PROSPECTUS
$1,000,000,000
SBG
SINCLAIR BROADCAST GROUP
CLASS A COMMON STOCK
DEBT SECURITIES
PREFERRED STOCK
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Sinclair Broadcast Group, Inc. ("Sinclair " or the "Company") may from time
to time offer, together or separately, its (i) Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), (ii) debt securities (the "Debt
Securities") which may be either senior debt securities (the "Senior Debt
Securities") or subordinated debt securities (the "Subordinated Debt
Securities") and (iii) shares of its preferred stock, par value $.01 per share
(the "Preferred Stock"), in amounts, at prices and on terms to be determined at
the time of the offering. The Class A Common Stock, the Debt Securities and the
Preferred Stock are collectively called the "Securities." To the extent
indicated in the accompanying Prospectus Supplement (the "Prospectus
Supplement"), certain stockholders of the Company (the "Selling Stockholders")
may from time to time offer up to 1,750,000 shares of Class A Common Stock. See
"Selling Stockholders" and "Plan of Distribution."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will be limited to $1,000,000,000 in aggregate
initial public offering price. Certain specific terms of the particular
Securities in respect of which this Prospectus is being delivered will be set
forth in the Prospectus Supplement, including, where applicable, (i) in the case
of Debt Securities, the specific title, aggregate principal amount, the
denomination, maturity, premium, if any, the interest, if any (which may be at a
fixed or variable rate), the time and method of calculating payment of interest,
if any, the place or places where principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, any terms of
redemption at the option of the Company or the holder, any sinking fund
provisions, terms for any conversion into Class A Common Stock, guarantees, if
any, the initial public offering price, listing (if any) on a securities
exchange or quotation (if any) on an automated quotation system, acceleration,
if any, and other terms and (ii) in the case of Preferred Stock, the specific
title, the aggregate number of shares offered, any dividend (including the
method of calculating payment of dividends), liquidation, redemption, voting and
other rights, any terms for any conversion or exchange into Class A Common Stock
or Debt Securities, the initial public offering price, listing (if any) on a
securities exchange or quotation (if any) on an automated quotation system and
other terms. If so specified in the applicable Prospectus Supplement, Debt
Securities of a series may be issued in whole or in part in the form of one or
more temporary or permanent global securities.
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt
Securities, when issued, will be subordinated in right of payment to all Senior
Debt (as defined in the applicable Prospectus Supplement) of the Company. Debt
Securities may be guaranteed to the extent specified in the applicable
Prospectus Supplement (the "Guarantees") by certain subsidiaries of the Company
specified in the Prospectus Supplement (the "Guarantors").
The Securities will be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. If agents of the Company or any dealers or underwriters are involved in
the sale of the Securities in respect of which this Prospectus is being
delivered, the names of such agents, dealers or underwriters and any applicable
commissions or discounts will be set forth in or may be calculated from the
Prospectus Supplement with respect to such Securities. See "Plan of
Distribution" for possible indemnification arrangements with agents, dealers and
underwriters.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement relating to such Securities. Any
statement contained in this Prospectus will be deemed to be modified or
superseded by any inconsistent statement contained in an accompanying Prospectus
Supplement.
The Prospectus Supplement will contain information concerning certain
United States federal income tax considerations, if applicable to the Securities
offered.
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SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 16, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission: 75 Park
Place, Room 1228, New York, New York 10007 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60621. Copies of such material may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. at prescribed rates. Such reports and other information can also be
reviewed through the Commission's Electronic Data Gathering, Analysis, and
Retrieval System ("EDGAR") which is publicly available though the Commission's
Web site (http:// www.sec.gov). In addition, the Company's Class A Common Stock
is listed on the Nasdaq Stock Market's National Market System, and material
filed by the Company can be inspected at the offices of the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed a Registration Statement on Form S-3 (together with
all amendments thereto, the "Registration Statement") with the Commission in
Washington, D.C., in accordance with the provisions of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus and any accompanying Prospectus Supplement do not contain all of the
information contained in the Registration Statement and the exhibits and
schedules thereto. Statements contained herein and in any accompanying
Prospectus Supplement concerning the provisions of any document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission are
not necessarily complete, and in each instance reference is made to the copy of
the document so filed. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits thereto may be inspected
without charge at the offices of the Commission or on EDGAR or copies thereof
may be obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to Sections 13(a) and 15(d) of the Exchange Act are incorporated hereby by
reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1996 (as amended), together with the report of Arthur Andersen
LLP, independent certified public accountants;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997; and
(c) The Company's Current Reports on Form 8-K and Form 8-K/A filed May
10, 1996, May 13, 1996, May 17, 1996, May 29, 1996, August 30, 1996,
September 5, 1996, February 25, 1997, June 27, 1997, July 2, 1997,
July 14, 1997, July 17, 1997, July 29, 1997, August 13, 1997, August
26, 1997 and August 29, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to termination of the offering of the Securities offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference in this Prospectus will be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any subsequently filed document which also is or is deemed to be incorporated
by reference herein or in any accompanying Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or superseded will not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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<PAGE>
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
A copy of any and all of the documents incorporated herein by reference
(other than exhibits unless such exhibits are specifically incorporated by
reference into any such document) will be provided without charge to any person
to whom a copy of this Prospectus is delivered, upon written or oral request.
Requests should be directed to:
Patrick J. Talamantes
Sinclair Broadcasting Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
SECURITIES OFFERED HEREBY TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
IN CONNECTION WITH THE OFFERING OF SECURITIES PURSUANT TO THIS PROSPECTUS,
THE UNDERWRITERS AND SELLING GROUP MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE SECURITIES ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH
RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "PLAN
OF DISTRIBUTION."
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Unless the context otherwise indicates, as used herein, the "Company" or
"Sinclair" means Sinclair Broadcast Group, Inc. and its direct and indirect
wholly-owned subsidiaries (collectively, the "Subsidiaries").
THE COMPANY
The Company is a diversified broadcasting company that owns or provides
programming services to more television stations than any other commercial
broadcasting group in the United States. The Company currently owns or provides
programming services pursuant to Local Marketing Agreements (LMAs) to 29
television stations, has pending acquisitions of four additional television
stations, and has pending acquisitions of the rights to provide programming to
two additional television stations. The Company believes it is also one of the
top 20 radio groups in the United States, when measured by the total number of
radio stations owned by the Company. The Company owns 27 radio stations, has
pending acquisitions of 24 radio stations and has options to acquire an
additional seven radio stations.
The Company is a Maryland corporation formed in 1986. The Company's
principal offices are located at 2000 West 41st Street, Baltimore, Maryland
21211, and its telephone number is (410) 467-5005.
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, prospective investors should review carefully the following
risks concerning the Company, the Securities and the broadcast industry before
purchasing the Securities offered hereby.
SUBSTANTIAL LEVERAGE AND PREFERRED STOCK OUTSTANDING
The Company has consolidated indebtedness that is substantial in relation
to its total stockholders' equity. As of July 31, 1997, the Company had
outstanding long-term indebtedness (including current installments) of
approximately $1.2 billion. In addition, Sinclair Capital, a subsidiary trust of
the Company (the "Trust"), had issued and outstanding $200 million aggregate
liquidation amount of 11 5/8% High Yield Trust Offered Preferred Securities (the
"Preferred Securities"), which are ultimately backed by $206.2 million
liquidation amount of Series C Preferred Stock, par value $.01, of the Company
(the "Series C Preferred Stock") each of which must be redeemed in 2009. The
Company may borrow additional amounts under a bank credit facility governed by
an Amended and Restated Credit Agreement dated as of May 20, 1997 with The Chase
Manhattan Bank, as agent (as amended from time to time, the "Bank Credit
Agreement"), of which $633.7 million was outstanding as of July 31, 1997 and
expects to do so to finance its pending acquisition (the "Heritage Acquisition")
of assets from certain subsidiaries of Heritage Media Corporation, Inc.
(collectively, "Heritage"). The Company also had outstanding 1,106,608 shares of
Series B Convertible Preferred Stock with an aggregate liquidation preference of
$110.7 million as of July 31, 1997. The Company also has significant program
contracts payable and commitments for future programming. Moreover, subject to
the restrictions contained in its debt instruments and preferred stock, the
Company may incur additional debt and issue additional preferred stock in the
future.
The Company and its Subsidiaries have and will continue to have significant
payment obligations relating to the Bank Credit Agreement, the 10% Senior
Subordinated Notes due 2003 (the "1993 Notes"), the 10% Senior Subordinated
Notes due 2005 (the "1995 Notes"), the 9% Senior Subordinated Notes due 2007
(the "1997 Notes," and, together with the 1993 Notes and the 1995 Notes, the
"Existing Notes"), and the Preferred Securities, and a significant amount of the
Company's cash flow will be required to service these obligations. In addition,
the Company may be required to pay dividends on the Series B Convertible
Preferred Stock in certain circumstances. See "Description of Capital Stock --
Existing Preferred Stock." The Company, on a consolidated basis, reported
interest expense of $84.3 million for the year ended December 31, 1996. After
giving pro forma effect to acquisitions completed by the Company in 1996, the
issuance of the Preferred Securities and the issuance of the 1997 Notes as
though each occurred on January 1, 1996, and the use of the net proceeds
therefrom, the interest expense and Subsidiary Trust Minority Interest Expense
would have been $145.9 million. The weighted average interest rates on the
Company's indebtedness under the Bank Credit Agreement during the year ended
December 31, 1996 was 8.08%.
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<PAGE>
The $400 million revolving credit facility available to the Company under
the Bank Credit Agreement will be subject to reductions beginning March 31,
2000, and will mature on the last business day of December 2004. Payment of
portions of the $600 million term loan under the Bank Credit Agreement begins on
September 30, 1997 and the term loan must be fully repaid by December 31, 2004.
The 1993 Notes mature in 2003, the 1995 Notes mature in 2005 and the 1997 Notes
mature in 2007. The Series C Preferred Stock must be redeemed in 2009. Required
repayment of indebtedness of the Company totaling approximately $1.2 billion
will occur at various dates through May 31, 2007.
The Company's current and future debt service obligations and obligations
to make distributions on and to redeem preferred stock could have adverse
consequences to holders of the Securities, including the following: (i) the
Company's ability to obtain financing for future working capital needs or
additional acquisitions or other purposes may be limited; (ii) a substantial
portion of the Company's cash flow from operations will be dedicated to the
payment of principal and interest on its indebtedness and payments related to
the Preferred Securities, thereby reducing funds available for operations; (iii)
the Company may be vulnerable to changes in interest rates under its credit
facilities; and (iv) the Company may be more vulnerable to adverse economic
conditions than less leveraged competitors and, thus, may be limited in its
ability to withstand competitive pressures. If the Company is unable to service
or refinance its indebtedness or preferred stock, it may be required to sell one
or more of its stations to reduce debt service obligations.
The Company expects to be able to satisfy its future debt service and
dividend and other payment obligations and other commitments with cash flow from
operations. However, there can be no assurance that the future cash flow of the
Company will be sufficient to meet such obligations and commitments. If the
Company is unable to generate sufficient cash flow from operations in the future
to service its indebtedness and to meet its other commitments, it may be
required to refinance all or a portion of its existing indebtedness or to obtain
additional financing. There can be no assurance that any such refinancing or
additional financing could be obtained on acceptable terms. If the Company is
unable to service or refinance its indebtedness, it may be required to sell one
or more of its stations to reduce debt service obligations.
COVENANT RESTRICTIONS ON DIVIDENDS AND REDEMPTION
Certain covenants under the Existing Indentures, the Bank Credit Agreement
and the Articles Supplementary relating to the Series C Preferred Stock restrict
the amount of dividends and redemptions that may be declared and paid by the
Company on its capital stock, which will include Preferred Stock offered
pursuant to this Prospectus unless otherwise provided in the applicable
Prospectus Supplement. Although the Company presently believes it will be able
to pay dividends on any Preferred Stock offered hereunder as required, there can
be no assurance that the Company will be permitted under such restrictions to
declare dividends throughout the term of the Preferred Stock. The Company may
make other restricted payments or the Company's consolidated operating
performance may decline, either of which could limit the Company's ability to
declare dividends. In addition, under the terms of the Bank Credit Agreement,
the Company may not be able to pay full cash dividends on Preferred Stock
throughout the term of any Preferred Stock unless the Company's Total
Indebtedness Ratio (as defined in the Bank Credit Agreement) improves from the
Company's pro forma 1996 Total Indebtedness Ratio. The Company must also satisfy
other financial covenants to pay cash dividends under the Bank Credit Agreement.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The indentures relating to the Existing Notes (the "Existing Indentures")
and the Articles Supplementary relating to the Series C Preferred Stock
restrict, among other things, the Company's and its Subsidiaries' (as defined in
the Existing Indentures) ability to (i) incur additional indebtedness, (ii) pay
dividends, make certain other restricted payments or consummate certain asset
sales, (iii) enter into certain transactions with affiliates, (iv) incur
indebtedness that is subordinate in priority and in right of payment to any
senior debt and senior in right of payment to the Existing Notes, (v) merge or
consolidate with any other person, or (vi) sell, assign, transfer, lease,
convey, or otherwise dispose of all or
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<PAGE>
substantially all of the assets of the Company. In addition, the Bank Credit
Agreement contains certain other and more restrictive covenants, including
restrictions on redemption of capital stock, a limitation on the aggregate size
of future acquisitions undertaken without lender consent, a requirement that
certain conditions be satisfied prior to consummation of future acquisitions,
and a limitation on the amount of capital expenditures permitted by the Company
in future years without lender consent. The Bank Credit Agreement also requires
the Company to maintain specific financial ratios and to satisfy certain
financial condition tests. In addition, any Debt Securities may have other and
more restrictive covenants. The Company's ability to meet these financial ratios
and financial condition tests can be affected by events beyond its control, and
there can be no assurance that the Company will meet those tests. The breach of
any of these covenants could result in a default under the Bank Credit Agreement
and/or the Existing Indentures and/or Debt Securities. In the event of a default
under the Bank Credit Agreement, the Existing Indentures or any Debt Securities,
the lenders and the noteholders could seek to declare all amounts outstanding
under the Bank Credit Agreement, the Existing Notes or any Debt Securities,
together with accrued and unpaid interest, to be immediately due and payable. If
the Company were unable to repay those amounts, the lenders under the Bank
Credit Agreement could proceed against the collateral granted to them to secure
that indebtedness. If the indebtedness under the Bank Credit Agreement or the
Existing Notes were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay in full that indebtedness and the
other indebtedness of the Company including Debt Securities. Substantially all
of the assets of the Company and its Subsidiaries (other than the assets of
KDSM, Inc. which ultimately back up the Preferred Securities) are pledged as
security under the Bank Credit Agreement. The Subsidiaries (with the exception
of Cresap Enterprises, Inc., KDSM, Inc. and KDSM Licensee, Inc.) also guarantee
the indebtedness under the Bank Credit Agreement and the Existing Indentures.
In addition to a pledge of substantially all of the assets of the Company
and its Subsidiaries, the Company's obligations under the Bank Credit Agreement
are secured by mortgages on certain real property assets of certain non-Company
entities (the "Stockholder Affiliates") owned and controlled by the Company's
current majority stockholders (David D. Smith, Frederick G. Smith, J. Duncan
Smith and Robert E. Smith, collectively, the "Controlling Stockholders"),
including Cunningham Communications, Inc. ("CCI"), Gerstell Development
Corporation ("Gerstell"), Gerstell Development Limited Partnership ("Gerstell
LP") and Keyser Investment Group, Inc. ("KIG"). If the Company were to seek to
replace the Bank Credit Agreement, there can be no assurance that the assets of
these Stockholder Affiliates would be available to provide additional security
under a new credit agreement, or that a new credit agreement could be arranged
on terms as favorable as the terms of the Bank Credit Agreement without a pledge
of such Stockholder Affiliates' assets.
SUBORDINATION OF THE SUBORDINATED DEBT SECURITIES AND THE RELATED
GUARANTEES; ASSET ENCUMBRANCES
The payment of principal of, premium, if any, and interest on the
Subordinated Debt Securities will be subordinated to the prior payment in full
of Senior Debt (as defined in the applicable Prospectus Supplement) of the
Company, which, unless specified otherwise in the applicable Prospectus
Supplement, will include, among other things, all indebtedness under the Bank
Credit Agreement including obligations under interest rate agreements related
thereto (the "Bank Interest Rate Agreements"). Therefore, in the event of the
liquidation, dissolution, reorganization, or any similar proceeding regarding
the Company, the assets of the Company will be available to pay obligations on
the Subordinated Debt Securities only after Senior Debt has been paid in full in
cash or cash equivalents or in any other form acceptable to the holders of
Senior Debt, and there may not be sufficient assets to pay amounts due on all or
any of the Subordinated Debt Securities. In addition, the Company may not pay
principal of, premium, if any, interest on or any other amounts owing in respect
of the Subordinated Debt Securities, make any deposit pursuant to defeasance
provisions or purchase, redeem or otherwise retire the Subordinated Debt
Securities, if any Designated Senior Debt (as defined in the indenture relating
to Subordinated Debt Securities) is not paid when due or any other default on
Designated Senior Debt occurs and the maturity of such indebtedness is
accelerated in accordance with its terms unless, in either case, such default
has been cured or waived, any such acceleration has been rescinded or such
indebtedness has been repaid in full. Moreover, under certain circumstances, if
any non-payment default exists
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<PAGE>
with respect to Designated Senior Debt, the Company may not make any payments on
the Subordinated Debt Securities for a specified time, unless such default is
cured or waived, any acceleration of such indebtedness has been rescinded or
such indebtedness has been repaid in full. See "Description of the Notes --
Subordination." Unless otherwise specified in the applicable Prospectus
Supplement, the Company's and the Subsidiaries' ability to incur additional
indebtedness will also be restricted under the indenture relating to the
Subordinated Debt Securities.
