AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1997
REGISTRATION NO. 333-12257
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3/A
AMENDMENT NO. 3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SINCLAIR BROADCAST GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<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>
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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)
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With a copy to:
George P. Stamas, Esq Steven A. Thomas, Esq.
Wilmer, Cutler & Pickering Thomas & Libowitz, P.A.
2445 M Street, N.W. 100 Light Street -- Suite 1100
Washington, D.C. 20037 Baltimore, MD 21202
(202) 663-6000 (410) 752-2468
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Approximate date of commencement of proposed sale of the
securities to the public:
As soon as practicable after the effective date
of this Registration Statement.
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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 Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant 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.
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PROSPECTUS
11,550,000 SHARES
SBG
SINCLAIR BROADCAST GROUP
CLASS A COMMON STOCK
PAR VALUE $.01 PER SHARE
Of the shares of Class A Common Stock, par value $.01 per share (the "Class A
Common Stock") offered hereby, 10,250,000 shares are being sold by Sinclair
Broadcast Group, Inc. (the "Company" or "Sinclair") and 1,300,000 shares are
being sold by certain stockholders of the Company ("Selling Stockholders"). See
"Selling Stockholders" and "Plan of Distribution." The shares offered hereby
will be sold at prices and on terms to be determined at the time of a sale or
sales. The shares may be sold on a negotiated or competitive bid basis to or
through underwriters or dealers designated from time to time. In addition, the
shares may be sold by the Company or the Selling Stockholders to other
purchasers directly or through agents. Certain terms of the sale of the shares
in respect of which this Prospectus is being delivered, including, where
applicable, the names of the underwriters, dealers and agents, the public
offering price, the proceeds to the Company (if any) from such sale, and any
applicable commissions, discounts and other terms constituting compensation to
such underwriters, dealers or agents, will be set forth in a Prospectus
Supplement, to the extent required (the "Prospectus Supplement"). See "Plan of
Distribution." The Class A Common Stock is traded on the Nasdaq National Market
System under the symbol "SBGI."
The Company's outstanding capital stock consists of the Class A Common Stock,
shares of Class B Common Stock, par value $.01 per share (the "Class B Common
Stock"), shares of Series B Convertible 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, the Controlling Stockholders (as defined) 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 92.1% 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 certain
affiliates of the Controlling Stockholders. 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 herein, 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."
----------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
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 August 18, 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 provision of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Class A Common
Stock offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained in
the Registration Statement and the exhibits and schedules thereto. Statements
contained herein 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 Report on Form 10-Q for the quarter ended 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 and August 13, 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 Class A Common Stock 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 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.
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
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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, MD 21211
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK 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 SHARES PURSUANT TO THIS PROSPECTUS, THE
UNDERWRITERS AND SELLING GROUP MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"PLAN OF DISTRIBUTION."
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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 agreements 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 or provides programming services to 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 Class A Common Stock and the broadcast
industry before purchasing the Class A Common Stock 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 11 5/8 % High Yield Trust Offered Preferred Securities (the "Preferred
Securities"), which are ultimately backed by $206.2 million liquidation amount
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") and
expects to do so to finance its pending acquisition of assets from Heritage
Media Group. (the "Heritage Acquisition") 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
payments 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. 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%.
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
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Notes mature in 2003, the 1995 Notes mature in 2005 and the 1997 Notes mature in
2007. The Parent Preferred 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 Class A Common Stock, 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.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The indentures relating to the Existing Notes (the "Existing Indentures")
restrict, among other things, the Company's and its Subsidiaries' (as defined in
the Existing Indentures) ability to (i) incur additional indebtedness, (ii) pay
dividends, make certain other restricted payments or consummate certain asset
sales, (iii) enter into certain transactions with affiliates, (iv) incur
indebtedness that is subordinate in priority and in right of payment to any
senior debt and senior in right of payment to the Existing Notes, (v) merge or
consolidate with any other person, or (vi) sell, assign, transfer, lease,
convey, or otherwise dispose of all or substantially all of the assets of the
Company. In addition, the Bank Credit Agreement contains certain other and more
restrictive covenants, including restrictions on redemption of capital stock, a
limitation on the aggregate size of future acquisitions undertaken without
lender consent, a requirement that certain conditions be satisfied prior to
consummation of future acquisitions, and a limitation on the amount of capital
expenditures permitted by the Company in future years without lender consent.
