UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 COMMISSION FILE NUMBER : 0-26076
SINCLAIR BROADCAST GROUP, INC.
(Exact name of Registrant as specified in its charter)
Maryland 52-1494660
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211
(Address of principal executive offices)
(410) 467-5005
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act:
Class A Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Based on the closing sale price of $25.125 per share as of April 7, 1997, the
aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $177.3 million.
As of April 7, 1997, there were 6,917,827 shares of Class A Common Stock, $.01
par value, 27,850,581 shares of Class B Common Stock, $.01 par value and
1,115,370 shares of Series B Preferred Stock, $.01 par value, of the Registrant
issued and outstanding.
<PAGE>
PART I
The matters discussed in this Form 10-K/A include forward-looking statements.
Such statements are subject to a number of risks and uncertainties, such as 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 and
volatility in programming costs. Additional risk factors regarding the Company
are set forth in the Company's registration statement on Form S-3 filed with the
Securities and Exchange Commission on November 7, 1996 (as amended).
ITEM 1. BUSINESS
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 to 28 television stations and has agreed to acquire one
additional television station. The Company believes it is also one of the top 20
radio groups in the United States, when measured by the total number of radio
stations owned, programmed or with which the Company has Joint Sales Agreements
("JSAs"). (For a description of JSAs see--Federal Regulation of Television and
Radio Broadcasting--Ownership Matters--Radio--Local Marketing Agreements.) The
Company owns or provides programming services to 23 radio stations, has pending
acquisitions of two radio stations (with both of which it has JSAs), has a JSA
with one additional radio station and has options to acquire an additional seven
radio stations.
The 28 television stations the Company owns or programs pursuant to Local
Marketing Agreements ("LMAs") are located in 20 geographically diverse markets,
with 23 of the stations in the top 51 television Designated Market Areas
("DMAs") in the United States. (For a description of LMAs see--Federal
Regulation of Television and Radio Broadcasting--Ownership Matters--Local
Marketing Agreements. A Designated Market Area is one of 211
generally-recognized television market areas.) The Company's television station
group is diverse in network affiliation with ten stations affiliated with Fox,
11 with UPN, two with ABC, two with Warner Brothers and one with CBS. Two
stations operate as Independents.
The Company's radio station group is also geographically diverse with a
variety of programming formats including country, urban, news/talk/sports,
album/progressive rock and adult contemporary. Of the 26 stations owned,
programmed or with which the Company has a JSA, 12 broadcast on the AM band and
14 on the FM band. The Company owns or programs from two to seven stations in
all but one of the radio markets it serves.
The Company has undergone rapid and significant growth over the course of the
last six years. Beginning with the acquisition of WPGH in Pittsburgh in 1991,
the Company has increased the number of television stations it owns or programs
from three to 28. From 1991 to 1996, net broadcast revenues and operating cash
flow increased from $39.7 million to $346.5 million, and from $15.5 million to
$180.3 million. Pro forma for the acquisitions described below, 1996 net
broadcasting revenue and operating cash flow would have been $445.0 million and
$206.5 million, respectively.
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TELEVISION BROADCASTING
The Company owns and operates, provides programming services to, or has
agreed to acquire the following television stations:
<TABLE>
<CAPTION>
NUMBER OF
COMMERCIAL EXPIRATION
MARKET STATIONS IN STATION DATE OF
MARKET RANK(A) STATIONS STATUS(B) CHANNEL AFFILIATION THE MARKET(C) RANK(D) FCC LICENSE
- ----------------------- -------- ---------- ----------- --------- ------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pittsburgh,
Pennsylvania........... 19 WPGH O&O 53 FOX 6 4 8/1/99
WPTT LMA 22 UPN 5 8/1/99
St. Louis, Missouri ... 20 KDNL LMA(e) 30 ABC 7 5 2/1/98
Sacramento, California. 21 KOVR LMA(e) 13 CBS 8 3 2/1/99
Baltimore, Maryland ... 23 WBFF O&O 45 FOX 5 4 10/1/01
WNUV LMA 54 UPN 5 10/1/01
Indianapolis, Indiana . 25 WTTV LMA(e) 4 UPN 8 4 8/1/97
WTTK LMA(e)(f) 29 UPN 4 8/1/97
Cincinnati, Ohio....... 29 WSTR O&O 64 UPN 5 5 10/1/97
Raleigh-Durham,
North Carolina 30 WLFL O&O 22 FOX 7 3 12/1/01
WRDC LMA 28 UPN 5 12/1/01
Milwaukee, Wisconsin .. 31 WCGV O&O 24 UPN 6 4 12/1/97
WVTV LMA 18 WB 5 12/1/97
Kansas City, Missouri . 32 KSMO O&O 62 UPN 7 5 2/1/98
Columbus, Ohio......... 34 WTTE O&O 28 FOX 5 4 10/1/97
Asheville, North
Carolina and
Greenville/
Spartanburg/Anderson,
South Carolina......... 35 WFBC LMA(g) 40 IND(i) 6 5 12/1/01
WLOS LMA(e) 13 ABC 6 3 12/0/01
San Antonio, Texas .... 37 KABB LMA(e) 29 FOX 7 4 8/1/98
KRRT LMA(h) 35 UPN 6 8/1/98
Norfolk, Virginia...... 40 WTVZ O&O 33 FOX 6 4 10/1/01
Oklahoma City, Oklahoma 43 KOCB O&O 34 UPN 7 5 6/1/98
Birmingham, Alabama ... 51 WTTO O&O 21 WB 5 4 4/1/97
WABM LMA 68 UPN 5 4/1/97
Flint/Saginaw/Bay City,
Michigan............... 60 WSMH O&O 66 FOX 5 4 10/1/97
Las Vegas, Nevada...... 64 KUPN Pending 21 UPN 8 5 10/1/98
Lexington, Kentucky ... 68 WDKY O&O 56 FOX 5 4 8/1/97
Des Moines, Iowa....... 72 KDSM LMA(e) 17 FOX 4 4 2/1/98
Peoria/Bloomington,
Illinois............... 109 WYZZ O&O 43 FOX 4 4 12/1/97
Tuscaloosa, Alabama ... 187 WDBB LMA 17 IND(i) 2 2 4/1/97
</TABLE>
- ----------
(a) Rankings are based on the relative size of a station's DMA among the 211
generally recognized DMAs in the United States as estimated by Nielsen.
(b) "O&O" refers to stations owned and operated by the Company, "LMA" refers to
stations to which the Company provides programming services pursuant to an
LMA and "Pending" refers to stations the Company has agreed to acquire.
(c) Represents the number of television stations designed by Nielsen as "local"
to the DMA, excluding public television stations and stations which do not
meet the minimum Nielsen reporting standards (weekly cumulative audience of
at least 2.5%) for the Sunday- Saturday, 6:00 a.m. to 2:00 a.m. time
period.
(Footnotes continued on following page)
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(d) The rank of each station in its market is based upon the November 1996
Nielsen estimates of the percentage of persons tuned to each station in the
market from 6:00 a.m. to 2:00 a.m., Sunday-Saturday.
(e) Non-License Assets (as defined herein) acquired from River City
Broadcasting, L.P. and its controlled entities and option exercised to
acquire License Assets (as defined herein). Will become owned and operated
upon FCC approval of transfer of License Assets and closing of acquisition
of License Assets.
(f) WTTK currently simulcasts all of the programming aired on WTTV and the
station rank applies to the combined viewership of these stations.
(g) Non-License Assets acquired from River City. License Assets to be acquired
by Glencairn, Ltd., subject to the Company's LMA, upon FCC approval of
transfer of License Assets.
(h) River City provided programming to this station pursuant to an LMA. The
Company acquired River City's rights under the LMA from River City and the
Non-License Assets from the owners of this station. The License Assets are
to be transferred to Glencairn upon FCC approval of transfer of assets.
(i) "IND" or "Independent" refers to a station that is not affiliated with any
of ABC, CBS, NBC, Fox, UPN or Warner Brothers.
Operating Strategy
The Company's television operating strategy includes the following key
elements.
Attracting Viewership
Popular Programming. The Company believes that an important factor in
attracting viewership to its stations is their network affiliations with Fox,
UPN, ABC, CBS and WB. These affiliations enable the Company to attract viewers
by virtue of the quality first-run original programming provided by these
networks and the networks' promotion of such programming. The Company also seeks
to obtain, at attractive prices, popular syndicated programming that is
complementary to the station's network affiliation. Examples of popular
syndicated programming obtained by the Company for broadcast on its Fox, WB and
UPN affiliates and independent stations are "Mad About You," "Frasier," "The
Simpsons," "Home Improvement" and "Seinfeld." In addition to network
programming, the Company's ABC and CBS affiliates broadcast news magazine, talk
show, and game show programming such as "Hard Copy," "Entertainment Tonight,"
"Regis and Kathie Lee," "Wheel of Fortune" and "Jeopardy."
Children's Programming. The Company seeks to be a leader in children's
programming in each of its respective DMAs. The Company's nationally recognized
"Kids Club" was the forerunner and model for the Fox network-wide marketing
efforts promoting children's programming. Sinclair carries the Fox Children's
Network ("FCN") and UPN's childrens' programming, both of which include
significant amounts of animated programming throughout the week. In those
markets where the Company owns or programs ABC or CBS affiliates, the Company
broadcasts those networks' animated programming during weekends. In addition to
this animated programming, the Company broadcasts other forms of children's
programming, which may be produced by the Company or by an affiliated network.
Counter-Programming. The Company's programming strategy on its Fox, UPN and
Independent stations also includes "counter-programming," which consists of
broadcasting programs that are alternatives to the types of programs being shown
concurrently on competing stations. This strategy is designed to attract
additional audience share in demographic groups not served by concurrent
programming on competing stations. The Company believes that implementation of
this strategy enables its stations to achieve competitive rankings in households
in the 18-49 and 25-54 demographics and to offer greater diversity of
programming in each of its DMAs.
Local News. The Company believes that the production and broadcasting of
local news can be an important link to the community and an aid to the station's
efforts to expand its viewership. In addition, local news programming can
provide access to advertising sources targeted specifically to local news. The
Company carefully assesses the anticipated benefits and costs of producing local
news prior to introduction at a Company station because a significant investment
in capital equipment is required and substantial operating expenses are incurred
in introducing, developing and producing local news programming. The Company
currently provides local news programming at WBFF in Baltimore, WLFL in
Raleigh/Durham, KDNL in St. Louis, KABB in San Antonio, KOVR in Sacramento, WPGH
in Pittsburgh and WLOS in Asheville. The Company also broadcasts news programs
on WDKY in Lexington, which are produced in part by the Company and in part
through the purchase of production services from an independent third party and
on
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WTTV in Indianapolis, which are produced by a third party in exchange for a
limited number of advertising spots. River City Broadcasting, L.P. and its
controlled entities (collectively, "River City") provide the Company news
production services with respect to the production of news programming and on
air talent on WTTE. Pursuant to an agreement, River City provides certain
services to the Company in return for a fee equal to approximately $416,000 per
year. The possible introduction of local news at the other Company stations is
reviewed periodically. The Company's policy is to institute local news
programming at a specific station only if the expected benefits of local news
programming at the station are believed to exceed the associated costs after an
appropriate start-up period.
Popular Sporting Events. The Company attempts to capture a portion of
advertising dollars designated to sports programming in selected DMAs. The
Company's independent and UPN affiliated stations generally face fewer
restrictions on broadcasting live local sporting events than do their
competitors that are affiliates of the major networks and Fox since affiliates
of the major networks are subject to prohibitions against preemptions of network
programming. The Company has been able to acquire the local television broadcast
rights for certain sporting events, such as NBA basketball, Major League
Baseball, NFL football, NHL hockey, ACC basketball, Big Ten football and
basketball, and SEC football. The Company seeks to expand its sports
broadcasting in DMAs as profitable opportunities arise. In addition, the
Company's stations that are affiliated with Fox broadcast certain Major League
Baseball games, NFL football games and NHL hockey games.
Innovative Local Sales and Marketing
The Company believes that it is able to attract new advertisers to its
stations and increase its share of existing customers' advertising budgets by
creating a sense of partnership with those advertisers. The Company develops
such relationships by training its sales forces to offer new marketing ideas and
campaigns to advertisers. These campaigns often involve the sponsorship by
advertisers of local promotional events that capitalize on the station's local
identity and programming franchises. For example, several of the Company's
stations stage local Kids Fairs which allow station advertisers to reinforce
their on-air advertising with their target audience. Through its strong local
sales and marketing focus, the Company seeks to capture an increasing share of
its revenues from local sources, which are generally more stable than national
advertising.
Control of Operating and Programming Costs
By employing a disciplined approach to managing programming acquisition and
other costs, the Company has been able to achieve operating margins that the
Company believes are among the highest in the television broadcast industry. The
Company has sought in the past and will continue to seek to acquire quality
programming for prices at or below prices paid in the past. As an owner or
provider of programming services to 28 stations in 20 DMAs reaching
approximately 14% of U.S. television households, the Company believes that it is
able to negotiate favorable terms for the acquisition of programming. Moreover,
the Company emphasizes control of each of its stations' programming and
operating costs through program-specific profit analysis, detailed budgeting,
tight control over staffing levels and detailed long-term planning models.
Attract and Retain High Quality Management
The Company believes that much of its success is due to its ability to
attract and retain highly skilled and motivated managers, both at the corporate
and local station levels. A portion of the compensation provided to general
managers, sales managers and other station managers is based on their achieving
certain operating results. The Company also provides its corporate and station
managers with deferred compensation plans offering options to acquire Class A
Common Stock.
Community Involvement
Each of the Company's stations actively participates in various community
activities and offers many community services. The Company's activities include
broadcasting programming of local interest and sponsorship of community and
charitable events. The Company also encourages its station employees to become
4
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active members of their communities and to promote involvement in community and
charitable affairs. The Company believes that active community involvement by
its stations provides its stations with increased exposure in their respective
DMAs and ultimately increases viewership and advertising support.
Establish LMAs
The Company believes that it can attain significant growth in operating cash
flow through the utilization of LMAs. By expanding its presence in a market in
which it owns a station, the Company can improve its competitive position with
respect to a demographic sector. In addition, by providing programming services
to an additional station in a market, the Company is able to realize significant
economies of scale in marketing, programming, overhead and capital expenditures.
The Company provides programming services pursuant to an LMA to an additional
station in seven of its 20 television markets.
Programming and Affiliations
The Company continually reviews its existing programming inventory and seeks
to purchase the most profitable and cost-effective syndicated programs available
for each time period. In developing its selection of syndicated programming, the
Company balances the cost of available syndicated programs with their potential
to increase advertising revenue and the risk of their reduced popularity during
the term of the program contract. The Company seeks to purchase only those
programs with contractual periods that permit programming flexibility and which
complement a station's overall programming strategy and counter-programming
strategy. Programs that can perform successfully in more than one time period
are more attractive due to the long lead time and multi-year commitments
inherent in program purchasing.
Twenty-six of the 28 television stations owned or provided programming
services by the Company operate as affiliates of Fox (ten stations), UPN (eleven
stations), ABC (two stations), WB (two stations) and CBS (one station). The
networks produce and distribute programming in exchange for each station's
commitment to air the programming at specified times and for commercial
announcement time during the programming. In addition, networks other than Fox
and UPN pay each affiliated station a fee for each network-sponsored program
broadcast by the stations.
On August 21, 1996, the Company entered into an agreement with Fox (the "Fox
Agreement") which, among other things, provides that the affiliation agreements
between Fox and eight stations owned or provided programming services by the
Company (except as noted below) would be amended to have new five-year terms
commencing on the date of the Fox Agreement. Fox has the option to extend the
affiliation agreements for an additional five-year term and must extend all of
the affiliation agreements if it extends any (except that Fox may selectively
renew affiliation agreements if any station has breached its affiliation
agreement). The Fox Agreement also provides that the Company will have the right
to purchase, for fair market value, any station Fox acquires in a market
currently served by a Company owned Fox affiliate (other than the Norfolk and
Raleigh-Durham markets) if Fox determines to terminate the affiliation agreement
with the Company's station in that market and operate the station acquired by
Fox as a Fox affiliate. The agreement confirmed that the affiliation agreement
for WTTO (Birmingham, Alabama) would terminate on September 1, 1996, and that
affiliation agreements for WTVZ (Norfolk, Virginia) and WLFL (Raleigh, North
Carolina) will terminate August 31, 1998. The Fox Agreement also includes
provisions limiting the ability of the Company to preempt Fox programming except
where it has existing programming conflicts or where the Company preempts to
serve a public purpose.
The Company's affiliation agreements with ABC for KOVR, KDNC and WLOS in
Sacremento, St. Louis and Asheville, respectively, have a 10-year term expiring
in 2005, 2005 and 2004, respectively. Each of the Company's UPN affiliation
agreements is for three years, and expires in January 1998.
Each of the affiliation agreements relating to stations involved in the
Company's acquisition, agreed to on April 10, 1996, of certain assets of River
City (the "River City Acquisition") (other than River City's Fox and ABC
affiliates) is terminable by the network upon transfer of the License Assets of
the station.
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RADIO BROADCASTING
The following table sets forth certain information regarding the radio
stations (i) programmed by the Company, (ii) with which the Company has JSAs,
(iii) or which the Company has an option to acquire. Except as indicated, the
Company owns the Non-License Assets (as defined herein) of the following
stations, and the Company programs these stations pursuant to an LMA with River
City.
<TABLE>
<CAPTION>
RANKING OF STATION RANK EXPIRATION
GEOGRAPHIC STATION'S STATION PRIMARY IN PRIMARY DATE OF
MARKET MARKET BY PROGRAMMING DEMOGRAPHIC DEMOGRAPHIC FCC
SERVED(A) REVENUE(B) FORMAT TARGET(C) TARGET(D) LICENSE
- ---------------- ------------ ------------------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Los Angeles 2
KBLA-AM (e) Korean NA N/A 12/1/97
St. Louis 17
KPNT-FM Alternative Rock Adults 18-34 4 2/1/04
WVRV-FM Modern Adult
Contemporary Adults 18-34 7 12/1/03
New Orleans 38
WLMG-FM Adult Contemporary Women 25-54 2 6/1/03
KMEZ-FM Urban Oldies Women 25-54 6 6/1/03
WWL-AM News/Talk/Sports Adults 35-64 1 6/1/03
WSMB-AM Talk/Sports Adults 35-64 19 6/1/03
Buffalo 40
WMJQ-FM Adult Contemporary Women 25-54 2 6/1/98
WKSE-FM Contemporary Hit Radio Women 18-49 1 6/1/98
WBEN-AM News/Talk/Sports Adults 35-64 1 6/1/98
WWKB-AM Country Adults 35-64 16 6/1/98
WGR-AM(f)(g) Sports Adults 25-54 10 6/1/98
WWWS-AM(f)(g) Urban Oldies Women 25-54 12 6/1/98
Memphis 43
WRVR-FM Soft Adult Contemporary Women 25-54 3 8/1/03
WJCE-AM Urban Oldies Women 25-54 11 8/1/03
WOGY-FM Country Adults 25-54 10 8/1/03
Nashville 44
WLAC-FM Adult Contemporary Women 25-54 6 8/1/03
WJZC-FM Smooth Jazz Women 25-54 9 8/1/03
WLAC-AM News/Talk/Sports Adults 35-64 11 8/1/03
Greenville/
Spartanburg 59
WFBC-FM(h) Contemporary Hit Radio Women 18-49 6 12/1/02
WORD-AM(h) News/Talk Adults 35-64 9 12/1/02
WFBC-AM(h) News/Talk Adults 35-64 9 12/1/02
WSPA-AM(h) Full Service/Talk Adults 35-64 15 12/1/02
WSPA-FM(h) Soft Adult Contemporary Women 25-54 2 12/1/02
WOLI-FM(h)(i) Oldies Adults 25-54 9 12/1/02
WOLT-FM(h)(j) Oldies Adults 25-54 10 12/1/02
Wilkes-Barre/
Scranton 61
WKRZ-FM Contemporary Hit Radio Adults 18-49 1 8/1/98
WGGY-FM Country Adults 25-54 3 8/1/98
WILK-AM(k) News/Talk/Sports Adults 35-64 6 8/1/98
WGBI-AM(k) News/Talk/Sports Adults 35-64 31 8/1/98
WWSH-FM(f Soft Hits Women 25-54 7 8/1/98
WILP-AM(l) News/Talk/Sports Adults 35-64 31 8/1/98
WWFH-FM(m) Soft Hits Women 25-54 17 8/1/98
</TABLE>
(Footnotes on following page)
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(a) Actual city of license may differ from the geographic market served.
(b) Ranking of the principal radio market served by the station among all U.S.
radio markets by 1995 aggregate gross radio broadcast revenue according to
1996 Broadcasting & Cable Yearbook.
(c) Due to variations that may exist within programming formats, the primary
demographic target of stations with the same programming format may be
different.
(d) All information concerning ratings and audience listening information is
derived from the Fall 1996 Arbitron Metro Area Ratings Survey (the "Fall
1996 Arbitron"). Arbitron is the generally accepted industry source for
statistical information concerning audience ratings. Due to the nature of
listener surveys, other radio ratings services may report different
rankings; however, the Company does not believe that any radio ratings
service other than Arbitron is accorded significant weight in the radio
broadcast industry. "Station Rank in Primary Demographic Target" is the
ranking of the station among all radio stations in its market that are
ranked in its target demographic group and is based on the station's
average persons share in the primary demographic target in the applicable
Metro Survey Area. Source: Average Quarter Hour Estimates, Monday through
Sunday, 6:00 a.m. to midnight, Fall 1996 Arbitron.
(e) Programming is provided to this station by a third party pursuant to an
LMA.
(f) The Company sells advertising time on these stations pursuant to a JSA.
(g) The Company has agreed to acquire these stations, subject to FCC approval
of the transfer of the related licenses.
(h) The Company has an option to acquire Keymarket of South Carolina, Inc.,
which owns and operates WFBC-AM, WORD-AM and WFBC-FM, has an option to
acquire and provides programming services pursuant to an LMA to WSPA-AM and
WSPA-FM, and provides sales services pursuant to a JSA and has an option to
acquire WOLI-FM and WOLT-FM.
(i) WOLI-FM was formerly WXWX-FM.
(j) WOLT-FM was formerly WXWZ-FM.
(k) WILK-AM and WGBI-AM simulcast their programming.
(l) WILP-AM was formerly WXPX-AM.
(m) WWFH-FM was formerly WQEQ-FM.
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Radio Operating Strategy
The Company's radio strategy is to operate a cluster of radio stations in
each of a variety of geographic markets throughout the country. In each
geographic market, the Company employs broadly diversified programming formats
to appeal to a variety of demographic groups within the market. The Company
seeks to strengthen the identity of each of its stations through its programming
and promotional efforts, and emphasizes that identity to a far greater degree
than the identity of any local radio personality.
The Company believes that its strategy of appealing to diverse demographic
groups in a variety of geographic markets allows it to reach a larger share of
the overall advertising market while realizing economies of scale and avoiding
dependence on one demographic or geographic market. The Company realizes
economies of scale by combining sales and marketing forces, back office
operations and general management in each geographic market. At the same time,
the geographic diversity of its portfolio of radio stations helps lessen the
potential impact of economic downturns in specific markets and the diversity of
target audiences served helps lessen the impact of changes in listening
preferences. In addition, the geographic and demographic diversity allows the
Company to avoid dependence on any one or any small group of advertisers.
The Company's group of radio stations includes the top billing station group
in two markets and one of the top three billing station groups in each of its
markets other than Los Angeles, St. Louis and Nashville. Through ownership or
LMAs, the group also includes duopolies in six of its seven markets and, upon
exercise of options to acquire stations in the Greenville/Spartanburg market,
the Company will have duopolies in seven of its eight markets.
Depending on the programming format of a particular station, there are a
predetermined number of advertisements broadcast each hour. The Company
determines the optimum number of advertisements available for sale during each
hour without jeopardizing listening levels (and the resulting ratings). Although
there may be shifts from time to time in the number of advertisements available
for sale during a particular time of day, the total number of advertisements
available for sale on a particular station normally does not vary significantly.
Any change in net radio broadcasting revenue, with the exception of those
instances where stations are acquired or sold, is generally the result of
pricing adjustments made to ensure that the station effectively uses advertising
time available for sale, an increase in the number of commercials sold or a
combination of these two factors.
Large, well-trained local sales forces are maintained by the Company in each
of its radio markets. The Company's principal goal in its sales efforts is to
develop long-standing customer relationships through frequent direct contacts,
which the Company believes provides it with a competitive advantage.
Additionally, in some radio markets, duopolies permit the Company to offer
creative advertising packages to local, regional and national advertisers. Each
radio station programmed by the Company also engages a national independent
sales representative to assist it in obtaining national advertising revenues.
These representatives obtain advertising through national advertising agencies
and receive a commission from the radio station based on its gross revenue from
the advertising obtained.
Broadcasting acquisition strategy
On February 8, 1996, the 1996 Telecommunications Act of 1996 (the "1996 Act")
was signed into law. The 1996 Act represents the most sweeping overhaul of the
country's telecommunications laws since the Communications Act of 1934 (as
amended, the "Communications Act"). The 1996 Act relaxes the broadcast ownership
rules and simplifies the process for renewal of broadcast station licenses.
The Company believes that the enactment of the 1996 Act presents a unique
opportunity to build a larger and more diversified broadcasting company.
Additionally, the Company expects that the opportunity to act as one of the
consolidators of the industry will enable the Company to gain additional
influence with program suppliers, television networks, other vendors, and
alternative delivery media. The Company also believes that the additions to its
management team as a result of the River City Acquisition will give it
additional resources to take advantage of these developments.
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In implementing its acquisition strategy, the Company seeks to identify and
pursue favorable station or group acquisition opportunities primarily in the
15th to 75th largest DMAs and Metro Survey Areas as defined by the audience
measuring service Arbitron ("MSAs"). In assessing potential acquisitions, the
Company examines opportunities to improve revenue share, audience share and/or
cost control. Additional factors considered by the Company in a potential
acquisition include geographic location, demographic characteristics and
competitive dynamics of the market.
In furtherance of its acquisition strategy, the Company routinely reviews,
and conducts investigations of, potential television and radio station
acquisitions. When the Company believes a favorable opportunity exists, the
Company seeks to enter into discussions with the owners of such stations
regarding the possibility of an acquisition by the Company. At any given time,
the Company may be in discussions with one or more such station owners.
Since the 1996 Act became effective, the Company has acquired, obtained
options to acquire or has acquired the right to program or provide sales
services to 16 television and 33 radio stations for an aggregate consideration
of approximately $1.3 billion. Certain terms of these acquisitions are described
below.
River City Acquisition. On May 31, 1996, pursuant to the Amended and Restated
Asset Purchase Agreement, the Company acquired all of the Non-License Assets of
River City other than the assets relating to WSYX-TV in Columbus, Ohio.
Simultaneously, the Company entered into a 10-year LMA with River City with
respect to all of River City's License Assets (with the exception of the License
Assets relating to WSYX) and was granted: (i) a 10-year option (the "License
Assets Option") to acquire River City's License Assets (with the exception of
the License Assets relating to WSYX); and (ii) a three-year option to acquire
the assets relating to WSYX-TV (both the License and Non-License Assets,
collectively the "Columbus Option"). The exercise price for the License Assets
Option is $20 million and the Company is required to pay an extension fee with
respect to the License Assets Option as follows: (1) 8% of $20 million for the
first year following the closing of the River City Acquisition; (2) 15% of $20
million for the second year following such closing; and (3) 25% of $20 million
for each following year. The Non-License Assets acquired from River City relate
to eight television stations and 21 radio stations owned and operated by River
City. In addition, the Company acquired from another party the Non-License
Assets relating to one additional television station (KRRT) to which River City
provided programming pursuant to an LMA. The Company assigned its option to
acquire the License Assets of one television station (WFBC) to Glencairn, and
Glencairn also acquired the option to acquire the License Assets of KRRT. The
Company also acquired River City's rights under LMAs with respect to KRRT and
four radio stations to which River City provided programming or sales services.
The Company has exercised the License Assets Option and has acquired the License
Assets of all but the two radio stations in the St. Louis market. Acquisition of
the remaining License Assets is now subject to FCC approval of transfer of such
License Assets. There can be no assurance that this approval will be obtained.
Applications for transfer of the License Assets were filed in July and August
1996, except application for transfer of the License Assets relating to WTTV and
WTTK which was filed in November 1996. The applications with respect to the two
radio stations in the St. Louis market are pending, and require a special waiver
because of the Company's pending acquisition of a television station (KDNL) in
the market.
The Company paid an aggregate of approximately $1.0 billion for the
Non-License Assets and the License Assets Option consisting of $847.6 million in
cash and 1,150,000 shares of Series A Convertible Preferred Stock of the Company
and 1,382,435 stock options. The Series A Convertible Preferred Stock has been
exchanged for 1,150,000 shares of Series B Convertible Preferred Stock of the
Company, which at issuance had an aggregate liquidation value of $115 million,
and are convertible at any time, at the option of the holders, into an aggregate
of 4,181,818 shares of Class A Common Stock of the Company (which had a market
value on May 31, 1996 of approximately $125.1 million). The exercise price for
the Columbus Option is approximately $130 million plus the amount of
indebtedness secured by the WSYX assets on the date of exercise (not to exceed
the amount outstanding on the date of closing of $105 million) and the Company
is required to pay an extension fee with respect to the Columbus Option as
follows: (1) 8% of $130 million for the first year following the closing of the
River City Acquisition; (2) 15% of $130 million for the second year following
the closing; and (3) 25% of $130 million for each
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following year. The extension fee accrues beginning on the date of closing, and
is payable (beginning December 31, 1996) at the end of each calendar quarter
until such time as the option is exercised or River City sells WSYX to a third
party. The Company paid the extension fee due December 31, 1996. Pursuant to the
LMAs with River City and the owner of KRRT, the Company is required to provide
at least 166 hours per week of programming to each television and radio station
and, subject to certain exceptions, River City and the owner of KRRT are
required to broadcast all programming provided by the Company. The Company is
required to pay River City and the owner of KRRT monthly fees under the LMAs in
an amount sufficient to cover specified expenses of operating the stations,
which are currently approximately $134,000 per month for all River City
television and radio stations the Company programs (including KRRT). The Company
has the right to sell advertising time on the stations during the hours
programmed by the Company.
The Company and River City filed notification under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), with respect to
the Company's acquisition of all River City assets prior to closing the
acquisition. After the United States Justice Department ("DOJ") indicated that
it would request additional information regarding the antitrust implications of
the acquisition of WSYX by the Company in light of the Company's ownership of
WTTE, the Company and River City agreed to submit separate notifications with
respect to the WSYX assets and the other River City assets. The DOJ then granted
early termination of the waiting period with respect to the transfer of the
River City assets other than WSYX, permitting the acquisition of those assets to
proceed. The Company and River City agreed to notify the DOJ 30 days before
entering into an LMA or similar agreement with respect to WSYX and agreed not to
enter into such an agreement until 20 days after substantially complying with
any request for information from DOJ regarding the transaction. The Company is
in the process of preparing a submission to the DOJ regarding the competitive
effects of entering into an LMA arrangement in Columbus. The Company has agreed
to sell the License Assets of WTTE to Glencairn and to enter into an LMA with
Glencairn to provide programming services to WTTE, but the Company does not
believe that this transaction will be completed unless the Company acquires
WSYX.
In the River City Acquisition, the Company also acquired an option held by
River City to purchase either (i) all of the assets of Keymarket of South
Carolina, Inc. ("KSC") for the forgiveness of debt held by the Company in an
aggregate principal amount of approximately $7.4 million as of August 22, 1996,
plus payment of approximately $1,000,000 less certain adjustments or (ii) all of
the stock of KSC for $1,000,000 less certain adjustments. KSC owns and operates
three radio stations in the Greenville/Spartanburg, South Carolina MSA (WFBC-FM,
WFBC-AM and WORD-AM). The options to acquire the assets and stock of KSC expire
on December 31, 1997. KSC also holds an option to acquire from Spartan
Radiocasting, Inc. certain assets relating to two additional stations (WSPA-AM
and WSPA-FM) in the Greenville/Spartanburg MSA and which KSC currently programs
pursuant to an LMA. KSC's option to acquire these assets is exercisable for
$5.15 million and expires in January 2000, subject to extension to the extent
the applicable LMA is extended beyond that date. KSC also has an option to
acquire assets of Palm Broadcasting Company, L.P., which owns two additional
stations in the Greenville/Spartanburg MSA (WOLI-FM and WOLT-FM) in an amount
equal to the outstanding debt of Palm Broadcasting Company, L.P. to the Company,
which was approximately $3.0 million as of June 30, 1996. This option expires in
April 2001. KSC has a JSA with Palm Broadcasting Company, L.P., but does not
provide programming for WOLI or WOLT.
Superior Acquisition. On May 8, 1996, the Company acquired WDKY-TV
(Lexington, Kentucky) and KOCB-TV (Oklahoma City, Oklahoma) by acquiring the
stock of Superior Communications, Inc. for approximately $63.5 million.
Flint Acquisition. On February 27, 1996 the Company acquired the assets of
WSMH-TV (Flint, Michigan) for approximately $35.8 million by exercising options
granted in 1995.
Cincinnati/Kansas City Acquisitions. On July 1, 1996, the Company acquired
the assets of KSMO-TV (Kansas City, Missouri) and on August 1, 1996, it acquired
the assets of WSTR-TV (Cincinnati, Ohio) for approximately $34.2 million.
Peoria/Bloomington Acquisition. On July 1, 1996, the Company acquired the
assets of WYZZ-TV (Peoria/Bloomington, Illinois) for approximately $21.2
million.
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1997 ACQUISITIONS
Since the end of 1996, the Company has entered into agreements to acquire one
television station and two radio stations, and has completed the acquisition of
two radio stations. On January 30, 1997, the Company entered into an agreement
to acquire the assets of KUPN-TV, the UPN affiliate in Las Vegas, Nevada, for
$87.0 million. The Company also entered into an agreement on January 29, 1997 to
acquire the assets of WGR-AM and WWWS-AM in Buffalo, New York for $1.5 million.
The Company's acquisition of these stations is subject to FCC approval of
applications to assign the licenses of these stations. The Company currently
sells the commercial air time of WGR-AM and WWWS-AM pursuant to a JSA. On
January 31, 1997, the Company completed the acquisition of the assets of WWSH-FM
and WILP-AM, each in Wilkes-Barre, Pennsylvania, for aggregate consideration of
approximately $773,000.
LOCAL MARKETING AGREEMENTS
The Company generally enters into LMAs and similar arrangements with stations
located in markets in which the Company already owns and operates a station, and
in connection with acquisitions, pending regulatory approval of transfer of
License Assets. Under the terms of the LMAs the Company makes specified periodic
payments to the owner-operator in exchange for the grant to the Company of the
right to program and sell advertising on a specified portion of the station's
inventory of broadcast time. Nevertheless, as the holder of the FCC license, the
owner-operator retains full control and responsibility for the operation of the
station, including control over all programming broadcast on the station.
The Company currently has LMA arrangements with stations in five markets in
which it owns a television station: Pittsburgh, Pennsylvania (WPTT), Baltimore,
Maryland (WNUV), Raleigh/Durham, North Carolina (WRDC), Milwaukee, Wisconsin
(WVTV) and Birmingham, Alabama (WABM). The Company also has LMA arrangements in
two markets (San Antonio and Asheville/Greenville/Spartanburg) in which the
Company will own a station upon completion of the acquisition of License Assets
from River City. In addition, the Company has an LMA arrangement with a station
in the Tuscaloosa, Alabama market (WDBB), which is adjacent to Birmingham. In
each of these markets, other than Pittsburgh and Tuscaloosa, the LMA arrangement
is (or will be after transfer of License Assets from River City) with Glencairn
and the Company owns the Non-License Assets (as defined below) of the stations.
