AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1997
REGISTRATION NO. 333-12257
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-3/A
AMENDMENT NO. 6
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
SINCLAIR BROADCAST GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 4833 52-1494660
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211
(410) 467-5005
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
DAVID D. SMITH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SINCLAIR BROADCAST GROUP, INC.
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211
(410) 467-5005
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
SEE TABLE OF ADDITIONAL REGISTRANTS.
------------------
With a copy to:
<TABLE>
<S> <C>
GEORGE P. STAMAS, ESQ. STEVEN A. THOMAS, ESQ.
WILMER, CUTLER & PICKERING THOMAS & LIBOWITZ, P.A.
2445 M STREET, N.W. 100 LIGHT STREET -- SUITE 1100
WASHINGTON, D.C. 20037 BALTIMORE, MD 21202
(202) 663-6000 (410) 752-2468
</TABLE>
------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable and from time to time after the effective date
of this Registration Statement.
------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
ADDRESS, INCLUDING
ZIP CODE,
PRIMARY AND TELEPHONE NUMBER,
EXACT NAME OF STATE OR OTHER STANDARD I.R.S. INCLUDING AREA CODE,
REGISTRANT AS JURISDICTION OF INDUSTRIAL EMPLOYER OF REGISTRANT'S
SPECIFIED IN INCORPORATION OR CLASSIFICATION INDENTIFICATION PRINCIPAL EXECUTIVE
ITS CHARTER ORGANIZATION CODE NUMBER NUMBER OFFICES
- ------------------------- ------------------ ---------------- ----------------- --------------------------
<S> <C> <C> <C> <C>
Chesapeake Television, Maryland 4833 52-1590917 2000 West 41st Street
Inc. Baltimore, Maryland 21211
410/467-5005
Chesapeake Television Delaware 4833 51-0336990 2000 West 41st Street
Licensee, Inc. Baltimore, Maryland 21211
410/467-5005
FSF-TV, Inc. North Carolina 4833 56-1739096 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
KABB Licensee, Inc. Delaware 4833 52-1974581 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
KDNL Licensee, Inc. Delaware 4833 52-1974579 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
KSMO, Inc. Maryland 4833 52-1836395 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
KSMO Licensee, Inc. Delaware 4833 52-1966077 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
KUPN Licensee, Inc. Maryland 4833 52-2016990 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
SCI-Indiana Licensee, Delaware 4833 52-1974576 2000 West 41st Street
Inc. Baltimore, Maryland 21211
410/467-5005
SCI-Sacramento Delaware 4833 52-1974575 2000 West 41st Street
Licensee, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Communica- Maryland 4833 52-1977539 2000 West 41st Street
tions, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of Albu- Maryland 4833 52-1976547 2000 West 41st Street
querque, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of Albu- Delaware 4833 52-1974593 2000 West 41st Street
querque Licensee, Baltimore, Maryland 21211
Inc. 410/467-5005
Sinclair Radio of Maryland 4833 52-1975701 2000 West 41st Street
Buffalo, Inc. Baltimore, Maryland 21211
410/467-5005
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS, INCLUDING
ZIP CODE,
PRIMARY AND TELEPHONE NUMBER,
EXACT NAME OF STATE OR OTHER STANDARD I.R.S. INCLUDING AREA CODE,
REGISTRANT AS JURISDICTION OF INDUSTRIAL EMPLOYER OF REGISTRANT'S
SPECIFIED IN INCORPORATION OR CLASSIFICATION INDENTIFICATION PRINCIPAL EXECUTIVE
ITS CHARTER ORGANIZATION CODE NUMBER NUMBER OFFICES
- ------------------------- ------------------ ---------------- ----------------- --------------------------
<S> <C> <C> <C> <C>
Sinclair Radio of Buf- Delaware 4833 52-1974582 2000 West 41st Street
falo Licensee, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of Maryland 4833 52-1975786 2000 West 41st Street
Greenville, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of Delaware 4833 52-1974584 2000 West 41st Street
Greenville Licensee, Baltimore, Maryland 21211
Inc. 410/467-5005
Sinclair Radio of Los Maryland 4833 52-1975780 2000 West 41st Street
Angeles, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of Los Delaware 4833 52-1974591 2000 West 41st Street
Angeles Licensee, Baltimore, Maryland 21211
Inc. 410/467-5005
Sinclair Radio of Maryland 4833 52-1975784 2000 West 41st Street
Memphis, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of Delaware 4833 52-1974586 2000 West 41st Street
Memphis Licensee, Baltimore, Maryland 21211
Inc. 410/467-5005
Sinclair Radio of Maryland 4833 52-1975785 2000 West 41st Street
Nashville, Inc. Baltimore, aryland 21211
410/467-5005
Sinclair Radio of Nash- Delaware 4833 52-1974585 2000 West 41st Street
ville Licensee, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of New Maryland 4833 52-1975783 2000 West 41st Street
Orleans, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of New Delaware 4833 52-1974588 2000 West 41st Street
Orleans Licensee, Baltimore, Maryland 21211
Inc. 410/467-5005
Sinclair Radio of St. Maryland 4833 52-1975782 2000 West 41st Street
Louis, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of St. Delaware 4833 52-1974592 2000 West 41st Street
Louis Licensee, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio of Maryland 4833 52-1975788 2000 West 41st Street
Wilkes-Barre, Inc. Baltimore, Maryland 21211
410/467-5005
Sinclair Radio Delaware 4833 52-1974583 2000 West 41st Street
of Wilkes-Barre Baltimore, Maryland 21211
Licensee, Inc. 410/467-5005
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS, INCLUDING
ZIP CODE,
PRIMARY AND TELEPHONE NUMBER,
EXACT NAME OF STATE OR OTHER STANDARD I.R.S. INCLUDING AREA CODE,
REGISTRANT AS JURISDICTION OF INDUSTRIAL EMPLOYER OF REGISTRANT'S
SPECIFIED IN INCORPORATION OR CLASSIFICATION INDENTIFICATION PRINCIPAL EXECUTIVE
ITS CHARTER ORGANIZATION CODE NUMBER NUMBER OFFICES
- ----------------------- ------------------ ---------------- ----------------- --------------------------
<S> <C> <C> <C> <C>
Superior Communica- Delaware 4833 61-1250982 2000 West 41st Street
tions of Kentucky, Baltimore, Maryland 21211
Inc. 410/467-5005
Superior Communica- Oklahoma 4833 73-1021304 2000 West 41st Street
tions of Oklahoma, Baltimore, Maryland 21211
Inc. 410/467-5005
Superior KY License Delaware 4833 61-1250983 2000 West 41st Street
Corp. Baltimore, Maryland 21211
410/467-5005
Superior OK License Delaware 4833 73-1438189 2000 West 41st Street
Corp. Baltimore, Maryland 21211
410/467-5005
Tuscaloosa Broadcast- Maryland 4833 52-1940000 2000 West 41st Street
ing, Inc. Baltimore, Maryland 21211
410/467-5005
WCGV, Inc. Maryland 4833 52-1836393 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WCGV Licensee, Inc. Delaware 4833 52-0349552 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WDBB, Inc. Maryland 4833 52-1947227 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WLFL, Inc. Maryalnd 4833 52-1911462 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WLFL Licensee, Inc. Delaware 4833 51-0364246 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WLOS Licensee, Inc. Delaware 4833 52-1974580 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WPGH, Inc. Maryland 4833 52-1742771 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WPGH Licensee, Inc. Maryland 4833 52-1742774 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WSMH, Inc. Maryland 4833 52-1952880 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ADDRESS, INCLUDING
ZIP CODE,
PRIMARY AND TELEPHONE NUMBER,
EXACT NAME OF STATE OR OTHER STANDARD I.R.S. INCLUDING AREA CODE,
REGISTRANT AS JURISDICTION OF INDUSTRIAL EMPLOYER OF REGISTRANT'S
SPECIFIED IN INCORPORATION OR CLASSIFICATION INDENTIFICATION PRINCIPAL EXECUTIVE
ITS CHARTER ORGANIZATION CODE NUMBER NUMBER OFFICES
- ------------------------ ------------------ ---------------- ----------------- --------------------------
<S> <C> <C> <C> <C>
WSMH Licensee, Inc. Delaware 4833 52-1939265 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WSTR, Inc. Maryland 4833 52-1836394 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WSTR Licensee, Inc. Maryalnd 4833 52-1958895 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WSYX, Inc. Maryland 4833 52-2050323 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WTTE, Channel 28, Inc. Maryland 4833 52-1313500 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WTTE, Channel 28 Maryland 4833 52-1742776 2000 West 41st Street
Licensee, Inc. Baltimore, Maryland 21211
410/467-5005
WTTO , Inc. Maryland 4833 52-1836391 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WTTO Licensee, Inc. Delaware 4833 51-0349553 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WTVZ, Inc. Maryland 4833 52-1903498 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WTVZ Licensee, Inc. Maryland 4833 52-1908393 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WYZZ, Inc. Maryland 4833 52-1959155 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
WYZZ Licensee, Inc. Delaware 4833 52-1959631 2000 West 41st Street
Baltimore, Maryland 21211
410/467-5005
</TABLE>
<PAGE>
PROSPECTUS
$1,000,000,000
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." To the extent
indicated in the accompanying Prospectus Supplement (the "Prospectus
Supplement"), certain stockholders of the Company (the "Selling Stockholders")
may from time to time offer up to 1,750,000 shares of Class A Common Stock. See
"Selling Stockholders" and "Plan of Distribution."
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
Debt (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.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is September 16, 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 and June 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, February 25, 1997, June 27, 1997, July 2, 1997,
July 14, 1997, July 17, 1997, July 29, 1997, August 13, 1997, August
26, 1997 and August 29, 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.
1
<PAGE>
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
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 Broadcasting 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 SECURITIES EXCHANGE ACT OF 1934. SEE "PLAN
OF DISTRIBUTION."
2
<PAGE>
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 four additional television
stations, and has pending acquisitions of the rights to provide programming to
two additional television stations. The Company believes it is also one of the
top 20 radio groups in the United States, when measured by the total number of
radio stations owned by the Company. The Company owns 27 radio stations, has
pending acquisitions of 24 radio stations and has options to acquire an
additional seven radio stations.
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 July 31, 1997, the Company had
outstanding long-term indebtedness (including current installments) of
approximately $1.2 billion. In addition, Sinclair Capital, a subsidiary trust of
the Company (the "Trust"), had issued and outstanding $200 million aggregate
liquidation amount of 115/8% 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, 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"), of which $633.7 million was outstanding as of July 31, 1997 and
expects to do so to finance its pending acquisition (the "Heritage Acquisition")
of assets from certain subsidiaries of Heritage Media Corporation, Inc.
(collectively, "Heritage"). The Company also had outstanding 1,106,608 shares of
Series B Convertible Preferred Stock with an aggregate liquidation preference of
$110.7 million as of July 31, 1997. 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
(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 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 and the issuance of the 1997 Notes 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 $145.9 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%.
3
<PAGE>
The $400 million revolving credit facility available to the Company under
the Bank Credit Agreement will be subject to reductions beginning March 31,
2000, and will mature on the last business day of December 2004. Payment of
portions of the $600 million term loan under the Bank Credit Agreement begins 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 $1.2 billion
will occur at various dates through May 31, 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 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 dividends. 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 indentures relating to the Existing Notes (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
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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 Debt (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 including 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 Debt has been paid in full in
cash or cash equivalents or in any other form acceptable to the holders of
Senior Debt, 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 Debt (as defined in the indenture relating
to Subordinated Debt Securities) is not paid when due or any other default on
Designated Senior Debt 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
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with respect to Designated Senior Debt, 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 the Notes --
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 the 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.
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.
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
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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) will be
required to be applied to the repayment of any Senior Debt 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 FCC regulations, the Controlling Stockholders and the Stockholder
Affiliates may continue to engage in the operation of the St. Petersburg,
Florida station and other already existing businesses. However, under Maryland
law, generally a corporate insider is precluded from acting on a business
opportunity in his or her individual capacity if that opportunity is one which
the corporation is financially able to undertake, is in the line of the
corporation's business and of practical advantage to the corporation, and is one
in which the corporation has an interest or reasonable expectancy. Accordingly,
the Controlling Stockholders generally are required to engage in new business
opportunities of the Company only through the Company unless a majority of the
Company's disinterested directors decide under the standards discussed above,
that it is not in the best interests of the Company to pursue such
opportunities. Non-Company activities of the Controlling Stockholders such as
those described above could, however, present conflicts of interest with the
Company in the allocation of management time and resources of the Controlling
Stockholders, a substantial majority of which is currently devoted to the
business of the Company.
In addition, there have been and will be transactions between the Company
and Glencairn Ltd. (with its subsidiaries, "Glencairn"), a corporation in which
relatives of the Controlling Stockholders beneficially own a majority of the
equity interests. Glencairn is the owner-operator and licensee of 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 August 29, 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
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(the "River City Acquisition"). In addition, in connection with the River City
Acquisition, the Company has entered into various ongoing agreements with River
City, including options to acquire assets that were not acquired at the time of
the initial closing of the River City Acquisition, and LMAs relating to stations
for which River City continues to own License Assets. See "Business --
Broadcasting Acquisition Strategy" in Sinclair's Form 8-K dated August 29, 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
Class B Common Stock, 100% of which is beneficially owned by the Controlling
Stockholders, entitles a holder to ten votes per share, except for "going
private" and certain other transactions for which the holder is entitled to one
vote per share. The Class A Common Stock, the Class B Common Stock and the
Series B 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 over 60% of the
outstanding voting capital stock (including the Series B Preferred Stock) of the
Company and control over 90% of all voting rights associated with the Company's
capital stock. As a result, any three of the Controlling Stockholders will be
able to elect a majority of the members of the Board of Directors of Sinclair
and, thus, will have the ability to maintain control over the operations and
business of the Company.
The Controlling Stockholders have entered into a stockholders' agreement
(the "Stockholders' Agreement") pursuant to which they have agreed, for a period
ending in 2005, to vote for each other as candidates for election to the board
of directors. In addition, in connection with the River City Acquisition, the
Controlling Stockholders and Barry Baker and Boston Ventures IV Limited
Partnership and Boston Ventures IVA Limited Partnership (collectively, "Boston
Ventures") have entered into a voting agreement (the "Voting Agreement")
pursuant to which the Controlling Stockholders have agreed to vote in favor of
certain specified matters including, but not limited to, the appointment of Mr.
Baker and Mr. Coppedge (or another designee of Boston Ventures) to the Company's
Board of Directors at such time as they are allowed to become directors pursuant
to Federal Communications Commission ("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
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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 August 29, 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
August 29, 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 DMA or Mr. Baker no longer has an attributable
interest in WTTV or WTTK in Indianapolis; and (ii) either the Company disposes
of its attributable interest in WTTE in Columbus or Mr. Baker no longer has an
attributable interest in WSYX in Columbus. There can be no assurance as to when
or whether these events will occur. The failure of Mr. Baker to become a
director and officer of the Company on or before August 31, 1997 may allow Mr.
Baker to terminate his employment agreement. The Company has no reason to
believe Mr. Baker will terminate his employment agreement in such event. 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/Greenville/Spartanburg 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 or sales services from
none to 27 radio stations. In addition, the Company has entered into an
agreement to acquire four television and 24 radio stations and the right to
provide programming services to two television stations in connection with the
Heritage Acquisition. There can be no assurance that the Company will be able to
continue to locate and complete acquisitions on the
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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 August 29, 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, including those to be acquired in the Heritage Acquisition. 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 programming services in Milwaukee, Wisconsin pursuant to an
LMA, WTTO, a station owned by the Company in Birmingham, Alabama, and WDBB, a
station to which the Company provides programming services in Tuscaloosa,
Alabama pursuant to an LMA, each of which was previously affiliated with Fox,
had their affiliation agreements with Fox terminated by Fox in December 1994,
September 1996 and September 1996, respectively. WVTV and WTTO are now
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 August 29, 1997, which is incorporated by reference
herein. The Company's UPN affiliation agreements expire in January 1998. The
non-renewal or termination of affiliations with Fox or any other network could
have a material adverse effect on the Company's operations.
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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. Two stations owned or
programmed by the Company are operated as affiliates with 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. 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, UPN has filed an 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. Certain subsidiaries of the Company
have filed an action in the Circuit Court for Baltimore City seeking declaratory
relief that their notice was effective to terminate the affiliations on January
15, 1998. 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
broadcasting ("DAB"). In April 1997, the FCC awarded two licenses for DAB. DAB
may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and national audiences.
The Company's stations face strong competition for market share and
advertising revenues in their respective markets from other local free
over-the-air radio and television broadcast stations, cable television and
over-the-air wireless cable television as well as newspapers, periodicals and
other entertainment media. Some competitors are part of larger companies with
greater resources than the Company. In addition, the FCC has adopted rules which
permit telephone companies to provide video services to homes on a
common-carrier basis without owning or controlling the product being
distributed, and proposed legislation could relax or repeal the telephone-cable
cross-ownership prohibition for all systems. See "Business of
Sinclair--Competition" in Sinclair's Form 8-K dated August 29, 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 imposed by
the 1996 Act and the removal of previous station ownership limitations have
sharply increased the competition for and prices of stations. The 1996 Act also
frees telephone companies, cable companies and others from some of the
restrictions which have previously precluded them from involvement in the
provision of video services. The 1996 Act may also have other effects on the
competition the Company faces, either in individual markets or in making
acquisitions.
11
<PAGE>
IMPACT OF NEW TECHNOLOGIES
The FCC has taken a number of steps to implement digital television ("DTV")
broadcasting service in the United States. In December 1996, the FCC adopted a
DTV broadcast standard and, in April 1997, made decisions in several pending
rulemaking proceedings that establish service rules and a plan for implementing
DTV. The FCC adopted a DTV Table of Allotments that provides all authorized
television stations with a second channel on which to broadcast a DTV signal.
The FCC has attempted to provide DTV coverage areas that are comparable to
stations' existing service areas. The FCC has ruled that television broadcast
licensees may use their digital channels for a wide variety of services such as
high-definition television, multiple standard definition television programming,
audio, data, and other types of communications, subject to the requirement that
each broadcaster provide at least one free video channel equal in quality to the
current technical standard.
Initially, DTV channels will be located in the range of channels from
channel 2 through channel 51. The FCC is requiring that affiliates of ABC, CBS,
Fox and NBC in the top 10 television markets begin digital broadcasting by May
1, 1999 (the stations affiliated with these networks in the top 10 markets have
voluntarily committed to begin digital broadcasting within 18 months), and that
affiliates of these networks in markets 11 through 30 begin digital broadcasting
by November 1999. The FCC's plan calls for the DTV transition period to end in
the year 2006, at which time the FCC expects that (i) DTV channels will be
clustered either in the range of channels 2 through 46 or channels 7 through 51;
and (ii) television broadcasters will have ceased broadcasting on their
non-digital channels, allowing that spectrum to be recovered by the government
for other uses. 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 converted
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 FCC has stated that it will open a separate
proceeding to consider the recovery of television channels 60 through 69 and how
those frequencies will be used after they are eventually recovered from
television broadcasters. Additionally, the FCC will open a separate proceeding
to consider to what extent the cable must-carry requirements will apply to DTV
signals.
Implementation of digital television will improve the technical quality of
television signals received by viewers. Under certain circumstances, however,
conversion to digital operation may reduce a station's geographic coverage area
or result in some increased interference. The FCC's DTV allotment plan may also
result in UHF stations having considerably less signal power within their
service areas than present VHF stations that move to DTV channels. 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 also
impose substantial additional costs on television stations because of the need
to replace equipment and because some stations will need to operate at higher
utility costs. The FCC is also considering imposing new public interest
requirements on television licensees in exchange for their receipt of DTV
channels. The Company is currently considering plans to provide high definition
television ("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 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. Congress has announced plans to hold hearings on
broadcasters' plans for the use of their digital spectrum. The Company cannot
predict what future actions the FCC or Congress
12
<PAGE>
might take with respect to DTV, nor can it predict the effect of the FCC's
present DTV implementation plan or such future actions on the Company's
business.
Further advances in technology may also increase competition for household
audiences and advertisers. The video compression techniques now under
development for use with current cable television channels or direct broadcast
satellites which do not carry local television signals (some of which commenced
operation in 1994) are expected to reduce the bandwidth which is required for
television signal transmission. These compression techniques, as well as other
technological developments, are applicable to all video delivery systems,
including over-the-air broadcasting, and have the potential to provide vastly
expanded programming to highly targeted audiences. Reduction in the cost of
creating additional channel capacity could lower entry barriers for new channels
and encourage the development of increasingly specialized "niche" programming.
This ability to reach a very defined audience may alter the competitive dynamics
for advertising expenditures. The Company is unable to predict the effect that
technological changes will have on the broadcast television industry or the
future results of the Company's operations. 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 televisions
systems and by digital audio broadcasting ("DAB"). DAB may provide a medium for
the delivery by satellite or terrestrial means of multiple new audio programming
formats to local and national audiences. The FCC has issued licenses for two DAB
systems. See "Business of Sinclair-- Competition" in Sinclair's Form 8-K dated
August 29, 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 August 29, 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 an attributable interest in television stations that
reach in excess of 35% of all U.S. television households (for purposes of this
calculation, UHF stations are credited with only 50% of the television
households in their markets). The Company currently reaches approximately 9% of
U.S. television households using the FCC's method of calculation. On a local
level, the "duopoly" rules prohibit attributable interests in two or more
television stations with overlapping service areas. There are no national limits
on ownership of radio stations, but on a local level no entity or individual can
have an attributable interest in more than five to eight stations (depending on
the total number of stations in the market), with no more than three to five
stations (depending on the total allowed) broadcasting in the same band (AM or
FM). There are limitations on the extent to which 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. FCC rules
also impose limitations on the ownership of a television and radio station in
the same market, though such cross-ownership is permitted on a limited basis in
larger markets.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other entity. In the case of
corporations holding broadcast licenses, the interests of officers, directors
and those who, directly or indirectly, have the right to vote 5% or more of
13
<PAGE>
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 August 29, 1997, which is incorporated by reference
herein.
The FCC has initiated rulemaking proceedings to consider proposals to
modify its television ownership restrictions, including ones that may permit the
ownership, in some circumstances, of two television stations with overlapping
service areas. The FCC is also considering in these proceedings whether to adopt
restrictions on television LMAs. The "duopoly" rules currently prevent the
Company from acquiring the FCC licenses of television stations with which it has
LMAs in those markets where the Company owns a television station. In addition,
if the FCC were to decide that the provider of programming services under an LMA
should be treated as the owner of the television station and if it did not relax
the duopoly rules, or if the FCC were to adopt restrictions on LMAs without
grandfathering existing arrangements, the Company could be required to modify or
terminate certain of its LMAs. In such an event, the Company could be required
to pay termination penalties under certain of its LMAs. The 1996 Act provides
that nothing therein "shall be construed to prohibit the origination,
continuation, or renewal of any television local marketing agreement that is in
compliance with the regulations of the [FCC]." The legislative history of the
1996 Act reflects that this provision was intended to grandfather television
LMAs that were in existence upon enactment of the 1996 Act, and to allow
television LMAs consistent with the FCC's rules subsequent to enactment of the
1996 Act. In its pending rulemaking proceeding regarding the television duopoly
rule, the FCC has proposed to adopt a grandfathering policy providing that, in
the event that television LMAs become attributable interests, LMAs that are in
compliance with existing FCC rules and policies and were entered into before
November 5, 1996, would be permitted to continue in force until the original
term of the LMA expires. Under the FCC's proposal, television LMAs that are
entered into or renewed after November 5, 1996 would have to be terminated if
LMAs are made attributable interests and the LMA in question resulted in a
violation of the television multiple ownership rules. All of the Company's LMAs
were entered into prior to November 5, 1996, but one was entered into after
enactment of the 1996 Act. The Company cannot predict if 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 August 29, 1997,
which is incorporated by reference herein. The LMA entered into after enactment
of the 1996 Act 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.
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 petition to deny 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 the changes
to the FCC rules or the resolution of this petition to deny will not have a
material adverse effect upon the Company.
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<PAGE>
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 27,510,581 shares of Class B Common Stock outstanding
prior to the date of this Prospectus (and shares of Class A Common Stock into
which they are convertible), all of which are beneficially owned by the
Controlling Stockholders, are 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 of 1933, as amended (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 659,738 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 1,085,983 shares (which are convertible at
any time at the option of the holders, into an aggregate of 3,949,029 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
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<PAGE>
a net loss of $5.8 million during the six months ended June 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 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
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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<PAGE>
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 July 31, 1997 was 6.75%. The Company will
receive no proceeds from the sale of shares of Class A Common Stock by the
Selling Stockholders.
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<PAGE>
HISTORICAL AND PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratios of earnings to fixed charges for each of
the periods indicated are set forth below:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 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 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 six months ended June 30, 1997. Additional
earnings of $5,840, $3,387 and $9,922 would have been required to cover
fixed charges in the years ended December 31, 1992 and 1994, and the six
months ended June 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
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 six months ended June 30, 1997.
(c) Earnings were inadequate to cover fixed charges for the pro forma year ended
December 31, 1996 and pro forma six months ended June 30, 1997. Additional
earnings of $42,088 and $12,148 would have been required to cover fixed
charges for the pro forma year ended December 31, 1996 and pro forma six
months ended June 30, 1997, respectively.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
company's voting securities beneficially owned as of August 12, 1997 by the
Selling Stockholders. The address of all persons in the table is 2000 W. 41st
Street, Baltimore, Maryland 21211. Except as set forth below, each of the shares
offered by the Selling Stockholders is currently held as a share of Class B
Common Stock, and each of such shares will automatically be converted into a
share of Class A Common Stock upon their transfer in connection with a sale
pursuant to this Prospectus. The Selling Stockholders may sell up to an
aggregate of 1,750,000 shares of Class A Common Stock from time to time in
amounts specified in an accompanying Prospectus Supplement.
<TABLE>
<CAPTION>
SHARES OWNED AS OF AUGUST 12, 1997
----------------------------------------------
CLASS A CLASS B PERCENTAGE
COMMON STOCK COMMON STOCK (1) OF VOTING
--------------------- ------------------- POWER OF
NUMBER PERCENT OF NUMBER PERCENT OF ALL
NAMES OF OF CLASS A OF CLASS B CAPITAL
SELLING STOCKHOLDERS SHARES SHARES SHARES SHARES STOCK
- ------------------------------ -------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
David D. Smith ............... 10,000 * 7,249,999 26.3% 25.3%
Frederick G. Smith (2) ...... 4,000 * 6,726,944 24.5% 23.5%
J. Duncan Smith (3) ......... -- -- 6,969,994 25.3% 24.3%
Robert E. Smith (4) ......... -- -- 6,563,644 23.9% 22.9%
</TABLE>
* Less than one percent.
(1) Holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to ten votes per share expect
for votes relating to "going private" and certain other transactions.
Holders of both classes of Common Stock will vote together as a single class
on all matters presented for a vote, except as otherwise may be required by
Maryland law, and holders of Class B Common Stock may exchange their shares
of Class B Common Stock into Class A Common Stock at any time.
(2) Includes 478,645 shares held in irrevocable trusts established by Frederick
G. Smith for the benefit of himself, his spouse and his children and as to
certain of those trusts Mr. Smith has the power to acquire by substitution
of trust property. Absent such substitution, Mr. Smith would have no power
to vote or dispose of the shares.
(3) Includes 491,695 shares held in irrevocable trusts established by J. Duncan
Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(4) Includes 921,745 shares held in irrevocable trusts established by Robert E.
Smith for the benefit of himself, his spouse and his children and as to
certain of those trusts Mr. Smith has the power to acquire by substitution
of trust property. Absent such substitution, Mr. Smith would have no power
to vote or dispose of the shares.
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<PAGE>
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 Debt (as defined in the applicable Prospectus
Supplement) 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 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 for
the applicable Debt Securities (the "Register"). 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 occured 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 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 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.
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 Trust Indenture Act ("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
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necessary to facilitate the issuance or 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
Debt (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 Debt (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 Securites 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 Debt (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 Debt after which the Company shall resume making any and
all required payments in respect of the 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
Debt 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 Debt 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 Debt 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
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Designated Senior Debt 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 Debt is discharged or paid in full in cash or cash equivalents
or in any other form as acceptable to the holders of Designated Senior Debt 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
intiated) shall have been terminated by written notice to the Company or the
Trustee from the representative of holders of Designated Senior Debt or the
holders of at least a majority of the Designated Senior Debt 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 Debt 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 Debt must be
paid in full in cash or cash equivalents or in any other manner acceptable to
the holders of Senior Debt, 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 Debt 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 Debt to the extent necessary to pay
the Senior Debt in full in cash or cash equivalents or in any other manner
acceptable to the holders of Senior Debt, 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 Debt (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 Debt to the same extent as the Subordinated Debt Securities are
subordinated to Senior Debt and during any period when payment on the
Subordinated Debt Securities is blocked by Designated Senior Debt, 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,HERE IT ISIn the event covenant defeasance occurs, certain event
(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 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 an opinion of independent
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counsel to the effect that (A) the trust funds will not be subject to any rights
of holders of Senior Debt or Guarantor Senior Debt, 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 August 11, 1997, 34,745,522
shares of Common Stock, consisting of 7,168,941 shares of Class A Common Stock
and 27,576,581 shares of Class B Common Stock, were issued and outstanding,
1,091,825 shares of Series B Preferred Stock were issued and outstanding and
2,062,000 shares of Series C Preferred Stock will be 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
Securities Exchange Act of 1934, as amended (the "Exchange Act") between the
Company and (i) the Controlling Stockholders, (ii) any affiliate of the
Controlling Stockholders, or (iii) any group of which the Controlling
Stockholders are an affiliate or of which the Controlling Stockholders are a
member. An "affiliate" is defined as (i) any individual or entity who or that,
directly or indirectly, controls, is controlled by, or is under the common
control of the Controlling Stockholders; (ii) any corporation or
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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 Preferred
Stock allocated the amount of dividends allocated to approximately 3.64 shares
of Common
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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 August 11, 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 115/8% Senior Debentures due 2009 (the "KDSM Senior Debentures"), all of
which are held by Sinclair Capital, 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 115/8% High Yield Trust Offered Preferred Securities (the "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 (the "Issue Date"). 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 (each a "Dividend Extension Period"); 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 below, 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
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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.
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 ("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
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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 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.
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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 Stockholder or
any affiliate thereof may not engage in a "business combination" with the
corporation for a period of five (5) years following the date he becomes an
Interested Stockholder. These provisions of Maryland law do not apply, however,
to business combinations that are approved or exempted by the board of directors
of a Maryland corporation. It is anticipated that the Company's Board of
Directors will exempt from the Maryland statute any business combination with
the Controlling Stockholders, any present or future affiliate or associate of
any of them, or any other person acting in concert or as a group with any of the
foregoing persons.
Control Share Acquisitions. The Maryland General Corporation Law provides
that "control shares" of a Maryland corporation acquired in a "control share
acquisition" may not be voted except to the extent approved by a vote of
two-thirds of the votes entitled to be cast by stockholders excluding shares
owned by the acquirer, officers of the corporation and directors who are
employees of the corporation. "Control shares" are shares which, if aggregated
with all other shares previously acquired which the person is entitled to vote,
would entitle the acquirer to vote (i) 20% or more but less than one-third of
such shares, (ii) one-third or more but less than a majority of such shares, or
(iii) a majority of the outstanding shares. Control shares do not include shares
the acquiring person is entitled to vote because stockholder approval has
previously been obtained. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition and
who has obtained a definitive financing agreement with a responsible financial
institution providing for any amount of financing not to be provided by the
acquiring person may compel the corporation's board of directors to call a
special meeting of stockholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders meeting.
Subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or of any meeting
of 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
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shares as determined for purposes of such appraisal rights may not be less than
the highest price per share paid in the control share acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or excepted by or pursuant to the
articles of incorporation or by-laws of the corporation.
Effect of Business Combination and Control Share Acquisition Statutes. The
business combination and control share acquisition statutes could have the
effect of discouraging offers to acquire any such offer.
Limitation on Liability of Directors and Officers. The Company's Amended
Certificate provides that, to the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Company shall have any liability
to the Company or its stockholders for monetary damages. The Maryland General
Corporation Law provides that a corporation's charter may include a provision
which restricts or limits the liability of its directors or officers to the
corporation or its stockholders for money damages except (1) to the extent that
it is proved that the person actually received an improper benefit or profit in
money, property or services, for the amount of the benefit or profit in money,
property or services actually received or (2) to the extent that a judgment or
other final adjudication adverse to the person is entered in a proceeding based
on a finding in the proceeding that the person's action, or failure to act, was
the result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. In situations to which the Amended
Certificate provision applies, the remedies available to the Company or a
stockholder are limited to equitable remedies such as injunction or rescission.
This provision would not, in the opinion of the Commission, eliminate or limit
the liability of directors and officers under the federal securities laws.
Indemnification. The Company's Amended Certificate and by-laws provide that
the Company may advance expenses to its currently acting and its former
directors to the fullest extent permitted by Maryland General Corporation Law,
and that the Company shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
law. The Maryland General Corporation Law provides that a corporation may
indemnify any director made a party to any proceeding by reason of service in
that capacity unless it is established that (1) the act or omission of the
director was material to the matter giving rise to the proceeding and (a) was
committed in bad faith or (b) was the result of active and deliberate
dishonesty, or (2) the director actually received an improper personal benefit
in money, property or services, or (3) in the case of an criminal proceeding,
the director had reasonable cause to believe that the act or omission was
unlawful. The statute permits Maryland corporations to indemnify its officers,
employees or agents to the same extent as its directors and to such further
extent as is consistent with law.
The Company has also entered into indemnification agreements with certain
officers and directors which provide that the Company shall indemnify and
advance expenses to such officers and directors to the fullest extent permitted
by applicable law in effect on the date of the agreement, and to such greater
extent as applicable law may thereafter from time to time permit. Such
agreements provide for the advancement of expenses (subject to reimbursement if
it is ultimately determined that the officer or director is not entitled to
indemnification) prior to the final disposition of any claim or proceeding.
FOREIGN OWNERSHIP
Under the Amended Certificate and to comply with FCC rules and regulations,
the Company is not permitted to issue or transfer on its books any of its
capital stock to or for the account of any Alien (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
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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 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.
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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.
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
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.
43
<PAGE>
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 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.
44
<PAGE>
SUBJECT TO COMPLETION DATED SEPTEMBER 16, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 16, 1997)
5,300,000 SHARES
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------
Of the 5,300,000 shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), of Sinclair Broadcast Group, Inc. ("Sinclair" or
the "Company") offered hereby, 4,000,000 shares are being offered by the Company
(the "Common Stock Offering" or the "Offering") and 1,300,000 shares are being
offered by certain stockholders of the Company (the "Selling Stockholders"). See
"Selling Stockholders." The Company will receive no proceeds from the sale of
shares by the Selling Stockholders. Concurrently with the Common Stock Offering,
the Company is offering to sell 3,000,000 shares of its Series D Preferred
Stock, par value $.01 per share (the "Convertible Exchangeable Preferred Stock"
and the offering of such securities, the "Preferred Stock Offering"). The
Convertible Exchangeable Preferred Stock will have an aggregate liquidation
value of $150 million. See "Prospectus Supplement Summary - Recent
Developments." The completion of the Common Stock Offering is not conditioned
upon the completion of the Preferred Stock Offering. The Class A Common Stock is
traded on the Nasdaq National Market System under the symbol "SBGI." On August
21, 1997, the last reported sale price of the Class A Common Stock as reported
by Nasdaq was $36 per share.
The Company's outstanding capital stock consists of shares of Class A
Common Stock, shares of Class B Common Stock, par value $.01 per share (the
"Class B Common Stock"), shares of Series B Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock") and shares of Series C Preferred Stock,
par value $.01 per share (the "Series C Preferred Stock"). The rights of the
Class A Common Stock and the Class B Common Stock (collectively, the "Common
Stock") are identical, except that each share of Class A Common Stock entitles
the holder thereof to one vote in respect of matters submitted for the vote of
holders of Common Stock, whereas each share of Class B Common Stock entitles
the holder thereof to one vote on "going private" and certain other
transactions and to ten votes on other matters. Immediately after the sale of
all shares covered by this Prospectus Supplement, the Controlling Stockholders
(as defined in the accompanying Prospectus) will have the power to vote 100% of
the outstanding shares of Class B Common Stock representing, together with the
Class A Common Stock held by the Controlling Stockholders, approximately 94.1%
of the aggregate voting power of the Company's capital stock, assuming no
exercise of the Underwriters' over-allotment option. Each share of Class B
Common Stock converts automatically into one share of Class A Common Stock upon
sale or other transfer to a party other than a Permitted Transferee (generally,
related parties of a Controlling Stockholder). Each share of Series B Preferred
Stock has a liquidation preference of $100, is convertible into 3.64 shares of
Class A Common Stock (subject to adjustment), and has 3.64 votes on all matters
on which holders of shares of Common Stock have a vote. Except as described in
the accompanying Prospectus, the Series C Preferred Stock does not and the
Convertible Exchangeable Preferred Stock will not have rights to vote on
matters on which holders of shares of Common Stock have a vote. Each share of
Convertible Exchangeable Preferred Stock to be issued in the Preferred Stock
Offering will be convertible at any time at the option of the holder thereof
into shares of Class A Common Stock at an initial conversion price of $ per
share of Class A Common Stock (subject to adjustment). See "Description of
Capital Stock" 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 CLASS A COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO PROCEEDS TO
THE PUBLIC AND COMMISSIONS (1) THE COMPANY (2) THE SELLING STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share $ $ $ $
Total(3) $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $800,000.
(3) The Company and certain Selling Stockholders have granted the Underwriters
a 30-day option to purchase up to an additional 345,000 and 450,000
shares, respectively, of Class A Common Stock on the same terms as set
forth above solely to cover over-allotments, if any. If all such 795,000
shares are purchased, the total Price to the Public, Underwriting
Discounts and Commissions, Proceeds to the Company and Proceeds to the
Selling Stockholders will be $ , $ ,$ and $ , respectively. See
"Underwriting." The Company will not receive any of the proceeds from the
sale of shares of Class A Common Stock by Selling Stockholders pursuant to
the over-allotment option.
-----------
The shares of Class A Common Stock are being offered by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for
the Class A Common Stock will be available for delivery on or about , 1997,
at the offices of Smith Barney Inc., 333 West 34th Street, New York, New York
10001.
-----------
SMITH BARNEY INC.
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
SALOMON BROTHERS INC
CHASE SECURITIES INC.
FURMAN SELZ
, 1997
<PAGE>
[INSERT MAP]
TELEVISION AND RADIO STATIONS (I)OWNED AND OPERATED BY THE COMPANY, (II)
PROGRAMMED BY THE COMPANY PURSUANT TO LMAS, (III) PROVIDED SELLING
SERVICES PURSUANT TO JSAS, (IV) SUBJECT TO OPTIONS TO ACQUIRE AND (V)
UNDER AGREEMENTS TO BE ACQUIRED, INCLUDING AGREEMENTS TO ACQUIRE
RIGHTS TO PROGRAM STATIONS PURSUANT TO LMAS, ALL AS SET FORTH
UNDER "BUSINESS OF SINCLAIR."
Certain persons participating in this offering may engage in transactions that
stabilize, maintain, or otherwise affect the price of Class A Common Stock,
including overallotment, entering stabilizing bids, effecting syndicate covering
transactions and imposing penalty bids. For a description of those 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 requires otherwise, this Prospectus Supplement
and the Prospectus assume no exercise of the Underwriters' over-allotment
option. 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"). Capitalized terms
used in this Prospectus Supplement have the meaning set forth in the Glossary of
Defined Terms, which appears at the end of this Prospectus Supplement.
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 four additional television
stations, and has pending acquisitions of the rights to provide programming to
two additional television stations. The Company believes it is also one of the
top 20 radio groups in the United States, when measured by the total number of
radio stations owned. The Company owns 27 radio stations, has pending
acquisitions of 24 radio stations and has options to acquire an additional seven
radio stations.
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 DMAs in the United States. The Company's television station
group is diverse in network affiliation with ten stations affiliated with Fox,
12 with UPN, three with 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 seven of its stations would switch affiliations to, and one
independent station has 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 27 stations owned by the
Company, 12 broadcast on the AM band and 15 on the FM band. The Company owns
from two to 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 27 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.
COMPANY STRATEGY
The Company's operating strategy is to (i) attract audience share through
the acquisition and broadcasting of popular programming, children's television
programming, counter-programming, local news programming in selected DMAs, and
popular sporting events in selected DMAs; (ii) increase its share of market
revenues through innovative sales and marketing efforts; (iii) aggressively
control programming and other operating costs; (iv) attract and retain high
quality management; (v) expand its stations' involvement in their communities;
and (vi) establish additional television LMAs and increase the size of its radio
clusters.
S-1
<PAGE>
The Company's LMA arrangements in markets where it already owns a
television station are a major factor in enabling the Company to increase its
revenues and improve operating margins. These LMAs have also helped the Company
to manage its programming inventory effectively and increase the Company's
broadcast revenues in those markets. In addition, the Company believes that its
LMA arrangements have assisted certain television and radio stations whose
operations may have been marginally profitable to continue to air popular
programming and contribute to programming diversity in their respective
television DMAs and radio MSAs.
The Company intends to continue to pursue acquisitions in order to build a
larger and more diversified broadcasting company. In implementing its
acquisition strategy, the Company routinely reviews and conducts investigations
of potential television and radio station acquisitions. When the Company
believes a favorable opportunity exists, the Company seeks to enter into
discussions with the owners of such stations regarding the possibility of an
acquisition by the Company. At any given time, the Company may be in discussions
with one or more such station owners. In addition, the Company intends to seek
and may take advantage of favorable opportunities to sell or swap television and
radio stations. See "Business of Sinclair - Broadcast Acquisition Strategy."
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: 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, 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 end January 15, 2008). Pursuant to the WB Agreement,
the WB affiliation agreements of WVTV-TV, Milwaukee, Wisconsin, and WTTO-TV,
Birmingham, Alabama (whose programming is simulcasted on WDBB-TV, Tuscaloosa,
Alabama), have been extended to January 16, 2008. In addition, WFBC-TV in
Greenville, South Carolina 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 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. Certain subsidiaries of the Company
have filed an action in the Circuit Court for Baltimore City seeking declaratory
relief that their
S-2
<PAGE>
notice was effective to terminate the affiliations on January 15, 1998. See
"Risk Factors - Certain Network Affiliation Agreements" in the accompanying
Prospectus and "Business of Sinclair - Legal Proceedings" herein.
HERITAGE ACQUISITION
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 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. The Company intends to finance the purchase
price from some combination of the proceeds of the Common Stock Offering, the
proceeds of the Preferred Stock Offering, funds available under the Company's
Bank Credit Agreement (as defined herein), and the anticipated $60 million in
proceeds from the sale of the Company's interest in the Oklahoma City station.
Closing of the Heritage Acquisition is conditioned on, among other things, FCC
approval and the expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
PREFERRED STOCK OFFERING
Concurrently with the offering of shares of Class A Common Stock pursuant
to this Prospectus Supplement, the Company plans to offer in the Preferred Stock
Offering $150 million aggregate liquidation amount of Convertible Exchangeable
Preferred Stock. The Convertible Exchangeable Preferred Stock will have a
liquidation preference of $50 per share and a stated annual dividend of $ per
share payable quarterly out of legally available funds and will be convertible
into shares of Class A Common Stock at the option of the holders thereof at a
conversion price of $ per share, subject to adjustment. The Convertible
Exchangeable Preferred Stock will be exchangeable at the option of the Company,
for % Convertible Subordinated Debentures of the Company, due 2012, and will be
redeemable at the option of the Company on or after , 2000 at specified prices
plus accrued dividends. Except as described herein, the Convertible Exchangeable
Preferred Stock will not have rights to vote on matters on which shares of
Common Stock have a vote, prior to their conversion into Class A Common Stock.
The sale of shares of Class A Common Stock pursuant to this Prospectus
Supplement is not contingent on the completion of the Preferred Stock Offering.
See "Use of Proceeds."
S-3
<PAGE>
THE OFFERING
CLASS A COMMON STOCK OFFERED:
Company ............... 4,000,000 shares
Selling Stockholders... 1,300,000 shares
Total ............... 5,300,000 shares(a)
COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING 12,545,566 shares of Class A
Common Stock(a)(b) 26,210,581 shares of Class B
Common Stock(b)
---------
38,756,147 total shares of Common Stock(a)
USE OF PROCEEDS ...... The net proceeds to the Company from the Offering
will be used to repay certain amounts outstanding
under the Company's Bank Credit Agreement with the
remainder retained for general corporate purposes
including funding the Heritage Acquisition, which is
anticipated to close in the first quarter of 1998,
and other acquisitions if suitable acquisitions can
be identified on acceptable terms. See "Use of
Proceeds."
VOTING RIGHTS ......... The holders of the Class A Common Stock, the Class
B Common Stock and the Series B Preferred Stock vote
together as a single class (except as may be
otherwise required by Maryland law) on all matters
submitted to a vote of stockholders, with each share
of Class A Common Stock entitled to one vote, each
share of Class B Common Stock entitled to one vote
on "going private" and certain other transactions
and to ten votes on all other matters and each share
of Series B Preferred Stock entitled to 3.64 votes
(subject to adjustment). The holders of Series C
Preferred Stock and the Convertible Exchangeable
Preferred Stock to be issued in the Preferred Stock
Offering are not entitled to vote on matters
submitted to a vote of stockholders except on
matters that may adversely affect their rights and
except that holders of each such series have the
right to elect two directors of the Company in
certain circumstances. See "Description of Capital
Stock -
- ----------
(a) Excludes up to 345,000 and 450,000 shares of Class A Common Stock that may
be sold by the Company and certain of the Selling Stockholders,
respectively, upon exercise of the over-allotment option granted to the
Underwriters. See "Underwriting." Also excludes 3,963,611 shares of Class A
Common Stock that may be issued upon conversion of shares of Series B
Preferred Stock outstanding after the Offering and up to 2,641,673 shares of
Class A Common Stock reserved for issuance pursuant to the Company's
Incentive Stock Option Plan, the Company's Designated Participants Stock
Option Plan and the Company's Long-Term Incentive Plan. Also excludes shares
of Class A Common Stock that may be issued upon conversion of shares of
Convertible Exchangeable Preferred Stock to be issued in the Preferred Stock
Offering (based on the conversion price on the date of issuance). See "Risk
Factors - Potential Effect on the Market Price Resulting from Shares
Eligible for Future Sale" in the accompanying Prospectus.
(b) The number of shares of Class A Common Stock and Class B Common Stock
outstanding after the Offering assumes that the sale of shares of Common
Stock by the Selling Stockholders in the Offering will include the sale of
1,300,000 shares of Class B Common Stock and the conversion of such shares
upon sale into 1,300,000 shares of Class A Common Stock. See "Risk Factors -
Potential Effect on the Market Price Resulting from Shares Eligible for
Future Sale" in the accompanying Prospectus.
S-4
<PAGE>
Preferred Stock" in the accompanying Prospectus and
"- Recent Developments," above. Each share of Class
B Common Stock converts automatically into one share
of Class A Common Stock upon the sale or other
transfer of such share of Class B Common Stock to a
person or entity other than a Permitted Transferee
(generally, related parties of a Controlling
Stockholder (as defined in the accompanying
Prospectus)). Each share of Series B Preferred Stock
may be converted at any time, at the option of the
holder thereof, into 3.64 shares of Class A Common
Stock (subject to adjustment). Each class of Common
Stock otherwise has identical rights. After giving
effect to the Offering contemplated hereby,
approximately 94.1% of the total voting power of the
capital stock of the Company will be owned by the
Controlling Stockholders. See "Risk Factors - Voting
Rights; Control by Controlling Stockholders;
Potential Anti-Takeover Effect of Disproportionate
Voting Rights" in the accompanying Prospectus.
NASDAQ NATIONAL MARKET SYSTEM
SYMBOL.................. SBGI
DIVIDEND POLICY......... The Company generally has not paid a dividend on
its Common Stock and does not expect to pay cash
dividends on its Common Stock in the foreseeable
future. The Company's ability to pay cash dividends
in the future is subject to limitations and
prohibitions contained in certain debt instruments
to which the Company is a party. See "Risk Factors -
Dividend Restrictions" in the accompanying
Prospectus.
S-5
<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 incorporated herein by reference. The summary
historical consolidated financial data for the six months ended June 30, 1996
and 1997 and as of June 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 six months ended June 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"), 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 "Debt
Issuance"), the issuance of $200,000,000 in liquidation amount of the Company's
115/8% High Yield Trust Offered Preferred Securities (the "HYTOPS") issued on
March 14, 1997 (the "HYTOPS Issuance"), and the Common and Preferred Stock
Offerings and the application of the proceeds therefrom as set forth in "Use of
Proceeds" as though they occurred at the beginning of the periods presented and
are derived from the pro forma consolidated financial statements of the Company
included elsewhere in this Prospectus Supplement. See "Pro Forma Consolidated
Financial Information of Sinclair." The information below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Sinclair" included herein and Sinclair's
Consolidated Financial Statements, 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 June 30, 1997 incorporated herein by
reference. Included elsewhere in this Prospectus Supplement under the heading
"Pro Forma Consolidated Financial Information of Sinclair" are pro forma
financial statements for the six months ended June 30, 1997.
<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(C) ........................... $ 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 depreciation and amor-
tization, deferred compensation and special bonuses
paid to executive officers ........................ 32,993 32,295 50,545 80,446 167,765
Depreciation and amortization(d) .................. 30,943 22,486 55,587 80,410 121,081
Amortization of deferred compensation ............... - - - - 739
Special bonuses paid to executive officers ......... - 10,000 3,638 - -
-------- -------- -------- -------- ---------
Broadcast operating income ........................ 5,950 11,643 19,584 45,278 88,903
-------- -------- -------- -------- ---------
Interest and amortization of debt discount 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 expense(e) ...... - - - - -
-------- -------- -------- -------- ---------
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 sharehold-
ers $ (4,651) $ (7,945) $ (2,740) $ 76 $ 1,131
======== ======== ======== ======== =========
Earnings (loss) per common share:
Net income (loss) before extraordinary item ......... $ (0.16) $ - $ (0.09) $ 0.15 $ 0.03
Extraordinary item ................................. - (0.27) - (0.15) -
-------- -------- -------- -------- ---------
Net income (loss) per common share .................. $ (0.16) $ (0.27) $ (0.09) $ - $ 0.03
======== ======== ======== ======== =========
Weighted average shares outstanding (in thousands) 29,000 29,000 29,000 32,205 37,381
======== ======== ======== ======== =========
OTHER DATA:
Broadcast cash flow(f) .............................. $ 28,019 $ 37,498 $ 67,519 $111,124 $189,216
Broadcast cash flow margin(g) ..................... 45.9 % 53.9 % 56.9 % 59.1 % 54.6 %
Adjusted EBITDA(h) ................................. $ 26,466 $ 35,406 $ 64,547 $105,750 $180,272
Adjusted EBITDA margin(g) ........................... 43.3 % 50.9 % 54.4 % 56.3 % 52.0 %
After tax cash flow(i) .............................. $ 9,398 $ 17,950 $ 24,948 $ 51,288 $ 76,745
After tax cash flow margin(g) ..................... 15.4 % 25.8 % 21.0 % 22.3 % 22.3 %
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
<CAPTION>
DEBT AND
DEBT AND HYTOPS ISSUANCES,
HYTOPS ISSUANCES, 1996 ACQUISITIONS,
SIX MONTHS ENDED 1996 ACQUISITIONS AND HERITAGE ACQUISITION
JUNE 30, HERITAGE ACQUISITION AND COMMON STOCK OFFERING
----------------------- ----------------------- ---------------------------
1996(A) 1997(A) PRO FORMA YEAR ENDED DECEMBER 31, 1996(B)
---------- ------------ ---------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
NET BROADCAST REVENUES(C) ........................... $117,339 $219,701 $ 532,357 $ 532,357
Barter revenues .................................... 9,571 19,870 40,179 40,179
--------- -------- --------- ---------
Total revenues .................................... 126,910 239,571 572,536 572,536
--------- -------- --------- ---------
Operating expenses, excluding depreciation and amor-
tization, deferred compensation and special bonuses
paid to executive officers ........................ 52,826 114,697 274,073 274,073
Depreciation and amortization(d) .................. 45,493 76,650 177,286 177,286
Amortization of deferred compensation ............... 506 233 933 933
Special bonuses paid to executive officers ......... - - - -
--------- -------- --------- ---------
Broadcast operating income ........................ 28,085 47,991 120,244 120,244
--------- -------- --------- ---------
Interest and amortization of debt discount expense 27,646 51,993 163,207 153,877
Interest and other income ........................... 3,172 1,087 7,753 7,753
Subsidiary trust minority interest expense(e) ...... - 7,007 23,250 23,250
--------- -------- --------- ---------
Income (loss) before (provision) benefit for income
taxes and extraordinary item ........................ $ 3,611 $ (9,922) $ (58,460) $ (49,130)
========= ======== ========= =========
Net income (loss) available to common sharehold-
ers $ 1,511 $ (5,822) $ (40,553) $ (34,955)
========= ======== ========= =========
Earnings (loss) per common share:
Net income (loss) before extraordinary item ......... $ 0.04 $ (0.17) $ (1.04) $ (0.81)
Extraordinary item ................................. - - - -
--------- -------- --------- ---------
Net income (loss) per common share .................. $ 0.04 $ (0.17) $ (1.04) $ (0.81)
========= ======== ========= =========
Weighted average shares outstanding (in thousands) 34,750 34,746 39,058 43,058
========= ======== ========= =========
OTHER DATA:
Broadcast cash flow(f) .............................. $ 65,079 $105,600 $ 257,528 $ 257,528
Broadcast cash flow margin(g) ..................... 55.5 % 48.1 % 48.4 % 48.4 %
Adjusted EBITDA(h) ................................. $ 62,013 $ 98,615 $ 246,278 $ 246,278
Adjusted EBITDA margin(g) ........................... 52.8 % 44.9 % 46.3 % 46.3 %
After tax cash flow(i) .............................. $ 30,441 $ 32,737 $ 78,383 $ 83,981
After tax cash flow margin(g) ..................... 26.0 % 15.0 % 14.7 % 15.8 %
Program contract payments ........................... $ 12,071 $ 26,259 $ 52,185 $ 52,185
Capital expenditures .............................. 2,114 8,286 18,512 18,512
Corporate overhead expense ........................ 3,066 6,985 11,250 11,250
<CAPTION>
DEBT AND
HYTOPS ISSUANCES,
1996 ACQUISITIONS,
HERITAGE ACQUISITION,
COMMON AND PREFERRED
STOCK OFFERINGS(M)
----------------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
NET BROADCAST REVENUES(C) ........................... $ 532,357
Barter revenues .................................... 40,179
---------
Total revenues .................................... 572,536
---------
Operating expenses, excluding depreciation and amor-
tization, deferred compensation and special bonuses
paid to executive officers ........................ 274,073
Depreciation and amortization(d) .................. 177,286
Amortization of deferred compensation ............... 933
Special bonuses paid to executive officers ......... -
---------
Broadcast operating income ........................ 120,244
---------
Interest and amortization of debt discount expense 143,903
Interest and other income ........................... 7,753
Subsidiary trust minority interest expense(e) ...... 23,250
---------
Income (loss) before (provision) benefit for income
taxes and extraordinary item ........................ $ (39,156)
=========
Net income (loss) available to common sharehold-
ers $ (38,346)
=========
Earnings (loss) per common share:
Net income (loss) before extraordinary item ......... $ (0.89)
Extraordinary item ................................. -
---------
Net income (loss) per common share .................. $ (0.89)
=========
Weighted average shares outstanding (in thousands) 43,058
=========
OTHER DATA:
Broadcast cash flow(f) .............................. $ 257,528
Broadcast cash flow margin(g) ..................... 48.4 %
Adjusted EBITDA(h) ................................. $ 246,278
Adjusted EBITDA margin(g) ........................... 46.3 %
After tax cash flow(i) .............................. $ 86,922
After tax cash flow margin(g) ..................... 16.3 %
Program contract payments ........................... $ 52,185
Capital expenditures .............................. 18,512
Corporate overhead expense ........................ 11,250
</TABLE>
(Continued on following page)
S-6
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------------------ JUNE 30,
1992 1993 1994(A) 1995(A) 1996(A) 1997(A)
---------- ------------ ------------ ------------- --------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET AND CASH
FLOW DATA:
Cash and cash equivalents .................. $ 1,823 $ 18,036 $ 2,446 $ 112,450 $ 2,341 $ 2,740
Total assets .............................. 140,366 242,917 399,328 605,272 1,707,297 1,762,505
Total debt(j) .............................. 110,659 224,646 346,270 418,171 1,288,147 1,175,783
Company Obligated Mandatorily Re-
deemable Security of Subsidiary
Trust Holding Solely KDSM Senior
Debentures(k) .............................. - - - - - 200,000
Total stockholders' equity (deficit) ...... (3,127) (11,024) (13,723) 96,374 237,253 232,638
Cash flows from operating activities(l). 5,235 11,230 20,781 55,909 68,970 42,483
Cash flows from investing activities(l) . (1,051) 1,521 (249,781) (119,243) (1,011,897) (112,429)
Cash flows from financing activities(l) . (3,741) 3,462 213,410 173,338 832,818 70,345
</TABLE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(a) The Company made acquisitions in 1994, 1995, 1996 and the first six
months of 1997 as described in the footnotes to the 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 Debt Issuance, the HYTOPS Issuance, the 1996
Acquisitions, the completion of the Heritage Acquisition and the
completion of the Common Stock Offering and the Preferred Stock
Offering. See "Pro Forma Consolidated Financial Information of
Sinclair" included elsewhere herein. The Heritage Acquisition is
subject to a number of conditions customary for acquisitions of
broadcasting properties. See "- Recent Developments."
(c) Net broadcast revenues are defined as broadcast revenues net of
agency commissions.
(d) Depreciation and amortization includes amortization of program
contract costs and net realizable value adjustments, depreciation and
amortization of property and equipment, and amortization of acquired
intangible broadcasting assets and other assets including
amortization of deferred financing costs and costs related to excess
syndicated programming.
(e) Subsidiary trust minority interest expense represents the
distributions on the HYTOPS.
(f) "Broadcast cash flow" is defined as broadcast operating income plus
corporate overhead expense, special bonuses paid to executive
officers, depreciation and amortization (including film amortization
and amortization of deferred compensation and excess syndicated
programming), less cash payments for program contract rights. Cash
program payments represent cash payments made for current program
payables and do not necessarily correspond to program usage. Special
bonuses paid to executive officers are considered non-recurring
expenses. The Company has presented broadcast cash flow data, which
the Company believes are comparable to the data provided by other
companies in the industry, because such data are commonly used as a
measure of performance for broadcast companies. However, broadcast
cash flow does not purport to represent cash provided by operating
activities as reflected in the Company's consolidated statements of
cash flows, is not a measure of financial performance under
generally accepted accounting principles and should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted
accounting principles.
(g) "Broadcast cash flow margin" is defined as broadcast cash flow
divided by net broadcast revenues. "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.
(h) "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.
(i) "After tax cash flow" is defined as net income (loss) before
extraordinary items 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.
(notes continued on following page)
S-7
<PAGE>
(j) "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 (as defined herein), the proceeds of which were held in escrow
to provide a source of financing for acquisitions that were
subsequently consummated in 1994 utilizing borrowings under the Bank
Credit Agreement. $100,000 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.
(k) Company Obligated Mandatorily Redeemable Security of Subsidiary
Trust Holding Solely KDSM Senior Debentures represents $200,000
aggregate liquidation value of the HYTOPS.
(l) These items are financial statement disclosures in accordance with
generally accepted accounting principles and are also presented in
the Company's consolidated financial statements incorporated by
reference herein.
(m) There can be no assurance that the Preferred Stock Offering will be
consummated. The completion of the Common Stock Offering is not
conditioned upon the completion of the Preferred Stock Offering.
S-8
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the Common Stock Offering as contemplated
hereby (net of underwriting discounts and commissions and the estimated expenses
of the Offering) at an assumed price of $36 per share (the closing price for the
Class A Common Stock on August 21, 1997) are estimated to be approximately
$137.1 million ($149.0 million if the Underwriters' over-allotment option is
exercised in full). The Company will not receive any of the net proceeds from
the sale of Class A Common Stock by the Selling Stockholders. Concurrently with
this Offering, the Company is conducting the Preferred Stock Offering, the net
proceeds of which are estimated to be approximately $145.1 million (such
offering along with the Common Stock Offering, the "Offerings"). There can be no
assurance that the Preferred Stock Offering will be consummated. The completion
of the Common Stock Offering is not conditioned upon the completion of the
Preferred Stock Offering. A portion of the net proceeds to the Company from the
Offerings will be used to repay existing borrowings under the Company's
revolving credit facility under the Bank Credit Agreement (as defined herein).
These borrowings, which total $14 million as of the date of this Prospectus
Supplement and which were used for general corporate purposes, bear interest at
the rate of 8.5% per annum. After such debt repayment, the Company may make
additional borrowings under the revolving credit facility until December 31,
2004. The remainder of the net proceeds to the Company from the Offerings
($268.2 million if both of the Offerings are completed and $123.1 million if
only the Common Stock Offering is completed) will be retained by the Company for
general corporate purposes including funding the Heritage Acquisition, which is
anticipated to close in the first quarter of 1998, and other acquisitions if
suitable acquisitions can be identified on acceptable terms. The Company has
requested that the lenders under the Bank Credit Agreement approve an amendment
that would recharacterize $275 million of indebtedness from the Tranche A term
loan under the Bank Credit Agreement to amounts owing under the revolving credit
facility. If this amendment is approved, the Company will use all of the net
proceeds of the Offerings to repay indebtedness under the Bank Credit Agreement,
all of which may be reborrowed. 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% as of the date of this Prospectus Supplement.
S-9
<PAGE>
CAPITALIZATION
THE FOLLOWING TABLE SETS FORTH, AS OF JUNE 30, 1997, (A) THE ACTUAL
CAPITALIZATION OF THE COMPANY, (B) THE pro forma capitalization of the Company
as adjusted to reflect the consummation of the Debt Issuance consummated on July
2, 1997 and the Heritage Acquisition as if such transaction had occurred on June
30, 1997, (c) the pro forma capitalization of the Company as adjusted to reflect
the items noted in (b) and the Common Stock Offering at an assumed offering
price of $36 per share (the closing price of the Class A Common Stock on August
21, 1997) and the application of the estimated net proceeds therefrom as set
forth in "Use of Proceeds" as if such transactions had occurred on June 30, 1997
and (d) the pro forma capitalization of the Company as adjusted to reflect the
items noted in (b) and (c) and the Preferred Stock Offering at an offering price
of $50 per share and the application of the estimated net proceeds therefrom as
set forth in "Use of Proceeds" as if such transactions had occurred on June 30,
1997. The information set forth below should be read in conjunction with "Pro
Forma Consolidated Financial Information of Sinclair" located elsewhere in this
Prospectus Supplement and the historical Consolidated Financial Statements of
the Company incorporated herein by reference.
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
DEBT ISSUANCE, DEBT ISSUANCE,
HERITAGE HERITAGE ACQUISITION,
DEBT ISSUANCE ACQUISITION COMMON AND
AND HERITAGE AND COMMON PREFERRED
ACTUAL ACQUISITION STOCK OFFERING STOCK OFFERINGS(A)
------------ --------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents .............................. $ 2,740 $ 35,740 $ 35,740 $ 35,740
========== ========== ========== ==========
Current portion of long-term debt ..................... $ 66,881 $ 66,881 $ 66,881 $ 66,881
========== ========== ========== ==========
Long-term debt:
Commercial bank financing ........................... $ 697,000 $1,104,500 $ 967,420 $ 822,345
Notes and capital leases payable to affiliates ......... 11,872 11,872 11,872 11,872
Capital leases ....................................... 30 30 30 30
Senior subordinated notes .............................. 400,000 600,000 600,000 600,000
---------- ---------- ---------- ----------
1,108,902 1,716,402 1,579,322 1,434,247
---------- ---------- ---------- ----------
Company Obligated Mandatorily Redeemable Security
of Subsidiary Trust Holding Solely KDSM Senior
Debentures ............................................. 200,000 200,000 200,000 200,000
---------- ---------- ---------- ----------
Stockholders' equity (deficit):
Series B Preferred Stock, $.01 par value, 10,000,000 shares authorized and
1,106,608 shares issued and
outstanding .......................................... 11 11 11 11
Series D Convertible Exchangeable Preferred Stock,
v $.01 par alue, 3,450,000 shares authorized and
3,000,000 shares issued and outstanding post Pre-
ferred Stock Offering - - - 30
Class A Common Stock, $.01 par value, 100,000,000
shares authorized and 7,100,188 shares issued and
outstanding; 11,100,188 shares issued and outstand-
ing, post Common Stock Offering 71 71 111 111
Class B Common Stock, $.01 par value, 35,000,000
shares authorized and 27,591,581 shares issued and
outstanding .......................................... 277 277 277 277
Additional paid-in capital ........................... 234,812 234,812 371,852 516,897
Additional paid-in capital - deferred compensation (896) (896) (896) (896)
Additional paid-in capital - equity put options ...... 23,117 23,117 23,117 23,117
Accumulated deficit ................................. (24,754) (24,754) (24,754) (24,754)
--------- ---------- ---------- ----------
Total stockholders' equity ........................... 232,638 232,638 369,718 514,793
--------- ---------- ---------- ----------
Total capitalization .................................$1,541,540 $2,149,040 $2,149,040 $2,149,040
========== ========== ========== ==========
</TABLE>
- ----------
(a) There can be no assurance that the Preferred Stock Offering will be
consummated. The completion of the Common Stock Offering is not
conditioned upon the completion of the Preferred Stock Offering.
S-10
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF SINCLAIR
The following Pro Forma Consolidated Financial Data include the unaudited
pro forma consolidated balance sheet as of June 30, 1997 (the "Pro Forma
Consolidated Balance Sheet") and the unaudited pro forma consolidated statement
of operations for the year ended December 31, 1996 and the six months ended June
30, 1997 (the "Pro Forma Consolidated Statement of Operations"). The unaudited
Pro Forma Consolidated Balance Sheet is adjusted to give effect to the Debt
Issuance, the Heritage Acquisition, the Common Stock Offering and the Preferred
Stock Offering as if they occurred on June 30, 1997 and assuming application of
the proceeds of the Common Stock Offering and the Preferred Stock Offering as
set forth in "Use of Proceeds" above. The unaudited Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1996 is adjusted to give
effect to the 1996 Acquisitions, the HYTOPS Issuance, the Debt Issuance, the
Heritage Acquisition, the Common Stock Offering and the Preferred Stock Offering
as if each occurred at the beginning of such period and assuming application of
the proceeds of the Common Stock Offering and the Preferred Stock Offering as
set forth in "Use of Proceeds." The unaudited Pro Forma Consolidated Statement
of Operations for the six months ended June 30, 1997 is adjusted to give effect
to the HYTOPS Issuance, the Debt Issuance, the Heritage Acquisition, and the
Common Stock Offering and the Preferred Stock Offering as if each occurred at
the beginning of such period and assuming application of the proceeds of the
Common Stock Offering and the Preferred Stock Offering as set forth in "Use of
Proceeds." The pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable. The Pro Forma
Consolidated Financial Data should be read in conjunction with the Company's
Consolidated Financial Statements as of and for the year ended December 31, 1996
and related notes thereto, the Company's unaudited consolidated financial
statements for the six months ended June 30, 1997 and related notes thereto, the
historical financial data of Flint T.V., Inc., the historical financial data of
Superior Communications, Inc., the historical financial data of KSMO and WSTR,
the historical financial data of River City Broadcasting, L.P. and the
historical financial data of Heritage Media Services, Inc. - Broadcasting
Segment, all of which have been filed with the Commission as part of (i) 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; (ii) the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997; or (iii) the Company's Current Reports on Form 8-K
and Form 8-K/A filed May 10, 1996, May 13, 1996, May 17, 1996, May 29, 1996,
August 30, 1996, September 5, 1996 and August 26, 1997, each of which is
incorporated by reference into this Prospectus Supplement. The unaudited Pro
Forma Consolidated Financial Data do not purport to represent what the Company's
results of operations or financial position would have been had any of the above
events occurred on the dates specified or to project the Company's results of
operations or financial position for or at any future period or date.
S-11
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DEBT
ISSUANCE
CONSOLIDATED DEBT HERITAGE AND HERITAGE
HISTORICAL ISSUANCE(A) ACQUISITION(B) ACQUISITION
-------------- ------------------ ---------------- -------------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .................................... $ 2,740 $ 33,000 (e) $ 35,740
Accounts receivable, net of allowance for doubtful accounts 102,093 102,093
Current portion of program contract costs .................. 34,768 $ 926 35,694
Prepaid expenses and other current assets .................. 4,054 4,054
Deferred barter costs ....................................... 4,267 2,218 6,485
Deferred tax asset .......................................... 8,188 8,188
---------- ----------
Total current assets ....................................... 156,110 33,000 3,144 192,254
PROGRAM CONTRACT COSTS, less current portion .................. 30,778 712 31,490
LOANS TO OFFICERS AND AFFILIATES .............................. 11,241 11,241
PROPERTY AND EQUIPMENT, net ................................. 156,681 22,022 178,703
NON-COMPETE AND CONSULTING AGREEMENTS, net .................. 2,250 2,250
OTHER ASSETS ................................................ 71,970 4,500 (f) 76,470
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net .................. 1,333,475 545,969 1,879,444
---------- ------------- ----------
Total Assets ............................................. $1,762,505 $ 37,500 $ 571,847 $2,371,852
========== ============ ============= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................. $ 5,310 $ 5,310
Accrued liabilities .......................................... 39,023 39,023
Current portion of long-term liabilities-
Notes payable and commercial bank financing ............... 65,500 65,500
Capital leases payable .................................... 11 11
Notes and capital leases payable to affiliates ............ 1,370 1,370
Program contracts payable ................................. 49,766 $ 1,096 50,862
Deferred barter revenues .................................... 4,458 4,458
---------- ----------
Total current liabilities ................................. 165,438 1,096 166,534
LONG-TERM LIABILITIES:
Notes payable and commercial bank financing ............... 1,097,000 $ 37,500 (g) 570,000 (h) 1,704,500
Capital leases payable .................................... 30 30
Notes and capital leases payable to affiliates ............ 11,872 11,872
Program contracts payable ................................. 46,670 751 47,421
Other long-term liabilities ................................. 4,960 4,960
---------- ----------
Total liabilities .......................................... 1,325,970 37,500 571,847 1,935,317
---------- ------------ ------------- ----------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES ............... 3,897 3,897
---------- ----------
COMPANY OBLIGATED MANDATORILY REDEEMABLE SE-
CURITY OF SUBSIDIARY TRUST HOLDING SOLELY KDSM
SENIOR DEBENTURES .......................................... 200,000 200,000
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series B Preferred Stock ................................. 11 11
Series D Convertible Exchangeable Preferred Stock ......... - -
Class A Common Stock ....................................... 71 71
Class B Common Stock ....................................... 277 277
Additional paid-in capital ................................. 234,812 234,812
Additional paid-in capital - deferred compensation ......... (896) (896)
Additional paid-in capital - equity put options ............ 23,117 23,117
Accumulated deficit ....................................... (24,754) (24,754)
---------- ----------
Total stockholders' equity ................................. 232,638 232,638
---------- ----------
Total Liabilities and Stockholders' Equity ............... $1,762,505 $ 37,500 $ 571,847 $2,371,852
========== ============ ============= ==========
</TABLE>
(Continued on following page)
S-12
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DEBT
ISSUANCE COMMON
AND HERITAGE STOCK
ACQUISITION OFFERING(C)
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 35,740
Accounts receivable, net of allowance for doubtful ac-
counts 102,093
Current portion of program contract costs ............ 35,694
Prepaid expenses and other current assets ............ 4,054
Deferred barter costs ................................. 6,485
Deferred tax asset .................................... 8,188
----------
Total current assets .............................. 192,254
PROGRAM CONTRACT COSTS, less current portion 31,490
LOANS TO OFFICERS AND AFFILIATES ..................... 11,241
PROPERTY AND EQUIPMENT, net ........................... 178,703
NON-COMPETE AND CONSULTING AGREE-
MENTS, net 2,250
OTHER ASSETS .......................................... 76,470
ACQUIRED INTANGIBLE BROADCASTING AS-
SETS, net 1,879,444 -
---------- ----------
Total Assets ....................................... $2,371,852 $
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................... $ 5,310
Accrued liabilities ................................. 39,023
Current portion of long-term liabilities-
Notes payable and commercial bank financing ......... 65,500
Capital leases payable .............................. 11
Notes and capital leases payable to affiliates ...... 1,370
Program contracts payable ........................... 50,862
Deferred barter revenues .............................. 4,458 -
---------- ----------
Total current liabilities ........................... 166,534
LONG-TERM LIABILITIES:
Notes payable and commercial bank financing ......... 1,704,500 $ (137,080)
Capital leases payable .............................. 30
Notes and capital leases payable to affiliates ...... 11,872
Program contracts payable ........................... 47,421
Other long-term liabilities ........................ 4,960
----------
Total liabilities ................................. 1,935,317 (137,080)
---------- ----------
MINORITY INTEREST IN CONSOLIDATED SUB-
SIDIARIES 3,897
----------
COMPANY OBLIGATED MANDATORILY RE-
DEEMABLE SECURITY OF SUBSIDIARY
TRUST HOLDING SOLELY KDSM SENIOR DE-
BENTURES 200,000
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series B Preferred Stock ........................... 11
Series D Convertible Exchangeable Preferred Stock -
Class A Common Stock .............................. 71 40
Class B Common Stock .............................. 277
Additional paid-in capital ........................... 234,812 137,040
Additional paid-in capital - deferred compensation. (896)
Additional paid-in capital - equity put options ...... 23,117
Accumulated deficit ................................. (24,754)
----------
Total stockholders' equity ........................ 232,638 137,080
---------- ----------
Total Liabilities and Stockholders' Equity ......... $2,371,852 $ -
========== ==========
<CAPTION>
DEBT
DEBT ISSUANCE,
ISSUANCE, HERITAGE
HERITAGE ACQUISITION,
ACQUISITION, AND PREFERRED COMMON AND
COMMON STOCK STOCK PREFERRED STOCK
OFFERING OFFERING(D) OFFERINGS(D)
------------------ ------------- ----------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 35,740 $ 35,740
Accounts receivable, net of allowance for doubtful ac-
counts 102,093 102,093
Current portion of program contract costs ............ 35,694 35,694
Prepaid expenses and other current assets ............ 4,054 4,054
Deferred barter costs ................................. 6,485 6,485
Deferred tax asset .................................... 8,188 - 8,188
----------- ---------- -----------
Total current assets .............................. 192,254 192,254
PROGRAM CONTRACT COSTS, less current portion 31,490 31,490
LOANS TO OFFICERS AND AFFILIATES ..................... 11,241 11,241
PROPERTY AND EQUIPMENT, net ........................... 178,703 178,703
NON-COMPETE AND CONSULTING AGREE-
MENTS, net 2,250 2,250
OTHER ASSETS .......................................... 76,470 76,470
ACQUIRED INTANGIBLE BROADCASTING AS-
SETS, net 1,879,444 - 1,879,444
----------- ---------- -----------
Total Assets ....................................... $ 2,371,852 $ $ 2,371,852
=========== ========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................... $ 5,310 $ 5,310
Accrued liabilities ................................. 39,023 39,023
Current portion of long-term liabilities-
Notes payable and commercial bank financing ......... 65,500 65,500
Capital leases payable .............................. 11 11
Notes and capital leases payable to affiliates ...... 1,370 1,370
Program contracts payable ........................... 50,862 50,862
Deferred barter revenues .............................. 4,458 - 4,458
----------- ---------- -----------
Total current liabilities ........................... 166,534 166,534
LONG-TERM LIABILITIES:
Notes payable and commercial bank financing ......... 1,567,420 $ (145,075) 1,422,345
Capital leases payable .............................. 30 30
Notes and capital leases payable to affiliates ...... 11,872 11,872
Program contracts payable ........................... 47,421 47,421
Other long-term liabilities ........................ 4,960 4,960
----------- -----------
Total liabilities ................................. 1,798,237 (145,075) 1,653,162
----------- ---------- -----------
MINORITY INTEREST IN CONSOLIDATED SUB-
SIDIARIES 3,897 3,897
----------- -----------
COMPANY OBLIGATED MANDATORILY RE-
DEEMABLE SECURITY OF SUBSIDIARY
TRUST HOLDING SOLELY KDSM SENIOR DE-
BENTURES 200,000 200,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series B Preferred Stock ........................... 11 11
Series D Convertible Exchangeable Preferred Stock - 30 30
Class A Common Stock .............................. 111 111
Class B Common Stock .............................. 277 277
Additional paid-in capital ........................... 371,852 145,045 516,897
Additional paid-in capital - deferred compensation. (896) (896)
Additional paid-in capital - equity put options ...... 23,117 23,117
Accumulated deficit ................................. (24,754) (24,754)
----------- -----------
Total stockholders' equity ........................ 369,718 145,075 514,793
----------- ---------- -----------
Total Liabilities and Stockholders' Equity ......... $ 2,371,852 $ - $ 2,371,852
=========== ========== ===========
</TABLE>
S-13
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) To reflect the proceeds of the Debt Issuance consummated on July 2, 1997,
net of $4,500 of underwriting discounts and commissions and estimated
expenses and the application of the proceeds therefrom.
(b) The Heritage Acquisition column reflects the assets and liabilities acquired
in connection with the $630,000 purchase of Heritage less the $60,000
divestiture of the Heritage television station KOKH in Oklahoma City,
Oklahoma, which is required pursuant to the Heritage Acquisition Agreements
and with respect to which the Company has entered into a letter of intent.
The Heritage Acquisition is subject to a number of conditions customary for
acquisitions of broadcasting properties. Total acquired intangibles are
calculated as follows:
<TABLE>
<CAPTION>
HERITAGE
HERITAGE KOKH ACQUISITION
---------- ---------- ------------
<S> <C> <C> <C>
Purchase Price .......................................... $630,000
Add:
Liabilities acquired-
Current portion of program contracts payable ......... $ 1,552 $ (456) 1,096
Long-term portion of program contracts payable ...... 860 (109) 751
Less:
Assets acquired-
Current portion of program contract costs ............ 1,603 (677) 926
Deferred barter costs .............................. 2,496 (278) 2,218
Program contract costs, less current portion ......... 1,266 (554) 712
Property and equipment .............................. 27,524 (5,502) 22,022
Sale of KOKH ....................................... 60,000
---------
Acquired intangibles ................................. $545,969
=========
</TABLE>
(c) To reflect the proceeds of the Common Stock Offering (at an assumed offering
price of $36 per share, the closing price of the Class A Common Stock on
August 21, 1997), net of $6,920 of underwriting discounts and commissions
and estimated expenses and the application of the proceeds therefrom as set
forth in "Use of Proceeds."
(d) To reflect the proceeds of the Preferred Stock Offering (at an assumed
offering price of $50 per share), net of $4,925 of underwriting discounts
and commissions and estimated expenses and the application of the proceeds
therefrom as set forth in "Use of Proceeds." There can be no assurance that
the Preferred Stock Offering will be consummated. The completion of the
Common Stock Offering is not conditioned upon the completion of the
Preferred Stock Offering.
(e) To record the increase in cash and cash equivalents resulting from the net
proceeds of the Debt Issuance after giving effect to the repayment of the
revolving credit facility under the Bank Credit Agreement as follows:
<TABLE>
<S> <C>
Offering proceeds .......................................... $ 200,000
Underwriting discounts, commissions and estimated expenses (4,500)
Repayment of revolving credit facility under the Bank Credit
Agreement ................................................ (162,500)
----------
Pro forma adjustment ....................................... $ 33,000
==========
</TABLE>
(f) To record underwriting discounts and commissions and estimated expenses of
$4,500.
(g) To reflect the increase in indebtedness resulting from the Debt Issuance
after giving effect to the repayment of the revolving credit facility under
the Bank Credit Agreement as follows:
<TABLE>
<S> <C>
Indebtedness incurred .................................... $ 200,000
Repayment of revolving credit facility under the Bank Credit
Agreement ................................................ (162,500)
----------
Pro forma adjustment ....................................... $ 37,500
==========
</TABLE>
(h) To reflect the incurrence of $570,000 of bank financing in connection with
the Heritage Acquisition.
S-14
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SUPERIOR
CONSOLIDATED FLINT COMMUNICATIONS
HISTORICAL TV, INC.(A) GROUP, INC.(B) KSMO(C)
-------------- ------------- ---------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commis-
sions $ 346,459 $1,012 $4,431 $ 7,694
Revenues realized from station barter arrange-
ments 32,029 2,321
---------- --------
Total revenues .................................... 378,488 1,012 4,431 10,015
---------- ------- ------ --------
OPERATING EXPENSES:
Program and production ........................... 66,652 101 539 1,550
Selling, general and administrative ............... 75,924 345 2,002 2,194
Expenses realized from barter arrangements ......... 25,189 2,276
Amortization of program contract costs and net
realizable value adjustments ..................... 47,797 125 736 601
Amortization of deferred compensation ............ 739
Depreciation and amortization of property and
equipment ....................................... 11,711 4 373 374
Amortization of acquired intangible broadcasting
assets, non-compete and consulting agreements
and other assets ................................. 58,530 529
Amortization of excess syndicated programming . 3,043
----------
Total operating expenses ........................ 289,585 575 4,179 6,995
---------- ------- ------ --------
Broadcast operating income (loss) ............... 88,903 437 252 3,020
---------- ------- ------ --------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense (84,314) (457) (823)
Interest income .................................... 3,136
Subsidiary trust minority interest expense .........
Other income (expense) ........................... 342 19 4 7
---------- ------- ------ --------
Income (loss) before provision (benefit) for
income taxes .................................... 8,067 456 (201) 2,204
PROVISION (BENEFIT) FOR INCOME
TAXES ............................................. 6,936
----------
NET INCOME (LOSS) ................................. $ 1,131 $ 456 $ (201) $ 2,204
========== ======= ====== ========
NET INCOME (LOSS) AVAILABLE TO COM-
MON STOCKHOLDERS $ 1,131
==========
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE ........................... $ 0.03
==========
WEIGHTED AVERAGE COMMON AND COM-
MON EQUIVALENT SHARES OUTSTAND-
ING 37,381
==========
<CAPTION>
RIVER CITY(E) 1996
-------------------------- ACQUISITION
WSTR(D) RIVER CITY WSYX WYZZ(F) ADJUSTMENTS
----------- ------------ ------------- --------- ------------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commis-
sions $ 7,488 $ 86,869 $ (10,783) $1,838
Revenues realized from station barter arrange-
ments 1,715
---------
Total revenues .................................... 9,203 86,869 (10,783) 1,838
--------- ---------- ---------- -------
OPERATING EXPENSES:
Program and production ........................... 961 10,001 (736) 214
Selling, general and administrative ............... 2,173 39,786 (3,950) 702 $ (3,577)(h)
Expenses realized from barter arrangements ......... 1,715
Amortization of program contract costs and net
realizable value adjustments ..................... 1,011 9,721 (458) 123
Amortization of deferred compensation ............ 194 (i)
Depreciation and amortization of property and
equipment ....................................... 284 6,294 (1,174) 6 (943)(j)
Amortization of acquired intangible broadcasting
assets, non-compete and consulting agreements
and other assets ................................. 39 14,041 (3,599) 3 4,034 (k)
Amortization of excess syndicated programming .
Total operating expenses ........................ 6,183 79,843 (9,917) 1,048 (292)
--------- ---------- ---------- ------- -------------
Broadcast operating income (loss) ............... 3,020 7,026 (866) 790 292
--------- ---------- ---------- ------- -------------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense (1,127) (12,352) (17,409)(l)
Interest income .................................... 15 195 (1,636)(m)
Subsidiary trust minority interest expense .........
Other income (expense) ........................... (149) (8)
---------- ----------
Income (loss) before provision (benefit) for
income taxes .................................... 1,908 (5,280) (874) 790 (18,753)
PROVISION (BENEFIT) FOR INCOME
TAXES ............................................. (7,900)(n)
-------------
NET INCOME (LOSS) ................................. $ 1,908 $ (5,280) $ (874) $ 790 $ (10,853)
========= ========== ========== ======= =============
NET INCOME (LOSS) AVAILABLE TO COM-
MON STOCKHOLDERS
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE ...........................
WEIGHTED AVERAGE COMMON AND COM-
MON EQUIVALENT SHARES OUTSTAND-
ING
<CAPTION>
DEBT ISSUANCE,
HYTOPS DEBT HYTOPS ISSUANCE
ISSUANCE ISSUANCE AND 1996 ACQUISITIONS
------------------ -------------------- ----------------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commis-
sions $ 445,008
Revenues realized from station barter arrange-
ments 36,065
-----------
Total revenues .................................... 481,073
-----------
OPERATING EXPENSES:
Program and production ........................... 79,282
Selling, general and administrative ............... 115,599
Expenses realized from barter arrangements ......... 29,180
Amortization of program contract costs and net
realizable value adjustments ..................... 59,656
Amortization of deferred compensation ............ 933
Depreciation and amortization of property and
equipment ....................................... 16,929
Amortization of acquired intangible broadcasting
assets, non-compete and consulting agreements
and other assets ................................. $ 500 (p) $ 450 (s) 74,527
Amortization of excess syndicated programming . 3,043
-----------
Total operating expenses ........................ 500 450 379,149
------------- ------------- -----------
Broadcast operating income (loss) ............... (500) (450) 101,924
------------- ------------- -----------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense 11,820 (q) (18,000) (t) (122,662)
Interest income .................................... 1,710
Subsidiary trust minority interest expense ......... (23,250)(r) (23,250)
Other income (expense) ........................... 215
-----------
Income (loss) before provision (benefit) for
income taxes .................................... (11,930) (18,450) (42,063)
PROVISION (BENEFIT) FOR INCOME
TAXES ............................................. (4,772)(n) (7,380)(n) (13,116)
------------- -------------- -----------
NET INCOME (LOSS) ................................. $ (7,158) $ (11,070) $ (28,947)
============= ============== ===========
NET INCOME (LOSS) AVAILABLE TO COM-
MON STOCKHOLDERS
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE ...........................
WEIGHTED AVERAGE COMMON AND COM-
MON EQUIVALENT SHARES OUTSTAND-
ING
</TABLE>
(Continued on following page)
S-15
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HERITAGE(G)
DEBT ISSUANCE, -------------------------
HYTOPS ISSUANCE
AND 1996 ACQUISITIONS HERITAGE KOKH
----------------------- ------------ ------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions ...... $ 445,008 $ 95,302 $ (7,953)
Revenues realized from station barter arrangements ......... 36,065 4,292 (178)
----------- ---------- --------
Total revenues ............................................. 481,073 99,594 (8,131)
----------- ---------- --------
OPERATING EXPENSES:
Program and production ....................................... 79,282 20,089 (1,871)
Selling, general and administrative ........................ 115,599 31,916 (1,722)
Expenses realized from barter arrangements .................. 29,180 3,478 (70)
Amortization of program contract costs and net realizable
value adjustments .......................................... 59,656 3,165 (1,208)
Amortization of deferred compensation ........................ 933
Depreciation and amortization of property and equipment . 16,929 5,472 (1,022)
Amortization of acquired intangible broadcasting assets, non-
compete and consulting agreements and other assets ......... 74,527 8,460 (367)
Amortization of excess syndicated programming ............... 3,043
-----------
Total operating expenses ................................. 379,149 72,580 (6,260)
----------- ---------- --------
Broadcast operating income (loss) ........................... 101,924 27,014 (1,871)
----------- ---------- --------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense ......... (122,662) (17,949) 1,025
Gain on sale of station .................................... 6,031
Interest income ............................................. 1,710
Subsidiary trust minority interest expense .................. (23,250)
Other income (expense) ....................................... 215 (203)
----------- ----------
Income (loss) before provision (benefit) for income taxes (42,063) 14,893 (846)
PROVISION (BENEFIT) FOR INCOME
TAXES ...................................................... (13,116) 7,853 (466)
----------- ---------- --------
NET INCOME (LOSS) ............................................. $ (28,947) $ 7,040 $ (380)
=========== ========== ========
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS ................................................
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE .............................................
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING ..............................
<CAPTION>
DEBT ISSUANCE,
HERITAGE HYTOPS ISSUANCE, COMMON
ACQUISITION 1996 ACQUISITIONS AND STOCK
ADJUSTMENTS HERITAGE ACQUISITION OFFERING
-------------------- ----------------------- -----------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions ...... $ 532,357
Revenues realized from station barter arrangements ......... 40,179
------------
Total revenues ............................................. 572,536
------------
OPERATING EXPENSES:
Program and production ....................................... 97,500
Selling, general and administrative ........................ $ (1,808)(u) 143,985
Expenses realized from barter arrangements .................. 32,588
Amortization of program contract costs and net realizable
value adjustments .......................................... 61,613
Amortization of deferred compensation ........................ 933
Depreciation and amortization of property and equipment . (900)(v) 20,479
Amortization of acquired intangible broadcasting assets, non-
compete and consulting agreements and other assets ......... 9,531 (w) 92,151
Amortization of excess syndicated programming ............... 3,043
------------
Total operating expenses ................................. 6,823 452,292
----------- ------------
Broadcast operating income (loss) ........................... (6,823) 120,244
----------- ------------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense ......... (23,621)(x) (163,207) $ 9,330 (y)
Gain on sale of station .................................... 6,031
Interest income ............................................. 1,710
Subsidiary trust minority interest expense .................. (23,250)
Other income (expense) ....................................... 12
------------
Income (loss) before provision (benefit) for income taxes (30,444) (58,460) 9,330
PROVISION (BENEFIT) FOR INCOME
TAXES ...................................................... (12,178)(n) (17,907) 3,732 (n)
------------ ------------ ----------
NET INCOME (LOSS) ............................................. $ (18,266) $ (40,553) $ 5,598
============ ============ ==========
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS ................................................ $ (40,553)
============
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE ............................................. $ (1.04)
============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING .............................. 39,058 (o)
============
<CAPTION>
DEBT ISSUANCE,
DEBT ISSUANCE, HYTOPS ISSUANCE,
HYTOPS ISSUANCE, 1996 ACQUISITIONS,
1996 ACQUISITIONS, HERITAGE ACQUISITION,
HERITAGE ACQUISITION PREFERRED COMMON AND
AND COMMON STOCK STOCK PREFERRED STOCK
OFFERING OFFERING(MM) OFFERINGS(MM)
---------------------- ----------------- ----------------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions ...... $ 532,357 $ 532,357
Revenues realized from station barter arrangements ......... 40,179 40,179
------------ ------------
Total revenues ............................................. 572,536 572,536
------------ ------------
OPERATING EXPENSES:
Program and production ....................................... 97,500 97,500
Selling, general and administrative ........................ 143,985 143,985
Expenses realized from barter arrangements .................. 32,588 32,588
Amortization of program contract costs and net realizable
value adjustments .......................................... 61,613 61,613
Amortization of deferred compensation ........................ 933 933
Depreciation and amortization of property and equipment . 20,479 20,479
Amortization of acquired intangible broadcasting assets, non-
compete and consulting agreements and other assets ......... 92,151 92,151
Amortization of excess syndicated programming ............... 3,043 3,043
------------ ------------
Total operating expenses ................................. 452,292 452,292
------------ ------------
Broadcast operating income (loss) ........................... 120,244 120,244
------------ ------------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense ......... (153,877) $ 9,974(aa) (143,903)
Gain on sale of station .................................... 6,031 6,031
Interest income ............................................. 1,710 1,710
Subsidiary trust minority interest expense .................. (23,250) (23,250)
Other income (expense) ....................................... 12 12
------------ ------------
Income (loss) before provision (benefit) for income taxes (49,130) 9,974 (39,156)
PROVISION (BENEFIT) FOR INCOME
TAXES ...................................................... (14,175) 3,990(n) (10,185)
------------ ---------- ------------
NET INCOME (LOSS) ............................................. $ (34,955) $ 5,984 $ (28,971)
============ ========== ============
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS ................................................ $ (34,955) $ (38,346)
============ ============
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE ............................................. $ (0.81) $ (0.89)
============ ============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING .............................. 43,058 (z) 43,058 (z)
============ ============
</TABLE>
S-16
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HERITAGE(G)
CONSOLIDATED HYTOPS DEBT ------------------------
HISTORICAL ISSUANCE ISSUANCE HERITAGE KOKH
------------ -------------- ------------- --------- --------
<S> <C> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency
commissions ................................. $ 219,701 $ 46,451 $ (3,706)
Revenues realized from station barter ar-
rangements 19,870 2,430 (125)
---------- --------- --------
Total revenues .............................. 239,571 48,881 (3,831)
---------- --------- --------
OPERATING EXPENSES:
Program and production ........................ 46,760 15,313 (1,150)
Selling, general and administrative ......... 51,634 9,447 (784)
Expenses realized from station barter ar-
rangements 16,303 1,849 (62)
Amortization of program contract costs and
net realizable value adjustments ............ 30,918 824 (297)
Amortization of deferred compensation ......... 233
Depreciation and amortization of property
and equipment .............................. 8,340 2,819 (445)
Amortization of acquired intangible broad-
casting assets, non-compete and consult-
ing agreements and other assets 37,392 $ 88 (bb) $ 225 (ee) 4,174 (184)
---------- ------------- ------------ -------- --------
Total operating expenses ..................... 191,580 88 225 34,426 (2,922)
---------- ------------- ------------ -------- --------
Broadcast operating income (loss) ............ 47,991 (88) (225) 14,455 (909)
---------- ------------- ------------ -------- --------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount
expense ....................................... (51,993) 2,894 (cc) (9,000)(ff) (9,979) 425
Gain of sale of station ..................... 9,401
Interest income .............................. 1,040
Subsidiary trust minority interest expense . (7,007) (4,618)(dd)
Other income ................................. 47 (98)
---------- --------
Income (loss) before provision (bene-
fit) for income taxes (9,922) (1,812) (9,225) 13,779 (484)
PROVISION (BENEFIT) FOR INCOME
TAXES ....................................... (4,100) (725)(n) (3,690)(n) 7,262 (369)
---------- ------------- ------------ -------- --------
NET INCOME (LOSS) .............................. $ (5,822) $ (1,087) $ (5,535) $ 6,517 $ (115)
========== ============= ============ ========= ========
NET LOSS AVAILABLE TO COMMON
STOCKHOLDERS ................................. $ (5,822)
==========
NET LOSS PER COMMON AND COM-
MON EQUIVALENT SHARE $ (0.17)
==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ........................... 34,746
==========
<CAPTION>
HERITAGE DEBT ISSUANCE, COMMON
ACQUISITION HYTOPS ISSUANCE STOCK
ADJUSTMENTS AND HERITAGE ACQUISITION OFFERING
---------------- ------------------------- --------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency
commissions ................................. $ 262,446
Revenues realized from station barter ar-
rangements 22,175
---------
Total revenues .............................. 284,621
---------
OPERATING EXPENSES:
Program and production ........................ 60,923
Selling, general and administrative ......... $ (883) (gg) 59,414
Expenses realized from station barter ar-
rangements 18,090
Amortization of program contract costs and
net realizable value adjustments ............ 31,445
Amortization of deferred compensation ......... 233
Depreciation and amortization of property
and equipment .............................. (450) (hh) 10,264
Amortization of acquired intangible broad-
casting assets, non-compete and consult-
ing agreements and other assets 4,964 (ii) 46,659
-------------- ---------
Total operating expenses ..................... 3,631 227,028
-------------- ---------
Broadcast operating income (loss) ............ (3,631) 57,593
-------------- ---------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount
expense ....................................... (10,768) (jj) (78,421) $ 4,665 (kk)
Gain of sale of station ..................... 9,401
Interest income .............................. 1,040
Subsidiary trust minority interest expense . (11,625)
Other income ................................. (51)
---------
Income (loss) before provision (bene-
fit) for income taxes (14,399) (22,063) 4,665
PROVISION (BENEFIT) FOR INCOME
TAXES ....................................... (5,760) (n) (7,382) 1,866 (n)
-------------- --------- ----------
NET INCOME (LOSS) .............................. $ (8,639) $ (14,681) $ 2,799
============== ========= ===========
NET LOSS AVAILABLE TO COMMON
STOCKHOLDERS ................................. $ (14,681)
=========
NET LOSS PER COMMON AND COM-
MON EQUIVALENT SHARE $ (0.42)
=========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ........................... 34,769
=========
<CAPTION>
DEBT ISSUANCE,
DEBT ISSUANCE, HYTOPS ISSUANCE,
HYTOPS ISSUANCE, HERITAGE ACQUISITION,
HERITAGE ACQUISITION PREFERRED COMMON AND
AND COMMON STOCK PREFERRED STOCK
<S> <C> <C> <C>
STOCK OFFERING OFFERING(MM) OFFERINGS(MM)
---------------------- ------------------- ----------------------
REVENUES:
Station broadcast revenues, net of agency
commissions ................................. $ 262,446 $ 262,446
Revenues realized from station barter ar-
rangements 22,175 22,175
------------ ------------
Total revenues .............................. 284,621 284,621
------------ ------------
OPERATING EXPENSES:
Program and production ........................ 60,923 60,923
Selling, general and administrative ......... 59,414 59,414
Expenses realized from station barter ar-
rangements 18,090 18,090
Amortization of program contract costs and
net realizable value adjustments ............ 31,445 31,445
Amortization of deferred compensation ......... 233 233
Depreciation and amortization of property
and equipment .............................. 10,264 10,264
Amortization of acquired intangible broad-
casting assets, non-compete and consult-
ing agreements and other assets 46,659 46,659
------------ ------------
Total operating expenses ..................... 227,028 227,028
------------ ------------
Broadcast operating income (loss) ............ 57,593 57,593
------------ ------------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount
expense ....................................... (73,756) $ 4,987 (ll) (68,769)
Gain of sale of station ..................... 9,401 9,401
Interest income .............................. 1,040 1,040
Subsidiary trust minority interest expense . (11,625) (11,625)
Other income ................................. (51) (51)
------------ ------------
Income (loss) before provision (bene-
fit) for income taxes (17,398) 4,987 (12,411)
PROVISION (BENEFIT) FOR INCOME
TAXES ....................................... (5,516) 1,994 (n) (3,522)
------------ ----------- ------------
NET INCOME (LOSS) .............................. $ (11,882) $ 2,993 $ (8,889)
============ =========== ============
NET LOSS AVAILABLE TO COMMON
STOCKHOLDERS ................................. $ (11,882) $ (13,577)
============ ============
NET LOSS PER COMMON AND COM-
MON EQUIVALENT SHARE $ (0.31) $ (0.35)
============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ........................... 38,769 (z) 38,769 (z)
============ ============
</TABLE>
S-17
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) The Flint T.V., Inc. ("Flint-TV") column reflects the results of operations
for WSMH for the period from January 1, 1996 to February 28, 1996, the
date the Flint Acquisition was consummated.
(b) The Superior Communications Group, Inc. column reflects the results of
operations for Superior for the period from January 1, 1996 to May 7,
1996, the date the Superior Acquisition was consummated.
(c) The KSMO column reflects the results of operations for the period from
January 1, 1996 to June 30, 1996 as the transaction was consummated in July
1996.
(d) The WSTR column reflects the results of operations for the period from
January 1, 1996 to July 31, 1996 as the transaction was consummated in
August 1996.
(e) The River City column reflects the results of operations for River City
(including KRRT, Inc.) for the period from January 1, 1996 to May 31,
1996, the date the River City Acquisition was consummated. The WSYX column
removes the results of WSYX from the results of River City for the period
as the Company has not yet acquired WSYX. See "Business of Sinclair -
Broadcasting Acquisition Strategy."
(f) The WYZZ column reflects the results of operations for the period from
January 1, 1996 to June 30, 1996 as the purchase transaction was consummated
in July 1996.
(g) The Heritage column reflects the results of operations for the period from
January 1, 1996 to December 31, 1996 for the year ended December 31, 1996
Pro Forma Consolidated Statement of Operations and the results of operations
for the period from January 1, 1997 to June 30, 1997 for the six months
ended June 30, 1997 Pro Forma Consolidated Statement of Operations. The KOKH
column removes the results of KOKH from the results of Heritage for both
periods to reflect the sale of KOKH, which is required pursuant to the
Heritage Acquisition Agreements and with respect to which the Company has
entered into a letter of intent. See "Business of Sinclair - 1997
Acquisitions."
(h) To adjust River City operating expenses for non-recurring LMA payments made
to KRRT, Inc. for KRRT, Inc. debt service and to adjust River City and
Superior operating expenses for employment contracts and other corporate
overhead expenses not assumed at the time of the 1996 Acquisitions.
(i) To record compensation expense related to options granted under the
Company's Long-Term Incentive Plan:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
-------------
<S> <C>
Compensation expense related to the Long-Term Incentive
Plan on a pro forma basis ........................... $ 933
Less: Compensation expense recorded by the Company re-
lated to the Long-Term Incentive Plan (739)
------
$ 194
======
</TABLE>
(j) To record depreciation expense related to acquired tangible assets and
eliminate depreciation expense recorded by Flint-TV, Superior, KSMO, WSTR,
River City and WYZZ from the period of January 1, 1996 through the date of
acquisition. Tangible assets are to be depreciated over lives ranging from
5 to 29.5 years, calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
---------------------------------
FLINT-TV SUPERIOR KSMO
---------- ---------- -----------
<S> <C> <C> <C>
Depreciation expense on acquired tangible assets $ 32 $ 315 $ 240
Less: Depreciation expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City and WYZZ ...... (4) (373) (374)
----- ------ -------
Pro forma adjustment ........................... $ 28 $ (58) $ (134)
===== ====== =======
<CAPTION>
WSTR RIVER CITY WYZZ TOTAL
--------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Depreciation expense on acquired tangible assets $ 507 $ 3,965 $ 159 $ 5,218
Less: Depreciation expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City and WYZZ ...... (284) (5,120) (6) (6,161)
------- --------- ------ ---------
Pro forma adjustment ........................... $ 223 $ (1,155) $ 153 $ (943)
======= ========= ====== =========
</TABLE>
(k) To record amortization expense related to acquired intangible assets and
deferred financing costs and eliminate amortization expense recorded by
Flint-TV, Superior, KSMO, WSTR, River City and WYZZ from the period of
January 1, 1996 through date of acquisition. Intangible assets are to be
amortized over lives ranging from 1 to 40 years, calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------------------
FLINT-TV SUPERIOR KSMO
---------- ---------- -------
<S> <C> <C> <C>
Amortization expense on acquired intangible assets $ 167 $ 827 $ 180
Deferred financing costs ...........................
Less: Amortization expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City and WYZZ ......... - (529) -
------ ------- ------
Pro forma adjustment .............................. $ 167 $ 298 $ 180
====== ======= ======
<CAPTION>
WSTR RIVER CITY WYZZ TOTAL
------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Amortization expense on acquired intangible assets $ 285 $ 12,060 $ 99 $ 13,618
Deferred financing costs ........................... 1,429 1,429
Less: Amortization expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City and WYZZ ......... (39) (10,442) (3) (11,013)
----- ---------- ----- ----------
Pro forma adjustment .............................. $ 246 $ 3,047 $ 96 $ 4,034
===== ========== ===== ==========
</TABLE>
S-18
<PAGE>
(l) To record interest expense for the year ended December 31, 1996 on
acquisition financing relating to Superior of $59,850 (under the
Bank Credit Agreement at 8.0% for four months), KSMO and WSTR of
$10,425 and $7,881, respectively (both under the Bank Credit
Agreement at 8.0% for six months), River City (including KRRT) of
$868,300 (under the Bank Credit Agreement at 8.0% for five months)
and of $851 for hedging agreements related to the River City
financing and WYZZ of $20,194 (under the Bank Credit Agreement at
8.0% for six months) and eliminate interest expense recorded. No
interest expense has been recorded for Flint-TV as it has been
assumed that the proceeds from the 1995 Notes were used to purchase
Flint-TV.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-------------------------------------
SUPERIOR KSMO WSTR
------------- ----------- -----------
<S> <C> <C> <C>
Interest expense adjustment as noted above ...... $ (1,596) $ (417) $ (315)
Less: Interest expense recorded by Superior, KSMO,
WSTR, River City and WYZZ ........................ 457 823 1,127
--------- ------- -------
Pro forma adjustment ........................... $ (1,139) $ 406 $ 812
========= ======= =======
<CAPTION>
RIVER CITY WYZZ TOTAL
------------ ---------- --------------
<S> <C> <C> <C>
Interest expense adjustment as noted above ...... $ (29,032) $ (808) $ (32,168)
Less: Interest expense recorded by Superior, KSMO,
WSTR, River City and WYZZ ........................ 12,352 - 14,759
--------- ------- ----------
Pro forma adjustment ........................... $ (16,680) $ (808) $ (17,409)
========= ======= ==========
</TABLE>
(m) To eliminate interest income for the year ended December 31, 1996 on
proceeds from the sale of the 1995 Notes due to assumed utilization
of excess cash for the following acquisitions: Flint-TV, KSMO and
WSTR and WYZZ of $34,400 (with a commercial bank at 5.7% for two
months), $10,425 and $7,881 (both with a commercial bank at 5.7% for
six months) and $20,194 (with a commercial bank at 5.7% for six
months).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-------------------------------------------------------------------------
FLINT-TV KSMO WSTR RIVER CITY WYZZ TOTAL
---------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Interest income adjustment as noted above ...... $ (327) $ (297) $ (226) $ - $ (576) $ (1,426)
Less: Interest income recorded by Flint-TV, KSMO,
WSTR, River City and WYZZ ..................... - - (15) (195) - (210)
------- ------- ------- ------- ------- ---------
Pro forma adjustment ........................... $ (327) $ (297) $ (241) $ (195) $ (576) $ (1,636)
======= ======= ======= ======= ======= =========
</TABLE>
(n) To record tax provision (benefit) at the applicable statutory tax
rates.
(o) Weighted average shares outstanding on a pro forma basis assumes that
the 1,150,000 shares of Series B Preferred Stock were converted to
4,181,818 shares of Class A Common Stock and the Company's Incentive
Stock Options and Long-Term Incentive Plan Options were outstanding
as of the beginning of the period.
(p) To record amortization expense on other assets that relate to the
HYTOPS Issuance for one year ($6,000 over 12 years).
(q) To record the net interest expense reduction for 1996 related to
application of the HYTOPS Issuance proceeds to the outstanding
balance under the revolving credit facility offset by an increase in
commitment fees for the available but unused portion of the revolving
credit facility for the year ended December 31, 1996.
<TABLE>
<S> <C>
Interest on adjusted borrowing on the revolving credit facility .................. $ 12,600
Commitment fee on available but unused borrowings of $250,000 of revolving credit
facility at 1/2 of 1% for 12 months ............................................. (1,250)
Commitment fee on available borrowings recorded by the Company .................. 470
--------
Pro forma adjustment ............................................................ $ 11,820
========
</TABLE>
(r) To record subsidiary trust minority interest expense for the year
ended December 31, 1996 ($200,000 aggregate liquidation value of
HYTOPS).
(s) To record amortization expense on other assets for one year ($4,500
over 10 years). See note (f) of notes to Pro Forma Consolidated
Balance Sheet.
(t) To record interest expense on the 1997 Notes for one year ($200,000
at 9%).
(u) To adjust Heritage operating expenses for corporate overhead
expenses which the Company does not expect to incur upon its
consummation of the Heritage Acquisition on a going-forward basis.
(v) To record depreciation expense related to acquired tangible assets
of $3,550 and eliminate depreciation expense of $4,450 recorded by
Heritage. Tangible assets are to be depreciated over lives ranging
from 5 to 29.5 years.
(w) To record amortization expense related to acquired intangible assets
of $17,624 and eliminate amortization expense of $8,093 recorded by
Heritage. Intangible assets are to be amortized over lives ranging
from 1 to 40 years.
(x) To record interest expense on acquisition financing of $570,000
(under the Bank Credit Agreement at 71/4%), net of $780 of
commitment fees for the available but unused portion of the
revolving credit facility, and eliminated interest expense of
$16,924 recorded by Heritage.
(y) To record the interest expense reduction of $9,938 related to
application of the Common Stock Offering proceeds to the
S-19
<PAGE>
outstanding balance under the revolving credit facility offset by an increase
in commitment fees of $608 for the available but unused portion of the
revolving credit facility.
(z) Weighted average shares outstanding on a pro forma basis assumes
that the 4,000,000 shares of Class A Common Stock to be issued in
the Common Stock Offering were outstanding as of the beginning of
the period.
(aa) To record the interest expense reduction of $10,518 related to
application of the Preferred Stock Offering proceeds to the
outstanding balance under the revolving credit facility offset by
an increase in commitment fees of $544 for the available but unused
portion of the revolving credit facility.
(bb) To record amortization expense on other assets that resulted from
the HYTOPS Issuance for six months ($6,000 over 12 years).
Amortization expense on other assets ............... $ 250
Amortization expense recorded by the Company ...... (162)
------
Pro forma adjustment .............................. $ 88
======
(cc) To record the net interest expense reduction for 1997 related to
application of the HYTOPS Issuance proceeds to the outstanding
balance under the revolving credit facility offset by an increase in
commitment fees for the available but unused portion of the revolving
credit facility for the quarter ended June 30, 1997.
<TABLE>
<S> <C>
Interest on adjusted borrowing on the revolving credit facility ............... $3,235
Commitment fee on available but unused borrowings of $250,000 of revolving credit
facility at 1/2 of 1% for six months .......................................... (625)
Commitment fee on available borrowings recorded by the Company .................. 284
------
Pro forma adjustment ............................................................ $2,894
======
</TABLE>
(dd) To record subsidiary trust minority interest expense for the quarter
ended June 30, 1997 ($200,000 aggregate liquidation value HYTOPS).
<TABLE>
<S> <C>
Subsidiary trust minority interest expense for six months ........................ $ (11,625)
Subsidiary trust minority interest expense made by the Company during the quarter . 7,007
---------
Pro forma adjustment ............................................................... $ (4,618)
=========
</TABLE>
(ee) To record amortization expense on other assets for six months
($4,500 over 10 years). See note (f) of notes to Pro Forma
Consolidated Balance Sheet.
(ff) To record interest expense on the 1997 Notes for six months
($200,000 at 9%).
(gg) To adjust Heritage operating expenses for corporate overhead expenses
which the Company does not expect to incur upon its consummation of
the Heritage Acquisition on a going-forward basis.
(hh) To record depreciation expenses related to acquired tangible assets
of $1,775 and eliminate depreciation expense of $2,225 recorded by
Heritage. Tangible assets are to be depreciated over lives ranging
from 5 to 29.5 years.
(ii) To record amortization expense related to acquired intangible assets
of $8,954 and eliminate amortization expense of $3,990 recorded by
Heritage. Intangible assets are to be amortized over lives ranging
from 1 to 40 years.
(jj) To record interest expense on acquisition financing of $570,000
(under the Bank Credit Agreement at 71/4%), net of $341 of commitment
fees for the available but unused portion of the revolving credit
facility, and eliminate interest expense of $9,554 recorded by
Heritage.
(kk) To record the interest expense reduction of $4,969 related to
application of the Common Stock Offering proceeds to the outstanding
balance under the revolving credit facility offset by an increase in
commitment fees of $304 for the available but unused portion of the
revolving credit facility.
(ll) To record the interest expense reduction of $5,259 related to
application of the Preferred Stock Offering proceeds to the
outstanding balance under the revolving credit facility offset by an
increase in commitment fees of $272 for the available but unused
portion of the revolving credit facility.
(mm) There can be no assurance that the Preferred Stock Offering will be
consummated. The completion of the Common Stock Offering is not
conditioned upon the completion of the Preferred Stock Offering.
S-20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SINCLAIR
INTRODUCTION
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 four additional television
stations, and has pending acquisitions of the right to provide programming to
two additional stations. The Company believes it is also one of the top 20 radio
groups in the United States, when measured by the total number of radio stations
owned, programmed or with which the Company has Joint Sales Agreements (JSAs).
The Company owns 27 radio stations, has pending acquisitions of 24 radio
stations, and has options to acquire an additional seven radio stations.
The operating revenues of the Company are derived from local and national
advertisers and, to a much lesser extent, from television network compensation.
The Company's primary operating expenses involved in owning, operating or
programming the television and radio stations are syndicated program rights
fees, commissions on revenues, employee salaries, news-gathering and promotion.
Amortization and depreciation of costs associated with the acquisition of the
stations and interest carrying charges are significant factors in determining
the Company's overall profitability.
Set forth below are the principal types of broadcast revenues received by
the Company's stations for the periods indicated and the percentage contribution
of each type to the Company's total gross broadcast revenues:
BROADCAST REVENUES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1994 1995 1996
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Local/regional advertising ...... $ 67,881 48.6% $ 104,299 47.5% $ 199,029 49.4%
National advertising ............ 69,374 49.6 113,678 51.7 191,449 47.6
Network compensation ............ 302 0.2 442 0.2 3,907 1.0
Political advertising ............ 1,593 1.1 197 0.1 6,972 1.7
Production ..................... 696 0.5 1,115 0.5 1,142 0.3
--------- ------ --------- ------ --------- ------
Broadcast revenues ............... 139,846 100.0% 219,731 100.0% 402,499 100.0%
====== ====== ======
Less: agency commissions ......... (21,235) (31,797) (56,040)
--------- --------- ---------
Broadcast revenues, net ......... 118,611 187,934 346,459
Barter revenues .................. 10,743 18,200 32,029
--------- --------- ---------
Total revenues .................. $ 129,354 $ 206,134 $ 378,488
========= ========= =========
</TABLE>
The Company's primary types of programming and their approximate
percentages of 1996 net broadcast revenues were network programming (14.1%),
children's programming (7.4%) and other syndicated programming (56.7%).
Similarly, the Company's three largest categories of advertising and their
approximate percentages of 1996 net broadcast revenues were automotive (17.4%),
fast food advertising (9.2%) and movies (5.5%). No other advertising category
accounted for more than 5% of the Company's net broadcast revenues in 1996. No
individual advertiser accounted for more than 5% of any of the Company's
individual station's net broadcast revenues in 1996.
S-21
<PAGE>
The following table sets forth certain operating data of the Company for
the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1996 and 1997:
OPERATING DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------ ---------------------------
1994 1995 1996 1996 1997
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net broadcast revenues .............................. $ 118,611 $ 187,934 $ 346,459 $ 117,339 $ 219,701
Barter revenues .................................... 10,743 18,200 32,029 9,571 19,870
---------- --------- --------- --------- ---------
Total revenues .................................... 129,354 206,134 378,488 126,910 239,571
---------- --------- --------- --------- ---------
Operating expenses, excluding depreciation and
amortization and special bonuses paid to executive
officers .......................................... 50,545 80,446 167,765 52,826 114,697
Depreciation and amortization ..................... 55,587 80,410 118,038 45,493 76,650
Amortization of deferred compensation ............... - - 739 506 233
Amortization of excess syndicated programming ...... - - 3,043 - -
Special bonuses to executive officers ............... 3,638 - - - -
---------- --------- --------- --------- ---------
Broadcast operating income ........................ $ 19,584 $ 45,278 $ 88,903 $ 28,085 $ 47,991
========== ========= ========= ========= =========
BROADCAST CASH FLOW (BCF) DATA:
Television BCF .................................... $ 67,519 $ 111,124 $ 175,212 $ 63,309 $ 98,032
Radio BCF .......................................... - - 14,004 1,770 7,568
---------- --------- --------- --------- ---------
Consolidated BCF (a) .............................. $ 67,519 $ 111,124 $ 189,216 $ 65,079 $ 105,600
========== ========= ========= ========= =========
Television BCF margin .............................. 56.9% 59.1% 56.7% 56.3% 51.2%
Radio BCF margin .................................... - - 37.3% 36.4% 26.7%
Consolidated BCF margin (b) ........................ 56.9% 59.1% 54.6% 55.5% 48.1%
OTHER DATA:
Adjusted EBITDA(c) ................................. $ 64,547 $ 105,750 $ 180,272 $ 62,013 $ 98,615
Adjusted EBITDA margin (b) ........................ 54.4% 56.3% 52.0% 52.8% 44.9%
After-tax cash flow (d) ........................... $ 24,948 $ 51,288 $ 76,745 $ 30,441 $ 32,737
Program contract payments ........................... 14,262 19,938 30,451 12,071 26,259
Corporate expense ................................. 2,972 5,374 8,944 3,066 6,985
</TABLE>
- ----------
(a) "Consolidated BCF" is defined as broadcast operating income plus corporate
overhead expenses, 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, Consolidated BCF does not
purport to represent cash provided by operating activities as reflected in
the Company's consolidated statements of cash flow, is not a measure of
financial performance under generally accepted accounting principles and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
(b) "Consolidated BCF 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.
