any LMA or
options to acquire License Assets being terminated for any reason whatsoever;
(xi) any amendment, modification, supplement or waiver of the provisions of the
Indenture without the prior written consent of the majority lenders; and (xii) a
payment default on any other indebtedness of the Company if the principal amount
of such indebtedness exceeds $5 million.
EXISTING NOTES UNDER EXISTING INDENTURES
The Company has issued and outstanding indebtedness pursuant to the 1993
Notes, the 10% Senior Subordinated Notes due 2005 (the "1995 Notes") and the 9%
Senior Subordinated Notes due 2007 (the "1997 Notes," and, together with the
1993 Notes and the 1995 Notes, the "Existing Notes"). The Existing
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Notes were issued under Indentures dated December 9, 1993 (as amended, modified
or supplemented from time to time the "1993 Indenture"), August 28, 1995 (as
amended, modified or supplemented from time to time, the "1995 Indenture") and
July 2, 1997 (as amended, modified or supplemented from time to time, the "1997
Indenture" and together with the 1993 Indenture and the 1995 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., KDSM Licensee, Inc. and the Trust.
The 1993 Notes mature on December 15, 2003, the 1995 Notes mature on
September 30, 2005 and the 1997 Notes mature on July 15, 2007, 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, the 1995
Indenture limited the aggregate principal amount of the 1995 Notes to $300.0
million and the 1997 Indenture limited the aggregate principal amount of the
1997 Notes to $200.0 million. The 1993 Notes bear interest at the rate of 10%
per annum payable semi-annually on June 15 and December 15 of each year, the
1995 Notes bear interest at a rate of 10% per annum payable semi-annually on
September 30 and March 30 of each year and the 1997 Notes bear interest at a
rate of 9% per annum payable semi-annually on January 15 and July 15 of each
year.
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 and $200.0 million of the 1997 Notes on July 2, 1997. As of the date
hereof, $300.0 million of the 1995 Notes remain outstanding and $200.0 million
of the 1997 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. 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 1997
Notes are redeemable in whole or in part prior to maturity at the option of the
Company on or after July 15, 2002 at certain redemption prices specified in the
1997 Indenture.
The Company has commenced the Tender Offer and related consent solicitation
for all of the 1993 Notes. See "Summary -- Recent Developments -- The Tender
Offer."
The Existing Notes are general unsecured obligations of the Company and
subordinated in right of payment to all Senior Indebtedness (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. A Change
of Control will also result in an event of default under the Bank Credit
Agreement and could result in an acceleration of the indebtedness under the Bank
Credit Agreement. See "-- Bank Credit Agreement." In addition, the Company will
be obligated to offer to repurchase Existing Notes at 100% of their principal
amount plus accrued interest through the date of repurchase in the event of
certain asset sales.
The Existing Indentures include covenants that impose certain limitations
on the ability of the Company and its Restricted 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 Company's
Subsidiaries 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. See
"Risk Factors -- Restrictions Imposed by Terms of Indebtedness" in the
accompanying Prospectus.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement (the "Underwriting Agreement"), each of the underwriters named below
(the "Underwriters"), has agreed, severally and not jointly, to purchase from
the Company the principal amount of Notes set forth opposite the name of such
Underwriter below:
PRINCIPAL
AMOUNT
UNDERWRITERS OF NOTES
------------------------------------ -------------
Salomon Brothers Inc ............ $
Chase Securities Inc. ............ $
Total ........................... $150,000,000
============
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes offered hereby are
subject to the approval of certain legal matters by counsel and to certain other
conditions. The Underwriters will be obligated to take and pay for all of the
Notes offered hereby if any of such Notes are purchased.
The Underwriters initially propose to offer part of the Notes offered
hereby directly to the public at the public offering price set forth on the
cover page of this Prospectus Supplement and part of the Notes offered hereby to
certain dealers at a price which represents a concession not in excess of % of
the principal amount per Note under the price to the public. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of % of the
principal amount per Note to certain other dealers. After the Offering, the
public offering price and such concessions may be changed by the Underwriters.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
In the Underwriting Agreement, subject to the conditions thereof, the
Company and the Guarantors have agreed that for a period of 150 days after the
date of this Prospectus Supplement, they will not, without the prior consent of
Salomon Brothers Inc, on behalf of the Underwriters, issue, offer to sell, sell,
grant any option for the sale of, or otherwise dispose of any debt securities
(other than any debt under the Bank Credit Agreement), other than the Notes.
In connection with this Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Notes. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M, pursuant to which such persons may bid for or purchase
Notes for the purpose of stabilizing their market price. The Underwriters also
may create a short position for the account of the Underwriters by selling more
Notes in connection with the Offering than they are committed to purchase from
the Company, and in such case may purchase Notes in the open market following
completion of the Offering to cover such short position. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Notes at a level above that which might otherwise prevail in the open market.
None of the transactions described in this paragraph is required, and, if they
are undertaken, they may be discontinued at any time.
Chase Securities Inc. is an affiliate of The Chase Manhattan Bank which is
agent bank and a lender to the Company under the Bank Credit Agreement. The
Chase Manhattan Bank will receive its proportionate share of any repayment by
the Company of amounts outstanding under the Bank Credit Agreement from the
proceeds of the sale of the Notes.
Salomon Brothers Inc, Chase Securities Inc. and their respective affiliates
have from time to time performed various investment banking and other financing
services for the Company and its affiliates and have received customary fees in
respect of such services.
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The Company has been advised by the Underwriters that they currently intend
to make a market in the Notes. However, such entities are not obligated to do
so, and any market making may be discontinued at any time without any notice.
There can be no assurance as to whether an active trading market for the Notes
will develop.
LEGAL MATTERS
Certain matters will be passed upon for the Underwriters by Fried, Frank,
Harris, Shriver & Jacobson (a partnership including professional corporations),
New York, New York. See "Legal Matters" in the accompanying Prospectus for
information regarding legal matters to be passed upon for the Company.
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PROSPECTUS
$1,000,000,000
[SBG
Sinclair Broadcast Group
Logo]
CLASS A COMMON STOCK
DEBT SECURITIES
PREFERRED STOCK
-----------------
Sinclair Broadcast Group, Inc. ("Sinclair " or the "Company") may from time
to time offer, together or separately, its (i) Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), (ii) debt securities (the "Debt
Securities") which may be either senior debt securities (the "Senior Debt
Securities") or subordinated debt securities (the "Subordinated Debt
Securities") and (iii) shares of its preferred stock, par value $.01 per share
(the "Preferred Stock"), in amounts, at prices and on terms to be determined at
the time of the offering. The Class A Common Stock, the Debt Securities and the
Preferred Stock are collectively called the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will be limited to $1,000,000,000 in aggregate
initial public offering price. Certain specific terms of the particular
Securities in respect of which this Prospectus is being delivered will be set
forth in the Prospectus Supplement, including, where applicable, (i) in the case
of Debt Securities, the specific title, aggregate principal amount, the
denomination, maturity, premium, if any, the interest, if any (which may be at a
fixed or variable rate), the time and method of calculating payment of interest,
if any, the place or places where principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, any terms of
redemption at the option of the Company or the holder, any sinking fund
provisions, terms for any conversion into Class A Common Stock, guarantees, if
any, the initial public offering price, listing (if any) on a securities
exchange or quotation (if any) on an automated quotation system, acceleration,
if any, and other terms and (ii) in the case of Preferred Stock, the specific
title, the aggregate number of shares offered, any dividend (including the
method of calculating payment of dividends), liquidation, redemption, voting and
other rights, any terms for any conversion or exchange into Class A Common Stock
or Debt Securities, the initial public offering price, listing (if any) on a
securities exchange or quotation (if any) on an automated quotation system and
other terms. If so specified in the applicable Prospectus Supplement, Debt
Securities of a series may be issued in whole or in part in the form of one or
more temporary or permanent global securities.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt
Securities, when issued, will be subordinated in right of payment to all Senior
Indebtedness (as defined in the applicable Prospectus Supplement) of the
Company. Debt Securities may be guaranteed to the extent specified in the
applicable Prospectus Supplement (the "Guarantees") by certain subsidiaries of
the Company specified in the Prospectus Supplement (the "Guarantors").
The Securities will be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. If agents of the Company or any dealers or underwriters are involved in
the sale of the Securities in respect of which this Prospectus is being
delivered, the names of such agents, dealers or underwriters and any applicable
commissions or discounts will be set forth in or may be calculated from the
Prospectus Supplement with respect to such Securities. See "Plan of
Distribution" for possible indemnification arrangements with agents, dealers and
underwriters.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement relating to such Securities. Any
statement contained in this Prospectus will be deemed to be modified or
superseded by any inconsistent statement contained in an accompanying Prospectus
Supplement.
The Prospectus Supplement will contain information concerning certain
United States federal income tax considerations, if applicable to the Securities
offered.
-----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURI-
TIES 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 December 5, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "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: 75 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
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.
The Company has filed a Registration Statement on Form S-3 (together with
all amendments thereto, the "Registration Statement") with the Commission in
Washington, D.C., in accordance with the provisions of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus and any accompanying Prospectus Supplement do not contain all of the
information contained in the Registration Statement and the exhibits and
schedules thereto. Statements contained herein and in any accompanying
Prospectus Supplement concerning the provisions of any document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission are
not necessarily complete, and in each instance reference is made to the copy of
the document so filed. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits thereto may be inspected
without charge at the offices of the Commission or on EDGAR or copies thereof
may be obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to Sections 13(a) and 15(d) of the Exchange Act are incorporated hereby by
reference:
(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;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997; and
(c) 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, August 26, 1997, August 29, 1997,
October 8, 1997 and December 5, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to termination of the offering of the Securities offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference in this Prospectus will be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any subsequently filed document which also is or is deemed to be incorporated
by reference herein or in any accompanying Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or superseded will not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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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.
A copy of any and all of the documents incorporated herein by reference
(other than exhibits unless such exhibits are specifically incorporated by
reference into any such document) will be provided without charge to any person
to whom a copy of this Prospectus is delivered, upon written or oral request.
Requests should be directed to:
Patrick J. Talamantes
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF SECURITIES
OFFERED HEREBY TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
IN CONNECTION WITH THE OFFERING OF SECURITIES PURSUANT TO THIS PROSPECTUS,
THE UNDERWRITERS AND SELLING GROUP MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE SECURITIES ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH
RULE 103 OF REGULATION M UNDER THE EXCHANGE ACT. SEE "PLAN OF DISTRIBUTION."
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Unless the context otherwise indicates, as used herein, the "Company" or
"Sinclair" means Sinclair Broadcast Group, Inc. and its direct and indirect
wholly-owned subsidiaries (collectively, the "Subsidiaries").
THE COMPANY
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 pursuant to Local Marketing Agreements (LMAs) to 29
television stations, has pending acquisitions of 11 additional television
stations, and has pending acquisitions of the rights to provide programming to
five additional television stations. The Company believes it is also one of the
top ten radio groups in the United States, when measured by the total number of
radio stations owned or programmed pursuant to LMAs by the Company. The Company
owns or programs pursuant to LMAs 30 radio stations, two of which the Company
has options to acquire, has pending acquisitions of 37 radio stations and has
options to acquire two additional radio stations. The Company has entered into
an agreement to sell or exchange four of the radio stations it currently owns or
programs and the prospective buyer of three of the radio stations currently
programs such stations pursuant to an LMA.
The Company is a Maryland corporation 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.
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, prospective investors should review carefully the following
risks concerning the Company, the Securities 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 September 30, 1997, the Company had
outstanding long-term indebtedness (including current installments) of
approximately $939.2 million. In addition, Sinclair Capital, a subsidiary trust
of the Company (the "Trust"), had issued and outstanding $200 million aggregate
liquidation amount of 11 5/8% High Yield Trust Offered Preferred Securities (the
"Preferred Securities"), which are ultimately backed by $206.2 million
liquidation amount of Series C Preferred Stock, par value $.01 per share, of the
Company (the "Series C Preferred Stock") each of which must be redeemed in 2009.
The Company may borrow additional amounts under a bank credit facility governed
by an Amended and Restated Credit Agreement dated as of May 20, 1997 with The
Chase Manhattan Bank, as agent (as amended from time to time, the "Bank Credit
Agreement"), under which $316.1 million was outstanding as of September 30, 1997
and expects to do so to finance its pending acquisitions, including, without
limitation, the acquisition of assets (the "Heritage Acquisition") from certain
subsidiaries of Heritage Media Corporation, Inc. (collectively, "Heritage"), the
acquisition of 100% of the stock of Lakeland Group Television, Inc. and the
acquisition, directly or indirectly, of all of the equity interests of Max Media
Properties, L.L.C. The Company also had outstanding 1,085,983 shares of its
Series B Convertible Preferred Stock, par value $.01 per share (the "Series B
Preferred Stock") with an aggregate liquidation preference of $108.6 million as
of October 1, 1997 and 3,450,000 shares of Series D Convertible Exchangeable
Preferred Stock, par value $.01 per share (the "Series D Convertible
Exchangeable Preferred Stock") with an aggregate liquidation preference of
approximately $172.5 million, which is exchangeable at the option of the Company
in certain circumstances for subordinated debentures of the Company with an
aggregate principal amount of approximately $172.5 million. 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 and its Subsidiaries have and will continue to have significant
payment obligations relating to the Bank Credit Agreement, the 10% Senior
Subordinated Notes due 2003 (the "1993 Notes"), the 10% Senior Subordinated
Notes due 2005 (the "1995 Notes"), the 9% Senior Subordinated Notes due 2007
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(the "1997 Notes," and, together with the 1993 Notes and the 1995 Notes, the
"Existing Notes"), and the Preferred Securities, and a significant amount of the
Company's cash flow will be required to service these obligations. In addition,
the Company will be required to pay dividends on the Series D Convertible
Exchangeable Preferred Stock, and may be required to pay dividends on the Series
B Convertible Preferred Stock in certain circumstances. See "Description of
Capital Stock -- Existing Preferred Stock." 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 acquisitions completed by the Company
in 1996, the issuance of the Preferred Securities, the issuance of the 1997
Notes, the Heritage Acquisition, and the Company's issuance in September 1997 of
4,345,000 shares (the "Common Stock Offering") of Class A Common Stock, and
3,450,000 shares of Series D Convertible Exchangeable Preferred Stock (the
"Preferred Stock Offering"), as though each occurred on January 1, 1996, and the
use of the net proceeds therefrom, the interest expense and subsidiary trust
minority interest expense would have been $162.6 million. The weighted average
interest rates on the Company's indebtedness under the Bank Credit Agreement
during the year ended December 31, 1996 was 8.08%.