If Subordinated Debt Securities are guaranteed (the "Guarantees") by all or
some of the Company's Subsidiaries (the "Guarantors"), unless otherwise
specified in the applicable Prospectus Supplement, the Guarantees by the
Guarantors will be subordinated in right of payment to the guarantees by the
Guarantors of the Company's obligations under the Bank Credit Agreement
including, but not limited to the obligations under any Bank Interest Rate
Agreement related thereto.
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will not be secured by any of the Company's assets. The
obligations of the Company under the Bank Credit Agreement including, but not
limited to any Bank Interest Rate Agreement, however, are secured, to the extent
permitted by law, by a first priority security interest in substantially all of
the Company's assets, including the assets of the substantially all of the
Company's Subsidiaries. Moreover, the Company's obligations under certain other
indebtedness (the "Founders' Notes") are secured on a second priority basis by
substantially all of the Company's assets, including the assets of substantially
all of the Company's Subsidiaries. If the Company becomes insolvent or is
liquidated, or if payment under the Bank Credit Agreement, any Bank Interest
Rate Agreement or the Founders' Notes is accelerated, the lenders under the Bank
Credit Agreement, any Bank Interest Rate Agreement or the holders of the
Founders' Notes would be entitled to exercise the remedies available to a
secured lender under applicable law and pursuant to instruments governing such
indebtedness. Accordingly, such lenders will have a prior claim on the Company's
assets. In any such event, because the Debt Securities will not be secured by
any of the Company's assets, it is possible that there would be no assets
remaining from which claims of the holders of the Debt Securities could be
satisfied or, if any such assets remained, such assets might be insufficient to
satisfy such claims fully. See "Description of the Debt Securities" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," and Notes to the Consolidated
Financial Statements in the filings incorporated by reference herein.
DEPENDENCE UPON OPERATIONS OF SUBSIDIARIES; POSSIBLE INVALIDITY OF GUARANTEES
The Debt Securities will be the obligations of the Company. Substantially
all of the Company's operating assets are held by its Subsidiaries and
substantially all of its income before provision or benefit for income taxes was
derived from operations of its Subsidiaries. Therefore, the Company's ability to
make interest and principal payments when due to holders of the Debt Securities
is dependent, in part, upon the receipt of sufficient funds from its
Subsidiaries.
To the extent that a court were to find that: (i) any Guarantee of the Debt
Securities was incurred by a Guarantor with intent to hinder, delay or defraud
any present or future creditor or the Guarantor contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or in part of
others; or (ii) such Guarantor did not receive fair consideration or reasonably
equivalent value for issuing its Guarantee and such Guarantor: (a) was
insolvent; (b) was rendered insolvent by reason of the issuance of such
Guarantee; (c) was engaged or about to engage in a business or transaction for
which the remaining assets of such Guarantor constituted unreasonably small
capital to carry on its business; or (d) intended to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they matured, the
court could avoid or subordinate such Guarantee in favor of the Guarantor's
other creditors. Among other things, a legal challenge of a Guarantee on
fraudulent conveyance grounds may focus on the benefits, if any, realized by the
Guarantor as a result of the issuance by the Company of the Debt Securities. To
the extent any Guarantee were to be avoided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the Debt Securities would cease
to have any claim in respect of such Guarantor and would be creditors solely of
the Company and any Guarantor whose Guarantee was not avoided or held
unenforceable. In such event, the claims of the holders of the Debt
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<PAGE>
Securities against the issuer of an invalid Guarantee would be subject to the
prior payment of all liabilities of such Guarantor. There can be no assurance
that, after providing for all prior claims, there would be sufficient assets to
satisfy the claims of the holders of the Debt Securities relating to any voided
Guarantee.
POTENTIAL RELEASE OF GUARANTEES
Unless otherwise provided in the applicable Prospectus Supplement, any
Guarantee of a Guarantor, if granted, may be released at any time upon any sale,
exchange or transfer by the Company of the stock of such Guarantor or
substantially all the assets of such Guarantor to a non-affiliate. Unless
otherwise provided in the applicable Prospectus Supplement, under the
Indentures, the net cash proceeds of any Asset Sale (as defined) will be
required to be applied to the repayment of any Senior Debt or to the purchase of
properties and assets for use in the Company's businesses existing on the date
of the Indenture or reasonably related thereto. Unless otherwise provided in the
applicable Prospectus Supplement, any Guarantee of any of the Company's
subsidiaries may also be released at such time as such subsidiary no longer
guarantees any other debt of the Company.
CONFLICTS OF INTEREST
In addition to their respective interests in the Company, the Controlling
Stockholders have interests in various non-Company entities which are involved
in businesses related to the business of the Company, including, among others,
the operation of a television station in St. Petersburg, Florida since 1991 and
a television station in Bloomington, Indiana since 1990. In addition, the
Company leases certain real property and tower space from and engages in other
transactions with the Stockholder Affiliates, which are controlled by the
Controlling Stockholders. Although the Controlling Stockholders have agreed to
divest interests in the Bloomington station that are attributable to them under
applicable FCC regulations, the Controlling Stockholders and the Stockholder
Affiliates may continue to engage in the operation of the St. Petersburg,
Florida station and other already existing businesses. However, under Maryland
law, generally a corporate insider is precluded from acting on a business
opportunity in his or her individual capacity if that opportunity is one which
the corporation is financially able to undertake, is in the line of the
corporation's business and of practical advantage to the corporation, and is one
in which the corporation has an interest or reasonable expectancy. Accordingly,
the Controlling Stockholders generally are required to engage in new business
opportunities of the Company only through the Company unless a majority of the
Company's disinterested directors decide under the standards discussed above,
that it is not in the best interests of the Company to pursue such
opportunities. Non-Company activities of the Controlling Stockholders such as
those described above could, however, present conflicts of interest with the
Company in the allocation of management time and resources of the Controlling
Stockholders, a substantial majority of which is currently devoted to the
business of the Company.
In addition, there have been and will be transactions between the Company
and Glencairn Ltd. (with its subsidiaries, "Glencairn"), a corporation in which
relatives of the Controlling Stockholders beneficially own a majority of the
equity interests. Glencairn is the owner-operator and licensee of television
stations WRDC in Raleigh/Durham, WVTV in Milwaukee, WNUV in Baltimore, WABM in
Birmingham, KRRT in San Antonio, and WFBC in Asheville, North
Carolina/Greenville/Spartanburg, South Carolina. The Company has also agreed to
sell the assets essential for broadcasting a television signal in compliance
with regulatory guidelines ("License Assets") relating to WTTE in Columbus, Ohio
to Glencairn and to enter into an LMA with Glencairn pursuant to which the
Company will provide programming services for this station after the acquisition
of the License Assets by Glencairn. See "Business of Sinclair -- Broadcasting
Acquisition Strategy" in Sinclair's Form 8-K dated August 29, 1997, which is
incorporated by reference herein. The FCC has approved this transaction.
However, the Company does not expect this transfer to occur unless the Company
acquires the assets of WSYX in Columbus, Ohio.
Two persons who are expected to become directors of the Company, Barry
Baker (who is also expected to become an executive officer of the Company) and
Roy F. Coppedge, III, have direct and indirect interests in River City
Broadcasting, L.P. ("River City"), from which the Company purchased certain
assets in 1996
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(the "River City Acquisition"). In addition, in connection with the River City
Acquisition, the Company has entered into various ongoing agreements with River
City, including options to acquire assets that were not acquired at the time of
the initial closing of the River City Acquisition, and LMAs relating to stations
for which River City continues to own License Assets. See "Business --
Broadcasting Acquisition Strategy" in Sinclair's Form 8-K dated August 29, 1997,
which is incorporated by reference herein. Messrs. Baker and Coppedge were not
officers or directors of the Company at the time these agreements were entered
into, but, upon their expected election to the Board of Directors of the Company
and upon Mr. Baker's expected appointment as an executive officer of the
Company, they may have conflicts of interest with respect to issues that arise
under any continuing agreements and any other agreements with River City.
The Bank Credit Agreement, the Existing Indentures and the Articles
Supplementary relating to the Series C Preferred Stock provide (and the Debt
Securities may provide) that transactions between the Company and its affiliates
must be no less favorable to the Company than would be available in comparable
transactions in arm's-length dealings with an unrelated third party. Moreover,
the Existing Indentures provide (and the Debt Securities may provide) that any
such transactions involving aggregate payments in excess of $1.0 million must be
approved by a majority of the members of the Board of Directors of the Company
and the Company's independent directors (or, in the event there is only one
independent director, by such director), and, in the case of any such
transactions involving aggregate payments in excess of $5.0 million, the Company
is required to obtain an opinion as to the fairness of the transaction to the
Company from a financial point of view issued by an investment banking or
appraisal firm of national standing.
VOTING RIGHTS; CONTROL BY CONTROLLING STOCKHOLDERS; POTENTIAL ANTI-TAKEOVER
EFFECT OF DISPROPORTIONATE VOTING RIGHTS
The Company's Common Stock has been divided into two classes, each with
different voting rights. The Class A Common Stock entitles a holder to one vote
per share on all matters submitted to a vote of the stockholders, whereas the
Class B Common Stock, 100% of which is beneficially owned by the Controlling
Stockholders, entitles a holder to ten votes per share, except for "going
private" and certain other transactions for which the holder is entitled to one
vote per share. The Class A Common Stock, the Class B Common Stock and the
Series B Preferred Stock vote together as a single class (except as otherwise
may be required by Maryland law) on all matters submitted to a vote of
stockholders, with each share of Series B Preferred Stock entitled to 3.64 votes
on all such matters. Holders of Class B Common Stock may at any time convert
their shares into the same number of shares of Class A Common Stock and holders
of Series B Convertible Preferred Stock may at any time convert each share of
Series B Convertible Preferred Stock into 3.64 Shares of Class A Common Stock.
The Controlling Stockholders own in the aggregate over 60% of the
outstanding voting capital stock (including the Series B Preferred Stock) of the
Company and control over 90% of all voting rights associated with the Company's
capital stock. As a result, any three of the Controlling Stockholders will be
able to elect a majority of the members of the Board of Directors of Sinclair
and, thus, will have the ability to maintain control over the operations and
business of the Company.
The Controlling Stockholders have entered into a stockholders' agreement
(the "Stockholders' Agreement") pursuant to which they have agreed, for a period
ending in 2005, to vote for each other as candidates for election to the board
of directors. In addition, in connection with the River City Acquisition, the
Controlling Stockholders and Barry Baker and Boston Ventures IV Limited
Partnership and Boston Ventures IVA Limited Partnership (collectively, "Boston
Ventures") have entered into a voting agreement (the "Voting Agreement")
pursuant to which the Controlling Stockholders have agreed to vote in favor of
certain specified matters including, but not limited to, the appointment of Mr.
Baker and Mr. Coppedge (or another designee of Boston Ventures) to the Company's
Board of Directors at such time as they are allowed to become directors pursuant
to Federal Communications Commission ("FCC") rules. Mr. Baker and Boston
Ventures, in turn, have agreed to vote in favor of the reappointment of each of
the Controlling Stockholders to the Company's board of directors. The Voting
Agreement will remain in effect with respect to Mr. Baker for as long as he is a
director of the Company and will remain in effect with respect to Mr. Coppedge
(or another designee of Boston Ventures) until the first to occur of (a) the
later of (i) May 31, 2001 and (ii) the expiration of the initial five-year term
of Mr. Baker's
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employment agreement and (b) such time as Boston Ventures no longer owns
directly or indirectly through its interest in River City at least 721,115
shares of Class A Common Stock (including shares that may be obtained on
conversion of the Series B Preferred Stock). See "Management -- Employment
Agreements" in Sinclair's Form 8-K dated August 29, 1997 incorporated herein by
reference.
The disproportionate voting rights of the Class B Common Stock relative to
the Class A Common Stock and the Stockholders' Agreement and the Voting
Agreement may make the Company a less attractive target for a takeover than it
otherwise might be or render more difficult or discourage a merger proposal,
tender offer or other transaction involving an actual or potential change of
control of the Company. In addition, the Company has the right to issue
additional shares of preferred stock the terms of which could make it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company and accordingly may be used as an anti-takeover device.
DEPENDENCE UPON KEY PERSONNEL; EMPLOYMENT AGREEMENTS WITH KEY PERSONNEL
The Company believes that its success will continue to be dependent upon
its ability to attract and retain skilled managers and other personnel,
including its present officers, regional directors and general managers. The
loss of the services of any of the present officers, especially its President
and Chief Executive Officer, David D. Smith, or Barry Baker, who is currently a
consultant to the Company and is expected to become President and Chief
Executive Officer of Sinclair Communications, Inc. (a wholly owned subsidiary of
the Company that holds all of the broadcast operations of the Company, "SCI")
and Executive Vice President and a director of the Company as soon as
permissible under FCC rules, may have a material adverse effect on the
operations of the Company. Each of the Controlling Stockholders has entered into
an employment agreement with the Company, each of which terminates June 12,
1998, unless renewed for an additional one year period according to its terms,
and Barry Baker has entered into an employment agreement that terminates in
2001. See "Management--Employment Agreements" in Sinclair's Form 8-K dated
August 29, 1997. The Company has key-man life insurance for Mr. Baker, but does
not currently maintain key personnel life insurance on any of its executive
officers.
Mr. Baker is Chief Executive Officer of River City and devotes a
substantial amount of his business time and energies to those services. Mr.
Baker cannot be appointed as an executive officer or director of the Company
until such time as (i) either the Controlling Stockholders dispose of their
attributable interests (as defined by applicable FCC rules) in a television
station in the Indianapolis DMA or Mr. Baker no longer has an attributable
interest in WTTV or WTTK in Indianapolis; and (ii) either the Company disposes
of its attributable interest in WTTE in Columbus or Mr. Baker no longer has an
attributable interest in WSYX in Columbus. There can be no assurance as to when
or whether these events will occur. The failure of Mr. Baker to become a
director and officer of the Company on or before August 31, 1997 may allow Mr.
Baker to terminate his employment agreement. The Company has no reason to
believe Mr. Baker will terminate his employment agreement in such event. If Mr.
Baker's employment agreement is terminated under certain specified
circumstances, Mr. Baker will have the right to purchase from the Company at
fair market value either (i) the Company's broadcast operations in either the
St. Louis market or the Asheville/Greenville/Spartanburg market or (ii) all of
the Company's radio operations, either of which may also have a material adverse
effect on the operations of the Company.
RECENT RAPID GROWTH; ABILITY TO MANAGE GROWTH; FUTURE ACCESS TO CAPITAL
Since the beginning of 1992, the Company has experienced rapid and
substantial growth primarily through acquisitions and the development of LMA
arrangements. In 1996 and 1997, the Company completed the River City Acquisition
and other acquisitions, which increased the number of television stations owned
or provided programming services by the Company from 13 to 29 and increased the
number of radio stations owned or provided programming or sales services from
none to 27 radio stations. In addition, the Company has entered into an
agreement to acquire four television and 24 radio stations and the right to
provide programming services to two television stations in connection with the
Heritage Acquisition. There can be no assurance that the Company will be able to
continue to locate and complete acquisitions on the
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scale of the River City Acquisition, the Heritage Acquisition or in general. In
addition, acquisitions in the television and radio industry have come under
increased scrutiny from the Department of Justice and the Federal Trade
Commission. See "Business of Sinclair--Federal Regulation of Television and
Radio Broadcasting" in Sinclair's Form 8-K dated August 29, 1997, which is
incorporated by reference herein. Accordingly, there is no assurance that the
Company will be able to maintain its rate of growth or that the Company will
continue to be able to integrate and successfully manage such expanded
operations, including those to be acquired in the Heritage Acquisition. Inherent
in any acquisitions are certain risks such as increasing leverage and debt
service requirements and combining company cultures and facilities which could
have a material adverse effect on the Company's operating results, particularly
during the period immediately following such acquisitions. Additional debt or
capital may be required in order to complete future acquisitions, and there can
be no assurance the Company will be able to obtain such financing or raise the
required capital.
DEPENDENCE ON ADVERTISING REVENUES; EFFECT OF LOCAL, REGIONAL AND
NATIONAL ECONOMIC CONDITIONS
The Company's operating results are primarily dependent on advertising
revenues which, in turn, depend on national and local economic conditions, the
relative popularity of the Company's programming, the demographic
characteristics of the Company's markets, the activities of competitors and
other factors which are outside the Company's control. Both the television and
radio industries are cyclical in nature, and the Company's revenues could be
adversely affected by a future local, regional or national recessionary
environment.
RELIANCE ON TELEVISION PROGRAMMING
One of the Company's most significant operating cost components is
television programming. There can be no assurance that the Company will not be
exposed in the future to increased programming costs which may materially
adversely affect the Company's operating results. Acquisitions of program rights
are usually made two or three years in advance and may require multi-year
commitments, making it difficult to accurately predict how a program will
perform. In some instances, programs must be replaced before their costs have
been fully amortized, resulting in write-offs that increase station operating
costs.