(c) "Adjusted EBITDA" is defined as broadcast cash flow less corporate expenses
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.
(d) "After-tax cash flow" is defined as net income (loss) before extraordinary
items 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.
S-22
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
Total revenues increased to $239.6 million for the six months ended June
30, 1997 from $126.9 million for the six months ended June 30, 1996, or 88.8%.
After excluding the effects of non-cash barter transactions, net broadcast
revenues for the six months ended June 30, 1997 increased by 87.2% over the six
months ended June 30, 1996. The increase in broadcast revenues was primarily the
result of acquisitions and LMA transactions consummated by the Company in 1996
(the "1996 Acquisitions") and, to a lesser extent, market growth in television
broadcast revenue and television broadcast revenue on a same stations basis.
Operating expenses excluding depreciation, amortization of intangible
assets and amortization of deferred compensation increased to $114.7 million for
the six months ended June 30, 1997 from $52.8 million for the six months ended
June 30, 1996, or 117.2%. The increase in expenses for the six months ended June
30, 1997 as compared to the six months ended June 30, 1996 was primarily
attributable to operating costs associated with the 1996 Acquisitions (92.9% of
increase for the six month period) and an increase in corporate overhead
expenses (6.3% of increase for the six month period) related primarily to the
additional expense of managing a larger base of operations.
Broadcast operating income increased to $48.0 million for the six months
ended June 30, 1997 from $28.1 million for the six months ended June 30, 1996,
or 70.8%. The increase in broadcast operating income for the six months ended
June 30, 1997 as compared to the six months ended June 30, 1996 was primarily
attributable to the 1996 Acquisitions.
Interest expense increased to $52.0 million for the six months ended June
30, 1997 from $27.6 million for the six months ended June 30, 1996, or 88.4%.
The increase in interest expense for the six months ended June 30, 1997
primarily related to indebtedness incurred by the Company to finance the River
City Acquisition on May 31, 1996, other subsequent 1996 acquisitions and
acquisitions consummated in 1997 (the "1997 Acquisitions"). Subsidiary Trust
Minority Interest Expense of $7.0 million for the six months ended June 30, 1997
is related to the HYTOPS. Subsidiary Trust Minority Interest Expense
distributions will be partially offset by reductions in interest expense because
a portion of the proceeds of the sale of the HYTOPS was used to reduce
indebtedness under the Company's Bank Credit Agreement.
Interest and other income decreased to $1.1 million for the six months
ended June 30, 1997 from $3.2 million for the six months ended June 30, 1996, or
65.6%. This decrease was primarily due to lower average cash balances and
related interest income.
The net deferred tax asset increased to $8.2 million as of June 30, 1997
from $782,000 at December 31, 1996. The increase in the Company's net deferred
tax asset as of June 30, 1997 as compared to December 31, 1996 primarily results
from the anticipation that the pre-tax losses incurred in the first six months
of 1997 will be used to offset future taxable income.
Net loss for the six months ended June 30, 1997 was $5.8 million or $(0.17)
per share compared to net income of $1.5 million or $0.04 per share for the six
months ended June 30, 1996.
Broadcast cash flow increased to $105.6 million for the six months ended
June 30, 1997 from $65.1 million for the six months ended June 30, 1996, or
62.2%. This increase in broadcast cash flow primarily resulted from the 1996 and
1997 Acquisitions and, to a lesser extent, increases in net broadcast revenues
on a same station basis. The Company's broadcast cash flow margin decreased to
48.1% for the six months ended June 30, 1997 from 55.5% for the six months ended
June 30, 1996. Excluding the effect of radio station broadcast cash flow,
television broadcast cash flow margin decreased to 51.2% for the six months
ended June 30, 1997 from 56.3% for the six months ended June 30, 1996. The
decrease in broadcast cash flow margins for the six months ended June 30, 1997
as compared to the six months ended June 30, 1996 primarily resulted from the
lower margins of the acquired radio broadcasting assets and lower margins of
certain television stations acquired during 1996. For television stations owned,
operated or programmed for the six months ended June 30, 1996 and the six months
ending June 30,
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1997, broadcast cash flow margins increased from 55.5% to 57.0%, respectively.
This increase primarily resulted from expense savings related to synergies
realized from the 1996 Acquisitions combined with increases in net broadcast
revenue.
Adjusted EBITDA increased to $98.6 million for the six months ended June
30, 1997 from $62.0 million for the six months ended June 30, 1996, or 59.0%.
This increase in Adjusted EBITDA for the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996 resulted from the 1996 and 1997
Acquisitions. The Company's Adjusted EBITDA margin decreased to 44.9% for the
six months ended June 30, 1997 from 52.8% for the six months ended June 30,
1996. The decrease in Adjusted EBITDA margin for the six months ended June 30,
1997 as compared to the six months ended June 30, 1996 primarily resulted from
operating cost structures at certain of the acquired stations and increases in
corporate overhead expenses. The Company has begun to implement and will
continue to implement operating and programming expense savings resulting from
synergies realized from the businesses acquired in and prior to 1996 and 1997
and believes that the benefits of the implementation of these methods will
result in improvement in broadcast cash flow margin and Adjusted EBITDA margin
over time.
After-tax cash flow increased to $32.7 million for the six months ended
June 30, 1997 from $30.4 million for the six months ended June 30, 1996, or
7.6%. The increase in after-tax cash flow for the six months ended June 30, 1997
as compared to the six months ended June 30, 1996 primarily resulted from the
1996 and 1997 Acquisitions and internal growth, offset by increased interest
expense on the debt incurred to consummate the 1996 and 1997 Acquisitions and
subsidiary trust minority interest expense related to the HYTOPS Issuance during
March 1997.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total revenues increased to $378.5 million for the year ended December 31,
1996 from $206.1 million for the year ended December 31, 1995, or 83.6%.
Excluding the effects of non-cash barter transactions, net broadcast revenues
for the year ended December 31, 1996 increased by 84.4% over the year ended
December 31, 1995. The increase in broadcast revenues was primarily the result
of acquisitions and LMA transactions consummated by the Company in 1995 (the
"1995 Acquisitions") and 1996. For stations owned, operated or programmed
throughout 1995 and 1996, television broadcast revenue grew 2.1% for the year
ended December 31, 1996 when compared to the year ended December 31, 1995. For
stations owned, operated or programmed throughout 1994 and 1995, television
broadcast revenue grew 12.8% for the year ended December 31, 1995 when compared
to the year ended December 31, 1994. The decrease in 1996 revenue growth as
compared to 1995 revenue growth primarily resulted from the loss in 1996 of the
Fox affiliation at WTTO in the Birmingham market, the loss of the NBC
affiliation at WRDC in the Raleigh market and decreases in ratings at WCGV and
WNUV in the Milwaukee and Baltimore markets, respectively.
Operating expenses excluding depreciation, amortization of intangible
assets and amortization of deferred compensation and excess syndicated
programming costs increased to $167.8 million for the year ended December 31,
1996 from $80.4 million for the year ended December 31, 1995, or 108.7%. The
increase in expenses for the year ended December 31, 1996 as compared to the
year ended December 31, 1995 was largely attributable to operating costs
associated with the 1995 and 1996 Acquisitions, an increase in LMA fees
resulting from LMA transactions and an increase in corporate overhead expenses.
Broadcast operating income increased to $88.9 million for the year ended
December 31, 1996, from $45.3 million for the year ended December 31, 1995, or
96.2%. The increase in broadcast operating income for the year ended December
31, 1996 as compared to the year ended December 31, 1995 was primarily
attributable to the 1995 and 1996 Acquisitions.
Interest expense increased to $84.3 million for the year ended December 31,
1996 from $39.3 million for the year ended December 31, 1995, or 114.5%. The
increase in interest expense for the year ended December 31, 1996 was primarily
related to senior bank indebtedness incurred by the Company to finance the River
City Acquisition and other acquisitions.
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Interest and other income decreased to $3.5 million for the year ended
December 31, 1996 from $4.2 million for the year ended December 31, 1995, or
16.7%. The decrease for the year ended December 31, 1996 was primarily due to
lower cash balances and related interest income resulting from cash payments
made in February 1996 when the Company made a $34.4 million payment relating to
the WSMH acquisition and April 1996 when the Company made a $60 million down
payment relating to the River City Acquisition. The decrease in interest income
was offset by an increase in other income resulting from the 1995 and 1996
Acquisitions.
For the reasons described above, net income for the year ended December 31,
1996 was $1.1 million or $0.03 per share compared to net income of $5.0 million
or $0.15 per share for the year ended December 31, 1995 before the extraordinary
loss on early extinguishment of debt.
Broadcast cash flow increased to $189.2 million for the year ended December
31, 1996 from $111.1 million for the year ended December 31, 1995, or 70.3%. The
increase in broadcast cash flow for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 primarily resulted from the 1995 and 1996
Acquisitions. For stations owned, operated or programmed throughout 1995 and
1996, broadcast cash flow grew 1.3% for the year ended December 31, 1996 when
compared to the year ended December 31, 1995. For stations owned, operated or
programmed throughout 1994 and 1995, broadcast cash flow grew 23.7% for the year
ended December 31, 1995 when compared to the year ended December 31, 1994. The
decrease in 1996 broadcast cash flow growth as compared to 1995 broadcast cash
flow growth primarily resulted from the loss in 1996 of the Fox affiliation at
WTTO in the Birmingham market, the loss of the NBC affiliation at WRDC in the
Raleigh market and decreases in ratings at WCGV and WNUV in the Milwaukee and
Baltimore markets, respectively. The Company's broadcast cash flow margin
decreased to 54.6% for the year ended December 31, 1996 from 59.1% for the year
ended December 31, 1995. Excluding the effect of radio station broadcast cash
flow, television station broadcast cash flow margin decreased to 56.7% for the
year ended December 31, 1996 as compared to 59.1% for the year ended December
31, 1995. The decrease in broadcast cash flow margins for the year ended
December 31, 1996 as compared to the year ended December 31, 1995 primarily
resulted from the lower margins of the acquired radio broadcasting assets and
lower margins of certain of the acquired television stations. For stations
owned, operated or programmed throughout 1996 and 1995, broadcast cash flow
margins were unchanged when comparing the years ended December 31, 1996 and
1995. The Company believes that margins of certain of the acquired stations will
improve as operating and programming synergies are implemented.
Adjusted EBITDA increased to $180.3 million for the year ended December 31,
1996 from $105.8 million for the year ended December 31, 1995, or 70.4%. The
increase in Adjusted EBITDA for the year ended December 31, 1996 as compared to
the year ended December 31, 1995 resulted from the 1995 and 1996 Acquisitions.
The Company's Adjusted EBITDA margin decreased to 52.0% for the year ended
December 31, 1996 from 56.3% for the year ended December 31, 1995. The decrease
in Adjusted EBITDA margins for the year ended December 31, 1996 as compared to
the year ended December 31, 1995 primarily resulted from higher operating costs
at certain of the acquired stations. The Company has begun to implement and will
continue to implement operating and programming synergies throughout the
businesses acquired in and prior to 1996. The Company believes that the benefits
of the implementation of these methods will result in improvement in broadcast
cash flow and Adjusted EBITDA margins in future periods.
After-tax cash flow increased to $76.7 million for the year ended December
31, 1996 from $51.3 million for the year ended December 31, 1995, or 49.5%. The
increase in after-tax cash flow for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 primarily resulted from the 1995 and 1996
Acquisitions offset by interest expense on the debt incurred to consummate these
acquisitions.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Total revenues increased to $206.1 million for the year ended December 31,
1995, from $129.4 million for the year ended December 31, 1994, or 59.3%. This
increase includes revenues from the acquisitions of WTVZ and WLFL and the
entering into LMA agreements with WABM and WDBB.
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This increase also includes the first full year of revenues from the acquisition
of WCGV and WTTO and the entering into LMA agreements with WNUV, WVTV and FSFA
(the "1994 Acquisitions"). Excluding the effect of non-cash barter transactions,
net broadcast revenues increased to $187.9 million for the year ended December
31, 1995 from $118.6 million for the year ended December 31, 1994, or 58.4%.
These increases in net broadcast revenues were primarily a result of the
1994 and 1995 Acquisitions and LMA transactions consummated by the Company, as
well as television broadcast revenue growth in each of the Company's markets.
WPGH, the Pittsburgh Fox affiliate, achieved in excess of 14% net broadcast
revenue growth for the year ended December 31, 1995 as compared to the year
ended December 31, 1994. This increase was primarily attributable to a new
metered rating service that began in May 1995 which significantly improved
WPGH's market rating. WBFF, the Fox affiliate in Baltimore and WCGV, the former
Fox affiliate, now a UPN affiliate in Milwaukee, both achieved in excess of 10%
net broadcast revenue growth as these stations began to realize the advantages
of having an LMA in these markets.
Operating expenses excluding depreciation and amortization and special
bonuses paid to executive officers increased to $80.4 million for the year ended
December 31, 1995 from $50.5 million for the year ended December 31, 1994. These
increases in expenses were primarily attributable to increases in operating
expenses relating to the 1994 and 1995 Acquisitions, including the payment of
LMA fees which increased to approximately $5.6 million for the year ended
December 31, 1995 as compared to $1.1 million for the year ended December 31,
1994. Corporate overhead expenses increased 80.8% for the year ended December
31, 1995 as compared to the year ended December 31, 1994. This increase was
primarily due to expenses associated with being a public company (i.e.,
directors and officers insurance, travel expenses and professional fees) and
executive bonus accruals for bonuses which were paid based on achieving in
excess of 20% growth percentages in pro forma broadcast cash flow for the year
1995 compared to 1994.
Broadcast operating income increased to $45.3 million for the year ended
December 31, 1995 from $19.6 million for the year ended December 31, 1994, or
131.1%. This increase in broadcast operating income was primarily a result of
the 1994 and 1995 Acquisitions and an increase in television broadcast revenues
in each of the Company's markets, partially offset by increased amortization
expenses related to these acquisitions.
Interest expense increased to $39.3 million for the year ended December 31,
1995 from $25.4 million for the year ended December 31, 1994, or 54.7%. The
major component of this increase in interest expense was increased borrowings
under the Bank Credit Agreement to finance the 1994 and 1995 Acquisitions.
During August 1995, the Company issued $300 million of Senior Subordinated Notes
and used a portion of the net proceeds to repay outstanding indebtedness under
the Bank Credit Agreement and the remainder provided an increase to the
Company's cash balances of approximately $91.4 million. The interest expense
related to these notes was approximately $10.0 million in 1995. This increase
was partially offset by the application of the net proceeds of an offering of
Class A Common Stock to reduce a portion of the indebtedness under the Bank
Credit Agreement during June 1995. Interest expense was also reduced as a result
of the application of net cash flow from operating activities to further
decrease borrowings under the Bank Credit Agreement.
Interest and other income increased to $4.2 million for the year ended
December 31, 1995 from $2.4 million for the year ended December 31, 1994, or
75.0%. This increase in interest income primarily resulted from an increase in
cash balances that remained from the proceeds of Senior Subordinated Notes
issued in August 1995. Income (loss) before benefit (provision) for income taxes
and extraordinary item increased to income of $10.2 million for the year ended
December 31, 1995 from a loss of $3.4 million for the year ended December 31,
1994.
Net income available to common shareholders improved to income of $76,000
for the year ended December 31, 1995 from a loss of $2.7 million for the year
ended December 31, 1994. In August 1995, the Company consummated the sale of
$300 million of Senior Subordinated Notes generating net proceeds to the Company
of $293.2 million. The net proceeds of this offering were utilized to repay
outstanding indebtedness under the Bank Credit Agreement of $201.8 million with
the remainder being
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retained for general corporate purposes including potential future acquisitions.
In conjunction with the early retirement of the indebtedness under the Bank
Credit Agreement, the Company recorded an extraordinary loss of $4.9 million net
of a tax benefit of $3.4 million, related to the write-off of deferred financing
costs under the Bank Credit Agreement.
Broadcast cash flow increased to $111.1 million for the year ended December
31, 1995 from $67.5 million for the year ended December 31, 1994, or 64.6%. This
increase in broadcast cash flow was primarily due to the 1994 and 1995
Acquisitions, growth in market revenues and a reduction in program payments as a
percentage of net broadcast revenues to 10.6% for the year ended December 31,
1995 from 12.0% for the year ended December 31, 1994.
Adjusted EBITDA increased to $105.8 million for the year ended December 31,
1995 from $64.6 million for the year ended December 31, 1994, or 63.8%,
consistent with the growth in broadcast cash flow. After tax cash flow increased
to $51.3 million for the year ended December 31, 1995 from $24.9 million for the
year ended December 31, 1994, or 106.0%.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had $2.7 million in cash balances and a
working capital deficit of approximately $9.3 million. The Company's working
capital deficit primarily results from the accelerated method of amortization of
program contract costs and the even payment streams of program contract
liabilities. Excluding the effect of current program contract costs and current
program contract liabilities, the Company's working capital at June 30, 1997,
would have been $5.7 million. The Company's primary source of liquidity is cash
provided by operations and availability under the Bank Credit Agreement. As of
August 11, 1997, the Company's cash balances were approximately $1.9 million
with approximately $254 million available for borrowing under the Bank Credit
Agreement. 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. In July 1997, the Company entered into a purchase agreement to
acquire the license and non-license assets of the radio and television stations
of Heritage for $630 million and made a cash down payment of $63.0 million. The
Company has entered into a letter of intent to sell one of the Heritage
television stations for $60 million (the sale of which is required pursuant to
the acquisition agreement relating to the remaining Heritage television and
radio properties). The Company anticipates that it will finance the Heritage
acquisition through additional bank financing (including a draw under Tranche C
described above) or through a combination of additional bank financing and
proceeds from an offering of securities.
Net cash flows from operating activities increased to $42.5 million for the
six months ended June 30, 1997 from $26.4 million for the six months ended June
30, 1996. The Company made income tax payments of $5.3 million for the six
months ended June 30, 1997 as compared to $5.6 million for the six months ended
June 30, 1996 due to anticipated tax benefits generated by the 1996
Acquisitions. The Company made interest payments on outstanding indebtedness of
$55.7 million during the six months ended June 30, 1997 as compared to $29.5
million for the six months ended June 30, 1996. Additional interest payments for
the six months ended June 30, 1997 as compared to the six months ended June 30,
1996 primarily related to additional interest costs on indebtedness incurred to
finance the 1996 Acquisitions. The Company made subsidiary trust minority
interest expense payments of $6.0 million for the six months ended June 30, 1997
related to the private placement of the HYTOPS completed in March 1997. Program
rights payments increased to $26.3 million for the six months ended June 30,
1997 from $12.1 million for the six months ended June 30, 1996, primarily as a
result of the 1996 Acquisitions.
Net cash flows used in investing activities decreased to $112.4 million for
the six months ended June 30, 1997 from $942.1 million for the six months ended
June 30, 1996. During January 1997, the Company purchased the license and
non-license assets of WWFH-FM and WILP-AM in Wilkes-Barre, Pennsylvania for
approximately $770,000. In January and March 1997, the Company made cash
payments of $9.0 million and $1.5 million relating to the acquisition of the
license and non-license assets of KUPN-TV and WGR-AM and WWWS-AM, respectively,
utilizing indebtedness under the Bank Credit Agreement and existing cash
balances. In May 1997, the Company made cash payments of $78 million to acquire
the
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license and non-license assets of KUPN-TV utilizing indebtedness under the Bank
Credit Agreement and existing cash balances. During the six months ended June
30, 1997, the Company made purchase option extension payments of $6.5 million
relating to WSYX-TV. The Company made payments totaling $8.5 million during the
six months ended June 30, 1997 in order to exercise options to acquire certain
FCC licenses. The Company made payments for property and equipment of $8.3
million for the six months ended June 30, 1997. In July 1997, the Company
entered into a purchase agreement to acquire the license and non-license assets
of the television and radio stations of Heritage and made a cash down payment of
$63.0 million. The Company anticipates that future requirements for capital
expenditures will also include other acquisitions if suitable acquisitions can
be identified on acceptable terms and capital expenditures incurred during the
ordinary course of business.
Net cash flows provided by financing activities decreased to $70.3 million
for the six months ended June 30, 1997 from $807.4 million for the six months
ended June 30, 1996. In March 1997, the Company completed a private placement of
the HYTOPS. The Company utilized $135 million of the approximately $193.4
million net proceeds of the HYTOPS Issuance to repay outstanding debt and
retained the remainder for general corporate purposes. The Company made payments
totaling $4.6 million to repurchase 186,000 shares of Class A Common Stock for
the six months ended June 30, 1997. In May 1997, the Company made payments of
$4.7 million related to the amendment of its Bank Credit Agreement. In the
fourth quarter of 1996, the Company negotiated the prepayment of syndicated
program contract liabilities for excess syndicated programming assets. In the
first quarter of 1997, the Company made final cash payments of $1.4 million
related to these negotiations. In July 1997, the Company issued the 1997 Notes
using $162.5 million of the approximately $196 million proceeds to repay
outstanding indebtedness under the revolving credit facility under the Bank
Credit Agreement and using the remainder to pay a portion of the $63 million
cash down payment relating to the Heritage Acquisition.
The Company anticipates that funds from operations, existing cash balances
and availability of the revolving credit facility under the Bank Credit
Agreement will be sufficient to meet its working capital, capital expenditure
commitments and debt service requirements for the foreseeable future. However,
to the extent such funds are not sufficient, or if the Company commits to
additional capital expenditures (including additional acquisitions), the Company
may need to incur additional indebtedness, refinance existing indebtedness or
raise funds from the sale of additional equity. The Bank Credit Agreement and
the indentures relating to the Company's 9% Senior Subordinated Notes due 2007,
10% Senior Subordinated Notes due 2003 and 10% Senior Subordinated Notes due
2005 restrict the incurrence of additional indebtedness and the use of proceeds
of an equity issuance. On August 22, 1997, the Company filed a $1 billion shelf
registration statement covering the issuance of the Company's debt securities,
preferred stock and common stock. The shares of Class A Common Stock offered in
the Common Stock Offering and the shares of Convertible Exchangeable Preferred
Stock offered in the Preferred Stock Offering are offered pursuant to such shelf
registration statement. A portion of the net proceeds to the Company from the
Offerings will be used to repay existing borrowings under the revolving credit
facility under the Bank Credit Agreement, and the remainder of the net proceeds
will be retained by the Company for general corporate purposes, including
funding the Heritage Acquisition, which is anticipated to close in the first
quarter of 1998, and other acquisitions if suitable acquisitions can be
identified on acceptable terms. The Company has requested the lenders under the
Bank Credit Agreement to approve an amendment that would recharacterize $275
million of indebtedness from the Tranche A term loan to amounts owing under the
revolving credit facility. If this amendment is approved, the Company will use
all of the net proceeds of the Offerings to repay indebtedness under the Bank
Credit Agreement. See "Use of Proceeds" and "Business of Sinclair - 1997
Acquisitions."
INCOME TAXES
Income tax benefit increased to $4.1 million for the six months ended June
30, 1997 from a provision of $2.1 million for the six months ended June 30,
1996. The Company's effective tax rate decreased to a benefit of 41.3% for the
six months ended June 30, 1997 from a provision of 58.2% for the six months
ended June 30, 1996. The net deferred tax asset increased to $8.2 million as of
June 30, 1997 from $782,000 at December 31, 1996. The increase in the Company's
net deferred tax asset as of June 30, 1997 as compared to December 31, 1996
primarily resulted from the anticipation that the pre-tax losses incurred in the
first six months of 1997 will be used to offset future taxable income.
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The Company's income tax provision increased to $6.9 million for the year
ended December 31, 1996 from $5.2 million for the year ended December 31, 1995.
The Company's effective tax rate increased to 86% for the year ended December
31, 1996 from 51% for the year ended December 31, 1995. The increase for the
year ended December 31, 1996 as compared to the year ended December 31, 1995
primarily related to certain financial reporting and income tax differences
attributable to certain 1995 and 1996 Acquisitions, and state franchise taxes
which are independent of pre-tax income.
The net deferred tax asset decreased to $782,000 as of December 31, 1996
from $21.0 million at December 31, 1995. The decrease in the Company's net
deferred tax asset as of December 31, 1996 as compared to December 31, 1995 is
primarily due to the Company recording deferred tax liabilities of $18.1 million
relating to the acquisition of all of the outstanding stock of Superior in May
1996, adjustments related to certain 1995 acquisitions, and resulting
differences between the book and tax basis of the underlying assets.
A $1.8 million net tax provision and a $647,000 tax benefit was recognized
for the years ended December 31, 1995 and December 31, 1994, respectively. The
provision for the year ended December 31, 1995 was comprised of $5.2 million
provision relating to the Company's income before provision for income taxes and
extraordinary item offset by a $3.4 million income tax benefit relating to the
extraordinary loss on early extinguishment of debt. The $5.2 million tax
provision reflects a 51% effective tax rate for the year ended December 31,
1995, which is higher than the statutory rate primarily due to the
non-deductibility of goodwill relating to the repurchase of Common Stock in
1990. The income tax benefit for the year ended December 31, 1994 was 19.1% of
the Company's loss before income taxes, which is lower than the benefit
calculated at statutory rates primarily due to non-deductible goodwill
amortization. After giving effect to these changes the Company had net deferred
tax assets of $21.0 million at December 31, 1995 and $12.5 million at December
31, 1994, respectively.
SEASONALITY
The Company's results usually are subject to seasonal fluctuations, which
result in fourth quarter broadcast operating income usually being greater than
first, second and third quarter broadcast operating income. This seasonality is
primarily attributable to increased expenditures by advertisers in anticipation
of holiday season spending and an increase in viewership during this period.
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INDUSTRY OVERVIEW
TELEVISION BROADCASTING
Commercial television stations in the United States are typically
affiliated with one of six television networks, which are at different stages of
development. The networks are differentiated in part by the amount of
programming they provide their affiliates each week and by the length of time
they have been in operation. These networks are ABC, CBS, NBC, FOX, WB, and UPN.
The ABC, CBS, and NBC networks (the "Traditional Networks") have a substantial
number of affiliated stations, have been in operation for the longest time and
provide the majority of their affiliates' programming each day. Fox established
an affiliate network in the mid-`80s and provides fewer hours of prime-time and
daytime programming than the Traditional Networks. WB and UPN, the newest
television networks, will soon increase their prime-time programming from three
to four nights and also provide a number of hours of children's programming each
week. Television stations affiliated with Fox, WB, or UPN have more hours of the
day to program and consequently have more commercial inventory to sell to
advertisers.
Each Traditional Network provides the majority of its affiliates'
programming each day without charge in exchange for a substantial majority of
the available advertising time in the programs supplied. Each Traditional
Network sells this advertising time and retains the revenue. The affiliate
receives compensation from the Traditional Network and retains the revenue from
time sold during breaks in and between network programs and in programming the
affiliate produces or purchases from non-network sources.
In contrast, a station that is not affiliated with a Traditional Network
supplies over-the-air programming by acquiring rights to broadcast programs
through syndication. This syndicated programming is generally acquired by such
stations for cash and barter. Those stations that acquire a program through
syndication are usually given exclusive rights to show the program in the
station's market for either a period of years or a number of episodes agreed
upon between the station and the syndicator of the programming. Types of
syndicated programs aired on these stations include feature films, popular
series previously shown on network television and series produced for direct
distribution to television stations.
Fox has established a network of television stations that operates on a
basis similar to the Traditional Networks. However, the 15 hours per week of
prime-time programming supplied by Fox to its affiliates are significantly less
than that of the Traditional Networks and, as a result, Fox affiliates retain a
significantly higher portion of the available inventory of broadcast time for
their own use than Traditional Network affiliates. As of December 31, 1996, Fox
had 169 affiliated stations broadcasting to 95.0% of U.S. television households.
During 1994, WB established an affiliation of independent stations which
began broadcasting in January 1995 and operates on a basis similar to Fox.
However, WB currently supplies only six hours of prime-time programming per week
to its affiliates (which will increase to eight hours per week in January 1998),
which is significantly less than that of Fox and, as a result, WB affiliates
retain a significantly higher portion of the available inventory of broadcast
time for their own use than affiliates of Fox or the Traditional Networks. As of
December 31, 1996, WB had 96 affiliated stations broadcasting to 86.0% of U.S.
television households, including cable coverage provided by WGN-TV.
During 1994, UPN established an affiliation of independent television
stations that began broadcasting in January 1995. The amount of prime-time
programming supplied by UPN to its affiliates in January 1997 was six hours per
week, which will be increased in the 1997 fall season to eight hours per week.
As of December 31, 1996, UPN had 91 affiliated stations broadcasting to 73.9% of
U.S. television households, excluding secondary affiliations.
Television stations derive their revenues primarily from the sale of
national, regional and local advertising. All network-affiliated stations,
including those affiliated with Fox and others, are required to carry spot
advertising sold by their networks. This reduces the amount of advertising
available for sale directly by the network-affiliated stations. Network
affiliates generally are compensated for the broadcast of network advertising.
The compensation paid is negotiated, station-by-station, based on a fixed
formula, subject to certain adjustments. Stations directly sell all of the
remaining advertising to be
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inserted in network programming and all of the advertising in non-network
programming, retaining all of the revenues received from these sales of
advertising, less any commissions paid. Through barter and cash-plus-barter
arrangements, however, a national syndicated program distributor typically
retains a portion of the available advertising time for programming it supplies,
in exchange for no or reduced fees to the station for such programming.
Advertisers wishing to reach a national audience usually purchase time
directly from the Traditional Networks, the Fox network, UPN, or WB, or
advertise nationwide on an ad hoc basis. National advertisers who wish to reach
a particular regional or local audience buy advertising time directly from local
stations through national advertising sales representative firms. Additionally,
local businesses purchase advertising time directly from the stations' local
sales staff. Advertising rates are based upon factors which include the size of
the DMA in which the station operates, a program's popularity among the viewers
that an advertiser wishes to attract, the number of advertisers competing for
the available time, demographic characteristics of the DMA served by the
station, the availability of alternative advertising media in the DMA,
aggressive and knowledgeable sales forces and the development of projects,
features and marketing programs that tie advertiser messages to programming.
Because broadcast television stations rely on advertising revenues, declines in
advertising budgets, particularly in recessionary periods, will adversely affect
the broadcast business. Conversely, increases in advertising budgets may
contribute to an increase in the revenue and operating cash flow of a particular
broadcast television station.
Information regarding competition in the television broadcast industry is
set forth under "Business of Sinclair - Competition."
RADIO BROADCASTING
The primary source of revenues for radio stations is the sale of
advertising time to local and national spot advertisers and national network
advertisers. During the past decade, local advertising revenue as a percentage
of total radio advertising revenue in a given market has ranged from
approximately 79% to 82%. The growth in total radio advertising revenue tends to
be fairly stable and has generally grown at a rate faster than the Gross
Domestic Product ("GDP"). Total domestic radio advertising revenue reached an
all-time record of $12.3 billion in 1996, as reported by the Radio Advertising
Bureau (the "RAB").
According to the RAB's Radio Marketing Guide and Fact Book for Advertisers,
1997, radio reaches approximately 95% of all Americans over the age of 12 every
week. More than one half of all radio listening is done outside the home, in
contrast to other advertising media. The average adult listener spends
approximately three hours and 20 minutes per weekday listening to radio. Most
radio listening occurs during the morning, particularly between the time a
listener wakes up and the time the listener reaches work. This "morning drive
time" period reaches more than 80% of people over the age of 12 and, as a
result, radio advertising sold during this period achieves premium advertising
rates. Radio listeners have gradually shifted over the years from AM to FM
stations. FM reception, as compared to AM, is generally clearer and provides
greater total range and higher fidelity, except for so-called "clear channel" AM
radio stations, which have the maximum range of any type of station and can be
very successful in the news/talk/sports format. In comparison to AM, FM's
listener share is now in excess of 75%, despite the fact that the number of AM
and FM commercial stations in the United States is approximately equal.
Radio is considered an efficient, cost-effective means of reaching
specifically identified demographic groups. Stations are typically classified by
their on-air format, such as country, adult contemporary, oldies and news/talk.
A station's format and style of presentation enable it to target certain
demographics. By capturing a specific share of a market's radio listening
audience, with particular concentration in a targeted demographic, a station is
able to market its broadcasting time to advertisers seeking to reach a specific
audience. Advertisers and stations utilize data published by audience measuring
services, such as Arbitron, to estimate how many people within particular
geographical markets and demographics listen to specific stations.
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format of
a particular station and the local competitive envi-
S-31
<PAGE>
ronment. Although the number of advertisements broadcast during a given time
period may vary, the total number of advertisements broadcast on a particular
station generally does not vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station
usually will engage a firm that specializes in soliciting radio advertising
sales on a national level. National sales representatives obtain advertising
principally from advertising agencies located outside the station's market and
receive commissions based on the revenue from the advertising obtained.
Information regarding competition in the radio broadcast industry is set
forth under "Business of Sinclair - Competition."
S-32
<PAGE>
BUSINESS OF SINCLAIR
The Company is a diversified broadcasting company that owns or provides
programming services to more television stations than any other commercial
broadcasting group in the United States. The Company currently owns or provides
programming services pursuant to Local Marketing Agreements (LMAs) to 29
television stations, has pending acquisitions of four additional television
stations, and has pending acquisitions of the rights to provide programming to
two additional television stations. The Company believes it is also one of the
top 20 radio groups in the United States, when measured by the total number of
radio stations owned. The Company owns 27 radio stations, has pending
acquisitions of 24 radio stations, and has options to acquire an additional
seven radio stations.
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 DMAs in the United States. The Company's television station
group is diverse in network affiliation, with ten stations affiliated with Fox,
12 with UPN, three with 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 seven 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 new
affiliation agreements with UPN or another network. See "- Television
Broadcasting - Programming and Affiliations," below.
The Company's radio station group is also geographically diverse with a
variety of programming formats including country, urban, news/talk/sports,
album/progressive rock and adult contemporary. Of the 27 stations owned by the
Company, 12 broadcast on the AM band and 15 on the FM band. The Company owns
from two to 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 27 radio stations. From 1991 to 1996, net broadcast revenues and
Adjusted EBITDA increased from $39.7 million to $346.5 million and from $15.5
million to $180.3 million, respectively. Pro forma for the 1996 Acquisitions and
the Heritage Acquisition, 1996 net broadcast revenues and Adjusted EBITDA would
have been $532.4 million and $246.3 million, respectively.
S-33
<PAGE>
TELEVISION BROADCASTING
The Company owns and operates, provides programming services to, or has
agreed to acquire the following television stations:
<TABLE>
<CAPTION>
NUMBER OF
COMMERCIAL EXPIRATION
MARKET STATIONS IN STATION DATE OF
MARKET RANK(A) STATIONS STATUS(B) CHANNEL AFFILIATION THE MARKET(C) RANK(D) FCC LICENSE
- ----------------------------- --------- ---------- ------------ --------- ------------- --------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PITTSBURGH, PENNSYLVANIA . 19 WPGH O&O 53 FOX 6 4 8/1/99
WPTT LMA 22 UPN 5 8/1/99
Sacramento, California ...... 20 KOVR O&O 13 CBS 8 3 2/1/98
St. Louis, Missouri ......... 21 KDNL O&O 30 ABC 7 5 2/1/98
Baltimore, Maryland ......... 23 WBFF O&O 45 FOX 5 4 10/1/04
WNUV LMA 54 UPN 5 10/1/04
Indianapolis, Indiana ...... 25 WTTV LMA(e) 4 UPN 8 4 8/1/97 (f)
WTTK LMA(e)(g) 29 UPN 4 8/1/97 (f)
Raleigh-Durham,
North Carolina ............ 29 WLFL O&O 22 FOX 5 3 12/1/04
WRDC LMA 28 UPN 5 12/1/04
Cincinnati, Ohio ............ 30 WSTR O&O 64 UPN 5 5 10/1/97 (f)
Milwaukee, Wisconsin ...... 31 WCGV O&O 24 UPN 6 4 12/1/97 (f)
WVTV LMA 18 WB 5 12/1/97 (f)
Kansas City, Missouri ...... 32 KSMO O&O 62 UPN 5 5 2/1/98
Columbus, Ohio ............ 34 WTTE O&O 28 FOX 5 4 10/1/97 (f)
Asheville, North Carolina
and Greenville/
Spartanburg/Anderson,
South Carolina ......... 35 WFBC LMA 40 IND(h) 6 5 12/1/04
WLOS O&O 13 ABC 6 3 12/0/04
San Antonio, Texas ......... 38 KABB O&O 29 FOX 7 4 8/1/98
KRRT LMA 35 UPN 6 8/1/98
Norfolk, Virginia ......... 40 WTVZ O&O 33 FOX 6 4 10/1/04
Oklahoma City,
Oklahoma .................. 43 KOCB O&O 34 UPN 7 5 6/1/98
Birmingham, Alabama ......... 51 WTTO O&O 21 WB 5 4 4/1/05
WABM LMA 68 UPN 5 4/1/05
Charleston and Hunting-
ton, West Virginia 56 WCHS Pending 8 ABC 4 3 10/01/04
Mobile, Alabama and
Pensacola, Florida ......... 61 WEAR Pending 3 ABC 6 2 2/01/05
WFGX Pending(i) 35 WB 6 2/01/05
Flint/Saginaw/Bay City,
Michigan .................. 62 WSMH O&O 66 FOX 5 4 10/1/97 (f)
Las Vegas, Nevada ......... 64 KUPN O&O 21 UPN 8 5 10/1/98
Lexington, Kentucky ......... 68 WDKY O&O 56 FOX 5 4 8/1/05
Des Moines, Iowa ............ 71 KDSM O&O 17 FOX 4 4 2/1/98
Burlington, Vermont and
Plattsburgh, New York . 91 WPTZ Pending 5 NBC 4 2 6/1/99
WNNE Pending(j) 31 NBC 3 4/1/99
WFFF Pending(i) 44 FOX (k) (k)
Peoria/Bloomington,
Illinois .................. 110 WYZZ O&O 43 FOX 4 4 12/1/97 (f)
Tuscaloosa, Alabama ......... 185 WDBB LMA(l) 17 WB 2 2 4/1/05
</TABLE>
(footnotes on following page)
- ----------
S-34
<PAGE>
(a) Rankings are based on the relative size of a station's DMA among the 211
generally recognized DMAs in the United States as estimated by Nielsen.
(b) "O&O" refers to stations owned and operated by the Company, "LMA" refers to
stations to which the Company provides programming services pursuant to an
LMA and "Pending" refers to stations the Company has agreed to acquire.
See "- 1997 Acquisitions."
(c) Represents the number of television stations designated by Nielsen as
"local" to the DMA, excluding public television stations and stations which
do not meet the minimum Nielsen reporting standards (weekly cumulative
audience of at least 2.5%) for the Sunday-Saturday, 6:00 a.m.
to 2:00 a.m. time period.
(d) The rank of each station in its market is based upon the November 1996
Nielsen estimates of the percentage of persons tuned to each station in the
market from 6:00 a.m. to 2:00 a.m., Sunday-Saturday.
(e) Non-License Assets acquired from River City Broadcasting, L.P. ("River
City") and option exercised to acquire License Assets will become owned and
operated upon FCC approval of transfer of License Assets and closing of
acquisition of License Assets.
(f) License renewal application pending.
(g) WTTK currently simulcasts all of the programming aired on WTTV and the
station rank applies to the combined viewership of these stations.
(h) "IND" or "Independent" refers to a station that is not affiliated with any
of ABC, CBS, NBC, Fox, WB or UPN.
(i) The Company will provide programming services to this station upon
completion of the Heritage Acquisition.
(j) WNNE currently simulcasts the programming broadcast on WPTZ.
(k) This station began broadcast operations in August 1997 pursuant to program
test authority and does not yet have a license. This station has not yet
established a rank.
(l) WDBB simulcasts the programming broadcast on WTTO.
Operating Strategy
The Company's television operating strategy includes the following key
elements:
Attracting Viewership
The Company seeks to attract viewership and expand its audience share
through selective, high-quality programming.
Popular Programming. The Company believes that an important factor in
attracting viewership to its stations is their network affiliations with Fox,
WB, ABC, CBS and UPN. These affiliations enable the Company to attract viewers
by virtue of the quality first-run original programming provided by these
networks and the networks' promotion of such programming. The Company also seeks
to obtain, at attractive prices, popular syndicated programming that is
complementary to the station's network affiliation. Examples of popular
syndicated programming obtained by the Company for broadcast on its Fox, WB and
UPN affiliates and Independent stations are "Mad About You," "Frasier," "The
Simpsons," "Home Improvement" and "Seinfeld." In addition to network
programming, the Company's ABC and CBS affiliates broadcast news magazine, talk
show, and game show programming such as "Hard Copy," "Entertainment Tonight,"
"Regis and Kathie Lee," "Wheel of Fortune" and "Jeopardy."
Children's Programming. The Company seeks to be a leader in children's
programming in each of its respective DMAs. The Company's nationally recognized
"Kids Club" was the forerunner and model for the Fox network-wide marketing
efforts promoting children's programming. Sinclair carries the Fox Children's
Network ("FCN") and WB's and UPN's children's programming, all of which include
significant amounts of animated programming throughout the week. In those
markets where the Company owns or programs ABC or CBS affiliates, the Company
broadcasts those networks' animated programming during weekends. In addition to
this animated programming, the Company broadcasts other forms of children's
programming, which may be produced by the Company or by an affiliated network.
Counter-Programming. The Company's programming strategy on its Fox, WB,
UPN and Independent stations also includes "counter-programming," which
consists of broadcasting programs that are alternatives to the types of
programs being shown concurrently on competing stations. This strategy is
S-35
<PAGE>
designed to attract additional audience share in demographic groups not served
by concurrent programming on competing stations. The Company believes that
implementation of this strategy enables its stations to achieve competitive
rankings in households in the 18-49 and 25-54 demographics and to offer greater
diversity of programming in each of its DMAs.
Local News. The Company believes that the production and broadcasting of
local news can be an important link to the community and an aid to the station's
efforts to expand its viewership. In addition, local news programming can
provide access to advertising sources targeted specifically to local news. The
Company carefully assesses the anticipated benefits and costs of producing local
news prior to introduction at a Company station because a significant investment
in capital equipment is required and substantial operating expenses are incurred
in introducing, developing and producing local news programming. The Company
currently provides local news programming at WBFF and WNUV in Baltimore, WLFL in
Raleigh/Durham, KDNL in St. Louis, KABB in San Antonio, KOVR in Sacramento, WPGH
in Pittsburgh and WLOS in Asheville. The Company also broadcasts news programs
on WDKY in Lexington, which are produced in part by the Company and in part
through the purchase of production services from an independent third party and
on WTTV in Indianapolis, which are produced by a third party in exchange for a
limited number of advertising spots. River City provides the Company news
production services with respect to the production of news programming and on
air talent on WTTE. Pursuant to an agreement, River City provides certain
services to the Company in return for a fee equal to approximately $416,000 per
year. The possible introduction of local news at the other Company stations is
reviewed periodically. The Company's policy is to institute local news
programming at a specific station only if the expected benefits of local news
programming at the station are believed to exceed the associated costs after an
appropriate start-up period.
Popular Sporting Events. The Company attempts to capture a portion of
advertising dollars designated to sports programming in selected DMAs. The
Company's WB and UPN affiliated and independent stations generally face fewer
restrictions on broadcasting live local sporting events than do their
competitors that are affiliates of the major networks and Fox since affiliates
of the major networks and Fox are subject to prohibitions against preemptions of
network programming. The Company has been able to acquire the local television
broadcast rights for certain sporting events, including NBA basketball, Major
League Baseball, NFL football, NHL hockey, ACC basketball, Big Ten football and
basketball, and SEC football. The Company seeks to expand its sports
broadcasting in DMAs as profitable opportunities arise. In addition, the
Company's stations that are affiliated with Fox, ABC and CBS broadcast certain
Major League Baseball games, NFL football games and NHL hockey games as well as
other popular sporting events.
Innovative Local Sales and Marketing
The Company believes that it is able to attract new advertisers to its
stations and increase its share of existing customers' advertising budgets by
creating a sense of partnership with those advertisers. The Company develops
such relationships by training its sales forces to offer new marketing ideas and
campaigns to advertisers. These campaigns often involve the sponsorship by
advertisers of local promotional events that capitalize on the station's local
identity and programming franchises. For example, several of the Company's
stations stage local "Kids Fairs" which allow station advertisers to reinforce
their on-air advertising with their target audience. Through its strong local
sales and marketing focus, the Company seeks to capture an increasing share of
its revenues from local sources, which are generally more stable than national
advertising.
Control of Operating and Programming Costs
By employing a disciplined approach to managing programming acquisition and
other costs, the Company has been able to achieve operating margins that the
Company believes are among the highest in the television broadcast industry. The
Company has sought and will continue to seek to acquire quality programming for
prices at or below prices paid in the past. As an owner or provider of
programming services to 29 stations in 21 DMAs reaching approximately 15% of
U.S. television households (without giving effect to the Heritage Acquisition),
the Company believes that it is able to negotiate favorable terms for the
acquisition of programming. Moreover, the Company emphasizes control of each of
its stations' programming and operating costs through program-specific profit
analysis, detailed budgeting, tight control over staffing levels and detailed
long-term planning models.
S-36
<PAGE>
Attract and Retain High Quality Management
The Company believes that much of its success is due to its ability to
attract and retain highly skilled and motivated managers, both at the corporate
and local station levels. A portion of the compensation provided to general
managers, sales managers and other station managers is based on their achieving
certain operating results. The Company also provides its corporate and station
managers with deferred compensation plans offering options to acquire Class A
Common Stock.
Community Involvement
Each of the Company's stations actively participates in various community
activities and offers many community services. The Company's activities include
broadcasting programming of local interest and sponsorship of community and
charitable events. The Company also encourages its station employees to become
active members of their communities and to promote involvement in community and
charitable affairs. The Company believes that active community involvement by
its stations provides its stations with increased exposure in their respective
DMAs and ultimately increases viewership and advertising support.
Establish LMAs
The Company believes that it can attain significant growth in operating
cash flow through the utilization of LMAs. By expanding its presence in a market
in which it owns a station, the Company can improve its competitive position
with respect to a demographic sector. In addition, by providing programming
services to an additional station in a market, the Company is able to realize
significant economies of scale in marketing, programming, overhead and capital
expenditures. The Company provides programming services pursuant to an LMA to an
additional station in seven of the 21 television markets in which the Company
owns or programs a station.
Programming and Affiliations
The Company continually reviews its existing programming inventory and
seeks to purchase the most profitable and cost-effective syndicated programs
available for each time period. In developing its selection of syndicated
programming, the Company balances the cost of available syndicated programs with
their potential to increase advertising revenue and the risk of their reduced
popularity during the term of the program contract. The Company seeks to
purchase only those programs with contractual periods that permit programming
flexibility and which complement a station's overall programming strategy and
counter-programming strategy. Programs that can perform successfully in more
than one time period are more attractive due to the long lead time and
multi-year commitments inherent in program purchasing.
Twenty-eight of the 29 television stations owned or provided programming
services by the Company currently operate as affiliates of Fox (ten stations),
UPN (twelve stations), ABC (two stations), WB (three stations) or CBS (one
station). The networks produce and distribute programming in exchange for each
station's commitment to air the programming at specified times and for
commercial announcement time during the programming. In addition, networks other
than Fox and UPN pay each affiliated station a fee for each network-sponsored
program broadcast by the stations.
On August 21, 1996, the Company entered into an agreement with Fox (the
"Fox Agreement") which, among other things, provides that the affiliation
agreements between Fox and eight stations owned or provided programming services
by the Company (except as noted below) would be amended to have new five-year
terms commencing on the date of the Fox Agreement. Fox has the option to extend
the affiliation agreements for additional five-year terms and must extend all of
the affiliation agreements if it extends any (except that Fox may selectively
renew affiliation agreements if any station has breached its affiliation
agreement). The Fox Agreement also provides that the Company will have the right
to purchase, for fair market value, any station Fox acquires in a market
currently served by a Company-owned Fox affiliate (other than the Norfolk and
Raleigh-Durham markets) if Fox determines to terminate the affiliation agreement
with the Company's station in that market and operate the station acquired by
Fox as a Fox affiliate. The Fox Agreement confirmed that the affiliation
agreements for WTVZ-TV (Norfolk, Virginia) and WLFL-TV
S-37
<PAGE>
(Raleigh, North Carolina) will terminate August 31, 1998. The Fox Agreement also
includes provisions limiting the ability of the Company to preempt Fox
programming except where it has existing programming conflicts or where the
Company preempts to serve a public purpose.
The Company's affiliation agreements with ABC for KDNL and WLOS in St.
Louis and Asheville, respectively, have ten-year terms expiring in 2005 and
2004, respectively. Each of the Company's current UPN affiliation agreements
expires in January 1998 unless renewed by the Company.
On July 4, 1997, the Company entered into an agreement with WB, 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: 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, 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
end January 15, 2008). Pursuant to the WB Agreement, the WB affiliation
agreements of WVTV-TV, Milwaukee, Wisconsin, and WTTO-TV, Birmingham, Alabama
(whose programming is simulcasted on WDBB-TV, Tuscaloosa, Alabama), have been
extended to January 16, 2008. In addition, WFBC-TV in Greenville, South Carolina
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 in aggregate amount in monthly installments during the first 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 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. Certain subsidiaries of the Company
have filed an action in the Circuit Court for Baltimore City seeking declaratory
relief that their notice was effective to terminate the affiliations on January
15, 1998.
Each of the affiliation agreements relating to stations involved in the
River City Acquisition (other than River City's Fox and ABC affiliates) is
terminable by the network upon transfer of the License Assets of the station.
Since transfer of the License Assets, no such affiliation agreement has been
terminated.
S-38
<PAGE>
Radio Broadcasting
The following table sets forth certain information regarding the radio
stations (i) owned and operated by the Company, or (ii) which the Company has an
option or has agreed to acquire:
<TABLE>
<CAPTION>
RANKING OF STATION RANK EXPIRATION
GEOGRAPHIC STATION'S STATION PRIMARY IN PRIMARY DATE OF
MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC FCC
SERVED(A) REVENUE(B) FORMAT TARGET(C) TARGET(D) LICENSE
- ------------------------- ------------ --------------------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Los Angeles, California 1
KBLA-AM(e) Korean N/A(e) N/A(e) 12/1/97(f)
St. Louis, Missouri 18
KPNT-FM Alternative Rock Adults 18-34 2 2/1/05
WVRV-FM Modern Adult Contemporary Adults 18-34 3 12/1/04
WRTH-AM(g) Adult Standards Adults 25-54 20 2/1/05
WIL-FM(g) Country Adults 25-54 7 2/1/05
KIHT-FM(g) 70s Rock Adults 25-54 11 2/1/05
Portland, Oregon 22
KKSN-AM(g) Adult Standards Adults 25-54 28 2/1/98
KKSN-FM(g) 60s Oldies Adults 25-54 5 2/1/98
KKRH-FM(g) 70s Rock Adults 25-54 7 2/1/98
Kansas City, Missouri 29
KCAZ-AM(g)(h) Children's N/A(h) N/A(h) 6/1/97(f)
KCFX-FM(g) 70s Rock Adults 25-54 1 6/1/97(f)
KQRC-FM(g) Active Rock Adults 18-34 2 6/1/05
KCIY-FM(g) Smooth Jazz Adults 25-54 11 2/1/05
KXTR-FM(g) Classical Adults 25-54 18 2/1/05
Milwaukee, Wisconsin 32
WEMP-AM(g) 60s Oldies Adults 25-54 26 12/1/04
WMYX-FM(g) Adult Contemporary Adults 25-54 6 12/1/04
WAMG-FM(g) Rhythmic Adults 25-54 15 12/1/04
Nashville, Tennessee 34
WLAC-FM(i) Adult Contemporary Women 25-54 5 8/1/04
WJZC-FM(i) Smooth Jazz Women 25-54 9 8/1/04
WLAC-AM(i) News/Talk/Sports Adults 35-64 9 8/1/04
New Orleans, Louisiana 38
WLMG-FM Adult Contemporary Women 25-54 4 6/1/04
KMEZ-FM Urban Oldies Women 25-54 6 6/1/04
WWL-AM News/Talk/Sports Adults 35-64 1 6/1/04
WSMB-AM Talk/Sports Adults 35-64 17 6/1/04
WBYU-AM(g) Adult Standards Adults 25-54 19 6/1/98
WEZB-FM(g)(j) Adult Contemporary Adults 25-54 10 6/1/05
WRNO-FM(g) 70s Rock Adults 25-54 8 6/1/01
Memphis, Tennessee 40
WRVR-FM Soft Adult Contemporary Women 25-54 2 8/1/04
WJCE-AM Urban Oldies Women 25-54 13 8/1/04
WOGY-FM Country Adults 25-54 7 8/1/04
Norfolk, Virginia 41
WGH-AM(g) Sports Talk Adults 25-54 18 10/1/03
WGH-FM(g) Country Adults 25-54 3 10/1/03
WVCL-FM(g)(k) 60s Oldies Adults 25-54 10 10/1/03
Buffalo, New York 42
WMJQ-FM Adult Contemporary Women 25-54 2 6/1/98
WKSE-FM Contemporary Hit Radio Women 18-49 1 6/1/98
WBEN-AM News/Talk/Sports Adults 35-64 6 6/1/98
WWKB-AM Country Adults 35-64 18 6/1/98
WGR-AM Sports Adults 25-54 9 6/1/98
WWWS-AM Urban Oldies Women 25-54 11 6/1/98
(con
</TABLE>
S-39
<PAGE>
<TABLE>
<CAPTION>
RANKING OF STATION RANK EXPIRATION
GEOGRAPHIC STATION'S STATION PRIMARY IN PRIMARY DATE OF
MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC FCC
SERVED(A) REVENUE(B) FORMAT TARGET(C) TARGET(D) LICENSE
- ------------------------ ------------ ------------------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Rochester, New York 53
WBBF-AM(g) Adult Standards Adults 25-54 23 6/1/98
WBEE-FM(g) Country Adults 25-54 1 6/1/98
WKLX-FM(g) 60s Oldies Adults 25-54 7 6/1/98
WQRV-FM(g) Classic Hits Adults 25-54 9 6/1/98
60
Asheville, North Carolina/
Greenville/Spartanburg,
South Carolina
WFBC-FM(l) Contemporary Hit Radio Women 18-49 4 12/1/03
WORD-AM(l) News/Talk Adults 35-64 9 12/1/03
WYRD-AM(l) News/Talk Adults 35-64 10 12/1/03
WSPA-AM(l) Full Service/Talk Adults 35-64 15 12/1/03
WSPA-FM(l) Soft Adult Contemporary Women 25-54 4 12/1/03
WOLI-FM(l) Oldies Adults 25-54 9 12/1/03
WOLT-FM(l) Oldies Adults 25-54 11 12/1/03
Wilkes-Barre/Scranton, 68
Pennsylvania
WKRZ-FM(m) Contemporary Hit Radio Adults 18-49 1 8/1/98
WGGY-FM Country Adults 25-54 2 8/1/98
WILK-AM(n) News/Talk/Sports Adults 35-64 8 8/1/98
WGBI-AM(n) News/Talk/Sports Adults 35-64 20 8/1/98
WWSH-FM(o) Soft Hits Women 25-54 7 8/1/98
WILP-AM(n) News/Talk/Sports Adults 35-64 19 8/1/98
WWFH-FM(o) Soft Hits Women 25-54 10 8/1/98
WKRF-FM(m) Contemporary Hit Radio Adults 18-49 17 8/1/98
</TABLE>
- ----------
(a)
Actual city of license may differ from the geographic market served.
(b) Ranking of the principal radio market served by the station among all
U.S. radio markets by 1996 aggregate gross radio broadcast revenue
according to Duncan's Radio Market Guide - 1997 Edition.
(c) Due to variations that may exist within programming formats, the
primary demographic target of stations with the same programming
format may be different.
(d) All information concerning ratings and audience listening
information is derived from the Spring 1997 Arbitron Metro Area
Ratings Survey (the "Spring 1997 Arbitron"). Arbitron is the
generally accepted industry source for statistical information
concerning audience ratings. Due to the nature of listener surveys,
other radio ratings services may report different rankings; however,
the Company does not believe that any radio ratings service other
than Arbitron is accorded significant weight in the radio broadcast
industry. "Station Rank in Primary Demographic Target" is the
ranking of the station among all radio stations in its market that
are ranked in its target demographic group and is based on the
station's average persons share in the primary demographic target in
the applicable Metro Survey Area. Source: Average Quarter Hour
Estimates, Monday through Sunday, 6:00 a.m. to midnight, Spring 1997
Arbitron.
(e) Programming is provided to this station by a third party pursuant to
an LMA.
(f) License renewal application pending.
(g) The Company has the right to acquire the assets of this station in
the Heritage Acquisition.
(h) This station is being programmed by a third party pursuant to an LMA.
The third party has an option to acquire this station for $550,000
which expires on September 30, 1997.
(i) The Company has agreed to sell this station to a third party.
(j) A petition for reconsideration of the grant of this station's
license renewal is pending.
(k) EEO reporting conditions were placed on this station's license
renewals for 1997, 1998 and 1999.
(l) The Company has an option to acquire Keymarket of South Carolina,
Inc. ("Keymarket" or "KSC"). Keymarket owns and operates WYRD-AM,
WORD-AM and WFBC-FM, and has exercised its option to acquire WSPA-AM
and WSPA-FM, and provides sales services pursuant to a JSA and has an
option to acquire WOLI-FM and WOLT-FM.
(m) WKRZ-FM and WKRF-FM simulcast their programming.
(n) WILK-AM, WGBI-AM and WILP-AM simulcast their programming.
(o) WWSH-FM and WWFH-FM simulcast their programming.
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Radio Operating Strategy
The Company's radio strategy is to operate a cluster of radio stations in
selected geographic markets throughout the country. In each geographic market,
the Company employs broadly diversified programming formats to appeal to a
variety of demographic groups within the market. The Company seeks to strengthen
the identity of each of its stations through its programming and promotional
efforts, and emphasizes that identity to a far greater degree than the identity
of any local radio personality.
The Company believes that its strategy of appealing to diverse demographic
groups in selected geographic markets allows it to reach a larger share of the
overall advertising market while realizing economies of scale and avoiding
dependence on one demographic or geographic market. The Company realizes
economies of scale by combining sales and marketing forces, back office
operations and general management in each geographic market. At the same time,
the geographic diversity of its portfolio of radio stations helps lessen the
potential impact of economic downturns in specific markets and the diversity of
target audiences served helps lessen the impact of changes in listening
preferences. In addition, the geographic and demographic diversity allows the
Company to avoid dependence on any one or any small group of advertisers.
The Company's group of radio stations includes the top billing station
group in two markets and one of the top three billing station groups in each of
its markets other than Los Angeles, St. Louis and Nashville. Through ownership
or LMAs, the group also includes duopolies in six of its seven markets and, upon
exercise of options to acquire stations in the Asheville/Greenville/Spartanburg
market, the Company will have duopolies in seven of its eight markets.
Depending on the programming format of a particular station, there are a
predetermined number of advertisements broadcast each hour. The Company
determines the optimum number of advertisements available for sale during each
hour without jeopardizing listening levels (and the resulting ratings). Although
there may be shifts from time to time in the number of advertisements available
for sale during a particular time of day, the total number of advertisements
available for sale on a particular station normally does not vary significantly.
Any change in net radio broadcasting revenue, with the exception of those
instances where stations are acquired or sold, is generally the result of
pricing adjustments made to ensure that the station effectively uses advertising
time available for sale, an increase in the number of commercials sold or a
combination of these two factors.
Large, well-trained local sales forces are maintained by the Company in
each of its radio markets. The Company's principal goal is to utilize its sales
efforts to develop long-standing customer relationships through frequent direct
contacts, which the Company believes provides it with a competitive advantage.
Additionally, in some radio markets, duopolies permit the Company to offer
creative advertising packages to local, regional and national advertisers. Each
radio station programmed by the Company also engages a national independent
sales representative to assist it in obtaining national advertising revenues.
These representatives obtain advertising through national advertising agencies
and receive a commission from the radio station based on its gross revenue from
the advertising obtained.
BROADCASTING ACQUISITION STRATEGY
On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act")
was signed into law. The 1996 Act represents the most sweeping overhaul of the
country's telecommunications laws since the Communications Act of 1934, as
amended (the "Communications Act"). The 1996 Act relaxes the broadcast ownership
rules and simplifies the process for renewal of broadcast station licenses.
The Company believes that the enactment of the 1996 Act presents a unique
opportunity to build a larger and more diversified broadcasting company.
Additionally, the Company expects that the opportunity to act as one of the
consolidators of the industry will enable the Company to gain additional
influence with program suppliers, television networks, other vendors, and
alternative delivery media. The additions to the Company's management team as a
result of the River City Acquisition have given it additional resources to take
advantage of these developments.
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In implementing its acquisition strategy, the Company seeks to identify and
pursue favorable station or group acquisition opportunities primarily in the
15th to 75th largest DMAs and Metro Service Areas ("MSAs"). In assessing
potential acquisitions, the Company examines opportunities to improve revenue
share, audience share and/or cost control. Additional factors considered by the
Company in a potential acquisition include geographic location, demographic
characteristics and competitive dynamics of the market. The Company also
considers the opportunity for cross-ownership of television and radio stations
and the opportunity it may provide for cross-promotion and cross-selling.
In conjunction with its acquisitions, the Company may determine that
certain of the acquired stations may not be consistent with the Company's
strategic plan. In such an event, the Company reviews opportunities for swapping
such stations with third parties for other stations or selling such stations
outright. The Heritage Acquisition may provide such opportunities.
Since the 1996 Act became effective, the Company has acquired, obtained
options to acquire or has acquired the right to program or provide sales
services to 18 television and 34 radio stations for an aggregate consideration
of approximately $1.3 billion. Certain terms of these acquisitions are described
below.
River City Acquisition. On May 31, 1996, pursuant to an amended and
restated asset purchase agreement, the Company acquired all of the Non-License
Assets of River City other than the assets relating to WSYX-TV in Columbus,
Ohio. Simultaneously, the Company entered into a 10-year LMA with River City
with respect to all of River City's License Assets (with the exception of the
License Assets relating to WSYX-TV). The Company has since exercised options to
acquire all of River City's License Assets other than License Assets relating to
WTTV-TV and WTTK-TV in Indianapolis, Indiana, WSYX-TV in Columbus, Ohio and
WFBC-TV in Greenville, South Carolina. Glencairn has acquired the License Assets
of WFBC-TV, and the Company provides programming services to WFBC-TV pursuant to
an LMA. The Company has a 10-year option (the "License Assets Option") to
acquire River City's License Assets relating to WTTV-TV and WTTK-TV, and a
three-year option to acquire the assets relating to WSYX-TV (both the License
and Non-License Assets, collectively the "Columbus Option"). The exercise price
for the License Assets Option for WTTV-TV and WTTK-TV is $1.9 million and the
Company is required to pay a quarterly extension fee with respect to the License
Assets Option of 15% of the option exercise price through May 3, 1998 and 25% of
the option exercise price thereafter. Acquisition of the License Assets relating
to WTTV-TV and WTTK-TV is now subject to FCC approval of transfer of such
License Assets. There can be no assurance that this approval will be obtained.
An application for transfer of the License Assets was filed in November 1996. A
petition was filed to deny this application and, at the Company's request, the
FCC has withheld action on this application. The petitioner has appealed the
withholding of action on the application.
At the time of the River City Acquisition, the Company also acquired from
another party the Non-License Assets relating to one additional television
station (KRRT-TV in Kerrville, Texas) to which River City provided programming
pursuant to an LMA. Glencairn has acquired the License Assets of KRRT-TV and the
Company provides programming services to KRRT-TV pursuant to an LMA. The Company
has also acquired or has agreed to acquire four radio stations to which River
City provided programming or sales services.
On July 17, 1997, the Company and Glencairn acquired the License Assets of
WLOS-TV and WFBC-TV, respectively. 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.
The Company paid an aggregate of approximately $1.0 billion for the
Non-License Assets and the options to acquire the License Assets in connection
with the River City Acquisition consisting of $847.6 million in cash and
1,150,000 shares of Series A Preferred Stock of the Company and options to
acquire 1,382,435 shares of Class A Common Stock at an exercise price of $30.11.
The Series A Preferred Stock has been exchanged for 1,150,000 shares of Series B
Preferred Stock of the Company, which at issuance had an aggregate liquidation
value of $115 million and are convertible at any time, at the option of the
holders, into an aggregate of 4,181,818 shares of Class A Common Stock of the
Company (which had a
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market value on May 31, 1996 of approximately $125.1 million). The exercise
price for the Columbus Option is approximately $130 million plus the amount of
indebtedness secured by the WSYX assets on the date of exercise (not to exceed
the amount outstanding on the date of closing of $105 million) and the Company
is required to pay an extension fee with respect to the Columbus Option as
follows: (i) 8% of $130 million for the first year following the closing of the
River City Acquisition; (ii) 15% of $130 million for the second year following
the closing; and (iii) 25% of $130 million for each following year. The
extension fee accrues beginning on the date of closing, and is payable
(beginning December 31, 1996) at the end of each calendar quarter until such
time as the option is exercised or River City sells WSYX-TV to a third party,
which River City has the right to do in certain limited circumstances. The
Company paid the extension fees due March 31, 1997 and June 30, 1997. The
Company has acquired all of the River City License Assets except those related
to WTTV-TV and WTTK-TV, and the Company continues to provide programming
services to WTTV-TV and WTTK-TV pursuant to an LMA with River City. Pursuant to
the LMA with River City, the Company is required to provide at least 166 hours
per week of programming to WTTV-TV and WTTK-TV and, subject to certain
exceptions, River City is required to broadcast all programming provided by the
Company. The Company is required to pay River City monthly fees under the LMA
with respect to WTTV-TV and WTTK-TV in an amount sufficient to cover specified
expenses of operating the stations. The Company has the right to sell
advertising time on the stations during the hours programmed by the Company.
The Company and River City filed notification under the HSR Act, with
respect to the Company's acquisition of all River City assets prior to closing
the acquisition. After the United States Justice Department ("DOJ") indicated
that it would request additional information regarding the antitrust
implications of the acquisition of WSYX-TV by the Company in light of the
Company's ownership of WTTE-TV, the Company and River City agreed to submit
separate notifications with respect to the WSYX-TV assets and the other River
City assets. The DOJ then granted early termination of the waiting period with
respect to the transfer of the River City assets other than WSYX-TV, permitting
the acquisition of those assets to proceed. The Company and River City agreed to
notify the DOJ 30 days before entering into an LMA or similar agreement with
respect to WSYX-TV and agreed not to enter into such an agreement until 20 days
after substantially complying with any request for information from DOJ
regarding the transaction. The Company is in the process of preparing a
submission to the DOJ regarding the competitive effects of entering into an LMA
arrangement in Columbus. The Company has agreed to sell the License Assets of
WTTE-TV to Glencairn and to enter into an LMA with Glencairn to provide
programming services to WTTE-TV. The FCC has approved this transaction, but the
Company does not believe that this transaction will be completed unless the
Company acquires WSYX-TV.
In the River City Acquisition, the Company also acquired an option held by
River City to purchase either (i) all of the assets of Keymarket of South
Carolina, Inc. for the forgiveness of debt held by the Company in an aggregate
principal amount of approximately $7.4 million as of August 22, 1997, plus
payment of approximately $1,000,000 less certain adjustments or (ii) all of the
stock of KSC for $1,000,000 less certain adjustments. KSC owns and operates
three radio stations in the Asheville, North Carolina/ Greenville/Spartanburg,
South Carolina MSA (WFBC-FM, WFBC-AM and WORD-AM). The option to acquire the
assets or stock of KSC expires on December 31, 1997. The Company intends to
exercise this option in the fourth quarter of 1997. KSC also holds an option to
acquire from Spartan Radiocasting, Inc. certain assets relating to two
additional stations (WSPA-AM and WSPA-FM) in the Asheville, North
Carolina/Greenville/Spartanburg, South Carolina MSA which KSC currently programs
pursuant to an LMA. KSC's option to acquire these assets is exercisable for
$5.15 million and expires in January 2000, subject to extension to the extent
the applicable LMA is extended beyond that date. KSC also has an option to
acquire assets of Palm Broadcasting Company, L.P., which owns two additional
stations in the Asheville, North Carolina/Greenville/Spartanburg, South Carolina
MSA (WOLI-FM and WOLT-FM) in an amount equal to the outstanding debt of Palm
Broadcasting Company, L.P. to the Company, which was approximately $3.03 million
as of March 31, 1997. This option expires in April 2001. KSC has a JSA with Palm
Broadcasting Company, L.P., but does not provide programming for WOLI or WOLT.
Superior Acquisition. On May 8, 1996, the Company acquired WDKY-TV
(Lexington, Kentucky) and KOCB-TV (Oklahoma City, Oklahoma) by acquiring the
stock of Superior Communications Group, Inc. for approximately $63.5 million.
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Flint Acquisition. On February 27, 1996 the Company acquired the assets of
WSMH-TV (Flint, Michigan) for approximately $35.8 million by exercising options
granted in 1995.
Cincinnati/Kansas City Acquisitions. On July 1, 1996, the Company acquired
the assets of KSMO-TV (Kansas City, Missouri) and on August 1, 1996, it acquired
the assets of WSTR-TV (Cincinnati, Ohio) for approximately $34.2 million.
Peoria/Bloomington Acquisition. On July 1, 1996, the Company acquired the
assets of WYZZ-TV (Peoria/Bloomington, Illinois) for approximately $21.2
million.
1997 ACQUISITIONS
Las Vegas Acquisition. On January 30, 1997, the Company entered into an
agreement to acquire the assets of KUPN-TV, the UPN affiliate in Las Vegas,
Nevada, for $87.0 million. The Company completed this acquisition on May 30,
1997.
Heritage Acquisition. On July 16, 1997, the Company entered into the
Heritage Acquisition Agreements with certain subsidiaries of Heritage. Pursuant
to the Heritage Acquisition Agreements, the Company has the right to acquire the
assets of five television stations (the interests in one of which the Company is
required to dispose), programming rights under LMAs with respect to two
additional television stations, and the assets of 24 radio stations. The Company
will acquire the assets of one television station serving the
Charleston/Huntington, West Virginia market, one station in the Mobile, Alabama/
Pensacola, Florida market and rights under an LMA with respect to another
station in that market, and the assets of two stations in the Burlington,
Vermont/Plattsburgh, New York market and the right to provide programming to one
station in that market. The radio stations to be acquired serve the St. Louis,
Missouri market (three stations), the Portland, Oregon market (three stations),
the Kansas City, Missouri market (five stations), the Milwaukee, Wisconsin
market (three stations), the Norfolk, Virginia market (three stations), the New
Orleans, Louisiana market (three stations) and the Rochester, New York market
(four stations). The Heritage Acquisition Agreements also provide for the
acquisition of the assets relating to the operation of a television station in
Oklahoma City, Oklahoma, but the Company is required by the 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.
The aggregate purchase price of the Heritage Acquisition 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 Company intends to finance the
purchase price from some combination of the proceeds of the Common Stock
Offering, the proceeds of the Preferred Stock Offering, funds available under
the Bank Credit Agreement, and the expected proceeds ($60 million) from the sale
of interests in the Oklahoma City station.
The Heritage Acquisition is conditioned on, among other things, FCC
approval and the expiration of the applicable waiting period under the HSR Act.
Additional Radio Acquisitions and Dispositions. The Company entered into an
agreement on January 29, 1997 to acquire the assets of WGR-AM and WWWS-AM in
Buffalo, New York, for $1.5 million. The Company's acquisition of WGR-AM and
WWWS-AM was consummated on April 18, 1997. On January 31, 1997, the Company
completed the acquisition of the assets of WWFH-FM and WILP-AM, each in
Wilkes-Barre, Pennsylvania, for aggregate consideration of approximately
$773,000. On March 12, 1997, the Company entered into an agreement to acquire
the assets of radio station WKRF-FM in the Wilkes-Barre/Scranton, Pennsylvania
market. The Company completed this acquisition on July 31, 1997. In April 1997,
the Company entered into an agreement to acquire the assets of radio station
WWSH-FM in the Wilkes-Barre/Scranton market. The Company completed this
acquisition on August 29, 1997.
In August, 1997, the Company entered into an agreement with SFX
Broadcasting, Inc. ("SFX") pursuant to which the Company will sell to SFX the
assets relating to the operations of Nashville radio stations WJZC-FM, WLAC-FM
and WLAC-AM (the "SFX Stations"). Under the agreement, SFX will pay to the
Company an aggregate consideration of $35 million in cash for the SFX Stations
or, at the Company's option, transfer to the Company assets that both SFX and
the Company agree have a fair
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market value equal to $35 million. The sale of the SFX Stations is conditioned
on the approval of each of the Department of Justice and the Federal
Communications Commission and is expected to close in 1998.
Ongoing Discussions. In furtherance of its acquisition strategy, the
Company routinely reviews, and conducts investigations of potential television
and radio station acquisitions. When the Company believes a favorable
opportunity exists, the Company seeks to enter into discussions with the owners
of such stations regarding the possibility of an acquisition by the Company. At
any given time, the Company may be in discussions with one or more such station
owners. The Company is in serious negotiations with various parties relating to
the acquisition of television and radio properties which would be acquired for
aggregate consideration of approximately $85 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.
LOCAL MARKETING AGREEMENTS
The Company currently has LMA arrangements with stations in seven markets
in which it owns a television station: Pittsburgh, Pennsylvania (WPTT),
Baltimore, Maryland (WNUV), Raleigh/Durham, North Carolina (WRDC), Milwaukee,
Wisconsin (WVTV), Birmingham, Alabama (WABM), San Antonio, Texas (KRRT) and
Asheville/Greenville/Spartanburg, South Carolina (WFBC). In addition, the
Company has an LMA arrangement with a station in the Tuscaloosa, Alabama market
(WDBB), which is adjacent to Birmingham. In each of these markets, other than
Pittsburgh and Tuscaloosa, the LMA arrangement is with Glencairn and the Company
owns the Non-License Assets of the stations. The Company owns the assets of one
radio station (KBLA-AM in Los Angeles) which an independent third party programs
pursuant to an LMA.
The Company believes that it is able to increase its revenues and improve
its margins by providing programming services to stations in selected DMAs and
MSAs where the Company already owns a station. In certain instances, single
station operators and stations operated by smaller ownership groups do not have
the management expertise or the operating efficiencies available to the Company
as a multi-station broadcaster. The Company seeks to identify such stations in
selected markets and to provide such stations with programming services pursuant
to LMAs. In addition to providing the Company with additional revenue
opportunities, the Company believes that these LMA arrangements have assisted
certain stations whose operations may have been marginally profitable to
continue to air popular programming and contribute to diversity of programming
in their respective DMAs and MSAs.
In cases where the Company enters into LMA arrangements in connection with
a station whose acquisition by the Company is pending FCC approval, the Company
(i) obtains an option to acquire the station assets essential for broadcasting a
television or radio signal in compliance with regulatory guidelines, generally
consisting of the FCC license, transmitter, transmission lines, technical
equipment, call letters and trademarks, and certain furniture, fixtures and
equipment (the "License Assets") and (ii) acquires the remaining assets (the
"Non-License Assets") at the time it enters into the option. Following
acquisition of the Non-License Assets, the License Assets continue to be owned
by the owner-operator and holder of the FCC license, which enters into an LMA
with the Company. After FCC approval for transfer of the License Assets is
obtained, the Company exercises its option to acquire the License Assets and
become the owner-operator of the station, and the LMA arrangement is terminated.
In connection with the River City Acquisition, the Company entered into
LMAs with River City and the owner of KRRT with respect to each of the nine
television and 21 radio stations with respect to which the Company acquired
Non-License Assets. The Company or Glencairn has now acquired the License Assets
of all of the television and radio stations with respect to which the Company
initially acquired Non-License Assets in the River City Acquisition, other than
WTTV and WTTK in Indianapolis, Indiana. The LMA with River City for these two
stations is in effect for a ten-year term, which corresponds with the term of
the option the Company holds to acquire the related River City License Assets.
Pursuant to the LMA, the Company pays River City fees in return for which the
Company acquires all of the inventory of broadcast time of the stations and the
right to sell 100% of each station's inventory of advertising time. Upon grant
of FCC approval of the transfer of License Assets with respect to WTTV and WTTK,
the
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Company intends to acquire the License Assets, and thereafter the LMA will
terminate and the Company will operate the stations. At the Company's request,
the FCC has withheld action on the application for the Company's acquisition of
WTTV and WTTK in Indianapolis (and a pending application for the Controlling
Stockholders to divest their attributable interests in WIIB in Indianapolis)
until the FCC completes its pending rulemaking proceeding considering the
cross-interest policy.
USE OF DIGITAL TELEVISION TECHNOLOGY
The Company believes that television broadcasting may be enhanced
significantly by the development and increased availability of digital
broadcasting service technology. This technology has the potential to permit the
Company to provide viewers multiple channels of digital television over each of
its existing standard channels, to provide certain programming in a high
definition television format and to deliver various forms of data, including
data on the Internet, to home and business computers. These additional
capabilities may provide the Company with additional sources of revenue. The
Company is currently considering plans to provide high definition television
("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 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 announced plans to hold 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. This digital broadcasting service
technology is not currently available to the viewing public and a successful
transition from the current analog broadcast format to a digital format may take
many years. There can be no assurance that the Company's efforts to take
advantage of the new technology will be commercially successful.
FEDERAL REGULATION OF TELEVISION AND RADIO BROADCASTING
The ownership, operation and sale of television and radio stations are
subject to the jurisdiction of the FCC, which acts under authority granted by
the Communications Act. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and operating
power of stations; issues, renews, revokes and modifies station licenses;
regulates equipment used by stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation and
employment practices of stations; and has the power to impose penalties for
violations of its rules or the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act, the 1996 Act and specific FCC regulations and policies.
Reference should be made to the Communications Act, the 1996 Act, FCC rules and
the public notices and rulings of the FCC for further information concerning the
nature and extent of federal regulation of broadcast stations.
License Grant and Renewal. Television and radio stations operate pursuant
to broadcasting licenses that are granted by the FCC for maximum terms of eight
years.
Television and radio station licenses are subject to renewal upon
application to the FCC. During certain periods when renewal applications are
pending, competing applicants may file for the radio or television frequency
being used by the renewal applicant. During the same periods, petitions to deny
license renewal applications may be filed by interested parties, including
members of the public. Prior to the 1996 Act, the FCC was generally required to
hold hearings on renewal applications if a competing application against a
renewal application was filed, if the FCC was unable to determine that renewal
of a license would serve the public interest, convenience and necessity, or if a
petition to deny raised a "substantial and material question of fact" as to
whether the grant of the renewal application would be prima facie inconsistent
with the public interest, convenience and necessity.
The 1996 Act does not prohibit either the filing of petitions to deny
license renewals or the filing of competing applications. Under the 1996 Act,
the FCC is still required to hold hearings on renewal
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applications if it is unable to determine that renewal of a license would serve
the public interest, convenience or necessity, or if a petition to deny raises a
"substantial and material question of fact" as to whether the grant of the
renewal application would be prima facie inconsistent with the public interest,
convenience and necessity. Pursuant to the 1996 Act, however, the FCC is
prohibited from considering competing applications for a renewal applicant's
frequency, and is required to grant the renewal application, if the FCC finds:
(i) that the station has served the public interest, convenience and necessity;
(ii) that there have been no serious violations by the licensee of the
Communications Act or the rules and regulations of the FCC; and (iii) there have
been no other violations by the licensee of the Communications Act or the rules
and regulations of the FCC that, when taken together, would constitute a pattern
of abuse.
All of the stations that the Company (i) owns and operates, (ii) intends to
acquire pursuant to pending acquisitions, or (iii) currently provides
programming services to pursuant to an LMA are presently operating under regular
licenses, which expire as to each station on the dates set forth under "-
Television Broadcasting" and "- Radio Broadcasting," above. Although renewal of
license is granted in the vast majority of cases even when petitions to deny are
filed, there can be no assurance that the licenses of such stations will be
renewed.
Ownership Matters
General
The Communications Act prohibits the assignment of a broadcast license or
the transfer of control of a broadcast licensee without the prior approval of
the FCC. In determining whether to permit the assignment or transfer of control
of, or the grant or renewal of, a broadcast license, the FCC considers a number
of factors pertaining to the licensee, including compliance with various rules
limiting common ownership of media properties, the "character" of the licensee
and those persons holding "attributable" interests therein, and compliance with
the Communications Act's limitations on alien ownership.
To obtain the FCC's prior consent to assign a broadcast license or transfer
control of a broadcast licensee, appropriate applications must be filed with the
FCC. If the application involves a "substantial change" in ownership or control,
the application must be placed on public notice for a period of approximately 30
days during which petitions to deny the application may be filed by interested
parties, including members of the public. If the application does not involve a
"substantial change" in ownership or control, it is a "pro forma" application.
The "pro forma" application is nevertheless subject to having informal
objections filed against it. If the FCC grants an assignment or transfer
application, interested parties have approximately 30 days from public notice of
the grant to seek reconsideration of that grant. Generally, parties that do not
file initial petitions to deny or informal objections against the application
face difficulty in seeking reconsideration of the grant. The FCC normally has
approximately an additional 10 days to set aside such grant on its own motion.
When passing on an assignment or transfer application, the FCC is prohibited
from considering whether the public interest might be served by an assignment or
transfer to any party other than the assignee or transferee specified in the
application.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations holding, or through subsidiaries controlling, broadcast
licenses, the interests of officers, directors and those who, directly or
indirectly, have the right to vote 5% or more of the corporation's stock (or 10%
or more of such stock in the case of insurance companies, investment companies
and bank trust departments that are passive investors) are generally
attributable, except that, in general, no minority voting stock interest will be
attributable if there is a single holder of more than 50% of the outstanding
voting power of the corporation. The FCC has a pending rulemaking proceeding
that, among other things, seeks comment on whether the FCC should modify its
attribution rules by (i) raising the attribution stock benchmark from 5% to 10%;
(ii) raising the attribution stock benchmark for passive investors from 10% to
20%; (iii) restricting the availability of the single majority shareholder
exemption; and (iv) attributing certain interests such as non-voting stock, debt
and certain holdings by limited liability corporations in certain circumstances.
More recently, the FCC has solicited comment on proposed rules that would (i)
treat an otherwise nonattributable equity or debt interest in a licensee as an
attributable interest where the interest holder
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is a program supplier or the owner of a broadcast station in the same market and
the equity and/or debt holding is greater than a specified benchmark; (ii) treat
a licensee of a television station which, under an LMA, brokers more than 15% of
the time on another television station serving the same market, as having an
attributable interest in the brokered station; and (iii) in certain
circumstances, treat the licensee of a broadcast station that sells advertising
time on another station in the same market pursuant to a JSA as having an
attributable interest in the station whose advertising is being sold.
The Controlling Stockholders hold attributable interests in two entities
owning media properties, namely: Channel 63, Inc., licensee of WIIB-TV, a UHF
television station in Bloomington, Indiana, and Bay Television, Inc., licensee
of WTTA-TV, a UHF television station in St. Petersburg, Florida. All of the
issued and outstanding shares of Channel 63, Inc. are owned by the Controlling
Stockholders. All the issued and outstanding shares of Bay Television, Inc. are
owned by the Controlling Stockholders (75%) and Robert L. Simmons (25%), a
former stockholder of the Company. The Controlling Stockholders have agreed to
divest their attributable interests in Channel 63, Inc. and the Company believes
that, after doing so, such holdings will not materially restrict its ability to
acquire or program additional broadcast stations.
Under its "cross-interest" policy, the FCC considers certain "meaningful"
relationships among competing media outlets in the same market, even if the
ownership rules do not specifically prohibit the relationship. Under this
policy, the FCC may consider significant equity interests combined with an
attributable interest in a media outlet in the same market, joint ventures, and
common key employees among competitors. The cross-interest policy does not
necessarily prohibit all of these interests, but requires that the FCC consider
whether, in a particular market, the "meaningful" relationships between
competitors could have a significant adverse effect upon economic competition
and program diversity. Heretofore, the FCC has not applied its cross-interest
policy to LMAs and JSAs between broadcast stations. In its ongoing rulemaking
proceeding concerning the attribution rules, the FCC has sought comment on,
among other things, (i) whether the cross-interest policy should be applied only
in smaller markets, and (ii) whether non-equity financial relationships such as
debt, when combined with multiple business interrelationships such as LMAs and
JSAs, raise concerns under the cross-interest policy. Moreover, in its most
recent proposals in its ongoing attribution rulemaking proceeding, the FCC has
proposed treating television LMAs, JSAs, and debt or equity interests as
attributable interests in certain circumstances without regard to the
cross-interest policy.
The Communications Act prohibits the issuance of broadcast licenses to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by Aliens. The Company has been
advised that the FCC staff has interpreted this provision to require a finding
that such grant or holding would be in the public interest before a broadcast
license may be granted to or held by any such corporation and that the FCC staff
has made such a finding only in limited circumstances. The FCC has issued
interpretations of existing law under which these restrictions in modified form
apply to other forms of business organizations, including partnerships. As a
result of these provisions, the licenses granted to Subsidiaries of the Company
by the FCC could be revoked if, among other restrictions imposed by the FCC,
more than 25% of the Company's stock were directly or indirectly owned or voted
by Aliens. The Company and the Subsidiaries are domestic corporations, and the
Controlling Stockholders are all United States citizens. The Amended and
Restated Articles of Incorporation of the Company (the "Amended Certificate")
contain limitations on Alien ownership and control that are substantially
similar to those contained in the Communications Act. Pursuant to the Amended
Certificate, the Company has the right to repurchase Alien-owned shares at their
fair market value to the extent necessary, in the judgment of the Board of
Directors, to comply with the Alien ownership restrictions.
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Television
National Ownership Rule. Prior to the 1996 Act, FCC rules generally
prohibited an individual or entity from having an attributable interest in more
than 12 television stations nationwide, or in television stations reaching more
than 25% of the national television viewing audience. Pursuant to the 1996 Act,
the FCC has modified its rules to eliminate any limitation on the number of
television stations an individual or entity may own nationwide, subject to the
restriction that no individual or entity may have an attributable interest in
television stations reaching more than 35% of the national television viewing
audience. Historically, VHF stations have shared a larger portion of the market
than UHF stations. Therefore, only half of the households in the market area of
any UHF station are included when calculating whether an entity or individual
owns television stations reaching more than 35% of the national television
viewing audience. All but three of the stations owned and operated by the
Company, or to which the Company provides programming services, are UHF.
Duopoly Rule. On a local level, the television "duopoly" rule generally
prohibits a single individual or entity from having an attributable interest in
two or more television stations with overlapping Grade B service areas. While
the 1996 Act has not eliminated the TV duopoly rule, it does direct the FCC to
initiate a rulemaking proceeding to determine whether to retain, modify, or
eliminate the rule. The FCC has pending a rulemaking proceeding in which it has
proposed to modify the television duopoly rule to permit the common ownership of
television stations in different DMAs, so long as the Grade A signal contours of
the stations do not overlap. Pending resolution of its rulemaking proceeding,
the FCC has adopted an interim waiver policy that permits the common ownership
of television stations in different DMAs with no overlapping Grade A signal
contours, conditioned on the final outcome of the rulemaking proceeding. The FCC
has also sought comment on whether common ownership of two television stations
in a market should be permitted (i) where one or more of the commonly owned
stations is UHF, (ii) where one of the stations is in bankruptcy or has been off
the air for a substantial period of time and (iii) where the commonly owned
stations have very small audience or advertising shares, are located in a very
large market, and/or a specified number of independently owned media voices
would remain after the acquisition.
Local Marketing Agreements. Over the past few years, a number of television
stations, including certain of the Company's stations, have entered into what
have commonly been referred to as LMAs. While these agreements may take varying
forms, pursuant to a typical LMA, separately owned and licensed television
stations agree to enter into cooperative arrangements of varying sorts, subject
to compliance with the requirements of antitrust laws and with the FCC's rules
and policies. Under these types of arrangements, separately owned stations could
agree to function cooperatively in terms of programming, advertising sales,
etc., subject to the requirement that the licensee of each station shall
maintain independent control over the programming and operations of its own
station. One typical type of LMA is a programming agreement between two
separately owned television stations serving a common service area, whereby the
licensee of one station programs substantial portions of the broadcast day on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the latter licensee, and sells advertising time during such
program segments. Such arrangements are an extension of the concept of "time
brokerage" agreements, under which a licensee of a station sells blocks of time
on its station to an entity or entities which program the blocks of time and
which sell their own commercial advertising announcements during the time
periods in question. The staff of the FCC's Mass Media Bureau has held that LMAs
are not contrary to the Communications Act, provided that the licensee of the
station which is being substantially programmed by another entity maintains
complete responsibility for and control over programming and operations of its
broadcast station and assures compliance with applicable FCC rules and policies.
At present, FCC rules permit television station LMAs, and the licensee of a
television station brokering time on another television station is not
considered to have an attributable interest in the brokered station. However, in
connection with its ongoing rulemaking proceeding regarding the television
duopoly rule, the FCC has proposed to adopt rules providing that the licensee of
a television station which brokers more than 15% of the time on another
television station serving the same market would be deemed to have an
attributable interest in the brokered station for purposes of the national and
local
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multiple ownership rules. In connection with this proceeding, the FCC has
solicited detailed information from parties to television LMAs as to the terms
and characteristics of such LMAs.
The 1996 Act provides that nothing therein "shall be construed to prohibit
the origination, continuation, or renewal of any television local marketing
agreement that is in compliance with the regulations of the [FCC]." The
legislative history of the 1996 Act reflects that this provision was intended to
grandfather television LMAs that were in existence upon enactment of the 1996
Act, and to allow television LMAs consistent with the FCC's rules subsequent to
enactment of the 1996 Act. In its pending rulemaking proceeding regarding the
television duopoly rule, the FCC has proposed to adopt a grandfathering policy
providing that, in the event that television LMAs become attributable interests,
LMAs that are in compliance with existing FCC rules and policies and were
entered into before November 5, 1996, would be permitted to continue in force
until the original term of the LMA expires. Under the FCC's proposal, television
LMAs that are entered into or renewed after November 5, 1996 would have to be
terminated if LMAs are made attributable interests and the LMA in question
resulted in a violation of the television multiple ownership rules. The
Company's LMAs with television stations WPTT in Pittsburgh, Pennsylvania, WNUV
in Baltimore, Maryland, WVTV in Milwaukee, Wisconsin, WRDC in Raleigh/Durham,
North Carolina, WABM in Birmingham, Alabama, and WDBB in Tuscaloosa, Alabama,
were in existence on both the date of enactment of the 1996 Act and November 5,
1996. The Company's LMAs with television stations WTTV and WTTK in Indianapolis,
Indiana were entered into subsequent to the date of enactment of the 1996 Act
but prior to November 5, 1996. The Company's LMA with television station KRRT-TV
in Kerrville, Texas was in existence on the date of enactment of the 1996 Act,
but was assumed by the Company subsequent to that date but prior to November 5,
1996. The licensee's rights under the Company's LMA with KRRT-TV were assumed by
Glencairn subsequent to November 5, 1996. The Company's LMA with WFBC-TV in
Asheville/Greenville/Spartanburg, South Carolina, was entered into by the
Company subsequent to the date of enactment of the 1996 Act but prior to
November 5, 1996, and the licensee's rights under that LMA were assumed by
Glencairn subsequent to November 5, 1996. The Company cannot predict if any or
all of its LMAs will be grandfathered.
The Conference Agreement adopted as part of the Balanced Budget Act of 1997
recently signed into law by President Clinton (the "Balanced Budget Act")
clarifies Congress' intent with respect to LMAs and duopolies. The Conference
Agreement states as follows: "The conferees do not intend that the duopoly and
television-newspaper cross-ownership relief provided herein should have any
bearing upon the [FCC's] current proceedings, which concerns more immediate
relief. The conferees expect that the [FCC] will proceed with its own
independent examination in these matters. Specifically, the conferees expect
that the [FCC] will provide additional relief (e.g., VHF/UHF combinations) that
it finds to be in the public interest, and will implement the permanent
grandfather requirement for local marketing agreements as provided in the
Telecommunications Act of 1996."
The TV duopoly rule currently prevents the Company from acquiring the
licenses of television stations with which it has LMAs in those markets where
the Company owns a television station. As a result, if the FCC were to decide
that the provider of programming services under a television LMA should be
treated as having an attributable interest in the brokered station, and if it
did not relax its television duopoly rule, the Company could be required to
modify or terminate those of its LMAs that were not in existence on the date of
enactment of the 1996 Act or on November 5, 1996. Furthermore, if the FCC adopts
its present proposal with respect to the grandfathering of television LMAs, the
Company could be required to terminate even those LMAs that were in effect prior
to the date of enactment of the 1996 Act or prior to November 5, 1996, after the
initial term of the LMA or upon assignment of the LMA. In such an event, the
Company could be required to pay termination penalties under certain of such
LMAs. Further, if the FCC were to find, in connection with any of the Company's
LMAs, that the owners/licensees of the stations with which the Company has LMAs
failed to maintain control over their operations as required by FCC rules and
policies, the licensee of the LMA station and/or the Company could be fined or
set for hearing, the outcome of which could be a monetary forfeiture or, under
certain circumstances, loss of the applicable FCC license. The Company is unable
to predict the ultimate outcome of possible changes to these FCC rules and the
impact such FCC rules may have on its broadcasting operations.
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On June 1, 1995, the Chief of the FCC's Mass Media Bureau released a Public
Notice concerning the processing of television assignment and transfer of
control applications proposing LMAs. Due to the pendency of the ongoing
rulemaking proceeding concerning attribution of ownership, the Mass Media Bureau
has placed certain restrictions on the types of television assignment and
transfer of control applications involving LMAs that it will approve during the
pendency of the rulemaking. Specifically, the Mass Media Bureau has stated that
it will not approve arrangements where a time broker seeks to finance a station
acquisition and hold an option to purchase the station in the future. The
Company believes that none of the Company's LMAs fall within the ambit of this
Public Notice.
Radio
National Ownership Rule. Prior to the 1996 Act, the FCC's rules limited an
individual or entity from holding attributable interests in more than 20 AM and
20 FM radio stations nationwide. Pursuant to the 1996 Act, the FCC has modified
its rules to eliminate any limitation on the number of radio stations a single
individual or entity may own nationwide.
Local Ownership Rule. Prior to the 1996 Act, the FCC's rules generally
permitted an individual or entity to hold attributable interests in no more than
four radio stations in a local market (no more than two of which could be in the
same service (AM or FM)), and then only if the aggregate audience share of the
commonly owned stations did not exceed 25%. In markets with fewer than 15
commercial radio stations, an individual or entity could hold an attributable
interest in no more than three radio stations in the market (no more than two of
which could be in the same service), and then only if the number of the commonly
owned stations did not exceed 50% of the total number of commercial radio
stations in the market.
Pursuant to the 1996 Act, the limits on the number of radio stations one
entity may own locally have been increased as follows: (i) in a market with 45
or more commercial radio stations, an entity may own up to eight commercial
radio stations, not more than five of which are in the same service (AM or FM);
(ii) in a market with between 30 and 44 (inclusive) commercial radio stations,
an entity may own up to seven commercial radio stations, not more than four of
which are in the same service; (iii) in a market with between 15 and 29
(inclusive) commercial radio stations, an entity may own up to six commercial
radio stations, not more than four of which are in the same service; and (iv) in
a market with 14 or fewer commercial radio stations, an entity may own up to
five commercial radio stations, not more than three of which are in the same
service, except that an entity may not own more than 50% of the stations in such
market. These numerical limits apply regardless of the aggregate audience share
of the stations sought to be commonly owned. FCC ownership rules continue to
permit an entity to own one FM and one AM station in a local market regardless
of market size. Irrespective of FCC rules governing radio ownership, however,
the DOJ and the Federal Trade Commission have the authority to determine, and in
certain recent radio transactions not involving the Company have determined,
that a particular transaction presents antitrust concerns.
Local Marketing Agreements. As in television, a number of radio stations
have entered into LMAs. The FCC's multiple ownership rules specifically permit
radio station LMAs to be entered into and implemented, so long as the licensee
of the station which is being programmed under the LMA maintains complete
responsibility for and control over programming and operations of its broadcast
station and assures compliance with applicable FCC rules and policies. For the
purposes of the multiple ownership rules, in general, a radio station being
programmed pursuant to an LMA by an entity is not considered an attributable
ownership interest of that entity unless that entity already owns a radio
station in the same market. However, a licensee that owns a radio station in a
market, and brokers more than 15% of the time on another station serving the
same market, is considered to have an attributable ownership interest in the
brokered station for purposes of the FCC's multiple ownership rules. As a
result, in a market in which the Company owns a radio station, the Company would
not be permitted to enter into an LMA with another local radio station which it
could not own under the local ownership rules, unless the Company's programming
constituted 15% or less of the other local station's programming time on a
weekly basis. The FCC's rules also prohibit a broadcast licensee from
simulcasting more than 25% of its programming on another station in the same
broadcast service (i.e., AM-AM or FM--
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FM) through a time brokerage or LMA arrangement where the brokered and brokering
stations serve substantially the same area.
Joint Sales Agreements. Over the past few years, a number of radio (and
television) stations have entered into cooperative arrangements commonly known
as joint sales agreements, or JSAs. While these agreements may take varying
forms, under the typical JSA, a station licensee obtains, for a fee, the right
to sell substantially all of the commercial advertising on a separately-owned
and licensed station in the same market. The typical JSA also customarily
involves the provision by the selling licensee of certain sales, accounting, and
"back office" services to the station whose advertising is being sold. The
typical JSA is distinct from an LMA in that a JSA (unlike an LMA) normally does
not involve programming.
The FCC has determined that issues of joint advertising sales should be
left to enforcement by antitrust authorities, and therefore does not generally
regulate joint sales practices between stations. Currently, stations for which a
licensee sells time under a JSA are not deemed by the FCC to be attributable
interests of that licensee. However, in connection with its ongoing rulemaking
proceeding concerning the attribution rules, the FCC is considering whether JSAs
should be considered attributable interests or within the scope of the FCC's
cross-interest policy, particularly when JSAs contain provisions for the supply
of programming services and/or other elements typically associated with LMAs. If
JSAs become attributable interests as a result of changes in the FCC rules, the
Company may be required to terminate any JSA it might have with a radio station
which the Company could not own under the FCC's multiple ownership rules.
Other Ownership Matters
There remain in place after the 1996 Act a number of additional
cross-ownership rules and prohibitions pertaining to licensees of television and
radio stations. FCC rules, the Communications Act, or both generally prohibit an
individual or entity from having an attributable interest in both a television
station and a radio station, a daily newspaper, or a cable television system
that is located in or serves the same market area.
Antitrust Regulation. The DOJ and the Federal Trade Commission have
increased their scrutiny of the television and radio industry since the adoption
of the 1996 Act, and have indicated their intention to review matters related to
the concentration of ownership within markets (including LMAs and JSAs) even
when the ownership or LMA or JSA in question is permitted under the laws
administered by the FCC or by FCC rules and regulations.
Radio/Television Cross-Ownership Rule. The FCC's radio/television
cross-ownership rule (the "one to a market" rule) generally prohibits a single
individual or entity from having an attributable interest in a television
station and a radio station serving the same market. However, in each of the 25
largest local markets in the United States, provided that there are at least 30
separately owned stations in the particular market, the FCC has traditionally
employed a policy that presumptively allows waivers of the one to a market rule
to permit the common ownership of one AM, one FM and one TV station in the
market. The 1996 Act directs the FCC to extend this policy to each of the top 50
markets. Moreover, the FCC has pending a rulemaking proceeding in which it has
solicited comment on whether the one to a market rule should be eliminated
altogether. The Company has pending several requests for waivers of the
"one-to-a-market" rule in connection with its applications to acquire radio
stations in the Heritage Acquisition in markets where the Company owns or
proposes to own a television station.
However, the FCC does not apply its presumptive waiver policy in cases
involving the common ownership of one television station, and two or more radio
stations in the same service (AM or FM), in the same market. Pending its ongoing
rulemaking proceeding to reexamine the one to a market rule, the FCC has stated
that it will consider waivers of the rule in such instances on a case-by-case
basis, considering (i) the public service benefits that will arise from the
joint operation of the facilities such as economies of scale, cost savings and
programming and service benefits; (ii) the types of facilities involved; (iii)
the number of media outlets owned by the applicant in the relevant market; (iv)
the financial difficulties of the stations involved; and (v) the nature of the
relevant market in light of the level of competition and diversity after joint
operation is implemented. The FCC has stated that it expects that any such
waivers that are granted will be conditioned on the outcome of the rulemaking
proceeding.
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In its ongoing rulemaking proceeding to reexamine the one to a market rule,
the FCC has proposed the following options for modifying the rule in the event
it is not eliminated: (i) extending the presumptive waiver policy to any
television market in which a specified number of independently owned voices
would remain after common ownership of a television station and one or more
radio stations is effectuated; (ii) extending the presumptive waiver policy to
entities that seek to own more than one FM and/or one AM radio station; (iii)
reducing the minimum number of independently owned voices that must remain after
a transaction is effectuated; and (iv) modifying the five-factor case-by-case
test for waivers.
Local Television/Cable Cross-Ownership Rule. While the 1996 Act eliminates
a previous statutory prohibition against the common ownership of a television
broadcast station and a cable system that serve the same local market, the 1996
Act leaves the current FCC rule in place. The legislative history of the Act
indicates that the repeal of the statutory ban should not prejudge the outcome
of any FCC review of the rule.
Broadcast Network/Cable Cross-Ownership Rule. The 1996 Act directs the FCC
to eliminate its rules which formerly prohibited the common ownership of a
broadcast network and a cable system, subject to the provision that the FCC
revise its rules as necessary to ensure carriage, channel positioning, and
non-discriminatory treatment of non-affiliated broadcast stations by cable
systems affiliated with a broadcast network. In March 1996, the FCC issued an
order implementing this legislative change.
Broadcast/Daily Newspaper Cross-Ownership Rule. The FCC's rules prohibit
the common ownership of a radio or television broadcast station and a daily
newspaper in the same market. The 1996 Act does not eliminate or modify this
prohibition. In October 1996, however, the FCC initiated a rulemaking proceeding
to determine whether it should liberalize its waiver policy with respect to
cross-ownership of a daily newspaper and one or more radio stations in the same
market.
Dual Network Rule. The 1996 Act directs the FCC to repeal its rule which
formerly prohibited an entity from operating more than one television network.
In March 1996, the FCC issued an order implementing this legislative change.
Under the modified rule, a network entity is permitted to operate more than one
television network, provided, however, that ABC, CBS, NBC, and/or Fox are
prohibited from merging with each other or with another network television
entity such as WB or UPN.
Expansion of the Company's broadcast operations on both a local and
national level will continue to be subject to the FCC's ownership rules and any
changes the FCC or Congress may adopt. Concomitantly, any further relaxation of
the FCC's ownership rules may increase the level of competition in one or more
of the markets in which the Company's stations are located, more specifically to
the extent that any of the Company's competitors may have greater resources and
thereby be in a superior position to take advantage of such changes.
Must-Carry/Retransmission Consent
Pursuant to the Cable Act of 1992, television broadcasters are required to
make triennial elections to exercise either certain "must-carry" or
"retransmission consent" rights in connection with their carriage by cable
systems in each broadcaster's local market. By electing the must-carry rights, a
broadcaster demands carriage on a specified channel on cable systems within its
Area of Dominant Influence, in general as defined by the Arbitron 1991-92
Television Market Guide. These must-carry rights are not absolute, and their
exercise is dependent on variables such as (i) the number of activated channels
on a cable system; (ii) the location and size of a cable system; and (iii) the
amount of programming on a broadcast station that duplicates the programming of
another broadcast station carried by the cable system. Therefore, under certain
circumstances, a cable system may decline to carry a given station.
Alternatively, if a broadcaster chooses to exercise retransmission consent
rights, it can prohibit cable systems from carrying its signal or grant the
appropriate cable system the authority to retransmit the broadcast signal for a
fee or other consideration. In October 1996, the Company elected must-carry or
retransmission consent with respect to each of its markets based on its
evaluation of the respective markets and the position of the Company's station
within the market. The Company's stations continue to be carried on all
pertinent cable systems, and the Company does not believe that its elections
have resulted in the shifting of its stations to less desirable cable channel
locations. Certain of the Company's stations affiliated with Fox are required to
elect retransmission consent because Fox's retransmission consent negotiations
on behalf of the Company
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resulted in agreements which extend into 1998. Therefore, the Company will need
to negotiate retransmission consent agreements for these Fox-affiliated stations
to attain carriage on those relevant cable systems for the balance of this
triennial period (i.e., through December 31, 1999). For subsequent elections
beginning with the election to be made by October 1, 1999, the must-carry market
will be the station's DMA, in general as defined by the Nielsen DMA Market and
Demographic Rank Report of the prior year.
The must-carry rules have been subject to judicial scrutiny. In April 1993,
the United States District Court for the District of Columbia summarily upheld
the constitutionality of the legislative must-carry provisions under a First
Amendment challenge. However, in June 1994, the Supreme Court remanded the case
to the lower court with instructions to test the constitutionality of the
must-carry rules under an "intermediate scrutiny" standard. In a decision issued
in December 1995, a closely divided three-judge District Court panel ruled that
the record showed that there was substantial evidence before Congress from which
it could draw the reasonable inferences that (1) the must-carry rules were
necessary to protect the local broadcast industry; and (2) the burdens on cable
systems with rapidly increasing channel capacity would be quite small.
Accordingly, the District Court panel ruled that Congress had not violated the
First Amendment in enacting the "must-carry" provisions. In March 1997, the
Supreme Court, by a 5-4 majority, affirmed the District Court's decision and
thereby let stand the must-carry rules.
Syndicated Exclusivity/Territorial Exclusivity
The FCC has imposed syndicated exclusivity rules and expanded existing
network nonduplication rules. The syndicated exclusivity rules allow local
broadcast television stations to demand that cable operators black out
syndicated non-network programming carried on "distant signals" (i.e., signals
of broadcast stations, including so-called "superstations," which serve areas
substantially removed from the cable system's local community). The network
non-duplication rules allow local broadcast network television affiliates to
require that cable operators black out duplicating network programming carried
on distant signals. However, in a number of markets in which the Company owns or
programs stations affiliated with a network, a station that is affiliated with
the same network in a nearby market is carried on cable systems in the Company's
market. This is not in violation of the FCC's network nonduplication rules.
However, the carriage of two network stations on the same cable system could
result in a decline of viewership adversely affecting the revenues of the
Company owned or programmed station.
Restrictions on Broadcast Advertising
Advertising of cigarettes and certain other tobacco products on broadcast
stations has been banned for many years. Various states restrict the advertising
of alcoholic beverages. Congressional committees have recently examined
legislation proposals which may eliminate or severely restrict the advertising
of beer and wine. Although no prediction can be made as to whether any or all of
the present proposals will be enacted into law, the elimination of all beer and
wine advertising would have an adverse effect upon the revenues of the Company's
stations, as well as the revenues of other stations which carry beer and wine
advertising.
The FCC has imposed commercial time limitations in children's television
programming pursuant to legislation. In television programs designed for viewing
by children of 12 years of age and under, commercial matter is limited to 12
minutes per hour on weekdays and 10.5 minutes per hour on weekends. In granting
renewal of the license for WBFF-TV, the FCC imposed a fine of $10,000 on the
Company alleging that the station had exceeded these limitations. The Company
has appealed this fine and the appeal is pending.
The Communications Act and FCC rules also place restrictions on the
broadcasting of advertisements by legally qualified candidates for elective
office. Among other things, (i) stations must provide "reasonable access" for
the purchase of time by legally qualified candidates for federal office; (ii)
stations must provide "equal opportunities" for the purchase of equivalent
amounts of comparable broadcast time by opposing candidates for the same
elective office; and (iii) during the 45 days preceding a primary or primary
run-off election and during the 60 days preceding a general or special election,
legally qualified candidates for elective office may be charged no more than the
station's "lowest unit charge" for the same class of advertisement, length of
advertisement, and daypart.
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Programming and Operation
General. The Communications Act requires broadcasters to serve the "public
interest." The FCC gradually has relaxed or eliminated many of the more
formalized procedures it had developed in the past to promote the broadcast of
certain types of programming responsive to the needs of a station's community of
license. FCC licensees continue to be required, however, to present programming
that is responsive to their communities' issues, and to maintain certain records
demonstrating such responsiveness. Complaints from viewers concerning a
station's programming may be considered by the FCC when it evaluates renewal
applications of a licensee, although such complaints may be filed at any time
and generally may be considered by the FCC at any time. Stations also must pay
regulatory and application fees, and follow various rules promulgated under the
Communications Act that regulate, among other things, political advertising,
sponsorship identifications, the advertisement of contests and lotteries,
obscene and indecent broadcasts, and technical operations, including limits on
radiofrequency radiation. In addition, licensees must develop and implement
affirmative action programs designed to promote equal employment opportunities,
and must submit reports to the FCC with respect to these matters on an annual
basis and in connection with a renewal application. Failure to observe these or
other rules and policies can result in the imposition of various sanctions,
including monetary forfeitures, or the grant of a "short" (i.e., less than the
full) license renewal term or, for particularly egregious violations, the denial
of a license renewal application or the revocation of a license.
Children's Television Programming. Pursuant to legislation enacted in 1991,
all television stations have been required to broadcast some television
programming designed to meet the educational and informational needs of children
16 years of age and under. In August 1996, the FCC adopted new rules setting
forth more stringent children's programming requirements. Specifically,
television stations are now required to broadcast a minimum of three hours per
week of "core" children's educational programming, which the FCC defines as
programming that (i) has serving the educational and informational needs of
children 16 years of age and under as a significant purpose; (ii) is regularly
scheduled, weekly and at least 30 minutes in duration; and (iii) is aired
between the hours of 7:00 a.m. and 10:00 p.m. Furthermore, "core" children's
educational programs, in order to qualify as such, are required to be identified
as educational and informational programs over the air at the time they are
broadcast, and are required to be identified in the children's programming
reports required to be placed in stations' public inspection files.
Additionally, television stations are required to identify and provide
information concerning "core" children's programming to publishers of program
guides and listings.
Television Violence. The 1996 Act contains a number of provisions relating
to television violence. First, pursuant to the 1996 Act, the television industry
has developed a ratings system, and the FCC has recently solicited public
comment on that system. Furthermore, the 1996 Act provides that all television
sets larger than 13 inches that are manufactured one year after enactment of the
1996 Act must include the so-called "V-chip," a computer chip that allows
blocking of rated programming. In addition, the 1996 Act requires that all
television license renewal applications filed after May 1, 1995 contain
summaries of written comments and suggestions received by the station from the
public regarding violent programming.
Closed Captioning. The 1996 Act directs the FCC to adopt rules requiring
closed captioning of all broadcast television programming, except where
captioning would be "economically burdensome." The FCC has recently adopted such
rules. The rules require generally that (i) 95% of all new programming first
published or exhibited on or after January 1, 1998 must be closed captioned
within eight years, and (ii) 75% of "old" programming which first aired prior to
January 1, 1998 must be closed captioned within 10 years, subject to certain
exemptions.
Digital Television
The FCC has taken a number of steps to implement digital television ("DTV")
broadcasting service in the United States. In December 1996, the FCC adopted a
DTV broadcast standard and, in April 1997, adopted decisions in several pending
rulemaking proceedings that establish service rules and a plan for implementing
DTV. The FCC adopted a DTV Table of Allotments that provides all authorized
television stations with a second channel on which to broadcast a DTV signal.
The FCC has attempted to provide DTV coverage areas that are comparable to
stations' existing service areas. The FCC has ruled
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that television broadcast licensees may use their digital channels for a wide
variety of services such as high-definition television, multiple standard
definition television programming, audio, data, and other types of
communications, subject to the requirement that each broadcaster provide at
least one free video channel equal in quality to the current technical standard.
Initially, DTV channels will be located in the range of channels from
channel 2 through channel 51. The FCC is requiring that affiliates of ABC, CBS,
Fox and NBC in the top 10 television markets begin digital broadcasting by May
1, 1999 (the stations affiliated with these networks in the top 10 markets have
voluntarily committed to begin digital broadcasting within 18 months), and that
affiliates of these networks in markets 11 through 30 begin digital broadcasting
by November 1999. The FCC's plan calls for the DTV transition period to end in
the year 2006, at which time the FCC expects that (i) DTV channels will be
clustered either in the range of channels 2 through 46 or channels 7 through 51;
and (ii) television broadcasters will have ceased broadcasting on their
non-digital channels, allowing that spectrum to be recovered by the government
for other uses. Under the Balanced Budget Act, 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: (i) 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 such stations have "exercised due
diligence" in attempting to convert to digital broadcasting; (ii) less than 85%
of the television households in the station's market subscribe to a multichannel
video service (cable, wireless cable or DBS) that carries at least one digital
channel from each of the local stations in that market; or (iii) 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 DTV 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 some increased interference. The FCC's DTV allotment plan may also
result in UHF stations having considerably less signal power within their
service areas than present VHF stations that move to DTV channels. 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 also
impose substantial additional costs on television stations because of the need
to replace equipment and because some stations will need to operate at higher
utility costs. The FCC is also considering imposing new public interest
requirements on television licensees in exchange for their receipt of DTV
channels. The Company is currently considering plans to provide high definition
television ("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 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 announced plans to hold
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.
Proposed Changes
The Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation, ownership
and profitability of the Company's broadcast stations, result in the
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loss of audience share and advertising revenues for the Company's broadcast
stations, and affect the ability of the Company to acquire additional broadcast
stations or finance such acquisitions. In addition to the changes and proposed
changes noted above, such matters may include, for example, the license renewal
process, spectrum use fees, political advertising rates, potential restrictions
on the advertising of certain products (beer, wine and hard liquor, for
example), and the rules and policies to be applied in enforcing the FCC's equal
employment opportunity regulations. Other matters that could affect the
Company's broadcast properties include technological innovations and
developments generally affecting competition in the mass communications
industry, such as direct radio and television broadcast satellite service, the
continued establishment of wireless cable systems and low power television
stations, digital television and radio technologies, and the advent of telephone
company participation in the provision of video programming service.
Other Considerations
The foregoing summary does not purport to be a complete discussion of all
provisions of the Communications Act or other congressional acts or of the
regulations and policies of the FCC. For further information, reference should
be made to the Communications Act, other congressional acts, and regulations and
public notices promulgated from time to time by the FCC. There are additional
regulations and policies of the FCC and other federal agencies that govern
political broadcasts, public affairs programming, equal employment opportunity,
and other matters affecting the Company's business and operations.
ENVIRONMENTAL REGULATION
Prior to the Company's ownership or operation of its facilities, substances
or waste that are or might be considered hazardous under applicable
environmental laws may have been generated, used, stored or disposed of at
certain of those facilities. In addition, environmental conditions relating to
the soil and groundwater at or under the Company's facilities may be affected by
the proximity of nearby properties that have generated, used, stored or disposed
of hazardous substances. As a result, it is possible that the Company could
become subject to environmental liabilities in the future in connection with
these facilities under applicable environmental laws and regulations. Although
the Company believes that it is in substantial compliance with such
environmental requirements, and have not in the past been required to incur
significant costs in connection therewith, there can be no assurance that the
Company's costs to comply with such requirements will not increase in the
future. The Company presently believes that none of its properties have any
condition that is likely to have a material adverse effect on the Company's
financial condition or results of operations.