The $675 million revolving credit facility available to the Company under
the Bank Credit Agreement is subject to reductions (beginning September 30,
1997), and will mature on the last business day of December 2004. Payment of
portions of the $325 million term loan under the Bank Credit Agreement began on
September 30, 1997 and the term loan must be fully repaid by December 31, 2004.
The 1993 Notes mature in 2003, the 1995 Notes mature in 2005 and the 1997 Notes
mature in 2007. The Series C Preferred Stock must be redeemed in 2009. Required
repayment of indebtedness of the Company totaling approximately $939.2 million
will occur at various dates through July 15, 2007.
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 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 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.
COVENANT RESTRICTIONS ON DIVIDENDS AND REDEMPTION
Certain covenants under the indentures relating to the Existing Notes (the
"Existing Indentures"), the Bank Credit Agreement and the Articles Supplementary
relating to the Series C Preferred Stock restrict the amount of dividends and
redemptions that may be declared and paid by the Company on its capital stock,
which will include Preferred Stock offered pursuant to this Prospectus unless
otherwise provided in the applicable Prospectus Supplement. Although the Company
presently believes it will be able to pay dividends on any Preferred Stock
offered hereunder as required, there can be no assurance that the Company will
be permitted under such restrictions to declare dividends throughout the term of
the Preferred Stock. The Company may make other restricted payments or the
Company's consolidated operating performance may decline, either of which could
limit the Company's ability to declare divi-
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<PAGE>
dends. In addition, under the terms of the Bank Credit Agreement, the Company
may not be able to pay full cash dividends on Preferred Stock throughout the
term of any Preferred Stock unless the Company's Total Indebtedness Ratio (as
defined in the Bank Credit Agreement) improves from the Company's pro forma 1996
Total Indebtedness Ratio. The Company must also satisfy other financial
covenants to pay cash dividends under the Bank Credit Agreement.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Existing Indentures and the Articles Supplementary relating to the
Series C Preferred Stock 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. In addition, any Debt Securities may have other and
more restrictive covenants. 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 and/or Debt Securities. In the event of a default
under the Bank Credit Agreement, the Existing Indentures or any Debt Securities,
the lenders and the noteholders could seek to declare all amounts outstanding
under the Bank Credit Agreement, the Existing Notes or any Debt Securities,
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 including Debt Securities. Substantially all
of the assets of the Company and its Subsidiaries (other than the assets of
KDSM, Inc. which ultimately back up the Preferred Securities) 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 mortgages on certain real property assets of certain non-Company
entities (the "Stockholder Affiliates") owned and controlled by the Company's
current majority stockholders (David D. Smith, Frederick G. Smith, J. Duncan
Smith and Robert E. Smith, collectively, 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.
SUBORDINATION OF THE SUBORDINATED DEBT SECURITIES AND THE RELATED GUARANTEES;
ASSET ENCUMBRANCES
The payment of principal of, premium, if any, and interest on the
Subordinated Debt Securities will be subordinated to the prior payment in full
of Senior Indebtedness (as defined in the applicable Prospectus Supplement) of
the Company, which, unless specified otherwise in the applicable Prospectus
Supplement, will include, among other things, all indebtedness under the Bank
Credit Agreement in-
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<PAGE>
cluding obligations under interest rate agreements related thereto (the "Bank
Interest Rate Agreements"). Therefore, in the event of the liquidation,
dissolution, reorganization, or any similar proceeding regarding the Company,
the assets of the Company will be available to pay obligations on the
Subordinated Debt Securities only after Senior Indebtedness has been paid in
full in cash or cash equivalents or in any other form acceptable to the holders
of Senior Indebtedness, and there may not be sufficient assets to pay amounts
due on all or any of the Subordinated Debt Securities. In addition, the Company
may not pay principal of, premium, if any, interest on or any other amounts
owing in respect of the Subordinated Debt Securities, make any deposit pursuant
to defeasance provisions or purchase, redeem or otherwise retire the
Subordinated Debt Securities, if any Designated Senior Indebtedness (as defined
in the Supplemental Indenture relating to Subordinated Debt Securities) is not
paid when due or any other default on Designated Senior Indebtedness occurs and
the maturity of such indebtedness is accelerated in accordance with its terms
unless, in either case, such default has been cured or waived, any such
acceleration has been rescinded or such indebtedness has been repaid in full.
Moreover, under certain circumstances, if any non-payment default exists with
respect to Designated Senior Indebtedness, the Company may not make any payments
on the Subordinated Debt Securities for a specified time, unless such default is
cured or waived, any acceleration of such indebtedness has been rescinded or
such indebtedness has been repaid in full. See "Description of Debt Securities
- -- Subordination." Unless otherwise specified in the applicable Prospectus
Supplement, the Company's and the Subsidiaries' ability to incur additional
indebtedness will also be restricted under the indenture relating to the
Subordinated Debt Securities.
If Subordinated Debt Securities are guaranteed (the "Guarantees") by all or
some of the Company's Subsidiaries (the "Guarantors"), unless otherwise
specified in the applicable Prospectus Supplement, the Guarantees by the
Guarantors will be subordinated in right of payment to the guarantees by the
Guarantors of the Company's obligations under the Bank Credit Agreement
including, but not limited to the obligations under any Bank Interest Rate
Agreement related thereto.
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will not be secured by any of the Company's assets. The
obligations of the Company under the Bank Credit Agreement including, but not
limited to any Bank Interest Rate Agreement, however, are secured, to the extent
permitted by law, by a first priority security interest in substantially all of
the Company's assets, including the assets of the substantially all of the
Company's Subsidiaries. Moreover, the Company's obligations under certain other
indebtedness (the "Founders' Notes") are secured on a second priority basis by
substantially all of the Company's assets, including the assets of substantially
all of the Company's Subsidiaries. If the Company becomes insolvent or is
liquidated, or if payment under the Bank Credit Agreement, any Bank Interest
Rate Agreement or the Founders' Notes is accelerated, the lenders under the Bank
Credit Agreement, any Bank Interest Rate Agreement or the holders of the
Founders' Notes would be entitled to exercise the remedies available to a
secured lender under applicable law and pursuant to instruments governing such
indebtedness. Accordingly, such lenders will have a prior claim on the Company's
assets. In any such event, because the Debt Securities will not be secured by
any of the Company's assets, it is possible that there would be no assets
remaining from which claims of the holders of the Debt Securities could be
satisfied or, if any such assets remained, such assets might be insufficient to
satisfy such claims fully. See "Description of Debt Securities" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," and Notes to the Consolidated
Financial Statements in the filings incorporated by reference herein. In
addition, KDSM, Inc.'s 11 5/8% Senior Debentures due 2009 (the "KDSM Senior
Debentures"), $206.2 million principal amount of which is outstanding, are
secured by a first priority security interest in the Series C Preferred Stock.
DEPENDENCE UPON OPERATIONS OF SUBSIDIARIES; POSSIBLE INVALIDITY OF GUARANTEES
The Debt Securities will be the obligations of the Company. Substantially
all of the Company's operating assets are held by its Subsidiaries and
substantially all of its income before provision or benefit for income taxes was
derived from operations of its Subsidiaries. Therefore, the Company's ability to
make interest and principal payments when due to holders of the Debt Securities
is dependent, in part, upon the receipt of sufficient funds from its
Subsidiaries.
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To the extent that a court were to find that: (i) any Guarantee of the Debt
Securities was incurred by a Guarantor with intent to hinder, delay or defraud
any present or future creditor or the Guarantor contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in part of
others; or (ii) such Guarantor did not receive fair consideration or reasonably
equivalent value for issuing its Guarantee and such Guarantor: (a) was
insolvent; (b) was rendered insolvent by reason of the issuance of such
Guarantee; (c) was engaged or about to engage in a business or transaction for
which the remaining assets of such Guarantor constituted unreasonably small
capital to carry on its business; or (d) intended to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they matured, the
court could avoid or subordinate such Guarantee in favor of the Guarantor's
other creditors. Among other things, a legal challenge of a Guarantee on
fraudulent conveyance grounds may focus on the benefits, if any, realized by the
Guarantor as a result of the issuance by the Company of the Debt Securities. To
the extent any Guarantee were to be avoided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the Debt Securities would cease
to have any claim in respect of such Guarantor and would be creditors solely of
the Company and any Guarantor whose Guarantee was not avoided or held
unenforceable. In such event, the claims of the holders of the Debt Securities
against the issuer of an invalid Guarantee would be subject to the prior payment
of all liabilities of such Guarantor. There can be no assurance that, after
providing for all prior claims, there would be sufficient assets to satisfy the
claims of the holders of the Debt Securities relating to any voided Guarantee.
POTENTIAL RELEASE OF GUARANTEES
Unless otherwise provided in the applicable Prospectus Supplement, any
Guarantee of a Guarantor, if granted, may be released at any time upon any sale,
exchange or transfer by the Company of the stock of such Guarantor or
substantially all the assets of such Guarantor to a non-affiliate. Unless
otherwise provided in the applicable Prospectus Supplement, under the
Indentures, the net cash proceeds of any Asset Sale (as defined in the
applicable Prospectus Supplement) will be required to be applied to the
repayment of any Senior Indebtedness or to the purchase of properties and assets
for use in the Company's businesses existing on the date of the Indenture or
reasonably related thereto. Unless otherwise provided in the applicable
Prospectus Supplement, any Guarantee of any of the Company's subsidiaries may
also be released at such time as such subsidiary no longer guarantees any other
debt of the Company.
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 regulations of the Federal Communications Commission (the "FCC"), 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.
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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 television
stations WRDC in Raleigh/Durham, WVTV in Milwaukee, WNUV in Baltimore, WABM in
Birmingham, KRRT in San Antonio, and WFBC in Asheville, North
Carolina/Greenville/Spartanburg, South Carolina. The Company has also agreed to
sell the assets essential for broadcasting a television signal in compliance
with regulatory guidelines ("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
Acquisition Strategy" in Sinclair's Form 8-K dated October 8, 1997, which is
incorporated by reference herein. The FCC has approved this transaction.
However, 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
Broadcasting, L.P. ("River City"), from which the Company purchased certain
assets in 1996 (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
an LMA relating to stations for which River City continues to own License
Assets. See "Business -- Broadcasting Acquisition Strategy" in Sinclair's Form
8-K dated October 8, 1997, which is incorporated by reference herein. 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 Articles
Supplementary relating to the Series C Preferred Stock provide (and the Debt
Securities may 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 (and the Debt Securities may 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 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
Company's Class B Common Stock, par value $.01 per share (the "Class B Common
Stock" and together with the Class A Common Stock, the "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 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
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 Controlling Stockholders own in the aggregate approximately 60% of the
outstanding voting capital stock (including the Series B Preferred Stock) of the
Company and control over 90% of all
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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 of Sinclair. 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 the Series B
Preferred Stock). See "Management -- Employment Agreements" in Sinclair's Form
8-K dated October 8, 1997 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 the 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. In addition, the Company has the right to issue
additional shares of preferred stock the terms of which could make it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company and accordingly may be used as an anti-takeover device.
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 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 Form 8-K dated
October 8, 1997. 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 is Chief Executive Officer of River City and devotes a
substantial amount of his business time and energies to those services. 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 designated market area ("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. These
events have not occurred as of the date of this Prospectus and, accordingly, Mr.
Baker may be able to terminate his employment
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agreement at any time. If Mr. Baker's employment agreement is terminated under
certain specified circumstances, 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, North Carolina/
Greenville/Spartanburg, South Carolina market or (ii) all of the Company's radio
operations, either of 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 and 1997, 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 29 and increased the
number of radio stations owned or provided programming services from none to 30
radio stations. In addition, as of the date of this Prospectus, the Company has
entered into agreements to acquire 11 television and 37 radio stations and the
right to provide programming services to five television stations. The Company
has options to acquire two additional 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, the Heritage 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" in Sinclair's Form 8-K dated October 8, 1997, which is
incorporated by reference herein. 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 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 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 materially
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 one 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 (without giving effect to the Heritage Acquisition) was from
Fox-affiliated stations. WVTV, a station to which the Company provides pro-
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gramming 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, WTTO and WDBB are now affiliates of The WB
Television Network ("WB"). 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, and the Company has entered into an agreement with WB for those
stations to become affiliated with WB at that time. 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" in
Sinclair's Form 8-K dated October 8, 1997, which is incorporated by reference
herein. The Company's UPN affiliation agreements expire in January 1998 (except
for the affiliation agreement with respect to two stations, which expires in
January 1999). 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)
became 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.