The Company owns the assets of one radio station (KBLA-AM in Los Angeles) which
an independent third party programs pursuant to an LMA.
The Company believes that it is able to increase its revenues and improve its
margins by providing programming services to stations in selected DMAs and MSAs
where the Company already owns a station. In certain instances, single station
operators and stations operated by smaller ownership groups do not have the
management expertise or the operating efficiencies available to the Company as a
multi-station broadcaster. The Company seeks to identify such stations in
selected markets and to provide such stations with programming services pursuant
to LMAs. In addition to providing the Company with additional revenue
opportunities, the Company believes that these LMA arrangements have assisted
certain stations whose operations may have been marginally profitable to
continue to air popular programming and contribute to diversity of programming
in their respective DMAs and MSAs.
In cases where the Company enters into LMA arrangements in connection with a
station whose acquisition by the Company is pending FCC approval, the Company
(i) obtains an option to acquire the station assets essential for broadcasting a
television or radio signal in compliance with regulatory guidelines, generally
consisting of the FCC license, transmitter, transmission lines, technical
equipment, call letters and trademarks, and certain furniture, fixtures and
equipment (the "License Assets") and (ii) acquires the remaining assets (the
"Non-License Assets") at the time it enters into the option. Following
acquisition of the Non-License Assets, the License Assets continue to be owned
by the owner-operator and holder of the FCC license, which enters into an LMA
with the Company. After FCC approval for transfer of the License Assets is
obtained, the Company exercises its option to acquire the License Assets and
become the owner-operator of the station, and the LMA arrangement is terminated.
In connection with the River City Acquisition, the Company entered into an
LMA in the form of time brokerage agreements ("TBAs") with River City and the
owner of KRRT with respect to each of the nine television (including KDSM-TV)
and 21 radio stations with respect to which the Company
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acquired Non-License Assets. The TBAs are for a ten-year term, which corresponds
with the term of the option the Company holds to acquire the related River City
License Assets. Pursuant to the TBA, the Company pays River City and the owner
of KRRT fees in return for which the Company acquires all of the inventory of
broadcast time of the stations and the right to sell 100% of each station's
inventory of advertising time. The Company has filed applications with respect
to the transfer of the License Assets of seven of the nine television stations
and the 21 radio stations with respect to which the Company acquired Non-License
Assets in the River City Acquisition. Such applications have been granted with
respect to 19 of the 21 radio stations, and the Company has acquired the license
assets of each of the 19 radio stations. Upon grant of FCC approval of the
transfer of License Assets with respect to the remaining stations, the Company
intends to acquire the License Assets, and thereafter the LMAs will terminate
and the Company will operate the stations. With respect to the remaining two
television stations, Glencairn has applied for transfer of the License Assets of
these stations, and the Company intends to program these stations under LMAs
with Glencairn upon FCC approval of the transfer of the License Assets to
Glencairn. Petitions to deny or informal objections have been filed against
these applications by third parties.
In addition to its LMAs, the Company sells commercial air time for (but does
not provide programming to) three radio stations pursuant to JSAs in MSAs in
which it has interests in other radio stations. Under the Company's JSAs, the
Company has obtained the right, for a fee paid to the owner and operator of the
station, to sell substantially all of the commercial advertising on the station.
FEDERAL REGULATION OF TELEVISION AND RADIO BROADCASTING
The ownership, operation and sale of television and radio stations are
subject to the jurisdiction of the FCC, which acts under authority granted by
the Communications Act. Among other things, the FCC assigns frequency bands for
broadcasting; determines the particular frequencies, locations and operating
power of stations; issues, renews, revokes and modifies station licenses;
regulates equipment used by stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation and
employment practices of stations; and has the power to impose penalties for
violations of its rules or the Communications Act.
The following is a brief summary of certain provisions of the Communications
Act, the recently-enacted 1996 Act and specific FCC regulations and policies.
Reference should be made to the Communications Act, FCC rules and the public
notices and rulings of the FCC for further information concerning the nature and
extent of federal regulation of broadcast stations.
License Grant and Renewal. Television stations operate pursuant to
broadcasting licenses that formerly were granted by the FCC for maximum terms of
five years, and radio stations operate pursuant to broadcasting licenses that
formerly were granted by the FCC for maximum terms of seven years. The 1996 Act
authorizes the FCC to grant all broadcast licenses (both television and radio)
for maximum terms of eight years, and the FCC has issued an order directing its
staff to implement this statutory change.
Television and radio station licenses are subject to renewal upon application
to the FCC. During certain periods when renewal applications are pending,
competing applicants may file for the radio or television frequency being used
by the renewal applicant. During the same periods, petitions to deny license
renewal applications may be filed by interested parties, including members of
the public. Prior to the 1996 Act, the FCC was generally required to hold
hearings on renewal applications if a competing application against a renewal
application was filed, if the FCC was unable to determine that renewal of a
license would serve the public interest, convenience and necessity, or if a
petition to deny raised a "substantial and material question of fact" as to
whether the grant of the renewal application would be prima facie consistent
with the public interest, convenience and necessity.
The 1996 Act does not prohibit either the filing of petitions to deny license
renewals or the filing of competing applications. Under the 1996 Act, the FCC is
still required to hold hearings on renewal applications if it is unable to
determine that renewal of a license would serve the public interest, convenience
or necessity, or if a petition to deny raises a "substantial and material
question of fact" as to whether the grant of the renewal application would be
prima facie inconsistent with the public interest,
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convenience and necessity. Pursuant to the 1996 Act, however, the FCC is
prohibited from considering competing applications for a renewal applicant's
frequency, and is required to grant the renewal application, if the FCC finds
(i) that the station has served the public interest, convenience and necessity;
(ii) that there have been no serious violations by the licensee of the
Communications Act or the rules and regulations of the FCC; and (iii) there have
been no other violations by the licensee of the Communications Act or the rules
and regulations of the FCC that, when taken together, would constitute a pattern
of abuse.
All of the stations that the Company (i) owns and operates; (ii) intends to
acquire pursuant to the River City Acquisition and other acquisitions; (iii)
currently provides programming services to pursuant to an LMA or (iv) currently
sells commercial air time pursuant to a JSA, are presently operating under
regular licenses, which expire as to each station on the dates set forth under
"Television Broadcasting" and "Radio Broadcasting," above. Although renewal of
license is granted in the vast majority of cases even when petitions to deny are
filed, there can be no assurance that the licenses of such stations will be
renewed.
Ownership Matters
General
The Communications Act prohibits the assignment of a broadcast license or the
transfer of control of a broadcast licensee without the prior approval of the
FCC. In determining whether to permit the assignment or transfer, or the grant
or renewal of, a broadcast license, the FCC considers a number of factors
pertaining to the licensee, including compliance with various rules limiting
common ownership of media properties, the "character" of the licensee and those
persons holding "attributable" interests therein, and compliance with the
Communications Act's limitations on Alien (as defined herein) ownership.
To obtain the FCC's prior consent to assign or transfer a broadcast license,
appropriate applications must be filed with the FCC. If the application involves
the assignment of the license or a "substantial change" in ownership or control
(i.e., the transfer of more than 50% of the voting stock), the application must
be placed on public notice for a period of approximately 30 days during which
petitions to deny the application may be filed by interested parties, including
members of the public. If an assignment application does not involve new
parties, or if a transfer application does not involve a "substantial change" in
ownership or control, it is a "pro forma" application. The "pro forma"
application is nevertheless subject to having informal objections filed against
it. If the FCC grants an assignment or transfer application, interested parties
have approximately 30 days from public notice of the grant to seek
reconsideration of that grant. Generally, parties that do not file initial
petitions to deny or informal objections against the application face a high
hurdle in seeking reconsideration of the grant. The FCC normally has
approximately an additional 10 days to set aside such grant on its own motion.
When passing on an assignment or transfer application, the FCC is prohibited
from considering whether the public interest might be served by an assignment or
transfer to any party other than the assignee or transferee specified in the
application.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations holding, or through subsidiaries controlling, broadcast
licenses, the interests of officers, directors and those who, directly or
indirectly, have the right to vote 5% or more of the corporation's stock (or 10%
or more of such stock in the case of insurance companies, investment companies
and bank trust departments that are passive investors) are generally
attributable, except that, in general, no minority voting stock interest will be
attributable if there is a single holder of more than 50% of the outstanding
voting power of the corporation. The FCC has a pending rulemaking proceeding
that, among other things, seeks comment on whether the FCC should modify its
attribution rules by, among other things, (i) raising the attribution stock
benchmark from 5% to 10%; (ii) raising the attribution stock benchmark for
passive investors from 10% to 20%; (iii) restricting the availability of the
single majority shareholder exemption; and (iv) attributing certain interests
such as non-voting stock, debt and certain holdings by limited liability
corporations in certain circumstances. More recently, the FCC has solicited
comment on proposed rules that would (i) treat an
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otherwise nonattributable equity or debt interest in a licensee as an
attributable interest where the interest holder is a program supplier or the
owner of a broadcast station in the same market and the equity and/or debt
holding is greater than a specified benchmark; (ii) treat a licensee of a
television station which, under an LMA, brokers more than 15% of the time on
another television station serving the same market, as having an attributable
interest in the brokered station; and (iii) in certain circumstances, treat the
licensee of a broadcast station that sells advertising time on another station
in the same market pursuant to a JSA as having an attributable interest in the
station whose advertising is being sold.
The Controlling Stockholders hold attributable interests in two entities
owning media properties, namely: Channel 63, Inc., licensee of WIIB-TV, a UHF
television station in Bloomington, Indiana, and Bay Television, Inc., licensee
of WTTA-TV, a UHF television station in St. Petersburg, Florida. All of the
issued and outstanding shares of Channel 63, Inc. are owned by the Controlling
Stockholders. All the issued and outstanding shares of Bay Television, Inc. are
owned by the Controlling Stockholders (75%) and Robert L. Simmons (25%), a
former stockholder of the Company. The Controlling Stockholders have agreed to
divest their attributable interests in Channel 63, Inc. and the Company believes
that, after doing so, such holdings will not materially restrict its ability to
acquire or program additional broadcast stations.
Under its "cross-interest" policy, the FCC considers certain "meaningful"
relationships among competing media outlets in the same market, even if the
ownership rules do not specifically prohibit the relationship. Under this
policy, the FCC may consider significant equity interests combined with an
attributable interest in a media outlet in the same market, joint ventures, and
common key employees among competitors. The cross-interest policy does not
necessarily prohibit all of these interests, but requires that the FCC consider
whether, in a particular market, the "meaningful" relationships between
competitors could have a significant adverse effect upon economic competition
and program diversity. Heretofore, the FCC has not applied its cross-interest
policy to LMAs and JSAs between broadcast stations. In its ongoing rulemaking
proceeding concerning the attribution rules, the FCC has sought comment on,
among other things, (i) whether the cross-interest policy should be applied only
in smaller markets, and (ii) whether non-equity financial relationships such as
debt, when combined with multiple business interrelationships such as LMAs and
JSAs, raise concerns under the cross-interest policy. Moreover, in its most
recent proposals in its ongoing attribution rulemaking proceeding, the FCC has
proposed treating television LMAs, JSAs, and debt or equity interests as
attributable interests in certain circumstances without regard to the
cross-interest policy.
The Communications Act prohibits the issuance of broadcast licenses to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast license by, any corporation directly
or indirectly controlled by any other corporation of which more than 25% of the
capital stock is owned of record or voted by Aliens. The Company has been
advised that the FCC staff has interpreted this provision to require a finding
that such grant or holding would be in the public interest before a broadcast
license may be granted to or held by any such corporation and that the FCC staff
has made such a finding only in limited circumstances. The FCC has issued
interpretations of existing law under which these restrictions in modified form
apply to other forms of business organizations, including partnerships. As a
result of these provisions, the licenses granted to subsidiaries of the Company
by the FCC could be rescinded if, among other restrictions imposed by the FCC,
more than 25% of the Company's stock were owned or voted by Aliens. The Company
and the subsidiaries are domestic corporations, and the Controlling Stockholders
are all United States citizens. The Amended and Restated Articles of
Incorporation of the Company (the "Amended Certificate") contains limitations on
Alien ownership and control that are substantially similar to those contained in
the Communications Act. Pursuant to the Amended Certificate, the Company has the
right to repurchase Alien-owned shares at their fair market value to the extent
necessary, in the judgment of the Board of Directors, to comply with the Alien
ownership restrictions.
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Television
National Ownership Rule. Prior to the 1996 Act, FCC rules generally
prohibited an individual or entity from having an attributable interest in more
than 12 television stations nationwide, or in television stations reaching more
than 25% of the national television viewing audience. Pursuant to the 1996 Act,
the FCC has modified its rules to eliminate any limitation on the number of
television stations an individual or entity may own nationwide, subject to the
restriction that no individual or entity may have an attributable interest in
television stations reaching more than 35% of the national television viewing
audience. Historically, VHF stations have shared a larger portion of the market
than UHF stations. Therefore, only half of the households in the market area of
any UHF station are included when calculating whether an entity or individual
owns television stations reaching more than 35% of the national television
viewing audience. All but three of the stations owned and operated by the
Company, or to which the Company provides programming services, are UHF.
Duopoly Rule. On a local level, the television "duopoly" rule generally
prohibits a single individual or entity from having an attributable interest in
two or more television stations with overlapping Grade B service areas. While
the 1996 Act has not eliminated the TV duopoly rule, it does direct the FCC to
initiate a rulemaking proceeding to determine whether to retain, modify, or
eliminate the rule. The FCC has pending a rulemaking proceeding in which it has
proposed to modify the television duopoly rule to permit the common ownership of
television stations in different DMAs, so long as the Grade A signal contours of
the stations do not overlap. Pending resolution of its rulemaking proceeding,
the FCC has adopted an interim waiver policy that permits the common ownership
of television stations in different DMAs with no overlapping Grade A signal
contours, conditioned on the final outcome of the rulemaking proceeding. The FCC
has also sought comment on whether common ownership of two television stations
in a market should be permitted (i) where one or more of the commonly owned
stations is UHF, (ii) where one of the stations is in bankruptcy or has been off
the air for a substantial period of time and (iii) where the commonly owned
stations have very small audience or advertising shares, are located in a very
large market, and/or a specified number of independently owned media voices
would remain after the acquisition.
Local Marketing Agreements. Over the past few years, a number of television
stations, including certain of the Company's stations, have entered into what
have commonly been referred to as LMAs. While these agreements may take varying
forms, pursuant to a typical LMA, separately owned and licensed television
stations agree to enter into cooperative arrangements of varying sorts, subject
to compliance with the requirements of antitrust laws and with the FCC's rules
and policies. Under these types of arrangements, separately-owned stations could
agree to function cooperatively in terms of programming, advertising sales,
etc., subject to the requirement that the licensee of each station shall
maintain independent control over the programming and operations of its own
station. One typical type of LMA is a programming agreement between two
separately-owned television stations serving a common service area, whereby the
licensee of one station programs substantial portions of the broadcast day on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the latter licensee, and sells advertising time during such
program segments. Such arrangements are an extension of the concept of "time
brokerage" agreements, under which a licensee of a station sells blocks of time
on its station to an entity or entities which program the blocks of time and
which sell their own commercial advertising announcements during the time
periods in question. Over the past few years, the staff of the FCC's Mass Media
Bureau has held that LMAs are not contrary to the Communications Act, provided
that the licensee of the station which is being substantially programmed by
another entity maintains complete responsibility for and control over
programming and operations of its broadcast station and assures compliance with
applicable FCC rules and policies.
At present, FCC rules permit television station LMAs, and the licensee of a
television station brokering time on another television station is not
considered to have an attributable interest in the brokered station. However, in
connection with its ongoing rulemaking proceeding regarding the television
duopoly rule, the FCC has proposed to adopt rules providing that the licensee of
a television station which brokers more than 15% of the time on another
television station serving the same market would be deemed to have an
attributable interest in the brokered station for purposes of the national and
local multiple ownership rules.
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The 1996 Act provides that nothing therein "shall be construed to prohibit
the origination, continuation, or renewal of any television local marketing
agreement that is in compliance with the regulations of the [FCC]." The
legislative history of the 1996 Act reflects that this provision was intended to
grandfather television LMAs that were in existence upon enactment of the 1996
Act, and to allow television LMAs consistent with the FCC's rules subsequent to
enactment of the 1996 Act. In its pending rulemaking proceeding regarding the
television duopoly rule, the FCC has proposed to adopt a grandfathering policy
providing that, in the event that television LMAs become attributable interests,
LMAs that are in compliance with existing FCC rules and policies and were
entered into before November 5, 1996, would be permitted to continue in force
until the original term of the LMA expires. Under the FCC's proposal, television
LMAs that are entered into or renewed after November 5, 1996 would have to be
terminated if LMAs are made attributable interests and the LMA in question
resulted in a violation of the television multiple ownership rules. The
Company's LMAs with television stations WPTT in Pittsburgh, Pennsylvania, WNUV
in Baltimore, Maryland, WVTV in Milwaukee, Wisconsin, WRDC in Raleigh/Durham,
North Carolina, WABM in Birmingham, Alabama, and WDBB in Tuscaloosa, Alabama,
were in existence on both the date of enactment of the 1996 Act and November 5,
1996. The Company's LMAs with television stations KDNL in St. Louis, Missouri,
KOVR in Sacramento, California, WTTV and WTTK in Indianapolis, Indiana, WLOS in
Asheville, North Carolina, WFBC in Greenville-Spartanburg, South Carolina, KABB
in San Antonio, Texas, and KDSM in Des Moines, Iowa, were entered into
subsequent to the date of enactment of the 1996 Act but prior to November 5,
1996. The Company's LMA with television station KRRT in Kerrville, Texas was in
existence on the date of enactment of the 1996 Act, but was assumed by the
Company subsequent to that date but prior to November 5, 1996.
The TV duopoly rule currently prevents the Company from acquiring the
licenses of television stations with which it has LMAs in those markets where
the Company owns a television station. As a result, if the FCC were to decide
that the provider of programming services under a television LMA should be
treated as having an attributable interest in the brokered station, and if it
did not relax its television duopoly rule, the Company could be required to
modify or terminate those of its LMAs that were not in existence on the date of
enactment of the 1996 Act or on November 5, 1996. Furthermore, if the FCC adopts
its present proposal with respect to the grandfathering of television LMAs, the
Company could be required to terminate even those LMAs that were in effect prior
to the date of enactment of the 1996 Act or prior to November 5, 1996, after the
initial term of the LMA or upon assignment of the LMA. In such an event, the
Company could be required to pay termination penalties under certain of such
LMAs. Further, if the FCC were to find, in connection with any of the Company's
LMAs, that the owners/licensees of the stations with which the Company has LMAs
failed to maintain control over their operations as required by FCC rules and
policies, the licensee of the LMA station and/or the Company could be fined or
set for hearing, the outcome of which could be a monetary forfeiture or, under
certain circumstances, loss of the applicable FCC license. The Company is unable
to predict the ultimate outcome of possible changes to these FCC rules and the
impact such FCC rules may have on its broadcasting operations.
On June 1, 1995, the Chief of the FCC's Mass Media Bureau released a Public
Notice concerning the processing of television assignment and transfer
applications proposing LMAs. Due to the pendency of the ongoing rulemaking
proceeding concerning attribution of ownership, the Mass Media Bureau has placed
certain restrictions on the types of television assignment and transfer
applications involving LMAs that it will approve during the pendency of the
rulemaking. Specifically, the Mass Media Bureau has stated that it will not
approve arrangements where a time broker seeks to finance a station acquisition
and hold an option to purchase the station in the future. The Company believes
that none of the Company's LMAs or TBAs fall within the ambit of this Public
Notice.
Radio
National Ownership Rule. Prior to the 1996 Act, the FCC's rules limited an
individual or entity from holding attributable interests in more than 20 AM and
20 FM radio stations nationwide. Pursuant to the 1996 Act, the FCC has modified
its rules to eliminate any limitation on the number of radio stations a single
individual or entity may own nationwide.
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Local Ownership Rule. Prior to the 1996 Act, the FCC's rules generally
permitted an individual or entity to hold attributable interests in no more than
four radio stations in a local market (no more than two of which could be in the
same service (AM or FM)), and then only if the aggregate audience share of the
commonly owned stations did not exceed 25%. In markets with fewer than 15
commercial radio stations, an individual or entity could hold an attributable
interest in no more than three radio stations in the market (no more than two of
which could be in the same service), and then only if the number of the commonly
owned stations did not exceed 50% of the total number of commercial radio
stations in the market.
Pursuant to the 1996 Act, the limits on the number of radio stations one
entity may own locally have been increased as follows: (i) in a market with 45
or more commercial radio stations, an entity may own up to eight commercial
radio stations, not more than five of which are in the same service (AM or FM);
(ii) in a market with between 30 and 44 (inclusive) commercial radio stations,
an entity may own up to seven commercial radio stations, not more than four of
which are in the same service; (iii) in a market with between 15 and 29
(inclusive) commercial radio stations, an entity may own up to six commercial
radio stations, not more than four of which are in the same service; and (iv) in
a market with 14 or fewer commercial radio stations, an entity may own up to
five commercial radio stations, not more than three of which are in the same
service, except that an entity may not own more than 50% of the stations in such
market. These numerical limits apply regardless of the aggregate audience share
of the stations sought to be commonly owned. FCC ownership rules continue to
permit an entity to own one FM and one AM station in a local market regardless
of market size. Irrespective of FCC rules governing radio ownership, however,
the Department of Justice and the Federal Trade Commission have the authority to
determine, and in certain recent radio transactions not involving the Company
have determined, that a particular transaction presents antitrust concerns.
Local Marketing Agreements. As in television, a number of radio stations have
entered into LMAs. The Company has entered into LMAs with certain radio stations
in connection with the River City Acquisition.
The FCC's multiple ownership rules specifically permit radio station LMAs to
be entered into and implemented, so long as the licensee of the station which is
being programmed under the LMA maintains complete responsibility for and control
over programming and operations of its broadcast station and assures compliance
with applicable FCC rules and policies. For the purposes of the multiple
ownership rules, in general, a radio station being programmed pursuant to an LMA
by an entity is not considered an attributable ownership interest of that entity
unless that entity already owns a radio station in the same market. However, a
licensee that owns a radio station in a market, and brokers more than 15% of the
time on another station serving the same market, is considered to have an
attributable ownership interest in the brokered station for purposes of the
FCC's multiple ownership rules. As a result, in a market in which the Company
owns a radio station, the Company would not be permitted to enter into an LMA
with another local radio station which it could not own under the local
ownership rules, unless the Company's programming constituted 15% or less of the
other local station's programming time on a weekly basis. The FCC's rules also
prohibit a broadcast licensee from simulcasting more than 25% of its programming
on another station in the same broadcast service (i.e., AM-AM or FM-FM) through
a time brokerage or LMA arrangement where the brokered and brokering stations
serve substantially the same area.
Joint Sales Agreements. Over the past few years, a number of radio (and
television) stations have entered into cooperative arrangements commonly known
as joint sales agreements, or JSAs. While these agreements may take varying
forms, under the typical JSA, a station licensee obtains, for a fee, the right
to sell substantially all of the commercial advertising on a separately-owned
and licensed station in the same market. The typical JSA also customarily
involves the provision by the selling licensee of certain sales, accounting, and
"back office" services to the station whose advertising is being sold. The
typical JSA is distinct from an LMA in that a JSA (unlike an LMA) normally does
not involve programming. In connection with the River City Acquisition, the
Company has assumed River City's rights under JSAs with three radio stations.
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The FCC has determined that issues of joint advertising sales should be left
to enforcement by antitrust authorities, and therefore does not generally
regulate joint sales practices between stations. Currently, stations for which a
licensee sells time under a JSA are not deemed by the FCC to be attributable
interests of that licensee. However, in connection with its ongoing rulemaking
proceeding concerning the attribution rules, the FCC is considering whether JSAs
should be considered attributable interests or within the scope of the FCC's
cross-interest policy, particularly when JSAs contain provisions for the supply
of programming services and/or other elements typically associated with LMAs. If
JSAs become attributable interests as a result of changes in the FCC rules, the
Company may be required to terminate any JSA it might have with a radio station
which the Company could not own under the FCC's multiple ownership rules.
OTHER OWNERSHIP MATTERS
There remain in place after the 1996 Act a number of additional
cross-ownership rules and prohibitions pertaining to licensees of television and
radio stations. FCC rules, the Communications Act, or both generally prohibit an
individual or entity from having an attributable interest in both a television
station and a radio station, a daily newspaper, or a cable television system
that is located in or serves the same market area.
Antitrust Regulation. The Department of Justice and the Federal Trade
Commission have recently increased their scrutiny of the television and radio
industry, and have indicated their intention to review matters related to the
concentration of ownership within markets (including LMAs and JSAs) even when
the ownership or LMA or JSA in question is permitted under the laws administered
by the FCC or by FCC rules and regulations.
Radio/Television Cross-Ownership Rule. The FCC's radio/television
cross-ownership rule (the "one to a market" rule) generally prohibits a single
individual or entity from having an attributable interest in a television
station and a radio station serving the same market. However, in each of the 25
largest local markets in the United States, provided that there are at least 30
separately owned stations in the particular market, the FCC has traditionally
employed a policy that presumptively allows waivers of the one to a market rule
to permit the common ownership of one AM, one FM and one TV station in the
market. The 1996 Act directs the FCC to extend this policy to each of the top 50
markets. Moreover, the FCC has pending a rulemaking proceeding in which it has
solicited comment on whether the one to a market rule should be eliminated
altogether.
However, the FCC does not apply its presumptive waiver policy in cases
involving the common ownership of one television station, and two or more radio
stations in the same service (AM or FM), in the same market. Pending its ongoing
rulemaking proceeding to reexamine the one to a market rule, the FCC has stated
that it will consider waivers of the rule in such instances on a case-by-case
basis, considering (i) the public service benefits that will arise from the
joint operation of the facilities such as economies of scale, cost savings and
programming and service benefits; (ii) the types of facilities involved; (iii)
the number of media outlets owned by the applicant in the relevant market; (iv)
the financial difficulties of the stations involved; and (v) the nature of the
relevant market in light of the level of competition and diversity after joint
operation is implemented. The FCC has stated that it expects that any such
waivers that are granted will be conditioned on the outcome of the rulemaking
proceeding. The Company has applied for such a waiver with respect to ownership
of a television station and radio stations in the St. Louis market, and there
can be no assurance that this waiver will be granted.
In its ongoing rulemaking proceeding to reexamine the one to a market rule,
the FCC has proposed the following options for modifying the rule in the event
it is not eliminated: (i) extending the presumptive waiver policy to any
television market in which a specified number of independently owned voices
would remain after common ownership of a television station and one or more
radio stations is effectuated; (ii) extending the presumptive waiver policy to
entities that seek to own more than one FM and/or one AM radio station; (iii)
reducing the minimum number of independently owned voices that must remain after
a transaction is effectuated; and (iv) modifying the five-factor case-by-case
test for waivers.
Local Television/Cable Cross-Ownership Rule. While the 1996 Act eliminates a
previous statutory prohibition against the common ownership of a television
broadcast station and a cable system that
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serve the same local market, the 1996 Act leaves the current FCC rule in place.
The legislative history of the Act indicates that the repeal of the statutory
ban should not prejudge the outcome of any FCC review of the rule.
Broadcast Network/Cable Cross-Ownership Rule. The 1996 Act directs the FCC to
eliminate its rules which formerly prohibited the common ownership of a
broadcast network and a cable system, subject to the provision that the FCC
revise its rules as necessary to ensure carriage, channel positioning, and
non-discriminatory treatment of non-affiliated broadcast stations by cable
systems affiliated with a broadcast network. In March 1996, the FCC issued an
order implementing this legislative change.
Broadcast/Daily Newspaper Cross-Ownership Rule. The FCC's rules prohibit the
common ownership of a radio or television broadcast station and a daily
newspaper in the same market. The 1996 Act does not eliminate or modify this
prohibition. In October 1996, however, the FCC initiated a rulemaking proceeding
to determine whether it should liberalize its waiver policy with respect to
cross-ownership of a daily newspaper and one or more radio stations in the same
market.
Dual Network Rule. The 1996 Act directs the FCC to repeal its rule which
formerly prohibited an entity from operating more than one television network.
In March 1996, the FCC issued an order implementing this legislative change.
Under the modified rule, a network entity is permitted to operate more than one
television network, provided, however, that ABC, CBS, NBC, and/or Fox are
prohibited from merging with each other or with another network television
entity such as UPN or Warner Brothers.
Expansion of the Company's broadcast operations on both a local and national
level will continue to be subject to the FCC's ownership rules and any changes
the FCC or Congress may adopt. Concomitantly, any further relaxation of the
FCC's ownership rules may increase the level of competition in one or more of
the markets in which the Company's stations are located, more specifically to
the extent that any of the Company's competitors may have greater resources and
thereby be in a superior position to take advantage of such changes.
MUST-CARRY/RETRANSMISSION CONSENT
Pursuant to the Cable Act of 1992, television broadcasters are required to
make triennial elections to exercise either certain "must-carry" or
"retransmission consent" rights in connection with their carriage by cable
systems in each broadcaster's local market. By electing the must-carry rights, a
broadcaster demands carriage on a specified channel on cable systems within its
Area of Dominant Influence, in general as defined by the Arbitron 1991-92
Television Market Guide. These must-carry rights are not absolute, and their
exercise is dependent on variables such as (i) the number of activated channels
on a cable system; (ii) the location and size of a cable system; and (iii) the
amount of programming on a broadcast station that duplicates the programming of
another broadcast station carried by the cable system. Therefore, under certain
circumstances, a cable system may decline to carry a given station.
Alternatively, if a broadcaster chooses to exercise retransmission consent
rights, it can prohibit cable systems from carrying its signal or grant the
appropriate cable system the authority to retransmit the broadcast signal for a
fee or other consideration. In October 1996, the Company elected must-carry or
retransmission consent with respect to each of its markets based on its
evaluation of the respective markets and the position of the Company's station
within the market. The Company's stations continue to be carried on all
pertinent cable systems, and the Company does not believe that its election has
resulted in the shifting of its stations to less desirable cable channel
locations. Certain of the Company's stations affiliated with Fox are required to
elect retransmission consent, because Fox's retransmission consent negotiations
on behalf of the Company resulted in agreements which extend into 1998.
Therefore, the Company will need to negotiate retransmission consent agreements
for these Fox-affiliated stations to attain carriage on those relevant cable
systems for the balance of this triennial period (i.e., through December 31,
1999). For subsequent elections beginning with the election to be made by
October 1, 1999, the must-carry market will be the station's DMA, in general as
defined by the Nielsen DMA Market and Demographic Rank Report of the prior year.
The must-carry rules have been subject to judicial scrutiny. In April 1993,
the United States District Court for the District of Columbia summarily upheld
the constitutionality of the legislative must-carry provisions under a First
Amendment challenge. However, in June 1994, the Supreme Court remanded the case
to the lower court with instructions to test the constitutionality of the
must-carry rules under an
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"intermediate scrutiny" standard. In a decision issued in December 1995, a
closely divided three-judge District Court panel ruled that the record showed
that there was substantial evidence before Congress from which it could draw the
reasonable inferences that (1) the must-carry rules were necessary to protect
the local broadcast industry; and (2) the burdens on cable systems with rapidly
increasing channel capacity would be quite small. Accordingly, the District
Court panel ruled that Congress had not violated the First Amendment in enacting
the "must-carry" provisions. The case is once again on appeal to the Supreme
Court, which heard oral arguments in October 1996. The Company cannot predict
the final outcome of the Supreme Court case or how it may affect the Company's
cable contracts.
SYNDICATED EXCLUSIVITY/TERRITORIAL EXCLUSIVITY
The FCC has imposed syndicated exclusivity rules and expanded existing
network nonduplication rules. The syndicated exclusivity rules allow local
broadcast television stations to demand that cable operators black out
syndicated non-network programming carried on "distant signals" (i.e., signals
of broadcast stations, including so-called "superstations," which serve areas
substantially removed from the cable system's local community). The network
non-duplication rules allow local broadcast network television affiliates to
require that cable operators black out duplicating network programming carried
on distant signals. However, in a number of markets in which the Company owns or
programs stations affiliated with a network, a station that is affiliated with
the same network in a nearby market is carried on cable systems in the Company's
market. This is not in violation of the FCC's syndicated exclusivity rules.
However, the carriage of two network stations on the same cable system could
result in a decline of viewership adversely affecting the revenues of the
Company owned or programmed station.
RESTRICTIONS ON BROADCAST ADVERTISING
Advertising of cigarettes and certain other tobacco products on broadcast
stations has been banned for many years. Various states restrict the advertising
of alcoholic beverages. Congressional committees have recently examined
legislation proposals which may eliminate or severely restrict the advertising
of beer and wine. Although no prediction can be made as to whether any or all of
the present proposals will be enacted into law, the elimination of all beer and
wine advertising would have an adverse effect upon the revenues of the Company's
stations, as well as the revenues of other stations which carry beer and wine
advertising.
The FCC has imposed commercial time limitations in children's television
programming pursuant to legislation. In television programs designed for viewing
by children of 12 years of age and under, commercial matter is limited to 12
minutes per hour on weekdays and 10.5 minutes per hour on weekends. In granting
renewal of the license for WBFF-TV, the FCC imposed a fine of $10,000 on the
Company alleging that the station had exceeded these limitations.
The Communications Act and FCC rules also place restrictions on the
broadcasting of advertisements by legally qualified candidates for elective
office. Among other things, (i) stations must provide "reasonable access" for
the purchase of time by legally qualified candidates for federal office; (ii)
stations must provide "equal opportunities" for the purchase of equivalent
amounts of comparable broadcast time by opposing candidates for the same
elective office; and (iii) during the 45 days preceding a primary or primary
run-off election and during the 60 days preceding a general or special election,
legally qualified candidates for elective office may be charged no more than the
station's "lowest unit charge" for the same class of advertisement, length of
advertisement, and daypart.
PROGRAMMING AND OPERATION
General. The Communications Act requires broadcasters to serve the "public
interest." The FCC gradually has relaxed or eliminated many of the more
formalized procedures it had developed in the past to promote the broadcast of
certain types of programming responsive to the needs of a station's community of
license. FCC licensees continue to be required, however, to present programming
that is responsive to community issues, and to maintain certain records
demonstrating such responsiveness. Complaints from viewers concerning a
station's programming often will be considered by the FCC when it evaluates
renewal applications of a licensee, although such complaints may be filed at any
time and
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generally may be considered by the FCC at any time. Stations also must pay
regulatory and application fees, and follow various rules promulgated under the
Communications Act that regulate, among other things, political advertising,
sponsorship identifications, the advertisement of contests and lotteries,
obscene and indecent broadcasts, and technical operations, including limits on
radiofrequency radiation. In addition, licensees must develop and implement
affirmative action programs designed to promote equal employment opportunities,
and must submit reports to the FCC with respect to these matters on an annual
basis and in connection with a renewal application. Failure to observe these or
other rules and policies can result in the imposition of various sanctions,
including monetary forfeitures, or the grant of a "short" (i.e., less than the
full) renewal term or, for particularly egregious violations, the denial of a
license renewal application or the revocation of a license.
Children's Television Programming. Pursuant to legislation enacted in 1991,
all television stations have been required to broadcast some television
programming designed to meet the educational and informational needs of children
16 years of age and under. In August 1996, the FCC adopted new rules setting
forth more stringent children's programming requirements. Specifically, as of
September 1, 1997, television stations will be required to broadcast a minimum
of three hours per week of "core" children's educational programming, which the
FCC defines as programming that (i) has serving the educational and
informational needs of children 16 years of age and under as a significant
purpose; (ii) is regularly scheduled, weekly and at least 30 minutes in
duration; and (iii) is aired between the hours of 7:00 a.m. and 10:00 p.m.