COMPETITION
The Company's television and radio stations compete for audience share and
advertising revenue with other television and radio stations in their respective
DMAs or MSAs, as well as with other advertising media, such as newspapers,
magazines, outdoor advertising, transit advertising, yellow page directories,
direct mail and local cable and wireless cable systems. Some competitors are
part of larger organizations with substantially greater financial, technical and
other resources than the Company.
Television Competition. Competition in the television broadcasting industry
occurs primarily in individual DMAs. Generally, a television broadcasting
station in one DMA does not compete with stations in other DMAs. The Company's
television stations are located in highly competitive DMAs. In addition, certain
of the Company's DMAs are overlapped by both over-the-air and cable carriage of
stations in adjacent DMAs, which tends to spread viewership and advertising
expenditures over a larger number of television stations.
Broadcast television stations compete for advertising revenues primarily
with other broadcast television stations, radio stations and cable system
operators serving the same market. Traditional Network programming generally
achieves higher household audience levels than Fox, WB and UPN programming and
syndicated programming aired by independent stations. This can be attributed to
a combination of factors, including the Traditional Networks' efforts to reach a
broader audience, generally better
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signal carriage available when broadcasting over VHF channels 2 through 13
versus broadcasting over UHF channels 14 through 69 and the higher number of
hours of Traditional Network programming being broadcast weekly. However,
greater amounts of advertising time are available for sale during Fox, UPN and
WB programming and non-network syndicated programming, and as a result the
Company believes that the Company's programming typically achieves a share of
television market advertising revenues greater than its share of the market's
audience.
Television stations compete for audience share primarily on the basis of
program popularity, which has a direct effect on advertising rates. A large
amount of the Company's prime time programming is supplied by Fox and to a
lesser extent WB, UPN, ABC and CBS. In those periods, the Company's affiliated
stations are totally dependent upon the performance of the networks' programs in
attracting viewers. Non-network time periods are programmed by the station
primarily with syndicated programs purchased for cash, cash and barter, or
barter-only, and also through self-produced news, public affairs and other
entertainment programming.
Television advertising rates are based upon factors which include the size
of the DMA in which the station operates, a program's popularity among the
viewers that an advertiser wishes to attract, the number of advertisers
competing for the available time, the demographic makeup of the DMA served by
the station, the availability of alternative advertising media in the DMA
(including radio and cable), the aggressiveness and knowledge of sales forces in
the DMA and development of projects, features and programs that tie advertiser
messages to programming. The Company believes that its sales and programming
strategies allow it to compete effectively for advertising within its DMAs.
Other factors that are material to a television station's competitive
position include signal coverage, local program acceptance, network affiliation,
audience characteristics and assigned broadcast frequency. Historically, the
Company's UHF broadcast stations have suffered a competitive disadvantage in
comparison to stations with VHF broadcast frequencies. This historic
disadvantage has gradually declined through (i) carriage on cable systems, (ii)
improvement in television receivers, (iii) improvement in television
transmitters, (iv) wider use of all channel antennae, (v) increased availability
of programming, and (vi) the development of new networks such as Fox, WB and
UPN.
The broadcasting industry is continuously faced with technical changes and
innovations, the popularity of competing entertainment and communications media,
changes in labor conditions, and governmental restrictions or actions of federal
regulatory bodies, including the FCC, any of which could possibly have a
material effect on a television station's operations and profits. There are
sources of video service other than conventional television stations, the most
common being cable television, which can increase competition for a broadcast
television station by bringing into its market distant broadcasting signals not
otherwise available to the station's audience, serving as a distribution system
for national satellite-delivered programming and other non-broadcast programming
originated on a cable system and selling advertising time to local advertisers.
Other principal sources of competition include home video exhibition,
direct-to-home broadcast satellite television ("DBS") entertainment services and
multichannel multipoint distribution services ("MMDS"). Moreover, technology
advances and regulatory changes affecting programming delivery through fiber
optic telephone lines and video compression could lower entry barriers for new
video channels and encourage the development of increasingly specialized "niche"
programming. The 1996 Act permits telephone companies to provide video
distribution services via radio communication, on a common carrier basis, as
"cable systems" or as "open video systems," each pursuant to different
regulatory schemes. The Company is unable to predict the effect that
technological and regulatory changes will have on the broadcast television
industry and on the future profitability and value of a particular broadcast
television station.
The FCC authorizes DBS services throughout the United States. Currently,
two FCC permitees, DirecTV and United States Satellite Broadcasting, provide
subscription DBS services via high-power communications satellites and small
dish receivers, and other companies provide direct-to-home video service using
lower powered satellites and larger receivers. Additional companies are expected
to commence direct-to-home operations in the near future. DBS and MMDS, as well
as other new technologies, will further increase competition in the delivery of
video programming.
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The Company cannot predict what other matters might be considered in the
future, nor can it judge in advance what impact, if any, the implementation of
any of these proposals or changes might have on its business.
The Company believes that television broadcasting may be enhanced
significantly by the development and increased availability of digital
broadcasting service technology. This technology has the potential to permit the
Company to provide viewers multiple channels of digital television over each of
its existing standard channels, to provide certain programming in a high
definition television format and to deliver various forms of data, including
data on the Internet, to home and business computers. These additional
capabilities may provide the Company with additional sources of revenue. The
Company is currently considering plans to provide high definition television
("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 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 announced plans to hold 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. This digital broadcasting service
technology is not currently available to the viewing public and a successful
transition from the current analog broadcast format to a digital format may take
many years. There can be no assurance that the Company's efforts to take
advantage of the new technology will be commercially successful.
The Company also competes for programming, which involves negotiating with
national program distributors or syndicators that sell first-run and rerun
packages of programming. The Company's stations compete for exclusive access to
those programs against in-market broadcast station competitors for syndicated
products. Cable systems generally do not compete with local stations for
programming, although various national cable networks from time to time have
acquired programs that would have otherwise been offered to local television
stations. Public broadcasting stations generally compete with commercial
broadcasters for viewers but not for advertising dollars.
Historically, the cost of programming has increased because of an increase
in the number of new Independent stations and a shortage of quality programming.
However, the Company believes that over the past five years program prices
generally have stabilized.
The Company believes it competes favorably against other television
stations because of its management skill and experience, the ability of the
Company historically to generate revenue share greater than its audience share,
the network affiliations and its local program acceptance. In addition, the
Company believes that it benefits from the operation of multiple broadcast
properties, affording it certain nonquantifiable economies of scale and
competitive advantages in the purchase of programming.
Radio Competition. Radio broadcasting is a highly competitive business, and
each of the radio stations operated by the Company competes for audience share
and advertising revenue directly with other radio stations in its geographic
market, as well as with other media, including television, cable television,
newspapers, magazines, direct mail and billboard advertising. The audience
ratings and advertising revenue of each of such stations are subject to change,
and any adverse change in a particular market could have a material adverse
effect on the revenue of such radio stations located in that market. There can
be no assurance that any one of the Company's radio stations will be able to
maintain or increase its current audience ratings and radio advertising revenue
market share.
The Company will attempt to improve each radio station's competitive
position with promotional campaigns designed to enhance and reinforce its
identities with the listening public. Extensive market research is conducted in
order to identify specific demographic groups and design a programming format
for those groups. The Company seeks to build a strong listener base composed of
specific demographic groups in each market, and thereby attract advertisers
seeking to reach these listeners. Aside from building its stations' identities
and targeting its programming at specific demographic groups, manage-
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ment believes that the Company also obtains a competitive advantage by operating
duopolies or multiple stations in the nation's larger mid-size markets.
The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems and by digital audio
broadcasting ("DAB"). DAB may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and
national audiences. The FCC has issued licenses for two DAB systems.
Historically, the radio broadcasting industry has grown in terms of total
revenues despite the introduction of new technologies for the delivery of
entertainment and information, such as television broadcasting, cable
television, audio tapes and compact disks. There can be no assurance, however,
that the development or introduction in the future of any new media technology
will not have an adverse effect on the radio broadcast industry.
EMPLOYEES
As of August 20, 1997, the Company had approximately 2,300 employees. With
the exception of certain of the employees of KOVR-TV, KDNL-TV, WBEN-AM and
WWL-AM, none of the employees are represented by labor unions under any
collective bargaining agreement. No significant labor problems have been
experienced by the Company, and the Company considers its overall labor
relations to be good.
LEGAL PROCEEDINGS
On July 14, 1997, Sinclair publicly announced that it had reached an
agreement for certain of its owned and/or programmed television stations which
are currently affiliated with UPN to become affiliated with WB beginning January
16, 1998. On August 1, 1997, UPN informed Sinclair that it did not believe
Sinclair or its affiliates had provided proper notice of its intention not to
extend the UPN affiliation agreements beyond January 15, 1998, and, accordingly,
that these agreements had been automatically renewed through January 15, 2001.
In August 1997, UPN filed an 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. Certain subsidiaries of the Company
have filed an action in the Circuit Court for Baltimore City seeking declaratory
relief that their notice was effective to terminate the affiliations on January
15, 1998. Although the Company believes that proper notice of intention not to
extend was provided to UPN, 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.
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. Except as described above, the
Company is not a party to any lawsuit or proceeding that in the opinion of the
Company will have a material adverse effect.
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SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
company's voting securities beneficially owned as of August 12, 1997 by the
Selling Stockholders and as adjusted to reflect the sale of 5,300,000 shares of
Class A Common Stock collectively offered hereby by the Company and the Selling
Stockholders (assuming no exercise of the Underwriters' over-allotment option).
The address of all persons in the table is 2000 W. 41st Street, Baltimore,
Maryland 21211. Except as set forth below, each of the shares offered by the
Selling Stockholders is currently held as a share of Class B Common Stock, and
each of such shares will automatically be converted into a share of Class A
Common Stock upon their transfer in connection with a sale pursuant to this
Prospectus Supplement.
<TABLE>
<CAPTION>
SHARES OWNED AS OF AUGUST 12, 1997
----------------------------------------------
CLASS A CLASS B PERCENTAGE PERCENTAGE OF
COMMON STOCK COMMON STOCK (A) OF VOTING VOTING POWER OF
--------------------- ------------------------ POWER OF NUMBER OF ALL CAPITAL
NUMBER PERCENT OF NUMBER PERCENT OF ALL SHARES OF CLASS STOCK AFTER
NAMES OF OF CLASS A OF CLASS B CAPITAL A COMMON COMMON STOCK
SELLING STOCKHOLDERS SHARES SHARES SHARES SHARES STOCK STOCK OFFERED(B)(C) OFFERING(B)(C)
- ------------------------------ -------- ------------ ----------- ------------ ------------ -------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
David D. Smith ............... 10,000 * 7,249,999 26.3% 25.3% 325,000 24.9%
Frederick G. Smith (d) ...... 4,000 * 6,726,944 24.5% 23.5% 325,000 23.0%
J. Duncan Smith (e) ......... - - 6,969,994 25.3% 24.3% 325,000 23.9%
Robert E. Smith (f) ......... - - 6,563,644 23.9% 22.9% 325,000 22.3%
</TABLE>
- ----------
* Less than one percent.
(a) Holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to ten votes per share expect
for votes relating to "going private" and certain other transactions.
Holders of both classes of Common Stock will vote together as a single class
on all matters presented for a vote, except as otherwise may be required by
Maryland law, and holders of Class B Common Stock may convert their shares
of Class B Common Stock into shares of Class A Common Stock at any time.
(b) Assumes no exercise of the Underwriters' over-allotment option. If the
Underwriters' over-allotment option is exercised in full, the aggregate
number of shares of Class A Common Stock offered by each of Frederick G.
Smith and Robert E. Smith would be 550,000 and the percentage of voting
power of all capital stock after the Common Stock Offering for these Selling
Stockholders would be 22.5% and 21.9%, respectively.
(c) Shares of Class A Common Stock offered by a given Selling Stockholder will
be obtained upon sale to a non-affiliate in the Common Stock Offering and
resultant conversion of shares of Class B Common Stock owned by such Selling
Stockholder.
(d) Includes 478,645 shares held in irrevocable trusts established by Frederick
G. Smith for the benefit of himself, his spouse and his children and as to
certain of those trusts Mr. Smith has the power to acquire by substitution
of trust property. Absent such substitution, Mr. Smith would have no power
to vote or dispose of the shares.
(e) Includes 491,695 shares held in irrevocable trusts established by J. Duncan
Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(f) Includes 921,745 shares held in irrevocable trusts established by Robert E.
Smith for the benefit of himself, his spouse and his children and as to
certain of those trusts Mr. Smith has the power to acquire by substitution
of trust property. Absent such substitution, Mr. Smith would have no power
to vote or dispose of the shares.
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MANAGEMENT
Set forth below is certain information relating to the Company's executive
officers, directors, certain key employees and persons expected to become
executive officers, directors or key employees.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------------- ----- -------------------------------------------------
<S> <C> <C>
David D. Smith ............ 46 President, Chief Executive Officer, Director and
Chairman of the Board
Frederick G. Smith ......... 48 Vice President and Director
J. Duncan Smith ............ 43 Vice President, Secretary and Director
Robert E. Smith ............ 34 Vice President, Treasurer and Director
David B. Amy ............... 44 Chief Financial Officer
Barry Drake ............... 45 Chief Operating Officer, SCI Radio
Alan B. Frank ............... 47 Regional Director, SCI
Robert Gluck ............... 39 Regional Director, SCI
Michael Granados ............ 42 Regional Director, SCI
Steven M. Marks ............ 40 Regional Director, SCI
John T. Quigley ............ 54 Regional Director, SCI
Frank Quitoni ............... 52 Regional Director, SCI
M. William Butler ......... 44 Vice President/Group Program Director, SCI
Michael Draman ............ 48 Vice President/TV Sales and Marketing, SCI
Stephen A. Eisenberg ...... 55 Vice President/Director of National Sales, SCI
Nat Ostroff ............... 56 Vice President/New Technology
Delbert R. Parks, III ...... 44 Director of Operations and Engineering, SCI
Robert E. Quicksilver ...... 42 Vice President/General Counsel, SCI
Thomas E. Severson ......... 33 Corporate Controller
Michael E. Sileck ......... 37 Vice President/Finance, SCI
Robin A. Smith ............ 41 Chief Financial Officer, SCI Radio
Patrick J. Talamantes ...... 33 Director of Corporate Finance
Lawrence E. McCanna ......... 53 Director
Basil A. Thomas ............ 82 Director
</TABLE>
In addition to the foregoing, the following persons have agreed to serve as
executive officers and/or directors of the Company as soon as permissible under
the rules of the FCC and applicable laws. See "Risk Factors - Dependence Upon
Key Personnel; Employment Agreements with Key Personnel" in the attached
Prospectus.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---------------------------- ----- -----------------------------------------------
<S> <C> <C>
Barry Baker ............... 45 Executive Vice President of the Company, Chief
Executive Officer of SCI and Director
Kerby Confer ............... 56 Chief Executive Officer, SCI Radio
Roy F. Coppedge, III ...... 49 Director
</TABLE>
In connection with the River City Acquisition, the Company agreed to
increase the size of the Board of Directors from seven members to nine to
accommodate the prospective appointment of each of Barry Baker and Roy F.
Coppedge, III or such other designee as Boston Ventures may select. Mr. Baker
and Mr. Confer currently serve as consultants to the Company.
Members of the Board of Directors are elected for one-year terms and until
their successors are duly elected and qualified. Executive officers are
appointed by the Board of Directors annually to serve for one-year terms and
until their successors are duly appointed and qualified.
On July 30, 1997 William E. Brock submitted and the Company accepted his
resignation from the Company's Board of Directors. Currently, no action has
been taken by the Board of Directors to identify a replacement for Mr. Brock.
David D. Smith has served as President, Chief Executive Officer and
Chairman of the Board since September 1990. Prior to that, he served as General
Manager of WPTT from 1984, and assumed the financial and engineering
responsibility for the Company, including the construction of WTTE in 1984. In
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1980, Mr. Smith founded Comark Television, Inc., which applied for and was
granted the permit for WPXT-TV in Portland, Maine and which purchased WDSI-TV in
Chattanooga, Tennessee. WPXT-TV was sold one year after construction and WDSI-TV
was sold two years after its acquisition. From 1978 to 1986, Mr. Smith
co-founded and served as an officer and director of Comark Communications, Inc.,
a company engaged in the manufacture of high power transmitters for UHF
television stations. His television career began with WBFF in Baltimore, where
he helped in the construction of the station and was in charge of technical
maintenance until 1978. David D. Smith, Frederick G. Smith, J. Duncan Smith and
Robert E. Smith are brothers.
Frederick G. Smith has served as Vice President of the Company since 1990
and as a Director since 1986. Prior to joining the Company in 1990, Mr. Smith
was an oral and maxillofacial surgeon engaged in private practice and was
employed by Frederick G. Smith, M.S., D.D.S., P.A., a professional corporation
of which Mr. Smith was the sole officer, director and stockholder.
J. Duncan Smith has served as Vice President, Secretary and a Director of
the Company since 1988. Prior to that, he worked for Comark Communications, Inc.
installing UHF transmitters. In addition, he also worked extensively on the
construction of WPTT in Pittsburgh, WTTE in Columbus, WIIB in Bloomington and
WTTA in St. Petersburg, as well as on the renovation of the new studio, offices
and news facility for WBFF in Baltimore.
Robert E. Smith has served as Vice President, Secretary and a Director of
the Company since 1988. Prior to that, he served as Program Director at WBFF
from 1986 to 1988. Prior to that, he assisted in the construction of WTTE and
also worked for Comark Communications, Inc. installing UHF transmitters.
David B. Amy has served as Chief Financial Officer ("CFO") since October of
1994. In addition, he serves as Secretary of Sinclair Communications, Inc., the
Company subsidiary which owns and operates the broadcasting operations. Prior to
his appointment as CFO Mr. Amy served as the Corporate Controller of the Company
beginning in 1986 and has been the Company's Chief Accounting Officer since that
time. Mr. Amy has over thirteen years of broadcast experience, having joined the
Company as a business manager for WPTT in Pittsburgh. Mr. Amy received an MBA
degree from the University of Pittsburgh in 1981.
Barry Drake has served as Chief Operating Officer of SCI Radio since
completion of the River City Acquisition. Prior to that time, he was Chief
Operating Officer - Keymarket Radio Division of River City since July 1995.
Prior to that time, he was President and Chief Operating Officer of Keymarket
since 1988. From 1985 through 1988, Mr. Drake performed the duties of the
President of each of the Keymarket broadcasting entities, with responsibility
for three stations located in Houston, St. Louis and Detroit.
Alan B. Frank has served as Regional Director for the Company since May
1994. As Regional Director, Mr. Frank is responsible for the Pittsburgh and
Kansas City markets. Prior to his appointment to Regional Director, Mr. Frank
served as General Manager of WPGH beginning in September 1991.
Robert Gluck has served as Regional Director of the Company since August
1997. As Regional Director, Mr. Gluck is responsible for the Milwaukee and
Raleigh/Durham markets. Prior to joining the Company, Mr. Gluck served as
General Manager at WTIC-TV in the Hartford-New Haven market. Prior to joining
WTIC-TV in 1988, Mr. Gluck served as National Sales Manager and Local Sales
Manager of WLVI-TV in Boston. Before joining WLVI-TV, Mr. Gluck served in
various sales and management capacities in with New York advertising agency
firms.
Michael Granados has served as a Regional Director of the Company since
July 1996. As a Regional Director, Mr. Granados is responsible for the San
Antonio, Des Moines, Peoria and Las Vegas markets. Prior to July 1996, Mr.
Granados has served in various positions with the Company and, before the River
City Acquisition, with River City. He served as the General Sales Manager of
KABB from 1989 to 1993, the Station Manager and Director of Sales of WTTV from
1993 to 1994 and the General Manager of WTTV prior to his appointment as
Regional Director in 1996.
Steven M. Marks has served as Regional Director for the Company since
October 1994. As Regional Director, Mr. Marks is responsible for the Baltimore,
Norfolk, Flint and Birmingham markets. Prior to his appointment as Regional
Director, Mr. Marks served as General Manager for WBFF since July 1991. From
1986 until joining WBFF in 1991, Mr. Marks served as General Sales Manager at
WTTE. Prior to that time, he was national sales manager for WFLX-TV in West
Palm Beach, Florida.
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John T. Quigley has served as a Regional Director of the Company since June
1996. As Regional Director, Mr. Quigley is responsible for the Columbus,
Cincinnati, and Oklahoma City markets. Prior to that time, Mr. Quigley served as
general manager of WTTE since July 1985. Prior to joining WTTE, Mr. Quigley
served in broadcast management positions at WCPO-TV in Cincinnati, Ohio and
WPTV-TV in West Palm Beach, Florida.
Frank Quitoni has served as a Regional Director since completion of the
River City Acquisition. As Regional Director, Mr. Quitoni is responsible for
the St. Louis, Sacramento, Indianapolis and Asheville/ Greenville/Spartanburg
markets. Prior to joining the Company, he was Vice President of Operations for
River City since 1995. Mr. Quitoni had served as the Director of Operations and
Engineering for River City since 1994. Prior thereto Mr. Quitoni served as a
consultant to CBS beginning in 1989. Mr. Quitoni was the Director of Olympic
Operations for CBS Sports for the 1992 Winter Olympic Games and consulted with
CBS for the 1994 Winter Olympic Games. Mr. Quitoni was awarded the Technical
Achievement Emmy for the 1992 and 1994 CBS Olympic broadcasts.
M. William Butler has served as Vice President/Group Program Director, SCI
since 1997. From 1995 to 1997, Mr. Butler served as Director of Programming at
KCAL, the Walt Disney Company station in Los Angeles, California. From 1991 to
1995, he was Director of Marketing and Programming at WTXF in Philadelphia,
Pennsylvania and prior to that he held the same position at WLVI in Boston,
Massachusetts. Mr. Butler attended the Graduate Business School of the
University of Cincinnati from 1975 to 1976.
Michael Draman has served as Vice President/TV Sales and Marketing, SCI
since 1997. From 1995 until joining the Company, Mr. Draman served as Vice
President of Revenue Development for New World Television. From 1983 to 1995,
he was Director of Sales and Marketing for WSVN in Miami, Florida. Mr. Draman
attended The American University and The Harvard Business School and served
with the U.S. Marine Corps in Vietnam.
Stephen A. Eisenberg has served as Director of National Sales, SCI since
November 1996. Prior to joining the Company, he worked since 1975 in various
capacities at Petry Television, including most recently as Vice
President/Director of Sales with total national sales responsibility for KTTV in
Los Angeles, California, KCPQ-TV in Seattle, Washington, WTNH-TV in New Haven,
Connecticut, WKYC-TV in Cleveland, Ohio, WBIR-TV in Knoxville, Tennessee,
WKEF-TV in Dayton, Ohio and WTMJ-TV in Milwaukee, Wisconsin. Mr. Eisenberg
received an MS degree in Journalism from Northwestern's Medill School and a BA
degree from Brooklyn College.
Nat Ostroff has served as Vice President for New Technology since joining
the Company in January of 1996. From 1981 until joining the Company, he was the
President and CEO of Comark Communication Inc., a leading manufacturer of UHF
transmission equipment. While at Comark, Mr. Ostroff was nominated and awarded a
Prime Time Emmy Award for outstanding engineering achievement for the
development of new UHF transmitter technologies in 1993. In 1968, Mr. Ostroff
founded Acrodyne Industries Inc., a manufacturer of TV transmitters and a public
company and served as its first President and CEO. Mr. Ostroff holds a BSEE
degree from Drexel University and an MEEE degree from New York University. He is
a member of several industry organizations, including, AFCCE, IEEE and SBE.
Delbert R. Parks III has served as Vice President of Operations and
Engineering since the completion of the River City Acquisition. Prior to that
time, he was Director of Operations and Engineering for WBFF and Sinclair since
1985, and has been with the Company for 25 years. He is responsible for
planning, organizing and implementing operational and engineering policies and
strategies as they relate to television and computer systems. Currently, he is
consolidating facilities for Sinclair's television stations and has just
completed a digital facility for Sinclair's news and technical operation in
Pittsburgh. Mr. Parks is also a Lieutenant Colonel in the Maryland Army National
Guard and commands the 1st Battalion, 175th Infantry (Light).
Robert E. Quicksilver has served as Vice President/General Counsel, SCI
since completion of the River City Acquisition. Prior to that time he served as
General Counsel of River City since September 1994. From 1988 to 1994, Mr.
Quicksilver was a partner of the law firm of Rosenblum, Goldenhersh,
Silverstein and Zafft, P.C. in St. Louis. Mr. Quicksilver holds a B.A. from
Dartmouth College and a J.D. from the University of Michigan.
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Thomas E. Severson has served as Corporate Controller since January 1997.
Prior to that time, Mr. Severson served as Assistant Controller of the Company
since 1995. Prior to joining the Company, Mr. Severson held positions in the
audit departments of KPMG Peat Marwick LLP and Deloitte & Touche LLP from 1991
to 1995. Mr. Severson is a graduate of the University of Baltimore and is a
Certified Public Accountant.
Michael E. Sileck has served as Vice President/Finance of SCI since
completion of the River City Acquisition. Prior to that time he served as the
Director of Finance for River City since 1993. Mr. Sileck joined River City in
July 1990 as Director of Finance and Business Affairs for KDNL-TV. Mr. Sileck
is an active member of the Broadcast Cable Financial Management Association
("BCFM") and was a Director of BCFM from 1993 to 1996. Mr. Sileck, a Certified
Public Accountant, received a B.S. degree in Accounting from Wayne State
University and an M.B.A. in Finance from Oklahoma City University.
Robin A. Smith has served as Chief Financial Officer, SCI Radio since June
1996. From 1993 until joining the Company, Ms. Smith served as Vice President
and Chief Financial Officer of the Park Lane Group of Menlo Park, California,
which owned and operated small market radio stations. From 1982 to 1993, she
served as Vice President and Treasurer of Edens Broadcasting, Inc. in Phoenix,
Arizona, which owns and operates radio stations in major markets. Ms. Smith is a
graduate of the Arizona State University and is a Certified Public Accountant.
Patrick J. Talamantes has served as Director of Corporate Finance and
Treasurer of SCI since completion of the River City Acquisition. Prior to that
time, he served as Treasurer for River City since April 1995. From 1991 to 1995,
he was a Vice President with Chemical Bank, where he completed financings for
clients in the cable, broadcasting, publishing and entertainment industries. Mr.
Talamantes holds a B.A. degree from Stanford University and an M.B.A. from the
Wharton School at the University of Pennsylvania.
Lawrence E. McCanna has served as a Director of the Company since July
1995. Mr. McCanna has been a partner of the accounting firm of Gross,
Mendelsohn & Associates, P.A., since 1972 and has served as its managing
partner since 1982. Mr. McCanna has served on various committees of the
Maryland Association of Certified Public Accountants and was chairman of the
Management of the Accounting Practice Committee. He is also a former member of
the Management of an Accounting Practice Committee of the American Institute of
Certified Public Accountants. Mr. McCanna is a member of the board of directors
of Maryland Special Olympics.
Basil A. Thomas has served as a Director of the Company since November
1993. He is of counsel to the Baltimore law firm of Thomas & Libowitz, P.A. and
has been in the private practice of law since 1983. From 1961 to 1968, Judge
Thomas served as an Associate Judge on the Municipal Court of Baltimore City
and, from 1968 to 1983, he served as an Associate Judge of the Supreme Bench of
Baltimore City. Judge Thomas is a trustee of the University of Baltimore and a
member of the American Bar Association and the Maryland State Bar Association.
Judge Thomas attended the College of William & Mary and received his L.L.B. from
the University of Baltimore. Judge Thomas is the father of Steven A. Thomas, a
senior attorney and founder of Thomas & Libowitz, counsel to the Company.
Barry Baker has been the Chief Executive Officer of River City since 1989,
and is the President of the corporate general partner of River City and Better
Communications, Inc. ("BCI"). The principal business of both River City and BCI
is television and radio broadcasting. In connection with the River City
Acquisition, the Company agreed to appoint Mr. Baker Executive Vice President of
the Company and to elect him as a Director at such time as he is eligible to
hold those positions under applicable FCC regulations. He currently serves as a
consultant to the Company.
Kerby Confer served as a member of the Board of Representatives and Chief
Executive Officer - Keymarket Radio Division of River City since July 1995.
Prior thereto, Mr. Confer served as Chairman of the Board and Chief Executive
Officer of Keymarket since its founding in December 1981. Prior to engaging in
the acquisition of various radio stations in 1975, Mr. Confer held a number of
jobs in the broadcast business, including serving as Managing Partner of a radio
station in Annapolis, Maryland from 1969 to 1975. From 1966 to 1969, he hosted a
pop music television show on WBAL-TV (Baltimore) and
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WDCA-TV (Washington, D.C.). Prior thereto, Mr. Confer served as program director
or producer/director for radio and television stations owned by Susquehanna
Broadcasting and Plough Broadcasting Company, Inc. Mr. Confer currently provides
services to the Company and is expected to become Chief Executive Officer of SCI
Radio at such time as he is eligible to hold this position under applicable FCC
regulations.
Roy F. Coppedge, III is a general partner of the general partner of each of
the Boston Ventures partnerships, limited partnerships primarily involved in the
business of investments. Mr. Coppedge is a director of Continental Cablevision,
Inc., and American Media, Inc. and a member of the Board of Representatives of
Falcon Holding Group, L.P. In connection with the River City Acquisition, the
Company agreed to elect Mr. Coppedge as a Director at such time as he is
eligible to hold that position under applicable FCC regulations.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with David D. Smith,
President and Chief Executive Officer of the Company. David Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. The Company's
Compensation Committee has approved an increase in Mr. Smith's total
compensation to $1,200,000. Mr. Smith is also entitled to participate in the
Company's Executive Bonus Plan based upon the performance of the Company during
the year. The employment agreement provides that the Company may terminate Mr.
Smith's employment prior to expiration of the agreement's term as a result of
(i) a breach by Mr. Smith of any material covenant, promise or agreement
contained in the employment agreement; (ii) a dissolution or winding up of the
Company; (iii) the disability of Mr. Smith for more than 210 days in any twelve
month period (as determined under the employment agreement); or (iv) for cause,
which includes conviction of certain crimes, breach of a fiduciary duty to the
Company or the stockholders, or repeated failure to exercise or undertake his
duties as an officer of the Company (each, a "Termination Event").
In June 1995, the Company entered into an employment agreement with
Frederick G. Smith, Vice President of the Company. Frederick Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. Under the agreement, Mr.
Smith receives a base salary of $260,000 and is also entitled to participate in
the Company's Executive Bonus Plan based upon the performance of the Company and
Mr. Smith during the year. The employment agreement provides that the Company
may terminate Mr. Smith's employment prior to expiration of the agreement's term
as a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with J.
Duncan Smith, Vice President and Secretary of the Company. J. Duncan Smith's
employment agreement has an initial term of three years and is renewable for
additional one-year terms, unless either party gives notice of termination not
less than 60 days prior to the expiration of the then current term. Under the
agreement, Mr. Smith receives a base salary of $270,000 and is also entitled to
participate in the Company's Executive Bonus Plan based upon the performance of
the Company and Mr. Smith during the year. The employment agreement provides
that the Company may terminate Mr. Smith's employment prior to expiration of the
agreement's term as a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with Robert
E. Smith, Vice President and Treasurer of the Company. Robert E. Smith's
employment agreement has an initial term of three years and is renewable for
additional one-year terms, unless either party gives notice of termination not
less than 60 days prior to the expiration of the then current term. Under the
agreement, Mr. Smith receives a base salary of $250,000 and is also entitled to
participate in the Company's Executive Bonus Plan based upon the performance of
the Company and Mr. Smith during the year. The employment agreement provides
that the Company may terminate Mr. Smith's employment prior to expiration of the
agreement's term as a result of a Termination Event.
In connection with the River City Acquisition, the Company entered into an
employment agreement (the "Baker Employment Agreement") with Barry Baker
pursuant to which Mr. Baker will become President and Chief Executive Officer of
SCI and Executive Vice President of the Company at such time as
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Mr. Baker is able to hold those positions consistent with applicable FCC
regulations. Until such time as Mr. Baker is able to become an officer of the
Company, he serves as a consultant to the Company pursuant to a consulting
agreement and receives compensation that he would be entitled to as an officer
under the Baker Employment Agreement. While Mr. Baker acts as consultant to the
Company he will not direct employees of Sinclair in the operation of its
television stations and will not perform services relating to any shareholder,
bank financing or regulatory compliance matters with respect to the Company. In
addition, Mr. Baker will remain the Chief Executive Officer of River City and
will devote a substantial amount of his business time and energies to those
services. Mr. Baker receives a base salary of approximately $1,135,200 per year,
subject to annual increases of 7 1/2% on January 1 each year. Mr. Baker is also
entitled to receive a bonus equal to 2% of the amount by which the Broadcast
Cash Flow (as defined in the Baker Employment Agreement) of SCI for a year
exceeds the Broadcast Cash Flow for the immediately preceding year. Mr. Baker
has received options to acquire 1,382,435 shares of the Class A Common Stock (or
3.33% of the common equity of Sinclair determined on a fully diluted basis as of
the date of the River City Acquisition). The option became exercisable with
respect to 50% of the shares upon closing of the River City Acquisition, and
became exercisable with respect to an additional 25% of the shares on the first
anniversary of the closing of the River City Acquisition, and will become
exercisable with respect to the remaining 25% on the second anniversary of the
closing of the River City Acquisition. The exercise price of the option is
approximately $30.11 per share. The term of the Baker Employment Agreement
extends until May 31, 2001, and is automatically extended to the third
anniversary of any Change of Control (as defined in the Baker Employment
Agreement). If the Baker Employment Agreement is terminated as a result of a
Series B Trigger Event (as defined below), then Mr. Baker shall be entitled to a
termination payment equal to the amount that would have been paid in base salary
for the remainder of the term of the agreement plus bonuses that would be paid
for such period based on the average bonus paid to Mr. Baker for the previous
three years, and all options shall vest immediately upon such termination. In
addition, upon such a termination, Mr. Baker shall have the option to purchase
from the Company for the fair market value thereof either (i) all broadcast
operations of Sinclair in the St. Louis, Missouri DMA or (at the option of Mr.
Baker) the Asheville/Greenville/Spartanburg, South Carolina DMA or (ii) all of
the Company's radio broadcast operations. Mr. Baker shall also have the right
following such a termination to receive quarterly payments (which may be paid
either in cash or, at the Company's option, in additional shares of Class A
Common Stock) equal to 5.00% of the fair market value (on the date of each
payment) of all stock options and common stock issued pursuant to the exercise
of such stock options or pursuant to payments of this obligation in shares of
Class A Common Stock and held by him at the time of such payment (except that
the first such payment shall be 3.75% of such value). The fair market value of
unexercised options for such purpose shall be equal to the market price of
underlying shares less the exercise price of the options. Following termination
of Mr. Baker's employment agreement, the Company shall have the option to
purchase the options and shares from Mr. Baker at their market value. A "Series
B Trigger Event" means the termination of Barry Baker's employment with the
Company prior to the expiration of the initial five-year term of the Baker
Employment Agreement (i) by the Company for any reason other than "for cause"
(as defined in the Baker Employment Agreement) or (ii) by Barry Baker under
certain circumstances, including (a) on 60 days' prior written notice given at
any time within 180 days following a Change of Control; (b) if Mr. Baker is not
elected (and continued) as a director of Sinclair or SCI, as President and Chief
Executive Officer of SCI or as Executive Vice President of Sinclair, or Mr.
Baker shall be removed from any such board or office; (c) upon a material breach
by Sinclair or SCI of the Baker Employment Agreement which is not cured; (d) if
there shall be a material diminution in Mr. Baker's authority or responsibility,
or certain of his economic benefits are materially reduced, or Mr. Baker shall
be required to work outside Baltimore; or (e) the effective date of his
employment as contemplated by clause (b) shall not have occurred by August 31,
1997. Mr. Baker cannot be appointed to such positions with the Company or SCI
until the Company or SCI takes certain actions with respect to WTTV and WTTK in
Indianapolis or WTTE or WSYX in Columbus as described under "Risk Factors -
Dependence on Key Personnel; Employment Agreements with Key Personnel" in the
accompanying Prospectus. The Company has not taken these actions as of the date
of this Prospectus Supplement and, accordingly, Mr. Baker is able to terminate
the Baker Employment Agreement at any time.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
SCOPE AND LIMITATION
The following is a general discussion of certain United States federal
income and estate tax consequences of the purchase, ownership and disposition of
Class A Common Stock by a "Non-U.S. Holder" (as defined below). This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"),
administrative pronouncements, judicial decisions and existing and proposed
Treasury regulations each as in effect on the date hereof and changes to any of
which subsequent to the date of this Prospectus Supplement may affect the tax
consequences described herein.
This discussion does not purport to be a comprehensive description of all
of the tax considerations that may be relevant to a decision to purchase Class A
Common Stock. It does not discuss all of the tax consequences that may be
relevant to a holder in light of the holder's particular circumstances. This
discussion does not address any tax consequences arising under the laws of any
state, local or foreign taxing jurisdiction.
Prospective purchasers should consult their own tax advisors as to the
particular tax consequences of the purchase, ownership or disposition of Class A
Common Stock, including the effects of applicable state, local, foreign, or
other tax laws and possible changes in the tax laws.
For purposes of this discussion, a "Non-U.S. Holder" means any individual
or entity other than a holder of Class A Common Stock that is (i) a citizen or
resident of the United States (including certain former citizens and former
residents), (ii) a partnership, corporation (including an entity treated as a
corporation or partnership for United States federal income tax purposes) or
other entity created or organized in the United States or under the laws of the
United States or of any political subdivision thereof (other than any
partnership treated as foreign under federal regulations), (iii) an estate the
income of which is subject to United States federal income taxation regardless
of source, or (iv) a trust with respect to the administration of which a court
within the United States is able to exercise primary supervision and which has
one or more United States fiduciaries, who have the authority to control all
substantial decisions of the trust. The tax treatment of a Non-U.S. Holder may
vary depending upon the particular situation of such holder.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to United States federal tax as if they were United States citizens.
DIVIDENDS
Subject to the discussion below, any dividends paid to a Non-U.S. Holder of
Class A Common Stock generally will be subject to withholding tax at a 30% rate
or such lower rate as may be specified by an applicable income tax treaty.
Under present law, for purposes of determining whether tax is to be
withheld at a 30% rate or a reduced rate as specified by an income tax treaty,
the Company ordinarily will presume that dividends paid to an address in a
foreign country are paid to a resident of such country absent definite knowledge
that such presumption is not warranted. A Non-U.S. Holder that is eligible for a
reduced rate of United States withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amounts currently withheld by filing an
appropriate claim for refund with the United States Internal Revenue Service.
Under proposed regulations, a beneficial owner who is a Non-U.S. Holder must
submit a properly completed Internal Revenue Service Form W-8 to the Company or
a qualified intermediary to be eligible for a tax treaty reduction.
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If a Non-U.S. Holder is engaged in a trade or business in the United
States, and if (i) dividends on the Class A Common Stock are effectively
connected with the conduct of such trade or business or (ii) if a tax treaty
applies, dividends are attributable to a United States permanent establishment
of the Non-U.S. Holder, the Non-U.S. Holder will generally be subject to regular
United States income tax on such effectively connected income in the same manner
as if the Non-U.S. Holder were a United States resident. Such a Non-U.S. Holder
will be required to provide the Company a properly executed United States
Internal Revenue Service Form 4224 or successor form in order to claim an
exemption from the 30% withholding tax.
In addition, if such Non-U.S. Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or such lower rate provided by an
applicable treaty) of its effectively connected earnings and profits, subject to
certain adjustments, deemed to have been repatriated from the United States. For
purposes of the branch profits tax, dividends on and any gain recognized on the
sale, exchange or other disposition of the Class A Common Stock will be included
in the effectively connected earnings and profits of such Non-U.S. Holder if
such dividends or gain, as the case may be, is effectively connected with the
conduct by the Non-U.S. Holder of a trade or business in the United States.
OWNERSHIP AND SALE
In general, a Non-U.S. Holder will not be subject to United States federal
income tax with respect to any gain realized on a sale or other disposition of
Class A Common Stock unless (i) such Non-U.S. Holder is an individual who is
present in the United States for 183 days or more in the taxable year of
disposition, and either (a) such individual has a "tax home" (as defined in Code
Section 911(d)(3)) in the United States (unless such gain is attributable to a
fixed place of business in a foreign country maintained by such individual and
has been subject to foreign tax of at least 10%) or (b) the gain is attributable
to an office or other fixed place of business maintained by such individual in
the United States; (ii) such gain is effectively connected with the conduct by
such Non-U.S. Holder of a trade or business in the United States; or (iii) the
Company is or has been a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code at any time within the
shorter of the five-year period preceding such disposition or such Non-U.S.
Holder's holding period, and, with respect to any class of stock of the Company
that is regularly traded on an established securities market within the meaning
of the applicable Department of Treasury regulations, the Non-U.S. Holder held,
directly or indirectly, at any time within the shorter of the periods described
above more than 5% of such class. A corporation is generally a "United States
real property holding corporation" if the fair market value of its "United
States real property interests" equals or exceeds 50% of the sum of the fair
market value of its worldwide real property interests plus its other assets used
or held for use in a trade or business. Although the Company does not believe
that it has been or is or will become a "United States real property holding
corporation" in the foreseeable future, any such development could have adverse
United States tax consequences for Non-U.S. Holders.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under certain circumstances, the Internal Revenue Service requires
"information reporting" and "backup withholding" at a rate of 31% with respect
to certain payments on Class A Common Stock. Non-U.S. Holders of Class A Common
Stock generally would be exempt from Internal Revenue Service reporting
requirements and United States backup withholding with respect to dividends
payable on Class A Common Stock. Under proposed regulations, however, a Non-U.S.
Holder of Class A Common Stock that fails to certify its Non-U.S. Holder status
in accordance with the requirements of the proposed regulations, would under
certain circumstances be subject to United States backup withholding at a rate
of 31% on payments of dividends. The application for exemption is available by
providing a properly completed Internal Revenue Service Form W-8.
The payment of the proceeds of the disposition of Class A Common Stock by a
holder to or through the United States office of a broker or through a
non-United States branch of a United States broker generally will be subject to
information reporting and backup withholding at a rate of 31% unless the holder
either certifies its status as a Non-U.S. Holder under penalties of perjury or
otherwise estab-
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lishes an exemption. The payment of the proceeds of the disposition by a
Non-U.S. Holder of Class A Common Stock to or through a non-United States office
of a non-United States broker will not be subject to backup withholding or
information reporting unless the non-United States broker has certain United
States relationships.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded (or credited against the holder's United States
federal income tax liability, if any) provided that the required information is
furnished to the Internal Revenue Service.
FEDERAL ESTATE TAX
Under the United States federal estate tax law, an individual Non-U.S.
Holder who is treated as the owner of an interest in the Class A Common Stock
will be required to include the value thereof in his gross estate for United
States federal estate tax purposes, and may be subject to United States federal
estate tax unless an applicable estate tax treaty provides otherwise.
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UNDERWRITING
Under the terms and subject to the conditions stated in the Underwriting
Agreement dated the date of this Prospectus Supplement, each of the underwriters
of the Offering named below (the "Underwriters"), for whom Smith Barney Inc., BT
Alex. Brown Incorporated, Credit Suisse First Boston Corporation, Salomon
Brothers Inc, Chase Securities Inc. and Furman Selz LLC are acting as the
representatives (the "Representatives"), has severally agreed to purchase, and
the Company and the Selling Stockholders have agreed to sell to each
Underwriter, the number of shares of Class A Common Stock set forth opposite the
name of such Underwriter below:
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------- ----------
Smith Barney Inc. ...........................
BT Alex. Brown Incorporated ..................
Credit Suisse First Boston Corporation ......
Salomon Brothers Inc ........................
Chase Securities Inc. ........................
Furman Selz LLC ..............................
Total ....................................... 5,300,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Class A Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.
The Underwriters initially propose to offer part of the shares of Class A
Common Stock directly to the public at the public offering price set forth on
the cover page of this Prospectus Supplement and part of the shares to certain
dealers at a price that represents a concession not in excess of $ per share
below the public offering price. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share to the other Underwriters
or to certain other dealers. After the initial offering of the shares to the
public, the public offering price and such concessions may be changed by the
Representatives.
The Company and certain of the Selling Stockholders have granted to the
Underwriters options, exercisable for 30 days from the date of this Prospectus
Supplement, to purchase up to an aggregate of 345,000 and 450,000 additional
shares of Class A Common Stock, respectively, at the public offering price set
forth on the cover page of this Prospectus Supplement less underwriting
discounts and commissions. The Underwriters may exercise such option to purchase
additional shares solely for the purpose of covering over-allotments, if any,
incurred in connection with the sale of the shares of Class A Common Stock
offered hereby. To the extent such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares as the number of shares set forth
opposite each Underwriter's name in the preceding table bears to the total
number of shares of Class A Common Stock offered by the Underwriters hereby.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
The Company, its officers and directors and the holders of all of the
shares of Class B Common Stock to be outstanding after the Offering have agreed
that, for a period of 90 days from the date of this
S-71
<PAGE>
Prospectus Supplement, they will not, without the prior written consent of Smith
Barney Inc., offer, sell, contract to sell, or otherwise dispose of, any shares
of Common Stock of the Company or any securities convertible into, or
exercisable or exchangeable for, Common Stock of the Company.
In connection with this Offering and in compliance with applicable law, the
Underwriters may overallot (i.e., sell more shares of Class A Common Stock than
the total amount shown on the list of Underwriters which appears above) and may
effect transactions which stabilize, maintain or otherwise affect the market
price of the shares of Class A Common Stock at levels above those which might
otherwise prevail in the open market. Such transactions may include placing bids
for the Class A Common Stock or effecting purchases of the Class A Common Stock
for the purpose of pegging, fixing or maintaining the price of the Class A
Common Stock or for the purpose of reducing a syndicate short position created
in connection with the Offering. A syndicate short position may be covered by
exercise of the option described above in lieu of or in addition to open market
purchases. In addition, the contractual arrangements among the Underwriters
include a provision whereby, if the Representatives purchase shares of Class A
Common Stock in the open market for the account of the underwriting syndicate
and the securities purchased can be traced to a particular Underwriter or member
of the selling group, the underwriting syndicate may require the Underwriter or
selling group member in question to purchase the shares of Class A Common Stock
in question at the cost price to the syndicate or may recover from (or decline
to pay to) the Underwriter or selling group member in question the selling
concession applicable to the securities in question. The Underwriters are not
required to engage in any of these activities and any such activities, if
commenced, may be discontinued at any time.
Smith Barney Inc. and certain of the other Representatives have and may
continue to provide investment banking services to the Company for which they
receive customary fees.
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 shares of Class A Common Stock offered hereby. In
addition, Chase Securities Inc., The Chase Manhattan Bank and their affiliates
participate from time to time in investment banking and commercial banking
transactions for the Company.
S-72
<PAGE>
GLOSSARY OF DEFINED TERMS
"ABC" means Capital Cities/ABC, Inc.
"Adjusted EBITDA" means 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.
"Adjusted EBITDA margin" means the Adjusted EBITDA divided by net
broadcast revenues.
"Amended Certificate" means the Amended and Restated Articles of
Incorporation of the Company as amended.
"Arbitron" means Arbitron, Inc.
"Bank Credit Agreement" means the Third Amended and Restated Credit
Agreement, dated as of May 20, 1997, among the Company, the Subsidiaries,
certain lenders named therein, and The Chase Manhattan Bank, as agent.
"Broadcast cash flow margin" means broadcast cash flow divided by net
broadcast revenues.
"Broadcast Cash Flow" means operating income plus corporate overhead
expenses, special bonuses paid to executive officers, non-cash deferred
compensation, depreciation and amortization, including both tangible and
intangible assets and program rights, less cash payment for program rights. Cash
program payments represent cash payments made for current program payables and
sports rights and do not necessarily correspond to program usage. Special
bonuses paid to executive officers are considered unusual and non-recurring. The
Company has presented broadcast cash flow data, which the Company believes are
comparable to the data provided by other companies in the industry, because such
data are commonly used as a measure of performance for broadcast companies.
However, broadcast cash flow (i) does not purport to represent cash provided by
operating activities as reflected in the Company's consolidated statements of
cash flow, (ii) is not a measure of financial performance under generally
accepted accounting principles and (iii) should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
"CBS" means CBS, Inc.
"Cincinnati/Kansas City Acquisitions" means the Company's acquisition of
the assets and liabilities of WSTR-TV (Cincinnati, OH) and KSMO-TV (Kansas City,
MO).
"Class A Common Stock" means the Company's Class A Common Stock, par value
$.01 per share.
"Class B Common Stock" means the Company's Class B Common Stock, par value
$.01 per share.
"Columbus Option" means the Company's option to purchase both the
Non-License Assets and the License Assets relating to WSYX-TV, Columbus, OH.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Common Stock and the Class B Common
Stock.
"Communications Act" means the Communications Act of 1934, as amended.
"Company" means Sinclair Broadcast Group, Inc. and its wholly owned
subsidiaries.
"Controlling Stockholders" means David D. Smith, Frederick G. Smith, J.
Duncan Smith and Robert E. Smith.
"DAB" means digital audio broadcasting.
"DBS" means direct-to-home broadcast satellite television.
"Debt Issuance" means the Company's private placement of the 1997 Notes, in
the principal amount of $200,000,000, on July 2, 1997.
S-73
<PAGE>
"Designated Market Area" or "DMA" means one of the 211 generally-recognized
television market areas.
"DOJ" means the United States Justice Department.
"DTV" means digital television.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FCC" means the Federal Communications Commision.
"FCN" means the Fox Children's Network.
"Flint Acquisition" means the Company's acquisition of the assets of
WSMH-TV (Flint, Michigan).
"Fox" means Fox Broadcasting Company.
"Glencairn" means Glencairn, Ltd. and its subsidiaries.
"Greenville Stations" means radio stations WFBC-FM, WORD-AM, WFBC-AM,
WSPA-AM, WSPA-FM, WOLI-FM, and WOLT-FM located in the Greenville/Spartanburg,
South Carolina area.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"HYTOPS" means the Company's 115/8% High Yield Trust Offered Preferred
Securities issued pursuant to the HYTOPS Issuance.
"HYTOPS Issuance" means the Company's private placement of HYTOPS, in a
liquidation amount of $200,000,000, on March 14, 1997.
"Independent" means a station that is not affiliated with any of ABC, CBS,
NBC, FOX, UPN or WB.
"JSAs" means joint sales agreements pursuant to which an entity has the
right, for a fee paid to the owner and operator of a station, to sell
substantially all of the commercial advertising on the station.
"KSC" means Keymarket of South Carolina, Inc.
"License Assets" means the television and radio station assets essential
for broadcasting a television or radio signal in compliance with regulatory
guidelines, generally consisting of the FCC license, transmitter, transmission
lines, technical equipment, call letters and trademarks, and certain furniture,
fixtures and equipment.
"License Assets Option" means the Company's option to purchase the License
Assets of KDNL-TV, St. Louis, MO; KOVR-TV, Sacramento, CA; WTTV-TV and WTTK-TV,
Indianapolis, IN; WLOS-TV, Asheville, NC; KABB-TV, San Antonio, TX; and KDSM-TV,
Des Moines, IA, which the Company has exercised with respect to all stations
other than WTTV-TV and WTTK-TV.
"LMAs" means program services agreements, time brokerage agreements or
local marketing agreements pursuant to which an entity provides programming
services to television or radio stations that are not owned by the entity.
"Major Networks" means each of ABC, CBS or NBC, singly or collectively.
"MSA" means the Metro Survey Area as defined by Arbitron.
"MMDS" means multichannel multipoint distribution services.
"NBC" means the National Broadcasting Company.
"Nielsen" means the A.C. Nielsen Company Station Index dated May 1996.
"1993 Notes" means the Company's 10% Senior Subordinated Notes due 2003.
"1995 Notes" means the Company's 10% Senior Subordinated Notes due 2005.
"1996 Acquisitions" means the 16 television and 33 radio stations that the
Company acquired, obtained options to acquire, or obtained the right to program
during 1996 for an aggregate consideration of approximately $1.2 billion.
S-74
<PAGE>
"1997 Notes" means the Company's 9% Senior Subordinated Notes due 2007,
issued pursuant to the Debt Issuance.
"Non-License Assets" means the assets relating to operation of a television
or radio station other than License Assets.
"Peoria/Bloomington Acquisition" means the acquisition by the Company of
the assets of WYZZ-TV on July 1, 1996.
"River City" means River City Broadcasting, L.P.
"River City Acquisition" means the Company's acquisition from River City
and the owner of KRRT of certain Non-License Assets, options to acquire certain
License and Non-License Assets and rights to provide programming or sales and
marketing for certain stations, which was completed May 31, 1996.
"SCI" means Sinclair Communications, Inc., a wholly owned subsidiary of the
Company that holds all of the broadcast operations of the Company.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Company's Series A Exchangeable
Preferred Stock, par value $.01 per share, each share of which has been
exchanged for a share of the Company's Series B Convertible Preferred Stock.
"Series B Preferred Stock" means the Company's Series B Convertible
Preferred Stock, par value $.01 per share.
"Series C Preferred Stock" means the Company's Series C Preferred Stock,
par value $.01 per share.
"Sinclair" means Sinclair Broadcast Group, Inc. and its wholly owned
subsidiaries.
"Superior Acquisition" means the Company's acquisition of the stock of
Superior Communications, Inc. ("Superior").
"TBAs" means time brokerage agreements; see definition of "LMAs."
"UHF" means ultra-high frequency.
"UPN" means United Paramount Television Network Partnership.
"VHF" means very-high frequency.
"WB" and the "WB Network" mean The WB Television Network Partners.
S-75
<PAGE>
No dealer, salesperson or other person has been AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH 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 SHARES OF CLASS A COMMON STOCK 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 QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
PAGE NO.
---------
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary ............... S- 1
Use of Proceeds ........................... S- 9
Capitalization .............................. S-10
Pro Forma Consolidated Financial Informa-
tion S-11
Management's Discussion and Analysis of
Financial Condition and Results of Op-
erations of Sinclair ..................... S-21
Industry Overview ........................... S-30
Business of Sinclair ........................ S-33
Selling Stockholders ........................ S-61
Management ................................. S-62
Certain United States Federal Tax Consid-
erations for Non-U.S. Holders of Com-
mon Stock S-68
Underwriting .............................. S-71
Glossary of Defined Terms .................. S-73
PROSPECTUS
Available Information ..................... 1
Incorporation of Certain Documents by
Reference .............................. 1
The Company ................................. 3
Risk Factors .............................. 3
Use of Proceeds ........................... 16
Historical and Pro Forma
Ratio of Earnings to Fixed Charges ...... 16
Selling Stockholders ........................ 17
Description of Debt Securities ............ 18
Description of Capital Stock ............... 32
Plan of Distribution ........................ 40
Legal Matters .............................. 41
Experts .................................... 41
================================================================================
5,300,000 SHARES
SINCLAIR BROADCAST GROUP, INC.
Class A Common Stock
-------------
P R O S P E C T U S S U P P L E M E N T
, 1997
-------------
SMITH BARNEY INC.
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
SALOMON BROTHERS INC
CHASE SECURITIES INC.
FURMAN SELZ
================================================================================
<PAGE>
SUBJECT TO COMPLETION DATED SEPTEMBER 16, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 16, 1997)
3,000,000 SHARES
[GRAPHIC OMITTED]
$ CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
-----------
Each share of $ series d convertible exchangeable preferred stock, par
value $.01 per share (the "Convertible Exchangeable Preferred Stock"), of
Sinclair Broadcast Group, Inc. ("Sinclair" or the "Company") has a liquidation
preference of $50. Dividends on the Convertible Exchange Preferred Stock will be
cumulative from the date of original issue and will be payable quarterly
commencing on , 1997, in the amount of $ per share annually when, as and if
declared by the Board of Directors out of legally available funds. See
"Description of Preferred Stock - Dividends."
Shares of the Convertible Exchangeable Preferred Stock are convertible at
any time, at the option of the holders thereof, unless previously redeemed or
exchanged, into shares of Class A Common Stock, par value $.01 per share, of the
Company (the "Class A Common Stock") at an initial conversion price of $ per
share of Class A Common Stock (equivalent to a conversion rate of shares of
Class A Common Stock per share of Convertible Exchangeable Preferred Stock)
subject to adjustment in certain events. See "Description of Preferred Stock-
Conversion Rights". On August 21, 1997, the last reported sale price of the
Class A Common Stock as reported by Nasdaq was $36 per share. The Convertible
Exchangeable Preferred Stock will not be redeemable until September , 2000. On
and after September , 2000, the Convertible Exchangeable Preferred Stock will be
redeemable at the option of the Company, in whole or in part, initially at a
price per share equal to % of the liquidation preference thereof and thereafter
at prices declining to 100% of such liquidation preference on and after
September , 2007, in each case plus accrued and unpaid dividends to the
redemption date. See "Description of Preferred Stock - Company's Right of
Redemption."
(continued on next page)
-----------
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 SHARES OF CONVERTIBLE EXCHANGEABLE PREFERRED STOCK OFFERED
HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
THE PUBLIC AND COMMISSIONS (1) THE COMPANY (2)
<S> <C> <C> <C>
Per Share $ 50 $ $
Total(3) $150,000,000 $ $
</TABLE>
- ------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $800,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 450,000 additional shares of Convertible Exchangeable
Preferred Stock on the same terms as set forth above solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to the Public, Underwriting Discounts and Commissions and Proceeds to
the Company will be $ , $ and $ , respectively. See "Underwriting."
-----------
The shares of Convertible Exchangeable Preferred Stock are being offered by the
several Underwriters named herein, subject to prior sale, when, as and if
accepted by them and subject to certain conditions. It is expected the
Convertible Exchangeable Preferred Stock will be available for delivery in book
entry form only through the facilities of The Depository Trust Company ("DTC")
in New York, New York on or about , 1997, against payment
therefor in immediately available funds.
-----------
SMITH BARNEY INC.
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
SALOMON BROTHERS INC
CHASE SECURITIES INC.
, 1997 FURMAN SELZ
Information contained herein is subject to completion or amendment. A
registration statement has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective. This prospectus
supplement and the attached prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
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]
TELEVISION AND RADIO STATIONS (I) OWNED AND OPERATED BY THE COMPANY, (II)
PROGRAMMED BY THE COMPANY PURSUANT TO LMAS, (III) PROVIDED
SELLING SERVICES PURSUANT TO JSAS, (IV) SUBJECT TO OPTIONS TO ACQUIRE AND (V)
UNDER AGREEMENTS TO BE ACQUIRED, INCLUDING
AGREEMENTS TO ACQUIRE RIGHTS TO PROGRAM STATIONS PURSUANT TO LMAS, ALL AS SET
FORTH UNDER "BUSINESS OF SINCLAIR."
Certain persons participating in this offering may engage in transactions that
stabilize, maintain, or otherwise affect the price of Convertible Exchangeable
Preferred Stock, including overallotment, entering stabilizing bids, effecting
syndicate covering transactions and imposing penalty bids. For a description of
those activities, see "Underwriting."
<PAGE>
Subject to certain conditions, on any dividend payment date after , 2000,
the Convertible Exchangeable Preferred Stock will be exchangeable at the option
of the Company, in whole but not in part, for % Convertible Subordinated
Exchange Debentures (the "Exchange Debentures") due September , 2012 in a
principal amount equal to $50 per share of Convertible Exchangeable Preferred
Stock, provided that all accrued dividends (whether or not declared) have been
paid. The Exchange Debentures will be issued pursuant to an indenture (the
"Exchange Debentures Indenture"), will be convertible into shares of Class A
Common Stock on the same terms as the Convertible Exchangeable Preferred Stock
and will pay interest quarterly. The Exchange Debentures will contain redemption
provisions similar to those of the Convertible Exchangeable Preferred Stock. The
Exchange Debentures will be unsecured obligations of the Company and
subordinated to all Senior Debt (as defined herein) whether outstanding on the
date of the exchange or thereafter incurred. As of June 30, 1997, on a pro forma
basis, after giving effect to the Debt Issuance (as defined herein), the sale of
the Convertible Exchangeable Preferred Stock offered hereby and the use of the
estimated net proceeds therefrom, the aggregate amount of Senior Debt that would
have ranked senior in right of payment to the Exchange Debentures would have
been approximately $1.6 billion. See "Description of Exchange Debentures."
Concurrently with the offering of the Convertible Exchangeable Preferred
Stock hereunder (the "Preferred Stock Offering" or the "Offering") the Company
and certain stockholders of the Company (the "Selling Stockholders") are
offering to sell by a separate Prospectus Supplement 4,000,000 shares and
1,300,000 shares, respectively, of Class A Common Stock (the "Common Stock
Offering"). The completion of the Preferred Stock Offering is not conditioned
upon the completion of the Common Stock Offering.
The Company intends to apply for listing for the Convertible Exchangeable
Preferred Stock on the Nasdaq National Market.
The Company's outstanding capital stock consists of shares of Class A
Common Stock, shares of Class B Common Stock, par value $.01 per share (the
"Class B Common Stock"), shares of Series B Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock") and shares of Series C Preferred Stock,
par value $.01 per share (the "Series C Preferred Stock"). The rights of the
Class A Common Stock and the Class B Common Stock (collectively, the "Common
Stock") are identical, except that each share of Class A Common Stock entitles
the holder thereof to one vote in respect of matters submitted for the vote of
holders of Common Stock, whereas each share of Class B Common Stock entitles the
holder thereof to one vote on "going private" and certain other transactions and
to ten votes on other matters. The Controlling Stockholders (as defined in the
accompanying Prospectus) have the power to vote 100% of the outstanding shares
of Class B Common Stock representing, together with the Class A Common Stock
held by the Controlling Stockholders, approximately 96.0% of the aggregate
voting power of the Company's capital stock (or approximately 94.1% after the
sale of shares in the Common Stock Offering assuming no exercise of the
over-allotment option granted the Underwriters in connection with the Common
Stock Offering). Each share of Class B Common Stock converts automatically into
one share of Class A Common Stock upon sale or other transfer to a party other
than a Permitted Transferee (generally, related parties of a Controlling
Stockholder). Each share of Series B Preferred Stock has a liquidation
preference of $100, is convertible into 3.64 shares of Class A Common Stock
(subject to adjustment), and has 3.64 votes on all matters on which shares of
Common Stock have a vote. Except as described in the accompanying Prospectus,
the Series C Preferred Stock does not have rights to vote on matters on which
shares of Common Stock have a vote. See "Description of Capital Stock" in the
accompanying Prospectus.
iii
<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 requires otherwise, this Prospectus Supplement
and the Prospectus assume no exercise of the Underwriters' over-allotment
option. 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"). Capitalized terms
used in this Prospectus Supplement have the meaning set forth in the Glossary of
Defined Terms, which appears at the end of this Prospectus Supplement.
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 four additional television
stations, and has pending acquisitions of the rights to provide programming to
two additional television stations. The Company believes it is also one of the
top 20 radio groups in the United States, when measured by the total number of
radio stations owned. The Company owns 27 radio stations, has pending
acquisitions of 24 radio stations and has options to acquire an additional seven
radio stations.
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 DMAs in the United States. The Company's television station
group is diverse in network affiliation with ten stations affiliated with Fox,
12 with UPN, three with 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 seven of its stations would switch affiliations to, and one
independent station has 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 27 stations owned by the
Company, 12 broadcast on the AM band and 15 on the FM band. The Company owns
from two to 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 27 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.
COMPANY STRATEGY
THE COMPANY'S OPERATING STRATEGY IS TO (I) ATTRACT AUDIENCE SHARE THROUGH
THE ACQUISITION and broadcasting of popular programming, children's television
programming, counter-programming, local news programming in selected DMAs, and
popular sporting events in selected DMAs; (ii) increase its share of market
revenues through innovative sales and marketing efforts; (iii) aggressively
control programming and other operating costs; (iv) attract and retain high
quality management; (v) expand its stations' involvement in their communities;
and (vi) establish additional television LMAs and increase the size of its radio
clusters.
S-1
<PAGE>
The Company's LMA arrangements in markets where it already owns a
television station are a major factor in enabling the Company to increase its
revenues and improve operating margins. These LMAs have also helped the Company
to manage its programming inventory effectively and increase the Company's
broadcast revenues in those markets. In addition, the Company believes that its
LMA arrangements have assisted certain television and radio stations whose
operations may have been marginally profitable to continue to air popular
programming and contribute to programming diversity in their respective
television DMAs and radio MSAs.
The Company intends to continue to pursue acquisitions in order to build a
larger and more diversified broadcasting company. In implementing its
acquisition strategy, the Company routinely reviews and conducts investigations
of potential television and radio station acquisitions. When the Company
believes a favorable opportunity exists, the Company seeks to enter into
discussions with the owners of such stations regarding the possibility of an
acquisition by the Company. At any given time, the Company may be in discussions
with one or more such station owners. In addition, the Company intends to seek
and may take advantage of favorable opportunities to sell or swap television and
radio stations. See "Business of Sinclair - Broadcast Acquisition Strategy."
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: 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, 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 either will 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 end January 15, 2008). Pursuant to the WB Agreement, the WB
affiliation agreements of WVTV-TV, Milwaukee, Wisconsin, and WTTO-TV,
Birmingham, Alabama (whose programming is simulcasted on WDBB-TV, Tuscaloosa,
Alabama), have been extended to January 16, 2008. In addition, WFBC-TV in
Greenville, South Carolina 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 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. Certain subsidiaries of the Company
S-2
<PAGE>
have filed an action in the Circuit Court for Baltimore City seeking declaratory
relief that their notice was effective to terminate the affiliations on January
15, 1998. See "Risk Factors - Certain Network Affiliations" in the accompanying
Prospectus and "Business of Sinclair - Legal Proceedings" herein.
HERITAGE ACQUISITION
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 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. The Company intends to finance the purchase
price from some combination of the proceeds of the Common Stock Offering, the
proceeds of the Preferred Stock Offering, funds available under the Bank Credit
Agreement, and the anticipated $60 million in proceeds from the sale of the
Company's interest in the Oklahoma City station. Closing of the Heritage
Acquisition is conditioned on, among other things, FCC approval and the
expiration of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
COMMON STOCK OFFERING
Concurrently with the Preferred Stock Offering, the Company and the Selling
Stockholders plan to offer 4,000,000 shares and 1,300,000 shares of Class A
Common Stock, respectively, in the Common Stock Offering. There can be no
assurance that the Common Stock Offering will be consummated. The completion of
the Preferred Stock Offering is not conditioned upon the completion of the
Common Stock Offering.
S-3
<PAGE>
THE OFFERING
SHARES OF CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK
OFFERED. 3,000,000 shares (a)
PREFERRED AND COMMON STOCK
TO BE OUTSTANDING AFTER
THE OFFERING .......... 1,088,904 shares of Series B Preferred Stock
2,062,000 shares of Series C Preferred Stock
3,000,000 shares of Convertible Exchangeable
Preferred Stock(a)
7,245,566 shares of Class A Common Stock(b)
27,510,581 shares of Class B Common Stock 34,756,147
total shares of Common Stock(b)
USE OF PROCEEDS ...... The net proceeds to the Company from the Offering
and the Common Stock Offering will be used to repay
certain amounts outstanding under the Company's Bank
Credit Agreement, with the remainder retained for
general corporate purposes including funding the
Heritage Acquisition, which is anticipated to close
in the first quarter of 1998, and other acquisitions
if suitable acquisitions can be identified on
acceptable terms. See "Use of Proceeds."
DIVIDENDS ............... Dividends on the Convertible Exchangeable
Preferred Stock will be cumulative and accrue from
the date of issuance and will be payable quarterly
commencing on , 1997, in the amount of
$ per share annually, when, as and if declared
by the Board of Directors out of legally available
funds.
LIQUIDATION PREFERENCE $50.00 per share, plus an amount equal to
any accrued and unpaid dividends.
CONVERSION RIGHTS ...... The shares of 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 $ per share of Class A
Common Stock (equivalent to a conversion rate of
shares of Class A Common Stock per share of
Convertible Exchangeable Preferred Stock), subject
to adjustment in certain events. See "Description of
Convertible Exchangeable Preferred Stock -
Conversion Rights."
- ----------
(a) Excludes up to 450,000 shares of Convertible Exchangeable Preferred Stock
that may be sold by the Company upon exercise of the over-allotment option
granted to the Underwriters. See "Underwriting."
(b) Excludes 3,963,611 shares of Class A Common Stock that may be issued upon
conversion of shares of Series B Preferred Stock outstanding after the
Offering and up to 2,641,673 shares of Class A Common Stock reserved for
issuance pursuant to the Company's Incentive Stock Option Plan, the
Company's Designated Participants Stock Option Plan and the Company's
Long-Term Incentive Plan. Also excludes (i) 4,000,000 shares of Class A
Common Stock that are being issued in the Common Stock Offering by the
Company and 1,300,000 shares of Class A Common Stock that are being sold by
the Selling Stockholders in the Common Stock Offering (which shares are
included in shares of Class B Common Stock), (ii) 395,000 shares and
450,000 shares (which shares are included in shares of Class B Common
Stock) of Class A Common Stock that may be sold by the Company and the
Selling Stockholders, respectively, upon exercise of the over-allotment
option granted to the Underwriters in the Common Stock Offering and (iii)
shares of Class A Common Stock that may be issued upon conversion of the
shares of Convertible Exchangeable Preferred Stock offered hereby (based on
the conversion price on the date of issuance).
S-4
<PAGE>
Change of Control...... Upon the occurrence of a Change of Control (as
defined herein), each share of 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 an adjusted conversion price. Upon a
Change of Control, the Company may elect to pay
holders of the Convertible Exchangeable Preferred
Stock exercising their special conversion rights an
amount in cash equal to the $50 liquidation
preference of the 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 (as defined herein)
and could result in the acceleration of all
indebtedness under the Bank Credit Agreement.
Moreover, the Bank Credit Agreement prohibits the
repurchase of the Convertible Exchangeable Preferred
Stock by the Company. A Change of Control will also
require the Company to offer to redeem the Existing
Notes (as defined herein) and the Series C Preferred
Stock. See "Description of Convertible Exchangeable
Preferred Stock - Change of Control."
OPTIONAL REDEMPTION ... The 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 , 2000, initially at a price per
share equal to % of the liquidation preference
thereof, declining ratably on or after of
each year thereafter to a redemption price equal to
100% of such liquidation preference per share on or
after , 2007 plus, in each case, accrued and
unpaid dividends. See "Description of Convertible
Exchangeable Preferred Stock - Redemption at Option
of the Company."
RANK..................... With respect to dividends and amounts payable upon
the liquidation, dissolution or winding up of the
Company, the 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 ($206.2 million
liquidation value as of the date hereof) and (iv)
senior to the Company's Series B Preferred Stock
($108.9 million liquidation value as of the date
hereof) except that upon the termination of Barry
Baker's employment agreement with the Company prior
to May 31, 2001 by the Company for any reason other
than "for cause" (as defined in the employment
agreement) or by Mr. Baker under certain
circumstances described under "Management -
Employment Agreements," then the 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. One such
circumstance pursuant to which Mr. Baker can
terminate his employment agreement is the failure of
Mr. Baker to be elected and continued in certain
positions at the Company before August 31, 1997,
which election cannot take place prior to the
Company
S-5
<PAGE>
taking certain actions related to FCC approval of
such election. The Company has not taken these
actions as of the date of this Prospectus
Supplement and, accordingly, Mr. Baker is able to
terminate his employment agreement at any time. See
"Description of Convertible Exchangeable Preferred
Stock - Liquidation Rights."
VOTING RIGHTS ......... Except as described below or as required by law,
holders of Convertible Exchangeable Preferred Stock
will not be entitled to any voting rights. In
exercising any voting rights, each outstanding share
of Convertible Exchangeable Preferred Stock will be
entitled to one vote. Whenever dividends on the
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 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 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. If the Company does not provide for such
directors when required, certain penalty dividends
may accrue. Under certain circumstances, the Company
may be required to pay additional dividends if it
fails to provide for the board seats referred to
above. See "Description of Convertible Exchangeable
Preferred Stock - Voting Rights."
In addition, so long as any Convertible Exchangeable
Preferred Stock is outstanding, the Company will
not, without the affirmative vote or consent of the
holders of at least 662/3% of all outstanding shares
of Convertible Exchangeable Preferred Stock (i)
amend, alter or repeal (by merger or otherwise) any
provision of the Amended and Restated Articles of
Incorporation of the Company, as amended, or the
Bylaws of the Company so as to affect adversely the
relative rights, preferences, qualifications,
limitations or restrictions of the Convertible
Exchangeable Preferred Stock, (ii) authorize any new
class of Senior Dividend Stock (as defined herein),
any Senior Liquidation Stock (as defined herein) or
any security convertible into Senior Dividend Stock
or Senior Liquidation Stock, or (iii) effect any
reclassification of the Convertible Exchangeable
Preferred Stock. See "Description of Convertible
Exchangeable Preferred Stock - Voting Rights."
EXCHANGE PROVISIONS ... Subject to certain conditions, the Company may, at
its option, on any scheduled Dividend Payment Date
(as defined herein) commencing on , 2000,
exchange the Convertible Exchangeable Preferred
Stock, in whole but not in part, for the Company's
% Convertible Subordinated Debentures due
S-6
<PAGE>
2012 (the "Exchange Debentures"). Holders of
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 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 , ,
and of each year, commencing on the first
such payment date following the date of exchange.
Beginning on , 2000, at the Company's option, the
Exchange Debentures will be redeemable, in whole or
in part, at the redemption prices set forth herein
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 Convertible
Exchangeable Preferred Stock is convertible into
Class A Common Stock. The Exchange Debentures will
be subordinated to all Senior Debt (as defined
herein). As of June 30, 1997, on a pro forma basis,
after giving effect to the Debt Issuance (as defined
herein), the sale of the Convertible Exchangeable
Preferred Stock offered hereby and the use of the
estimated net proceeds therefrom, the aggregate
amount of the Senior Debt that would have ranked
senior in right of payment to the Exchange
Debentures would have been approximately $1.6
billion. See "Description of Convertible
Exchangeable Preferred Stock - Exchange Rights" and
"Description of Exchange Debentures."
FEDERAL INCOME TAX CONSIDER
ATIONS There are certain federal income tax considerations
associated with the purchasing, holding and
disposing of the Convertible Exchangeable Preferred
Stock or the Exchange Debentures, including the
fact that the exchange of Convertible Exchangeable
Preferred Stock for Exchange Debentures will be a
taxable event. See "Certain Federal Income Tax
Considerations."
S-7
<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 incorporated herein by reference. The summary
historical consolidated financial data for the six months ended June 30, 1996
and 1997 and as of June 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 six months ended June 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"), 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 "Debt
Issuance"), the issuance of $200,000,000 in liquidation amount of the Company's
115/8% High Yield Trust Offered Preferred Securities (the "HYTOPS") issued on
March 14, 1997 (the "HYTOPS Issuance"), and the Preferred and Common Stock
Offerings and the application of the proceeds thereof as set forth in "Use of
Proceeds" as though they occurred at the beginning of the periods presented and
are derived from the pro forma consolidated financial statements of the Company
included elsewhere in this Prospectus Supplement. See "Pro Forma Consolidated
Financial Information of Sinclair" included herein. The information below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations of Sinclair" included herein and Sinclair's
Consolidated Financial Statements incorporated by reference herein, and
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 June
30, 1997. Included elsewhere in this Prospectus Supplement under the heading
"Pro Forma Consolidated Financial Information of Sinclair" are pro forma
financial statements for the six months ended June 30, 1997.
<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(C) ........................... $ 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 depreciation and amor-
tization, deferred compensation and special bonuses
paid to executive officers ........................ 32,993 32,295 50,545 80,446 167,765
Depreciation and amortization(d) .................. 30,943 22,486 55,587 80,410 121,081
Amortization of deferred compensation ............... - - - - 739
Special bonuses paid to executive officers ......... - 10,000 3,638 - -
-------- -------- -------- -------- ---------
Broadcast operating income ........................ 5,950 11,643 19,584 45,278 88,903
-------- -------- -------- -------- ---------
Interest and amortization of debt discount 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 expense(e) ...... - - - - -
-------- -------- -------- -------- ---------
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 sharehold-
ers $ (4,651) $ (7,945) $ (2,740) $ 76 $ 1,131
======== ======== ======== ======== =========
Earnings (loss) per common share:
Net income (loss) before extraordinary item ......... $ (0.16) $ - $ (0.09) $ 0.15 $ 0.03
Extraordinary item ................................. - (0.27) - (0.15) -
-------- -------- -------- -------- ---------
Net income (loss) per common share .................. $ (0.16) $ (0.27) $ (0.09) $ - $ 0.03
======== ======== ======== ======== =========
Weighted average shares outstanding (in thousands) 29,000 29,000 29,000 32,205 37,381
======== ======== ======== ======== =========
OTHER DATA:
Broadcast cash flow(f) .............................. $ 28,019 $ 37,498 $ 67,519 $111,124 $189,216
Broadcast cash flow margin(g) ..................... 45.9 % 53.9 % 56.9 % 59.1 % 54.6 %
Adjusted EBITDA(h) ................................. $ 26,466 $ 35,406 $ 64,547 $105,750 $180,272
Adjusted EBITDA margin(g) ........................... 43.3 % 50.9 % 54.4 % 56.3 % 52.0 %
After tax cash flow(i) .............................. $ 9,398 $ 17,950 $ 24,948 $ 51,288 $ 76,745
After tax cash flow margin(g) ..................... 15.4 % 25.8 % 21.0 % 27.3 % 22.3 %
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
<CAPTION>
DEBT AND
HYTOPS ISSUANCES,
SIX MONTHS ENDED 1996 ACQUISITIONS AND
JUNE 30, HERITAGE ACQUISITION
----------------------- -----------------------
PRO FORMA YEAR ENDED
1996(A) 1997(A) DECEMBER 31, 1996(B)
---------- ------------ -----------------------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
NET BROADCAST REVENUES(C) ........................... $117,339 $219,701 $ 532,357
Barter revenues .................................... 9,571 19,870 40,179
--------- -------- ---------
Total revenues .................................... 126,910 239,571 572,536
--------- -------- ---------
Operating expenses, excluding depreciation and amor-
tization, deferred compensation and special bonuses
paid to executive officers ........................ 52,826 114,697 274,073
Depreciation and amortization(d) .................. 45,493 76,650 177,286
Amortization of deferred compensation ............... 506 233 933
Special bonuses paid to executive officers ......... - - -
--------- -------- ---------
Broadcast operating income ........................ 28,085 47,991 120,244
--------- -------- ---------
Interest and amortization of debt discount expense 27,646 51,993 163,207
Interest and other income ........................... 3,172 1,087 7,753
Subsidiary trust minority interest expense(e) ...... - 7,007 23,250
--------- -------- ---------
Income (loss) before (provision) benefit for income
taxes and extraordinary item ........................ $ 3,611 $ (9,922) $ (58,460)
========= ======== =========
Net income (loss) available to common sharehold-
ers $ 1,511 $ (5,822) $ (40,553)
========= ======== =========
Earnings (loss) per common share:
Net income (loss) before extraordinary item ......... $ 0.04 $ (0.17) $ (1.04)
Extraordinary item ................................. - - -
--------- -------- ---------
Net income (loss) per common share .................. $ 0.04 $ (0.17) $ (1.04)
========= ======== =========
Weighted average shares outstanding (in thousands) 34,750 34,746 39,058
========= ======== =========
OTHER DATA:
Broadcast cash flow(f) .............................. $ 65,079 $105,600 $ 257,528
Broadcast cash flow margin(g) ..................... 55.5 % 48.1 % 48.4 %
Adjusted EBITDA(h) ................................. $ 62,013 $ 98,615 $ 246,278
Adjusted EBITDA margin(g) ........................... 52.8 % 44.9 % 46.3 %
After tax cash flow(i) .............................. $ 30,441 $ 32,737 $ 78,383
After tax cash flow margin(g) .................... . 26.0 % 15.0 % 14.7 %
Program contract payments ........................... $ 12,071 $ 26,259 $ 52,185
Capital expenditures .............................. 2,114 8,286 18,512
Corporate overhead expense ........................ 3,066 6,985 11,250
<CAPTION>
DEBT AND
DEBT AND HYTOPS ISSUANCES,
HYTOPS ISSUANCES, 1996 ACQUISITIONS,
1996 ACQUISITIONS, HERITAGE ACQUISITION,
HERITAGE ACQUISITION PREFERRED AND COMMON
AND PREFERRED STOCK OFFERING STOCK OFFERINGS(M)
------------------------------ ----------------------
PRO FORMA YEAR ENDED DECEMBER 31, 1996(B)
-----------------------------------------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
NET BROADCAST REVENUES(C) ........................... $ 532,357 $ 532,357
Barter revenues .................................... 40,179 40,179
--------- ---------
Total revenues .................................... 572,536 572,536
--------- ---------
Operating expenses, excluding depreciation and amor-
tization, deferred compensation and special bonuses
paid to executive officers ........................ 274,073 274,073
Depreciation and amortization(d) .................. 177,286 177,286
Amortization of deferred compensation ............... 933 933
Special bonuses paid to executive officers ......... - -
--------- ---------
Broadcast operating income ........................ 120,244 120,244
--------- ---------
Interest and amortization of debt discount expense 153,327 143,903
Interest and other income ........................... 7,753 7,753
Subsidiary trust minority interest expense(e) ...... 23,250 23,250
--------- ---------
Income (loss) before (provision) benefit for income
taxes and extraordinary item ........................ $ (48,580) $ (39,156)
========= =========
Net income (loss) available to common sharehold-
ers $ (44,000) $ (38,346)
========= =========
Earnings (loss) per common share:
Net income (loss) before extraordinary item ......... $ (1.13) $ (0.89)
Extraordinary item ................................. - -
--------- ---------
Net income (loss) per common share .................. $ (1.13) $ (0.89)
========= =========
Weighted average shares outstanding (in thousands) 39,058 43,058
========= =========
OTHER DATA:
Broadcast cash flow(f) .............................. $ 257,528 $ 257,528
Broadcast cash flow margin(g) ..................... 48.4 % 48.4 %
Adjusted EBITDA(h) ................................. $ 246,278 $ 246,278
Adjusted EBITDA margin(g) ........................... 46.3 % 46.3 %
After tax cash flow(i) .............................. $ 84,311 $ 89,965
After tax cash flow margin(g) ..................... 15.8 % 16.9 %
Program contract payments ........................... $ 52,185 $ 52,185
Capital expenditures .............................. 18,512 18,512
Corporate overhead expense ........................ 11,250 11,250
</TABLE>
(Continued on following page)
S-8
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------------------ JUNE 30,
1992 1993 1994(A) 1995(A) 1996(A) 1997(A)
---------- ------------ ------------ ------------- --------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET AND CASH
FLOW DATA:
Cash and cash equivalents .................. $ 1,823 $ 18,036 $ 2,446 $ 112,450 $ 2,341 $ 2,740
Total assets .............................. 140,366 242,917 399,328 605,272 1,707,297 1,762,505
Total debt(j) .............................. 110,659 224,646 346,270 418,171 1,288,147 1,175,783
Company Obligated Mandatorily Re-
deemable Security of Subsidiary
Trust Holding Solely KDSM Senior
Debentures(k) .............................. - - - - - 200,000
Total stockholders' equity (deficit) ...... (3,127) (11,024) (13,723) 96,374 237,253 232,638
Cash flows from operating activities(l). 5,235 11,230 20,781 55,909 68,970 42,483
Cash flows from investing activities(l). (1,051) 1,521 (249,781) (119,243) (1,011,897) (112,429)
Cash flows from financing activities(l). (3,741) 3,462 213,410 173,338 832,818 70,345
</TABLE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(a) The Company made acquisitions in 1994, 1995, 1996 and the first six
months of 1997 as described in the footnotes to the 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 Debt Issuance, the HYTOPS Issuance, the 1996
Acquisitions, the completion of the Heritage Acquisition and the
completion of the Preferred Stock Offering and the Common Stock
Offering. See "Pro Forma Consolidated Financial Information of
Sinclair" included elsewhere herein. The Heritage Acquisition is
subject to a number of conditions customary for acquisitions of
broadcasting properties. See "- Recent Developments."
(c) Net broadcast revenues are defined as broadcast revenues net of
agency commissions.
(d) Depreciation and amortization includes amortization of program
contract costs and net realizable value adjustments, depreciation and
amortization of property and equipment, and amortization of acquired
intangible broadcasting assets and other assets including
amortization of deferred financing costs and costs related to excess
syndicated programming.
(e) Subsidiary trust minority interest expense represents the
distributions on the HYTOPS.
(f) "Broadcast cash flow" is defined as broadcast operating income plus
corporate overhead expense, special bonuses paid to executive
officers, depreciation and amortization (including film amortization
and amortization of deferred compensation and excess syndicated
programming), less cash payments for program contract rights. Cash
program payments represent cash payments made for current program
payables and do not necessarily correspond to program usage. Special
bonuses paid to executive officers are considered non-recurring
expenses. The Company has presented broadcast cash flow data, which
the Company believes are comparable to the data provided by other
companies in the industry, because such data are commonly used as a
measure of performance for broadcast companies. However, broadcast
cash flow does not purport to represent cash provided by operating
activities as reflected in the Company's consolidated statements of
cash flows, is not a measure of financial performance under
generally accepted accounting principles and should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted
accounting principles.
(g) "Broadcast cash flow margin" is defined as broadcast cash flow
divided by net broadcast revenues. "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.
(h) "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.
(i) "After tax cash flow" is defined as net income (loss) before
extraordinary items 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.
(notes continued on following page)
S-9
(j) "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 (as defined herein), the proceeds of which were held in escrow
to provide a source of financing for acquisitions that were
subsequently consummated in 1994 utilizing borrowings under the Bank
Credit Agreement. $100,000 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.
(k) Company Obligated Mandatorily Redeemable Security of Subsidiary
Trust Holding Solely KDSM Senior Debentures represents $200,000
aggregate liquidation value of the HYTOPS.
(l) These items are financial statement disclosures in accordance with
generally accepted accounting principles and are also presented in
the Company's consolidated financial statements incorporated by
reference herein.
(m) There can be no assurance that the Common Stock Offering will be
consummated. The completion of the Preferred Stock Offering is not
conditioned upon the completion of the Common Stock Offering.
S-10
<PAGE>
HISTORICAL AND PRO FORMA RATIOS OF EARNINGS TO FIXED CHARGES
AND OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
The Company's consolidated ratios of earnings to fixed charges and earnings
to fixed charges and preferred dividends for each of the periods indicated are
set forth below:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
------ ------- ------ ------- ------- ------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a) ......... - 1.1 x - 1.3 x 1.1 x 1.1 x -
Ratio of earnings to fixed charges and preferred
stock dividends(a) ........................... - 1.1 x - 1.3 x 1.1 x 1.1 x -
= ===== = ===== ===== ===== =
</TABLE>
- ----------
(a) Earnings were inadequate to cover fixed charges and were inadequate to cover
fixed charges and preferred stock dividends for the years ended December 31,
1992 and 1994, and for the six months ended June 30, 1997. Additional
earnings of $5,840, $3,387, and $9,922 would have been required to cover
fixed charges and to cover fixed charges and preferred stock dividends in
the years ended December 31, 1992 and 1994, and the six months ended June
30, 1997, respectively.
Earnings were inadequate to cover fixed charges for the pro forma year
ended December 31, 1996 after giving effect to (i) the Debt and HYTOPS
Issuances, 1996 Acquisitions and Heritage Acquisition, (ii) such transactions
and consummation of the Preferred Stock Offering and (iii) such transactions and
consummation of the Preferred and Common Stock Offerings as if each transaction
had occurred on January 1, 1996; additional earnings of $58,460, $48,580 and
$39,156, respectively, would have been required to cover fixed charges for the
pro forma year ended December 31, 1996.
Earnings were inadequate to cover fixed charges for the pro forma six
months ended June 30, 1997 after giving effect to (i) the Debt and HYTOPS
Issuances, and the Heritage Acquisition, (ii) such transactions and consummation
of the Preferred Stock Offering and (iii) such transactions and consummation of
the Preferred and Common Stock Offerings as if each transaction had occurred on
January 1, 1997; additional earnings of $22,063, $17,123 and $12,411,
respectively, would have been required to cover fixed charges for the pro forma
six months ended June 30, 1997.
S-11
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the Preferred Stock Offering as
contemplated hereby (net of underwriting discounts and commissions and the
estimated expenses of the Offering) are estimated to be approximately $145.1
million ($167.0 million, if the Underwriter's over-allotment option is exercised
in full). Concurrently with this Offering, the Company and the Selling
Stockholders are conducting the Common Stock Offering, the net proceeds of which
to the Company are estimated to be approximately $137.1 million at an assumed
price of $36 per share (the closing price for the Class A Common Stock on August
21, 1997) (such offering along with the Preferred Stock Offering, the
"Offerings"). There can be no assurance that the Common Stock Offering will be
consummated. The completion of the Preferred Stock Offering is not conditioned
upon completion of the Common Stock Offering. The Company will not receive any
of the net proceeds from the sale of Class A Common Stock by the Selling
Stockholders, in the Common Stock Offering. A portion of the net proceeds to the
Company from the Offerings will be used to repay existing borrowings under the
Company's revolving credit facility under the Bank Credit Agreement (as defined
herein). These borrowings, which total $14 million as of the date of this
Prospectus Supplement and which were used for general corporate purposes, bear
interest at the rate of 8.5% per annum. After such debt repayment, the Company
may make additional borrowings under the revolving credit facility until
December 31, 2004. The remainder of the net proceeds from the Offerings ($268.2
million if both of the Offerings are completed and $131.2 million if only the
Preferred Stock Offering is completed) will be retained by the Company for
general corporate purposes including funding the Heritage Acquisition, which is
anticipated to close in the first quarter of 1998, and other acquisitions if
suitable acquisitions can be identified on acceptable terms. The Company has
requested that the lenders under the Bank Credit Agreement approve an amendment
that would recharacterize $275 million of indebtedness from the Tranche A term
loan under the Credit Agreement to amounts owing under the revolving credit
facility. If this amendment is approved, the Company will use all of the net
proceeds of the Offerings to repay indebtedness under the Bank Credit Agreement,
all of which may be reborrowed. 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% as of the date of this Prospectus Supplement.
S-12
<PAGE>
CAPITALIZATION
THE FOLLOWING TABLE SETS FORTH, AS OF JUNE 30, 1997, (A) THE ACTUAL
CAPITALIZATION OF THE COMPANY, (B) THE pro forma capitalization of the Company
as adjusted to reflect the consummation of the Debt Issuance consummated on July
2, 1997 and the Heritage Acquisition as if such transaction had occurred on June
30, 1997 (c) the pro forma capitalization of the Company as adjusted to reflect
the items in (b) and the Preferred Stock Offering at an offering price of $50
per share and the application of the estimated net proceeds therefrom as set
forth in "Use of Proceeds" as if such transactions had occurred on June 30, 1997
and (d) the pro forma capitalization of the Company as adjusted to reflect the
items noted in (b) and (c) and the Common Stock Offering at an assumed offering
price of $36 per share (the closing price of the Class A Common Stock on August
21, 1997) and the application of the estimated net proceeds therefrom as set
forth in "Use of Proceeds" as if such transactions had occurred on June 30,
1997. The information set forth below should be read in conjunction with "Pro
Forma Consolidated Financial Information of Sinclair" located elsewhere in this
Prospectus Supplement and the historical Consolidated Financial Statements of
the Company incorporated herein by reference.
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
DEBT ISSUANCE, DEBT ISSUANCE,
HERITAGE HERITAGE ACQUISITION,
DEBT ISSUANCE ACQUISITION PREFERRED AND
AND HERITAGE AND PREFERRED COMMON
ACTUAL ACQUISITION STOCK OFFERING STOCK OFFERINGS(A)
------------ --------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents .............................. $ 2,740 $ 35,740 $ 35,740 $ 35,740
========== ========== ========== ==========
Current portion of long-term debt ..................... $ 66,881 $ 66,881 $ 66,881 $ 66,881
========== ========== ========== ==========
Long-term debt:
Commercial bank financing ........................... $ 697,000 $1,104,500 $ 959,425 $ 822,345
Notes and capital leases payable to affiliates ......... 11,872 11,872 11,872 11,872
Capital leases ....................................... 30 30 30 30
Senior subordinated notes .............................. 400,000 600,000 600,000 600,000
---------- ---------- ---------- ----------
1,108,902 1,716,402 1,571,327 1,434,247
---------- ---------- ---------- ----------
Company Obligated Mandatorily Redeemable Security
of Subsidiary Trust Holding Solely KDSM Senior
Debentures ............................................. 200,000 200,000 200,000 200,000
---------- ---------- ---------- ----------
Stockholders' equity (deficit):
Series B Preferred Stock, $.01 par value, 10,000,000 shares authorized and
1,106,608 shares issued and
outstanding .......................................... 11 11 11 11
Series D Convertible Exchangeable Preferred Stock,
v $.01 par alue, 3,450,000 shares authorized and
3,000,000 shares issued and outstanding post Pre-
ferred Stock Offering - - 30 30
Class A Common Stock, $.01 par value, 100,000,000
shares authorized and 7,100,188 shares issued and
outstanding; 11,100,188 shares issued and outstand-
ing, post Common Stock Offering 71 71 71 111
Class B Common Stock, $.01 par value, 35,000,000
shares authorized and 27,591,581 shares issued and
outstanding .......................................... 277 277 277 277
Additional paid-in capital ........................... 234,812 234,812 379,857 516,897
Additional paid-in capital - deferred compensation . (896) (896) (896) (896)
Additional paid-in capital - equity put options ...... 23,117 23,117 23,117 23,117
Accumulated deficit ................................. (24,754) (24,754) (24,754) (24,754)
---------- ---------- ---------- ----------
Total stockholders' equity ........................... 232,638 232,638 377,713 514,793
---------- ---------- ---------- ----------
Total capitalization ................................. $1,541,540 $2,149,040 $2,149,040 $2,149,040
========== ========== ========== ==========
</TABLE>
- ----------
(a) There can be no assurance that the Common Stock Offering will be
consummated. The completion of the Preferred Stock Offering is not
conditioned upon the completion of the Common Stock Offering.
S-13
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF SINCLAIR
The following Pro Forma Consolidated Financial Data include the unaudited
pro forma consolidated balance sheet as of June 30, 1997 (the "Pro Forma
Consolidated Balance Sheet") and the unaudited pro forma consolidated statement
of operations for the year ended December 31, 1996 and the six months ended June
30, 1997 (the "Pro Forma Consolidated Statement of Operations"). The unaudited
Pro Forma Consolidated Balance Sheet is adjusted to give effect to the Debt
Issuance, the Heritage Acquisition, the Preferred Stock Offering and the Common
Stock Offering as if they occurred on June 30, 1997 and assuming application of
the proceeds of the Preferred Stock Offering and the Common Stock Offering as
set forth in "Use of Proceeds" above. The unaudited Pro Forma Consolidated
Statement of Operations for the year ended December 31, 1996 is adjusted to give
effect to the 1996 Acquisitions, the HYTOPS Issuance, the Debt Issuance, the
Heritage Acquisition, the Preferred Stock Offering and the Common Stock Offering
as if each occurred at the beginning of such period and assuming application of
the proceeds of the Preferred Stock Offering and the Common Stock Offering as
set forth in "Use of Proceeds." The unaudited Pro Forma Consolidated Statement
of Operations for the six months ended June 30, 1997 is adjusted to give effect
to the HYTOPS Issuance, the Debt Issuance, the Heritage Acquisition, and the
Preferred Stock Offering and the Common Stock Offering as if each occurred at
the beginning of such period and assuming application of the proceeds of the
Preferred Stock Offering and the Common Stock Offering as set forth in "Use of
Proceeds." The pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable. The Pro Forma
Consolidated Financial Data should be read in conjunction with the Company's
Consolidated Financial Statements as of and for the year ended December 31, 1996
and related notes thereto, the Company's unaudited consolidated financial
statements for the six months ended June 30, 1997 and related notes thereto, the
historical financial data of Flint T.V., Inc., the historical financial data of
Superior Communications, Inc., the historical financial data of KSMO and WSTR,
the historical financial data of River City Broadcasting, L.P. and the
historical financial data of Heritage Media Services, Inc. - Broadcasting
Segment, all of which have been filed with the Commission as part of (i) 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; (ii) the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997; or (iii) the Company's Current Reports on Form 8-K
and Form 8-K/A filed May 10, 1996, May 13, 1996, May 17, 1996, May 29, 1996,
August 30, 1996, September 5, 1996 and August 26, 1997, each of which is
incorporated by reference into this Prospectus Supplement. The unaudited Pro
Forma Consolidated Financial Data do not purport to represent what the Company's
results of operations or financial position would have been had any of the above
events occurred on the dates specified or to project the Company's results of
operations or financial position for or at any future period or date.
S-14
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DEBT
ISSUANCE
CONSOLIDATED DEBT HERITAGE AND HERITAGE
HISTORICAL ISSUANCE(A) ACQUISITION(B) ACQUISITION
-------------- ------------------ ---------------- -------------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .................................... $ 2,740 $ 33,000 (e) $ 35,740
Accounts receivable, net of allowance for doubtful accounts 102,093 102,093
Current portion of program contract costs .................. 34,768 $ 926 35,694
Prepaid expenses and other current assets .................. 4,054 4,054
Deferred barter costs ....................................... 4,267 2,218 6,485
Deferred tax asset .......................................... 8,188 8,188
---------- ----------
Total current assets ....................................... 156,110 33,000 3,144 192,254
PROGRAM CONTRACT COSTS, less current portion .................. 30,778 712 31,490
LOANS TO OFFICERS AND AFFILIATES .............................. 11,241 11,241
PROPERTY AND EQUIPMENT, net ................................. 156,681 22,022 178,703
NON-COMPETE AND CONSULTING AGREEMENTS, net .................. 2,250 2,250
OTHER ASSETS ................................................ 71,970 4,500 (f) 76,470
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net .................. 1,333,475 545,969 1,879,444
---------- ------------- ----------
Total Assets ............................................. $1,762,505 $ 37,500 $ 571,847 $2,371,852
========== ============ ============= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................. $ 5,310 $ 5,310
Accrued liabilities .......................................... 39,023 39,023
Current portion of long-term liabilities-
Notes payable and commercial bank financing ............... 65,500 65,500
Capital leases payable .................................... 11 11
Notes and capital leases payable to affiliates ............ 1,370 1,370
Program contracts payable ................................. 49,766 $ 1,096 50,862
Deferred barter revenues .................................... 4,458 4,458
---------- ----------
Total current liabilities ................................. 165,438 1,096 166,534
LONG-TERM LIABILITIES:
Notes payable and commercial bank financing ............... 1,097,000 $ 37,500 (g) 570,000 (h)1,704,500
Capital leases payable .................................... 30 30
Notes and capital leases payable to affiliates ............ 11,872 11,872
Program contracts payable ................................. 46,670 751 47,421
Other long-term liabilities ................................. 4,960 4,960
---------- ----------
Total liabilities .......................................... 1,325,970 37,500 571,847 1,935,317
---------- ------------ ------------- ----------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES ............... 3,897 3,897
---------- ----------
COMPANY OBLIGATED MANDATORILY REDEEMABLE SE-
CURITY OF SUBSIDIARY TRUST HOLDING SOLELY KDSM
SENIOR DEBENTURES .......................................... 200,000 200,000
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series B Preferred Stock ................................. 11 11
Series D Convertible Exchangeable Preferred Stock ......... - -
Class A Common Stock ....................................... 71 71
Class B Common Stock ....................................... 277 277
Additional paid-in capital ................................. 234,812 234,812
Additional paid-in capital - deferred compensation ......... (896) (896)
Additional paid-in capital - equity put options ............ 23,117 23,117
Accumulated deficit ....................................... (24,754) (24,754)
---------- ----------
Total stockholders' equity ................................. 232,638 232,638
---------- ----------
Total Liabilities and Stockholders' Equity ............... $1,762,505 $ 37,500 $ 571,847 $2,371,852
========== ============ ============= ==========
</TABLE>
(Continued on following page)
S-15
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DEBT
ISSUANCE PREFERRED
AND HERITAGE STOCK
ACQUISITION OFFERING(C)
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 35,740
Accounts receivable, net of allowance for doubtful ac-
counts 102,093
Current portion of program contract costs ............ 35,694
Prepaid expenses and other current assets ............ 4,054
Deferred barter costs ................................. 6,485
Deferred tax asset .................................... 8,188 -
---------- ----------
Total current assets .............................. 192,254
PROGRAM CONTRACT COSTS, less current portion 31,490
LOANS TO OFFICERS AND AFFILIATES ..................... 11,241
PROPERTY AND EQUIPMENT, net ........................... 178,703
NON-COMPETE AND CONSULTING AGREE-
MENTS, net 2,250
OTHER ASSETS .......................................... 76,470
ACQUIRED INTANGIBLE BROADCASTING AS-
SETS, net 1,879,444 -
---------- ----------
Total Assets ....................................... $2,371,852 $
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................... $ 5,310
Accrued liabilities ................................. 39,023
Current portion of long-term liabilities-
Notes payable and commercial bank financing ......... 65,500
Capital leases payable .............................. 11
Notes and capital leases payable to affiliates ...... 1,370
Program contracts payable ........................... 50,862
Deferred barter revenues .............................. 4,458 -
---------- ----------
Total current liabilities ........................... 166,534
LONG-TERM LIABILITIES:
Notes payable and commercial bank financing ......... 1,704,500 $ (145,075)
Capital leases payable .............................. 30
Notes and capital leases payable to affiliates ...... 11,872
Program contracts payable ........................... 47,421
Other long-term liabilities ........................ 4,960
----------
Total liabilities ................................. 1,935,317 (145,075)
---------- ----------
MINORITY INTEREST IN CONSOLIDATED SUB-
SIDIARIES 3,897
----------
COMPANY OBLIGATED MANDATORILY RE-
DEEMABLE SECURITY OF SUBSIDIARY
TRUST HOLDING SOLELY KDSM SENIOR DE-
BENTURES 200,000
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series B Preferred Stock ........................... 11
Series D Convertible Exchangeable Preferred Stock - 30
Class A Common Stock .............................. 71
Class B Common Stock .............................. 277
Additional paid-in capital ........................... 234,812 145,045
Additional paid-in capital - deferred compensation. (896)
Additional paid-in capital - equity put options ...... 23,117
Accumulated deficit ................................. (24,754)
----------
Total stockholders' equity ........................ 232,638 145,075
---------- ----------
Total Liabilities and Stockholders' Equity ......... $2,371,852 $ -
========== ==========
<CAPTION>
DEBT
DEBT ISSUANCE,
ISSUANCE, HERITAGE
HERITAGE ACQUISITION,
ACQUISITION, AND COMMON PREFERRED AND
PREFERRED STOCK STOCK COMMON STOCK
OFFERING OFFERING(D) OFFERINGS(D)
------------------ ------------- --------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 35,740 $ 35,740
Accounts receivable, net of allowance for doubtful ac-
counts 102,093 102,093
Current portion of program contract costs ............ 35,694 35,694
Prepaid expenses and other current assets ............ 4,054 4,054
Deferred barter costs ................................. 6,485 6,485
Deferred tax asset .................................... 8,188 8,188
----------- -----------
Total current assets .............................. 192,254 192,254
PROGRAM CONTRACT COSTS, less current portion 31,490 31,490
LOANS TO OFFICERS AND AFFILIATES ..................... 11,241 11,241
PROPERTY AND EQUIPMENT, net ........................... 178,703 178,703
NON-COMPETE AND CONSULTING AGREE-
MENTS, net 2,250 2,250
OTHER ASSETS .......................................... 76,470 76,470
ACQUIRED INTANGIBLE BROADCASTING AS-
SETS, net 1,879,444 - 1,879,444
----------- ---------- -----------
Total Assets ....................................... $ 2,371,852 $ $ 2,371,852
=========== ========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................... $ 5,310 $ 5,310
Accrued liabilities ................................. 39,023 39,023
Current portion of long-term liabilities-
Notes payable and commercial bank financing ......... 65,500 65,500
Capital leases payable .............................. 11 11
Notes and capital leases payable to affiliates ...... 1,370 1,370
Program contracts payable ........................... 50,862 50,862
Deferred barter revenues .............................. 4,458 - 4,458
----------- ---------- -----------
Total current liabilities ........................... 166,534 166,534
LONG-TERM LIABILITIES:
Notes payable and commercial bank financing ......... 1,559,425 $ (137,080) 1,422,345
Capital leases payable .............................. 30 30
Notes and capital leases payable to affiliates ...... 11,872 11,872
Program contracts payable ........................... 47,421 47,421
Other long-term liabilities ........................ 4,960 4,960
----------- -----------
Total liabilities ................................. 1,790,242 (137,080) 1,653,162
----------- ---------- -----------
MINORITY INTEREST IN CONSOLIDATED SUB-
SIDIARIES 3,897 3,897
----------- -----------
COMPANY OBLIGATED MANDATORILY RE-
DEEMABLE SECURITY OF SUBSIDIARY
TRUST HOLDING SOLELY KDSM SENIOR DE-
BENTURES 200,000 200,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series B Preferred Stock ........................... 11 11
Series D Convertible Exchangeable Preferred Stock 30 30
Class A Common Stock .............................. 71 40 111
Class B Common Stock .............................. 277 277
Additional paid-in capital ........................... 379,857 137,040 516,897
Additional paid-in capital - deferred compensation. (896) (896)
Additional paid-in capital - equity put options ...... 23,117 23,117
Accumulated deficit ................................. (24,754) (24,754)
----------- -----------
Total stockholders' equity ........................ 377,713 137,080 514,793
----------- ---------- -----------
Total Liabilities and Stockholders' Equity ......... $ 2,371,852 $ - $ 2,371,852
=========== ========== ===========
</TABLE>
S-16
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) To reflect the proceeds of the Debt Issuance consummated on July 2, 1997,
net of $4,500 of underwriting discounts and commissions and estimated
expenses and the application of the proceeds therefrom.
(b) The Heritage Acquisition column reflects the assets and liabilities acquired
in connection with the $630,000 purchase of Heritage less the $60,000
divestiture of the Heritage television station KOKH in Oklahoma City,
Oklahoma which is required pursuant to the Heritage Acquisition Agreements
and with respect to which the Company has entered into a letter of intent.
The Heritage Acquisition is subject to a number of conditions customary for
acquisitions of broadcasting properties. Total acquired intangibles are
calculated as follows:
<TABLE>
<CAPTION>
HERITAGE
HERITAGE KOKH ACQUISITION
---------- ---------- ------------
<S> <C> <C> <C>
Purchase Price .......................................... $630,000
Add:
Liabilities acquired-
Current portion of program contracts payable ......... $ 1,552 $ (456) 1,096
Long-term portion of program contracts payable ...... 860 (109) 751
Less:
Assets acquired-
Current portion of program contract costs ............ 1,603 (677) 926
Deferred barter costs .............................. 2,496 (278) 2,218
Program contract costs, less current portion ......... 1,266 (554) 712
Property and equipment .............................. 27,524 (5,502) 22,022
Sale of KOKH ....................................... 60,000
---------
Acquired intangibles ................................. $545,969
=========
</TABLE>
(c) To reflect the proceeds of the Preferred Stock Offering (at an assumed
offering price of $50 per share), net of $4,925 of underwriting discounts
and commissions and estimated expenses and the application of the proceeds
therefrom as set forth in "Use of Proceeds."
(d) To reflect the proceeds of the Common Stock Offering (at an assumed offering
price of $36 per share, the closing price of the Class A Common Stock on
August 21, 1997), net of $6,920 of underwriting discounts and commissions
and estimated expenses and the application of the proceeds therefrom as set
forth in "Use of Proceeds." There can be no assurance that the Common Stock
Offering will be consummated. The completion of the Preferred Stock Offering
is not conditioned upon the completion of the Common Stock Offering.
(e) To record the increase in cash and cash equivalents resulting from the net
proceeds of the Debt Issuance after giving effect to the repayment of the
revolving credit facility under the Bank Credit Agreement as follows:
<TABLE>
<S> <C>
Offering proceeds .......................................... $ 200,000
Underwriting discounts, commissions and estimated expenses (4,500)
Repayment of revolving credit facility under the Bank Credit
Agreement ................................................ (162,500)
----------
Pro forma adjustment ....................................... $ 33,000
==========
</TABLE>
(f) To record underwriting discounts and commissions and estimated expenses of
$4,500.
(g) To reflect the increase in indebtedness resulting from the Debt Issuance
after giving effect to the repayment of the revolving credit facility under
the Bank Credit Agreement as follows:
<TABLE>
<S> <C>
Indebtedness incurred .................................... $ 200,000
Repayment of revolving credit facility under the Bank Credit
Agreement ................................................ (162,500)
----------
Pro forma adjustment ....................................... $ 37,500
==========
</TABLE>
(h) To reflect the incurrence of $570,000 of bank financing in connection with
the Heritage Acquisition.
S-17
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SUPERIOR
CONSOLIDATED FLINT COMMUNICATIONS
HISTORICAL TV, INC.(A) GROUP, INC.(B) KSMO(C)
-------------- ------------- ---------------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commis-
sions $ 346,459 $1,012 $4,431 $ 7,694
Revenues realized from station barter arrange-
ments 32,029 2,321
---------- --------
Total revenues .................................... 378,488 1,012 4,431 10,015
---------- ------- ------ --------
OPERATING EXPENSES:
Program and production ........................... 66,652 101 539 1,550
Selling, general and administrative ............... 75,924 345 2,002 2,194
Expenses realized from barter arrangements ......... 25,189 2,276
Amortization of program contract costs and net
realizable value adjustments ..................... 47,797 125 736 601
Amortization of deferred compensation ............ 739
Depreciation and amortization of property and
equipment ....................................... 11,711 4 373 374
Amortization of acquired intangible broadcasting
assets, non-compete and consulting agreements
and other assets ................................. 58,530 529
Amortization of excess syndicated programming . 3,043
----------
Total operating expenses ........................ 289,585 575 4,179 6,995
---------- ------- ------ --------
Broadcast operating income (loss) ............... 88,903 437 252 3,020
---------- ------- ------ --------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense (84,314) (457) (823)
Interest income .................................... 3,136
Subsidiary trust minority interest expense .........
Other income (expense) ........................... 342 19 4 7
---------- ------- ------ --------
Income (loss) before provision (benefit) for
income taxes .................................... 8,067 456 (201) 2,204
PROVISION (BENEFIT) FOR INCOME
TAXES ............................................. 6,936
----------
NET INCOME (LOSS) ................................. $ 1,131 $ 456 $ (201) $ 2,204
========== ======= ====== ========
NET INCOME (LOSS) AVAILABLE TO COM-
MON STOCKHOLDERS $ 1,131
==========
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE ........................... $ 0.03
==========
WEIGHTED AVERAGE COMMON AND COM-
MON EQUIVALENT SHARES OUTSTAND-
ING 37,381
==========
<CAPTION>
RIVER CITY(E) 1996
-------------------------- ACQUISITION
WSTR(D) RIVER CITY WSYX WYZZ(F) ADJUSTMENTS
----------- ------------ ------------- --------- ------------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commis-
sions $ 7,488 $ 86,869 $ (10,783) $1,838
Revenues realized from station barter arrange-
ments 1,715
---------
Total revenues .................................... 9,203 86,869 (10,783) 1,838
--------- ---------- ---------- -------
OPERATING EXPENSES:
Program and production ........................... 961 10,001 (736) 214
Selling, general and administrative ............... 2,173 39,786 (3,950) 702 $ (3,577)(h)
Expenses realized from barter arrangements ......... 1,715
Amortization of program contract costs and net
realizable value adjustments ..................... 1,011 9,721 (458) 123
Amortization of deferred compensation ............ 194 (i)
Depreciation and amortization of property and
equipment ....................................... 284 6,294 (1,174) 6 (943)(j)
Amortization of acquired intangible broadcasting
assets, non-compete and consulting agreements
and other assets ................................. 39 14,041 (3,599) 3 4,034 (k)
Amortization of excess syndicated programming .
Total operating expenses ........................ 6,183 79,843 (9,917) 1,048 (292)
--------- ---------- ---------- ------- -------------
Broadcast operating income (loss) ............... 3,020 7,026 (866) 790 292
--------- ---------- ---------- ------- -------------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense (1,127) (12,352) (17,409)(l)
Interest income .................................... 15 195 (1,636)(m)
Subsidiary trust minority interest expense .........
Other income (expense) ........................... (149) (8)
---------- ----------
Income (loss) before provision (benefit) for
income taxes .................................... 1,908 (5,280) (874) 790 (18,753)
PROVISION (BENEFIT) FOR INCOME
TAXES ............................................. (7,900)(n)
-------------
NET INCOME (LOSS) ................................. $ 1,908 $ (5,280) $ (874) $ 790 $ (10,853)
========= ========== ========== ======= =============
NET INCOME (LOSS) AVAILABLE TO COM-
MON STOCKHOLDERS
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE ...........................
WEIGHTED AVERAGE COMMON AND COM-
MON EQUIVALENT SHARES OUTSTAND-
ING
<CAPTION>
DEBT ISSUANCE,
HYTOPS DEBT HYTOPS ISSUANCE
ISSUANCE ISSUANCE AND 1996 ACQUISITIONS
------------------ -------------------- ----------------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commis-
sions $ 445,008
Revenues realized from station barter arrange-
ments 36,065
-----------
Total revenues .................................... 481,073
-----------
OPERATING EXPENSES:
Program and production ........................... 79,282
Selling, general and administrative ............... 115,599
Expenses realized from barter arrangements ......... 29,180
Amortization of program contract costs and net
realizable value adjustments ..................... 59,656
Amortization of deferred compensation ............ 933
Depreciation and amortization of property and
equipment ....................................... 16,929
Amortization of acquired intangible broadcasting
assets, non-compete and consulting agreements
and other assets ................................. $ 500 (p) $ 450 (s) 74,527
Amortization of excess syndicated programming . 3,043
-----------
Total operating expenses ........................ 500 450 379,149
------------- -------------- -----------
Broadcast operating income (loss) ............... (500) (450) 101,924
------------- -------------- -----------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense 11,820 (q) (18,000) (t) (122,662)
Interest income .................................... 1,710
Subsidiary trust minority interest expense ......... (23,250)(r) (23,250)
Other income (expense) ........................... 215
-----------
Income (loss) before provision (benefit) for
income taxes .................................... (11,930) (18,450) (42,063)
PROVISION (BENEFIT) FOR INCOME
TAXES ............................................. (4,772)(n) (7,380)(n) (13,116)
------------- -------------- -----------
NET INCOME (LOSS) ................................. $ (7,158) $ (11,070) $ (28,947)
============= ============== ===========
NET INCOME (LOSS) AVAILABLE TO COM-
MON STOCKHOLDERS
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE ...........................
WEIGHTED AVERAGE COMMON AND COM-
MON EQUIVALENT SHARES OUTSTAND-
ING
</TABLE>
(Continued on following page)
S-18
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HERITAGE(G)
DEBT ISSUANCE, -------------------------
HYTOPS ISSUANCE
AND 1996 ACQUISITIONS HERITAGE KOKH
----------------------- ------------ ------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions ...... $ 445,008 $ 95,302 $ (7,953)
Revenues realized from station barter arrangements ......... 36,065 4,292 (178)
----------- ---------- --------
Total revenues ............................................. 481,073 99,594 (8,131)
----------- ---------- --------
OPERATING EXPENSES:
Program and production ....................................... 79,282 20,089 (1,871)
Selling, general and administrative ........................ 115,599 31,916 (1,722)
Expenses realized from barter arrangements .................. 29,180 3,478 (70)
Amortization of program contract costs and net realizable
value adjustments .......................................... 59,656 3,165 (1,208)
Amortization of deferred compensation ........................ 933
Depreciation and amortization of property and equipment . 16,929 5,472 (1,022)
Amortization of acquired intangible broadcasting assets, non-
compete and consulting agreements and other assets ......... 74,527 8,460 (367)
Amortization of excess syndicated programming ............... 3,043
-----------
Total operating expenses ................................. 379,149 72,580 (6,260)
----------- ---------- --------
Broadcast operating income (loss) ........................... 101,924 27,014 (1,871)
----------- ---------- --------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense ......... (122,662) (17,949) 1,025
Gain on sale of station .................................... 6,031
Interest income ............................................. 1,710
Subsidiary trust minority interest expense .................. (23,250)
Other income (expense) ....................................... 215 (203)
----------- ----------
Income (loss) before provision (benefit) for income taxes (42,063) 14,893 (846)
PROVISION (BENEFIT) FOR INCOME
TAXES ...................................................... (13,116) 7,853 (466)
----------- ---------- --------
NET INCOME (LOSS) ............................................. $ (28,947) $ 7,040 $ (380)
=========== ========== ========
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS ................................................