CERTAIN NETWORK AFFILIATION AGREEMENTS
All but one of the television stations owned or provided programming
services by the Company are affiliated with a network. Under the affiliation
agreements, the networks possess, under certain circumstances, the right to
terminate the agreement on prior written notice generally ranging between 15 and
45 days, depending on the agreement. Ten of the stations currently owned or
programmed by the Company are affiliated with Fox and 39.0% of the Company's
revenue in 1996 on a pro forma basis (without giving effect to the Heritage
Acquisition) was from Fox affiliated stations. WVTV, a station to which the
Company provides programming services in Milwaukee, Wisconsin pursuant to an
LMA, WTTO, a station owned by the Company in Birmingham, Alabama, and WDBB, a
station to which the Company provides programming services in Tuscaloosa,
Alabama pursuant to an LMA, each of which was previously affiliated with Fox,
had their affiliation agreements with Fox terminated by Fox in December 1994,
September 1996 and September 1996, respectively. WVTV and WTTO are now
affiliates of The WB Television Network ("WB"). In addition, the Company has
been notified by Fox of Fox's intention to terminate WLFL's affiliation with Fox
in the Raleigh-Durham market and WTVZ's affiliation with Fox in the Norfolk
market, effective August 31, 1998, and the Company has entered into an agreement
with WB for those stations to become affiliated with WB at that time. On August
20, 1996, the Company entered into an agreement with Fox limiting Fox's rights
to terminate the Company's affiliation agreements with Fox in other markets, but
there can be no assurance that the Fox affiliation agreements will remain in
place or that Fox will continue to provide programming to affiliates on the same
basis that currently exists. See "Business of Sinclair--Television Broadcasting"
in Sinclair's Form 8-K dated August 29, 1997, which is incorporated by reference
herein. The Company's UPN affiliation agreements expire in January 1998. The
non-renewal or termination of affiliations with Fox or any other network could
have a material adverse effect on the Company's operations.
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Each of the affiliation agreements relating to television stations involved
in the River City Acquisition (other than River City's ABC and Fox affiliates)
became terminable by the network upon transfer of the License Assets of the
stations. These stations are continuing to operate as network affiliates, but
there can be no assurance that the affiliation agreements will be continued, or
that they will be continued on terms favorable to the Company. If any
affiliation agreements are terminated, the affected station could lose market
share, may have difficulty obtaining alternative programming at an acceptable
cost, and may otherwise be adversely affected.
Twelve stations owned or programmed by the Company are affiliated with UPN,
a network that began broadcasting in January 1995. Two stations owned or
programmed by the Company are operated as affiliates with WB, a network that
began broadcasting in January 1995, and, pursuant to an agreement between the
Company and WB, certain of the Company's stations affiliated with UPN will
become affiliated with WB when their current affiliations expire in January
1998. There can be no assurance as to the future success of UPN or WB
programming or as to the continued operation of the UPN or WB networks. In
connection with the change of affiliation of certain of the Company's stations
from UPN to WB, UPN has filed an action in Los Angeles Superior Court against
the Company, seeking declaratory relief and specific performance or, in the
alternative, unspecified damages and alleging that neither the Company nor its
affiliates provided proper notice of their intention not to extend the current
UPN affiliations beyond January 15, 1998. Certain subsidiaries of the Company
have filed an action in the Circuit Court for Baltimore City seeking declaratory
relief that their notice was effective to terminate the affiliations on January
15, 1998. There can be no assurance that the Company and its subsidiaries will
prevail in these proceedings or that the outcome of these proceedings, if
adverse to the Company and its subsidiaries, will not have a material adverse
effect on the Company.
COMPETITION
The television and radio industries are highly competitive. Some of the
stations and other businesses with which the Company's stations compete are
subsidiaries of large, national or regional companies that may have greater
resources than the Company. Technological innovation and the resulting
proliferation of programming alternatives, such as cable television, wireless
cable, in home satellite-to-home distribution services, pay-per-view and home
video and entertainment systems have fractionalized television viewing audiences
and have subjected free over-the-air television broadcast stations to new types
of competition. The radio broadcasting industry is also subject to competition
from new media technologies that are being developed or introduced, such as the
delivery of audio programming by cable television systems and by digital audio
broadcasting ("DAB"). In April 1997, the FCC awarded two licenses for DAB. DAB
may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and national audiences.
The Company's stations face strong competition for market share and
advertising revenues in their respective markets from other local free
over-the-air radio and television broadcast stations, cable television and
over-the-air wireless cable television as well as newspapers, periodicals and
other entertainment media. Some competitors are part of larger companies with
greater resources than the Company. In addition, the FCC has adopted rules which
permit telephone companies to provide video services to homes on a
common-carrier basis without owning or controlling the product being
distributed, and proposed legislation could relax or repeal the telephone-cable
cross-ownership prohibition for all systems. See "Business of
Sinclair--Competition" in Sinclair's Form 8-K dated August 29, 1997, which is
incorporated by reference herein.
In February 1996, the Telecommunications Act of 1996 (the "1996 Act") was
adopted by the Congress of the United States and signed into law by President
Clinton. The 1996 Act contains a number of sweeping reforms that are having an
impact on broadcasters, including the Company. While creating substantial
opportunities for the Company, the increased regulatory flexibility imposed by
the 1996 Act and the removal of previous station ownership limitations have
sharply increased the competition for and prices of stations. The 1996 Act also
frees telephone companies, cable companies and others from some of the
restrictions which have previously precluded them from involvement in the
provision of video services. The 1996 Act may also have other effects on the
competition the Company faces, either in individual markets or in making
acquisitions.
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IMPACT OF NEW TECHNOLOGIES
The FCC has taken a number of steps to implement digital television ("DTV")
broadcasting service in the United States. In December 1996, the FCC adopted a
DTV broadcast standard and, in April 1997, made decisions in several pending
rulemaking proceedings that establish service rules and a plan for implementing
DTV. The FCC adopted a DTV Table of Allotments that provides all authorized
television stations with a second channel on which to broadcast a DTV signal.
The FCC has attempted to provide DTV coverage areas that are comparable to
stations' existing service areas. The FCC has ruled that television broadcast
licensees may use their digital channels for a wide variety of services such as
high-definition television, multiple standard definition television programming,
audio, data, and other types of communications, subject to the requirement that
each broadcaster provide at least one free video channel equal in quality to the
current technical standard.
Initially, DTV channels will be located in the range of channels from
channel 2 through channel 51. The FCC is requiring that affiliates of ABC, CBS,
Fox and NBC in the top 10 television markets begin digital broadcasting by May
1, 1999 (the stations affiliated with these networks in the top 10 markets have
voluntarily committed to begin digital broadcasting within 18 months), and that
affiliates of these networks in markets 11 through 30 begin digital broadcasting
by November 1999. The FCC's plan calls for the DTV transition period to end in
the year 2006, at which time the FCC expects that (i) DTV channels will be
clustered either in the range of channels 2 through 46 or channels 7 through 51;
and (ii) television broadcasters will have ceased broadcasting on their
non-digital channels, allowing that spectrum to be recovered by the government
for other uses. Under the Balanced Budget Act recently signed into law by
President Clinton, however, the FCC is authorized to extend the December 31,
2006 deadline for reclamation of a television station's non-digital channel if,
in any given case: (a) one or more television stations affiliated with one of
the four major networks in a market are not broadcasting digitally and the FCC
determines that the station(s) has (have) "exercised due diligence" in
attempting to convert to digital broadcasting; (b) less than 85% of the
television households in the station's market subscribe to a multichannel video
service (cable, wireless cable or direct-to-home broadcast satellite television)
that carries at least one digital channel from each of the local stations in
that market; or (c) less than 85% of the television households in the station's
market can receive digital signals off the air using either a set-top converted
box for an analog television set or a new digital television set. The Balanced
Budget Act also directs the FCC to auction the non-digital channels by September
30, 2002 even though they are not to be reclaimed by the government until at
least December 31, 2006. The FCC has stated that it will open a separate
proceeding to consider the recovery of television channels 60 through 69 and how
those frequencies will be used after they are eventually recovered from
television broadcasters. Additionally, the FCC will open a separate proceeding
to consider to what extent the cable must-carry requirements will apply to DTV
signals.
Implementation of digital television will improve the technical quality of
television signals received by viewers. Under certain circumstances, however,
conversion to digital operation may reduce a station's geographic coverage area
or result in some increased interference. The FCC's DTV allotment plan may also
result in UHF stations having considerably less signal power within their
service areas than present VHF stations that move to DTV channels. The Company
has filed with the FCC a petition for reconsideration of the FCC's DTV allotment
plan because of its concerns with respect to the relative DTV signal powers of
VHF/UHF and UHF/UHF stations. Implementation of digital television will also
impose substantial additional costs on television stations because of the need
to replace equipment and because some stations will need to operate at higher
utility costs. The FCC is also considering imposing new public interest
requirements on television licensees in exchange for their receipt of DTV
channels. The Company is currently considering plans to provide high definition
television ("HDTV"), to provide multiple channels of television, including the
provision of additional broadcast programming and transmitted data on a
subscription basis, and to continue its current TV program channels without
subscription fees on its allocated portions of the broadcast spectrum. The 1996
Act allows the FCC to charge a spectrum fee to broadcasters who use the digital
spectrum to offer subscription-based services. The FCC is expected to open a
rulemaking in the fall of 1997 to consider the spectrum fees to be charged to
broadcasters for such use. Congress has announced plans to hold hearings on
broadcasters' plans for the use of their digital spectrum. The Company cannot
predict what future actions the FCC or Congress
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might take with respect to DTV, nor can it predict the effect of the FCC's
present DTV implementation plan or such future actions on the Company's
business.
Further advances in technology may also increase competition for household
audiences and advertisers. The video compression techniques now under
development for use with current cable television channels or direct broadcast
satellites which do not carry local television signals (some of which commenced
operation in 1994) are expected to reduce the bandwidth which is required for
television signal transmission. These compression techniques, as well as other
technological developments, are applicable to all video delivery systems,
including over-the-air broadcasting, and have the potential to provide vastly
expanded programming to highly targeted audiences. Reduction in the cost of
creating additional channel capacity could lower entry barriers for new channels
and encourage the development of increasingly specialized "niche" programming.
This ability to reach a very defined audience may alter the competitive dynamics
for advertising expenditures. The Company is unable to predict the effect that
technological changes will have on the broadcast television industry or the
future results of the Company's operations. The radio broadcasting industry is
also subject to competition from new media technologies that are being developed
or introduced, such as the delivery of audio programming by cable televisions
systems and by digital audio broadcasting ("DAB"). DAB may provide a medium for
the delivery by satellite or terrestrial means of multiple new audio programming
formats to local and national audiences. The FCC has issued licenses for two DAB
systems. See "Business of Sinclair-- Competition" in Sinclair's Form 8-K dated
August 29, 1997, which is incorporated by reference herein.
GOVERNMENTAL REGULATIONS; NECESSITY OF MAINTAINING FCC LICENSES
The broadcasting industry is subject to regulation by the FCC pursuant to
the Communications Act. Approval by the FCC is required for the issuance,
renewal and assignment of station operating licenses and the transfer of control
of station licensees. In particular, the Company's business will be dependent
upon its continuing to hold broadcast licenses from the FCC. While in the vast
majority of cases such licenses are renewed by the FCC, there can be no
assurance that the Company's licenses or the licenses owned by the
owner-operators of the stations with which the Company has LMAs will be renewed
at their expiration dates. A number of federal rules governing broadcasting have
changed significantly in recent years and additional changes may occur,
particularly with respect to the rules governing digital television, multiple
ownership and attribution. The Company cannot predict the effect that these
regulatory changes may ultimately have on the Company's operations. Additional
information regarding governmental regulation is set forth under "Business of
Sinclair--Federal Regulation of Television and Radio Broadcasting" in Sinclair's
Form 8-K dated August 29, 1997, which is incorporated by reference herein.
MULTIPLE OWNERSHIP RULES AND EFFECT ON LMAS
On a national level, FCC rules and regulations generally prevent an entity
or individual from having an attributable interest in television stations that
reach in excess of 35% of all U.S. television households (for purposes of this
calculation, UHF stations are credited with only 50% of the television
households in their markets). The Company currently reaches approximately 9% of
U.S. television households using the FCC's method of calculation. On a local
level, the "duopoly" rules prohibit attributable interests in two or more
television stations with overlapping service areas. There are no national limits
on ownership of radio stations, but on a local level no entity or individual can
have an attributable interest in more than five to eight stations (depending on
the total number of stations in the market), with no more than three to five
stations (depending on the total allowed) broadcasting in the same band (AM or
FM). There are limitations on the extent to which radio programming can be
simulcast through LMA arrangements, and LMA arrangements in radio are counted in
determining the number of stations that a single entity may control. FCC rules
also impose limitations on the ownership of a television and radio station in
the same market, though such cross-ownership is permitted on a limited basis in
larger markets.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other entity. In the case of
corporations holding broadcast licenses, the interests of officers, directors
and those who, directly or indirectly, have the right to vote 5% or more of
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the corporation's voting stock (or 10% or more of such stock in the case of
insurance companies, certain regulated investment companies and bank trust
departments that are passive investors) are generally deemed to be attributable,
as are positions as an officer or director of a corporate parent of a broadcast
licensee. The FCC has proposed changes to these attribution rules. See "Business
of Sinclair--Federal Regulation of Television and Radio Broadcasting" in
Sinclair's Form 8-K dated August 29, 1997, which is incorporated by reference
herein.
The FCC has initiated rulemaking proceedings to consider proposals to
modify its television ownership restrictions, including ones that may permit the
ownership, in some circumstances, of two television stations with overlapping
service areas. The FCC is also considering in these proceedings whether to adopt
restrictions on television LMAs. The "duopoly" rules currently prevent the
Company from acquiring the FCC licenses of television stations with which it has
LMAs in those markets where the Company owns a television station. In addition,
if the FCC were to decide that the provider of programming services under an LMA
should be treated as the owner of the television station and if it did not relax
the duopoly rules, or if the FCC were to adopt restrictions on LMAs without
grandfathering existing arrangements, the Company could be required to modify or
terminate certain of its LMAs. In such an event, the Company could be required
to pay termination penalties under certain of its LMAs. The 1996 Act provides
that nothing therein "shall be construed to prohibit the origination,
continuation, or renewal of any television local marketing agreement that is in
compliance with the regulations of the [FCC]." The legislative history of the
1996 Act reflects that this provision was intended to grandfather television
LMAs that were in existence upon enactment of the 1996 Act, and to allow
television LMAs consistent with the FCC's rules subsequent to enactment of the
1996 Act. In its pending rulemaking proceeding regarding the television duopoly
rule, the FCC has proposed to adopt a grandfathering policy providing that, in
the event that television LMAs become attributable interests, LMAs that are in
compliance with existing FCC rules and policies and were entered into before
November 5, 1996, would be permitted to continue in force until the original
term of the LMA expires. Under the FCC's proposal, television LMAs that are
entered into or renewed after November 5, 1996 would have to be terminated if
LMAs are made attributable interests and the LMA in question resulted in a
violation of the television multiple ownership rules. All of the Company's LMAs
were entered into prior to November 5, 1996, but one was entered into after
enactment of the 1996 Act. The Company cannot predict if any or all of its LMAs
will be grandfathered. See "Business of Sinclair--Federal Regulation of
Television and Radio Broadcasting" in Sinclair's Form 8-K dated August 29, 1997,
which is incorporated by reference herein. The LMA entered into after enactment
of the 1996 Act has a term expiring May 31, 2006. Further, if the FCC were to
find that the owners/licensees of the stations with which the Company has LMAs
failed to maintain control over their operations as required by FCC rules and
policies, the licensee of the LMA station and/or the Company could be fined or
could be set for hearing, the outcome of which could be a fine or, under certain
circumstances, loss of the applicable FCC license.
A petition has been filed to deny the application to assign WTTV and WTTK
in the Indianapolis DMA from River City to the Company. Although the petition to
deny does not challenge the assignments of WTTV and WTTK to the Company, it
alleges that station WIIB in the Indianapolis DMA should be deemed an
attributable interest of the Controlling Stockholders (resulting in a violation
of the FCC's local television ownership restrictions when coupled with the
Company's acquisition of WTTV and WTTK) even though the Controlling Stockholders
have agreed to transfer their voting stock in WIIB to a third party. The FCC, at
the Company's request, has withheld action on the applications for the Company
to acquire WTTV and WTTK, and for the Controlling Stockholders to transfer their
voting stock in WIIB, pending the outcome of the FCC's rulemaking proceeding
concerning the cross-interest policy. The petitioner has appealed the
withholding of action on these applications.
The Company is unable to predict (i) the ultimate outcome of possible
changes to the FCC's LMA and multiple ownership rules or the resolution of the
above-described petition to deny or (ii) the impact such factors may have upon
the Company's broadcast operations. As a result of regulatory changes, the
Company could be required to modify or terminate some or all of its LMAs,
resulting in termination penalties and/or divestitures of broadcast properties.
In addition, the Company's competitive position in certain markets could be
materially adversely affected. Thus, no assurance can be given that the changes
to the FCC rules or the resolution of this petition to deny will not have a
material adverse effect upon the Company.