Twelve stations owned or programmed by the Company are affiliated with UPN,
a network that began broadcasting in January 1995. Three stations owned or
programmed by the Company are operated as affiliates of WB, a network that began
broadcasting in January 1995, and, pursuant to an agreement between the Company
and WB, certain of the Company's stations affiliated with UPN will become
affiliated with WB when their current affiliations expire in January 1998 (or in
the case of two stations, January 1999). 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. In connection with the change of affiliation of certain of
the Company's stations from UPN to WB, in August 1997, UPN filed an action (the
"California Action") in Los Angeles Superior Court against the Company, seeking
declaratory relief and specific performance or, in the alternative, unspecified
damages and alleging that neither the Company nor its affiliates provided proper
notice of their intention not to extend the current UPN affiliations beyond
January 15, 1998. The Company filed a cross complaint in the California Action
seeking declaratory relief that the notice was effective to terminate the
affiliations on January 15, 1998. UPN has sought a preliminary injunction,
scheduled to be heard on December 15, 1997, to prevent the termination of the
affiliations on January 15, 1998. The court has set a trial date for the
California Action of July 1, 1998. Also in August 1997, certain subsidiaries of
the Company filed an action (the "Baltimore Action") in the Circuit Court for
Baltimore City seeking declaratory relief that their notice was effective to
terminate the affiliations on January 15, 1998. UPN has responded to the
Baltimore Action, and has filed a counterclaim against the Company seeking the
same remedies sought by UPN in the California Action. Both the Company and UPN
have filed motions for summary judgment in the Baltimore Action, and the parties
are awaiting a ruling from the court. If the court grants UPN's motion for
summary judgment, certain of the Company's current UPN affiliation agreements
would be extended for an additional term of three years until January 15, 2001.
If these affiliation agreements are extended, such stations would be unable to
negotiate affiliations and compensation agreements with any network for three
years. In addition, the Company could lose all or a portion of the cash
consideration to be received by the Company under the WB Agreement and WB may
assert that the Company is in breach of the WB Agreement and seek compensation
for damages resulting from such breach. The UPN affiliation agreements currently
do not, and if extended will not, require UPN to pay cash consideration to the
Company in connection with the UPN affiliation of such stations. In the event of
a summary judgment ruling adverse to the Company in the Baltimore Action, the
Company intends to pursue an appeal and, concurrently, seek a
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preliminary injunction to delay implementation of the court's ruling. Any ruling
adverse to the Company in the Baltimore Action also may affect the California
Action. In the event the court in the Baltimore Action denies both parties'
motions for summary judgment, it is expected that a trial date will be set for
early next year. See "Business of Sinclair -- Legal Proceedings" in the
Company's Current Report on Form 8-K filed on October 8, 1997, which is
incorporated herein by reference. There can be no assurance that the Company and
its subsidiaries will prevail in these proceedings or that the outcome of these
proceedings, if adverse to the Company and its subsidiaries, will not have a
material adverse effect on the Company.
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
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
radio service ("DARS"). In October 1997, the FCC awarded two licenses for
satellite DARS. DARS 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 Sinclair's Form 8-K dated October 8, 1997, which is
incorporated by reference herein.
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 afforded 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 ("HDTV"), 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 ten television markets begin digital broadcasting by May
1, 1999 (the stations affiliated with these networks in the top ten markets have
volun-
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tarily 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. Under the Balanced Budget Act recently signed into law by
President Clinton, however, the FCC is authorized to extend the December 31,
2006 deadline for reclamation of a television station's non-digital channel if,
in any given case: (a) one or more television stations affiliated with one of
the four major networks in a market are not broadcasting digitally and the FCC
determines that the station(s) has (have) "exercised due diligence" in
attempting to convert to digital broadcasting; (b) less than 85% of the
television households in the station's market subscribe to a multichannel video
service (cable, wireless cable or direct-to-home broadcast satellite television)
that carries at least one digital channel from each of the local stations in
that market; or (c) less than 85% of the television households in the station's
market can receive digital signals off the air using either a set-top converter
box for an analog television set or a new digital television set. The Balanced
Budget Act also directs the FCC to auction the non-digital channels by September
30, 2002 even though they are not to be reclaimed by the government until at
least December 31, 2006. The Balanced Budget Act also permits broadcasters to
bid on the non-digital channels in cities with populations greater than 400,000,
provided the channels are used for DTV. Thus, it is possible a broadcaster could
own two channels in a market. The FCC has opened a separate proceeding in which
it has proposed to reallocate television channels 60 through 69 to other
services while protecting existing television stations on those channels from
interference during the DTV transition period. 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 increased interference. The FCC's DTV allotment plan may also
result in present UHF stations that move to DTV channels ("UHF/UHF stations")
having considerably less signal power within their service areas than present
VHF stations that move to DTV channels ("VHF/UHF stations"). The Company has
filed with the FCC a petition for reconsideration of the FCC's DTV allotment
plan because of its concerns with respect to the relative DTV signal powers of
VHF/UHF and UHF/UHF stations. Implementation of digital television will 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 is currently considering plans to provide HDTV, to provide
multiple channels of television, including the provision of additional broadcast
programming and transmitted data on a subscription basis, and to continue its
current TV program channels without subscription fees on its allocated portions
of the broadcast spectrum. The Company has filed with the FCC a request for
special temporary authority to conduct experimental DTV operations in Baltimore,
Maryland. The 1996 Act allows the FCC to charge a spectrum fee to broadcasters
who use the digital spectrum to offer subscription-based services. The FCC is
expected to open a rulemaking in the fall of 1997 to consider the spectrum fees
to be charged to broadcasters for such use. In addition, Congress has held
hearings on broadcasters' plans for the use of their digital spectrum. The
Company cannot predict what future actions the FCC or Congress 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 increas-
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ingly 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. 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 DARS. DARS may
provide a medium for the delivery by satellite or terrestrial means of multiple
new audio programming formats to local and national audiences. The FCC has
issued licenses for two satellite DARS systems. See "Business of
Sinclair--Competition" in Sinclair's Form 8-K dated October 8, 1997, which is
incorporated by reference herein.
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" in Sinclair's
Form 8-K dated October 8, 1997, which is incorporated by reference herein.
MULTIPLE OWNERSHIP RULES AND EFFECT ON LMAS
On a national level, FCC rules and regulations generally prevent an entity
or individual from having attributable interests 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" rule prohibits 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 attributable interests 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 radio programming can be
simulcast through LMA arrangements, and LMA arrangements in radio are counted in
determining the number of stations that a single entity may control if the
provider of programming under an LMA owns one or more radio stations in the same
market. FCC rules also impose limitations on the ownership of a television and
one or more radio stations in the same market, though such cross-ownership is
presumptively 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 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" in
Sinclair's Form 8-K dated October 8, 1997, which is incorporated by reference
herein.
The FCC has initiated rulemaking proceedings to consider proposals to
modify its television ownership restrictions, including proposals 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
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restrictions on television LMAs. The "duopoly" rule currently prevents 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 rule, 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, renewed or assigned 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 one was entered
into after enactment of the 1996 Act. However, rights under certain of the
Company's LMAs were acquired by other parties either subsequent to enactment of
the 1996 Act but prior to November 5, 1996, or subsequent to November 5, 1996.
The Company cannot predict whether any or all of its LMAs will be grandfathered.
See "Business of Sinclair--Federal Regulation of Television and Radio
Broadcasting" in Sinclair's Form 8-K dated October 8, 1997, which is
incorporated by reference herein. The LMA entered into after enactment of the
1996 Act but prior to November 5, 1996 has a term 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.
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 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 FCC, at
the Company's request, has withheld action on the applications for the Company
to acquire WTTV and WTTK, and for the Controlling Stockholders to transfer their
voting stock in WIIB, pending the outcome of the FCC's rulemaking proceeding
concerning the cross-interest policy. The petitioner has appealed the
withholding of action on these applications.
In addition, the FCC granted the assignment applications for the Company to
acquire the License Assets of WLOS-TV and KABB-TV in the Asheville, North
Carolina/Greenville/Spartanburg, South Carolina and San Antonio, Texas markets,
respectively, and for Glencairn to acquire the License Assets of WFBC-TV and
KRRT-TV in these two markets, respectively, subject to the outcome of the FCC's
cross-interest policy rulemaking proceeding and certain other conditions
relating to certain trusts that have non-voting ownership interests in
Glencairn. The Company has acquired the License Assets of KABB-TV and WLOS-TV.
Glencairn has acquired the License Assets of KRRT-TV and WFBC-TV and the Company
provides programming services to KRRT-TV and WFBC-TV pursuant to LMAs.
Applications for review have been filed by third parties which appeal the FCC's
grants of: (i) the Company's application to acquire WLOS-TV in the Asheville,
North Carolina/Greenville/Spartanburg, South Carolina market and Glencairn's
application to acquire WFBC-TV in that market; and (ii) the Company's
application to acquire KABB-TV in the San Antonio market. The Company has filed
oppositions to both applications for review.
An objection has been filed against the Company's application to acquire
WNNE-TV in the Burlington, Vermont/Plattsburgh, New York market pursuant to the
Heritage Acquisition. The objection
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alleges that the FCC erred in a previous determination that the contour overlap
between WNNE-TV and WPTZ-TV in the same market (which the Company has also
proposed to acquire) is of a de minimis nature, and that the Company's
acquisition of WNNE-TV and WPTZ-TV would violate the television duopoly rule.
The Company has opposed this objection. The Company also has pending several
requests for waivers of the FCC's radio-television cross-ownership, or "one to a
market," rule, in connection with its applications to acquire radio stations in
the Heritage Acquisition and other acquisitions in markets where the Company
owns or proposes to own a television station. In addition, certain of the
television stations to be acquired in the Max Media Acquisition have overlapping
service areas with the Company's television stations and, therefore, the Company
intends to request waivers from the FCC to complete the Max Media Acquisition.
There can be no assurance that any or all of such waiver requests will be
granted. Additionally, the Company has recently begun providing programming to
two radio stations in the New Orleans, Louisiana market under an LMA. As a
result of this LMA, the Company's acquisition of the Heritage radio stations in
the New Orleans market would result in the Company holding attributable
interests in more radio stations in that market than permitted under current FCC
rules. Accordingly, the Company intends to divest one or more stations in the
New Orleans market if necessary.
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 matters or (ii) the impact such factors may have upon the
Company's broadcast operations. As a result of regulatory changes, 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 changes to the FCC
rules or the resolution of these matters 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.
POTENTIAL EFFECT ON THE MARKET PRICE RESULTING FROM SHARES ELIGIBLE FOR FUTURE
SALE
Any shares of Class A Common Stock offered pursuant to this Prospectus will
be freely tradeable in the United States without restriction or further
registration unless purchased by affiliates of the Company. Shares of Class B
Common Stock are convertible into Class A Common Stock on a share-for-share
basis at any time at the option of the holder and are automatically converted
into Class A Common Stock upon transfer, except for transfers to certain
permitted transferees. The 25,750,081 shares of Class B Common Stock outstanding
as of November 30, 1997 (and shares of Class A Common Stock into which they are
convertible), all of which are beneficially owned by the Controlling
Stockholders, are
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held by persons who may be deemed to be affiliates of the Company and are
eligible for resale under Rule 144 under the Securities Act, subject to the
volume limitations thereunder. Options to acquire 2,023,285 shares of Class A
Common Stock have been granted to certain officers or employees of the Company
under the Company's various stock option plans. Of the options granted, 865,093
have vested as of the date of this Prospectus. Up to an additional 618,388
shares of Class A Common Stock are reserved for future issuance pursuant to the
Company's Stock Option Plans and Long Term Incentive Plan. In addition, the
Company issued 1,150,000 shares of Series B Preferred Stock to River City in
connection with the River City Acquisition, of which 1,071,381 shares (which are
convertible at any time at the option of the holders, into an aggregate of
3,895,931 shares of Class A Common Stock subject to certain adjustments) were
issued and outstanding as of September 10, 1997. All such shares are registered
under the Securities Act pursuant to a shelf registration statement and may be
sold into the public market at any time. The Company has also registered under
the Securities Act 1,382,435 shares of Class A Common Stock issuable upon
exercise of stock options held by Barry Baker, and has registered an additional
1,259,238 shares issuable upon exercise of options issued or issuable pursuant
to the Company's stock option plans. Sale of substantial amounts of shares of
Class A Common Stock, or the perception that such sales could occur, may
materially adversely affect the market price of the Class A Common Stock.
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 $29.0 million in 1996 on a pro forma basis
reflecting the acquisitions completed by the Company in 1996 (the "1996
Acquisitions"), the issuance of the 1997 Notes and the Preferred Securities).
The Company experienced a net loss of $6.1 million during the nine months ended
September 30, 1997. 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.
DIVIDEND RESTRICTIONS
The terms of the Company's Bank Credit Agreement, the Existing Indentures
and the other indebtedness of the Company restrict the Company from paying
dividends on its Common Stock. The Company does not expect to pay dividends on
its Common Stock in the foreseeable future.
ABSENCE OF PUBLIC TRADING MARKET
There may be no public market for certain Securities at the time of their
issuance. The Company may or may not apply for listing of such Securities on an
exchange or for quotation on an automated interdealer quotation system. If the
Company does apply for such listing, there is no assurance that such application
will be granted. If the Securities are accepted for listing, no assurance can be
given as to whether an active trading market for the Securities will develop
and, if so, as to the liquidity of such trading market. If any active trading
market does not develop or is not maintained, the market price of the Securities
may be adversely affected.
TRADING CHARACTERISTICS OF FIXED INCOME SECURITIES
Securities offered hereunder that constitute a fixed-income security are
expected to trade at a price that takes into account the value, if any, of
accrued and unpaid interest or distributions; thus, purchasers will not pay for,
and sellers will not receive, any accrued and unpaid interest or distributions
that are not included in the trading price of such Securities.