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE .............................................
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING ..............................
<CAPTION>
DEBT ISSUANCE,
HERITAGE HYTOPS ISSUANCE, PREFERRED
ACQUISITION 1996 ACQUISITIONS AND STOCK
ADJUSTMENTS HERITAGE ACQUISITION OFFERING
-------------------- ----------------------- -----------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions ...... $ 532,357
Revenues realized from station barter arrangements ......... 40,179
------------
Total revenues ............................................. 572,536
------------
OPERATING EXPENSES:
Program and production ....................................... 97,500
Selling, general and administrative ........................ $ (1,808) (u) 143,985
Expenses realized from barter arrangements .................. 32,588
Amortization of program contract costs and net realizable
value adjustments .......................................... 61,613
Amortization of deferred compensation ........................ 933
Depreciation and amortization of property and equipment . (900)(v) 20,479
Amortization of acquired intangible broadcasting assets, non-
compete and consulting agreements and other assets ......... 9,531 (w) 92,151
Amortization of excess syndicated programming ............... 3,043
------------
Total operating expenses ................................. 6,823 452,292
----------- ------------
Broadcast operating income (loss) ........................... (6,823) 120,244
----------- ------------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense ......... (23,621)(x) (163,207) $ 9,880 (y)
Gain on sale of station .................................... 6,031
Interest income ............................................. 1,710
Subsidiary trust minority interest expense .................. (23,250)
Other income (expense) ....................................... 12
------------
Income (loss) before provision (benefit) for income taxes (30,444) (58,460) 9,880
PROVISION (BENEFIT) FOR INCOME
TAXES ...................................................... (12,178)(n) (17,907) 3,952 (n)
----------- ------------ ----------
NET INCOME (LOSS) ............................................. $ (18,266) $ (40,553) $ 5,928
=========== ============ ==========
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS ................................................ $ (40,553)
============
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE ............................................. $ (1.04)
============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING .............................. 39,058 (o)
============
<CAPTION>
DEBT ISSUANCE,
DEBT ISSUANCE, HYTOPS ISSUANCE,
HYTOPS ISSUANCE, 1996 ACQUISITIONS,
1996 ACQUISITIONS, HERITAGE ACQUISITION,
HERITAGE ACQUISITION COMMON PREFERRED AND
AND PREFERRED STOCK STOCK COMMON STOCK
OFFERING OFFERING(MM) OFFERINGS(MM)
---------------------- ----------------- ----------------------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions ...... $ 532,357 $ 532,357
Revenues realized from station barter arrangements ......... 40,179 40,179
------------ -------------
Total revenues ............................................. 572,536 572,536
------------ -------------
OPERATING EXPENSES:
Program and production ....................................... 97,500 97,500
Selling, general and administrative ........................ 143,985 143,985
Expenses realized from barter arrangements .................. 32,588 32,588
Amortization of program contract costs and net realizable
value adjustments .......................................... 61,613 61,613
Amortization of deferred compensation ........................ 933 933
Depreciation and amortization of property and equipment . 20,479 20,479
Amortization of acquired intangible broadcasting assets, non-
compete and consulting agreements and other assets ......... 92,151 92,151
Amortization of excess syndicated programming ............... 3,043 3,043
------------ -------------
Total operating expenses ................................. 452,292 452,292
------------ -------------
Broadcast operating income (loss) ........................... 120,244 120,244
------------ -------------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense ......... (153,327) $ 9,424 (z) (143,903)
Gain on sale of station .................................... 6,031 6,031
Interest income ............................................. 1,710 1,710
Subsidiary trust minority interest expense .................. (23,250) (23,250)
Other income (expense) ....................................... 12 12
------------ -------------
Income (loss) before provision (benefit) for income taxes (48,580) 9,424 (39,156)
PROVISION (BENEFIT) FOR INCOME
TAXES ...................................................... (13,955) 3,770 (n) (10,185)
------------ ---------- -------------
NET INCOME (LOSS) ............................................. $ (34,625) $ 5,654 $ (28,971)
============ ========== =============
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS ................................................ $ (44,000) $ (38,346)
============ =============
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE ............................................. $ (1.13) $ (0.89)
============ =============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING .............................. 39,058 (o) 43,058 (aa)
============ =============
</TABLE>
S-19
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
HERITAGE(G)
CONSOLIDATED HYTOPS DEBT ------------------------
HISTORICAL ISSUANCE ISSUANCE HERITAGE KOKH
------------ -------------- ------------- --------- --------
<S> <C> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency
commissions ................................. $ 219,701 $ 46,451 $ (3,706)
Revenues realized from station barter ar-
rangements 19,870 2,430 (125)
---------- --------- --------
Total revenues .............................. 239,571 48,881 (3,831)
---------- --------- --------
OPERATING EXPENSES:
Program and production ........................ 46,760 15,313 (1,150)
Selling, general and administrative ......... 51,634 9,447 (784)
Expenses realized from station barter ar-
rangements 16,303 1,849 (62)
Amortization of program contract costs and
net realizable value adjustments ............ 30,918 824 (297)
Amortization of deferred compensation ......... 233
Depreciation and amortization of property
and equipment .............................. 8,340 2,819 (445)
Amortization of acquired intangible broad-
casting assets, non-compete and consult-
ing agreements and other assets 37,392 $ 88 (bb) $ 225 (ee) 4,174 (184)
---------- ------------- ------------- --------- --------
Total operating expenses ..................... 191,580 88 225 34,426 (2,922)
---------- ------------- ------------- --------- --------
Broadcast operating income (loss) ............ 47,991 (88) (225) 14,455 (909)
---------- ------------- ------------- --------- --------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount
expense ....................................... (51,993) 2,894 (cc) (9,000)(ff) (9,979) 425
Gain of sale of station ..................... 9,401
Interest income .............................. 1,040
Subsidiary trust minority interest expense . (7,007) (4,618)(dd)
Other income ................................. 47 (98)
---------- ---------
Income (loss) before provision (bene-
fit) for income taxes (9,922) (1,812) (9,225) 13,779 (484)
PROVISION (BENEFIT) FOR INCOME
TAXES ....................................... (4,100) (725)(n) (3,690)(n) 7,262 (369)
---------- ------------- ------------ --------- --------
NET INCOME (LOSS) .............................. $ (5,822) $ (1,087) $ (5,535) $ 6,517 $ (115)
========== ============= ============ ========= ========
NET LOSS AVAILABLE TO COMMON
STOCKHOLDERS ................................. $ (5,822)
==========
NET LOSS PER COMMON AND COM-
MON EQUIVALENT SHARE $ (0.17)
==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ........................... 34,746
==========
<CAPTION>
HERITAGE DEBT ISSUANCE, PREFERRED
ACQUISITION HYTOPS ISSUANCE STOCK
<S> <C> <C> <C>
ADJUSTMENTS AND HERITAGE ACQUISITION OFFERING
---------------- ------------------------- --------------
REVENUES:
Station broadcast revenues, net of agency
commissions ................................. $ 262,446
Revenues realized from station barter ar-
rangements 22,175
---------
Total revenues .............................. 284,621
---------
OPERATING EXPENSES:
Program and production ........................ 60,923
Selling, general and administrative ......... $ (883) (gg) 59,414
Expenses realized from station barter ar-
rangements 18,090
Amortization of program contract costs and
net realizable value adjustments ............ 31,445
Amortization of deferred compensation ......... 233
Depreciation and amortization of property
and equipment .............................. (450) (hh) 10,264
Amortization of acquired intangible broad-
casting assets, non-compete and consult-
ing agreements and other assets 4,964 (ii) 46,659
------------- ---------
Total operating expenses ..................... 3,631 227,028
------------- ---------
Broadcast operating income (loss) ............ (3,631) 57,593
------------- ---------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount
expense ....................................... (10,768) (jj) (78,421) $ 4,940 (kk)
Gain of sale of station ..................... 9,401
Interest income .............................. 1,040
Subsidiary trust minority interest expense . (11,625)
Other income ................................. (51)
---------
Income (loss) before provision (bene-
fit) for income taxes (14,399) (22,063) 4,940
PROVISION (BENEFIT) FOR INCOME
TAXES ....................................... (5,760) (n) (7,382) 1,976 (n)
------------- --------- ----------
NET INCOME (LOSS) .............................. $ (8,639) $ (14,681) $ 2,964
============= ========= ==========
NET LOSS AVAILABLE TO COMMON
STOCKHOLDERS ................................. $ (14,681)
=========
NET LOSS PER COMMON AND COM-
MON EQUIVALENT SHARE $ (0.42)
=========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ........................... 34,769
=========
<CAPTION>
DEBT ISSUANCE,
DEBT ISSUANCE, HYTOPS ISSUANCE,
HYTOPS ISSUANCE, HERITAGE ACQUISITION,
HERITAGE ACQUISITION COMMON PREFERRED AND
AND PREFERRED STOCK COMMON STOCK
<S> <C> <C> <C>
STOCK OFFERING OFFERING(MM) OFFERINGS(MM)
---------------------- ------------------- ----------------------
REVENUES:
Station broadcast revenues, net of agency
commissions ................................. $ 262,446 $ 262,446
Revenues realized from station barter ar-
rangements 22,175 22,175
--------- -------------
Total revenues .............................. 284,621 284,621
--------- -------------
OPERATING EXPENSES:
Program and production ........................ 60,923 60,923
Selling, general and administrative ......... 59,414 59,414
Expenses realized from station barter ar-
rangements 18,090 18,090
Amortization of program contract costs and
net realizable value adjustments ............ 31,445 31,445
Amortization of deferred compensation ......... 233 233
Depreciation and amortization of property
and equipment .............................. 10,264 10,264
Amortization of acquired intangible broad-
casting assets, non-compete and consult-
ing agreements and other assets 46,659 46,659
--------- -------------
Total operating expenses ..................... 227,028 227,028
--------- -------------
Broadcast operating income (loss) ............ 57,593 57,593
--------- -------------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount
expense ....................................... (73,481) $ 4,712 (ll) (68,769)
Gain of sale of station ..................... 9,401 9,401
Interest income .............................. 1,040 1,040
Subsidiary trust minority interest expense . (11,625) (11,625)
Other income ................................. (51) (51)
--------- -------------
Income (loss) before provision (bene-
fit) for income taxes (17,123) 4,712 (12,411)
PROVISION (BENEFIT) FOR INCOME
TAXES ....................................... (5,406) 1,884 (n) (3,522)
--------- ---------- -------------
NET INCOME (LOSS) .............................. $ (11,717) $ 2,880 $ (8,889)
========= ========== =============
NET LOSS AVAILABLE TO COMMON
STOCKHOLDERS ................................. $ (16,405) $ (13,577)
========= =============
NET LOSS PER COMMON AND COM-
MON EQUIVALENT SHARE $ (0.47) $ (0.35)
========= =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING ........................... 34,769 38,769 (aa)
========= =============
</TABLE>
S-20
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) The Flint T.V., Inc. ("Flint-TV") column reflects the results of operations
for WSMH for the period from January 1, 1996 to February 28, 1996, the
date the Flint Acquisition was consummated.
(b) The Superior Communications Group, Inc. column reflects the results of
operations for Superior for the period from January 1, 1996 to May 7,
1996, the date the Superior Acquisition was consummated.
(c) The KSMO column reflects the results of operations for the period from
January 1, 1996 to June 30, 1996 as the transaction was consummated in July
1996.
(d) The WSTR column reflects the results of operations for the period from
January 1, 1996 to July 31, 1996 as the transaction was consummated in
August 1996.
(e) The River City column reflects the results of operations for River City
(including KRRT, Inc.) for the period from January 1, 1996 to May 31,
1996, the date the River City Acquisition was consummated. The WSYX column
removes the results of WSYX from the results of River City for the period
as the Company has not yet acquired WSYX. See "Business of Sinclair -
Broadcasting Acquisition Strategy."
(f) The WYZZ column reflects the results of operations for the period from
January 1, 1996 to June 30, 1996 as the purchase transaction was consummated
in July 1996.
(g) The Heritage column reflects the results of operations for the period from
January 1, 1996 to December 31, 1996 for the year ended December 31, 1996
Pro Forma Consolidated Statement of Operations and the results of operations
for the period from January 1, 1997 to June 30, 1997 for the six months
ended June 30, 1997 Pro Forma Consolidated Statement of Operations. The KOKH
column removes the results of KOKH from the results of Heritage for both
periods to reflect the sale of KOKH, which is required pursuant to the
Heritage Acquisition Agreements and with respect to which the Company has
entered into a letter of intent. See "Business of Sinclair - 1997
Acquisitions."
(h) To adjust River City operating expenses for non-recurring LMA payments made
to KRRT, Inc. for KRRT, Inc. debt service and to adjust River City and
Superior operating expenses for employment contracts and other corporate
overhead expenses not assumed at the time of the 1996 Acquisitions.
(i) To record compensation expense related to options granted under the
Company's Long-Term Incentive Plan:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
-------------
<S> <C>
Compensation expense related to the Long-Term Incentive
Plan on a pro forma basis ........................... $ 933
Less: Compensation expense recorded by the Company re-
lated to the Long-Term Incentive Plan (739)
------
$ 194
======
</TABLE>
(j) To record depreciation expense related to acquired tangible assets and
eliminate depreciation expense recorded by Flint-TV, Superior, KSMO, WSTR,
River City and WYZZ from the period of January 1, 1996 through the date of
acquisition. Tangible assets are to be depreciated over lives ranging from 5
to 29.5 years, calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
---------------------------------
FLINT-TV SUPERIOR KSMO
---------- ---------- -----------
<S> <C> <C> <C>
Depreciation expense on acquired tangible assets $ 32 $ 315 $ 240
Less: Depreciation expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City and WYZZ ...... (4) (373) (374)
----- ------ -------
Pro forma adjustment ........................... $ 28 $ (58) $ (134)
===== ====== =======
<CAPTION>
WSTR RIVER CITY WYZZ TOTAL
--------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Depreciation expense on acquired tangible assets $ 507 $ 3,965 $ 159 $ 5,218
Less: Depreciation expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City and WYZZ ...... (284) (5,120) (6) (6,161)
------- --------- ------ ---------
Pro forma adjustment ........................... $ 223 $ (1,155) $ 153 $ (943)
======= ========= ====== =========
</TABLE>
(k) To record amortization expense related to acquired intangible assets and
deferred financing costs and eliminate amortization expense recorded by
Flint-TV, Superior, KSMO, WSTR, River City and WYZZ from the period of
January 1, 1996 through date of acquisition. Intangible assets are to be
amortized over lives ranging from 1 to 40 years, calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------------------
FLINT-TV SUPERIOR KSMO
---------- ---------- -------
<S> <C> <C> <C>
Amortization expense on acquired intangible assets $ 167 $ 827 $ 180
Deferred financing costs ...........................
Less: Amortization expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City and WYZZ ......... - (529) -
------ ------- ------
Pro forma adjustment .............................. $ 167 $ 298 $ 180
====== ======= ======
<CAPTION>
WSTR RIVER CITY WYZZ TOTAL
------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Amortization expense on acquired intangible assets $ 285 $ 12,060 $ 99 $ 13,618
Deferred financing costs ........................... 1,429 1,429
Less: Amortization expense recorded by Flint-TV,
Superior, KSMO, WSTR, River City and WYZZ ......... (39) (10,442) (3) (11,013)
----- ---------- ----- ----------
Pro forma adjustment .............................. $ 246 $ 3,047 $ 96 $ 4,034
===== ========== ===== ==========
</TABLE>
S-21
<PAGE>
(l) To record interest expense for the year ended December 31, 1996 on
acquisition financing relating to Superior of $59,850 (under the Bank Credit
Agreement at 8.0% for four months), KSMO and WSTR of $10,425 and $7,881,
respectively (both under the Bank Credit Agreement at 8.0% for six months),
River City (including KRRT) of $868,300 (under the Bank Credit Agreement at
8.0% for five months) and of $851 for hedging agreements related to the
River City financing and WYZZ of $20,194 (under the Bank Credit Agreement at
8.0% for six months) and eliminate interest expense recorded. No interest
expense has been recorded for Flint-TV as it has been assumed that the
proceeds from the 1995 Notes were used to purchase Flint-TV.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-------------------------------------
SUPERIOR KSMO WSTR
------------- ----------- -----------
<S> <C> <C> <C>
Interest expense adjustment as noted above ...... $ (1,596) $ (417) $ (315)
Less: Interest expense recorded by Superior, KSMO,
WSTR, River City and WYZZ ........................ 457 823 1,127
--------- ------- -------
Pro forma adjustment ........................... $ (1,139) $ 406 $ 812
========= ======= =======
<CAPTION>
RIVER CITY WYZZ TOTAL
------------ ---------- --------------
<S> <C> <C> <C>
Interest expense adjustment as noted above ...... $ (29,032) $ (808) $ (32,168)
Less: Interest expense recorded by Superior, KSMO,
WSTR, River City and WYZZ ........................ 12,352 - 14,759
--------- ------- ----------
Pro forma adjustment ........................... $ (16,680) $ (808) $ (17,409)
========= ======= ==========
</TABLE>
(m) To eliminate interest income for the year ended December 31, 1996 on
proceeds from the sale of the 1995 Notes due to assumed utilization of
excess cash for the following acquisitions: Flint-TV, KSMO and WSTR and WYZZ
of $34,400 (with a commercial bank at 5.7% for two months), $10,425 and
$7,881 (both with a commercial bank at 5.7% for six months) and $20,194
(with a commercial bank at 5.7% for six months).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-------------------------------------------------------------------------
FLINT-TV KSMO WSTR RIVER CITY WYZZ TOTAL
---------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Interest income adjustment as noted above ...... $ (327) $ (297) $ (226) $ - $ (576) $ (1,426)
Less: Interest income recorded by Flint-TV, KSMO,
WSTR, River City and WYZZ ..................... - - (15) (195) - (210)
------- ------- ------- ------- ------- ---------
Pro forma adjustment ........................... $ (327) $ (297) $ (241) $ (195) $ (576) $ (1,636)
======= ======= ======= ======= ======= =========
</TABLE>
(n) To record tax provision (benefit) at the applicable statutory tax rates.
(o) Weighted average shares outstanding on a pro forma basis assumes that the
1,150,000 shares of Series B Preferred Stock were converted to 4,181,818
shares of Class A Common Stock and the Company's Incentive Stock Options and
Long-Term Incentive Plan Options were outstanding as of the beginning of the
period.
(p) To record amortization expense on other assets that relates to the HYTOPS
Issuance for one year ($6,000 over 12 years).
(q) To record the net interest expense reduction for 1996 related to application
of the HYTOPS Issuance proceeds to the outstanding balance under the
revolving credit facility offset by an increase in commitment fees for the
available but unused portion of the revolving credit facility for the year
ended December 31, 1996.
<TABLE>
<S> <C>
Interest on adjusted borrowing on the revolving credit facility .................. $ 12,600
Commitment fee on available but unused borrowings of $250,000 of revolving credit
facility at 1/2 of 1% for 12 months ............................................. (1,250)
Commitment fee on available borrowings recorded by the Company .................. 470
--------
Pro forma adjustment ............................................................ $ 11,820
========
</TABLE>
(r) To record subsidiary trust minority interest expense for the year ended
December 31, 1996 ($200,000 aggregate liquidation value of HYTOPS).
(s) To record amortization expense on other assets for one year ($4,500 over 10
years). See note (f) of notes to Pro Forma Consolidated Balance Sheet.
(t) To record interest expense on the 1997 Notes for one year ($200,000 at 9%).
(u) To adjust Heritage operating expenses for corporate overhead expenses which
the Company does not expect to incur upon its consummation of the Heritage
Acquisition on a going-forward basis.
(v) To record depreciation expense related to acquired tangible assets of $3,550
and eliminate depreciation expense of $4,450 recorded by Heritage. Tangible
assets are to be depreciated over lives ranging from 5 to 29.5 years.
(w) To record amortization expense related to acquired intangible assets of
$17,624 and eliminate amortization expense of $8,093 recorded by Heritage.
Intangible assets are to be amortized over lives ranging from 1 to 40 years.
(x) To record interest expense on acquisition financing of $570,000 (under the
Bank Credit Agreement at 71/4%), net of $780 of commitment fees for the
available but unused portion of the revolving credit facility, and
eliminated interest expense of $16,924 recorded by Heritage.
(y) To record the interest expense reduction of $10,518 related to application
of the Preferred Stock Offering proceeds to the outstanding balance under
the revolving credit facility offset by an increase in commitment fees of
$638 for the available but unused portion of the revolving credit facility.
(z) To record the interest expense reduction of $9,938 related to application of
the Common Stock Offering proceeds to the outstanding balance under the
revolving credit facility offset by an increase in commitment fees of $514
for the available but unused portion of the revolving credit facility.
S-22
<PAGE>
(aa) Weighted average shares outstanding on a pro forma basis assumes that the
4,000,000 shares of Class A Common Stock to be issued in the Common Stock
Offering were outstanding as of the beginning of the period.
(bb) To record amortization expense on other assets that resulted from
the HYTOPS Issuance for six months ($6,000 over 12 years).
<TABLE>
<S> <C>
Amortization expense on other assets ............... $ 250
Amortization expense recorded by the Company ...... (162)
------
Pro forma adjustment .............................. $ 88
======
</TABLE>
(cc) To record the net interest expense reduction for 1997 related to
application of the HYTOPS Issuance proceeds to the outstanding
balance under the revolving credit facility offset by an increase in
commitment fees for the available but unused portion of the revolving
credit facility for the quarter ended June 30, 1997.
<TABLE>
<S> <C>
Interest on adjusted borrowing on the revolving credit facility ............... $3,235
Commitment fee on available but unused borrowings of $250,000 of revolving credit
facility at 1/2 of 1% for six months .......................................... (625)
Commitment fee on available borrowings recorded by the Company .................. 284
------
Pro forma adjustment ............................................................ $2,894
======
</TABLE>
(dd) To record subsidiary trust minority interest expense for the quarter
ended June 30, 1997 ($200,000 aggregate liquidation value HYTOPS).
<TABLE>
<S> <C>
Subsidiary trust minority interest expense for six months ........................ $ (11,625)
Subsidiary trust minority interest expense made by the Company during the quarter . 7,007
---------
Pro forma adjustment ............................................................... $ (4,618)
=========
</TABLE>
(ee) To record amortization expense on other assets for six months
($4,500 over 10 years). See note (f) of notes to Pro Forma
Consolidated Balance Sheet.
(ff) To record interest expense on the 1997 Notes for six months
($200,000 at 9%).
(gg) To adjust Heritage operating expenses for corporate overhead expenses
which the Company does not expect to incur upon its consummation of
the Heritage Acquisition on a going-forward basis.
(hh) To record depreciation expenses related to acquired tangible assets
of $1,775 and eliminate depreciation expense of $2,225 recorded by
Heritage. Tangible assets are to be depreciated over lives ranging
from 5 to 29.5 years.
(ii) To record amortization expense related to acquired intangible assets
of $8,954 and eliminate amortization expense of $3,990 recorded by
Heritage. Intangible assets are to be amortized over lives ranging
from 1 to 40 years.
(jj) To record interest expense on acquisition financing of $570,000
(under the Bank Credit Agreement at 71/4%), net of $341 of commitment
fees for the available but unused portion of the revolving credit
facility, and eliminate interest expense of $9,554 recorded by
Heritage.
(kk) To record the interest expense reduction of $5,259 related to
application of the Preferred Stock Offering proceeds to the
outstanding balance under the revolving credit facility offset by an
increase in commitment fees of $319 for the available but unused
portion of the revolving credit facility.
(ll) To record the interest expense reduction of $4,969 related to
application of the Common Stock Offering proceeds to the outstanding
balance under the revolving credit facility offset by an increase in
commitment fees of $257 for the available but unused portion of the
revolving credit facility.
(mm) There can be no assurance that the Common Stock Offering will be
consummated. The completion of the Preferred Stock Offering is not
conditioned upon the completion of the Common Stock Offering.
S-23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SINCLAIR
INTRODUCTION
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 four additional television
stations, and has pending acquisitions of the right to provide programming to
two additional stations. The Company believes it is also one of the top 20 radio
groups in the United States, when measured by the total number of radio stations
owned, programmed or with which the Company has Joint Sales Agreements (JSAs).
The Company owns 27 radio stations, has pending acquisitions of 24 radio
stations, and has options to acquire an additional seven radio stations.
The operating revenues of the Company are derived from local and national
advertisers and, to a much lesser extent, from television network compensation.
The Company's primary operating expenses involved in owning, operating or
programming the television and radio stations are syndicated program rights
fees, commissions on revenues, employee salaries, news-gathering and promotion.
Amortization and depreciation of costs associated with the acquisition of the
stations and interest carrying charges are significant factors in determining
the Company's overall profitability.
Set forth below are the principal types of broadcast revenues received by
the Company's stations for the periods indicated and the percentage contribution
of each type to the Company's total gross broadcast revenues:
BROADCAST REVENUES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1994 1995 1996
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Local/regional advertising ...... $ 67,881 48.6% $ 104,299 47.5% $ 199,029 49.4%
National advertising ............ 69,374 49.6 113,678 51.7 191,449 47.6
Network compensation ............ 302 0.2 442 0.2 3,907 1.0
Political advertising ............ 1,593 1.1 197 0.1 6,972 1.7
Production ..................... 696 0.5 1,115 0.5 1,142 0.3
--------- ------ --------- ------ --------- ------
Broadcast revenues ............... 139,846 100.0% 219,731 100.0% 402,499 100.0%
====== ====== ======
Less: agency commissions ......... (21,235) (31,797) (56,040)
--------- --------- ---------
Broadcast revenues, net ......... 118,611 187,934 346,459
Barter revenues .................. 10,743 18,200 32,029
--------- --------- ---------
Total revenues .................. $ 129,354 $ 206,134 $ 378,488
========= ========= =========
</TABLE>
The Company's primary types of programming and their approximate
percentages of 1996 net broadcast revenues were network programming (14.1%),
children's programming (7.4%) and other syndicated programming (56.7%).
Similarly, the Company's three largest categories of advertising and their
approximate percentages of 1996 net broadcast revenues were automotive (17.4%),
fast food advertising (9.2%) and movies (5.5%). No other advertising category
accounted for more than 5% of the Company's net broadcast revenues in 1996. No
individual advertiser accounted for more than 5% of any of the Company's
individual station's net broadcast revenues in 1996.
S-24
<PAGE>
The following table sets forth certain operating data of the Company for
the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1996 and 1997:
OPERATING DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------ ---------------------------
1994 1995 1996 1996 1997
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net broadcast revenues .............................. $ 118,611 $ 187,934 $ 346,459 $ 117,339 $ 219,701
Barter revenues .................................... 10,743 18,200 32,029 9,571 19,870
---------- --------- --------- --------- ---------
Total revenues .................................... 129,354 206,134 378,488 126,910 239,571
---------- --------- --------- --------- ---------
Operating expenses, excluding depreciation and
amortization and special bonuses paid to executive
officers .......................................... 50,545 80,446 167,765 52,826 114,697
Depreciation and amortization ..................... 55,587 80,410 118,038 45,493 76,650
Amortization of deferred compensation ............... - - 739 506 233
Amortization of excess syndicated programming ...... - - 3,043 - -
Special bonuses to executive officers ............... 3,638 - - - -
---------- --------- --------- --------- ---------
Broadcast operating income ........................ $ 19,584 $ 45,278 $ 88,903 $ 28,085 $ 47,991
========== ========= ========= ========= =========
BROADCAST CASH FLOW (BCF) DATA:
Television BCF .................................... $ 67,519 $ 111,124 $ 175,212 $ 63,309 $ 98,032
Radio BCF .......................................... - - 14,004 1,770 7,568
---------- --------- --------- --------- ---------
Consolidated BCF (a) .............................. $ 67,519 $ 111,124 $ 189,216 $ 65,079 $ 105,600
========== ========= ========= ========= =========
Television BCF margin .............................. 56.9% 59.1% 56.7% 56.3% 51.2%
Radio BCF margin .................................... - - 37.3% 36.4% 26.7%
Consolidated BCF margin (b) ........................ 56.9% 59.1% 54.6% 55.5% 48.1%
OTHER DATA:
Adjusted EBITDA(c) ................................. $ 64,547 $ 105,750 $ 180,272 $ 62,013 $ 98,615
Adjusted EBITDA margin (b) ........................ 54.4% 56.3% 52.0% 52.8% 44.9%
After-tax cash flow (d) ........................... $ 24,948 $ 51,288 $ 76,745 $ 30,441 $ 32,737
Program contract payments ........................... 14,262 19,938 30,451 12,071 26,259
Corporate expense ................................. 2,972 5,374 8,944 3,066 6,985
</TABLE>
- ----------
(a) "Consolidated BCF" is defined as broadcast operating income plus corporate
overhead expenses, 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, Consolidated BCF does not
purport to represent cash provided by operating activities as reflected in
the Company's consolidated statements of cash flow, is not a measure of
financial performance under generally accepted accounting principles and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
(b) "Consolidated BCF 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.
(c) "Adjusted EBITDA" is defined as broadcast cash flow less corporate expenses
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.
(d) "After-tax cash flow" is defined as net income (loss) before extraordinary
items 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.
S-25
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
Total revenues increased to $239.6 million for the six months ended June
30, 1997 from $126.9 million for the six months ended June 30, 1996, or 88.8%.
After excluding the effects of non-cash barter transactions, net broadcast
revenues for the six months ended June 30, 1997 increased by 87.2% over the six
months ended June 30, 1996. The increase in broadcast revenues was primarily the
result of acquisitions and LMA transactions consummated by the Company in 1996
(the "1996 Acquisitions") and, to a lesser extent, market growth in television
broadcast revenue and television broadcast revenue on a same stations basis.
Operating expenses excluding depreciation, amortization of intangible
assets and amortization of deferred compensation increased to $114.7 million for
the six months ended June 30, 1997 from $52.8 million for the six months ended
June 30, 1996, or 117.2%. The increase in expenses for the six months ended June
30, 1997 as compared to the six months ended June 30, 1996 was primarily
attributable to operating costs associated with the 1996 Acquisitions (92.9% of
increase for the six month period) and an increase in corporate overhead
expenses (6.3% of increase for the six month period) related primarily to the
additional expense of managing a larger base of operations.
Broadcast operating income increased to $48.0 million for the six months
ended June 30, 1997 from $28.1 million for the six months ended June 30, 1996,
or 70.8%. The increase in broadcast operating income for the six months ended
June 30, 1997 as compared to the six months ended June 30, 1996 was primarily
attributable to the 1996 Acquisitions.
Interest expense increased to $52.0 million for the six months ended June
30, 1997 from $27.6 million for the six months ended June 30, 1996, or 88.4%.
The increase in interest expense for the six months ended June 30, 1997
primarily related to indebtedness incurred by the Company to finance the River
City Acquisition on May 31, 1996, other subsequent 1996 acquisitions and
acquisitions consummated in 1997 (the "1997 Acquisitions"). Subsidiary Trust
Minority Interest Expense of $7.0 million for the six months ended June 30, 1997
is related to the HYTOPS. Subsidiary Trust Minority Interest Expense
distributions will be partially offset by reductions in interest expense because
a portion of the proceeds of the sale of the HYTOPS was used to reduce
indebtedness under the Company's Bank Credit Agreement.
Interest and other income decreased to $1.1 million for the six months
ended June 30, 1997 from $3.2 million for the six months ended June 30, 1996, or
65.6%. This decrease was primarily due to lower average cash balances and
related interest income.
The net deferred tax asset increased to $8.2 million as of June 30, 1997
from $782,000 at December 31, 1996. The increase in the Company's net deferred
tax asset as of June 30, 1997 as compared to December 31, 1996 primarily results
from the anticipation that the pre-tax losses incurred in the first six months
of 1997 will be used to offset future taxable income.
Net loss for the six months ended June 30, 1997 was $5.8 million or $(0.17)
per share compared to net income of $1.5 million or $0.04 per share for the six
months ended June 30, 1996.
Broadcast cash flow increased to $105.6 million for the six months ended
June 30, 1997 from $65.1 million for the six months ended June 30, 1996, or
62.2%. This increase in broadcast cash flow primarily resulted from the 1996 and
1997 Acquisitions and, to a lesser extent, increases in net broadcast revenues
on a same station basis. The Company's broadcast cash flow margin decreased to
48.1% for the six months ended June 30, 1997 from 55.5% for the six months ended
June 30, 1996. Excluding the effect of radio station broadcast cash flow,
television broadcast cash flow margin decreased to 51.2% for the six months
ended June 30, 1997 from 56.3% for the six months ended June 30, 1996. The
decrease in broadcast cash flow margins for the six months ended June 30, 1997
as compared to the six months ended June 30, 1996 primarily resulted from the
lower margins of the acquired radio broadcasting assets and lower margins of
certain television stations acquired during 1996. For television stations owned,
operated or programmed for the six months ended June 30, 1996 and the six months
ending June 30,
S-26
<PAGE>
1997, broadcast cash flow margins increased from 55.5% to 57.0%, respectively.
This increase primarily resulted from expense savings related to synergies
realized from the 1996 Acquisitions combined with increases in net broadcast
revenue.
Adjusted EBITDA increased to $98.6 million for the six months ended June
30, 1997 from $62.0 million for the six months ended June 30, 1996, or 59.0%.
This increase in Adjusted EBITDA for the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996 resulted from the 1996 and 1997
Acquisitions. The Company's Adjusted EBITDA margin decreased to 44.9% for the
six months ended June 30, 1997 from 52.8% for the six months ended June 30,
1996. The decrease in Adjusted EBITDA margin for the six months ended June 30,
1997 as compared to the six months ended June 30, 1996 primarily resulted from
operating cost structures at certain of the acquired stations and increases in
corporate overhead expenses. The Company has begun to implement and will
continue to implement operating and programming expense savings resulting from
synergies realized from the businesses acquired in and prior to 1996 and 1997
and believes that the benefits of the implementation of these methods will
result in improvement in broadcast cash flow margin and Adjusted EBITDA margin
over time.
After-tax cash flow increased to $32.7 million for the six months ended
June 30, 1997 from $30.4 million for the six months ended June 30, 1996, or
7.6%. The increase in after-tax cash flow for the six months ended June 30, 1997
as compared to the six months ended June 30, 1996 primarily resulted from the
1996 and 1997 Acquisitions and internal growth, offset by increased interest
expense on the debt incurred to consummate the 1996 and 1997 Acquisitions and
subsidiary trust minority interest expense related to the HYTOPS Issuance during
March 1997.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total revenues increased to $378.5 million for the year ended December 31,
1996 from $206.1 million for the year ended December 31, 1995, or 83.6%.
Excluding the effects of non-cash barter transactions, net broadcast revenues
for the year ended December 31, 1996 increased by 84.4% over the year ended
December 31, 1995. The increase in broadcast revenues was primarily the result
of acquisitions and LMA transactions consummated by the Company in 1995 (the
"1995 Acquisitions") and 1996. For stations owned, operated or programmed
throughout 1995 and 1996, television broadcast revenue grew 2.1% for the year
ended December 31, 1996 when compared to the year ended December 31, 1995. For
stations owned, operated or programmed throughout 1994 and 1995, television
broadcast revenue grew 12.8% for the year ended December 31, 1995 when compared
to the year ended December 31, 1994. The decrease in 1996 revenue growth as
compared to 1995 revenue growth primarily resulted from the loss in 1996 of the
Fox affiliation at WTTO in the Birmingham market, the loss of the NBC
affiliation at WRDC in the Raleigh market and decreases in ratings at WCGV and
WNUV in the Milwaukee and Baltimore markets, respectively.
Operating expenses excluding depreciation, amortization of intangible
assets and amortization of deferred compensation and excess syndicated
programming costs increased to $167.8 million for the year ended December 31,
1996 from $80.4 million for the year ended December 31, 1995, or 108.7%. The
increase in expenses for the year ended December 31, 1996 as compared to the
year ended December 31, 1995 was largely attributable to operating costs
associated with the 1995 and 1996 Acquisitions, an increase in LMA fees
resulting from LMA transactions and an increase in corporate overhead expenses.
Broadcast operating income increased to $88.9 million for the year ended
December 31, 1996, from $45.3 million for the year ended December 31, 1995, or
96.2%. The increase in broadcast operating income for the year ended December
31, 1996 as compared to the year ended December 31, 1995 was primarily
attributable to the 1995 and 1996 Acquisitions.
Interest expense increased to $84.3 million for the year ended December 31,
1996 from $39.3 million for the year ended December 31, 1995, or 114.5%. The
increase in interest expense for the year ended December 31, 1996 was primarily
related to senior bank indebtedness incurred by the Company to finance the River
City Acquisition and other acquisitions.
S-27
<PAGE>
Interest and other income decreased to $3.5 million for the year ended
December 31, 1996 from $4.2 million for the year ended December 31, 1995, or
16.7%. The decrease for the year ended December 31, 1996 was primarily due to
lower cash balances and related interest income resulting from cash payments
made in February 1996 when the Company made a $34.4 million payment relating to
the WSMH acquisition and April 1996 when the Company made a $60 million down
payment relating to the River City Acquisition. The decrease in interest income
was offset by an increase in other income resulting from the 1995 and 1996
Acquisitions.
For the reasons described above, net income for the year ended December 31,
1996 was $1.1 million or $0.03 per share compared to net income of $5.0 million
or $0.15 per share for the year ended December 31, 1995 before the extraordinary
loss on early extinguishment of debt.
Broadcast cash flow increased to $189.2 million for the year ended December
31, 1996 from $111.1 million for the year ended December 31, 1995, or 70.3%. The
increase in broadcast cash flow for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 primarily resulted from the 1995 and 1996
Acquisitions. For stations owned, operated or programmed throughout 1995 and
1996, broadcast cash flow grew 1.3% for the year ended December 31, 1996 when
compared to the year ended December 31, 1995. For stations owned, operated or
programmed throughout 1994 and 1995, broadcast cash flow grew 23.7% for the year
ended December 31, 1995 when compared to the year ended December 31, 1994. The
decrease in 1996 broadcast cash flow growth as compared to 1995 broadcast cash
flow growth primarily resulted from the loss in 1996 of the Fox affiliation at
WTTO in the Birmingham market, the loss of the NBC affiliation at WRDC in the
Raleigh market and decreases in ratings at WCGV and WNUV in the Milwaukee and
Baltimore markets, respectively. The Company's broadcast cash flow margin
decreased to 54.6% for the year ended December 31, 1996 from 59.1% for the year
ended December 31, 1995. Excluding the effect of radio station broadcast cash
flow, television station broadcast cash flow margin decreased to 56.7% for the
year ended December 31, 1996 as compared to 59.1% for the year ended December
31, 1995. The decrease in broadcast cash flow margins for the year ended
December 31, 1996 as compared to the year ended December 31, 1995 primarily
resulted from the lower margins of the acquired radio broadcasting assets and
lower margins of certain of the acquired television stations. For stations
owned, operated or programmed throughout 1996 and 1995, broadcast cash flow
margins were unchanged when comparing the years ended December 31, 1996 and
1995. The Company believes that margins of certain of the acquired stations will
improve as operating and programming synergies are implemented.
Adjusted EBITDA increased to $180.3 million for the year ended December 31,
1996 from $105.8 million for the year ended December 31, 1995, or 70.4%. The
increase in Adjusted EBITDA for the year ended December 31, 1996 as compared to
the year ended December 31, 1995 resulted from the 1995 and 1996 Acquisitions.
The Company's Adjusted EBITDA margin decreased to 52.0% for the year ended
December 31, 1996 from 56.3% for the year ended December 31, 1995. The decrease
in Adjusted EBITDA margins for the year ended December 31, 1996 as compared to
the year ended December 31, 1995 primarily resulted from higher operating costs
at certain of the acquired stations. The Company has begun to implement and will
continue to implement operating and programming synergies throughout the
businesses acquired in and prior to 1996. The Company believes that the benefits
of the implementation of these methods will result in improvement in broadcast
cash flow and Adjusted EBITDA margins in future periods.
After-tax cash flow increased to $76.7 million for the year ended December
31, 1996 from $51.3 million for the year ended December 31, 1995, or 49.5%. The
increase in after-tax cash flow for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 primarily resulted from the 1995 and 1996
Acquisitions offset by interest expense on the debt incurred to consummate these
acquisitions.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Total revenues increased to $206.1 million for the year ended December 31,
1995, from $129.4 million for the year ended December 31, 1994, or 59.3%. This
increase includes revenues from the acquisitions of WTVZ and WLFL and the
entering into LMA agreements with WABM and WDBB.
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This increase also includes the first full year of revenues from the acquisition
of WCGV and WTTO and the entering into LMA agreements with WNUV, WVTV and FSFA
(the "1994 Acquisitions"). Excluding the effect of non-cash barter transactions,
net broadcast revenues increased to $187.9 million for the year ended December
31, 1995 from $118.6 million for the year ended December 31, 1994, or 58.4%.
These increases in net broadcast revenues were primarily a result of the
1994 and 1995 Acquisitions and LMA transactions consummated by the Company, as
well as television broadcast revenue growth in each of the Company's markets.
WPGH, the Pittsburgh Fox affiliate, achieved in excess of 14% net broadcast
revenue growth for the year ended December 31, 1995 as compared to the year
ended December 31, 1994. This increase was primarily attributable to a new
metered rating service that began in May 1995 which significantly improved
WPGH's market rating. WBFF, the Fox affiliate in Baltimore and WCGV, the former
Fox affiliate, now a UPN affiliate in Milwaukee, both achieved in excess of 10%
net broadcast revenue growth as these stations began to realize the advantages
of having an LMA in these markets.
Operating expenses excluding depreciation and amortization and special
bonuses paid to executive officers increased to $80.4 million for the year ended
December 31, 1995 from $50.5 million for the year ended December 31, 1994. These
increases in expenses were primarily attributable to increases in operating
expenses relating to the 1994 and 1995 Acquisitions, including the payment of
LMA fees which increased to approximately $5.6 million for the year ended
December 31, 1995 as compared to $1.1 million for the year ended December 31,
1994. Corporate overhead expenses increased 80.8% for the year ended December
31, 1995 as compared to the year ended December 31, 1994. This increase was
primarily due to expenses associated with being a public company (i.e.,
directors and officers insurance, travel expenses and professional fees) and
executive bonus accruals for bonuses which were paid based on achieving in
excess of 20% growth percentages in pro forma broadcast cash flow for the year
1995 compared to 1994.
Broadcast operating income increased to $45.3 million for the year ended
December 31, 1995 from $19.6 million for the year ended December 31, 1994, or
131.1%. This increase in broadcast operating income was primarily a result of
the 1994 and 1995 Acquisitions and an increase in television broadcast revenues
in each of the Company's markets, partially offset by increased amortization
expenses related to these acquisitions.
Interest expense increased to $39.3 million for the year ended December 31,
1995 from $25.4 million for the year ended December 31, 1994, or 54.7%. The
major component of this increase in interest expense was increased borrowings
under the Bank Credit Agreement to finance the 1994 and 1995 Acquisitions.
During August 1995, the Company issued $300 million of Senior Subordinated Notes
and used a portion of the net proceeds to repay outstanding indebtedness under
the Bank Credit Agreement and the remainder provided an increase to the
Company's cash balances of approximately $91.4 million. The interest expense
related to these notes was approximately $10.0 million in 1995. This increase
was partially offset by the application of the net proceeds of an offering of
Class A Common Stock to reduce a portion of the indebtedness under the Bank
Credit Agreement during June 1995. Interest expense was also reduced as a result
of the application of net cash flow from operating activities to further
decrease borrowings under the Bank Credit Agreement.
Interest and other income increased to $4.2 million for the year ended
December 31, 1995 from $2.4 million for the year ended December 31, 1994, or
75.0%. This increase in interest income primarily resulted from an increase in
cash balances that remained from the proceeds of Senior Subordinated Notes
issued in August 1995. Income (loss) before benefit (provision) for income taxes
and extraordinary item increased to income of $10.2 million for the year ended
December 31, 1995 from a loss of $3.4 million for the year ended December 31,
1994.
Net income available to common shareholders improved to income of $76,000
for the year ended December 31, 1995 from a loss of $2.7 million for the year
ended December 31, 1994. In August 1995, the Company consummated the sale of
$300 million of Senior Subordinated Notes generating net proceeds to the Company
of $293.2 million. The net proceeds of this offering were utilized to repay
outstanding indebtedness under the Bank Credit Agreement of $201.8 million with
the remainder being
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retained for general corporate purposes including potential future acquisitions.
In conjunction with the early retirement of the indebtedness under the Bank
Credit Agreement, the Company recorded an extraordinary loss of $4.9 million net
of a tax benefit of $3.4 million, related to the write-off of deferred financing
costs under the Bank Credit Agreement.
Broadcast cash flow increased to $111.1 million for the year ended December
31, 1995 from $67.5 million for the year ended December 31, 1994, or 64.6%. This
increase in broadcast cash flow was primarily due to the 1994 and 1995
Acquisitions, growth in market revenues and a reduction in program payments as a
percentage of net broadcast revenues to 10.6% for the year ended December 31,
1995 from 12.0% for the year ended December 31, 1994.
Adjusted EBITDA increased to $105.8 million for the year ended December 31,
1995 from $64.6 million for the year ended December 31, 1994, or 63.8%,
consistent with the growth in broadcast cash flow. After tax cash flow increased
to $51.3 million for the year ended December 31, 1995 from $24.9 million for the
year ended December 31, 1994, or 106.0%.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had $2.7 million in cash balances and a
working capital deficit of approximately $9.3 million. The Company's working
capital deficit primarily results from the accelerated method of amortization of
program contract costs and the even payment streams of program contract
liabilities. Excluding the effect of current program contract costs and current
program contract liabilities, the Company's working capital at June 30, 1997,
would have been $5.7 million. The Company's primary source of liquidity is cash
provided by operations and availability under the Bank Credit Agreement. As of
August 11, 1997, the Company's cash balances were approximately $1.9 million
with approximately $254 million available for borrowing under the Bank Credit
Agreement. 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. In July 1997, the Company entered into a purchase agreement to
acquire the license and non-license assets of the radio and television stations
of Heritage for $630 million and made a cash down payment of $63.0 million. The
Company has entered into a letter of intent to sell one of the Heritage
television stations for $60 million (the sale of which is required pursuant to
the acquisition agreement relating to the remaining Heritage television and
radio properties). The Company anticipates that it will finance the Heritage
acquisition through additional bank financing (including a draw under Tranche C
described above) or through a combination of additional bank financing and
proceeds from an offering of securities.
Net cash flows from operating activities increased to $42.5 million for the
six months ended June 30, 1997 from $26.4 million for the six months ended June
30, 1996. The Company made income tax payments of $5.3 million for the six
months ended June 30, 1997 as compared to $5.6 million for the six months ended
June 30, 1996 due to anticipated tax benefits generated by the 1996
Acquisitions. The Company made interest payments on outstanding indebtedness of
$55.7 million during the six months ended June 30, 1997 as compared to $29.5
million for the six months ended June 30, 1996. Additional interest payments for
the six months ended June 30, 1997 as compared to the six months ended June 30,
1996 primarily related to additional interest costs on indebtedness incurred to
finance the 1996 Acquisitions. The Company made subsidiary trust minority
interest expense payments of $6.0 million for the six months ended June 30, 1997
related to the private placement of the HYTOPS completed in March 1997. Program
rights payments increased to $26.3 million for the six months ended June 30,
1997 from $12.1 million for the six months ended June 30, 1996, primarily as a
result of the 1996 Acquisitions.
Net cash flows used in investing activities decreased to $112.4 million for
the six months ended June 30, 1997 from $942.1 million for the six months ended
June 30, 1996. During January 1997, the Company purchased the license and
non-license assets of WWFH-FM and WILP-AM in Wilkes-Barre, Pennsylvania for
approximately $770,000. In January and March 1997, the Company made cash
payments of $9.0 million and $1.5 million relating to the acquisition of the
license and non-license assets of KUPN-TV and WGR-AM and WWWS-AM, respectively,
utilizing indebtedness under the Bank Credit Agreement and existing cash
balances. In May 1997, the Company made cash payments of $78 million to acquire
the
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license and non-license assets of KUPN-TV utilizing indebtedness under the Bank
Credit Agreement and existing cash balances. During the six months ended June
30, 1997, the Company made purchase option extension payments of $6.5 million
relating to WSYX-TV. The Company made payments totaling $8.5 million during the
six months ended June 30, 1997 in order to exercise options to acquire certain
FCC licenses. The Company made payments for property and equipment of $8.3
million for the six months ended June 30, 1997. In July 1997, the Company
entered into a purchase agreement to acquire the license and non-license assets
of the television and radio stations of Heritage and made a cash down payment of
$63.0 million. The Company anticipates that future requirements for capital
expenditures will also include other acquisitions if suitable acquisitions can
be identified on acceptable terms and capital expenditures incurred during the
ordinary course of business.
Net cash flows provided by financing activities decreased to $70.3 million
for the six months ended June 30, 1997 from $807.4 million for the six months
ended June 30, 1996. In March 1997, the Company completed a private placement of
the HYTOPS. The Company utilized $135 million of the approximately $193.4
million net proceeds of the HYTOPS Issuance to repay outstanding debt and
retained the remainder for general corporate purposes. The Company made payments
totaling $4.6 million to repurchase 186,000 shares of Class A Common Stock for
the six months ended June 30, 1997. In May 1997, the Company made payments of
$4.7 million related to the amendment of its Bank Credit Agreement. In the
fourth quarter of 1996, the Company negotiated the prepayment of syndicated
program contract liabilities for excess syndicated programming assets. In the
first quarter of 1997, the Company made final cash payments of $1.4 million
related to these negotiations. In July 1997, the Company issued the 1997 Notes
using $162.5 million of the approximately $196 million proceeds to repay
outstanding indebtedness under the revolving credit facility under the Bank
Credit Agreement and using the remainder to pay a portion of the $63 million
cash down payment relating to the Heritage Acquisition.
The Company anticipates that funds from operations, existing cash balances
and availability of the revolving credit facility under the Bank Credit
Agreement will be sufficient to meet its working capital, capital expenditure
commitments and debt service requirements for the foreseeable future. However,
to the extent such funds are not sufficient, or if the Company commits to
additional capital expenditures (including additional acquisitions), the Company
may need to incur additional indebtedness, refinance existing indebtedness or
raise funds from the sale of additional equity. The Bank Credit Agreement and
the indentures relating to the Company's 9% Senior Subordinated Notes due 2007,
10% Senior Subordinated Notes due 2003 and 10% Senior Subordinated Notes due
2005 restrict the incurrence of additional indebtedness and the use of proceeds
of an equity issuance. On August 22, 1997, the Company filed a $1 billion shelf
registration statement covering the issuance of the Company's debt securities,
preferred stock and common stock. The shares of Class A Common Stock offered in
the Common Stock Offering and the shares of Convertible Exchangeable Preferred
Stock offered in the Preferred Stock Offering are offered pursuant to such shelf
registration statement. A portion of the net proceeds to the Company from the
Offerings will be used to repay existing borrowings under the revolving credit
facility under the Bank Credit Agreement, and the remainder of the net proceeds
will be retained by the Company for general corporate purposes, including
funding the Heritage Acquisition, which is anticipated to close in the first
quarter of 1998, and other acquisitions if suitable acquisitions can be
identified on acceptable terms. The Company has requested the lenders under the
Bank Credit Agreement to approve an amendment that would characterize $275
million of indebtedness from the Tranche A term loan to amounts owing under the
revolving credit facility. If this amendment is approved, the Company will use
all of the net proceeds of the Offerings to repay indebtedness under the Bank
Credit Agreement. See "Use of Proceeds" and "Business of Sinclair - 1997
Acquisitions."
INCOME TAXES
Income tax benefit increased to $4.1 million for the six months ended June
30, 1997 from a provision of $2.1 million for the six months ended June 30,
1996. The Company's effective tax rate decreased to a benefit of 41.3% for the
six months ended June 30, 1997 from a provision of 58.2% for the six months
ended June 30, 1996. The net deferred tax asset increased to $8.2 million as of
June 30, 1997 from $782,000 at December 31, 1996. The increase in the Company's
net deferred tax asset as of June 30, 1997 as compared to December 31, 1996
primarily resulted from the anticipation that the pre-tax losses incurred in the
first six months of 1997 will be used to offset future taxable income.
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The Company's income tax provision increased to $6.9 million for the year
ended December 31, 1996 from $5.2 million for the year ended December 31, 1995.
The Company's effective tax rate increased to 86% for the year ended December
31, 1996 from 51% for the year ended December 31, 1995. The increase for the
year ended December 31, 1996 as compared to the year ended December 31, 1995
primarily related to certain financial reporting and income tax differences
attributable to certain 1995 and 1996 Acquisitions, and state franchise taxes
which are independent of pre-tax income.
The net deferred tax asset decreased to $782,000 as of December 31, 1996
from $21.0 million at December 31, 1995. The decrease in the Company's net
deferred tax asset as of December 31, 1996 as compared to December 31, 1995 is
primarily due to the Company recording deferred tax liabilities of $18.1 million
relating to the acquisition of all of the outstanding stock of Superior in May
1996, adjustments related to certain 1995 acquisitions, and resulting
differences between the book and tax basis of the underlying assets.
A $1.8 million net tax provision and a $647,000 tax benefit was recognized
for the years ended December 31, 1995 and December 31, 1994, respectively. The
provision for the year ended December 31, 1995 was comprised of $5.2 million
provision relating to the Company's income before provision for income taxes and
extraordinary item offset by a $3.4 million income tax benefit relating to the
extraordinary loss on early extinguishment of debt. The $5.2 million tax
provision reflects a 51% effective tax rate for the year ended December 31,
1995, which is higher than the statutory rate primarily due to the
non-deductibility of goodwill relating to the repurchase of Common Stock in
1990. The income tax benefit for the year ended December 31, 1994 was 19.1% of
the Company's loss before income taxes, which is lower than the benefit
calculated at statutory rates primarily due to non-deductible goodwill
amortization. After giving effect to these changes the Company had net deferred
tax assets of $21.0 million at December 31, 1995 and $12.5 million at December
31, 1994, respectively.
SEASONALITY
The Company's results usually are subject to seasonal fluctuations, which
result in fourth quarter broadcast operating income usually being greater than
first, second and third quarter broadcast operating income. This seasonality is
primarily attributable to increased expenditures by advertisers in anticipation
of holiday season spending and an increase in viewership during this period.
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INDUSTRY OVERVIEW
TELEVISION BROADCASTING
Commercial television stations in the United States are typically
affiliated with one of six television networks, which are at different stages of
development. The networks are differentiated in part by the amount of
programming they provide their affiliates each week and by the length of time
they have been in operation. These networks are ABC, CBS, NBC, FOX, WB, and UPN.
The ABC, CBS, and NBC networks (the "Traditional Networks") have a substantial
number of affiliated stations, have been in operation for the longest time and
provide the majority of their affiliates' programming each day. Fox established
an affiliate network in the mid-`80s and provides fewer hours of prime-time and
daytime programming than the Traditional Networks. WB and UPN, the newest
television networks, will soon increase their prime-time programming from three
to four nights and also provide a number of hours of children's programming each
week. Television stations affiliated with Fox, WB, or UPN have more hours of the
day to program and consequently have more commercial inventory to sell to
advertisers.
Each Traditional Network provides the majority of its affiliates'
programming each day without charge in exchange for a substantial majority of
the available advertising time in the programs supplied. Each Traditional
Network sells this advertising time and retains the revenue. The affiliate
receives compensation from the Traditional Network and retains the revenue from
time sold during breaks in and between network programs and in programming the
affiliate produces or purchases from non-network sources.
In contrast, a station that is not affiliated with a Traditional Network
supplies over-the-air programming by acquiring rights to broadcast programs
through syndication. This syndicated programming is generally acquired by such
stations for cash and barter. Those stations that acquire a program through
syndication are usually given exclusive rights to show the program in the
station's market for either a period of years or a number of episodes agreed
upon between the station and the syndicator of the programming. Types of
syndicated programs aired on these stations include feature films, popular
series previously shown on network television and series produced for direct
distribution to television stations.
Fox has established a network of television stations that operates on a
basis similar to the Traditional Networks. However, the 15 hours per week of
prime-time programming supplied by Fox to its affiliates are significantly less
than that of the Traditional Networks and, as a result, Fox affiliates retain a
significantly higher portion of the available inventory of broadcast time for
their own use than Traditional Network affiliates. As of December 31, 1996, Fox
had 169 affiliated stations broadcasting to 95.0% of U.S. television households.
During 1994, WB established an affiliation of independent stations which
began broadcasting in January 1995 and operates on a basis similar to Fox.
However, WB currently supplies only six hours of prime-time programming per week
to its affiliates (which will increase to eight hours per week in January 1998),
which is significantly less than that of Fox and, as a result, WB affiliates
retain a significantly higher portion of the available inventory of broadcast
time for their own use than affiliates of Fox or the Traditional Networks. As of
December 31, 1996, WB had 96 affiliated stations broadcasting to 86.0% of U.S.
television households, including cable coverage provided by WGN-TV.
During 1994, UPN established an affiliation of independent television
stations that began broadcasting in January 1995. The amount of prime-time
programming supplied by UPN to its affiliates in January 1997 was six hours per
week, which will be increased in the 1997 fall season to eight hours per week.
As of December 31, 1996, UPN had 91 affiliated stations broadcasting to 73.9% of
U.S. television households, excluding secondary affiliations.
Television stations derive their revenues primarily from the sale of
national, regional and local advertising. All network-affiliated stations,
including those affiliated with Fox and others, are required to carry spot
advertising sold by their networks. This reduces the amount of advertising
available for sale directly by the network-affiliated stations. Network
affiliates generally are compensated for the broadcast of network advertising.
The compensation paid is negotiated, station-by-station, based on a fixed
formula, subject to certain adjustments. Stations directly sell all of the
remaining advertising to be
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inserted in network programming and all of the advertising in non-network
programming, retaining all of the revenues received from these sales of
advertising, less any commissions paid. Through barter and cash-plus-barter
arrangements, however, a national syndicated program distributor typically
retains a portion of the available advertising time for programming it supplies,
in exchange for no or reduced fees to the station for such programming.
Advertisers wishing to reach a national audience usually purchase time
directly from the Traditional Networks, the Fox network, UPN, or WB, or
advertise nationwide on an ad hoc basis. National advertisers who wish to reach
a particular regional or local audience buy advertising time directly from local
stations through national advertising sales representative firms. Additionally,
local businesses purchase advertising time directly from the stations' local
sales staff. Advertising rates are based upon factors which include the size of
the DMA in which the station operates, a program's popularity among the viewers
that an advertiser wishes to attract, the number of advertisers competing for
the available time, demographic characteristics of the DMA served by the
station, the availability of alternative advertising media in the DMA,
aggressive and knowledgeable sales forces and the development of projects,
features and marketing programs that tie advertiser messages to programming.
Because broadcast television stations rely on advertising revenues, declines in
advertising budgets, particularly in recessionary periods, will adversely affect
the broadcast business. Conversely, increases in advertising budgets may
contribute to an increase in the revenue and operating cash flow of a particular
broadcast television station.
Information regarding competition in the television broadcast industry is
set forth under "Business of Sinclair - Competition."
RADIO BROADCASTING
The primary source of revenues for radio stations is the sale of
advertising time to local and national spot advertisers and national network
advertisers. During the past decade, local advertising revenue as a percentage
of total radio advertising revenue in a given market has ranged from
approximately 79% to 82%. The growth in total radio advertising revenue tends to
be fairly stable and has generally grown at a rate faster than the Gross
Domestic Product ("GDP"). Total domestic radio advertising revenue reached an
all-time record of $12.3 billion in 1996, as reported by the Radio Advertising
Bureau (the "RAB").
According to the RAB's Radio Marketing Guide and Fact Book for Advertisers,
1997, radio reaches approximately 95% of all Americans over the age of 12 every
week. More than one half of all radio listening is done outside the home, in
contrast to other advertising media. The average adult listener spends
approximately three hours and 20 minutes per weekday listening to radio. Most
radio listening occurs during the morning, particularly between the time a
listener wakes up and the time the listener reaches work. This "morning drive
time" period reaches more than 80% of people over the age of 12 and, as a
result, radio advertising sold during this period achieves premium advertising
rates. Radio listeners have gradually shifted over the years from AM to FM
stations. FM reception, as compared to AM, is generally clearer and provides
greater total range and higher fidelity, except for so-called "clear channel" AM
radio stations, which have the maximum range of any type of station and can be
very successful in the news/talk/sports format. In comparison to AM, FM's
listener share is now in excess of 75%, despite the fact that the number of AM
and FM commercial stations in the United States is approximately equal.
Radio is considered an efficient, cost-effective means of reaching
specifically identified demographic groups. Stations are typically classified by
their on-air format, such as country, adult contemporary, oldies and news/talk.
A station's format and style of presentation enable it to target certain
demographics. By capturing a specific share of a market's radio listening
audience, with particular concentration in a targeted demographic, a station is
able to market its broadcasting time to advertisers seeking to reach a specific
audience. Advertisers and stations utilize data published by audience measuring
services, such as Arbitron, to estimate how many people within particular
geographical markets and demographics listen to specific stations.
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format of
a particular station and the local competitive envi-
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ronment. Although the number of advertisements broadcast during a given time
period may vary, the total number of advertisements broadcast on a particular
station generally does not vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station
usually will engage a firm that specializes in soliciting radio advertising
sales on a national level. National sales representatives obtain advertising
principally from advertising agencies located outside the station's market and
receive commissions based on the revenue from the advertising obtained.
Information regarding competition in the radio broadcast industry is set
forth under "Business of Sinclair - Competition."
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BUSINESS OF SINCLAIR
The Company is a diversified broadcasting company that owns or provides
programming services to more television stations than any other commercial
broadcasting group in the United States. The Company currently owns or provides
programming services pursuant to Local Marketing Agreements (LMAs) to 29
television stations, has pending acquisitions of four additional television
stations, and has pending acquisitions of the rights to provide programming to
two additional television stations. The Company believes it is also one of the
top 20 radio groups in the United States, when measured by the total number of
radio stations owned. The Company owns 27 radio stations, has pending
acquisitions of 24 radio stations, and has options to acquire an additional
seven radio stations.
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 DMAs in the United States. The Company's television station
group is diverse in network affiliation, with ten stations affiliated with Fox,
12 with UPN, three with 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 seven 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. See "- Television
Broadcasting - Programming and Affiliations," below.
The Company's radio station group is also geographically diverse with a
variety of programming formats including country, urban, news/talk/sports,
album/progressive rock and adult contemporary. Of the 27 stations owned by the
Company, 12 broadcast on the AM band and 15 on the FM band. The Company owns
from two to 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 27 radio stations. From 1991 to 1996, net broadcast revenues and
Adjusted EBITDA increased from $39.7 million to $346.5 million and from $15.5
million to $180.3 million, respectively. Pro forma for the 1996 Acquisitions and
the Heritage Acquisition, 1996 net broadcast revenues and Adjusted EBITDA would
have been $532.4 million and $246.3 million, respectively.
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license and non-license assets of KUPN-TV utilizing indebtedness under the Bank
Credit Agreement and existing cash balances. During the six months ended June
30, 1997, the Company made purchase option extension payments of $6.5 million
relating to WSYX-TV. The Company made payments totaling $8.5 million during the
six months ended June 30, 1997 in order to exercise options to acquire certain
FCC licenses. The Company made payments for property and equipment of $8.3
million for the six months ended June 30, 1997. In July 1997, the Company
entered into a purchase agreement to acquire the license and non-license assets
of the television and radio stations of Heritage and made a cash down payment of
$63.0 million. The Company anticipates that future requirements for capital
expenditures will also include other acquisitions if suitable acquisitions can
be identified on acceptable terms and capital expenditures incurred during the
ordinary course of business.
Net cash flows provided by financing activities decreased to $70.3 million
for the six months ended June 30, 1997 from $807.4 million for the six months
ended June 30, 1996. In March 1997, the Company completed a private placement of
the HYTOPS. The Company utilized $135 million of the approximately $193.4
million net proceeds of the HYTOPS Issuance to repay outstanding debt and
retained the remainder for general corporate purposes. The Company made payments
totaling $4.6 million to repurchase 186,000 shares of Class A Common Stock for
the six months ended June 30, 1997. In May 1997, the Company made payments of
$4.7 million related to the amendment of its Bank Credit Agreement. In the
fourth quarter of 1996, the Company negotiated the prepayment of syndicated
program contract liabilities for excess syndicated programming assets. In the
first quarter of 1997, the Company made final cash payments of $1.4 million
related to these negotiations. In July 1997, the Company issued the 1997 Notes
using $162.5 million of the approximately $196 million proceeds to repay
outstanding indebtedness under the revolving credit facility under the Bank
Credit Agreement and using the remainder to pay a portion of the $63 million
cash down payment relating to the Heritage Acquisition.
The Company anticipates that funds from operations, existing cash balances
and availability of the revolving credit facility under the Bank Credit
Agreement will be sufficient to meet its working capital, capital expenditure
commitments and debt service requirements for the foreseeable future. However,
to the extent such funds are not sufficient, or if the Company commits to
additional capital expenditures (including additional acquisitions), the Company
may need to incur additional indebtedness, refinance existing indebtedness or
raise funds from the sale of additional equity. The Bank Credit Agreement and
the indentures relating to the Company's 9% Senior Subordinated Notes due 2007,
10% Senior Subordinated Notes due 2003 and 10% Senior Subordinated Notes due
2005 restrict the incurrence of additional indebtedness and the use of proceeds
of an equity issuance. On August 22, 1997, the Company filed a $1 billion shelf
registration statement covering the issuance of the Company's debt securities,
preferred stock and common stock. The shares of Class A Common Stock offered in
the Common Stock Offering and the shares of Convertible Exchangeable Preferred
Stock offered in the Preferred Stock Offering are offered pursuant to such shelf
registration statement. A portion of the net proceeds to the Company from the
Offerings will be used to repay existing borrowings under the revolving credit
facility under the Bank Credit Agreement, and the remainder of the net proceeds
will be retained by the Company for general corporate purposes, including
funding the Heritage Acquisition, which is anticipated to close in the first
quarter of 1998, and other acquisitions if suitable acquisitions can be
identified on acceptable terms. The Company has requested the lenders under the
Bank Credit Agreement to approve an amendment that would characterize $275
million of indebtedness from the Tranche A term loan to amounts owing under the
revolving credit facility. If this amendment is approved, the Company will use
all of the net proceeds of the Offerings to repay indebtedness under the Bank
Credit Agreement. See "Use of Proceeds" and "Business of Sinclair - 1997
Acquisitions."
INCOME TAXES
Income tax benefit increased to $4.1 million for the six months ended June
30, 1997 from a provision of $2.1 million for the six months ended June 30,
1996. The Company's effective tax rate decreased to a benefit of 41.3% for the
six months ended June 30, 1997 from a provision of 58.2% for the six months
ended June 30, 1996. The net deferred tax asset increased to $8.2 million as of
June 30, 1997 from $782,000 at December 31, 1996. The increase in the Company's
net deferred tax asset as of June 30, 1997 as compared to December 31, 1996
primarily resulted from the anticipation that the pre-tax losses incurred in the
first six months of 1997 will be used to offset future taxable income.
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The Company's income tax provision increased to $6.9 million for the year
ended December 31, 1996 from $5.2 million for the year ended December 31, 1995.
The Company's effective tax rate increased to 86% for the year ended December
31, 1996 from 51% for the year ended December 31, 1995. The increase for the
year ended December 31, 1996 as compared to the year ended December 31, 1995
primarily related to certain financial reporting and income tax differences
attributable to certain 1995 and 1996 Acquisitions, and state franchise taxes
which are independent of pre-tax income.
The net deferred tax asset decreased to $782,000 as of December 31, 1996
from $21.0 million at December 31, 1995. The decrease in the Company's net
deferred tax asset as of December 31, 1996 as compared to December 31, 1995 is
primarily due to the Company recording deferred tax liabilities of $18.1 million
relating to the acquisition of all of the outstanding stock of Superior in May
1996, adjustments related to certain 1995 acquisitions, and resulting
differences between the book and tax basis of the underlying assets.
A $1.8 million net tax provision and a $647,000 tax benefit was recognized
for the years ended December 31, 1995 and December 31, 1994, respectively. The
provision for the year ended December 31, 1995 was comprised of $5.2 million
provision relating to the Company's income before provision for income taxes and
extraordinary item offset by a $3.4 million income tax benefit relating to the
extraordinary loss on early extinguishment of debt. The $5.2 million tax
provision reflects a 51% effective tax rate for the year ended December 31,
1995, which is higher than the statutory rate primarily due to the
non-deductibility of goodwill relating to the repurchase of Common Stock in
1990. The income tax benefit for the year ended December 31, 1994 was 19.1% of
the Company's loss before income taxes, which is lower than the benefit
calculated at statutory rates primarily due to non-deductible goodwill
amortization. After giving effect to these changes the Company had net deferred
tax assets of $21.0 million at December 31, 1995 and $12.5 million at December
31, 1994, respectively.
SEASONALITY
The Company's results usually are subject to seasonal fluctuations, which
result in fourth quarter broadcast operating income usually being greater than
first, second and third quarter broadcast operating income. This seasonality is
primarily attributable to increased expenditures by advertisers in anticipation
of holiday season spending and an increase in viewership during this period.
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INDUSTRY OVERVIEW
TELEVISION BROADCASTING
Commercial television stations in the United States are typically
affiliated with one of six television networks, which are at different stages of
development. The networks are differentiated in part by the amount of
programming they provide their affiliates each week and by the length of time
they have been in operation. These networks are ABC, CBS, NBC, FOX, WB, and UPN.
The ABC, CBS, and NBC networks (the "Traditional Networks") have a substantial
number of affiliated stations, have been in operation for the longest time and
provide the majority of their affiliates' programming each day. Fox established
an affiliate network in the mid-`80s and provides fewer hours of prime-time and
daytime programming than the Traditional Networks. WB and UPN, the newest
television networks, will soon increase their prime-time programming from three
to four nights and also provide a number of hours of children's programming each
week. Television stations affiliated with Fox, WB, or UPN have more hours of the
day to program and consequently have more commercial inventory to sell to
advertisers.
Each Traditional Network provides the majority of its affiliates'
programming each day without charge in exchange for a substantial majority of
the available advertising time in the programs supplied. Each Traditional
Network sells this advertising time and retains the revenue. The affiliate
receives compensation from the Traditional Network and retains the revenue from
time sold during breaks in and between network programs and in programming the
affiliate produces or purchases from non-network sources.
In contrast, a station that is not affiliated with a Traditional Network
supplies over-the-air programming by acquiring rights to broadcast programs
through syndication. This syndicated programming is generally acquired by such
stations for cash and barter. Those stations that acquire a program through
syndication are usually given exclusive rights to show the program in the
station's market for either a period of years or a number of episodes agreed
upon between the station and the syndicator of the programming. Types of
syndicated programs aired on these stations include feature films, popular
series previously shown on network television and series produced for direct
distribution to television stations.
Fox has established a network of television stations that operates on a
basis similar to the Traditional Networks. However, the 15 hours per week of
prime-time programming supplied by Fox to its affiliates are significantly less
than that of the Traditional Networks and, as a result, Fox affiliates retain a
significantly higher portion of the available inventory of broadcast time for
their own use than Traditional Network affiliates. As of December 31, 1996, Fox
had 169 affiliated stations broadcasting to 95.0% of U.S. television households.
During 1994, WB established an affiliation of independent stations which
began broadcasting in January 1995 and operates on a basis similar to Fox.
However, WB currently supplies only six hours of prime-time programming per week
to its affiliates (which will increase to eight hours per week in January 1998),
which is significantly less than that of Fox and, as a result, WB affiliates
retain a significantly higher portion of the available inventory of broadcast
time for their own use than affiliates of Fox or the Traditional Networks. As of
December 31, 1996, WB had 96 affiliated stations broadcasting to 86.0% of U.S.
television households, including cable coverage provided by WGN-TV.
During 1994, UPN established an affiliation of independent television
stations that began broadcasting in January 1995. The amount of prime-time
programming supplied by UPN to its affiliates in January 1997 was six hours per
week, which will be increased in the 1997 fall season to eight hours per week.
As of December 31, 1996, UPN had 91 affiliated stations broadcasting to 73.9% of
U.S. television households, excluding secondary affiliations.
Television stations derive their revenues primarily from the sale of
national, regional and local advertising. All network-affiliated stations,
including those affiliated with Fox and others, are required to carry spot
advertising sold by their networks. This reduces the amount of advertising
available for sale directly by the network-affiliated stations. Network
affiliates generally are compensated for the broadcast of network advertising.
The compensation paid is negotiated, station-by-station, based on a fixed
formula, subject to certain adjustments. Stations directly sell all of the
remaining advertising to be
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inserted in network programming and all of the advertising in non-network
programming, retaining all of the revenues received from these sales of
advertising, less any commissions paid. Through barter and cash-plus-barter
arrangements, however, a national syndicated program distributor typically
retains a portion of the available advertising time for programming it supplies,
in exchange for no or reduced fees to the station for such programming.
Advertisers wishing to reach a national audience usually purchase time
directly from the Traditional Networks, the Fox network, UPN, or WB, or
advertise nationwide on an ad hoc basis. National advertisers who wish to reach
a particular regional or local audience buy advertising time directly from local
stations through national advertising sales representative firms. Additionally,
local businesses purchase advertising time directly from the stations' local
sales staff. Advertising rates are based upon factors which include the size of
the DMA in which the station operates, a program's popularity among the viewers
that an advertiser wishes to attract, the number of advertisers competing for
the available time, demographic characteristics of the DMA served by the
station, the availability of alternative advertising media in the DMA,
aggressive and knowledgeable sales forces and the development of projects,
features and marketing programs that tie advertiser messages to programming.
Because broadcast television stations rely on advertising revenues, declines in
advertising budgets, particularly in recessionary periods, will adversely affect
the broadcast business. Conversely, increases in advertising budgets may
contribute to an increase in the revenue and operating cash flow of a particular
broadcast television station.
Information regarding competition in the television broadcast industry is
set forth under "Business of Sinclair - Competition."
RADIO BROADCASTING
The primary source of revenues for radio stations is the sale of
advertising time to local and national spot advertisers and national network
advertisers. During the past decade, local advertising revenue as a percentage
of total radio advertising revenue in a given market has ranged from
approximately 79% to 82%. The growth in total radio advertising revenue tends to
be fairly stable and has generally grown at a rate faster than the Gross
Domestic Product ("GDP"). Total domestic radio advertising revenue reached an
all-time record of $12.3 billion in 1996, as reported by the Radio Advertising
Bureau (the "RAB").
According to the RAB's Radio Marketing Guide and Fact Book for Advertisers,
1997, radio reaches approximately 95% of all Americans over the age of 12 every
week. More than one half of all radio listening is done outside the home, in
contrast to other advertising media. The average adult listener spends
approximately three hours and 20 minutes per weekday listening to radio. Most
radio listening occurs during the morning, particularly between the time a
listener wakes up and the time the listener reaches work. This "morning drive
time" period reaches more than 80% of people over the age of 12 and, as a
result, radio advertising sold during this period achieves premium advertising
rates. Radio listeners have gradually shifted over the years from AM to FM
stations. FM reception, as compared to AM, is generally clearer and provides
greater total range and higher fidelity, except for so-called "clear channel" AM
radio stations, which have the maximum range of any type of station and can be
very successful in the news/talk/sports format. In comparison to AM, FM's
listener share is now in excess of 75%, despite the fact that the number of AM
and FM commercial stations in the United States is approximately equal.
Radio is considered an efficient, cost-effective means of reaching
specifically identified demographic groups. Stations are typically classified by
their on-air format, such as country, adult contemporary, oldies and news/talk.
A station's format and style of presentation enable it to target certain
demographics. By capturing a specific share of a market's radio listening
audience, with particular concentration in a targeted demographic, a station is
able to market its broadcasting time to advertisers seeking to reach a specific
audience. Advertisers and stations utilize data published by audience measuring
services, such as Arbitron, to estimate how many people within particular
geographical markets and demographics listen to specific stations.
The number of advertisements that can be broadcast without jeopardizing
listening levels (and the resulting ratings) is limited in part by the format of
a particular station and the local competitive envi-
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ronment. Although the number of advertisements broadcast during a given time
period may vary, the total number of advertisements broadcast on a particular
station generally does not vary significantly from year to year.
A station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a station
usually will engage a firm that specializes in soliciting radio advertising
sales on a national level. National sales representatives obtain advertising
principally from advertising agencies located outside the station's market and
receive commissions based on the revenue from the advertising obtained.
Information regarding competition in the radio broadcast industry is set
forth under "Business of Sinclair - Competition."
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<PAGE>
BUSINESS OF SINCLAIR
The Company is a diversified broadcasting company that owns or provides
programming services to more television stations than any other commercial
broadcasting group in the United States. The Company currently owns or provides
programming services pursuant to Local Marketing Agreements (LMAs) to 29
television stations, has pending acquisitions of four additional television
stations, and has pending acquisitions of the rights to provide programming to
two additional television stations. The Company believes it is also one of the
top 20 radio groups in the United States, when measured by the total number of
radio stations owned. The Company owns 27 radio stations, has pending
acquisitions of 24 radio stations, and has options to acquire an additional
seven radio stations.
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 DMAs in the United States. The Company's television station
group is diverse in network affiliation, with ten stations affiliated with Fox,
12 with UPN, three with 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 seven 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. See "- Television
Broadcasting - Programming and Affiliations," below.
The Company's radio station group is also geographically diverse with a
variety of programming formats including country, urban, news/talk/sports,
album/progressive rock and adult contemporary. Of the 27 stations owned by the
Company, 12 broadcast on the AM band and 15 on the FM band. The Company owns
from two to 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 27 radio stations. From 1991 to 1996, net broadcast revenues and
Adjusted EBITDA increased from $39.7 million to $346.5 million and from $15.5
million to $180.3 million, respectively. Pro forma for the 1996 Acquisitions and
the Heritage Acquisition, 1996 net broadcast revenues and Adjusted EBITDA would
have been $532.4 million and $246.3 million, respectively.
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<PAGE>
TELEVISION BROADCASTING
The Company owns and operates, provides programming services to, or has
agreed to acquire the following television stations:
<TABLE>
<CAPTION>
NUMBER OF
COMMERCIAL EXPIRATION
MARKET STATIONS IN STATION DATE OF
MARKET RANK(A) STATIONS STATUS(B) CHANNEL AFFILIATION THE MARKET(C) RANK(D) FCC LICENSE
- ----------------------------- --------- ---------- ------------ --------- ------------- --------------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PITTSBURGH, PENNSYLVANIA . 19 WPGH O&O 53 FOX 6 4 8/1/99
WPTT LMA 22 UPN 5 8/1/99
Sacramento, California ...... 20 KOVR O&O 13 CBS 8 3 2/1/98
St. Louis, Missouri ......... 21 KDNL O&O 30 ABC 7 5 2/1/98
Baltimore, Maryland ......... 23 WBFF O&O 45 FOX 5 4 10/1/04
WNUV LMA 54 UPN 5 10/1/04
Indianapolis, Indiana ...... 25 WTTV LMA(e) 4 UPN 8 4 8/1/97 (f)
WTTK LMA(e)(g) 29 UPN 4 8/1/97 (f)
Raleigh-Durham,
North Carolina ............ 29 WLFL O&O 22 FOX 5 3 12/1/04
WRDC LMA 28 UPN 5 12/1/04
Cincinnati, Ohio ............ 30 WSTR O&O 64 UPN 5 5 10/1/97 (f)
Milwaukee, Wisconsin ...... 31 WCGV O&O 24 UPN 6 4 12/1/97 (f)
WVTV LMA 18 WB 5 12/1/97 (f)
Kansas City, Missouri ...... 32 KSMO O&O 62 UPN 5 5 2/1/98
Columbus, Ohio ............ 34 WTTE O&O 28 FOX 5 4 10/1/97 (f)
Asheville, North Carolina
and Greenville/
Spartanburg/Anderson,
South Carolina ......... 35 WFBC LMA 40 IND(h) 6 5 12/1/04
WLOS O&O 13 ABC 6 3 12/0/04
San Antonio, Texas ......... 38 KABB O&O 29 FOX 7 4 8/1/98
KRRT LMA 35 UPN 6 8/1/98
Norfolk, Virginia ......... 40 WTVZ O&O 33 FOX 6 4 10/1/04
Oklahoma City,
Oklahoma .................. 43 KOCB O&O 34 UPN 7 5 6/1/98
Birmingham, Alabama ......... 51 WTTO O&O 21 WB 5 4 4/1/05
WABM LMA 68 UPN 5 4/1/05
Charleston and Hunting-
ton, West Virginia 56 WCHS Pending 8 ABC 4 3 10/01/04
Mobile, Alabama and
Pensacola, Florida ......... 61 WEAR Pending 3 ABC 6 2 2/01/05
WFGX Pending(i) 35 WB 6 2/01/05
Flint/Saginaw/Bay City,
Michigan .................. 62 WSMH O&O 66 FOX 5 4 10/1/97 (f)
Las Vegas, Nevada ......... 64 KUPN O&O 21 UPN 8 5 10/1/98
Lexington, Kentucky ......... 68 WDKY O&O 56 FOX 5 4 8/1/05
Des Moines, Iowa ............ 71 KDSM O&O 17 FOX 4 4 2/1/98
Burlington, Vermont and
Plattsburgh, New York . 91 WPTZ Pending 5 NBC 4 2 6/1/99
WNNE Pending(j) 31 NBC 3 4/1/99
WFFF Pending(i) 44 FOX (k) (k)
Peoria/Bloomington,
Illinois .................. 110 WYZZ O&O 43 FOX 4 4 12/1/97 (f)
Tuscaloosa, Alabama ......... 185 WDBB LMA(l) 17 WB 2 2 4/1/05
</TABLE>
(footnotes on following page)
- ----------
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(a) Rankings are based on the relative size of a station's DMA among the 211
generally recognized DMAs in the United States as estimated by Nielsen.
(b) "O&O" refers to stations owned and operated by the Company, "LMA" refers to
stations to which the Company provides programming services pursuant to an
LMA and "Pending" refers to stations the Company has agreed to acquire.
See "- 1997 Acquisitions."
(c) Represents the number of television stations designated by Nielsen as
"local" to the DMA, excluding public television stations and stations which
do not meet the minimum Nielsen reporting standards (weekly cumulative
audience of at least 2.5%) for the Sunday-Saturday, 6:00 a.m.
to 2:00 a.m. time period.
(d) The rank of each station in its market is based upon the November 1996
Nielsen estimates of the percentage of persons tuned to each station in the
market from 6:00 a.m. to 2:00 a.m., Sunday-Saturday.
(e) Non-License Assets acquired from River City Broadcasting, L.P. ("River
City") and option exercised to acquire License Assets will become owned and
operated upon FCC approval of transfer of License Assets and closing of
acquisition of License Assets.
(f) License renewal application pending.
(g) WTTK currently simulcasts all of the programming aired on WTTV and the
station rank applies to the combined viewership of these stations.
(h) "IND" or "Independent" refers to a station that is not affiliated with any
of ABC, CBS, NBC, Fox, WB or UPN.
(i) The Company will provide programming services to this station upon
completion of the Heritage Acquisition.
(j) WNNE currently simulcasts the programming broadcast on WPTZ.
(k) This station began broadcast operations in August 1997 pursuant to program
test authority and does not yet have a license. This station has not yet
established a rank.
(l) WDBB simulcasts the programming broadcast on WTTO.
Operating Strategy
The Company's television operating strategy includes the following key
elements:
Attracting Viewership
The Company seeks to attract viewership and expand its audience share
through selective, high-quality programming.
Popular Programming. The Company believes that an important factor in
attracting viewership to its stations is their network affiliations with Fox,
WB, ABC, CBS and UPN. These affiliations enable the Company to attract viewers
by virtue of the quality first-run original programming provided by these
networks and the networks' promotion of such programming. The Company also seeks
to obtain, at attractive prices, popular syndicated programming that is
complementary to the station's network affiliation. Examples of popular
syndicated programming obtained by the Company for broadcast on its Fox, WB and
UPN affiliates and Independent stations are "Mad About You," "Frasier," "The
Simpsons," "Home Improvement" and "Seinfeld." In addition to network
programming, the Company's ABC and CBS affiliates broadcast news magazine, talk
show, and game show programming such as "Hard Copy," "Entertainment Tonight,"
"Regis and Kathie Lee," "Wheel of Fortune" and "Jeopardy."
Children's Programming. The Company seeks to be a leader in children's
programming in each of its respective DMAs. The Company's nationally recognized
"Kids Club" was the forerunner and model for the Fox network-wide marketing
efforts promoting children's programming. Sinclair carries the Fox Children's
Network ("FCN") and WB's and UPN's children's programming, all of which include
significant amounts of animated programming throughout the week. In those
markets where the Company owns or programs ABC or CBS affiliates, the Company
broadcasts those networks' animated programming during weekends. In addition to
this animated programming, the Company broadcasts other forms of children's
programming, which may be produced by the Company or by an affiliated network.
Counter-Programming. The Company's programming strategy on its Fox, WB,
UPN and Independent stations also includes "counter-programming," which
consists of broadcasting programs that are alternatives to the types of
programs being shown concurrently on competing stations. This strategy is
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designed to attract additional audience share in demographic groups not served
by concurrent programming on competing stations. The Company believes that
implementation of this strategy enables its stations to achieve competitive
rankings in households in the 18-49 and 25-54 demographics and to offer greater
diversity of programming in each of its DMAs.
Local News. The Company believes that the production and broadcasting of
local news can be an important link to the community and an aid to the station's
efforts to expand its viewership. In addition, local news programming can
provide access to advertising sources targeted specifically to local news. The
Company carefully assesses the anticipated benefits and costs of producing local
news prior to introduction at a Company station because a significant investment
in capital equipment is required and substantial operating expenses are incurred
in introducing, developing and producing local news programming. The Company
currently provides local news programming at WBFF and WNUV in Baltimore, WLFL in
Raleigh/Durham, KDNL in St. Louis, KABB in San Antonio, KOVR in Sacramento, WPGH
in Pittsburgh and WLOS in Asheville. The Company also broadcasts news programs
on WDKY in Lexington, which are produced in part by the Company and in part
through the purchase of production services from an independent third party and
on WTTV in Indianapolis, which are produced by a third party in exchange for a
limited number of advertising spots. River City provides the Company news
production services with respect to the production of news programming and on
air talent on WTTE. Pursuant to an agreement, River City provides certain
services to the Company in return for a fee equal to approximately $416,000 per
year. The possible introduction of local news at the other Company stations is
reviewed periodically. The Company's policy is to institute local news
programming at a specific station only if the expected benefits of local news
programming at the station are believed to exceed the associated costs after an
appropriate start-up period.
Popular Sporting Events. The Company attempts to capture a portion of
advertising dollars designated to sports programming in selected DMAs. The
Company's WB and UPN affiliated and independent stations generally face fewer
restrictions on broadcasting live local sporting events than do their
competitors that are affiliates of the major networks and Fox since affiliates
of the major networks and Fox are subject to prohibitions against preemptions of
network programming. The Company has been able to acquire the local television
broadcast rights for certain sporting events, including NBA basketball, Major
League Baseball, NFL football, NHL hockey, ACC basketball, Big Ten football and
basketball, and SEC football. The Company seeks to expand its sports
broadcasting in DMAs as profitable opportunities arise. In addition, the
Company's stations that are affiliated with Fox, ABC and CBS broadcast certain
Major League Baseball games, NFL football games and NHL hockey games as well as
other popular sporting events.
Innovative Local Sales and Marketing
The Company believes that it is able to attract new advertisers to its
stations and increase its share of existing customers' advertising budgets by
creating a sense of partnership with those advertisers. The Company develops
such relationships by training its sales forces to offer new marketing ideas and
campaigns to advertisers. These campaigns often involve the sponsorship by
advertisers of local promotional events that capitalize on the station's local
identity and programming franchises. For example, several of the Company's
stations stage local "Kids Fairs" which allow station advertisers to reinforce
their on-air advertising with their target audience. Through its strong local
sales and marketing focus, the Company seeks to capture an increasing share of
its revenues from local sources, which are generally more stable than national
advertising.
Control of Operating and Programming Costs
By employing a disciplined approach to managing programming acquisition and
other costs, the Company has been able to achieve operating margins that the
Company believes are among the highest in the television broadcast industry. The
Company has sought and will continue to seek to acquire quality programming for
prices at or below prices paid in the past. As an owner or provider of
programming services to 29 stations in 21 DMAs reaching approximately 15% of
U.S. television households (without giving effect to the Heritage Acquisition),
the Company believes that it is able to negotiate favorable terms for the
acquisition of programming. Moreover, the Company emphasizes control of each of
its stations' programming and operating costs through program-specific profit
analysis, detailed budgeting, tight control over staffing levels and detailed
long-term planning models.
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<PAGE>
Attract and Retain High Quality Management
The Company believes that much of its success is due to its ability to
attract and retain highly skilled and motivated managers, both at the corporate
and local station levels. A portion of the compensation provided to general
managers, sales managers and other station managers is based on their achieving
certain operating results. The Company also provides its corporate and station
managers with deferred compensation plans offering options to acquire Class A
Common Stock.
Community Involvement
Each of the Company's stations actively participates in various community
activities and offers many community services. The Company's activities include
broadcasting programming of local interest and sponsorship of community and
charitable events. The Company also encourages its station employees to become
active members of their communities and to promote involvement in community and
charitable affairs. The Company believes that active community involvement by
its stations provides its stations with increased exposure in their respective
DMAs and ultimately increases viewership and advertising support.
Establish LMAs
The Company believes that it can attain significant growth in operating
cash flow through the utilization of LMAs. By expanding its presence in a market
in which it owns a station, the Company can improve its competitive position
with respect to a demographic sector. In addition, by providing programming
services to an additional station in a market, the Company is able to realize
significant economies of scale in marketing, programming, overhead and capital
expenditures. The Company provides programming services pursuant to an LMA to an
additional station in seven of the 21 television markets in which the Company
owns or programs a station.
Programming and Affiliations
The Company continually reviews its existing programming inventory and
seeks to purchase the most profitable and cost-effective syndicated programs
available for each time period. In developing its selection of syndicated
programming, the Company balances the cost of available syndicated programs with
their potential to increase advertising revenue and the risk of their reduced
popularity during the term of the program contract. The Company seeks to
purchase only those programs with contractual periods that permit programming
flexibility and which complement a station's overall programming strategy and
counter-programming strategy. Programs that can perform successfully in more
than one time period are more attractive due to the long lead time and
multi-year commitments inherent in program purchasing.
Twenty-eight of the 29 television stations owned or provided programming
services by the Company currently operate as affiliates of Fox (ten stations),
UPN (twelve stations), ABC (two stations), WB (three stations) or CBS (one
station). The networks produce and distribute programming in exchange for each
station's commitment to air the programming at specified times and for
commercial announcement time during the programming. In addition, networks other
than Fox and UPN pay each affiliated station a fee for each network-sponsored
program broadcast by the stations.
On August 21, 1996, the Company entered into an agreement with Fox (the
"Fox Agreement") which, among other things, provides that the affiliation
agreements between Fox and eight stations owned or provided programming services
by the Company (except as noted below) would be amended to have new five-year
terms commencing on the date of the Fox Agreement. Fox has the option to extend
the affiliation agreements for additional five-year terms and must extend all of
the affiliation agreements if it extends any (except that Fox may selectively
renew affiliation agreements if any station has breached its affiliation
agreement). The Fox Agreement also provides that the Company will have the right
to purchase, for fair market value, any station Fox acquires in a market
currently served by a Company-owned Fox affiliate (other than the Norfolk and
Raleigh-Durham markets) if Fox determines to terminate the affiliation agreement
with the Company's station in that market and operate the station acquired by
Fox as a Fox affiliate. The Fox Agreement confirmed that the affiliation
agreements for WTVZ-TV (Norfolk, Virginia) and WLFL-TV
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(Raleigh, North Carolina) will terminate August 31, 1998. The Fox Agreement also
includes provisions limiting the ability of the Company to preempt Fox
programming except where it has existing programming conflicts or where the
Company preempts to serve a public purpose.
The Company's affiliation agreements with ABC for KDNL and WLOS in St.
Louis and Asheville, respectively, have ten-year terms expiring in 2005 and
2004, respectively. Each of the Company's current UPN affiliation agreements
expires in January 1998 unless renewed by the Company.
On July 4, 1997, the Company entered into an agreement with WB, 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: 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, 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
end January 15, 2008). Pursuant to the WB Agreement, the WB affiliation
agreements of WVTV-TV, Milwaukee, Wisconsin, and WTTO-TV, Birmingham, Alabama
(whose programming is simulcasted on WDBB-TV, Tuscaloosa, Alabama), have been
extended to January 16, 2008. In addition, WFBC-TV in Greenville, South Carolina
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 in aggregate amount in monthly installments during the first 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 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. Certain subsidiaries of the Company
have filed an action in the Circuit Court for Baltimore City seeking declaratory
relief that their notice was effective to terminate the affiliations on January
15, 1998.
Each of the affiliation agreements relating to stations involved in the
River City Acquisition (other than River City's Fox and ABC affiliates) is
terminable by the network upon transfer of the License Assets of the station.
Since transfer of the License Assets, no such affiliation agreement has been
terminated.
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<PAGE>
Radio Broadcasting
The following table sets forth certain information regarding the radio
stations (i) owned and operated by the Company, or (ii) which the Company has an
option or has agreed to acquire:
<TABLE>
<CAPTION>
RANKING OF STATION RANK EXPIRATION
GEOGRAPHIC STATION'S STATION PRIMARY IN PRIMARY DATE OF
MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC FCC
SERVED(A) REVENUE(B) FORMAT TARGET(C) TARGET(D) LICENSE
- ------------------------- ------------ --------------------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Los Angeles, California 1
KBLA-AM(e) Korean N/A(e) N/A(e) 12/1/97(f)
St. Louis, Missouri 18
KPNT-FM Alternative Rock Adults 18-34 2 2/1/05
WVRV-FM Modern Adult Contemporary Adults 18-34 3 12/1/04
WRTH-AM(g) Adult Standards Adults 25-54 20 2/1/05
WIL-FM(g) Country Adults 25-54 7 2/1/05
KIHT-FM(g) 70s Rock Adults 25-54 11 2/1/05
Portland, Oregon 22
KKSN-AM(g) Adult Standards Adults 25-54 28 2/1/98
KKSN-FM(g) 60s Oldies Adults 25-54 5 2/1/98
KKRH-FM(g) 70s Rock Adults 25-54 7 2/1/98
Kansas City, Missouri 29
KCAZ-AM(g)(h) Children's N/A(h) N/A(h) 6/1/97(f)
KCFX-FM(g) 70s Rock Adults 25-54 1 6/1/97(f)
KQRC-FM(g) Active Rock Adults 18-34 2 6/1/05
KCIY-FM(g) Smooth Jazz Adults 25-54 11 2/1/05
KXTR-FM(g) Classical Adults 25-54 18 2/1/05
Milwaukee, Wisconsin 32
WEMP-AM(g) 60s Oldies Adults 25-54 26 12/1/04
WMYX-FM(g) Adult Contemporary Adults 25-54 6 12/1/04
WAMG-FM(g) Rhythmic Adults 25-54 15 12/1/04
Nashville, Tennessee 34
WLAC-FM (i) Adult Contemporary Women 25-54 5 8/1/04
WJZC-FM(i) Smooth Jazz Women 25-54 9 8/1/04
WLAC-AM(i) News/Talk/Sports Adults 35-64 9 8/1/04
New Orleans, Louisiana 38
WLMG-FM Adult Contemporary Women 25-54 4 6/1/04
KMEZ-FM Urban Oldies Women 25-54 6 6/1/04
WWL-AM News/Talk/Sports Adults 35-64 1 6/1/04
WSMB-AM Talk/Sports Adults 35-64 17 6/1/04
WBYU-AM(g) Adult Standards Adults 25-54 19 6/1/98
WEZB-FM(g)(j) Adult Contemporary Adults 25-54 10 6/1/05
WRNO-FM(g) 70s Rock Adults 25-54 8 6/1/01
Memphis, Tennessee 40
WRVR-FM Soft Adult Contemporary Women 25-54 2 8/1/04
WJCE-AM Urban Oldies Women 25-54 13 8/1/04
WOGY-FM Country Adults 25-54 7 8/1/04
Norfolk, Virginia 41
WGH-AM(g) Sports Talk Adults 25-54 18 10/1/03
WGH-FM(g) Country Adults 25-54 3 10/1/03
WVCL-FM(g)(k) 60s Oldies Adults 25-54 10 10/1/03
Buffalo, New York 42
WMJQ-FM Adult Contemporary Women 25-54 2 6/1/98
WKSE-FM Contemporary Hit Radio Women 18-49 1 6/1/98
WBEN-AM News/Talk/Sports Adults 35-64 6 6/1/98
WWKB-AM Country Adults 35-64 18 6/1/98
WGR-AM Sports Adults 25-54 9 6/1/98
WWWS-AM Urban Oldies Women 25-54 11 6/1/98
(continued on following page)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
RANKING OF STATION RANK EXPIRATION
GEOGRAPHIC STATION'S STATION PRIMARY IN PRIMARY DATE OF
MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC FCC
SERVED(A) REVENUE(B) FORMAT TARGET(C) TARGET(D) LICENSE
- ------------------------ ------------ ------------------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Rochester, New York 53
WBBF-AM(g) Adult Standards Adults 25-54 23 6/1/98
WBEE-FM(g) Country Adults 25-54 1 6/1/98
WKLX-FM(g) 60s Oldies Adults 25-54 7 6/1/98
WQRV-FM(g) Classic Hits Adults 25-54 9 6/1/98
60
Asheville, North Carolina/
Greenville/Spartanburg,
South Carolina
WFBC-FM(l) Contemporary Hit Radio Women 18-49 4 12/1/03
WORD-AM(l) News/Talk Adults 35-64 9 12/1/03
WYRD-AM(l) News/Talk Adults 35-64 10 12/1/03
WSPA-AM(l) Full Service/Talk Adults 35-64 15 12/1/03
WSPA-FM(l) Soft Adult Contemporary Women 25-54 4 12/1/03
WOLI-FM(l) Oldies Adults 25-54 9 12/1/03
WOLT-FM(l) Oldies Adults 25-54 11 12/1/03
Wilkes-Barre/Scranton, 68
Pennsylvania
WKRZ-FM(m) Contemporary Hit Radio Adults 18-49 1 8/1/98
WGGY-FM Country Adults 25-54 2 8/1/98
WILK-AM(n) News/Talk/Sports Adults 35-64 8 8/1/98
WGBI-AM(n) News/Talk/Sports Adults 35-64 20 8/1/98
WWSH-FM(o) Soft Hits Women 25-54 7 8/1/98
WILP-AM(n) News/Talk/Sports Adults 35-64 19 8/1/98
WWFH-FM(o) Soft Hits Women 25-54 10 8/1/98
WKRF-FM(m) Contemporary Hit Radio Adults 18-49 17 8/1/98
</TABLE>
- ----------
(a) Actual city of license may differ from the geographic market served.
(b) Ranking of the principal radio market served by the station among all
U.S. radio markets by 1996 aggregate gross radio broadcast revenue
according to Duncan's Radio Market Guide - 1997 Edition.
(c) Due to variations that may exist within programming formats, the
primary demographic target of stations with the same programming
format may be different.
(d) All information concerning ratings and audience listening
information is derived from the Spring 1997 Arbitron Metro Area
Ratings Survey (the "Spring 1997 Arbitron"). Arbitron is the
generally accepted industry source for statistical information
concerning audience ratings. Due to the nature of listener surveys,
other radio ratings services may report different rankings; however,
the Company does not believe that any radio ratings service other
than Arbitron is accorded significant weight in the radio broadcast
industry. "Station Rank in Primary Demographic Target" is the
ranking of the station among all radio stations in its market that
are ranked in its target demographic group and is based on the
station's average persons share in the primary demographic target in
the applicable Metro Survey Area. Source: Average Quarter Hour
Estimates, Monday through Sunday, 6:00 a.m. to midnight, Spring 1997
Arbitron.
(e) Programming is provided to this station by a third party pursuant to
an LMA.
(f) License renewal application pending.
(g) The Company has the right to acquire the assets of this station in
the Heritage Acquisition.
(h) This station is being programmed by a third party pursuant to an LMA.
The third party has an option to acquire this station for $550,000
which expires on September 30, 1997.
(i) The Company has agreed to sell this station to a third party.
(j) A petition for reconsideration of the grant of this station's
license renewal is pending.
(k) EEO reporting conditions were placed on this station's license
renewals for 1997, 1998 and 1999.
(l) The Company has an option to acquire Keymarket of South Carolina,
Inc. ("Keymarket" or "KSC"). Keymarket owns and operates WYRD-AM,
WORD-AM and WFBC-FM, and has exercised its option to acquire WSPA-AM
and WSPA-FM, and provides sales services pursuant to a JSA and has an
option to acquire WOLI-FM and WOLT-FM.
(m) WKRZ-FM and WKRF-FM simulcast their programming.
(n) WILK-AM, WGBI-AM and WILP-AM simulcast their programming.
(o) WWSH-FM and WWFH-FM simulcast their programming.
S-43
<PAGE>
Radio Operating Strategy
The Company's radio strategy is to operate a cluster of radio stations in
selected geographic markets throughout the country. In each geographic market,
the Company employs broadly diversified programming formats to appeal to a
variety of demographic groups within the market. The Company seeks to strengthen
the identity of each of its stations through its programming and promotional
efforts, and emphasizes that identity to a far greater degree than the identity
of any local radio personality.
The Company believes that its strategy of appealing to diverse demographic
groups in selected geographic markets allows it to reach a larger share of the
overall advertising market while realizing economies of scale and avoiding
dependence on one demographic or geographic market. The Company realizes
economies of scale by combining sales and marketing forces, back office
operations and general management in each geographic market. At the same time,
the geographic diversity of its portfolio of radio stations helps lessen the
potential impact of economic downturns in specific markets and the diversity of
target audiences served helps lessen the impact of changes in listening
preferences. In addition, the geographic and demographic diversity allows the
Company to avoid dependence on any one or any small group of advertisers.
The Company's group of radio stations includes the top billing station
group in two markets and one of the top three billing station groups in each of
its markets other than Los Angeles, St. Louis and Nashville. Through ownership
or LMAs, the group also includes duopolies in six of its seven markets and, upon
exercise of options to acquire stations in the Asheville/Greenville/Spartanburg
market, the Company will have duopolies in seven of its eight markets.
Depending on the programming format of a particular station, there are a
predetermined number of advertisements broadcast each hour. The Company
determines the optimum number of advertisements available for sale during each
hour without jeopardizing listening levels (and the resulting ratings). Although
there may be shifts from time to time in the number of advertisements available
for sale during a particular time of day, the total number of advertisements
available for sale on a particular station normally does not vary significantly.
Any change in net radio broadcasting revenue, with the exception of those
instances where stations are acquired or sold, is generally the result of
pricing adjustments made to ensure that the station effectively uses advertising
time available for sale, an increase in the number of commercials sold or a
combination of these two factors.
Large, well-trained local sales forces are maintained by the Company in
each of its radio markets. The Company's principal goal is to utilize its sales
efforts to develop long-standing customer relationships through frequent direct
contacts, which the Company believes provides it with a competitive advantage.
Additionally, in some radio markets, duopolies permit the Company to offer
creative advertising packages to local, regional and national advertisers. Each
radio station programmed by the Company also engages a national independent
sales representative to assist it in obtaining national advertising revenues.
These representatives obtain advertising through national advertising agencies
and receive a commission from the radio station based on its gross revenue from
the advertising obtained.
BROADCASTING ACQUISITION STRATEGY
On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act")
was signed into law. The 1996 Act represents the most sweeping overhaul of the
country's telecommunications laws since the Communications Act of 1934, as
amended (the "Communications Act"). The 1996 Act relaxes the broadcast ownership
rules and simplifies the process for renewal of broadcast station licenses.
The Company believes that the enactment of the 1996 Act presents a unique
opportunity to build a larger and more diversified broadcasting company.
Additionally, the Company expects that the opportunity to act as one of the
consolidators of the industry will enable the Company to gain additional
influence with program suppliers, television networks, other vendors, and
alternative delivery media. The additions to the Company's management team as a
result of the River City Acquisition have given it additional resources to take
advantage of these developments.
S-44
<PAGE>
In implementing its acquisition strategy, the Company seeks to identify and
pursue favorable station or group acquisition opportunities primarily in the
15th to 75th largest DMAs and Metro Service Areas ("MSAs"). In assessing
potential acquisitions, the Company examines opportunities to improve revenue
share, audience share and/or cost control. Additional factors considered by the
Company in a potential acquisition include geographic location, demographic
characteristics and competitive dynamics of the market. The Company also
considers the opportunity for cross-ownership of television and radio stations
and the opportunity it may provide for cross-promotion and cross-selling.
In conjunction with its acquisitions, the Company may determine that
certain of the acquired stations may not be consistent with the Company's
strategic plan. In such an event, the Company reviews opportunities for swapping
such stations with third parties for other stations or selling such stations
outright. The Heritage Acquisition may provide such opportunities.
Since the 1996 Act became effective, the Company has acquired, obtained
options to acquire or has acquired the right to program or provide sales
services to 18 television and 34 radio stations for an aggregate consideration
of approximately $1.3 billion. Certain terms of these acquisitions are described
below:
River City Acquisition. On May 31, 1996, pursuant to an amended and
restated asset purchase agreement, the Company acquired all of the Non-License
Assets of River City other than the assets relating to WSYX-TV in Columbus,
Ohio. Simultaneously, the Company entered into a 10-year LMA with River City
with respect to all of River City's License Assets (with the exception of the
License Assets relating to WSYX-TV). The Company has since exercised options to
acquire all of River City's License Assets other than License Assets relating to
WTTV-TV and WTTK-TV in Indianapolis, Indiana, WSYX-TV in Columbus, Ohio and
WFBC-TV in Greenville, South Carolina. Glencairn has acquired the License Assets
of WFBC-TV, and the Company provides programming services to WFBC-TV pursuant to
an LMA. The Company has a 10-year option (the "License Assets Option") to
acquire River City's License Assets relating to WTTV-TV and WTTK-TV, and a
three-year option to acquire the assets relating to WSYX-TV (both the License
and Non-License Assets, collectively the "Columbus Option"). The exercise price
for the License Assets Option for WTTV-TV and WTTK-TV is $1.9 million and the
Company is required to pay a quarterly extension fee with respect to the License
Assets Option of 15% of the option exercise price through May 3, 1998 and 25% of
the option exercise price thereafter. Acquisition of the License Assets relating
to WTTV-TV and WTTK-TV is now subject to FCC approval of transfer of such
License Assets. There can be no assurance that this approval will be obtained.
An application for transfer of the License Assets was filed in November 1996. A
petition was filed to deny this application and, at the Company's request, the
FCC has withheld action on this application. The petitioner has appealed the
withholding of action on the application.
At the time of the River City Acquisition, the Company also acquired from
another party the Non-License Assets relating to one additional television
station (KRRT-TV in Kerrville, Texas) to which River City provided programming
pursuant to an LMA. Glencairn has acquired the License Assets of KRRT-TV and the
Company provides programming services to KRRT-TV pursuant to an LMA. The Company
has also acquired or has agreed to acquire four radio stations to which River
City provided programming or sales services.
On July 17, 1997, the Company and Glencairn acquired the License Assets of
WLOS-TV and WFBC-TV, respectively. 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.
The Company paid an aggregate of approximately $1.0 billion for the
Non-License Assets and the options to acquire the License Assets in connection
with the River City Acquisition consisting of $847.6 million in cash and
1,150,000 shares of Series A Preferred Stock of the Company and options to
acquire 1,382,435 shares of Class A Common Stock at an exercise price of $30.11.
The Series A Preferred Stock has been exchanged for 1,150,000 shares of Series B
Preferred Stock of the Company, which at issuance had an aggregate liquidation
value of $115 million and are convertible at any time, at the option of the
S-45
<PAGE>
holders, into an aggregate of 4,181,818 shares of Class A Common Stock of the
Company (which had a market value on May 31, 1996 of approximately $125.1
million). The exercise price for the Columbus Option is approximately $130
million plus the amount of indebtedness secured by the WSYX assets on the date
of exercise (not to exceed the amount outstanding on the date of closing of $105
million) and the Company is required to pay an extension fee with respect to the
Columbus Option as follows: (i) 8% of $130 million for the first year following
the closing of the River City Acquisition; (ii) 15% of $130 million for the
second year following the closing; and (iii) 25% of $130 million for each
following year. The extension fee accrues beginning on the date of closing, and
is payable (beginning December 31, 1996) at the end of each calendar quarter
until such time as the option is exercised or River City sells WSYX-TV to a
third party, which River City has the right to do in certain limited
circumstances. The Company paid the extension fees due March 31, 1997 and June
30, 1997. The Company has acquired all of the River City License Assets except
those related to WTTV-TV and WTTK-TV, and the Company continues to provide
programming services to WTTV-TV and WTTK-TV pursuant to an LMA with River City.
Pursuant to the LMA with River City, the Company is required to provide at least
166 hours per week of programming to WTTV-TV and WTTK-TV and, subject to certain
exceptions, River City is required to broadcast all programming provided by the
Company. The Company is required to pay River City monthly fees under the LMA
with respect to WTTV-TV and WTTK-TV in an amount sufficient to cover specified
expenses of operating the stations. The Company has the right to sell
advertising time on the stations during the hours programmed by the Company.
The Company and River City filed notification under the HSR Act, with
respect to the Company's acquisition of all River City assets prior to closing
the acquisition. After the United States Justice Department ("DOJ") indicated
that it would request additional information regarding the antitrust
implications of the acquisition of WSYX-TV by the Company in light of the
Company's ownership of WTTE-TV, the Company and River City agreed to submit
separate notifications with respect to the WSYX-TV assets and the other River
City assets. The DOJ then granted early termination of the waiting period with
respect to the transfer of the River City assets other than WSYX-TV, permitting
the acquisition of those assets to proceed. The Company and River City agreed to
notify the DOJ 30 days before entering into an LMA or similar agreement with
respect to WSYX-TV and agreed not to enter into such an agreement until 20 days
after substantially complying with any request for information from DOJ
regarding the transaction. The Company is in the process of preparing a
submission to the DOJ regarding the competitive effects of entering into an LMA
arrangement in Columbus. The Company has agreed to sell the License Assets of
WTTE-TV to Glencairn and to enter into an LMA with Glencairn to provide
programming services to WTTE-TV. The FCC has approved this transaction, but the
Company does not believe that this transaction will be completed unless the
Company acquires WSYX-TV.
In the River City Acquisition, the Company also acquired an option held by
River City to purchase either (i) all of the assets of Keymarket of South
Carolina, Inc. for the forgiveness of debt held by the Company in an aggregate
principal amount of approximately $7.4 million as of August 22, 1997, plus
payment of approximately $1,000,000 less certain adjustments or (ii) all of the
stock of KSC for $1,000,000 less certain adjustments. KSC owns and operates
three radio stations in the Asheville, North Carolina/ Greenville/Spartanburg,
South Carolina MSA (WFBC-FM, WFBC-AM and WORD-AM). The option to acquire the
assets or stock of KSC expire on December 31, 1997. The Company intends to
exercise this option in the fourth quarter of 1997. KSC also holds an option to
acquire from Spartan Radiocasting, Inc. certain assets relating to two
additional stations (WSPA-AM and WSPA-FM) in the Asheville, North
Carolina/Greenville/Spartanburg, South Carolina MSA which KSC currently programs
pursuant to an LMA. KSC's option to acquire these assets is exercisable for
$5.15 million and expires in January 2000, subject to extension to the extent
the applicable LMA is extended beyond that date. KSC also has an option to
acquire assets of Palm Broadcasting Company, L.P., which owns two additional
stations in the Asheville, North Carolina/Greenville/Spartanburg, South Carolina
MSA (WOLI-FM and WOLT-FM) in an amount equal to the outstanding debt of Palm
Broadcasting Company, L.P. to the Company, which was approximately $3.03 million
as of March 31, 1997. This option expires in April 2001. KSC has a JSA with Palm
Broadcasting Company, L.P., but does not provide programming for WOLI or WOLT.
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<PAGE>
Superior Acquisition. On May 8, 1996, the Company acquired WDKY-TV
(Lexington, Kentucky) and KOCB-TV (Oklahoma City, Oklahoma) by acquiring the
stock of Superior Communications Group, Inc. for approximately $63.5 million.
Flint Acquisition. On February 27, 1996 the Company acquired the assets of
WSMH-TV (Flint, Michigan) for approximately $35.8 million by exercising options
granted in 1995.
Cincinnati/Kansas City Acquisitions. On July 1, 1996, the Company acquired
the assets of KSMO-TV (Kansas City, Missouri) and on August 1, 1996, it acquired
the assets of WSTR-TV (Cincinnati, Ohio) for approximately $34.2 million.
Peoria/Bloomington Acquisition. On July 1, 1996, the Company acquired the
assets of WYZZ-TV (Peoria/Bloomington, Illinois) for approximately $21.2
million.
1997 ACQUISITIONS
Las Vegas Acquisition. On January 30, 1997, the Company entered into an
agreement to acquire the assets of KUPN-TV, the UPN affiliate in Las Vegas,
Nevada, for $87.0 million. The Company completed this acquisition on May 30,
1997.
Heritage Acquisition. On July 16, 1997, the Company entered into the
Heritage Acquisition Agreements with certain subsidiaries of Heritage. Pursuant
to the Heritage Acquisition Agreements, the Company has the right to acquire the
assets of five television stations (the interests in one of which the Company is
required to dispose), programming rights under LMAs with respect to two
additional television stations, and the assets of 24 radio stations. The Company
will acquire the assets of one television station serving the
Charleston/Huntington, West Virginia market, one station in the Mobile, Alabama/
Pensacola, Florida market and rights under an LMA with respect to another
station in that market, and the assets of two stations in the Burlington,
Vermont/Plattsburgh, New York market and the right to provide programming to one
station in that market. The radio stations to be acquired serve the St. Louis,
Missouri market (three stations), the Portland, Oregon market (three stations),
the Kansas City, Missouri market (five stations), the Milwaukee, Wisconsin
market (three stations), the Norfolk, Virginia market (three stations), the New
Orleans, Louisiana market (three stations) and the Rochester, New York market
(four stations). The Heritage Acquisition Agreements also provide for the
acquisition of the assets relating to the operation of a television station in
Oklahoma City, Oklahoma, but the Company is required by the 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.
The aggregate purchase price of the Heritage Acquisition 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 Company intends to finance the
purchase price from some combination of the proceeds of the Common Stock
Offering, the proceeds of the Preferred Stock Offering, funds available under
the Bank Credit Agreement, and the expected proceeds ($60 million) from the sale
of interests in the Oklahoma City station.
The Heritage Acquisition is conditioned on, among other things, FCC
approval and the expiration of the applicable waiting period under the HSR Act.
Additional Radio Acquisitions and Dispositions. The Company entered into an
agreement on January 29, 1997 to acquire the assets of WGR-AM and WWWS-AM in
Buffalo, New York, for $1.5 million. The Company's acquisition of WGR-AM and
WWWS-AM was consummated on April 18, 1997. On January 31, 1997, the Company
completed the acquisition of the assets of WWFH-FM and WILP-AM, each in
Wilkes-Barre, Pennsylvania, for aggregate consideration of approximately
$773,000. On March 12, 1997, the Company entered into an agreement to acquire
the assets of radio station WKRF-FM in the Wilkes-Barre/Scranton, Pennsylvania
market. The Company completed this acquisition on July 31, 1997. In April 1997,
the Company entered into an agreement to acquire the assets of radio station
WWSH-FM in the Wilkes-Barre/Scranton market. The Company completed this
acquisition on August 29, 1997.