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LMAs--RIGHTS OF PREEMPTION AND TERMINATION
All of the Company's LMAs allow, in accordance with FCC rules, regulations
and policies, preemptions of the Company's programming by the owner-operator and
FCC licensee of each station with which the Company has an LMA. In addition,
each LMA provides that under certain limited circumstances the arrangement may
be terminated by the FCC licensee. Accordingly, the Company cannot be assured
that it will be able to air all of the programming expected to be aired on those
stations with which it has an LMA or that the Company will receive the
anticipated advertising revenue from the sale of advertising spots in such
programming. Although the Company believes that the terms and conditions of each
of its LMAs should enable the Company to air its programming and utilize the
programming and other non-broadcast license assets acquired for use on the LMA
stations, there can be no assurance that early terminations of the arrangements
or unanticipated preemptions of all or a significant portion of the programming
by the owner-operator and FCC licensee of such stations will not occur. An early
termination of one of the Company's LMAs, or repeated and material preemptions
of programming thereunder, could adversely affect the Company's operations. In
addition, the Company's LMAs expire on various dates from March 27, 2000 to May
31, 2006, unless extended or earlier terminated. There can be no assurance that
the Company will be able to negotiate extensions of its arrangements on terms
satisfactory to the Company.
In certain of its LMAs, the Company has agreed to indemnify the FCC
licensee against certain claims (including trademark and copyright infringement,
libel or slander and claims relating to certain FCC proceedings or
investigations) that may arise against the FCC licensee as a result of the
arrangement.
POTENTIAL EFFECT ON THE MARKET PRICE RESULTING FROM SHARES ELIGIBLE FOR
FUTURE SALE
Any shares of Class A Common Stock offered pursuant to this Prospectus will
be freely tradeable in the United States without restriction or further
registration unless purchased by affiliates of the Company. Shares of Class B
Common Stock are convertible into Class A Common Stock on a share-for-share
basis at any time at the option of the holder and are automatically converted
into Class A Common Stock upon transfer, except for transfers to certain
permitted transferees. The 27,510,581 shares of Class B Common Stock outstanding
prior to the date of this Prospectus (and shares of Class A Common Stock into
which they are convertible), all of which are beneficially owned by the
Controlling Stockholders, are held by persons who may be deemed to be affiliates
of the Company and are eligible for resale under Rule 144 under the Securities
Act of 1933, as amended (the "Securities Act"), subject to the volume
limitations thereunder. Options to acquire 2,023,285 shares of Class A Common
Stock have been granted to certain officers or employees of the Company under
the Company's various stock option plans. Of the options granted, 865,093 have
vested as of the date of this Prospectus. Up to an additional 618,388 shares of
Class A Common Stock are reserved for future issuance pursuant to the Company's
Stock Option Plans and Long Term Incentive Plan. In addition, the Company issued
1,150,000 shares of Series B Preferred Stock to River City in connection with
the River City Acquisition, of which 1,085,983 shares (which are convertible at
any time at the option of the holders, into an aggregate of 3,949,029 shares of
Class A Common Stock subject to certain adjustments) were issued and outstanding
as of September 10, 1997. All such shares are registered under the Securities
Act pursuant to a shelf registration statement and may be sold into the public
market at any time. The Company has also registered under the Securities Act
1,382,435 shares of Class A Common Stock issuable upon exercise of stock options
held by Barry Baker, and has registered an additional 1,259,238 shares issuable
upon exercise of options issued or issuable pursuant to the Company's stock
option plans. Sale of substantial amounts of shares of Class A Common Stock, or
the perception that such sales could occur, may materially adversely affect the
market price of the Class A Common Stock.
NET LOSSES
The Company experienced net losses of $7.9 million and $2.7 million during
1993 and 1994, respectively, net income of $76,000 in 1995 and net income of
$1.1 million in 1996 (a net loss of $29.0 million in 1996 on a pro forma basis
reflecting the acquisitions completed by the Company in 1996 (the "1996
Acquisitions"), the issuance of the 1997 Notes and the Preferred Securities).
The Company experienced
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<PAGE>
a net loss of $5.8 million during the six months ended June 30, 1997. The losses
include significant interest expense as well as substantial non-cash expenses
such as depreciation, amortization and deferred compensation. Notwithstanding
the slight net income in 1995 and 1996, the Company expects to experience net
losses in the future, principally as a result of interest expense, amortization
of programming and intangibles and depreciation.
DIVIDEND RESTRICTIONS
The terms of the Company's Bank Credit Agreement, the Indentures and the
other indebtedness of the Company restrict the Company from paying dividends on
its Common Stock. The Company does not expect to pay dividends on its Common
Stock in the foreseeable future.
ABSENCE OF PUBLIC TRADING MARKET
There may be no public market for certain Securities at the time of their
issuance. The Company may or may not apply for listing of such Securities on an
exchange or for quotation on an automated interdealer quotation system. If the
Company does apply for such listing, there is no assurance that such application
will be granted. If the Securities are accepted for listing, no assurance can be
given as to whether an active trading market for the Securities will develop
and, if so, as to the liquidity of such trading market. If any active trading
market does not develop or is not maintained, the market price of the Securities
may be adversely affected.
TRADING CHARACTERISTICS OF FIXED INCOME SECURITIES
Securities offered hereunder that constitute a fixed-income security are
expected to trade at a price that takes into account the value, if any, of
accrued and unpaid interest or distributions; thus, purchasers will not pay for,
and sellers will not receive, any accrued and unpaid interest or distributions
that are not included in the trading price of such Securities.
The liquidation preference of any Preferred Stock offered pursuant to this
Prospectus or the principal amount of any Debt Security offered pursuant to this
Prospectus will not necessarily be indicative of the price at which such
Securities will actually trade at or after the time of the issuance, and such
Securities may trade at prices below their liquidation preference or principal
amount, as applicable. The market price can be expected to fluctuate with
changes in the fixed income markets and economic conditions, the financial
condition and prospects of the Company and other factors that generally
influence the market prices of debt and other fixed-income securities.
FORWARD-LOOKING STATEMENTS
This Prospectus (including the documents or portions thereof incorporated
herein by reference and any Prospectus Supplement) contains forward-looking
statements. In addition, when used in this Prospectus, the words "intends to,"
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to a number of
risks and uncertainties. Actual results in the future could differ materially
and adversely from those described in the forward-looking statements as a result
of various important factors, including the impact of changes in national and
regional economies, successful integration of acquired television and radio
stations (including achievement of synergies and cost reductions), pricing
fluctuations in local and national advertising, volatility in programming costs,
the availability of suitable acquisitions on acceptable terms and the other risk
factors set forth above and the matters set forth in this Prospectus generally.
The Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
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<PAGE>
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will use the net proceeds from the sale of the Securities for general
corporate purposes including, without limitation, acquisitions and the repayment
of outstanding indebtedness. Pursuant to the terms of the Bank Credit Agreement,
all or a portion of the proceeds may be required to be used for reduction of
indebtedness. Amounts repaid under the Bank Credit Agreement may be subsequently
reborrowed. The Bank Credit Agreement matures on December 31, 2004 and the
average interest rate thereunder as of July 31, 1997 was 6.75%. The Company will
receive no proceeds from the sale of shares of Class A Common Stock by the
Selling Stockholders.
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<PAGE>
HISTORICAL AND PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
The Company's consolidated ratios of earnings to fixed charges for each of
the periods indicated are set forth below:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------ --------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Historical(a) .................. -- 1.1x -- 1.3x 1.1x 1.1x --
Pro Forma(b)(c) .................. -- 1.1x --
</TABLE>
- ----------
(a) Earnings were inadequate to cover fixed charges for the years ended December
31, 1992 and 1994, and for the six months ended June 30, 1997. Additional
earnings of $5,840, $3,387 and $9,922 would have been required to cover
fixed charges in the years ended December 31, 1992 and 1994, and the six
months ended June 30, 1997, respectively.
(b) The pro forma information in this table reflects the pro forma effect of the
completion of the issuance of the Preferred Securities and the 1997 Notes
and the 1996 Acquisitions as if such transactions had occurred on January 1,
1996 with respect to the pro forma information for the year ended December
31, 1996 and as if such transactions had occurred on January 1, 1997 with
respect to the pro forma information for the six months ended June 30, 1997.
(c) Earnings were inadequate to cover fixed charges for the pro forma year ended
December 31, 1996 and pro forma six months ended June 30, 1997. Additional
earnings of $39,024 and $12,345 would have been required to cover fixed
charges for the pro forma year ended December 31, 1996 and pro forma six
months ended June 30, 1997, respectively.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Company's voting securities beneficially owned as of August 12, 1997 by the
Selling Stockholders. The address of all persons in the table is 2000 W. 41st
Street, Baltimore, Maryland 21211. Except as set forth below, each of the shares
offered by the Selling Stockholders is currently held as a share of Class B
Common Stock, and each of such shares will automatically be converted into a
share of Class A Common Stock upon their transfer in connection with a sale
pursuant to this Prospectus. The Selling Stockholders may sell up to an
aggregate of 1,750,000 shares of Class A Common Stock from time to time in
amounts specified in an accompanying Prospectus Supplement.
<TABLE>
<CAPTION>
SHARES OWNED AS OF AUGUST 12, 1997
----------------------------------------------
CLASS A CLASS B PERCENTAGE
COMMON STOCK COMMON STOCK (1) OF VOTING
--------------------- ---------------------- POWER OF
NUMBER PERCENT OF NUMBER PERCENT OF ALL
NAMES OF OF CLASS A OF CLASS B CAPITAL
SELLING STOCKHOLDERS SHARES SHARES SHARES SHARES STOCK
- ------------------------------ -------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
David D. Smith (2) ......... 10,000 * 7,249,999 26.3% 25.3%
Frederick G. Smith (3) ...... 4,000 * 6,726,944 24.5% 23.5%
J. Duncan Smith (4) ......... -- -- 6,969,994 25.3% 24.3%
Robert E. Smith (5) ......... -- -- 6,563,644 23.9% 22.9%
</TABLE>
- -----------------
* Less than one percent.
(1) Holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to ten votes per share expect
for votes relating to "going private" and certain other transactions.
Holders of both classes of Common Stock will vote together as a single class
on all matters presented for a vote, except as otherwise may be required by
Maryland law, and holders of Class B Common Stock may exchange their shares
of Class B Common Stock into Class A Common Stock at any time.
(2) Includes 608,458 shares held by a Permitted Transferee pursuant to an
agreement whereby David D. Smith has the power to vote the shares and to
acquire the shares by substitution of like value property.
(3) Includes 478,645 shares held in irrevocable trusts established by Frederick
G. Smith for the benefit of himself, his spouse and his children and as to
certain of those trusts Mr. Smith has the power to acquire by substitution
of trust property. Absent such substitution, Mr. Smith would have no power
to vote or dispose of the shares.
(4) 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.
(5) Includes 921,745 shares held in irrevocable trusts established by Robert E.
Smith for the benefit of himself, his spouse and his children and as to
certain of those trusts Mr. Smith has the power to acquire by substitution
of trust property. Absent such substitution, Mr. Smith would have no power
to vote or dispose of the shares.
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<PAGE>
DESCRIPTION OF DEBT SECURITIES
Debt Securities may be issued from time to time in one or more series under
one or more indentures, each dated as of a date on or prior to the issuance of
the Debt Securities to which it relates. Senior Debt Securities and Subordinated
Debt Securities may be issued pursuant to separate indentures (respectively, a
"Senior Indenture" and a "Subordinated Indenture"), in each case between the
Company and a trustee (a "Trustee"), which may be the same Trustee, and in the
form that will be filed as an exhibit to or incorporated by reference into the
Registration Statement of which this Prospectus is a part, subject to such
amendments or supplements as may be adopted from time to time. The Senior
Indenture and the Subordinated Indenture, as amended or supplemented from time
to time, are sometimes referred to individually as an "Indenture" and
collectively as the "Indentures." Each Indenture will be subject to and governed
by the Trust Indenture Act of 1939, as amended (the "TIA").
The statements made hereunder relating to the Debt Securities and the
Indentures are summaries of the anticipated provisions thereof, do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the applicable Indenture, including the
definitions therein of certain terms and those terms made part of such Indenture
by reference to the TIA, as in effect on the date of such Indenture, and to such
Debt Securities. Copies of the forms of the Indentures will be filed as exhibits
to or incorporated by reference into the Registration Statement of which this
Prospectus is a part. See "Available Information." Certain capitalized terms
used below and not defined have the respective meanings assigned to them in the
applicable Indenture.
GENERAL
The Debt Securities will be unsecured obligations of the Company unless
otherwise specified in the Prospectus Supplement. The Senior Debt Securities
will rank on a parity with all other unsecured and unsubordinated obligations of
the Company. The Subordinated Debt Securities will be subordinate and junior in
right of payment to the extent and in the manner set forth in the Subordinated
Indenture to all Senior Debt (as defined in the applicable Prospectus
Supplement) of the Company, including any Senior Debt Securities. See "--
Subordination." The Company is a holding company which presently conducts its
business through its subsidiaries. Most of the operating assets of the Company
and its consolidated subsidiaries are owned by such subsidiaries and the Company
relies primarily on dividends from such subsidiaries to meet its obligations for
payment of principal and interest on its outstanding debt obligations and
corporate expenses. Accordingly, the Debt Securities will be effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, and holders of Debt Securities should look only to the assets of
the Company for payments on the Debt Securities unless the Debt Securities are
guaranteed by the Company's subsidiaries as described in any Prospectus
Supplement. The Debt Securities may be guaranteed by some or all of the
Company's Subsidiaries, in which case such guarantees will, unless otherwise
specified in the applicable Prospectus Supplement, (i) rank pari passu in right
of payment with all other unsecured senior obligations of such Subsidiaries with
respect to guarantees of Senior Debt Securities, and (ii) rank subordinate in
right of payment to all unsecured senior obligations of such Subsidiaries and
rank pari passu in right of payment to all subordinated obligations of such
Subsidiaries with respect to guarantees of Subordinated Debt Securities. The
guarantees will be effectively subordinated in right of payment to all secured
Indebtedness of such Subsidiaries to the extent of the value of the assets
securing such Indebtedness.
The Indentures will not limit the aggregate amount of Debt Securities which
may be issued thereunder. Except as otherwise provided in the applicable
Prospectus Supplement, the Indentures, as they apply to any series of Debt
Securities, will not limit the incurrence or issuance of other secured or
unsecured debt of the Company, whether under the Indentures, any other indenture
that the Company may enter into in the future or otherwise.
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus for a description of the specific series of Debt
Securities being offered thereby, including:
(1) the title of such Debt Securities;
(2) any limit upon the aggregate principal amount of such Debt
Securities;
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<PAGE>
(3) the date or dates on which the principal of and premium, if any, on
such Debt Securities will mature or the method of determining such date or
dates;
(4) the rate or rates (which may be fixed or variable) at which such Debt
Securities will bear interest, if any, or the method of calculating such rate
or rates;
(5) the date or dates from which interest, if any, will accrue or the
method by which such date or dates will be determined;
(6) the date or dates on which interest, if any, will be payable and the
record date or dates therefor;
(7) the place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable or at which Debt
Securities may be surrendered for registration of transfer or exchange;
(8) the period or periods within which, the price or prices at which, the
currency or currencies if other than in United States dollars (including
currency unit or units) in which, and the other terms and conditions upon
which, such Debt Securities may be redeemed, in whole or in part, at the
option of the Company;
(9) the obligation, if any, of the Company to redeem or purchase such
Debt Securities pursuant to any sinking fund or analogous provisions or upon
the happening of a specified event or at the option of a holder thereof and
the period or periods within which, the price or prices at which, the
currency or currencies if other than in United States dollars (including
currency unit or units) in which, and the other terms and conditions upon
which, such Debt Securities shall be redeemed or purchased, in whole or in
part, pursuant to such obligation;
(10) the denominations in which such Debt Securities are authorized to
be issued;
(11) the currency or currency unit in which such Debt Securities may be
denominated and/or the currency or currencies (including currency unit or
units) in which principal of, premium, if any, and interest, if any, on such
Debt Securities will be payable and whether the Company or the holders of any
such Debt Securities may elect to receive payments in respect of such Debt
Securities in a currency or currency unit other than that in which such Debt
Securities are stated to be payable;
(12) if the amount of principal of, or any premium or interest on, such
Debt Securities may be determined with reference to an index or pursuant to a
formula or other method, the manner in which such amounts will be determined;
(13) if other than the principal amount thereof, the portion of the
principal amount of such Debt Securities which will be payable upon
declaration of the acceleration of the maturity thereof or the method by
which such portion shall be determined;
(14) provisions, if any, granting special rights to the holders of such
Debt Securities upon the occurrence of such events as may be specified;
(15) any addition to, or modification or deletion of, any Event of
Default or any covenant of the Company specified in the Indenture with
respect to such Debt Securities;
(16) the circumstances, if any, under which the Company will pay
additional amounts on such Debt Securities held by non-U.S. persons in
respect of taxes, assessments or similar charges;
(17) whether such Debt Securities will be issued in registered or bearer
form or both;
(18) the date as of which any bearer Securities of the series and any
temporary global security representing outstanding securities shall be dated,
if other than the original issuance date of the series of Debt Securities;
(19) the forms of the Securities and interest coupons, if any, of the
series;
21
<PAGE>
(20) if other than the Trustee, the identity of the Registrar and any
Paying Agent;
(21) the application, if any, of such means of defeasance or covenant
defeasance as may be specified for such Debt Securities;
(22) whether such Debt Securities are to be issued in whole or in part in
the form of one or more temporary or permanent global securities and, if so,
the identity of the depositary or its nominee, if any, for such global
security or securities and the circumstances under which beneficial owners of
interests in the global security may exchange such interests for certificated
Debt Securities to be registered in the names of or to be held by such
beneficial owners or their nominees;
(23) if the debt Securities of the series may be issued or delivered, or
any installation of principal or interest payable, only upon receipt of
certain certificates or other documents or satisfaction of other conditions
in addition to those specified in the Indenture, the form of such
certificates, documents or conditions;
(24) if other than as provided in the Indenture, the person to whom any
interest on any registered security of the series shall be payable and the
manner in which, or the person to whom, any interest on any bearer Securities
of the series shall be payable;
(25) any definition for Debt Securities of that series which are not to
be as set forth in the Indenture, including, without limitation, the
definition of "Unrestricted Subsidiary" to be used for such series;
(26) in the case of the Subordinated Indenture, the relative degree to
which Debt Securities of the series offered shall be senior to or be
subordinated to other series of such Debt Securities, and to other
indebtedness of the Company, in right of payment, whether such other series
of Debt Securities and other indebtedness are outstanding or not;
(27) whether such Debt Securities are guaranteed and, if so, the identity
of the Guarantors and the terms of such Guarantees (including whether and the
extent to which the Guarantees are subordinated to the other indebtedness of
the Guarantors);
(28) the terms, if any, upon which the Company may be able to redeem such
Debt Securities prior to their maturity including the dates on which such
redemptions may be made and the price at which such redemptions may be made;
(29) the terms, if any, upon which such Debt Securities may be converted
or exchanged into or for Common Stock, Preferred Stock or other securities or
property of the Company;
(30) any restrictions on the registration, transfer or exchange of such
Debt Securities; and
(31) any other terms not inconsistent with the terms of the Indentures
pertaining to such Debt Securities or which may be required or advisable
under the United States laws or regulations or advisable (as determined by
the Company) in connection with marketing of securities of the series.