The Bank Credit Agreement also requires the Company to maintain specific
financial ratios and to satisfy certain financial condition tests. The Company's
ability to meet these financial ratios and financial condition tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet those tests. The breach of any of these covenants could result
in a default under the Bank Credit Agreement and/or the Existing Indentures. In
the event of a default under the Bank Credit Agreement or the Existing
Indentures, the lenders and the noteholders could seek to declare all amounts
outstanding under the Bank Credit Agreement and the Existing Notes, together
with accrued and unpaid interest, to be immediately due and payable. If the
Company were unable to repay those amounts, the lenders under the Bank Credit
Agreement could proceed against the collateral granted to them to secure that
indebtedness. If the indebtedness under the Bank Credit Agreement or the
Existing Notes were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay in full that indebtedness and the
other indebtedness of the Company. Substantially all of the assets of the
Company and its Subsidiaries (other than the assets of KDSM, Inc. which
ultimately back-up the Series C Preferred Stock) 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.
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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.
CONFLICTS OF INTEREST
In addition to their respective interests in the Company, the Controlling
Stockholders have interests in various non-Company entities which are involved
in businesses related to the business of the Company, including, among others,
the operation of a television station in St. Petersburg, Florida since 1991 and
a television station in Bloomington, Indiana since 1990. In addition, the
Company leases certain real property and tower space from and engages in other
transactions with the Stockholder Affiliates, which are controlled by the
Controlling Stockholders. Although the Controlling Stockholders have agreed to
divest interests in the Bloomington station that are attributable to them under
applicable FCC regulations, the Controlling Stockholders and the Stockholder
Affiliates may continue to engage in the operation of the St. Petersburg,
Florida station and other already existing businesses. However, under Maryland
law, generally a corporate insider is precluded from acting on a business
opportunity in his or her individual capacity if that opportunity is one which
the corporation is financially able to undertake, is in the line of the
corporation's business and of practical advantage to the corporation, and is one
in which the corporation has an interest or reasonable expectancy. Accordingly,
the Controlling Stockholders generally are required to engage in new business
opportunities of the Company only through the Company unless a majority of the
Company's disinterested directors decide under the standards discussed above,
that it is not in the best interests of the Company to pursue such
opportunities. Non-Company activities of the Controlling Stockholders such as
those described above could, however, present conflicts of interest with the
Company in the allocation of management time and resources of the Controlling
Stockholders, a substantial majority of which is currently devoted to the
business of the Company.
In addition, there have been and will be transactions between the Company and
Glencairn Ltd. (with its subsidiaries, "Glencairn"), a corporation in which
relatives of the Controlling Stockholders beneficially own a majority of the
equity interests. Glencairn is the owner-operator and licensee of WRDC in
Raleigh/Durham, WVTV in Milwaukee, WNUV in Baltimore, WABM in Birmingham, KRRT
in San Antonio, and WFBC in 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 Acquisitions Strategy" in Sinclair's Form 8-K dated June
27, 1997, which is incorporated by reference herein. The FCC has approved this
transaction. However, the Company does not expect this transfer to occur unless
the Company acquires the assets of WSYX in Columbus, Ohio.
Two persons who are expected to become directors of the Company, Barry Baker
(who is also expected to become an executive officer of the Company) and Roy F.