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<PAGE>
In August, 1997, the Company entered into an agreement with SFX
Broadcasting, Inc. ("SFX") pursuant to which the Company will sell to SFX the
assets relating to the operations of Nashville radio stations WJZC-FM, WLAC-FM
and WLAC-AM (the "SFX Stations"). Under the agreement, SFX will pay to the
Company an aggregate consideration of $35 million in cash for the SFX Stations
or, at the Company's option, transfer to the Company assets that both SFX and
the Company agree have a fair market value equal to $35 million. The sale of the
SFX Stations is conditioned on the approval of each of the Department of Justice
and the Federal Communications Commission and is expected to close in 1998.
Ongoing Discussions. In furtherance of its acquisition strategy, the
Company routinely reviews, and conducts investigations of potential television
and radio station acquisitions. When the Company believes a favorable
opportunity exists, the Company seeks to enter into discussions with the owners
of such stations regarding the possibility of an acquisition by the Company. At
any given time, the Company may be in discussions with one or more such station
owners. The Company is in serious negotiations with various parties relating to
the acquisition of television and radio properties which would be acquired for
aggregate consideration of approximately $85 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.
LOCAL MARKETING AGREEMENTS
The Company currently has LMA arrangements with stations in seven markets
in which it owns a television station: Pittsburgh, Pennsylvania (WPTT),
Baltimore, Maryland (WNUV), Raleigh/Durham, North Carolina (WRDC), Milwaukee,
Wisconsin (WVTV), Birmingham, Alabama (WABM), San Antonio, Texas (KRRT) and
Asheville/Greenville/Spartanburg, South Carolina (WFBC). In addition, the
Company has an LMA arrangement with a station in the Tuscaloosa, Alabama market
(WDBB), which is adjacent to Birmingham. In each of these markets, other than
Pittsburgh and Tuscaloosa, the LMA arrangement is with Glencairn and the Company
owns the Non-License Assets of the stations. The Company owns the assets of one
radio station (KBLA-AM in Los Angeles) which an independent third party programs
pursuant to an LMA.
The Company believes that it is able to increase its revenues and improve
its margins by providing programming services to stations in selected DMAs and
MSAs where the Company already owns a station. In certain instances, single
station operators and stations operated by smaller ownership groups do not have
the management expertise or the operating efficiencies available to the Company
as a multi-station broadcaster. The Company seeks to identify such stations in
selected markets and to provide such stations with programming services pursuant
to LMAs. In addition to providing the Company with additional revenue
opportunities, the Company believes that these LMA arrangements have assisted
certain stations whose operations may have been marginally profitable to
continue to air popular programming and contribute to diversity of programming
in their respective DMAs and MSAs.
In cases where the Company enters into LMA arrangements in connection with
a station whose acquisition by the Company is pending FCC approval, the Company
(i) obtains an option to acquire the station assets essential for broadcasting a
television or radio signal in compliance with regulatory guidelines, generally
consisting of the FCC license, transmitter, transmission lines, technical
equipment, call letters and trademarks, and certain furniture, fixtures and
equipment (the "License Assets") and (ii) acquires the remaining assets (the
"Non-License Assets") at the time it enters into the option. Following
acquisition of the Non-License Assets, the License Assets continue to be owned
by the owner-operator and holder of the FCC license, which enters into an LMA
with the Company. After FCC approval for transfer of the License Assets is
obtained, the Company exercises its option to acquire the License Assets and
become the owner-operator of the station, and the LMA arrangement is terminated.
In connection with the River City Acquisition, the Company entered into
LMAs with River City and the owner of KRRT with respect to each of the nine
television and 21 radio stations with respect to which the Company acquired
Non-License Assets. The Company or Glencairn has now acquired the License Assets
of all of the television and radio stations with respect to which the Company
initially acquired Non-License Assets in the River City Acquisition, other than
WTTV and WTTK in Indianap-
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olis, Indiana. The LMA with River City for these two stations is in effect for a
ten-year term, which corresponds with the term of the option the Company holds
to acquire the related River City License Assets. Pursuant to the LMA, the
Company pays River City fees in return for which the Company acquires all of the
inventory of broadcast time of the stations and the right to sell 100% of each
station's inventory of advertising time. Upon grant of FCC approval of the
transfer of License Assets with respect to WTTV and WTTK, the Company intends to
acquire the License Assets, and thereafter the LMA will terminate and the
Company will operate the stations. At the Company's request, the FCC has
withheld action on the application for the Company's acquisition of WTTV and
WTTK in Indianapolis (and a pending application for the Controlling Stockholders
to divest their attributable interests in WIIB in Indianapolis) until the FCC
completes its pending rulemaking proceeding considering the cross-interest
policy.
USE OF DIGITAL TELEVISION TECHNOLOGY
The Company believes that television broadcasting may be enhanced
significantly by the development and increased availability of digital
broadcasting service technology. This technology has the potential to permit the
Company to provide viewers multiple channels of digital television over each of
its existing standard channels, to provide certain programming in a high
definition television format and to deliver various forms of data, including
data on the Internet, to home and business computers. These additional
capabilities may provide the Company with additional sources of revenue. The
Company is currently considering plans to provide high definition television
("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 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 announced plans to hold 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. This digital broadcasting service
technology is not currently available to the viewing public and a successful
transition from the current analog broadcast format to a digital format may take
many years. There can be no assurance that the Company's efforts to take
advantage of the new technology will be commercially successful.
FEDERAL REGULATION OF TELEVISION AND RADIO BROADCASTING
The ownership, operation and sale of television and radio stations are
subject to the jurisdiction of the FCC, which acts under authority granted by
the Communications Act. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and operating
power of stations; issues, renews, revokes and modifies station licenses;
regulates equipment used by stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation and
employment practices of stations; and has the power to impose penalties for
violations of its rules or the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act, the 1996 Act and specific FCC regulations and policies.
Reference should be made to the Communications Act, the 1996 Act, FCC rules and
the public notices and rulings of the FCC for further information concerning the
nature and extent of federal regulation of broadcast stations.
License Grant and Renewal. Television and radio stations operate pursuant
to broadcasting licenses that are granted by the FCC for maximum terms of eight
years.
Television and radio station licenses are subject to renewal upon
application to the FCC. During certain periods when renewal applications are
pending, competing applicants may file for the radio or television frequency
being used by the renewal applicant. During the same periods, petitions to deny
license renewal applications may be filed by interested parties, including
members of the public. Prior to the 1996 Act, the FCC was generally required to
hold hearings on renewal applications if a competing
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application against a renewal application was filed, if the FCC was unable to
determine that renewal of a license would serve the public interest, convenience
and necessity, or if a petition to deny raised a "substantial and material
question of fact" as to whether the grant of the renewal application would be
prima facie inconsistent with the public interest, convenience and necessity.
The 1996 Act does not prohibit either the filing of petitions to deny
license renewals or the filing of competing applications. Under the 1996 Act,
the FCC is still required to hold hearings on renewal applications if it is
unable to determine that renewal of a license would serve the public interest,
convenience or necessity, or if a petition to deny raises a "substantial and
material question of fact" as to whether the grant of the renewal application
would be prima facie inconsistent with the public interest, convenience and
necessity. Pursuant to the 1996 Act, however, the FCC is prohibited from
considering competing applications for a renewal applicant's frequency, and is
required to grant the renewal application, if the FCC finds: (i) that the
station has served the public interest, convenience and necessity; (ii) that
there have been no serious violations by the licensee of the Communications Act
or the rules and regulations of the FCC; and (iii) there have been no other
violations by the licensee of the Communications Act or the rules and
regulations of the FCC that, when taken together, would constitute a pattern of
abuse.
All of the stations that the Company (i) owns and operates, (ii) intends to
acquire pursuant to pending acquisitions, or (iii) currently provides
programming services to pursuant to an LMA, are presently operating under
regular licenses, which expire as to each station on the dates set forth under
"- Television Broadcasting" and "- Radio Broadcasting," above. Although renewal
of license is granted in the vast majority of cases even when petitions to deny
are filed, there can be no assurance that the licenses of such stations will be
renewed.
Ownership Matters
General
The Communications Act prohibits the assignment of a broadcast license or
the transfer of control of a broadcast licensee without the prior approval of
the FCC. In determining whether to permit the assignment or transfer of control
of, or the grant or renewal of, a broadcast license, the FCC considers a number
of factors pertaining to the licensee, including compliance with various rules
limiting common ownership of media properties, the "character" of the licensee
and those persons holding "attributable" interests therein, and compliance with
the Communications Act's limitations on alien ownership.
To obtain the FCC's prior consent to assign a broadcast license or transfer
control of a broadcast licensee, appropriate applications must be filed with the
FCC. If the application involves a "substantial change" in ownership or control,
the application must be placed on public notice for a period of approximately 30
days during which petitions to deny the application may be filed by interested
parties, including members of the public. If the application does not involve a
"substantial change" in ownership or control, it is a "pro forma" application.
The "pro forma" application is nevertheless subject to having informal
objections filed against it. If the FCC grants an assignment or transfer
application, interested parties have approximately 30 days from public notice of
the grant to seek reconsideration of that grant. Generally, parties that do not
file initial petitions to deny or informal objections against the application
face difficulty in seeking reconsideration of the grant. The FCC normally has
approximately an additional 10 days to set aside such grant on its own motion.
When passing on an assignment or transfer application, the FCC is prohibited
from considering whether the public interest might be served by an assignment or
transfer to any party other than the assignee or transferee specified in the
application.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations holding, or through subsidiaries controlling, broadcast
licenses, the interests of officers, directors and those who, directly or
indirectly, have the right to vote 5% or more of the corporation's stock (or 10%
or more of such stock in the case of insurance companies, investment companies
and bank trust departments that are passive investors) are generally
attributable, except that, in general, no minority voting stock interest will be
attributable if there is a single holder of more than 50% of the outstanding
voting power of the corporation. The FCC has a pending rulemaking proceeding
that, among other things, seeks comment on whether the FCC
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should modify its attribution rules by (i) raising the attribution stock
benchmark from 5% to 10%; (ii) raising the attribution stock benchmark for
passive investors from 10% to 20%; (iii) restricting the availability of the
single majority shareholder exemption; and (iv) attributing certain interests
such as non-voting stock, debt and certain holdings by limited liability
corporations in certain circumstances. More recently, the FCC has solicited
comment on proposed rules that would (i) treat an otherwise nonattributable
equity or debt interest in a licensee as an attributable interest where the
interest holder is a program supplier or the owner of a broadcast station in the
same market and the equity and/or debt holding is greater than a specified
benchmark; (ii) treat a licensee of a television station which, under an LMA,
brokers more than 15% of the time on another television station serving the same
market, as having an attributable interest in the brokered station; and (iii) in
certain circumstances, treat the licensee of a broadcast station that sells
advertising time on another station in the same market pursuant to a JSA as
having an attributable interest in the station whose advertising is being sold.
The Controlling Stockholders hold attributable interests in two entities
owning media properties, namely: Channel 63, Inc., licensee of WIIB-TV, a UHF
television station in Bloomington, Indiana, and Bay Television, Inc., licensee
of WTTA-TV, a UHF television station in St. Petersburg, Florida. All of the
issued and outstanding shares of Channel 63, Inc. are owned by the Controlling
Stockholders. All the issued and outstanding shares of Bay Television, Inc. are
owned by the Controlling Stockholders (75%) and Robert L. Simmons (25%), a
former stockholder of the Company. The Controlling Stockholders have agreed to
divest their attributable interests in Channel 63, Inc. and the Company believes
that, after doing so, such holdings will not materially restrict its ability to
acquire or program additional broadcast stations.
Under its "cross-interest" policy, the FCC considers certain "meaningful"
relationships among competing media outlets in the same market, even if the
ownership rules do not specifically prohibit the relationship. Under this
policy, the FCC may consider significant equity interests combined with an
attributable interest in a media outlet in the same market, joint ventures, and
common key employees among competitors. The cross-interest policy does not
necessarily prohibit all of these interests, but requires that the FCC consider
whether, in a particular market, the "meaningful" relationships between
competitors could have a significant adverse effect upon economic competition
and program diversity. Heretofore, the FCC has not applied its cross-interest
policy to LMAs and JSAs between broadcast stations. In its ongoing rulemaking
proceeding concerning the attribution rules, the FCC has sought comment on,
among other things, (i) whether the cross-interest policy should be applied only
in smaller markets, and (ii) whether non-equity financial relationships such as
debt, when combined with multiple business interrelationships such as LMAs and
JSAs, raise concerns under the cross-interest policy. Moreover, in its most
recent proposals in its ongoing attribution rulemaking proceeding, the FCC has
proposed treating television LMAs, JSAs, and debt or equity interests as
attributable interests in certain circumstances without regard to the
cross-interest policy.
The Communications Act prohibits the issuance of broadcast licenses to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by Aliens. The Company has been
advised that the FCC staff has interpreted this provision to require a finding
that such grant or holding would be in the public interest before a broadcast
license may be granted to or held by any such corporation and that the FCC staff
has made such a finding only in limited circumstances. The FCC has issued
interpretations of existing law under which these restrictions in modified form
apply to other forms of business organizations, including partnerships. As a
result of these provisions, the licenses granted to Subsidiaries of the Company
by the FCC could be revoked if, among other restrictions imposed by the FCC,
more than 25% of the Company's stock were directly or indirectly owned or voted
by Aliens. The Company and the Subsidiaries are domestic corporations, and the
Controlling Stockholders are all United States citizens. The Amended and
Restated Articles of Incorporation of the Company (the "Amended Certificate")
contain limitations
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on Alien ownership and control that are substantially similar to those contained
in the Communications Act. Pursuant to the Amended Certificate, the Company has
the right to repurchase Alien-owned shares at their fair market value to the
extent necessary, in the judgment of the Board of Directors, to comply with the
Alien ownership restrictions.
Television
National Ownership Rule. Prior to the 1996 Act, FCC rules generally
prohibited an individual or entity from having an attributable interest in more
than 12 television stations nationwide, or in television stations reaching more
than 25% of the national television viewing audience. Pursuant to the 1996 Act,
the FCC has modified its rules to eliminate any limitation on the number of
television stations an individual or entity may own nationwide, subject to the
restriction that no individual or entity may have an attributable interest in
television stations reaching more than 35% of the national television viewing
audience. Historically, VHF stations have shared a larger portion of the market
than UHF stations. Therefore, only half of the households in the market area of
any UHF station are included when calculating whether an entity or individual
owns television stations reaching more than 35% of the national television
viewing audience. All but three of the stations owned and operated by the
Company, or to which the Company provides programming services, are UHF.
Duopoly Rule. On a local level, the television "duopoly" rule generally
prohibits a single individual or entity from having an attributable interest in
two or more television stations with overlapping Grade B service areas. While
the 1996 Act has not eliminated the TV duopoly rule, it does direct the FCC to
initiate a rulemaking proceeding to determine whether to retain, modify, or
eliminate the rule. The FCC has pending a rulemaking proceeding in which it has
proposed to modify the television duopoly rule to permit the common ownership of
television stations in different DMAs, so long as the Grade A signal contours of
the stations do not overlap. Pending resolution of its rulemaking proceeding,
the FCC has adopted an interim waiver policy that permits the common ownership
of television stations in different DMAs with no overlapping Grade A signal
contours, conditioned on the final outcome of the rulemaking proceeding. The FCC
has also sought comment on whether common ownership of two television stations
in a market should be permitted (i) where one or more of the commonly owned
stations is UHF, (ii) where one of the stations is in bankruptcy or has been off
the air for a substantial period of time and (iii) where the commonly owned
stations have very small audience or advertising shares, are located in a very
large market, and/or a specified number of independently owned media voices
would remain after the acquisition.
Local Marketing Agreements. Over the past few years, a number of television
stations, including certain of the Company's stations, have entered into what
have commonly been referred to as LMAs. While these agreements may take varying
forms, pursuant to a typical LMA, separately owned and licensed television
stations agree to enter into cooperative arrangements of varying sorts, subject
to compliance with the requirements of antitrust laws and with the FCC's rules
and policies. Under these types of arrangements, separately owned stations could
agree to function cooperatively in terms of programming, advertising sales,
etc., subject to the requirement that the licensee of each station shall
maintain independent control over the programming and operations of its own
station. One typical type of LMA is a programming agreement between two
separately owned television stations serving a common service area, whereby the
licensee of one station programs substantial portions of the broadcast day on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the latter licensee, and sells advertising time during such
program segments. Such arrangements are an extension of the concept of "time
brokerage" agreements, under which a licensee of a station sells blocks of time
on its station to an entity or entities which program the blocks of time and
which sell their own commercial advertising announcements during the time
periods in question. The staff of the FCC's Mass Media Bureau has held that LMAs
are not contrary to the Communications Act, provided that the licensee of the
station which is being substantially programmed by another entity maintains
complete responsibility for and control over programming and operations of its
broadcast station and assures compliance with applicable FCC rules and policies.
At present, FCC rules permit television station LMAs, and the licensee of a
television station brokering time on another television station is not
considered to have an attributable interest in the
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brokered station. However, in connection with its ongoing rulemaking proceeding
regarding the television duopoly rule, the FCC has proposed to adopt rules
providing that the licensee of a television station which brokers more than 15%
of the time on another television station serving the same market would be
deemed to have an attributable interest in the brokered station for purposes of
the national and local multiple ownership rules. In connection with this
proceeding, the FCC has solicited detailed information from parties to
television LMAs as to the terms and characteristics of such LMAs.
The 1996 Act provides that nothing therein "shall be construed to prohibit
the origination, continuation, or renewal of any television local marketing
agreement that is in compliance with the regulations of the [FCC]." The
legislative history of the 1996 Act reflects that this provision was intended to
grandfather television LMAs that were in existence upon enactment of the 1996
Act, and to allow television LMAs consistent with the FCC's rules subsequent to
enactment of the 1996 Act. In its pending rulemaking proceeding regarding the
television duopoly rule, the FCC has proposed to adopt a grandfathering policy
providing that, in the event that television LMAs become attributable interests,
LMAs that are in compliance with existing FCC rules and policies and were
entered into before November 5, 1996, would be permitted to continue in force
until the original term of the LMA expires. Under the FCC's proposal, television
LMAs that are entered into or renewed after November 5, 1996 would have to be
terminated if LMAs are made attributable interests and the LMA in question
resulted in a violation of the television multiple ownership rules. The
Company's LMAs with television stations WPTT in Pittsburgh, Pennsylvania, WNUV
in Baltimore, Maryland, WVTV in Milwaukee, Wisconsin, WRDC in Raleigh/Durham,
North Carolina, WABM in Birmingham, Alabama, and WDBB in Tuscaloosa, Alabama,
were in existence on both the date of enactment of the 1996 Act and November 5,
1996. The Company's LMAs with television stations WTTV and WTTK in Indianapolis,
Indiana were entered into subsequent to the date of enactment of the 1996 Act
but prior to November 5, 1996. The Company's LMA with television station KRRT-TV
in Kerrville, Texas was in existence on the date of enactment of the 1996 Act,
but was assumed by the Company subsequent to that date but prior to November 5,
1996. The licensee's rights under the Company's LMA with KRRT-TV were assumed by
Glencairn subsequent to November 5, 1996. The Company's LMA with WFBC-TV in
Asheville/Greenville/Spartanburg, South Carolina, was entered into by the
Company subsequent to the date of enactment of the 1996 Act but prior to
November 5, 1996, and the licensee's rights under that LMA were assumed by
Glencairn subsequent to November 5, 1996. The Company cannot predict if any or
all of its LMAs will be grandfathered.
The Conference Agreement adopted as part of the Balanced Budget Act of 1997
recently signed into law by President Clinton (the "Balanced Budget Act")
clarifies Congress' intent with respect to LMAs and duopolies. The Conference
Agreement states as follows: "The conferees do not intend that the duopoly and
television-newspaper cross-ownership relief provided herein should have any
bearing upon the [FCC's] current proceedings, which concerns more immediate
relief. The conferees expect that the [FCC] will proceed with its own
independent examination in these matters. Specifically, the conferees expect
that the [FCC] will provide additional relief (e.g., VHF/UHF combinations) that
it finds to be in the public interest, and will implement the permanent
grandfather requirement for local marketing agreements as provided in the
Telecommunications Act of 1996."
The TV duopoly rule currently prevents the Company from acquiring the
licenses of television stations with which it has LMAs in those markets where
the Company owns a television station. As a result, if the FCC were to decide
that the provider of programming services under a television LMA should be
treated as having an attributable interest in the brokered station, and if it
did not relax its television duopoly rule, the Company could be required to
modify or terminate those of its LMAs that were not in existence on the date of
enactment of the 1996 Act or on November 5, 1996. Furthermore, if the FCC adopts
its present proposal with respect to the grandfathering of television LMAs, the
Company could be required to terminate even those LMAs that were in effect prior
to the date of enactment of the 1996 Act or prior to November 5, 1996, after the
initial term of the LMA or upon assignment of the LMA. In such an event, the
Company could be required to pay termination penalties under certain of such
LMAs. Further, if the FCC were to find, in connection with any of the Company's
LMAs, that the owners/licensees of the stations with which the Company has LMAs
failed to maintain control over their operations as required by FCC rules and
policies, the licensee of the LMA station
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and/or the Company could be fined or set for hearing, the outcome of which could
be a monetary forfeiture or, under certain circumstances, loss of the applicable
FCC license. The Company is unable to predict the ultimate outcome of possible
changes to these FCC rules and the impact such FCC rules may have on its
broadcasting operations.
On June 1, 1995, the Chief of the FCC's Mass Media Bureau released a Public
Notice concerning the processing of television assignment and transfer of
control applications proposing LMAs. Due to the pendency of the ongoing
rulemaking proceeding concerning attribution of ownership, the Mass Media Bureau
has placed certain restrictions on the types of television assignment and
transfer of control applications involving LMAs that it will approve during the
pendency of the rulemaking. Specifically, the Mass Media Bureau has stated that
it will not approve arrangements where a time broker seeks to finance a station
acquisition and hold an option to purchase the station in the future. The
Company believes that none of the Company's LMAs fall within the ambit of this
Public Notice.
Radio
National Ownership Rule. Prior to the 1996 Act, the FCC's rules limited an
individual or entity from holding attributable interests in more than 20 AM and
20 FM radio stations nationwide. Pursuant to the 1996 Act, the FCC has modified
its rules to eliminate any limitation on the number of radio stations a single
individual or entity may own nationwide.
Local Ownership Rule. Prior to the 1996 Act, the FCC's rules generally
permitted an individual or entity to hold attributable interests in no more than
four radio stations in a local market (no more than two of which could be in the
same service (AM or FM)), and then only if the aggregate audience share of the
commonly owned stations did not exceed 25%. In markets with fewer than 15
commercial radio stations, an individual or entity could hold an attributable
interest in no more than three radio stations in the market (no more than two of
which could be in the same service), and then only if the number of the commonly
owned stations did not exceed 50% of the total number of commercial radio
stations in the market.
Pursuant to the 1996 Act, the limits on the number of radio stations one
entity may own locally have been increased as follows: (i) in a market with 45
or more commercial radio stations, an entity may own up to eight commercial
radio stations, not more than five of which are in the same service (AM or FM);
(ii) in a market with between 30 and 44 (inclusive) commercial radio stations,
an entity may own up to seven commercial radio stations, not more than four of
which are in the same service; (iii) in a market with between 15 and 29
(inclusive) commercial radio stations, an entity may own up to six commercial
radio stations, not more than four of which are in the same service; and (iv) in
a market with 14 or fewer commercial radio stations, an entity may own up to
five commercial radio stations, not more than three of which are in the same
service, except that an entity may not own more than 50% of the stations in such
market. These numerical limits apply regardless of the aggregate audience share
of the stations sought to be commonly owned. FCC ownership rules continue to
permit an entity to own one FM and one AM station in a local market regardless
of market size. Irrespective of FCC rules governing radio ownership, however,
the DOJ and the Federal Trade Commission have the authority to determine, and in
certain recent radio transactions not involving the Company have determined,
that a particular transaction presents antitrust concerns.
Local Marketing Agreements. As in television, a number of radio stations
have entered into LMAs. The FCC's multiple ownership rules specifically permit
radio station LMAs to be entered into and implemented, so long as the licensee
of the station which is being programmed under the LMA maintains complete
responsibility for and control over programming and operations of its broadcast
station and assures compliance with applicable FCC rules and policies. For the
purposes of the multiple ownership rules, in general, a radio station being
programmed pursuant to an LMA by an entity is not considered an attributable
ownership interest of that entity unless that entity already owns a radio
station in the same market. However, a licensee that owns a radio station in a
market, and brokers more than 15% of the time on another station serving the
same market, is considered to have an attributable ownership interest in the
brokered station for purposes of the FCC's multiple ownership rules. As a
result, in a market in which the Company owns a radio station, the Company would
not be permitted to
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enter into an LMA with another local radio station which it could not own under
the local ownership rules, unless the Company's programming constituted 15% or
less of the other local station's programming time on a weekly basis. The FCC's
rules also prohibit a broadcast licensee from simulcasting more than 25% of its
programming on another station in the same broadcast service (i.e., AM-AM or
FM-FM) through a time brokerage or LMA arrangement where the brokered and
brokering stations serve substantially the same area.
Joint Sales Agreements. Over the past few years, a number of radio (and
television) stations have entered into cooperative arrangements commonly known
as joint sales agreements, or JSAs. While these agreements may take varying
forms, under the typical JSA, a station licensee obtains, for a fee, the right
to sell substantially all of the commercial advertising on a separately-owned
and licensed station in the same market. The typical JSA also customarily
involves the provision by the selling licensee of certain sales, accounting, and
"back office" services to the station whose advertising is being sold. The
typical JSA is distinct from an LMA in that a JSA (unlike an LMA) normally does
not involve programming.
The FCC has determined that issues of joint advertising sales should be
left to enforcement by antitrust authorities, and therefore does not generally
regulate joint sales practices between stations. Currently, stations for which a
licensee sells time under a JSA are not deemed by the FCC to be attributable
interests of that licensee. However, in connection with its ongoing rulemaking
proceeding concerning the attribution rules, the FCC is considering whether JSAs
should be considered attributable interests or within the scope of the FCC's
cross-interest policy, particularly when JSAs contain provisions for the supply
of programming services and/or other elements typically associated with LMAs. If
JSAs become attributable interests as a result of changes in the FCC rules, the
Company may be required to terminate any JSA it might have with a radio station
which the Company could not own under the FCC's multiple ownership rules.
Other Ownership Matters
There remain in place after the 1996 Act a number of additional
cross-ownership rules and prohibitions pertaining to licensees of television and
radio stations. FCC rules, the Communications Act, or both generally prohibit an
individual or entity from having an attributable interest in both a television
station and a radio station, a daily newspaper, or a cable television system
that is located in or serves the same market area.
Antitrust Regulation. The DOJ and the Federal Trade Commission have
increased their scrutiny of the television and radio industry since the adoption
of the 1996 Act, and have indicated their intention to review matters related to
the concentration of ownership within markets (including LMAs and JSAs) even
when the ownership or LMA or JSA in question is permitted under the laws
administered by the FCC or by FCC rules and regulations.
Radio/Television Cross-Ownership Rule. The FCC's radio/television
cross-ownership rule (the "one to a market" rule) generally prohibits a single
individual or entity from having an attributable interest in a television
station and a radio station serving the same market. However, in each of the 25
largest local markets in the United States, provided that there are at least 30
separately owned stations in the particular market, the FCC has traditionally
employed a policy that presumptively allows waivers of the one to a market rule
to permit the common ownership of one AM, one FM and one TV station in the
market. The 1996 Act directs the FCC to extend this policy to each of the top 50
markets. Moreover, the FCC has pending a rulemaking proceeding in which it has
solicited comment on whether the one to a market rule should be eliminated
altogether. The Company has pending several requests for waivers to the
"one-to-a-market" rule in connection with its applications to acquire radio
stations in the Heritage Acquisition Markets where the Company owns or proposes
to own a television station.
However, the FCC does not apply its presumptive waiver policy in cases
involving the common ownership of one television station, and two or more radio
stations in the same service (AM or FM), in the same market. Pending its ongoing
rulemaking proceeding to reexamine the one to a market rule, the FCC has stated
that it will consider waivers of the rule in such instances on a case-by-case
basis, considering (i) the public service benefits that will arise from the
joint operation of the facilities such as economies of scale, cost savings and
programming and service benefits; (ii) the types of facilities in-
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volved; (iii) the number of media outlets owned by the applicant in the relevant
market; (iv) the financial difficulties of the stations involved; and (v) the
nature of the relevant market in light of the level of competition and diversity
after joint operation is implemented. The FCC has stated that it expects that
any such waivers that are granted will be conditioned on the outcome of the
rulemaking proceeding.
In its ongoing rulemaking proceeding to reexamine the one to a market rule,
the FCC has proposed the following options for modifying the rule in the event
it is not eliminated: (i) extending the presumptive waiver policy to any
television market in which a specified number of independently owned voices
would remain after common ownership of a television station and one or more
radio stations is effectuated; (ii) extending the presumptive waiver policy to
entities that seek to own more than one FM and/or one AM radio station; (iii)
reducing the minimum number of independently owned voices that must remain after
a transaction is effectuated; and (iv) modifying the five-factor case-by-case
test for waivers.
Local Television/Cable Cross-Ownership Rule. While the 1996 Act eliminates
a previous statutory prohibition against the common ownership of a television
broadcast station and a cable system that serve the same local market, the 1996
Act leaves the current FCC rule in place. The legislative history of the Act
indicates that the repeal of the statutory ban should not prejudge the outcome
of any FCC review of the rule.
Broadcast Network/Cable Cross-Ownership Rule. The 1996 Act directs the FCC
to eliminate its rules which formerly prohibited the common ownership of a
broadcast network and a cable system, subject to the provision that the FCC
revise its rules as necessary to ensure carriage, channel positioning, and
non-discriminatory treatment of non-affiliated broadcast stations by cable
systems affiliated with a broadcast network. In March 1996, the FCC issued an
order implementing this legislative change.
Broadcast/Daily Newspaper Cross-Ownership Rule. The FCC's rules prohibit
the common ownership of a radio or television broadcast station and a daily
newspaper in the same market. The 1996 Act does not eliminate or modify this
prohibition. In October 1996, however, the FCC initiated a rulemaking proceeding
to determine whether it should liberalize its waiver policy with respect to
cross-ownership of a daily newspaper and one or more radio stations in the same
market.
Dual Network Rule. The 1996 Act directs the FCC to repeal its rule which
formerly prohibited an entity from operating more than one television network.
In March 1996, the FCC issued an order implementing this legislative change.
Under the modified rule, a network entity is permitted to operate more than one
television network, provided, however, that ABC, CBS, NBC, and/or Fox are
prohibited from merging with each other or with another network television
entity such as WB or UPN.
Expansion of the Company's broadcast operations on both a local and
national level will continue to be subject to the FCC's ownership rules and any
changes the FCC or Congress may adopt. Concomitantly, any further relaxation of
the FCC's ownership rules may increase the level of competition in one or more
of the markets in which the Company's stations are located, more specifically to
the extent that any of the Company's competitors may have greater resources and
thereby be in a superior position to take advantage of such changes.
Must-Carry/Retransmission Consent
Pursuant to the Cable Act of 1992, television broadcasters are required to
make triennial elections to exercise either certain "must-carry" or
"retransmission consent" rights in connection with their carriage by cable
systems in each broadcaster's local market. By electing the must-carry rights, a
broadcaster demands carriage on a specified channel on cable systems within its
Area of Dominant Influence, in general as defined by the Arbitron 1991-92
Television Market Guide. These must-carry rights are not absolute, and their
exercise is dependent on variables such as (i) the number of activated channels
on a cable system; (ii) the location and size of a cable system; and (iii) the
amount of programming on a broadcast station that duplicates the programming of
another broadcast station carried by the cable system. Therefore, under certain
circumstances, a cable system may decline to carry a given station.
Alternatively, if a broadcaster chooses to exercise retransmission consent
rights, it can prohibit cable systems from carrying its signal or grant the
appropriate cable system the authority to retransmit the broadcast signal for a
fee or other consideration. In October 1996, the Company elected must-carry or
retransmission consent with respect to
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each of its markets based on its evaluation of the respective markets and the
position of the Company's station within the market. The Company's stations
continue to be carried on all pertinent cable systems, and the Company does not
believe that its elections have resulted in the shifting of its stations to less
desirable cable channel locations. Certain of the Company's stations affiliated
with Fox are required to elect retransmission consent because Fox's
retransmission consent negotiations on behalf of the Company resulted in
agreements which extend into 1998. Therefore, the Company will need to negotiate
retransmission consent agreements for these Fox-affiliated stations to attain
carriage on those relevant cable systems for the balance of this triennial
period (i.e., through December 31, 1999). For subsequent elections beginning
with the election to be made by October 1, 1999, the must-carry market will be
the station's DMA, in general as defined by the Nielsen DMA Market and
Demographic Rank Report of the prior year.
The must-carry rules have been subject to judicial scrutiny. In April 1993,
the United States District Court for the District of Columbia summarily upheld
the constitutionality of the legislative must-carry provisions under a First
Amendment challenge. However, in June 1994, the Supreme Court remanded the case
to the lower court with instructions to test the constitutionality of the
must-carry rules under an "intermediate scrutiny" standard. In a decision issued
in December 1995, a closely divided three-judge District Court panel ruled that
the record showed that there was substantial evidence before Congress from which
it could draw the reasonable inferences that (1) the must-carry rules were
necessary to protect the local broadcast industry; and (2) the burdens on cable
systems with rapidly increasing channel capacity would be quite small.
Accordingly, the District Court panel ruled that Congress had not violated the
First Amendment in enacting the "must-carry" provisions. In March 1997, the
Supreme Court, by a 5-4 majority, affirmed the District Court's decision and
thereby let stand the must-carry rules.
Syndicated Exclusivity/Territorial Exclusivity
The FCC has imposed syndicated exclusivity rules and expanded existing
network nonduplication rules. The syndicated exclusivity rules allow local
broadcast television stations to demand that cable operators black out
syndicated non-network programming carried on "distant signals" (i.e., signals
of broadcast stations, including so-called "superstations," which serve areas
substantially removed from the cable system's local community). The network
non-duplication rules allow local broadcast network television affiliates to
require that cable operators black out duplicating network programming carried
on distant signals. However, in a number of markets in which the Company owns or
programs stations affiliated with a network, a station that is affiliated with
the same network in a nearby market is carried on cable systems in the Company's
market. This is not in violation of the FCC's network nonduplication rules.
However, the carriage of two network stations on the same cable system could
result in a decline of viewership adversely affecting the revenues of the
Company owned or programmed station.
Restrictions on Broadcast Advertising
Advertising of cigarettes and certain other tobacco products on broadcast
stations has been banned for many years. Various states restrict the advertising
of alcoholic beverages. Congressional committees have recently examined
legislation proposals which may eliminate or severely restrict the advertising
of beer and wine. Although no prediction can be made as to whether any or all of
the present proposals will be enacted into law, the elimination of all beer and
wine advertising would have an adverse effect upon the revenues of the Company's
stations, as well as the revenues of other stations which carry beer and wine
advertising.
The FCC has imposed commercial time limitations in children's television
programming pursuant to legislation. In television programs designed for viewing
by children of 12 years of age and under, commercial matter is limited to 12
minutes per hour on weekdays and 10.5 minutes per hour on weekends. In granting
renewal of the license for WBFF-TV, the FCC imposed a fine of $10,000 on the
Company alleging that the station had exceeded these limitations. The Company
has appealed this fine and the appeal is pending.
The Communications Act and FCC rules also place restrictions on the
broadcasting of advertisements by legally qualified candidates for elective
office. Among other things, (i) stations must provide "reasonable access" for
the purchase of time by legally qualified candidates for federal office; (ii)
sta-
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tions must provide "equal opportunities" for the purchase of equivalent amounts
of comparable broadcast time by opposing candidates for the same elective
office; and (iii) during the 45 days preceding a primary or primary run-off
election and during the 60 days preceding a general or special election, legally
qualified candidates for elective office may be charged no more than the
station's "lowest unit charge" for the same class of advertisement, length of
advertisement, and daypart.
Programming and Operation
General. The Communications Act requires broadcasters to serve the "public
interest." The FCC gradually has relaxed or eliminated many of the more
formalized procedures it had developed in the past to promote the broadcast of
certain types of programming responsive to the needs of a station's community of
license. FCC licensees continue to be required, however, to present programming
that is responsive to their communities' issues, and to maintain certain records
demonstrating such responsiveness. Complaints from viewers concerning a
station's programming may be considered by the FCC when it evaluates renewal
applications of a licensee, although such complaints may be filed at any time
and generally may be considered by the FCC at any time. Stations also must pay
regulatory and application fees, and follow various rules promulgated under the
Communications Act that regulate, among other things, political advertising,
sponsorship identifications, the advertisement of contests and lotteries,
obscene and indecent broadcasts, and technical operations, including limits on
radiofrequency radiation. In addition, licensees must develop and implement
affirmative action programs designed to promote equal employment opportunities,
and must submit reports to the FCC with respect to these matters on an annual
basis and in connection with a renewal application. Failure to observe these or
other rules and policies can result in the imposition of various sanctions,
including monetary forfeitures, or the grant of a "short" (i.e., less than the
full) license renewal term or, for particularly egregious violations, the denial
of a license renewal application or the revocation of a license.
Children's Television Programming. Pursuant to legislation enacted in 1991,
all television stations have been required to broadcast some television
programming designed to meet the educational and informational needs of children
16 years of age and under. In August 1996, the FCC adopted new rules setting
forth more stringent children's programming requirements. Specifically,
television stations are now required to broadcast a minimum of three hours per
week of "core" children's educational programming, which the FCC defines as
programming that (i) has serving the educational and informational needs of
children 16 years of age and under as a significant purpose; (ii) is regularly
scheduled, weekly and at least 30 minutes in duration; and (iii) is aired
between the hours of 7:00 a.m. and 10:00 p.m. Furthermore, "core" children's
educational programs, in order to qualify as such, are required to be identified
as educational and informational programs over the air at the time they are
broadcast, and are required to be identified in the children's programming
reports required to be placed in stations' public inspection files.
Additionally, television stations are required to identify and provide
information concerning "core" children's programming to publishers of program
guides and listings.
Television Violence. The 1996 Act contains a number of provisions relating
to television violence. First, pursuant to the 1996 Act, the television industry
has developed a ratings system, and the FCC has recently solicited public
comment on that system. Furthermore, the 1996 Act provides that all television
sets larger than 13 inches that are manufactured one year after enactment of the
1996 Act must include the so-called "V-chip," a computer chip that allows
blocking of rated programming. In addition, the 1996 Act requires that all
television license renewal applications filed after May 1, 1995 contain
summaries of written comments and suggestions received by the station from the
public regarding violent programming.
Closed Captioning. The 1996 Act directs the FCC to adopt rules requiring
closed captioning of all broadcast television programming, except where
captioning would be "economically burdensome." The FCC has recently adopted such
rules. The rules require generally that (i) 95% of all new programming first
published or exhibited on or after January 1, 1998 must be closed captioned
within eight years, and (ii) 75% of "old" programming which first aired prior to
January 1, 1998 must be closed captioned within 10 years, subject to certain
exemptions.
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Digital Television
The FCC has taken a number of steps to implement digital television ("DTV")
broadcasting service in the United States. In December 1996, the FCC adopted a
DTV broadcast standard and, in April 1997, adopted decisions in several pending
rulemaking proceedings that establish service rules and a plan for implementing
DTV. The FCC adopted a DTV Table of Allotments that provides all authorized
television stations with a second channel on which to broadcast a DTV signal.
The FCC has attempted to provide DTV coverage areas that are comparable to
stations' existing service areas. The FCC has ruled that television broadcast
licensees may use their digital channels for a wide variety of services such as
high-definition television, multiple standard definition television programming,
audio, data, and other types of communications, subject to the requirement that
each broadcaster provide at least one free video channel equal in quality to the
current technical standard.
Initially, DTV channels will be located in the range of channels from
channel 2 through channel 51. The FCC is requiring that affiliates of ABC, CBS,
Fox and NBC in the top 10 television markets begin digital broadcasting by May
1, 1999 (the stations affiliated with these networks in the top 10 markets have
voluntarily committed to begin digital broadcasting within 18 months), and that
affiliates of these networks in markets 11 through 30 begin digital broadcasting
by November 1999. The FCC's plan calls 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, 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: (i) 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 such stations have "exercised due
diligence" in attempting to convert to digital broadcasting; (ii) less than 85%
of the television households in the station's market subscribe to a multichannel
video service (cable, wireless cable or DBS) that carries at least one digital
channel from each of the local stations in that market; or (iii) 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 DTV 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 some increased interference. The FCC's DTV allotment plan may also
result in UHF stations having considerably less signal power within their
service areas than present VHF stations that move to DTV channels. 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 also
impose substantial additional costs on television stations because of the need
to replace equipment and because some stations will need to operate at higher
utility costs. The FCC is also considering imposing new public interest
requirements on television licensees in exchange for their receipt of DTV
channels. The Company is currently considering plans to provide high definition
television ("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 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 announced plans to hold
hearings on broadcasters' plans for the use of their digital spectrum. The
Company
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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.
Proposed Changes
The Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation, ownership
and profitability of the Company's broadcast stations, result in the loss of
audience share and advertising revenues for the Company's broadcast stations,
and affect the ability of the Company to acquire additional broadcast stations
or finance such acquisitions. In addition to the changes and proposed changes
noted above, such matters may include, for example, the license renewal process,
spectrum use fees, political advertising rates, potential restrictions on the
advertising of certain products (beer, wine and hard liquor, for example), and
the rules and policies to be applied in enforcing the FCC's equal employment
opportunity regulations. Other matters that could affect the Company's broadcast
properties include technological innovations and developments generally
affecting competition in the mass communications industry, such as direct radio
and television broadcast satellite service, the continued establishment of
wireless cable systems and low power television stations, digital television and
radio technologies, and the advent of telephone company participation in the
provision of video programming service.
Other Considerations
The foregoing summary does not purport to be a complete discussion of all
provisions of the Communications Act or other congressional acts or of the
regulations and policies of the FCC. For further information, reference should
be made to the Communications Act, other congressional acts, and regulations and
public notices promulgated from time to time by the FCC. There are additional
regulations and policies of the FCC and other federal agencies that govern
political broadcasts, public affairs programming, equal employment opportunity,
and other matters affecting the Company's business and operations.
ENVIRONMENTAL REGULATION
Prior to the Company's ownership or operation of its facilities, substances
or waste that are or might be considered hazardous under applicable
environmental laws may have been generated, used, stored or disposed of at
certain of those facilities. In addition, environmental conditions relating to
the soil and groundwater at or under the Company's facilities may be affected by
the proximity of nearby properties that have generated, used, stored or disposed
of hazardous substances. As a result, it is possible that the Company could
become subject to environmental liabilities in the future in connection with
these facilities under applicable environmental laws and regulations. Although
the Company believes that it is in substantial compliance with such
environmental requirements, and have not in the past been required to incur
significant costs in connection therewith, there can be no assurance that the
Company's costs to comply with such requirements will not increase in the
future. The Company presently believes that none of its properties have any
condition that is likely to have a material adverse effect on the Company's
financial condition or results of operations.
COMPETITION
The Company's television and radio stations compete for audience share and
advertising revenue with other television and radio stations in their respective
DMAs or MSAs, as well as with other advertising media, such as newspapers,
magazines, outdoor advertising, transit advertising, yellow page directories,
direct mail and local cable and wireless cable systems. Some competitors are
part of larger organizations with substantially greater financial, technical and
other resources than the Company.
Television Competition. Competition in the television broadcasting industry
occurs primarily in individual DMAs. Generally, a television broadcasting
station in one DMA does not compete with stations in other DMAs. The Company's
television stations are located in highly competitive DMAs. In addition, certain
of the Company's DMAs are overlapped by both over-the-air and cable carriage of
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stations in adjacent DMAs, which tends to spread viewership and advertising
expenditures over a larger number of television stations.
Broadcast television stations compete for advertising revenues primarily
with other broadcast television stations, radio stations and cable system
operators serving the same market. Traditional Network programming generally
achieves higher household audience levels than Fox, WB and UPN programming and
syndicated programming aired by independent stations. This can be attributed to
a combination of factors, including the Traditional Networks' efforts to reach a
broader audience, generally better signal carriage available when broadcasting
over VHF channels 2 through 13 versus broadcasting over UHF channels 14 through
69 and the higher number of hours of Traditional Network programming being
broadcast weekly. However, greater amounts of advertising time are available for
sale during Fox, UPN and WB programming and non-network syndicated programming,
and as a result the Company believes that the Company's programming typically
achieves a share of television market advertising revenues greater than its
share of the market's audience.
Television stations compete for audience share primarily on the basis of
program popularity, which has a direct effect on advertising rates. A large
amount of the Company's prime time programming is supplied by Fox and to a
lesser extent WB, UPN, ABC and CBS. In those periods, the Company's affiliated
stations are totally dependent upon the performance of the networks' programs in
attracting viewers. Non-network time periods are programmed by the station
primarily with syndicated programs purchased for cash, cash and barter, or
barter-only, and also through self-produced news, public affairs and other
entertainment programming.
Television advertising rates are based upon factors which include the size
of the DMA in which the station operates, a program's popularity among the
viewers that an advertiser wishes to attract, the number of advertisers
competing for the available time, the demographic makeup of the DMA served by
the station, the availability of alternative advertising media in the DMA
(including radio and cable), the aggressiveness and knowledge of sales forces in
the DMA and development of projects, features and programs that tie advertiser
messages to programming. The Company believes that its sales and programming
strategies allow it to compete effectively for advertising within its DMAs.
Other factors that are material to a television station's competitive
position include signal coverage, local program acceptance, network affiliation,
audience characteristics and assigned broadcast frequency. Historically, the
Company's UHF broadcast stations have suffered a competitive disadvantage in
comparison to stations with VHF broadcast frequencies. This historic
disadvantage has gradually declined through (i) carriage on cable systems, (ii)
improvement in television receivers, (iii) improvement in television
transmitters, (iv) wider use of all channel antennae, (v) increased availability
of programming, and (vi) the development of new networks such as Fox, WB and
UPN.
The broadcasting industry is continuously faced with technical changes and
innovations, the popularity of competing entertainment and communications media,
changes in labor conditions, and governmental restrictions or actions of federal
regulatory bodies, including the FCC, any of which could possibly have a
material effect on a television station's operations and profits. There are
sources of video service other than conventional television stations, the most
common being cable television, which can increase competition for a broadcast
television station by bringing into its market distant broadcasting signals not
otherwise available to the station's audience, serving as a distribution system
for national satellite-delivered programming and other non-broadcast programming
originated on a cable system and selling advertising time to local advertisers.
Other principal sources of competition include home video exhibition,
direct-to-home broadcast satellite television ("DBS") entertainment services and
multichannel multipoint distribution services ("MMDS"). Moreover, technology
advances and regulatory changes affecting programming delivery through fiber
optic telephone lines and video compression could lower entry barriers for new
video channels and encourage the development of increasingly specialized "niche"
programming. The 1996 Act permits telephone companies to provide video
distribution services via radio communication, on a common carrier basis, as
"cable systems" or as "open video systems," each pursuant to different
regulatory schemes. The Company is unable to predict the effect that
technological and regulatory changes will have on the broadcast television
industry and on the future profitability and value of a particular broadcast
television station.
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The FCC authorizes DBS services throughout the United States. Currently,
two FCC permitees, DirecTV and United States Satellite Broadcasting, provide
subscription DBS services via high-power communications satellites and small
dish receivers, and other companies provide direct-to-home video service using
lower powered satellites and larger receivers. Additional companies are expected
to commence direct-to-home operations in the near future. DBS and MMDS, as well
as other new technologies, will further increase competition in the delivery of
video programming.
The Company cannot predict what other matters might be considered in the
future, nor can it judge in advance what impact, if any, the implementation of
any of these proposals or changes might have on its business.
The Company believes that television broadcasting may be enhanced
significantly by the development and increased availability of digital
broadcasting service technology. This technology has the potential to permit the
Company to provide viewers multiple channels of digital television over each of
its existing standard channels, to provide certain programming in a high
definition television format and to deliver various forms of data, including
data on the Internet, to home and business computers. These additional
capabilities may provide the Company with additional sources of revenue. The
Company is currently considering plans to provide high definition television
("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 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 announced plans to hold 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. This digital broadcasting service
technology is not currently available to the viewing public and a successful
transition from the current analog broadcast format to a digital format may take
many years. There can be no assurance that the Company's efforts to take
advantage of the new technology will be commercially successful.
The Company also competes for programming, which involves negotiating with
national program distributors or syndicators that sell first-run and rerun
packages of programming. The Company's stations compete for exclusive access to
those programs against in-market broadcast station competitors for syndicated
products. Cable systems generally do not compete with local stations for
programming, although various national cable networks from time to time have
acquired programs that would have otherwise been offered to local television
stations. Public broadcasting stations generally compete with commercial
broadcasters for viewers but not for advertising dollars.
Historically, the cost of programming has increased because of an increase
in the number of new Independent stations and a shortage of quality programming.
However, the Company believes that over the past five years program prices
generally have stabilized.
The Company believes it competes favorably against other television
stations because of its management skill and experience, the ability of the
Company historically to generate revenue share greater than its audience share,
the network affiliations and its local program acceptance. In addition, the
Company believes that it benefits from the operation of multiple broadcast
properties, affording it certain nonquantifiable economies of scale and
competitive advantages in the purchase of programming.
Radio Competition. Radio broadcasting is a highly competitive business, and
each of the radio stations operated by the Company competes for audience share
and advertising revenue directly with other radio stations in its geographic
market, as well as with other media, including television, cable television,
newspapers, magazines, direct mail and billboard advertising. The audience
ratings and advertising revenue of each of such stations are subject to change,
and any adverse change in a particular market could have a material adverse
effect on the revenue of such radio stations located in that market. There can
be no assurance that any one of the Company's radio stations will be able to
maintain or increase its current audience ratings and radio advertising revenue
market share.
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The Company will attempt to improve each radio station's competitive
position with promotional campaigns designed to enhance and reinforce its
identities with the listening public. Extensive market research is conducted in
order to identify specific demographic groups and design a programming format
for those groups. The Company seeks to build a strong listener base composed of
specific demographic groups in each market, and thereby attract advertisers
seeking to reach these listeners. Aside from building its stations' identities
and targeting its programming at specific demographic groups, management
believes that the Company also obtains a competitive advantage by operating
duopolies or multiple stations in the nation's larger mid-size markets.
The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems and by digital audio
broadcasting ("DAB"). DAB may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and
national audiences. The FCC has issued licenses for two DAB systems.
Historically, the radio broadcasting industry has grown in terms of total
revenues despite the introduction of new technologies for the delivery of
entertainment and information, such as television broadcasting, cable
television, audio tapes and compact disks. There can be no assurance, however,
that the development or introduction in the future of any new media technology
will not have an adverse effect on the radio broadcast industry.
EMPLOYEES
As of August 20, 1997, the Company had approximately 2,300 employees. With
the exception of certain of the employees of KOVR-TV, KDNL-TV, WBEN-AM and
WWL-AM, none of the employees are represented by labor unions under any
collective bargaining agreement. No significant labor problems have been
experienced by the Company, and the Company considers its overall labor
relations to be good.
LEGAL PROCEEDINGS
On July 14, 1997, Sinclair publicly announced that it had reached an
agreement for certain of its owned and/or programmed television stations which
are currently affiliated with UPN to become affiliated with WB beginning January
16, 1998. On August 1, 1997, UPN informed Sinclair that it did not believe
Sinclair or its affiliates had provided proper notice of its intention not to
extend the UPN affiliation agreements beyond January 15, 1998, and, accordingly,
that these agreements had been automatically renewed through January 15, 2001.
In August 1997, UPN filed an 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. Certain subsidiaries of the Company
have filed an action in the Circuit Court for Baltimore City seeking declaratory
relief that their notice was effective to terminate the affiliations on January
15, 1998. Although the Company believes that proper notice of intention not to
extend was provided to UPN, 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.
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. Except as described above, the
Company is not a party to any lawsuit or proceeding that in the opinion of the
Company will have a material adverse effect.
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MANAGEMENT
Set forth below is certain information relating to the Company's executive
officers, directors, certain key employees and persons expected to become
executive officers, directors or key employees.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ----------------------------- ----- -------------------------------------------------
<S> <C> <C>
David D. Smith ............ 46 President, Chief Executive Officer, Director and
Chairman of the Board
Frederick G. Smith ......... 48 Vice President and Director
J. Duncan Smith ............ 43 Vice President, Secretary and Director
Robert E. Smith ............ 34 Vice President, Treasurer and Director
David B. Amy ............... 44 Chief Financial Officer
Barry Drake ............... 45 Chief Operating Officer, SCI Radio
Alan B. Frank ............... 47 Regional Director, SCI
Robert Gluck ............... 39 Regional Director, SCI
Michael Granados ............ 42 Regional Director, SCI
Steven M. Marks ............ 40 Regional Director, SCI
John T. Quigley ............ 54 Regional Director, SCI
Frank Quitoni ............... 52 Regional Director, SCI
M. William Butler ......... 44 Vice President/Group Program Director, SCI
Michael Draman ............ 48 Vice President/TV Sales and Marketing, SCI
Stephen A. Eisenberg ...... 55 Vice President/Director of National Sales, SCI
Nat Ostroff ............... 56 ice President/New Technology
Delbert R. Parks, III ...... 44 Director of Operations and Engineering, SCI
Robert E. Quicksilver ...... 42 Vice President/General Counsel, SCI
Thomas E. Severson ......... 33 Corporate Controller
Michael E. Sileck ......... 37 Vice President/Finance, SCI
Robin A. Smith ............ 41 Chief Financial Officer, SCI Radio
Patrick J. Talamantes ...... 33 Director of Corporate Finance
Lawrence E. McCanna ......... 53 Director
Basil A. Thomas ............ 82 Director
</TABLE>
In addition to the foregoing, the following persons have agreed to serve as
executive officers and/or directors of the Company as soon as permissible under
the rules of the FCC and applicable laws. See "Risk Factors - Dependence Upon
Key Personnel; Employment Agreements with Key Personnel" in the attached
Prospectus.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---------------------------- ----- -----------------------------------------------
<S> <C> <C>
Barry Baker ............... 45 Executive Vice President of the Company, Chief
Executive Officer of SCI and Director
Kerby Confer ............... 56 Chief Executive Officer, SCI Radio
Roy F. Coppedge, III ...... 49 Director
</TABLE>
In connection with the River City Acquisition, the Company agreed to
increase the size of the Board of Directors from seven members to nine to
accommodate the prospective appointment of each of Barry Baker and Roy F.
Coppedge, III or such other designee as Boston Ventures may select. Mr. Baker
and Mr. Confer currently serve as consultants to the Company.
Members of the Board of Directors are elected for one-year terms and until
their successors are duly elected and qualified. Executive officers are
appointed by the Board of Directors annually to serve for one-year terms and
until their successors are duly appointed and qualified.
On July 30, 1997 William E. Brock submitted and the Company accepted his
resignation from the Company's Board of Directors. Currently, no action has
been taken by the Board of Directors to identify a replacement for Mr. Brock.
David D. Smith has served as President, Chief Executive Officer and
Chairman of the Board since September 1990. Prior to that, he served as General
Manager of WPTT from 1984, and assumed the financial and engineering
responsibility for the Company, including the construction of WTTE in 1984. In
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1980, Mr. Smith founded Comark Television, Inc., which applied for and was
granted the permit for WPXT-TV in Portland, Maine and which purchased WDSI-TV in
Chattanooga, Tennessee. WPXT-TV was sold one year after construction and WDSI-TV
was sold two years after its acquisition. From 1978 to 1986, Mr. Smith
co-founded and served as an officer and director of Comark Communications, Inc.,
a company engaged in the manufacture of high power transmitters for UHF
television stations. His television career began with WBFF in Baltimore, where
he helped in the construction of the station and was in charge of technical
maintenance until 1978. David D. Smith, Frederick G. Smith, J. Duncan Smith and
Robert E. Smith are brothers.
Frederick G. Smith has served as Vice President of the Company since 1990
and as a Director since 1986. Prior to joining the Company in 1990, Mr. Smith
was an oral and maxillofacial surgeon engaged in private practice and was
employed by Frederick G. Smith, M.S., D.D.S., P.A., a professional corporation
of which Mr. Smith was the sole officer, director and stockholder.
J. Duncan Smith has served as Vice President, Secretary and a Director of
the Company since 1988. Prior to that, he worked for Comark Communications, Inc.
installing UHF transmitters. In addition, he also worked extensively on the
construction of WPTT in Pittsburgh, WTTE in Columbus, WIIB in Bloomington and
WTTA in St. Petersburg, as well as on the renovation of the new studio, offices
and news facility for WBFF in Baltimore.
Robert E. Smith has served as Vice President, Secretary and a Director of
the Company since 1988. Prior to that, he served as Program Director at WBFF
from 1986 to 1988. Prior to that, he assisted in the construction of WTTE and
also worked for Comark Communications, Inc. installing UHF transmitters.
David B. Amy has served as Chief Financial Officer ("CFO") since October of
1994. In addition, he serves as Secretary of Sinclair Communications, Inc., the
Company subsidiary which owns and operates the broadcasting operations. Prior to
his appointment as CFO Mr. Amy served as the Corporate Controller of the Company
beginning in 1986 and has been the Company's Chief Accounting Officer since that
time. Mr. Amy has over thirteen years of broadcast experience, having joined the
Company as a business manager for WPTT in Pittsburgh. Mr. Amy received an MBA
degree from the University of Pittsburgh in 1981.
Barry Drake has served as Chief Operating Officer of SCI Radio since
completion of the River City Acquisition. Prior to that time, he was Chief
Operating Officer - Keymarket Radio Division of River City since July 1995.
Prior to that time, he was President and Chief Operating Officer of Keymarket
since 1988. From 1985 through 1988, Mr. Drake performed the duties of the
President of each of the Keymarket broadcasting entities, with responsibility
for three stations located in Houston, St. Louis and Detroit.
Alan B. Frank has served as Regional Director for the Company since May
1994. As Regional Director, Mr. Frank is responsible for the Pittsburgh and
Kansas City markets. Prior to his appointment to Regional Director, Mr. Frank
served as General Manager of WPGH beginning in September 1991.
Robert Gluck has served as Regional Director of the Company since August
1997. As Regional Director, Mr. Gluck is responsible for the Milwaukee and
Raleigh/Durham markets. Prior to joining the Company, Mr. Gluck served as
General Manager at WTIC-TV in the Hartford-New Haven market. Prior to joining
WTIC-TV in 1988, Mr. Gluck served as National Sales Manager and Local Sales
Manager of WLVI-TV in Boston. Before joining WLVI-TV, Mr. Gluck served in
various sales and management capacities with New York advertising agency firms.
Michael Granados has served as a Regional Director of the Company since
July 1996. As a Regional Director, Mr. Granados is responsible for the San
Antonio, Des Moines, Peoria and Las Vegas markets. Prior to July 1996, Mr.
Granados has served in various positions with the Company and, before the River
City Acquisition, with River City. He served as the General Sales Manager of
KABB from 1989 to 1993, the Station Manager and Director of Sales of WTTV from
1993 to 1994 and the General Manager of WTTV prior to his appointment as
Regional Director in 1996.
Steven M. Marks has served as Regional Director for the Company since
October 1994. As Regional Director, Mr. Marks is responsible for the Baltimore,
Norfolk, Flint and Birmingham markets. Prior to his appointment as Regional
Director, Mr. Marks served as General Manager for WBFF since July 1991. From
1986 until joining WBFF in 1991, Mr. Marks served as General Sales Manager at
WTTE. Prior to that time, he was national sales manager for WFLX-TV in West Palm
Beach, Florida.
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John T. Quigley has served as a Regional Director of the Company since June
1996. As Regional Director, Mr. Quigley is responsible for the Columbus,
Cincinnati, and Oklahoma City markets. Prior to that time, Mr. Quigley served as
general manager of WTTE since July 1985. Prior to joining WTTE, Mr. Quigley
served in broadcast management positions at WCPO-TV in Cincinnati, Ohio and
WPTV-TV in West Palm Beach, Florida.
Frank Quitoni has served as a Regional Director since completion of the
River City Acquisition. As Regional Director, Mr. Quitoni is responsible for
the St. Louis, Sacramento, Indianapolis and Asheville/ Greenville/Spartanburg
markets. Prior to joining the Company, he was Vice President of Operations for
River City since 1995. Mr. Quitoni had served as the Director of Operations and
Engineering for River City since 1994. Prior thereto Mr. Quitoni served as a
consultant to CBS beginning in 1989. Mr. Quitoni was the Director of Olympic
Operations for CBS Sports for the 1992 Winter Olympic Games and consulted with
CBS for the 1994 Winter Olympic Games. Mr. Quitoni was awarded the Technical
Achievement Emmy for the 1992 and 1994 CBS Olympic broadcasts.
M. William Butler has served as Vice President/Group Program Director, SCI
since 1997. From 1995 to 1997, Mr. Butler served as Director of Programming at
KCAL, the Walt Disney Company station in Los Angeles, California. From 1991 to
1995, he was Director of Marketing and Programming at WTXF in Philadelphia,
Pennsylvania and prior to that he held the same position at WLVI in Boston,
Massachusetts. Mr. Butler attended the Graduate Business School of the
University of Cincinnati from 1975 to 1976.
Michael Draman has served as Vice President/TV Sales and Marketing, SCI
since 1997. From 1995 until joining the Company, Mr. Draman served as Vice
President of Revenue Development for New World Television. From 1983 to 1995,
he was Director of Sales and Marketing for WSVN in Miami, Florida. Mr. Draman
attended The American University and The Harvard Business School and served
with the U.S. Marine Corps in Vietnam.
Stephen A. Eisenberg has served as Director of National Sales, SCI since
November 1996. Prior to joining the Company, he worked since 1975 in various
capacities at Petry Television, including most recently as Vice
President/Director of Sales with total national sales responsibility for KTTV in
Los Angeles, California, KCPQ-TV in Seattle, Washington, WTNH-TV in New Haven,
Connecticut, WKYC-TV in Cleveland, Ohio, WBIR-TV in Knoxville, Tennessee,
WKEF-TV in Dayton, Ohio and WTMJ-TV in Milwaukee, Wisconsin. Mr. Eisenberg
received an MS degree in Journalism from Northwestern's Medill School and a BA
degree from Brooklyn College.
Nat Ostroff has served as Vice President for New Technology since joining
the Company in January of 1996. From 1981 until joining the Company, he was the
President and CEO of Comark Communication Inc., a leading manufacturer of UHF
transmission equipment. While at Comark, Mr. Ostroff was nominated and awarded a
Prime Time Emmy Award for outstanding engineering achievement for the
development of new UHF transmitter technologies in 1993. In 1968, Mr. Ostroff
founded Acrodyne Industries Inc., a manufacturer of TV transmitters and a public
company and served as its first President and CEO. Mr. Ostroff holds a BSEE
degree from Drexel University and an MEEE degree from New York University. He is
a member of several industry organizations, including, AFCCE, IEEE and SBE.
Delbert R. Parks III has served as Vice President of Operations and
Engineering since the completion of the River City Acquisition. Prior to that
time, he was Director of Operations and Engineering for WBFF and Sinclair since
1985, and has been with the Company for 25 years. He is responsible for
planning, organizing and implementing operational and engineering policies and
strategies as they relate to television and computer systems. Currently, he is
consolidating facilities for Sinclair's television stations and has just
completed a digital facility for Sinclair's news and technical operation in
Pittsburgh. Mr. Parks is also a Lieutenant Colonel in the Maryland Army National
Guard and commands the 1st Battalion, 175th Infantry (Light).
Robert E. Quicksilver has served as Vice President/General Counsel, SCI
since completion of the River City Acquisition. Prior to that time he served as
General Counsel of River City since September 1994. From 1988 to 1994, Mr.
Quicksilver was a partner of the law firm of Rosenblum, Goldenhersh,
Silverstein and Zafft, P.C. in St. Louis. Mr. Quicksilver holds a B.A. from
Dartmouth College and a J.D. from the University of Michigan.
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Thomas E. Severson has served as Corporate Controller since January 1997.
Prior to that time, Mr. Severson served as Assistant Controller of the Company
since 1995. Prior to joining the Company, Mr. Severson held positions in the
audit departments of KPMG Peat Marwick LLP and Deloitte & Touche LLP from 1991
to 1995. Mr. Severson is a graduate of the University of Baltimore and is a
Certified Public Accountant.
Michael E. Sileck has served as Vice President/Finance of SCI since
completion of the River City Acquisition. Prior to that time he served as the
Director of Finance for River City since 1993. Mr. Sileck joined River City in
July 1990 as Director of Finance and Business Affairs for KDNL-TV. Mr. Sileck
is an active member of the Broadcast Cable Financial Management Association
("BCFM") and was a Director of BCFM from 1993 to 1996. Mr. Sileck, a Certified
Public Accountant, received a B.S. degree in Accounting from Wayne State
University and an M.B.A. in Finance from Oklahoma City University.
Robin A. Smith has served as Chief Financial Officer, SCI Radio since June
1996. From 1993 until joining the Company, Ms. Smith served as Vice President
and Chief Financial Officer of the Park Lane Group of Menlo Park, California,
which owned and operated small market radio stations. From 1982 to 1993, she
served as Vice President and Treasurer of Edens Broadcasting, Inc. in Phoenix,
Arizona, which owns and operates radio stations in major markets. Ms. Smith is a
graduate of the Arizona State University and is a Certified Public Accountant.
Patrick J. Talamantes has served as Director of Corporate Finance and
Treasurer of SCI since completion of the River City Acquisition. Prior to that
time, he served as Treasurer for River City since April 1995. From 1991 to 1995,
he was a Vice President with Chemical Bank, where he completed financings for
clients in the cable, broadcasting, publishing and entertainment industries. Mr.
Talamantes holds a B.A. degree from Stanford University and an M.B.A. from the
Wharton School at the University of Pennsylvania.
Lawrence E. McCanna has served as a Director of the Company since July
1995. Mr. McCanna has been a partner of the accounting firm of Gross,
Mendelsohn & Associates, P.A., since 1972 and has served as its managing
partner since 1982. Mr. McCanna has served on various committees of the
Maryland Association of Certified Public Accountants and was chairman of the
Management of the Accounting Practice Committee. He is also a former member of
the Management of an Accounting Practice Committee of the American Institute of
Certified Public Accountants. Mr. McCanna is a member of the board of directors
of Maryland Special Olympics.
Basil A. Thomas has served as a Director of the Company since November
1993. He is of counsel to the Baltimore law firm of Thomas & Libowitz, P.A. and
has been in the private practice of law since 1983. From 1961 to 1968, Judge
Thomas served as an Associate Judge on the Municipal Court of Baltimore City
and, from 1968 to 1983, he served as an Associate Judge of the Supreme Bench of
Baltimore City. Judge Thomas is a trustee of the University of Baltimore and a
member of the American Bar Association and the Maryland State Bar Association.
Judge Thomas attended the College of William & Mary and received his L.L.B. from
the University of Baltimore. Judge Thomas is the father of Steven A. Thomas, a
senior attorney and founder of Thomas & Libowitz, counsel to the Company.
Barry Baker has been the Chief Executive Officer of River City since 1989,
and is the President of the corporate general partner of River City and Better
Communications, Inc. ("BCI"). The principal business of both River City and BCI
is television and radio broadcasting. In connection with the River City
Acquisition, the Company agreed to appoint Mr. Baker Executive Vice President of
the Company and to elect him as a Director at such time as he is eligible to
hold those positions under applicable FCC regulations. He currently serves as a
consultant to the Company.
Kerby Confer served as a member of the Board of Representatives and Chief
Executive Officer - Keymarket Radio Division of River City since July 1995.
Prior thereto, Mr. Confer served as Chairman of the Board and Chief Executive
Officer of Keymarket since its founding in December 1981. Prior to engaging in
the acquisition of various radio stations in 1975, Mr. Confer held a number of
jobs in the broadcast business, including serving as Managing Partner of a radio
station in Annapolis, Maryland from 1969 to 1975. From 1966 to 1969, he hosted a
pop music television show on WBAL-TV (Baltimore) and
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WDCA-TV (Washington, D.C.). Prior thereto, Mr. Confer served as program director
or producer/director for radio and television stations owned by Susquehanna
Broadcasting and Plough Broadcasting Company, Inc. Mr. Confer currently provides
services to the Company and is expected to become Chief Executive Officer of SCI
Radio at such time as he is eligible to hold this position under applicable FCC
regulations.
Roy F. Coppedge, III is a general partner of the general partner of each of
the Boston Ventures partnerships, limited partnerships primarily involved in the
business of investments. Mr. Coppedge is a director of Continental Cablevision,
Inc., and American Media, Inc. and a member of the Board of Representatives of
Falcon Holding Group, L.P. In connection with the River City Acquisition, the
Company agreed to elect Mr. Coppedge as a Director at such time as he is
eligible to hold that position under applicable FCC regulations.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with David D. Smith,
President and Chief Executive Officer of the Company. David Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. The Company's
Compensation Committee has approved an increase in Mr. Smith's total
compensation to $1,200,000. Mr. Smith is also entitled to participate in the
Company's Executive Bonus Plan based upon the performance of the Company during
the year. The employment agreement provides that the Company may terminate Mr.
Smith's employment prior to expiration of the agreement's term as a result of
(i) a breach by Mr. Smith of any material covenant, promise or agreement
contained in the employment agreement; (ii) a dissolution or winding up of the
Company; (iii) the disability of Mr. Smith for more than 210 days in any twelve
month period (as determined under the employment agreement); or (iv) for cause,
which includes conviction of certain crimes, breach of a fiduciary duty to the
Company or the stockholders, or repeated failure to exercise or undertake his
duties as an officer of the Company (each, a "Termination Event").
In June 1995, the Company entered into an employment agreement with
Frederick G. Smith, Vice President of the Company. Frederick Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. Under the agreement, Mr.
Smith receives a base salary of $260,000 and is also entitled to participate in
the Company's Executive Bonus Plan based upon the performance of the Company and
Mr. Smith during the year. The employment agreement provides that the Company
may terminate Mr. Smith's employment prior to expiration of the agreement's term
as a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with J.
Duncan Smith, Vice President and Secretary of the Company. J. Duncan Smith's
employment agreement has an initial term of three years and is renewable for
additional one-year terms, unless either party gives notice of termination not
less than 60 days prior to the expiration of the then current term. Under the
agreement, Mr. Smith receives a base salary of $270,000 and is also entitled to
participate in the Company's Executive Bonus Plan based upon the performance of
the Company and Mr. Smith during the year. The employment agreement provides
that the Company may terminate Mr. Smith's employment prior to expiration of the
agreement's term as a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with Robert
E. Smith, Vice President and Treasurer of the Company. Robert E. Smith's
employment agreement has an initial term of three years and is renewable for
additional one-year terms, unless either party gives notice of termination not
less than 60 days prior to the expiration of the then current term. Under the
agreement, Mr. Smith receives a base salary of $250,000 and is also entitled to
participate in the Company's Executive Bonus Plan based upon the performance of
the Company and Mr. Smith during the year. The employment agreement provides
that the Company may terminate Mr. Smith's employment prior to expiration of the
agreement's term as a result of a Termination Event.
In connection with the River City Acquisition, the Company entered into an
employment agreement (the "Baker Employment Agreement") with Barry Baker
pursuant to which Mr. Baker will become President and Chief Executive Officer of
SCI and Executive Vice President of the Company at such time as
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Mr. Baker is able to hold those positions consistent with applicable FCC
regulations. Until such time as Mr. Baker is able to become an officer of the
Company, he serves as a consultant to the Company pursuant to a consulting
agreement and receives compensation that he would be entitled to as an officer
under the Baker Employment Agreement. While Mr. Baker acts as consultant to the
Company he will not direct employees of Sinclair in the operation of its
television stations and will not perform services relating to any shareholder,
bank financing or regulatory compliance matters with respect to the Company. In
addition, Mr. Baker will remain the Chief Executive Officer of River City and
will devote a substantial amount of his business time and energies to those
services. Mr. Baker receives a base salary of approximately $1,135,200 per year,
subject to annual increases of 7 1/2% on January 1 each year. Mr. Baker is also
entitled to receive a bonus equal to 2% of the amount by which the Broadcast
Cash Flow (as defined in the Baker Employment Agreement) of SCI for a year
exceeds the Broadcast Cash Flow for the immediately preceding year. Mr. Baker
has received options to acquire 1,382,435 shares of the Class A Common Stock (or
3.33% of the common equity of Sinclair determined on a fully diluted basis as of
the date of the River City Acquisition). The option became exercisable with
respect to 50% of the shares upon closing of the River City Acquisition, and
became exercisable with respect to an additional 25% of the shares on the first
anniversary of the closing of the River City Acquisition, and will become
exercisable with respect to the remaining 25% on the second anniversary of the
closing of the River City Acquisition. The exercise price of the option is
approximately $30.11 per share. The term of the Baker Employment Agreement
extends until May 31, 2001, and is automatically extended to the third
anniversary of any Change of Control (as defined in the Baker Employment
Agreement). If the Baker Employment Agreement is terminated as a result of a
Series B Trigger Event (as defined below), then Mr. Baker shall be entitled to a
termination payment equal to the amount that would have been paid in base salary
for the remainder of the term of the agreement plus bonuses that would be paid
for such period based on the average bonus paid to Mr. Baker for the previous
three years, and all options shall vest immediately upon such termination. In
addition, upon such a termination, Mr. Baker shall have the option to purchase
from the Company for the fair market value thereof either (i) all broadcast
operations of Sinclair in the St. Louis, Missouri DMA or (at the option of Mr.
Baker) the Asheville/Greenville/Spartanburg, South Carolina DMA or (ii) all of
the Company's radio broadcast operations. Mr. Baker shall also have the right
following such a termination to receive quarterly payments (which may be paid
either in cash or, at the Company's option, in additional shares of Class A
Common Stock) equal to 5.00% of the fair market value (on the date of each
payment) of all stock options and common stock issued pursuant to the exercise
of such stock options or pursuant to payments of this obligation in shares of
Class A Common Stock and held by him at the time of such payment (except that
the first such payment shall be 3.75% of such value). The fair market value of
unexercised options for such purpose shall be equal to the market price of
underlying shares less the exercise price of the options. Following termination
of Mr. Baker's employment agreement, the Company shall have the option to
purchase the options and shares from Mr. Baker at their market value. A "Series
B Trigger Event" means the termination of Barry Baker's employment with the
Company prior to the expiration of the initial five-year term of the Baker
Employment Agreement (i) by the Company for any reason other than "for cause"
(as defined in the Baker Employment Agreement) or (ii) by Barry Baker under
certain circumstances, including (a) on 60 days' prior written notice given at
any time within 180 days following a Change of Control; (b) if Mr. Baker is not
elected (and continued) as a director of Sinclair or SCI, as President and Chief
Executive Officer of SCI or as Executive Vice President of Sinclair, or Mr.
Baker shall be removed from any such board or office; (c) upon a material breach
by Sinclair or SCI of the Baker Employment Agreement which is not cured; (d) if
there shall be a material diminution in Mr. Baker's authority or responsibility,
or certain of his economic benefits are materially reduced, or Mr. Baker shall
be required to work outside Baltimore; or (e) the effective date of his
employment as contemplated by clause (b) shall not have occurred by August 31,
1997. Mr. Baker cannot be appointed to such positions with the Company or SCI
until the Company or SCI takes certain actions with respect to WTTV and WTTK in
Indianapolis or WTTE or WSYX in Columbus as described under "Risk Factors
Dependence on Key Personnel; Employment Agreements with Key Personnel" in the
accompanying Prospectus. The Company has not taken these actions as of the date
of this Prospectus Supplement and, accordingly, Mr. Baker is able to terminate
the Baker Employment Agreement at any time.
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DESCRIPTION OF CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
THE FOLLOWING SUMMARY DESCRIPTION OF THE CONVERTIBLE EXCHANGEABLE PREFERRED
STOCK IS QUALIFIED IN ITS entirety by reference to the Articles Supplementary to
the Amended and Restated Articles of Incorporation of the Company as amended
(the "Amended Certificate") governing the Convertible Exchangeable Preferred
Stock (the "Articles Supplementary"), a copy of which will be filed as an
exhibit to the registration statement of which this Prospectus Supplement is a
part. The definitions of certain capitalized terms used in the following summary
are set forth under "Certain Definitions" below. Other capitalized terms used
herein and not otherwise defined below or under "Certain Definitions" below are
defined in the Articles Supplementary.
General
The Convertible Exchangeable Preferred Stock has been authorized as a new
series of preferred stock, consisting of up to 3,450,000 shares. The Amended
Certificate authorizes the Company to issue, without any action on the part of
its stockholders, an aggregate of 10,000,000 shares of preferred stock, $.01 par
value ("Preferred Stock"). The Company's Board of Directors (the "Board of
Directors") has authority to divide the Preferred Stock into one or more series
and has broad authority to determine the relative rights and preferences of the
shares within each series, including voting rights. Subject to certain
conditions, the Convertible Exchangeable Preferred Stock will be exchangeable
for the Company's % Convertible Subordinated Debentures due 2012 (the "Exchange
Debentures") at the option of the Company on any scheduled dividend payment date
on or after , 2000. See "Certain Federal Income Tax Considerations."
The Convertible Exchangeable Preferred Stock will rank (i) junior in right
of payment to all indebtedness of the Company and the Subsidiaries; (ii) senior
in right of payment to all Common Stock of the Company; (iii) pari passu with
the Company's Series C Preferred Stock ($206.2 million liquidation value as of
the date hereof); and (iv) senior to the Company's Series B Preferred Stock
($108.9 million liquidation value as of August 25, 1997) except that upon the
termination of Barry Baker's employment agreement with the Company prior to May
31, 2001 by the Company for any reason other than "for cause" (as defined in the
employment agreement) or by Mr. Baker under certain circumstances described
under "Description of Capital Stock - Existing Preferred Stock - Series B
Preferred Stock" in the accompanying Prospectus, then the 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. One such circumstance pursuant to which Mr. Baker
can terminate his employment agreement is the failure of Mr. Baker to be elected
and continued in certain positions at the Company before August 31, 1997, which
election cannot take place prior to the Company taking certain actions related
to FCC approval of such election. The Company has not taken these actions as of
the date of this Prospectus Supplement and, accordingly, Mr. Baker is able to
terminate his employment agreement at any time. See "Description of Capital
Stock" in the accompanying Prospectus and "Management" herein.
The Articles Supplementary relating to the Series B Preferred Stock limit
the aggregate liquidation value of preferred stock that is senior to the Series
B Preferred Stock ("Senior Securities") to $400 million. The Series C Preferred
Stock does, and the Convertible Exchangeable Preferred Stock will, constitute
Senior Securities.
DIVIDENDS
Holders of Convertible Exchangeable Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors out of legally
available funds, cash dividends of $ per share annually, payable quarterly in
arrears on , , and
of each year, on or after , 1997 (each a "Dividend Payment
Date"). Such dividends will accrue and be cumulative from the most recent
Dividend Payment Date or, if none have been paid, from the date of first
issuance of the Convertible Exchangeable Preferred Stock and will be payable to
holders of record on the record date for each dividend payment fixed by the
Board of
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Directors. If a Dividend Payment Date is a Saturday, Sunday or legal holiday,
however, the dividend will be payable on the next business day without any
additional amounts required to be paid; provided that dividends will accrue and
be cumulative from Dividend Payment Dates and not from the date of payment.
The Convertible Exchangeable Preferred Stock will have priority as to
dividends over the Class A Common Stock, the Class B Common Stock and any other
series or class of the Company's stock that ranks junior to the Convertible
Exchangeable Preferred Stock, as to dividends ("Junior Dividend Stock"). The
Company's Series B Preferred Stock is Junior Dividend Stock except in certain
circumstances with respect to Mr. Baker's employment agreement as described
above. No dividend (other than dividends payable solely in Common Stock, any
Junior Dividend Stock or warrants or other rights to acquire such Common Stock
or Junior Dividend Stock) may be paid or set apart for payment on, and no
purchase, redemption or other acquisition shall be made by the Company of, the
Common Stock or Junior Dividend Stock unless all accrued and unpaid dividends on
the Convertible Exchangeable Preferred Stock, including the full dividend for
the then-current quarterly dividend period and any Additional Dividends (as
defined herein), shall have been paid or declared and set apart for payment
without interest.
Except as provided below, the Company may not pay dividends on any class or
series of stock having parity with the Convertible Exchangeable Preferred Stock
as to dividends ("Parity Dividend Stock") unless it has paid or declared and set
apart for payment or contemporaneously pays or declares and sets apart for
payment all accrued and unpaid dividends for all prior dividend payment periods
on the Convertible Exchangeable Preferred Stock. The Company's Series C
Preferred Stock is Parity Dividend Stock and, in certain circumstances with
respect to Mr. Baker's employment agreement as described above, the Series B
Preferred Stock is also Parity Dividend Stock. In addition, except as provided
below, the Company may not pay dividends on the Convertible Exchangeable
Preferred Stock unless it has paid or declared and set apart for payment or
contemporaneously pays or declares and sets apart for payment all accrued and
unpaid dividends for all prior dividend payment periods on the Parity Dividend
Stock. Whenever all accrued dividends are not paid in full on Convertible
Exchangeable Preferred Stock and on any Parity Dividend Stock, all dividends
declared on the Convertible Exchangeable Preferred Stock and the Parity Dividend
Stock will be declared and made pro rata so that the amount of dividends
declared on the Convertible Exchangeable Preferred Stock and the Parity Dividend
Stock will bear the same ratio that accrued and unpaid dividends on the
Convertible Exchangeable Preferred Stock and the Parity Dividend Stock bear to
each other.
The Company may not purchase any shares of the Convertible Exchangeable
Preferred Stock or any Parity Dividend Stock (except for consideration payable
in Common Stock or Junior Dividend Stock) or redeem fewer than all the shares of
the Convertible Exchangeable Preferred Stock and Parity Dividend Stock then
outstanding if the Company has failed to pay any accrued dividend on the
Convertible Exchangeable Preferred Stock or any Parity Dividend Stock on a
stated payment date. Notwithstanding the foregoing, in such event, the Company
may purchase or redeem fewer than all the shares of the Convertible Exchangeable
Preferred Stock and Parity Dividend Stock if such repurchase or redemption is
made pro rata so that the amounts purchased or redeemed bear to each other the
same ratio that the required redemption payments on the shares of the
Convertible Exchangeable Preferred Stock and any Parity Dividend Stock then
outstanding bear to each other.
If the Company hereafter issues any series or class of stock that ranks
senior as to dividends to the Convertible Exchangeable Preferred Stock ("Senior
Dividend Stock") and fails to pay or declare and set apart for payment accrued
and unpaid dividends on any Senior Dividend Stock (except to the extent allowed
by the terms of the Senior Dividend Stock), the Company may not pay or declare
and set apart for payment any dividend on the Convertible Exchangeable Preferred
Stock unless and until all accrued and unpaid dividends on the Senior Dividend
Stock, including the full dividends for the then-current dividend period, have
been paid or declared and set apart for payment without interest. The Company
has no Senior Dividend Stock outstanding on the date of this Prospectus
Supplement.
The dividend payable on Convertible Exchangeable Preferred Stock for each
quarterly dividend period will be computed by dividing the annual dividend
amount by four. The amount of dividends
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payable for the initial dividend period and for any period shorter than a full
quarterly dividend period will be computed on the basis of a 360-day year of
twelve 30-day months. No interest will be payable on any scheduled Convertible
Exchangeable Preferred Stock dividend that may be in arrears.
Under Maryland law, no distribution to stockholders may be made by the
Company if, after giving effect to the distribution, (i) the Company would not
be able to pay indebtedness of the Company as the indebtedness becomes due in
the usual course of business, or (ii) the Company's total assets would be less
than the sum of the Company's total liabilities plus, unless the charter permits
otherwise, the amount that would be needed, if the Company were to be dissolved
at the time of the distribution, to satisfy the preferential rights upon
dissolution of stockholders whose preferential rights on dissolution are
superior to those receiving the distribution. The Company's Amended Certificate
does not contain such a provision. The Existing Notes and Bank Credit Agreement
limit the Company's ability to pay cash dividends on its capital stock,
including the Convertible Exchangeable Preferred Stock, and future agreements
may provide the same.
Certain covenants under the Existing Indentures (as defined in the
accompanying Prospectus), the Bank Credit Agreement and the Articles
Supplementary relating to the Series C Preferred Stock restrict the amount of
dividends that may be declared and paid by the Company on its capital stock
including the Convertible Exchangeable Preferred Stock. Although the Company
presently believes it will be able to pay dividends on the Convertible
Exchangeable Preferred Stock as required, there can be no assurance that the
Company will be permitted under such restrictions to declare dividends
throughout the term of the Convertible Exchangeable 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 dividends. In addition, under the terms of the Bank Credit Agreement,
the Company would not be able to pay full cash dividends on the Convertible
Exchangeable Preferred Stock beginning December 31, 1998 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. As of December 31, 1996,
on a pro forma basis assuming completion on January 1, 1996 of the 1996
Acquisitions, the HYTOPS Issuance, the Debt Issuance, the Heritage Acquisition,
and the Preferred Stock Offering, this limitation would have allowed the Company
to pay up to $16.3 million in dividends on capital stock for fiscal 1996. The
Company must also satisfy other financial covenants under the Bank Credit
Agreement to pay cash dividends. See "Risk Factors Restrictions Imposed by Terms
of Indebtedness" in the accompanying Prospectus.
LIQUIDATION RIGHTS
In the case of the voluntary or involuntary liquidation, dissolution or
winding up of the Company, subject to the payment in full, or until provision
has been made for the payment in full of all claims of creditors of the Company,
(i) holders of Convertible Exchangeable Preferred Stock are entitled to receive
the liquidation preference of $50.00 per share, plus an amount equal to any
accrued and unpaid dividends (including Additional Dividends, if any), whether
or not declared, to the payment date, before any payment or distribution is made
to the holders of Common Stock or any other series or class of stock hereafter
issued that ranks junior as to liquidation rights to the Convertible
Exchangeable Preferred Stock ("Junior Liquidation Stock"), and (ii) holders of
Convertible Exchangeable Preferred Stock will not be entitled to receive the
liquidation preference of their shares until the liquidation preference of any
other series or class of stock hereafter issued that ranks senior as to
liquidation rights to the Convertible Exchangeable Preferred Stock ("Senior
Liquidation Stock"), if any, has been paid in full. The holders of Convertible
Exchangeable Preferred Stock and any series or class of stock hereafter issued
that ranks on a parity as to the liquidation rights with the Convertible
Exchangeable Preferred Stock ("Parity Liquidation Stock") are entitled to share
ratably, in accordance with the respective preferential amounts payable on their
stock, in any distribution (after payment of the liquidation preference on any
Senior Liquidation Stock) that is not sufficient to pay in full the aggregate
liquidation preference on both the Convertible Exchangeable Preferred Stock and
the Parity Liquidation Stock. The Series C Preferred Stock is Parity Liquidation
Stock and the Series B Preferred Stock is Junior Liquidation Stock except in
certain circumstances with respect to Mr. Baker's employment agreement as
described above in which it becomes Parity Liquidation Stock.
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After payment in full of the liquidation preference plus any accrued and
unpaid dividends (including Additional Dividends, if any), on the Convertible
Exchangeable Preferred Stock, the holders will not be entitled to any further
participation in any distribution of assets by the Company. Neither a
consolidation or merger of the Company with another entity nor a sale or
transfer of all or part of the Company's assets for cash, securities or other
property will be considered a liquidation, dissolution or winding up of the
Company.
VOTING RIGHTS
The holders of Convertible Exchangeable Preferred Stock will have no voting
rights except as described below or as required by law. In exercising any voting
rights, each outstanding share of Convertible Exchangeable Preferred Stock will
be entitled to one vote, although shares held by the Company or any entity
controlled by the Company will have no voting rights.
Whenever dividends on the Convertible Exchangeable Preferred Stock are in
arrears in 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, and the holders of Convertible Exchangeable Preferred Stock,
voting separately as a class, will be entitled to select the two additional
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) at a special meeting of stockholders called by the
Company at the request of the holders of the Convertible Exchangeable Preferred
Stock; provided, that, at any time when shares of Convertible Exchangeable
Preferred Stock are outstanding and after the earlier of (i) the time when the
Amended Certificate is amended to increase the Board of Directors by two or two
directors have resigned as contemplated by the next succeeding paragraph and
(ii) one year after the issue date of the Convertible Exchangeable Preferred
Stock, if additional directors are not then holding office pursuant to those
provisions, the number of directors at any such time constituting the Board of
Directors may not exceed the number which is two less than the maximum number of
directors then specified in the Amended Certificate. 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.
The Amended Certificate currently limits the number of directors to nine
and, pursuant to the Amended Certificate, directors can only be removed from the
Board of Directors "for cause". Accordingly, unless the Amended Certificate is
amended to increase the number of directors that may be elected to the Board of
Directors or unless two directors resign in order to accommodate the election of
directors by the holders of Convertible Exchangeable Preferred Stock, such
holders may be unable to elect the two directors to which such holders are
entitled. If the Company fails, within one year after the issue date of the
Convertible Exchangeable Preferred Stock, either to cause the Amended
Certificate to be amended to increase the maximum number of directors by two or
to cause two directors to resign, then the Company shall pay additional
dividends ("Additional Dividends") to the holders of the Convertible
Exchangeable Preferred Stock. Additional Dividends shall accrue on the
Convertible Exchangeable Preferred Stock over and above the stated payment rates
thereon at a rate of .50% per annum for the first 90 days immediately following
the first anniversary of the issue date of the Convertible Exchangeable
Preferred Stock, with such Additional Dividend rate increasing by an additional
..25% per annum at the beginning of each subsequent 90-day period; provided,
however, that the Additional Dividend rate on any shares of the Convertible
Exchangeable Preferred Stock may not exceed 1.5% per annum; and provided
further, that when the Amended Certificate has been so amended or such directors
have resigned, Additional Dividends shall cease to accrue.
Any Additional Dividends will be payable in cash on the various payment
dates related to the Convertible Exchangeable Preferred Stock. The Additional
Dividends will be determined by multiplying the applicable Additional Dividend
rate by the liquidation preference of the Convertible Exchangeable Preferred
Stock multiplied by a fraction, the numerator of which is the number of days
such Additional Dividend rate was applicable during such period, and the
denominator of which is 360.
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In addition, so long as any 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 Convertible
Exchangeable Preferred Stock, (i) amend, alter or repeal (by merger or
otherwise) any provision of the Amended Certificate or the Bylaws of the Company
so as to affect adversely the relative rights, preferences, qualifications,
limitations or restrictions of the Convertible Exchangeable Preferred Stock,
(ii) authorize any new class of Senior Dividend Stock, any Senior Liquidation
Stock or any security convertible into or exchangeable for Senior Dividend Stock
or Senior Liquidation Stock or (iii) effect any reclassification of the
Convertible Exchangeable Preferred Stock or any reclassification of any capital
stock into Senior Dividend Stock or Senior Liquidation Stock.
REDEMPTION AT OPTION OF THE COMPANY
The Convertible Exchangeable Preferred Stock will be redeemable, at the
Company's option, in whole or from time to time in part, at any time on or after
, 2000, upon not less than 30 nor more than 60 days' prior notice by first class
mail to each holder of Convertible Exchangeable Preferred Stock to be redeemed
at its address appearing in the security register at the following redemption
prices ("Redemption Prices") plus accrued and unpaid dividends (including
Additional Dividends, if any), expressed on a per share basis, whether or not
declared, to the date of redemption.
If redeemed during the 12-month period beginning in the year indicated, the
Redemption Price shall be:
<TABLE>
<CAPTION>
PRICE PRICE
YEAR PER SHARE YEAR PER SHARE
- ------------ ----------- --------------------------- ----------
<S> <C> <C> <C>
2000 ...... $ 2004 ..................... $
2001 ...... 2005 .....................
2002 ...... 2006 .....................
2003 ...... 2007 and thereafter ...... 50
</TABLE>
If fewer than all the outstanding shares of Convertible Exchangeable
Preferred Stock are to be redeemed, the Company will select those shares to be
redeemed pro rata or in such other manner as the Board of Directors may
reasonably determine to be equitable. There is no mandatory redemption or
sinking fund obligation for the Convertible Exchangeable Preferred Stock. In the
event that the Company has failed to pay accrued and unpaid dividends (including
Additional Dividends, if any) on the Convertible Exchangeable Preferred Stock,
it may not redeem less than all of the outstanding shares of the Convertible
Exchangeable Preferred Stock until all such accrued and unpaid dividends have
been paid in full.
After the redemption date, dividends will cease to accrue on the shares of
Convertible Exchangeable Preferred Stock called for redemption and all rights of
the holders of those shares will terminate, except the conversion rights to the
extent described below and the right to receive the redemption price plus
accrued and unpaid dividends (including Additional Dividends, if any), whether
or not declared, to the redemption date, without interest. The Bank Credit
Agreement, the Existing Indentures and the Articles Supplementary relating to
the Series C Preferred Stock restrict the ability of the Company to redeem the
Convertible Exchangeable Preferred Stock and future agreements may do the same.
Shares of Convertible Exchangeable Preferred Stock issued and reacquired
will, upon compliance with the applicable requirements of Maryland law, have the
status of authorized but unissued shares of preferred stock of the Company
undesignated as to series and may with any and all other authorized but unissued
shares of preferred stock of the Company be designated or redesignated and
issued or reissued, as the case may be, as part of any series of preferred stock
of the Company, except that any issuance or reissuance of shares of preferred
stock must be in compliance with the Articles Supplementary and except that such
shares may not be reissued or sold as shares of Convertible Exchangeable
Preferred Stock.
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CONVERSION RIGHTS
Each holder of Convertible Exchangeable Preferred Stock will have the
right, at the holder's option, to convert any or all shares into Class A Common
Stock at any time at a conversion price (subject to adjustment as described
below) of $ per share of the underlying Class A Common Stock. If the Convertible
Exchangeable Preferred Stock is called for redemption, the conversion right will
terminate at the close of business on the second day preceding the redemption
date fixed by the Board of Directors.
Holders of shares of Convertible Exchangeable Preferred Stock at the close
of business on a dividend payment record date shall be entitled to receive the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof following such dividend payment record
date and prior to such Dividend Payment Date. If shares of Convertible
Exchangeable Preferred Stock not called for redemption are surrendered for
conversion during the period between the close of business on any dividend
record date and the opening of business on any corresponding Dividend Payment
Date such shares so surrendered must be accompanied by payment in same day funds
of an amount equal to the dividend payable on such shares on such Dividend
Payment Date and such shares will be entitled to such dividends. No such payment
will be required to accompany shares of Convertible Exchangeable Preferred Stock
called for redemption and surrendered during such period and which are not
converted. A holder of shares of Convertible Exchangeable Preferred Stock on a
dividend record date who (or whose transferee) tenders any such shares for
conversion into shares of Class A Common Stock on the corresponding Dividend
Payment Date will receive the dividend payable by the Company on such shares of
Convertible Exchangeable Preferred Stock on such date, and the converting holder
need not include payment of the amount of such dividend upon surrender of shares
of Convertible Exchangeable Preferred Stock for conversion. Except as provided
above, the Company will make no payment or allowance for accrued and unpaid
dividends, whether or not in arrears, on converted shares or for dividends on
the shares of Class A Common Stock issuable upon such conversion. No fractional
shares of Class A Common Stock will be required to be issued upon conversion
but, in lieu thereof, the Company may deliver cash in an appropriate amount
which will be paid based on the last reported sale price for the Class A Common
Stock on the day of conversion.
The conversion price will be subject to adjustment upon the occurrence of
any of the following events: (i) the subdivision, combination or
reclassification of outstanding shares of Class A Common Stock; (ii) the payment
in shares of Common Stock of a dividend or distribution on any class of capital
stock of the Company; (iii) the issuance of rights or warrants to all holders of
Class A Common Stock or Class B Common Stock or both entitling them to acquire
shares of Common Stock at a price per share less than the average of the last
reported sales price of the Class A Common Stock for the five consecutive
trading days immediately prior to such issuance; (iv) the distribution to
holders of Class A Common Stock or Class B Common stock or both of shares of
capital stock other than Common Stock, evidences of indebtedness, cash or assets
(including securities, but excluding dividends or distributions paid exclusively
in cash and dividends, distributions, rights and warrants referred to above);
(v) a distribution consisting exclusively of cash (excluding any cash
distributions referred to in (iv) above) to all holders of Class A Common Stock
or Class B Common Stock or both in an aggregate amount that, together with (A)
the aggregate amount of all other cash distributions to all holders of the Class
A Common Stock or Class B Common Stock within the 12 months preceding such
distribution and (B) any cash and the fair market value of other consideration
payable in respect of any tender offer by the Company or a Subsidiary of the
Company for Common Stock consummated within the 12 months preceding such
distribution, exceeds 12.5% of the Company's Market Capitalization (as defined
below) on the date fixed for determining the stockholders entitled to such
distribution; and (vi) the consummation of a tender offer made by the Company or
any Subsidiary of the Company for Common Stock which involves an aggregate
consideration that, together with (X) any cash and the fair market value of
other consideration payable in respect of any tender offer by the Company or a
Subsidiary for Common Stock consummated within the 12 months preceding the
consummation of such tender offer and (Y) the aggregate amount of all cash
distributions (excluding any cash distributions referred to in (iv) above) to
all holders of the Class A Common Stock or Class B Common Stock or both within
the 12 months preceding the consummation of such tender offer, exceeds 12.5% of
the Company's Market Capitalization on the date of consummation of such tender
offer. No adjustment of the conversion price will be
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made until cumulative adjustments amount to one percent or more of the
conversion price as last adjusted; provided, however, that any adjustments
which, by reason of the foregoing, are not required to be made will be carried
forward and taken into account in any subsequent adjustment. All adjustments
will be made successively.
"Market Capitalization" means the product of the number of issued and
outstanding shares of Common Stock multiplied by the last reported sales price
of the Class A Common Stock.
The Company from time to time may reduce the conversion price by any amount
for any period of time if the period is at least 20 days and if the reduction is
irrevocable during the period. Whenever the conversion price is so reduced, the
Company shall mail to holders of the Convertible Exchangeable Preferred Stock a
notice of the reduction at least 15 days before the date the reduced conversion
price takes effect, stating the reduced conversion price and the period it will
be in effect.
In case of any reclassification of the Class A Common Stock, any
consolidation of the Company with, or merger of the Company into, any other
entity, any merger of any entity into the Company (other than a merger that does
not result in a reclassification, conversion, exchange or cancellation of the
outstanding shares of Class A Common Stock), any sale or transfer of all or
substantially all of the assets of the Company or any compulsory share exchange
whereby the Class A Common Stock is converted into other securities, cash or
other property, then the holder of each share of Convertible Exchangeable
Preferred Stock then outstanding shall have the right thereafter, during the
period that the Convertible Exchangeable Preferred Stock shall be convertible,
to convert that share only into the kind and amount of securities, cash and
other property receivable upon the reclassification, consolidation, merger,
sale, transfer or share exchange by a holder of the number of shares of Class A
Common Stock into which one share of Convertible Exchangeable Preferred Stock
would have been convertible immediately prior to the reclassification,
consolidation, merger, sale, transfer or share exchange. The kind and amount of
securities into or for which the shares of Convertible Exchangeable Preferred
Stock will be convertible or redeemable after consummation of such transaction
will be subject to adjustment as described above following the date of
consummation of such transaction. The Company may not become a party to any such
transaction unless the terms thereof are consistent with the foregoing and the
surviving corporation in any such transaction agrees in writing to comply with
the terms of the foregoing.
CHANGE OF CONTROL
If a Change of Control (as hereinafter defined) occurs with respect to the
Company, then shares of the Convertible Exchangeable Preferred Stock may be
converted, at the option of the holder thereof, at any time from the date of
such Change of Control until the expiration of 45 days after the date of a
notice by the Company to all holders of the Convertible Exchangeable Preferred
Stock of the occurrence of the Change of Control, into the number of shares of
Class A Common Stock determined by dividing (i) the $50 liquidation preference
of the Convertible Exchangeable Preferred Stock, plus accrued and unpaid
dividends, if any, up to but excluding the date of the Change of Control by (ii)
the adjusted conversion price. The adjusted conversion price (the "Adjusted
Conversion Price") is 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) $ (being 66 2/3% of the last reported sales
price of the Class A Common Stock on the day before the date of this Prospectus
Supplement) as adjusted for stock splits or combinations. The special conversion
rights will exist upon the occurrence of any Change of Control, whether or not
the transaction relating thereto has been approved by management of the Company
and may not be waived by management. Exercise of the special conversion rights
by the holder of a share of Convertible Exchangeable Preferred Stock will be
irrevocable. If the Change of Control involves a consolidation, merger or sale
of assets of the Company, the holders of Convertible Exchangeable Preferred
Stock exercising their special conversion rights will be entitled to receive the
same consideration as received for the number of shares of Class A Common Stock
into which their shares of Convertible Exchangeable Preferred Stock would have
been converted pursuant to the special conversion rights. These special
conversion rights are in addition to the regular conversion rights that apply to
the Convertible Exchangeable Preferred Stock.
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The Company may, at its option, elect to pay holders of the Convertible
Exchangeable Preferred Stock exercising their special conversion rights an
amount in cash equal to the $50 liquidation preference of the Convertible
Exchangeable Preferred Stock, plus accrued and unpaid dividends, if any, up to
but excluding the date of the Change of Control, in which event no conversion
pursuant to the exercise of the special conversion rights set forth in the
preceding paragraph will occur, unless the Company defaults in making payment 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 Convertible Exchangeable Preferred Stock by the Company. A
Change of Control will also allow holders of Existing Notes or holders of Series
C Preferred Stock to require the Company to redeem either the Existing Notes or
the Series C Preferred Stock, as the case may be.
The existence of these special conversion rights may deter certain mergers,
tender offers or other takeover attempts and may thereby adversely affect the
market price of the Class A Common Stock.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders (as defined below), is or
becomes the "beneficial owner" (as defined in Ruled 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 of directors, or whose nomination for
election by the shareholders of the Company, was approved by a vote of 66 2/3%
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of such board of
directors then in office; (iii) the Company consolidates with or merges with or
into any Person or conveys, transfers or leases all or substantially all of its
assets to any Person, or any corporation consolidates with or merges into or
with the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is changed into or exchanged for cash,
securities or other property, other than any such transaction where the
outstanding Voting Stock of the Company is not changed or exchanged at all
(except to the extent necessary to reflect a change in the jurisdiction of
incorporation of the Company) or where (A) the outstanding Voting Stock of the
Company is changed into or exchanged for (x) Voting Stock of the surviving
corporation which is not Disqualified Equity Interests or (y) cash, securities
and other property (other than Equity Interests of the surviving corporation) in
an amount which could be paid by the Company as a Restricted Payment under the
terms of the indenture relating to the 1997 Notes as in effect on the date of
this Prospectus Supplement, without giving effect to any later amendments
thereto (and such amount shall be treated as a Restricted Payment) and (B) no
"person" or "group" other than Permitted Holders owns immediately after such
transaction, directly or indirectly, more than the greater of (1) 40% of the
total outstanding Voting Stock of the surviving corporation and (2) the
percentage of the outstanding Voting Stock of the surviving corporation owned,
directly or indirectly, by Permitted Holders immediately after such transaction;
or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation
or dissolution other than in a transaction which complies with the provisions
described under "Consolidation, Merger, Sale of Assets" of the 1997 Indenture.
"Disqualified Equity Interests" means any equity interests that, either by
their terms or by the terms of any security into which they are convertible or
exchangeable or otherwise, are or upon the happening of an event or passage of
time would be required to be redeemed prior to any stated maturity of the
principal of the applicable security or are redeemable at the option of the
holder thereof at any time prior to any such stated maturity, or are convertible
into or exchangeable for debt securities at any time prior to any such stated
maturity at the option or the holder thereof.
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"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 of the relatives of the Persons described in clause (i); (iii) any
trusts created for the benefit of any of the Persons described in clauses (i),
(ii) or (iv) or any trust for the benefit of 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, who, in each case, at any particular date shall
beneficially own or have the right to acquire, directly or indirectly, equity
interests of the Company.
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under Maryland law (which is the Company's
state of incorporation) to represent a specific quantitative test. As a
consequence, in the event the Holders of the Convertible Exchangeable Preferred
Stock elected to exercise their rights in the event of a Change of Control under
the terms set forth above and the Company elected to contest such election,
there could be no assurance as to how a court interpreting Maryland law would
interpret the phrase.
EXCHANGE RIGHTS
Subject to certain conditions, the Company may, at its option, on any
scheduled Dividend Payment Date on or after , 2000, exchange the Convertible
Exchangeable Preferred Stock, in whole but not in part, for the Exchange
Debentures; provided that (i) on the date of such exchange there are no
accumulated and unpaid dividends (whether or not declared) (including Additional
Dividends, if any) on the Convertible Exchangeable Preferred Stock which are not
being simultaneously paid with such exchange (including the dividend payable on
such date) or other contractual impediments to such exchange; (ii) there shall
be legally available funds sufficient for any such dividends; (iii) immediately
after giving effect to such exchange, no Default or Event of Default (each as
defined in the Exchange Debenture Indenture) would exist under the Exchange
Debenture Indenture; and (iv) no default or event of default would exist under
the Existing Indentures or the Bank Credit Agreement. See "Description of
Exchange Debentures" below for the terms of the Exchange Debentures. Holders of
Convertible Exchangeable Preferred Stock so exchanged will be entitled to
receive, subject to the succeeding sentence $1,000 principal amount of Exchange
Debentures for each $1,000 of liquidation preference of 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 thereon to the date of
exchange. The Exchange Debentures will be issued (i) only in denominations of
$1,000 and integral multiples thereof with a single Exchange Debenture in an
amount less than $1,000 to effectuate the transfer or exchange or (ii) in such
other denominations as may be authorized by the Company for purposes of transfer
or exchange. An amount in cash may be paid to holders for any principal amount
otherwise issuable which is less than $1,000. Following such exchange, all
dividends on the Convertible Exchangeable Preferred Stock will cease to accrue,
the rights of the holders of Convertible Exchangeable Preferred Stock as
stockholders of the Company shall cease and the person or persons entitled to
receive the Exchange Debentures issuable upon exchange shall be treated as the
registered holder or holders of such Exchange Debentures. Notice of exchange
will be mailed at least 30 days but not more than 60 days prior to the date of
exchange to each holder of Convertible Exchangeable Preferred Stock. See
"Description of Exchange Debentures" below.
In addition, under applicable provisions of the federal bankruptcy law or
comparable provisions of state fraudulent transfer law, if at the time of the
Company's payment of dividends on, redemption of or exchange of Exchange
Debentures for, the Convertible Exchangeable Preferred Stock (i) the Company is
insolvent or rendered insolvent by reason thereof; (ii) the Company is engaged
in a business or transaction for which the Company's remaining assets constitute
unreasonably small capital; or (iii) the Company intends to incur or believes
that it would incur debts beyond its ability to pay such debts as they mature,
then the relevant distribution to holders of Convertible Exchangeable Preferred
Stock could be avoided in whole or in part as a fraudulent conveyance and such
holders could be required to return the same or equivalent amounts to or for the
benefit of existing or future creditors of the Company. The measure of
insolvency for purposes of the foregoing will vary depending on the law of the
jurisdiction which is being applied. Generally, the Company would be considered
insolvent if the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of its assets at a fair
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valuation or if the present fair saleable value of its assets were less than
the amount that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and mature.
See "Description of Exchange Debentures - Fraudulent Conveyance
Considerations."
The Bank Credit Agreement, the Existing Indentures and the Articles
Supplementary relating to the Series C Preferred Stock restrict the Company's
ability to exchange the Convertible Exchangeable Preferred Stock for the
Exchange Debentures.
GLOBAL CERTIFICATE
Shares of Convertible Exchangeable Preferred Stock will be evidenced
initially by one or more registered global certificates (the "Global
Certificate") which will be deposited with or on behalf of The Depository Trust
Company ("DTC") and registered in the name of Cede & Co. as DTC's nominee.
Except as set forth below, record ownership of the Global Certificate may be
transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
Owners of beneficial interests in the Global Certificate may hold their
interests in the Global Certificate directly through DTC if such holder is a
participant in DTC or indirectly through organizations that are participants in
DTC ( the "Participants"). Persons who are not Participants may beneficially own
interests in the Global Certificate held by DTC only through Participants or
certain banks, brokers, dealers, trust companies and other parties that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly ("Indirect Participants"). So long as Cede & Co., as nominee of
DTC, is the registered owner of the Global Certificate, Cede & Co, for all
purposes will be considered the sole holder of the Global Certificate. Except as
noted below, owners of beneficial interests in the Global Certificate will be
entitled to receive physical delivery of certificates in definitive form.
Payment of dividends on and any redemption price with respect to the
Global Certificate will be made to Cede & Co., the nominee for DTC, as
registered owner of the Global Certificate, by wire transfer of immediately
available funds on each dividend payment date or redemption date, as applicable.
Neither the Company nor the Transfer Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Certificate or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company has been informed by DTC that, with respect to any payment
of dividends on, or the redemption price with respect to, the Global
Certificate, DTC's practice is to credit Participants' accounts on the payment
date therefor, with payments in amounts proportionate to their respective
beneficial interests in the Convertible Exchangeable Preferred Stock represented
by the Global Certificate as shown on the records of DTC, unless DTC has reason
to believe that it will not receive payment on such payment date. Payments by
Participants to owners of beneficial interests in the Convertible Exchangeable
Preferred Stock represented by the Global Certificate held through such
Participants will be the responsibility of such participants, as is now the case
with securities held for the accounts of customers registered in "street name."
Transfers between Participants will be effected in the ordinary way in
accordance with DTC's rules and will be settled in immediately available funds.
The laws of some states require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer beneficial
interests in the Global Certificate to such persons may be limited. Because DTC
can only act on behalf of Participants, who in turn act on behalf of Indirect
Participants and certain banks, the ability of a person having a beneficial
interest in the Convertible Exchangeable Preferred Stock represented by the
Global Certificate to pledge such interest to persons or entitles that do not
participate in the DTC system, or otherwise take actions in respect of such
interest may be affected by lack of a physical certificate evidencing such
interest.
Neither the Company nor the Transfer Agent will have responsibility for the
performance of DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Convertible Exchangeable Preferred Stock including,
without limitation, the presentation of Convertible Exchangeable Preferred
Stock for exchange or conversion as described above) only at the direction of
one or more Participants to whose account with DTC interests in the Global
Certificate are credited, and only in respect of the Convertible Exchangeable
Preferred Stock represented by the Global Certificate as to which such
Participant or Participants has or have given such direction.
DTC has also advised the Company that DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants and through electronic
book-entry changes to accounts of its Participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the Underwriters. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as brokers,
dealers and trust companies through, or which maintain a custodial relationship
with, a Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interest in the Global Certificate among Participants, it is under
no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will cause the Convertible Exchangeable
Preferred Stock to be issued in definitive form in exchange for the Global
Certificate. In addition, the Company in its sole discretion may at any time
determine not to have any of the Convertible Exchangeable Preferred Stock
represented by the Global Certificate.
OTHER PROVISIONS
The shares of Convertible Exchangeable Preferred Stock, and the Class A
Common Stock when issued upon conversion thereof, will be duly and validly
issued, fully paid and nonassessable.
The holders of shares of Convertible Exchangeable Preferred Stock will have
no preemptive rights with respect to any securities of the Company.
The Company intends to apply for listing of the Convertible Exchangeable
Preferred Stock on the Nasdaq National Market. Prior to the issuance of the
Convertible Exchangeable Preferred Stock, there will be no trading market for
the shares of Convertible Exchangeable Preferred Stock, and there can be no
assurance that a market will develop. See "Risk Factors - Absence of Public
Trading Market" in the accompanying Prospectus.
If shares of the Convertible Exchangeable Preferred Stock trade, they are
expected to trade at a price that takes into account the value, if any, of
accrued and unpaid distributions; thus, purchasers will not pay for, and sellers
will not receive, any accrued and unpaid distributions that are not included in
the trading price of the Convertible Exchangeable Preferred Stock.
The Convertible Exchangeable Preferred Stock pays dividends at a fixed
rate. The liquidation preference of the Convertible Exchangeable Preferred Stock
is not necessarily indicative of the price at which the Convertible Exchangeable
Preferred Stock will actually trade at or after the time of the issuance
thereof, and the Convertible Exchangeable Preferred Stock may trade at prices
below its liquidation preference. The market price can be expected to fluctuate
with changes in other securities that pay dividends or interest at a fixed rate
and economic conditions, the financial condition and prospects of the Company
and other factors that generally influence the market prices of debt and other
securities that pay dividends or interest at a fixed rate.
The registrar, transfer agent, conversion agent and dividend disbursing
agent for the Convertible Exchangeable Preferred Stock and the transfer agent
and registrar for the Class A Common Stock issuable upon conversion thereof is
The First National Bank of Boston.
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DESCRIPTION OF EXCHANGE DEBENTURES
The Exchange Debentures will be issued under an indenture, a copy of the
form of which will be filed as an exhibit to the registration statement of which
this Prospectus Supplement is a part (the "Exchange Debenture Indenture"),
between the Company and First Union National Bank, as trustee (the "Trustee").
The following summaries of certain provisions of the Exchange Debenture
Indenture 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 Exchange Debenture
Indenture, including the definition therein of certain terms. Wherever
particular sections or defined terms of the Exchange Debenture Indenture are
referred to, such sections or defined terms are incorporated herein by
reference. For purposes of the following discussion, "Common Stock" includes any
stock of any class of the Company which has no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company and which is not subject
to redemption by the Company, including, without limitation, the Company's Class
A Common Stock and Class B Common Stock.
GENERAL
The Exchange Debentures will be unsecured obligations of the Company, will
be limited to $150 million in aggregate principal amount (plus an amount equal
to the aggregate liquidation preference of any shares of Convertible
Exchangeable Preferred Stock issued upon exercise of the Underwriters'
over-allotment option) and will mature on , 2012. The Exchange Debentures will
bear interest at the rate per annum of % from the date of original issuance of
Exchange Debentures pursuant to the Indenture, or from the most recent interest
payment date to which interest has been paid or provided for, payable quarterly
on , , and of each year (each an "Interest Payment Date") commencing on the
first such payment date following the date of the exchange, to the Person in
whose name the Exchange Debenture (or any predecessor Exchange Debenture) is
registered at the close of business on the preceding , , and
, as the case may be. Interest on the Exchange Debentures will be paid
on the basis of a 360-day year of twelve 30-day months.
Principal of, and premium, if any, and interest on, the Exchange Debentures
will be payable (i) in respect of Exchange Debentures held of record by The
Depository Trust Company ("DTC") or its nominee, in same day funds on or prior
to the payment dates with respect to such amounts and (ii) in respect of
Exchange Debentures held of record by holders other than DTC or its nominee, at
the corporate trust office of the Trustee. In addition, with respect to Exchange
Debentures held of record by holders other than DTC or its nominee, payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto as it appears in the register for the Exchange
Debentures on the regular record date for such interest (the "Regular Record
Date"). The Exchange Debentures may be surrendered for transfer, exchange or
conversion at the corporate trust office of the Trustee. Except under certain
conditions, the Exchange Debentures will not be issued in certificate form but
will be held by DTC in permanent global form.
The Exchange Debentures will be issued only in registered form, without
coupons and in denominations of $1,000 or any integral multiple thereof or such
other denomination as determined by the Company. No service charge will be made
for any transfer or exchange of the Exchange Debentures, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge and any other expenses (including the fees and expenses of the Trustee)
payable in connection therewith. The Company is not required (i) to issue,
register the transfer of or exchange any Exchange Debentures during a period
beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption and ending at the close of business on the day of such
mailing, or (ii) to register the transfer of or exchange any Exchange Debenture
selected for redemption in whole or in part, except the unredeemed portion of
Exchange Debentures being redeemed in part.
All monies paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium if any and interest on any Exchange
Debenture which remain unclaimed for two years after such principal, premium or
interest become due and payable may be repaid to the Company. Thereafter, the
registered holder of such Exchange Debenture may, as an unsecured general
creditor, look only to the Company for payment thereof.