The liquidation preference of any Preferred Stock offered pursuant to this
Prospectus or the principal amount of any Debt Security offered pursuant to this
Prospectus will not necessarily be indicative of the price at which such
Securities will actually trade at or after the time of the issuance, and such
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Securities may trade at prices below their liquidation preference or principal
amount, as applicable. 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.
FORWARD-LOOKING STATEMENTS
This Prospectus (including the documents or portions thereof incorporated
herein by reference and any Prospectus Supplement) contains forward-looking
statements. 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.
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USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will use the net proceeds from the sale of the Securities for general
corporate purposes including, without limitation, acquisitions and the repayment
of outstanding indebtedness. Pursuant to the terms of the Bank Credit Agreement,
all or a portion of the proceeds may be required to be used for reduction of
indebtedness. Amounts repaid under the Bank Credit Agreement may be subsequently
reborrowed. The Bank Credit Agreement matures on December 31, 2004 and the
average interest rate thereunder as of September 30, 1997 was 6.72%.
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HISTORICAL AND PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
The Company's consolidated ratios of earnings to fixed charges for each of
the periods indicated are set forth below:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Historical(a) .................. -- 1.1x -- 1.3x 1.1x -- --
Pro Forma(b)(c) .................. -- -- --
</TABLE>
- ----------
(a) Earnings were inadequate to cover fixed charges for the years ended
December 31, 1992 and 1994, and for the nine months ended September 30,
1997. Additional earnings of $5,840, $3,387 and $10,091 would have been
required to cover fixed charges in the years ended December 31, 1992 and
1994, and the nine months ended September 30, 1997, respectively.
(b) The pro forma information in this table reflects the pro forma effect of
the completion of the issuance of the Preferred Securities and the 1997
Notes, the Common Stock Offering and the Preferred Stock Offering, and the
1996 Acquisitions as if such transactions had occurred on January 1, 1996
with respect to the pro forma information for the year ended December 31,
1996 and as if such transactions had occurred on January 1, 1997 with
respect to the pro forma information for the nine months ended September
30, 1997.
(c) Earnings were inadequate to cover fixed charges for the pro forma year
ended December 31, 1996 and pro forma nine months ended September 30, 1997.
Additional earnings of $44,972 and $17,127 would have been required to
cover fixed charges for the pro forma year ended December 31, 1996 and pro
forma nine months ended September 30, 1997, respectively.
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DESCRIPTION OF DEBT SECURITIES
Debt Securities may be issued from time to time in one or more series under
one or more indentures, each dated as of a date on or prior to the issuance of
the Debt Securities to which it relates. Senior Debt Securities and Subordinated
Debt Securities may be issued pursuant to separate indentures (respectively, a
"Senior Indenture" and a "Subordinated Indenture"), in each case between the
Company and a trustee (a "Trustee"), which may be the same Trustee, and in the
form that will be filed as an exhibit to or incorporated by reference into the
Registration Statement of which this Prospectus is a part, subject to such
amendments or supplements as may be adopted from time to time. The Senior
Indenture and the Subordinated Indenture, as amended or supplemented from time
to time, are sometimes referred to individually as an "Indenture" and
collectively as the "Indentures." Each Indenture will be subject to and governed
by the Trust Indenture Act of 1939, as amended (the "TIA").
The statements made hereunder relating to the Debt Securities and the
Indentures are summaries of the anticipated provisions thereof, do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the applicable Indenture, including the
definitions therein of certain terms and those terms made part of such Indenture
by reference to the TIA, as in effect on the date of such Indenture, and to such
Debt Securities. Copies of the forms of the Indentures will be filed as exhibits
to or incorporated by reference into the Registration Statement of which this
Prospectus is a part. See "Available Information." Certain capitalized terms
used below and not defined have the respective meanings assigned to them in the
applicable Indenture.
GENERAL
The Debt Securities will be unsecured obligations of the Company unless
otherwise specified in the Prospectus Supplement. The Senior Debt Securities
will rank on a parity with all other unsecured and unsubordinated obligations of
the Company. The Subordinated Debt Securities will be subordinate and junior in
right of payment to the extent and in the manner set forth in the Subordinated
Indenture to all Senior Indebtedness of the Company, including any Senior Debt
Securities. See "-- Subordination." The Company is a holding company which
presently conducts its business through its Subsidiaries. Most of the operating
assets of the Company and its consolidated Subsidiaries are owned by such
Subsidiaries and the Company relies primarily on dividends from such
Subsidiaries to meet its obligations for payment of principal and interest on
its outstanding debt obligations and corporate expenses. Accordingly, the Debt
Securities will be effectively subordinated to all existing and future
liabilities of the Company's Subsidiaries, and holders of Debt Securities should
look only to the assets of the Company for payments on the Debt Securities
unless the Debt Securities are guaranteed by the Company's Subsidiaries as
described in any Prospectus Supplement. The Debt Securities may be guaranteed by
some or all of the Company's Subsidiaries, in which case such Guarantees will,
unless otherwise specified in the applicable Prospectus Supplement, (i) rank
pari passu in right of payment with all other unsecured senior obligations of
such Subsidiaries with respect to guarantees of Senior Debt Securities, and (ii)
rank subordinate in right of payment to all unsecured senior obligations of such
Subsidiaries and rank pari passu in right of payment to all subordinated
obligations of such Subsidiaries with respect to Guarantees of Subordinated Debt
Securities. The Guarantees will be effectively subordinated in right of payment
to all secured Indebtedness of such Subsidiaries to the extent of the value of
the assets securing such Indebtedness.
The Indentures will not limit the aggregate amount of Debt Securities which
may be issued thereunder. Except as otherwise provided in the applicable
Prospectus Supplement, the Indentures, as they apply to any series of Debt
Securities, will not limit the incurrence or issuance of other secured or
unsecured debt of the Company, whether under the Indentures, any other indenture
that the Company may enter into in the future or otherwise.
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus for a description of the specific series of Debt
Securities being offered thereby, including:
(1) the title of such Debt Securities;
(2) any limit upon the aggregate principal amount of such Debt
Securities;
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(3) the date or dates on which the principal of and premium, if any,
on such Debt Securities will mature or the method of determining such date
or dates;
(4) the rate or rates (which may be fixed or variable) at which such
Debt Securities will bear interest, if any, or the method of calculating
such rate or rates;
(5) the date or dates from which interest, if any, will accrue or the
method by which such date or dates will be determined;
(6) the date or dates on which interest, if any, will be payable and
the record date or dates therefor;
(7) the place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable or at which Debt
Securities may be surrendered for registration of transfer or exchange;
(8) the period or periods within which, the price or prices at which,
the currency or currencies if other than in United States dollars
(including currency unit or units) in which, and the other terms and
conditions upon which, such Debt Securities may be redeemed, in whole or in
part, at the option of the Company;
(9) the obligation, if any, of the Company to redeem or purchase such
Debt Securities pursuant to any sinking fund or analogous provisions or
upon the happening of a specified event or at the option of a holder
thereof and the period or periods within which, the price or prices at
which, the currency or currencies if other than in United States dollars
(including currency unit or units) in which, and the other terms and
conditions upon which, such Debt Securities shall be redeemed or purchased,
in whole or in part, pursuant to such obligation;
(10) the denominations in which such Debt Securities are authorized to
be issued;
(11) the currency or currency unit in which such Debt Securities may
be denominated and/or the currency or currencies (including currency unit
or units) in which principal of, premium, if any, and interest, if any, on
such Debt Securities will be payable and whether the Company or the holders
of any such Debt Securities may elect to receive payments in respect of
such Debt Securities in a currency or currency unit other than that in
which such Debt Securities are stated to be payable;
(12) if the amount of principal of, or any premium or interest on,
such Debt Securities may be determined with reference to an index or
pursuant to a formula or other method, the manner in which such amounts
will be determined;
(13) if other than the principal amount thereof, the portion of the
principal amount of such Debt Securities which will be payable upon
declaration of the acceleration of the maturity thereof or the method by
which such portion shall be determined;
(14) provisions, if any, granting special rights to the holders of
such Debt Securities upon the occurrence of such events as may be
specified;
(15) any addition to, or modification or deletion of, any Event of
Default or any covenant of the Company specified in the Indenture with
respect to such Debt Securities;
(16) the circumstances, if any, under which the Company will pay
additional amounts on such Debt Securities held by non-U.S. persons in
respect of taxes, assessments or similar charges;
(17) whether such Debt Securities will be issued in registered or
bearer form or both;
(18) the date as of which any bearer Securities of the series and any
temporary global security representing outstanding securities shall be
dated, if other than the original issuance date of the series of Debt
Securities;
(19) the forms of the Securities and interest coupons, if any, of the
series;
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(20) if other than the Trustee, the identity of the Registrar and any
Paying Agent;
(21) the application, if any, of such means of defeasance or covenant
defeasance as may be specified for such Debt Securities;
(22) whether such Debt Securities are to be issued in whole or in part
in the form of one or more temporary or permanent global securities and, if
so, the identity of the depositary or its nominee, if any, for such global
security or securities and the circumstances under which beneficial owners
of interests in the global security may exchange such interests for
certificated Debt Securities to be registered in the names of or to be held
by such beneficial owners or their nominees;
(23) if the Debt Securities of the series may be issued or delivered,
or any installation of principal or interest payable, only upon receipt of
certain certificates or other documents or satisfaction of other conditions
in addition to those specified in the Indenture, the form of such
certificates, documents or conditions;
(24) if other than as provided in the applicable Indenture, the person
to whom any interest on any registered security of the series shall be
payable and the manner in which, or the person to whom, any interest on any
bearer Securities of the series shall be payable;
(25) any definition for Debt Securities of that series which are not
to be as set forth in the Indenture, including, without limitation, the
definition of "Unrestricted Subsidiary" to be used for such series;
(26) in the case of the Subordinated Indenture, the relative degree to
which Debt Securities of the series offered shall be senior to or be
subordinated to other series of such Debt Securities, and to other
indebtedness of the Company, in right of payment, whether such other series
of Debt Securities and other indebtedness are outstanding or not;
(27) whether such Debt Securities are guaranteed and, if so, the
identity of the Guarantors and the terms of such Guarantees (including
whether and the extent to which the Guarantees are subordinated to the
other indebtedness of the Guarantors);
(28) the terms, if any, upon which the Company may be able to redeem
such Debt Securities prior to their maturity including the dates on which
such redemptions may be made and the price at which such redemptions may be
made;
(29) the terms, if any, upon which such Debt Securities may be
converted or exchanged into or for Common Stock, Preferred Stock or other
securities or property of the Company;
(30) any restrictions on the registration, transfer or exchange of
such Debt Securities; and
(31) any other terms not inconsistent with the terms of the Indentures
pertaining to such Debt Securities or which may be required or advisable
under the United States laws or regulations or advisable (as determined by
the Company) in connection with marketing of securities of the series.
The terms of each specific series of Debt Securities being offered in the
Prospectus Supplements shall be established (i) by the resolution of the Board
of Directors, (ii) by action taken pursuant to a resolution of the Board of
Directors and set forth, or determined in a manner provided in, an Officer's
Certificate (as defined in the applicable Prospectus Supplement) or (iii) in one
or more supplemental indentures.
Unless otherwise provided in the applicable Prospectus Supplement, the Debt
Securities will not be listed on any securities exchange.
The number of shares of Common Stock or Preferred Stock that will be
issuable upon the conversion or exchange of any Debt Securities issued with
conversion or exchange provisions will be adjusted to prevent dilution resulting
from stock splits, stock dividends or similar or other transactions, and the
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nature and amount of the securities, assets or other property to be received
upon the conversion or exchange of such Debt Securities will be changed as
necessary in the event of any consolidation, merger, combination or similar
transaction. The specific provisions will be set forth in the applicable
Prospectus Supplement.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be issued in denominations of U.S. $1,000 or
any integral multiples of U.S. $1,000, and Debt Securities in bearer form will
be issued in denominations of U.S. $5,000 or any integral multiples of U.S.
$5,000. Where Debt Securities of any series are issued in bearer form, the
special restrictions and considerations, including special offering restrictions
and material U.S. federal income tax considerations, applicable to any such Debt
Securities and to payments in respect of and transfers and exchanges of such
Debt Securities will be described in the applicable Prospectus Supplement. Debt
Securities in bearer form will be transferable by delivery.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Material U.S. federal income tax consequences
and special considerations applicable to any such Debt Securities will be
described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, material U.S. federal income tax considerations and other information
with respect to such issue of Debt Securities and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest, if any, on any series of Debt Securities, material
U.S. federal income tax, accounting and other considerations applicable thereto
will be described in the applicable Prospectus Supplement.
The general provisions of the Indentures will not afford holders of the
Debt Securities protection in the event of a highly leveraged transaction,
restructuring, change in control, merger or similar transaction involving the
Company that may adversely affect holders of the Debt Securities.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise provided in the applicable Prospectus Supplement, payments
in respect of the Debt Securities will be made in the designated currency at
such office or agency of the Company maintained for that purpose as the Company
may designate from time to time, except that, at the option of the Company,
interest payments, if any, on Debt Securities in registered form may be made (i)
by checks mailed to the holders of Debt Securities entitled thereto at their
registered addresses or (ii) by wire transfer to an account maintained by the
holders of the Debt Securities entitled thereto as specified in the register
(the "Register") for the applicable Debt Securities. Unless otherwise provided
in the applicable Prospectus Supplement, each payment in respect of the Debt
Securities shall be considered to have been made on the date such payment is due
if there shall have been sent to the Trustee or paying agent by wire transfer
(received by no later than the business day following such due date), or the
Trustee or paying agent otherwise holds, on such due date sufficient funds to
make such payment. Unless otherwise indicated in an applicable Prospectus
Supplement, scheduled payments of any installment of interest on Debt Securities
in registered form will be made to the person in whose name such Debt Security
is registered at the close of business on the regular record date for such
interest.