Coppedge, III, have direct and indirect interests in River City Broadcasting,
L.P. ("River City"), from which the Company purchased certain assets in 1996
(the "River City Acquisition"). In addition, in connection with the River City
Acquisition, the Company has entered into various ongoing agreements with River
City, including options to acquire assets that were not acquired at the time of
the initial closing of the River City Acquisition, and 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 June
27, 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,
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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 Series C Preferred
Stock provide that transactions between the Company and its affiliates must be
no less favorable to the Company than would be available in comparable
transactions in arm's-length dealings with an unrelated third party. Moreover,
the Existing Indentures provide that any such transactions involving aggregate
payments in excess of $1.0 million must be approved by a majority of the members
of the board of directors of the Company and the Company's independent directors
(or, in the event there is only one independent director, by such director),
and, in the case of any such transactions involving aggregate payments in excess
of $5.0 million, the Company is required to obtain an opinion as to the fairness
of the transaction to the Company from a financial point of view issued by an
investment banking or appraisal firm of national standing.
VOTING RIGHTS; CONTROL BY CONTROLLING STOCKHOLDERS;
POTENTIAL ANTI-TAKEOVER EFFECT OF DISPROPORTIONATE VOTING RIGHTS
The Company's Common Stock has been divided into two classes, each with
different voting rights. The Class A Common Stock entitles a holder to one vote
per share on all matters submitted to a vote of the stockholders, whereas the
Class B Common Stock, 100% of which is beneficially owned by the Controlling
Stockholders, entitles a holder to ten votes per share, except for "going
private" and certain other transactions for which the holder is entitled to one
vote per share. The Class A Common Stock, the Class B Common Stock and the
Series B Convertible Preferred Stock vote together as a single class (except as
otherwise may be required by Maryland law) on all matters submitted to a vote of
stockholders, with each share of Series B 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 FCC rules. Mr. Baker and Boston Ventures, in turn, have agreed to vote in
favor of the reappointment of each of the Controlling Stockholders to the
Company's board of directors. The Voting Agreement will remain in effect with
respect to Mr. Baker for as long as he is a director of the Company and will
remain in effect with respect to Mr. Coppedge (or another designee of Boston
Ventures) until the first to occur of (a) the later of (i) May 31, 2001 and (ii)
the expiration of the initial five-year term of Mr. Baker's employment agreement
and (b) such time as Boston Ventures no longer owns directly or indirectly
through its interest in River City at least 721,115 shares of Class A Common
Stock (including shares that may be obtained on conversion of the Series B
Convertible Preferred Stock). See "Management--Employment Agreements" in
Sinclair's Annual Report on Form 10-K (as amended) for the year ended December
31, 1996 (the "1996 10-K") incorporated herein by reference.
The disproportionate voting rights of the Class B Common Stock relative to
the Class A Common Stock and the Stockholders' Agreement and Voting Agreement
may make the Company a less attractive target for a takeover than it otherwise
might be or render more difficult or discourage a merger proposal,
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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 the 1996 10-K. The Company has key-man
life insurance for Mr. Baker, but does not currently maintain key personnel life
insurance on any of its executive officers.
Mr. Baker cannot be appointed as an executive officer or director of the
Company until such time as (i) either the Controlling Stockholders dispose of
their attributable interests (as defined by applicable FCC rules) in a
television station in the Indianapolis DMA or Mr. Baker no longer has an
attributable interest in WTTV or WTTK in Indianapolis; and (ii) either the
Company disposes of its attributable interest in WTTE in Columbus or Mr. Baker
no longer has an attributable interest in WSYX in Columbus. There can be no
assurance as to when or whether these events will occur. The failure of Mr.
Baker to become a director and officer of the Company on or before August 31,
1997 may allow Mr. Baker to terminate his employment agreement. 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 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 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 June 27, 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 future acquisitions are
certain risks such as increasing leverage and debt service requirements and
combining company cultures and facilities which could have a material adverse
effect on the Company's operating results, particularly during the period
immediately following such acquisitions. Additional debt or capital may be
required in order to complete future acquisitions, and there can be no assurance
the Company will be able to obtain such financing or raise the required capital.
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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 June 27, 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.