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The Exchange Debenture Indenture does not contain any provisions that would
provide protection to holders of the Exchange Debentures against a sudden and
dramatic decline in credit quality of the Company resulting from any takeover,
recapitalization or similar restructuring, except as described below under
"Change of Control."
CONVERSION RIGHTS
The holder of any Exchange Debenture will have the right, at the holder's
option, to convert the principal amount thereof (or any portion thereof that is
an integral multiple of $1,000) into shares of Class A Common Stock at any time
prior to maturity, initially at the conversion rate in effect on the Convertible
Exchangeable Preferred Stock at the date of exchange of the Convertible
Exchangeable Preferred Stock for Exchange Debentures (subject to adjustments as
described below), except that if an Exchange Debenture is called for redemption,
the conversion right will terminate on the close of business on the second
business day preceding the date fixed for redemption. No payment of interest and
no adjustment in respect of dividends will be made upon the conversion of any
Exchange Debenture, and the holder will lose any right to payment of interest on
the Exchange Debentures surrendered for conversion. Exchange Debentures
surrendered for conversion during the period from the Regular Record Date for an
interest payment to the corresponding Interest Payment Date (except Exchange
Debentures called for redemption during that period) must be accompanied by
payment of an amount equal to the interest upon conversion. No fractional shares
will be issued upon conversion but, in lieu thereof, an appropriate amount will
be paid in cash based on the last reported sale price for the shares of Class A
Common Stock on the day of conversion. The provisions in the Exchange Debenture
Indenture for adjustment of the conversion rate (including a reduction of the
conversion rate under certain circumstances) and conversion in connection with a
reclassification, consolidation, merger, sale, transfer or share exchange will
be substantially the same as those applicable to the Convertible Exchangeable
Preferred Stock described above under the caption "Description of Convertible
Exchangeable Preferred Stock Conversion Rights."
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Exchange Debentures will, to the extent set forth in the Exchange Debenture
Indenture, be subordinated in right of payment to the prior payment in full of
all Senior Debt in cash or cash equivalents or in any other form acceptable to
the holders of Senior Debt. The Exchange Debentures will be subordinated
indebtedness of the Company ranking junior to all existing and future Senior
Subordinated Indebtedness of the Company and pari passu to all other existing
and future subordinated indebtedness of the Company.
As of June 30, 1997 on a pro forma basis, after giving effect to the Debt
Issuance, the sale of the Convertible Exchangeable Preferred Stock offered
hereby and the application of the estimated net proceeds thereof, the aggregate
amount of Senior Debt that ranked senior in right of payment to the Exchange
Debentures would have been approximately $1.6 billion. As the Company is a
holding company, substantially all of the Company's assets consist of the
capital stock of its Subsidiaries. Except to the extent that the Company may
itself be a creditor with recognized claims against its Subsidiaries, the claims
of the holders of the Exchange Debentures are effectively subordinated to the
claims of the direct creditors of the Subsidiaries of the Company. All of the
Senior Debt is guaranteed by substantially all of the Company's Subsidiaries.
Subject to compliance with certain limitations in the Company's debt
instruments, the Company and its Subsidiaries may incur additional indebtedness.
See "Risk Factors - Subordination of the Subordinated Debt Securities and the
Related Guarantees; Asset Encumbrances" in the accompanying Prospectus and
"Capitalization" herein.
During the continuance of any default in the payment of any Senior Debt and
non-payment default with respect to Senior Debt pursuant to which the maturity
thereof has been accelerated, no payment 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 Exchange Debentures or on account of the
purchase, redemption, defeasance or other
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acquisition of the Exchange Debentures unless and until such default has been
cured, waived or has ceased to exist or such Senior Debt shall have been
discharged or paid in full in cash or cash equivalents or in any other form
acceptable to the holders of Senior Debt.
During the continuance of any non-payment default with respect to any
Designated Senior Debt pursuant to the terms of 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 Debt of a written
notice of such default, no payment 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 Exchange Debentures or on account of the purchase,
redemption, defeasance or other acquisition of the Exchange Debentures 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 from a representative of the holders of
any Designated Senior Debt 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 Debt as to which notice was given shall
not therefore 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 or waived or ceased to exist or
on which such Designated Senior Debt is discharged or paid in full in cash or
cash equivalents or in any other form acceptable to the holders of Designated
Senior Debt; 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 Debt or
the holders of at least a majority of the Designated Senior Debt 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 Exchange Debentures, 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 of 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, premium, if any, or
interest on the Exchange Debentures may not be made may commence and that the
duration of the Payment Blockage Period may not exceed 179 days. No Non-payment
Default with respect to Designated Senior Debt 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.
If the Company fails to make any payment on the Exchange Debentures 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 Exchange Debenture Indenture and would enable the
holders of the Exchange Debentures to accelerate the Maturity thereof. See
"Events of Default."
The Exchange Debenture Indenture will provide that in the event of any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case 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 marshaling of assets or liabilities of the Company, all
Senior Debt must be paid in full in cash or cash equivalents or in any other
manner acceptable to the holders of Senior Debt, 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 Exchange Debentures.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Debt may recover more,
ratably, than the holders of the Exchange Debentures, and funds which would be
otherwise payable to the holders of the Exchange Debentures will be
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paid to the holders of the Senior Debt to the extent necessary to pay the Senior
Debt in full in cash or cash equivalents or in any other manner acceptable to
the holders of Senior Debt, and the Company may be unable to meet its
obligations fully with respect to the Exchange Debentures.
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if a court were to find that at the
time of the exchange of the Convertible Exchangeable Preferred Securities for
Exchange Debentures (i) the Company was insolvent or rendered insolvent by
reason thereof, (ii) the Company was engaged, or about to engage, in a business
or transaction for which the Company's remaining assets constitute unreasonably
small capital, (iii) the Company intended to incur or believed that it would
incur debts beyond its ability to pay such debts as they mature or (iv) the
Company was a defendant in an action for money damages, or had a judgment for
money damages docketed against it (if in either case, after final judgment, the
judgment is unsatisfied). In such case, the holders could be required to return
the Exchange Debentures to or for the benefit of existing or future creditors of
the Company. The measure of insolvency for purposes of the foregoing will vary
depending on the law of the jurisdiction which is being applied. Generally, an
entity would be considered insolvent if, at the time it incurs any obligation
(i) the sum of its debts, including contingent liabilities, was greater than the
fair salable value of its assets at a fair valuation, (ii) the present fair
salable value of its assets was less than the amount that would be required to
pay its probable liability on its existing debts and liabilities, including
contingent liabilities, as they become absolute and mature, or (iii) it is
incurring debt beyond its ability to pay as such debt matures.
REDEMPTION AT OPTION OF THE COMPANY
The Exchange Debentures will be redeemable, at the Company's option, in
whole or from time to time in part, at any time on or after , 2000, upon not
less than 30 nor more than 60 days' prior notice by first class mail to each
holder of Exchange Debentures to be redeemed at its address appearing in the
security register and prior to maturity at the following redemption prices
("Redemption Prices") (expressed as percentages of the principal amount) plus
accrued interest to the Redemption Date (subject to the right of holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
If redeemed during the 12-month period beginning , in the year indicated,
the Redemption Price shall be:
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
YEAR PRICE YEAR PRICE
- ------------ ------------ ------------------- -----------
<S> <C> <C> <C>
2000 ...... % 2004 ............ %
2001 ...... 2005 ............
2002 ...... 2006 ............
2003 ...... 2007 and thereafter 100%
</TABLE>
SINKING FUND AND DEFEASANCE
There will be no sinking fund or defeasance rights.
CONSOLIDATION, MERGER AND 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:
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(i) either (1) the Company shall be the surviving 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 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 Exchange Debentures and the Exchange Debenture Indenture, and the
Exchange Debenture 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) such
transaction does not adversely effect the validity or enforceability of the
Exchange Debentures; and (iv) 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 Exchange Debenture Indenture and that
all conditions precedent provided for in the Exchange Debenture Indenture
relating to such transaction have been complied with.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which the Company 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, and the Company would be discharged from its
obligations under the Exchange Debenture Indenture and the Exchange Debentures.
CHANGE OF CONTROL
If a Change of Control (as defined under the caption "Description of
Convertible Exchangeable Preferred Stock - Change of Control") shall occur at
any time, then each holder of Exchange Debentures shall have the right to
require that the Company purchase such holder's Exchange Debentures 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 100% of the principal
amount of such Exchange Debentures, 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 Exchange Debenture 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 the
holder of Exchange Debentures, by first-class mail, postage prepaid, at their
addresses appearing in the security register, stating, among other things, the
Change of Control Purchase Price and that the Change of Control Purchase Date
shall be a business day no earlier than 30 days nor later than 60 days from the
date such notice is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act; that any Exchange Debenture not tendered
will continue to accrue interest; that, unless the Company defaults in the
payment of the Change of Control Purchase Price, any Exchange Debentures
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Purchase Date; and certain other
procedures that a holder of Exchange Debentures 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 Exchange Debentures that might be delivered by
holders of the Exchange Debentures seeking to accept the Change of Control
Offer. The holders of the Existing Notes and the Series C Preferred Stock have
rights upon a Change of Control that are similar to the rights of the holders of
the Exchange Debentures. 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. Moreover, the Bank Credit
Agreement prohibits the repurchase of the Exchange Debentures 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 Exchange Debenture Indenture.
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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 Exchange Debenture Indenture) to represent a specific quantitative test.
As a consequence, in the event the holders of the Exchange Debentures elected to
exercise their rights under the Exchange Debenture 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 Exchange Debentures upon a Change of Control may deter a third party
from acquiring the Company in a transaction which constitutes a Change of
Control.
The provisions of the Exchange Debenture Indenture will not afford holders
of Exchange Debentures the right to require the Company to repurchase the
Exchange Debentures 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
Exchange Debentures, 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 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.
EVENTS OF DEFAULT
An Event of Default will occur under the Exchange Debenture Indenture if:
(i) there shall be a default in the payment of any interest on any Exchange
Debenture 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 Exchange Debenture 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 under the Exchange Debenture 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) or (c)
of this clause (iii)) and such default or breach shall continue for a period of
60 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 Exchange
Debentures; (b) there shall be a default in the performance or breach of the
provisions described in "- Consolidation, Merger, Sale of Assets"; or (c) the
Company shall have failed to make or consummate a Change of Control Offer in
accordance with the provisions described in "- Change of Control";
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company 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) 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 or any Restricted
Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy
Law or (b) a decree or order adjudging the Company or any Restricted Subsidiary
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company 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 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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(vi) (a) the Company 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 or any
Restricted Subsidiary consents to the entry of a decree or order for relief in
respect of the Company 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 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 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 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 or any Restricted Subsidiary takes any corporate action in
furtherance of any such actions in this paragraph (vi).
If an Event of Default (other than as specified in clauses (v) and (vi) 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 Exchange Debentures
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
Exchange Debentures to be due and payable immediately by a notice in writing to
the Company (and to the Trustee if given by the holders of the Exchange
Debentures); 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
Exchange Debentures by appropriate judicial proceeding. If an Event of Default
specified in clause (v) or (vi) of the prior paragraph occurs and is continuing,
then all the Exchange Debentures shall ipso facto become and be immediately due
and payable, in an amount equal to the principal amount of the Exchange
Debentures, together with accrued and unpaid interest, if any, to the date the
Exchange Debentures 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 Exchange Debentures, the holders of
the Exchange Debentures 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 Exchange Debentures 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
Exchange Debenture Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, (ii) all
overdue interest on all Exchange Debentures, (iii) the principal of and premium,
if any, on any Exchange Debentures which have become due otherwise than by such
declaration of acceleration and interest thereon at a rate borne by the Exchange
Debentures and (iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Exchange Debentures; and
(b) all Events of Default, other than the non-payment of principal of the
Exchange Debentures which have become due solely by such declaration of
acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount of
the Exchange Debentures outstanding may on behalf of the holders of all the
Exchange Debentures waive any past default under the Exchange Debenture
Indenture and its consequences, except a default in the payment of the principal
of, premium, if any, or interest on any Exchange Debenture, or in respect of a
covenant or provision which under the Exchange Debenture Indenture cannot be
modified or amended without the consent of the holder of each Exchange Debenture
outstanding.
The Company is also required to notify the Trustee within five business
days of the occurrence of any Default. 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 Exchange Debenture Indenture, including
whether or not
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any default has occurred. The Trustee is under no obligation to exercise any of
the rights or powers vested in it by the Exchange Debenture Indenture at the
request or direction of any of the holders of the Exchange Debentures 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 Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company, 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. The Exchange Debenture Indenture provides that the Trustee may withhold
notice to the holders of the Exchange Debentures of any continuing default
(except in the payment of the principal of or premium, if any, or interest on
any Exchange Debentures) if the Trustee considers it in the interest of holders
of the Exchange Debentures to do so.
MODIFICATION, AMENDMENTS AND WAIVERS
Modifications and amendments of the Exchange Debenture Indenture may be
made by the Company and the Trustee with the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding Exchange
Debentures; provided, however, that no such modification or amendment may,
without the consent of the holder of each outstanding Exchange Debenture
affected thereby: (i) change the stated Maturity of the principal of, or any
installment of interest on, any Exchange Debenture or reduce the principal
amount thereof or the rate of interest thereon or any premium, if any, payable
upon the redemption thereof, or change the coin or currency in which the
principal of any Exchange Debenture or any premium, if any, 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) 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 the provisions described in
"- Change of Control," including amending, changing or modifying any definitions
with respect thereto; (iii) reduce the percentage in principal amount of
outstanding Exchange Debentures, the consent of whose holders is required for
any such supplemental indenture, or the consent of whose holders is required for
any waiver or compliance with certain provisions of the Exchange Debenture
Indenture or certain defaults; (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 Exchange Debentures required for such
actions or to provide that certain other provisions of the Exchange Debenture
Indenture cannot be modified or waived without the consent of the holder of each
Exchange Debenture affected thereby; (v) except as otherwise permitted under
"Consolidation, Merger, Sale of Assets," consent to the assignment or transfer
by the Company of any of its rights and obligations under the Exchange Debenture
Indenture; or (vi) amend or modify any of the provisions of the Exchange
Debenture Indenture relating to the subordination or conversion of the Exchange
Debentures in any manner adverse to the holders of the Exchange Debentures.
The holders of a majority in aggregate principal amount of the Exchange
Debentures outstanding may waive compliance with certain restrictive covenants
and provisions of the Exchangeable Debenture Indenture.
SATISFACTION AND DISCHARGE
The Exchange Debenture Indenture will cease to be of further effect (except
as to surviving rights of registration of transfer or conversion of Exchange
Debentures, as expressly provided for in the Exchange Debenture Indenture) as to
all outstanding Exchange Debentures when (a) either (i) all of the Exchange
Debentures therefore authenticated and delivered (except lost, stolen or
destroyed Exchange Debentures which have been replaced or paid) have been
delivered to the Trustee for cancellation or (ii) all Exchange Debentures 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
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giving of notice of redemption by the Trustee in the name, and at the expense,
of the Company and the Company 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 Exchange Debentures not therefore 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 has
paid or caused to be paid all other sums payable under the Exchange Debenture
Indenture by the Company; 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 Exchange Debenture Indenture relating to the satisfaction
and discharge of the Exchange Debenture Indenture have been complied with and
(ii) such satisfaction and discharge will not result in a breach or violation
of, or constitute a default under, the Exchange Debenture Indenture or any other
material agreement or instrument to which the Company is a party or by which the
Company is bound.
PAYMENTS OF PRINCIPAL AND INTEREST
The Exchange Debenture Indenture will require that payments in respect of
the Exchange Debentures (including principal, premium, if any, and interest)
held of record by DTC (including Exchange Debentures evidenced by the Global
Exchange Debentures) be made in same day funds. Payments in respect of the
Exchange Debentures held of record by holders other than DTC may, at the option
of the Company, be made by check and mailed to such holders of record as shown
on the register for the Exchange Debentures.
GOVERNING LAW
The Exchange Debenture Indenture and Exchange Debentures will be governed
by and construed in accordance with the laws of the State of New York, without
giving effect to such state's conflict of laws principles.
INFORMATION CONCERNING THE TRUSTEE
The Exchange Debenture Indenture contains certain limitations on the rights
of the Trustee, should it become 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 Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within ninety days, apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
Exchange Debentures will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Exchange Debenture Indenture provides that in
case an Event of Default shall occur (which shall not be cured), the Trustee
will be required, in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Exchange Debenture Indentures at the request of any of the holders of
the Exchange Debentures, unless they shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
OTHER PROVISIONS
The Company is under no obligation to apply for listing of the Exchange
Debentures on any securities exchange or on any automated interdealer quotation
system. If the Company did apply for any such listing, there is no assurance
that such application would be granted or that, if granted, an active trading
market would develop. See "Risk Factors - Absence of Public Trading Market for
Certain Securities" in the accompanying Prospectus.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain terms used in the Exchange
Debenture Indenture and the Articles Supplementary:
"Bank Credit Agreement" means the Third Amended and Restated Credit
Agreement, dated as of May 20, 1997, between the Company, the Subsidiaries of
the Company identified on the signature pages thereof under the caption
"Subsidiary Guarantors," the lenders named therein and The Chase Manhattan Bank
as agent, as such agreement may be amended, renewed, extended, substituted,
refinanced, restructured, replaced, supplemented or otherwise modified from time
to time (including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing). For all purposes under the 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.
"Designated Senior Debt" is defined as (i) all Senior Debt outstanding
under the Bank Credit Agreement and (ii) any other Senior Debt 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 Debt or the agreement under which such Senior
Indebtedness arises as "Designated Senior Debt" by the Company.
"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 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.
"Existing Indentures" means the indentures relating to the Existing Notes.
"Existing Notes" means the Company's 10% Senior Subordinated Notes due
2003, the Company's 10% Senior Subordinated Notes due 2005, and the Company's 9%
Senior Subordinated Notes due 2007.
"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.
"Guaranteed Debt" of any Persons means, without duplication, all
Indebtedness of any other person referred to in the definition of Indebtedness
contained in this section guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services without requiring that such property
be received or such services be rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor or (v) otherwise to assure a creditor
against loss; provided that the term "guarantee" shall not include endorsements
for collection or deposit, in either case in the ordinary course of business.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but 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 Subsidiaries with respect to Film Contracts entered into
in the ordinary course of business.
"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 Agreement, as defined in the Bank
Credit Agreement.
"Maturity," when used with respect to any Exchange Debenture, means the
date on which the principal of such Exchange Debenture becomes due and payable
as provided in the Exchange Debenture or as provided in the Exchange Debenture
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.
"Person" means any individual, corporate, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Restricted Subsidiary" means a Subsidiary subject to the covenants or
events of default under the agreements governing other indebtedness of the
Company.
"Senior Subordinated Indebtedness" means the Existing Notes and all other
Indebtedness ranking pari passu in right of payment with the Existing Notes.
"Senior Debt" 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 note
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 Exchange Debenture Indenture or thereafter created, incurred or
assumed, and whether at any time owing, actually or contingently, 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 Exchange Debentures.
Without limiting the generality of the foregoing, "Senior Debt" 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 Debt to the
extent that the Indebt-
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edness thereunder is by its express terms subordinate to any other Indebtedness
of the Company, (ii) Indebtedness outstanding under the Founders' Notes, (iii)
existing and future Senior Subordinated Indebtedness of the Company and (iv)
Indebtedness under Interest Rate Agreements. Notwithstanding the foregoing,
"Senior Debt" shall not include (i) Indebtedness evidenced by the Exchange
Debentures, (ii) Indebtedness which when incurred and without respect to any
election under Section 1111(b) of Title 11 United States Code, is without
recourse to the Company, (iii) Indebtedness which is represented by Disqualified
Equity Interests, (iv) any liability for foreign, federal, state, local or other
taxes owed or owing by the Company, (v) 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, and (vi)
Indebtedness owed by the Company for compensation to employees or for services.
"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.
"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).
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DESCRIPTION OF INDEBTEDNESS OF SINCLAIR
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 the Bank Credit Agreement is available upon request
from the Company. In addition, not all indebtedness of the Company is described
below, only that incurred in connection with the Existing Notes and indebtedness
that has been incurred since May 20, 1997. The terms of other indebtedness of
the Company are set forth in other documents previously filed by the Company
with the Commission. See "Available Information."
The Company entered into the Bank Credit Agreement with the Banks. The Bank
Credit Agreement is comprised of two components, consisting of (i) the $400
million Revolving Credit Facility and (ii) the $600 million Term Loan. An
additional term loan in the amount of $400 million is available to the Company
under the Bank Credit Agreement. The Company has borrowed no funds with respect
to this additional term loan. Beginning March 31, 2000, the commitment under the
Revolving Credit Facility is subject to mandatory quarterly reductions to the
following percentages of the initial amount: 90% at December 31, 2000, 69.2% at
December 31, 2001, 48.4% at December 31, 2002, 27.5% at December 31, 2003 and 0%
at December 31, 2004. The Term Loan is required to be repaid by the Company in
equal quarterly installments beginning on September 30, 1997 with the quarterly
payment escalating annually through the final maturity date of December 31,
2004.
Concurrently with the Common Stock Offering and the Preferred Stock
Offering the Company has requested that the Banks approve a reduction in the
$600 million Term Loan by $275 million (to $325 million) and an increase in the
$400 million Revolving Credit Facility by $275 million (to $675 million). If the
Banks approve the Company's request, the commitments under the Revolving Credit
Facility, as increased, will be subject to mandatory quarterly reductions to the
following percentages of the increased 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,
58.1% at December 31, 2004. The Term Loan, as amended, will be 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 Loan subject to certain prepayment
conditions and certain notice provisions at any time and from time to time.
Partial prepayments of the Term Loan are applied in the inverse order of
maturity to the outstanding loans on a pro rata basis. Prepaid amounts of the
Term Loan may not be reborrowed. In addition, the Company is required to pay an
amount equal to (i) 100% of the net proceeds from the sale of assets (other than
in the ordinary course of business) not used within 270 days, (ii) insurance
recoveries and condemnation proceeds not used for permitted uses within 270 days
(iii) 80% of net Equity Issuance (as defined in the Bank Credit Agreement), 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
(each as defined in the Bank Credit Agreement) is greater than or equal to 5.0x,
to the Banks for application first to prepay the Term Loan, 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 Term Loans, the Bank
Credit Agreement provides that the Banks may, but are not obligated to, loan the
Company up to an additional $400 million at any time prior to September 29, 1998
(the "Incremental Facility"). This additional loan, if agreed to by the Agent
and a majority of the Banks, would be in the form of a senior secured standby
multiple draw term loan. The Incremental Facility would be available to fund the
acquisition of WSYX and certain other acquisitions and would be repayable in
equal quarterly installments beginning September 30, 1998, with the quarterly
payment escalating annually through the final maturity date of December 30,
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., the
Trust and Cresap Enterprises, Inc. The subsidiaries of the Company (other than
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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
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 a single
purpose entity utilized solely for that purpose (the "Radio License
Subsidiaries"). The Radio License Subsidiaries are in all instances owned by
wholly-owned indirect subsidiaries of the Company.
Interest on amounts drawn under the Bank Credit Agreement is, at the option
of Company, equal to (i) the London Interbank Offered Rate plus a margin of .50%
to 1.875% for the Revolving Credit Facility and 2.75% for the 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 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 on the Parent Preferred; (iv) enter into certain
arrangements with or investments in affiliates; and (v) change the business or
ownership of the Company. The Company and its subsidiaries are also prohibited
under the Bank Credit Agreement from incurring obligations relating to the
acquisition of programming if, as a result of such acquisition, the cash
payments on such programming exceed specified amounts set forth in the Bank
Credit Agreement.
In addition, the Company must comply with certain other financial covenants
in the Bank Credit Agreement which include: (i) Fixed Charges Ratio (as defined
in the Bank Credit Agreement) of no less than 1.05 to 1 at any time; (ii)
Interest Coverage Ratio (as defined in the Bank Credit Agreement) of no less
than 1.8 to 1 from the Restatement Effective Date (as defined in the Bank Credit
Agreement) 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 (as
defined in the Bank Credit Agreement) 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 (as defined in the Bank
Credit Agreement) of no greater than 6.75 to 1 from the Restatement Effective
Date declining 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.
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Description of Existing Notes Under Existing Indentures
THE EXISTING NOTES WERE ISSUED UNDER INDENTURES DATED DECEMBER 9, 1993 AS
AMENDED, MODIFIED OR supplemented from time to time (the "1993 Indenture") and
August 28, 1995 (the "1995 Indenture" and July 2, 1997 (the "1997 Indenture" and
as amended, modified, or supplemented from time to time 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. 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 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 "Description of Indebtedness of Sinclair - 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 Subsidiaries to, among other things, incur
additional indebtedness, pay dividends, or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, incur indebtedness that is subordinate in right to the payment of
any senior debt and senior in right of payment to the Existing Notes, incur
liens, impose restrictions on the ability of the subsidiary to pay dividends or
make any payments to the Company, or merge or consolidate with any other person
or sell, assign, transfer, lease, convey, or otherwise dispose of all or
substantially all of the assets of the Company. See "Risk Factors Restrictions
Imposed by Terms of Indebtedness" in the accompanying Prospectus.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material federal income tax
consequences of the purchase, ownership, conversion, redemption, and disposition
of the Convertible Exchangeable Preferred Stock and the Exchange Debentures.
This summary is based upon the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), the final, temporary and proposed regulations
promulgated thereunder and administrative rulings and judicial decisions now in
effect, all of which are subject to change (possibly with retroactive effect).
This summary addresses only the tax consequences of the purchase, ownership,
conversion, redemption and disposition of the Convertible Exchangeable Preferred
Stock and the Exchange Debentures by a person who is (i) for United States
federal income tax purposes a citizen or resident of the United States
(including certain former citizens and former long-term residents), (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof (except, to
the extent, in the case of a partnership, the partnership is treated as foreign
under regulations), (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source or (iv) a trust with
respect to the administration of which a court within the United States is able
to exercise primary supervision and one or more United States fiduciaries have
the authority to control all substantial decisions of the trust. This summary
does not purport to deal with all aspects of federal income taxation that may be
relevant to an investor's decision to purchase the Convertible Exchangeable
Preferred Stock, such as foreign, state and local, or estate and gift tax
consequences, and it is not intended to be applicable to all categories of
investors, some of which, such as dealers in securities, financial institutions,
insurance companies, tax-exempt organizations and foreign persons, may be
subject to special rules.
In addition, the summary is (i) limited to initial purchasers who will
acquire the Convertible Exchangeable Preferred Stock pursuant to the Offering
made by this Prospectus Supplement and any Exchange Debentures received in
exchange therefor, and (ii) assumes that the Convertible Exchangeable Preferred
Stock and Exchange Debentures will be held as capital assets (generally,
property held for investment within the meaning of Section 1221 of the Code).
Holders should note that there can be no assurance that the Internal Revenue
Service ("IRS") will take a similar view with respect to the tax consequences
described below and that no ruling has been or will be requested by the Company
from the IRS on any tax matters relating to the Convertible Exchangeable
Preferred Stock or Exchange Debentures. ALL PROSPECTIVE HOLDERS OF CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK OR EXCHANGE DEBENTURES ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP, CONVERSION, REDEMPTION, AND DISPOSITION
OF CONVERTIBLE EXCHANGEABLE PREFERRED STOCK OR EXCHANGE DEBENTURES.
DIVIDENDS AND OTHER DISTRIBUTIONS
Distributions on the Convertible Exchangeable Preferred Stock will be
taxable as ordinary income to the extent of the Company's current or accumulated
earnings and profits, as determined for federal income tax purposes. Any
distribution in excess of current or accumulated earnings and profits will be
treated first as a nontaxable return of capital reducing the holder's tax basis
in the Convertible Exchangeable Preferred Stock. Any distribution in excess of
the holder's basis in the Convertible Exchangeable Preferred Stock will be
treated as a capital gain.
Dividends received by corporate holders of Convertible Exchangeable
Preferred Stock will qualify for the 70% dividends received deduction under
Section 243 of the Code if the holding period and other requirements for such
deduction are met, subject to the limitations in Section 246 and 246A of the
Code (although the benefits of the deductions may be reduced or eliminated by
the corporate alternative minimum tax). Under Section 246(c) of the Code the 70%
dividends received deduction is disallowed for any dividend with respect to
stock (i) that is held for 45 days or less during the 90 day period beginning 45
days before the ex-dividend date (or held 90 days or less in the 180 day period
beginning 90 days before the ex-dividend date in the case of a dividend on stock
having preference in dividends which are attributable to a period or periods
aggregating more than 366 days), or (ii) if the taxpayer is under
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an obligation to make related payments with respect to positions in
substantially similar or related property. In addition, a taxpayer's holding
period for these purposes is suspended during any period in which the taxpayer
has an option to sell, is under a contractual obligation to sell, has made (and
not closed) a short sale of, or has granted an option to buy, substantially
identical stock or securities, or holds one or more positions with respect to
substantially similar or related property that diminish the risk of loss from
holding the stock. Finally, under Section 246A of the Code, the dividends
received deduction may be reduced or eliminated if a corporate holder's shares
of Convertible Exchangeable Preferred Stock are debt financed.
Section 1059 of the Code requires a corporate holder of stock to reduce
(but not below zero) its basis in the stock by the "nontaxed portion" of any
"extraordinary dividend" if the holder has not held the stock subject to a risk
of loss for more than 2 years before the date of the announcement, declaration,
or agreement (whichever is earliest) with respect to the extraordinary dividend
or if the distribution occurs in the context of a redemption, as discussed
below.
A holder will recognize gain in the year the dividend is received to the
extent the nontaxed portion of any extraordinary dividend exceeds the holder's
adjusted tax basis for the stock. Generally, the "nontaxed portion" of an
extraordinary dividend is the amount excluded from income under Section 243 of
the Code (relating to the dividends received deduction described above). An
"extraordinary dividend" is a dividend that (i) equals or exceeds 5% of the
holder's adjusted tax basis in the stock (reduced for this purpose by the
nontaxed portion of any prior extraordinary dividend), treating all dividends
having ex-dividend dates within an 85-day period as one dividend, or (ii)
exceeds 20% of the holder's adjusted tax basis in the stock, treating all
dividends having ex-dividend dates within a 365-day period as one dividend,
provided, however, that in either case the fair market value of the stock (as of
the day before the ex-dividend date) may be substituted for stock basis if the
fair market value of the stock can be established by the holder to the
satisfaction of the IRS.
An extraordinary dividend would also include any amount treated as a
dividend in the case of a redemption (including an exchange of Convertible
Exchangeable Preferred Stock for Exchange Debentures) that is either non-pro
rata as to all stockholders or in partial liquidation of the Company, regardless
of the relative size of the dividend and regardless of the corporate holder's
holding period for the Convertible Exchangeable Preferred Stock. In addition,
"extraordinary dividend" treatment will result without regard to the period
stock is held if a redemption is treated as a dividend by reason of options
being taken into account under Section 318(a)(4) of the Code. Thus, if, as
discussed below, the exchange of Convertible Exchangeable Preferred Stock for
Exchange Debentures is treated as a dividend, any such dividend may be an
extraordinary dividend to corporate holders.
Special rules overriding the general application of Code Section 1059 apply
with respect to "qualified preferred dividends," which are defined as any fixed
dividends paid on stock that provide for a fixed preferred dividend to be paid
not less frequently than annually, provided that no such dividends were in
arrears at the time the holder acquired the stock. Where a qualified preferred
dividend exceeds the 5% or 20% limitations described above, it will be treated
as an extraordinary dividend only if (i) the actual rate of return on the stock
for the period the stock has been held by the holder receiving the dividend
exceeds 15%, or (ii) such rate of return does not exceed 15% and the holder
disposes of such stock before holding it, subject to risk of loss, for 5 years.
In the latter case, however, the amount treated as an extraordinary dividend is
generally limited to the excess of the actual rate of return over the stated
rate of return. For purposes of determining the actual or stated rate of return,
a holder should compare the actual or stated annual dividends to the lesser of
(a) the holder's adjusted tax basis for the stock, or (b) the liquidation
preference of the stock. The length of time that a taxpayer is deemed to have
held stock for purposes of Section 1059 of the Code is determined under
principles similar to those contained in Section 246(c) of the Code, described
above.
REDEMPTION PREMIUM
Under Section 305(c) of the Code and applicable Treasury Regulations, if
the Convertible Exchangeable Preferred Stock is redeemable at a premium, the
entire premium may be taxable as a constructive distribution to the holder
(treated as a dividend, a non-taxable return of capital, or capital
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gain pursuant to the rules summarized above under the caption "Dividends and
Other Distributions"). Holders would be required to recognize such redemption
premium before payment is actually received under a constant interest rate
method similar to that described below for accruing original issue discount.
The Company does not intend to treat the Convertible Exchangeable Preferred
Stock as having such a redemption premium reportable under the constant interest
rate method because the Company believes that there are no plans, arrangements,
or agreements that effectively require or are intended to compel it to redeem or
exchange the Convertible Exchangeable Preferred Stock. Were the IRS to disagree
with the Company's conclusion, holders could be required to report any
redemption premium as described above. Moreover, holders who are related to the
Company within the meaning of Treasury regulations under Section 305 may be
subject to different rules.
SALE, REDEMPTION, OR EXCHANGE OF CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
Sale
On the sale of shares of Convertible Exchangeable Preferred Stock, gain or
loss will be recognized by the holder in an amount equal to the difference
between (i) the amount of cash and fair market value of any property received on
such sale (less any portion thereof attributable to accumulated and declared but
unpaid dividends, which will be taxable as a dividend to the extent of the
Company's current or accumulated earnings and profits), and (ii) the holder's
adjusted tax basis in the Convertible Exchangeable Preferred Stock. Such gain or
loss will be capital gain or loss if the shares of Convertible Exchangeable
Preferred Stock are held as capital assets. For certain noncorporate holders
(including individuals), the rate of taxation of capital gains will depend upon
(i) the holder's holding period for the Convertible Exchangeable Preferred Stock
(with the lowest rate available only for Convertible Exchangeable Preferred
Stock held more than 18 months) and (ii) the holder's marginal tax rate for
ordinary income. Holders of Convertible Exchangeable Preferred Stock should
consult their tax advisors with respect to applicable rates and holding periods,
and netting rules for capital losses.
Redemption
A redemption of shares of Convertible Exchangeable Preferred Stock will be
treated under Section 302 of the Code as a distribution that is taxable at
ordinary income tax rates as a dividend, a non-taxable return of capital, or
capital gain, pursuant to the rules summarized above under the caption
"Dividends and Other Distributions" unless the redemption satisfies certain
tests set forth in Section 302(b) of the Code, in which case the redemption will
be treated as a sale or exchange of the Convertible Exchangeable Preferred
Stock, the tax treatment of which is described in the preceding paragraph. The
redemption will have satisfied such tests under Section 302(b) of the Code if it
(i) is "substantially disproportionate" with respect to the holder, (ii) results
in a "complete termination" of the holder's stock interest in the company, or
(iii) is "not essentially equivalent to a dividend" with respect to the holder.
A distribution to a holder is "not essentially equivalent to a dividend" if it
results in a "meaningful reduction" in such holder's proportionate interest in
the Company. If, as a result of the redemption of the Convertible Exchangeable
Preferred Stock, a holder, whose relative stock interest in the Company is
minimal and who exercises no control over corporate affairs, experiences a
reduction in his proportionate interest in the Company (taking into account
shares deemed owned by the holder under Sections 302(c) and 318 of the Code and,
in certain events, dispositions of stock which occur contemporaneously with the
redemption), then, based upon published IRS rulings, such holder may be regarded
as having suffered a meaningful reduction in his interest in the Company. In
determining whether any of these tests has been met, shares considered to be
owned by the holder by reason of certain constructive ownership rules set forth
in Sections 302(c) and 318 of the Code, as well as shares actually owned, must
generally be taken into account. Because the determination as to whether any of
the alternative tests of Section 302(b) of the Code will be satisfied with
respect to any particular holder of Convertible Exchangeable Preferred Stock
depends on the facts and circumstances at the time that the determination must
be made, prospective investors are advised to consult their own tax advisors to
determine such tax treatment.
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If a redemption of the Convertible Exchangeable Preferred Stock is treated
as a distribution that is taxable as a dividend, the amount of the distribution
will be measured by the amount of cash and the fair market value of property
received by the holder without any offset for the holder's basis in the
Convertible Exchangeable Preferred Stock. The holder's adjusted tax basis in the
redeemed Convertible Exchangeable Preferred Stock will be transferred to any of
the holder's remaining stock holdings in the Company. If, however, the holder
has no remaining stock holdings in the Company, such basis could be lost.
Any redemption of the Convertible Exchangeable Preferred Stock that is
treated as a dividend and that is non-pro rata as to all stockholders, including
holders of Class A Common Stock, will be subject to the "extraordinary dividend"
provisions of Code Section 1059 discussed above under the caption "Dividends and
Other Distributions."
Exchange of Convertible Exchangeable Preferred Stock for Exchange Debentures
An exchange of Convertible Exchangeable Preferred Stock for Exchange
Debentures will be a taxable event for federal income tax purposes. For the
reasons set forth below, it is unclear whether, standing alone, the exchange
would be treated as a sale or exchange of the Convertible Exchangeable Preferred
Stock or would be taxable as a dividend. This is so because an exchange of the
Convertible Exchangeable Preferred Stock will be subject to the same general
rules as a redemption for cash or property. However, since a holder of Exchange
Debentures will be treated under the constructive ownership rules of the Code as
owning the Class A Common Stock into which the Exchange Debentures are
convertible, in applying Section 302 of the Code, a redemption of the
Convertible Exchangeable Preferred Stock may not, standing alone, satisfy the
"complete termination" or the "substantially disproportionate" tests of Code
Section 302(b), as described above. Such a redemption may, therefore, be taxable
as a dividend to the extent of the Company's current or accumulated earnings and
profits, unless, based on all the facts and circumstances, it satisfies either
the "not essentially equivalent to a dividend" test or unless any of the
foregoing tests could otherwise be satisfied. Although the Company intends to
take the position that the redemption of the Convertible Exchangeable Preferred
Stock for Exchange Debentures is a sale or exchange for federal income tax
purposes that is "not essentially equivalent to a dividend," no assurance can be
given that an exchange of Convertible Exchangeable Preferred Stock for Exchange
Debentures will be treated as a sale or exchange for federal income tax
purposes. Based on published rulings, a holder who does not desire dividend
treatment and who sells or otherwise disposes of a portion of the Convertible
Exchangeable Preferred Stock or Exchange Debentures to unrelated parties
substantially contemporaneously with the exchange of the Convertible
Exchangeable Preferred Stock for Exchange Debentures may increase the likelihood
of satisfying one or more of the foregoing tests. Prospective holders should
consult their tax advisors as to whether dividend treatment might apply to them
on an exchange of Convertible Exchangeable Preferred Stock for Exchange
Debentures.
If any of the foregoing tests under Section 302 of the Code are met, the
exchange of shares of Convertible Exchangeable Preferred Stock for Exchange
Debentures will result in taxable gain or loss based on the difference between
(i) the issue price of the Exchange Debentures (less any portion thereof
attributable to accumulated and declared but unpaid dividends, which will be
taxable as a dividend to the extent of the Company's current or accumulated
earnings and profits) and (ii) the holder's adjusted tax basis in the
Convertible Exchangeable Preferred Stock surrendered in the exchange. The
determination of the issue price of the Exchange Debentures is discussed below
under the caption "Original Issue Discount."
If an exchange of the Convertible Exchangeable Preferred Stock for Exchange
Debentures is treated as a distribution that is taxable as a dividend, the
amount of the distribution will be measured by the issue price of the Exchange
Debentures received by the holder. Any amount so treated as a dividend will, in
most circumstances, be subject to the "extraordinary dividend" provisions of
Code Section 1059 applicable to corporate holders, which is discussed above
under the caption "Dividends and Other Distributions." To the extent that
dividend treatment results from the exchange, a holder's adjusted tax basis in
the exchanged Convertible Exchangeable Preferred Stock will be transferred to
such holder's remaining stock holdings, if any, in the Company. If the holder
does not retain any stock ownership in the Company, such holder's basis may be
transferred to any shares owned by a related person or to any
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Exchange Debentures received in the exchange (although some uncertainty exists
with respect to the holder's ability to apply such basis to the Exchange
Debentures) or the holder may lose such basis entirely. If such basis is
transferred to the Exchange Debentures received, it may have an effect on
subsequent calculations of original issue discount or bond premium.
STATED INTEREST ON EXCHANGE DEBENTURES
The stated interest on the Exchange Debentures will be taxable as ordinary
income when received by a holder utilizing the cash receipts and disbursements
method of tax accounting and when accrued by a holder utilizing the accrual
method of tax accounting, unless the Exchange Debentures are issued with
original issue discount or premium, in which case the rules described below will
apply.
ORIGINAL ISSUE DISCOUNT
An Exchange Debenture that is issued for an issue price that is less than
its stated redemption price at maturity will generally be considered to have
been issued with original issue discount for United States federal income tax
purposes. If the Exchange Debentures are traded on an established securities
market within the meaning of Section 1273(b) of the Code, the "issue price" of
an Exchange Debenture will equal its fair market value on the issue date. If the
Exchange Debentures are not traded on an established market and the Convertible
Exchangeable Preferred Stock is traded on an established market, the "issue
price" of an Exchange Debenture will equal the fair market value of the
Convertible Exchangeable Preferred Stock on the issue date. In the event that
neither the Convertible Exchangeable Preferred Stock nor the Exchange Debentures
are traded on an established securities market, and absent any "potentially
abusive situation," the issue price of the Exchange Debentures will be their
stated principal amount, or, in the event the Exchange Debentures do not bear
"adequate stated interest" within the meaning of Section 1274 of the Code, their
"imputed principal amount" as determined under Section 1274 of the Code using
the applicable federal rate ("AFR") in effect as of the date of the exchange.
The "stated redemption price at maturity" of an Exchange Debenture will equal
the sum of all payments required under the Exchange Debenture other than
payments of qualified stated interest. "Qualified stated interest" generally
means stated interest unconditionally payable as a series of payments in cash or
property (other than debt instruments of the Company) at least annually during
the entire term of the Exchange Debenture at a single fixed rate of interest
that appropriately takes into account the length of the interval between
payments.
An Exchange Debenture will not be considered to have original issue
discount if the difference between the Exchange Debenture's stated redemption
price at maturity and its issue price is less than a de minimis amount, i.e.
one-quarter of one percent of the stated redemption price at maturity multiplied
by the number of complete years to maturity. Holders of Exchange Debentures with
a de minimis amount of original issue discount will generally include such
original issue discount in income, as capital gain, on a pro rata basis as
principal payments are made on such Exchange Debentures.
A holder of an Exchange Debenture with original issue discount will be
required to include qualified stated interest payments in income as such
payments are received or accrued in accordance with the holder's method of
accounting for federal income tax purposes. A holder will be required to include
original issue discount in income for federal income tax purposes as it accrues,
regardless of accounting method, in accordance with a constant yield method
based on a compounding of interest. As a consequence, holders may be required to
include interest on Exchange Debentures with original issue discount in income
before receiving the corresponding interest payments.
If issued with original issue discount, the Exchange Debentures may be
subject to the provision of the Code dealing with high-yield discount
obligations, in which case a certain portion of the original issue discount may
be treated as a dividend with respect to the stock of the Company and the rules
applicable to distributions with respect to the Convertible Exchangeable
Preferred Stock may apply.
PREMIUM
If a holder's tax basis in an Exchange Debenture exceeds the amount payable
at maturity, Section 171 of the Code provides for an election whereby the excess
or premium, to the extent not attributable to the conversion privilege of the
Exchange Debenture, can be offset against (and thereby reduce)
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taxable income attributable to interest received on the Exchange Debenture. The
premium is amortized, as an offset to interest received, over the remaining term
of the Exchange Debenture. An election under Section 171 of the Code generally
is binding once made and applies to all obligations owned or subsequently
acquired by the taxpayer. In addition, if the price paid for an Exchange
Debenture is in excess of the "adjusted issue price" of the Exchange Debenture
at the time of the purchase, but less than the Exchange Debenture's stated
redemption price at maturity, the regulations allow the holder to take the
"acquisition premium" into account thereby reducing the amount of original issue
discount otherwise required to be included in income.
MARKET DISCOUNT
The market discount provisions of Sections 1276-1278 of the Code generally
provide that, subject to a statutorily-defined de minimis exception, if a holder
of an Exchange Debenture purchases it at a market discount and thereafter
recognizes gain on the disposition of the Exchange Debenture (including a gift),
the lesser of such gain (or appreciation, in the case of a gift) or the portion
of the market discount that accrued while the Exchange Debenture was held by
such holder will be treated as ordinary interest income at the time of the
disposition. For this purpose, a purchase at a market discount includes a
purchase of an Exchange Debenture with original issue discount at or after the
original issue at a price below the revised issue price. The revised issue price
equals the original issue price of the Exchange Debenture plus the aggregate
amount of original issue discount includible in income with respect to the
Exchange Debenture before the date of its purchase. The market discount rules
also provide that a holder who acquires an Exchange Debenture at a market
discount (and who does not elect to include such market discount in income on a
current basis) may be required to defer a portion of any interest incurred or
maintained to purchase or carry such debt instrument until the holder disposes
of the debt instrument in a taxable transaction.
The Exchange Debentures provide that they may be redeemed, in whole or in
part, before maturity. If some or all of the Exchange Debentures are redeemed,
each holder of an Exchange Debenture that was acquired at a market discount
would be required to treat the principal payment as ordinary interest income to
the extent of any accrued market discount on such Exchange Debenture.
A holder of an Exchange Debenture may elect to have market discount accrue
on a constant interest rate basis or a straight line basis. In addition, a
holder of an Exchange Debenture acquired at a market discount may elect to
include the market discount in income as the discount thereon accrues, either on
a straight line basis or, if elected, on a constant interest rate basis. The
current inclusion election, once made, applies to all market discount
obligations acquired by such holder on or after the first day of the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS. If a holder of an Exchange Debenture elects to include
market discount in income in accordance with the preceding sentence, the
foregoing rules with respect to the recognition of ordinary income on a sale or
certain other disposition of such Exchange Debenture and the deferral of
interest deduction on indebtedness related to such Exchange Debenture will not
apply.
REDEMPTION OR SALE OF EXCHANGE DEBENTURES
In general, a holder of an Exchange Debenture will recognize gain or loss
upon the sale, exchange, redemption or other taxable disposition of the Exchange
Debenture measured by the difference between (i) the amount of cash and the fair
market value of property received (except to the extent attributable to the
payment of accrued interest not previously included in income) and (ii) the
holder's tax basis in the Exchange Debenture. The tax basis of an Exchange
Debenture to a holder will generally equal its cost, or in the case of a holder
who received an Exchange Debenture in exchange for Convertible Exchangeable
Preferred Stock, the issue price of the Exchange Debenture on the date of issue
(in either case increased by any original issue discount or market discount
previously included in income by the holder and decreased by any cash payments
received, other than payments constituting qualified stated interest, and any
amortizable bond premium deducted over the term of the Exchange Debenture).
Subject to the market discount rules discussed above, any such gain or loss will
generally be capital gain or loss, the tax consequences of which are discussed
under the caption "Sale, Redemption, or Exchange of Convertible Exchangeable
Preferred Stock."
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CONVERSION OF CONVERTIBLE EXCHANGEABLE PREFERRED STOCK OR EXCHANGE DEBENTURES
INTO
CLASS A COMMON STOCK
In general, no gain or loss will be recognized for federal income tax
purposes upon conversion of the Convertible Exchangeable Preferred Stock or the
Exchange Debentures solely into shares of Class A Common Stock. However, if
dividends on the Convertible Exchangeable Preferred Stock were in arrears at the
time of conversion, a portion of the Class A Common Stock received in exchange
for the Convertible Exchangeable Preferred Stock would be viewed under Section
305(c) of the Code as a distribution with respect to the Convertible
Exchangeable Preferred Stock, taxable as a dividend at the time of the exchange.
Similarly, if interest on the Exchange Debentures were in arrears at the time of
conversion, a portion of the Class A Common Stock received in exchange for the
Exchange Debentures would be taxable as ordinary interest income at the time of
the exchange. In addition, a holder will recognize gain or loss on receipt of
cash in lieu of fractional shares of Class A Common Stock in an amount equal to
the difference between the amount of cash received and the holder's tax basis in
such fractional shares. Except to the extent of cash paid in lieu of fractional
shares of Class A Common Stock, the adjusted tax basis for the shares of Class A
Common Stock received upon conversion will be equal to the adjusted tax basis of
the Convertible Exchangeable Preferred Stock or the Exchange Debentures
converted, and, provided the Convertible Exchangeable Preferred Stock or the
Exchange Debentures are held as capital assets, the holding period of the shares
of Class A Common Stock will include the holding period of the Convertible
Exchangeable Preferred Stock or the Exchange Debentures converted. Any accrued
market discount not previously included in income as of the date of the
conversion of Exchange Debentures will carry over to the Class A Common Stock
received on conversion and gain realized upon the subsequent disposition of the
Class A Common Stock will be treated as ordinary income to the extent of such
market discount.
ADJUSTMENTS TO CONVERSION PRICE
Adjustments in the conversion price (or the failure to make such
adjustments) pursuant to the anti-dilution provisions of the Convertible
Exchangeable Preferred Stock or the Exchange Debentures to reflect distributions
of cash or property to holders of Class A Common Stock, or pursuant to the
optional adjustment provisions permitted to be made by the Company, may result
in constructive distributions to holders of Convertible Exchangeable Preferred
Stock or Exchange Debentures that could be taxable to them as dividends pursuant
to Section 305 of the Code. If such a constructive distribution were to occur, a
holder of Convertible Exchangeable Preferred Stock or Exchange Debentures could
be required to recognize ordinary income for tax purposes without receiving a
corresponding distribution of cash.
Backup Withholding and Reporting Requirements
Information reporting to the IRS is required for dividends, interest
payments and original issue discount accruals for certain noncorporate holders
(including individuals). These noncorporate holders may be subject to backup
withholding at a rate of 31 percent on payments of dividends, principal, premium
and interest (including original issue discount, if any) on, and the proceeds of
a sale, exchange, or redemption of, shares of Convertible Exchangeable Preferred
Stock or the Exchange Debentures. Backup withholding will apply only if the
holder (i) fails to furnish its Taxpayer Identification Number ("TIN") which,
for an individual, would be his Social Security Number, (ii) furnishes an
incorrect TIN, (iii) is notified by the Internal Revenue Service that it has
failed to properly report payments of interest and dividends, or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the IRS that it is subject
to backup withholding for failure to report interest and dividend payments. The
application for exemption is available by providing a properly completed IRS
Form W-9. Holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable.
The Company will report to the holders of Convertible Exchangeable
Preferred Stock or Exchange Debentures and the IRS the amount of any "reportable
payments" and any amount withheld with respect to the Convertible Exchangeable
Preferred Stock or Exchange Debentures during each calendar year.
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Special Tax Rules Applicable to Foreign Holders
General
As used herein, a "Non-U.S. Holder" means any individual or entity other
than a holder of Convertible Exchangeable Preferred Stock that is (i) a citizen
or resident of the United States (including certain former citizens and former
residents), (ii) a partnership, corporation (including an entity treated as a
corporation or partnership for United States federal income tax purposes) or
other entity created or organized in the United States or under the laws of the
United States or of any political subdivision organized thereof (other than any
partnership treated as foreign under federal regulations), (iii) an estate the
income of which is subject to United States federal income taxation regardless
of source, or (iv) a trust with respect to the administration of which a court
within the United States is able to exercise primary supervision and which has
one or more United States fiduciaries, who have the authority to control all
substantial decisions of the trust.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to United States federal tax as if they were United States citizens.
Dividends on Convertible Exchangeable Preferred Stock
Subject to the discussion below, any dividends paid to a Non-U.S. Holder of
Convertible Exchangeable Preferred Stock generally will be subject to
withholding tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Under present law, for purposes of determining whether tax is to be
withheld at a 30% rate or a reduced rate as specified by an income tax treaty,
the Company ordinarily will presume that dividends paid to an address in a
foreign country are paid to a resident of such country absent definite knowledge
that such presumption is not warranted. A Non-U.S. Holder that is eligible for a
reduced rate of United States withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amount currently withheld by filing an
appropriate claim for refund with the United States Internal Revenue Service.
Under proposed regulations, a beneficial owner who is a Non-U.S. Holder must
submit a properly completed Internal Revenue Service Form W-8 to the Company or
a qualified intermediary to be eligible for a tax treaty reduction.
If a Non-U.S. Holder is engaged in a trade or business in the United
States, and if (i) dividends on the Convertible Exchangeable Preferred Stock are
effectively connected with the conduct of such trade or business or (ii) if a
tax treaty applies, dividends are attributable to a United States permanent
establishment of the Non-U.S. Holder, the Non-U.S. Holder will generally be
subject to regular United States income tax on such effectively connected income
in the same manner as if the Non-U.S. Holder were a United States resident. Such
a Non-U.S. Holder will be required to provide the Company a properly executed
United States Revenue Service Form 4224 or successor form in order to claim an
exemption from the 30% withholding tax.
Interest on Exchange Debentures
Payments of interest (including original issue discount, if any) on the
Exchange Debentures by the Company or any agent of the Company to any Non-U.S.
Holder will not be subject to withholding of United States federal income tax,
provided that in the case of interest (including original issue discount) (1)
the Non-U.S. Holder does not actually or constructively own 10 percent or more
of the total combined voting power of all classes of stock of the Company
entitled to vote, (2) the Non-U.S. Holder is not (x) a controlled foreign
corporation that is related to the Company through stock ownership, or (y) a
bank receiving interest described in Section 881(c)(3)(A) of the Code, and (3)
either (A) the beneficial owner of the Exchange Debentures certifies to the
Company or its agent, under penalties of perjury, that
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it is not a "United States person" (as defined in the Code) and provides its
name and address, or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") and holds the Exchange
Debentures on behalf of the beneficial owner certifies to the Company or its
agent, under penalties of perjury, that such statement has been received from
the beneficial owner by it or by the financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof. The certification
requirement described in clause 3(A) will be fulfilled by the provision of
United States Internal Revenue Service Form W-8. Each Non-U.S. Holder of an
Exchange Debenture should be aware that if it does not properly provide the
required Internal Revenue Service form, or if the Internal Revenue Service form
is not properly transmitted to and received by the United States person
otherwise required to withhold United States federal income tax, interest on the
Exchange Debenture may be subject to United States withholding tax at a 30
percent rate.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest (including original issue discount, if any) on the Exchange
Debentures is effectively connected with the conduct of such trade or business
(or, if an income tax treaty applies, and the Non-U.S. Holder maintains a United
States "permanent establishment" to which the interest is generally
attributable), the Non-U.S. Holder, although exempt from the withholding tax
discussed in the preceding paragraph (provided that such holder furnishes a
properly executed IRS Form 4224 on or before any payment date to claim such
exemption), will generally be subject to United States federal income tax on
such interest in the same manner as if it were a United States person.
Ownership and Sale of Convertible Exchangeable Preferred Stock and Exchange
Debentures
In general, a Non-U.S. Holder will not be subject to United States federal
income tax with respect to any gain realized on a sale or other disposition of
Convertible Exchangeable Preferred Stock or Exchange Debentures (including any
gain realized on an exchange of Convertible Exchangeable Preferred Stock for
Exchange Debentures that is treated as a sale or exchange for United States
federal income tax purposes) unless (i) such Non-U.S. Holder is an individual
who is present in the United States for 183 days or more in the taxable year of
disposition, and either (a) such individual has a "tax home" (as defined in Code
Section 911 (d)(3)) in the United States (unless such gain is attributable to a
fixed place of business in a foreign country maintained by such individual and
has been subject to foreign tax of at least 10%) or (b) the gain is attributable
to an office or other fixed place of business maintained by such individual in
the United States; (ii) such gain is effectively connected with the conduct by
such Non-U.S. Holder of a trade or business in the United States; or (iii) in
certain cases, if the Company is or has been a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code at any
time within the shorter of the five-year period preceding such disposition or
such Non-U.S. Holder's holding period. A corporation is generally a "United
States real property holding corporation" if the fair market value of its
"United States real property interests" equals or exceeds 50% of the sum of the
fair market value of its worldwide real property interests plus its other assets
used or held for use in a trade or business. Although the Company does not
believe that it has been or is or will become a "United States real property
holding corporation" in the foreseeable future, any such development could have
adverse United States tax consequences for Non-U.S. Holders.
In addition, no federal income tax will be imposed on a Non-U.S. Holder on
the conversion of the Convertible Exchangeable Preferred Stock or Exchange
Debentures for Class A Common Stock.
Further, if such Non-U.S. Holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or such lower rate provided by an
applicable treaty) of its effectively connected earnings and profits, subject to
certain adjustments, deemed to have been repatriated from the United States. For
purposes of the branch profits tax, dividends or interest on, and any gain
recognized on the sale, exchange or other disposition of the Convertible
Exchangeable Preferred Stock or the Exchange Debentures, will be included in the
effectively connected earnings and profits of such Non-U.S. Holder if such
dividends, interest or gain, as the case may be, is effectively connected with
the conduct by the Non-U.S. Holder of a trade or business in the United States.
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Federal Estate Tax
Under Section 2104 of the Code an individual Non-U.S. Holder who owns
shares of Convertible Exchangeable Preferred Stock at the time of his death will
be required to include the value thereof in his gross estate for United States
federal estate tax purposes, and may be subject to United States federal estate
tax unless an applicable estate tax treaty provides otherwise. Exchange
Debentures held by an individual Non-U.S. Holder at the time of his death will
not be included in his gross estate for United States federal estate tax
purposes, provided that the individual Non-U.S. Holder does not own, actually or
constructively, 10 percent or more of the total combined voting power of all
classes of stock of the Company entitled to vote and, at the time of such
individual Non-U.S. Holder's death, payments with respect to such Exchange
Debentures would not have been effectively connected with the conduct by such
individual Non-U.S. Holder of a trade or business in the United States.
Information Reporting and Backup Withholding
Under certain circumstances, the Internal Revenue Service requires
"information reporting" and "backup withholding" at a rate of 31% with respect
to payments of dividends and interest. Non-U.S. Holders generally would be
exempt from Internal Revenue Service reporting requirements and United States
backup withholding with respect to dividends payable on Convertible Exchangeable
Preferred Stock and interest payable on Exchange Debentures. Under proposed
regulations, however, a Non-U.S. Holder of Convertible Exchangeable Preferred
Stock that fails to certify its Non-U.S. Holder status in accordance with the
requirements of the proposed regulations, would under certain circumstances be
subject to United States backup withholding at a rate of 31% on payments of
dividends and interest. The application for exemption is available by providing
a properly completed Internal Revenue Service Form W-8.
The payment of the proceeds of the disposition of Convertible Exchangeable
Preferred Stock or Exchange Debentures by a holder to or through the United
States office of a broker or through a non-United States branch of a United
States broker generally will be subject to information reporting and backup
withholding at a rate of 31% unless the holder either certifies its status as a
Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption. The payment of the proceeds of the disposition by a Non-U.S. Holder
of Convertible Exchangeable Preferred Stock or Exchange Debentures to or through
a non-United States office of a non-United States broker will not be subject to
backup withholding or information reporting unless the non-United States broker
has certain United States relationships.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded (or credited against the holder's United States
federal income tax liability, if any) provided that the required information is
furnished to the Internal Revenue Service.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE HOLDER OF CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
OR EXCHANGE DEBENTURES SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP, CONVERSION, REDEMPTION AND
DISPOSITION OF THE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK OR EXCHANGE
DEBENTURES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
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UNDERWRITING
Under the terms and subject to the conditions stated in the Underwriting
Agreement dated the date of this Prospectus Supplement, each of Smith Barney
Inc., BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation,
Salomon Brothers Inc, Chase Securities Inc. and Furman Selz LLC (the
"Underwriters") has severally agreed to purchase, and the Company has agreed to
sell to each Underwriter, the number of shares of Convertible Exchangeable
Preferred Stock set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------- ----------
<S> <C>
Smith Barney Inc. ...........................
BT Alex. Brown Incorporated ..................
Credit Suisse First Boston Corporation ......
Salomon Brothers Inc. ........................
Chase Securities Inc. ........................
Furman Selz LLC ..............................
Total ....................................... 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Convertible
Exchangeable Preferred Stock offered hereby (other than those covered by the
overallotment option described below) if any such shares are taken.
The Underwriters initially propose to offer part of the shares of
Convertible Exchangeable Preferred Stock directly to the public at the public
offering price set forth on the cover page of this Prospectus Supplement and
part of the shares to certain dealers at a price that represents a concession
not in excess of $________ per share below the public offering price. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $________ per share to the other Underwriters or to certain other dealers.
After the initial offering of the shares to the public, the public offering
price and such concessions may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus Supplement, to purchase up to an aggregate
of 450,000 additional shares of Convertible Exchangeable Preferred Stock at the
public offering price set forth on the cover page of this Prospectus Supplement
less underwriting discounts and commissions. The Underwriters may exercise such
option to purchase additional shares solely for the purpose of covering
over-allotments, if any, incurred in connection with the sale of the shares of
Convertible Exchangeable Preferred Stock offered hereby. To the extent such
option is exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares set forth opposite each Underwriter's name in the
preceding table bears to the total number of shares of Convertible Exchangeable
Preferred Stock offered by the Underwriters hereby.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
The Company, its officers and directors and the holders of all of the
shares of Class B Common Stock to be outstanding after the Offering have agreed
that, for a period of 90 days from the date of this Prospectus Supplement, they
will not, without the prior written consent of Smith Barney Inc., offer, sell,
contract to sell, or otherwise dispose of, any shares of Common Stock of the
Company or any securities convertible into, or exercisable or exchangeable for,
Common Stock of the Company.
In connection with this Offering and in compliance with applicable law, the
Underwriters may overallot (i.e., sell more shares of Convertible Exchangeable
Preferred Stock than the total amount shown on the list of Underwriters which
appears above) and may effect transactions which stabilize,
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maintain or otherwise affect the market price of the shares of Convertible
Exchangeable Preferred Stock at levels above those which might otherwise prevail
in the open market. Such transactions may include placing bids for the
Convertible Exchangeable Preferred Stock or effecting purchases of the
Convertible Exchangeable Preferred Stock for the purpose of pegging, fixing or
maintaining the price of the Convertible Exchangeable Preferred Stock or for the
purpose of reducing a syndicate short position created in connection with the
Offering. A syndicate short position may be covered by exercise of the option
described above in lieu of or in addition to open market purchases. In addition,
the contractual arrangements among the Underwriters include a provision whereby,
if the Underwriters purchase shares of Convertible Exchangeable Preferred Stock
in the open market for the account of the underwriting syndicate and the
securities purchased can be traced to a particular Underwriter or member of the
selling group, the underwriting syndicate may require the Underwriter or selling
group member in question to purchase the shares of Convertible Exchangeable
Preferred Stock in question at the cost price to the syndicate or may recover
from (or decline to pay to) the Underwriter or selling group member in question
the selling concession applicable to the securities in question. The
Underwriters are not required to engage in any of these activities and any such
activities, if commenced, may be discontinued at any time.
Smith Barney Inc. and certain of the other Underwriters have and may
continue to provide investment banking services to the Company for which they
receive customary fees.
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 shares of Convertible Exchangeable Preferred Stock
offered hereby. In addition, Chase Securities Inc., The Chase Manhattan Bank and
their affiliates participate from time to time in investment banking and
commercial banking transactions for the Company.
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GLOSSARY OF DEFINED TERMS
"ABC" means Capital Cities/ABC, Inc.
"Adjusted EBITDA" means 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.
"Adjusted EBITDA margin" means the Adjusted EBITDA divided by net
broadcast revenues.
"Amended Certificate" means the Amended and Restated Articles of
Incorporation of the Company, as amended.
"Arbitron" means Arbitron, Inc.
"Bank Credit Agreement" means the Third Amended and Restated Credit
Agreement, dated as of May 20, 1997, among the Company, the Subsidiaries,
certain lenders named therein, and The Chase Manhattan Bank, as agent.
"Broadcast cash flow margin" means broadcast cash flow divided by net
broadcast revenues.
"Broadcast Cash Flow" means operating income plus corporate overhead
expenses, special bonuses paid to executive officers, non-cash deferred
compensation, depreciation and amortization, including both tangible and
intangible assets and program rights, less cash payment for program rights. Cash
program payments represent cash payments made for current program payables and
sports rights and do not necessarily correspond to program usage. Special
bonuses paid to executive officers are considered unusual and non-recurring. The
Company has presented broadcast cash flow data, which the Company believes are
comparable to the data provided by other companies in the industry, because such
data are commonly used as a measure of performance for broadcast companies.
However, broadcast cash flow (i) does not purport to represent cash provided by
operating activities as reflected in the Company's consolidated statements of
cash flow, (ii) is not a measure of financial performance under generally
accepted accounting principles and (iii) should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
"CBS" means CBS, Inc.
"Cincinnati/Kansas City Acquisitions" means the Company's acquisition of
the assets and liabilities of WSTR-TV (Cincinnati, OH) and KSMO-TV (Kansas City,
MO).
"Class A Common Stock" means the Company's Class A Common Stock, par value
$.01 per share.
"Class B Common Stock" means the Company's Class B Common Stock, par value
$.01 per share.
"Columbus Option" means the Company's option to purchase both the
Non-License Assets and the License Assets relating to WSYX-TV, Columbus, OH.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Common Stock and the Class B Common
Stock.
"Communications Act" means the Communications Act of 1934, as amended.
"Company" means Sinclair Broadcast Group, Inc. and its wholly owned
subsidiaries.
"Controlling Stockholders" means David D. Smith, Frederick G. Smith, J.
Duncan Smith and Robert E. Smith.
"DAB" means digital audio broadcasting.
"DBS" means direct-to-home broadcast satellite television.
"Debt Issuance" means the Company's private placement of the 1997 Notes, in
the principal amount of $200,000,000, on July 2, 1997.
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"Designated Market Area" or "DMA" means one of the 211 generally-recognized
television market areas.
"DOJ" means the United States Justice Department.
"DTV" means digital television.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FCC" means the Federal Communications Commision.
"FCN" means the Fox Children's Network.
"Flint Acquisition" means the Company's acquisition of the assets of
WSMH-TV (Flint, Michigan).
"Fox" means Fox Broadcasting Company.
"Glencairn" means Glencairn, Ltd. and its subsidiaries.
"Greenville Stations" means radio stations WFBC-FM, WORD-AM, WFBC-AM,
WSPA-AM, WSPA-FM, WOLI-FM, and WOLT-FM located in the Greenville/Spartanburg,
South Carolina area.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"HYTOPS" means the Company's 115/8% High Yield Trust Offered Preferred
Securities issued pursuant to the HYTOPS Issuance.
"HYTOPS Issuance" means the Company's private placement of HYTOPS, in a
liquidation amount of $200,000,000, on March 14, 1997.
"Independent" means a station that is not affiliated with any of ABC, CBS,
NBC, FOX, UPN or WB.
"JSAs" means joint sales agreements pursuant to which an entity has the
right, for a fee paid to the owner and operator of a station, to sell
substantially all of the commercial advertising on the station.
"KSC" means Keymarket of South Carolina, Inc.
"License Assets" means the television and radio station assets essential
for broadcasting a television or radio signal in compliance with regulatory
guidelines, generally consisting of the FCC license, transmitter, transmission
lines, technical equipment, call letters and trademarks, and certain furniture,
fixtures and equipment.
"License Assets Option" means the Company's option to purchase the License
Assets of KDNL-TV, St. Louis, MO; KOVR-TV, Sacramento, CA; WTTV-TV and WTTK-TV,
Indianapolis, IN; WLOS-TV, Asheville, NC; KABB-TV, San Antonio, TX; and KDSM-TV,
Des Moines, IA, which the Company has exercised with respect to all stations
other than WTTV-TV and WTTK-TV.
"LMAs" means program services agreements, time brokerage agreements or
local marketing agreements pursuant to which an entity provides programming
services to television or radio stations that are not owned by the entity.
"Major Networks" means each of ABC, CBS or NBC, singly or collectively.
"MSA" means the Metro Survey Area as defined by Arbitron.
"MMDS" means multichannel multipoint distribution services.
"NBC" means the National Broadcasting Company.
"Nielsen" means the A.C. Nielsen Company Station Index dated May 1996.
"1993 Notes" means the Company's 10% Senior Subordinated Notes due 2003.
"1995 Notes" means the Company's 10% Senior Subordinated Notes due 2005.
"1996 Acquisitions" means the 16 television and 33 radio stations that the
Company acquired, obtained options to acquire, or obtained the right to program
during 1996 for an aggregate consideration of approximately $1.2 billion.
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"1997 Notes" means the Company's 9% Senior Subordinated Notes due 2007,
issued pursuant to the Debt Issuance.
"Non-License Assets" means the assets relating to operation of a television
or radio station other than License Assets.
"Peoria/Bloomington Acquisition" means the acquisition by the Company of
the assets of WYZZ-TV on July 1, 1996.
"River City" means River City Broadcasting, L.P.
"River City Acquisition" means the Company's acquisition from River City
and the owner of KRRT of certain Non-License Assets, options to acquire certain
License and Non-License Assets and rights to provide programming or sales and
marketing for certain stations, which was completed May 31, 1996.
"SCI" means Sinclair Communications, Inc., a wholly owned subsidiary of the
Company that holds all of the broadcast operations of the Company.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Company's Series A Exchangeable
Preferred Stock, par value $.01 per share, each share of which has been
exchanged for a share of the Company's Series B Convertible Preferred Stock.
"Series B Preferred Stock" means the Company's Series B Convertible
Preferred Stock, par value $.01 per share.
"Series C Preferred Stock" means the Company's Series C Preferred Stock,
par value $.01 per share.
"Sinclair" means Sinclair Broadcast Group, Inc. and its wholly owned
subsidiaries.
"Superior Acquisition" means the Company's acquisition of the stock of
Superior Communications, Inc. ("Superior").
"TBAs" means time brokerage agreements; see definition of "LMAs."
"UHF" means ultra-high frequency.
"UPN" means United Paramount Television Network Partnership.
"VHF" means very-high frequency.
"WB" and the "WB Network" mean The WB Television Network Partners.
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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 CONTAINED IN THIS
PROSPECTUS SUPPLEMENT IN THE ACCOMPANYING PROSPECTUS, IN CONNECTION WITH THE
OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH 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 SHARES OF CONVERTIBLE EXCHANGEABLE PREFERRED STOCK 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
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
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
<TABLE>
<CAPTION>
PAGE NO.
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary ........................ S-1
Historical and Pro Forma Ratios of Earnings to
Fixed Charges and of Earnings to Fixed Charges
and Preferred Dividends ........................... S-11
Use of Proceeds .................................... S-12
Capitalization ....................................... S-13
Pro Forma Consolidated Financial Information of
Sinclair .......................................... S-14
Management's Discussion and Analysis of
Financial Condition and Results of Operations of
Sinclair .......................................... S-24
Industry Overview .................................... S-33
Business of Sinclair ................................. S-36
Management .......................................... S-64
Description of Convertible Exchangeable Preferred
Stock ............................................. S-70
Description of Exchange Debentures .................. S-80
Certain Definitions ................................. S-89
Description of Indebtedness of Sinclair ............ S-92
Certain Federal Income Tax Considerations ......... S-95
Underwriting ....................................... S-105
Glossary of Defined Terms ........................... G-1
PROSPECTUS
Available Information .............................. 1
Incorporation of Certain Documents by Reference . 1
The Company .......................................... 3
Risk Factors ....................................... 3
Use of Proceeds .................................... 16
Historical and Pro Forma Ratio of Earnings to Fixed
Charges .......................................... 16
Selling Stockholders ................................. 17
Description of Debt Securities ..................... 18
Description of Capital Stock ........................ 32
Plan of Distribution ................................. 40
Legal Matters ....................................... 41
Experts ............................................. 41
</TABLE>
================================================================================
<PAGE>
================================================================================
3,000,000 SHARES
SINCLAIR BROADCAST GROUP, INC.
$ CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK
[GRAPHIC OMITTED]
----------------------------
P R O S P E C T U S S U P P L E M E N T
, 1997
----------------------------
SMITH BARNEY INC.
BT ALEX. BROWN
CREDIT SUISSE FIRST BOSTON
SALOMON BROTHERS INC
CHASE SECURITIES INC.
FURMAN SELZ
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses payable by the Company in
connection with the issuance and distribution of the securities being registered
other than any underwriting compensation.
<TABLE>
<CAPTION>
ITEM AMOUNT
- -------------------------------------------------------------- -----------
<S> <C>
SEC Registration Fee .................................... $ 303,030
Nasdaq fees ............................................. 35,000
Blue Sky fees and expenses (including legal fees) ...... 35,000
Printing and engraving expenses ........................ 450,000
Legal fees and expenses ................................. 375,000
Accounting fees and expenses ........................... 300,000
Trustees and registrar fees ........................... 35,000
Miscellaneous fees and expenses ........................ 66,970
-----------
Total ................................................ $1,600,000
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Amendment and Restatement and By-Laws of the Company state
that the Company shall indemnify, and advance expenses to, its directors and
officers whether serving the Company or at the request of another entity to the
fullest extent permitted by and in accordance with Section 2-418 of the Maryland
General Corporation Law. Section 2-418 contains certain provisions which
establish that a Maryland corporation may indemnify any director or officer made
party to any proceeding by reason of service in that capacity, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by the director or officer in connection with such proceeding unless it
is established that the director's or officer's act or omission was material to
the matter giving rise to the proceeding and the director or officer (i) acted
in bad faith or with active and deliberate dishonesty; (ii) actually received an
improper personal benefit in money, property or services; or (iii) in the case
of a criminal proceeding, had reasonable cause to believe that his act was
unlawful. However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made if the director or officer is
adjudged to be liable to the corporation. The statute also provides for
indemnification of directors and officers by court order.
Section 12 of Article II of the Amended By-Laws of Sinclair Broadcast
Group, Inc. provides as follows:
A director shall perform his duties as a director, including his duties as
a member of any Committee of the Board upon which he may serve, in good faith,
in a manner he reasonably believes to be in the best interests of the
Corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances. In performing his duties, a
director shall be entitled to rely on information, opinions, reports, or
statements, including financial statements and other financial data, in each
case prepared or presented by:
(a) one or more officers or employees of the Corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
(b) counsel, certified public accountants, or other persons as to matters
which the director reasonably believes to be within such person's
professional or expert competence; or
(c) a Committee of the Board upon which he does not serve, duly
designated in accordance with a provision of the Articles of Incorporation
or the By-Laws, as to matters within its designated authority, which
Committee the director reasonably believes to merit confidence.
II-1
<PAGE>
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted. A person who performs his duties in
compliance with this Section shall have no liability by reason of being or
having been a director of the Corporation.
The Company has also entered into indemnification agreements with certain
officers and directors which provide that the Company shall indemnify and
advance expenses to such officers and directors to the fullest extent permitted
by applicable law in effect on the date of the agreement, and to such greater
extent as applicable law may thereafter from time to time permit. Such
agreements provide for the advancement of expenses (subject to reimbursement if
it is ultimately determined that the officer or director is not entitled to
indemnification) prior to the disposition of any claim or proceeding.
The Underwriting Agreement, filed as Exhibit 1.1 to this Registration
Statement, provides for indemnification by the Underwriters of the Registrant's
directors, officers and controlling persons against certain liabilities that may
be incurred in connection with the Offering, including liabilities under the
Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------------------------------------------------------------------
<S> <C>
1.1* Form of Common Stock Underwriting Agreement
1.2* Form of Debt Security Underwriting Agreement
1.3* Form of Preferred Stock Underwriting Agreement
4.1 Amended and Restated certificate of Incorporation (incorporated by
reference to the Company's Report on Form 10-Q for the quarterly period
ended June 30, 1996.)
4.2 Bylaws (incorporated by reference to the Company Registration Statement
on Form S-1, No. 33-90682)
4.3 Form of Class A Common Stock Certificate (incorporated by reference to
the Company's registration statement on Form S-1, No. 33-90682)
4.4* Form of Articles Supplementary relating to Preferred Stock issued
pursuant to this Registration Statement
4.5 Form of Senior Indenture
4.6 Form of Senior Subordinated Indenture
4.7* Form of Preferred Stock Certificate
4.8* Form of Depositary Agreement
4.9* Form of Depositary Receipt
5.1* Form of Opinion of Wilmer, Cutler & Pickering (including the consent
of such firm) regarding legality of securities being offered
5.2* Form of Opinion of Thomas & Libowitz, P.A. (including the consent of
such firm) regarding legality of securities being offered
12.1_ Statement re computation of ratios
23.1 Consent of Wilmer, Cutler & Pickering (incorporated herein by reference
to Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP,independent certified public accountants
23.3 Consent of KPMG Peat Marwick LLP, independent certified public
accountants
23.4 Consent of Price Waterhouse LLP, independent accountants, relating to
Financial Statements of Kansas City TV 62 Limited Partnership
23.5 Consent of Price Waterhouse LLP, independent accountants, relating to
financial statements of Cincinnati TV 64 Limited Partnership
23.6 Consent of Ernst & Young LLP, independent certified public accountants
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ----------------------------------------------------------------------
<S> <C>
23.7_ Consent of Barry Baker to be named as a director
23.8_ Consent of Roy F. Coppedge, III to be named as a director
24.1_ Powers of Attorney for David D. Smith, Frederick G. Smith, J. Duncan
Smith, Robert E. Smith, Basil A. Thomas, William Brock, Lawrence
McCanna and David B. Amy.
25.1 Statement of Eligibility of Trustee for Convertible Subordinated
Debentures due 2012 on Form T-1.
25.2 Statement of Eligibility of Trustee For Senior Debentures on Form T-1.
</TABLE>
- ----------
* To be filed by amendment or as an exhibit to be incorporated by reference
herein in connection with an offering of the offered securities.
_ Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES:
Incorporated by reference to Schedule II of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, as amended.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling persons of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
II-3
<PAGE>
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, That paragraphs (1)(i) and (1) (ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
certify that they have reasonable grounds to believe that they meet all of the
requirements for filing on Form S-3 and have duly caused this amendment to
registration statement to be signed on their behalf by the undersigned,
thereunto duly authorized, in the City of Baltimore, Maryland on the 15th day of
September , 1997.
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
------------------------------------
David B. Amy
Chief Financial Officer
THE GUARANTORS LISTED BELOW
By: /s/ David B. Amy
------------------------------------
David B. Amy
Chief Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- --------------------------------------- ------------------
<S> <C> <C>
* Chairman of the Board, September 15, 1997
- ------------------------- Chief Executive Officer,
David D. Smith President and Director
of the Guarantors listed below
(Principal executive officer)
/s/ David B. Amy Chief Financial Officer and September 15, 1997
- ----------------------- Director of the Guarantors listed below
David B. Amy (other than Sinclair Communications, Inc.,)
(Prinicipal Financial and Accounting Officer
of Sinclair Broadcast Group, Inc. and
the Guarantors listed below
- ------------------------- Director of Sinclair Broadcast Group, September 15, 1997
Frederick G. Smith Inc. and Sinclair Communications,
*
- ------------------------- Director of Sinclair Broadcast Group,
J. Duncan Smith Inc. and Sinclair Communications,
Inc.
- ------------------------- Director of Sinclair Broadcast Group, September 15, 1997
Robert E. Smith Inc. and Sinclair Communications,
Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- --------------------------------------- ------------------
<S> <C> <C>
* Director of Sinclair Broadcast Group, September 15, 1997
- ------------------------- Inc. and Sinclair Communications,
Basil A. Thomas Inc.
* Director of Sinclair Broadcast Group, September 15, 1997
- ------------------------- Inc. and Sinclair Communications,
Lawrence E. McCanna Inc.
</TABLE>
*By: /s/ David B. Amy
David B. Amy
Attorney-in-fact
GUARANTORS
Chesapeake Television, Inc.
Chesapeake Television Licensee, Inc.
FSF-TV, Inc.
KABB Licensee, Inc.
KDNL Licensee, Inc.
KSMO, Inc.
KSMO Licensee, Inc.
KUPN Licensee, Inc.
SCI-Indiana Licensee, Inc.
SCI-Sacramento Licensee, Inc.
Sinclair Communications, Inc.
Sinclair Radio of Albuquerque, Inc.
Sinclair Radio of Albuquerque Licensee, Inc.
Sinclair Radio of Buffalo, Inc.
Sinclair Radio of Buffalo Licensee, Inc.
Sinclair Radio of Greenville, Inc.
Sinclair Radio of Greenville Licensee, Inc.
Sinclair Radio of Los Angeles, Inc.
Sinclair Radio of Los Angeles Licensee, Inc.
Sinclair Radio of Memphis, Inc.
Sinclair Radio of Memphis Licensee, Inc.
Sinclair Radio of Nashville, Inc.
Sinclair Radio of Nashville Licensee, Inc.
Sinclair Radio of New Orleans, Inc.
Sinclair Radio of New Orleans Licensee, Inc.
Sinclair Radio of St. Louis, Inc.
Sinclair Radio of St. Louis Licensee, Inc.
Sinclair Radio of Wilkes-Barre, Inc.
Sinclair Radio of Wilkes-Barre Licensee, Inc.
Superior Communications of Kentucky, Inc.
Superior Communications of Oklahoma, Inc.
Superior KY License Corp.
Superior OK License Corp.
Tuscaloosa Broadcasting Inc.
WCGV, Inc.
WCGV Licensee, Inc.
WDBB, Inc.
WLFL, Inc.
WLFL Licensee, Inc.
WLOS Licensee, Inc.
WPGH, Inc.
WPGH Licensee, Inc.
WSMH, Inc.
WSMH Licensee, Inc.
WSTR, Inc.
WSTR Licensee, Inc.
WSYX, Inc.
WTTE, Channel 28, Inc.
WTTE, Channel 28 Licensee, Inc.
WTTO, Inc.
WTTO Licensee, Inc.
WTVZ, Inc.
WTVZ Licensee, Inc.
WYZZ, Inc.
WYZZ Licensee, Inc.
II-6
<PAGE>
EXHIBIT INDEX
----------------
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------------------------------------------------------------------
1.1* Form of Common Stock Underwriting Agreement
1.2* Form of Debt Security Underwriting Agreement
1.3* Form of Preferred Stock Underwriting Agreement
4.1 Amended and Restated certificate of Incorporation (incorporated by
reference to the Company's Report on Form 10-Q for the quarterly period
ended June 30, 1996.)
4.2 Bylaws (incorporated by reference to the Company Registration Statement
on Form S-1, No. 33-90682)
4.3 Form of Class A Common Stock Certificate (incorporated by reference to
the Company's registration statement on Form S-1, No. 33-90682)
4.4* Form of Articles Supplementary relating to Preferred Stock issued
pursuant to this Registration Statement
4.5 Form of Senior Indenture
4.6 Form of Senior Subordinated Indenture
4.7* Form of Preferred Stock Certificate
4.8* Form of Depositary Agreement
4.9* Form of Depositary Receipt
5.1* Form of Opinion of Wilmer, Cutler & Pickering (including the consent
of such firm) regarding legality of securities being offered
5.2* Form of Opinion of Thomas & Libowitz, P.A. (including the consent of
such firm) regarding legality of securities being offered
12.1_ Statement re computation of ratios
23.1 Consent of Wilmer, Cutler & Pickering (incorporated herein by reference
to Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP,independent certified public accountants
23.3 Consent of KPMG Peat Marwick LLP, independent certified public
accountants
23.4 Consent of Price Waterhouse LLP, independent accountants, relating to
Financial Statements of Kansas City TV 62 Limited Partnership
23.5 Consent of Price Waterhouse LLP, independent accountants, relating to
financial statements of Cincinnati TV 64 Limited Partnership
23.6 Consent of Ernst & Young LLP, independent certified public accountants
23.7_ Consent of Barry Baker to be named as a director
23.8_ Consent of Roy F. Coppedge, III to be named as a director
24.1_ Powers of Attorney for David D. Smith, Frederick G. Smith, J. Duncan
Smith, Robert E. Smith, Basil A. Thomas, William Brock, Lawrence
McCanna and David B. Amy.
25.1 Statement of Eligibility of Trustee for convertible Subordinated
Debentures due 2012 on Form T-1
25.2 Statement of Eligibility of Trustee For Senior Debentures of Form T-1.
DRAFT
9/9/97
SINCLAIR BROADCAST GROUP, INC., as Issuer,
and
FIRST UNION NATIONAL BANK, as Trustee
SENIOR INDENTURE
Dated as of ___________, 1997
Providing for Issuance of
Senior Debt Securities in Series
<PAGE>
TABLE OF CONTENTS
PAGE
----
PARTIES.......................................................................1
RECITALS......................................................................1
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL
APPLICATION....................................................1
Section 101. Definitions.....................................................1
"Affiliate"....................................................2
"Bank Credit Agreement"........................................2
"Bankruptcy Law"...............................................3
"Bearer Security"..............................................3
"Board of Directors"...........................................3
"Board Resolution".............................................3
"Business Day".................................................3
"Capital Lease Obligation".....................................3
"Cash Equivalents".............................................3
"Code".........................................................4
"Commission"...................................................4
"Company"......................................................4
"Company Request" or "Company Order"...........................4
"Consolidated Net Worth".......................................5
"Corporate Trust Office".......................................5
"Default"......................................................5
"Depositary"...................................................5
"Disqualified Equity Interests"................................5
"Equity Interest"..............................................5
"Event of Default".............................................6
"Exchange Act".................................................6
"Fair Market Value"............................................6
"Film Contract"................................................6
"Generally Accepted Accounting Principles" or "GAAP"...........6
"Global Security"..............................................6
"Guarantee"....................................................6
"Guaranteed Debt"..............................................6
"Guarantor,"...................................................7
"Holder".......................................................7
"Indebtedness".................................................7
-i-
<PAGE>
PAGE
----
"Indenture"....................................................8
"Indenture Obligations"........................................8
"Independent Director".........................................9
"Interest Payment Date"........................................9
"Interest Rate Agreements".....................................9
"Investments"..................................................9
"Lien".........................................................9
"Maturity"....................................................10
"Moody's".....................................................10
"Officers' Certificate".......................................10
"Opinion of Counsel"..........................................10
"Opinion of Independent Counsel"..............................10
"Original Issue Discount Security"............................10
"Outstanding".................................................10
"Paying Agent"................................................11
"Person"......................................................11
"Predecessor Security"........................................12
"Preferred Equity Interest,"..................................12
"Qualified Equity Interests"..................................12
"Redemption Date".............................................12
"Redemption Price"............................................12
"Regular Record Date".........................................12
"Responsible Officer".........................................12
"Restricted Subsidiary".......................................13
"S&P".........................................................13
"Securities"..................................................13
"Securities Act"..............................................13
"Security Register" and "Security Registrar"..................13
"Special Record Date".........................................13
"Stated Maturity".............................................13
"Subsidiary"..................................................13
"Successor Security"..........................................14
"Temporary Cash Investments"..................................14
"Trust Indenture Act".........................................14
"Trustee".....................................................14
"Unrestricted Subsidiary,"....................................14
"U.S. Person".................................................15
"Voting Stock"................................................15
Section 102. Other Definitions..............................................15
-ii-
<PAGE>
PAGE
----
Section 103. Compliance Certificates and Opinions...........................15
Section 104. Form of Documents Delivered to Trustee.........................16
Section 105. Acts of Holders................................................17
Section 106. Notices, etc., to Trustee, the Company and any Guarantor.......18
Section 107. Notice to Holders; Waiver......................................19
Section 108. Conflict with Trust Indenture Act..............................19
Section 109. Effect of Headings and Table of Contents.......................19
Section 110. Successors and Assigns.........................................20
Section 111. Separability Clause............................................20
Section 112. Benefits of Indenture..........................................20
Section 113. Governing Law..................................................20
Section 114. Legal Holidays.................................................20
Section 115. Schedules and Exhibits.........................................20
Section 116. Counterparts...................................................21
ARTICLE TWO SECURITY FORMS.................................................21
Section 201. Forms Generally................................................21
Section 202. Form of and Provisions Required in Global Security.............22
Section 203. Form of Trustee's Certificate of Authentication................22
Section 204. Form of Guarantee of Each of the Guarantors....................23
ARTICLE THREE THE SECURITIES...............................................24
Section 301. Amount Unlimited; Issuable in Series...........................24
Section 302. Denominations..................................................28
Section 303. Execution, Authentication, Delivery and Dating.................28
Section 304. Temporary Securities...........................................30
Section 305. Global Securities..............................................31
Section 306. Registration, Registration of Transfer and Exchange............32
Section 307. Mutilated, Destroyed, Lost and Stolen Securities...............34
Section 308. [RESERVED].....................................................35
Section 309. Payment of Interest; Interest Rights Preserved.................35
Section 310. Persons Deemed Owners..........................................36
Section 311. Cancellation...................................................37
Section 312. Computation of Interest........................................37
Section 313. CUSIP Numbers..................................................37
-iii-
<PAGE>
PAGE
----
ARTICLE FOUR DEFEASANCE AND COVENANT DEFEASANCE............................38
Section 401. Company's Option to Effect Defeasance or Covenant
Defeasance...............................................38
Section 402. Defeasance and Discharge.......................................38
Section 403. Covenant Defeasance............................................39
Section 404. Conditions to Defeasance or Covenant Defeasance................39
Section 405. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions......42
Section 406. Reinstatement..................................................42
ARTICLE FIVE REMEDIES .....................................................43
Section 501. Events of Default..............................................43
Section 502. Acceleration of Maturity; Rescission and Annulment.............45
Section 503. Collection of Indebtedness and Suits for Enforcement
by Trustee...............................................46
Section 504. Trustee May File Proofs of Claim...............................47
Section 505. Trustee May Enforce Claims without Possession of Securities....48
Section 506. Application of Money Collected.................................48
Section 507. Limitation on Suits............................................49
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.....................................50
Section 509. Restoration of Rights and Remedies.............................50
Section 510. Rights and Remedies Cumulative.................................50
Section 511. Delay or Omission Not Waiver...................................50
Section 512. Control by Holders.............................................51
Section 513. Waiver of Past Defaults........................................51
Section 514. Undertaking for Costs..........................................51
Section 515. Waiver of Stay, Extension or Usury Laws........................52
ARTICLE SIX THE TRUSTEE ...................................................52
Section 601. Notice of Defaults.............................................52
Section 602. Certain Rights of Trustee......................................52
Section 603. Trustee Not Responsible for Recitals, Dispositions
of Securities or Application of Proceeds Thereof.........54
Section 604. Trustee and Agents May Hold Securities; Collections; etc.......54
-iv-
<PAGE>
PAGE
----
Section 605. Money Held in Trust............................................54
Section 606. Compensation and Indemnification of Trustee and Its
Prior Claim..............................................55
Section 607. Conflicting Interests..........................................56
Section 608. Corporate Trustee Required; Eligibility........................56
Section 609. Resignation and Removal; Appointment of Successor Trustee......56
Section 610. Acceptance of Appointment by Successor.........................58
Section 611. Merger, Conversion, Consolidation or Succession to Business....60
Section 612. Preferential Collection of Claims Against Company..............60
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY............60
Section 701. Company to Furnish Trustee Names and Addresses of Holders......60
Section 702. Disclosure of Names and Addresses of Holders...................61
Section 703. Reports by Trustee.............................................61
Section 704. Reports by Company and Guarantors..............................61
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.........62
Section 801. Company or Any Guarantor May Consolidate, etc.,
Only on Certain Terms....................................62
Section 802. Successor Substituted..........................................64
ARTICLE NINE SUPPLEMENTAL INDENTURES.......................................65
Section 901. Supplemental Indentures and Agreements without Consent
of Holders...............................................65
Section 902. Supplemental Indentures and Agreements with Consent
of Holders...............................................66
Section 903. Execution of Supplemental Indentures and Agreements............67
Section 904. Effect of Supplemental Indentures..............................68
Section 905. Conformity with Trust Indenture Act............................68
Section 906. Reference in Securities to Supplemental Indentures.............68
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PAGE
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ARTICLE TEN COVENANTS .....................................................68
Section 1001. Payment of Principal, Premium and Interest....................68
Section 1002. Maintenance of Office or Agency...............................68
Section 1003. Money for Security Payments to Be Held in Trust...............69
Section 1004. Corporate Existence...........................................71
Section 1005. Payment of Taxes and Other Claims.............................71
Section 1006. Maintenance of Properties.....................................71
Section 1007. Insurance.....................................................72
Section 1008. Statement by Officers as to Default...........................72
Section 1009. Waiver of Certain Covenants...................................72
ARTICLE ELEVEN REDEMPTION OF SECURITIES....................................73
Section 1101. Rights of Redemption..........................................73
Section 1102. Applicability of Article......................................73
Section 1103. Election to Redeem; Notice to Trustee.........................73
Section 1104. Selection by Trustee of Securities to Be Redeemed.............73
Section 1105. Notice of Redemption..........................................74
Section 1106. Deposit of Redemption Price...................................75
Section 1107. Securities Payable on Redemption Date.........................75
Section 1108. Securities Redeemed or Purchased in Part......................76
ARTICLE TWELVE SATISFACTION AND DISCHARGE..................................76
Section 1201. Satisfaction and Discharge of Indenture.......................76
Section 1202. Application of Trust Money....................................77
ARTICLE THIRTEEN GUARANTEE.................................................78
Section 1301. Guarantors' Guarantee.........................................78
Section 1302. Continuing Guarantee; No Right of Set-Off;
Independent Obligation...................................78
Section 1303. Guarantee Absolute............................................79
Section 1304. Right to Demand Full Performance..............................82
Section 1305. Waivers.......................................................82
Section 1306. The Guarantors Remain Obligated in Event the Company Is
No Longer Obligated to Discharge Indenture Obligations...83
Section 1307. Fraudulent Conveyance; Contribution Subrogation...............83
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Section 1308. Guarantee Is in Addition to Other Security....................84
Section 1309. Release of Security Interests.................................84
Section 1310. No Bar to Further Actions.....................................84
Section 1311. Failure to Exercise Rights Shall Not Operate as a Waiver;
No Suspension of Remedies................................85
Section 1312. Trustee's Duties; Notice to Trustee...........................85
Section 1313. Successors and Assigns........................................85
Section 1314. Release of Guarantee..........................................85
Section 1315. Execution of Guarantee........................................86
SIGNATURES AND SEALS
ACKNOWLEDGMENTS
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Reconciliation and tie between Trust Indenture Act of 1939, as amended,
and Indenture, dated as of _______, 1997
Trust Indenture Indenture
Act Section Section
- ---------------------------- ----------------------------
ss. 310 (a)(1) ........................ 608
(a)(2) ........................ 608
(b) ........................ 607, 609
ss. 311 (a) ........................ 612
ss. 312 (a) ........................ 701
(b) ........................ 702
(c) ........................ 702
ss. 313 (a) ........................ 703
(c) ........................ 703, 704
ss. 314 (a) ........................ 704
(a)(4) ........................ 1008
(c)(1) ........................ 103, 104, 404, 1103
(c)(2) ........................ 103, 104, 404, 1103
(e) ........................ 103
ss. 315 (a) ........................ 602, 903
(b) ........................ 601
(c) ........................ 602
(d) ........................ 602
(e) ........................ 514
ss. 316 (a)(last sentence) ........................ 101 ("Outstanding")
(a)(1)(A) ........................ 502, 512
(a)(1)(B) ........................ 513
(b) ........................ 508
(c) ........................ 105
ss. 317 (a)(1) ........................ 503
(a)(2) ........................ 504
(b) ........................ 1003
ss. 318 (a) ........................ 108
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Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of this Indenture.
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<PAGE>
INDENTURE, dated as of _____, 1997, between SINCLAIR BROADCAST GROUP, INC.,
a Maryland corporation (the "Company"), and FIRST UNION NATIONAL BANK, a
national banking association organized under the laws of the United States of
America, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsubordinated
debentures, notes or other evidences of indebtedness ("Securities") to be issued
in one or more series as herein provided.
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act that are required to be part of and to govern indentures
qualified under the Trust Indenture Act.
All acts and things necessary have been done to make (i) the Securities of
any series, when their terms have been determined in accordance with this
Indenture and when executed by the Company and authenticated and delivered
hereunder and duly issued by the Company, the valid obligations of the Company,
(ii) the Guarantees, if and when executed by each of the Guarantors and
delivered hereunder, the valid obligation of each of the Guarantors and (iii)
this Indenture a valid agreement of the Company and, if applicable, each of the
Guarantors in accordance with the terms of this Indenture.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of any series thereof,
as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or as set forth pursuant to Section 301 or unless the context otherwise
requires:
(a) the terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular;
<PAGE>
(b) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
(d) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(e) all references to $, US$, dollars or United States dollars shall refer
to the lawful currency of the United States of America.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any other Person that
owns, directly or indirectly, 5% or more of such Person's Equity Interest or any
officer or director of any such Person or other Person or, with respect to any
natural Person, any Person having a relationship with such Person or other
Person by blood, marriage or adoption not more remote than first cousin or (iii)
any other Person 10% or more of the voting Equity Interests of which are
beneficially owned or held directly or indirectly by such specified Person. For
the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Bank Credit Agreement" means the Third Amended and Restated Credit
Agreement, dated as of May 20, 1997, between the Company, the subsidiaries of
the Company identified on the signature pages thereof under the caption
"SUBSIDIARY GUARANTORS," the lenders named therein and The Chase Manhattan Bank,
as agent, as such agreement may be amended, renewed, extended, substituted,
refinanced, restructured, replaced, supplemented or otherwise modified from time
to time (including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing). For all purposes under this Indenture,
"Bank Credit Agreement" shall include any amendments, renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplements or any
other modifications that increase the principal amount of the Indebtedness or
the commitments to lend thereunder.
"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,
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insolvency, receivership, winding-up, liquidation, reorganization or relief of
debtors or any amendment to, succession to or change in any such law.
"Bearer Security" means any Security issued hereunder which is payable to
bearer.
"Board of Directors" means the board of directors of the Company or any
Guarantor, as the case may be, or any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company or any Guarantor, as the case may be,
to have been duly adopted by the Board of Directors of such entity and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York, the
State of Maryland or the city in which the Corporate Trust Office is located are
authorized or obligated by law or executive order to close.
"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.
"Cash Equivalents" means, (i) any evidence of Indebtedness with a maturity
of one year or less from the date of acquisition issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of one year or less from the date of acquisition
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$500,000,000; (iii) commercial paper with a maturity of one year or less from
the date of acquisition issued by a corporation that is not an Affiliate of the
Company organized under the laws of any state of the United States or the
District of Columbia and rated A-1 (or higher) according to S&P or P-1 (or
higher) according to Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; (iv) any money market
deposit accounts issued or offered by a domestic commercial bank having capital
and surplus in excess of $500,000,000; and (v) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of America or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one year from the date of
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acquisition; provided that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions With Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of this 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 Maryland, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Vice Chairman, its President or a Vice President (regardless of vice
presidential designation), and by any one of its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"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.
"Corporate Trust Office" means the office of the Trustee or an affiliate or
agent thereof at which at any particular time the corporate trust business for
the purposes of this Indenture shall be principally administered, which office
at the date of execution of this Indenture is located at First Union National
Bank, 901 East Cary Street, 2nd Floor, Richmond, Virginia 23219, Attention:
Patricia Welling.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Depositary" means, with respect to the Securities issued in the form of
Global Securities, if any, The Depository Trust Company, a New York limited
purpose corporation, its nominees and successors, or any other Person designated
as the Depositary by the Company pursuant to Section 305(b), in each case
registered as a "clearing agency" under the Exchange Act and maintaining a
book-entry system that qualifies for treatment as "registered form" under
Section 163(f) of the Code.
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"Disqualified Equity Interests" means any Equity Interests that, either by
their terms or by the terms of any security into which they are convertible or
exchangeable or otherwise, are or upon the happening of an event or passage of
time would be required to be redeemed prior to any Stated Maturity of the
principal of the Securities or are redeemable at the option of the holder
thereof at any time prior to any such Stated Maturity, or are convertible into
or exchangeable for debt securities at any time prior to any such Stated
Maturity at the option of the holder thereof.
"Equity Interest" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such Person, including any Preferred Equity Interests.
"Event of Default" has the meaning specified in Article Five.
"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.
"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 this Indenture.
"Global Security" means a Security of any series in book entry form
evidencing all or part of the Securities of any series, issued to the Depositary
or its nominee and registered in the name of the Depositary or such nominee.
"Guarantee" means, in respect of the Securities of any series, the
guarantee, if any, by any Guarantor, if any, of the Company's Indenture
Obligations pursuant to a guarantee given in accordance with Section 301 of this
Indenture, including, without limitation, the Guarantees by the Guarantors, if
any, included in Article Thirteen of this Indenture.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
contained in this Section guaranteed directly or indirectly in any manner by
such Person, or in effect
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<PAGE>
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," as of any time, means, in respect of a series of Securities, a
Subsidiary which provides a Guarantee pursuant to Section 301 of the Indenture
or any other guarantor of the Indenture Obligations. Guarantors, if any, will be
listed as signatories to any supplemental indenture of any series of Securities
which provide for Guarantees.
"Holder" means a Person in whose name a Security of any series is
registered in the Security Register.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities arising in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit issued under letter of credit facilities,
acceptance facilities or other similar facilities and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Equity Interests of such Person, or any warrants, rights or options to
acquire such Equity Interests, now or hereafter outstanding, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (iv) all obligations under Interest Rate Agreements of such Person,
(v) all Capital Lease Obligations of such Person, (vi) all Indebtedness referred
to in clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such
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<PAGE>
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 this Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified Equity
Interests, such Fair Market Value to be determined in good faith by the Board of
Directors of the issuer of such Disqualified Equity Interests.
"Indenture" means this instrument as originally executed and as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively. The term
"Indenture" shall also include the terms of particular series of Securities
established as contemplated by Section 301.
"Indenture Obligations" means the obligations of the Company and any other
obligor under this Indenture or under the Securities of any series, including
any Guarantor, to pay principal, premium, if any, and interest when due and
payable under the Securities of that series, and all other amounts due or to
become due under or in connection with this Indenture, the Securities of that
series, and the performance of all other obligations to the Trustee and the
Holders under this Indenture and the Securities of that series, according to the
terms hereof and thereof.
"Independent Director" means a director of the Company other than a
director (i) who (apart from being a director of the Company or any Subsidiary)
is an employee, insider, associate or Affiliate of the Company or a Subsidiary
or has held any
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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 Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and any obligations in respect of any
Hedging Agreement, 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.
"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.
"Maturity" when used with respect to any Security means the date on which
the principal of such Security becomes due and payable as therein provided or as
provided in this Indenture, whether at Stated Maturity, or the Redemption Date
and whether by declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor rating
agency.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, Vice Chairman, the President or a Vice President (regardless of vice
presidential designation), and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company or any Guarantor, as the
case may be, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, any of the Guarantors or the Trustee, unless an Opinion of
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<PAGE>
Independent Counsel is required pursuant to the terms of this Indenture, and who
shall be acceptable to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel issued
by someone who is not an employee or consultant of the Company or any Guarantor
and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides for an
amount less than the stated principal amount thereof to be due and payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 301.
"Outstanding" when used with respect to Securities of any series means,
unless otherwise provided pursuant to Section 301, as of the date of
determination, all Securities theretofore authenticated and delivered under this
Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company or any Affiliate thereof) in trust or set
aside and segregated in trust by the Company or such Affiliate (if the Company
or such Affiliate shall act as the Paying Agent) for the Holders; provided that
if such Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor reasonably satisfactory
to the Trustee has been made;
(c) Securities, except to the extent provided in Sections 402 and 403, with
respect to which the Company has effected defeasance or covenant defeasance as
provided in Article Four; and
(d) Securities in exchange for or in lieu of which other Securities have
been authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the Trustee
proof reasonably satisfactory to it that such Securities are held by a bona fide
purchaser in whose hands the Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company, any Guarantor, or any other obligor upon the Securities or any
Affiliate of the Company, any Guarantor, or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good
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<PAGE>
faith may be regarded as Outstanding if the pledgee establishes to the
reasonable satisfaction of the Trustee the pledgee's right so to act with
respect to such Securities and that the pledgee is not the Company, any
Guarantor or any other obligor upon the Securities or any Affiliate of the
Company, any Guarantor or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of, premium, if any, or interest on any Securities on behalf of the
Company.
"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.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 307 in exchange for a mutilated
Security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Equity Interest," as applied to the Equity Interest of any
Person, means an Equity Interest of any class or classes (however designated)
which is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such person, over Equity Interests of any other class of such
Person.
"Qualified Equity Interests" of any Person means any and all Equity
Interests of such Person other than Disqualified Equity Interests.
"Redemption Date" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the date fixed for such
redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the price at which it is to be
redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the 15th day (whether or not a Business Day) next preceding such Interest
Payment Date.
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or the agent of the Trustee
appointed hereunder, including any vice president, assistant vice president,
assistant secretary, or
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any other officer or assistant officer of the Trustee or the agent of the
Trustee appointed hereunder to whom any corporate trust matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means a Subsidiary subject to the covenants or
events of default under the agreements governing other indebtedness of the
Company.
"S&P" means Standard & Poor's Ratings Service, a division of the McGraw
Hill Companies, or any successor rating agency.
"Securities" has the meaning specified in the Recitals.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 306.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the date specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subsidiary" 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.
"Successor Security" of any particular Security means every Security issued
after, and evidencing all or a portion of the same debt as that evidenced by,
such particular Security. For the purposes of this definition, any Security
authenticated and delivered under Section 307 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof and guaranteed
fully as to principal, premium, if any, and interest by the United States of
America, (ii) any certificate of deposit, maturing not more than one year after
the date of acquisition, issued by, or time deposit of, a commercial banking
institution (including the Trustee) that is a member of the Federal Reserve
System and that has combined capital and surplus and undivided
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profits of not less than $500,000,000, whose debt has a rating, at the time as
of which any investment therein is made, of "P-1" (or higher) according to
Moody's or "A-1" (or higher) according to S&P, (iii) commercial paper, maturing
not more than one year after the date of acquisition, issued by a corporation
(other than an Affiliate or Subsidiary of the Company) (including the Trustee)
organized and existing under the laws of the United States of America with a
rating, at the time as of which any investment therein is made, of "P-1" (or
higher) according to Moody's or "A-1" (or higher) according to S&P and (iv) any
money market deposit accounts issued or offered by a domestic commercial bank
(including the Trustee) having capital and surplus in excess of $500,000,000.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument, until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee and, if at any time, there is more than one Trustee,
"Trustee" as used with respect to the Securities of any series shall mean the
Trustee with respect to the Securities of that series.
"Unrestricted Subsidiary," with respect to any series of Securities, shall
have the meaning as set forth pursuant to Section 301.
"U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust, the income of which is subject to United States federal income taxation
regardless of its source.
"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).
Section 102. Other Definitions.
Defined in
Term Section
---- ----------
"Act" 105
"Agent Members" 305
"Bearer Global Security" 305
"covenant defeasance" 403
"Defaulted Interest" 309
"defeasance" 402
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"Defeasance Redemption Date" 404
"Defeased Securities" 401
"Global Security" 202
"Physical Securities" 305
"Surviving Entity" 801
"U.S. Government Obligations" 404
Section 103. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company, any Guarantor and any
other obligor on the Securities of any series shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenants compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents,
certificates and/or opinions is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or Opinion of Counsel with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.
Section 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered
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by the opinion of, only one such Person, or that they be so certified or covered
by only one document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an officer of the Company, any Guarantor or
other obligor of the Securities of any series may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company, any Guarantor or
other obligor of the Securities of any series stating that the information with
respect to such factual matters is in the possession of the Company, any
Guarantor or other obligor of the Securities of that series, unless such counsel
knows that the certificate or opinion or representations with respect to such
matters are erroneous. Opinions of Counsel required to be delivered to the
Trustee may have qualifications customary for opinions of the type required and
counsel delivering such Opinions of Counsel may rely on certificates of the
Company or government or other officials customary for opinions of the type
required, including certificates certifying as to matters of fact, including
that various financial covenants have been complied with.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 105. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Procedures in connection
to acts of Holders with respect to Bearer Securities shall be as provided
pursuant to Section 301. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Holders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture, if made in the manner provided in this
Section. The fact and date of the execution by any person of any such instrument
or writing or the authority of the person executing the same, may also be proved
in any other manner which the Trustee deems sufficient in accordance with such
reasonable rules as the Trustee may determine.
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(b) The ownership of Securities of any series shall be proved by the
Security Register.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security of any series shall bind every
future Holder of the same Security of that series or the Holder of every
Security of that series issued upon the transfer thereof or in exchange therefor
or in lieu thereof, in respect of anything done, suffered or omitted to be done
by the Trustee, any Paying Agent or the Company or any Guarantor in reliance
thereon, whether or not notation of such action is made upon such Security.
(d) If the Company shall solicit from the Holders of Securities of one or
more series any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, by or pursuant to a Board
Resolution, fix in advance a record date for the determination of such Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Notwithstanding Trust Indenture Act Section 316(c), any such record date shall
be the record date specified in or pursuant to such Board Resolution, which
shall be a date not more than 30 days prior to the first solicitation of Holders
generally in connection therewith and no later than the date such solicitation
is completed.
In the absence of any such record date fixed by the Company, regardless as
to whether a solicitation of the Holders of Securities of one or more series is
occurring on behalf of the Company or any Holder, the Trustee may, at its
option, fix in advance a record date for the determination of such Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Trustee shall have no obligation to do so.
Any such record date shall be a date not more than 30 days prior to the first
solicitation of Holders generally in connection therewith and no later than a
date such solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for purposes of determining
whether Holders of Securities of one or more series of the requisite proportion
of Securities then Outstanding have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for this purpose the Securities of any series then Outstanding shall be
computed as of such record date; provided that no such request, demand,
authorization, direction, notice, consent, waiver or other Act by the Holders on
such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six months after the
record date.
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Section 106. Notices, etc., to Trustee, the Company and any Guarantor.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company or any Guarantor or any
other obligor of the Securities shall be sufficient for every purpose hereunder
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to or with the Trustee at the Corporate Trust
Office, Attention: Corporate Trust Division, or at any other address previously
furnished in writing to the Holders, the Company, any Guarantor or any other
obligor of the Securities by the Trustee; or
(b) the Company or any Guarantor shall be sufficient for every purpose
(except as provided in Section 501(c)) hereunder or pursuant to Section 301 if
in writing and mailed, first-class postage prepaid, or delivered by recognized
overnight courier, to the Company or such Guarantor addressed to it at Sinclair
Broadcast Group, Inc., 2000 West 41st Street, Baltimore, Maryland 21211,
Attention: President, or at any other address previously furnished in writing to
the Trustee by the Company;
Section 107. Notice to Holders; Waiver.
Where this Indenture or the Securities of any series provides for notice to
Holders of the Securities of any series of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid, or delivered by recognized overnight
courier, to each Holder affected by such event, at his address as it appears in
the Security Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice when mailed
to a Holder in the aforesaid manner shall be conclusively deemed to have been
received by such Holder whether or not actually received by such Holder. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver. Notices to Holders of Bearer Securities shall be provided as may be
specified pursuant to Section 301.
In case by reason of the suspension of regular mail service or by reason of
any other cause, it shall be impracticable to mail notice of any event as
required by any
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provision of this Indenture, then any method of giving such notice as shall be
reasonably satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice.
Section 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any provision
of the Trust Indenture Act or another provision which is required or deemed to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, the provision or requirement of the Trust Indenture Act shall control. If
any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
Section 109. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Guarantors shall bind their successors and assigns, whether so expressed or not.
Section 111. Separability Clause.
In case any provision in this Indenture or in the Securities of any series
or in any Guarantees shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 112. Benefits of Indenture.
Nothing in this Indenture or in the Securities or the Guarantees, express
or implied, shall give to any Person (other than the parties hereto and their
successors hereunder, any Paying Agent or the Holders) any benefit or any legal
or equitable right, remedy or claim under this Indenture.
Section 113. Governing Law.
THIS INDENTURE AND THE SECURITIES OF ANY SERIES AND ANY INTEREST COUPONS
APPERTAINING THERETO AND ANY GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF).
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Section 114. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security of any series shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal or premium, if any, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity and no interest shall accrue with respect to such payment for
the period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, to the next succeeding Business Day.
Section 115. Schedules and Exhibits.
All schedules and exhibits attached hereto are by this reference made a
part hereof with the same effect as if herein set forth in full.
Section 116. Counterparts.
This Indenture may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
The Securities of each series and the Trustee's certificate of
authentication and the interest coupons, if any, to be attached thereto shall be
in substantially such form as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any applicable securities
exchange, organizational document, governing instrument or law or as may,
consistently herewith, be determined by the officers executing the Securities of
that series and interest coupons, if any, to be attached thereto, as evidenced
by their execution of the Securities and interest coupons, if any. If temporary
Securities of any series are issued as permitted by Section 304, the form
thereof also shall be established as provided in the preceding sentence. If the
forms of Securities and interest coupons, if any, of any series are established
by, or by action taken pursuant to, a Board Resolution, a copy of the Board
Resolution together with an appropriate record of any such action taken
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pursuant thereto, including a copy of the approved form of Securities or
interest coupons, if any, shall be delivered to the Trustee at or prior to the
delivery of the Company Order contemplated by Section 303 for the authentication
and delivery of such Securities. Any portion of the text of any Security may be
set forth on the reverse thereof, with an appropriate reference thereto on the
face of the Security.
Unless otherwise provided pursuant to Section 301, Bearer Securities, if
any, shall have interest coupons attached.
The definitive Securities of any series shall be printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Securities of that series may be listed, all as determined by the officers
executing such Securities, as evidenced by their execution of such Securities.
Section 202. Form of and Provisions Required in Global Security.
If Securities of or within a series are issuable in whole or in part in
global form, such Global Securities will be subject to Sections 301, 303, 304
(if applicable), 305 and 306.
Unless otherwise provided pursuant to Section 301, any Global Security
issued hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
If The Depository Trust Company is acting as the Depositary, insert -- UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY
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AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Section 203. Form of Trustee's Certificate of Authentication.
Unless otherwise provided pursuant to Section 301, the Trustee's
certificate of authentication shall be included on the Securities and shall be
substantially in the form as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK,
------------------------------------
As Trustee
By:
----------------------------------
Authorized Signatory
Section 204. Form of Guarantee of Each of the Guarantors.
If a Guarantee is to be endorsed on a Security of any series, the form of
Guarantee shall be set forth on the Securities substantially as follows:
GUARANTEES
For value received, each of the undersigned hereby unconditionally
guarantees, jointly and severally, to the holder of this Security the payment of
principal of, premium, if any, and interest on this Security in the amounts and
at the time when due and interest on the overdue principal and interest, if any,
of this Security, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture or the Securities, to the holder
of this Security and the Trustee, all in accordance with and subject to the
terms and limitations of this Security and Article Thirteen of the Indenture.
These Guarantees will not become effective until the Trustee duly executes the
certificate of authentication on this Security.
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[LIST OF GUARANTORS]
Attest By
------------------------- ----------------------------
Name: Name:
Title: Title:
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ARTICLE THREE
THE SECURITIES
Section 301. Amount Unlimited; Issuable in Series.
(a) The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited. The Securities may be issued
from time to time in one or more series.