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the Prospectus Supplement, subject to
any applicable laws and regulations, at such paying agencies outside the United
States as the Company may appoint from time to time. The paying agents outside
the United States, if any, initially appointed by the Company for a series of
Debt Securities will be named in the Prospectus Supplement. Unless otherwise
provided in the applicable Prospectus Supplement, the Company may at any time
designate additional paying agents or rescind the designation of any paying
agents, except that, if Debt Securities of a series are issuable in registered
form, the Company will be
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required to maintain at least one paying agent in each place of payment for such
series and if Debt Securities of a series are issuable in bearer form, the
Company will be required to maintain at least one paying agent in a place of
payment outside the United States where Debt Securities of such series and any
coupons appertaining thereto may be presented and surrendered for payment.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the agency
of the Company maintained for such purpose as designated by the Company from
time to time. Debt Securities may be transferred or exchanged without service
charge, although the Company may require a holder to pay any tax or other
governmental charge imposed in connection therewith.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Registered Global
Security"). Each Registered Global Security will be registered in the name of a
depositary (the "Depositary") or a nominee for the Depositary identified in the
applicable Prospectus Supplement, will be deposited with such Depositary or
nominee or a custodian therefor and will bear a legend regarding the
restrictions on exchanges and registration of transfer thereof and any such
other matters as may be provided for pursuant to the applicable Indenture. In
such a case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Registered Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive certificated
form, a Registered Global Security may not be transferred or exchanged except as
a whole by the Depositary for such Registered Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor Depositary for such series or a nominee of such successor Depositary,
or except in the circumstances described in the applicable Prospectus
Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the applicable Prospectus Supplement.
Upon the issuance of any Registered Global Security, and the deposit of
such Registered Global Security with or on behalf of the Depositary for such
Registered Global Security, the Depositary will credit on its book-entry
registration and transfer system the respective principal amounts of the Debt
Securities represented by such Registered Global Security to the accounts of
institutions ("Participants") that have accounts with the Depositary. The
accounts to be credited will be designated by the underwriters or agents
engaging in the distribution of such Debt Securities or by the Company, if such
Debt Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Registered Global Security will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in a Registered Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depositary for such Registered Global Security or by its nominee.
Ownership of beneficial interests in such Registered Global Security by persons
who hold through Participants will be shown on, and the transfer of such
beneficial interests within such Participants will be effected only through,
records maintained by such Participants.
So long as the Depositary for a Registered Global Security, or its nominee,
is the owner of such Registered Global Security, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Debt Security represented by such Registered Global Security for all purposes
under each Indenture. Accordingly, each person owning a beneficial interest in
such Registered Global Security must rely on the procedures of the Depositary
and, if such person is not a Participant, on the procedures of the Participant
through which such person owns its interest, to exercise any rights of a holder
under such Indenture. The Company understands that under existing industry
practices, if it requests any action of holders or if an owner of a beneficial
interest in a Registered Global Security desires to give or take any instruction
or action which a holder is entitled to give or take under the Indenture, the
Depositary would authorize the Participants holding the relevant beneficial
interests to
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give or take such instruction or action, and such Participants would authorize
beneficial owners owning through such Participants to give or take such
instruction or action or would otherwise act upon the instructions of beneficial
owners holding through them.
Unless otherwise provided in the Prospectus Supplement, payments with
respect to principal, premium, if any, and interest, if any, on the Debt
Securities represented by a Registered Global Security registered in the name of
the Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owner of such Registered Global Security. The
Company expects that the Depositary for any Debt Securities represented by a
Registered Global Security, upon receipt of any payment of principal or interest
in respect of such Registered Global Security, will credit immediately
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Registered Global Security as shown on
the records of the Depositary. The Company also expects that payments by
Participants to owners of beneficial interests in such Registered Global
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities in
bearer form held for the accounts of customers or registered in "street name,"
and will be the responsibility of such Participants. None of the Company, the
respective Trustees or any agent of the Company or the respective Trustees shall
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial interests in any Registered Global
Security, or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
Unless otherwise provided in the applicable Prospectus Supplement, (i) if
the Depositary for any Debt Securities represented by a Registered Global
Security is at any time unwilling or unable to continue as depositary of such
Registered Global Security and a successor depositary is not appointed by the
Company within 90 days or (ii) 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 Debt Securities represented
by such Registered Global Security and such Event of Default continues for a
period of 90 days, the Company will issue Debt Securities in certificated form
in exchange for such Registered Global Security. In addition, unless otherwise
provided in the applicable Prospectus Supplement, the Company in its sole
discretion may at any time determine not to have any of the Debt Securities of a
series represented by one or more Registered Global Securities and, in such
event, will issue Debt Securities of such series in certificated form in
exchange for all of the Registered Global Securities representing such series of
Debt Securities. The Debt Securities of a series may also be issued in whole or
in part in the form of one or more bearer global securities (a "Bearer Global
Security") that will be deposited with a depositary, or with a nominee for such
depositary, identified in the applicable Prospectus Supplement. Any such Bearer
Global Securities may be issued in temporary or permanent form. The specific
terms and procedures, including the specific terms of the depositary
arrangement, with respect to any portion of a series of Debt Securities to be
represented by one or more Bearer Global Securities will be described in the
applicable Prospectus Supplement.
CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants
in respect of any series of Debt Securities.
CONSOLIDATION, MERGER, SALE OF ASSETS
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the Company shall not, in a single transaction or a
series of related transactions, consolidate with or merge with or into any other
person or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any person or group of
affiliated persons, or permit any of its Subsidiaries to enter into any such
transaction or transactions if such transaction or transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
disposition of all or substantially all of the properties and assets of the
Company and its Subsidiaries on a consolidated basis to any other person or
group of affiliated persons, unless at the time and after giving effect thereto:
(i) either (1) the Company shall be the continuing corporation or (2) the person
(if other than the Company) formed by such consolidation or into which the
Company is merged or the person which acquires by sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company and its Subsidiaries on a
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consolidated basis (the "Surviving Entity") shall be a corporation duly
organized and validly existing under the laws of the United States of America,
any state thereof or the District of Columbia and such person assumes, by a
supplemental indenture in a form reasonably satisfactory to the Trustee, all the
obligations of the Company under the applicable Debt Securities and the
Indenture, and the Indenture shall remain in full force and effect; (ii)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction on a pro forma basis, the
consolidated net worth (as defined in the applicable Indenture) of the Company
(or the Surviving Entity if the Company is not the continuing obligor under the
Indenture) is equal to or greater than the consolidated net worth of the Company
immediately prior to such transaction; (iv) immediately before and immediately
after giving effect to such transaction on a pro forma basis (on the assumption
that the transaction occurred on the first day of the four-quarter period
immediately prior to the consummation of such transaction with the appropriate
adjustments with respect to the transaction being included in such pro forma
calculation), the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Indenture) could incur $1.00 of additional
indebtedness under any applicable provisions of the Indenture limiting
incurrence of indebtedness; (v) each Guarantor, if any, unless it is the other
party to the transactions described above, shall have by supplemental indenture
confirmed that its guarantee shall apply to such person's obligations under the
Indenture and the Debt Securities; (vi) if any of the property or assets of the
Company or any of its Subsidiaries would thereupon become subject to any lien,
any provisions of the Indenture limiting liens are complied with; and (vii) the
Company or the Surviving Entity shall have delivered, or caused to be delivered,
to the Trustee, in form and substance reasonably satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, lease or other transaction
and the supplemental indenture in respect thereto comply with the provisions of
the Indenture and that all conditions precedent provided for in the Indenture
relating to such transaction have been complied with.
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that any Guarantor will not, and the Company will not
permit any such Guarantor to, in a single transaction or series of related
transactions merge or consolidate with or into any other corporation (other than
the Company or any other Guarantor) or other entity, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets on a consolidated basis to any entity (other than the
Company or any other Guarantor) unless at the time and after giving effect
thereto: (i) either (1) such Guarantor shall be the continuing corporation or
(2) the entity (if other than such Guarantor) formed by such consolidation or
into which such Guarantor is merged or the entity which acquires by sale,
assignment, conveyance, transfer, lease or disposition the properties and assets
of such Guarantor shall be a corporation duly organized and validly existing
under the laws of the United States, any state thereof or the District of
Columbia and shall expressly assume by a supplemental indenture, executed and
delivered to the Trustee, in a form reasonably satisfactory to the Trustee, all
the obligations of such Guarantor under the Debt Securities and the Indenture;
(ii) immediately before and immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; and (iii)
such Guarantor shall have delivered to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an officers' certificate and an opinion
of counsel, each stating that such consolidation, merger, sale, assignment,
conveyance, transfer, lease or disposition and such supplemental indenture
comply with the Indenture, and thereafter all obligations of the predecessor
shall terminate.
EVENTS OF DEFAULT
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that an Event of Default with respect to the Debt
Securities of a particular series will occur under the applicable Indenture if:
(i) there shall be a default in the payment of any interest on any
Debt Security of that series when it becomes due and payable, and such
default shall continue for a period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Debt Security of that series at its maturity (upon
acceleration, optional or mandatory redemption, required repurchase or
otherwise);
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(iii) (a) there shall be a default in the performance, or breach, of
any covenant or agreement of the Company or any Guarantor under the
Indenture (other than a default in the performance, or breach, of a
covenant or agreement which is specifically dealt with in clause (i) or
(ii) or in clause (b) of this clause (iii)) and such default or breach
shall continue for a period of 30 days after written notice has been given,
by certified mail, (x) to the Company by the Trustee or (y) to the Company
and the Trustee by the holders of at least 25% in aggregate principal
amount of the outstanding Debt Securities of the series; or (b) there shall
be a default in the performance or breach of the provisions described in
"-- Consolidation, Merger, Sale of Assets;"
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company, any Guarantor or certain
subsidiaries specified in the Indenture (a "Restricted Subsidiary") then
has outstanding indebtedness in excess of an amount specified in the
applicable Prospectus Supplement in the aggregate and, if not already
matured at its final maturity in accordance with its terms, such
indebtedness shall have been accelerated;
(v) any Guarantee shall for any reason cease to be, or be asserted in
writing by any Guarantor or the Company not to be, in full force and
effect, enforceable in accordance with its terms, except to the extent
contemplated by the Indenture and any such Guarantee;
(vi) one or more judgments, orders or decrees for the payment of money
in excess of an amount specified in the applicable Prospectus Supplement,
either individually or in the aggregate (net of amounts covered by
insurance, bond, surety or similar instrument) shall be entered against the
Company, any Guarantor or any Restricted Subsidiary or any of their
respective properties and shall not be discharged and either (a) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree or (b) there shall have been a period of 60 consecutive
days during which a stay of enforcement of such judgment or order, by
reason of an appeal or otherwise, shall not be in effect;
(vii) any holder or holders of at least an amount specified in the
applicable Prospectus Supplement in aggregate principal amount of
indebtedness of the Company, any Guarantor or any Restricted Subsidiary
after a default under such indebtedness shall notify the Trustee of the
intended sale or disposition of any assets of the Company, any Guarantor or
any Restricted Subsidiary that have been pledged to or for the benefit of
such holder or holders to secure such indebtedness or shall commence
proceedings, or take any action (including by way of set-off), to retain in
satisfaction of such indebtedness or to collect on, seize, dispose of or
apply in satisfaction of indebtedness, assets of the Company or any
Restricted Subsidiary (including funds on deposit or held pursuant to
lock-box and other similar arrangements);
(viii) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Guarantor or any Restricted Subsidiary in an involuntary case or
proceeding under any applicable bankruptcy law or (b) a decree or order
adjudging the Company, any Guarantor or any Restricted Subsidiary bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, any Guarantor or any
Restricted Subsidiary under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company, any Guarantor or
any Restricted 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
(ix) (a) the Company, any Guarantor or any Restricted Subsidiary
commences a voluntary case or proceeding under any applicable bankruptcy
law or any other case or proceeding to be adjudicated bankrupt or
insolvent, (b) the Company, any Guarantor or any Restricted Subsidiary
consents to the entry of a decree or order for relief in respect of the
Company, any Guarantor or such Restricted 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, (c) the
Company, any Guarantor or any Restricted Subsidiary files a petition or
answer or consent seeking
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reorganization or relief under any applicable federal or state law, (d) the
Company, any Guarantor or any Restricted Subsidiary (x) 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, any Guarantor or such Restricted
Subsidiary or of any substantial part of their respective 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) the
Company, any Guarantor or any Restricted Subsidiary takes any corporate
action in furtherance of any such actions in this paragraph (ix).