Each of the affiliation agreements relating to television stations involved
in the River City Acquisition (other than River City's ABC and Fox affiliates)
is terminable by the network upon transfer of the License Assets of the
stations. These stations are continuing to operate as network affiliates, but
there can be no assurance that the affiliation agreements will be continued, or
that they will be continued on terms favorable to the Company. If any
affiliation agreements are terminated, the affected station could lose market
share, may have difficulty obtaining alternative programming at an acceptable
cost, and may otherwise be adversely affected.
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.
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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 June 27, 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.
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
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<PAGE>
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 DBS)
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 cannot predict what future actions the FCC might take with
respect to DTV, nor can it predict the effect of the FCC's present DTV
implementation plan or such future actions on the Company's business.
Further advances in technology may also increase competition for household
audiences and advertisers. The video compression techniques now under
development for use with current cable television channels or direct broadcast
satellites which do not carry local television signals (some of which commenced
operation in 1994) are expected to reduce the bandwidth which is required for
television signal transmission. These compression techniques, as well as other
technological developments, are applicable to all video delivery systems,
including over-the-air broadcasting, and have the potential to provide vastly
expanded programming to highly targeted audiences. Reduction in the cost of
creating additional channel capacity could lower entry barriers for new channels
and encourage the development of increasingly specialized "niche" programming.
This ability to reach a very defined audience may alter the competitive dynamics
for advertising expenditures. The Company is unable to predict the effect that
technological changes will have on the broadcast television industry or the
future results of the Company's operations. See "Business of
Sinclair--Competition" in Sinclair's Form 8-K dated June 27, 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 June 27, 1997, which is incorporated by reference herein.
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<PAGE>
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 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 June 27, 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, and the Company expects to enter into two additional
LMA's in connection with the Heritage Acquisition. See Business of
Sinclair--Federal Regulation of Television and Radio Broadcasting" in Sinclair's
Form 8-K dated June 27, 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.
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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 deferral of
actions 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.
LMAS--RIGHTS OF PREEMPTION AND TERMINATION
All of the Company's LMAs allow, in accordance with FCC rules, regulations
and policies, preemptions of the Company's programming by the owner-operator and
FCC licensee of each station with which the Company has an LMA. In addition,
each LMA provides that under certain limited circumstances the arrangement may
be terminated by the FCC licensee. Accordingly, the Company cannot be assured
that it will be able to air all of the programming expected to be aired on those
stations with which it has an LMA or that the Company will receive the
anticipated advertising revenue from the sale of advertising spots in such
programming. Although the Company believes that the terms and conditions of each
of its LMAs should enable the Company to air its programming and utilize the
programming and other non-broadcast license assets acquired for use on the LMA
stations, there can be no assurance that early terminations of the arrangements
or unanticipated preemptions of all or a significant portion of the programming
by the owner-operator and FCC licensee of such stations will not occur. An early
termination of one of the Company's LMAs, or repeated and material preemptions
of programming thereunder, could adversely affect the Company's operations. In
addition, the Company's LMAs expire on various dates from March 27, 2000 to May
31, 2006, unless extended or earlier terminated. There can be no assurance that
the Company will be able to negotiate extensions of its arrangements on terms
satisfactory to the Company.
In certain of its LMAs, the Company has agreed to indemnify the FCC licensee
against certain claims (including trademark and copyright infringement, libel or
slander and claims relating to certain FCC proceedings or investigations) that
may arise against the FCC licensee as a result of the arrangement.
NET LOSSES
The Company experienced net losses of $7.9 million and $2.7 million during
1993 and 1994, respectively, net income of $76,000 in 1995 and net income of
$1.1 million in 1996 (a net loss of $29.0 million in 1996 on a pro forma basis
reflecting the 1996 Acquisitions, the issuance of the 1997 Notes and the
Preferred Securities). The Company experienced 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.
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 in
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tended 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.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will use the net proceeds from the sale of Class A Common Stock 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 Class A Common Stock by
Selling Stockholders.