The terms of each specific series of Debt Securities being offered in the
Prospectus Supplements shall be established (i) by the resolution of the Board
of Directors, (ii) by action taken pursuant to a resolution of the Board of
Directors and set forth, or determined in a manner provided in, an Officer's
Certificate (as defined in the applicable Prospectus Supplement) or (iii) in one
or more supplemental indentures.
Unless otherwise provided in the applicable Prospectus Supplement, the Debt
Securities will not be listed on any securities exchange.
The number of shares of Common Stock or Preferred Stock that will be
issuable upon the conversion or exchange of any Debt Securities issued with
conversion or exchange provisions will be adjusted to prevent dilution resulting
from stock splits, stock dividends or similar or other transactions, and the
22
<PAGE>
nature and amount of the securities, assets or other property to be received
upon the conversion or exchange of such Debt Securities will be changed as
necessary in the event of any consolidation, merger, combination or similar
transaction. The specific provisions will be set forth in the applicable
Prospectus Supplement.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be issued in denominations of U.S. $1,000 or
any integral multiples of U.S. $1,000, and Debt Securities in bearer form will
be issued in denominations of U.S. $5,000 or any integral multiples of U.S.
$5,000. Where Debt Securities of any series are issued in bearer form, the
special restrictions and considerations, including special offering restrictions
and material U.S. federal income tax considerations, applicable to any such Debt
Securities and to payments in respect of and transfers and exchanges of such
Debt Securities will be described in the applicable Prospectus Supplement. Debt
Securities in bearer form will be transferable by delivery.
Debt Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time of
issuance is below market rates. Material U.S. federal income tax consequences
and special considerations applicable to any such Debt Securities will be
described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, material U.S. federal income tax considerations and other information
with respect to such issue of Debt Securities and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest, if any, on any series of Debt Securities, material
U.S. federal income tax, accounting and other considerations applicable thereto
will be described in the applicable Prospectus Supplement.
The general provisions of the Indentures will not afford holders of the
Debt Securities protection in the event of a highly leveraged transaction,
restructuring, change in control, merger or similar transaction involving the
Company that may adversely affect holders of the Debt Securities.
PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
Unless otherwise provided in the applicable Prospectus Supplement, payments
in respect of the Debt Securities will be made in the designated currency at
such office or agency of the Company maintained for that purpose as the Company
may designate from time to time, except that, at the option of the Company,
interest payments, if any, on Debt Securities in registered form may be made (i)
by checks mailed to the holders of Debt Securities entitled thereto at their
registered addresses or (ii) by wire transfer to an account maintained by the
holders of the Debt Securities entitled thereto as specified in the register for
the applicable Debt Securities (the "Register"). Unless otherwise provided in
the applicable Prospectus Supplement, each payment in respect of the Debt
Securities shall be considered to have been made on the date such payment is due
if there shall have been sent to the Trustee or paying agent by wire transfer
(received by no later than the business day following such due date), or the
Trustee or paying agent otherwise holds, on such due date sufficient funds to
make such payment. Unless otherwise indicated in an applicable Prospectus
Supplement, scheduled payments of any installment of interest on Debt Securities
in registered form will be made to the person in whose name such Debt Security
is registered at the close of business on the regular record date for such
interest.
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the Prospectus Supplement, subject to
any applicable laws and regulations, at such paying agencies outside the United
States as the Company may appoint from time to time. The paying agents outside
the United States, if any, initially appointed by the Company for a series of
Debt Securities will be named in the Prospectus Supplement. Unless otherwise
provided in the applicable Prospectus Supplement, the Company may at any time
designate additional paying agents or rescind the designation of any paying
agents, except that, if Debt Securities of a series are issuable in registered
form, the Company will be
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<PAGE>
required to maintain at least one paying agent in each place of payment for such
series and if Debt Securities of a series are issuable in bearer form, the
Company will be required to maintain at least one paying agent in a place of
payment outside the United States where Debt Securities of such series and any
coupons appertaining thereto may be presented and surrendered for payment.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities in registered form will be transferable or exchangeable at the agency
of the Company maintained for such purpose as designated by the Company from
time to time. Debt Securities may be transferred or exchanged without service
charge, although the Company may require a holder to pay any tax or other
governmental charge imposed in connection therewith.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Registered Global
Security"). Each Registered Global Security will be registered in the name of a
depositary (the "Depositary") or a nominee for the Depositary identified in the
applicable Prospectus Supplement, will be deposited with such Depositary or
nominee or a custodian therefor and will bear a legend regarding the
restrictions on exchanges and registration of transfer thereof and any such
other matters as may be provided for pursuant to the applicable Indenture. In
such a case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities of the series to be represented
by such Registered Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive certificated
form, a Registered Global Security may not be transferred or exchanged except as
a whole by the Depositary for such Registered Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor Depositary for such series or a nominee of such successor Depositary,
or except in the circumstances described in the applicable Prospectus
Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the applicable Prospectus Supplement.
Upon the issuance of any Registered Global Security, and the deposit of
such Registered Global Security with or on behalf of the Depositary for such
Registered Global Security, the Depositary will credit on its book-entry
registration and transfer system the respective principal amounts of the Debt
Securities represented by such Registered Global Security to the accounts of
institutions ("Participants") that have accounts with the Depositary. The
accounts to be credited will be designated by the underwriters or agents
engaging in the distribution of such Debt Securities or by the Company, if such
Debt Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Registered Global Security will be limited to
Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in a Registered Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depositary for such Registered Global Security or by its nominee.
Ownership of beneficial interests in such Registered Global Security by persons
who hold through Participants will be shown on, and the transfer of such
beneficial interests within such Participants will be effected only through,
records maintained by such Participants.
So long as the Depositary for a Registered Global Security, or its nominee,
is the owner of such Registered Global Security, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Debt Security represented by such Registered Global Security for all purposes
under each Indenture. Accordingly, each person owning a beneficial interest in
such Registered Global Security must rely on the procedures of the Depositary
and, if such person is not a Participant, on the procedures of the Participant
through which such person owns its interest, to exercise any rights of a holder
under such Indenture. The Company understands that under existing industry
practices, if it requests any action of holders or if an owner of a beneficial
interest in a Registered Global Security desires to give or take any instruction
or action which a holder is entitled to give or take under the Indenture, the
Depositary would authorize the Participants holding the relevant beneficial
interests to
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give or take such instruction or action, and such Participants would authorize
beneficial owners owning through such Participants to give or take such
instruction or action or would otherwise act upon the instructions of beneficial
owners holding through them.
Unless otherwise provided in the Prospectus Supplement, payments with
respect to principal, premium, if any, and interest, if any, on the Debt
Securities represented by a Registered Global Security registered in the name of
the Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owner of such Registered Global Security. The
Company expects that the Depositary for any Debt Securities represented by a
Registered Global Security, upon receipt of any payment of principal or interest
in respect of such Registered Global Security, will credit immediately
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the Registered Global Security as shown on
the records of the Depositary. The Company also expects that payments by
Participants to owners of beneficial interests in such Registered Global
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities in
bearer form held for the accounts of customers or registered in "street name,"
and will be the responsibility of such Participants. None of the Company, the
respective Trustees or any agent of the Company or the respective Trustees shall
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial interests in any Registered Global
Security, or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
Unless otherwise provided in the applicable Prospectus Supplement, (i) if
the Depositary for any Debt Securities represented by a Registered Global
Security is at any time unwilling or unable to continue as depositary of such
Registered Global Security and a successor depositary is not appointed by the
Company within 90 days or (ii) there shall have occured an Event of Default or
an event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default with respect to the Debt Securities represented
by such Registered Global Security and such Event of Default continues for a
period of 90 days, the Company will issue Debt Securities in certificated form
in exchange for such Registered Global Security. In addition, unless otherwise
provided in the applicable Prospectus Supplement, the Company in its sole
discretion may at any time determine not to have any of the Debt Securities of a
series represented by one or more Registered Global Securities and, in such
event, will issue Debt Securities of such series in certificated form in
exchange for all of the Registered Global Securities representing such series of
Debt Securities. The Debt Securities of a series may also be issued in whole or
in part in the form of one or more bearer global securities (a "Bearer Global
Security") that will be deposited with a depositary, or with a nominee for such
depositary, identified in the applicable Prospectus Supplement. Any such Bearer
Global Securities may be issued in temporary or permanent form. The specific
terms and procedures, including the specific terms of the depositary
arrangement, with respect to any portion of a series of Debt Securities to be
represented by one or more Bearer Global Securities will be described in the
applicable Prospectus Supplement.
CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants
in respect of any series of Debt Securities.
CONSOLIDATION, MERGER, SALE OF ASSETS
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the company shall not, in a single transaction or a
series of related transactions, consolidate with or merge with or into any other
person or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any person or group of
affiliated persons, or permit any of its Subsidiaries to enter into any such
transaction or transactions if such transaction or transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
disposition of all or substantially all of the properties and assets of the
Company and its Subsidiaries on a consolidated basis to any other person or
group of affiliated persons, unless at the time and after giving effect thereto:
(i) either (1) the Company shall be the continuing corporation or (2) the person
(if other than the Company) formed by such consolidation or into which the
Company is merged or the person which acquires by sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company and its Subsidiaries on a
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consolidated basis (the "Surviving Entity") shall be a corporation duly
organized and validly existing under the laws of the United States of America,
any state thereof or the District of Columbia and such person assumes, by a
supplemental indenture in a form reasonably satisfactory to the Trustee, all the
obligations of the Company under the applicable Debt Securities and the
Indenture, and the Indenture shall remain in full force and effect; (ii)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction on a pro forma basis, the
consolidated net worth (as defined in the applicable Indenture) of the Company
(or the Surviving Entity if the Company is not the continuing obligor under the
Indenture) is equal to or greater than the consolidated net worth of the Company
immediately prior to such transaction; (iv) immediately before and immediately
after giving effect to such transaction on a pro forma basis (on the assumption
that the transaction occurred on the first day of the four-quarter period
immediately prior to the consummation of such transaction with the appropriate
adjustments with respect to the transaction being included in such pro forma
calculation), the Company (or the Surviving Entity if the Company is not the
continuing obligor under the Indenture) could incur $1.00 of additional
indebtedness under any applicable provisions of the Indenture limiting
incurrence of indebtedness; (v) each Guarantor, if any, unless it is the other
party to the transactions described above, shall have by supplemental indenture
confirmed that its guarantee shall apply to such person's obligations under the
Indenture and the Debt Securities; (vi) if any of the property or assets of the
Company or any of its Subsidiaries would thereupon become subject to any lien,
any provisions of the Indenture limiting liens are complied with; and (vii) the
Company or the Surviving Entity shall have delivered, or caused to be delivered,
to the Trustee, in form and substance reasonably satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, lease or other transaction
and the supplemental indenture in respect thereto comply with the provisions of
the Indenture and that all conditions precedent provided for in the Indenture
relating to such transaction have been complied with.
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that any Guarantor will not, and the Company will not
permit any such Guarantor to, in a single transaction or series of related
transactions merge or consolidate with or into any other corporation (other than
the Company or any other Guarantor) or other entity, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets on a consolidated basis to any entity (other than the
Company or any other Guarantor) unless at the time and after giving effect
thereto: (i) either (1) such Guarantor shall be the continuing corporation or
(2) the entity (if other than such Guarantor) formed by such consolidation or
into which such Guarantor is merged or the entity which acquires by sale,
assignment, conveyance, transfer, lease or disposition the properties and assets
of such Guarantor shall be a corporation duly organized and validly existing
under the laws of the United States, any state thereof or the District of
Columbia and shall expressly assume by a supplemental indenture, executed and
delivered to the Trustee, in a form reasonably satisfactory to the Trustee, all
the obligations of such Guarantor under the Debt Securities and the Indenture;
(ii) immediately before and immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; and (iii)
such Guarantor shall have delivered to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an officers' certificate and an opinion
of counsel, each stating that such consolidation, merger, sale, assignment,
conveyance, transfer, lease or disposition and such supplemental indenture
comply with the Indenture, and thereafter all obligations of the predecessor
shall terminate.
EVENTS OF DEFAULT
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that an Event of Default with respect to the Debt
Securities of a particular series will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any Debt
Security of that series when it becomes due and payable, and such default
shall continue for a period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Debt Security of that series at its maturity (upon
acceleration, optional or mandatory redemption, required repurchase or
otherwise);
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(iii) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under the Indenture
(other than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with in clause (i) or (ii) or in clause
(b) of this clause (iii)) and such default or breach shall continue for a
period of 30 days after written notice has been given, by certified mail, (x)
to the Company by the Trustee or (y) to the Company and the Trustee by the
holders of at least 25% in aggregate principal amount of the outstanding Debt
Securities of the series; or (b) there shall be a default in the performance
or breach of the provisions described in "-- Consolidation, Merger, Sale of
Assets;"
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company, any Guarantor or certain
subsidiaries specified in the Indenture (a "Restricted Subsidiary") then has
outstanding indebtedness in excess of an amount specified in the applicable
Prospectus Supplement in the aggregate and, if not already matured at its
final maturity in accordance with its terms, such Indebtedness shall have
been accelerated;
(v) any Guarantee shall for any reason cease to be, or be asserted in
writing by any Guarantor or the Company not to be, in full force and effect,
enforceable in accordance with its terms, except to the extent contemplated
by the Indenture and any such guarantee;
(vi) one or more judgments, orders or decrees for the payment of money in
excess of an amount specified in the applicable Prospectus Supplement, either
individually or in the aggregate (net of amounts covered by insurance, bond,
surety or similar instrument) shall be entered against the Company, any
Guarantor or any Restricted Subsidiary or any of their respective properties
and shall not be discharged and either (a) any creditor shall have commenced
an enforcement proceeding upon such judgment, order or decree or (b) there
shall have been a period of 60 consecutive days during which a stay of
enforcement of such judgment or order, by reason of an appeal or otherwise,
shall not be in effect;
(vii) any holder or holders of at least an amount specified in the
applicable Prospectus Supplement in aggregate principal amount of
indebtedness of the Company, any Guarantor or any Restricted Subsidiary after
a default under such indebtedness shall notify the Trustee of the intended
sale or disposition of any assets of the Company, any Guarantor or any
Restricted Subsidiary that have been pledged to or for the benefit of such
holder or holders to secure such indebtedness or shall commence proceedings,
or take any action (including by way of set-off), to retain in satisfaction
of such indebtedness or to collect on, seize, dispose of or apply in
satisfaction of indebtedness, assets of the Company or any Restricted
Subsidiary (including funds on deposit or held pursuant to lock-box and other
similar arrangements);
(viii) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Guarantor or any Restricted Subsidiary in an involuntary case or
proceeding under any applicable bankruptcy law or (b) a decree or order
adjudging the Company, any Guarantor or any Restricted Subsidiary bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company, any Guarantor or any Restricted Subsidiary
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company, any Guarantor or any Restricted Subsidiary or of
any substantial part of their respective properties, or ordering the winding
up or liquidation of their affairs, and any such decree or order for relief
shall continue to be in effect, or any such other decree or order shall be
unstayed and in effect, for a period of 60 consecutive days; or
(ix) (a) the Company, any Guarantor or any Restricted Subsidiary
commences a voluntary case or proceeding under any applicable bankruptcy law
or any other case or proceeding to be adjudicated bankrupt or insolvent, (b)
the Company, any Guarantor or any Restricted Subsidiary consents to the entry
of a decree or order for relief in respect of the Company, any Guarantor or
such Restricted Subsidiary in an involuntary case or proceeding under any
applicable bankruptcy law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, (c) the Company, any Guarantor or
any Restricted Subsidiary files a petition or answer or consent seeking
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reorganization or relief under any applicable federal or state law, (d) the
Company, any Guarantor or any Restricted Subsidiary (x) consents to the
filing of such petition or the appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company, any Guarantor or such Restricted Subsidiary
or of any substantial part of their respective property, (y) makes an
assignment for the benefit of creditors or (z) admits in writing its
inability to pay its debts generally as they become due or (e) the Company,
any Guarantor or any Restricted Subsidiary takes any corporate action in
furtherance of any such actions in this paragraph (ix).