Furthermore, since January 2, 1997, "core" children's educational programs, in
order to qualify as such, are required to be identified as educational and
informational programs over the air at the time they are broadcast, and are
required to be identified in the children's programming reports required to be
placed in stations' public inspection files. Additionally, since January 2,
1997, television stations are required to identify and provide information
concerning "core" children's programming to publishers of program guides and
listings.
Television Violence. The 1996 Act contains a number of provisions relating to
television violence. First, pursuant to the 1996 Act, the television industry
has developed a ratings system, and the FCC has recently solicited public
comment on that system. Furthermore, the 1996 Act provides that all television
sets larger than 13 inches that are manufactured one year after enactment of the
1996 Act must include the so-called "V-chip," a computer chip that allows
blocking of rated programming. In addition, the 1996 Act requires that all
television license renewal applications filed after May 1, 1995 contain
summaries of written comments and suggestions received by the station from the
public regarding violent programming.
Closed Captioning. The 1996 Act directs the FCC to adopt rules requiring
closed captioning of all broadcast television programming, except where
captioning would be "economically burdensome." The FCC has recently instituted a
rulemaking proceeding to implement such rules.
PROPOSED CHANGES
The Congress and the FCC have under consideration, and in the future may
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation, ownership
and profitability of the Company's broadcast stations, result in the loss of
audience share and advertising revenues for the Company's broadcast stations,
and affect the ability of the Company to acquire additional broadcast stations
or finance such acquisitions. In addition to the changes and proposed changes
noted above, such matters include, for example, the license renewal process,
spectrum use fees, political advertising rates, potential restrictions on the
advertising of certain products (beer, wine and hard liquor, for example), and
the rules and policies to be applied in enforcing the FCC's equal employment
opportunity regulations. Other matters that could affect the Company's broadcast
properties include technological innovations and developments generally
affecting competition in the mass communications industry, such as direct radio
and television broadcast satellite service, the continued establishment of
wireless cable systems and low power television stations, digital television and
radio technologies, and the advent of telephone company participation in the
provision of video programming service.
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OTHER CONSIDERATIONS
The foregoing summary does not purport to be a complete discussion of all
provisions of the Communications Act or other congressional acts or of the
regulations and policies of the FCC. For further information, reference should
be made to the Communications Act, other congressional acts, and regulations and
public notices promulgated from time to time by the FCC. There are additional
regulations and policies of the FCC and other federal agencies that govern
political broadcasts, public affairs programming, equal employment opportunity,
and other matters affecting the Company's business and operations.
ENVIRONMENTAL REGULATION
Prior to the Company's ownership or operation of its facilities, substances
or waste that are or might be considered hazardous under applicable
environmental laws may have been generated, used, stored or disposed of at
certain of those facilities. In addition, environmental conditions relating to
the soil and groundwater at or under the Company's facilities may be affected by
the proximity of nearby properties that have generated, used, stored or disposed
of hazardous substances. As a result, it is possible that the Company could
become subject to environmental liabilities in the future in connection with
these facilities under applicable environmental laws and regulations. Although
the Company believes that it is in substantial compliance with such
environmental requirements, and has not in the past been required to incur
significant costs in connection therewith, there can be no assurance that the
Company's costs to comply with such requirements will not increase in the
future. The Company presently believes that none of its properties have any
condition that is likely to have a material adverse effect on the Company's
financial condition or results of operations.
COMPETITION
The Company's television and radio stations compete for audience share and
advertising revenue with other television and radio stations in their respective
DMAs, as well as with other advertising media, such as newspapers, magazines,
outdoor advertising, transit advertising, yellow page directories, direct mail
and local cable and wireless cable systems. Some competitors are part of larger
organizations with substantially greater financial, technical and other
resources than the Company.
Television Competition. Competition in the television broadcasting industry
occurs primarily in individual DMAs. Generally, a television broadcasting
station in one DMA does not compete with stations in other DMAs. The Company's
television stations are located in highly competitive DMAs. In addition, certain
of the Company's DMAs are overlapped by both over-the-air and cable carriage of
stations in adjacent DMAs, which tends to spread viewership and advertising
expenditures over a larger number of television stations.
Broadcast television stations compete for advertising revenues primarily with
other broadcast television stations, radio stations and cable system operators
serving the same market. Major Network programming generally achieves higher
household audience levels than Fox, UPN and WB programming and syndicated
programming aired by independent stations. This can be attributed to a
combination of factors, including the Major Networks' efforts to reach a broader
audience, generally better signal carriage available when broadcasting over VHF
channels 2 through 13 versus broadcasting over UHF channels 14 through 69 and
the higher number of hours of Major Network programming being broadcast weekly.
However, greater amounts of advertising time are available for sale during Fox,
UPN and WB programming and non-network syndicated programming, and as a result
the Company believes that the Company's programming typically achieves a share
of television market advertising revenues greater than its share of the market's
audience.
Television stations compete for audience share primarily on the basis of
program popularity, which has a direct effect on advertising rates. A large
amount of the Company's prime time programming is supplied by Fox and to a
lesser extent UPN, WB, ABC and CBS. In those periods, the Company's affiliated
stations are totally dependent upon the performance of the networks' programs in
attracting viewers. Non-network time periods are programmed by the station
primarily with syndicated programs
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purchased for cash, cash and barter, or barter-only, and also through
self-produced news, public affairs and other entertainment programming.
Television advertising rates are based upon factors which include the size of
the DMA in which the station operates, a program's popularity among the viewers
that an advertiser wishes to attract, the number of advertisers competing for
the available time, the demographic makeup of the DMA served by the station, the
availability of alternative advertising media in the DMA (including radio and
cable), the aggressiveness and knowledge of sales forces in the DMA and
development of projects, features and programs that tie advertiser messages to
programming. The Company believes that its sales and programming strategies
allow it to compete effectively for advertising within its DMAs.
Other factors that are material to a television station's competitive
position include signal coverage, local program acceptance, network affiliation,
audience characteristics and assigned broadcast frequency. Historically, the
Company's UHF broadcast stations have suffered a competitive disadvantage in
comparison to stations with VHF broadcast frequencies. This historic
disadvantage has gradually declined through (i) carriage on cable systems, (ii)
improvement in television receivers, (iii) improvement in television
transmitters, (iv) wider use of all channel antennae, (v) increased availability
of programming, and (vi) the development of new networks such as Fox, UPN and
WB.
The broadcasting industry is continuously faced with technical changes and
innovations, the popularity of competing entertainment and communications media,
changes in labor conditions, and governmental restrictions or actions of Federal
regulatory bodies, including the FCC, any of which could possibly have a
material effect on a television station's operations and profits. There are
sources of video service other than conventional television stations, the most
common being cable television, which can increase competition for a broadcast
television station by bringing into its market distant broadcasting signals not
otherwise available to the station's audience, serving as a distribution system
for national satellite-delivered programming and other non-broadcast programming
originated on a cable system and selling advertising time to local advertisers.
Other principal sources of competition include home video exhibition,
direct-to-home broadcast satellite television ("DBS") entertainment services and
multichannel multipoint distribution services ("MMDS"). Moreover, technology
advances and regulatory changes affecting programming delivery through fiber
optic telephone lines and video compression could lower entry barriers for new
video channels and encourage the development of increasingly specialized "niche"
programming. The 1996 Act permits telephone companies to provide video
distribution services via radio communication, on a common carrier basis, as
"cable systems" or as "open video systems," each pursuant to different
regulatory schemes. The Company is unable to predict the effect that
technological and regulatory changes will have on the broadcast television
industry and on the future profitability and value of a particular broadcast
television station.
The FCC authorizes DBS services throughout the United States. Currently, two
FCC permites, DirecTV and United States Satellite Broadcasting, provide
subscription DBS services via high-power communications satellites and small
dish receivers, and other companies provide direct-to-home video service using
lower powered satellites and larger receivers. Additional companies are expected
to commence direct-to-home operations in the near future. DBS and MMDS, as well
as other new technologies, will further increase competition in the delivery of
video programming.
The Company cannot predict what other matters might be considered in the
future, nor can it judge in advance what impact, if any, the implementation of
any of these proposals or changes might have on its business.
The Company is exploring ways in which it might take advantage of new
technology, including the delivery of additional content and services via the
broadcast spectrum. There can be no assurance that any such efforts will result
in the development of technology or services that are commercially successful.
The Company also competes for programming, which involves negotiating with
national program distributors or syndicators that sell first-run and rerun
packages of programming. The Company's stations compete for exclusive access to
those programs against in-market broadcast station competitors for syndicated
products. Cable systems generally do not compete with local stations for
programming, although various national cable networks from time to time have
acquired programs that would have
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otherwise been offered to local television stations. Public broadcasting
stations generally compete with commercial broadcasters for viewers but not for
advertising dollars.
Historically, the cost of programming had increased because of an increase in
the number of new Independent stations and a shortage of quality programming.
However, the Company believes that over the past five years program prices have
stabilized and, in some instances, have declined as a result of recent increases
in the supply of programming and the failure of some Independent stations.
The Company believes it competes favorably against other television stations
because of its management skill and experience, the ability of the Company
historically to generate revenue share greater than its audience share, the
network affiliations and its local program acceptance. In addition, the Company
believes that it benefits from the operation of multiple broadcast properties,
affording it certain nonquantifiable economies of scale and competitive
advantages in the purchase of programming.
Radio Competition. Radio broadcasting is a highly competitive business, and
each of the radio stations operated by the Company competes for audience share
and advertising revenue directly with other radio stations in its geographic
market, as well as with other media, including television, cable television,
newspapers, magazines, direct mail and billboard advertising. The audience
ratings and advertising revenue of each of such stations are subject to change,
and any adverse change in a particular market could have a material adverse
effect on the revenue of such radio stations located in that market. There can
be no assurance that any one of the Company's radio stations will be able to
maintain or increase its current audience ratings and radio advertising revenue
market share.
The Company will attempt to improve each radio station's competitive position
with promotional campaigns designed to enhance and reinforce its identities with
the listening public. Extensive market research is conducted in order to
identify specific demographic groups and design a programming format for those
groups. The Company seeks to build a strong listener base composed of specific
demographic groups in each market, and thereby attract advertisers seeking to
reach these listeners. Aside from building its stations' identities and
targeting its programming at specific demographic groups, management believes
that the Company also obtains a competitive advantage by operating duopolies or
multiple stations in the nation's larger mid-size markets.
The radio broadcasting industry is also subject to competition from new media
technologies that are being developed or introduced, such as the delivery of
audio programming by cable television systems and by digital audio broadcasting
("DAB"). DAB may provide a medium for the delivery by satellite or terrestrial
means of multiple new audio programming formats to local and national audiences.
Historically, the radio broadcasting industry has grown in terms of total
revenues despite the introduction of new technologies for the delivery of
entertainment and information, such as television broadcasting, cable
television, audio tapes and compact disks. There can be no assurance, however,
that the development or introduction in the future of any new media technology
will not have an adverse effect on the radio broadcast industry.
EMPLOYEES
As of December 31, 1996, the Company had approximately 2,359 employees. With
the exception of certain of the employees of KOVR-TV, KDNL-TV, WBEN-AM and
WWL-AM, none of the employees are represented by labor unions under any
collective bargaining agreement. No significant labor problems have been
experienced by the Company, and the Company considers its overall labor
relations to be good.
ITEM 2. PROPERTIES
Generally, each of the Company's stations has facilities consisting of
offices, studios and tower sites. Transmitter and tower sites are located to
provide maximum signal coverage of the stations' markets. The following table
generally describes the Company's principal owned and leased real property in
each of its markets of operation:
24
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
SIZE (SQ.
TELEVISION PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED(A) FEET)
- ----------------------- -------------------------------------------------- ---------------------------- ---------------
<S> <C> <C> <C>
Pittsburgh Market Station Site for WPTT Owned 30,000
Station Site for WPGH Leased (expires 10/01/2028) 25,500
Space on WPGH Tower Site Leased (expires 02/23/2039) On site of station
Baltimore Market Old WBFF Studio Leased (month to month) 2,000
WBFF Studio and Company Offices Leased (expires 09/01/2011) 39,000
WBFF Parking Lot Leased (month to month) N/A
Space on Main WBFF Tower for Antenna Leased (expires 04/01/2007) N/A
Space on Main WBFF Tower for Transmission Disks Leased (expires 04/01/2011) N/A
Space on Main WBFF Tower for Receivers Leased (expires 04/01/2012) N/A
Space on Backup WBFF Tower for Antenna Leased (expires 03/15/2000) N/A
Milwaukee Market WVTV Studio Site Owned 37,800
WVTV Transmitter Site Land Leased (expires 01/30/2030) N/A
WVTV Transmitter Site Building Owned 6,200
WCGV Studio Site Owned 22,296
WCGV Studio & Transmitter Site Leased (expires 12/31/2029) N/A
Raleigh/Durham Mkt WLFL/WRDC Studio Site Leased (expires 07/29/2021) 26,600
WLFL Tower Site Land Leased (expires 12/31/2018) 1,800
Columbus Market WTTE Studio Site Leased (expires 12/31/2002) 14,400
WTTE Office Space Leased (expires 06/01/2003) 4,500
WTTE Tower Site Leased (month to month) 1,000
Norfolk Market WTVZ Studio Site Leased (expires 07/31/2009) 15,000
Space on WHRD Tower Leased (expires 09/30/97)
Birmingham Market WTTO Tower and Old WTTO Studio Owned 9,500
WTTO Studio Site Leased (expires 1/31/2016) 9,750
WABM Studio Site Leased (expires 1/31/2016) 9,750
Flint/Saginaw/Bay WSMH Studio & Office Site Owned 13,800
City Market WSMH Sales Office Site Leased (month to month) 525
WSMH Transmitter Site Leased (expires 11/13/2004)
Tuscaloosa Market WDBB Studio & Office Site Leased (month to month) 4,605
WDBB Transmitter Site Leased (month to month) 678
Kansas City Market KSMO Studio & Office Site Leased (expires 02/28/2011) 10,867
KSMO Transmitter Site Leased (expires 07/12/2013) 1,250
Cincinnati Market WSTR Studio & Office Site Owned 14,800
WSTR Transmitter Site Owned 6,600
W66AQ Translator Leased (month to month) N/A
Peoria Market WYZZ Studio & Office Site Owned 6,000
WYZZ Transmitter Site -- real property only Leased (expires 12/01/2001) 600
WYZZ Transmitter Site -- tower, transmitter, Owned N/A
building, & equipment
Oklahoma City KOCB Studio & Office Site Owned 12,000
Market KOCB Transmitter Site Owned Included above
Lexington Market WDKY Studio & Office Site Leased (expires 12/31/2010) 12,000
WDKY Transmitter Site Owned 2,900
25
<PAGE>
APPROXIMATE
SIZE (SQ.
TELEVISION PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED(A) FEET)
- ----------------------- -------------------------------------------------- ---------------------------- ---------------
Indianapolis Market WTTV/WTTK Studio & Office Site (building) Owned 19,900
WTTV/WTTK Studio & Office Site (lot) Owned 18.5 acres
WTTV Transmitter Site Owned 2,730
WTTK Transmitter Site Owned 800
Bloomington microwave site Leased (expires 07/05/2077) 216
Sacramento Market KOVR Studio & Office Site Owned 42,600
KOVR Stockton Office Site Leased (expires 03/31/1999) 1,000
KOVR Transmitter Site 50% Ownership N/A
KOVR Back-up Transmitter Site 1/3 Ownership N/A
Mt Oso Microwave Site Leased (month to month) N/A
Volmer Peak Microwave Site Leased (expires 06/30/2000) N/A
Downtown Sacramento Microwave Site Leased (expires 05/31/1999) N/A
Elverta Microwave Site Leased (expires 07/31/1999) N/A
San Antonio Market KABB/KRRT Studio & Office Site Owned by KABB 22,460
KABB/KRRT Transmitter building/tower Owned 1200/1200
KABB/KRRT Transmitter land Leased (expires 06/30/2007) 35.562 acres
Asheville/Spartanburg WFBC/WLOS Studio & Office Site Owned by WLOS 28,000
Market WLOS Transmitter tower, building, land Leased (expires 12/31/2001) N/A
WFBC Transmitter Site Owned by WFBC 45 6 acres
WFBC/WAXA studio Owned 6,000
KDNL Studio & Office (Lot) Owned 53,550
St Louis Market KDNL Studio & Office (building) Owned 41,372
KDNL Transmitter Site (2 buildings) Owned 1,600 & 1,330
Des Moines Market KDSM Studio & Office Site Leased (expired) 13,000
KDSM Transmitter building/tower Owned 2,000
KDSM Transmitter land Leased (expires 11/08/2034) 40 Acres
APPROXIMATE
RADIO PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED(A) SIZE (SQ. FEET)
- ----------- -------------------------------------------------- ---------------------------- ---------------
Buffalo Market WWKB/WKSE Studio & Office Site Leased (expires 09/30/1998) 5,000
WWKB/WKSE Office Site Leased (expires 09/30/1998) 5,200
WBEN/WMJQ Studio & Office Site Leased (expires 12/31/1998) 7,750
WBEN Transmitter Site Owned 1,024
WWKB Transmitter Site Owned 2,600
WMJQ Transmitter Site Leased (expires 12/31/1998) 825
WKSE Transmitter Site Owned 6,722
Memphis Market WJCE/WRVR/WOGY Studio & Office Site Leased (expires 12/02/98) 10,000
WJCE Transmitter Site Leased (expires 03/27/2035) 2,262
WRVR Transmitter Site Leased (expires 12/31/2003) 169
WOGY Transmitter Site (on 4 5 acres) Owned 340
New Orleans Market WWL/WSMB/WLMG/KMEZ
Studio & Office Site Leased (expires 08/31/2002) 11,553
WWL Transmitter Site Owned 64.62 acres
WSMB Transmitter Site Owned 3,600
WLMG Transmitter Site Leased (expires 10/27/2014) N/A
KMEZ Transmitter Site Leased (expires 03/14/2001) N/A
Nashville/Russellville WLAC-AM / WLAC-FM / WJZC / Road Gang /IRN Leased (expires 06/30/1999) 18,800
Market Studio & Office Site
WLAC-AM Transmitter Site Owned 27.69 acres
WLAC-FM Transmitter Site 1/3 Owned (3-way ownership) 18.12 acres
WJZC Transmitter Site (land) Leased (expires 09/27/2019) 400
WJZC Transmitter Site (tower & building) Owned 1,324
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
RADIO PROPERTIES TYPE OF FACILITY AND USE OWNED OR LEASED(A) SIZE (SQ. FEET)
- ------------------ ---------------------------------- ------------------------ ----------------
<S> <C> <C> <C>
Wilkes Barre/ WILK/WGBI/WGGY/WKRZ Leased (expires
Scranton Market Studio & Office Site 12/31/1998) 14,000
Leased (expires
WILK Transmitter Site 08/31/1999) 1,000
Leased (expires
WGBI Transmitter Site 02/28/2000) 1,000
Leased (expires
WGGY Transmitter Site 02/28/2000) 300
WKRZ Transmitter Site (building) Owned 4,052
St. Louis Market . KPNT/WVRV Studio & Office Site Owned 1,753
KPNT Transmitter Site Owned 7450
WVRV Transmitter Site Owned 7,278
WVRV back up building Owned 240
Los Angeles Market KBLA Studio & Office
Site-building Owned 6,000
KBLA Transmitter Site - land Owned 3 acres
</TABLE>
(a) Lease expiration dates assume exercise of all renewal options of the
lessee.
The Company believes that all of its properties, both owned and leased, are
generally in good operating condition, subject to normal wear and tear, and are
suitable and adequate for the Company's current business operations.
ITEM 3. LEGAL PROCEEDINGS
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business. Management, after reviewing developments to date
with legal counsel, is of the opinion that the outcome of such matters will not
have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during the
fourth quarter of 1996.
27
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
Effective June 13, 1995, the common stock of the Company was listed for
trading on the Nasdaq stock market under the symbol SBGI. The following table
sets forth for the periods indicated the high and low sales prices on the Nasdaq
stock market.
1995 High Low
- -------------------------------------- ------- ---------
Second Quarter (from June 13) ........ $ 29.00 $ 23.50
Third Quarter ........................ 31.00 27.375
Fourth Quarter ....................... 27.75 16.25
1996 High Low
- -------------------------------------- ------- ---------
First Quarter ........................ $ 26.50 $ 16.875
Second Quarter ....................... 43.50 25.50
Third Quarter ........................ 46.50 36.125
Fourth Quarter ....................... 43.75 23.00
As of April 7, 1997, there were approximately 66 stockholders of record of
the common stock of the Company. This number does not include beneficial owners
holding shares through nominee names. Based on information available to it, the
Company believes it has more than 1,500 beneficial owners of its Class A Common
Stock.
The Company generally has not paid a dividend on its common stock and does
not expect to pay dividends on its common stock in the foreseeable future. The
Bank Credit Agreement and certain subordinated debt of the Company generally
prohibit the Company from paying dividends on its common stock. Under the
indentures governing the Company's 10% Senior Subordinated Notes due 2003 and
the Company's 10% Senior Subordinated Notes due 2005 (the "Indentures"), the
Company is not permitted to pay dividends on its common stock unless certain
specified conditions are satisfied, including that (i) no event of default then
exists under the Indentures or certain other specified agreements relating to
indebtedness of the Company and (ii) the Company, after taking account of the
dividend, is in compliance with certain net cash flow requirements contained in
the Indentures. In addition, under certain senior unsecured debt of the Company,
the payment of dividends is not permissible during a default thereunder.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for the years ended December 31,
1992, 1993, 1994, 1995 and 1996 have been derived from the Company's audited
Consolidated Financial Statements. The Consolidated Financial Statements for the
years ended December 31, 1994, 1995 and 1996 are included elsewhere in this Form
10-K/A.
The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere in this Form 10-K/A.
28
<PAGE>
STATEMENT OF OPERATIONS DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net broadcast revenues (a) ................... $ 61,081 $ 69,532 $ 118,611 $ 187,934 $ 346,459
Barter revenues .............................. 8,805 6,892 10,743 18,200 32,029
---------- ---------- ---------- ---------- ----------
Total revenues ............................... 69,886 76,424 129,354 206,134 378,488
---------- ---------- ---------- ---------- ----------
Operating expenses, excluding depreciation and
amortization and special bonuses paid to
executive officers ........................ 32,993 32,295 50,545 80,446 167,765
Depreciation and amortization (b) ............ 30,943 22,486 55,587 80,410 121,081
Amortization of deferred compensation ........ -- -- -- -- 739
Special bonuses paid to executive officers ... -- 10,000 3,638 -- --
---------- ---------- ---------- ---------- ----------
Broadcast operating income ................... 5,950 11,643 19,584 45,278 88,903
---------- ---------- ---------- ---------- ----------
Interest and amortization of debt discount
expense ................................... 12,997 12,852 25,418 39,253 84,314
Interest and other income .................... 1,207 2,131 2,447 4,163 3,478
---------- ---------- ---------- ---------- ----------
Income (loss) before provision (benefit) for
income taxes and extraordinary items ...... $ (5,840) $ 922 $ (3,387) $ 10,188 $ 8,067
========== ========== ========== ========== ==========
Net income (loss) ............................ $ (4,651) $ (7,945) $ (2,740) $ 76 $ 1,131
========== ========== ========== ========== ==========
OTHER DATA:
Broadcast cash flow (c) ..................... $ 28,019 $ 37,498 $ 67,519 $ 111,124 $ 189,216
Broadcast cash flow margin (d) .............. 45.9% 53.9% 56.9% 59.1% 54.6%
Operating cash flow (e) ..................... $ 26,466 $ 35,406 $ 64,547 $ 105,750 $ 180,272
Operating cash flow margin (d) .............. 43.3% 50.9% 54.4% 56.3% 52.0%
After tax cash flow (f) ..................... $ 15,865 $ 23,725 $ 42,223 $ 65,460 $ 92,500
After tax cash flow margin (d) .............. 26.0% 34.1% 35.6% 34.8% 26.7%
Program contract payments ................... $ 10,427 $ 8,723 $ 14,262 $ 19,938 $ 30,451
Capital expenditures ........................ $ 426 $ 528 $ 2,352 $ 1,702 $ 12,609
Corporate expense ........................... $ 1,553 $ 2,092 $ 2,972 $ 5,374 $ 8,944
PER SHARE DATA:
After tax cash flow per share (g) ........... $ 0.55 $ 0.82 $ 1.46 $ 2.03 $ 2.47
Net income (loss) per share before
extraordinary items ........................ $ (0.16) $ -- $ (0.09) $ 0.15 $ 0.03
Net income (loss) per common share .......... $ (0.16) $ (0.27) $ (0.09) $ -- $ 0.03
BALANCE SHEET DATA:
Cash and cash equivalents ................... $ 1,823 $ 18,036 $ 2,446 $ 112,450 $ 2,341
Total assets ................................ $ 140,366 $ 242,917 $ 399,328 $ 605,272 $1,707,297
Total debt (h) .............................. $ 110,659 $ 224,646 $ 346,270 $ 418,171 $1,288,147
Total stockholders' equity (deficit) ........ $ (3,127) $ (11,024) $ (13,723) $ 96,374 $ 237,253
</TABLE>
- ----------
(a) Net broadcast revenues are defined as broadcast revenues net of agency
commissions.
(b) Depreciation and amortization includes amortization of program contract
costs and net realizable value adjustments, depreciation and amortization
of property and equipment, and amortization of acquired intangible
broadcasting assets and other assets including amortization of deferred
financing costs and costs related to excess syndicated programming.
(c) "Broadcast cash flow" is defined as broadcast operating income plus
corporate expenses, special bonuses paid to executive officers,
depreciation and amortization (including film amortization and amortization
of deferred compensation and excess syndicated programming), less cash
payments for program rights. Cash program payments represent cash payments
made for
29
<PAGE>
current programs payable and do not necessarily correspond to program
usage. Special bonuses paid to executive officers are considered
non-recurring. The Company has presented broadcast cash flow data, which
the Company believes are comparable to the data provided by other companies
in the industry, because such data are commonly used as a measure of
performance for broadcast companies. However, broadcast cash flow does not
purport to represent cash provided by operating activities as reflected in
the Company's consolidated statements of cash flows, is not a measure of
financial performance under generally accepted accounting principles and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles.
(d) "Broadcast cash flow margin" is defined as broadcast cash flow divided by
net broadcast revenues. "Operating cash flow margin" is defined as
operating cash flow divided by net broadcast revenues. "After tax cash flow
margin" is defined as after tax cash flow divided by net broadcast
revenues.
(e) "Operating cash flow" is defined as broadcast cash flow less corporate
expenses and is a commonly used measure of performance for broadcast
companies. Operating cash flow does not purport to represent cash provided
by operating activities as reflected in the Company's consolidated
statements of cash flows, is not a measure of financial performance under
generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(f) "After tax cash flow" is defined as net income (loss) before extraordinary
items plus depreciation and amortization (including film amortization and
amortization of deferred compensation and excess syndicated programming)
plus special bonuses paid to executive officers, less program contract
payments. After tax cash flow is presented here not as a measure of
operating results and does not purport to represent cash provided by
operating activities. After tax cash flow should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(g) "After tax cash flow per share" is defined as after tax cash flow divided
by weighted average common and common equivalent shares outstanding.
(h) "Total debt" is defined as long-term debt, net of unamortized discount, and
capital lease obligations, including current portion thereof. In 1992 total
debt included warrants outstanding which were redeemable outside the
control of the Company. The warrants were purchased by the Company for
$10.4 million in 1993. Total debt as of December 31, 1993 included $100.0
million in principal amount of the Company's 10% Senior Subordinated Notes
due 2003 (the "1993 Notes"), the proceeds of which were held in escrow to
provide a source of financing for acquisitions that were subsequently
consummated in 1994 utilizing borrowings under the Bank Credit Agreement.
$100 million of the 1993 Notes was redeemed from the escrow in the first
quarter of 1994.
30
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
As of December 31, 1996, the Company owned and operated or programmed 28
television stations in twenty geographically diverse markets and 21 radio
stations in seven geographically diverse markets in the United States. Thirteen
of the television stations are owned and 15 are provided programming services by
the Company through LMAs. The LMA arrangements for seven of these stations
acquired in the River City acquisition will be terminated after FCC approval for
transfer of these stations' License Assets is obtained. The Company owns 21
radio stations, provides programming services to two radio stations pursuant to
LMAs, has pending acquisitions of two radio stations (with both of which it has
JSAs), has a JSA with one additional radio station and has options to acquire an
additional seven radio stations. The LMA arrangements for two remaining radio
stations acquired in the River City Acquisition will be terminated and the
License Assets will be transferred after FCC approval is obtained, which
approval requires a waiver of FCC cross-ownership rules. In January 1997, the
Company entered into a purchase agreement to acquire the License and Non-License
Assets of KUPN, a television station in Las Vegas, Nevada for approximately
$87.0 million. The Company anticipates the consummation of the agreement upon
FCC approval in 1997.
The operating revenues of the Company are derived from local and national
advertisers and, to a much lesser extent, from television network compensation.
The Company's primary operating expenses involved in owning, operating or
programming the television and radio stations are syndicated program rights
fees, commissions on revenues, employee salaries, news-gathering and promotion.
Amortization and depreciation of costs associated with the acquisition of the
stations and interest carrying charges are significant factors in determining
the Company's overall profitability.
Set forth below are the principal types of broadcast revenues received by the
Company's stations for the periods indicated and the percentage contribution of
each type to the Company's total gross broadcast revenues:
BROADCAST REVENUES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1994 1995 1996
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Local/regional
advertising............... $ 67,881 48.6% $104,299 47.5% $199,029 49.4%
National advertising ..... 69,374 49.6% 113,678 51.7% 191,449 47.6%
Network compensation ..... 302 0.2% 442 0.2% 3,907 1.0%
Political advertising .... 1,593 1.1% 197 0.1% 6,972 1.7%
Production................ 696 0.5% 1,115 0.5% 1,142 0.3%
---------- -------- ---------- -------- ---------- --------
Broadcast revenues........ 139,846 100.0% 219,731 100.0% 402,499 100.0%
======== ======== ========
Less: agency commissions . (21,235) (31,797) (56,040)
---------- ---------- ----------
Broadcast revenues, net .. 118,611 187,934 346,459
Barter revenues........... 10,743 18,200 32,029
---------- ---------- ----------
Total revenues............ $129,354 $206,134 $378,488
========== ========== ==========
</TABLE>
The Company's primary types of programming and their approximate percentages
of 1996 net broadcast revenues were network programming (14.1%), children's
programming (7.4%) and other syndicated programming (56.7%). Similarly, the
Company's three largest categories of advertising and their approximate
percentages of 1996 net broadcast revenues were automotive (17.4%), fast food
advertising (9.2%) and movies (5.5%). No other advertising category accounted
for more than 5% of the Company's net broadcast revenues in 1996. No individual
advertiser accounted for more than 5% of any of the Company's individual
station's net broadcast revenues in 1996.
31
<PAGE>
The following table sets forth certain operating data of the Company for the
years ended December 31, 1994, 1995 and 1996:
OPERATING DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net broadcast revenues......................................... $118,611 $187,934 $346,459
Barter revenues................................................ 10,743 18,200 32,029
---------- ---------- ----------
Total revenues................................................. 129,354 206,134 378,488
---------- ---------- ----------
Operating expenses, excluding depreciation and amortization
and special bonuses paid to executive officers.............. 50,545 80,446 167,765
Depreciation and amortization.................................. 55,587 80,410 118,038
Amortization of deferred compensation.......................... -- -- 739
Amortization of excess syndicated programming.................. -- -- 3,043
Special bonuses to executive officers.......................... 3,638 -- --
---------- ---------- ----------
Broadcast operating income..................................... $ 19,584 $ 45,278 $ 88,903
========== ========== ==========
BROADCAST CASH FLOW (BCF) DATA:
Television BCF (a)............................................. $ 67,519 $111,124 $175,212
Radio BCF (a).................................................. -- -- 14,004
---------- ---------- ----------
Consolidated BCF (a)........................................... $ 67,519 $111,124 $189,216
========== ========== ==========
Television BCF margin.......................................... 56.9% 59.1% 56.7%
Radio BCF margin............................................... -- -- 37.3%
Consolidated BCF margin........................................ 56.9% 59.1% 54.6%
OTHER DATA:
Operating cash flow (b)........................................ $ 64,547 $105,750 $180,272
Operating cash flow margin..................................... 54.4% 56.3% 52.0%
After tax cash flow (c)........................................ $ 42,223 $ 65,460 $ 92,500
After tax cash flow per share (d).............................. $ 1.46 $ 2.03 $ 2.47
Program contract payments...................................... $ 14,262 $ 19,938 $ 30,451
Corporate expense.............................................. $ 2,972 $ 5,374 $ 8,944
</TABLE>
- ----------
(a) "Broadcast cash flow" is defined as broadcast operating income plus
corporate expenses, special bonuses paid to executive officers,
depreciation and amortization (including film amortization and amortization
of deferred compensation and excess syndicated programming), less cash
payments for program contract rights. Cash program payments represent cash
payments made for current program payables and do not necessarily
correspond to program usage. Special bonuses to executive officers are
considered non-recurring expenses. The company has presented broadcast cash
flow data, which the Company believes are comparable to the data provided
by other companies in the industry, because such data are commonly used as
a measure of performance for broadcast companies. However, broadcast cash
flow does not purport to represent cash provided by operating activities as
reflected in the Company's consolidated statements of cash flows, is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
(b) "Operating cash flow" is defined as broadcast cash flow less corporate
expenses and is a commonly used measure of performance for broadcast
companies. Operating cash flow does not purport to represent cash provided
by operating activities as reflected in the Company's consolidated
statements of cash flows, is not a measure of financial performance under
generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(c) "After tax cash flow" is defined as net income (loss) before extraordinary
items plus depreciation and amortization (including film amortization and
amortization of deferred compensation and excess syndicated programming),
plus special bonuses paid to executive officers less program contract
payments. After tax cash flow is presented here not as a measure of
operating results and does not purport to represent cash provided by
operating activities. After tax cash flow should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
(d) "After tax cash flow per share" is defined as after tax cash flow divided
by weighted average common and common equivalent shares outstanding.
32
<PAGE>
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total revenues increased to $378.5 million for the year ended December 31,
1996 from $206.1 million for the year ended December 31, 1995, or 83.6%.
Excluding the effects of non-cash barter transactions, net broadcast revenues
for the year ended December 31, 1996 increased by 84.4% over the year ended
December 31, 1995. The increase in broadcast revenues was primarily the result
of acquisitions and LMA transactions consummated by the Company in 1995 and 1996
(collectively, the "Acquisitions"). For stations owned, operated or programmed
throughout 1995 and 1996, television broadcast revenue grew 2.1% for the year
ended December 31, 1996 when compared to the year ended December 31, 1995. For
stations owned, operated or programmed throughout 1994 and 1995, television
broadcast revenue grew 12.8% for the year ended December 31, 1995 when compared
to the year ended December 31, 1994. The decrease in 1996 revenue growth as
compared to 1995 revenue growth primarily resulted from the loss in 1996 of the
Fox affiliation at WTTO in the Birmingham market, the loss of the NBC
affiliation at WRDC in the Raleigh market and decreases in ratings at WCGV and
WNUV in the Milwaukee and Baltimore markets, respectively.
Operating expenses excluding depreciation, amortization of intangible assets
and amortization of deferred compensation and excess syndicated programming
costs increased to $167.8 million for the year ended December 31, 1996 from
$80.4 million for the year ended December 31, 1995 or 108.7%. The increase in
expenses for the year ended December 31, 1996 as compared to the year ended
December 31, 1995 was largely attributable to operating costs associated with
the Acquisitions, an increase in LMA fees resulting from LMA transactions and an
increase in corporate overhead expenses.