(b) The following matters shall be established with respect to each series
of Securities issued hereunder (i) by a Board Resolution, (ii) by action taken
pursuant to a Board Resolution and (subject to Section 303) set forth, or
determined in the manner provided, in an Officers' Certificate or (iii) in one
or more indentures supplemental hereto:
(1) the title of the Securities of the series (which title shall
distinguish the Securities of the series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(which limit shall not pertain to Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 306, 307, 906 or 1108 or
any Securities of the series that, pursuant to Section 303, are deemed
never to have been authenticated and delivered hereunder);
(3) the date or dates on which the principal of and premium, if any,
on the Securities of the series will mature or the method or methods of
determining such date or dates;
(4) the rate or rates (which may be fixed or variable) at which the
Securities of the series shall bear interest, if any, or the method or
methods of calculating such rate or rates;
(5) the date or dates from which such interest, if any, shall accrue
or the method or methods by which such date or dates shall be determined;
(6) the date or dates on which interest, if any, shall be payable and
the record date or dates therefor, and the basis upon which interest shall
be calculated if other than that of a 360-day year of twelve 30-day months;
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(7) the place or places where the principal of, premium, if any, and
interest, if any, on Securities of the series shall be payable, or at which
Securities of the series may be surrendered for registration of transfer
and 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, Securities of the series 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
Securities of the series 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 United States dollars)
(including currency unit or units) in which, and the other terms and
conditions upon which, Securities of the series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(10) the denominations in which Securities of the series are
authorized to be issued;
(11) the currency or currency unit in which such 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 Securities will be payable and whether the Company or the holders of
any such Securities may elect to receive payments in respect of such
Securities in a currency or currency unit other than that in which such
Securities are stated to be payable;
(12) if the amount of payments of principal of, premium, if any, and
interest, if any, on the Securities of the series may be determined with
reference to an index, formula or other method (which index, formula or
method may be based, without limitation, on a currency or currencies
(including currency unit or units) other than that in which the Securities
of the series are denominated or designated to be payable), the manner in
which such amounts will be determined;
(13) if other than the entire principal amount thereof, the portion of
the principal amount of such Securities of the series which shall be
payable upon declaration of acceleration thereof pursuant to Section 502 or
the method by which such portion shall be determined;
(14) provisions, if any, granting special rights to the Holders of
Securities of the series upon the occurrence of such events as may be
specified;
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(15) any addition to, modifications of or deletion from the Events of
Default set forth in Section 501 or covenants of the Company set forth in
Article 9 pertaining to the Securities of the series;
(16) the circumstances, if any, under which the Company will pay
additional amounts on the Securities of that series held by a Person who is
not a U.S. Person (including any modification of the definition of such
term) in respect of taxes, assessments or similar charges;
(17) whether Securities of the series shall be issuable in registered
or bearer form (with or without interest coupons), or both, and any
restrictions applicable to the offering, sale, transfer or delivery of
Bearer Securities and, if other than as provided in Section 306, the terms
upon which Bearer Securities of a series may be exchanged for Securities of
the same series and vice versa;
(18) the date as of which any Bearer Securities of the series and any
temporary Global Security representing Outstanding Securities of the series
shall be dated, if other than the date of original issuance of the first
Security of the series to be issued;
(19) the forms of the Securities and interest coupons, if any, of the
series;
(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 Securities of that series;
(22) whether such Securities of the series are to be issued in whole
or in part in the form of one or more in temporary or permanent Global
Securities, and, if so, the identity of the Depositary or its nominee, if
any, for such Global Securities, and the circumstances under which the
beneficial owners of interests in any Securities of the series in global
form may exchange such interests for certificated Securities of that
series, to be registered in the names of or to be held by such beneficial
owners or their nominees;
(23) if the Securities of the series may be issued or delivered, or
any installment of principal or interest is payable, only upon receipt of
certain certificates or other documents or satisfaction of other conditions
in addition to those specified in this Indenture, the form and terms of
such certificates, documents or conditions;
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(24) if other than as provided in Section 309, the Person to whom any
interest on any 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 definitions for Securities of that series which are not to be
as set forth in this Indenture, including, without limitation, the
definition of "Unrestricted Subsidiary" to be used for that series;
(26) 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);
(27) 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;
(28) the terms, if any, upon which such Securities of any series may
be converted or exchanged into or for Common Stock, Preferred Stock or
other securities or property of the Company;
(29) any restrictions on the registration, transfer or exchange of the
Securities; and
(30) any other terms not inconsistent with the terms of the Indenture
pertaining to the Securities which may be required by or advisable under
United States laws or regulations or advisable (as determined by the
Company) in connection with the marketing of Securities of the series.
(c) All provisions set forth in this Indenture shall be applicable to each
series of Debt Securities issued hereunder unless otherwise specified in a
supplemental indenture entered into pursuant to this Section 301, in which case
the provisions of the supplemental indenture shall govern and references herein
to "unless otherwise provided pursuant to Section 301" are not intended to limit
what provisions may be amended pursuant to any supplemental indenture. Subject
to Sections 108, 113 and any controlling provision of the Trust Indenture Act,
in the event of any inconsistency between the terms of this Indenture and the
terms applicable to a series of Securities established in the manner permitted
by this Section 301, the (i) Board Resolution, (ii) Officers' Certificate or
(iii) supplemental indenture setting forth such conflicting term shall prevail.
(d) All Securities of any one series and interest coupons, if any,
appertaining thereto shall be substantially identical except as to denomination
and except as may
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otherwise be provided (i) by a Board Resolution, (ii) by action taken pursuant
to a Board Resolution and (subject to Section 303) set forth, or determined in
the manner provided, in the related Officers' Certificate or (iii) in an
indenture supplemental hereto. All Securities of any one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the Holders, for issuances of additional
Securities of that series.
(e) If any of the terms of the Securities of any series are established by
action taken pursuant to a Board Resolution, a copy of such Board Resolution
shall be delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth, or providing the manner for determining, the terms of
the Securities of that series, and an appropriate record of any action taken
pursuant thereto in connection with the issuance of any Securities of that
series shall be delivered to the Trustee prior to the authentication and
delivery thereof.
(f) Unless otherwise provided pursuant to Section 301, payment of the
principal of, premium, if any, and interest on the Securities shall be made at
the office or agency of the Company maintained for that purpose as the Company
may designate pursuant to Section 301, in the United States, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made (i) by check mailed to
addresses of the Persons entitled thereto as such addresses shall appear on the
Security Register or (ii) by wire transfer in immediately available funds to an
account specified (not later than one Business Day prior to the applicable
Interest Payment Date) by the Holder thereof. If any of the Securities are held
by the Depository, payments of interest may be made by wire transfer to the
Depository. Procedures with respect to payments in connection with Bearer
Securities shall be established pursuant to Section 301.
Section 302. Denominations.
Unless otherwise provided pursuant to Section 301, the Securities shall be
issuable only in registered form without coupons and only in denominations of
$1,000 and any integral multiple of $1000, and Bearer Securities shall be issued
in denominations of $5,000 or any integral multiple of $5,000. Securities
denominated in a foreign currency shall be issuable in such denominations as are
established with respect to such Securities in or pursuant to this Indenture.
Section 303. Execution, Authentication, Delivery and Dating.
Unless otherwise provided pursuant to Section 301, the Securities of any
series shall be executed on behalf of the Company by one of its Chairman of the
Board, its
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President or one of its Vice Presidents under its corporate seal reproduced
thereon attested by its Secretary or one of its Assistant Secretaries.
Securities and interest coupons, if any, on Securities bearing the manual
or facsimile signatures of individuals who were at any time the proper officers
of the Company shall bind the Company, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices on the date of such
Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities, together with any interest
coupons appertaining thereto, of any series executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities; and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities as provided in this
Indenture and not otherwise.
Each Security shall be dated the date of its authentication.
No Security of any series shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder.
Unless otherwise provided pursuant to Section 301, in case the Company or
any Guarantor, pursuant to Article Eight, shall be consolidated, merged with or
into any other Person or shall sell, assign, convey, transfer or lease
substantially all of its properties and assets to any Person, and the successor
Person resulting from such consolidation, or surviving such merger, or into
which the Company or such Guarantor shall have been merged, or the Person which
shall have received a sale, assignment, conveyance, transfer or lease as
aforesaid, shall have executed an indenture supplemental hereto with the Trustee
pursuant to Article Eight, any of the Securities authenticated or delivered
prior to such consolidation, merger, sale, assignment, conveyance, transfer or
lease may, from time to time, at the request of the successor Person, be
exchanged for other Securities executed in the name of the successor Person with
such changes in phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Securities surrendered for such exchange and of
like principal amount; and the Trustee, upon Company Request of the successor
Person, shall authenticate and deliver Securities as specified in such request
for the purpose of such exchange. If Securities shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Securities,
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such successor Person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time Outstanding for
Securities authenticated and delivered in such new name.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities on behalf of the Trustee. Unless limited by the terms
of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Security Registrar or Paying
Agent to deal with the Company and its Affiliates.
The Bearer Securities will be transferable by delivery. Other terms,
conditions and restrictions in connection with Bearer Securities will be as
provided pursuant to Section 301.
The specific terms of the depositary arrangement with respect to any
portion of a series of Securities to be represented by a Global Security will be
as provided pursuant to Section 301.
Section 304. Temporary Securities.
Unless otherwise provided pursuant to Section 301, pending the preparation
of definitive Securities of any series, the Company may execute, and upon
Company Order, the Trustee shall authenticate and deliver, temporary Securities
which are printed, lithographed, typewritten or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Securities
of any series in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities.
Unless otherwise provided pursuant to Section 301, after the preparation of
definitive Securities of any series, the temporary Securities of any series
shall be exchangeable for definitive Securities of that series upon surrender of
the temporary Securities of that series at the office or agency of the Company
designated for such purpose pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities
the Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Securities of authorized
denominations. Until so exchanged the temporary Securities of any series shall
in all respects be entitled to the same benefits under this Indenture as
definitive Securities of that series.
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Section 305. Global Securities.
(a) Unless otherwise provided pursuant to Section 301, any Global Security
of any series shall, if the Depositary permits, (i) be registered in the name of
the Depositary for such Global Security or the nominee of such Depositary, (ii)
be deposited with, or on behalf of, the Depositary and (iii) bear legends as set
forth in Section 202; provided, that the Securities are eligible to be in the
form of a Global Security.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary, or the Trustee as its custodian, or under the Global
Security, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or shall impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a holder of any Security.
The Securities of any 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 a depositary, as
provided pursuant to Section 301. Any Bearer Global Security 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 Securities to be represented by one or more Bearer Global Securities
will be as provided pursuant to Section 301.
(b) Unless otherwise provided pursuant to Section 301, transfers of the
Global Security of a series shall be limited to transfers of such Global
Security in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in a Global Security may be
transferred in accordance with the rules and procedures of the Depositary. Under
the circumstances described in this clause (b) below, beneficial owners shall
obtain physical securities in the form provided pursuant to Section 301
("Physical Securities") in exchange for their beneficial interests in a Global
Security in accordance with the Depositary's and the Securities Registrar's
procedures. In connection with the execution, authentication and delivery of
such Physical Securities, the Security Registrar shall reflect on its books and
records a decrease in the principal amount of the Global Security equal to the
principal amount of such Physical Securities and the Company shall execute and
the Trustee shall authenticate and deliver one or more Physical Securities
having an equal aggregate principal amount. Unless otherwise provided pursuant
to Section 301, the Securities will be delivered in certificated form if (i) the
Depositary ceases to be registered as a clearing agency under the Exchange Act
or
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is not willing or no longer willing or able to provide securities depository
services with respect to the Securities and a successor depositary is not
appointed by the Company within 90 days and (ii) the Company, in its sole
discretion, so determines or (iii) there shall have occurred an Event of Default
or an event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default with respect to the Securities represented by
such Global Security and such Event of Default or event continues for a period
of 90 days.
(c) In connection with any transfer of a portion of the beneficial interest
in a Global Security to a Physical Security pursuant to subsection (b) of this
Section to beneficial owners, the Security Registrar shall reflect on its books
and records the date and a decrease in the principal amount of a Global Security
in an amount equal to the principal amount of the beneficial interest in the
Global Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Physical Securities of like
tenor and amount.
(d) In connection with the transfer of the entire Global Security of any
series to beneficial owners pursuant to subsection (b) of this Section, a Global
Security shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in a Global Security, an equal aggregate principal amount of
Physical Securities of authorized denominations.
(e) The registered holder of a Global Security may grant proxies and
otherwise authorize any person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
Section 306. Registration, Registration of Transfer and Exchange.
Unless otherwise provided pursuant to Section 301, the Company shall cause
to be kept at the Corporate Trust Office of the Trustee, or such other office as
the Trustee may designate, a register (the register maintained in such office
and in any other office or agency designated pursuant to Section 1002 being
herein sometimes referred to as the "Security Register") in which, subject to
such reasonable regulations as the Security Registrar may prescribe, the Company
shall provide for the registration of Securities of any series and of transfers
of Securities of any series. The Trustee or an agent thereof or of the Company
shall initially be the "Security Registrar" for the purpose of registering
Securities of any series and transfers of Securities of any series as herein
provided.
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Procedures with respect to the registration and registration of transfer
and exchange, and other matters related thereto, with respect to Bearer
Securities shall be provided pursuant to Section 301.
Unless otherwise provided pursuant to Section 301, upon surrender for
registration of transfer of any Security of any series at the office or agency
of the Company designated pursuant to Section 1002, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of that series of any
authorized denomination or denominations, of a like aggregate principal amount.
Furthermore, any Holder of a Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interest in such Global
Security may be effected only through a book-entry system maintained by the
Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in the Securities shall be required to be reflected in a
book entry.
Unless otherwise provided pursuant to Section 301, at the option of the
Holder, Securities of any series may be exchanged for other Securities of that
series of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities of that series to be
exchanged at such office or agency. Whenever any Securities of any series are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities of that series which the Holder making
the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities of any series shall be the valid obligations of the Company,
evidencing the same Indebtedness, and entitled to the same benefits under this
Indenture, as the Securities of the series surrendered upon such registration of
transfer or exchange.
Unless otherwise provided pursuant to Section 301, every Security presented
or surrendered for registration of transfer, or for exchange or redemption shall
(if so required by the Company or the Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Securities of any series, but the Company
may require payment of a sum sufficient to pay all documentary, stamp or similar
issue or transfer taxes or other governmental charges that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Sections 303, 304, 305, 306, 307 and 906, not
involving any transfer.
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Unless otherwise provided pursuant to Section 301, the Company shall not be
required (a) to issue, register the transfer of or exchange any Security of any
series during a period beginning at the opening of business (i) 15 days before
the date of selection of Securities of that series for redemption under Section
1104 and ending at the close of business on the day of such selection or (ii) 15
days before an Interest Payment Date and ending on the close of business on the
Interest Payment Date, or (b) to register the transfer of or exchange any
Security of that series so selected for redemption in whole or in part, except
the unredeemed portion of Securities of that series being redeemed in part.
Except as otherwise permitted pursuant to Section 304, any Security of a
series authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, any Global Security, whether pursuant to this
Section, Sections 304, 307, 906 or 1108 or otherwise, shall also be a Global
Security and bear the legend specified in Section 202.
Section 307. Mutilated, Destroyed, Lost and Stolen Securities.
If (a) any mutilated Security of any series is surrendered to the Trustee,
or (b) the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security of any series, and there is delivered
to the Company, each Guarantor and the Trustee, such security or indemnity, in
each case, as may be required by them to save each of them harmless, then, in
the absence of notice to the Company, any Guarantor or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon its written request the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a replacement Security of that series of like tenor and
principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security of any
series has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a replacement Security of that series, pay
such Security.
Upon the issuance of any replacement Securities of that series under this
Section, the Company may require the payment of a sum sufficient to pay all
documentary, stamp or similar issue or transfer taxes or other governmental
charges that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every replacement Security of a series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security of that series shall constitute
an original additional contractual obligation of the Company and the Guarantors,
if any, whether or not the destroyed, lost or stolen Security of that series
shall be at any time enforceable by anyone,
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and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities of the same series duly issued
hereunder.
Procedures relating to mutilated, destroyed, lost or stolen Bearer
Securities shall be provided pursuant to Section 301.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 308. [RESERVED]
Section 309. Payment of Interest; Interest Rights Preserved.
Unless otherwise provided pursuant to Section 301, interest on any Security
of a series which is payable, and is punctually paid or duly provided for, on
any Interest Payment Date shall be paid to the Person in whose name that
Security of that series is registered at the close of business on the Regular
Record Date for such interest.
Unless otherwise provided pursuant to Section 301, any interest on any
Security of a series which is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date and interest on such defaulted
interest at the then applicable interest rate borne by the Securities of that
series, to the extent lawful (such defaulted interest and interest thereon
herein collectively called "Defaulted Interest") shall forthwith cease to be
payable to the Holder on the Regular Record Date; and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in
Subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of that series are registered at
the close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of that series and the date
(not less than 30 days after such notice) of the proposed payment, and at
the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Subsection provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of
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the proposed payment. The Trustee shall promptly notify the Company in
writing of such Special Record Date. In the name and at the expense of the
Company, the Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in
the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities of that series
are registered on such Special Record Date and shall no longer be payable
pursuant to the following Subsection (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of that series may be listed,
and upon such notice as may be required by such exchange, if, after written
notice given by the Company to the Trustee of the proposed payment pursuant
to this Subsection, such payment shall be deemed practicable by the
Trustee.
Payment of interest and preservation of interest rights of Bearer
Securities shall be set forth pursuant to Section 301.
Subject to the foregoing provisions of this Section, each Security of any
series delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security of the same series shall carry the
rights to interest accrued and unpaid, and to accrue, which were carried by such
other Security of the same series.
Section 310. Persons Deemed Owners.
Unless otherwise provided pursuant to Section 301, the Company, any
Guarantor, the Trustee and any agent of the Company, any Guarantor or the
Trustee may treat the Person in whose name any Security of any series is
registered as the owner of such Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 309) interest on such
Security and for all other purposes whatsoever, whether or not such Security is
overdue, and neither the Company, any Guarantor, the Trustee nor any agent of
the Company, any Guarantor or the Trustee shall be affected by notice to the
contrary.
Unless otherwise provided as contemplated by Section 301, the Company, any
Guarantor, the Trustee and any agent of the Company, any Guarantor or the
Trustee may treat the bearer of any Bearer Security of any series and the bearer
of any interest coupon as the absolute owner of such Bearer Security or interest
coupon for the purpose of receiving payment thereof or on account thereof and
for all other purposes whatsoever,
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whether or not such Bearer Security or interest coupon be overdue, and neither
the Company, any Guarantor, the Trustee nor any agent of the Company, the
Guarantor or the Trustee shall be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security of any series
held on its behalf by a Depositary of that series shall have any rights under
this Indenture with respect to such Global Security of that series, and such
Depositary may be treated by the Company, any Guarantor, the Trustee and any
agent of the Company, any Guarantor or the Trustee as the owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, any Guarantor, the Trustee or any agent of the
Company, any Guarantor or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and such holders of beneficial interests, the
operation of customary practices governing the exercise of the rights of the
Depositary (or its nominee) as Holder of any Security of any series.
Section 311. Cancellation.
All Securities of any series surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and, if
not already cancelled, shall be promptly cancelled by it. The Company and any
Guarantor may at any time deliver to the Trustee for cancellation any Securities
of any series previously authenticated and delivered hereunder which the Company
or such Guarantor may have acquired in any manner whatsoever, and all Securities
of any series so delivered shall be promptly cancelled by the Trustee. No
Securities of any series shall be authenticated in lieu of or in exchange for
any Securities of that series canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities of any series
held by the Trustee shall be destroyed and certification of their destruction
delivered to the Company unless by a Company Order the Company shall direct that
the canceled Securities of that series be returned to it. The Trustee shall
provide the Company a list of all Securities of the series that have been
canceled from time to time as requested by the Company.
Section 312. Computation of Interest.
Except as otherwise provided pursuant to Section 301, interest on the
Securities of all series shall be computed on the basis of a 360-day year of
twelve 30-day months.
Section 313. CUSIP Numbers.
The Company in issuing the Securities of any series may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no
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representation is made as to the correctness of such numbers either as printed
on the Securities of that series or as contained in any notice of a redemption
and that reliance may be placed only on the other identification numbers printed
on the Securities of that series, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided pursuant to Section 301, Securities of any series
shall be subject to the following provisions:
Section 401. Company's Option to Effect Defeasance or Covenant Defeasance.
Unless otherwise provided pursuant to Section 301, the Company may, at its
option by Board Resolution, at any time, with respect to the Securities of any
series, elect to have either Section 402 or Section 403 be applied to all of the
Outstanding Securities of any series (the "Defeased Securities"), upon
compliance with the conditions set forth below in this Article Four.
Section 402. Defeasance and Discharge.
Unless otherwise provided pursuant to Section 301, upon the Company's
exercise under Section 401 of the option applicable to this Section 402, the
Company, each of the Guarantors, if any, and any other obligor upon the
Securities of any series, if any, shall be deemed to have been discharged from
its obligations with respect to the Defeased Securities on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company, 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 Defeased Securities of
that series, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 405 and the other Sections of this Indenture referred to in
(a) and (b) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, and, upon written request, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of Defeased Securities to receive, solely from the trust fund described
in Section 404 and as more fully set forth in such Section, payments in respect
of the principal of, premium, if any, and interest on such Securities when such
payments are due, (b) the Company's obligations with respect to such Defeased
Securities under Sections 304, 305, 306, 1002 and 1003, (c) the rights, powers,
trusts, duties and
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immunities of the Trustee hereunder, including, without limitation, the
Trustee's rights under Section 606, (d) this Article Four and (e) if the
Security is convertible, the right of the Holder to convert the Security
according to the terms set forth pursuant to Section 301. Subject to compliance
with this Article Four, the Company may exercise its option under this Section
402 notwithstanding the prior exercise of its option under Section 403 with
respect to the Securities of that series.
Section 403. Covenant Defeasance.
Upon the Company's exercise under Section 401 of the option applicable to
this Section 403, the Company and each Guarantor shall be released from its
obligations under any covenant or provision contained or referred to in Article
Ten (except Section 1002 and 1003) or otherwise set forth in this Indenture and
expressly made subject to this Section 403 pursuant to Section 301, and the
provisions of Article Thirteen, if applicable, shall not apply, with respect to
the Defeased Securities on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance"), and the Defeased Securities
shall thereafter be deemed to be not "Outstanding" for the purposes of any
direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with such covenants and the
provisions of Article Thirteen, if applicable, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Defeased Securities, the Company and
each Guarantor may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such Section or Article,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or Article or by reason of any reference in any such Section or
Article to any other provision herein or in any other document and such omission
to comply shall not constitute a Default or an Event of Default under Section
501(c), (d) or (g), but, except as specified above, the remainder of this
Indenture and such Defeased Securities shall be unaffected thereby.
Section 404. Conditions to Defeasance or Covenant Defeasance.
Unless otherwise provided pursuant to Section 301, the following shall be
the conditions to application of either Section 402 or Section 403 to the
Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be deposited
with the Trustee (or another trustee satisfying the requirements of Section 608
who shall agree to comply with the provisions of this Article Four applicable to
it) as trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the benefit of
the Holders of such Securities, (a) United States dollars in an amount, or (b)
U.S. Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their
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terms will provide, not later than one day before the due date of any payment,
money in an amount, or (c) a combination thereof, sufficient, in the opinion of
a nationally recognized firm of independent public accountants or a nationally
recognized investment banking firm expressed in a written certification thereof
delivered to the Trustee, to pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge the principal of,
premium, if any, and interest on the Defeased Securities on the Stated Maturity
of such principal or installment of principal or interest (or on the "Defeasance
Redemption Date" as defined pursuant to Section 301), if when exercising under
Section 401 either its option applicable to Section 402 or its option applicable
to Section 403, the Company shall have delivered to the Trustee an irrevocable
notice to redeem all of the Outstanding Securities of the applicable series on
the Defeasance Redemption Date); provided that the Trustee shall have been
irrevocably instructed to apply such United States dollars or the proceeds of
such U.S. Government Obligations to said payments with respect to the Securities
of that series. For this purpose, "U.S. Government Obligations" means securities
that are (i) direct obligations of the United States of America for the timely
payment of which its full faith and credit is pledged or (ii) obligations of a
Person controlled or supervised by and acting as an agency or instrumentality of
the United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian with respect
to any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
(2) In the case of an election under Section 402, the Company shall have
delivered to the Trustee an Opinion of Independent Counsel in the United States
stating that (A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (B) since the date of this Indenture,
there has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Independent Counsel in the
United States shall confirm that, the holders of the Outstanding 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.
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(3) In the case of an election under Section 403, the Company shall have
delivered to the Trustee an Opinion of Independent Counsel in the United States
to the effect that the holders of the Outstanding 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.
(4) No Default or Event of Default shall have occurred and be continuing on
the date of such deposit or insofar as subsections 501(h) and (i) are concerned,
at any time during the period ending on the 91st day after the date of deposit.
(5) Such defeasance or covenant defeasance shall not cause the Trustee for
the Securities of that series to have a conflicting interest with respect to any
securities of the Company or any Guarantor.
(6) Such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a Default under, this Indenture or any other
material agreement or instrument to which the Company or any Guarantor is a
party or by which it is bound.
(7) 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 this 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.
(8) 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 Securities of that series 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.
(9) 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
Securities of that series on the date of such deposit or at any time ending on
the 91st day after the date of such deposit.
(10) 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 under
Section 402 or the covenant defeasance under Section 403 (as the case may be)
have been complied with as contemplated by this Section 404.
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Opinions of Counsel or Opinions of Independent Counsel required to be delivered
under this Section may have qualifications customary for opinions of the type
required and counsel delivering such opinions may rely on certificates of the
Company or government or other officials customary for opinions of the type
required, including certificates certifying as to matters of fact, including
that various financial covenants have been complied with.
Section 405. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all United
States dollars and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee or other qualifying trustee as permitted under
Section 404 (collectively, for purposes of this Section 405, the "Trustee")
pursuant to Section 404 in respect of the Defeased Securities shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Securities of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 404 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Defeased Securities.
Anything in this Article Four to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
United States dollars or U.S. Government Obligations held by it as provided in
Section 404 which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect defeasance or covenant defeasance.
Section 406. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or U.S. Government Obligations in accordance with Section 402 or 403, as the
case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's and any Guarantor's obligations under this Indenture and the
Securities of that series and the
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provisions of Article Thirteen hereof shall be revived and reinstated as though
no deposit had occurred pursuant to Section 402 or 403, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
United States dollars or U.S. Government Obligations in accordance with Section
402 or 403, as the case may be; provided, however, that if the Company makes any
payment to the Trustee or Paying Agent of principal of, premium, if any, or
interest on any Security following the reinstatement of its obligations, the
Trustee or Paying Agent shall promptly pay any such amount to the Holders of the
Securities of that series and the Company shall be subrogated to the rights of
the Holders of such Securities of that series to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
Unless otherwise provided pursuant to Section 301, "Event of Default",
wherever used herein with respect to the Securities of any series, means any one
of the following events which has occurred and is continuing (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) there shall be a default in the payment of any interest on any Security
of that series when it becomes due and payable, and such default shall continue
for a period of 30 days;
(b) there shall be a default in the payment of the principal of (or
premium, if any, on) any Security of that series at its Maturity (upon
acceleration, optional or mandatory redemption, required repurchase or
otherwise);
(c) (i) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under this Indenture
(other than a default in the performance or breach of a covenant or agreement
which is specifically dealt with in clause (a) or (b) or in clause (ii) of this
clause (c)) and such default or breach shall continue for a period of 30 days
after written notice has been given, by certified mail, (1) to the Company by
the Trustee or (z) to the Company and the Trustee by the Holders of at least 25%
in aggregate principal amount of the Outstanding Securities of the series; and
(ii) there shall be a default in the performance or breach of the provisions of
Article Eight;
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(d) 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;
(e) 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, and
enforceable in accordance with its terms, except to the extent contemplated by
this Indenture and any such Guarantee;
(f) 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;
(g) 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);
(h) there shall have been the entry by a court of competent jurisdiction of
(i) a decree or order for relief in respect of the Company, any Guarantor or any
Restricted Subsidiary in an involuntary case or proceeding under any applicable
Bankruptcy Law or (ii) 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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(i) (i) 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, (ii) 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, (iii) 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, (iv) the Company, any Guarantor or any
Restricted Subsidiary (1) consents to the filing of such petition or the
appointment of, or taking possession by, a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company, any
Guarantor or such Restricted Subsidiary or of any substantial part of its
respective properties, (2) makes an assignment for the benefit of creditors or
(3) admits in writing its inability to pay its debts generally as they become
due, or (v) the Company, any Guarantor or any Restricted Subsidiary takes any
corporate action authorizing any such actions in this paragraph (i).
Unless otherwise provided pursuant to Section 301, the Company shall
deliver to the Trustee within five days after the occurrence thereof, written
notice, in the form of an Officers' Certificate, of any Default, its status and
what action the Company is taking or proposes to take with respect thereto.
Unless the Corporate Trust Office of the Trustee has received written notice of
an Event of Default of the nature described in this Section, the Trustee shall
not be deemed to have knowledge of such Event of Default for the purposes of
Article Five or for any other purpose.
Section 502. Acceleration of Maturity; Rescission and Annulment.
Unless otherwise provided pursuant to Section 301, if an Event of Default
(other than an Event of Default specified in Sections 501(h) and (i)) shall
occur and be continuing, the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Securities Outstanding of the applicable
series may, and the Trustee at the request of the Holders of not less than 25%
in aggregate principal amount of the Securities of the applicable series
Outstanding shall, declare all unpaid principal of, premium, if any, and accrued
interest on, all the Securities of that 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 Securities of that series). Thereupon the Trustee may, at
its discretion, proceed to protect and enforce the rights of the Holders of the
Securities of that series by appropriate judicial proceeding. If an Event of
Default specified in clause (h) or (i) of Section 501 occurs and is continuing,
then all the Securities shall ipso facto become and be immediately due and
payable, in an amount equal to the principal amount of the Securities of that
series, together with accrued and unpaid interest, if any, to the date the
Securities become due and payable, without any declaration or other act on the
part of the Trustee or any Holder.
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Unless otherwise provided pursuant to Section 301, at any time after such
declaration of acceleration has been made but before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
Securities Outstanding of the applicable series, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(i) all sums paid or advanced by the Trustee under this Indenture and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel,
(ii) all overdue interest on all Securities of any series,
(iii) the principal of and premium, if any, on any Securities of any
series which have become due otherwise than by such declaration of
acceleration and interest thereon at a rate borne by the Securities, and
(iv) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Securities; and
(b) all Events of Default, other than the non-payment of principal of the
Securities of any series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon provided in Section 513. Provisions relating to acceleration
of the Maturity of a portion of the principal amount of an Original Issue
Discount Security upon the occurrence of an Event of Default and the
continuation thereof shall be provided pursuant to Section 301.
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company, as to Securities of any series, and any Guarantor, as to
Securities of any series guaranteed by such Guarantor, covenant that if
(a) default is made in the payment of any interest on any such
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of or premium, if
any, on any such Security at the Stated Maturity thereof,
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the Company and, if applicable, any such Guarantor will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Securities, subject
to Article Thirteen, if applicable, the whole amount then due and payable on
such Securities for principal and premium, if any, and interest, with interest
upon the overdue principal and premium, if any, and, to the extent that payment
of such interest shall be legally enforceable, upon overdue installments of
interest, at the rate borne by the Securities of that series; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company or, if applicable, any Guarantor fails to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as trustee of an
express trust, may institute a judicial proceeding for the collection of the
sums so due and unpaid and may prosecute such proceeding to judgment or final
decree, and may enforce the same against the Company or, if applicable, any
Guarantor or any other obligor upon the Securities of any series and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or, if applicable, any Guarantor or any other
obligor upon the Securities of that series, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture or the Guarantees by such appropriate private or
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce such rights, including, seeking recourse against any Guarantor pursuant
to the terms of any Guarantee, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein or therein, or to enforce any other proper remedy, including,
without limitation, seeking recourse against any Guarantor pursuant to the terms
of a Guarantee, or to enforce any other proper remedy, subject however to
Section 512.
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, including each
Guarantor, upon the Securities of any series or the property of the Company or
of such other obligor or their creditors, the Trustee (irrespective of whether
the principal of the Securities of that series shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment of overdue
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal, and
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premium, if any, and interest owing and unpaid in respect of the Securities
of that series and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding, and
(b) subject to Article Thirteen, if applicable, to collect and receive
any moneys, securities or other property payable or deliverable upon any
conversion or exchange of Securities of that series or upon any such claims
and to distribute the same;
and any custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
of any series or the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
Section 505. Trustee May Enforce Claims without Possession of Securities.
All rights of action and claims under this Indenture or the Securities of
any series may be prosecuted and enforced by the Trustee without the possession
of any of the Securities of that series or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name and as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities of that
series in respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article or otherwise on
behalf of the Holders or the Trustee pursuant to this Article or through any
proceeding or any arrangement or restructuring in anticipation or in lieu of any
proceeding contemplated by this Article shall be applied, subject to applicable
law, in the following order, at the date or dates fixed by the Trustee and, in
case of the distribution of such money on account of principal, premium, if any,
or interest, upon presentation of the Securities of any series
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and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 606;
SECOND: Subject to Article Thirteen, if applicable, to the payment of the
amounts then due and unpaid upon the Securities of that series for principal,
premium, if any, and interest, in respect of which or for the benefit of which
such money has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Securities for principal,
premium, if any, and interest; and
THIRD: Subject to Article Thirteen, if applicable, the balance, if any, to
the Person or Persons entitled thereto, including the Company, provided that all
sums due and owing to the Holders and the Trustee have been paid in full as
required by this Indenture.
Section 507. Limitation on Suits.
No Holder of any Securities of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
trustee hereunder;
(c) such Holder or Holders have offered to the Trustee an indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities of that series;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Guarantee to affect, disturb or prejudice the rights of
any other Holders, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under
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this Indenture, except in the manner provided in this Indenture or any Guarantee
and for the equal and ratable benefit of all the Holders of Securities of that
series.
Section 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, but subject to
Article Thirteen, if applicable, the Holder of any Security of any series shall
have the right on the terms stated herein, which is absolute and unconditional,
to receive payment of the principal of, premium, if any, and (subject to Section
309) interest on such Security on the respective Stated Maturities expressed in
such Security (or, in the case of redemption or repurchase, on the Redemption
Date or repurchase date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder, subject to Article Thirteen, if applicable.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture or the Guarantees and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, each
of the Guarantors, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
Section 510. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security of any
series to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
or by law to the Trustee or to the
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Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
Section 512. Control by Holders.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of a series (or if more than one series is affected
thereby, of all series so affected, voting as a single class) shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee of that series, provided that
(a) such direction shall not be in conflict with any rule of law or with
this Indenture or any Guarantee or expose the Trustee to personal liability; and
(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
Unless otherwise provided pursuant to Section 301, the Holders of not less
than a majority in aggregate principal amount of the Outstanding Securities of
any series may on behalf of the Holders of all the Securities of that series
waive any past Default hereunder and its consequences, except a Default
(a) in the payment of the principal of, premium, if any, or interest on any
Security of any series; or
(b) in respect of a covenant or a provision hereof which under Article Nine
cannot be modified or amended without the consent of the holder of each
Outstanding Security of that series.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security of any
series by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee of that series
for any action taken, suffered or omitted by it as Trustee of that series, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess
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reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Trustee of that series, to
any suit instituted by any Holder, or group of Holders, of that series holding
in the aggregate more than 10% in principal amount of the Outstanding Securities
of that series, or to any suit instituted by any Holder for the enforcement of
the payment of the principal of, premium, if any, or interest on any Security of
any series on or after the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on or after the Redemption Date).
Section 515. Waiver of Stay, Extension or Usury Laws.
Each of the Company and any Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company or any Guarantor
from paying all or any portion of the principal of, premium, if any, or interest
on the Securities of any series or which may affect the covenants or the
performance of this Indenture; and each of the Company and any Guarantor (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee of that series,
but will suffer and permit the execution of every such power as though no such
law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults.
Within 30 days after the occurrence of any Default, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of, premium, if any, or
interest on any Security of any series, the Trustee shall be protected in
withholding such notice if and so long as a trust committee of Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders.
Section 602. Certain Rights of Trustee.
Subject to the provisions of Trust Indenture Act Sections 315(a) through
315(d):
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(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of Indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) the Trustee may consult with counsel and any written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon in accordance with such advice or Opinion
of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee security or indemnity satisfactory to the Trustee against the
costs, expenses and liabilities which might be incurred therein or thereby in
compliance with such request or direction;
(e) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture other than any liabilities
arising out of the negligence of the Trustee;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document;
provided, that the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may deem fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers;
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(i) the Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company, except as
otherwise provided herein;
(j) money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law, except as otherwise provided herein;
and
(k) if a Default or an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
Section 603. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof.
The recitals contained herein and in the Securities of each series, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities of any series, except that the Trustee represents
that it is duly authorized to execute and deliver this Indenture, authenticate
the Securities of any securities and perform its obligations hereunder and that
the statements made by it in any Statement of Eligibility and Qualification on
Form T-1 supplied to the Company are true and accurate subject to the
qualifications set forth therein. The Trustee shall not be accountable for the
use or application by the Company of Securities of any series or the proceeds
thereof.
Section 604. Trustee and Agents May Hold Securities; Collections; etc.
The Trustee, any Paying Agent, Security Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Trust Indenture Act Sections 310 and 311, may otherwise deal with the Company
and receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
Section 605. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Four, the Trustee may invest all moneys received by
the Trustee, until used or applied as herein provided,
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in Temporary Cash Investments in accordance with the written directions of the
Company. The Trustee shall not be liable for any losses incurred in connection
with any investments made in accordance with this Section 605, unless the
Trustee acted with gross negligence or in bad faith. With respect to any losses
on investments made under this Section 605, the Company is liable for the full
extent of any such loss.
Section 606. Compensation and Indemnification of Trustee and Its Prior
Claim.
The Company covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, such compensation for all services
rendered by it hereunder (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) set forth in a
letter agreement executed by the Company and the Trustee, as such agreement may
be amended or supplemented, and the Company covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on behalf
of it in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
The Company also covenants to indemnify the Trustee and each predecessor Trustee
for, and to hold it harmless against, any loss, liability, tax, assessment or
other governmental charge (other than taxes applicable to the Trustee's
compensation hereunder) or expense incurred without negligence or bad faith on
such Trustee's part, arising out of or in connection with the acceptance or
administration of this Indenture or the trusts hereunder and such Trustee's
duties hereunder, including enforcement of this Indenture and also including any
liability which the Trustee may incur as a result of failure to withhold, pay or
report any tax, assessment or other governmental charge, and the costs and
expenses of defending itself against or investigating any claim of liability
(whether asserted by any Holder, the Company or any other Person) in connection
with the exercise or performance of any of its powers or duties under this
Indenture. The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute an additional obligation hereunder and shall survive the
satisfaction and discharge of this Indenture.
All payments and reimbursements pursuant to this Section 606 shall be made
with interest at the rate borne by the Securities.
As security for the performance of the obligations of the Company under
this Section 606, the Trustee shall have a Lien prior to the Securities of any
series upon all property and funds held or collected by the Trustee, except
funds held in trust for the payment of principal of (and premium, if any) or
interest on particular Securities. The
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Trustee's right to receive payment of any amounts due under this Section 606
shall not be subordinate to any other liability or indebtedness of the Company
(even though the Securities of any series may be so subordinate), and the
Securities of any series shall be subordinate to the Trustee's right to receive
such payment.
Section 607. Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the Trust
Indenture Act.
Section 608. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible to
act as trustee under Trust Indenture Act Section 310(a)(1) and which shall have
a combined capital and surplus of at least $250,000,000, to the extent there is
an institution eligible and willing to serve. The Trustee shall be a participant
in the Depository Trust Company and FAST distribution systems. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect hereinafter specified in this
Article. The Corporate Trust Office shall initially be located at First Union
National Bank of Maryland, 901 East Cary Street, Richmond, Virginia 23219.
Section 609. Resignation and Removal; Appointment of Successor Trustee.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor trustee under Section 610.
(b) The Trustee, or any trustee or trustees hereafter appointed, may at any
time resign by giving written notice thereof to the Company. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee by
written instrument executed by authority of the Board of Directors of the
Company, a copy of which shall be delivered to the resigning Trustee and a copy
to the successor trustee. If an instrument of acceptance by a successor trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may, or any Holder who has
been a bona fide Holder of a Security of the applicable series for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor trustee. Such
court
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may thereupon, after such notice, if any, as it may deem proper, appoint a
successor trustee.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by an Act of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of that series, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Trust
Indenture Act Section 310(b) after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Security for at least
six months, or
(2) the Trustee shall cease to be eligible under Section 608 and shall
fail to resign after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the Trustee,
or (ii) subject to Section 514, the Holder of any Security who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(e) If the Trustee shall be removed or become incapable of acting, or if a
vacancy shall occur in the office of Trustee for any cause, with respect to the
Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor trustee with respect to the Securities of that or
those series (it being understood that any such successor Trustee may be
appointed with respect to the Securities of one or more or all series and that
at any time there shall be only one Trustee with respect to the Securities of
any particular series). If, within one year after such removal or incapability,
or the occurrence of such vacancy, a successor trustee with respect to the
Securities of any series shall be appointed by Act of the Holders of a majority
in principal amount of the Outstanding Securities of that series delivered to
the Company and the retiring Trustee, the successor trustee so appointed shall,
forthwith upon its acceptance of such
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appointment, become the successor Trustee with respect to the Securities of that
series and to that extent supersede the successor trustee appointed by the
Company. If no successor Trustee with respect to the Securities of that series
shall have been so appointed by the Company or the Holders of the Securities of
that series and accepted appointment in the manner hereinafter provided, the
Holder of any Security of such series who has been a bona fide Holder for at
least six months may, subject to Section 514, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of that
series.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Securities of the affected series as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor trustee
and the address of its Corporate Trust Office or agent hereunder.
Section 610. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee with respect to
all Securities, such successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee as if originally named as
Trustee hereunder; but, nevertheless, on the written request of the Company or
the successor trustee, upon payment of its charges then unpaid, such retiring
Trustee shall, pay over to the successor trustee all moneys at the time held by
it hereunder and shall execute and deliver an instrument transferring to such
successor trustee all such rights, powers, duties and obligations. Upon request
of any such successor trustee, the Company shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor trustee
all such rights and powers. Any Trustee ceasing to act shall, nevertheless,
retain a prior claim upon all property or funds held or collected by such
Trustee or such successor trustee to secure any amounts then due such Trustee
pursuant to the provisions of Section 606.
In case of the appointment hereunder of a successor Trustee with respect to
the Securities of one or more (but not all) series, the Company, the Guarantors,
the retiring Trustee and each successor Trustee with respect to the Securities
of such one or more series shall execute and deliver an indenture supplemental
hereto wherein such successor Trustee shall accept such appointment and which
(1) shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, such successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the
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Securities of that or those series to which the appointment of such successor
Trustee relates, (2) if the retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company, any Guarantor or any
successor Trustee, such retiring Trustee shall duly assign, transfer and deliver
to such successor Trustee all property and money held by such retiring Trustee
hereunder with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates.
Upon request of any such successor Trustee, the Company and the Guarantors
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Trustee with respect to the Securities of any series shall
accept appointment as provided in this Section 610 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Trust Indenture Act Section 310(a) and this Article Sixth and
shall have a combined capital and surplus of at least $250,000,000 and have a
Corporate Trust Office or an agent selected in accordance with Section 608.
Upon acceptance of appointment by any successor Trustee with respect to the
Securities of any particular series as provided in this Section 610, the Company
shall give notice thereof to the Holders of the Securities of any series
affected, by mailing such notice to such Holders at their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
609. If the Company fails to give such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Company.
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Section 611. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be eligible under Trust Indenture Act Section
310(a) and this Article Sixth and shall have a combined capital and surplus of
at least $250,000,000 and have a Corporate Trust Office or an agent selected in
accordance with Section 608 without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of any series shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and deliver
such Securities so authenticated; and, in case at that time any of the
Securities of that series shall not have been authenticated, any successor to
the Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor trustee; and in all such
cases such certificate shall have the full force which it is anywhere in the
Securities of any series or in this Indenture provided that the certificate of
the Trustee shall have; provided that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Securities of that
series in the name of any predecessor Trustee shall apply only to its successor
or successors by merger, conversion or consolidation.
Section 612. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
other obligor under the Securities of any series), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor). A Trustee who has resigned or
been removed shall be subject to the Trust Indenture Act Section 311(a) to the
extent indicated therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
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(a) semiannually, not more than 15 days after each Regular Record Date, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Company of any such request, a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished;
provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
Holders may communicate pursuant to Trust Indenture Act Section 312(b) with
other Holders with respect to their rights under this Indenture or the
Securities, and the Trustee shall comply with Trust Indenture Act Section
312(b). The Company, the Trustee, the Security Registrar and any other Person
shall have the protection of Trust Indenture Act Section 312(c). Every Holder of
Securities of any series, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any agent
of either of them shall be held accountable by reason of the disclosure of any
information as to the names and addresses of the Holders in accordance with
Trust Indenture Act Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Trust Indenture
Act Section 312.
Section 703. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first May 15
after the first issuance of Securities of each series, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, as provided in Trust Indenture Act Section 313(c), a brief
report dated as of such May 15 in accordance with and to the extent required by
Trust Indenture Act Section 313(a).
Section 704. Reports by Company and Guarantors.
The Company and any Guarantor shall:
(a) file with the Trustee, within 15 days after the Company or any
Guarantor, as the case may be, is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company or any
Guarantor may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the
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Company or any Guarantor, as the case may be, is not required to file
information, documents or reports pursuant to either of said Sections, then it
shall file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with the rules
and regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company or
any Guarantor, as the case may be, with the conditions and covenants of this
Indenture as may be required from time to time by such rules and regulations;
and
(c) transmit or cause to be transmitted by mail to all Holders, as their
names and addresses appear in the Security Register, within 30 days after the
filing thereof with the Trustee, in the manner and to the extent provided in
Trust Indenture Act Section 313(c), such summaries of any information, documents
and reports required to by filed by the Company or any Guarantor, as the case
may be, pursuant to Subsections (a) and (b) of this Section as may be required
by rules and regulations prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER,
CONVEYANCE, TRANSFER OR LEASE
Section 801. Company or Any Guarantor May Consolidate, etc., Only on
Certain Terms.
Unless otherwise provided pursuant to Section 301:
(a) The Company shall not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person or
sell, assign, convey, transfer or lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety 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
disposal 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
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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 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
Securities and this Indenture, and this 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 this 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 this Indenture) could incur $1.00 of additional Indebtedness
under any applicable provisions of the Indenture limiting incurrence of
indebtedness and established pursuant to Section 301;
(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
this Indenture and the Securities;
(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
the Indenture limiting liens (established pursuant to Section 301) 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
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Trustee, an Officers' Certificate and an Opinion of Counsel, each to the
effect that such consolidation, merger, transfer, sale, assignment,
conveyance, lease or other transaction and the supplemental indenture in
respect thereto comply with this Indenture and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
(b) If any Securities of any series are guaranteed pursuant to Article
Thirteen, each Guarantor, if any, shall not, and the Company shall not permit a
Guarantor to, in a single transaction or through a 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 an indenture
supplemental hereto, executed and delivered to the Trustee, in a form
reasonably satisfactory to the Trustee, all the obligations of such
Guarantor under its Guarantees and this 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 this Indenture, and thereafter all
obligations of the predecessor shall terminate.
Section 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company or any Guarantor in accordance with Section 801, the
successor Person formed by such consolidation or into which the Company or such
Guarantor, as the case may be, is merged or the successor Person to which such
sale, assignment, conveyance, transfer,
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lease or disposition is made 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, under this Indenture, the Securities of any series and/or such
Guarantee, as the case may be, with the same effect as if such successor had
been named as the Company or such Guarantor, as the case may be, herein, in the
Securities of that series and/or in such Guarantee, as the case may be. When a
successor assumes all the obligations of its predecessor under this Indenture,
the Securities of any series or a Guarantee, as the case may be, the predecessor
shall be released from those obligations; provided that in the case of a
transfer by lease, the predecessor shall not be released from the payment of
principal and interest on the Securities of any series or a Guarantee, as the
case may be.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent of
Holders.
Unless otherwise provided for in Section 301, without the consent of any
Holders, the Company and the Guarantors, when authorized by a Board Resolution,
and the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto or agreements or other instruments with respect
to any Guarantee, in form and substance satisfactory to the Trustee, for any of
the following purposes:
(a) cause the Indenture to be qualified under the Trust Indenture Act
("TIA") or to add provisions expressly required under the TIA;
(b) evidence the succession of another Person to the Company, any Guarantor
or other obligor upon the Securities and the assumption by any such successor of
the covenants of the Company, any Guarantor or other obligor upon the Securities
under the Indenture and in the Securities of any series;
(c) add to the covenants of the Company, any Guarantor or other obligor
upon the Securities for the benefit of the Holders (and if such covenants are to
be for the benefit of less than all series of 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 Securities, or
surrender any right or power conferred upon the Company;
(d) to secure the Securities of any series thereof;
(e) to add to or change any provisions to such extent as necessary to
facilitate the issuance or administration of Securities in bearer form or to
facilitate the issuance or administration of Securities in global form;
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(f) to change or eliminate any provision affecting only series of
Securities not yet issued;
(g) to establish the form or terms of Securities and Guarantee, if any, of
any series;
(h) 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
Securities;
(i) to permit payment in respect of Securities in bearer form in the United
States to the extent allowed by law;
(j) to make provision with respect to any conversion or exchange rights of
holders not adverse to the holders of any Securities of any series then
outstanding with such conversion or exchange rights which provision directly
effects any such series, including providing for the conversion or exchange of
Securities into Common Stock or Preferred Stock;
(k) 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 modifications or amendment may adversely affect the interest of holders of
Securities of any series then outstanding in any material respect; or
(l) to add a Guarantor pursuant to the requirements of Article Thirteen.
Section 902. Supplemental Indentures and Agreements with Consent of
Holders.
Unless otherwise provided pursuant to Section 301, with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities of all series affected, by Act of said Holders delivered
to the Company, each Guarantor, and the Trustee, the Company and each Guarantor
(if a party thereto), when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto or agreements or other
instruments with respect to any Guarantee in form and substance satisfactory to
the Trustee for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of modifying in
any manner the rights of the Holders under this Indenture, the Securities or any
Guarantee; provided, however, that no such supplemental indenture, agreement or
instrument shall, without the consent of the Holder of each Outstanding Security
of all series affected thereby:
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(a) change the Stated Maturity of the principal of, or any installment of
interest on, any 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 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);
(b) reduce the percentage in principal amount of the Outstanding 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 this Indenture or certain defaults or with
respect to any Guarantee;
(c) modify any of the provisions of this Section, Section 513 or Section
1009, except to increase the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such actions or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Security affected thereby;
(d) except as otherwise permitted under Article Eight, consent to the
assignment or transfer by the Company or any Guarantor of any of its rights and
obligations under this Indenture; or
(e) modify the ranking or priority of any Security or the Guarantee in
respect thereof of any Guarantor in any manner adverse to the holders of the
Securities.
Upon the written request of the Company and each Guarantor, accompanied by
a copy of a Board Resolution authorizing the execution of any such supplemental
indenture or Guarantee, and upon the filing with the Trustee of evidence of the
consent of Holders as aforesaid, the Trustee shall, subject to Section 903, join
with the Company and each Guarantor in the execution of such supplemental
indenture or Guarantee.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture or Guarantee
or agreement or instrument relating to any Guarantee, but it shall be sufficient
if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement or instrument permitted by this Article or the
modifications thereby of the trusts created by this Indenture, the Trustee shall
be entitled to receive, and (subject to Trust Indenture Act Section 315(a)
through 315(d) and Section 602 hereof) shall be fully protected in relying upon,
an Opinion of Counsel and an Officers' Certificate stating
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that the execution of such supplemental indenture, agreement or instrument is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture, agreement or
instrument which affects the Trustee's own rights, duties or immunities under
this Indenture, any Guarantee or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities of each series theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of each series authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities of each series so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any such supplemental
indenture may be prepared and executed by the Company and each Guarantor and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of that series.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
Subject to the provisions of Article Thirteen, if applicable, the Company
will duly and punctually pay the principal of, premium, if any, and interest on
each series of the Securities in accordance with the terms of the Securities of
each series and this Indenture.
Section 1002. Maintenance of Office or Agency.
Unless otherwise provided pursuant to Section 301, the Company will
maintain an office or agency where Securities of each series may be presented or
surrendered for payment. The Company also will maintain an office or agency
where Securities of each series may be surrendered for registration of transfer,
redemption or exchange and where notices and demands to or upon the Company in
respect of the Securities of each
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series and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location and any change in the location of any such
offices or agencies. If at any time the Company shall fail to maintain any such
required offices or agencies or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the office of the agent of the Trustee described above and the
Company hereby appoints such agent as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices or
agencies where the Securities of each series may be presented or surrendered for
any or all such purposes, and may from time to time rescind such designation.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such office or
agency.
Procedures with respect to Bearer Securities in connection with the matters
addressed in this Section 1002 shall be set forth pursuant to Section 301.
Unless otherwise provided pursuant to Section 301, the Trustee shall
initially serve as Paying Agent.
Section 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of, premium, if any, or interest on any
of the Securities of any series, segregate and hold in trust for the benefit of
the Holders entitled thereto a sum sufficient to pay the principal, premium, if
any, or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided, and will promptly notify the
Trustee of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company will, before each
due date of the principal of, premium, if any, or interest on any Securities of
any series, deposit with a Paying Agent or Paying Agents, as the case may be, a
sum in same day funds sufficient to pay the principal, premium, if any, or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of such
action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will cause each
Paying Agent other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will:
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(a) hold all sums held by it for the payment of the principal of, premium,
if any, or interest on Securities of any series in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company or any Guarantor
(or any other obligor upon the Securities of any series) in the making of any
payment of principal, premium, if any, or interest;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and disabilities of
such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, including each
Guarantor, upon the Securities of any series or the property of the Company or
of such other obligor or their creditors, the Trustee shall serve as the Paying
Agent.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Security of any series and remaining unclaimed for two years
after such principal and premium, if any, or interest has become due and payable
shall promptly be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in The New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification
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or publication, any unclaimed balance of such money then remaining will promptly
be repaid to the Company.
Section 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence and related rights and franchises (charter and statutory) of the
Company and each Subsidiary; provided, however, that the Company shall not be
required to preserve any such right or franchise or the corporate existence of
any such Subsidiary if the Board of Directors of the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the loss
thereof would not reasonably be expected to have a material adverse effect on
the ability of the Company to perform its obligations hereunder; and provided,
further, however, that the foregoing shall not prohibit a sale, transfer or
conveyance of a Subsidiary or any of its assets in compliance with the terms of
this Indenture.
Section 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged, on or
before the date the same shall become due and payable, (a) all taxes,
assessments and governmental charges levied or imposed upon the Company or any
Subsidiary shown to be due on any return of the Company or any Subsidiary or
otherwise assessed or upon the income, profits or property of the Company or any
Subsidiary if failure to pay or discharge the same could reasonably be expected
to have a material adverse effect on the ability of the Company or any
Guarantor, if any, to perform its obligations hereunder and (b) all lawful
claims for labor, materials and supplies, which, if unpaid, would by law become
a lien upon the property of the Company or any Subsidiary; provided, however,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted and in respect of which
appropriate reserves (in the good faith judgment of management of the Company)
are being maintained in accordance with generally accepted accounting principles
consistently applied.
Section 1006. Maintenance of Properties.
The Company will cause all material properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order (ordinary wear and tear excepted) and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and
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improvements thereof, all as in the judgment of the Company may be consistent
with sound business practice and necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of the Company, desirable in the conduct of its business or
the business of any Subsidiary and not reasonably expected to have a material
adverse effect on the ability of the Company to perform its obligations
hereunder.
Section 1007. Insurance.
The Company will at all times keep all of its and its Subsidiaries'
properties which are of an insurable nature insured with insurers, believed by
the Company to be responsible, against loss or damage to the extent that
property of similar character is usually so insured by corporations similarly
situated and owning like properties.
Section 1008. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, on or before a date not more
than 60 days after the end of each fiscal quarter and not more than 120 days
after the end of each fiscal year of the Company ending after the date hereof, a
written statement signed by two executive officers of the Company, one of whom
shall be the principal executive officer, principal financial officer or
principal accounting officer of the Company, stating whether or not, after a
review of the activities of the Company during such year or such quarter and of
the Company's performance under this Indenture, to the best knowledge, based on
such review, of the signers thereof, the Company has fulfilled all its
obligations and is in compliance with all conditions and covenants under this
Indenture throughout such year or quarter, as the case may be, and, if there has
been a Default specifying each Default and the nature and status thereof.
(b) When any Default or Event of Default has occurred and is continuing, or
if the Trustee or any Holder or the trustee for or the holder of any other
evidence of Indebtedness of the Company or any Subsidiary gives any notice or
takes any other action with respect to a claimed default (other than with
respect to Indebtedness in the principal amount of less than $5,000,000), the
Company shall deliver to the Trustee by registered or certified mail or by
telegram, telex or facsimile transmission followed by hard copy an Officers'
Certificate specifying such Default, Event of Default, notice or other action
within five Business Days of its occurrence.
Section 1009. Waiver of Certain Covenants.
Unless otherwise provided pursuant to Section 301, the Company or any
Guarantor may, with respect to the Securities of any series, omit in any
particular instance to comply
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with any term, provision or condition set forth in any covenant provided
pursuant to Sections 301 or 901 for the benefit of the Holders of any series,
if, before or after the time for such compliance, the Holders of not less than a
majority in aggregate principal amount of the Securities of that series at the
time Outstanding shall, by Act of such Holders, waive such compliance in such
instance with such covenant, but no such waiver shall extend to or affect such
covenant except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.
Unless otherwise provided pursuant to Section 301, the Securities of each
series may be redeemed at the election of the Company, in whole or in part, at
any time as specified pursuant to Section 301, subject to the conditions, and at
the Redemption Price, specified in the form of Security of each series
(specified pursuant to Section 301), together with accrued and unpaid interest,
if any, to the Redemption Date.
Section 1102. Applicability of Article.
Redemption of Securities of each series at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
Section 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities of any series pursuant
to Section 1101 shall be evidenced by a Company Order and an Officers'
Certificate. In case of any redemption at the election of the Company, the
Company shall, not less than 45 nor more than 60 days prior to the Redemption
Date fixed by the Company (unless a shorter notice period shall be satisfactory
to the Trustee), notify the Trustee in writing of such Redemption Date and of
the principal amount of Securities of that series to be redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities of that series or portions thereof to be redeemed shall be
selected not more than 30 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities not previously called for redemption, pro rata, by
lot or such other method as the Trustee
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shall deem fair and reasonable, and the amounts to be redeemed may be equal to
$1,000 or any integral multiple thereof.
The Trustee shall promptly notify the Company and the Security Registrar in
writing of the Securities of each series selected for redemption and, in the
case of any Securities of that series selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Securities of any series (including
interest coupons, if any) shall relate, in the case of any Security of that
series (including interest coupons, if any) redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security of that series
(including interest coupons, if any) which has been or is to be redeemed.
Section 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities of the affected series to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities of any series are to be
redeemed, the identification of the particular Securities of that series to be
redeemed;
(d) in the case of a Security of any series to be redeemed in part, the
principal amount of such Security to be redeemed and that after the Redemption
Date upon surrender of such Security of that series, new Security or Securities
of that series in the aggregate principal amount equal to the unredeemed portion
thereof will be issued;
(e) that Securities of any series called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due and
payable upon each such Security or portion thereof, and that (unless the Company
shall default in payment of the Redemption Price) interest thereon shall cease
to accrue on and after said date;
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(g) the place or places where such Securities are to be surrendered for
payment of the Redemption Price; and
(h) the CUSIP number, if any, relating to such Securities.
Notice of redemption of Securities of any series to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
written request, by the Trustee in the name and at the expense of the Company.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the Holder receives such notice. In
any case, failure to give such notice to any Holder of any Security of any
series designated for redemption as a whole or in part, or any defect in any
such notice, shall not affect the validity of the proceedings for the redemption
of any other Security of any series.
Section 1106. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money in same day funds sufficient to pay the Redemption Price of and (except if
the Redemption Date shall be an Interest Payment Date) accrued interest on, all
the Securities or portions thereof which are to be redeemed on that date. When
the Redemption Date falls on an Interest Payment Date, payments of interest due
on such date are to be paid as provided hereunder as if no such redemption were
occurring.
Section 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities of the
series so to be redeemed shall, on the Redemption Date, become due and payable
at the Redemption Price therein specified and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price together with accrued interest to
the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such on the relevant Regular Record Dates according to the terms and the
provisions of Section 309.
If any Security of any series called for redemption shall not be so paid
upon surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate borne by such
Security.
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Procedures regarding the treatment of Holders of Bearer Securities with
respect to the matters addressed in this Section 1107 shall be provided pursuant
to Section 301.
Section 1108. Securities Redeemed or Purchased in Part.
Any Security of any series which is to be redeemed or purchased only in
part shall be surrendered to the Paying Agent at the office or agency maintained
for such purpose pursuant to Section 1002 (with, if the Company, the Security
Registrar or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company, the Security
Registrar or the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities of that series, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to,
and in exchange for, the unredeemed portion of the principal of the Security of
that series so surrendered that is not redeemed or purchased.
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture.
Unless otherwise provided pursuant to Section 301, this Indenture shall
cease to be of further effect (except as to surviving rights of registration of
transfer or exchange of Securities herein, rights to payment, rights to
conversion, and rights to replacement of stolen, lost or mutilated Securities
expressly provided for) and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(1) all the Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 308 or (ii) all
Securities for whose payment United States dollars have theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as provided
in Section 1003) have been delivered to the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the Trustee for
cancellation (x) have become due and payable, (y) will become due and
payable at their Stated Maturity within one year, or (z) are to be called
for redemption within
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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, in the case of (2)(x),(y) or (z)
above, has irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust for the purpose an amount in United States dollars
sufficient to pay and discharge the entire Indebtedness on the Securities
not theretofore delivered to the Trustee for cancellation, for the
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 hereunder 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 herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with and (ii) such satisfaction and discharge will not result in a
breach or violation of or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any Guarantor is
a party or by which the Company or any Guarantor is bound.
Opinions of Counsel required to be delivered under this Section may have
qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if United
States dollars shall have been deposited with the Trustee pursuant to subclause
(2) of Subsection (a) of this Section, the obligations of the Trustee under
Section 1202 and the last paragraph of Section 1003 shall survive.
Section 1202. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all United
States dollars deposited with the Trustee pursuant to Section 1201 shall be held
in trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal of, premium, if
any, and interest on the Securities for whose payment such United States dollars
have been deposited with the Trustee.
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ARTICLE THIRTEEN
GUARANTEE
If, pursuant to Section 301, the Securities of any series are to be
guaranteed by any Guarantor, the following provisions, unless otherwise provided
pursuant to Section 301, shall apply. In this Article Thirteen, unless the
context otherwise requires, all references to Securities refers to the series of
Securities guaranteed by the Guarantors and all references to Indenture
Obligations refer to Indenture Obligations in respect of the series of
Securities so guaranteed. If no series of Securities are guaranteed, this
Article Thirteen and all references to Guarantees and Guarantors in this
Indenture shall have no force and effect.
Section 1301. Guarantors' Guarantee.
For value received, each of the Guarantors, in accordance with this Article
Thirteen, hereby absolutely, unconditionally and irrevocably guarantees, jointly
and severally, to the Trustee and the Holders, as if the Guarantors were the
principal debtor, the punctual payment and performance when due of all Indenture
Obligations (which for purposes of this Guarantee shall also be deemed to
include all commissions, fees, charges, costs and other expenses (including
reasonable legal fees and disbursements of one counsel in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances) arising out of or
incurred by the Trustee or the Holders in connection with the enforcement of
this Guarantee).
Section 1302. Continuing Guarantee; No Right of Set-Off; Independent
Obligation.
(a) This Guarantee shall be a continuing guarantee of the payment and
performance of all Indenture Obligations and shall remain in full force and
effect until the payment in full of all of the Indenture Obligations and shall
apply to and secure any ultimate balance due or remaining unpaid to the Trustee
or the Holders; and this Guarantee shall not be considered as wholly or
partially satisfied by the payment or liquidation at any time or from time to
time of any sum of money for the time being due or remaining unpaid to the
Trustee or the Holders. Each Guarantor, jointly and severally, covenants and
agrees to comply with all obligations, covenants, agreements and provisions
applicable to it in this Indenture including those set forth in Article Eight.
Without limiting the generality of the foregoing, each of the Guarantors'
liability shall extend to all amounts which constitute part of the Indenture
Obligations and would be owed by the Company under this Indenture and the
Securities but for the fact that they are
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unenforceable, reduced, limited, impaired, suspended or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving the
Company.
(b) Each Guarantor, jointly and severally, hereby guarantees that the
Indenture Obligations will be paid to the Trustee without set-off or
counterclaim or other reduction whatsoever (whether for taxes, withholding or
otherwise) in lawful currency of the United States of America.
(c) Each Guarantor, jointly and severally, guarantees that the Indenture
Obligations shall be paid strictly in accordance with their terms regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the holders of the Securities.
(d) Each Guarantor's liability under this Guarantee to pay or perform or
cause the performance of the Indenture Obligations shall arise forthwith after
demand for payment or performance by the Trustee has been given to the
Guarantors in the manner prescribed in Section 106 hereof.
(e) Except as provided herein, the provisions of this Article Thirteen
cover all agreements between the parties hereto relative to this Guarantee and
none of the parties shall be bound by any representation, warranty or promise
made by any Person relative thereto which is not embodied herein; and it is
specifically acknowledged and agreed that this Guarantee has been delivered by
each Guarantor free of any conditions whatsoever and that no representations,
warranties or promises have been made to any Guarantor affecting its liabilities
hereunder, and that the Trustee shall not be bound by any representations,
warranties or promises now or at any time hereafter made by the Company to any
Guarantor.
Section 1303. Guarantee Absolute.
The obligations of the Guarantors hereunder are independent of the
obligations of the Company under the Securities and this Indenture and a
separate action or actions may be brought and prosecuted against any Guarantor
whether or not an action or proceeding is brought against the Company and
whether or not the Company is joined in any such action or proceeding. The
liability of the Guarantors hereunder is irrevocable, absolute and unconditional
and (to the extent permitted by law) the liability and obligations of the
Guarantors hereunder shall not be released, discharged, mitigated, waived,
impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect of any
Indebtedness or other obligation of the Company or any other Person
under this Indenture or the Securities, or any agreement or instrument
relating to any of the foregoing;
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(b) any grants of time, renewals, extensions, indulgences, releases,
discharges or modifications which the Trustee or the Holders may
extend to, or make with, the Company, any Guarantor or any other
Person, or any change in the time, manner or place of payment of, or
in any other term of, all or any of the Indenture Obligations, or any
other amendment or waiver of, or any consent to or departure from,
this Indenture or the Securities, including any increase or decrease
in the Indenture Obligations;
(c) the taking of security from the Company, any Guarantor or any
other Person, and the release, discharge or alteration of, or other
dealing with, such security;
(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or
otherwise affecting, or purporting to amend, vary, reduce or otherwise
affect, any of the Indenture Obligations and the obligations of any
Guarantor hereunder;
(e) the abstention from taking security from the Company, any
Guarantor or any other Person or from perfecting, continuing to keep
perfected or taking advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any
security received from the Company, any Guarantor or any other Person,
and including any other guarantees received by the Trustee;
(g) any other dealings with the Company, any Guarantor or any other
Person, or with any security;
(h) the Trustee's or the Holders' acceptance of compositions from the
Company or any Guarantor;
(i) the application by the Holders or the Trustee of all monies at any
time and from time to time received from the Company, any Guarantor or
any other Person on account of any indebtedness and liabilities owing
by the Company or any Guarantor to the Trustee or the Holders, in such
manner as the Trustee or the Holders deems best and the changing of
such application in whole or in part and at any
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time or from time to time, or any manner of application of collateral,
if any, or proceeds thereof, to all or any of the Indenture
Obligations, or the manner of sale of any such collateral;
(j) the release or discharge of the Company or any Guarantor of the
Securities or of any Person liable directly as surety or otherwise by
operation of law or otherwise for the Securities, other than an
express release in writing given by the Trustee, on behalf of the
Holders, of the liability and obligations of any Guarantor hereunder;
(k) any change in the name, business, capital structure or governing
instrument of the Company or any Guarantor or any refinancing or
restructuring of any of the Indenture Obligations;
(l) the sale of the Company's or any Guarantor's business or any part
thereof;
(m) subject to Section 1314, any merger or consolidation, arrangement
or reorganization of the Company, any Guarantor, any Person resulting
from the merger or consolidation of the Company or any Guarantor with
any other Person or any other successor to such Person or merged or
consolidated Person or any other change in the corporate existence,
structure or ownership of the Company or any Guarantor;
(n) the insolvency, bankruptcy, liquidation, winding-up, dissolution,
receivership or distribution of the assets of the Company or its
assets or any resulting discharge of any obligations of the Company
(whether voluntary or involuntary) or of any Guarantor or the loss of
corporate existence;
(o) subject to Section 1314, any arrangement or plan of reorganization
affecting the Company or any Guarantor;
(p) any other circumstance (including any statute of limitations) that
might otherwise constitute a defense available to, or discharge of,
the Company or any Guarantor; or
(q) any modification, compromise, settlement or release by the
Trustee, or by operation of law or otherwise, of the Indenture
Obligations or the liability of the Company or any other obligor
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under the Securities, in whole or in part, and any refusal of payment
by the Trustee, in whole or in part, from any other obligor or other
guarantor in connection with any of the Indenture Obligations, whether
or not with notice to, or further assent by, or any reservation of
rights against, each of the Guarantors.
Section 1304. Right to Demand Full Performance.
In the event of any demand for payment or performance by the Trustee from
any Guarantor hereunder, the Trustee or the Holders shall have the right to
demand its full claim and to receive all dividends or other payments in respect
thereof until the Indenture Obligations have been paid in full, and the
Guarantors shall continue to be jointly and severally liable hereunder for any
balance which may be owing to the Trustee or the Holders by the Company under
this Indenture and the Securities. The retention by the Trustee or the Holders
of any security, prior to the realization by the Trustee or the Holders of its
rights to such security upon foreclosure thereon, shall not, as between the
Trustee and any Guarantor, be considered as a purchase of such security, or as
payment, satisfaction or reduction of the Indenture Obligations due to the
Trustee or the Holders by the Company or any part thereof.
Section 1305. Waivers.
(a) Each Guarantor hereby expressly waives (to the extent permitted by law)
notice of the acceptance of this Guarantee and notice of the existence, renewal,
extension or the non-performance, non-payment, or non-observance on the part of
the Company of any of the terms, covenants, conditions and provisions of this
Indenture or the Securities or any other notice whatsoever to or upon the
Company or such Guarantor with respect to the Indenture Obligations. Each
Guarantor hereby acknowledges communication to it of the terms of this Indenture
and the Securities and all of the provisions therein contained and consents to
and approves the same. Each Guarantor hereby expressly waives (to the extent
permitted by law) diligence, presentment, protest and demand for payment.
(b) Without prejudice to any of the rights or recourses which the Trustee
or the Holders may have against the Company, each Guarantor hereby expressly
waives (to the extent permitted by law) any right to require the Trustee or the
Holders to:
(i) initiate or exhaust any rights, remedies or recourse against the
Company, any Guarantor or any other Person;
(ii) value, realize upon, or dispose of any security of the Company or
any other Person held by the Trustee or the Holders; or
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(iii) initiate or exhaust any other remedy which the Trustee or the
Holders may have in law or equity;
before requiring or becoming entitled to demand payment from such Guarantor
under this Guarantee.
(c) With respect to this Section 1305, to the extent applicable to any
Guarantor, each Guarantor expressly waives application of Sections 26-7 through
26-9 of the North Carolina General Statutes.
Section 1306. The Guarantors Remain Obligated in Event the Company Is No
Longer Obligated to Discharge Indenture Obligations.
It is the express intention of the Trustee and the Guarantors that if for
any reason the Company has no legal existence, is or becomes under no legal
obligation to discharge the Indenture Obligations owing to the Trustee or the
Holders by the Company or if any of the Indenture Obligations owing by the
Company to the Trustee or the Holders becomes irrecoverable from the Company by
operation of law or for any reason whatsoever, this Guarantee and the covenants,
agreements and obligations of the Guarantors contained in this Article Thirteen
shall nevertheless be binding upon the Guarantors, as principal debtor, until
such time as all such Indenture Obligations have been paid in full to the
Trustee and all such Indenture Obligations owing to the Trustee or the Holders
by the Company have been discharged, or such earlier time as Section 402 shall
apply to the Securities and the Guarantors shall be responsible for the payment
thereof to the Trustee or the Holders upon demand.
Section 1307. Fraudulent Conveyance; Contribution Subrogation.
(a) Each Guarantor that is a Subsidiary of the Company, and by its
acceptance hereof each Holder, hereby confirms that it is the intention of all
such parties that the Guarantee by such Guarantor pursuant to its Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar federal or state law. To effectuate the foregoing intention, the
Holders and such Guarantor hereby irrevocably agree that the obligations of such
Guarantor under its Guarantee shall be limited to the maximum amount which,
after giving effect to all other contingent and fixed liabilities of such
Guarantor, and after giving effect to any collections from or payments made by
or on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
this Indenture, will result in the obligations of such Guarantor under its
Guarantee not constituting such fraudulent transfer or conveyance.
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(b) Each Guarantor that makes a payment or distribution under its Guarantee
shall be entitled to a contribution from each other Guarantor, if any, in a pro
rata amount based on the net assets of each Guarantor, determined in accordance
with GAAP.
(c) Each Guarantor hereby waives all rights of subrogation or contribution,
whether arising by contract or operation of law (including, without limitation,
any such right arising under federal bankruptcy law) or otherwise by reason of
any payment by it pursuant to the provisions of this Article Thirteen.
Section 1308. Guarantee Is in Addition to Other Security.
This Guarantee shall be in addition to and not in substitution for any
other guarantees or other security which the Trustee may now or hereafter hold
in respect of the Indenture Obligations owing to the Trustee or the Holders by
the Company and (except as may be required by law) the Trustee shall be under no
obligation to marshal in favor of each of the Guarantors any other guarantees or
other security or any moneys or other assets which the Trustee may be entitled
to receive or upon which the Trustee or the Holders may have a claim.
Section 1309. Release of Security Interests.
Without limiting the generality of the foregoing and except as otherwise
provided in this Indenture, each Guarantor hereby consents and agrees, to the
fullest extent permitted by applicable law, that the rights of the Trustee
hereunder, and the liability of the Guarantors hereunder, shall not be affected
by any and all releases for any purpose of any collateral, if any, from the
Liens and security interests created by any collateral document and that this
Guarantee shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Indenture Obligations is rescinded or
must otherwise be returned by the Trustee upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had not
been made.
Section 1310. No Bar to Further Actions.
Except as provided by law, no action or proceeding brought or instituted
under Article Thirteen and this Guarantee and no recovery or judgment in
pursuance thereof shall be a bar or defense to any further action or proceeding
which may be brought under Article Thirteen and this Guarantee by reason of any
further default or defaults under Article Thirteen and this Guarantee or in the
payment of any of the Indenture Obligations owing by the Company.
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Section 1311. Failure to Exercise Rights Shall Not Operate as a Waiver; No
Suspension of Remedies.
(a) No failure to exercise and no delay in exercising, on the part of the
Trustee or the Holders, any right, power, privilege or remedy under this Article
Thirteen and this Guarantee shall operate as a waiver thereof, nor shall any
single or partial exercise of any rights, power, privilege or remedy preclude
any other or further exercise thereof, or the exercise of any other rights,
powers, privileges or remedies. The rights and remedies herein provided for are
cumulative and not exclusive of any rights or remedies provided in law or
equity.
(b) Nothing contained in this Article Thirteen shall limit the right of the
Trustee or the Holders to take any action to accelerate the maturity of the
Securities pursuant to Article Five or to pursue any rights or remedies
hereunder or under applicable law.
Section 1312. Trustee's Duties; Notice to Trustee.
(a) Any provision in this Article Thirteen or elsewhere in this Indenture
allowing the Trustee to request any information or to take any action authorized
by, or on behalf of any Guarantor, shall be permissive and shall not be
obligatory on the Trustee except as the Holders may direct in accordance with
the provisions of this Indenture or where the failure of the Trustee to request
any such information or to take any such action arises from the Trustee's
negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into the existence, powers
or capacities of the Company, any Guarantor or the officers, directors or agents
acting or purporting to act on their respective behalf.
Section 1313. Successors and Assigns.
All terms, agreements and conditions of this Article Thirteen shall extend
to and be binding upon each Guarantor and its successors and permitted assigns
and shall enure to the benefit of and may be enforced by the Trustee and its
successors and assigns; provided, however, that the Guarantors may not assign
any of their rights or obligations hereunder other than in accordance with
Article Eight.
Section 1314. Release of Guarantee.
Concurrently with the payment in full of all of the Indenture Obligations,
the Guarantors shall be released from and relieved of their obligations under
this Article Thirteen. Upon the delivery by the Company to the Trustee of an
Officer's Certificate and, if requested by the Trustee, an Opinion of Counsel to
the effect that the transaction
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giving rise to the release of this Guarantee was made by the Company in
accordance with the provisions of this Indenture and the Securities, the Trustee
shall execute any documents reasonably required in order to evidence the release
of the Guarantors from their obligations under this Guarantee. If any of the
Indenture Obligations are revived and reinstated after the termination of this
Guarantee, then all of the obligations of the Guarantors under this Guarantee
shall be revived and reinstated as if this Guarantee had not been terminated
until such time as the Indenture Obligations are paid in full, and each
Guarantor shall enter into an amendment to this Guarantee, reasonably
satisfactory to the Trustee, evidencing such revival and reinstatement.
This Guarantee shall terminate with respect to each Guarantor and shall be
automatically and unconditionally released and discharged under any
circumstances set forth pursuant to Section 301.
Section 1315. Execution of Guarantee.
To evidence the Guarantee, each Guarantor hereby agrees to execute the
guarantee substantially in the form set forth in Section 204, to be endorsed on
each Security authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of each Guarantor by its Chairman of the Board, its
President, or one of its Vice Presidents and attested by its Secretary or one of
its Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
SINCLAIR BROADCAST GROUP, INC.,
as Issuer
Attest _______________________________ By:__________________________________
Name: Name:
Title: Title:
FIRST UNION NATIONAL BANK, as Trustee
By:__________________________________
Name:
Title:
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STATE OF ___________________________)
) ss.:
COUNTY OF __________________________)
On the ___ day of July, 1997, before me personally came
_____________________ , to me known, who, being by me duly sworn, did depose and
say that he resides at _______________________ ; that he is ________________ of
Sinclair Broadcast Group, Inc., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto pursuant to
authority of the Boards of Directors of such corporation.
(NOTARIAL
SEAL)
-------------------------
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STATE OF ___________________________)
) ss.:
COUNTY OF __________________________)
On the __ day of July, 1997, before me personally came
_____________________ , to me known, who, being by me duly sworn, did depose and
say that he resides at _______________________; that he is an authorized officer
of First Union National Bank, one of the corporations described in and which
executed the above instrument; that he knows the corporate seal of such
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed pursuant to authority of the Board of Directors of such
corporation; and that he signed his name thereto pursuant to like authority.
(NOTARIAL
SEAL)
-------------------------
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DRAFT
9/9/97
SINCLAIR BROADCAST GROUP, INC., as Issuer,
and
FIRST UNION NATIONAL BANK, as Trustee
SUBORDINATED INDENTURE
Dated as of ___________, 1997
Providing for Issuance of
Subordinated Debt Securities in Series
<PAGE>
TABLE OF CONTENTS
PAGE
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PARTIES ................................................................. 1
RECITALS ................................................................ 1
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION ..... 1
Section 101. Definitions ................................................ 1
"Affiliate" ................................................ 2
"Bank Credit Agreement" .................................... 2
"Bankruptcy Law" ........................................... 2
"Bearer Security" .......................................... 3
"Board of Directors" ....................................... 3
"Board Resolution" ......................................... 3
"Business Day" ............................................. 3
"Capital Lease Obligation" ................................. 3
"Cash Equivalents" ......................................... 3
"Code" ..................................................... 4
"Commission" ............................................... 4
"Company" .................................................. 4
"Company Request" or "Company Order" ....................... 4
"Consolidated Net Worth" ................................... 4
"Corporate Trust Office" ................................... 4
"Default" .................................................. 4
"Depositary" ............................................... 4
"Designated Guarantor Senior Indebtedness" ................. 4
"Designated Senior Indebtedness" ........................... 5
"Disqualified Equity Interests" ............................ 5
"Equity Interest" .......................................... 5
"Event of Default" ......................................... 5
"Exchange Act" ............................................. 5
"Existing Notes" ........................................... 5
"Fair Market Value" ........................................ 5
"Film Contract" ............................................ 6
"Founders' Notes" .......................................... 6
"Generally Accepted Accounting Principles" or "GAAP" ....... 6
"Global Security" .......................................... 6
"Guarantee" ................................................ 6
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"Guaranteed Debt" .......................................... 6
"Guarantor" ................................................ 6
"Guarantor Senior Indebtedness" ............................ 7
"Holder" ................................................... 7
"Indebtedness" ............................................. 7
"Indenture" ................................................ 9
"Indenture Obligations" .................................... 9
"Independent Director" ..................................... 9
"Interest Payment Date" .................................... 9
"Interest Rate Agreements" ................................. 9
"Investments" .............................................. 9
"Lien" ..................................................... 9
"Maturity" ................................................. 10
"Moody's" .................................................. 10
"Non-payment Default" ...................................... 10
"Officers' Certificate" .................................... 10
"Opinion of Counsel" ....................................... 10
"Opinion of Independent Counsel" ........................... 10
"Original Issue Discount Security" ......................... 10
"Outstanding" .............................................. 10
"Pari Passu Indebtedness" .................................. 11
"Paying Agent" ............................................. 11
"Payment Default" .......................................... 11
"Permitted Guarantor Junior Securities" .................... 11
"Permitted Junior Securities" .............................. 12
"Person" ................................................... 12
"Predecessor Security" ..................................... 12
"Preferred Equity Interest" ................................ 12
"Qualified Equity Interests" ............................... 13
"Redemption Date" .......................................... 13
"Redemption Price" ......................................... 13
"Regular Record Date" ...................................... 13
"Responsible Officer" ...................................... 13
"Restricted Subsidiary" .................................... 13
"S&P" ...................................................... 13
"Securities" ............................................... 13
"Securities Act" ........................................... 13
"Security Register" and "Security Registrar" ............... 13
"Senior Indebtedness" ...................................... 13
"Special Record Date" ...................................... 14
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"Stated Maturity" .......................................... 14
"Subordinated Indebtedness" ................................ 14
"Subsidiary" ............................................... 14
"Successor Security" ....................................... 14
"Temporary Cash Investments" ............................... 15
"Trust Indenture Act" ...................................... 15
"Trustee" .................................................. 15
"U.S. Person" .............................................. 15
"Unrestricted Subsidiary" .................................. 15
"Voting Stock" ............................................. 15
Section 102. Other Definitions .......................................... 16
Section 103. Compliance Certificates and Opinions ....................... 16
Section 104. Form of Documents Delivered to Trustee ..................... 17
Section 105. Acts of Holders ............................................ 18
Section 106. Notices, etc., to Trustee, the Company and any Guarantor ... 19
Section 107. Notice to Holders; Waiver .................................. 20
Section 108. Conflict with Trust Indenture Act .......................... 20
Section 109. Effect of Headings and Table of Contents ................... 20
Section 110. Successors and Assigns ..................................... 21
Section 111. Separability Clause ........................................ 21
Section 112. Benefits of Indenture ...................................... 21
Section 113. Governing Law .............................................. 21
Section 114. Legal Holidays ............................................. 21
Section 115. Schedules and Exhibits ..................................... 21
Section 116. Counterparts ............................................... 22
ARTICLE TWO SECURITY FORMS .............................................. 22
Section 201. Forms Generally ............................................ 22
Section 202. Form of and Provisions Required in Global Security ......... 23
Section 203. Form of Trustee's Certificate of Authentication ............ 23
Section 204. Form of Guarantee of Each of the Guarantors ................ 24
ARTICLE THREE THE SECURITIES ............................................ 25
Section 301. Amount Unlimited; Issuable in Series ....................... 25
Section 302. Denominations .............................................. 29
Section 303. Execution, Authentication, Delivery and Dating ............. 30
Section 304. Temporary Securities ....................................... 31
Section 305. Global Securities .......................................... 32
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Section 306. Registration, Registration of Transfer and Exchange ........ 33
Section 307. Mutilated, Destroyed, Lost and Stolen Securities ........... 35
Section 308. [RESERVED] ................................................. 36
Section 309. Payment of Interest; Interest Rights Preserved ............. 36
Section 310. Persons Deemed Owners ...................................... 37
Section 311. Cancellation ............................................... 38
Section 312. Computation of Interest .................................... 38
Section 313. CUSIP Numbers .............................................. 38
ARTICLE FOUR DEFEASANCE AND COVENANT DEFEASANCE ......................... 39
Section 401. Company's Option to Effect Defeasance or Covenant Defeasance 39
Section 402. Defeasance and Discharge ................................... 39
Section 403. Covenant Defeasance ........................................ 40
Section 404. Conditions to Defeasance or Covenant Defeasance ............ 40
Section 405. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions ................... 43
Section 406. Reinstatement .............................................. 43
ARTICLE FIVE REMEDIES ................................................... 44
Section 501. Events of Default .......................................... 44
Section 502. Acceleration of Maturity; Rescission and Annulment ......... 46
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee .................................................... 48
Section 504. Trustee May File Proofs of Claim ........................... 49
Section 505. Trustee May Enforce Claims without Possession of Securities 49
Section 506. Application of Money Collected ............................. 50
Section 507. Limitation on Suits ........................................ 50
Section 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest ............................ 51
Section 509. Restoration of Rights and Remedies ......................... 51
Section 510. Rights and Remedies Cumulative ............................. 52
Section 511. Delay or Omission Not Waiver ............................... 52
Section 512. Control by Holders ......................................... 52
Section 513. Waiver of Past Defaults .................................... 52
Section 514. Undertaking for Costs ...................................... 53
Section 515. Waiver of Stay, Extension or Usury Laws .................... 53
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ARTICLE SIX THE TRUSTEE ................................................. 54
Section 601. Notice of Defaults ......................................... 54
Section 602. Certain Rights of Trustee .................................. 54
Section 603. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof .............. 55
Section 604. Trustee and Agents May Hold Securities; Collections; etc ... 56
Section 605. Money Held in Trust ........................................ 56
Section 606. Compensation and Indemnification of Trustee and Its Prior
Claim ...................................................... 56
Section 607. Conflicting Interests ...................................... 57
Section 608. Corporate Trustee Required; Eligibility .................... 57
Section 609. Resignation and Removal; Appointment of Successor Trustee .. 58
Section 610. Acceptance of Appointment by Successor ..................... 59
Section 611. Merger, Conversion, Consolidation or Succession to Business 61
Section 612. Preferential Collection of Claims Against Company .......... 62
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY ......... 62
Section 701. Company to Furnish Trustee Names and Addresses of Holders .. 62
Section 702. Disclosure of Names and Addresses of Holders ............... 62
Section 703. Reports by Trustee ......................................... 63
Section 704. Reports by Company and Guarantors .......................... 63
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE ...... 64
Section 801. Company or Any Guarantor May Consolidate, etc., Only on
Certain Terms .............................................. 64
Section 802. Successor Substituted ...................................... 66
ARTICLE NINE SUPPLEMENTAL INDENTURES .................................... 66
Section 901. Supplemental Indentures and Agreements without Consent of
Holders ................................................... 66
Section 902. Supplemental Indentures and Agreements with Consent of
Holders ................................................... 68
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Section 903. Execution of Supplemental Indentures and Agreements ....... 69
Section 904. Effect of Supplemental Indentures ......................... 69
Section 905. Conformity with Trust Indenture Act ....................... 69
Section 906. Reference in Securities to Supplemental Indentures ........ 70
Section 907. Effect on Senior Indebtedness ............................. 70
ARTICLE TEN COVENANTS ................................................... 70
Section 1001. Payment of Principal, Premium and Interest ................ 70
Section 1002. Maintenance of Office or Agency ........................... 70
Section 1003. Money for Security Payments to Be Held in Trust ........... 71
Section 1004. Corporate Existence ....................................... 73
Section 1005. Payment of Taxes and Other Claims ......................... 73
Section 1006. Maintenance of Properties ................................. 73
Section 1007. Insurance ................................................. 74
Section 1008. Statement by Officers as to Default ....................... 74
Section 1009. Waiver of Certain Covenants ............................... 74
ARTICLE ELEVEN REDEMPTION OF SECURITIES ................................. 75
Section 1101. Rights of Redemption ...................................... 75
Section 1102. Applicability of Article .................................. 75
Section 1103. Election to Redeem; Notice to Trustee ..................... 75
Section 1104. Selection by Trustee of Securities to Be Redeemed ......... 75
Section 1105. Notice of Redemption ...................................... 76
Section 1106. Deposit of Redemption Price ............................... 77
Section 1107. Securities Payable on Redemption Date ..................... 77
Section 1108. Securities Redeemed or Purchased in Part .................. 78
ARTICLE TWELVE SUBORDINATION OF SECURITIES .............................. 78
Section 1201. Securities Subordinate to Senior Indebtedness ............. 78
Section 1202. Payment Over of Proceeds Upon Dissolution, etc ............ 79
Section 1203. Suspension of Payment When Senior Indebtedness in Default . 80
Section 1204. Payment Permitted if No Default ........................... 81
Section 1205. Subrogation to Rights of Holders of Senior Indebtedness ... 82
Section 1206. Provisions Solely to Define Relative Rights ............... 82
Section 1207. Trustee to Effectuate Subordination ....................... 83
Section 1208. No Waiver of Subordination Provisions ..................... 83
-vi-
<PAGE>
PAGE
----
Section 1209. Notice to Trustee ......................................... 84
Section 1210. Reliance on Judicial Order or
Certificate of Liquidating Agent .......................... 85
Section 1211. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights .......................... 85
Section 1212. Article Applicable to Paying Agents ....................... 85
Section 1213. No Suspension of Remedies ................................. 85
Section 1214. Trustee's Relation to Senior Indebtedness ................. 86
ARTICLE THIRTEEN SATISFACTION AND DISCHARGE ............................. 86
Section 1301. Satisfaction and Discharge of Indenture ................... 86
Section 1302. Application of Trust Money ................................ 87
ARTICLE FOURTEEN GUARANTEE .............................................. 88
Section 1401. Guarantors' Guarantee ..................................... 88
Section 1402. Continuing Guarantee; No Right of Set-Off; Independent
Obligation ................................................ 88
Section 1403. Guarantee Absolute ........................................ 89
Section 1404. Right to Demand Full Performance .......................... 92
Section 1405. Waivers ................................................... 92
Section 1406. The Guarantors Remain Obligated in Event the
Company Is No Longer Obligated to Discharge
Indenture Obligations ..................................... 93
Section 1407. Fraudulent Conveyance; Contribution Subrogation ........... 93
Section 1408. Guarantee Is in Addition to Other Security ................ 94
Section 1409. Release of Security Interests ............................. 94
Section 1410. No Bar to Further Actions ................................. 94
Section 1411. Failure to Exercise Rights Shall Not Operate as a
Waiver; No Suspension of Remedies ......................... 95
Section 1412. Trustee's Duties; Notice to Trustee ....................... 95
Section 1413. Successors and Assigns .................................... 95
Section 1414. Release of Guarantee ...................................... 95
Section 1415. Execution of Guarantee .................................... 96
Section 1416. Guarantee Subordinate to Guarantor
Senior Indebtedness ....................................... 96
Section 1417. Payment Over of Proceeds Upon Dissolution
of the Guarantor, etc ..................................... 97
Section 1418. Default on Guarantor Senior Indebtedness .................. 98
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PAGE
----
Section 1419. Payment Permitted by Each of the Guarantors
if No Default ............................................. 99
Section 1420. Subrogation to Rights of Holders of Guarantor Senior
Indebtedness .............................................. 99
Section 1421. Provisions Solely to Define Relative Rights ............... 99
Section 1422. Trustee to Effectuate Subordination ....................... 100
Section 1423. No Waiver of Subordination Provisions ..................... 100
Section 1424. Notice to Trustee by Each of the Guarantors ............... 101
Section 1425. Reliance on Judicial Order or
Certificate of Liquidating Agent .......................... 102
Section 1426. Rights of Trustee as a Holder of Guarantor Senior
Indebtedness; Preservation of Trustee's Rights ............ 102
Section 1427. Article Applicable to Paying Agents ....................... 102
Section 1428. No Suspension of Remedies ................................. 103
Section 1429. Trustee's Relation to Guarantor Senior Indebtedness ....... 103
TESTIMONIUM
SIGNATURES AND SEALS
ACKNOWLEDGMENTS
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<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939, as amended,
and Indenture, dated as of _______, 1997
Trust Indenture Indenture
Act Section Section
----------- -------
ss. 310 (a)(1) ............................ 608
(a)(2) ............................ 608
(b) ............................ 607, 609
ss. 311 (a) ............................ 612
ss. 312 (a) ............................ 701
(b) ............................ 702
(c) ............................ 702
ss. 313 (a) ............................ 703
(c) ............................ 703, 704
ss. 314 (a) ............................ 704
(a)(4) ............................ 1008
(c)(1) ............................ 103, 104, 404, 1103
(c)(2) ............................ 103, 104, 404, 1103
(e) ............................ 103
ss. 315 (a) ............................ 602, 903
(b) ............................ 601
(c) ............................ 602
(d) ............................ 602
(e) ............................ 514
ss. 316 (a)(last sentence) ............................ 101 ("Outstanding")
(a)(1)(A) ............................ 502, 512
(a)(1)(B) ............................ 513
(b) ............................ 508
(c) ............................ 105
ss. 317 (a)(1) ............................ 503
(a)(2) ............................ 504
(b) ............................ 1003
ss. 318 (a) ............................ 108
- ----------
Note:This reconciliation and tie shall not, for any purpose, be deemed to be a
part of this Indenture.
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<PAGE>
INDENTURE, dated as of _____, 1997, between SINCLAIR BROADCAST GROUP, INC.,
a Maryland corporation (the "Company"), and FIRST UNION NATIONAL BANK, a
national banking association organized under the laws of the United States of
America, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its subordinated
debentures, notes or other evidences of indebtedness ("Securities") to be issued
in one or more series as herein provided.
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act that are required to be part of and to govern indentures
qualified under the Trust Indenture Act.
All acts and things necessary have been done to make (i) the Securities of
any series, when their terms have been determined in accordance with this
Indenture and when executed by the Company and authenticated and delivered
hereunder and duly issued by the Company, the valid obligations of the Company,
(ii) the Guarantees, if and when executed by each of the Guarantors and
delivered hereunder, the valid obligation of each of the Guarantors and (iii)
this Indenture a valid agreement of the Company and, if applicable, each of the
Guarantors in accordance with the terms of this Indenture.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of any series thereof,
as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or as set forth pursuant to Section 301 or unless the context otherwise
requires:
(a) the terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular;
<PAGE>
(b) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
(d) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(e) all references to $, US$, dollars or United States dollars shall refer
to the lawful currency of the United States of America.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any other Person that
owns, directly or indirectly, 5% or more of such Person's Equity Interest or any
officer or director of any such Person or other Person or, with respect to any
natural Person, any Person having a relationship with such Person or other
Person by blood, marriage or adoption not more remote than first cousin or (iii)
any other Person 10% or more of the voting Equity Interests of which are
beneficially owned or held directly or indirectly by such specified Person. For
the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person directly or indirectly, whether through ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Bank Credit Agreement" means the Third Amended and Restated Credit
Agreement, dated as of May 20, 1997, between the Company, the subsidiaries of
the Company identified on the signature pages thereof under the caption
"SUBSIDIARY GUARANTORS," the lenders named therein and The Chase Manhattan Bank,
as agent, as such agreement may be amended, renewed, extended, substituted,
refinanced, restructured, replaced, supplemented or otherwise modified from time
to time (including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing). For all purposes under this Indenture,
"Bank Credit Agreement" shall include any amendments, renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplements or any
other modifications that increase the principal amount of the Indebtedness or
the commitments to lend thereunder.
"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,
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<PAGE>
insolvency, receivership, winding-up, liquidation, reorganization or relief of
debtors or any amendment to, succession to or change in any such law.
"Bearer Security" means any Security issued hereunder which is payable to
bearer.
"Board of Directors" means the board of directors of the Company or any
Guarantor, as the case may be, or any duly authorized committee of such board.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company or any Guarantor, as the case may be,
to have been duly adopted by the Board of Directors of such entity and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York, the
State of Maryland or the city in which the Corporate Trust Office is located are
authorized or obligated by law or executive order to close.
"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.
"Cash Equivalents" means, (i) any evidence of Indebtedness with a maturity
of one year or less from the date of acquisition issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit
or acceptances with a maturity of one year or less from the date of acquisition
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$500,000,000; (iii) commercial paper with a maturity of one year or less from
the date of acquisition issued by a corporation that is not an Affiliate of the
Company organized under the laws of any state of the United States or the
District of Columbia and rated A-1 (or higher) according to S&P or P-1 (or
higher) according to Moody's or at least an equivalent rating category of
another nationally recognized securities rating agency; (iv) any money market
deposit accounts issued or offered by a domestic commercial bank having capital
and surplus in excess of $500,000,000; and (v) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of America or
issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one year from the date of
acquisition; provided that the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
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<PAGE>
Institutions With Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of this 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 Maryland, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Vice Chairman, its President or a Vice President (regardless of vice
presidential designation), and by any one of its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"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.
"Corporate Trust Office" means the office of the Trustee or an affiliate or
agent thereof at which at any particular time the corporate trust business for
the purposes of this Indenture shall be principally administered, which office
at the date of execution of this Indenture is located at First Union National
Bank, 901 East Cary Street, 2nd Floor, Richmond, Virginia 23219, Attention:
Patricia Welling.
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Depositary" means, with respect to the Securities issued in the form of
Global Securities, if any, The Depository Trust Company, a New York limited
purpose corporation, its nominees and successors, or any other Person designated
as the Depositary by the Company pursuant to Section 305(b), in each case
registered as a "clearing agency" under the Exchange Act and maintaining a
book-entry system that qualifies for treatment as "registered form" under
Section 163(f) of the Code.
"Designated Guarantor Senior Indebtedness" means (i) all Guarantor Senior
Indebtedness which guarantees Indebtedness under the Bank Credit Agreement and
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<PAGE>
(ii) any other Guarantor 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 Guarantor Senior Indebtedness or the agreement under which such
Senior Indebtedness arises as "Designated Guarantor Senior Indebtedness" by the
Guarantor which is the obligor under the Guarantor Senior Indebtedness.
"Designated Senior Indebtedness" means (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.
"Disqualified Equity Interests" means any Equity Interests that, either by
their terms or by the terms of any security into which they are convertible or
exchangeable or otherwise, are or upon the happening of an event or passage of
time would be required to be redeemed prior to any Stated Maturity of the
principal of the Securities or are redeemable at the option of the holder
thereof at any time prior to any such Stated Maturity, or are convertible into
or exchangeable for debt securities at any time prior to any such Stated
Maturity at the option of the holder thereof.
"Equity Interest" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such Person, including any Preferred Equity Interests.
"Event of Default" has the meaning specified in Article Five.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Notes" means the Company's 10% Senior Subordinated Notes due
2003, the Company's 10% Senior Subordinated Notes due 2005 and the Company's 9%
Senior Subordinated Notes due 2007.
"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.
-5-
<PAGE>
"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 this Indenture.
"Global Security" means a Security of any series in book entry form
evidencing all or part of the Securities of any series, issued to the Depositary
or its nominee and registered in the name of the Depositary or such nominee.
"Guarantee" means, in respect of the Securities of any series, the
guarantee, if any, by any Guarantor, if any, of the Company's Indenture
Obligations pursuant to a guarantee given in accordance with Section 301 of this
Indenture, including, without limitation, the Guarantees by the Guarantors, if
any, included in Article Fourteen of this Indenture.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
contained in this Section guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services without requiring that such property
be received or such services be rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor or (v) otherwise to assure a creditor
against loss; provided that the term "guarantee" shall not include endorsements
for collection or deposit, in either case in the ordinary course of business.
"Guarantor," as of any time, means, in respect of a series of Securities, a
Subsidiary which provides a Guarantee pursuant to Section 301 of the Indenture
or any other guarantor of the Indenture Obligations. Guarantors, if any, will be
listed as
-6-
<PAGE>
signatories to any supplemental indenture of any series of Securities which
provide for Guarantees.
"Guarantor Senior Indebtedness" means the principal of, premium, if any,
and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on any Indebtedness of
any Guarantor (other than as otherwise provided in this definition), whether
outstanding on the date of this Indenture or thereafter created, incurred or
assumed, and whether at any time owing, actually or contingent, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to 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
of the 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 this Indenture and (ix) Indebtedness owed by any Guarantor for
compensation to employees or for services.
"Holder" means a Person in whose name a Security of any series is
registered in the Security Register.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities
-7-
<PAGE>
arising in the ordinary course of business, but including, without limitation,
all obligations, contingent or otherwise, of such Person in connection with any
letters of credit issued under letter of credit facilities, acceptance
facilities or other similar facilities and in connection with any agreement to
purchase, redeem, exchange, convert or otherwise acquire for value any Equity
Interests of such Person, or any warrants, rights or options to acquire such
Equity Interests, now or hereafter outstanding, (ii) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments, (iii)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade payables arising in the ordinary course of business, (iv) all
obligations under Interest Rate Agreements of such Person, (v) all Capital Lease
Obligations of such Person, (vi) all Indebtedness referred to in clauses (i)
through (v) above of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien, upon or
with respect to property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, (vii) all Guaranteed Debt of such
Person, (viii) all Disqualified Equity Interests valued at the greater of their
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends, and (ix) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any liability of the types referred to in
clauses (i) through (viii) above; provided, however, that the term Indebtedness
shall not include any obligations of the Company and its 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 this Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified Equity
Interests, such Fair Market Value to be determined in good faith by the Board of
Directors of the issuer of such Disqualified Equity Interests.
-8-
<PAGE>
"Indenture" means this instrument as originally executed and as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively. The term
"Indenture" shall also include the terms of particular series of Securities
established as contemplated by Section 301.
"Indenture Obligations" means the obligations of the Company and any other
obligor under this Indenture or under the Securities of any series, including
any Guarantor, to pay principal, premium, if any, and interest when due and
payable under the Securities of that series, and all other amounts due or to
become due under or in connection with this Indenture, the Securities of that
series, and the performance of all other obligations to the Trustee and the
Holders under this Indenture and the Securities of that series, according to the
terms hereof and thereof.
"Independent Director" means a director of the Company other than a
director (i) who (apart from being a director of the Company or any Subsidiary)
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 Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and any obligations in respect of any
Hedging Agreement, 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.
"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
-9-
<PAGE>
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.
"Maturity" when used with respect to any Security means the date on which
the principal of such Security becomes due and payable as therein provided or as
provided in this Indenture, whether at Stated Maturity, or the Redemption Date
and whether by declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor rating
agency.
"Non-payment Default" means any event (other than a Payment Default) the
occurrence of which entitles one or more Persons to accelerate the maturity of
any Designated Senior Indebtedness.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, Vice Chairman, the President or a Vice President (regardless of vice
presidential designation), and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company or any Guarantor, as the
case may be, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, any of the Guarantors or the Trustee, unless an Opinion of
Independent Counsel is required pursuant to the terms of this Indenture, and who
shall be acceptable to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel issued
by someone who is not an employee or consultant of the Company or any Guarantor
and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides for an
amount less than the stated principal amount thereof to be due and payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 301.
"Outstanding" when used with respect to Securities of any series means,
unless otherwise provided pursuant to Section 301, as of the date of
determination, all Securities theretofore authenticated and delivered under this
Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company or any Affiliate
thereof) in trust or set aside and
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segregated in trust by the Company or such Affiliate (if the Company or
such Affiliate shall act as the Paying Agent) for the Holders; provided
that if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor reasonably
satisfactory to the Trustee has been made;
(c) Securities, except to the extent provided in Sections 402 and 403,
with respect to which the Company has effected defeasance or covenant
defeasance as provided in Article Four; and
(d) Securities in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture, other
than any such Securities in respect of which there shall have been
presented to the Trustee proof reasonably satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands the Securities
are valid obligations of the Company; provided, however, that in
determining whether the Holders of the requisite principal amount of
Outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Securities owned by the
Company, any Guarantor, or any other obligor upon the Securities or any
Affiliate of the Company, any Guarantor, or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the reasonable satisfaction of
the Trustee the pledgee's right so to act with respect to such Securities
and that the pledgee is not the Company, any Guarantor or any other obligor
upon the Securities or any Affiliate of the Company, any Guarantor or such
other obligor.
"Pari Passu Indebtedness" means any Indebtedness of the Company or any
Guarantor that is pari passu in right of payment to the Securities or any
Guarantee of any particular series, as the case may be.
"Paying Agent" means any Person authorized by the Company to pay the
principal of, premium, if any, or interest on any Securities on behalf of the
Company.
"Payment Default" means any default in the payment of principal of,
premium, if any, or interest, on any Designated Senior Indebtedness.
"Permitted Guarantor Junior Securities" means (so long as the effect of any
exclusion employing this definition is not to cause the Guarantee to be treated
in any case or proceeding or similar event described in clause (a), (b) or (c)
of Section 1417 as part of the same class of claims as the Guarantor Senior
Indebtedness or any class of claims pari passu with, or senior to, the Guarantor
Senior Indebtedness) for any payment or
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distribution, debt or equity securities of any Guarantor or any successor
corporation provided for by a plan of reorganization or readjustment that are
subordinated at least to the same extent that the Guarantee is subordinated to
the payment of all Guarantor Senior Indebtedness then outstanding; provided that
(1) if a new corporation results from such reorganization or readjustment, such
corporation assumes any Guarantor Senior Indebtedness not paid in full in cash
or Cash Equivalents in connection with such reorganization or readjustment and
(2) the rights of the holders of such Guarantor Senior Indebtedness are not,
without the consent of such holders, altered by such reorganization or
readjustment.
"Permitted Junior Securities" means (so long as the effect of any exclusion
employing this definition is not to cause the Securities to be treated in any
case or proceeding or similar event described in clause (a), (b) or (c) of
Section 1202 as part of the same class of claims as the Senior Indebtedness or
any class of claims pari passu with, or senior to, the Senior Indebtedness) for
any payment or distribution, debt or equity securities of the Company or any
successor corporation provided for by a plan of reorganization or readjustment
that are subordinated at least to the same extent that the Securities are
subordinated to the payment of all Senior Indebtedness then outstanding;
provided that (1) if a new corporation results from such reorganization or
readjustment, such corporation assumes any Senior Indebtedness not paid in full
in cash or Cash Equivalents in connection with such reorganization or
readjustment and (2) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 307 in exchange for a mutilated
Security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Equity Interest," as applied to the Equity Interest of any
Person, means an Equity Interest of any class or classes (however designated)
which is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such person, over Equity Interests of any other class of such
Person.
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"Qualified Equity Interests" of any Person means any and all Equity
Interests of such Person other than Disqualified Equity Interests.
"Redemption Date" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the date fixed for such
redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the price at which it is to be
redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the 15th day (whether or not a Business Day) next preceding such Interest
Payment Date.
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or the agent of the Trustee
appointed hereunder, including any vice president, assistant vice president,
assistant secretary, or any other officer or assistant officer of the Trustee or
the agent of the Trustee appointed hereunder to whom any corporate trust matter
is referred because of his or her knowledge of and familiarity with the
particular subject.
"Restricted Subsidiary" means a Subsidiary subject to the covenants or
events of default under the agreements governing other indebtedness of the
Company.
"S&P" means Standard & Poor's Ratings Service, a division of the McGraw
Hill Companies, or any successor rating agency.
"Securities" has the meaning specified in the Recitals.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 306.
"Senior Indebtedness" means the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition initiating any
proceeding under any state, federal or foreign bankruptcy 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 this Indenture or thereafter created, incurred or assumed, and
whether at any time owing, actually or contingent, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall
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not be senior in right of payment to the Securities. Without limiting the
generality of the foregoing, "Senior Indebtedness" shall include 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 Securities, (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 of the 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 to the extent such liability constitutes
Indebtedness, (vi) Indebtedness of the Company 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 this Indenture and (viii) Indebtedness owed by the Company for compensation
to employees or for services.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" when used with respect to 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 Senior Indebtedness or Guarantor
Senior Indebtedness, 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.
"Successor Security" of any particular Security means every Security issued
after, and evidencing all or a portion of the same debt as that evidenced by,
such particular Security. For the purposes of this definition, any Security
authenticated and delivered
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under Section 307 in exchange for or in lieu of a mutilated, destroyed, lost or
stolen Security shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof and guaranteed
fully as to principal, premium, if any, and interest by the United States of
America, (ii) any certificate of deposit, maturing not more than one year after
the date of acquisition, issued by, or time deposit of, a commercial banking
institution (including the Trustee) that is a member of the Federal Reserve
System and that has combined capital and surplus and undivided profits of not
less than $500,000,000, whose debt has a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P, (iii) commercial paper, maturing not more than one
year after the date of acquisition, issued by a corporation (other than an
Affiliate or Subsidiary of the Company) (including the Trustee) organized and
existing under the laws of the United States of America with a rating, at the
time as of which any investment therein is made, of "P-1" (or higher) according
to Moody's or "A-1" (or higher) according to S&P and (iv) any money market
deposit accounts issued or offered by a domestic commercial bank (including the
Trustee) having capital and surplus in excess of $500,000,000.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument, until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee and, if at any time, there is more than one Trustee,
"Trustee" as used with respect to the Securities of any series shall mean the
Trustee with respect to the Securities of that series.
"U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust, the income of which is subject to United States federal income taxation
regardless of its source.
"Unrestricted Subsidiary," with respect to any series of Securities, shall
have the meaning set forth as provided pursuant to Section 301.
"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).
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Section 102. Other Definitions.
Defined in
Term Section
---- -------
"Act" 105
"Agent Members" 305
"Bearer Global Security" 305
"covenant defeasance" 403
"Defaulted Interest" 309
"defeasance" 402
"Defeasance Redemption Date" 404
"Defeased Securities" 401
"Global Security" 202
"Initial Blockage Period" 1203
"Payment Blockage Period" 1203
"Physical Securities" 305
"Senior Representative" 1203
"Surviving Entity" 801
"U.S. Government Obligations" 404
Section 103. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company, any Guarantor and any
other obligor on the Securities of any series shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenants compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents,
certificates and/or opinions is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or Opinion of Counsel with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
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(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company, any Guarantor or
other obligor of the Securities of any series may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company, any Guarantor or
other obligor of the Securities of any series stating that the information with
respect to such factual matters is in the possession of the Company, any
Guarantor or other obligor of the Securities of that series, unless such counsel
knows that the certificate or opinion or representations with respect to such
matters are erroneous. Opinions of Counsel required to be delivered to the
Trustee may have qualifications customary for opinions of the type required and
counsel delivering such Opinions of Counsel may rely on certificates of the
Company or government or other officials customary for opinions of the type
required, including certificates certifying as to matters of fact, including
that various financial covenants have been complied with.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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Section 105. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Procedures in connection
to acts of Holders with respect to Bearer Securities shall be as provided
pursuant to Section 301. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Holders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture, if made in the manner provided in this
Section. The fact and date of the execution by any person of any such instrument
or writing or the authority of the person executing the same, may also be proved
in any other manner which the Trustee deems sufficient in accordance with such
reasonable rules as the Trustee may determine.
(b) The ownership of Securities of any series shall be proved by the
Security Register.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security of any series shall bind every
future Holder of the same Security of that series or the Holder of every
Security of that series issued upon the transfer thereof or in exchange therefor
or in lieu thereof, in respect of anything done, suffered or omitted to be done
by the Trustee, any Paying Agent or the Company or any Guarantor in reliance
thereon, whether or not notation of such action is made upon such Security.
(d) If the Company shall solicit from the Holders of Securities of one or
more series any request, demand, authorization, direction, notice, consent,
waiver or other Act, the Company may, at its option, by or pursuant to a Board
Resolution, fix in advance a record date for the determination of such Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Notwithstanding Trust Indenture Act Section 316(c), any such record date shall
be the record date specified in or pursuant to such Board Resolution, which
shall be a date not more than 30 days prior to the first solicitation of Holders
generally in connection therewith and no later than the date such solicitation
is completed.
In the absence of any such record date fixed by the Company, regardless as
to whether a solicitation of the Holders of Securities of one or more series is
occurring on behalf of the Company or any Holder, the Trustee may, at its
option, fix in advance a
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record date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Trustee shall have no obligation to do so. Any such record date shall be a date
not more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than a date such solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for purposes of determining
whether Holders of Securities of one or more series of the requisite proportion
of Securities then Outstanding have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for this purpose the Securities of any series then Outstanding shall be
computed as of such record date; provided that no such request, demand,
authorization, direction, notice, consent, waiver or other Act by the Holders on
such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six months after the
record date.
Section 106. Notices, etc., to Trustee, the Company and any Guarantor.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company or any Guarantor or
any other obligor of the Securities or a Senior Representative or holder of
Senior Indebtedness shall be sufficient for every purpose hereunder if in
writing and mailed, first-class postage prepaid, or delivered by recognized
overnight courier, to or with the Trustee at the Corporate Trust Office,
Attention: Corporate Trust Division, or at any other address previously
furnished in writing to the Holders, the Company, any Guarantor, any other
obligor of the Securities or a Senior Representative or holder of Senior
Indebtedness by the Trustee; or
(b) the Company or any Guarantor shall be sufficient for every purpose
(except as provided in Section 501(c)) hereunder or pursuant to Section 301
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to the Company or such Guarantor addressed to
it at Sinclair Broadcast Group, Inc., 2000 West 41st Street, Baltimore,
Maryland 21211, Attention: President, or at any other address previously
furnished in writing to the Trustee by the Company;
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Section 107. Notice to Holders; Waiver.
Where this Indenture or the Securities of any series provides for notice to
Holders of the Securities of any series of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid, or delivered by recognized overnight
courier, to each Holder affected by such event, at his address as it appears in
the Security Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice when mailed
to a Holder in the aforesaid manner shall be conclusively deemed to have been
received by such Holder whether or not actually received by such Holder. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver. Notices to Holders of Bearer Securities shall be provided as may be
specified pursuant to Section 301.
In case by reason of the suspension of regular mail service or by reason of
any other cause, it shall be impracticable to mail notice of any event as
required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Section 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any provision
of the Trust Indenture Act or another provision which is required or deemed to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, the provision or requirement of the Trust Indenture Act shall control. If
any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
Section 109. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
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Section 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Guarantors shall bind their successors and assigns, whether so expressed or not.
Section 111. Separability Clause.
In case any provision in this Indenture or in the Securities of any series
or in any Guarantees shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 112. Benefits of Indenture.
Nothing in this Indenture or in the Securities or the Guarantees, express
or implied, shall give to any Person (other than the parties hereto and their
successors hereunder, any Paying Agent, the Holders and the holders of Senior
Indebtedness or Guarantor Senior Indebtedness) any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 113. Governing Law.
THIS INDENTURE AND THE SECURITIES OF ANY SERIES AND ANY INTEREST COUPONS
APPERTAINING THERETO AND ANY GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF).
Section 114. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security of any series shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal or premium, if any, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity and no interest shall accrue with respect to such payment for
the period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, to the next succeeding Business Day.
Section 115. Schedules and Exhibits.
All schedules and exhibits attached hereto are by this reference made a
part hereof with the same effect as if herein set forth in full.
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Section 116. Counterparts.
This Indenture may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
The Securities of each series and the Trustee's certificate of
authentication and the interest coupons, if any, to be attached thereto shall be
in substantially such form as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any applicable securities
exchange, organizational document, governing instrument or law or as may,
consistently herewith, be determined by the officers executing the Securities of
that series and interest coupons, if any, to be attached thereto, as evidenced
by their execution of the Securities and interest coupons, if any. If temporary
Securities of any series are issued as permitted by Section 304, the form
thereof also shall be established as provided in the preceding sentence. If the
forms of Securities and interest coupons, if any, of any series are established
by, or by action taken pursuant to, a Board Resolution, a copy of the Board
Resolution together with an appropriate record of any such action taken pursuant
thereto, including a copy of the approved form of Securities or interest
coupons, if any, shall be delivered to the Trustee at or prior to the delivery
of the Company Order contemplated by Section 303 for the authentication and
delivery of such Securities. Any portion of the text of any Security may be set
forth on the reverse thereof, with an appropriate reference thereto on the face
of the Security.