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that if an Event of Default (other than as specified in
clauses (viii) and (ix) of the prior paragraph) shall occur and be continuing,
the Trustee or the holders of not less than 25% in aggregate principal amount of
the Debt Securities of the applicable series outstanding may, and the Trustee at
the request of such holders shall, declare all unpaid principal of, premium, if
any, and accrued interest on, all the Debt Securities of the applicable series
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 Debt Securities of the applicable
series); provided that so long as the Bank Credit Agreement is in effect, such
declaration shall not become effective until the earlier of (a) five business
days after receipt of such notice of acceleration from the holders or the
Trustee by the agent under the Bank Credit Agreement or (b) acceleration of the
indebtedness under the Bank Credit Agreement. Thereupon the Trustee may, at its
discretion, proceed to protect and enforce the rights of the holders of the
applicable Debt Securities by appropriate judicial proceeding. If an Event of
Default specified in clause (viii) or (ix) of the prior paragraph occurs and is
continuing, then all the Debt Securities of the applicable series shall ipso
facto become and be immediately due and payable, in an amount equal to the
principal amount of the Debt Securities of the applicable series, together with
accrued and unpaid interest, if any, to the date the Debt Securities become due
and payable, without any declaration or other act on the part of the Trustee or
any holder. The Trustee or, if notice of acceleration is given by the holders of
the Debt Securities of the applicable series, the holders of the Debt Securities
of the applicable series shall give notice to the agent under the Bank Credit
Agreement of such acceleration.
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide after a declaration of acceleration, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the Debt
Securities of the applicable series, by written notice to the Company and the
Trustee, may rescind and annul such declaration if (a) the Company has paid or
deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced
by the Trustee under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, (ii) all
overdue interest on all Debt Securities of the applicable series, (iii) the
principal of and premium, if any, on any Debt Securities of the applicable
series which have become due otherwise than by such declaration of acceleration
and interest thereon at a rate borne by the Debt Securities and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate borne by the Debt Securities; and (b) all Events of Default, other
than the non-payment of principal of the Debt Securities which have become due
solely by such declaration of acceleration, have been cured or waived.
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the holders of not less than a majority in aggregate
principal amount of the Debt Securities of the applicable series outstanding may
on behalf of the holders of all the Debt Securities of the applicable series
waive any past default under the Indenture and its consequences, except a
default in the payment of the principal of, premium, if any, or interest on any
Debt Security, or in respect of a covenant or provision which under the
Indenture cannot be modified or amended without the consent of the holder of
each Debt Security outstanding.
Unless specified otherwise in the applicable Prospectus Supplement, each
Indenture will provide that the Company is also required to notify the Trustee
within five business days of the occurrence of any Default. Unless otherwise
provided in the applicable Prospectus Supplement, the Company is required to
deliver to the Trustee, on or before a date not more than 60 days after the end
of each fiscal
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quarter and not more than 120 days after the end of each fiscal year, a written
statement as to compliance with the Indenture, including whether or not any
default has occurred. Unless otherwise provided in the applicable Prospectus
Supplement, the Trustee is under no obligation to exercise any of the rights or
powers vested in it by the Indenture at the request or direction of any of the
holders of the Debt Securities unless such holders offer to the Trustee security
or indemnity satisfactory to the Trustee against the costs, expenses and
liabilities which might be incurred thereby.
The TIA contains limitations on the rights of the Trustee, should it become
a creditor of the Company or any Guarantor, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions, provided that if it acquires any conflicting interest it
must eliminate such conflict upon the occurrence of an Event of Default or else
resign.
Reference is made to the Prospectus Supplement relating to each series of
Debt Securities that are Original Issue Discount Securities for the particular
provisions relating to acceleration of the maturity of a portion of the
principal amount of such Original Issue Discount Securities upon the occurrence
of an Event of Default and the continuation thereof.
MODIFICATIONS AND AMENDMENTS
Unless otherwise specified in the applicable Prospectus Supplement,
modifications and amendments of the Indenture may be made by the Company, any
Guarantor and the Trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the outstanding Debt Securities of all
series affected by the modification or amendment; provided, however, that no
such modification or amendment may, without the consent of the holder of each
outstanding Debt Security of all series affected by the modification or
amendment affected thereby: (i) change the stated maturity of the principal of,
or any installment of interest on, any Debt Security or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which the principal of any
Debt Security 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); (ii) reduce the percentage in principal amount of outstanding Debt
Securities of a series, 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 the Indenture or certain
defaults or with respect to any Guarantee; (iii) modify any of the provisions
relating to supplemental indentures requiring the consent of holders or relating
to the waiver of past defaults or relating to the waiver of certain covenants,
except to increase the percentage in principal amount of outstanding Debt
Securities required for such actions or to provide that certain other provisions
of the Indenture cannot be modified or waived without the consent of the holder
of each Debt Security affected thereby; (iv) except as otherwise permitted under
"-- Consolidation, Merger, Sale of Assets," consent to the assignment or
transfer by the Company or any Guarantor of any of its rights and obligations
under the Indenture; or (v) amend or modify any provisions of the Indenture
relating to the subordination of the Debt Security or any guarantee in any
manner adverse to the holders of the Debt Securities or any guarantee.
Unless otherwise provided in the applicable Prospectus Supplement,
modifications and amendments of each Indenture may be made by the Company, any
Guarantor and the Trustee without the consent of the Holders to: (i) cause each
Indenture to be qualified under the TIA or to add provisions expressly required
under the TIA: (ii) evidence the succession of another person to the Company,
any Guarantor or other obligor upon the Debt Securities and the assumption by
any such successor of the covenants of the Company, any Guarantor or other
obligor upon the Debt Securities under the Indenture and in the Debt Securities
of any series; (iii) add to the covenants of the Company, any Guarantor or other
obligor upon the Debt Securities for the benefit of the holders (and if such
covenants are to be for the benefit of less than all series of Debt Securities,
stating that such covenants are expressly being included solely for the benefit
of such series) or an additional Event of Default to all or any series of Debt
Securities, or surrender any right or power conferred upon the Company; (iv) to
secure the Debt Securities of any series; (v) to add to or change any provisions
to such extent as necessary to facilitate the issuance or
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administration of Debt Securities in bearer form or facilitate the issuance or
administration of Debt Securities in global form; (vi) to change or eliminate
any provision affecting only Debt Securities not yet issued; (vii) to establish
the form or terms of Debt Securities and Guarantees of any series; (viii) to
evidence and provide for successor Trustees or to add or change any provisions
of such Indenture to such extent as necessary to permit or facilitate the
appointment of a separate Trustee or Trustees for specific series of Debt
Securities; (ix) to permit payment in respect of Debt Securities in bearer form
in the United States to the extent allowed by law; (x) to make provision with
respect to any conversion or exchange rights of holders not adverse to the
holders of any Debt Securities of any series then outstanding with such
conversion or exchange rights which provision directly affects any such series,
including providing for the conversion or exchange of Debt Securities into
Common Stock or Preferred Stock; (xi) cure any ambiguity, correct or supplement
any provision which may be defective or inconsistent with any other provision,
or make any other provisions with respect to matters or questions arising under
the Indenture which shall not be inconsistent with the provisions of the
Indenture; provided, however, that no such modification or amendment may
adversely affect the interest of holders of Debt Securities of any series then
outstanding in any material respect; or (xii) if a Debt Security of any series
is guaranteed, to add a Guarantor pursuant to the requirements of the Indenture.
The holders of a majority in aggregate principal amount of the Debt
Securities of a series may waive compliance with certain restrictive covenants
and provisions of the Indenture with respect to that series.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement, the
payment of principal of, premium on, if any, and interest on any Subordinated
Debt Securities will be subordinated in right of payment, as set forth in the
applicable Subordinated Indenture, to the prior payment in full of all Senior
Indebtedness (as defined in the applicable Prospectus Supplement), whether
outstanding on the date of the Subordinated Indenture or thereafter incurred.
Unless otherwise provided in the applicable Prospectus Supplement, during
the continuance of any default in the payment of any Designated Senior
Indebtedness (as such term is defined in the applicable Prospectus Supplement)
no payment (other than payments previously made pursuant to the provisions
described under "-- Defeasance or Covenant Defeasance of Indenture") or
distribution of any assets of the Company of any kind or character (excluding
certain permitted equity interests or subordinated securities) shall be made on
account of the principal of, premium, if any, or interest on, the Subordinated
Debt Securities or on account of the purchase, redemption, defeasance or other
acquisition of, the Subordinated Debt Securities unless and until such default
has been cured, waived or has ceased to exist or such Designated Senior
Indebtedness (as such term is defined in the applicable Prospectus Supplement)
shall have been discharged or paid in full in cash or cash equivalents or in any
other form as acceptable to the holders of Senior Indebtedness after which the
Company shall resume making any and all required payments in respect of the
Subordinated Debt Securities, including any missed payments.
Unless otherwise provided in the applicable Prospectus Supplement, 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 Trustee and the Company 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 the provisions described under "-- Defeasance or Covenant Defeasance
of Indenture") or distribution of any assets of the Company of any kind or
character (excluding certain permitted equity or subordinated securities) may be
made by the Company on account of the principal of, premium, if any, or interest
on, the Subordinated Debt Securities or on account of the purchase, redemption,
defeasance or other acquisition of, the Subordinated Debt Securities for the
period specified below (the "Payment Blockage Period").
Unless otherwise provided in the applicable Prospectus Supplement, the
Payment Blockage Period shall commence upon the receipt of notice of the
Non-payment Default by the Trustee from a representative of the holders 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
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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 as 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 the Company
or the Trustee from the representative of holders of Designated Senior
Indebtedness or the holders of at least a majority of the Designated Senior
Indebtedness initiating such Payment Blockage Period, after which, in the case
of clauses (i), (ii) and (iii), the Company shall promptly resume making any and
all required payments in respect of the Subordinated Debt Securities, including
any missed payments. In no event will a Payment Blockage Period extend beyond
179 days from the date of the receipt by the Company or the 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 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 Subordinated Debt Securities 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.
Unless otherwise provided in the applicable Prospectus Supplement, if the
Company fails to make any payment on Subordinated Debt Securities when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Subordinated
Debt Securities to accelerate the maturity thereof. See "-- Events of Default."
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that in the event of any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or its
assets, or any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or any assignment for the benefit of creditors or any other
marshalling of assets or liabilities of the Company, 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 on account of the principal
of, premium, if any, or interest on the Subordinated Debt Securities.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Subordinated Debt Securities, and funds
which would be otherwise payable to the holders of the Subordinated Debt
Securities 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 the
Company may be unable to meet its obligations fully with respect to the
Subordinated Debt Securities.
To the extent provided in the applicable Prospectus Supplement, any
Guarantee of Subordinated Debt Securities by a Guarantor will be an unsecured
subordinated obligation of such Guarantor, ranking pari passu with, or senior in
right of payment to, all other existing and future indebtedness of such
Guarantor that is expressly subordinated to Guarantor Senior Indebtedness (as
defined in the applicable Indenture). To the extent provided in the applicable
Prospectus Supplement, indebtedness evidenced by the Guarantees will be
subordinated to Guarantor Senior Indebtedness to the same extent as the
Subordinated Debt Securities are subordinated to Senior Indebtedness and during
any period when payment on the Subordinated Debt Securities is blocked by
Designated Senior Indebtedness, payment on the Guarantees will be similarly
blocked.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the Company may, at its option, at any time, elect
to have the obligations of the Company, each of the Guarantors (if any) and any
other obligor upon the Debt Securities discharged with respect to the
outstanding Debt Securities of an applicable series ("defeasance"). Such
defeasance means that the Company, each of the Guarantors (if any) and any other
obligor under the Indenture shall be deemed to have paid and discharged the
entire indebtedness represented by the outstanding Debt Securities of such
series, except for (i) the rights of holders of outstanding Debt Securities to
receive payments in respect of the principal of, premium, if any, and interest
on such Debt Securities when such payments are due, (ii) the Company's
obligations with respect to the Debt Securities concerning issuing temporary
Debt Securities, registration of Debt Securities, mutilated, destroyed, lost or
stolen Debt Securities, 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, (iv) the defeasance provisions of the
Indenture and (v) if the Debt Security is convertible, the right of the holder
to convert the Debt Security pursuant to the terms of the Debt Security. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and any Guarantor released with respect to certain
covenants that are described in the 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 Debt Securities of the applicable series.
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 Notes.
Unless otherwise provided in the applicable Prospectus Supplement, in order
to exercise either defeasance or covenant defeasance, (i) the Company must
irrevocably deposit with the Trustee, in trust, for the benefit of the holders
of the Debt Securities, cash in United States dollars, U.S. Government
Obligations (as defined in the applicable 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
Trustee, to pay and discharge the principal of, premium, if any, and interest on
the applicable Debt Securities on the stated maturity of such principal or
installment of principal or interest (or on the "Defeasance Redemption Date" as
defined in the applicable Prospectus Supplement), if when exercising either
defeasance or covenant defeasance, the Company has delivered to the Trustee an
irrevocable notice to redeem all of the outstanding Debt Securities of the
applicable series on the Defeasance Redemption Date; (ii) in the case of
defeasance, the Company shall have delivered to the Trustee an opinion of
independent counsel in the United States stating that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of issuance of the applicable Debt Securities,
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 Debt Securities
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, 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 applicable Debt
Securities 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 (vii) or (viii) under the first paragraph
under "-- Events of Default" are 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 Trustee for the applicable Debt Securities to
have a conflicting interest with respect to any securities of the Company or any
Guarantor; (vi) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, the Indenture or any
other material agreement or instrument to which the Company or any Guarantor is
a party or by which it is bound; (vii) the Company shall have delivered to the
Trustee
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an opinion of independent counsel to the effect that (A) the trust funds will
not be subject to any rights of holders of Senior Indebtedness or Guarantor
Senior Indebtedness, including, without limitation, those arising under the
Indenture and (B) 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) 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 Debt Securities or any guarantee over the other creditors of the
Company or any Guarantor with the intent of defeating, hindering, delaying or
defrauding creditors of the Company, any Guarantor or others; (ix) 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 Debt Securities on the date
of such deposit or at any time ending on the 91st day after the date of such
deposit; and (x) 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 relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with.