Broadcast operating income increased to $88.9 million for the year ended
December 31, 1996, from $45.3 million for the year ended December 31, 1995, or
96.2%. The increase in broadcast operating income for the year ended December
31, 1996 as compared to the year ended December 31, 1995 was primarily
attributable to the Acquisitions.
Interest expense increased to $84.3 million for the year ended December 31,
1996 from $39.3 million for the year ended December 31, 1995, or 114.5%. The
increase in interest expense for the year ended December 31, 1996 was primarily
related to senior bank indebtedness incurred by the Company to finance the River
City Acquisition and other acquisitions.
Interest and other income decreased to $3.5 million for the year ended
December 31, 1996 from $4.2 million for the year ended December 31, 1995, or
16.7%. The decrease for the year ended December 31, 1996 was primarily due to
lower cash balances and related interest income resulting from cash payments
made in February 1996 when the Company made a $34.4 million payment relating to
the WSMH acquisition and April 1996 when the company made a $60 million down
payment relating to the River City acquisition. The decrease in interest income
was offset by an increase in other income resulting from the Acquisitions.
For the reasons described above, net income for the year ended December 31,
1996 was $1.1 million or $0.03 per share compared to net income of $5.0 million
or $0.15 per share for the year ended December 31, 1995 before the extraordinary
loss on early extinguishment of debt.
Broadcast cash flow increased to $189.2 million for the year ended December
31, 1996 from $111.1 million for the year ended December 31, 1995, or 70.3%. The
increase in broadcast cash flow for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 primarily resulted from the Acquisitions.
For stations owned, operated or programmed throughout 1995 and 1996, broadcast
cash flow grew 1.3% for the year ended December 31, 1996 when compared to the
year ended December 31, 1995. For stations owned, operated or programmed
throughout 1994 and 1995, broadcast cash flow grew 23.7% for the year ended
December 31, 1995 when compared to the year ended December 31, 1994. The
decrease in 1996 broadcast cash flow growth as compared to 1995 broadcast cash
flow growth primarily resulted from the loss in 1996 of the Fox affiliation at
WTTO in the Birmingham market, the loss of the NBC affiliation at WRDC in the
Raleigh market and decreases in ratings at WCGV and WNUV in the Milwaukee and
Baltimore markets, respectively. The Company's broadcast
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cash flow margin decreased to 54.6% for the year ended December 31, 1996 from
59.1% for the year ended December 31, 1995. Excluding the effect of radio
station broadcast cash flow, television station broadcast cash flow margin
decreased to 56.7% for the year ended December 31, 1996 as compared to 59.1% for
the year ended December 31, 1995. The decrease in broadcast cash flow margins
for the year ended December 31, 1996 as compared to the year ended December 31,
1995 primarily resulted from the lower margins of the acquired radio
broadcasting assets and lower margins of certain of the acquired television
stations. For stations owned, operated or programmed throughout 1996 and 1995,
broadcast cash flow margins were unchanged when comparing the years ended
December 31, 1996 and 1995. The Company believes that margins of certain of the
acquired stations will improve as operating and programming synergies are
implemented.
Operating cash flow increased to $180.3 million for the year ended December
31, 1996 from $105.8 million for the year ended December 31, 1995, or 70.4%. The
increase in operating cash flow for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 resulted from the Acquisitions. The
Company's operating cash flow margin decreased to 52.0% for the year ended
December 31, 1996 from 56.3% for the year ended December 31, 1995. The decrease
in operating cash flow margins for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 primarily resulted from higher operating
costs at certain of the acquired stations. The Company has begun to implement
and will continue to implement operating and programming synergies throughout
the businesses acquired in and prior to 1996. The Company believes that the
benefits of the implementation of these methods will result in improvement in
broadcast cash flow and operating cash flow margins in future periods.
After tax cash flow increased to $92.5 million for the year ended December
31, 1996 from $65.5 million for the year ended December 31, 1995, or 41.2%. The
increase in after tax cash flow for the year ended December 31, 1996 as compared
to the year ended December 31, 1995 primarily resulted from the Acquisitions
offset by interest expense on the debt incurred to consummate the Acquisitions.
After tax cash flow per share increased to $2.47 for the year ended December 31,
1996 from $2.03 for the year ended December 31, 1995.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Total revenues increased to $206.1 million for the year ended December 31,
1995, from $129.4 million for the year ended December 31, 1994, or 59.3%. This
increase includes revenues from the acquisitions of WTVZ and WLFL and the
entering into LMA agreements with WABM and WDBB (the "1995 Acquisitions"). This
increase also includes the first full year of revenues from the acquisition of
WCGV and WTTO and the entering into LMA agreements with WNUV, WVTV and FSFA (the
"1994 Acquisitions"). Excluding the effect of non-cash barter transactions, net
broadcast revenues increased to $187.9 million for the year ended December 31,
1995 from $118.6 million for the year ended December 31, 1994, or 58.4%.
These increases in net broadcast revenues were primarily a result of the 1994
and 1995 Acquisitions and LMA transactions consummated by the Company, as well
as television broadcast revenue growth in each of the Company's markets. WPGH,
the Pittsburgh Fox affiliate, achieved in excess of 14% net broadcast revenue
growth for the year ended December 31, 1995 as compared to the year ended
December 31, 1994. This increase was primarily attributable to a new metered
rating service that began in May 1995 which significantly improved WPGH's market
rating. WBFF, the Fox affiliate in Baltimore and WCGV, the former Fox affiliate,
now UPN affiliate in Milwaukee, both achieved in excess of 10% net broadcast
revenue growth as these stations began to realize the advantages of having an
LMA in these markets.
Operating expenses excluding depreciation and amortization and special
bonuses paid to executive officers increased to $80.4 million for the year ended
December 31, 1995 from $50.5 million for the year ended December 31, 1994. These
increases in expenses were primarily attributable to increases in operating
expenses relating to the 1994 and 1995 Acquisitions, including the payment of
LMA fees which increased to approximately $5.6 million for the year ended
December 31, 1995 as compared to $1.1 million for the year ended December 31,
1994. Corporate overhead expenses increased 80.8% for the
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year ended December 31, 1995 as compared to the year ended December 31, 1994.
This increase was primarily due to expenses associated with being a public
company (i.e. directors and officers insurance, travel expenses and professional
fees) and executive bonus accruals for bonuses which were paid based on
achieving in excess of 20% growth percentages in pro forma broadcast cash flow
for the year 1995 compared to 1994.
Broadcast operating income increased to $45.3 million for the year ended
December 31, 1995 from $19.6 million for the year ended December 31, 1994, or
131.1%. This increase in broadcast operating income was primarily a result of
the 1994 and 1995 Acquisitions and an increase in television broadcast revenues
in each of the Company's markets, partially offset by increased amortization
expenses related to the Acquisitions.
Interest expense increased to $39.3 million for the year ended December 31,
1995 from $25.4 million for the year ended December 31, 1994, or 54.7%. The
major component of this increase in interest expense was increased borrowings
under Company's existing bank credit facility, which is governed by an agreement
with Chase Manhattan Bank, as Agent (the "Bank Credit Agreement") to finance the
1994 and 1995 Acquisitions. During August 1995, the Company issued $300 million
of senior subordinated notes and used a portion of the net proceeds to repay
outstanding indebtedness under the Bank Credit Agreement and the remainder
provided an increase to the Company's cash balances of approximately $91.4
million. The interest expense related to these notes was approximately $10.0
million in 1995. This increase was partially offset by the application of the
net proceeds of an offering of Class A Common Stock to reduce a portion of the
indebtedness under the Bank Credit Agreement during June 1995. Interest expense
was also reduced as a result of the application of net cash flow from operating
activities to further decrease borrowings under the Bank Credit Agreement.
Interest and other income increased to $4.2 million for the year ended
December 31, 1995 from $2.4 million for the year ended December 31, 1994, or
75.0%. This increase in interest income primarily resulted from an increase in
cash balances that remained from the proceeds of Senior Subordinated Notes
issued in August 1995. Income (loss) before benefit (provision) for income taxes
and extraordinary item increased to income of $10.2 million for the year ended
December 31, 1995 from a loss of $3.4 million for the year ended December 31,
1994.
Net income available to common shareholders improved to income of $76,000 for
the year ended December 31, 1995 from a loss of $2.7 million for the year ended
December 31, 1994. In August 1995, the Company consummated the sale of $300
million of Senior Subordinated Notes generating net proceeds to the Company of
$293.2 million. The net proceeds of this offering were utilized to repay
outstanding indebtedness under the Bank Credit Agreement of $201.8 million with
the remainder being retained for general corporate purposes including potential
future acquisitions. In conjunction with the early retirement of the
indebtedness under the Bank Credit Agreement, the Company recorded an
extraordinary loss of $4.9 million net of a tax benefit of $3.4 million, related
to the write off of deferred financing costs under the Bank Credit Agreement.
Broadcast cash flow increased to $111.1 million for the year ended December
31, 1995 from $67.5 million for the year ended December 31, 1994, or 64.6%. This
increase in broadcast cash flow was primarily due to the 1994 and 1995
Acquisitions, growth in market revenues and a reduction in program payments as a
percentage of net broadcast revenues to 10.6% for the year ended December 31,
1995 from 12.0% for the year ended December 31, 1994.
Operating cash flow increased to $105.8 million for the year ended December
31, 1995 from $64.6 million for the year ended December 31, 1994, or 63.8%,
consistent with the growth in broadcast cash flow. After tax cash flow increased
to $65.5 million for the year ended December 31, 1995 from $42.2 million for the
year ended December 31, 1994, or 55.2%.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had $2.3 million in cash balances, and
current liabilities were in excess of current assets by approximately $5.9
million. The Company's decrease in cash to $2.3 million at December 31, 1996
from $112.5 million at December 31, 1995 primarily resulted from cash payments
made
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relating to the 1996 Acquisitions and repayments of bank debt. As of March 31,
1997, approximately $178.5 million was available for borrowing under the Bank
Credit Agreement. The Company is obligated to pay approximately $82.0 million to
complete the acquisition of KUPN and expects to make this payment from
borrowings under the Bank Credit Agreement and/or from proceeds of an offering
of preferred securities consummated in March 1997. See "Item 1.
Business--1997 Acquisitions."
Net cash flows from operating activities increased to $69.0 million for the
year ended December 31, 1996 from $55.9 million for the year ended December 31,
1995. The Company made income tax payments of $6.8 million for the year ended
December 31, 1996 as compared to $7.9 million for the year ended December 31,
1995. This decrease was due to anticipated tax benefits generated by the 1996
Acquisitions. The Company made interest payments on outstanding indebtedness of
$82.8 million during the year ended December 31, 1996 as compared to $24.8
million for the year ended December 31, 1995. Additional interest payments for
the year ended December 31, 1996 as compared to the year ended December 31, 1995
primarily related to additional interest costs associated with the Company's
public debt offering in August 1995 and indebtedness incurred to finance the
1996 Acquisitions. Program rights payments increased to $30.5 million for the
year ended December 31, 1996 from $19.9 million for the year ended December 31,
1995, primarily as a result of the 1996 Acquisitions.
Net cash flows used in investing activities increased to $1.0 billion for the
year ended December 31, 1996 from $119.2 million for the year ended December 31,
1995. During February 1996, the Company purchased the License and Non-License
Assets of WSMH for $35.4 million at which time the balance due to the seller of
$34.4 million was paid from existing cash balances. In January 1996, the Company
made a cash payment of $1.0 million relating to the acquisition of the License
and Non-License Assets of WYZZ. In July 1996, the Company consummated the
acquisition for a purchase price of approximately $21.1 million. In May 1996,
the Company purchased the outstanding stock of Superior and made cash payments
totaling $63.5 million relating to the transaction. Also in May 1996, the
Company acquired certain Non-License assets of River City and KRRT and made
related cash payments totaling $818.1 million and $29.5 million, respectively.
In September 1996, the Company exercised its options to acquire certain FCC
licenses relating to the River City Acquisition for a cash payment of $6.9
million. In July 1996, the Company purchased the License and Non-License Assets
of KSMO and made net cash payments totaling $10.0 million. In August 1996, the
Company purchased the License and Non-License Assets of WSTR and made net cash
payments totaling $8.7 million. In December 1996, the Company made purchase
option extension payments of $7.0 million relating to WSYX. The Company made
payments for property and equipment of $12.6 million for the year ended December
31, 1996. Approximately $7.0 million of these payments related to the purchase
of property and equipment for the development of local news programming at WPGH
in Pittsburgh, Pennsylvania.
Net cash flows from financing activities increased to $832.8 million for the
year ended December 31, 1996 from $173.3 million for the year ended December 31,
1995. In May 1996, the Company utilized available indebtedness of $63.0 million
for the acquisition of Superior and simultaneously repaid indebtedness of $25.0
million. Also in May 1996, the Company utilized available indebtedness of $835.0
for the acquisition of the Non-License Assets of River City and KRRT and
simultaneously repaid indebtedness of $36.0 million. In September 1996, the
Company exercised its options to acquire certain FCC licenses relating to the
River City Acquisition for a cash payment of $6.9 million by utilizing
indebtedness under the Bank Credit Agreement. In July 1996, the Company utilized
available indebtedness under its Bank Credit Agreement totaling $30.6 million
for the acquisitions of WYZZ and KSMO. In August 1996, the Company utilized
available indebtedness totaling $9.9 million for the acquisition of WSTR. In
December 1996, the Company made purchase option extension payments of $7.0
million relating to WSYX utilizing indebtedness under the Bank Credit Agreement.
The Company also made a $20.0 million payment of debt acquisition costs relating
to the financing required to consummate the River City and KRRT acquisitions. In
the fourth quarter of 1996, the Company negotiated the prepayment of syndicated
program contract liabilities relating to excess syndicated programming assets
and made cash payments of $15.1 million utilizing indebtedness under its Bank
Credit Agreement of $10.0 million with the remainder being paid from existing
cash balances.
The Company anticipates that funds from operations, existing cash balances
and availability of the revolving credit facility under the Bank Credit
Agreement will be sufficient to meet its working capital, capital expenditures
and debt service requirements for the foreseeable future. However, to the extent
such
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funds are not sufficient, the Company may need to incur additional indebtedness,
refinance existing indebtedness or raise funds from the sale of additional
equity. The Bank Credit Agreement and the indentures the ("Existing Indentures")
relating to the Company's 10% Senior Subordinated Notes due 2003 (the "1993
Notes") and 10% Senior Subordinated Notes due 2005 (the "1995 Notes") restrict
the incurrence of additional indebtedness and the use of proceeds of an equity
issuance. In 1996, the Company filed a registration statement with the
Securities and Exchange Commission with respect to the sale by the Company of
5,750,000 shares of Class A Common Stock. The Company has not yet made such an
offering but continues to intend to make such an offering at such time as it
believes market conditions warrant, but there can be no assurance as to the
timing of such an offering or whether such an offering will in fact occur.
In March 1997, the Company completed a private placement of $200 million
aggregate liquidation value of 11 5/8 % High Yield Trust Offered Preferred
Securities (the "Preferred Securities") of Sinclair Capital, a subsidiary trust
of the Company. The Preferred Securities were issued March 12, 1997, and mature
March 15, 2009. The Preferred Securities were sold to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act of 1933, as amended)
and a limited number of institutional "accredited investors." The Company
utilized $135 million of the approximately $194 million net proceeds of the
private offering to repay outstanding debt and retained the remainder for
general corporate purposes, which may include acquisitions and repurchases of
shares of the Company's Class A Common Stock. The Preferred Securities have not
been registered under the Securities Act of 1933, as amended, or any state
securities or blue sky laws and may not be offered or sold in the United States
or in any state thereof absent registration or an applicable exemption from the
registration requirements of such laws.
INCOME TAXES
The Company's income tax provision increased to $6.9 million for the year
ended December 31, 1996 from $5.2 million for the year ended December 31, 1995.
The Company's effective tax rate increased to 86% for the year ended December
31, 1996 from 51% for the year ended December 31, 1995. The increase for the
year ended December 31, 1996 as compared to the year ended December 31, 1995
primarily related to certain financial reporting and income tax differences
attributable to certain 1995 and 1996 Acquisitions, and state franchise taxes
which are independent of pre-tax income. Management believes that as pre-tax
income increases in future years, the Company's effective tax rate will
decrease. See Note 9 to the Company's Consolidated Financial Statements.
The net deferred tax asset decreased to $782,000 as of December 31, 1996 from
$21.0 million at December 31, 1995. The decrease in the Company's net deferred
tax asset as of December 31, 1996 as compared to December 31, 1995 is primarily
due to the Company recording deferred tax liabilities of $18.1 million relating
to the acquisition of all of the outstanding stock of Superior Communications,
Inc. (Superior) in May 1996, adjustments related to certain 1995 acquisitions,
and resulting differences between the book and tax basis of the underlying
assets.
A $1.8 million net tax provision and a $647,000 tax benefit was recognized
for the years ended December 31, 1995 and December 31, 1994, respectively. The
provision for the year ended December 31, 1995 was comprised of $5.2 million
provision relating to the Company's income before provision for income taxes and
extraordinary item offset by a $3.4 million income tax benefit relating to the
extraordinary loss on early extinguishment of debt. The $5.2 million tax
provision reflects a 51% effective tax rate for the year ended December 31,
1995, which is higher than the statutory rate primarily due to the
non-deductibility of goodwill relating to the repurchase of Common Stock in
1990. The income tax benefit for the year ended December 31, 1994 was 19.1% of
the Company's loss before income taxes, which is lower than the benefit
calculated at statutory rates primarily due to non-deductible goodwill
amortization. After giving effect to these changes the Company had net deferred
tax assets of $21.0 million at December 31, 1995 and $12.5 million at December
31, 1994, respectively.
SEASONALITY
The Company's results usually are subject to seasonal fluctuations, which
result in fourth quarter broadcast operating income usually being greater than
first, second and third quarter broadcast operating income. This seasonality is
primarily attributable to increased expenditures by advertisers in anticipation
of holiday season spending and an increase in viewership during this period.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information relating to the Company's executive
officers, directors, certain key employees and persons expected to become
executive officers, directors or key employees.
NAME AGE TITLE
- --------------------- ----- -----------------------------------------------
David D. Smith....... 46 President, Chief Executive Officer, Director
and Chairman of the Board
Frederick G. Smith .. 47 Vice President and Director
J. Duncan Smith...... 43 Vice President, Secretary and Director
Robert E. Smith...... 33 Vice President, Treasurer and Director
David B. Amy......... 44 Chief Financial Officer
Barry Drake.......... 45 Chief Operating Officer, SCI Radio
Alan B. Frank........ 46 Regional Director, SCI
Michael Granados .... 42 Regional Director, SCI
Steven M. Marks...... 40 Regional Director, SCI
John T. Quigley...... 53 Regional Director, SCI
Frank Quitoni........ 52 Regional Director, SCI
M. William Butler ... 44 Vice President/Group Program Director, SCI
Michael Draman....... 48 Vice President/TV Sales and Marketing, SCI
Stephen A. Eisenberg. 55 Vice President/Director of National Sales, SCI
Delbert R. Parks, III 44 Director of Operations and Engineering, SCI
Robert E. Quicksilver 41 General Counsel, SCI
Thomas E. Severson .. 33 Corporate Controller
Michael E. Sileck ... 36 Vice President/Finance, SCI
Robin A. Smith....... 40 Chief Financial Officer, SCI Radio
Patrick J. Talamantes 32 Director of Corporate Finance
William E. Brock .... 66 Director
Lawrence E. McCanna . 53 Director
Basil A. Thomas...... 81 Director
In addition to the foregoing, the following persons have agreed to serve as
executive officers and/or directors of the Company as soon as permissible under
the rules of the FCC and applicable laws.
NAME AGE TITLE
- -------------------- ----- ----------------------------------------------
Barry Baker......... 44 Executive Vice President of the Company,
Chief Executive Officer of SCI and Director
Kerby Confer........ 56 Chief Executive Officer, SCI Radio
Roy F. Coppedge, III 48 Director
In connection with the River City Acquisition, the Company agreed to increase
the size of the Board of Directors from seven members to nine to accommodate the
prospective appointment of each of Barry Baker and Roy F. Coppedge, III or such
other designee as Boston Ventures may select. Mr. Baker and Mr. Confer currently
serve as consultants to the Company.
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Members of the Board of Directors are elected for one-year terms and until
their successors are duly elected and qualified. Executive officers are
appointed by the Board of Directors annually to serve for one year-terms and
until their successors are duly appointed and qualified.
David D. Smith has served as President, Chief Executive Officer and Chairman
of the Board since September 1990. Prior to that, he served as General Manager
of WPTT from 1984, and assumed the financial and engineering responsibility for
the Company, including the construction of WTTE in 1984. In 1980, Mr. Smith
founded Comark Television, Inc., which applied for and was granted the permit
for WPXT-TV in Portland, Maine and which purchased WDSI-TV in Chattanooga,
Tennessee. WPXT-TV was sold one year after construction and WDSI-TV was sold two
years after its acquisition. From 1978 to 1986, Mr. Smith co-founded and served
as an officer and director of Comark Communications, Inc., a company engaged in
the manufacture of high power transmitters for UHF television stations. His
television career began with WBFF in Baltimore, where he helped in the
construction of the station and was in charge of technical maintenance until
1978. David D. Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith
are brothers.
Frederick G. Smith has served as Vice President of the Company since 1990 and
as a Director since 1986. Prior to joining the Company in 1990, Mr. Smith was an
oral and maxillofacial surgeon engaged in private practice and was employed by
Frederick G. Smith, M.S., D.D.S., P.A., a professional corporation of which Mr.
Smith was the sole officer, director and stockholder.
J. Duncan Smith has served as Vice President, Secretary and a Director of the
Company since 1988. Prior to that, he worked for Comark Communications, Inc.
installing UHF transmitters. In addition, he also worked extensively on the
construction of WPTT in Pittsburgh, WTTE in Columbus, WIIB in Bloomington and
WTTA in St. Petersburg, as well as on the renovation of the new studio, offices
and news facility for WBFF in Baltimore.
Robert E. Smith has served as Vice President, Secretary and a Director of the
Company since 1988. Prior to that, he served as Program Director at WBFF from
1986 to 1988. Prior to that, he assisted in the construction of WTTE and also
worked for Comark Communications, Inc. installing UHF transmitters.
David B. Amy has served as Chief Financial Officer ("CFO") since October of
1994 and prior to his appointment as CFO served as the Controller of the Company
beginning in 1986. Before that, he served as the Business Manager for WPTT.
Prior to joining the Company in 1984, Mr. Amy was an accounting manager of Penn
Athletic Products Company in Pittsburgh, Pennsylvania. Mr. Amy received an MBA
degree from the University of Pittsburgh in 1981.
Barry Drake has served as Chief Operating Officer of SCI Radio since
completion of the River City Acquisition. Prior to that time, he was Chief
Operating Officer--Keymarket Radio Division of River City since July 1995. Prior
to that time, he was President and Chief Operating Officer of Keymarket since
1988. From 1985 through 1988, Mr. Drake performed the duties of the President of
each of the Keymarket broadcasting entities, with responsibility for three
stations located in Houston, St. Louis and Detroit.
Alan B. Frank has served as Regional Director for the Company since May 1994.
As Regional Director, Mr. Frank is responsible for the Pittsburgh, Milwaukee,
Kansas City and Raleigh-Durham markets. Prior to his appointment to Regional
Director, Mr. Frank served as General Manager of WPGH beginning in September
1991.
Michael Granados has served as a Regional Director of the Company since July
1996. As a Regional Director, Mr. Granados is responsible for the San Antonio,
Des Moines, Peoria and, upon completion of the KUPN acquisition, Las Vegas
markets. Prior to July 1996, Mr. Granados has served in various positions with
the Company and, before the River City Acquisition, with River City. He served
as the General Sales Manager of KABB from 1989 to 1993, the Station Manager and
Director of Sales of WTTV from 1993 to 1994 and the General Manager of WTTV
prior to his appointment as Regional Director in 1996.
Steven M. Marks has served as Regional Director for the Company since October
1994. As Regional Director, Mr. Marks is responsible for the Baltimore, Norfolk,
Flint and Birmingham markets. Prior to his appointment as Regional Director, Mr.
Marks served as General Manager for WBFF since July 1991. From 1986 until
joining WBFF in 1991, Mr. Marks served as General Manager at WTTE. Prior to that
time, he was national sales manager for WFLX-TV in West Palm Beach, Florida.
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John T. Quigley has served as a Regional Director of the Company since June
1996. As Regional Director, Mr. Quigley is responsible for the Columbus,
Cincinnati, and Oklahoma City markets. Prior to that time, Mr. Quigley served as
general manager of WTTE since July 1985. Prior to joining WTTE, Mr. Quigley
served in broadcast management positions at WCPO-TV in Cincinnati, Ohio and
WPTV-TV in West Palm Beach, Florida.
Frank Quitoni has served as a Regional Director since completion of the
River City Acquisition. As Regional Director, Mr. Quitoni is responsible for the
St. Louis, Sacramento, Indianapolis and Asheville/Greenville/Spartanburg
markets. Prior to joining the Company, he was Vice President of Operations for
River City since 1995. Mr. Quitoni had served as the Director of Operations and
Engineering for River City since 1994. Prior thereto Mr. Quitoni served as a
consultant to CBS beginning in 1989. Mr. Quitoni was the Director of Olympic
Operations for CBS Sports for the 1992 Winter Olympic Games and consulted with
CBS for the 1994 Winter Olympic Games. Mr. Quitoni was awarded the Technical
Achievement Emmy for the 1992 and 1994 CBS Olympic broadcasts.
M. William Butler has served as Vice President/Group Program Director, SCI
since 1997. Prior to joining the Company, he served as Director of Programming
at KCAL, the Walt Disney Company station in Los Angeles, California. Before
that, he was Director of Marketing and Programming at WTXF in Philadelphia,
Pennsylvania and WLVI in Boston, Massachusetts. Mr. Butler attended the Graduate
Business School of the University of Cincinnati from 1975 to 1976.
Michael Draman has served as Vice President/TV Sales and Marketing, SCI since
1997. Prior to joining the Company, he served as Vice President of Revenue
Development for New World Television. Before that, he was Director of Sales and
Marketing for WSVN in Miami, Florida. Mr. Draman attended The American
University and The Harvard Business School and served with the U.S.
Marine Corps in Vietnam.
Stephen A. Eisenberg has served as Director of National Sales, SCI since
November 1996. Prior to joining the Company, he served as Vice
President/Director of Sales for Petry Television, with total national sales
responsibility for KTTV in Los Angeles, California, KCPQ-TV in Seattle,
Washington, WTNH-TV in New Haven, Connecticut, WKYC-TV in Cleveland, Ohio,
WBIR-TV in Knoxville, Tennessee, WKEF-TV in Dayton, Ohio and WTMJ-TV in
Milwaukee, Wisconsin. His career at Petry Television spanned 21 years. Mr.
Eisenberg received an MS degree in Journalism from Northwestern's Medill School
and a BA degree from Brooklyn College.
Delbert R. Parks III has served as Vice President of Operations and
Engineering since the completion of the River City Acquisition. Prior to that
time, he was Director of Operations and Engineering for WBFF and Sinclair since
1985, and has been with the Company for 25 years. He is responsible for
planning, organizing and implementing operational and engineering policies and
strategies as they relate to television and computer systems. Currently, he is
consolidating facilities for Sinclair's television stations and has just
completed a digital facility for Sinclair's news and technical operation in
Pittsburgh. Mr. Parks is also a Lieutenant Colonel in the Maryland Army National
Guard and commands the 1st Battalion, 175th Infantry (Light).
Robert E. Quicksilver has served as General Counsel, SCI since completion
of the River City Acquisition. Prior to that time he served as General Counsel
of River City since September 1994. Prior to joining River City, Mr. Quicksilver
was with the law firm of Rosenblum, Goldenhersh, Silverstein and Zafft, P.C. in
St. Louis, where he was a partner for six years. Mr. Quicksilver holds a B.A.
from Dartmouth College and a J.D. from the University of Michigan.
Thomas E. Severson has served as Corporate Controller since 1997. Before
that, Mr. Severson served as Assistant Controller of the Company since 1995.
Prior to joining the Company, Mr. Severson held positions in the audit
departments of KPMG Peat Marwick LLP and Deloitte & Touche LLP from 1991 to
1995. Mr. Severson is a graduate of the University of Baltimore and is a
Certified Public Accountant.
Michael E. Sileck has served as Vice President/Finance of SCI since
completion of the River City Acquisition. Prior to that time he served as the
Director of Finance for River City since 1993. Mr. Sileck joined River City in
July 1990 as Director of Finance and Business Affairs for KDNL-TV. Mr. Sileck is
40
<PAGE>
an active member of the Broadcast Cable Financial Management Association
("BCFM") and was a Director of BCFM from 1993 to 1996. Mr. Sileck, a Certified
Public Accountant, received a B.S. degree in Accounting from Wayne State
University and an M.B.A. in Finance from Oklahoma City University.
Robin A. Smith has served as Chief Financial Officer, SCI Radio since June
1996. Prior to joining the Company, she served as Vice President and Chief
Financial Officer of the Park Lane Group of Menlo Park, California, which owned
and operated small market radio stations. Before that, she served as Vice
President and Treasurer of Edens Broadcasting, Inc. in Phoenix, Arizona, which
owns and operates radio stations in major markets. Ms. Smith is a graduate of
Arizona State University and is a Certified Public Accountant.
Patrick Talamantes has served as Director of Corporate Finance since
completion of the River City Acquisition. Prior to that time he served as
Treasurer for River City since April 1995. From 1991 to 1995, he was a Vice
President with Chemical Bank, where he completed financings for clients in the
cable, broadcasting, publishing and entertainment industries. Mr. Talamantes
holds a B.A. degree from Stanford University and an M.B.A. from the Wharton
School at the University of Pennsylvania.
William E. Brock has served as a Director of the Company since July 1995.
Mr. Brock served as chairman of The Brock Group from 1989 until January 1994,
and as chairman emeritus from 1994 to 1996. Mr. Brock currently serves as
chairman of Intellectual Development Systems. Mr. Brock served as a United
States Senator from Tennessee from 1971 to 1977 and as a member of the U.S.
House of Representatives from 1962 to 1970. Mr. Brock served as a member of
President Reagan's cabinet from 1981 to 1987, as U.S. Trade Representative from
1981 to 1985 and as Secretary of Labor from 1985 to 1987. Mr. Brock was National
Chairman of the Republican Party from 1977 to 1981.
Lawrence E. McCanna has served as a Director of the Company since July
1995. Mr. McCanna has been a partner of the accounting firm of Gross, Mendelsohn
& Associates, P.A., since 1972 and has served as its managing partner since
1982. Mr. McCanna has served on various committees of the Maryland Association
of Certified Public Accountants and was chairman of the Management of the
Accounting Practice Committee. He is also a former member of the Management of
an Accounting Practice Committee of the American Institute of Certified Public
Accountants. Mr. McCanna is a member of the board of directors of Maryland
Special Olympics.
Basil A. Thomas has served as a Director of the Company since November 1993.
He is of counsel to the Baltimore law firm of Thomas & Libowitz, P.A. and has
been in the private practice of law since 1983. From 1961 to 1968, Judge Thomas
served as an Associate Judge on the Municipal Court of Baltimore City and, from
1968 to 1983, he served as an Associate Judge of the Supreme Bench of Baltimore
City. Judge Thomas is a trustee of the University of Baltimore and a member of
the American Bar Association and the Maryland State Bar Association. Judge
Thomas attended the College of William & Mary and received his L.L.B. from the
University of Baltimore. Judge Thomas is the father of Steven A. Thomas, a
senior attorney and founder of Thomas & Libowitz, counsel to the Company.
Barry Baker has been the Chief Executive Officer of River City since 1989,
and is the President of the corporate general partner of River City, Better
Communications, Inc. ("BCI"). The principal business of both River City and BCI
is television and radio broadcasting. In connection with the River City
Acquisition, the Company agreed to appoint Mr. Baker Executive Vice President of
the Company and to elect him as a Director at such time as he is eligible to
hold those positions under applicable FCC regulations. He currently serves as a
consultant to the Company.
Kerby Confer served as a member of the Board of Representatives and Chief
Executive Officer-- Keymarket Radio Division of River City since July 1995.
Prior thereto, Mr. Confer served as Chairman of the Board and Chief Executive
Officer of Keymarket since its founding in December 1981. Prior to engaging in
the acquisition of various radio stations in 1975, Mr. Confer held a number of
jobs in the broadcast business, including serving as Managing Partner of a radio
station in Annapolis, Maryland from 1969 to 1975. From 1966 to 1969, he hosted a
pop music television show on WBAL-TV (Baltimore) and WDCA-TV (Washington, D.C.).
Prior thereto, Mr. Confer served as program director or producer/director for
radio and television stations owned by Susquehanna Broadcasting and Plough
Broadcasting Company, Inc. Mr. Confer currently provides services to the Company
and is expected to become Chief Executive Officer of SCI Radio at such time as
he is eligible to hold this position under applicable FCC regulations.
41
<PAGE>
Roy F. Coppedge, III is a general partner of the general partner of each of
the Boston Ventures partnerships, limited partnerships primarily involved in the
business of investments. Mr. Coppedge is a director of Continental Cablevision,
Inc., and American Media, Inc. and a member of the Board of Representatives of
Falcon Holding Group, L.P. In connection with the River City Acquisition, the
Company agreed to elect Mr. Coppedge as a Director at such time as he is
eligible to hold that position under applicable FCC regulations.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual and
long-term compensation by the Company for services rendered in all capacities
during the years ended December 31, 1994, 1995 and 1996 by the Chief Executive
Officer and the four other executive officers of the Company as to whom the
total annual salary and bonus exceeded $100,000 (the "Named Executive Officers")
in 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(a) OPTIONS GRANTED (#) COMPENSATION(b)
- ------------------------------------- ------ ---------- ----------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
David D. Smith,
President and Chief Executive Officer 1996 $767,308 $ 317,913 -- $ 6,748
1995 450,000 343,213 -- 4,592
1994 317,913 1,300,000 -- 3,841
Frederick G. Smith,
Vice President....................... 1996 260,000 233,054 -- 6,704
1995 260,000 258,354 -- 20,361
1994 233,054 900,000 -- 18,960
J. Duncan Smith,
Secretary............................ 1996 270,000 243,485 -- 18,494
1995 270,000 268,354 -- 21,467
1994 243,485 900,000 -- 16,418
Robert E. Smith,
Treasurer............................ 1996 250,000 233,054 -- 6,300
1995 250,000 258,354 -- 4,592
1994 233,054 900,000 -- 13,238
David B. Amy,
Chief Financial Officer.............. 1996 173,582 31,000 25,000 7,766
1995 132,310 20,000 7,500 7,868
1994 122,400 20,000 -- 5,011
</TABLE>
- ----------
(a) The bonuses reported in this column represent amounts awarded and paid
during the fiscal years noted but relate to the fiscal year immediately prior to
the year noted. In addition, David D. Smith and David B. Amy have received
$98,224 and $50,000, respectively, in 1997 with respect to 1996.
(b) All other compensation consists of income deemed received for personal
use of Company-leased automobiles, the Company's 401 (k) contribution, life
insurance and long-term disability coverage.
In addition to the foregoing, Mr. Barry Baker and Mr. Kerby Confer have
agreed to serve as executive officers and/or directors of the Company as soon as
permissible under the rules of the FCC and applicable laws and received
consulting fees during the year ended December 31, 1996 of $527,976 and
$162,500, respectively.