Unless otherwise provided pursuant to Section 301, Bearer Securities, if
any, shall have interest coupons attached.
The definitive Securities of any series shall be printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Securities of that series may be listed, all as determined by the officers
executing such Securities, as evidenced by their execution of such Securities.
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Section 202. Form of and Provisions Required in Global Security.
If Securities of or within a series are issuable in whole or in part in
global form, such Global Securities will be subject to Sections 301, 303, 304
(if applicable), 305 and 306.
Unless otherwise provided pursuant to Section 301, any Global Security
issued hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
If The Depository Trust Company is acting as the Depositary, insert -- UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
Section 203. Form of Trustee's Certificate of Authentication.
Unless otherwise provided pursuant to Section 301, the Trustee's
certificate of authentication shall be included on the Securities and shall be
substantially in the form as follows:
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK,
----------------------------------
As Trustee
By:
-------------------------------
Authorized Signatory
Section 204. Form of Guarantee of Each of the Guarantors.
If a Guarantee is to be endorsed on a Security of any series, the form of
Guarantee shall be set forth on the Securities substantially as follows:
GUARANTEES
For value received, each of the undersigned hereby unconditionally
guarantees, jointly and severally, to the holder of this Security the payment of
principal of, premium, if any, and interest on this Security in the amounts and
at the time when due and interest on the overdue principal and interest, if any,
of this Security, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture or the Securities, to the holder
of this Security and the Trustee, all in accordance with and subject to the
terms and limitations of this Security and Article Fourteen of the Indenture.
These Guarantees will not become effective until the Trustee duly executes the
certificate of authentication on this Security. The Indebtedness evidenced by
these Guarantees is, to the extent and in the manner provided in the Indenture,
subordinate and subject in right of payment to the prior payment in full of all
Guarantor Senior Indebtedness (as defined in the Indenture), whether Outstanding
on the date of the Indenture or thereafter, and these Guarantees are issued
subject to such provisions.
[LIST OF GUARANTORS]
Attest By
--------------------------- ------------------------------
Name: Name:
Title: Title:
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ARTICLE THREE
THE SECURITIES
Section 301. Amount Unlimited; Issuable in Series.
(a) The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited. The Securities may be issued
from time to time in one or more series.
(b) The following matters shall be established with respect to each series
of Securities issued hereunder (i) by a Board Resolution, (ii) by action taken
pursuant to a Board Resolution and (subject to Section 303) set forth, or
determined in the manner provided, in an Officers' Certificate or (iii) in one
or more indentures supplemental hereto:
(1) the title of the Securities of the series (which title shall
distinguish the Securities of the series from all other series of
Securities);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(which limit shall not pertain to Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 306, 307, 906 or 1108 or
any Securities of the series that, pursuant to Section 303, are deemed
never to have been authenticated and delivered hereunder);
(3) the date or dates on which the principal of and premium, if any,
on the Securities of the series will mature or the method or methods of
determining such date or dates;
(4) the rate or rates (which may be fixed or variable) at which the
Securities of the series shall bear interest, if any, or the method or
methods of calculating such rate or rates;
(5) the date or dates from which such interest, if any, shall accrue
or the method or methods by which such date or dates shall be determined;
(6) the date or dates on which interest, if any, shall be payable and
the record date or dates therefor, and the basis upon which interest shall
be calculated if other than that of a 360-day year of twelve 30-day months;
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(7) the place or places where the principal of, premium, if any, and
interest, if any, on Securities of the series shall be payable, or at which
Securities of the series may be surrendered for registration of transfer
and 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, Securities of the series 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
Securities of the series 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 United States dollars)
(including currency unit or units) in which, and the other terms and
conditions upon which, Securities of the series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(10) the denominations in which Securities of the series are
authorized to be issued;
(11) the currency or currency unit in which such 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 Securities will be payable and whether the Company or the holders of
any such Securities may elect to receive payments in respect of such
Securities in a currency or currency unit other than that in which such
Securities are stated to be payable;
(12) if the amount of payments of principal of, premium, if any, and
interest, if any, on the Securities of the series may be determined with
reference to an index, formula or other method (which index, formula or
method may be based, without limitation, on a currency or currencies
(including currency unit or units) other than that in which the Securities
of the series are denominated or designated to be payable), the manner in
which such amounts will be determined;
(13) if other than the entire principal amount thereof, the portion of
the principal amount of such Securities of the series which shall be
payable upon declaration of acceleration thereof pursuant to Section 502 or
the method by which such portion shall be determined;
(14) provisions, if any, granting special rights to the Holders of
Securities of the series upon the occurrence of such events as may be
specified;
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(15) any addition to, modifications of or deletion from the Events of
Default set forth in Section 501 or covenants of the Company set forth in
Article 9 pertaining to the Securities of the series;
(16) the circumstances, if any, under which the Company will pay
additional amounts on the Securities of that series held by a Person who is
not a U.S. Person (including any modification of the definition of such
term) in respect of taxes, assessments or similar charges;
(17) whether Securities of the series shall be issuable in registered
or bearer form (with or without interest coupons), or both, and any
restrictions applicable to the offering, sale, transfer or delivery of
Bearer Securities and, if other than as provided in Section 306, the terms
upon which Bearer Securities of a series may be exchanged for Securities of
the same series and vice versa;
(18) the date as of which any Bearer Securities of the series and any
temporary Global Security representing Outstanding Securities of the series
shall be dated, if other than the date of original issuance of the first
Security of the series to be issued;
(19) the forms of the Securities and interest coupons, if any, of the
series;
(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 Securities of that series;
(22) whether such Securities of the series are to be issued in whole
or in part in the form of one or more in temporary or permanent Global
Securities, and, if so, the identity of the Depositary or its nominee, if
any, for such Global Securities, and the circumstances under which the
beneficial owners of interests in any Securities of the series in global
form may exchange such interests for certificated Securities of that
series, to be registered in the names of or to be held by such beneficial
owners or their nominees;
(23) if the Securities of the series may be issued or delivered, or
any installment of principal or interest is payable, only upon receipt of
certain certificates or other documents or satisfaction of other conditions
in addition to those specified in this Indenture, the form and terms of
such certificates, documents or conditions;
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(24) if other than as provided in Section 309, the Person to whom any
interest on any 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 definitions for Securities of that series which are not to be
as set forth in this Indenture, including, without limitation, the
definition of "Unrestricted Subsidiary" to be used for that series;
(26) the relative degree to which Debt Securities of the series
offered shall be senior to or be subordinated to other series of
Securities, and to other indebtedness of the Company, in right of payment,
whether such other series of 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 Securities of any series 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 the
Securities; and
(31) any other terms not inconsistent with the terms of the Indenture
pertaining to the Securities which may be required by or advisable under
United States laws or regulations or advisable (as determined by the
Company) in connection with the marketing of Securities of the series.
(c) All provisions set forth in this Indenture shall be applicable to each
series of Debt Securities issued hereunder unless otherwise specified in a
supplemental indenture entered into pursuant to this Section 301, in which case
the provisions of the supplemental indenture shall govern and references herein
to "unless otherwise provided pursuant to Section 301" are not intended to limit
what provisions may be amended pursuant to any supplemental indenture. Subject
to Sections 108, 113 and any controlling provision of the Trust Indenture Act,
in the event of any inconsistency between the terms of this Indenture and the
terms applicable to a series of Securities established in the
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manner permitted by this Section 301, the (i) Board Resolution, (ii) Officers'
Certificate or (iii) supplemental indenture setting forth such conflicting term
shall prevail.
(d) All Securities of any one series and interest coupons, if any,
appertaining thereto shall be substantially identical except as to denomination
and except as may otherwise be provided (i) by a Board Resolution, (ii) by
action taken pursuant to a Board Resolution and (subject to Section 303) set
forth, or determined in the manner provided, in the related Officers'
Certificate or (iii) in an indenture supplemental hereto. All Securities of any
one series need not be issued at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the Holders, for issuances of
additional Securities of that series.
(e) If any of the terms of the Securities of any series are established by
action taken pursuant to a Board Resolution, a copy of such Board Resolution
shall be delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth, or providing the manner for determining, the terms of
the Securities of that series, and an appropriate record of any action taken
pursuant thereto in connection with the issuance of any Securities of that
series shall be delivered to the Trustee prior to the authentication and
delivery thereof.
(f) Unless otherwise provided pursuant to Section 301, payment of the
principal of, premium, if any, and interest on the Securities shall be made at
the office or agency of the Company maintained for that purpose as the Company
may designate pursuant to Section 301, in the United States, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made (i) by check mailed to
addresses of the Persons entitled thereto as such addresses shall appear on the
Security Register or (ii) by wire transfer in immediately available funds to an
account specified (not later than one Business Day prior to the applicable
Interest Payment Date) by the Holder thereof. If any of the Securities are held
by the Depository, payments of interest may be made by wire transfer to the
Depository. Procedures with respect to payments in connection with Bearer
Securities shall be established pursuant to Section 301.
Section 302. Denominations.
Unless otherwise provided pursuant to Section 301, the Securities shall be
issuable only in registered form without coupons and only in denominations of
$1,000 and any integral multiple of $1000, and Bearer Securities shall be issued
in denominations of $5,000 or any integral multiple of $5,000. Securities
denominated in a foreign currency shall be issuable in such denominations as are
established with respect to such Securities in or pursuant to this Indenture.
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Section 303. Execution, Authentication, Delivery and Dating.
Unless otherwise provided pursuant to Section 301, the Securities of any
series shall be executed on behalf of the Company by one of its Chairman of the
Board, its President or one of its Vice Presidents under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries.
Securities and interest coupons, if any, on Securities bearing the manual
or facsimile signatures of individuals who were at any time the proper officers
of the Company shall bind the Company, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices on the date of such
Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities, together with any interest
coupons appertaining thereto, of any series executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities; and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities as provided in this
Indenture and not otherwise.
Each Security shall be dated the date of its authentication.
No Security of any series shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder.
Unless otherwise provided pursuant to Section 301, in case the Company or
any Guarantor, pursuant to Article Eight, shall be consolidated, merged with or
into any other Person or shall sell, assign, convey, transfer or lease
substantially all of its properties and assets to any Person, and the successor
Person resulting from such consolidation, or surviving such merger, or into
which the Company or such Guarantor shall have been merged, or the Person which
shall have received a sale, assignment, conveyance, transfer or lease as
aforesaid, shall have executed an indenture supplemental hereto with the Trustee
pursuant to Article Eight, any of the Securities authenticated or delivered
prior to such consolidation, merger, sale, assignment, conveyance, transfer or
lease may, from time to time, at the request of the successor Person, be
exchanged for other Securities executed in the name of the successor Person with
such changes in phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Securities surrendered for such exchange and of
like principal amount; and the Trustee, upon
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Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities on behalf of the Trustee. Unless limited by the terms
of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Security Registrar or Paying
Agent to deal with the Company and its Affiliates.
The Bearer Securities will be transferable by delivery. Other terms,
conditions and restrictions in connection with Bearer Securities will be as
provided pursuant to Section 301.
The specific terms of the depositary arrangement with respect to any
portion of a series of Securities to be represented by a Global Security will be
as provided pursuant to Section 301.
Section 304. Temporary Securities.
Unless otherwise provided pursuant to Section 301, pending the preparation
of definitive Securities of any series, the Company may execute, and upon
Company Order, the Trustee shall authenticate and deliver, temporary Securities
which are printed, lithographed, typewritten or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Securities
of any series in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities.
Unless otherwise provided pursuant to Section 301, after the preparation of
definitive Securities of any series, the temporary Securities of any series
shall be exchangeable for definitive Securities of that series upon surrender of
the temporary Securities of that series at the office or agency of the Company
designated for such purpose pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities
the Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Securities of authorized
denominations. Until so exchanged the temporary
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Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of that series.
Section 305. Global Securities.
(a) Unless otherwise provided pursuant to Section 301, any Global Security
of any series shall, if the Depositary permits, (i) be registered in the name of
the Depositary for such Global Security or the nominee of such Depositary, (ii)
be deposited with, or on behalf of, the Depositary and (iii) bear legends as set
forth in Section 202; provided, that the Securities are eligible to be in the
form of a Global Security.
Members of, or participants in, the Depositary ("Agent Members") shall have
no rights under this Indenture with respect to any Global Security held on their
behalf by the Depositary, or the Trustee as its custodian, or under the Global
Security, and the Depositary may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or shall impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the exercise of
the rights of a holder of any Security.
The Securities of any 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 a depositary, as
provided pursuant to Section 301. Any Bearer Global Security 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 Securities to be represented by one or more Bearer Global Securities
will be as provided pursuant to Section 301.
(b) Unless otherwise provided pursuant to Section 301, transfers of the
Global Security of a series shall be limited to transfers of such Global
Security in whole, but not in part, to the Depositary, its successors or their
respective nominees. Interests of beneficial owners in a Global Security may be
transferred in accordance with the rules and procedures of the Depositary. Under
the circumstances described in this clause (b) below, beneficial owners shall
obtain physical securities in the form provided pursuant to Section 301
("Physical Securities") in exchange for their beneficial interests in a Global
Security in accordance with the Depositary's and the Securities Registrar's
procedures. In connection with the execution, authentication and delivery of
such Physical Securities, the Security Registrar shall reflect on its books and
records a decrease in the principal amount of the Global Security equal to the
principal amount of such Physical Securities and the Company shall execute and
the Trustee shall authenticate and deliver one or more
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Physical Securities having an equal aggregate principal amount. Unless otherwise
provided pursuant to Section 301, the Securities will be delivered in
certificated form if (i) the Depositary ceases to be registered as a clearing
agency under the Exchange Act or is not willing or no longer willing or able to
provide securities depository services with respect to the Securities and a
successor depositary is not appointed by the Company within 90 days and (ii) the
Company, in its sole discretion, so determines or (iii) there shall have
occurred an Event of Default or an event which, with the giving of notice or
lapse of time or both, would constitute an Event of Default with respect to the
Securities represented by such Global Security and such Event of Default or
event continues for a period of 90 days.
(c) In connection with any transfer of a portion of the beneficial interest
in a Global Security to a Physical Security pursuant to subsection (b) of this
Section to beneficial owners, the Security Registrar shall reflect on its books
and records the date and a decrease in the principal amount of a Global Security
in an amount equal to the principal amount of the beneficial interest in the
Global Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Physical Securities of like
tenor and amount.
(d) In connection with the transfer of the entire Global Security of any
series to beneficial owners pursuant to subsection (b) of this Section, a Global
Security shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in a Global Security, an equal aggregate principal amount of
Physical Securities of authorized denominations.
(e) The registered holder of a Global Security may grant proxies and
otherwise authorize any person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
Section 306. Registration, Registration of Transfer and Exchange.
Unless otherwise provided pursuant to Section 301, the Company shall cause
to be kept at the Corporate Trust Office of the Trustee, or such other office as
the Trustee may designate, a register (the register maintained in such office
and in any other office or agency designated pursuant to Section 1002 being
herein sometimes referred to as the "Security Register") in which, subject to
such reasonable regulations as the Security Registrar may prescribe, the Company
shall provide for the registration of Securities of any series and of transfers
of Securities of any series. The Trustee or an agent thereof or of the Company
shall initially be the "Security Registrar" for the purpose of registering
Securities of any series and transfers of Securities of any series as herein
provided.
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Procedures with respect to the registration and registration of transfer
and exchange, and other matters related thereto, with respect to Bearer
Securities shall be provided pursuant to Section 301.
Unless otherwise provided pursuant to Section 301, upon surrender for
registration of transfer of any Security of any series at the office or agency
of the Company designated pursuant to Section 1002, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Securities of that series of any
authorized denomination or denominations, of a like aggregate principal amount.
Furthermore, any Holder of a Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interest in such Global
Security may be effected only through a book-entry system maintained by the
Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in the Securities shall be required to be reflected in a
book entry.
Unless otherwise provided pursuant to Section 301, at the option of the
Holder, Securities of any series may be exchanged for other Securities of that
series of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities of that series to be
exchanged at such office or agency. Whenever any Securities of any series are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities of that series which the Holder making
the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities of any series shall be the valid obligations of the Company,
evidencing the same Indebtedness, and entitled to the same benefits under this
Indenture, as the Securities of the series surrendered upon such registration of
transfer or exchange.
Unless otherwise provided pursuant to Section 301, every Security presented
or surrendered for registration of transfer, or for exchange or redemption shall
(if so required by the Company or the Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Securities of any series, but the Company
may require payment of a sum sufficient to pay all documentary, stamp or similar
issue or transfer taxes or other governmental charges that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Sections 303, 304, 305, 306, 307 and 906, not
involving any transfer.
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Unless otherwise provided pursuant to Section 301, the Company shall not be
required (a) to issue, register the transfer of or exchange any Security of any
series during a period beginning at the opening of business (i) 15 days before
the date of selection of Securities of that series for redemption under Section
1104 and ending at the close of business on the day of such selection or (ii) 15
days before an Interest Payment Date and ending on the close of business on the
Interest Payment Date, or (b) to register the transfer of or exchange any
Security of that series so selected for redemption in whole or in part, except
the unredeemed portion of Securities of that series being redeemed in part.
Except as otherwise permitted pursuant to Section 304, any Security of a
series authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, any Global Security, whether pursuant to this
Section, Sections 304, 307, 906 or 1108 or otherwise, shall also be a Global
Security and bear the legend specified in Section 202.
Section 307. Mutilated, Destroyed, Lost and Stolen Securities.
If (a) any mutilated Security of any series is surrendered to the Trustee,
or (b) the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security of any series, and there is delivered
to the Company, each Guarantor and the Trustee, such security or indemnity, in
each case, as may be required by them to save each of them harmless, then, in
the absence of notice to the Company, any Guarantor or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon its written request the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a replacement Security of that series of like tenor and
principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security of any
series has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a replacement Security of that series, pay
such Security.
Upon the issuance of any replacement Securities of that series under this
Section, the Company may require the payment of a sum sufficient to pay all
documentary, stamp or similar issue or transfer taxes or other governmental
charges that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every replacement Security of a series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security of that series shall constitute
an original additional contractual obligation of the Company and the Guarantors,
if any, whether or not the destroyed, lost or stolen Security of that series
shall be at any time enforceable by anyone,
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and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities of the same series duly issued
hereunder.
Procedures relating to mutilated, destroyed, lost or stolen Bearer
Securities shall be provided pursuant to Section 301.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
Section 308. [RESERVED]
Section 309. Payment of Interest; Interest Rights Preserved.
Unless otherwise provided pursuant to Section 301, interest on any Security
of a series which is payable, and is punctually paid or duly provided for, on
any Interest Payment Date shall be paid to the Person in whose name that
Security of that series is registered at the close of business on the Regular
Record Date for such interest.
Unless otherwise provided pursuant to Section 301, any interest on any
Security of a series which is payable, but is not punctually paid or duly
provided for, on any Interest Payment Date and interest on such defaulted
interest at the then applicable interest rate borne by the Securities of that
series, to the extent lawful (such defaulted interest and interest thereon
herein collectively called "Defaulted Interest") shall forthwith cease to be
payable to the Holder on the Regular Record Date; and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in
Subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of that series are registered at
the close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of that series and the date
(not less than 30 days after such notice) of the proposed payment, and at
the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Subsection provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of
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the proposed payment. The Trustee shall promptly notify the Company in
writing of such Special Record Date. In the name and at the expense of the
Company, the Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in
the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities of that series
are registered on such Special Record Date and shall no longer be payable
pursuant to the following Subsection (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of that series may be listed,
and upon such notice as may be required by such exchange, if, after written
notice given by the Company to the Trustee of the proposed payment pursuant
to this Subsection, such payment shall be deemed practicable by the
Trustee.
Payment of interest and preservation of interest rights of Bearer
Securities shall be set forth pursuant to Section 301.
Subject to the foregoing provisions of this Section, each Security of any
series delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security of the same series shall carry the
rights to interest accrued and unpaid, and to accrue, which were carried by such
other Security of the same series.
Section 310. Persons Deemed Owners.
Unless otherwise provided pursuant to Section 301, the Company, any
Guarantor, the Trustee and any agent of the Company, any Guarantor or the
Trustee may treat the Person in whose name any Security of any series is
registered as the owner of such Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 309) interest on such
Security and for all other purposes whatsoever, whether or not such Security is
overdue, and neither the Company, any Guarantor, the Trustee nor any agent of
the Company, any Guarantor or the Trustee shall be affected by notice to the
contrary.
Unless otherwise provided as contemplated by Section 301, the Company, any
Guarantor, the Trustee and any agent of the Company, any Guarantor or the
Trustee may treat the bearer of any Bearer Security of any series and the bearer
of any interest coupon as the absolute owner of such Bearer Security or interest
coupon for the purpose of receiving payment thereof or on account thereof and
for all other purposes whatsoever,
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whether or not such Bearer Security or interest coupon be overdue, and neither
the Company, any Guarantor, the Trustee nor any agent of the Company, the
Guarantor or the Trustee shall be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security of any series
held on its behalf by a Depositary of that series shall have any rights under
this Indenture with respect to such Global Security of that series, and such
Depositary may be treated by the Company, any Guarantor, the Trustee and any
agent of the Company, any Guarantor or the Trustee as the owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, any Guarantor, the Trustee or any agent of the
Company, any Guarantor or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and such holders of beneficial interests, the
operation of customary practices governing the exercise of the rights of the
Depositary (or its nominee) as Holder of any Security of any series.
Section 311. Cancellation.
All Securities of any series surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and, if
not already cancelled, shall be promptly cancelled by it. The Company and any
Guarantor may at any time deliver to the Trustee for cancellation any Securities
of any series previously authenticated and delivered hereunder which the Company
or such Guarantor may have acquired in any manner whatsoever, and all Securities
of any series so delivered shall be promptly cancelled by the Trustee. No
Securities of any series shall be authenticated in lieu of or in exchange for
any Securities of that series canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities of any series
held by the Trustee shall be destroyed and certification of their destruction
delivered to the Company unless by a Company Order the Company shall direct that
the canceled Securities of that series be returned to it. The Trustee shall
provide the Company a list of all Securities of the series that have been
canceled from time to time as requested by the Company.
Section 312. Computation of Interest.
Except as otherwise provided pursuant to Section 301, interest on the
Securities of all series shall be computed on the basis of a 360-day year of
twelve 30-day months.
Section 313. CUSIP Numbers.
The Company in issuing the Securities of any series may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no
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representation is made as to the correctness of such numbers either as printed
on the Securities of that series or as contained in any notice of a redemption
and that reliance may be placed only on the other identification numbers printed
on the Securities of that series, and any such redemption shall not be affected
by any defect in or omission of such numbers.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided pursuant to Section 301, Securities of any series
shall be subject to the following provisions:
Section 401. Company's Option to Effect Defeasance or Covenant Defeasance.
Unless otherwise provided pursuant to Section 301, the Company may, at its
option by Board Resolution, at any time, with respect to the Securities of any
series, elect to have either Section 402 or Section 403 be applied to all of the
Outstanding Securities of any series (the "Defeased Securities"), upon
compliance with the conditions set forth below in this Article Four.
Section 402. Defeasance and Discharge.
Unless otherwise provided pursuant to Section 301, upon the Company's
exercise under Section 401 of the option applicable to this Section 402, the
Company, each of the Guarantors, if any, and any other obligor upon the
Securities of any series, if any, shall be deemed to have been discharged from
its obligations with respect to the Defeased Securities on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company, 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 Defeased Securities of
that series, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 405 and the other Sections of this Indenture referred to in
(a) and (b) below, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, and, upon written request, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of Defeased Securities to receive, solely from the trust fund described
in Section 404 and as more fully set forth in such Section, payments in respect
of the principal of, premium, if any, and interest on such Securities when such
payments are due, (b) the Company's obligations with respect to such Defeased
Securities under Sections 304, 305, 306, 1002 and 1003, (c) the rights, powers,
trusts, duties and
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immunities of the Trustee hereunder, including, without limitation, the
Trustee's rights under Section 606, (d) this Article Four and (e) if the
Security is convertible, the right of the Holder to convert the Security
according to the terms set forth pursuant to Section 301. Subject to compliance
with this Article Four, the Company may exercise its option under this Section
402 notwithstanding the prior exercise of its option under Section 403 with
respect to the Securities of that series.
Section 403. Covenant Defeasance.
Upon the Company's exercise under Section 401 of the option applicable to
this Section 403, the Company and each Guarantor shall be released from its
obligations under any covenant or provision contained or referred to in Article
Ten (except Section 1002 and 1003) or otherwise set forth in this Indenture and
expressly made subject to this Section 403 pursuant to Section 301, and the
provisions of Article Twelve and, if applicable, Article Fourteen, shall not
apply, with respect to the Defeased Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Defeased Securities shall thereafter be deemed to be not "Outstanding"
for the purposes of any direction, waiver, consent or declaration or Act of
Holders (and the consequences of any thereof) in connection with such covenants
and the provisions of Article Twelve and, if applicable, Article Fourteen, but
shall continue to be deemed "Outstanding" for all other purposes hereunder. For
this purpose, such covenant defeasance means that, with respect to the Defeased
Securities, the Company and each Guarantor may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such Section or Article, whether directly or indirectly, by reason of any
reference elsewhere herein to any such Section or Article or by reason of any
reference in any such Section or Article to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 501(c), (d) or (g), but, except as specified
above, the remainder of this Indenture and such Defeased Securities shall be
unaffected thereby.
Section 404. Conditions to Defeasance or Covenant Defeasance.
Unless otherwise provided pursuant to Section 301, the following shall be
the conditions to application of either Section 402 or Section 403 to the
Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 608 who shall agree to comply with the provisions of this
Article Four applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (a)
United States dollars in an amount, or (b) U.S. Government Obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their
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terms will provide, not later than one day before the due date of any
payment, money in an amount, or (c) a combination thereof, sufficient, in
the opinion of a nationally recognized firm of independent public
accountants or a nationally recognized investment banking firm expressed in
a written certification thereof delivered to the Trustee, to pay and
discharge and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge the principal of, premium, if any, and
interest on the Defeased Securities on the Stated Maturity of such
principal or installment of principal or interest (or on the "Defeasance
Redemption Date" as defined pursuant to Section 301), if when exercising
under Section 401 either its option applicable to Section 402 or its option
applicable to Section 403, the Company shall have delivered to the Trustee
an irrevocable notice to redeem all of the Outstanding Securities of the
applicable series on the Defeasance Redemption Date); provided that the
Trustee shall have been irrevocably instructed to apply such United States
dollars or the proceeds of such U.S. Government Obligations to said
payments with respect to the Securities of that series; and provided,
further, that the United States dollars or U.S. Government Obligations
deposited shall not be subject to the rights of the holders of Senior
Indebtedness or Guarantor Senior Indebtedness pursuant to the provisions of
Articles Twelve and Fourteen. For this purpose, "U.S. Government
Obligations" means securities that are (i) direct obligations of the United
States of America for the timely payment of which its full faith and credit
is pledged or (ii) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act), as custodian with respect to any
such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for
the account of the holder of such depository receipt, provided that (except
as required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(2) In the case of an election under Section 402, the Company shall
have delivered to the Trustee an Opinion of Independent Counsel in the
United States stating that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the
date of this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Independent Counsel in the United States shall confirm that, the
holders of the Outstanding 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
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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.
(3) In the case of an election under Section 403, the Company shall
have delivered to the Trustee an Opinion of Independent Counsel in the
United States to the effect that the holders of the Outstanding 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.
(4) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as subsections 501(h) and
(i) are concerned, at any time during the period ending on the 91st day
after the date of deposit.
(5) Such defeasance or covenant defeasance shall not cause the Trustee
for the Securities of that series to have a conflicting interest with
respect to any securities of the Company or any Guarantor.
(6) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, this Indenture or
any other material agreement or instrument to which the Company or any
Guarantor is a party or by which it is bound.
(7) 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 this
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.
(8) 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 Securities of that series 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.
(9) 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 Securities of that series on the date of such deposit or at any time
ending on the 91st day after the date of such deposit.
(10) 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 under
Section 402 or the covenant
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defeasance under Section 403 (as the case may be) have been complied with
as contemplated by this Section 404.
Opinions of Counsel or Opinions of Independent Counsel required to be
delivered under this Section may have qualifications customary for opinions
of the type required and counsel delivering such opinions may rely on
certificates of the Company or government or other officials customary for
opinions of the type required, including certificates certifying as to
matters of fact, including that various financial covenants have been
complied with.
Section 405. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all United
States dollars and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee or other qualifying trustee as permitted under
Section 404 (collectively, for purposes of this Section 405, the "Trustee")
pursuant to Section 404 in respect of the Defeased Securities shall be held in
trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Securities of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 404 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Defeased Securities.
Anything in this Article Four to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
United States dollars or U.S. Government Obligations held by it as provided in
Section 404 which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect defeasance or covenant defeasance.
Section 406. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or U.S. Government Obligations in accordance with Section 402 or 403, as the
case may be, by reason of any order or judgment of any court or governmental
authority enjoining,
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restraining or otherwise prohibiting such application, then the Company's and
any Guarantor's obligations under this Indenture and the Securities of that
series and the provisions of Articles Twelve and Fourteen hereof shall be
revived and reinstated as though no deposit had occurred pursuant to Section 402
or 403, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such United States dollars or U.S. Government Obligations
in accordance with Section 402 or 403, as the case may be; provided, however,
that if the Company makes any payment to the Trustee or Paying Agent of
principal of, premium, if any, or interest on any Security following the
reinstatement of its obligations, the Trustee or Paying Agent shall promptly pay
any such amount to the Holders of the Securities of that series and the Company
shall be subrogated to the rights of the Holders of such Securities of that
series to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
Unless otherwise provided pursuant to Section 301, "Event of Default",
wherever used herein with respect to the Securities of any series, means any one
of the following events which has occurred and is continuing (whatever the
reason for such Event of Default and whether it shall be occasioned by the
provisions of Article Twelve or be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) there shall be a default in the payment of any interest on any
Security of that series when it becomes due and payable, and such default
shall continue for a period of 30 days;
(b) there shall be a default in the payment of the principal of (or
premium, if any, on) any Security of that series at its Maturity (upon
acceleration, optional or mandatory redemption, required repurchase or
otherwise);
(c) (i) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under this Indenture
(other than a default in the performance or breach of a covenant or
agreement which is specifically dealt with in clause (a) or (b) or in
clause (ii) of this clause (c)) and such default or breach shall continue
for a period of 30 days after written notice has been given, by certified
mail, (1) to the Company by the Trustee or (z) to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities of the series;
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and (ii) there shall be a default in the performance or breach of the
provisions of Article Eight;
(d) 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;
(e) 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, and enforceable in accordance with its terms, except to the extent
contemplated by this Indenture and any such Guarantee;
(f) 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;
(g) 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);
(h) there shall have been the entry by a court of competent
jurisdiction of (i) a decree or order for relief in respect of the Company,
any Guarantor or any Restricted Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or (ii) 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
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the winding up or liquidation of their affairs, and any such decree or
order for relief shall continue to be in effect, or any such other decree
or order shall be unstayed and in effect, for a period of 60 consecutive
days; or
(i) (i) the Company, 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, (ii) 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, (iii) 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, (iv) the Company, any Guarantor or any Restricted
Subsidiary (1) consents to the filing of such petition or the appointment
of, or taking possession by, a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company, any
Guarantor or such Restricted Subsidiary or of any substantial part of its
respective properties, (2) makes an assignment for the benefit of creditors
or (3) admits in writing its inability to pay its debts generally as they
become due, or (v) the Company, any Guarantor or any Restricted Subsidiary
takes any corporate action authorizing any such actions in this paragraph
(i).
Unless otherwise provided pursuant to Section 301, the Company shall
deliver to the Trustee within five days after the occurrence thereof, written
notice, in the form of an Officers' Certificate, of any Default, its status and
what action the Company is taking or proposes to take with respect thereto.
Unless the Corporate Trust Office of the Trustee has received written notice of
an Event of Default of the nature described in this Section, the Trustee shall
not be deemed to have knowledge of such Event of Default for the purposes of
Article Five or for any other purpose.
Section 502. Acceleration of Maturity; Rescission and Annulment.
Unless otherwise provided pursuant to Section 301, if an Event of Default
(other than an Event of Default specified in Sections 501(h) and (i)) shall
occur and be continuing, the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Securities Outstanding of the applicable
series may, and the Trustee at the request of the Holders of not less than 25%
in aggregate principal amount of the Securities of the applicable series
Outstanding shall, declare all unpaid principal of, premium, if any, and accrued
interest on, all the Securities of that 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 Securities of that series); provided that, unless
otherwise provided pursuant to Section 301, 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
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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 Securities of that series by appropriate judicial proceeding. If
an Event of Default specified in clause (h) or (i) of Section 501 occurs and is
continuing, then all the Securities shall ipso facto become and be immediately
due and payable, in an amount equal to the principal amount of the Securities of
that series, together with accrued and unpaid interest, if any, to the date the
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, the Holders shall give notice to the agent under the Bank
Credit Agreement of any such acceleration.
Unless otherwise provided pursuant to Section 301, at any time after such
declaration of acceleration has been made but before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
Securities Outstanding of the applicable series, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(i) all sums paid or advanced by the Trustee under this Indenture
and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel,
(ii) all overdue interest on all Securities of any series,
(iii) the principal of and premium, if any, on any Securities of
any series which have become due otherwise than by such declaration of
acceleration and interest thereon at a rate borne by the Securities,
and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities;
and
(b) all Events of Default, other than the non-payment of principal of the
Securities of any series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon provided in Section 513. Provisions relating to acceleration
of the Maturity of a portion of the principal amount of an Original Issue
Discount Security upon the occurrence of an Event of Default and the
continuation thereof shall be provided pursuant to Section 301.
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Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company, as to Securities of any series, and any Guarantor, as to
Securities of any series guaranteed by such Guarantor, covenant that if
(a) default is made in the payment of any interest on any such
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of or premium, if
any, on any such Security at the Stated Maturity thereof,
the Company and, if applicable, any such Guarantor will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such Securities, subject
to Articles Twelve and, if applicable, Article Fourteen, the whole amount then
due and payable on such Securities for principal and premium, if any, and
interest, with interest upon the overdue principal and premium, if any, and, to
the extent that payment of such interest shall be legally enforceable, upon
overdue installments of interest, at the rate borne by the Securities of that
series; and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company or, if applicable, any Guarantor fails to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as trustee of an
express trust, may institute a judicial proceeding for the collection of the
sums so due and unpaid and may prosecute such proceeding to judgment or final
decree, and may enforce the same against the Company or, if applicable, any
Guarantor or any other obligor upon the Securities of any series and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or, if applicable, any Guarantor or any other
obligor upon the Securities of that series, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture or the Guarantees by such appropriate private or
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce such rights, including, seeking recourse against any Guarantor pursuant
to the terms of any Guarantee, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein or therein, or to enforce any other proper remedy, including,
without limitation, seeking recourse against any Guarantor pursuant to the terms
of a Guarantee, or to enforce any other proper remedy, subject however to
Section 512.
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Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, including each
Guarantor, upon the Securities of any series or the property of the Company or
of such other obligor or their creditors, the Trustee (irrespective of whether
the principal of the Securities of that series shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment of overdue
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal, and
premium, if any, and interest owing and unpaid in respect of the Securities
of that series and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding, and
(b) subject to Article Twelve and, if applicable, Article Fourteen, to
collect and receive any moneys, securities or other property payable or
deliverable upon any conversion or exchange of Securities of that series or
upon any such claims and to distribute the same;
and any custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
of any series or the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
Section 505. Trustee May Enforce Claims without Possession of Securities.
All rights of action and claims under this Indenture or the Securities of
any series may be prosecuted and enforced by the Trustee without the possession
of any of the Securities of that series or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name and as trustee of an express trust, and any
recovery of judgment shall, after provision for the
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payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Securities of that series in respect of which such judgment has been
recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article or otherwise on
behalf of the Holders or the Trustee pursuant to this Article or through any
proceeding or any arrangement or restructuring in anticipation or in lieu of any
proceeding contemplated by this Article shall be applied, subject to applicable
law, in the following order, at the date or dates fixed by the Trustee and, in
case of the distribution of such money on account of principal, premium, if any,
or interest, upon presentation of the Securities of any series and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 606;
SECOND: Subject to Article Twelve and, if applicable, Article Fourteen, to
the payment of the amounts then due and unpaid upon the Securities of that
series for principal, premium, if any, and interest, in respect of which or for
the benefit of which such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and payable on such
Securities for principal, premium, if any, and interest; and
THIRD: Subject to Article Twelve and, if applicable, Article Fourteen, the
balance, if any, to the Person or Persons entitled thereto, including the
Company, provided that all sums due and owing to the Holders and the Trustee
have been paid in full as required by this Indenture.
Section 507. Limitation on Suits.
No Holder of any Securities of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
trustee hereunder;
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(c) such Holder or Holders have offered to the Trustee an indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in principal
amount of the Outstanding Securities of that series;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Guarantee to affect, disturb or prejudice the rights of
any other Holders, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner provided in this Indenture or any Guarantee and for the equal and ratable
benefit of all the Holders of Securities of that series.
Section 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, but subject to
Article Twelve and, if applicable, Article Fourteen, the Holder of any Security
of any series shall have the right on the terms stated herein, which is absolute
and unconditional, to receive payment of the principal of, premium, if any, and
(subject to Section 309) interest on such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption or
repurchase, on the Redemption Date or repurchase date) and to institute suit for
the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder, subject to Article Twelve and, if
applicable, Article Fourteen.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture or the Guarantees and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, each
of the Guarantors, the Trustee and the Holders shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
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Section 510. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security of any
series to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
Section 512. Control by Holders.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of a series (or if more than one series is affected
thereby, of all series so affected, voting as a single class) shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee of that series, provided that
(a) such direction shall not be in conflict with any rule of law or with
this Indenture or any Guarantee or expose the Trustee to personal liability; and
(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
Unless otherwise provided pursuant to Section 301, the Holders of not less
than a majority in aggregate principal amount of the Outstanding Securities of
any series may on behalf of the Holders of all the Securities of that series
waive any past Default hereunder and its consequences, except a Default
(a) in the payment of the principal of, premium, if any, or interest on any
Security of any series; or
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(b) in respect of a covenant or a provision hereof which under Article Nine
cannot be modified or amended without the consent of the holder of each
Outstanding Security of that series.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security of any
series by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee of that series
for any action taken, suffered or omitted by it as Trustee of that series, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee of that series, to any suit instituted by any
Holder, or group of Holders, of that series holding in the aggregate more than
10% in principal amount of the Outstanding Securities of that series, or to any
suit instituted by any Holder for the enforcement of the payment of the
principal of, premium, if any, or interest on any Security of any series on or
after the respective Stated Maturities expressed in such Security (or, in the
case of redemption, on or after the Redemption Date).
Section 515. Waiver of Stay, Extension or Usury Laws.
Each of the Company and any Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company or any Guarantor
from paying all or any portion of the principal of, premium, if any, or interest
on the Securities of any series or which may affect the covenants or the
performance of this Indenture; and each of the Company and any Guarantor (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee of that series,
but will suffer and permit the execution of every such power as though no such
law had been enacted.
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ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults.
Within 30 days after the occurrence of any Default, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of, premium, if any, or
interest on any Security of any series, the Trustee shall be protected in
withholding such notice if and so long as a trust committee of Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders.
Section 602. Certain Rights of Trustee.
Subject to the provisions of Trust Indenture Act Sections 315(a) through
315(d):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of Indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) the Trustee may consult with counsel and any written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity satisfactory to the
Trustee against the costs, expenses and liabilities which might be incurred
therein or thereby in compliance with such request or direction;
(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the
discretion, rights or powers
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conferred upon it by this Indenture other than any liabilities arising out
of the negligence of the Trustee;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security or other paper
or document; provided, that the Trustee in its discretion may make such
further inquiry or investigation into such facts or matters as it may deem
fit, and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers;
(i) the Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company, except
as otherwise provided herein;
(j) money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law, except as otherwise
provided herein; and
(k) if a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Indenture and use the same degree of care and skill in its
exercise thereof as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
Section 603. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof.
The recitals contained herein and in the Securities of each series, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities of any series, except that the Trustee represents
that it is duly authorized to execute and deliver this Indenture, authenticate
the Securities of any securities and perform its obligations hereunder and that
the statements made by it in any Statement of Eligibility
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and Qualification on Form T-1 supplied to the Company are true and accurate
subject to the qualifications set forth therein. The Trustee shall not be
accountable for the use or application by the Company of Securities of any
series or the proceeds thereof.
Section 604. Trustee and Agents May Hold Securities; Collections; etc.
The Trustee, any Paying Agent, Security Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Trust Indenture Act Sections 310 and 311, may otherwise deal with the Company
and receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
Section 605. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Four, the Trustee may invest all moneys received by
the Trustee, until used or applied as herein provided, in Temporary Cash
Investments in accordance with the written directions of the Company. The
Trustee shall not be liable for any losses incurred in connection with any
investments made in accordance with this Section 605, unless the Trustee acted
with gross negligence or in bad faith. With respect to any losses on investments
made under this Section 605, the Company is liable for the full extent of any
such loss.
Section 606. Compensation and Indemnification of Trustee and Its Prior
Claim.
The Company covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, such compensation for all services
rendered by it hereunder (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) set forth in a
letter agreement executed by the Company and the Trustee, as such agreement may
be amended or supplemented, and the Company covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on behalf
of it in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
The Company also covenants to indemnify the Trustee and each predecessor Trustee
for, and to hold it harmless against, any loss, liability, tax, assessment or
other governmental
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charge (other than taxes applicable to the Trustee's compensation hereunder) or
expense incurred without negligence or bad faith on such Trustee's part, arising
out of or in connection with the acceptance or administration of this Indenture
or the trusts hereunder and such Trustee's duties hereunder, including
enforcement of this Indenture and also including any liability which the Trustee
may incur as a result of failure to withhold, pay or report any tax, assessment
or other governmental charge, and the costs and expenses of defending itself
against or investigating any claim of liability (whether asserted by any Holder,
the Company or any other Person) in connection with the exercise or performance
of any of its powers or duties under this Indenture. The obligations of the
Company under this Section to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall constitute an additional
obligation hereunder and shall survive the satisfaction and discharge of this
Indenture.
All payments and reimbursements pursuant to this Section 606 shall be made
with interest at the rate borne by the Securities.
As security for the performance of the obligations of the Company under
this Section 606, the Trustee shall have a Lien prior to the Securities of any
series upon all property and funds held or collected by the Trustee, except
funds held in trust for the payment of principal of (and premium, if any) or
interest on particular Securities. The Trustee's right to receive payment of any
amounts due under this Section 606 shall not be subordinate to any other
liability or indebtedness of the Company (even though the Securities of any
series may be so subordinate), and the Securities of any series shall be
subordinate to the Trustee's right to receive such payment.
Section 607. Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the Trust
Indenture Act.
Section 608. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible to
act as trustee under Trust Indenture Act Section 310(a)(1) and which shall have
a combined capital and surplus of at least $250,000,000, to the extent there is
an institution eligible and willing to serve. The Trustee shall be a participant
in the Depository Trust Company and FAST distribution systems. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at
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any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect hereinafter specified in this Article. The Corporate Trust
Office shall initially be located at First Union National Bank of Maryland, 901
East Cary Street, Richmond, Virginia 23219.
Section 609. Resignation and Removal; Appointment of Successor Trustee.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor trustee under Section 610.
(b) The Trustee, or any trustee or trustees hereafter appointed, may at any
time resign by giving written notice thereof to the Company. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee by
written instrument executed by authority of the Board of Directors of the
Company, a copy of which shall be delivered to the resigning Trustee and a copy
to the successor trustee. If an instrument of acceptance by a successor trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may, or any Holder who has
been a bona fide Holder of a Security of the applicable series for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper, appoint a
successor trustee.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by an Act of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of that series, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Trust
Indenture Act Section 310(b) after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Security for at least
six months, or
(2) the Trustee shall cease to be eligible under Section 608 and shall
fail to resign after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its
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property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the Trustee,
or (ii) subject to Section 514, the Holder of any Security who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(e) If the Trustee shall be removed or become incapable of acting, or if a
vacancy shall occur in the office of Trustee for any cause, with respect to the
Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor trustee with respect to the Securities of that or
those series (it being understood that any such successor Trustee may be
appointed with respect to the Securities of one or more or all series and that
at any time there shall be only one Trustee with respect to the Securities of
any particular series). If, within one year after such removal or incapability,
or the occurrence of such vacancy, a successor trustee with respect to the
Securities of any series shall be appointed by Act of the Holders of a majority
in principal amount of the Outstanding Securities of that series delivered to
the Company and the retiring Trustee, the successor trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
with respect to the Securities of that series and to that extent supersede the
successor trustee appointed by the Company. If no successor Trustee with respect
to the Securities of that series shall have been so appointed by the Company or
the Holders of the Securities of that series and accepted appointment in the
manner hereinafter provided, the Holder of any Security of such series who has
been a bona fide Holder for at least six months may, subject to Section 514, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of that series.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Securities of the affected series as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor trustee
and the address of its Corporate Trust Office or agent hereunder.
Section 610. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee with respect to
all Securities, such successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such
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appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee as if originally named as Trustee hereunder; but,
nevertheless, on the written request of the Company or the successor trustee,
upon payment of its charges then unpaid, such retiring Trustee shall, pay over
to the successor trustee all moneys at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. Upon request of any such successor
trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers. Any Trustee ceasing to act shall, nevertheless, retain a prior claim
upon all property or funds held or collected by such Trustee or such successor
trustee to secure any amounts then due such Trustee pursuant to the provisions
of Section 606.
In case of the appointment hereunder of a successor Trustee with respect to
the Securities of one or more (but not all) series, the Company, the Guarantors,
the retiring Trustee and each successor Trustee with respect to the Securities
of such one or more series shall execute and deliver an indenture supplemental
hereto wherein such successor Trustee shall accept such appointment and which
(1) shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, such successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company, any Guarantor or any successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder
with respect to the Securities of that or those series to which the appointment
of such successor Trustee relates.
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Upon request of any such successor Trustee, the Company and the Guarantors
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts
referred to in the first or second preceding paragraph, as the case may be.
No successor Trustee with respect to the Securities of any series shall
accept appointment as provided in this Section 610 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Trust Indenture Act Section 310(a) and this Article Sixth and
shall have a combined capital and surplus of at least $250,000,000 and have a
Corporate Trust Office or an agent selected in accordance with Section 608.
Upon acceptance of appointment by any successor Trustee with respect to the
Securities of any particular series as provided in this Section 610, the Company
shall give notice thereof to the Holders of the Securities of any series
affected, by mailing such notice to such Holders at their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
609. If the Company fails to give such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Company.
Section 611. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be eligible under Trust Indenture Act Section
310(a) and this Article Sixth and shall have a combined capital and surplus of
at least $250,000,000 and have a Corporate Trust Office or an agent selected in
accordance with Section 608 without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of any series shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and deliver
such Securities so authenticated; and, in case at that time any of the
Securities of that series shall not have been authenticated, any successor to
the Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor trustee; and in all such
cases such certificate shall have the full force which it is anywhere in the
Securities of any series or in this
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Indenture provided that the certificate of the Trustee shall have; provided that
the right to adopt the certificate of authentication of any predecessor Trustee
or to authenticate Securities of that series in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
Section 612. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
other obligor under the Securities of any series), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor). A Trustee who has resigned or
been removed shall be subject to the Trust Indenture Act Section 311(a) to the
extent indicated therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 15 days after each Regular Record Date, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Company of any such request, a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished;
provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
Holders may communicate pursuant to Trust Indenture Act Section 312(b) with
other Holders with respect to their rights under this Indenture or the
Securities, and the Trustee shall comply with Trust Indenture Act Section
312(b). The Company, the Trustee, the Security Registrar and any other Person
shall have the protection of Trust Indenture Act Section 312(c). Every Holder of
Securities of any series, by receiving and holding the same, agrees with the
Company and the Trustee that neither the Company nor the Trustee nor any agent
of either of them shall be held accountable by reason of the disclosure of any
information as to the names and addresses of the Holders in accordance with
Trust Indenture Act Section 312, regardless of the source from which such
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information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Trust Indenture
Act Section 312.
Section 703. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first May 15
after the first issuance of Securities of each series, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, as provided in Trust Indenture Act Section 313(c), a brief
report dated as of such May 15 in accordance with and to the extent required by
Trust Indenture Act Section 313(a).
Section 704. Reports by Company and Guarantors.
The Company and any Guarantor shall:
(a) file with the Trustee, within 15 days after the Company or any
Guarantor, as the case may be, is required to file the same with the
Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations prescribe)
which the Company or any Guarantor may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or,
if the Company or any Guarantor, as the case may be, is not required to
file information, documents or reports pursuant to either of said Sections,
then it shall file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
of the supplementary and periodic information, documents and reports which
may be required pursuant to Section 13 of the Exchange Act in respect of a
security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company or any Guarantor, as the case may be, with the conditions and
covenants of this Indenture as may be required from time to time by such
rules and regulations; and
(c) transmit or cause to be transmitted by mail to all Holders, as
their names and addresses appear in the Security Register, within 30 days
after the filing thereof with the Trustee, in the manner and to the extent
provided in Trust Indenture Act Section 313(c), such summaries of any
information, documents and reports required to by filed by the Company or
any Guarantor, as the case may be, pursuant to Subsections (a) and (b) of
this Section as may be required by rules and regulations prescribed from
time to time by the Commission.
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ARTICLE EIGHT
CONSOLIDATION, MERGER,
CONVEYANCE, TRANSFER OR LEASE
Section 801. Company or Any Guarantor May Consolidate, etc., Only on
Certain Terms.
Unless otherwise provided pursuant to Section 301:
(a) The Company shall not, in a single transaction or through a series
of related transactions, consolidate with or merge with or into any other
Person or sell, assign, convey, transfer or lease or otherwise dispose of
all or substantially all of its properties and assets as an entirety 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 disposal 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 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 Securities and
this Indenture, and this 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
this 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
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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 this Indenture) could incur $1.00 of
additional Indebtedness under any applicable provisions of the
Indenture limiting incurrence of indebtedness and established pursuant
to Section 301;
(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 this Indenture and the Securities;
(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 the Indenture limiting liens (established pursuant to
Section 301) 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, conveyance, lease or other
transaction and the supplemental indenture in respect thereto comply
with this Indenture and that all conditions precedent herein provided
for relating to such transaction have been complied with.
(b) If any Securities of any series are guaranteed pursuant to Article
Fourteen, each Guarantor, if any, shall not, and the Company shall not
permit a Guarantor to, in a single transaction or through a 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 an indenture supplemental hereto, executed and
delivered to the Trustee, in a form reasonably satisfactory to the
Trustee, all the obligations
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of such Guarantor under its Guarantees and this 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 this
Indenture, and thereafter all obligations of the predecessor shall
terminate.
Section 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company or any Guarantor in accordance with Section 801, the
successor Person formed by such consolidation or into which the Company or such
Guarantor, as the case may be, is merged or the successor Person to which such
sale, assignment, conveyance, transfer, lease or disposition is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Guarantor, as the case may be, under this Indenture, the
Securities of any series and/or such Guarantee, as the case may be, with the
same effect as if such successor had been named as the Company or such
Guarantor, as the case may be, herein, in the Securities of that series and/or
in such Guarantee, as the case may be. When a successor assumes all the
obligations of its predecessor under this Indenture, the Securities of any
series or a Guarantee, as the case may be, the predecessor shall be released
from those obligations; provided that in the case of a transfer by lease, the
predecessor shall not be released from the payment of principal and interest on
the Securities of any series or a Guarantee, as the case may be.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent of
Holders.
Unless otherwise provided for in Section 301, without the consent of any
Holders, the Company and the Guarantors, when authorized by a Board Resolution,
and the Trustee, at any time and from time to time, may enter into one or more
indentures
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supplemental hereto or agreements or other instruments with respect to any
Guarantee, in form and substance satisfactory to the Trustee, for any of the
following purposes:
(a) cause the Indenture to be qualified under the Trust Indenture Act
("TIA") or to add provisions expressly required under the TIA;
(b) evidence the succession of another Person to the Company[, any
Guarantor or other obligor upon the Securities and the assumption by any
such successor of the covenants of the Company, any Guarantor or other
obligor upon the Securities under the Indenture and in the Securities of
any series;
(c) add to the covenants of the Company, any Guarantor or other
obligor upon the Securities for the benefit of the Holders (and if such
covenants are to be for the benefit of less than all series of 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 Securities, or surrender any right or power conferred upon the
Company;
(d) to secure the Securities of any series thereof;
(e) to add to or change any provisions to such extent as necessary to
facilitate the issuance or administration of Securities in bearer form or
to facilitate the issuance or administration of Securities in global form;
(f) to change or eliminate any provision affecting only series of
Securities not yet issued;
(g) to establish the form or terms of Securities and Guarantee, if
any, of any series;
(h) 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 Securities;
(i) to permit payment in respect of Securities in bearer form in the
United States to the extent allowed by law;
(j) to make provision with respect to any conversion or exchange
rights of holders not adverse to the holders of any Securities of any
series then outstanding with such conversion or exchange rights which
provision directly effects any such series, including providing for the
conversion or exchange of Securities into Common Stock or Preferred Stock;
(k) cure any ambiguity, correct or supplement any provision which may
be defective or inconsistent with any other provision, or make any other
provisions with
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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 modifications or amendment may adversely affect the interest
of holders of Securities of any series then outstanding in any material
respect; or
(l) to add a Guarantor pursuant to the requirements of Article
Fourteen.
Section 902. Supplemental Indentures and Agreements with Consent of
Holders.
Unless otherwise provided pursuant to Section 301, with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities of all series affected, by Act of said Holders delivered
to the Company, each Guarantor, and the Trustee, the Company and each Guarantor
(if a party thereto), when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto or agreements or other
instruments with respect to any Guarantee in form and substance satisfactory to
the Trustee for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of modifying in
any manner the rights of the Holders under this Indenture, the Securities or any
Guarantee; provided, however, that no such supplemental indenture, agreement or
instrument shall, without the consent of the Holder of each Outstanding Security
of all series affected thereby:
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any 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
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);
(b) reduce the percentage in principal amount of the Outstanding
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 this Indenture or
certain defaults or with respect to any Guarantee;
(c) modify any of the provisions of this Section, Section 513 or
Section 1009, except to increase the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any
such actions or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
Security affected thereby;
(d) except as otherwise permitted under Article Eight, consent to the
assignment or transfer by the Company or any Guarantor of any of its rights
and obligations under this Indenture; or
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(e) amend or modify any of the provisions of this Indenture relating
to the subordination of the Securities or any Guarantee in any manner
adverse to the Holders of the Securities or any Guarantee.
Upon the written request of the Company and each Guarantor, accompanied by
a copy of a Board Resolution authorizing the execution of any such supplemental
indenture or Guarantee, and upon the filing with the Trustee of evidence of the
consent of Holders as aforesaid, the Trustee shall, subject to Section 903, join
with the Company and each Guarantor in the execution of such supplemental
indenture or Guarantee.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture or Guarantee
or agreement or instrument relating to any Guarantee, but it shall be sufficient
if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement or instrument permitted by this Article or the
modifications thereby of the trusts created by this Indenture, the Trustee shall
be entitled to receive, and (subject to Trust Indenture Act Section 315(a)
through 315(d) and Section 602 hereof) shall be fully protected in relying upon,
an Opinion of Counsel and an Officers' Certificate stating that the execution of
such supplemental indenture, agreement or instrument is authorized or permitted
by this Indenture. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture, agreement or instrument which affects the
Trustee's own rights, duties or immunities under this Indenture, any Guarantee
or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities of each series theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
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Section 906. Reference in Securities to Supplemental Indentures.
Securities of each series authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities of each series so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any such supplemental
indenture may be prepared and executed by the Company and each Guarantor and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of that series.
Section 907. Effect on Senior Indebtedness.
No supplemental indenture shall adversely affect the rights under Article
Twelve and, if applicable, Article Fourteen, or any definitions or provisions
related thereto, or the Guarantees of any holder of Senior Indebtedness or
Guarantor Senior Indebtedness unless the requisite holders of each issue of
Senior Indebtedness or Guarantor Senior Indebtedness affected thereby shall have
consented to such supplemental indenture.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
Subject to the provisions of Article Twelve and, if applicable, Article
Fourteen, the Company will duly and punctually pay the principal of, premium, if
any, and interest on each series of the Securities in accordance with the terms
of the Securities of each series and this Indenture.
Section 1002. Maintenance of Office or Agency.
Unless otherwise provided pursuant to Section 301, the Company will
maintain an office or agency where Securities of each series may be presented or
surrendered for payment. The Company also will maintain an office or agency
where Securities of each series may be surrendered for registration of transfer,
redemption or exchange and where notices and demands to or upon the Company in
respect of the Securities of each series and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location and any
change in the location of any such offices or agencies. If at any time the
Company shall fail to maintain any such required offices or agencies or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the office of the agent
of the Trustee
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described above and the Company hereby appoints such agent as its agent to
receive all such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices or
agencies where the Securities of each series may be presented or surrendered for
any or all such purposes, and may from time to time rescind such designation.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such office or
agency.
Procedures with respect to Bearer Securities in connection with the matters
addressed in this Section 1002 shall be set forth pursuant to Section 301.
Unless otherwise provided pursuant to Section 301, the Trustee shall
initially serve as Paying Agent.
Section 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of, premium, if any, or interest on any
of the Securities of any series, segregate and hold in trust for the benefit of
the Holders entitled thereto a sum sufficient to pay the principal, premium, if
any, or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided, and will promptly notify the
Trustee of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company will, before each
due date of the principal of, premium, if any, or interest on any Securities of
any series, deposit with a Paying Agent or Paying Agents, as the case may be, a
sum in same day funds sufficient to pay the principal, premium, if any, or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of such
action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will cause each
Paying Agent other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities of any series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
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(b) give the Trustee notice of any Default by the Company or any
Guarantor (or any other obligor upon the Securities of any series) in the
making of any payment of principal, premium, if any, or interest;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and
disabilities of such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, including each
Guarantor, upon the Securities of any series or the property of the Company or
of such other obligor or their creditors, the Trustee shall serve as the Paying
Agent.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Security of any series and remaining unclaimed for two years
after such principal and premium, if any, or interest has become due and payable
shall promptly be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in The New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will promptly be repaid to the Company.
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Section 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence and related rights and franchises (charter and statutory) of the
Company and each Subsidiary; provided, however, that the Company shall not be
required to preserve any such right or franchise or the corporate existence of
any such Subsidiary if the Board of Directors of the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the loss
thereof would not reasonably be expected to have a material adverse effect on
the ability of the Company to perform its obligations hereunder; and provided,
further, however, that the foregoing shall not prohibit a sale, transfer or
conveyance of a Subsidiary or any of its assets in compliance with the terms of
this Indenture.
Section 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged, on or
before the date the same shall become due and payable, (a) all taxes,
assessments and governmental charges levied or imposed upon the Company or any
Subsidiary shown to be due on any return of the Company or any Subsidiary or
otherwise assessed or upon the income, profits or property of the Company or any
Subsidiary if failure to pay or discharge the same could reasonably be expected
to have a material adverse effect on the ability of the Company or any
Guarantor, if any, to perform its obligations hereunder and (b) all lawful
claims for labor, materials and supplies, which, if unpaid, would by law become
a lien upon the property of the Company or any Subsidiary; provided, however,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted and in respect of which
appropriate reserves (in the good faith judgment of management of the Company)
are being maintained in accordance with generally accepted accounting principles
consistently applied.
Section 1006. Maintenance of Properties.
The Company will cause all material properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order (ordinary wear and tear excepted) and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be consistent with sound business practice and necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however,
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that nothing in this Section shall prevent the Company from discontinuing the
maintenance of any of such properties if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business or the business of any
Subsidiary and not reasonably expected to have a material adverse effect on the
ability of the Company to perform its obligations hereunder.
Section 1007. Insurance.
The Company will at all times keep all of its and its Subsidiaries'
properties which are of an insurable nature insured with insurers, believed by
the Company to be responsible, against loss or damage to the extent that
property of similar character is usually so insured by corporations similarly
situated and owning like properties.
Section 1008. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, on or before a date not more
than 60 days after the end of each fiscal quarter and not more than 120 days
after the end of each fiscal year of the Company ending after the date hereof, a
written statement signed by two executive officers of the Company, one of whom
shall be the principal executive officer, principal financial officer or
principal accounting officer of the Company, stating whether or not, after a
review of the activities of the Company during such year or such quarter and of
the Company's performance under this Indenture, to the best knowledge, based on
such review, of the signers thereof, the Company has fulfilled all its
obligations and is in compliance with all conditions and covenants under this
Indenture throughout such year or quarter, as the case may be, and, if there has
been a Default specifying each Default and the nature and status thereof.
(b) When any Default or Event of Default has occurred and is continuing, or
if the Trustee or any Holder or the trustee for or the holder of any other
evidence of Indebtedness of the Company or any Subsidiary gives any notice or
takes any other action with respect to a claimed default (other than with
respect to Indebtedness in the principal amount of less than $5,000,000), the
Company shall deliver to the Trustee by registered or certified mail or by
telegram, telex or facsimile transmission followed by hard copy an Officers'
Certificate specifying such Default, Event of Default, notice or other action
within five Business Days of its occurrence.
Section 1009. Waiver of Certain Covenants.
Unless otherwise provided pursuant to Section 301, the Company or any
Guarantor may, with respect to the Securities of any series, omit in any
particular instance to comply with any term, provision or condition set forth in
any covenant provided pursuant to Sections 301 or 901 for the benefit of the
Holders of any series, if, before or after the time for such compliance, the
Holders of not less than a majority in aggregate principal
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amount of the Securities of that series at the time Outstanding shall, by Act of
such Holders, waive such compliance in such instance with such covenant, but no
such waiver shall extend to or affect such covenant except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such covenant
shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.
Unless otherwise provided pursuant to Section 301, the Securities of each
series may be redeemed at the election of the Company, in whole or in part, at
any time as specified pursuant to Section 301, subject to the conditions, and at
the Redemption Price, specified in the form of Security of each series
(specified pursuant to Section 301), together with accrued and unpaid interest,
if any, to the Redemption Date.
Section 1102. Applicability of Article.
Redemption of Securities of each series at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
Section 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities of any series pursuant
to Section 1101 shall be evidenced by a Company Order and an Officers'
Certificate. In case of any redemption at the election of the Company, the
Company shall, not less than 45 nor more than 60 days prior to the Redemption
Date fixed by the Company (unless a shorter notice period shall be satisfactory
to the Trustee), notify the Trustee in writing of such Redemption Date and of
the principal amount of Securities of that series to be redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities of that series or portions thereof to be redeemed shall be
selected not more than 30 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities not previously called for redemption, pro rata, by
lot or such other method as the Trustee shall deem fair and reasonable, and the
amounts to be redeemed may be equal to $1,000 or any integral multiple thereof.
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The Trustee shall promptly notify the Company and the Security Registrar in
writing of the Securities of each series selected for redemption and, in the
case of any Securities of that series selected for partial redemption, the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Securities of any series (including
interest coupons, if any) shall relate, in the case of any Security of that
series (including interest coupons, if any) redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security of that series
(including interest coupons, if any) which has been or is to be redeemed.
Section 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities of the affected series to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities of any series are to be
redeemed, the identification of the particular Securities of that series to
be redeemed;
(d) in the case of a Security of any series to be redeemed in part,
the principal amount of such Security to be redeemed and that after the
Redemption Date upon surrender of such Security of that series, new
Security or Securities of that series in the aggregate principal amount
equal to the unredeemed portion thereof will be issued;
(e) that Securities of any series called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof, and that (unless
the Company shall default in payment of the Redemption Price) interest
thereon shall cease to accrue on and after said date;
(g) the place or places where such Securities are to be surrendered
for payment of the Redemption Price; and
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(h) the CUSIP number, if any, relating to such Securities.
Notice of redemption of Securities of any series to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
written request, by the Trustee in the name and at the expense of the Company.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the Holder receives such notice. In
any case, failure to give such notice to any Holder of any Security of any
series designated for redemption as a whole or in part, or any defect in any
such notice, shall not affect the validity of the proceedings for the redemption
of any other Security of any series.
Section 1106. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money in same day funds sufficient to pay the Redemption Price of and (except if
the Redemption Date shall be an Interest Payment Date) accrued interest on, all
the Securities or portions thereof which are to be redeemed on that date. When
the Redemption Date falls on an Interest Payment Date, payments of interest due
on such date are to be paid as provided hereunder as if no such redemption were
occurring.
Section 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities of the
series so to be redeemed shall, on the Redemption Date, become due and payable
at the Redemption Price therein specified and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price together with accrued interest to
the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such on the relevant Regular Record Dates according to the terms and the
provisions of Section 309.
If any Security of any series called for redemption shall not be so paid
upon surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate borne by such
Security.
Procedures regarding the treatment of Holders of Bearer Securities with
respect to the matters addressed in this Section 1107 shall be provided pursuant
to Section 301.
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Section 1108. Securities Redeemed or Purchased in Part.
Any Security of any series which is to be redeemed or purchased only in
part shall be surrendered to the Paying Agent at the office or agency maintained
for such purpose pursuant to Section 1002 (with, if the Company, the Security
Registrar or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company, the Security
Registrar or the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities of that series, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to,
and in exchange for, the unredeemed portion of the principal of the Security of
that series so surrendered that is not redeemed or purchased.
ARTICLE TWELVE
SUBORDINATION OF SECURITIES
Unless otherwise provided pursuant to Section 301, the following provisions
shall apply to the Securities of any series:
Section 1201. Securities Subordinate to Senior Indebtedness.
Unless otherwise provided pursuant to Section 301, the Company covenants
and agrees, and each Holder of a Security, by his acceptance thereof, likewise
covenants and agrees, that, to the extent and in the manner hereinafter set
forth in this Article, the Indebtedness represented by the Securities and the
payment of the principal of, premium, if any, and interest on each and all of
the Securities and all other Indenture Obligations are hereby expressly made
subordinate and subject in right of payment as provided in the Indenture to the
prior payment in full, in cash or Cash Equivalents or in any other form as
acceptable to the holders of Senior Indebtedness, of all Senior Indebtedness,
whether outstanding on the date of the Indenture or thereafter incurred.
This Article Twelve shall constitute a continuing offer to all Persons who,
in reliance upon such provisions, become holders of, or continue to hold Senior
Indebtedness; and such provisions are made for the benefit of the holders of
Senior Indebtedness; and such holders are made obligees hereunder and they or
each of them may enforce such provisions.
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Section 1202. Payment Over of Proceeds Upon Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets or liabilities of the Company, then and in any
such event:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash or Cash Equivalents or in any other form as
acceptable to the holders of Senior Indebtedness of all amounts due on or
in respect of all Senior Indebtedness, before the Holders of the Securities
are entitled to receive any payment or distribution of any kind or
character (excluding Permitted Junior Securities) on account of the
principal of, premium, if any, or interest on the Securities of any series
or any other Indenture Obligations; and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (excluding Permitted
Junior Securities), by set-off or otherwise, to which the Holders or the
Trustee would be entitled but for the provisions of this Article shall be
paid by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness or their representative or representatives or to the trustee
or trustees under any indenture under which any instruments evidencing any
of such Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness
held or represented by each, to the extent necessary to make payment in
full in cash or Cash Equivalents or in any other form as acceptable to the
Holders of Senior Indebtedness, of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security of any series shall
have received any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, in respect of
principal, premium, if any, and interest on the Securities of any series or
any other Indenture Obligations before all Senior Indebtedness is paid in
full, then and in such event such payment or distribution (excluding
Permitted Junior Securities) shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other person making payment or distribution of assets of
the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
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full in cash or Cash Equivalents or in any other form as acceptable to the
Holders of Senior Indebtedness, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company with or
into, another Person or the liquidation or dissolution of the Company following
the sale, assignment, conveyance, transfer, lease or other disposal of all or
substantially all of the Company's properties or assets to another Person upon
the terms and conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshaling of assets and liabilities of the Company for the
purposes of this Section if the Person formed by such consolidation or the
surviving entity of such merger or the Person which acquires by sale,
assignment, conveyance, transfer, lease or other disposal of all or
substantially all of the Company's properties or assets, as the case may be,
shall, as a part of such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposal, comply with the conditions set forth in
Article Eight.
Section 1203. Suspension of Payment When Senior Indebtedness in Default.
(a) Unless Section 1202 shall be applicable, upon the occurrence of a
Payment Default, no payment (other than any payments previously made pursuant to
the provisions described in Article Four) or distribution of any assets of the
Company of any kind or character (excluding Permitted Junior Securities) shall
be made by the Company on account of principal of, premium, if any, or interest
on, the Securities of any series or any other Indenture Obligations or on
account of the purchase, redemption, defeasance (whether under Section 402 or
403) or other acquisition of or in respect of the Securities unless and until
such Payment Default shall have been cured or waived or shall have ceased to
exist or the Designated Senior Indebtedness with respect to which such Payment
Default shall have occurred shall have been discharged or paid in full in cash
or Cash Equivalents or in any other form as acceptable to the Holders of Senior
Indebtedness, after which the Company shall resume making any and all required
payments in respect of the Securities, including any missed payments.
(b) Unless Section 1202 shall be applicable, upon (1) the occurrence of a
Non-payment Default and (2) after receipt by the Trustee and the Company from a
representative of the holder of any Designated Senior Indebtedness (a "Senior
Representative") of written notice of such occurrence, no payment (other than
any payments previously made pursuant to the provisions described in Article
Four) or distribution of any assets of the Company of any kind or character
(excluding Permitted Junior Securities) shall be made by the Company on account
of any principal of, premium, if any, or interest on, the Securities or any
other Indenture Obligations or on account of the purchase, redemption,
defeasance or other acquisition of or in respect of
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Securities for a period ("Payment Blockage Period") commencing on the date of
receipt by the Trustee of such notice unless and until the earliest of (subject
to any blockage of payments that may then or thereafter be in effect under
subsection (a) of this Section 1203) (x) 179 days having elapsed since receipt
of such written notice by the Trustee (provided any Designated Senior
Indebtedness as to which notice was given shall theretofore have not been
accelerated), (y) the date such Non-payment Default and all other Non-payment
Defaults as to which notice is also given after such period is initiated shall
have been cured or waived or shall have ceased to exist or the Designated Senior
Indebtedness related thereto shall have been discharged or paid in full in cash
or Cash Equivalents or in any other form as acceptable to the Holders of
Designated Senior Indebtedness, or (z) the date on which such Payment Blockage
Period (and all Non-payment Defaults as to which notice is given after such
Payment Blockage Period is initiated) shall have been terminated by written
notice to the Company or the Trustee from the representative of holders of
Designated Senior Indebtedness, or the holders of at least a majority of the
Designated Senior Indebtedness, that initiated such Payment Blockage Period,
after which, in each such case, the Company shall promptly resume making any and
all required payments in respect of the Securities, including any missed
payments. Notwithstanding any other provision of this Indenture, in no event
shall a Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Company or the Trustee of the notice referred to in clause (2) of
this paragraph (b) (the "Initial Blockage Period"). Any number of notices of
Non-payment Defaults may be given during the Initial Blockage Period; provided
that during any 365-day consecutive period only one Payment Blockage Period
during which payment of principal of, or interest on, the 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 shall have been cured or waived for a
period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, then and in such event such payment shall
be paid over and delivered forthwith to a Senior Representative of the holders
of the Designated Senior Indebtedness or as a court of competent jurisdiction
shall direct.
Section 1204. Payment Permitted if No Default.
Nothing contained in this Article, elsewhere in this Indenture or in any of
the Securities shall prevent the Company, at any time except during the pendency
of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit
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of creditors or other marshaling of assets and liabilities of the Company
referred to in Section 1202 or under the conditions described in Section 1203,
from making payments at any time of principal of, premium, if any, or interest
on the Securities.
Section 1205. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the 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 Holders of the Securities shall be subrogated to the rights of
the holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of, premium, if any, and interest on the Securities shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
holders of Senior Indebtedness of any cash, property or securities to which the
Holders or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Indebtedness by Holders of the Securities or the Trustee,
shall, as among the Company, its creditors other than holders of Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior Indebtedness.
Section 1206. Provisions Solely to Define Relative Rights.
The provisions of this Article are intended solely for the purpose of
defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the
Securities the principal of, premium, if any, and interest on the Securities as
and when the same shall become due and payable in accordance with their terms;
or (b) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article of the holders
of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of the Company referred to in Section 1202, to receive,
pursuant to and in accordance with such Section, cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder, or (2) under the
conditions specified in Section 1203, to prevent any payment prohibited by such
Section or enforce their rights pursuant to Section 1203(c).
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Section 1207. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of the
Company whether in bankruptcy, insolvency, receivership proceedings, or
otherwise, the timely filing of a claim for the unpaid balance of the
Indebtedness of the Company owing to such Holder in the form required in such
proceedings and the causing of such claim to be approved.
Section 1208. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act by any such holder, or by any non-compliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of Subsection (a) of this Section and
notwithstanding any other provision contained herein, the holders of Senior
Indebtedness may, at any time and from time to time, without the consent of or
notice to the Trustee or the Holders of the Securities, without incurring
responsibility to the Holders of the Securities and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other Person; provided, however, that in no
event shall any such actions limit the right of the Holders of the Securities to
take any action to accelerate the maturity of the Securities in accordance with
the provisions set forth in Article Five or to pursue any rights or remedies
under this Indenture or under applicable laws if the taking of such action does
not otherwise violate the terms of this Article.
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Section 1209. Notice to Trustee.
(a) The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities or other Indenture Obligations.
Notwithstanding the provisions of this Article or any provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Indebtedness or
from a Senior Representative or any trustee, fiduciary or agent therefor; and,
prior to the receipt of any such written notice, the Trustee shall be entitled
in all respects to assume that no such facts exist; provided, however, that if
the Trustee shall not have received the notice provided for in this Section
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the principal of,
premium, if any, or interest on any Security or other Indenture Obligations),
then, anything herein contained to the contrary notwithstanding but without
limiting the rights and remedies of the holders of Senior Indebtedness or any
trustee, fiduciary or agent thereof, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it after such date; nor shall the Trustee be charged
with knowledge of the curing of any such default or the elimination of the act
or condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee and the Company by a Person representing himself
to be a Senior Representative or a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
Senior Representative or a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor); provided, however, that failure to give such
notice to the Company shall not affect in any way the ability of the Trustee to
rely on such notice. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
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Section 1210. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee and the Holders of the Securities shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article, provided that the foregoing shall apply only if such court has
been fully apprised of the provisions of this Article.
Section 1211. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article with respect to any Senior Indebtedness which may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 606.
Section 1212. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting under this Indenture, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1211 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
Section 1213. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the Trustee or
the Holders of Securities to take any action to accelerate the maturity of the
Securities pursuant to Article Five and as set forth in this Indenture or to
pursue any rights or remedies hereunder or under applicable law, subject to the
rights, if any, under this Article of the
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holders, from time to time, of Senior Indebtedness to receive the cash, property
or securities receivable upon the exercise of such rights or remedies.
Section 1214. Trustee's Relation to Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Indebtedness shall be read into this
Article against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness and the Trustee shall not
be liable to any holder of Senior Indebtedness if it shall mistakenly in the
absence of gross negligence or willful misconduct pay over or deliver to
Holders, the Company or any other Person moneys or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article or otherwise.
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
Section 1301. Satisfaction and Discharge of Indenture.
Unless otherwise provided pursuant to Section 301, this Indenture shall
cease to be of further effect (except as to surviving rights of registration of
transfer or exchange of Securities herein, rights to payment, rights to
conversion, and rights to replacement of stolen, lost or mutilated Securities
expressly provided for) and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(1) all the Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 308 or (ii) all
Securities for whose payment United States dollars have theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as provided
in Section 1003) have been delivered to the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the Trustee for
cancellation (x) have become due and payable, (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
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redemption by the Trustee in the name, and at the expense, of the Company,
and the Company or any Guarantor, in the case of (2)(x),(y) or (z) above,
has irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose an amount in United States dollars
sufficient to pay and discharge the entire Indebtedness on the Securities
not theretofore delivered to the Trustee for cancellation, for the
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 hereunder 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 herein provided
for relating to the satisfaction and discharge of this Indenture have been
complied with and (ii) such satisfaction and discharge will not result in a
breach or violation of or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any Guarantor is
a party or by which the Company or any Guarantor is bound.
Opinions of Counsel required to be delivered under this Section may have
qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if United
States dollars shall have been deposited with the Trustee pursuant to subclause
(2) of Subsection (a) of this Section, the obligations of the Trustee under
Section 1302 and the last paragraph of Section 1003 shall survive.
Section 1302. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all United
States dollars deposited with the Trustee pursuant to Section 1301 shall be held
in trust and applied by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal of, premium, if
any, and interest on the Securities for whose payment such United States dollars
have been deposited with the Trustee.
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ARTICLE FOURTEEN
GUARANTEE
If, pursuant to Section 301, the Securities of any series are to be
guaranteed by any Guarantor, the following provisions, unless otherwise provided
pursuant to Section 301, shall apply. In this Article Fourteen, unless the
context otherwise requires, all references to Securities refers to the series of
Securities guaranteed by the Guarantors and all references to Indenture
Obligations refer to Indenture Obligations in respect of the series of
Securities so guaranteed. If no series of Securities are guaranteed, this
Article Fourteen and all references to Guarantees and Guarantors in this
Indenture shall have no force and effect.
Section 1401. Guarantors' Guarantee.
For value received, each of the Guarantors, in accordance with this Article
Fourteen, hereby absolutely, unconditionally and irrevocably guarantees, jointly
and severally, to the Trustee and the Holders, as if the Guarantors were the
principal debtor, the punctual payment and performance when due of all Indenture
Obligations (which for purposes of this Guarantee shall also be deemed to
include all commissions, fees, charges, costs and other expenses (including
reasonable legal fees and disbursements of one counsel in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances) arising out of or
incurred by the Trustee or the Holders in connection with the enforcement of
this Guarantee).
Section 1402. Continuing Guarantee; No Right of Set-Off; Independent
Obligation.
(a) This Guarantee shall be a continuing guarantee of the payment and
performance of all Indenture Obligations and shall remain in full force and
effect until the payment in full of all of the Indenture Obligations and shall
apply to and secure any ultimate balance due or remaining unpaid to the Trustee
or the Holders; and this Guarantee shall not be considered as wholly or
partially satisfied by the payment or liquidation at any time or from time to
time of any sum of money for the time being due or remaining unpaid to the
Trustee or the Holders. Each Guarantor, jointly and severally, covenants and
agrees to comply with all obligations, covenants, agreements and provisions
applicable to it in this Indenture including those set forth in Article Eight.
Without limiting the generality of the foregoing, each of the Guarantors'
liability shall extend to all amounts which constitute part of the Indenture
Obligations and would be owed by the Company under this Indenture and the
Securities but for the fact that they are
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unenforceable, reduced, limited, impaired, suspended or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving the
Company.
(b) Each Guarantor, jointly and severally, hereby guarantees that the
Indenture Obligations will be paid to the Trustee without set-off or
counterclaim or other reduction whatsoever (whether for taxes, withholding or
otherwise) in lawful currency of the United States of America.
(c) Each Guarantor, jointly and severally, guarantees that the Indenture
Obligations shall be paid strictly in accordance with their terms regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the holders of the Securities.
(d) Each Guarantor's liability under this Guarantee to pay or perform or
cause the performance of the Indenture Obligations shall arise forthwith after
demand for payment or performance by the Trustee has been given to the
Guarantors in the manner prescribed in Section 106 hereof.
(e) Except as provided herein, the provisions of this Article Fourteen
cover all agreements between the parties hereto relative to this Guarantee and
none of the parties shall be bound by any representation, warranty or promise
made by any Person relative thereto which is not embodied herein; and it is
specifically acknowledged and agreed that this Guarantee has been delivered by
each Guarantor free of any conditions whatsoever and that no representations,
warranties or promises have been made to any Guarantor affecting its liabilities
hereunder, and that the Trustee shall not be bound by any representations,
warranties or promises now or at any time hereafter made by the Company to any
Guarantor.
Section 1403. Guarantee Absolute.
The obligations of the Guarantors hereunder are independent of the
obligations of the Company under the Securities and this Indenture and a
separate action or actions may be brought and prosecuted against any Guarantor
whether or not an action or proceeding is brought against the Company and
whether or not the Company is joined in any such action or proceeding. The
liability of the Guarantors hereunder is irrevocable, absolute and unconditional
and (to the extent permitted by law) the liability and obligations of the
Guarantors hereunder shall not be released, discharged, mitigated, waived,
impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect of any
Indebtedness or other obligation of the Company or any other Person under
this Indenture or the Securities, or any agreement or instrument relating
to any of the foregoing;
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(b) any grants of time, renewals, extensions, indulgences, releases,
discharges or modifications which the Trustee or the Holders may extend to,
or make with, the Company, any Guarantor or any other Person, or any change
in the time, manner or place of payment of, or in any other term of, all or
any of the Indenture Obligations, or any other amendment or waiver of, or
any consent to or departure from, this Indenture or the Securities,
including any increase or decrease in the Indenture Obligations;
(c) the taking of security from the Company, any Guarantor or any other
Person, and the release, discharge or alteration of, or other dealing with,
such security;
(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any of
the Indenture Obligations and the obligations of any Guarantor hereunder;
(e) the abstention from taking security from the Company, any Guarantor or
any other Person or from perfecting, continuing to keep perfected or taking
advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any security
received from the Company, any Guarantor or any other Person, and including
any other guarantees received by the Trustee;
(g) any other dealings with the Company, any Guarantor or any other Person,
or with any security;
(h) the Trustee's or the Holders' acceptance of compositions from the
Company or any Guarantor;
(i) the application by the Holders or the Trustee of all monies at any time
and from time to time received from the Company, any Guarantor or any other
Person on account of any indebtedness and liabilities owing by the Company
or any Guarantor to the Trustee or the Holders, in such manner as the
Trustee or the Holders deems best and the changing of such application in
whole or in part and at any
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time or from time to time, or any manner of application of collateral, if
any, or proceeds thereof, to all or any of the Indenture Obligations, or
the manner of sale of any such collateral;
(j) the release or discharge of the Company or any Guarantor of the
Securities or of any Person liable directly as surety or otherwise by
operation of law or otherwise for the Securities, other than an express
release in writing given by the Trustee, on behalf of the Holders, of the
liability and obligations of any Guarantor hereunder;
(k) any change in the name, business, capital structure or governing
instrument of the Company or any Guarantor or any refinancing or
restructuring of any of the Indenture Obligations;
(l) the sale of the Company's or any Guarantor's business or any part
thereof;
(m) subject to Section 1414, any merger or consolidation, arrangement or
reorganization of the Company, any Guarantor, any Person resulting from the
merger or consolidation of the Company or any Guarantor with any other
Person or any other successor to such Person or merged or consolidated
Person or any other change in the corporate existence, structure or
ownership of the Company or any Guarantor;
(n) the insolvency, bankruptcy, liquidation, winding-up, dissolution,
receivership or distribution of the assets of the Company or its assets or
any resulting discharge of any obligations of the Company (whether
voluntary or involuntary) or of any Guarantor or the loss of corporate
existence;
(o) subject to Section 1414, any arrangement or plan of reorganization
affecting the Company or any Guarantor;
(p) any other circumstance (including any statute of limitations) that
might otherwise constitute a defense available to, or discharge of, the
Company or any Guarantor; or
(q) any modification, compromise, settlement or release by the Trustee, or
by operation of law or otherwise, of the Indenture Obligations or the
liability of the Company or any other obligor
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under the Securities, in whole or in part, and any refusal of payment by
the Trustee, in whole or in part, from any other obligor or other guarantor
in connection with any of the Indenture Obligations, whether or not with
notice to, or further assent by, or any reservation of rights against, each
of the Guarantors.
Section 1404. Right to Demand Full Performance.
In the event of any demand for payment or performance by the Trustee from
any Guarantor hereunder, the Trustee or the Holders shall have the right to
demand its full claim and to receive all dividends or other payments in respect
thereof until the Indenture Obligations have been paid in full, and the
Guarantors shall continue to be jointly and severally liable hereunder for any
balance which may be owing to the Trustee or the Holders by the Company under
this Indenture and the Securities. The retention by the Trustee or the Holders
of any security, prior to the realization by the Trustee or the Holders of its
rights to such security upon foreclosure thereon, shall not, as between the
Trustee and any Guarantor, be considered as a purchase of such security, or as
payment, satisfaction or reduction of the Indenture Obligations due to the
Trustee or the Holders by the Company or any part thereof.
Section 1405. Waivers.
(a) Each Guarantor hereby expressly waives (to the extent permitted by law)
notice of the acceptance of this Guarantee and notice of the existence, renewal,
extension or the non-performance, non-payment, or non-observance on the part of
the Company of any of the terms, covenants, conditions and provisions of this
Indenture or the Securities or any other notice whatsoever to or upon the
Company or such Guarantor with respect to the Indenture Obligations. Each
Guarantor hereby acknowledges communication to it of the terms of this Indenture
and the Securities and all of the provisions therein contained and consents to
and approves the same. Each Guarantor hereby expressly waives (to the extent
permitted by law) diligence, presentment, protest and demand for payment.
(b) Without prejudice to any of the rights or recourses which the Trustee
or the Holders may have against the Company, each Guarantor hereby expressly
waives (to the extent permitted by law) any right to require the Trustee or the
Holders to:
(i) initiate or exhaust any rights, remedies or recourse against the
Company, any Guarantor or any other Person;
(ii) value, realize upon, or dispose of any security of the Company or any
other Person held by the Trustee or the Holders; or
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(iii) initiate or exhaust any other remedy which the Trustee or the Holders
may have in law or equity;
before requiring or becoming entitled to demand payment from such Guarantor
under this Guarantee.
(c) With respect to this Section 1405, to the extent applicable to any
Guarantor, each Guarantor expressly waives application of Sections 26-7 through
26-9 of the North Carolina General Statutes.
Section 1406. The Guarantors Remain Obligated in Event the Company Is No
Longer Obligated to Discharge Indenture Obligations.
It is the express intention of the Trustee and the Guarantors that if for
any reason the Company has no legal existence, is or becomes under no legal
obligation to discharge the Indenture Obligations owing to the Trustee or the
Holders by the Company or if any of the Indenture Obligations owing by the
Company to the Trustee or the Holders becomes irrecoverable from the Company by
operation of law or for any reason whatsoever, this Guarantee and the covenants,
agreements and obligations of the Guarantors contained in this Article Fourteen
shall nevertheless be binding upon the Guarantors, as principal debtor, until
such time as all such Indenture Obligations have been paid in full to the
Trustee and all such Indenture Obligations owing to the Trustee or the Holders
by the Company have been discharged, or such earlier time as Section 402 shall
apply to the Securities and the Guarantors shall be responsible for the payment
thereof to the Trustee or the Holders upon demand.
Section 1407. Fraudulent Conveyance; Contribution Subrogation.
(a) Each Guarantor that is a Subsidiary of the Company, and by its
acceptance hereof each Holder, hereby confirms that it is the intention of all
such parties that the Guarantee by such Guarantor pursuant to its Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar federal or state law. To effectuate the foregoing intention, the
Holders and such Guarantor hereby irrevocably agree that the obligations of such
Guarantor under its Guarantee shall be limited to the maximum amount which,
after giving effect to all other contingent and fixed liabilities of such
Guarantor, and after giving effect to any collections from or payments made by
or on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
this Indenture, will result in the obligations of such Guarantor under its
Guarantee not constituting such fraudulent transfer or conveyance.
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(b) Each Guarantor that makes a payment or distribution under its Guarantee
shall be entitled to a contribution from each other Guarantor, if any, in a pro
rata amount based on the net assets of each Guarantor, determined in accordance
with GAAP.
(c) Each Guarantor hereby waives all rights of subrogation or contribution,
whether arising by contract or operation of law (including, without limitation,
any such right arising under federal bankruptcy law) or otherwise by reason of
any payment by it pursuant to the provisions of this Article Fourteen.
Section 1408. Guarantee Is in Addition to Other Security.
This Guarantee shall be in addition to and not in substitution for any
other guarantees or other security which the Trustee may now or hereafter hold
in respect of the Indenture Obligations owing to the Trustee or the Holders by
the Company and (except as may be required by law) the Trustee shall be under no
obligation to marshal in favor of each of the Guarantors any other guarantees or
other security or any moneys or other assets which the Trustee may be entitled
to receive or upon which the Trustee or the Holders may have a claim.
Section 1409. Release of Security Interests.
Without limiting the generality of the foregoing and except as otherwise
provided in this Indenture, each Guarantor hereby consents and agrees, to the
fullest extent permitted by applicable law, that the rights of the Trustee
hereunder, and the liability of the Guarantors hereunder, shall not be affected
by any and all releases for any purpose of any collateral, if any, from the
Liens and security interests created by any collateral document and that this
Guarantee shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Indenture Obligations is rescinded or
must otherwise be returned by the Trustee upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had not
been made.
Section 1410. No Bar to Further Actions.
Except as provided by law, no action or proceeding brought or instituted
under Article Fourteen and this Guarantee and no recovery or judgment in
pursuance thereof shall be a bar or defense to any further action or proceeding
which may be brought under Article Fourteen and this Guarantee by reason of any
further default or defaults under Article Fourteen and this Guarantee or in the
payment of any of the Indenture Obligations owing by the Company.
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Section 1411. Failure to Exercise Rights Shall Not Operate as a Waiver; No
Suspension of Remedies.
(a) No failure to exercise and no delay in exercising, on the part of the
Trustee or the Holders, any right, power, privilege or remedy under this Article
Fourteen and this Guarantee shall operate as a waiver thereof, nor shall any
single or partial exercise of any rights, power, privilege or remedy preclude
any other or further exercise thereof, or the exercise of any other rights,
powers, privileges or remedies. The rights and remedies herein provided for are
cumulative and not exclusive of any rights or remedies provided in law or
equity.
(b) Nothing contained in this Article Fourteen shall limit the right of the
Trustee or the Holders to take any action to accelerate the maturity of the
Securities pursuant to Article Five or to pursue any rights or remedies
hereunder or under applicable law.
Section 1412. Trustee's Duties; Notice to Trustee.
(a) Any provision in this Article Fourteen or elsewhere in this Indenture
allowing the Trustee to request any information or to take any action authorized
by, or on behalf of any Guarantor, shall be permissive and shall not be
obligatory on the Trustee except as the Holders may direct in accordance with
the provisions of this Indenture or where the failure of the Trustee to request
any such information or to take any such action arises from the Trustee's
negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into the existence, powers
or capacities of the Company, any Guarantor or the officers, directors or agents
acting or purporting to act on their respective behalf.
Section 1413. Successors and Assigns.
All terms, agreements and conditions of this Article Fourteen shall extend
to and be binding upon each Guarantor and its successors and permitted assigns
and shall enure to the benefit of and may be enforced by the Trustee and its
successors and assigns; provided, however, that the Guarantors may not assign
any of their rights or obligations hereunder other than in accordance with
Article Eight.
Section 1414. Release of Guarantee.
Concurrently with the payment in full of all of the Indenture Obligations,
the Guarantors shall be released from and relieved of their obligations under
this Article Fourteen. Upon the delivery by the Company to the Trustee of an
Officer's Certificate
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and, if requested by the Trustee, an Opinion of Counsel to the effect that the
transaction giving rise to the release of this Guarantee was made by the Company
in accordance with the provisions of this Indenture and the Securities, the
Trustee shall execute any documents reasonably required in order to evidence the
release of the Guarantors from their obligations under this Guarantee. If any of
the Indenture Obligations are revived and reinstated after the termination of
this Guarantee, then all of the obligations of the Guarantors under this
Guarantee shall be revived and reinstated as if this Guarantee had not been
terminated until such time as the Indenture Obligations are paid in full, and
each Guarantor shall enter into an amendment to this Guarantee, reasonably
satisfactory to the Trustee, evidencing such revival and reinstatement.
This Guarantee shall terminate with respect to each Guarantor and shall be
automatically and unconditionally released and discharged under any
circumstances set forth pursuant to Section 301.
Section 1415. Execution of Guarantee.
To evidence the Guarantee, each Guarantor hereby agrees to execute the
guarantee substantially in the form set forth in Section 204, to be endorsed on
each Security authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of each Guarantor by its Chairman of the Board, its
President, or one of its Vice Presidents and attested by its Secretary or one of
its Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
Section 1416. Guarantee Subordinate to Guarantor Senior Indebtedness.
Each Guarantor covenants and agrees, and each Holder of a Guarantee, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the Indebtedness represented
by the Guarantees is hereby made subordinate and subject in right of payment as
provided in this Article to the prior payment in full in cash or Cash
Equivalents or in any other form as acceptable to the holders of Guarantor
Senior Indebtedness of all Guarantor Senior Indebtedness; provided, however,
that the Indebtedness represented by this Guarantee in all respects shall rank
equally with, or prior to, all existing and future Indebtedness of such
Guarantor that is expressly subordinated to such Guarantor's Guarantor Senior
Indebtedness.
This Article Fourteen shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold
Guarantor Senior Indebtedness; and such provisions are made for the benefit of
the holders of Guarantor Senior Indebtedness; and such holders are made obligees
hereunder and they or each of them may enforce such provisions.
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With respect to the relative rights of Holders and holders of Senior
Indebtedness and Guarantor Senior Indebtedness and for the purpose of Section
1407(a), each Holder of a Security by his acceptance thereof acknowledges that
all Senior Indebtedness and any guarantee by a Guarantor of such Senior
Indebtedness shall be deemed to have been incurred prior to the incurrence by
such Guarantor of its liability under its Guarantee.
Section 1417. Payment Over of Proceeds Upon Dissolution of the Guarantor,
etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to any Guarantor or to its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding up of any
Guarantor, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets or liabilities of any Guarantor, then and in any
such event:
(1) the holders of Guarantor Senior Indebtedness shall be entitled to
receive payment in full in cash or Cash Equivalents or in any other form as
acceptable to the holders of Guarantor Senior Indebtedness of all amounts due on
or in respect of all Guarantor Senior Indebtedness, before the Holders of the
Securities are entitled to receive any payment or distribution of any kind or
character (excluding Permitted Guarantor Junior Securities) on account of the
Guarantee of such Guarantor; and
(2) any payment or distribution of assets of any Guarantor of any kind or
character, whether in cash, property or securities (excluding Permitted
Guarantor Junior Securities), by set-off or otherwise, to which the Holders or
the Trustee would be entitled but for the provisions of this Article shall be
paid by the liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holders of Guarantor Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Guarantor Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Guarantor Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full in cash or
Cash Equivalents or in any other form as acceptable to the holders of Guarantor
Senior Indebtedness of all Guarantor Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of such
Guarantor Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of any Guarantor of any kind or character,
whether in cash, property or securities, in respect of the Guarantee of such
Guarantor before all Guarantor Senior
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Indebtedness is paid in full, then and in such event such payment or
distribution (excluding Permitted Guarantor Junior Securities) shall be paid
over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other person making payment or
distribution of assets of such Guarantor for application to the payment of all
Guarantor Senior Indebtedness remaining unpaid, to the extent necessary to pay
all Guarantor Senior Indebtedness in full in cash or Cash Equivalents or in any
other form as acceptable to the holders of Guarantor Senior Indebtedness after
giving effect to any concurrent payment or distribution to or for the holders of
Guarantor Senior Indebtedness.
The consolidation of any Guarantor with, or the merger of any Guarantor
with or into, another Person or the liquidation or dissolution of any Guarantor
following the sale, assignment, conveyance, transfer, lease or other disposal of
all or substantially all of such Guarantor's properties or assets to another
Person upon the terms and conditions set forth in Article Eight shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshaling of assets and liabilities of such
Guarantor for the purposes of this Section if the Person formed by such
consolidation or the surviving entity of such merger or the Person which
acquires by sale, assignment, conveyance, transfer, lease or other disposal of
all or substantially all of such Guarantor's properties and assets, as the case
may be, shall, as a part of such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposal comply with the conditions set
forth in Article Eight.
Section 1418. Default on Guarantor Senior Indebtedness.
(a) Upon the maturity of any Guarantor Senior Indebtedness by lapse of
time, acceleration or otherwise, all principal thereof and interest thereon and
other amounts due in connection therewith shall first be paid in full or such
payment duly provided for before any payment is made by any of the Guarantors or
any Person acting on behalf of any of the Guarantors in respect of the Guarantee
of such Guarantor.
(b) No payment (excluding payments in the form of Permitted Guarantor
Junior Securities) shall be made by any Guarantor in respect of its Guarantee
during the period in which Section 1417 shall be applicable, during any
suspension of payments in effect under Section 1203(a) of this Indenture or
during any Payment Blockage Period in effect under Section 1203(b) of this
Indenture.
(c) In the event that, notwithstanding the foregoing, any Guarantor shall
make any payment to the Trustee or the Holder of its Guarantee prohibited by the
foregoing provisions of this Section, then and in such event such payment shall
be paid over and delivered forthwith to the representatives of Guarantor Senior
Indebtedness or as a court of competent jurisdiction shall direct.
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Section 1419. Payment Permitted by Each of the Guarantors if No Default.
Nothing contained in this Article, elsewhere in this Indenture or in any of
the Securities shall prevent any Guarantor, at any time except during the
pendency of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshaling of assets and
liabilities of such Guarantor referred to in Section 1417 or under the
conditions described in Section 1418, from making payments at any time of
principal of, premium, if any, or interest on the Securities.
Section 1420. Subrogation to Rights of Holders of Guarantor Senior
Indebtedness.
Subject to the payment in full of all Guarantor Senior Indebtedness in cash
or Cash Equivalents or in any other form acceptable to the holders of Guarantor
Senior Indebtedness, the Holders of the Securities shall be subrogated to the
rights of the holders of such Guarantor Senior Indebtedness to receive payments
and distributions of cash, property and securities applicable to the Guarantor
Senior Indebtedness until the principal of, premium, if any, and interest on the
Securities shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of Guarantor Senior Indebtedness of any cash,
property or securities to which the Holders of the Securities or the Trustee
would be entitled except for the provisions of this Article, and no payments
over pursuant to the provisions of this Article to the holders of Guarantor
Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among
any Guarantor, its creditors other than holders of Guarantor Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment or
distribution by such Guarantor to or on account of the Guarantor Senior
Indebtedness.
Section 1421. Provisions Solely to Define Relative Rights.
The provisions of Sections 1416 through 1429 of this Indenture are intended
solely for the purpose of defining the relative rights of the Holders of the
Securities on the one hand and the holders of Guarantor Senior Indebtedness on
the other hand. Nothing contained in this Article or elsewhere in this Indenture
or in the Securities is intended to or shall (a) impair, as among any Guarantor,
its creditors other than holders of Guarantor Senior Indebtedness and the
Holders of the Securities, the obligation of such Guarantor, which is absolute
and unconditional, to pay to the Holders of the Securities the principal of,
premium, if any, and interest on the Securities as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against each of the Guarantors of the Holders of the Securities
and creditors of each of the Guarantors other than the holders of Guarantor
Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article of the
holders of Guarantor Senior Indebtedness (1) in any case, proceeding,
dissolution,
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<PAGE>
liquidation or other winding up, assignment for the benefit of creditors or
other marshaling of assets and liabilities of the Guarantors referred to in
Section 1417, to receive, pursuant to and in accordance with such Section, cash,
property and securities otherwise payable or deliverable to the Trustee or such
Holder, or (2) under the conditions specified in Section 1418, to prevent any
payment prohibited by such Section or enforce their rights pursuant to Section
1418(c).
Section 1422. Trustee to Effectuate Subordination.
Each Holder of a Security by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes, including, in the
event of any dissolution, winding-up, liquidation or reorganization of any
Guarantor whether in bankruptcy, insolvency, receivership proceedings, or
otherwise, the timely filing of a claim for the unpaid balance of the
indebtedness of any Guarantor owing to such Holder in the form required in such
proceedings and the causing of such claim to be approved.
Section 1423. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Guarantor Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Guarantor or by any act or failure to act by any such holder, or by any
non-compliance by any Guarantor with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of Subsection (a) of this Section and
notwithstanding any other provision contained herein, the holders of Guarantor
Senior Indebtedness may, at any time and from time to time, without the consent
of or notice to the Trustee or the Holders of the Securities, without incurring
responsibility to the Holders of the Securities and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Guarantor Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter,
Guarantor Senior Indebtedness or any instrument evidencing the same or any
agreement under which Guarantor Senior Indebtedness is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Guarantor Senior Indebtedness; (3) release any Person liable
in any manner for the collection or payment of Guarantor Senior Indebtedness;
and (4) exercise or refrain from exercising any rights against any of the
Guarantors and any other Person; provided, however, that in no event shall any
such actions limit the right of the Holders of the Securities to take any
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<PAGE>
action to accelerate the maturity of the Securities in accordance with the
provisions set forth in Article 5 or to pursue any rights or remedies under this
Indenture or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article.
Section 1424. Notice to Trustee by Each of the Guarantors.
(a) Each Guarantor shall give prompt written notice to the Trustee of any
fact known to such Guarantor which would prohibit the making of any payment to
or by the Trustee in respect of the Guarantee. Notwithstanding the provisions of
this Article or any provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from any
Guarantor or a holder of Guarantor Senior Indebtedness or any trustee, fiduciary
or agent therefor; and, prior to the receipt of any such written notice, the
Trustee shall be entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the notice
provided for in this Section prior to the date upon which by the terms hereof
any money may become payable for any purpose (including, without limitation, the
payment of the principal of, premium, if any, or interest on any Security or any
other Indenture Obligations), then, anything herein contained to the contrary
notwithstanding but without limiting the rights and remedies of the holders of
Guarantor Senior Indebtedness or any trustee, fiduciary or agent thereof, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it after such
date; nor shall the Trustee be charged with knowledge of the curing of any such
default or the elimination of the act or condition preventing any such payment
unless and until the Trustee shall have received an Officers' Certificate to
such effect.
(b) The Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee and each Guarantor by a Person representing
himself to be a representative of one or more holders of Designated Guarantor
Senior Indebtedness (a "Guarantor Senior Representative") or a holder of
Guarantor Senior Indebtedness (or a trustee, fiduciary or agent therefor) to
establish that such notice has been given by a Guarantor Senior Representative
or a holder of Guarantor Senior Indebtedness (or a trustee, fiduciary or agent
therefor); provided, however, that failure to give such notice to the Company
shall not affect in any way the ability of the Trustee to rely on such notice.
In the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Guarantor Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Guarantor Senior
Indebtedness held by such Person, the extent to which such
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<PAGE>
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 1425. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of any Guarantor referred to in
this Article, the Trustee and the Holders of the Securities shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Guarantor Senior Indebtedness
and other indebtedness of such Guarantor, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article, provided that the foregoing shall apply only if such
court has been fully apprised of the provisions of this Article.
Section 1426. Rights of Trustee as a Holder of Guarantor Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article with respect to any Guarantor Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Guarantor Senior Indebtedness, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article shall apply
to claims of, or payments to, the Trustee under or pursuant to Section 606.
Section 1427. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting under this Indenture, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1426 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
-102-
<PAGE>
Section 1428. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the Trustee or
the Holders of Securities to take any action to accelerate the maturity of the
Securities pursuant to the provisions described under Article Five and as set
forth in this Indenture or to pursue any rights or remedies hereunder or under
applicable law, subject to the rights, if any, under this Article of the
holders, from time to time, of Guarantor Senior Indebtedness to receive the
cash, property or securities receivable upon the exercise of such rights or
remedies.
Section 1429. Trustee's Relation to Guarantor Senior Indebtedness.
With respect to the holders of Guarantor Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Guarantor Senior Indebtedness shall
be read into this Article against the Trustee. The Trustee shall not be deemed
to owe any fiduciary duty to the holders of Guarantor Senior Indebtedness and
the Trustee shall not be liable to any holder of Guarantor Senior Indebtedness
if it shall mistakenly in the absence of gross negligence or willful misconduct
pay over or deliver to Holders, the Company or any other Person moneys or assets
to which any holder of Guarantor Senior Indebtedness shall be entitled by virtue
of this Article or otherwise.
If an officer whose signature is on this Indenture no longer holds that
office at the time the Trustee authenticates a Security on which a Guarantee is
endorsed, such Guarantee shall be valid nevertheless.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
SINCLAIR BROADCAST GROUP, INC.,
as Issuer
Attest By:
------------------------------- -------------------------------
Name: Name:
Title: Title:
FIRST UNION NATIONAL BANK,
as Trustee
By:
-------------------------------
Name:
Title:
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<PAGE>
STATE OF ________________)
) ss.:
COUNTY OF _______________)
On the ___ day of July, 1997, before me personally came ___________, to me
known, who, being by me duly sworn, did depose and say that he resides
at___________________________ ; that he is __________ of Sinclair Broadcast
Group, Inc., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto pursuant to authority of the
Boards of Directors of such corporation.
(NOTARIAL
SEAL)
----------------------------
-105-
<PAGE>
STATE OF ____________________)
) ss.:
COUNTY OF ___________________)
On the ____ day of July, 1997, before me personally came ______, to me
known, who, being by me duly sworn, did depose and say that he resides at
_________________________________________; that he is an authorized officer of
First Union National Bank, one of the corporations described in and which
executed the above instrument; that he knows the corporate seal of such
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed pursuant to authority of the Board of Directors of such
corporation; and that he signed his name thereto pursuant to like authority.
(NOTARIAL
SEAL)
-------------------------
-106-
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Form S-3/A Amendment No. 6 Registration Statement under the Securities Act of
1933.
ARTHUR ANDERSEN LLP
Baltimore, Maryland
September 15, 1997
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Partners
River City Broadcasting, L.P.:
We consent to the inclusion and incorporation by reference in the Registration
Statement No. 333-12257 on Form S-3 as amended of Sinclair Broadcast Group, Inc.
of our report dated February 23, 1996 with respect to the consolidated balance
sheets of River City Broadcasting, L.P. as of December 31, 1994 and 1995 and the
related consolidated statements of operations, partners' capital (deficit), and
cash flows for each of the years in the three-year period ended December 31,
1995 which report appears in the form 8-K/A of Sinclair Broadcast Group, Inc.
dated May 9, 1996 and to the reference to our firm under the heading "Experts"
in the prospectus.
KPMG PEAT MARWICK LLP
St. Louis, Missouri
September 12, 1997
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to incorporation by reference in the Prospectus constituting
part of this Registration Statement on Form S-3/A of Sinclair Broadcast Group,
Inc. (the "Company") of our report dated March 22, 1996 relating to the
financial statements of Kansas City TV 62 Limited Partnership, which appears in
the Company's Form 8-K dated May 9, 1996 (filed May 17, 1996). We also consent
to the reference to us under the headings "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
- ---------------------
Price Waterhouse LLP
Boston, Massachusetts
September 11, 1997
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3/A of Sinclair
Broadcast Group, Inc. (the "Company") of our report dated March 22, 1996
relating to the financial statements of Cincinnati TV 64 Limited Partnership,
which appears in the Company's Form 8-K dated May 9, 1996 (filed May 17, 1996).
We also consent to the reference to us under the headings "Experts" in such
Prospectus.
/s/ Price Waterhouse LLP
- ---------------------
Price Waterhouse LLP
Boston, Massachusetts
September 11, 1997
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 23, 1996, with respect to the financial
statements of Superior Communication Group, Inc. included in the Registration
Statement (Form S-3 No. 333-12257) and related Prospectus of Sinclair Broadcast
Group, Inc.
/s/ Ernst & Young LLP
---------------------
Pittsburgh, Pennsylvania
September 10, 1997
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM T-1
---------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT FOR 1939, AS AMENDED,
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a trustee pursuant to
Section 305(b) (2) _____
FIRST UNION NATIONAL BANK
(Exact name of Trustee as specified in its charter)
230 SOUTH TRYON STREET, 9TH FL.
CHARLOTTE, NC 28288-1179 56-0900030
(Address of principal (Zip Code) (I.R.S. Employer
executive office) Identification No.)
Patricia A. Welling, (804) 788-9663
901 E. Cary Street, Richmond, Virginia 23219
SINCLAIR BROADCAST GROUP, INC.
(Exact name of obligor as specified in its charter)
Delaware 52-1494660
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2000 West 41st Street
Baltimore, MD 21211
(Address of principal executive offices) (Zip Code)
---------------------
CONVERTIBLE SUBORDINATED DEBENTURES DUE 2012
(Title of the indenture securities)
<PAGE>
1. General information.
(a) The following are the names and addresses of each examining or
supervising authority to which the Trustee is subject:
The Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Richmond, Richmond, Virginia.
Federal Deposit Insurance Corporation, Washington, D.C.
Securities and Exchange Commission, Division of Market
Regulation, Washington, D.C.
(b) The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with obligor.
The obligor is not an affiliate of the Trustee.
3. Voting Securities of the Trustee.
Not applicable.
(See answer to Item 13)
4. Trusteeships under other indentures.
Not applicable.
(See answer to Item 13)
5. Interlocking directorates and similar relationships with the obligor or
underwriters.
Not applicable.
(See answer to Item 13)
6. Voting securities of the Trustee owned by the obligor or its officials.
Not applicable.
(See answer to Item 13)
7. Voting securities of the Trustee owned by underwriters or their
officials.
Not applicable.
(See answer to Item 13)
8. Securities of the obligor owned or held by the Trustee.
Not applicable.
(See answer to Item 13)
2
<PAGE>
9. Securities of underwriters owned or held by the Trustee.
Not applicable.
(See answer to Item 13)
10. Ownership or holdings by the Trustee of voting securities of certain
affiliates or security holders of the obligor.
Not applicable.
(See answer to Item 13)
11. Ownership of holders by the Trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
Not applicable.
(See answer to Item 13)
12. Indebtedness of the obligor to the Trustee.
Not applicable.
(See answer to Item 13)
13. Defaults by the obligor.
A. None
B. None
14. Affiliations with the underwriters.
Not applicable.
(See answer to Item 13)
15. Foreign trustee.
Trustee is a national banking association organized under the
laws of the United States.
16. List of Exhibits.
(1) Articles of Incorporation. (Incorporated by reference from Exhibit
25 to Registration 333-25575, filed June 5, 1997.)
(2) Certificate of Authority of the Trustee to conduct business.
(Incorporated by reference from Exhibit 25 to Registration
333-25575, filed June 5, 1997.)
3
<PAGE>
(3) Certificate of Authority of the Trustee to exercise corporate
trust powers. (Incorporated by reference from Exhibit 25 to
Registration 333-25575, filed June 5, 1997)
(4) By-Laws. (Incorporated by reference from Exhibit 25 to
Registration 333-25575, filed June 5, 1997.)
(5) Inapplicable.
(6) Consent by the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939. Included at Page 6 of this Form T-1
Statement.
(7) Report of condition of Trustee. (Incorporated by reference on Form
S4, Registration #333-34753.)
(8) Inapplicable.
(9) Inapplicable.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, FIRST UNION NATIONAL BANK, a national association
organized and existing under the laws of the United States of America, has duly
caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Richmond, and Commonwealth of Virginia on the 10th day of September, 1997.
FIRST UNION NATIONAL BANK
(Trustee)
BY:/s/ Patricia A. Welling
--------------------------------------
Patricia A. Welling, Vice President
EXHIBIT T-1 (6)
CONSENTS OF TRUSTEE
Under section 321(b) of the Trust Indenture Act of 1939 and in connection
with the proposed issuance by Sinclair Broadcast Group, Inc. of its Convertible
Subordinated Debentures due 2012, First Union National Bank , as the Trustee
herein named, hereby consents that reports of examinations of said Trustee by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
FIRST UNION NATIONAL BANK
BY:/s/ John M. Turner
--------------------------------------------
John M. Turner, Vice President and Managing
Director
Dated: September 10, 1997
5
EXHIBIT 25.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM T-1
---------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT FOR 1939, AS AMENDED,
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a trustee pursuant to
Section 305(b) (2) _____
FIRST UNION NATIONAL BANK
(Exact name of Trustee as specified in its charter)
230 SOUTH TRYON STREET, 9TH FL.
CHARLOTTE, NC 28288-1179 56-0900030
(Address of principal (Zip Code) (I.R.S. Employer
executive office) Identification No.)
Patricia A. Welling, (804) 788-9663
901 E. Cary Street, Richmond, Virginia 23219
SINCLAIR BROADCAST GROUP, INC.
(Exact name of obligor as specified in its charter)
Delaware 52-1494660
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2000 West 41st Street
Baltimore, MD 21211
(Address of principal executive offices) (Zip Code)
---------------------
SENIOR DEBENTURES
(Title of the indenture securities)
<PAGE>
1. General information.
(a) The following are the names and addresses of each examining or
supervising authority to which the Trustee is subject:
The Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Richmond, Richmond, Virginia.
Federal Deposit Insurance Corporation, Washington, D.C.
Securities and Exchange Commission, Division of Market
Regulation, Washington, D.C.
(b) The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with obligor.
The obligor is not an affiliate of the Trustee.
3. Voting Securities of the Trustee.
Not applicable.
(See answer to Item 13)
4. Trusteeships under other indentures.
Not applicable.
(See answer to Item 13)
5. Interlocking directorates and similar relationships with the obligor or
underwriters.
Not applicable.
(See answer to Item 13)
6. Voting securities of the Trustee owned by the obligor or its officials.
Not applicable.
(See answer to Item 13)
7. Voting securities of the Trustee owned by underwriters or their
officials.
Not applicable.
(See answer to Item 13)
8. Securities of the obligor owned or held by the Trustee.
Not applicable.
(See answer to Item 13)
2
<PAGE>
9. Securities of underwriters owned or held by the Trustee.
Not applicable.
(See answer to Item 13)
10. Ownership or holdings by the Trustee of voting securities of certain
affiliates or security holders of the obligor.
Not applicable.
(See answer to Item 13)
11. Ownership of holders by the Trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
Not applicable.
(See answer to Item 13)
12. Indebtedness of the obligor to the Trustee.
Not applicable.
(See answer to Item 13)
13. Defaults by the obligor.
A. None
B. None
14. Affiliations with the underwriters.
Not applicable.
(See answer to Item 13)
15. Foreign trustee.
Trustee is a national banking association organized under the
laws of the United States.
16. List of Exhibits.
(1) Articles of Incorporation. (Incorporated by reference from Exhibit
25 to Registration 333-25575, filed June 5, 1997.)
(2) Certificate of Authority of the Trustee to conduct business.
(Incorporated by reference from Exhibit 25 to Registration
333-25575, filed June 5, 1997.)
3
<PAGE>
(3) Certificate of Authority of the Trustee to exercise corporate
trust powers. (Incorporated by reference from Exhibit 25 to
Registration 333-25575, filed June 5, 1997)
(4) By-Laws. (Incorporated by reference from Exhibit 25 to
Registration 333-25575, filed June 5, 1997.)
(5) Inapplicable.
(6) Consent by the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939. Included at Page 6 of this Form T-1
Statement.
(7) Report of condition of Trustee. ( Incorporated by reference on
Form S4, Registration #333-34753.)
(8) Inapplicable.
(9) Inapplicable.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, FIRST UNION NATIONAL BANK, a national association
organized and existing under the laws of the United States of America, has duly
caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Richmond, and Commonwealth of Virginia on the 10th day of September, 1997.
FIRST UNION NATIONAL BANK
(Trustee)
BY:/s/ Patricia A. Welling
-----------------------------------
Patricia A. Welling, Vice President
EXHIBIT T-1 (6)
CONSENTS OF TRUSTEE
Under section 321(b) of the Trust Indenture Act of 1939 and in connection
with the proposed issuance by Sinclair Broadcast Group, Inc. of its Senior
Debentures, First Union National Bank , as the Trustee herein named, hereby
consents that reports of examinations of said Trustee by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon requests therefor.
FIRST UNION NATIONAL BANK
BY:/s/ John M. Turner
-------------------------------------------
John M. Turner, Vice President and Managing
Director
Dated: September 10, 1997
5