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, notices
to holders of registered Debt Securities will be given by mail to the addresses
of such holders as they may appear in the Register.
OWNER OF DEBT SECURITIES
Unless otherwise provided in the applicable Prospectus Supplement relating
to the Debt Securities of a particular series, the Company, the Trustees and any
agent of the Company or the Trustees may treat the person in whose name a Debt
Security in registered form is registered, and may treat the bearer of a Debt
Security in bearer form, as the absolute owner thereof (whether or not such Debt
Security may be overdue) for the purpose of receiving payment and for all other
purposes.
GOVERNING LAW
Unless otherwise provided in the applicable Prospectus Supplement, the
Indenture, the Debt Securities and any guarantees will be governed by the laws
of the State of New York.
THE TRUSTEE
The Trustee for each series of Debt Securities will be identified in the
applicable Prospectus Supplement. Each Indenture will contain certain
limitations on the right of a Trustee thereunder, as a creditor of the Company,
to obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise.
The holders of a majority in principal amount of all outstanding Debt
Securities of a series (or if more than one series is affected thereby, of all
series so affected, voting as a single class) will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy or
power available to the Trustee for such series.
In case an Event of Default shall occur (and shall not be cured) under any
Indenture relating to a series of Debt Securities and is known to the Trustee
under such Indenture, such Trustee shall exercise such of the rights and powers
vested in it by such Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs. Subject to such provisions, no Trustee will be
under any obligation to exercise any of its rights or powers under the
applicable Indenture at the request of any of the Holders of Debt Securities
unless they shall have offered to such Trustee security and indemnity
satisfactory to it.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company currently has two classes of Common Stock, each having a par
value of $.01 per share, and two classes of issued and outstanding Preferred
Stock, also with a par value of $.01 per share. Upon the issuance of all shares
covered by this Prospectus, 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, will retain 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. As of November 30, 1997, 39,164,553
shares of Common Stock, consisting of 13,414,472 shares of Class A Common Stock
and 25,750,081 shares of Class B Common Stock, were issued and outstanding,
1,071,381 shares of Series B Preferred Stock were issued and outstanding,
2,062,000 shares of Series C Preferred Stock were issued and outstanding and
3,450,000 shares of Series D Convertible Exchangeable Preferred Stock were
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 defined as any "Rule 13e-3
transaction," as such term is defined in Rule 13e-3 promulgated under 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
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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 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 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
therefor 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, the terms of the Series C Preferred Stock and certain other
debt of the Company, the Company's ability to declare Common Stock dividends is
restricted.
EXISTING PREFERRED STOCK
Series B Preferred Stock. As partial consideration for the acquisition of
assets from River City, 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 Preferred Stock. Each share of Series B Preferred Stock has a
liquidation preference of $100 and, after payment of this preference, is
entitled to share in distributions made to holders of shares of (plus all
accrued and unpaid dividends through the determination date) Common Stock. Each
holder of a share of Series B 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 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. After a "Trigger Event" (as defined
below), the Series B 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 ("Senior Securities"), as to which the
Series B Preferred Stock will have the same rank. The Series C Preferred Stock
are Senior Securities. The Prospectus Supplement for any Preferred Securities
sold pursuant to this Prospectus that are to be designated Senior Securities
will so indicate. A 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 (1) by the Company for any reason other than
for Cause (as defined in the employment agreement) or (2) by Barry Baker upon
the occurrence of certain events described in the employment agreement.
The holders of Series B 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 Preferred Stock is entitled to share in any
dividends paid to holders of Common Stock, with each share of Series B
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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 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
Preferred Stock at the rate of $100 per share. Dividends on Series B Preferred
Stock are payable in preference to the holders of any other class of capital
stock of the Company, except for Senior Securities, which will rank senior to
the Series B Preferred Stock as to dividends until a Trigger Event, after which
Senior Securities will have the same rank as Series B Preferred Stock as to
dividends.
The Company may redeem shares of Series B 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 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 Preferred Stock votes together with
the Class A Common Stock as a single class, except that the Series B 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 Preferred Stock and actions affecting the rights of holders
of Series B Preferred Stock.
Shares of Series B Preferred Stock are convertible at any time into shares
of Class A Common Stock, with each share of Series B 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 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 Preferred Stock. All shares of
Series B 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. As of November 30, 1997, the Company has issued
and outstanding 2,062,000 shares of Series C Preferred Stock, all of which
shares are held by KDSM, Inc., a wholly-owned subsidiary of the Company. Each
share of Series C Preferred Stock has a liquidation preference (the "Liquidation
Amount") of $100 plus an amount equal to any accumulated and unpaid dividends
(whether or not earned or declared) to the date of payment. KDSM, Inc. purchased
the Series C Preferred Stock from the proceeds of $206,200,000 aggregate
principal amount of KDSM Senior Debentures, all of which are held by the Trust,
a trust all of the common securities of which are held by KDSM, Inc. The
obligations of KDSM, Inc. under the KDSM Senior Debentures are secured by the
Series C Preferred Stock. The Trust purchased the KDSM Senior Debentures from
the proceeds of $200 million aggregate liquidation value of Preferred Securities
plus the proceeds of the issuance to KDSM, Inc. of $6.2 million of common
securities of the Trust. Sinclair has guaranteed the obligations under the
Preferred Securities, on a junior subordinated basis in an amount 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 the satisfaction of all claims of other parties which, as a matter of law,
are prior to those of the holders of the Preferred Securities. Sinclair has also
agreed to fully and unconditionally guarantee the payment of the KDSM Senior
Debentures on a junior subordinated basis if and effective as of the time the
KDSM Senior Debentures are distributed to holders of the Preferred Securities in
certain circumstances.
The Series C Preferred Stock has a maturity date of March 15, 2009, and
will be mandatorily redeemable on its maturity date. With respect to dividend
rights and rights upon liquidation, winding-up and dissolution of Sinclair, the
Series C Preferred Stock ranks senior to the Sinclair's common stock and
Sinclair's Series B Preferred Stock except that upon a Trigger Event the Series
C Preferred Stock will rank pari passu with the Series B Preferred Stock in
respect of dividend rights and rights upon liquidation, dissolution and
winding-up of Sinclair.
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Dividends on the Series C Preferred Stock are payable quarterly at a rate
per annum of 12 5/8% of the stated Liquidation Amount of $100 per share and
cumulate from March 12, 1997. Dividends are payable quarterly 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. Sinclair has the right, at
any time and from time to time, to defer dividend payments for up to three
consecutive quarters; provided that Sinclair will be required to pay all
dividends due and owing on the Series C Preferred Stock at least once every four
quarters and must pay all dividends due and owing on the Series C Preferred
Stock on March 25, 2009. The remedy for the holders of the Series C Preferred
Stock 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 Series C
Preferred Stock) is the right to elect two directors to Sinclair's board of
directors.
Holders of the Series C Preferred Stock do not have any voting rights in
ordinary circumstances. However, the vote of the holders of a majority in
aggregate Liquidation Amount of outstanding Series C Preferred Stock (100% in
certain circumstances) is required to approve any amendment to the Amended
Certificate or the Articles Supplementary to the Amended Certificate that govern
the Series C Preferred Stock (the "Series C Articles Supplementary") that would
adversely affect the powers, preferences or special rights of the holders of the
Series C Preferred Stock or cause the liquidation, dissolution or winding-up of
Sinclair. In addition, the approval of the holders of a majority in aggregate
Liquidation Amount of outstanding Series C Preferred Stock is required to
approve the issuance of any preferred stock by Sinclair which is senior to the
Series C Preferred Stock in right of payment. In addition, upon a Voting Rights
Triggering Event (which is defined to include a failure to pay dividends as
described above, a failure to make a Change of Control Offer (as defined), a
failure to redeem the Series C Preferred Stock upon maturity and a breach of the
covenants described below), the holders of a majority in aggregate Liquidation
Amount of the outstanding Series C Preferred Stock have the right to elect two
directors to the board of directors of Sinclair. KDSM, Inc., as the holder of
the Series C Preferred Stock, has agreed not to take or consent to any actions
or waive any rights under the Series C Preferred Stock or elect any directors
without the approval of the holders of the majority in principal amount of the
KDSM Senior Debentures. The Trust, as the holder of the KDSM Senior Debentures,
has in turn agreed that it will not provide such approval without the approval
of the holders of a majority in aggregate Liquidation Value of the outstanding
Preferred Securities (100% in certain circumstances).
The Series C Articles Supplementary contain certain covenants, including,
but not limited to, covenants with respect 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.
Upon a Change of Control of Sinclair (as defined), Sinclair is required to
make an offer (a "Change of Control Offer") to redeem all or a portion of the
shares of Series C Preferred Stock at 101% of such shares' aggregate Liquidation
Amount, plus accrued and unpaid dividends, if any, to the date of redemption
unless and for so long as such redemption is prohibited by the terms of the Bank
Credit Agreement or the Existing Indentures. If Sinclair does not make and
consummate a Change of Control Offer upon a Change of Control, the holders of
the Series C Preferred Stock will have the right to elect two directors to the
board of directors of Sinclair.
The Company has the option (a) at any time on or after March 15, 2002 to
redeem the Series C Preferred Stock, in whole or in part, in cash at redemption
prices declining from 105.813% to 100% (in 2006) of the Liquidation Amount, 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 Liquidation Amount of the Series C Preferred Stock,
with the proceeds of one or more Public Equity Offerings (as defined), at a cash
redemption price of 111.625% of the principal amount thereof, plus accrued
dividends to the date of redemption; provided that after any such redemption at
least 66 2/3% of the aggregate Liquidation Amount of the Series C Preferred
Stock originally issued remain outstanding and that such redemption be made
within 180 days of each such Public Equity Offering.
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Series D Convertible Exchangeable Preferred Stock. As of November 30, 1997,
the Company had issued and outstanding 3,450,000 shares of Series D Convertible
Exchangeable Preferred Stock. Each share of Series D Convertible Exchangeable
Preferred Stock has a liquidation preference of $50 plus an amount equal to any
accrued and unpaid dividends.
With respect to dividends and amounts payable upon the liquidation,
dissolution or winding up of the Company, the Series D Convertible Exchangeable
Preferred Stock will rank (i) junior in right of payment to all indebtedness of
the Company and its Subsidiaries, (ii) senior to the Class A Common Stock and
the Class B Common Stock, (iii) pari passu with the Series C Preferred Stock and
(iv) senior to the Company's Series B Preferred Stock except that upon a Trigger
Event the Series D Convertible Exchangeable Preferred Stock will rank pari passu
with the Series B Preferred Stock in respect of dividends and distributions upon
liquidation, dissolution and winding-up of the Company.
Dividends on the Series D Convertible Exchangeable Preferred Stock are
cumulative and accrue from September 23, 1997, the date of issuance, and are
payable quarterly commencing on December 15, 1997, in the amount of $3.00 per
share annually, when, as and if declared by the Board of Directors out of
legally available funds.
Holders of Convertible Exchangeable Preferred Stock do not have any voting
rights in ordinary circumstances. In exercising any voting rights, each
outstanding share of Series D Convertible Exchangeable Preferred Stock will be
entitled to one vote. Whenever dividends on the Series D Convertible
Exchangeable Preferred Stock are in arrears in an aggregate amount equal to at
least six quarterly dividends (whether or not consecutive), the size of the
Company's board of directors will be increased by two (or, if the size of the
board of directors cannot be so increased, the Company shall cause the removal
or resignation of a sufficient number of directors), and the holders of a
majority of the Series D Convertible Exchangeable Preferred Stock, voting
separately as a class, will be entitled to select two directors to the board of
directors at (i) any annual meeting of stockholders at which directors are to be
elected held during the period when the dividends remain in arrears or (ii) a
special meeting of stockholders called by the Company at the request of the
holders of the Series D Convertible Exchangeable Preferred Stock. These voting
rights will terminate when all dividends in arrears and for the current
quarterly period have been paid in full or declared and set apart for payment.
The term of office of the additional directors so elected will terminate
immediately upon that payment or provision for payment. Under certain
circumstances, the Company may be required to pay additional dividends if it
fails to provide for the board seats referred to above.
In addition, so long as any Series D Convertible Exchangeable Preferred
Stock is outstanding, the Company will not, without the affirmative vote or
consent of the holders of at least 66 2/3% of all outstanding shares of Series D
Convertible Exchangeable Preferred Stock (i) amend, alter or repeal (by merger
or otherwise) any provision of the Amended Certificate, or the By-Laws of the
Company so as to affect adversely the relative rights, preferences,
qualifications, limitations or restrictions of the Series D Convertible
Exchangeable Preferred Stock, (ii) authorize any new class of Senior Dividend
Stock (as defined), any Senior Liquidation Stock (as defined) or any security
convertible into Senior Dividend Stock or Senior Liquidation Stock, or (iii)
effect any reclassification of the Series D Convertible Exchangeable Preferred
Stock.
The shares of Series D Convertible Exchangeable Preferred Stock are
convertible at the option of the holder at any time, unless previously redeemed
or exchanged, into Class A Common Stock of the Company, at a conversion price of
$45.625 per share of Class A Common Stock (equivalent to a conversion rate of
1.0959 shares of Class A Common Stock per share of Series D Convertible
Exchangeable Preferred Stock), subject to adjustment in certain events.