42
<PAGE>
STOCK OPTIONS
The following table sets forth information concerning each grant of stock
options made during 1996 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
VALUE OF
OPTIONS
NUMBER OF PERCENT OF AT DATE OF
SECURITIES TOTAL OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE BASED ON BLACK-
OPTIONS EMPLOYEES IN PRICE EXPIRATION SCHOLES OPTION
NAME GRANTED(#) FISCAL YEAR PER SHARE DATE PRICING MODEL
- ------------------ ------------ --------------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
David D. Smith ... -- --% $ -- -- $ --
Frederick G. Smith -- -- -- -- --
J. Duncan Smith .. -- -- -- -- --
Robert E. Smith .. -- -- -- -- --
David B. Amy...... 10,000 * 37.75 5/31/2006 160,419
15,000 * 30.11 5/31/2006 287,319
</TABLE>
- ----------
* Less than one percent.
The following table shows the number of stock options exercised during 1996
and the 1996 year-end value of the stock options held by the Named Executive
Officers:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS "IN-THE-MONEY" OPTIONS
ACQUIRED VALUE AT DECEMBER 31, 1996 AT DECEMBER 31, 1996(A)
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- --------------- ---------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
David D. Smith ... -- $ -- -- -- $ -- $ --
Frederick G. Smith -- -- -- -- -- --
J. Duncan Smith .. -- -- -- -- -- --
Robert E. Smith .. -- -- -- -- -- --
David B. Amy ...... -- -- 3,750 28,750 -- 37,500
</TABLE>
- ----------
(a) An "In-the-Money" option is an option for which the option price of the
underlying stock is less than the market price at December 31, 1996, and
all of the value shown reflects stock price appreciation since the granting
of the option.
DIRECTOR COMPENSATION
Directors of the Company who also are employees of the Company serve without
additional compensation. Independent directors receive $15,000 annually. These
independent directors also receive $1,000 for each meeting of the Board of
Directors attended and $500 for each committee meeting attended. In addition,
the independent directors are reimbursed for any expenses incurred in connection
with their attendance at such meetings.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with David D. Smith,
President and Chief Executive Officer of the Company. David Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. The Company's
Compensation Committee has approved an increase in Mr. Smith's total
compensation to $1,200,000. Mr. Smith is also entitled to participate in the
Company's Executive Bonus Plan based upon the performance of the Company during
the year. The employment agreement provides that the Company may terminate Mr.
Smith's employment prior to expiration of the agreement's term as a result of
(i) a breach by Mr. Smith of any material covenant, promise or agreement
contained in the employment agreement; (ii) a dissolution or winding up of the
Company; (iii) the disability of Mr. Smith for more than 210 days in any twelve
month period (as determined under the employment agreement); or (iv) for cause,
which includes conviction of certain crimes, breach of a fiduciary duty to the
Company or the stockholders, or repeated failure to exercise or undertake his
duties as an officer of the Company (each, a "Termination Event").
43
<PAGE>
In June 1995, the Company entered into an employment agreement with Frederick
G. Smith, Vice President of the Company. Frederick Smith's employment agreement
has an initial term of three years and is renewable for additional one-year
terms, unless either party gives notice of termination not less than 60 days
prior to the expiration of the then current term. Under the agreement, Mr. Smith
receives a base salary of $260,000 and is also entitled to participate in the
Company's Executive Bonus Plan based upon the performance of the Company and Mr.
Smith during the year. The employment agreement provides that the Company may
terminate Mr. Smith's employment prior to expiration of the agreement's term as
a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with J. Duncan
Smith, Vice President and Secretary of the Company. J. Duncan Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. Under the agreement, Mr.
Smith receives a base salary of $270,000 and is also entitled to participate in
the Company's Executive Bonus Plan based upon the performance of the Company and
Mr. Smith during the year. The employment agreement provides that the Company
may terminate Mr. Smith's employment prior to expiration of the agreement's term
as a result of a Termination Event.
In June 1995, the Company entered into an employment agreement with Robert E.
Smith, Vice President and Treasurer of the Company. Robert E. Smith's employment
agreement has an initial term of three years and is renewable for additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. Under the agreement, Mr.
Smith receives a base salary of $250,000 and is also entitled to participate in
the Company's Executive Bonus Plan based upon the performance of the Company and
Mr. Smith during the year. The employment agreement provides that the Company
may terminate Mr. Smith's employment prior to expiration of the agreement's term
as a result of a Termination Event.
In connection with the River City Acquisition, the Company entered into an
employment agreement (the "Baker Employment Agreement") with Barry Baker
pursuant to which Mr. Baker will become President and Chief Executive Officer of
SCI and Executive Vice President of the Company at such time as Mr. Baker is
able to hold those positions consistent with applicable FCC regulations. Until
such time as Mr. Baker is able to become an officer of the Company, he serves as
a consultant to the Company pursuant to a consulting agreement and receives
compensation that he would be entitled to as an officer under the Baker
Employment Agreement. While Mr. Baker acts as consultant to the Company he will
not direct employees of Sinclair in the operation of its television stations and
will not perform services relating to any shareholder, bank financing or
regulatory compliance matters with respect to the Company. In addition, Mr.
Baker will remain the Chief Executive Officer of River City and will devote a
substantial amount of his business time and energies to those services. Pursuant
to the Baker Employment Agreement, Mr. Baker receives a base salary of
approximately $1,056,000 per year, subject to annual increases of 7-1/2% January
1 each year beginning January 1, 1997. Mr. Baker is also entitled to receive a
bonus equal to 2% of the amount by which the Broadcast Cash Flow (as defined in
the Baker Employment Agreement) of SCI for a year exceeds the Broadcast Cash
Flow for the immediately preceding year. Pursuant to the Baker Employment
Agreement, Mr. Baker has received options to acquire 1,382,435 shares of the
Class A Common Stock (or 3.33% of the common equity of Sinclair determined on a
fully diluted basis). The option became exercisable with respect to 50% of the
shares upon closing of the River City Acquisition, and becomes exercisable with
respect to 25% of the shares on the first anniversary of the closing of the
River City Acquisition, and 25% on the second anniversary of the River City
Acquisition. The exercise price of the option is approximately $30.11 per share.
The term of the Baker Employment Agreement extends until May 31, 2001, and is
automatically extended to the third anniversary of any Change of Control (as
defined in the Baker Employment Agreement). If the Baker Employment Agreement is
terminated as a result of a Series B Trigger Event (as defined below), then Mr.
Baker shall be entitled to a termination payment equal to the amount that would
have been paid in base salary for the remainder of the term of the agreement
plus bonuses that would be paid for such period based on the average bonus paid
to Mr. Baker for the previous three years, and all options shall vest
immediately upon such termination. In addition, upon such a termination, Mr.
Baker shall have the option to purchase from the Company for the fair market
value thereof either (i) all broadcast operations of Sinclair in the St. Louis,
Missouri DMA or (at the option of Mr. Baker) the Asheville-Greenville-
44
<PAGE>
Spartanburg, South Carolina DMA or (ii) all of the Company's radio broadcast
operations. Mr. Baker shall also have the right following such a termination to
receive quarterly payments (which may be paid either in cash or, at the
Company's option, in additional shares of Class A Common Stock) equal to 5.00%
of the fair market value (on the date of each payment) of all stock options and
common stock issued pursuant to exercise of such stock options or pursuant to
payments of this obligation in shares and held by him at the time of such
payment (except that the first such payment shall be 3.75% of such value). The
fair market value of unexercised options for such purpose shall be equal to the
market price of underlying shares less the exercise price of the options.
Following termination of Mr. Baker's employment agreement, the Company shall
have the option to purchase the options and shares from Mr. Baker at their
market value. A "Series B Trigger Event" means the termination of Barry Baker's
employment with the Company prior to the expiration of the initial five-year
term of his employment agreement (i) by the Company for any reason other than
"for cause" (as defined in the Baker Employment Agreement) or (ii) by Barry
Baker under certain circumstances, including (a) on 60 days' prior written
notice given at any time within 180 days following a Change of Control (as
defined in the Baker Employment Agreement); (b) if Mr. Baker is not elected (and
continued) as a director of Sinclair or SCI, as President and Chief Executive
Officer of SCI or as Executive Vice President of Sinclair, or Mr. Baker shall be
removed from any such board or office; (c) upon a material breach by Sinclair or
SCI of the Baker Employment Agreement which is not cured; (d) if there shall be
a material diminution in Mr. Baker's authority or responsibility, or certain of
his economic benefits are materially reduced, or Mr. Baker shall be required to
work outside Baltimore; or (e) the effective date of his employment as
contemplated by clause (b) shall not have occurred by August 31, 1997. Mr. Baker
cannot be appointed to such positions with the Company or SCI until the Company
or SCI takes certain actions with respect to WTTV and WTTK in Indianapolis or in
Columbus.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Other than as follows, no Named Executive Officer is a director of a
corporation that has a director or executive officer who is also a director of
the Company. Each of David D. Smith, Frederick G. Smith, J. Duncan Smith and
Robert E. Smith (the "Controlling Stockholders") (all of whom are directors of
the Company and Named Executive Officers) is a director and/or executive officer
of each of various other corporations controlled by the Controlling
Stockholders.
During 1996, none of the Named Executive Officers participated in any
deliberations of the Company's Board of Directors or the Compensation Committee
relating to compensation of the Named Executive Officers.
The members of the Compensation Committee are Messrs. Thomas, Brock and
McCanna. Mr. Thomas is of counsel to the law firm of Thomas & Libowitz, and is
the father of Steven A. Thomas, a senior attorney and founder of Thomas &
Libowitz, P.A. During 1996, Thomas & Libowitz, P.A., billed the Company
approximately $900,000 in fees and expenses for legal services.
45
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the date hereof the number and
percentage of outstanding shares of the Company's Common Stock beneficially
owned by (i) all persons known by the Company to beneficially own more than 5%
of the Company's Common Stock, (ii) each director and each Named Executive
Officer who is a stockholder, and (iii) all directors and executive officers as
a group. Unless noted otherwise, the business address of each of the following
is 2000 West 41st Street, Baltimore, MD 21211:
<TABLE>
<CAPTION>
SHARES OF CLASS B SHARES OF SERIES B SHARES OF CLASS A PERCENT OF
COMMON STOCK PREFERRED STOCK COMMON STOCK TOTAL
BENEFICIALLY OWNED BENEFICIALLY OWNED BENEFICIALLY OWNED VOTING
------------------ ------------------- ------------------
NAME NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT POWER (A)
--------- -------- -------- -------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
David D. Smith (b)................ 7,249,999 26.0% 7,259,999 51.2% 25.0%
Frederick G. Smith (b)(c)......... 6,864,944 24.6% 6,868,944 49.8% 23.7%
J. Duncan Smith (b)(d)............ 6,999,994 25.1% 6,999,994 50.3% 24.2%
Robert E. Smith (b)(e)............ 6,735,644 24.2% 6,735,644 49.4% 23.3%
David B. Amy (f).................. 34,700 * *
Basil A. Thomas................... 2,000 * *
Lawrence E. McCanna............... 300 * *
William E. Brock.................. 2,500 * *
Barry Baker (g)(h)................ 72,016 6.3% 1,644,311 19.2% *
Putnam Investments, Inc........... 2,175,000 31.5% *
One Post Office Square
Boston, Massachusetts 02109 .....
T. Rowe Price Associates, Inc.
(i)............................... 425,000 6.1% *
100 East Pratt Street Baltimore,
Maryland 21202
FMR Corp.......................... 593,400 8.6% *
82 Devenshire Street
Boston, Massachusetts 02109
Better Communications, Inc. (h) .. 134,858 11.8% 490,883 6.6% *
1215 Cole Street
St. Louis, Missouri 63106
BancBoston Investments (h) ...... 150,335 13.2% 547,219 7.3% *
150 Royal Street
Canton, Massachusetts 02021
Pyramid Ventures, Inc. (h) ...... 152,995 13.4% 556,902 7.4% *
1215 Cole Street
St. Louis, Missouri 63106
Boston Ventures Limited
Partnership IV (h)................ 253,800 22.3% 923,832 11.8% *
21 Custom House Street
10th Floor
Boston, Massachusetts 02110 .....
Boston Ventures Limited
Partnership IVA (h) .............. 142,745 12.5% 519,592 7.0% *
21 Custom House Street
10th Floor
Boston, Massachusetts 02110 .....
All directors and executive
officers as a group (8 persons).. 27,850,581 100.0% -- -- 27,904,081 80.2% 96.2%
</TABLE>
46
<PAGE>
- ----------
* Less than 1%
(a) Holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to ten votes per share except
for votes relating to "going private" and certain other transactions. The
Class A Common Stock, the Class B Common Stock and the Series B Preferred
Stock vote together as a single class except as otherwise may be required
by Maryland law on all matters presented for a vote, with each share of
Series B 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
Preferred Stock may at any time convert each share of Series B Preferred
Stock into 3.64 shares of Class A Common Stock.
(b) Shares of Class A Common Stock beneficially owned includes shares of Class
B Common Stock beneficially owned, each of which is convertible into one
share of Class A Common Stock.
(c) Includes 532,645 shares held in irrevocable trusts established by Frederick
G. Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(d) Includes 521,695 shares held in irrevocable trusts established by J. Duncan
Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(e) Includes 1,009,745 shares held in irrevocable trusts established by Robert
E. Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(f) Includes 32,500 shares of Class A Common Stock that may be acquired upon
exercise of options granted in 1995 and 1996 pursuant to the Incentive
Stock Option Plan and Long Term Incentive Plan.
(g) Consists of 1,382,435 shares of Class A Common Stock that may be acquired
upon exercise of options granted in 1996 pursuant to the Long Term
Incentive Plan.
(h) Shares of Class A Common Stock beneficially owned includes 3.64 shares for
each share of Series B Preferred Stock beneficially owned as each share of
Series B Preferred Stock is immediately convertible into approximately 3.64
shares of Class A Common Stock.
(i) These securities are owned by various individual and institutional
investors to which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment advisor with power to direct investments and/or sole
voting power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, beneficial owner of
such securities. .
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since December 31, 1995, the Company has engaged in the following
transactions with persons who are, or are members of the immediate family of,
directors, persons expected to become a director, officers or beneficial owners
of 5% or more of the issued and outstanding Common Stock, or with entities in
which such persons or certain of their relatives have interests.
WPTT NOTE
In connection with the sale of WPTT in Pittsburgh by the Company to WPTT,
Inc., WPTT, Inc., issued to the Company a 15-year senior secured term note of
$6.0 million (the "WPTT Note"). The Company subsequently sold the WPTT Note to
the late Julian S. Smith and Carolyn C. Smith, the parents of the Controlling
Stockholders and both former stockholders of the Company, in exchange for the
payment of $50,000 and the issuance of a $6.6 million note, which bears interest
at 7.21% per annum and requires payments of interest only through September
2001. Monthly principal payments of $109,317 plus interest are payable with
respect to this note commencing in November 2001 and ending in September 2006,
at which time the remaining principal balance plus accrued interest, if any, is
due. During the year ended December 31, 1996, the Company received $473,000 in
interest payments on this note. At December 31, 1996, the balance on this note
was $6,559,000.
WIIB NOTE
In September 1990, the Company sold all the stock of Channel 63, Inc., the
owner of WIIB in Bloomington, Indiana, to the Controlling Stockholders for $1.5
million. The purchase price was delivered in the form of a note issued to the
Company which was refinanced in June 1992 (the "WIIB
47
<PAGE>
Note"). The WIIB Note bears interest at 6.88% per annum, is payable in monthly
principal and interest payments of $16,000 until September 30, 2000, at which
time a final payment of approximately $431,000 is due. Principal and interest
paid in 1996 on the WIIB Note was $174,000. At December 31, 1996, $1.0 million
in principal amount of the WIIB Note remained outstanding.
BAY CREDIT FACILITY
In connection with the capitalization of Bay Television, Inc., the Company
agreed on May 17, 1990 to loan the Controlling Stockholders up to $3.0 million
(the "Bay Credit Facility"). Each of the loans to the Controlling Stockholders
pursuant to the Bay Credit Facility is evidenced by an amended and restated
secured note totaling $2.6 million due December 31, 1999 accruing interest at a
fixed rate equal to 6.88%. Principal and interest are payable over six years
commencing on March 31, 1994, and are required to be repaid quarterly and
$480,000 was paid in 1996. $600,000 is payable in 1997, $660,000 is payable in
1998 and $718,000 is payable in 1999. As of December 31, 1996, approximately
$1.8 million in principal amount was outstanding under this note.
AFFILIATED LEASES
From 1987 to 1992, the Company entered into five lease transactions with CCI,
a corporation wholly owned by the Controlling Stockholders, to lease certain
facilities from CCI. Four of these leases are 10-year leases for rental space on
broadcast towers, two of which are capital leases having renewable terms of 10
years. The other lease is a month-to-month lease for a portion of studio and
office space at which certain satellite dishes are located. Aggregate annual
rental payments related to these leases were $498,000 in 1996. The aggregate
annual rental payments related to these leases are scheduled to be $454,000 in
1997 and $474,000 in 1998.
In January 1991, CTI entered into a 10-year capital lease with KIG, a
corporation wholly owned by the Controlling Stockholders, pursuant to which CTI
leases both an administrative facility and studios for station WBFF and the
Company's present corporate offices. Additionally, in June 1991, CTI entered
into a one-year renewable lease with KIG pursuant to which CTI leases parking
facilities at the administrative facility. Payments under these leases with KIG
were $559,300 in 1996. The aggregate annual rental payments related to the
administrative facility are scheduled to be $616,400 in 1997 and $636,400 in
1998. During 1996, the Company chartered airplanes owned by certain companies
controlled by the Controlling Stockholders and incurred expenses of
approximately $336,000 related to these charters.
TRANSACTIONS WITH GERSTELL
Gerstell LP, an entity wholly owned by the Controlling Stockholders, was
formed in April 1993 to acquire certain personal and real property interests of
the Company in Pennsylvania. In a transaction that was completed in September
1993, Gerstell LP acquired the WPGH office/studio, transmitter and tower site
for an aggregate purchase price of $2.2 million. The purchase price was financed
in part by a $2.1 million note from Gerstell LP bearing interest at 6.18% with
principal payments beginning on November 1, 1994 and a final maturity date of
October 1, 2013. Principal and interest paid in 1996 on the note was $188,000.
At December 31, 1996, $2.0 million in principal amount of the note remained
outstanding. Following the acquisition, Gerstell LP leased the office/studio,
transmitter and tower site to WPGH, Inc. (a subsidiary of the Company) for
$14,875 per month and $25,000 per month, respectively. The leases have terms of
seven years, with four seven-year renewal periods. Aggregate annual rental
payment related to these leases was $534,000 in 1996. Gerstell LP has arranged
for a $2.0 million loan (the "Gerstell Loan") from a bank lender to provide for
construction at the studio/transmitter site of an expansion to the existing
office building/television studio located there and for construction of a new
tower having an aggregate estimated cost of $1.5 million. The Company has
guaranteed the Gerstell Loan. As of December 31, 1996, $885,000 was outstanding
under the Gerstell Loan. The completed office building/television studio and the
new tower is leased from Gerstell LP by WPGH, Inc., a subsidiary of the Company.
The Company believes that the leases with Gerstell LP are on terms and
conditions customary in similar leases with independent third parties.
48
<PAGE>
STOCK REDEMPTIONS
On September 30, 1990, the Company issued certain notes (the "Founders'
Notes") maturing on May 31, 2005, payable to the late Julian S. Smith and
Carolyn C. Smith, former majority owners of the Company and the parents of the
Controlling Stockholders. The Founders' Notes, which were issued in
consideration for stock redemptions equal to 72.65% of the then outstanding
stock of the Company, have principal amounts of $7.5 million and $6.7 million,
respectively. The Founders' Notes include stated interest rates of 8.75%, which
were payable annually from October 1990 until October 1992, then payable monthly
commencing April 1993 to December 1996, and then semiannually thereafter until
maturity. The effective interest rate approximates 9.4%. The Founders' Notes are
secured by security interests in substantially all of the assets of the Company
and its Subsidiaries, and are personally guaranteed by the Controlling
Stockholders.
Principal and interest payments on the Founders' Note issued to the estate of
Julian S. Smith are payable, in various amounts, each April and October,
beginning October 1991 until October 2004, with a balloon payment due at
maturity in the amount of $5.0 million. Additionally, monthly interest payments
commenced on April 1993 and continued until December 1996. Principal and
interest paid in 1996 on this Founders' Note was $860,000 At December 31, 1996,
$6.0 million in principal amount of this Founders' Note remained outstanding.
Principal payments on the Founders' Note issued to Carolyn C. Smith are
payable, in various amounts, each April and October, beginning October 1991
until October 2002. Principal and interest paid in 1996 on this Founders' Note
was $1.1 million. At December 31, 1996, $4.5 million in principal amount of this
Founders' Note remained outstanding.
RELATIONSHIP WITH GLENCAIRN
Glencairn is a corporation owned by (i) Edwin L. Edwards, Sr. (3%), (ii)
Carolyn C. Smith, the mother of the Controlling Stockholders (7%), and (iii)
certain trusts established by Carolyn C. Smith for the benefit of her
grandchildren (the "Glencairn Trusts") (90%). The 90% equity interest in
Glencairn owned by the Glencairn Trusts is held through the ownership of
non-voting common stock. The 7% equity interest in Glencairn owned by Carolyn C.
Smith is held through the ownership of common stock that is generally
non-voting, except with respect to certain specified extraordinary corporate
matters as to which this 7% equity interest has the controlling vote. Edwin L.
Edwards, Sr. owns a 3% equity interest in Glencairn through ownership of all of
the issued and outstanding voting stock of Glencairn and is Chairman of the
Board, President and Chief Executive Officer of Glencairn.
There have been, and the Company expects that in the future there will be,
transactions between the Company and Glencairn. Glencairn is the owner-operator
and FCC licensee of WNUV in Baltimore, WVTV in Milwaukee, WRDC in Raleigh/Durham
and WABM in Birmingham. The Company has entered into LMAs with Glencairn
relating to WNUV, WVTV, WRDC and WABM pursuant to which the Company provides
programming to Glencairn for airing on WNUV, WVTV, WRDC and WABM, respectively,
during the hours of 6:00 a.m. to 2:00 a.m. each day and has the right to sell
advertising during this period, all in exchange for the payment by the Company
to Glencairn of a monthly fees totaling $446,000.
In June 1995, the Company acquired options from certain stockholders of
Glencairn (the "Glencairn Options") which grant to the Company the right to
acquire, subject to applicable FCC rules and regulations, stock comprising up to
a 97% equity interest in Glencairn. Of the stock subject to the Glencairn
Options, a 90% equity interest is non-voting and the remaining 7% equity
interest is non-voting, except with respect to certain extraordinary matters as
to which this 7% equity interest has the controlling vote. Each Glencairn Option
was purchased by the Company for $1,000 ($5,000 in the aggregate) and is
exercisable only upon the Company's payment of an option exercise price
generally equal to the optionor's proportionate share of the aggregate
acquisition cost of all stations owned by Glencairn on the date of exercise
(plus interest at a rate of 10% from the respective acquisition date). The
Company estimates that the aggregate option exercise price for the Glencairn
Options, if currently exercised, would be approximately $9.7 million.
49
<PAGE>
In connection with the River City Acquisition, the Company assigned to
Glencairn its option to purchase certain assets relating to WFBC, Anderson,
South Carolina, one of the River City stations. In addition, the Company has
agreed (subject to FCC approval) to sell to Glencairn for $2,000,000 the License
Assets of WTTE in Columbus, Ohio, which the Company currently owns. The Company
has applied with the FCC to acquire the License Assets of a television station
from River City located in the same market as WFBC. In addition, the Company has
an option to acquire from River City the assets of WSYX, which is in the same
market as WTTE. See "Business--Broadcasting Acquisition Strategy." The Company
intends to enter into LMAs with Glencairn relating to WFBC and WTTE pursuant to
which the Company will supply programming to Glencairn, obtain the right to sell
advertising during the periods covered by the supplied programming and make
payments to Glencairn in amounts to be negotiated.
Also in connection with the River City Acquisition, Glencairn has been
granted an option to acquire from the current owner of the License Assets of
KRRT, Kerrville, Texas, which is in the same market as a station the Company
will acquire from River City. The Company will acquire the Non-License Assets of
KRRT, and is expected to enter into an LMA with Glencairn with respect to KRRT
pursuant to which the Company will supply programming to Glencairn, obtain the
right to sell advertising during the periods covered by the supplied programming
and make payments to Glencairn in amounts to be negotiated.
RIVER CITY TRANSACTIONS
Roy F. Coppedge, who will become a director of the Company upon satisfaction
of certain conditions, and Barry Baker, who will become a director and executive
officer of the Company as soon as permissible under the rules of the FCC and
applicable laws, each have a direct or indirect equity interest in River City
Partners, L.P. Therefore, Messrs. Coppedge and Baker have an interest in the
River City Acquisition, which is described above in "Business--Broadcasting
Acquisition Strategy." During 1996, the Company made LMA payments of $1.4
million to River City. In September 1996, the Company entered into a five-year
agreement with River City pursuant to which River City will provide to the
Company certain production services. Pursuant to this agreement, River City will
provide certain services to the Company in return for an annual fee of $416,000,
subject to certain adjustments on each anniversary date.
KEYMARKET OF SOUTH CAROLINA
Kerby Confer, who is expected to become an executive officer of the Company
as soon as permissible under the rules of the FCC and applicable laws, is the
owner of 100% of the common stock of Keymarket of South Carolina, Inc. ("KSC"),
and the Company has an option to acquire either (i) all of the assets of KSC for
forgiveness of debt in an aggregate principal amount of approximately $7.4
million, plus payment of approximately $1.0 million, less certain adjustments or
(ii) all of the stock of KSC for $1.0 million, less certain adjustments. In
addition, the Company leases two properties from Mr. Confer, pursuant to which
the Company paid Mr. Confer $144,000 in 1996. The Company is required to
purchase each of the properties during the term of the applicable lease for an
aggregate purchase price of approximately $1.75 million.
BEAVER DAM LIMITED LIABILITY COMPANY
In May 1996, the Company, along with the Controlling Stockholders, formed
Beaver Dam Limited Liability Company ("BDLLC"), of which the Company owns a 45%
interest. BDLLC was formed for the purpose of constructing and owning a building
which may be the site for the Company's corporate headquarters. The Company made
capital contributions to BDLLC in 1996 of approximately $380,000.
HERITAGE AUTOMOTIVE GROUP
In January, 1997, David D. Smith, the Company's President and Chief Executive
Officer and one of the Controlling Shareholders, made a substantial investment
in, and became a member of the board of directors of, Summa Holdings, Ltd.
which, through wholly owned subsidiaries, owns the Heritage Auto
50
<PAGE>
motive Group ("Heritage") and Allstate Leasing ("Allstate"). Mr. Smith is not an
officer, nor does he actively participate in the management, of Summa Holdings,
Ltd., Heritage, or Allstate. Heritage owns and operates new and used car
dealerships in the Baltimore metropolitan area. Allstate owns and operates an
automobile and equipment leasing business with offices in the Baltimore,
Richmond, Houston, and Atlanta metropolitan areas. The Company sells Heritage
and Allstate advertising time on WBFF and WNUV, the television stations operated
by the Company serving the Baltimore DMA. The Company believes that the terms of
the transactions between the Company and Heritage and the Company and Allstate
are and will be comparable to those prevailing in similar transactions with or
involving unaffiliated parties.
51
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Index to Financial Statements
The financial statements required by this item are submitted in a separate
section beginning on page F-1 of this report.
Index to Financial Statements
PAGE
-------
Index to Financial Statements...................................... F-1
Report of Arthur Andersen LLP, Independent Public Accountants ..... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 ...... F-3
Consolidated Statements of Operations for the Years Ended December
31, 1994, 1995 and 1996............................................ F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1994, 1995 and 1996............................. F-5
Consolidated Statements of Cash Flows for the Years Ended December
31, 1994, 1995 and 1996............................................ F-6,7
Notes to Consolidated Financial Statements......................... F-8
(a) (2) Index to Financial Statement Schedules
The financial statement schedules required by this item are submitted on
pages S-1 through S-3 of this Report.
PAGE
------
Index to Schedules.......................................... S-1
Report of Arthur Andersen LLP, Independent Public
Accountants................................................. S-2
Schedule II - Valuation and Qualifying Account.............. S-3
All other schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements of the notes thereto.
52
<PAGE>
(a) (3) Index to Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ ------------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 By-laws (2)
4.2 Indenture, dated as of December 9, 1993, among Sinclair Broadcast
Group, Inc., its wholly-owned subsidiaries and First Union
National Banks of North Carolina, as trustee. (2)
4.2 Indenture, dated as of August 28, 1995, among Sinclair Broadcast
Group, Inc., its wholly-owned subsidiaries and the United States
Trust Company of New York as trustee. (2)
10.1 Asset Purchase Agreement dated as of April 10, 1996 by and between
River City Broadcasting, L.P. as seller and Sinclair Broadcast
Group, Inc. as buyer dated as of April 10, 1996. (3)
10.2 Option Agreement, dated as of April 10, 1996, by and among River
City Broadcasting, L.P., as sellers and Sinclair Broadcast Group,
Inc. dated as of April 10, 1996. (3)
10.3 Modification Agreement , dated as of April 10, 1996,by and between
River City Broadcast Group, L.P. as seller, and Sinclair Broadcast
Group, Inc. as buyer, with reference to Asset Purchase Agreement
(3)
10.4 Stock Option Agreement dated April 10 1996, by and between
Sinclair Broadcast Group, Inc. and Barry Baker.
10.5 Employment Agreement, dated as of April 10, 1996, with Barry
Baker. (1)
10.6 Indemnification Agreement, dated as of April 10, 1996, with Barry
Baker. (1)
10.7 Time Brokerage Agreement, dated as of May 31, 1996, by and among
Sinclair Communications, Inc., River City Broadcasting, L.P. and
River City License Partnership and Sinclair Broadcast Group, Inc.
(1)
10.8 Registration Rights Agreement, dated as of May 31, 1996, by and
between Sinclair Broadcast Group, Inc. and River City
Broadcasting, L.P. (1)
10.9 Time Brokerage Agreement, dated as of August 3, 1995, by and
between River City Broadcasting, L.P. and KRRT, Inc. and
Assignment and Assumption Agreement dated as of May 31, 1996 by
and among KRRT, Inc., River City Broadcasting, L.P. and KABB, Inc.
(as Assignee of Sinclair Broadcast Group, Inc.). (1)
10.10 Loan Agreement, dated as of July 7, 1995, by and between Keymarket
of South Carolina, Inc. and River City Broadcasting, L.P. and
First Amendment to Loan Agreement dated as of May 24, 1996. (1)
10.11 Option Agreement, dated as of July 7, 1995, by and among Keymarket
of South Carolina, Kerby E. Confer and River City Broadcasting,
L.P. (1)
10.12 Letter Agreement, dated August 20, 1996, between Sinclair
Broadcast Group, Inc., River City Broadcasting, L.P. and Fox
Broadcasting Company. (4)
10.13 Asset Purchase Agreement, dated January 31, 1997, by and between
Channel 21, L.P. and KUPN, Inc.*
10.14 Promissory Note, dated as of May 17, 1990, in the principal amount
of $3,000,000 among David D. Smith, Frederick G. Smith, J. Duncan
Smith and Robert E. Smith (as makers) and Sinclair Broadcast
Group, Inc., Channel 63, Inc., Commercial Radio Institute, Inc.,
WTTE, Channel 28, Inc. and Chesapeake Television, Inc. (as
holders). (5)
10.15 Term Note, dated as of September 30, 1990, in the principal amount
of $7,515,000 between Sinclair Broadcast Group, Inc. (as borrower)
and Julian S. Smith (as lender). (6)
53
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.16 Replacement Term Note dated as of September 30, 1990 in the
principal amount of $6,700,000 between Sinclair Broadcast Group,
Inc. (as borrower) and Carolyn C. Smith (as lender) (2)
10.17 Note dated as of September 30, 1990 in the principal amount of
$1,500,000 between Frederick G. Smith, David D. Smith, J. Duncan
Smith and Robert E. Smith (as borrowers and Sinclair Broadcast
Group, Inc. (as lender) (5)
10.18 Amended and Restated Note dated as of June 30, 1992 in the
principal amount of $1,458,489 between Frederick G. Smith, David
D. Smith, J. Duncan Smith and Robert E. Smith (as borrowers) and
Sinclair Broadcast Group, Inc. (as lender) (5)
10.19 Term Note dated August 1, 1992 in the principal amount of $900,000
between Frederick G. Smith, David D. Smith, J. Duncan Smith and
Robert E. Smith (as borrowers) and Commercial Radio Institute,
Inc. (as lender) (5)
10.20 Management Agreement dated as of January 6, 1992 between Keyser
Communications, Inc. and WPGH,Inc. (5)
10.21 Promissory Note dated as of December 28, 1986 in the principal
amount of $6,421,483.53 between Sinclair Broadcast Group, Inc. (as
maker) and Frederick H. Himes, B. Stanley Resnick and Edward A.
Johnston (as representatives for the holders) (5)
10.22 Term Note dated as of March 1, 1993 in the principal amount of
$6,559,000 between Julian S. Smith and Carolyn C. Smith (as
makers-borrowers) and Commercial Radio Institute, Inc. (as
holder-lender) (5)
10.23 Restatement of Stock Redemption Agreement by and among Sinclair
Broadcast Group, Inc. and Chesapeake Television, Inc., et al.
dated June 19, 1990 (5)
10.24 Corporate Guaranty Agreement dated as of September 30, 1990 by
Chesapeake Television, Inc., Commercial Radio, Inc., Channel 63,
Inc. and WTTE, Channel 28, Inc. (as guarantors) to Julian S. Smith
and Carolyn C. Smith (as lenders) (5)
10.25 Security Agreement dated as of September 30, 1990 among Sinclair
Broadcast Group, Inc., Chesapeake Television, Inc., Commercial
Radio Institute, Inc., WTTE, Channel 28, Inc. and Channel 63, Inc.
(as borrowers and subsidiaries of the borrower) and Julian S.
Smith and Carolyn C. Smith (as lenders) (5)
10.26 Term Note dated as of September 22, 1993, in the principal amount
of $1,900,000 between Gerstell Development Limited Partnership (as
maker-borrower) and Sinclair Broadcast Group, Inc. (as
holder-lender) (5)
10.27 Second Amended and Restated Credit Agreement, dated as of May 31,
1996, by and among Sinclair Broadcast Group, Inc., Certain
Subsidiary Guarantors, Certain Lenders and the Chase Manhattan
Bank as Agent (1)
10.28 Amendment No. 1 dated as of July 24, 1996 to the Second Amended
and Restated Credit Agreement dated as of May 31, 1996 by and
among Sinclair Broadcast, Inc., Certain Subsidiary Guarantors,
Certain Lenders and the Chase Manhattan Bank as Agent
10.29 Amendment No. 2 dated as of October 16, 1996 to the Second Amended
and Restated Credit Agreement dated as of May 31, 1996 by and
among Sinclair Broadcast, Inc., Certain Subsidiary Guarantors,
Certain Lenders and the Chase Manhattan Bank as Agent
10.30 Amendment No. 3 dated as of December 18, 1996 to the Second
Amended and Restated Credit Agreement dated as of May 31, 1996 by
and among Sinclair Broadcast, Inc., Certain Subsidiary Guarantors,
Certain Lenders and the Chase Manhattan Bank as Agent
10.31 Amendment No. 4 dated as of February 20, 1997 to the Second
Amended and Restated Credit Agreement dated as of May 31, 1996 by
and among Sinclair Broadcast, Inc., Certain Subsidiary Guarantors,
Certain Lenders and the Chase Manhattan Bank as Agent
54
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
------ ------------
10.32 Incentive Stock Option Plan for Designated Participants (2)
10.33 Incentive Stock Option Plan of Sinclair Broadcast Group, Inc. (2)
10.34 First Amendment to Incentive Stock Option Plan of Sinclair
Broadcast Group, Inc., adopted April 10, 1996
10.35 Second Amendment to Incentive Stock Option Plan of Sinclair
Broadcast Group, Inc., adopted May 31, 1996
10.36 1996 Long Term Incentive Plan of Sinclair Broadcast Group, Inc.