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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, and as
adjusted to reflect the sale of the 11,550,000 shares of Class A Common Stock
collectively offered hereby by the Company and the Selling Stockholders. The
address of all persons in the table unless otherwise specified is 2000 W. 41st
Street, Baltimore, MD 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.
<TABLE>
<CAPTION>
SHARES OWNED PRIOR TO THE OFFERING
----------------------------------- PERCENTAGE
CLASS A CLASS B OF VOTING PERCENTAGE
COMMON STOCK COMMON STOCK (1) POWER OF OF VOTING
- - ---------------------- ---------------------- ALL NUMBER POWER OF ALL
NUMBER PERCENT OF NUMBER PERCENT OF CAPITAL OF CAPITAL
NAMES OF OF CLASS A OF CLASS B STOCK PRIOR SHARES STOCK AFTER
SELLING STOCKHOLDERS SHARES SHARES SHARES SHARES TO SALE OFFERED SALE
- ---------------------- -------- ------ ----- ------ --------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
David D. Smith............. 10,000 * 7,249,999 26.3% 25.3% 325,000 24.3%
Frederick G. Smith(2)...... 4,000 * 6,754,944 24.5% 23.5% 325,000 22.5%
J. Duncan Smith (3)........ -- -- 6,969,994 25.3% 24.3% 325,000 23.3%
Robert E. Smith (4) ....... -- -- 6,601,644 23.9% 23.0% 325,000 22.0%
</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 506,645 shares held in irrevocable trusts established by Frederick
G. Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(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 959,745 shares held in irrevocable trusts established by Robert E.
Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
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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. Upon the issuance of all shares
covered by this Prospectus, 44,995,522 shares of Common Stock, consisting of
18,718,941 shares of Class A Common Stock and 26,276,581 shares of Class B
Common Stock, will be issued and outstanding, 1,091,825 shares of Series B
Preferred Stock will be 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."
Stockholders of the Company have no preemptive rights or other rights to
subscribe for additional shares, except that the Class B Common Stock is
convertible into Class A Common Stock by the holders thereof. Except as
described in the prior sentence, no shares of any class of Common Stock have
conversion rights or are subject to redemption. Subject to the rights of any
outstanding preferred stock which may be hereafter classified and issued,
holders of Common Stock are entitled to receive dividends, if any, as may be
declared by the Company's Board of Directors out of funds legally available
therefore and to share, regardless of class, equally on a share-for-share basis
in any assets available for distribution to stockholders on liquidation,
dissolution or winding up of the Company. Under the Bank Credit Agreement, the
Existing Indentures, 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.
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. 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 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
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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 the date of this Prospectus, 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 11 5/8% 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 11 5/8% High Yield Trust Offered
Preferred Securities (the "Preferred Securities"). 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.
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
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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 such redemption at
least 66-2/3% of the aggregate Liquidation Amount of the Series C Preferred
Stock originally issued remain outstanding and that such redemption be made
within 180 days of each such Public Equity Offering.
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Additional Preferred Stock. The Amended Certificate authorizes the Board of
Directors to issue, without any further action by the stockholders, additional
preferred stock in one or more series, to establish from time to time the number
of shares to be included in each series, and to fix the designations, powers,
preferences and rights of the shares of each series and the qualifications,
limitations or restrictions thereof. Although the ability of the Board of
Directors to designate and issue preferred stock provides desirable flexibility,
including the ability to engage in future public offerings to raise additional
capital, issuance of preferred stock may have adverse effects on the holders of
Common Stock including restrictions on dividends on the Common Stock if
dividends on the preferred stock have not been paid; dilution of voting power of
the Common Stock to the extent the preferred stock has voting rights; or
deferral of participation in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted to holders of the preferred
stock. In addition, issuance of preferred stock could make it more difficult for
a third party to acquire a majority of the outstanding voting stock of the
Company and accordingly may be used as an "anti-takeover" device. The Board of
Directors, however, is not aware of any pending transactions that would be
affected by such issuance.