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that if an Event of Default (other than as specified in
clauses (viii) and (ix) of the prior paragraph) shall occur and be continuing,
the Trustee or the holders of not less than 25% in aggregate principal amount of
the Debt Securities of the applicable series outstanding may, and the Trustee at
the request of such holders shall, declare all unpaid principal of, premium, if
any, and accrued interest on, all the Debt Securities of the applicable series
to be due and payable immediately by a notice in writing to the Company (and to
the Trustee if given by the holders of the Debt Securities of the applicable
series); provided that so long as the Bank Credit Agreement is in effect, such
declaration shall not become effective until the earlier of (a) five business
days after receipt of such notice of acceleration from the holders or the
Trustee by the agent under the Bank Credit Agreement or (b) acceleration of the
indebtedness under the Bank Credit Agreement. Thereupon the Trustee may, at its
discretion, proceed to protect and enforce the rights of the holders of the
applicable Debt Securities by appropriate judicial proceeding. If an Event of
Default specified in clause (viii) or (ix) of the prior paragraph occurs and is
continuing, then all the Debt Securities of the applicable series shall ipso
facto become and be immediately due and payable, in an amount equal to the
principal amount of the Debt Securities of the applicable series, together with
accrued and unpaid interest, if any, to the date the Debt Securities become due
and payable, without any declaration or other act on the part of the Trustee or
any holder. The Trustee or, if notice of acceleration is given by the holders of
the Debt Securities of the applicable series, the holders of the Debt Securities
of the applicable series shall give notice to the agent under the Bank Credit
Agreement of such acceleration.
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide after a declaration of acceleration, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the Debt
Securities of the applicable series, by written notice to the Company and the
Trustee, may rescind and annul such declaration if (a) the Company has paid or
deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced
by the Trustee under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, (ii) all
overdue interest on all Debt Securities of the applicable series, (iii) the
principal of and premium, if any, on any Debt Securities of the applicable
series which have become due otherwise than by such declaration of acceleration
and interest thereon at a rate borne by the Debt Securities and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate borne by the Debt Securities; and (b) all Events of Default, other
than the non-payment of principal of the Debt Securities which have become due
solely by such declaration of acceleration, have been cured or waived.
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the holders of not less than a majority in aggregate
principal amount of the Debt Securities of the applicable series outstanding may
on behalf of the holders of all the Debt Securities of the applicable series
waive any past default under the Indenture and its consequences, except a
default in the payment of the principal of, premium, if any, or interest on any
Debt Security, or in respect of a covenant or provision which under the
Indenture cannot be modified or amended without the consent of the holder of
each Debt Security outstanding.
Unless specified otherwise in the applicable Prospectus Supplement, each
Indenture will provide that the Company is also required to notify the Trustee
within five business days of the occurrence of any Default. Unless otherwise
provided in the applicable Prospectus Supplement, the Company is required to
deliver to the Trustee, on or before a date not more than 60 days after the end
of each fiscal
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quarter and not more than 120 days after the end of each fiscal year, a written
statement as to compliance with the Indenture, including whether or not any
default has occurred. Unless otherwise provided in the applicable Prospectus
Supplement, the Trustee is under no obligation to exercise any of the rights or
powers vested in it by the Indenture at the request or direction of any of the
holders of the Debt Securities unless such holders offer to the Trustee security
or indemnity satisfactory to the Trustee against the costs, expenses and
liabilities which might be incurred thereby.
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, to obtain payment
of claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions, provided that if it acquires any conflicting
interest it must eliminate such conflict upon the occurrence of an Event of
Default or else resign.
Reference is made to the Prospectus Supplement relating to each series of
Debt Securities that are Original Issue Discount Securities for the particular
provisions relating to acceleration of the maturity of a portion of the
principal amount of such Original Issue Discount Securities upon the occurrence
of an Event of Default and the continuation thereof.
MODIFICATIONS AND AMENDMENTS
Unless otherwise specified in the applicable Prospectus Supplement,
modifications and amendments of the Indenture may be made by the Company, any
Guarantor and the Trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the outstanding Debt Securities of all
series affected by the modification or amendment; provided, however, that no
such modification or amendment may, without the consent of the holder of each
outstanding Debt Security of all series affected by the modification or
amendment affected thereby: (i) change the stated maturity of the principal of,
or any installment of interest on, any Debt Security or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the coin or currency in which the principal of any
Debt Security or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment after the stated
maturity thereof (or in the case of redemption, on or after the redemption
date); (ii) reduce the percentage in principal amount of outstanding Debt
Securities of a series, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required for any
waiver or compliance with certain provisions of the Indenture or certain
defaults or with respect to any Guarantee; (iii) modify any of the provisions
relating to supplemental indentures requiring the consent of holders or relating
to the waiver of past defaults or relating to the waiver of certain covenants,
except to increase the percentage in principal amount of outstanding Debt
Securities required for such actions or to provide that certain other provisions
of the Indenture cannot be modified or waived without the consent of the holder
of each Debt Security affected thereby; (iv) except as otherwise permitted under
"-- Consolidation, Merger, Sale of Assets," consent to the assignment or
transfer by the Company or any Guarantor of any of its rights and obligations
under the Indenture; or (v) amend or modify any provisions of the Indenture
relating to the subordination of the Debt Security or any guarantee in any
manner adverse to the holders of the Debt Securities or any guarantee.
Unless otherwise provided in the applicable Prospectus Supplement,
modifications and amendments of each Indenture may be made by the Company, any
Guarantor and the Trustee without the consent of the Holders to: (i) cause each
Indenture to be qualified under the Trust Indenture Act ("TIA") or to add
provisions expressly required under the TIA: (ii) evidence the succession of
another person to the Company, any Guarantor or other obligor upon the Debt
Securities and the assumption by any such successor of the covenants of the
Company, any Guarantor or other obligor upon the Debt Securities under the
Indenture and in the Debt Securities of any series; (iii) add to the covenants
of the Company, any Guarantor or other obligor upon the Debt Securities for the
benefit of the holders (and if such covenants are to be for the benefit of less
than all series of Debt Securities, stating that such covenants are expressly
being included solely for the benefit of such series) or an additional Event of
Default to all or any series of Debt Securities, or surrender any right or power
conferred upon the Company; (iv) to secure the Debt Securities of any series;
(v) to add to or change any provisions to such extent as
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necessary to facilitate the issuance or administration of Debt Securities in
bearer form or facilitate the issuance or administration of Debt Securities in
global form; (vi) to change or eliminate any provision affecting only Debt
Securities not yet issued; (vii) to establish the form or terms of Debt
Securities and Guarantees of any series; (viii) to evidence and provide for
successor Trustees or to add or change any provisions of such Indenture to such
extent as necessary to permit or facilitate the appointment of a separate
Trustee or Trustees for specific series of Debt Securities; (ix) to permit
payment in respect of Debt Securities in bearer form in the United States to the
extent allowed by law; (x) to make provision with respect to any conversion or
exchange rights of holders not adverse to the holders of any Debt Securities of
any series then outstanding with such conversion or exchange rights which
provision directly affects any such series, including providing for the
conversion or exchange of Debt Securities into Common Stock or Preferred Stock;
(xi) cure any ambiguity, correct or supplement any provision which may be
defective or inconsistent with any other provision, or make any other provisions
with respect to matters or questions arising under the Indenture which shall not
be inconsistent with the provisions of the Indenture; provided, however, that no
such modification or amendment may adversely affect the interest of holders of
Debt Securities of any series then outstanding in any material respect; or (xii)
if a Debt Security of any series is guaranteed, to add a Guarantor pursuant to
the requirements of the Indenture.
The holders of a majority in aggregate principal amount of the Debt
Securities of a series may waive compliance with certain restrictive covenants
and provisions of the Indenture with respect to that series.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement, the
payment of principal of, premium on, if any, and interest on any Subordinated
Debt Securities will be subordinated in right of payment, as set forth in the
applicable Subordinated Indenture, to the prior payment in full of all Senior
Debt (as defined in the applicable Prospectus Supplement), whether outstanding
on the date of the Subordinated Indenture or thereafter incurred.
Unless otherwise provided in the applicable Prospectus Supplement, during
the continuance of any default in the payment of any Designated Senior Debt (as
such term is defined in the applicable Prospectus Supplement) no payment (other
than payments previously made pursuant to the provisions described under "--
Defeasance or Covenant Defeasance of Indenture") or distribution of any assets
of the Company of any kind or character (excluding certain permitted equity
interests or subordinated securities) shall be made on account of the principal
of, premium, if any, or interest on, the Subordinated Debt Securites or on
account of the purchase, redemption, defeasance or other acquisition of, the
Subordinated Debt Securities unless and until such default has been cured,
waived or has ceased to exist or such Designated Senior Debt (as such term is
defined in the applicable Prospectus Supplement) shall have been discharged or
paid in full in cash or cash equivalents or in any other form as acceptable to
the holders of Senior Debt after which the Company shall resume making any and
all required payments in respect of the Debt Securities, including any missed
payments.
Unless otherwise provided in the applicable Prospectus Supplement, during
the continuance of any non-payment default with respect to any Designated Senior
Debt pursuant to which the maturity thereof may be accelerated (a "Non-payment
Default") and after the receipt by the Trustee and the Company from a
representative of the holder of any Designated Senior Debt of a written notice
of such default, no payment (other than payments previously made pursuant to the
provisions described under "-- Defeasance or Covenant Defeasance of Indenture")
or distribution of any assets of the Company of any kind or character (excluding
certain permitted equity or subordinated securities) may be made by the Company
on account of the principal of, premium, if any, or interest on, the
Subordinated Debt Securities or on account of the purchase, redemption,
defeasance or other acquisition of, the Subordinated Debt Securities for the
period specified below (the "Payment Blockage Period").
Unless otherwise provided in the applicable Prospectus Supplement, the
Payment Blockage Period shall commence upon the receipt of notice of the
Non-payment Default by the Trustee from a representative of the holders of any
Designated Senior Debt and shall end on the earliest of (i) the first date on
which more than 179 days shall have elapsed since the receipt of such written
notice (provided such
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Designated Senior Debt as to which notice was given shall not theretofore have
been accelerated), (ii) the date on which such Non-payment Default (and all
Non-payment Defaults as to which notice is given after such Payment Blockage
Period is initiated) are cured, waived or ceased to exist or on which such
Designated Senior Debt is discharged or paid in full in cash or cash equivalents
or in any other form as acceptable to the holders of Designated Senior Debt or
(iii) the date on which such Payment Blockage Period (and all Non-payment
Defaults as to which notice is given after such Payment Blockage Period is
intiated) shall have been terminated by written notice to the Company or the
Trustee from the representative of holders of Designated Senior Debt or the
holders of at least a majority of the Designated Senior Debt initiating such
Payment Blockage Period, after which, in the case of clauses (i), (ii) and
(iii), the Company shall promptly resume making any and all required payments in
respect of the Subordinated Debt Securities, including any missed payments. In
no event will a Payment Blockage Period extend beyond 179 days from the date of
the receipt by the Company or the Trustee of the notice initiating such Payment
Blockage Period (such 179-day period referred to as the "Initial Period"). Any
number of notices of Non-payment Defaults may be given during the Initial
Period; provided that during any 365-day consecutive period only one Payment
Blockage Period during which payment of principal of, or interest on, the
Subordinated Debt Securities may not be made may commence and the duration of
the Payment Blockage Period may not exceed 179 days. No Non-payment Default with
respect to Designated Senior Debt which existed or was continuing on the date of
the commencement of any Payment Blockage Period will be, or can be, made the
basis for the commencement of a second Payment Blockage Period, whether or not
within a period of 365 consecutive days, unless such default has been cured or
waived for a period of not less than 90 consecutive days.
Unless otherwise provided in the applicable Prospectus Supplement, if the
Company fails to make any payment on Subordinated Debt Securities when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Subordinated
Debt Securities to accelerate the maturity thereof. See "-- Events of Default."
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that in the event of any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or its
assets, or any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or any assignment for the benefit of creditors or any other
marshalling of assets or liabilities of the Company, all Senior Debt must be
paid in full in cash or cash equivalents or in any other manner acceptable to
the holders of Senior Debt, or provision made for such payment, before any
payment or distribution (excluding distributions of certain permitted equity or
subordinated securities) is made on account of the principal of, premium, if
any, or interest on the Subordinated Debt Securities.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Debt may recover more,
ratably, than the holders of the Subordinated Debt Securities, and funds which
would be otherwise payable to the holders of the Subordinated Debt Securities
will be paid to the holders of the Senior Debt to the extent necessary to pay
the Senior Debt in full in cash or cash equivalents or in any other manner
acceptable to the holders of Senior Debt, and the Company may be unable to meet
its obligations fully with respect to the Subordinated Debt Securities.
To the extent provided in the applicable Prospectus Supplement, any
Guarantee of Subordinated Debt Securities by a Guarantor will be an unsecured
subordinated obligation of such Guarantor, ranking pari passu with, or senior in
right of payment to, all other existing and future indebtedness of such
Guarantor that is expressly subordinated to Guarantor Senior Debt (as defined in
the applicable Indenture). To the extent provided in the applicable Prospectus
Supplement, indebtedness evidenced by the Guarantees will be subordinated to
Guarantor Senior Debt to the same extent as the Subordinated Debt Securities are
subordinated to Senior Debt and during any period when payment on the
Subordinated Debt Securities is blocked by Designated Senior Debt, payment on
the Guarantees will be similarly blocked.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the Company may, at its option, at any time, elect
to have the obligations of the Company, each of the Guarantors (if any) and any
other obligor upon the Debt Securities discharged with respect to the
outstanding Debt Securities of an applicable series ("defeasance"). Such
defeasance means that the Company, each of the Guarantors (if any) and any other
obligor under the Indenture shall be deemed to have paid and discharged the
entire indebtedness represented by the outstanding Debt Securities of such
series, except for (i) the rights of holders of outstanding Debt Securities to
receive payments in respect of the principal of, premium, if any, and interest
on such Debt Securities when such payments are due, (ii) the Company's
obligations with respect to the Debt Securities concerning issuing temporary
Debt Securities, registration of Debt Securities, mutilated, destroyed, lost or
stolen Debt Securities, and the maintenance of an office or agency for payment
and money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, (iv) the defeasance provisions of the
Indenture and (v) if the Debt Security is convertible, the right of the holder
to convert the Debt Security pursuant to the terms of the Debt Security. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and any Guarantor released with respect to certain
covenants that are described in the Indenture ("covenant defeasance") and any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the Debt Securities of the applicable series.
In the event covenant defeasance occurs, certain events (not including
non-payment, enforceability of any Guarantee, bankruptcy and insolvency events)
described under "-- Events of Default" will no longer constitute an Event of
Default with respect to the Notes.
Unless otherwise provided in the applicable Prospectus Supplement, in order
to exercise either defeasance or covenant defeasance, (i) the Company must
irrevocably deposit with the Trustee, in trust, for the benefit of the holders
of the Debt Securities, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants or a nationally recognized investment banking
firm expressed in a written certification thereof delivered to the Trustee, to
pay and discharge the principal of, premium, if any, and interest on the
applicable Debt Securities on the stated maturity of such principal or
installment of principal or interest (or on the "Defeasance Redemption Date" as
defined in the applicable Prospectus Supplement), if when exercising either
defeasance or covenant defeasance, the Company has delivered to the Trustee an
irrevocable notice to redeem all of the outstanding Debt Securities of the
applicable series on the Defeasance Redemption Date; (ii) in the case of
defeasance, the Company shall have delivered to the Trustee an opinion of
independent counsel in the United States stating that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of issuance of the applicable Debt Securities,
there has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion of independent counsel in the
United States shall confirm that, the holders of the outstanding Debt Securities
will not recognize income, gain or loss for federal income tax purposes as a
result of such defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred; (iii) in the case of covenant defeasance, the
Company shall have delivered to the Trustee an opinion of independent counsel in
the United States to the effect that the holders of the applicable Debt
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit or insofar as clause (vii) or (viii) under the first paragraph
under "-- Events of Default" are concerned, at any time during the period ending
on the 91st day after the date of deposit; (v) such defeasance or covenant
defeasance shall not cause the Trustee for the applicable Debt Securities to
have a conflicting interest with respect to any securities of the Company or any
Guarantor; (vi) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, the Indenture or any
other material agreement or instrument to which the Company or any Guarantor is
a party or by which it is bound; (vii) the Company shall have delivered to the
Trustee an opinion of independent
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counsel to the effect that (A) the trust funds will not be subject to any rights
of holders of Senior Debt or Guarantor Senior Debt, including, without
limitation, those arising under the Indenture and (B) after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (viii) the Company shall have delivered to the
Trustee an officers' certificate stating that the deposit was not made by the
Company with the intent of preferring the holders of the Debt Securities or any
guarantee over the other creditors of the Company or any Guarantor with the
intent of defeating, hindering, delaying or defrauding creditors of the Company,
any Guarantor or others; (ix) no event or condition shall exist that would
prevent the Company from making payments of the principal of, premium, if any,
and interest on the Debt Securities on the date of such deposit or at any time
ending on the 91st day after the date of such deposit; and (x) the Company shall
have delivered to the Trustee an officers' certificate and an opinion of
independent counsel, each stating that all conditions precedent provided for
relating to either the defeasance or the covenant defeasance, as the case may
be, have been complied with.