10.37 Employment Agreement by and between Sinclair Broadcast Group, Inc.
Robert E. Smith, dated as of June 12, 1995
10.38 Employment Agreement by and between Sinclair Broadcast Group, Inc.
and J. Duncan Smith, dated as of June 12, 1995
10.39 Employment Agreement by and between Sinclair Broadcast Group, Inc.
and Frederick G. Smith, dated as of June 12, 1995
10.40 Employment Agreement by and between Sinclair Broadcast Group, Inc.
and David D. Smith, dated as of June 12, 1995
10.41 Common Stock Option dated as of August 26, 1994 by and between
Communications Corporation of America (as optionee) and Sinclair
Broadcast Group, Inc. (as optionor) (2)
10.42 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by
and between Sinclair Broadcast Group, Inc. and William Richard
Schmidt, as trustee (2)
10.43 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by
and between Sinclair Broadcast Group, Inc. and C. Victoria
Woodward, as trustee (2)
10.44 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by
and between Sinclair Broadcast Group, Inc. and Dyson Ehrhardt, as
trustee (2)
10.45 Common Non-Voting Capital Stock Option dated as of May 3, 1995 by
and between Sinclair Broadcast Group, Inc. and Mark Knobloch, as
trustee (2)
10.46 Agreement and Plan of Merger of Keyser Communications, Inc. into
Sinclair Broadcast Group, Inc. dated May 4, 1995 and Articles of
Merger dated May 4, 1995 (2)
10.47 Amended and Restated Asset Purchase Agreement by and between River
City Broadcasting, L.P. and Sinclair Broadcast Group, Inc. dated
as of April 10, 1996 and amended and restated as of May 31, 1996
(7)
10.48 Group I Option Agreement by and among River City Broadcasting,
L.P. and Sinclair Broadcast Group, Inc. dated as of May 31, 1996
(7)
10.49 Columbus Option Agreement by and among River City Broadcasting,
L.P. and River City License Partnership and Sinclair Broadcast
Group, Inc. dated as of May 31, 1996 (7)
10.50 Option Agreement dated as of May 24, 1994 between Kansas City TV
62 Limited Partnership and the Individuals Named Herein, on Behalf
of an Entity To Be Formed (1)
10.51 Option Agreement dated as of May 24, 1994 between Cincinnati 64
Limited Partnership and the Individuals Named Herein, on Behalf of
an Entity To Be Formed (1)
10.52 Stock Purchase Agreement dated as of March 1, 1996 by and between
Sinclair Broadcast Group, Inc. and The Stockholders of Superior
Communications Group, Inc. (1)
10.53 Asset Purchase Agreement dated as of January 16, 1996 by and
between Bloomington Comco, Inc. And WYZZ, Inc. (1)
10.54 Asset Purchase Agreement dated as of June 10, 1996 by and between
WTTE, Channel 28, Inc. and WTTE, Channel 28 Licensee, Inc. and
Glencairn, Ltd. (1)
10.55 Asset Purchase Agreement dated April 10, 1996 by and between KRRT,
Inc. and SBGI, Inc. (8)
10.56 Agreememt for the purchase of assets dated as of January 16, 1996
and escrow agreement dated as of January 16, 1996 between
Bloomington Comco, Inc. and Sinclair Broadcast Group (6)
55
10.57 Stock Purchase Agreement dated as of March 1, 1996 by and among
Sinclair Broadcast Group, Inc. and PNC Capital Corp., Primus
Capital Fund II, Ltd., Albert M. Holtz, Perry A. Sook, Richard J.
Roberts, George F. Boggs, Albert M. Holtz, as Trustee for the
Irrevocable Deed of Trust for Tara Ellen Holtz, dated December 6,
1994, and Albert M. Holtz as trustee for the Irrevocable Deed of
Trust for Meghan Ellen Holtz, dated December 6, 1994 (6)
10.58 Primary Television Affiliation Agreement dated as of March 24,
1997 by and among American Broadcasting Companies, Inc., River
City Broadcasting, L.P. and Chesapeake Television, Inc.**
10.59 Primary Television Affiliation Agreement dated as of March 24,
1997 by and among American Broadcasting Companies, Inc., River
City Broadcasting, L.P. and WPGH, Inc. **
11 Computation of Earnings Per Share
12 Computation of Ratio of Earnings to Fixed Charges
21 Subsidiaries of the Company
23 Consent of Independent Public Accountants
27 Financial Data Schedule
</TABLE>
- ----------
* Previously filed.
** To be filed by amendment.
(1) Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended June 30, 1996
(2) Incorporated by reference from the Company's Registration Statement on Form
S-1, No. 33-90682
(3) Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended March 31, 1996
(4) Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended September 30, 1996.
(5) Incorporated by reference from the Company's Registration Statement on Form
S-1, No. 33-69482
(6) Incorporated by reference from the Company's Report on Form 10-K for the
annual period ended December 31, 1995.
(7) Incorporated by reference from the Company's Amended Current Report on Form
8-K/A, filed May 9, 1996.
(8) Incorporated by reference from the Company's Current Report on Form 8-K,
filed May 17, 1996.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Registrant during the fourth
quarter of the fiscal year ended December 31, 1996.
56
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 14 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K/A
to be signed on its behalf by the undersigned, thereto duly authorized on April
4, 1997.
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
----------------------------------
David B. Amy
Chief Financial Officer
Principal Accounting Officer
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant in the
capacities indicated on April 4, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ David D. Smith President, Chief Executive Officer, Director,
- ------------------------- Chairman and Principal Executive Officer
David D. Smith
/s/ Frederick G. Smith Vice President, Assistant Secretary and Director
- -------------------------
Frederick G. Smith
/s/ J. Duncan Smith Vice President, Secretary and Director
- -------------------------
J. Duncan Smith
/s/ Robert E. Smith Vice President, Treasurer and Director
- -------------------------
Robert E. Smith
/s/ Basil A. Thomas Director
- -------------------------
Basil A. Thomas
/s/ Lawrence E. McCanna Director
- -------------------------
Lawrence E. McCanna
/s/ William E. Brock Director
- -------------------------
William E. Brock
</TABLE>
57
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-------------
<S> <C>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
Report of Independent Public Accountants................................................ F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996............................ F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996................................................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994
1995 and 1996.......................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996................................................................................... F-6, F-7
Notes to Consolidated Financial Statements ............................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sinclair Broadcast Group, Inc.:
We have audited the accompanying consolidated balance sheets of Sinclair
Broadcast Group, Inc. (a Maryland corporation) and Subsidiaries as of December
31, 1995 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1994, 1995
and 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sinclair Broadcast Group, Inc.
and Subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for the years ended December 31, 1994, 1995 and
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
February 7, 1997, except for Note 19,
as to which the date is March 12, 1997
F-2
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1995 1996
---------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, including cash equivalents of $108,720 and $-0-, respectively................... $112,450 $ 2,341
Accounts receivable, net of allowance for doubtful accounts of $1,066 and $2,472,
respectively......................................................................... 50,022 112,313
Current portion of program contract costs............................................. 18,036 44,526
Prepaid expenses and other current assets............................................. 1,972 3,704
Deferred barter costs................................................................. 1,268 3,641
Deferred tax assets .................................................................. 4,565 1,245
---------- ------------
Total current assets................................................................. 188,313 167,770
PROGRAM CONTRACT COSTS, less current portion........................................... 19,277 43,037
LOANS TO OFFICERS AND AFFILIATES....................................................... 11,900 11,426
PROPERTY AND EQUIPMENT, net............................................................ 42,797 154,333
NON-COMPETE AND CONSULTING AGREEMENTS, net of accumulated amortization of $34,000 and
$54,236, respectively................................................................. 30,379 10,193
DEFERRED TAX ASSET..................................................................... 16,462 --
OTHER ASSETS........................................................................... 27,355 64,235
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net of accumulated amortization of $49,746
and $85,155, respectively............................................................. 268,789 1,256,303
---------- ------------
Total Assets.......................................................................... $605,272 $1,707,297
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...................................................................... $ 2,187 $ 11,886
Income taxes payable.................................................................. 3,944 730
Accrued liabilities................................................................... 20,720 35,030
Current portion of long-term liabilities-
Notes payable and commercial bank financing.......................................... 1,133 62,144
Capital leases payable............................................................... 524 44
Notes and capital leases payable to affiliates....................................... 1,867 1,774
Program contracts payable............................................................ 26,395 58,461
Deferred barter revenues.............................................................. 1,752 3,576
---------- ------------
Total current liabilities............................................................ 58,522 173,645
LONG-TERM LIABILITIES:
Notes payable and commercial bank financing........................................... 400,644 1,212,000
Capital leases payable................................................................ 44 --
Notes and capital leases payable to affiliates........................................ 13,959 12,185
Program contracts payable............................................................. 30,942 56,194
Deferred tax liability................................................................ -- 463
Other long-term liabilities........................................................... 2,442 2,739
---------- ------------
Total liabilities.................................................................... 506,553 1,457,226
---------- ------------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES......................................... 2,345 3,880
---------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 and 10,000,000 shares authorized and -0-
and 1,138,318 issued and outstanding................................................. -- 11
Class A Common stock, $.01 par value, 35,000,000 and 100,000,000 shares authorized and
5,750,000 and 6,911,880 shares issued and outstanding, respectively.................. 58 70
Class B Common stock, $.01 par value, 35,000,000 shares authorized and 29,000,000 and
27,850,581 shares issued and outstanding............................................. 290 279
Additional paid-in capital............................................................ 116,089 231,170
Accumulated deficit................................................................... (20,063) (18,932)
Additional paid-in captial-- equity put options....................................... -- 8,938
Additional paid-in capital -- stock options........................................... -- 25,784
Deferred compensation................................................................. -- (1,129)
---------- ------------
Total stockholders' equity........................................................... 96,374 246,191
---------- ------------
Total Liabilities and Stockholders' Equity........................................... $605,272 $1,707,297
========== ============
</TABLE>
The accompanying notes are an integral part of
these consolidated balance sheets.
F-3
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions of
$21,235, $31,797 and $56,040, respectively .................. $ 118,611 $ 187,934 $ 346,459
Revenues realized from station barter arrangements ........... 10,743 18,200 32,029
--------- --------- ---------
Total revenues .............................................. 129,354 206,134 378,488
--------- --------- ---------
OPERATING EXPENSES:
Program and production ....................................... 15,760 28,152 66,652
Selling, general and administrative .......................... 25,578 36,174 75,924
Expenses realized from station barter arrangements ........... 9,207 16,120 25,189
Amortization of program contract costs and net realizable
value adjustments ........................................... 22,360 29,021 47,797
Amortization of deferred compensation ........................ -- -- 739
Depreciation and amortization of property and equipment ...... 3,841 5,400 11,711
Amortization of acquired intangible broadcasting assets,
non-compete and consulting agreements and other assets ...... 29,386 45,989 58,530
Special bonuses to executive officers ........................ 3,638 -- --
Amortization of excess syndicated programming ................ -- -- 3,043
--------- --------- ---------
Total operating expenses .................................... 109,770 160,856 289,585
--------- --------- ---------
Broadcast operating income .................................. 19,584 45,278 88,903
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest and amortization of debt discount expense ........... (25,418) (39,253) (84,314)
Interest income .............................................. 2,033 3,942 3,136
Other income ................................................. 414 221 342
--------- --------- ---------
Income (loss) before provision (benefit) for income taxes and
extraordinary item ......................................... (3,387) 10,188 8,067
PROVISION (BENEFIT) FOR INCOME TAXES .......................... (647) 5,200 6,936
--------- --------- ---------
Net income (loss) before extraordinary item .................. (2,740) 4,988 1,131
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of related income
tax benefit of $3,357 ....................................... -- (4,912) --
--------- --------- ---------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS ............ $ (2,740) $ 76 $ 1,131
========= ========= =========
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net income (loss) before extraordinary items ................. $ (.09) $ .15 $ .03
Extraordinary item ........................................... -- (.15) --
--------- --------- ---------
Net income (loss) per common and common equivalent share ..... $ (.09) $ -- $ .03
========= ========= =========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING ................................ 29,000 32,205 37,381
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS CLASS RETAINED
SERIES A SERIES B A B ADDITIONAL EARNINGS
PREFERRED PREFERRED COMMON COMMON PAID-IN (ACCUMULATED
STOCK STOCK STOCK STOCK CAPITAL DEFICIT)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 ................... $ -- $ -- $ -- $ 290 $ 4,733 $ (16,047)
Realization of deferred gain ................ -- -- -- -- 41 --
Net loss .................................... -- -- -- -- -- (2,740)
--------- --------- --------- --------- --------- ---------
BALANCE, December 31, 1994 ................... -- -- -- 290 4,774 (18,787)
Issuance of common shares, net of related
expenses of $9,288 ......................... -- -- 58 -- 111,403 --
Non-cash distribution prior to KCI merger ... -- -- -- -- (109) (1,352)
Realization of deferred gain ................ -- -- -- -- 21 --
Net income .................................. -- -- -- -- -- 76
--------- --------- --------- --------- --------- ---------
BALANCE, December 31, 1995 ................... -- -- 58 290 116,089 (20,063)
Class B Common Stock converted into Class A
Common Stock ............................... -- -- 11 (11) -- --
Issuance of Series A Preferred Stock ........ 12 -- -- -- 125,067 --
Series A Preferred Stock converted into
Series B Preferred Stock ................... (12) 12 -- -- -- --
Series B Preferred Stock converted into Class
A Common Stock ............................. -- (1) 1 -- -- --
Repurchase of 30,000 shares of Class A Common
Stock ...................................... -- -- -- -- (748) --
Stock option grants ......................... -- -- -- -- -- --
Income tax provision for deferred
compensation ............................... -- -- -- -- (300) --
Equity put options .......................... -- -- -- -- (8,938) --
Amortization of deferred compensation ....... -- -- -- -- -- --
Net income .................................. -- -- -- -- -- 1,131
--------- --------- --------- --------- --------- ---------
BALANCE, December 31, 1996 ................... $ -- $ 11 $ 70 $ 279 $ 231,170 $ (18,932)
========= ========= ========= ========= ========= =========
</TABLE>
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
(Continued)
<TABLE>
<CAPTION>
ADDITIONAL ADDITIONAL
PAID-IN PAID-IN
CAPITAL- CAPITAL- TOTAL
EQUITY PUT STOCK DEFERRED STOCKHOLDERS'
OPTIONS OPTIONS COMPENSATION EQUITY
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1993 ................... $ -- $ -- $ -- $ (11,024)
Realization of deferred gain ................ -- -- -- 41
Net loss .................................... -- -- -- (2,740)
--------- --------- --------- ---------
BALANCE, December 31, 1994 ................... -- -- -- (13,723)
Issuance of common shares, net of related
expenses of $9,288 ......................... -- -- -- 111,461
Non-cash distribution prior to KCI merger ... -- -- -- (1,461)
Realization of deferred gain ................ -- -- -- 21
Net income .................................. -- -- -- 76
--------- --------- --------- ---------
BALANCE, December 31, 1995 ................... -- -- -- 96,374
Class B Common Stock converted into Class A
Common Stock ............................... -- -- -- --
Issuance of Series A Preferred Stock ........ -- -- -- 125,079
Series A Preferred Stock converted into
Series B Preferred Stock ................... -- -- -- --
Series B Preferred Stock converted into Class
A Common Stock ............................. -- -- -- --
Repurchase of 30,000 shares of Class A Common
Stock ...................................... -- -- -- (748)
Stock option grants ......................... -- 25,784 (1,868) 23,916
Income tax provision for deferred
compensation ............................... -- -- -- (300)
Equity put options .......................... 8,938 -- -- --
Amortization of deferred compensation ....... -- -- 739 739
Net income .................................. -- -- -- 1,131
--------- --------- --------- ---------
BALANCE, December 31, 1996 ................... $ 8,938 $ 25,784 $ (1,129) $ 246,191
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
PAGE 1 OF 2
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................................... $ (2,740) $ 76 $ 1,131
Adjustments to reconcile net income (loss) to net cash flows from
operating activities-
Extraordinary loss ............................................. -- 8,269 --
Amortization of excess syndicated programming .................. -- -- 3,043
Gain on sales of assets ........................................ -- (221) --
Depreciation and amortization of property and equipment ........ 3,841 5,400 11,711
Amortization of acquired intangible broadcasting assets,
non-compete and consulting agreements and other assets ........ 29,386 45,989 58,530
Amortization of program contract costs and net realizable value
adjustments ................................................... 22,360 29,021 47,797
Amortization of deferred compensation .......................... -- -- 739
Deferred tax benefit ........................................... (9,177) (5,089) 2,330
Realization of deferred gain ................................... (152) (42) --
Changes in assets and liabilities, net of effects of acquisitions
and dispositions-
Increase in accounts receivable, net ........................... (19,726) (12,245) (41,310)
Increase in prepaid expenses and other current assets .......... (1,057) (273) (217)
(Increase) decrease in other assets and acquired intangible
broadcasting assets ........................................... 910 (77) (328)
Increase in accounts payable and accrued liabilities ........... 6,556 7,274 19,941
Increase (decrease) in income taxes payable .................... 5,481 (2,427) (3,214)
Net effect of change in deferred barter revenues and deferred
barter costs .................................................. 103 230 (908)
Increase in other long-term liabilities ........................ -- -- 297
Decrease in minority interest .................................. -- (38) (121)
Payments on program contracts payable ........................... (14,262) (19,938) (30,451)
Payments for consulting agreements .............................. (742) -- --
-------- -------- --------
Net cash flows from operating activities ...................... $ 20,781 $ 55,909 $ 68,970
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
PAGE 2 OF 2
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES ....................... $ 20,781 $ 55,909 $ 68,970
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ........................ (2,352) (1,702) (12,609)
Payments for acquisition of television stations .............. (160,795) (101,000) (74,593)
Payments related to the acquisition of the non-license assets
of River City Broadcasting .................................. -- -- (818,083)
Prepaid local marketing agreement fee ........................ (1,500) -- --
Payments for acquisition of certain other non-license assets . -- (14,283) (29,532)
Payments for the purchase of outstanding stock of Superior
Communications Group, Inc. .................................. -- -- (63,504)
Payments to exercise options to acquire certain FCC licenses . -- -- (6,894)
Purchase option extension payments relating to WSYX .......... -- -- (6,960)
Payments for purchase of investments ......................... (502) -- --
Payment for WSTR subordinated note ........................... (4,800) -- --
Payments for consulting and non-compete agreements ........... (59,970) (1,000) (50)
Payments for purchase options ................................ (17,500) (9,000) --
Payment to exercise purchase option .......................... -- (1,000) --
Distributions (investments) in joint ventures ................ -- 240 (380)
Proceeds from disposal of property and equipment ............. -- 3,330 --
Proceeds from assignment of license purchase options ......... -- 4,200 --
Payment for WPTT subordinated convertible debenture .......... -- (1,000) --
Loans to officers and affiliates ............................. (50) (205) (854)
Repayments of loans to officers and affiliates ............... 386 2,177 1,562
Payments for organization of new subsidiaries ................ (198) -- --
Fees paid relating to subsequent acquisitions ................ (2,500) -- --
----------- ----------- -----------
Net cash flows used in investing activities ................. (249,781) (119,243) (1,011,897)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and commercial bank financing .... 224,985 138,000 982,500
Repayments of notes payable, commercial bank financing and
capital leases .............................................. (102,069) (362,928) (110,657)
Payments of costs related to debt offering ................... -- (824) --
Payments of costs related to financing ....................... (7,083) (3,200) (20,009)
Payments for interest rate derivative agreements ............. (1,137) -- (851)
Repurchases of the Company's Class A Common Stock ............ -- -- (748)
Prepayments of excess syndicated program contract liabilities -- -- (15,116)
Payments for costs related to preferred stock offering not yet
consummated ................................................. -- -- (434)
Release of cash in escrow .................................... 100,000 -- --
Proceeds from debt offering, net of $6,000 underwriters'
discount .................................................... -- 294,000 --
Repayments of notes and capital leases to affiliates ......... (1,286) (3,171) (1,867)
Net proceeds from issuance of common shares .................. -- 111,461 --
----------- ----------- -----------
Net cash flows from financing activities .................... 213,410 173,338 832,818
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........... (15,590) 110,004 (110,109)
CASH AND CASH EQUIVALENTS, beginning of period ................. 18,036 2,446 112,450
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period ....................... $ 2,446 $ 112,450 $ 2,341
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid ................................................. $ 27,102 $ 24,770 $ 82,814
=========== =========== ===========
Income taxes paid ............................................. $ 4,921 $ 7,941 $ 6,837
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Sinclair Broadcast Group, Inc., Sinclair Communications, Inc. and all other
consolidated subsidiaries, which are collectively referred to hereafter as "the
Company, Companies or SBG." The Company owns and operates television and radio
stations throughout the United States. Additionally, included in the
accompanying consolidated financial statements are the results of operations of
certain television stations pursuant to local marketing agreements (LMAs) and
radio stations pursuant to joint sales agreements (JSAs).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all its wholly-owned and majority-owned subsidiaries. Minority interest
represents a minority owner's proportionate share of the equity in two of the
Company's subsidiaries. In addition, the Company uses the equity method of
accounting for 20% to 50% ownership investments. All significant intercompany
transactions and account balances have been eliminated.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses in the
financial statements and in the disclosures of contingent assets and
liabilities. While actual results could differ from those estimates, management
believes that actual results will not be materially different from amounts
provided in the accompanying consolidated financial statements.
Cash Equivalents
Cash equivalents are stated at cost plus accrued interest, which approximates
fair value. Cash equivalents are highly liquid investment grade debt instruments
with an original maturity of three months or less and consist of time deposits
with a number of consumer banks with high credit ratings.
Programming
The Companies have agreements with distributors for the rights to television
programming over contract periods which generally run from one to seven years.
Contract payments are made in installments over terms that are generally shorter
than the contract period. Each contract is recorded as an asset and a liability
when the license period begins and the program is available for its first
showing. The portion of the program contracts payable within one year is
reflected as a current liability in the accompanying consolidated balance
sheets.
The rights to program materials are reflected in the accompanying consolidated
balance sheets at the lower of unamortized cost or estimated net realizable
value. Estimated net realizable values are based upon management's expectation
of future advertising revenues net of sales commissions to be generated by the
program material. Amortization of program contract costs is generally computed
under either a four year accelerated method or based on usage, whichever yields
the greater amortization for each program. Program contract costs, estimated by
management to be amortized in the succeeding year, are classified as current
assets. Payments of program contract liabilities are typically paid on a
scheduled basis and are not affected by adjustments for amortization or
estimated net realizable value.
On August 21, 1996, the Company entered into an agreement (the "Fox Agreement")
with Fox Broadcasting Company, Inc. ("Fox") which, among other things, provides
that affiliation agreements between Fox would be amended to have new five-year
terms commencing on the date of the Fox Agreement.
F-8
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Fox Agreement also provides that the Company will have the right to
purchase, for fair market value, any station Fox acquires in a market currently
served by a Company owned Fox affiliate if Fox determines to terminate the
affiliation agreement with the Company's station in that market and operate the
station acquired by Fox as a Fox affiliate.
In October 1996, WTTO did not renew its Fox affiliation and is now operated as a
WB affiliate. 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.
Barter Arrangements
Certain program contracts provide for the exchange of advertising air time in
lieu of cash payments for the rights to such programming. These contracts are
recorded as the programs are aired at the estimated fair value of the
advertising air time given in exchange for the program rights. Network
programming is excluded from these calculations.
The Company broadcasts certain customers' advertising in exchange for equipment,
merchandise and services. The estimated fair value of the equipment, merchandise
or services received is recorded as deferred barter costs and the corresponding
obligation to broadcast advertising is recorded as deferred barter revenues. The
deferred barter costs are expensed or capitalized as they are used, consumed or
received. Deferred barter revenues are recognized as the related advertising is
aired.
Other Assets
Other assets as of December 31, 1995 and 1996 consist of the following (in
thousands):
1995 1996
------- -------
Unamortized debt acquisition
costs $ 9,049 $26,453
Investments in limited
partnerships 2,435 3,039
Notes receivable 4,775 10,773
Purchase options 10,000 22,902
Offering costs -- 434
Other 1,096 634
------- -------
$27,355 $64,235
======= =======
Non-Compete and Consulting Agreements
The Company has entered into non-compete and consulting agreements with various
parties. These agreements range from two to three years. Amounts paid under
these agreements are amortized over the life of the agreement.
Acquired Intangible Broadcasting Assets
Acquired intangible broadcasting assets are being amortized over periods of 1 to
40 years. These amounts result from the acquisition of certain television and
radio station license and non-license assets (see Note 12). The Company monitors
the individual financial performance of each of the stations and continually
evaluates the realizability of intangible and tangible assets and the existence
of any impairment to its recoverability based on the projected undiscounted cash
flows of the respective stations.
F-9
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Intangible assets, at cost, as of December 31, 1995 and 1996, consist of the
following (in thousands):
AMORTIZATION
PERIOD 1995 1996
--------------- ---------- ------------
Goodwill...................... 40 years $109,772 $ 676,219
Intangibles related to LMAs .. 15 years 103,437 120,787
Decaying advertiser base ..... 1 -- 15 years 38,424 93,896
FCC licenses.................. 25 years 44,564 370,533
Network affiliations.......... 1 -- 25 years 17,482 55,966
Other......................... 1 -- 40 years 4,856 24,057
---------- ------------
318,535 1,341,458
Less- Accumulated
amortization.................. (49,746) (85,155)
---------- ------------
$268,789 $1,256,303
========== ============
Accrued Liabilities
Accrued liabilities consist of the following as of December 31, 1995 and 1996
(in thousands):
1995 1996
------- -------
Compensation ........................... $ 4,847 $10,850
Interest ............................... 11,104 11,915
Other .................................. 4,769 12,265
------- -------
$20,720 $35,030
======= =======
Non-Cash Transactions
During 1994, 1995 and 1996 the Company entered into the following non-cash
transactions (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Purchase accounting adjustments related to deferred
taxes (Note 9)........................................... $ -- $ 3,400 $17,615
========= ========= =========
Program contract costs acquired.......................... $20,750 $26,918 $51,296
========= ========= =========
Distribution prior to KCI merger (Note 12)............... $ -- $ 1,461 $ --
========= ========= =========
</TABLE>
Local Marketing Agreements
The Company generally enters into LMAs, JSAs and similar arrangements with
stations located in markets in which the Company already owns and operates a
station, and in connection with acquisitions, pending regulatory approval of
transfer of License Assets. Under the terms of these agreements, the Company
makes specified periodic payments to the owner-operator in exchange for the
grant to the Company of the right to program and sell advertising on a specified
portion of the station's inventory of broadcast time. Nevertheless, as the
holder of the FCC license, the owner-operator retains full control and
responsibility for the operation of the station, including control over all
programming broadcast on the station.
Included in the accompanying consolidated statements of operations for the years
ended December 31, 1994, 1995 and 1996, are net revenues of $25.0 million, $49.5
million and $153.0 million (including $103.3 million relating to River City),
respectively, that relate to LMAs, JSAs and time brokerage agreements ("TBAs").
F-10
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
In connection with the River City Acquisition, the Company entered into an LMA
in the form of TBAs with River City and the owner of KRRT with respect to each
of the nine television and 21 radio stations with respect to which the Company
acquired Non-License Assets. The TBAs are for a ten-year term, which corresponds
with the term of the option the Company holds to acquire the related River City
License Assets. The Company has filed applications with respect to the transfer
of the License Assets of seven of the nine television stations and the 21 radio
stations for which the Company acquired Non-License Assets in the River City
Acquisition. Such applications have been granted and the transfer of the License
Assets has been consummated with respect to 19 of the 21 radio stations. The
approval of the transfer of the two remaining radio licenses is subject to
waiver of FCC cross-ownership rules. Upon grant of FCC approval of the transfer
of License Assets with respect to these stations, the Company intends to acquire
the License Assets, and thereafter the LMAs will terminate and the Company will
own and operate the stations. With respect to the remaining two television
stations, Glencairn has applied for transfer of the License Assets of these
stations, and the Company intends to enter into LMAs with Glencairn Ltd.
("Glencairn", see Note 8) with respect to these stations upon FCC approval of
the transfer of the License Assets to Glencairn. Petitions to deny or informal
objections have been filed against certain of these applications by third
parties. Management believes the Company will ultimately prevail on these
petitions.
Reclassifications
Certain reclassifications have been made to the prior years' financial
statements to conform with the current year presentation.
2. PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed under the straight-line method over the following
estimated useful lives:
Buildings and improvements.............................. 10 -- 35 years
Station equipment....................................... 5 -- 10 years
Office furniture and equipment.......................... 5 -- 10 years
Leasehold improvements.................................. 10 -- 31 years
Automotive equipment.................................... 3 -- 5 years
Shorter of 10 years
Property and equipment and autos under capital leases .. or the lease term
Property and equipment consisted of the following as of December 31, 1995 and
1996 (in thousands):
1995 1996
---------- ----------
Land and improvements.......................... $ 1,768 $ 9,795
Buildings and improvements..................... 17,515 39,008
Station equipment.............................. 36,949 112,994
Office furniture and equipment................. 3,451 10,140
Leasehold improvements......................... 2,564 3,377
Automotive equipment........................... 677 3,280
Construction in progress....................... -- 6,923
---------- ----------
62,924 185,517
Less- Accumulated depreciation and
amortization................................... (20,127) (31,184)
---------- ----------
$ 42,797 $154,333
========== ==========
F-11
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
3. INTEREST RATE DERIVATIVE AGREEMENTS:
The Company entered into interest rate derivative agreements to reduce the
impact of changing interest rates on its floating rate debt, primarily relating
to the Bank Credit Agreement. In May 1996, the Company amended its Bank Credit
Agreement. The agreement requires the Company to enter into Interest Rate
Protection Agreements at rates not to exceed 9.5% per annum as to a notional
principal amount at least equal to 66 2/3 % of the Tranche A term loans
scheduled to be outstanding from time to time and 9.75% per annum as to a
notional principal amount of 66 2/3 % of the aggregate amount of Tranche B term
loans scheduled to be outstanding from time to time.
At December 31, 1996, the Company had several interest rate swap agreements
relating to the Bank Credit Agreement which expire from March 31, 1997 to June
30, 2000. The swap agreements set rates in the range of 5.84% to 7.00%. The
notional amounts related to these agreements were $955.0 million at December 31,
1996, and decrease to $50.0 million through the expiration dates. The Company
has no intentions of terminating these instruments prior to their expiration
dates unless it were to prepay a portion of its bank debt.
The floating interest rates are based upon the three month London Interbank
Offered Rate (LIBOR) rate, and the measurement and settlement is performed
quarterly. Settlements of these agreements are recorded as adjustments to
interest expense in the relevant periods. Premiums paid under these agreements
were approximately $1.1 million in 1994 and $851,000 in 1996 and are amortized
over the life of the agreements. The counterparties to these agreements are
major national financial institutions. The Company estimates the aggregate cost
to retire these instruments at December 31, 1996 to be $2.3 million.
4. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:
Bank Credit Agreement
In connection with the 1994 Acquisitions (see Note 12), the Company entered into
a Bank Credit Agreement. The Bank Credit Agreement consisted of three classes:
Facility A Revolving Credit and Term Loan, Facility B Credit Loan and Facility C
Term Loan. In August 1995, the Company utilized the net proceeds from the Public
Debt Offering mentioned below to repay amounts outstanding under the Bank Credit
Agreement.
The weighted average interest rates during 1994 and as of December 31, 1994 were
7.48% and 8.56%, respectively, and during 1995 while amounts were outstanding
and as of August 28, 1995, when outstanding indebtedness relating to Bank Credit
Agreement were repaid, were 8.44% and 7.63%, respectively. Interest expense
relating to the Bank Credit Agreement was $9.4 million, $15.6 million and $-0-
for the years ended December 31, 1994, 1995 and 1996, respectively.
Simultaneously with the acquisition of the non-license assets of River City, the
aforementioned Bank Credit Agreement was amended and replaced with new terms as
outlined below.
Bank Credit Agreement as Amended
In order to finance the acquisition of the non-license assets of River City and
potential future acquisitions, the Company amended its Bank Credit Agreement on
May 31, 1996. The Bank Credit Agreement consists of three classes: Tranche A
Term Loan, Tranche B Term Loan and a Revolving Credit Commitment.
The Tranche A Term Loan is a term loan in a principal amount not to exceed $550
million and is scheduled to be paid in quarterly installments beginning December
31, 1996 through December 31, 2002. The Tranche B Term Loan is a term loan in a
principal amount not to exceed $200 million and is scheduled to be paid in
quarterly installments beginning December 31, 1996 through November 2003. The
Revolving Credit Commitment is a revolving credit facility in a principal amount
not to exceed $250 million and is scheduled to have reduced availability
quarterly beginning March 31, 1999 through
F-12
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
November 30, 2003. As of December 31, 1996, outstanding indebtedness under the
Tranche A Term Loan, Tranche B Term Loan and the Revolving Credit Commitment
were $520 million, $198.5 million and $155 million, respectively. The Company
incurred debt acquisition costs of approximately $20 million associated with
this indebtedness which are being amortized over the life of the debt.
The applicable interest rate for the Tranche A Term Loan and the Revolving
Credit Tranche is either LIBOR plus 1.25% to 2.5% or the base rate plus zero to
1.25%. The applicable interest rate for the Tranche A Term Loan and the
Revolving Credit Tranche is adjusted based on the ratio of total debt to four
quarters trailing earnings before interest, taxes, depreciation and
amortization. The applicable interest rate for Tranche B is either LIBOR plus
2.75% or the base rate plus 1.75%. The weighted average interest rates for
outstanding indebtedness relating to the current Bank Credit Agreement during
1996 and as of December 31, 1996, were 8.08% and 8.12%, respectively. Interest
expense relating to the Bank Credit Agreement was $40.4 million for the year
ended December 31, 1996.
The fair value of the Company's outstanding indebtedness under the Bank Credit
Agreement approximated its carrying value at December 31, 1996.
The Company is required to maintain certain debt covenants in connection with
the Bank Credit Agreement. As of December 31, 1996, the Company is in compliance
with all debt covenants.
Public Debt Offering
In August 1995, the Company consummated the sale of $300.0 million of 10% Senior
Subordinated Notes (the Notes), due 2005, generating net proceeds to the Company
of $293.2 million. The net proceeds of this offering were utilized to repay
outstanding indebtedness under the then existing Bank Credit Agreement of $201.8
million with the remainder being retained and eventually utilized to make
payments related to certain acquisitions consummated during 1996. In conjunction
with the repayment of outstanding indebtedness under the Bank Credit Agreement,
the Company recorded an extraordinary loss of $4.9 million, net of a tax benefit
of $3.4 million.
Interest on the Notes is payable semiannually on March 30 and September 30 of
each year, commencing March 30, 1996. Interest expense for the year ended
December 31, 1995 and 1996, was $10.4 million and $30.0 million, respectively.
The notes are issued under an indenture among SBG, its subsidiaries (the
guarantors) and the trustee. Costs associated with the offering totaled $6.8
million, including an underwriting discount of $6.0 million and are being
amortized over the life of the debt.
The Company has the option to redeem the notes at any time on or after September
30, 2000. Redemption prices are as follows:
REDEMPTION PRICE
(AS A % OF PRINCIPAL
REDEMPTION DATE AMOUNT)
- ------------------------------ --------------------------
On or after September 30, 2000................ 105%
2001................ 103%
2002................ 102%
Furthermore, at any time on or prior to September 30, 1998, the Company may
redeem up to 25% of the original principal amount of the Notes with the net
proceeds of a public equity offering at 110% of the principal amount. The Notes
also may be redeemed by the holder at 101% of the principal amount upon
occurrence of a change of control, as defined in the Indenture.