CERTAIN STATUTORY AND CHARTER PROVISIONS
The following paragraphs summarize certain provisions of the Maryland General
Corporation Law and the Company's Amended Certificate and by-laws. The summary
does not purport to be complete and reference is made to Maryland 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
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call a special meeting of stockholders to be held within 50 days of demand to
consider the voting rights of the shares. If no request for a meeting is made,
the corporation may itself present the question at any stockholders meeting.
Subject to certain conditions and limitations, the corporation may redeem any
or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or of any meeting
of stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquirer is entitled to vote a majority of the shares entitled
to vote, all other stockholders may exercise appraisal rights. The fair value of
the shares as determined for purposes of such appraisal rights may not be less
than the highest price per share paid in the control share acquisition, and
certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or excepted by or pursuant to the
articles of incorporation or by-laws of the corporation.
EFFECT OF BUSINESS COMBINATION AND CONTROL SHARE ACQUISITION STATUTES
The business combination and control share acquisition statutes could have
the effect of discouraging offers to acquire any such offer.
LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS
The Company's Amended Certificate provides that, to the fullest extent that
limitations on the liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of the Company shall
have any liability to the Company or its stockholders for monetary damages. The
Maryland General Corporation Law provides that a corporation's charter may
include a provision which restricts or limits the liability of its directors or
officers to the corporation or its stockholders for money damages except (1) to
the extent that it is proved that the person actually received an improper
benefit or profit in money, property or services, for the amount of the benefit
or profit in money, property or services actually received or (2) to the extent
that a judgment or other final adjudication adverse to the person is entered in
a proceeding based on a finding in the proceeding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. In situations to
which the Amended Certificate provision applies, the remedies available to the
Company or a stockholder are limited to equitable remedies such as injunction or
rescission. This provision would not, in the opinion of the Commission,
eliminate or limit the liability of directors and officers under the federal
securities laws.
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
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extent as applicable law may thereafter from time to time permit. Such
agreements provide for the advancement of expenses (subject to reimbursement if
it is ultimately determined that the officer or director is not entitled to
indemnification) prior to the final disposition of any claim or proceeding.
FOREIGN OWNERSHIP
Under the Amended Certificate and to comply with FCC rules and regulations,
the Company is not permitted to issue or transfer on its books any of its
capital stock to or for the account of any Alien if after giving effect to such
issuance or transfer, the capital stock held by or for the account of any alien
or aliens would exceed, individually or in the aggregate, 25% of the Company's
capital stock at any time outstanding. Pursuant to the Amended Certificate, the
Company will have the right to repurchase alien-owned shares at their fair
market value to the extent necessary, in the judgment of the Board of Directors,
to comply with the alien ownership restrictions. Any issuance or transfer of
capital stock in violation of such prohibition will be void and of no force and
effect. The Amended Certificate also provides that no Alien or Aliens shall be
entitled to vote, direct or control the vote of more than 25% of the total
voting power of all the shares of capital stock of the Company outstanding and
entitled to vote at any time and from time to time. Such percentage, however, is
20% in the case of the Company's subsidiaries which are direct holders of FCC
licenses. In addition, the Amended Certificate provides that no Alien shall be
qualified to act as an officer of the Company and no more than 25% of the total
number of directors of the Company at any time may be Aliens. The Amended
Certificate further gives the Board of Directors of the Company all power
necessary to administer the above provisions.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Class A Common Stock is
The First National Bank of Boston.
PLAN OF DISTRIBUTION
The shares of Class A Common Stock offered hereby may be sold by the Company
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 shares 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 shares will set forth the method of
distribution of the offered shares of Class A Common Stock terms 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 shares 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 shares
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 shares being offered by the Company 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 shares of Class A Common Stock 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
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the shares, the Company will sell the Class A Common Stock to the dealer as
principal. The dealer may then resell the Class A Common Stock 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 shares in respect of
which this Prospectus is delivered will be set forth in the Prospectus
Supplement.