NOTICES
Unless otherwise provided in the applicable Prospectus Supplement, notices
to holders of registered Debt Securities will be given by mail to the addresses
of such holders as they may appear in the Register.
OWNER OF DEBT SECURITIES
Unless otherwise provided in the applicable Prospectus Supplement relating
to the Debt Securities of a particular series, the Company, the Trustees and any
agent of the Company or the Trustees may treat the person in whose name a Debt
Security in registered form is registered, and may treat the bearer of a Debt
Security in bearer form, as the absolute owner thereof (whether or not such Debt
Security may be overdue) for the purpose of receiving payment and for all other
purposes.
GOVERNING LAW
Unless otherwise provided in the applicable Prospectus Supplement, the
Indenture, the Debt Securities and any guarantees will be governed by the laws
of the State of New York.
THE TRUSTEE
The Trustee for each series of Debt Securities will be identified in the
applicable Prospectus Supplement. Each Indenture will contain certain
limitations on the right of a Trustee thereunder, as a creditor of the Company,
to obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise.
The holders of a majority in principal amount of all outstanding Debt
Securities of a series (or if more than one series is affected thereby, of all
series so affected, voting as a single class) will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy or
power available to the Trustee for such series.
In case an Event of Default shall occur (and shall not be cured) under any
Indenture relating to a series of Debt Securities and is known to the Trustee
under such Indenture, such Trustee shall exercise such of the rights and powers
vested in it by such Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his own affairs. Subject to such provisions, no Trustee will be
under any obligation to exercise any of its rights or powers under the
applicable Indenture at the request of any of the Holders of Debt Securities
unless they shall have offered to such Trustee security and indemnity
satisfactory to it.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company currently has two classes of Common Stock, each having a par
value of $.01 per share, and two classes of issued and outstanding Preferred
Stock, also with a par value of $.01 per share. Upon the issuance of all shares
covered by this Prospectus, the Controlling Stockholders, by virtue of their
beneficial ownership of 100% of the shares of the Class B Common Stock, with its
super voting rights as described below, will retain control over the Company's
business and operations.
The following summary of the Company's capital stock does not purport to be
complete and is subject to detailed provisions of, and is qualified in its
entirety by reference to, the Company's Amended and Restated Articles of
Incorporation (the "Amended Certificate"). The Amended Certificate is an exhibit
to the Registration Statement of which this Prospectus is a part and is
available as set forth under "Available Information."
The Amended Certificate authorizes the Company to issue up to 100,000,000
shares of Class A Common Stock, par value $.01 per share, 35,000,000 shares of
Class B Common Stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, par value $.01 per share. As of August 11, 1997, 34,745,522
shares of Common Stock, consisting of 7,168,941 shares of Class A Common Stock
and 27,576,581 shares of Class B Common Stock, were issued and outstanding,
1,091,825 shares of Series B Preferred Stock were issued and outstanding and
2,062,000 shares of Series C Preferred Stock will be issued and outstanding.
COMMON STOCK
The rights of the holders of the Class A Common Stock and Class B Common
Stock are substantially identical in all respects, except for voting rights and
the right of Class B Common Stock to convert into Class A Common Stock. The
holders of the Class A Common Stock are entitled to one vote per share. The
holders of the Class B Common Stock are entitled to ten votes per share except
as described below. The holders of all classes of Common Stock entitled to vote
will vote together as a single class on all matters presented to the
stockholders for their vote or approval except as otherwise required by the
general corporation laws of the State of Maryland ("Maryland General Corporation
Law"). Except for transfers to a "Permitted Transferee" (generally, related
parties of a Controlling Stockholder), any transfer of shares of Class B Common
Stock held by any of the Controlling Stockholders will cause such shares to be
automatically converted to Class A Common Stock. In addition, if the total
number of shares of Common Stock held by the Controlling Stockholders falls to
below 10% of the total number of shares of Common Stock outstanding, all of the
outstanding shares of Class B Common Stock automatically will be classified as
Class A Common Stock. In any merger, consolidation or business combination, the
consideration to be received per share by the holders of the Class A Common
Stock must be identical to that received by the holders of the Class B Common
Stock, except that in any such transaction in which shares of a third party's
common stock are distributed in exchange for the Company's Common Stock, such
shares may differ as to voting rights to the extent that such voting rights now
differ among the classes of Common Stock.
The holders of Class A Common Stock and Class B Common Stock will vote as a
single class, with each share of each class entitled to one vote per share, with
respect to any proposed (a) "Going Private" transaction; (b) sale or other
disposition of all or substantially all of the Company's assets; (c) sale or
transfer which would cause a fundamental change in the nature of the Company's
business; or (d) merger or consolidation of the Company in which the holders of
the Company's Common Stock will own less than 50% of the Common Stock following
such transaction. A "Going Private" transaction is defined as any "Rule 13e-3
transaction," as such term is defined in Rule 13e-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") between the
Company and (i) the Controlling Stockholders, (ii) any affiliate of the
Controlling Stockholders, or (iii) any group of which the Controlling
Stockholders are an affiliate or of which the Controlling Stockholders are a
member. An "affiliate" is defined as (i) any individual or entity who or that,
directly or indirectly, controls, is controlled by, or is under the common
control of the Controlling Stockholders; (ii) any corporation or
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organization (other than the Company or a majority-owned subsidiary of the
Company) of which any of the Controlling Stockholders is an officer or partner
or is, directly or indirectly, the beneficial owner of 10% or more of any class
of voting securities or in which any of the Controlling Stockholders has a
substantial beneficial interest; (iii) a voting trust or similar arrangement
pursuant to which the Controlling Stockholders generally control the vote of the
shares of Common Stock held by or subject to any such trust or arrangement; (iv)
any other trust or estate in which any of the Controlling Stockholders has a
substantial beneficial interest or as to which any of the Controlling
Stockholders serves as a trustee or in a similar fiduciary capacity; or (v) any
relative or spouse of the Controlling Stockholders or any relative of such
spouse who has the same residence as any of the Controlling Stockholders.
Under Maryland General Corporation Law, the holders of Common Stock are
entitled to vote as a separate class with respect to any amendment of the
Amended Certificate that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or modify or change the powers, preferences or special
rights of the shares of such class so as to affect such class adversely.
For a discussion of the effects of disproportionate voting rights upon the
holders of the Class A Common Stock, see "Risk Factors -- Voting Rights; Control
by Controlling Stockholders; Potential Anti-Takeover Effect of Disproportionate
Voting Rights."
Stockholders of the Company have no preemptive rights or other rights to
subscribe for additional shares, except that the Class B Common Stock is
convertible into Class A Common Stock by the holders thereof. Except as
described in the prior sentence, no shares of any class of Common Stock have
conversion rights or are subject to redemption. Subject to the rights of any
outstanding preferred stock which may be hereafter classified and issued,
holders of Common Stock are entitled to receive dividends, if any, as may be
declared by the Company's Board of Directors out of funds legally available
therefor and to share, regardless of class, equally on a share-for-share basis
in any assets available for distribution to stockholders on liquidation,
dissolution or winding up of the Company. Under the Bank Credit Agreement, the
Existing Indentures, the terms of the Series C Preferred Stock and certain other
debt of the Company, the Company's ability to declare Common Stock dividends is
restricted.
EXISTING PREFERRED STOCK
Series B Preferred Stock. As partial consideration for the acquisition of
assets from River City, the Company issued 1,150,000 shares of Series A
Preferred Stock to River City which has since been converted into 1,150,000
shares of Series B Preferred Stock. Each share of Series B Preferred Stock has a
liquidation preference of $100 and, after payment of this preference, is
entitled to share in distributions made to holders of shares of (plus all
accrued and unpaid dividends through the determination date) Common Stock. Each
holder of a share of Series B Preferred Stock is entitled to receive the amount
of liquidating distributions received with respect to approximately 3.64 shares
of Common Stock (subject to adjustment) less the amount of the liquidation
preference. The liquidation preference of Series B Preferred Stock is payable in
preference to Common Stock of the Company, but may rank equal to or below other
classes of capital stock of the Company. After a "Trigger Event" (as defined
below), the Series B Preferred Stock ranks senior to all classes of capital
stock of the Company as to liquidation preference, except that the Company may
issue up to $400 million of capital stock ("Senior Securities"), as to which the
Series B Preferred Stock will have the same rank. The Series C Preferred Stock
are Senior Securities. The Prospectus Supplement for any Preferred Securities
sold pursuant to this Prospectus that are to be designated Senior Securities
will so indicate. A Trigger Event means the termination of Barry Baker's
employment with the Company prior to the expiration of the initial five-year
term of his employment agreement (1) by the Company for any reason other than
for Cause (as defined in the employment agreement) or (2) by Barry Baker upon
the occurrence of certain events described in the employment agreement.
The holders of Series B Preferred Stock do not initially receive dividends,
except to the extent that dividends are paid to the holders of Common Stock. A
holder of shares of Series B Preferred Stock is entitled to share in any
dividends paid to holders of Common Stock, with each share of Series B Preferred
Stock allocated the amount of dividends allocated to approximately 3.64 shares
of Common
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Stock (subject to adjustment). In addition, after the occurrence of a Trigger
Event, holders of shares of Series B Preferred Stock are entitled to quarterly
dividends in the amount of $3.75 per share per quarter for the first year, and
in the amount of $5.00 per share per quarter after the first year. Dividends are
payable either in cash or in additional shares of Series B Preferred Stock at
the rate of $100 per share. Dividends on Series B Preferred Stock are payable in
preference to the holders of any other class of capital stock of the Company,
except for Senior Securities, which will rank senior to the Series B Preferred
Stock as to dividends until a Trigger Event, after which Senior Securities will
have the same rank as Series B Preferred Stock as to dividends.
The Company may redeem shares of Series B Preferred Stock for an amount
equal to $100 per share plus any accrued and unpaid dividends at any time
beginning 180 days after a Trigger Event, but holders have the right to retain
their shares in which case the shares will automatically be converted into
shares of Class A Common Stock on the proposed redemption date.
Each share of Series B Preferred Stock is entitled to approximately 3.64
votes (subject to adjustment) on all matters with respect to which Class A
Common Stock has a vote, and the Series B Preferred Stock votes together with
the Class A Common Stock as a single class, except that the Series B Preferred
Stock is entitled to vote as a separate class (and approval of a majority of
such votes is required) on certain matters, including changes in the authorized
amount of Series B Preferred Stock and actions affecting the rights of holders
of Series B Preferred Stock.
Shares of Series B Preferred Stock are convertible at any time into shares
of Class A Common Stock, with each share of Series B Preferred Stock convertible
into approximately 3.64 shares of Class A Common Stock. The conversion rate is
subject to adjustment if the Company undertakes a stock split, combination or
stock dividend or distribution or if the Company issues Common Stock or
securities convertible into Common Stock at a price less than $27.50 per share.
Shares of Series B Preferred Stock issued as payment of dividends are not
convertible into Class A Common Stock and become void at the time of conversion
of a shareholder's other shares of Series B Preferred Stock. All shares of
Series B Preferred Stock remaining outstanding on May 31, 2001 (other than
shares issued as a dividend) automatically convert into Class A Common Stock on
that date.
Series C Preferred Stock. As of August 11, the Company has issued and
outstanding 2,062,000 shares of Series C Preferred Stock, all of which shares
are held by KDSM, Inc., a wholly-owned subsidiary of the Company. Each share of
Series C Preferred Stock has a liquidation preference (the "Liquidation Amount")
of $100 plus an amount equal to any accumulated and unpaid dividends (whether or
not earned or declared) to the date of payment. KDSM, Inc. purchased the Series
C Preferred Stock from the proceeds of $206,200,000 aggregate principal amount
of 115/8% Senior Debentures due 2009 (the "KDSM Senior Debentures"), all of
which are held by Sinclair Capital, a trust all of the common securities of
which are held by KDSM, Inc. The obligations of KDSM, Inc. under the KDSM Senior
Debentures are secured by the Series C Preferred Stock. The Trust purchased the
KDSM Senior Debentures from the proceeds of $200 million aggregate liquidation
value of 115/8% High Yield Trust Offered Preferred Securities (the "Preferred
Securities") plus the proceeds of the issuance to KDSM, Inc. of $6.2 million of
common securities of the Trust. Sinclair has guaranteed the obligations under
the Preferred Securities, on a junior subordinated basis in an amount equal to
the lesser of (a) the full liquidation preference plus accumulated and unpaid
dividends to which the holders of the Preferred Securities are lawfully
entitled, and (b) the amount of the Trust's legally available assets remaining
after the satisfaction of all claims of other parties which, as a matter of law,
are prior to those of the holders of the Preferred Securities. Sinclair has also
agreed to fully and unconditionally guarantee the payment of the KDSM Senior
Debentures on a junior subordinated basis if and effective as of the time the
KDSM Senior Debentures are distributed to holders of the Preferred Securities in
certain circumstances.
The Series C Preferred Stock has a maturity date of March 15, 2009, and
will be mandatorily redeemable on its maturity date. With respect to dividend
rights and rights upon liquidation, winding-up and dissolution of Sinclair, the
Series C Preferred Stock ranks senior to the Sinclair's common stock and
Sinclair's Series B Preferred Stock except that upon a Trigger Event the Series
C Preferred Stock will rank pari passu with the Series B Preferred Stock in
respect of dividend rights and rights upon liquidation, dissolution and
winding-up of Sinclair.
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Dividends on the Series C Preferred Stock are payable quarterly at a rate
per annum of 12 5/8% of the stated Liquidation Amount of $100 per share and
cumulate from March 12, 1997 (the "Issue Date"). Dividends are payable quarterly
in arrears on March 15, June 15, September 15 and December 15 of each year (each
a "Dividend Payment Date") to the holders of record on the March 1, June 1,
September 1 and December 1 next preceding each Dividend Payment Date. Sinclair
has the right, at any time and from time to time, to defer dividend payments for
up to three consecutive quarters (each a "Dividend Extension Period"); provided
that Sinclair will be required to pay all dividends due and owing on the Series
C Preferred Stock at least once every four quarters and must pay all dividends
due and owing on the Series C Preferred Stock on March 25, 2009. The remedy for
the holders of the Series C Preferred Stock upon a failure by Sinclair to pay
all dividends due and owing thereon at least once every four quarters (or for
any other breaches under the Series C Preferred Stock) is the right to elect two
directors to Sinclair's board of directors.
Holders of the Series C Preferred Stock do not have any voting rights in
ordinary circumstances. However, the vote of the holders of a majority in
aggregate Liquidation Amount of outstanding Series C Preferred Stock (100% in
certain circumstances) is required to approve any amendment to the Amended
Certificate or the Articles Supplementary to the Amended Certificate that govern
the Series C Preferred Stock (the "Series C Articles Supplementary") that would
adversely affect the powers, preferences or special rights of the holders of the
Series C Preferred Stock or cause the liquidation, dissolution or winding-up of
Sinclair. In addition, the approval of the holders of a majority in aggregate
Liquidation Amount of outstanding Series C Preferred Stock is required to
approve the issuance of any preferred stock by Sinclair which is senior to the
Series C Preferred Stock in right of payment. In addition, upon a Voting Rights
Triggering Event (which is defined to include a failure to pay dividends as
described above, a failure to make a Change of Control Offer as defined below, a
failure to redeem the Series C Preferred Stock upon maturity and a breach of the
covenants described below), the holders of a majority in aggregate Liquidation
Amount of the outstanding Series C Preferred Stock have the right to elect two
directors to the board of directors of Sinclair. KDSM, Inc., as the holder of
the Series C Preferred Stock, has agreed not to take or consent to any actions
or waive any rights under the Series C Preferred Stock or elect any directors
without the approval of the holders of the majority in principal amount of the
KDSM Senior Debentures. The Trust, as the holder of the KDSM Senior Debentures,
has in turn agreed that it will not provide such approval without the approval
of the holders of a majority in aggregate Liquidation Value of the outstanding
Preferred Securities (100% in certain circumstances).
The Series C Articles Supplementary contain certain covenants, including,
but not limited to, covenants with respect to the following matters: (i)
limitation on indebtedness; (ii) limitation on restricted payments; (iii)
limitation on transactions with affiliates; (iv) limitation on sale of assets;
(v) limitation on unrestricted subsidiaries; (vi) restrictions on mergers,
consolidations and the transfer of all or substantially all of the assets of the
Company to another person; (vii) provision of financial statements; and (viii)
limitation on the issuance of senior preferred stock. Violation of any of these
covenants (after a grace period in certain circumstances) will be a Voting
Rights Triggering Event.
Upon a Change of Control of Sinclair (as defined), Sinclair is required to
make an offer (a "Change of Control Offer") to redeem all or a portion of the
shares of Series C Preferred Stock at 101% of such shares' aggregate Liquidation
Amount, plus accrued and unpaid dividends, if any, to the date of redemption
unless and for so long as such redemption is prohibited by the terms of the Bank
Credit Agreement or the Existing Indentures. If Sinclair does not make and
consummate a Change of Control Offer upon a Change of Control, the holders of
the Series C Preferred Stock will have the right to elect two directors to the
board of directors of Sinclair.