Based upon the quoted market price, the fair value of the Notes as of December
31, 1996 is $306 million.
F-13
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Under the terms of the Indenture, the Notes are guaranteed by the Company and
substantially all of its subsidiaries (the guarantors). The guarantors are
wholly-owned, any non-guarantors are inconsequential to the consolidated
financial statements and the guarantees are full, unconditional, and joint and
several.
The Indenture contains covenants limiting indebtedness, transactions with
affiliates, liens, sales of assets, issuances of guarantees of, and pledges for,
indebtedness, transfer of assets, dividends, mergers and consolidations.
Senior Subordinated Notes
In December 1993, the Company raised $200.0 million through the issuance of 10%
senior subordinated notes (the 1993 Notes), due 2003. Subsequently, the Company
determined that a redemption of $100.0 million was required. This redemption and
a refund of $1.0 million of fees from the underwriters took place in the first
quarter of 1994. The remaining portion of the proceeds of the 1993 Notes was
used to repay a secured debt facility and for general corporate purposes.
Interest on the 1993 Notes is payable semiannually on June 15 and December 15 of
each year. Interest expense for the years ended December 31, 1994, 1995 and
1996, was $12.6 million, $10.0 million and $10.0 million, respectively. The 1993
Notes are issued under an Indenture among SBG, its subsidiaries (the guarantors)
and the trustee. Costs associated with the offering totaled $5.1 million,
including an underwriting discount of $4.0 million. These costs, less the $1.0
million refund related to the redemption, were capitalized and are being
amortized over the life of the debt.
The 1993 Notes may be redeemed by the holder at 101% of the principal amount
upon occurrence of a change of control, as defined in the Indenture. The Company
has the option to redeem the 1993 Notes any time after December 15, 1998.
Redemption prices are as follows:
REDEMPTION PRICE
(AS A % OF PRINCIPAL
REDEMPTION DATE AMOUNT)
- ----------------------------- ----------------
On or after December 15, 1998................. 105%
1999................. 104%
2000................. 103%
2001................. 100%
Based upon the quoted market price, the fair value of the 1993 Notes as of
December 31, 1996, is $102 million.
Under the terms of the Indenture, the 1993 Notes are guaranteed by the Company
and substantially each of its subsidiaries (the guarantors). The guarantors are
wholly-owned, any non-guarantors are inconsequential to the consolidated
financial statements and the guarantees are full, unconditional, and joint and
several.
The Indenture contains covenants limiting indebtedness, transactions with
affiliates, liens, sales of assets, issuances of guarantees of, and pledges for,
indebtedness, transfer of assets, dividends, mergers and consolidations.
F-14
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Summary
Notes payable and commercial bank financing consisted of the following as of
December 31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
---------- ------------
<S> <C> <C>
Bank Credit Agreement, Tranche A Term Loan............................ $ -- $ 520,000
Bank Credit Agreement, Tranche B Term Loan............................ -- 198,500
Bank Credit Agreement, Revolving Credit Commitment.................... -- 155,000
Senior subordinated notes due 2003, interest at 10%................... 100,000 100,000
Senior subordinated notes due 2005, interest at 10%................... 300,000 300,000
Unsecured installment notes to former minority stockholders of CRI
and WBFF, interest at 18%............................................. 1,777 644
---------- ------------
401,777 1,274,144
Less: Current portion................................................. (1,133) (62,144)
---------- ------------
$400,644 $ 1,212,000
========== ============
</TABLE>
The Revolving Credit Commitment is a revolving credit facility in a principal
amount not to exceed $250 million and is scheduled to have reduced availability
quarterly beginning March 31, 1999 through November 30, 2003. Indebtedness under
Tranche A and Tranche B of the Bank Credit Agreement and notes payable as of
December 31, 1996, mature as follows (in thousands):
1997 ................................................ $ 62,144
1998 ................................................ 71,500
1999 ................................................ 91,500
2000 ................................................ 101,500
2001 ................................................ 101,500
2002 and thereafter ................................. 691,000
----------
$1,119,144
==========
Substantially all of the Company's assets have been pledged as security for
notes payable and commercial bank financing. In addition, the Class B
stockholders have pledged their stock in SBG to the commercial bank and have
delivered mortgages and security agreements as additional collateral. Further,
Cunningham Communications, Inc. (Cunningham), Keyser Investment Group, Inc.
(KIG) and Gerstell Development Limited Partnership (Gerstell), all businesses
that are owned and controlled by these Class B stockholders, were required to
guarantee obligations to the commercial bank.
In January 1997, the Company made the final payment of $644,000 repaying the
remaining indebtedness to the former minority stockholders.
F-15
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
5. NOTES AND CAPITAL LEASES PAYABLE TO AFFILIATES:
Notes and capital leases payable to affiliates consisted of the following as of
December 31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1996
--------- ---------
Subordinated installment notes payable to former majority owners, interest
at 8.75%, principal payments in varying amounts due annually beginning
October 1991, with a balloon payment due at maturity in May 2005 ............ $11,442 $10,448
Capital lease for building, interest at 17.5%................................ 1,500 1,372
Capital leases for broadcasting tower facilities, interest rates averaging
10%.......................................................................... 632 249
Capital leases for building and tower, interest at 8.25%..................... 2,252 1,890
--------- ---------
15,826 13,959
Less: Current portion........................................................ (1,867) (1,774)
--------- ---------
$13,959 $12,185
========= =========
</TABLE>
Notes and capital leases payable to affiliates, as of December 31, 1996, mature
as follows (in thousands):
1997.................................................... $ 2,856
1998.................................................... 2,654
1999.................................................... 2,666
2000.................................................... 2,540
2001.................................................... 1,920
2002 and thereafter..................................... 7,872
---------
Total minimum payments due.............................. 20,508
Less: Amount representing interest...................... (6,549)
---------
Present value of future notes and capital lease
payments................................................ $13,959
=========
6. PROGRAM CONTRACTS PAYABLE:
Future payments required under program contracts payable as of December 31,
1996, are as follows (in thousands):
1997 ....................................................... $ 58,461
1998 ....................................................... 33,216
1999 ....................................................... 18,331
2000 ....................................................... 3,665
2001 ....................................................... 430
2002 and thereafter ........................................ 552
---------
114,655
Less: Current portion ...................................... (58,461)
---------
Long-term portion of program contracts
payable .................................................... $ 56,194
=========
F-16
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Included in the current portion amounts are payments due in arrears of $10.9
million. In addition, the Companies have entered into noncancelable commitments
for future program rights aggregating $60.5 million as of December 31, 1996.
The Company has estimated the fair value of its program contract payables and
noncancelable commitments at approximately $51.3 million and $29.0 million,
respectively, as of December 31, 1995, and $102.7 million and $43.1 million,
respectively, at December 31, 1996, based on future cash flows discounted at the
Company's current borrowing rate.
7. PREPAYMENT OF SYNDICATED PROGRAM CONTRACT LIABILITIES:
In connection with the 1996 Acquisitions (see Note 12), the Company assumed
certain syndicated program contracts payable for which the underlying value of
the associated syndicated program assets was determined, by management, to be of
little or no value. The Company negotiated the prepayment of syndicated program
contracts payable for certain of the 1996 Acquisitions, as well as certain other
of the Company's subsidiaries. The Company made cash payments totaling $15.1
million relating to these syndicated program contracts payable. For subsidiaries
owned prior to 1996, the Company recognized related amortization of excess
syndicated programming of $3.0 million.
8. RELATED PARTY TRANSACTIONS:
During 1990, WBFF sold certain station equipment to an affiliate for $512,000.
The sale is accounted for on an installment basis since the affiliate is in the
start-up phase. The note is to be paid over five years and earns annual interest
at 11%. In connection with the start-up of this affiliate, certain SBG Class B
Stockholders issued a note allowing them to borrow up to $3.0 million from the
Company. This note was amended and restated June 1, 1994, to a term loan bearing
interest of 6.88% with quarterly principal payments beginning March 31, 1996
through December 31, 1999. As of December 31, 1995 and 1996, the balance
outstanding was approximately $2.0 and $1.8 million, respectively.
During 1990, SBG lent $1.5 million to certain Class B Stockholders pursuant to a
note. The note bears interest at 6.88% per annum and is payable in monthly
principal and interest payments through September 2000 with a balloon payment in
September 2000. As of December 31, 1995 and 1996, the balance outstanding was
approximately $1.1 million and $1.0 million respectively.
During the year ended December 31, 1993, the Company loaned Gerstell Development
Limited Partnership (a partnership owned by Class B Stockholders) $2.1 million.
The note bears interest at 6.18%, with principal payments beginning on November
1, 1994, and a final maturity date of October 1, 2013. As of December 31, 1995
and 1996, the balance outstanding was approximately $2.0 million. In addition,
Gerstell has arranged for a $2.0 million loan from a commercial bank, which is
guaranteed by the Company.
During 1993, SBG lent $6.6 million to a former majority owner pursuant to a
note. The note bears interest at 7.21% per annum and requires payments of
interest only through September 2001. Monthly principal and interest payments
with respect to this note commence in November 2001 and end in September 2006.
During 1994, the Company assigned its options to purchase the license assets of
WNUV and WVTV to Glencairn for $4.2 million which was paid in 1995, and sold the
license assets of WRDC to Glencairn for $2.0 million. Subsequently, Glencairn
exercised its options to purchase the licenses of WNUV and WVTV. Glencairn is a
corporation of which a former shareholder of SBG, who is also the holder of the
$6.6 million note described above, and trusts established by this shareholder
hold the majority of the equity interests in Glencairn. The Company has entered
into five-year LMA agreements (with five-year renewal options) with Glencairn
for the right to program and sell advertising. During 1995 and 1996, the Company
made payments of $5.6 million and $5.4 million, respectively, to Glencairn under
these LMA agreements.
F-17
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Concurrently with the initial public offering (see Note 13), the Company
acquired options from certain stockholders of Glencairn that will grant the
Company the right to acquire, subject to applicable FCC rules and regulations,
up to 97% of the capital stock of Glencairn. The Glencairn options were
purchased by the Company for nominal consideration and will be exercisable only
upon payment of an aggregate price equal to Glencairn's cost for the underlying
stations, plus a 10% annual return.
During 1995 and 1996, the Company from time to time entered into charter
arrangements to lease airplanes owned by certain Class B Stockholders. During
1995 and 1996, the Company incurred expenses of approximately $489,000 and
$336,000 related to these arrangements, respectively.
In May 1996, the Company acquired certain assets from River City, obtained
options to acquire other assets from River City and entered into an LMA to
provide programming services to certain television and radio stations, of which
River City is the owner of the License Assets. Certain individuals who have
direct or indirect beneficial owners of equity interests in River City are
affiliates of the Company. During 1996, the Company made LMA payments of $1.4
million to River City.
In September 1996, the Company entered into a five-year agreement with River
City pursuant to which River City will provide to the Company certain production
services. Pursuant to this agreement, River City will provide certain services
to the Company in return for an annual fee of $416,000, subject to certain
adjustments on each anniversary date.
An individual who is an affiliate of the Company is the owner of 100% of the
common stock of Keymarket of South Carolina, Inc. ("KSC"), and the Company has
an option to acquire either (i) all of the assets of KSC for forgiveness of debt
in an aggregate principal amount of approximately $7.4 million, plus payment of
approximately $1.0 million, less certain adjustments or (ii) all of the stock of
KSC for $1.0 million, less certain adjustments. The Company is required to
purchase each of the properties during the term of the applicable lease for an
aggregate purchase price of approximately $1.75 million.
In May 1996, the Company, along with the Class B Stockholders, formed Beaver Dam
Limited Liability Company (BDLLC), of which the Company owns a 45% interest.
BDLLC was formed for the purpose of constructing and owning a building which may
be the site for the Company's corporate headquarters. The Company made capital
contributions of approximately $380,000.
Certain assets used by the Company's operating subsidiaries are leased from
Cunningham, KIG and Gerstell (entities owned by the Class B Stockholders). Lease
payments made to these entities were $1.2 million, $1.3 million, and $1.3
million for the years ended December 31, 1994, 1995 and 1996, respectively.
9. INCOME TAXES:
The Company files a consolidated federal income tax return and separate company
state tax returns. The provision (benefit) for income taxes consists of the
following as of December 31, 1994, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- --------
<S> <C> <C> <C>
Provision (benefit) for income taxes before extraordinary
item......................................................... $ (647) $ 5,200 $6,936
Income tax effect of extraordinary item...................... -- (3,357) --
--------- --------- --------
$ (647) $ 1,843 $6,936
========= ========= ========
Current:
Federal..................................................... $ 7,090 $ 5,374 $ 127
State....................................................... 1,440 1,558 4,479
--------- --------- --------
8,530 6,932 4,606
--------- --------- --------
Deferred:
Federal .................................................... (7,650) (4,119) 2,065
State....................................................... (1,527) (970) 265
--------- --------- --------
(9,177) (5,089) 2,330
--------- --------- --------
$ (647) $ 1,843 $6,936
========= ========= ========
</TABLE>
F-18
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a reconciliation of federal income taxes at the applicable
statutory rate to the recorded provision (benefit):
1994 1995 1996
--------- ------- -------
Statutory federal income taxes.............. (34.0)% 34.0% 34.0%
Adjustments-
State income taxes, net of federal effect.. 1.8 1.7 8.1
State franchise taxes, net of federal
effect.................................... 0.8 1.1 10.8
Non-deductible goodwill amortization....... 14.1 11.9 25.2
Non-deductible expense items .............. 6.3 3.0 6.4
Income of pooled S corporation (Note 12) .. (7.6) -- --
Other...................................... (0.5) (0.7) 1.5
--------- ------- -------
Provision (benefit) for income taxes....... (19.1)% 51.0% 86.0%
========= ======= =======
Temporary differences between the financial reporting carrying amounts and the
tax basis of assets and liabilities give rise to deferred taxes. The Company had
a net deferred tax asset of $21.0 million and $782,000 as of December 31, 1995
and 1996, respectively. The realization of deferred tax assets is contingent
upon the Company's ability to generate sufficient future taxable income to
realize the future tax benefits associated with the net deferred tax asset.
Management believes that deferred assets will be realized through future
operating results. This belief is based on taxable income for the year ended
December 31, 1996 and its projection of future years' results.
The Company has total available federal NOL's of approximately $15.0 million as
of December 31, 1996, which expire during various years from 2004 to 2011.
Certain NOL's are limited to use within a specific entity, and certain NOL's are
subject to annual limitations under Internal Revenue Code Section 382 and
similar state provisions.
Total deferred tax assets and deferred tax liabilities as of December 31, 1995
and 1996, including the effects of businesses acquired, and the sources of the
difference between financial accounting and tax bases of the Company's assets
and liabilities which give rise to the deferred tax assets and deferred tax
liabilities and the tax effects of each are as follows (in thousands):
1995 1996
--------- ---------
Deferred Tax Assets:
Accruals and reserves ......................... $ 1,110 $ 2,195
Loss on disposal of fixed
assets ....................................... 619 --
Net operating losses .......................... 2,676 4,829
Program contracts ............................. 4,575 2,734
Fixed assets and intangibles .................. 14,500 --
Other ......................................... 373 713
------- -------
$23,853 $10,471
======= =======
Deferred Tax Liabilities:
FCC license ................................... $ 1,656 $ 2,613
Hedging instruments ........................... -- 188
Fixed assets and intangibles .................. -- 4,430
Capital lease accounting ...................... 988 1,304
Affiliation agreement ......................... -- 691
Investment in partnerships .................... -- 209
Other ......................................... 182 254
------- -------
$ 2,826 $ 9,689
======= =======
F-19
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
During 1995, the Company made a $3.4 million deferred tax adjustment to decrease
its deferred tax asset and increase goodwill under the purchase accounting
guidelines of APB 16 and in accordance with SFAS 109 related to the opening
deferred tax asset balances of certain 1994 acquisitions. During 1996, the
Company made a $1.1 million deferred tax adjustment to decrease its deferred tax
asset and increase goodwill under the purchase accounting guidelines of APB 16
and in accordance with SFAS 109 related to the opening deferred tax asset
balances of certain 1995 acquisitions.
10. EMPLOYEE BENEFIT PLAN:
The Sinclair Broadcast Group, Inc. 401(k) profit sharing plan and trust (the SBG
Plan) covers eligible employees of the Company. Contributions made to the SBG
Plan include an employee elected salary reduction amount, company matching
contributions and a discretionary amount determined each year by the Board of
Directors. The Company's 401(k) expense for the years ended December 31, 1994,
1995 and 1996, was $274,000, $271,000 and $657,000, respectively. There were no
discretionary contributions during these periods.
11. CONTINGENCIES AND OTHER COMMITMENTS:
LITIGATION
Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business. These actions are in various preliminary stages,
and no judgments or decisions have been rendered by hearing boards or courts.
Management, after reviewing developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on the Company's financial position or results of operations.
OPERATING LEASES
The Company has entered into operating leases for certain property and equipment
under terms ranging from three to ten years. The rent expense under these
leases, as well as certain leases under month-to-month arrangements, for the
years ended December 31, 1994, 1995 and 1996, aggregated approximately $625,000,
$1.1 million and $3.1 million, respectively.
Future minimum payments under the leases are as follows (in thousands):
1997 .................................................. $ 3,672
1998 .................................................. 3,055
1999 .................................................. 2,244
2000 .................................................. 1,789
2001 .................................................. 1,206
2002 and thereafter ................................... 5,430
-------
$17,396
=======
CERTAIN AFFILIATION AGREEMENTS
The Company generally operates its television stations under affiliation
agreements with Fox, ABC, UPN, WB and CBS. These agreements range in terms from
one to five years and in certain circumstances have renewable options. The
Company has the option to acquire the FCC licenses of certain stations being
operated as LMAs. The networks affiliated with these stations, other than Fox,
have the right to terminate the affiliations upon transfer of the license.
F-20
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
12. ACQUISITIONS:
1994 ACQUISITIONS
In May 1994, the Company acquired WCGV and WTTO for an aggregate purchase price
of $60.0 million. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to the fair market value of
the assets purchased and the liabilities assumed. Based upon an independent
appraisal, $11.7 million was allocated to property and programming costs and
$29.9 million was allocated to acquired broadcasting assets. The excess of the
purchase price over the acquired assets of $18.4 million was allocated to other
intangible assets, and is being amortized over 40 years. The Company made an
additional investment of $56.0 million for covenants not-to-compete and
consulting agreements in these and the Company's current markets, which are
being amortized over the lives of the respective agreements.
Simultaneous with the acquisition of WCGV and WTTO, the Company acquired the
non-license assets of WNUV and WVTV for approximately $66.8 million and entered
into LMAs with the owner of the licenses of WNUV and WVTV. The acquisition was
accounted for under the purchase method of accounting whereby $14.8 million of
the purchase price was allocated to property and programming costs and $700,000
of the purchase price was allocated to deferred tax liabilities, with the
remainder being allocated to other intangible assets. The intangible assets are
being amortized over 15 years.
Simultaneous with the acquisitions of the non-license assets of WNUV and WVTV,
the Company acquired the options to purchase the license assets of these
stations for $8.0 million and intangible assets related to the LMAs for $9.5
million, for a total purchase price of $17.5 million. The Company subsequently
assigned the options to Glencairn for $4.2 million. The Company is amortizing
the difference between the total amount paid for the options by the Company and
the amount allocated to the value of the options over the estimated life of the
LMA, which is 15 years.
In August 1994, the Company acquired 100% of the non-voting stock representing a
98% ownership interest in F.S.F. Acquisition Corporation (FSFA), the corporate
parent of WRDC, for $34.0 million. The investment also includes a controlling
interest in a joint venture which owns the studio and office building and a
minority interest in a partnership that owns the TV broadcast tower. The joint
venture has been consolidated, with the other owners' share of equity shown as a
minority interest, while the partnership interest has been presented as an
investment and is included in other assets. The purchase was accounted for under
the purchase method of accounting whereby the purchase price was allocated to
property and programming assets, acquired intangible broadcasting assets and
other intangible assets for $10.0 million, $7.0 million and $17.0 million,
respectively, based upon an independent appraisal. Intangible assets are being
amortized over periods of 10 to 15 years. Simultaneous with the purchase of the
nonvoting stock of FSFA, the Company acquired an option to acquire the voting
common stock of FSFA. Additionally, the Company entered into two year consulting
and non-compete agreements with the former owner of the voting common stock of
FSFA for $4.0 million.
1995 ACQUISITIONS AND DISPOSITIONS
In January and May 1995, the Company acquired the non-license and license
assets, respectively, of WTVZ in Norfolk, Virginia for a purchase price of $49.0
million. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to property and programming
assets, acquired intangible broadcasting assets and other intangible assets for
$1.4 million, $12.6 million and $35.0 million, respectively, based upon an
independent appraisal. Intangible assets are being amortized over 1 to 40 years.
In January 1995, the Company acquired the license and non-license assets of the
Paramount Station Group of Raleigh/Durham, Inc. which owned and operated WLFL in
Raleigh-Durham, North Carolina for $55.5 million, plus the assumption of $3.7
million in liabilities. The acquisition was accounted for
F-21
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
under the purchase method of accounting whereby the purchase price was allocated
to property and programming assets, acquired intangible broadcasting assets and
other intangible assets for $8.6 million, $15.9 million and $34.7 million,
respectively, based upon an independent appraisal. Intangible assets are being
amortized over periods of 1 to 40 years.
On March 31, 1995, the Company exercised its option to acquire 100% of the
voting stock of FSFA for the exercise price of $100. FSFA was merged into WLFL,
Inc. and became a wholly-owned subsidiary of the Company. Simultaneously, the
Company sold the license assets of FSFA to Glencairn for $2.0 million, and
entered into a five-year LMA (with a five-year renewal option) with Glencairn
(see Note 8).
On May 5, 1995, Keyser Communications, Inc. (KCI), an affiliated entity
wholly-owned by the stockholders of the Company, was merged into the Company for
common stock. Certain assets and liabilities of KCI (other than programming
items, an LMA agreement and consulting agreements), were distributed to the KCI
shareholders immediately prior to the merger. The merger of KCI is being treated
as a reorganization and has been accounted for as a pooling of interests
transaction. Accordingly, the consolidated financial statements for all periods
presented have been restated to include the accounts of KCI.
Combined and separate results of the Company and KCI (through May 5, 1995,
merger date) during the period presented are as follows (in thousands):
COMPANY KCI COMBINED
---------- --------- ----------
Twelve months ended December 31, 1994:
Net broadcast revenues........................ $113,728 $4,883 $118,611
Income (loss) before provision for income
taxes........................................ (4,147) 760 (3,387)
Net income (loss)............................. (3,500) 760 (2,740)
Twelve months ended December 31, 1995:
Net broadcast revenues........................ $186,031 $1,903 $187,934
Income (loss) before provision for income
taxes........................................ 10,592 (404) 10,188
Net income (loss)............................. 480 (404) 76
In July 1995, the Company acquired the non-license assets of WABM in Birmingham,
Alabama for a purchase price of $2.5 million. The acquisition was accounted for
under the purchase method of accounting whereby $1.1 million of the purchase
price was allocated to property and program assets, based upon an independent
appraisal. The excess of the purchase price over the acquired assets of
approximately $1.4 million was allocated to other intangible assets and is being
amortized over 15 years. Simultaneously with the purchase, the Company entered
into a five-year LMA agreement (with a five-year renewal option) with Glencairn.
In November 1995, the Company acquired the non-license assets of WDBB in
Tuscaloosa, Alabama for a purchase price of $400,000. In addition, the Company
made "Option Grant Payments" of $11.3 million to certain parties for options to
purchase the issued and outstanding stock of WDBB, Inc., which holds the license
assets of WDBB. The option agreement further provides for the payment of option
grant installments of $2.6 million over five years and a final option exercise
price of $100,000. The acquisition was accounted for under the purchase method
of accounting whereby $1.3 million was allocated to the property and program
assets based upon an independent appraisal. The total of Option Grant Payments
paid and grant installments accrued of $13.1 million was allocated to other
intangible assets and is being amortized over 15 years.
F-22
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
1996 ACQUISITIONS
RIVER CITY ACQUISITION
In April 1996, the Company entered into an agreement to purchase certain
non-license assets of River City. In May 1996, the Company closed the
transaction for a purchase price of $967.1 million, providing as consideration
1,150,000 shares of Series A Convertible Preferred Stock with a fair market
value of $125.1 million, 1,382,435 stock options with a fair market value of
$23.9 million and cash payments totaling $818.1 million. The Company utilized
indebtedness under its Bank Credit Agreement to finance the transaction. The
acquisition was accounted for under the purchase method of accounting whereby
the purchase price was allocated to property and programming assets, acquired
intangible broadcasting assets and other intangible assets for $82.8 million,
$375.6 million and $508.7 million, respectively, based upon an independent
appraisal. Intangible assets are being amortized over 1 to 40 years.
Simultaneously, the Company entered into option agreements to purchase certain
license assets for an aggregate option exercise price of $20 million. In
September 1996, after receiving FCC approval for license transfer, the Company
made a cash payment of $6.9 million to acquire certain of the radio station FCC
licenses.
Also, simultaneously with the acquisition, the Company entered into an option
agreement to purchase the license and non-license assets of WSYX in Columbus,
Ohio, for the option purchase price of $130 million plus the amount of River
City indebtedness secured by the WSYX assets on the exercise date (not to exceed
the amount at the date of closing of $105 million). Pursuant to the WSYX option
agreement, the Company is required to make certain "Option Extension Fees", as
defined. These fees are required to begin quarterly beginning with December 31,
1996, through the earlier of the "Option Grant Date" or the expiration date of
June 30, 1999. The Option Extension Fees are calculated as 8% per annum of the
option purchase price through the first anniversary of the Option Grant Date,
15% per annum of the option purchase price through the second anniversary of the
Option Grant Date and 25% per annum of the option purchase price through the
expiration of the WSYX option agreement. On December 31, 1996, the Company made
an Option Extension Fee payment of $7.0 million which was recorded within Other
Assets in the accompanying balance sheets.
In conjunction with the River City acquisition, the Company entered into an
agreement to purchase the non-license assets of KRRT, Inc., a television station
in San Antonio, Texas, for a purchase price of $29.5 million. The acquisition
was accounted for under the purchase method of accounting whereby the purchase
price was allocated to property and programming assets, acquired intangible
broadcasting assets and other intangible assets for $3.8 million, $0.4 million
and $25.3 million, respectively, based upon an independent appraisal. Intangible
assets are being amortized over 1 to 15 years.
In connection with the River City acquisition, the Company consummated the
following transactions concurrent with or subsequent to the closing:
1. In June 1996, the Board of Directors of the Company adopted, upon approval
of the stockholders by proxy, an amendment to the Company's amended and restated
charter. This amendment increased the number of Class A Common Stock shares
authorized to be issued by the Company from 35,000,000 shares to 100,000,000
shares. The amendment also increased the number of shares of preferred stock
authorized from 5,000,000 shares to 10,000,000 shares.
2. Series A Preferred Stock -- As partial consideration for the acquisition
of the non-license assets of River City, the Company issued 1,150,000 shares of
Series A Preferred Stock. In June 1996, the Board of Directors of the Company
adopted, upon approval of the stockholders by proxy, an amendment to the
Company's amended and restated charter at which time Series A Preferred Stock
was exchanged for and converted into Series B Preferred Stock. The Company
F-23
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
recorded the issuance of Series A Preferred Stock based on the fair market value
at the date the River City acquisition was announced at the exchange rate of
3.64 shares of Class A Common Stock for each share of Series A Preferred Stock.
3. 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 Series A
Common Stock. The Company may redeem shares of Series B Preferred Stock only
after the occurrence of certain events. If the Company seeks to redeem shares of
Series B Preferred Stock and the stockholder elects to retain the shares, the
shares will automatically be converted into common stock on the proposed
redemption date. All shares of Series B Preferred stock remaining outstanding as
of May 31, 2001, will automatically convert into Class A Common Stock. Series B
Preferred Stock is entitled to 3.64 votes on all matters with respect to which
Class A Common Stock has a vote.
4. Stock Options and Awards:
Long-Term Incentive Plan-
In June 1996, the Board of Directors adopted, upon approval of the stockholders
by proxy, the 1996 Long-Term Incentive Plan of the Company (the "LTIP"). The
purpose of the LTIP is to reward key individuals for making major contributions
to the success of the Company and its subsidiaries and to attract and retain the
services of qualified and capable employees. A total of 2,073,673 shares of
Class A Common Stock is reserved and available for awards under the plan. In
connection with the River City acquisition, 244,500 options were granted to
certain employees and 1,382,435 were granted to Barry Baker (see Executive
Employment Agreement below) under this plan with an exercise price of $30.11 per
share.
The Company recorded deferred compensation of $1.9 million as additional paid-in
capital at the stock option grant date. During the year ended December 31, 1996,
compensation expense of $739,000 was recorded relating to the options issued
under the LTIP. The remaining deferred compensation of approximately $1.2
million will be recognized as expense on a straight-line basis over the vesting
period.
Incentive Stock Option Plan-
In June 1996, the Board of Directors adopted, upon approval of the stockholders
by proxy, certain amendments to the Company's Incentive Stock Option Plan. The
purpose of the amendments was (i) to increase the number of shares of Class A
Common Stock approved for issuance under the plan from 400,000 to 500,000, (ii)
to delegate to Barry Baker the authority to grant certain options, (iii) to
lengthen from two years to three the period after date of grant before options
become exercisable, (iv) and to provide immediate termination and three-year
ratable vesting of options in certain circumstances. In connection with the
River City acquisition, the Company granted 287,000 options to key management
employees at an exercise price of $37.75, the fair market value at the date of
grant.
5. Executive Employment Agreement
In connection with the acquisition of River City, the Company entered into a
five-year employment agreement (the "Baker Employment Agreement") with Barry
Baker, pursuant to which Mr. Baker will become President and Chief Executive
Officer of SCI and Executive Vice President of the Company, at such time as Mr.
Baker is able to hold those positions consistent with applicable FCC
regulations. Until such time as Mr. Baker is able to become an officer of the
Company, he serves as a consultant to the Company pursuant to a consulting
agreement and received compensation that he would be entitled to as an officer
under the Baker Employment Agreement. If the Baker Employment Agreement is
terminated by the Company other than for
F-24
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Cause (as defined) or by Mr. Baker for good cause (constituting certain
occurrences specified in the agreement), Mr. Baker shall be entitled to certain
termination payments entitling him to his salary and bonuses which would have
been paid under the agreement, to purchase certain television or radio assets
acquired by the Company from River City at fair market value, and all stock
options held by Mr. Baker shall vest immediately.
OTHER ACQUISITIONS
In May 1995, the Company entered into option agreements to acquire all of the
license and non-license assets of WSMH-TV in Flint, Michigan (WSMH). In July
1995, the Company paid the $1.0 million option exercise price to exercise its
option and in February 1996, the Company consummated the acquisition for a
purchase price of $35.4 million. The acquisition was accounted for under the
purchase method of accounting whereby the purchase price was allocated to
property and programming assets, acquired intangible broadcasting assets and
other intangible assets for $1.9 million, $6.0 million and $27.5 million,
respectively, based upon an independent appraisal. Intangible assets are being
amortized over 1 to 40 years.
In March 1996, the Company entered into an agreement to acquire the outstanding
stock of Superior Communications Group, Inc. (Superior) which owns the license
and non-license assets of television stations KOCB in Oklahoma City, Oklahoma
and WDKY in Lexington, Kentucky. In May 1996, the Company consummated the
acquisition for a purchase price of $63.5 million. The acquisition was accounted
for under the purchase method of accounting whereby the purchase price was
allocated to property and programming assets, acquired intangible broadcasting
assets and other intangible assets for $7.3 million, $20.4 million and $35.8
million, respectively, based upon an independent appraisal. Intangible assets
are being amortized over 1 to 40 years.
In January 1996, the Company entered into an agreement to acquire license and
non-license assets of television station WYZZ in Peoria, Illinois. In July 1996,
the Company consummated the acquisition for a purchase price of $21.1 million.
The acquisition was accounted for under the purchase method of accounting
whereby the purchase price was allocated to property and programming assets,
acquired intangible broadcasting assets and other intangible assets for $2.2
million, $4.3 million and $14.6 million, respectively, based upon an independent
appraisal. Intangible assets are being amortized over 1 to 40 years.
In July 1996, the Company entered into an agreement to acquire license and
non-license assets of television station KSMO in Kansas City, Missouri through
the exercise of its options described in Note 13 for a total purchase price of
$10.0 million. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to property and programming
assets and acquired intangible broadcasting assets for $4.6 million and $5.4
million, respectively, based upon an independent appraisal. Intangible assets
are being amortized over 1 to 25 years.
In August 1996, the Company acquired the license and non-license assets of
television station WSTR in Cincinnati, Ohio for a total purchase price of $8.7
million. The acquisition was accounted for under the purchase method of
accounting whereby the purchase price was allocated to property and programming
assets and acquired intangible broadcasting assets for $6.2 million and $2.5
million, respectively, based upon an independent appraisal. Intangible assets
are being amortized over 1 to 25 years.
F-25
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
13. INITIAL PUBLIC OFFERING:
In June 1995, the Company consummated an initial public offering of 5,750,000
shares of Class A Common Stock at an initial public offering price of $21.00 per
share realizing net proceeds of approximately $111.5 million. The net proceeds
to the Company from this offering were used to reduce long-term indebtedness.
The Company consummated the following transactions concurrent with or prior to
the offering:
1. The Company purchased the options to acquire the partnership interests of
KSMO in Kansas City, Missouri and WSTR in Cincinnati, Ohio ("Option Stations")
from the stockholders for an aggregate purchase price was $9.0 million. The
stockholders also assigned to the Company their rights and obligations under an
option agreement among the stockholders and a commercial bank which held secured
debt of KSMO and WSTR.
2. The stockholders assigned the subordinated convertible debenture relating
to the sale of WPTT to the Company in exchange for $1.0 million, a portion of
which was used to retire the outstanding balance of a note due from the
controlling stockholders.
3. The Company acquired options from certain stockholders of Glencairn that
will grant the Company the right to acquire, subject to applicable FCC rules and
regulations, up to 97% of the capital stock of Glencairn.
4. The Board of Directors of the Company adopted Amended and Restated
Articles of Incorporation to authorize up to 35,000,000 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 5,000,000 shares of Preferred Stock, par value $.01 per
share; completed a reclassification and conversion of its outstanding common
stock into shares of Class B Common Stock; and effected an approximately 49.1
for 1 stock split of the Company's common stock (resulting in 29,000,000 shares
of Class B Common Stock outstanding). The reclassification, conversion and stock
split have been retroactively reflected in the accompanying consolidated balance
sheets and statements of stockholders' equity. In June 1996, the Company amended
its charter, increasing the number of shares of Class A Common Stock authorized
to be issued from 35,000,000 to 100,000,000 (see Note 12).
5. The Board of Directors of the Company adopted an Incentive Stock Option
Plan for Designated Participants (the Designated Participants Stock Option Plan)
pursuant to which options for shares of Class A Common Stock will be granted to
certain designated employees of the Company upon adoption.
6. On March 27, 1995, the Board of Directors of the Company adopted an
Incentive Stock Option Plan (the Stock Option Plan) pursuant to which options
for shares of Class A Common Stock may be granted to certain designated classes
of employees of the Company. The Stock Option Plan provides that the maximum
number of shares of Class A Common Stock reserved for issuance under the Stock
Option Plan is 500,000, as amended, and that options to purchase Class A Common
Stock may be granted under the plan until the tenth anniversary of its adoption.