The shares may be sold directly by the Company or through agents designated
by the Company from time to time. To the extent required, any agent involved in
the offer or sale of the shares 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.
Any underwriters, dealers and agents that participate in the distribution of
the Class A Common Stock may be deemed to be underwriters as the term is defined
in the Securities Act of 1933, as amended (the "Securities Act"), and any
discounts or commissions received by them from the Company and any profits on
the resale of the Class A Common Stock 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, 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. To the extent required, any such
relationships will be set forth in a Prospectus Supplement.
LEGAL MATTERS
The validity of the shares of Class A Common Stock being offered hereby and
certain other legal matters regarding the shares of Class A Common Stock 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 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.
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The financial statements of KRRT, Inc. as of December 31, 1995 and for the
period from July 25, 1995 through December 31, 1995, incorporated by reference
in this Prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated herein in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated financial statements of Superior Communications Group, Inc.
at December 31, 1995 and 1994, and for each of the two years in the period ended
December 31, 1995, incorporated by reference in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon incorporated by reference herein, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of 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 by reference 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.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. 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.
ITEM AMOUNT
---- - -------
SEC Registration Fee............................. $ 140,542
NASD fee......................................... 27,625
Nasdaq fee....................................... 17,500
Blue Sky fees and expenses (including legal
fees)............................................ 25,000
Printing and engraving expenses.................. 355,000
Legal fees and expenses.......................... 290,000
Accounting fees and expenses..................... 220,000
Transfer agent and registrar fees................ 15,000
Miscellaneous fees and expenses.................. 9,333
------------
Total.......................................... $1,100,000
============
ITEM 14. 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.
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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 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1, 1994 the Registrant has made no unregistered offers or sales
of its securities except as follows:
The Company issued 1,150,000 shares of Series A Preferred Stock in connection
with the River City Acquisition. These shares (which were exchanged for a like
number of shares of Series B Preferred Stock and are convertible into 4,181,818
shares of Class A Common Stock) were issued in a transaction not involving any
public offering exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
On March 12, 1997, the Company issued 2,062,000 shares of Series C Preferred
Stock to KDSM, Inc., (a wholly owned subsidiary of the Company), which in turn
issued $200 million aggregate principal amount of 11 5/8% Senior Debentures due
2009 to Sinclair Capital (a trust, all of whose common securities are owned by
KDSM, Inc.), which in turn issued $200 million aggregate liquidation value of 11
5/8% High Yield Trust Offered Preferred Securities. Each of the securities was
issued in a transaction not involving any public offering exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
On July 2, 1997, the Company issued $200 million aggregate principal amount
of 9% Senior Subordinated Notes due 2007. The securities were issued in a
transaction not involving any public offering, exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933, as amended.
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<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
-------- ------------
1.1* Form of Underwriting Agreement
4.1 Form of Class A Common Stock Certificate (Incorporated by reference to
the Company's registration statement on Form S-1, No. 33-90682)
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
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.
- ---------------
* 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.
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<PAGE>
(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 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) (Section230.424(b) of this chapter) 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Baltimore, Maryland on the 18th day of August,
1997.
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David D. Smith
-------------------------------
David D. Smith
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Chairman of the Board,
* Chief Executive Officer,
- ------------------------ President and Director
David D. Smith (Principal executive officer) August 18, 1997
/s/ David B. Amy Chief Financial Officer
- ------------------------ (Principal Financial
David B. Amy and Accounting Officer) August 18, 1997
*
- ------------------------
Frederick G. Smith Director August 18, 1997
*
- ------------------------
J. Duncan Smith Director August 18, 1997
*
- -------------------------
Robert E. Smith Director August 18, 1997
*
- -------------------------
Basil A. Thomas Director August 18, 1997
*
- -------------------------
Lawrence E. McCanna Director August 18, 1997
*By: /s/ David B. Amy
--------------------
David B. Amy
Attorney-in-fact
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