The Company has the option (a) at any time on or after March 15, 2002 to
redeem the Series C Preferred Stock, in whole or in part, in cash at redemption
prices declining from 105.813% to 100% (in 2006) of the Liquidation Amount, and
(b) at any time on or prior to March 15, 2000 to redeem, in whole or in part, up
to 33 1/3% of the aggregate Liquidation Amount of the Series C Preferred Stock,
with the proceeds of one or more Public Equity Offerings (as defined), at a cash
redemption price of 111.625% of the principal amount thereof, plus accrued
dividends to the date of redemption; provided that after any
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such redemption at least 66 2/3% of the aggregate Liquidation Amount of the
Series C Preferred Stock originally issued remain outstanding and that such
redemption be made within 180 days of each such Public Equity Offering.
NEW PREFERRED STOCK
The particular terms of any series of Preferred Stock offered hereby will
be set forth in the Prospectus Supplement relating thereto. The rights,
preferences, privileges and restrictions, including dividend rights, voting
rights, terms of redemption, retirement and sinking fund provisions and
liquidation preferences, if any, of the Preferred Stock of each series offered
hereby will be fixed or designated pursuant to Articles Supplementary adopted by
the Board of Directors or a duly authorized committee thereof. The terms, if
any, on which shares of any series of Preferred Stock offered hereby are
convertible or exchangeable into Common Stock or Debt Securities will also be
set forth in the Prospectus Supplement relating thereto. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of the Company, in which case the number of shares of
Common Stock to be received by the holders of Preferred Stock offered hereby
would be calculated as of a time and in the manner stated in the applicable
Prospectus Supplement. The description of the terms of a particular series of
Preferred Stock offered hereby that will be set forth in the applicable
Prospectus Supplement does not purport to be complete and is qualified in its
entirety by reference to the Articles Supplementary relating to such series.
DEPOSITARY SHARES
General. The Company may, at its option, elect to offer receipts for
fractional interests ("Depositary Shares") in Preferred Stock, rather than full
shares of Preferred Stock. In such event, receipts ("Depositary Receipts") for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of Preferred Stock) of
a share of a particular series of Preferred Stock, will be issued as described
below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a depositary to be named by the Company in a Prospectus
Supplement (the "Depositary"). Subject to the terms of the Deposit Agreement,
each owner of a Depositary Share will be entitled, in proportion to the
applicable fraction of a share of Preferred Stock represented by such Depositary
Share, to all the rights and preferences of the Preferred Stock represented
thereby (including dividend, voting, redemption, subscription and liquidation
rights). The following summary of certain provisions of the Deposit Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Deposit Agreement, including
the definitions therein of certain terms. Copies of the forms of Deposit
Agreement and Depositary Receipt will be filed as exhibits to or incorporated by
reference into the Registration Statement of which this Prospectus is a part,
and the following summary is qualified in its entirety by reference to such
exhibits.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the Preferred Stock
to the record holders of Depositary Shares relating to such Preferred Stock in
proportion to the numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares in
an equitable manner, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may sell such property and
distribute the net proceeds from such sale to such holders. The amount
distributed in any of the foregoing cases may be reduced by any amounts required
to be withheld by the Company or the Depositary on account of taxes.
Withdrawal of Preferred Stock. Upon surrender of Depositary Receipts at a
designated office of the Depositary, the owner of the Depositary Shares
evidenced thereby will be entitled to delivery at such office of certificates
evidencing Preferred Stock (but only in whole shares of Preferred Stock)
represented by such Depositary Shares. If the Depositary Receipts delivered by
the holder evidence a
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number of Depositary Shares in excess of the number of whole shares of Preferred
Stock to be withdrawn, the Depositary will deliver to such holder at the same
time a new Depositary Receipt evidencing such excess number of Depositary
Shares.
Redemption of Depositary Shares. If a series of Preferred Stock represented
by Depositary Shares is subject to redemption, the Depositary Shares will be
redeemed from the proceeds received by the Depositary resulting from the
redemption, in whole or in part, of such series of Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
Preferred Stock so redeemed. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot, pro rata
or by any other equitable method as may be determined by the Depositary.
Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of the Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of the Depositary Shares relating to such Preferred Stock. Each record holder of
such Depositary Shares on the record date (which will be the same date as the
record date for the Preferred Stock) will be entitled to instruct the Depositary
as to the exercise of the voting rights pertaining to the amount of the
Preferred Stock represented by such holder's Depositary Shares. The Depositary
will endeavor, insofar as practicable, to vote the number of shares of the
Preferred Stock represented by such Depositary Shares in accordance with such
instructions, and the Company will agree to take all reasonable action which may
be deemed necessary by the Depositary in order to enable the Depositary to do
so. The Depositary will abstain from voting shares of the Preferred Stock to the
extent it does not receive specific instructions from the holder of Depositary
Shares representing such Preferred Stock.
Amendment and Termination of the Deposit Agreement. The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time be amended by agreement between the Company and the
Depositary. However, any amendment which materially and adversely alters the
rights of the holders of Depositary Shares will not be effective unless such
amendment has been approved by the holders of at least a majority of the
Depositary Shares then outstanding. The Deposit Agreement will only terminate if
(i) all outstanding Depositary Shares have been redeemed or (ii) there has been
a final distribution in respect of the Preferred Stock, including in connection
with any liquidation, dissolution or winding up of the Company and such
distribution has been distributed to the holders of Depositary Receipts.
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointments. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
Charges of Depositary. The Company will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Company will pay charges of the Depositary in connection with
the initial deposit of the Preferred Stock and issuance of Depositary Receipts,
all withdrawals of shares of Preferred Stock by owners of the Depositary Shares
and any redemption of the Preferred Stock. Holders of Depositary Receipts will
pay other transfer and other taxes and governmental charges and such other
charges as they are expressly provided in the Deposit Agreement to be for their
accounts.
Miscellaneous. The Depositary will forward all reports and communications
from the Company which are delivered to the Depositary and which the Company is
required or otherwise determines to furnish to the holders of the Preferred
Stock.
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Neither the Depositary nor the Company will be liable under the Deposit
Agreement to holders of Depositary Receipts other than for its gross negligence,
willful misconduct or bad faith. Neither the Company nor the Depositary will be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is furnished.
The Company and the Depositary may rely upon written advice of counsel or
accountants, or upon information provided by persons presenting Preferred Stock
for deposit, holders of Depositary Receipts or other persons believed to be
competent and on documents believed to be genuine.
CERTAIN STATUTORY AND CHARTER PROVISIONS
The following paragraphs summarize certain provisions of the Maryland
General Corporation Law and the Company's Amended Certificate and by-laws. The
summary does not purport to be complete and reference is made to Maryland
General Corporation Law and the Company's Amended Certificate and By-Laws for
complete information.
Business Combinations. Under the Maryland General Corporation Law, certain
"business combinations" (including a merger, consolidation, share exchange, or,
in certain circumstances, an asset transfer or issuance of equity securities)
between a Maryland corporation and any person who beneficially owns 10% or more
of the corporation's stock (an "Interested Stockholder") must be (a) recommended
by the corporation's board of directors; and (b) approved by the affirmative
vote of at least (i) 80% of the corporation's outstanding shares entitled to
vote and (ii) two-thirds of the outstanding shares entitled to vote which are
not held by the Interested Stockholder with whom the business combination is to
be effected, unless, among other things, the corporation's common stockholders
receive a minimum price (as defined in the statute) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for his shares. In addition, an Interested Stockholder or
any affiliate thereof may not engage in a "business combination" with the
corporation for a period of five (5) years following the date he becomes an
Interested Stockholder. These provisions of Maryland law do not apply, however,
to business combinations that are approved or exempted by the board of directors
of a Maryland corporation. It is anticipated that the Company's Board of
Directors will exempt from the Maryland statute any business combination with
the Controlling Stockholders, any present or future affiliate or associate of
any of them, or any other person acting in concert or as a group with any of the
foregoing persons.
Control Share Acquisitions. The Maryland General Corporation Law provides
that "control shares" of a Maryland corporation acquired in a "control share
acquisition" may not be voted except to the extent approved by a vote of
two-thirds of the votes entitled to be cast by stockholders excluding shares
owned by the acquirer, officers of the corporation and directors who are
employees of the corporation. "Control shares" are shares which, if aggregated
with all other shares previously acquired which the person is entitled to vote,
would entitle the acquirer to vote (i) 20% or more but less than one-third of
such shares, (ii) one-third or more but less than a majority of such shares, or
(iii) a majority of the outstanding shares. Control shares do not include shares
the acquiring person is entitled to vote because stockholder approval has
previously been obtained. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition and
who has obtained a definitive financing agreement with a responsible financial
institution providing for any amount of financing not to be provided by the
acquiring person may compel the corporation's board of directors to call a
special meeting of stockholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders meeting.
Subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or of any meeting
of stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquirer is entitled to vote a majority of the shares entitled
to vote, all other stockholders may exercise appraisal rights. The fair value of
the
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shares as determined for purposes of such appraisal rights may not be less than
the highest price per share paid in the control share acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or excepted by or pursuant to the
articles of incorporation or by-laws of the corporation.
Effect of Business Combination and Control Share Acquisition Statutes. The
business combination and control share acquisition statutes could have the
effect of discouraging offers to acquire any such offer.
Limitation on Liability of Directors and Officers. The Company's Amended
Certificate provides that, to the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Company shall have any liability
to the Company or its stockholders for monetary damages. The Maryland General
Corporation Law provides that a corporation's charter may include a provision
which restricts or limits the liability of its directors or officers to the
corporation or its stockholders for money damages except (1) to the extent that
it is proved that the person actually received an improper benefit or profit in
money, property or services, for the amount of the benefit or profit in money,
property or services actually received or (2) to the extent that a judgment or
other final adjudication adverse to the person is entered in a proceeding based
on a finding in the proceeding that the person's action, or failure to act, was
the result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. In situations to which the Amended
Certificate provision applies, the remedies available to the Company or a
stockholder are limited to equitable remedies such as injunction or rescission.
This provision would not, in the opinion of the Commission, eliminate or limit
the liability of directors and officers under the federal securities laws.
Indemnification. The Company's Amended Certificate and by-laws provide that
the Company may advance expenses to its currently acting and its former
directors to the fullest extent permitted by Maryland General Corporation Law,
and that the Company shall indemnify and advance expenses to its officers to the
same extent as its directors and to such further extent as is consistent with
law. The Maryland General Corporation Law provides that a corporation may
indemnify any director made a party to any proceeding by reason of service in
that capacity unless it is established that (1) the act or omission of the
director was material to the matter giving rise to the proceeding and (a) was
committed in bad faith or (b) was the result of active and deliberate
dishonesty, or (2) the director actually received an improper personal benefit
in money, property or services, or (3) in the case of an criminal proceeding,
the director had reasonable cause to believe that the act or omission was
unlawful. The statute permits Maryland corporations to indemnify its officers,
employees or agents to the same extent as its directors and to such further
extent as is consistent with law.
The Company has also entered into indemnification agreements with certain
officers and directors which provide that the Company shall indemnify and
advance expenses to such officers and directors to the fullest extent permitted
by applicable law in effect on the date of the agreement, and to such greater
extent as applicable law may thereafter from time to time permit. Such
agreements provide for the advancement of expenses (subject to reimbursement if
it is ultimately determined that the officer or director is not entitled to
indemnification) prior to the final disposition of any claim or proceeding.
FOREIGN OWNERSHIP
Under the Amended Certificate and to comply with FCC rules and regulations,
the Company is not permitted to issue or transfer on its books any of its
capital stock to or for the account of any Alien (as defined) if after giving
effect to such issuance or transfer, the capital stock held by or for the
account of any alien or Aliens would exceed, individually or in the aggregate,
25% of the Company's capital stock at any time outstanding. Pursuant to the
Amended Certificate, the Company will have the right to repurchase alien-owned
shares at their fair market value to the extent necessary, in the judgment of
the Board of Directors, to comply with the alien ownership restrictions. Any
issuance or transfer of capital stock in violation of such prohibition will be
void and of no force and effect. The Amended Certificate also provides that no
Alien or Aliens shall be entitled to vote, direct or control the vote of more
than
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25% of the total voting power of all the shares of capital stock of the Company
outstanding and entitled to vote at any time and from time to time. Such
percentage, however, is 20% in the case of the Company's subsidiaries which are
direct holders of FCC licenses. In addition, the Amended Certificate provides
that no Alien shall be qualified to act as an officer of the Company and no more
than 25% of the total number of directors of the Company at any time may be
Aliens. The Amended Certificate further gives the Board of Directors of the
Company all power necessary to administer the above provisions.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Class A Common Stock is
The First National Bank of Boston. The Transfer Agent and Registrar for any
Preferred Securities issued pursuant to this Prospectus will be specified in the
applicable Prospectus Supplement.
PLAN OF DISTRIBUTION
The Securities offered hereby may be sold by the Company or the Selling
Stockholders on a negotiated or competitive bid basis through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate, dealers or agents designated from time to time, or directly to other
purchasers. The distribution of the Securities offered hereby may be effected
from time to time in one or more transactions at a fixed price or prices, which
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. To the extent
required, any Prospectus Supplement with respect to the Securities will set
forth the method of distribution of the offered Securities, of the offering and
the proceeds to the Company from the sale thereof, any underwriting discounts,
commission and other terms constituting compensation to underwriters and other
items of price, and any discounts or concessions allowed or reallowed or paid to
dealers. Any public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are utilized, the Securities being sold to them will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price, or at varying prices determined at the time of
sale. The Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. To the extent required, the underwriter or
underwriters with respect to the Securities being offered by the Company or the
Selling Stockholders will be named in the Prospectus Supplement relating to such
offering and, if an underwriting syndicate is used, the managing underwriter or
underwriters will be set forth on the cover page of such Prospectus Supplement.
Any underwriting agreement will provide that the obligations of the underwriters
are subject to certain conditions precedent.
Underwriters may sell the Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they act as agents. If a dealer is utilized in the sale of the Securities,
the Company or the Selling Stockholders will sell the Securities to the dealer
as principal. The dealer may then resell the Securities to the public at varying
prices to be determined by the dealer at the time of sale. To the extent
required, any dealer involved in the offer or sale of the Securities in respect
of which this Prospectus is delivered will be set forth in the Prospectus
Supplement.
The Securities may be sold directly by the Company or the Selling
Stockholders or through agents designated by the Company or the Selling
Stockholders from time to time. To the extent required, any agent involved in
the offer or sale of the securities in respect of which this Prospectus is
delivered will be set forth in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment. This Prospectus is not the
exclusive means for resales of Class A Common Stock by the Selling Stockholders
who may, for example, sell Class A Common Stock under Rule 144 under the
Securities Act.
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Any underwriters, dealers and agents that participate in the distribution
of the Securities may be deemed to be underwriters as the term is defined in the
Securities Act and any discounts or commissions received by them from the
Company or the Selling Stockholders and any profits on the resale of the
Securities by them may be deemed to be underwriting discounts and commissions
under the Securities Act. Underwriters, dealers and agents may be entitled,
under agreements that may be entered into with the Company or the Selling
Stockholders, to indemnification against or to contribution toward certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments that the underwriters, dealers or agents may be
required to make in respect of such liabilities.
Underwriters, dealers and agents may engage in other transactions with or
perform other services for the Company or the Selling Stockholders. To the
extent required, any such relationships will be set forth in a Prospectus
Supplement.
LEGAL MATTERS
The validity of the securities being offered hereby and certain other legal
matters regarding the securities will be passed upon for the Company by Thomas &
Libowitz, P.A., Baltimore, Maryland, counsel to the Company, and by Wilmer,
Cutler & Pickering, Baltimore, Maryland, special securities counsel to the
Company. Certain legal matters under the Communications Act of 1934, as amended
and the rules and regulations promulgated thereunder by the FCC will be passed
upon for the Company by Fisher Wayland Cooper Leader & Zaragoza L.L.P.,
Washington. D.C. Basil A. Thomas, a director of the Company, is of counsel to
Thomas & Libowitz, P.A.
EXPERTS
The Consolidated Financial Statements and schedules of the Company as of
December 31, 1995 and 1996 and for each of the years ended December 31, 1994,
1995 and 1996, incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
giving said reports.
The consolidated financial statements of River City Broadcasting, L.P. as
of December 31, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1995 have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements of Paramount Stations Group of Kerrville, Inc. as
of December 31, 1994 and August 3, 1995 and for the year ended December 31, 1994
and the period from January 1, 1995 through August 3, 1995, incorporated by
reference in this Prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said reports.
The financial statements of KRRT, Inc. as of December 31, 1995 and for the
period from July 25, 1995 through December 31, 1995, incorporated by reference
in this Prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated herein in reliance upon the
authority of said firm as experts in giving said reports.
The consolidated financial statements of Superior Communications Group,
Inc. at December 31, 1995 and 1994, and for each of the two years in the period
ended December 31, 1995, incorporated by reference in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
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The financial statements of Flint TV, Inc. as of December 31, 1994 and 1995
and for each of the years ended December 31, 1994 and 1995, incorporated by
reference in this Prospectus and elsewhere in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their reports with respect thereto, and are incorporated herein in reliance
on the authority of said firm as experts in giving said reports.
The financial statements of Kansas City TV 62 Limited Partnership and
Cincinnati TV 64 Limited Partnership as of and for the year ended December 31,
1995, incorporated in this Prospectus by reference to the Form 8-K of Sinclair
Broadcast Group, Inc. dated May 9, 1996 (filed May 17, 1996) have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Heritage Media Services, Inc. -- Broadcasting
Segment as of and for the year ended December 31, 1996, incorporated by
reference in this Prospectus and elsewhere in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as stated
in their reports with respect thereto, and are incorporated herein in reliance
on the authority of said firm as experts in giving said reports.
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