Upon the occurrence of a Change of Control (as defined), each share of
Series D Convertible Exchangeable Preferred Stock will be convertible at the
option of its holder for a limited period into the number of shares of Class A
Common Stock determined by dividing the $50 liquidation preference of such
share, plus accrued and unpaid dividends, by the greater of (i) the average of
the last reported sales price per share of the Class A Common Stock for the last
five trading days before the Change of Control or (ii) $26.42, as adjusted for
stock splits or combinations. Upon a Change of Control, the Company may
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elect to pay holders of the Series D Convertible Exchangeable Preferred Stock
exercising their special conversion rights an amount in cash equal to the $50
liquidation preference of the Series D Convertible Exchangeable Preferred Stock
plus any accrued and unpaid dividends, in which event no conversion pursuant to
the exercise of the special conversion rights will occur, unless the Company
defaults in payments of such amounts. A Change of Control will result in an
event of default under the Bank Credit Agreement and could result in the
acceleration of all indebtedness under the Bank Credit Agreement. Moreover, the
Bank Credit Agreement prohibits the repurchase of the Series D Convertible
Exchangeable Preferred Stock by the Company. A Change of Control will also
require the Company to offer to redeem the Existing Notes and the Series C
Preferred Stock.
The Series D Convertible Exchangeable Preferred Stock is redeemable at the
Company's option, in whole or from time to time in part, for cash at any time on
or after September 20, 2000, initially at a price per share equal to 104.20% of
the liquidation preference thereof, declining ratably on or after September 15
of each year thereafter to a redemption price equal to 100% of such liquidation
preference per share on or after September 15, 2007 plus, in each case, accrued
and unpaid dividends.
Subject to certain conditions, the Company may, at its option, on any
scheduled date for the payment of dividends on the Series D Convertible
Exchangeable Preferred Stock commencing on December 15, 2000, exchange the
Series D Convertible Exchangeable Preferred Stock, in whole but not in part, for
the Company's 6% Convertible Subordinated Debentures due 2012 (the "Exchange
Debentures"). Holders of Series D Convertible Exchangeable Preferred Stock so
exchanged will be entitled to $1,000 principal amount of Exchange Debentures for
each $1,000 of liquidation preference of Series D Convertible Exchangeable
Preferred Stock held by such holders at the time of exchange plus an amount per
share in cash equal to all accrued but unpaid dividends (whether or not
declared) thereon to the date of exchange. The Exchange Debentures will bear
interest payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year, commencing on the first such payment date following
the date of exchange. Beginning on December 15, 2000, at the Company's option,
the Exchange Debentures will be redeemable, in whole or in part, at redemption
prices beginning at 104.20% of the principal amount of the Exchange Debentures
and decreasing to 100% of such principal amount on September 15, 2007, plus
accrued and unpaid interest. Under certain circumstances involving a Change of
Control, holders will have the right to require the Company to purchase their
Exchange Debentures at a price equal to 100% of the principal amount thereof
plus accrued interest. The Exchange Debentures will be convertible into Class A
Common Stock on substantially the same terms as the Series D Convertible
Exchangeable Preferred Stock is convertible into Class A Common Stock. The
Exchange Debentures will be subordinated to all Senior Indebtedness.
NEW PREFERRED STOCK
The particular terms of any series of Preferred Stock offered hereby will
be set forth in the Prospectus Supplement relating thereto. The rights,
preferences, privileges and restrictions, including dividend rights, voting
rights, terms of redemption, retirement and sinking fund provisions and
liquidation preferences, if any, of the Preferred Stock of each series offered
hereby will be fixed or designated pursuant to Articles Supplementary adopted by
the Board of Directors or a duly authorized committee thereof. The terms, if
any, on which shares of any series of Preferred Stock offered hereby are
convertible or exchangeable into Common Stock or Debt Securities will also be
set forth in the Prospectus Supplement relating thereto. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of the Company, in which case the number of shares of
Common Stock to be received by the holders of Preferred Stock offered hereby
would be calculated as of a time and in the manner stated in the applicable
Prospectus Supplement. The description of the terms of a particular series of
Preferred Stock offered hereby that will be set forth in the applicable
Prospectus Supplement does not purport to be complete and is qualified in its
entirety by reference to the Articles Supplementary relating to such series.
DEPOSITARY SHARES
General. The Company may, at its option, elect to offer receipts for
fractional interests ("Depositary Shares") in Preferred Stock, rather than full
shares of Preferred Stock. In such event, receipts
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("Depositary Receipts") for Depositary Shares, each of which will represent a
fraction (to be set forth in the Prospectus Supplement relating to a particular
series of Preferred Stock) of a share of a particular series of Preferred Stock,
will be issued as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a depositary to be named by the Company in a Prospectus
Supplement (the "Depositary"). Subject to the terms of the Deposit Agreement,
each owner of a Depositary Share will be entitled, in proportion to the
applicable fraction of a share of Preferred Stock represented by such Depositary
Share, to all the rights and preferences of the Preferred Stock represented
thereby (including dividend, voting, redemption, subscription and liquidation
rights). The following summary of certain provisions of the Deposit Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Deposit Agreement, including
the definitions therein of certain terms. Copies of the forms of Deposit
Agreement and Depositary Receipt will be filed as exhibits to or incorporated by
reference into the Registration Statement of which this Prospectus is a part,
and the following summary is qualified in its entirety by reference to such
exhibits.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred Stock
to the record holders of Depositary Shares relating to such Preferred Stock in
proportion to the numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares in
an equitable manner, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may sell such property and
distribute the net proceeds from such sale to such holders. The amount
distributed in any of the foregoing cases may be reduced by any amounts required
to be withheld by the Company or the Depositary on account of taxes.
Withdrawal of Preferred Stock. Upon surrender of Depositary Receipts at a
designated office of the Depositary, the owner of the Depositary Shares
evidenced thereby will be entitled to delivery at such office of certificates
evidencing Preferred Stock (but only in whole shares of Preferred Stock)
represented by such Depositary Shares. If the Depositary Receipts delivered by
the holder evidence a number of Depositary Shares in excess of the number of
whole shares of Preferred Stock to be withdrawn, the Depositary will deliver to
such holder at the same time a new Depositary Receipt evidencing such excess
number of Depositary Shares.
Redemption of Depositary Shares. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot, pro rata
or by any other equitable method as may be determined by the Depositary.
Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of the
Preferred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the number of shares of the
Preferred Stock represented by such Depositary Shares in accordance with such
instructions, and the Company will agree to take all reasonable action which may
be deemed necessary by the Depositary in order to enable
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<PAGE>
the Depositary to do so. The Depositary will abstain from voting shares of the
Preferred Stock to the extent it does not receive specific instructions from the
holder of Depositary Shares representing such Preferred Stock.
Amendment and Termination of the Deposit Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Depositary. However, any amendment which materially and adversely alters the
rights of the holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement will only terminate if
(i) all outstanding Depositary Shares have been redeemed or (ii) there has been
a final distribution in respect of the Preferred Stock, including in connection
with any liquidation, dissolution or winding up of the Company and such
distribution has been distributed to the holders of Depositary Receipts.
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointments. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
Charges of Depositary. The Company will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Company will pay charges of the Depositary in connection with
the initial deposit of the Preferred Stock and issuance of Depositary Receipts,
all withdrawals of shares of Preferred Stock by owners of the Depositary Shares
and any redemption of the Preferred Stock. Holders of Depositary Receipts will
pay other transfer and other taxes and governmental charges and such other
charges as they are expressly provided in the Deposit Agreement to be for their
accounts.
Miscellaneous. The Depositary will forward all reports and communications
from the Company which are delivered to the Depositary and which the Company is
required or otherwise determines to furnish to the holders of the Preferred
Stock.
Neither the Depositary nor the Company will be liable under the Deposit
Agreement to holders of Depositary Receipts other than for its gross negligence,
willful misconduct or bad faith. Neither the Company nor the Depositary will be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is furnished.
The Company and the Depositary may rely upon written advice of counsel or
accountants, or upon information provided by persons presenting Preferred Stock
for deposit, holders of Depositary Receipts or other persons believed to be
competent and on documents believed to be genuine.
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
General Corporation 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 Stock-
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holder 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 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.
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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 (as defined) if after giving
effect to such issuance or transfer, the capital stock held by or for the
account of any alien 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.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Class A Common Stock is
The First National Bank of Boston. The Transfer Agent and Registrar for any
Preferred Securities issued pursuant to this Prospectus will be specified in the
applicable Prospectus Supplement.
PLAN OF DISTRIBUTION
The Securities offered hereby may be sold by the Company or the Selling
Stockholders on a negotiated or competitive bid basis through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate, dealers or agents designated from time to time, or directly to other
purchasers. The distribution of the Securities offered hereby may be effected
from time to time in one or more transactions at a fixed price or prices, which
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. To the extent
required, any Prospectus Supplement with respect to the Securities will set
forth the method of distribution of the offered Securities, of the offering and
the proceeds to the Company from the sale thereof, any underwriting discounts,
commission and other terms constituting compensation to underwriters and
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<PAGE>
other items of price, and any discounts or concessions allowed or reallowed or
paid to dealers. Any public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If underwriters are utilized, the Securities being sold to them will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price, or at varying prices determined at the time of
sale. The Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. To the extent required, the underwriter or
underwriters with respect to the Securities being offered by the Company or the
Selling Stockholders will be named in the Prospectus Supplement relating to such
offering and, if an underwriting syndicate is used, the managing underwriter or
underwriters will be set forth on the cover page of such Prospectus Supplement.
Any underwriting agreement will provide that the obligations of the underwriters
are subject to certain conditions precedent.
Underwriters may sell the Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they act as agents. If a dealer is utilized in the sale of the Securities,
the Company or the Selling Stockholders will sell the Securities to the dealer
as principal. The dealer may then resell the Securities to the public at varying
prices to be determined by the dealer at the time of sale. To the extent
required, any dealer involved in the offer or sale of the Securities in respect
of which this Prospectus is delivered will be set forth in the Prospectus
Supplement.
The Securities may be sold directly by the Company or the Selling
Stockholders or through agents designated by the Company or the Selling
Stockholders from time to time. To the extent required, any agent involved in
the offer or sale of the securities in respect of which this Prospectus is
delivered will be set forth in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment. This Prospectus is not the
exclusive means for resales of Class A Common Stock by the Selling Stockholders
who may, for example, sell Class A Common Stock under Rule 144 under the
Securities Act.
Any underwriters, dealers and agents that participate in the distribution
of the Securities may be deemed to be underwriters as the term is defined in the
Securities Act and any discounts or commissions received by them from the
Company or the Selling Stockholders and any profits on the resale of the
Securities by them may be deemed to be underwriting discounts and commissions
under the Securities Act. Underwriters, dealers and agents may be entitled,
under agreements that may be entered into with the Company or the Selling
Stockholders, to indemnification against or to contribution toward certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments that the underwriters, dealers or agents may be
required to make in respect of such liabilities.
Underwriters, dealers and agents may engage in other transactions with or
perform other services for the Company or the Selling Stockholders. To the
extent required, any such relationships will be set forth in a Prospectus
Supplement.
LEGAL MATTERS
The validity of the securities being offered hereby and certain other legal
matters regarding the securities will be passed upon for the Company by Thomas &
Libowitz, P.A., Baltimore, Maryland, counsel to the Company, and by Wilmer,
Cutler & Pickering, Baltimore, Maryland, special securities counsel to the
Company. Certain legal matters under the Communications Act of 1934, as amended
and the rules and regulations promulgated thereunder by the FCC will be passed
upon for the Company by Fisher Wayland Cooper Leader & Zaragoza L.L.P.,
Washington, D.C. Basil A. Thomas, a director of the Company, is of counsel to
Thomas & Libowitz, P.A.
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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 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 River City Broadcasting, L.P. as
of December 31, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1995 have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
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 the
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 Flint TV, Inc. as of December 31, 1994 and 1995
and for each of the years ended December 31, 1994 and 1995, incorporated by
reference in this Prospectus and elsewhere in this Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their reports with respect thereto, and are incorporated herein in reliance
on the authority of said firm as experts in giving said reports.
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) 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.
The financial statements of Heritage Media Services, Inc. -- Broadcasting
Segment as of and for the year ended December 31, 1996, incorporated by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their reports with respect thereto, and are incorporated herein in reliance
on the authority of said firm as experts in giving said reports.
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======================================== =======================================
NO DEALER, SALESPERSON OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE $150,000,000
CONTAINED IN THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS, IN
CONNECTION WITH THE OFFER CONTAINED SINCLAIR BROADCAST
HEREIN, AND, IF GIVEN OR MADE, SUCH GROUP, INC.
INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE
NOTES BY ANYONE IN ANY JURISDICTION IN
WHICH THE OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT % SENIOR SUBORDINATED
QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER NOTES DUE 2007
OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL CREATE ANY
IMPLICATION THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THIS DATE HEREOF.
-----------------------------------
TABLE OF CONTENTS
[SBG
Sinclair Broadcast Group
Logo]
PAGE NO.
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PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary ... S-1
Historical and Pro Forma Ratios of ----------------------------
Earnings to Fixed Charges .... S-12
Use of Proceeds .................. S-13
Capitalization .................. S-14
Description of the Notes ......... S-15 PROSPECTUS SUPPLEMENT
Description of Indebtedness ...... S-46
Underwriting ..................... S-49 DECEMBER , 1997
Legal Matters .................. S-50
PROSPECTUS
Available Information ............ 1
Incorporation of Certain Documents
by Reference ................. 1
The Company ..................... 3 ----------------------------
Risk Factors ..................... 3
Use of Proceeds .................. 19
Historical and Pro Forma Ratio of
Earnings to Fixed Charges .... 20 SALOMON SMITH BARNEY
Description of Debt Securities ... 21
Description of Capital Stock ... 35 CHASE SECURITIES INC.
Plan of Distribution ............ 44
Legal Matters .................. 45
Experts ........................ 46
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