F-26
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
14. STOCK-BASED COMPENSATION PLANS:
As permitted under SFAS 123, "Accounting for Stock-Based Compensation," the
Company measures compensation expense for its stock-based employee compensation
plans using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and provides pro
forma disclosures of net income and earnings per share as if the fair
value-based method prescribed by SFAS 123 had been applied in measuring
compensation expense.
A summary of changes in outstanding stock options follows:
<TABLE>
<CAPTION>
WEIGHTED-
WEIGHTED- AVERAGE
AVERAGE EXERCISE
OPTIONS EXERCISE PRICE EXERCISABLE PRICE
----------- --------------- -------------- -----------
<S> <C> <C> <C> <C>
Outstanding at end of
1994...................... -- $ -- -- $ --
1995 Activity:
Granted.................. 68,000 21.00 -- $ --
----------- --------------- -------------- -----------
Outstanding at end of
1995..................... 68,000 21.00 -- --
1996 Activity:
Granted.................. 1,904,785 31.50 736,218 --
Exercised................ -- -- -- --
Forfeited................ (3,750) 21.00 -- --
----------- --------------- -------------- -----------
Outstanding at end of
1996..................... 1,969,035 $ 31.16 736,218 $ 30.11
=========== =============== ============== ===========
</TABLE>
Additional information regarding stock options outstanding at December 31, 1996,
follows:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
REMAINING REMAINING WEIGHTED-
VESTING CONTRACTUAL AVERAGE
RANGE OF EXERCISE PERIOD LIFE EXERCISE
EXERCISE PRICES OUTSTANDING PRICE (IN YEARS) (IN YEARS) EXERCISABLE PRICE
- ---------------- -------------- ----------- ------------ -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
$21.00.......... 64,250 $21.00 0.71 8.43 -- $ --
30.11.......... 1,562,435 30.11 1.53 9.41 736,218 30.11
37.75.......... 342,350 37.85 2.41 9.41 -- --
-------------- ----------- ------------ -------------- -------------- ------------
$21.00 to
37.75........... 1,969,035 $31.16 1.66 9.38 736,218 $ 30.11
============== =========== ============ ============== ============== ============
</TABLE>
Had compensation cost for the Company's 1995 and 1996 grants for stock-based
compensation plans been determined consistent with SFAS 123, the Company's net
income, net income applicable to common share before extraordinary items, and
net income per common share for 1995 and 1996 would approximate the pro forma
amounts below (in thousands except per share data):
<TABLE>
<CAPTION>
1995 1996
------------------------- --------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net income (loss) before extraordinary item ......... $4,988 $4,799 $1,131 $(1,639)
============= =========== ============= ============
Net income (loss) available to common shareholders .. $ 76 $ (113) $1,131 $(1,639)
============= =========== ============= ============
Net income (loss) per share before extraordinary
item................................................. $ .15 $ .15 $ .03 $ (.04)
============= =========== ============= ============
Net income (loss) per share.......................... $ -- $ -- $.03 $(.04)
============= =========== ============= ============
</TABLE>
F-27
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. EQUITY PUT AND CALL OPTIONS:
During December 1996, the Company entered into physically settled Put and Call
Options related to the Company's common stock. These option arrangements were
entered into for the purpose of hedging the dilution of the Company's common
stock upon the exercise of stock options granted. The Company entered into
250,000 call options for common stock and 320,600 put options for common stock,
with a strike price of $37.75 and $27.61 per common share, respectively. Upon
the exercise of Put and Call Options, sales and purchases will be recorded as a
component of stockholders' equity. Subsequent changes in the fair value of the
option contracts are not recognized. To the extent that the Company entered into
Put Options, the additional paid-in capital amounts have been adjusted
accordingly and amounts are reflected as Additional Paid- in Capital -- Equity
Put Options in the accompanying balance sheets. All Equity Put and Call Options
expire May 31, 1999.
16. REGISTRATION STATEMENTS:
In September 1996, the Company filed and in November 1996 obtained effectiveness
of a registration statement on Form S-3 with the Securities and Exchange
Commission with respect to the sale by certain selling stockholders of 5,564,253
shares of Class A Common Stock. These shares represent 4,181,818 shares of Class
A Common Stock issuable upon conversion of Series B Preferred Stock and
1,382,435 shares of Class A Common Stock issuable upon exercise of options held
by Barry Baker.
In September 1996, the Company filed a registration statement on Form S-3 with
the Securities and Exchange Commission with respect to the sale of up to
5,750,000 shares of Class A Common Stock by the Company, and subsequently
amended the registration statement to increase the number of shares that may be
sold by the Company to 5,937,500 shares and to cover the sale of 1,250,000
shares by certain selling stockholders. On November 1, 1996, the Company
announced that it was withdrawing the offering and that it intended to
reconsider an offering in the future when market conditions are more favorable.
The Company also announced that it was considering purchasing outstanding shares
of its Class A Common Stock pursuant to previous authorization by the Board of
Directors.
17. FINANCIAL INFORMATION BY SEGMENT:
Prior to the River City Acquisition in May 1996, the Company did not own or
operate radio stations. As of December 31, 1996 the Company consisted of two
principal business segments -- television broadcasting and radio broadcasting.
The television segment included 13 television stations for which the Company is
the licensee and 15 stations which are operated under local marketing
agreements. These 28 stations operate in 20 different markets in the continental
United States.
The radio segment included 19 stations for which the Company is the licensee and
two stations operated under local marketing agreements. These 21 stations
operate in seven different markets. Substantially all revenues represent income
from unaffiliated companies.
<TABLE>
<CAPTION>
1996
(IN THOUSANDS)
TELEVISION RADIO CONSOLIDATED
------------ ---------- ---------------
<S> <C> <C> <C>
Total revenues......................................... $ 338,467 $ 40,021 $ 378,488
Station operating expenses............................. 142,231 25,534 167,765
Depreciation, program amortization and deferred
compensation........................................... 56,420 3,827 60,247
Amortization of intangibles and other assets .......... 55,063 3,467 58,530
Amortization of excess syndicated programming ......... 3,043 -- 3,043
------------ ---------- ---------------
Station broadcast operating income..................... $ 81,710 $ 7,193 $ 88,903
============ ========== ===============
Total assets........................................... $1,400,521 $306,776 $1,707,297
============ ========== ===============
Capital expenditures................................... $ 12,335 $ 274 $ 12,609
============ ========== ===============
</TABLE>
F-28
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. UNAUDITED PRO FORMA SUMMARY RESULTS OF OPERATIONS:
The unaudited pro forma summary consolidated results of operations for the years
ended December 31, 1995 and 1996, assuming the 1995 and 1996 acquisitions had
been consummated on January 1, 1995, are as follows (in thousands, except per
share data):
(UNAUDITED) (UNAUDITED)
1995 1996
------------ ------------
Revenues, net............................... $430,762 $481,073
============ ============
Net loss before extraordinary item.......... $(34,345) $(10,719)
============ ============
Net loss available to common shareholders .. $(39,257) $(10,719)
============ ============
Net loss per share before extraordinary
item........................................ $ (0.94) $ (0.27)
============ ============
Net loss per share.......................... $ (1.08) $ (0.27)
============ ============
19. SUBSEQUENT EVENTS:
In January 1997, the Company entered into a purchase agreement to acquire the
license and non-license assets of KUPN-TV, the UPN affiliate in Las Vegas,
Nevada, for a purchase price of $87 million. Upon entering into this agreement,
the Company made a cash deposit payment of $5 million. The Company plans to
consummate the transaction following FCC approval.
In March 1997, the Company completed a private placement of $200 million
aggregate liquidation value of 11 5/8 % High Yield Trust Offered Preferred
Securities (the "Preferred Securities") of Sinclair Capital, a subsidiary trust
of the Company. The Preferred Securities were issued March 12, 1997, mature
March 15, 2009, and provide for quarterly distributions to be paid in arrears
beginning June 15, 1997. The Company received proceeds from the offerings
approximately $194 million net of $6 million of related offering costs. The
Company utilized $135 million of the net proceeds to repay outstanding
indebtedness under the Bank Credit Agreement and retained the remainder for
general corporate purposes.
F-29
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
INDEX TO SCHEDULES
Schedule II -- Valuation and Qualifying Accounts ... S-3
All schedules except those listed above are omitted as not applicable or not
required or the required information is included in the consolidated financial
statements or in the notes thereto.
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sinclair Broadcast Group, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated balance sheets, statements of operations, changes in stockholders'
equity and cash flows of Sinclair Broadcast Group, Inc. and Subsidiaries
included in this Form 10K/A and have issued our report thereon dated February 7,
1997 except for Note 19, as to which the date is March 12, 1997. Our audit was
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The schedule listed in the accompanying index is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commissions rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Baltimore, Maryland,
February 7, 1997, except for Note 19,
as to which the date is March 12, 1997
S-2
<PAGE>
SCHEDULE II
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- ------------------------------- ------------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1994
Allowance for doubtful accounts... $ 505 $ 445 $ -- $ 95 $ 855
1995
Allowance for doubtful accounts... 855 978 -- 767 1,066
1996
Allowance for doubtful accounts... 1,066 1,563 575((1)) 732 2,472
</TABLE>
(1) Amount represents allowance for doubtful account balances purchased in
connection with the acquisition of certain television stations during 1996.
S-3
SINCLAIR BROADCAST GROUP, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and
entered into as of April 10, 1996, (the "Option date"), between Sinclair
Broadcast Group, Inc., a Maryland corporation (the "Company"), and Barry Baker
(the "Optionee").
RECITALS
WHEREAS, the Company has adopted the 1996 Long-Term Incentive
Plan of Sinclair Broadcast Group, Inc. (the "Plan") to reward certain key
individuals for making major contributions to the Company and its subsidiaries
by enabling them to acquire shares of Class A Common Stock, part value $.01 per
share ("Common Stock"), of the Company;
WHEREAS, the Optionee and the Company have executed an
Employment Agreement (the "Employment Agreement") of even date herewith, and
WHEREAS, as part of its inducement to the Optionee to enter
into the Employment Agreement, the Company desires to grant the Optionee an
option to purchase shares of Common Stock pursuant to the Plan and upon the
terms and subject to the conditions hereinafter set forth:
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing premises,
the parties to this Agreement agree as follows:
1. Grant of Option. Subject to the terms and conditions set
forth in this Agreement, the Company hereby grants to the Optionee an option
(the "Option") to purchase from the Company up to but not exceeding in the
aggregate 1,382,435 shares of Common Stock at a price per share ("Exercise
Price") equal to the average of the closing share prices of the Common Stock as
reported on the NASDAQ National Market for the 21 trading days consisting of the
Option Date and each of the ten trading days immediately prior to such date and
each of the ten trading days immediately following such date, but in no event
less than $21.00 per share, such number of shares and such price per share being
subject to adjustment as provided in Section 13 of the Plan. The Company shall
not (a) purchase, or take any actions designed or intended to influence the
price of, Common Stock during such period, (b) permit any Smith Family Member
(hereinafter defined) to purchase, or take any actions designed or intended to
influence the price of, Common Stock during such period, or (c) ask or encourage
any of its affiliates, associates or any other person to purchase, or take any
action designed or intended to influence the price of, Common Stock during such
period;
-1-
<PAGE>
provided, however, that nothing contained in this Section shall be deemed to
prohibit the Company from acting in the normal course of business to communicate
with financial analysts or otherwise educate the market on the terms of the
River City Acquisition (as defined in the Employment Agreement.) For purposes of
this Agreement, "Smith Family Member" means David D. Smith, Frederick G. Smith,
J. Duncan Smith and Robert E. Smith and any of their respective parents,
grandparents, children, grandchildren, aunts, uncles, nephews, nieces or first
cousins and any trust or other entity which any such person individually, or
collectively with another person or persons, controls.
2. Company Covenants. The Company represents that the Plan has
been adopted by the Board of Directors of the Company and the Compensation
Committee thereof. The Company agrees to recommend approval and to solicit
proxies for the approval of the Plan by Sinclair's stockholders at the next
meeting of the Company's stockholders, to be held no later than June 30, 1996,
such that upon such approval, grants of options under the Plan will be treated
as exempt purchases under Rule 16b-3 issued by the Securities Exchange
Commission pursuant to Section 16 of the Exchange Act. The Company shall cause
the Common Stock issuable upon exercise of the Option to be registered in a
shelf registration statement pursuant to the Securities Act of 1933, as amended,
and all other applicable federal securities laws and state securities or blue
sky laws, shall cause such securities to be approved for quotation on the NASDAQ
National Market, and shall bear all expenses in connection with such
registration, quotation and compliance.
3. Relationship to Plan. The Option is issued in accordance
with and subject to all of the terms, conditions and provisions of the Plan, as
amended from time to time, and administrative interpretations thereunder, if
any, which have been adopted by the Committee thereunder and are in effect on
the date hereof. Except as defined herein or otherwise stated, capitalized terms
shall have the same meanings ascribed to them under the Plan.
4. Vesting and Exercise Schedules.
(a) The Option shall be vested with respect to 50% of
the aggregate number of shares of Common Stock subject to the
Option immediately upon the occurrence of the First Closing,
(as defined in the Employment Agreement). On the first
anniversary of the First Closing, the Option shall vest with
respect to an additional 25% of the aggregate number of shares
of Common Stock subject to the Option. On the second
anniversary of the First Closing, the Option shall vest with
respect to the remaining balance of the aggregate number of
shares subject to the Option.
(b) The Option shall immediately vest and become
fully exercisable, irrespective of the limitations set forth
in subparagraph (a) above, in the event of:
(i) the Optionee's death;
-2-
<PAGE>
(ii) the Optionee's Disability (as such
term is defined in Section 10.2 of
the Employment Agreement);
(iii) the termination of the Agreement
Term (as defined in the Employment
Agreement), by the Company, not "for
cause" (as defined in Section 9 of
the Employment Agreement); or
(iv) the termination of the Agreement
Term, by Optionee, pursuant to
Section 10.3.1 of the Employment
Agreement.
(c) If the Agreement Term is terminated (i) by the
Company, "for cause" (as defined therein) or (ii) by Optionee,
pursuant to Section 10.3.3 of the Employment Agreement, the
Option shall terminate and be of no force and effect with
respect to any shares of Common Stock as to which the Option
has not previously vested.
5. Termination of Option. Unless earlier terminated pursuant
to Section 4 hereof, the Option shall terminate and be of no force and effect
with respect to any shares of Common Stock not previously purchased by the
Optionee on the tenth anniversary of the First Closing.
6. Exercise of Option. The Option may be exercised with
respect to the shares of Common Stock then vested, in whole or in part, at any
time on or prior to the tenth anniversary of the First Closing, regardless of
the Optionee's service status, by written notice to the Company at its principal
executive office, which notice shall (a) specify the number of shares with
respect to which the Option is being exercised and the purchase price to be paid
therefor; (b) if the person exercising this Option is not the Optionee himself;
contain or be accompanied by satisfactory evidence of such person's right to
exercise this Option; and (c) be accompanied by payment in full of the purchase
price in cash or by a certified cashier's check to the order of the Company.
7. Transferability. The Option shall not be transferable
except by will or by the laws of descent and distribution. During the Optionee's
lifetime, the Option may be exercised only by the Optionee. No assignment or
transfer of the Option, whether voluntary or involuntary, by operation of law or
otherwise, except a transfer by will or by the laws of descent or distribution,
shall vest in the assignee or transferee any interest or right whatsoever in the
Option.
8. Certain Payments. Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Optionee (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement, but determined without regard to any Gross-Up Payment required under
this Section 8) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any interest or penalties are incurred by the Optionee with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Optionee
-3-
<PAGE>
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Optionee of all income taxes (and any
interest and penalties imposed with respect thereto), but excluding any Excise
Tax imposed upon the Gross-Up Payment, the Optionee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
9. No Rights as Stockholder. The Optionee shall not have any
rights as a stockholder of the Company with respect to any of the shares subject
to the Option, except to the extent that such shares shall have been purchased
and transferred to him.
10. No Right to Employment. The Option shall not confer on the
Optionee any right to continue in the service of the Company or any of its
subsidiaries or affect the right of the Company or any subsidiary to terminate
Optionee's employment at any time; and nothing contained in this Agreement shall
be deemed a waiver or modification of any provision contained in any agreement
between the Optionee and the Company or any parent or subsidiary thereof . This
Option shall not affect the right of the Company or any parent or subsidiary
thereof to reclassify, recapitalize, or otherwise change its capital or debt
structure or to merge, consolidate, convey any or all of its assets, dissolve,
liquidate, wind up, or otherwise reorganize.
11. Dissolution or Merger. Upon the dissolution or liquidation
of the Company, a merger or consolidation in which the Company is not the
surviving corporation, or a transaction in which another individual or entity
becomes the owner of 50% or more of the total combined voting power of all
classes of stock of the Company, the unexercised portion of this Option shall
terminate, but the Optionee shall have the right to exercise the unexpired and
unexercised portion of this Option, whether vested or unvested, immediately
prior to such event.
12. Withholding for Tax Purposes. Any amount of Common Stock
that is payable or transferable to the Optionee hereunder may be reduced by any
amount or amounts which the Company is required to withhold under the then
applicable provisions of the Internal Revenue Code of 1986, as amended, or its
successors, or any other federal, state or local tax withholding requirement. If
the Optionee does not elect to satisfy withholding requirements in this fashion,
the issuance of the shares of Common Stock payable or transferable to the
Optionee hereunder shall be contingent upon the Optionee's satisfaction of any
withholding obligations that may apply and the Optionee's presentation of
evidence satisfactory to the Board that such withholding obligations have been
satisfied.
13. Notice. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or sent by
mail. Any notice required or permitted to be delivered hereunder will be deemed
to be delivered on the date that it is personally delivered, or, whether
actually received or not, on the third business day after it is deposited in the
United States mail, certified or registered, postage prepaid, addressed to the
person who is to receive it at the address that such person has theretofore
specified by written notice delivered in accordance herewith. The Company or
Optionee may change, at any time and from time to time, by written notice to the
other, the address that it or he had therefore specified
-4-
<PAGE>
for receiving notices. Until changed in accordance herewith, the Company and the
Optionee specify their respective addresses as set forth below:
Company:
Sinclair Broadcasting Group, Inc.
2000 West 41st Street
Baltimore, Maryland 21211
Attention: Chief Executive Officer
with copy to:
Thomas & Libowitz, P.A.
The USF&G Tower
100 Light Street
Suite 1100
Baltimore, Maryland 21202-1053
Attention: Steve A. Thomas, Esq.
Optionee:
Barry Baker
River City Broadcasting, L.P.
1215 Cole Street
St. Louis, Missouri 63106-3897
with a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201-2980
Attention: Andrew M. Baker, Esq.
14. Amendment. Notwithstanding any other provision hereof,
this Agreement may not be supplemented or amended from time to time without the
consent of the Optionee.
15. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Maryland
applicable to agreements made and to be performed entirely in Maryland.
16. Counterparts. This Agreement may be executed in multiple
counterparts. The Company and Optionee may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have caused
this Agreement to be executed as of the date first above written.
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David D. Smith
-------------------------------
David D. Smith
Chief Executive Officer
OPTIONEE
By: /s/ Barry Baker
--------------------------------
Barry Baker
-6-
[CONFORMED COPY]
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of July 24, 1996, between:
SINCLAIR BROADCAST GROUP, INC., a corporation duly organized
and validly existing under the laws of the State of Maryland (the
"Borrower");
each of the Subsidiaries of the Borrower identified under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto
(individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors" and, together with the Borrower, the
"Obligors");
each of the lenders that is a signatory hereto (individually,
a "Lender" and, collectively, the "Lenders"); and
THE CHASE MANHATTAN BANK (as successor by merger to The Chase
Manhattan Bank (National Association)), a New York state banking
corporation, as agent for the Lenders (in such capacity, together with
its successors in such capacity, the "Agent").
The Borrower, the Subsidiary Guarantors, the Lenders and the
Agent are parties to a Second Amended and Restated Credit Agreement dated as of
May 31, 1996 (as heretofore modified and supplemented and in effect on the date
hereof, the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for extensions of credit (by making of loans and issuing letters of
credit) to be made by said Lenders to the Borrower in an aggregate principal or
face amount not exceeding $1,200,000,000. The Borrower, the Subsidiary
Guarantors, the Lenders and the Agent wish to amend the Credit Agreement in
certain respects, and accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but
Amendment No. 1
---------------
<PAGE>
- 2 -
effective as of the date hereof, the Credit Agreement shall be amended as
follows:
A. References in the Credit Agreement (including references to
the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby.
B. Section 9.30 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"9.30 FCC Filings. Not later than 30 days after the
Restatement Effective Date, the Borrower will cause to be filed with
the FCC in connection with the proposed transfer to the Borrower or any
of its Subsidiaries of the 'License Assets' referred to in the River
City Group I Option Agreement, applications for all material
authorizations, licenses and permits issued by the FCC that are
required or necessary for the conduct of business of the Borrower and
its Subsidiaries as proposed to be conducted with respect to each of
the Stations to which such 'License Assets' relate; provided that,
notwithstanding the foregoing, with respect to (a) KDNL-TV, St. Louis,
Missouri, (b) WVRV(FM), East St. Louis, Illinois, (c) KPNT(FM), Ste.
Genevieve, Missouri, (d) WTTV-TV, Bloomington, Indiana, (e) WTTK-TV,
Kokomo, Indiana, (f) WLOS-TV, Asheville, North Carolina and (g)
KABB-TV, San Antonio, Texas, the Borrower will cause such applications
to be filed with the FCC by not later than October 31, 1996."
Section 3. Representations and Warranties. The Borrower
represents and warrants to the Lenders that the representations and warranties
set forth in Section 8 of the Credit Agreement are true and complete on the date
hereof as if made on and as of the date hereof and as if each reference in said
Section 8 to "this Agreement" included reference to this Amendment No. 1.
Section 4. Conditions Precedent. As provided in Section 2
above, the amendments to the Credit Agreement set forth in said Section 2 shall
become effective, as of the date hereof, upon the execution and delivery of this
Amendment No. 1 by the Borrower, the Subsidiary Guarantors, the Majority Lenders
and the Agent.
Section 5. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and
Amendment No. 1
---------------
<PAGE>
- 3 -
effect. This Amendment No. 1 may be executed in any number of counterparts, all
of which taken together shall constitute one and the same amendatory instrument
and any of the parties hereto may execute this Amendment No. 1 by signing any
such counterpart. This Amendment No. 1 shall be governed by, and construed in
accordance with, the law of the State of New York.
Amendment No. 1
---------------
<PAGE>
- 4 -
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed and delivered as of the day and year first
above written.
SINCLAIR BROADCAST GROUP, INC.
By /s/ David Smith
---------------------------
Title: President
Amendment No. 1
---------------
<PAGE>
- 5 -
SUBSIDIARY GUARANTORS
CHESAPEAKE TELEVISION, INC.
KABB, INC.
KDNL, INC.
KDSM, INC.
KSMO, INC.
SCI - INDIANA, INC.
SCI - SACRAMENTO, INC.
SINCLAIR COMMUNICATIONS, INC.
SINCLAIR RADIO OF ALBUQUERQUE, INC.
SINCLAIR RADIO OF BUFFALO, INC.
SINCLAIR RADIO OF GREENVILLE, INC.
SINCLAIR RADIO OF LOS ANGELES, INC.
SINCLAIR RADIO OF MEMPHIS, INC.
SINCLAIR RADIO OF NASHVILLE, INC.
SINCLAIR RADIO OF NEW ORLEANS, INC.
SINCLAIR RADIO OF ST. LOUIS, INC.
SINCLAIR RADIO OF WILKES-BARRE,
INC.
TUSCALOOSA BROADCASTING, INC.
WCGV, INC.
WDBB, INC.
WLFL, INC.
WLOS, INC.
WPGH, INC.
WPGH LICENSEE, INC.
WSMH, INC.
WSTR, INC.
WSTR LICENSEE, INC.
WTTE, CHANNEL 28, INC.
WTTE, CHANNEL 28 LICENSEE, INC.
WTTO, INC.
WTVZ, INC.
WTVZ LICENSEE, INC.
WYZZ, INC.
SUPERIOR COMMUNICATIONS OF
OKLAHOMA, INC.
By /s/ David Smith
--------------------------------
Title: President
Amendment No. 1
---------------
<PAGE>
- 6 -
SUBSIDIARY GUARANTORS
CHESAPEAKE TELEVISION
LICENSEE, INC.
FSF TV, INC.
KABB LICENSEE, INC.
KDNL LICENSEE, INC.
KDSM LICENSEE, INC.
KSMO LICENSEE, INC.
SCI - INDIANA LICENSEE, INC.
SCI - SACRAMENTO LICENSEE, INC.
SINCLAIR RADIO OF ALBUQUERQUE
LICENSEE, INC.
SINCLAIR RADIO OF BUFFALO
LICENSEE, INC.
SINCLAIR RADIO OF GREENVILLE
LICENSEE, INC.
SINCLAIR RADIO OF LOS ANGELES
LICENSEE, INC.
SINCLAIR RADIO OF MEMPHIS
LICENSEE, INC.
SINCLAIR RADIO OF NASHVILLE
LICENSEE, INC.
SINCLAIR RADIO OF NEW ORLEANS
LICENSEE, INC.
SINCLAIR RADIO OF ST. LOUIS
LICENSEE, INC.
SINCLAIR RADIO OF WILKES-BARRE
LICENSEE, INC.
SUPERIOR COMMUNICATIONS GROUP, INC.
SUPERIOR COMMUNICATIONS OF
KENTUCKY, INC.
SUPERIOR KY LICENSE CORP.
SUPERIOR OK LICENSE CORP.
WCGV LICENSEE, INC.
WLFL LICENSEE, INC.
WLOS LICENSEE, INC.
WSMH LICENSEE, INC.
WTTO LICENSEE, INC.
WYZZ LICENSEE, INC.
By /s/ David Smith
--------------------------------
Title: President
Amendment No. 1
---------------
<PAGE>
- 7 -
AGENT
-----
THE CHASE MANHATTAN BANK,
as Agent
By /s/ Tracey A. Navin
--------------------------------
Title: Vice President
LENDERS
THE CHASE MANHATTAN BANK
By /s/ Tracey A. Navin
--------------------------------
Title: Vice President
ABN AMRO BANK N.V.
By /s/ Ann Schwalbenberg
--------------------------------
Title: Vice President
By /s/ James Dunleavy
--------------------------------
Title: Group Vice President
BANK OF AMERICA, ILLINOIS
By /s/ Carl Salas
--------------------------------
Title: Vice President
BANK OF HAWAII
By /s/ Bruce E. Helberg
--------------------------------
Title: Officer
Amendment No. 1
---------------
<PAGE>
- 8 -
BANK OF IRELAND GRAND CAYMAN
By /s/ Roger Burns
--------------------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Joseph P. Matteo
--------------------------------
Title: Vice President
BANKERS TRUST COMPANY
By /s/ Patricia Hogan
--------------------------------
Title: Vice President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By /s/ Brian J. Cumberland
--------------------------------
Title: Assistant Treasurer
By /s/ Frederick K. Kammler
--------------------------------
Title: Vice President
BANQUE NATIONALE DE PARIS
By /s/ Serge Desrayaud
--------------------------------
Title: Vice President/
Team Leader
By /s/ Pamela Lucash
--------------------------------
Title: Assistant Treasurer
Amendment No. 1
---------------
<PAGE>
- 9 -
BANQUE PARIBAS
By /s/ Philippe Vuarchex
--------------------------------
Title: Vice President
BARCLAYS BANK plc
By /s/ Frank J. Sisinni
--------------------------------
Title: Director
CERES FINANCE LTD.
By /s/ Elizabeth Kearns
--------------------------------
Title: Director
CHL HIGH YIELD LOAN PORTFOLIO (A
UNIT OF THE CHASE MANHATTAN BANK)
By /s/ Andrew D. Gordon
--------------------------------
Title: Managing Director
CIBC, INC.
By /s/ Lorain Granberg
--------------------------------
Title: Director, CIBC Wood
Gundy Securities Corp.
as Agent
Amendment No. 1
---------------
<PAGE>
- 10 -
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By /s/ Marcus Edward
--------------------------------
Title: Vice President
By /s/ Brian O'Leary
--------------------------------
Title: Vice President
COOPERATIEVE CENTRALE RAIFFEISEN -
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND," NEW YORK BRANCH
By /s/ Howard C. Walker, III
--------------------------------
Title: Assistant Treasurer
By /s/ W. Jeffrey Vollack
--------------------------------
Title: Vice President, Manager
By /s/ Dana W. Hemenway
--------------------------------
Title: Vice President
CORESTATES BANK, N.A.
By /s/ Edward L. Kittrell
--------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By /s/ Dean Murdock
--------------------------------
Title: Vice President
Amendment No. 1
---------------
<PAGE>
- 11 -
FLEET NATIONAL BANK
By /s/ Lynne S. Randall
--------------------------------
Title: Senior Vice President
THE FUJI BANK, LTD., NEW YORK
BRANCH
By /s/ Teiji Teramoto
--------------------------------
Title: Vice President & Manager
HIBERNIA NATIONAL BANK
By /s/ Troy J. Villafarra
--------------------------------
Title: Vice President
INDOSUEZ CAPITAL FUNDING II,
LIMITED
By: Indosuez Capital, as
Portfolio Advisor
By /s/ Francoise Berthelot
--------------------------------
Title: Vice President
KEYPORT LIFE INSURANCE COMPANY
By: Chancellor Senior Secured
Management, Inc. as
Portfolio Advisor
By /s/ Gregory L. Smith
--------------------------------
Title: Vice President
LEHMAN COMMERCIAL PAPER INC.
By /s/ Michele Swanson
--------------------------------
Title: Authorized Signatory
Amendment No. 1
---------------
<PAGE>
- 12 -
LTCB TRUST COMPANY
By /s/ Satoru Otsubo
--------------------------------
Title: Executive Vice President
MEDICAL LIABILITY MUTUAL INSURANCE
CO.
By: Chancellor Senior Secured
Management, Inc. as
Investment Manager
By /s/ Gregory L. Smith
--------------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ John T. Kranefuss
--------------------------------
Title: Assistant Vice President
MERCANTILE BANK OF ST. LOUIS,
NATIONAL ASSOCIATION
By /s/ Eloise A. Engman
--------------------------------
Title: Vice President
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset
Management, L.P., as
Investment Advisor
By /s/ John W. Fraser
--------------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By /s/ John W. Fraser
--------------------------------
Title: Authorized Signatory
Amendment No. 1
---------------
<PAGE>
- 13 -
MICHIGAN NATIONAL BANK
By /s/ Stephane E. Lubin
--------------------------------
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/ Patricia Loret De Mola
--------------------------------
Title: Senior Vice President
NATIONSBANK, N.A.
By /s/ Jennifer O. Bishop
--------------------------------
Title: Vice President
NEW YORK LIFE INSURANCE COMPANY
By /s/ Adam G. Clemens
--------------------------------
Title: Investment Vice
President
THE NIPPON CREDIT BANK, LTD.
By /s/ David C. Carrington
--------------------------------
Title: Vice President and
Manager
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ John E. Schlifske
--------------------------------
Title: Vice President
Amendment No. 1
---------------
<PAGE>
- 14 -
PNC BANK, NATIONAL ASSOCIATION
By /s/ Jeffrey E. Hauser
--------------------------------
Title: Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P.
By /s/ John E. Urban
--------------------------------
Title: Authorized Signer
PROTECTIVE LIFE INSURANCE COMPANY
By /s/ Mark K. Okada
--------------------------------
Title: CFA Principal
Protective Asset
Management Co.
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
By: Chancellor Senior Secured
Management, Inc.
as Portfolio Advisor
By /s/ Gregory L. Smith
--------------------------------
Title: Vice President
THE ROYAL BANK OF SCOTLAND plc
By /s/ Grant F. Stoddart
---------------------------------
Title: Senior Vice President
& Manager
THE SAKURA BANK, LTD.
By /s/ Yoshikaza Nagura
---------------------------------
Title: Vice President
Amendment No. 1
---------------
<PAGE>
- 15 -
THE SANWA BANK LTD.
By /s/ Christian Kambour
--------------------------------
Title: Assistant Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and
Research, as Investment
Advisor
By
--------------------------------
Title:
SENIOR HIGH INCOME PORTFOLIO, INC.
By /s/ John W. Fraser
--------------------------------
Title: Authorized Signatory
KEYBANK NATIONAL ASSOCIATION
F/K/A SOCIETY NATIONAL BANK
By /s/ Jason R. Weaver
---------------------------------
Title: Assistant Vice President
SOUTHERN PACIFIC THRIFT & LOAN
ASSOCIATION
By /s/ Charles D. Martorano
--------------------------------
Title: Senior Vice President
THE TORONTO-DOMINION (NEW YORK)
BANK, INC.
By /s/ Debbie A. Greene
--------------------------------
Title: Vice President
Amendment No. 1
---------------
<PAGE>
- 16 -
UNION BANK OF CALIFORNIA, N.A.
By /s/ Christine P. Ball
--------------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
--------------------------------
Title: Sr. Vice Pres.
- Portfolio Manager
Amendment No. 1
---------------
[CONFORMED COPY]
AMENDMENT NO. 2
AMENDMENT NO. 2 dated as of October 16, 1996, between:
SINCLAIR BROADCAST GROUP, INC., a corporation duly organized
and validly existing under the laws of the State of Maryland (the
"Borrower");
each of the Subsidiaries of the Borrower identified under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto
(individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors" and, together with the Borrower, the
"Obligors");
each of the lenders that is a signatory hereto (individually,
a "Lender" and, collectively, the "Lenders"); and
THE CHASE MANHATTAN BANK (as successor by merger to The Chase
Manhattan Bank (National Association)), a New York state banking
corporation, as agent for the Lenders (in such capacity, together with
its successors in such capacity, the "Agent").
The Borrower, the Subsidiary Guarantors, the Lenders and the
Agent are parties to a Second Amended and Restated Credit Agreement dated as of
May 31, 1996 (as heretofore modified and supplemented and in effect on the date
hereof, the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for extensions of credit (by the making of loans and the issuance of
letters of credit) to be made by said Lenders to the Borrower in an aggregate
principal or face amount not exceeding $1,200,000,000. The Borrower, the
Subsidiary Guarantors, the Lenders and the Agent wish to amend the Credit
Agreement in certain respects, and accordingly, the parties hereto hereby agree
as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 2, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of the date
hereof, the Credit Agreement shall be amended as follows:
A. References in the Credit Agreement to "this Agreement" (and
indirect references such as "hereunder", "hereby", "herein" and "hereof") shall
be deemed to be references to the Credit Agreement as amended hereby.
Amendment No. 2
---------------
<PAGE>
- 2 -
B. Section 9.05(b) of the Credit Agreement is hereby amended
to read as follows:
"(b) The Borrower will not, and will not permit any of its
Subsidiaries to, acquire any business or Property from, or capital
stock of, or be a party to any acquisition of, any Person, or acquire
any option to make any such acquisition, except for purchases of
inventory, programming rights and other Property to be sold or used in
the ordinary course of business, Investments permitted under Section
9.08 hereof, Dividend Payments permitted under Section 9.09(e) hereof,
Capital Expenditures permitted under Section 9.12 hereof and the River
City Non-License Acquisition."
C. Section 9.09 of the Credit Agreement is hereby amended by
(i) replacing the period at the end of clause (d) thereof with "; and" and (ii)
inserting a new clause (e) therein reading as follows:
"(e) the Borrower may purchase, in one transaction or a series
of transactions, its Class A Common Stock and its Class B Common Stock,
provided that the aggregate purchase price (including, without
limitation, cash payments, the principal amount of promissory notes and
Indebtedness assumed, and the fair market value of Property delivered)
paid, delivered or assumed by the Borrower therefor shall not exceed
$20,000,000."
D. Section 9.28(a) of the Credit Agreement is hereby amended
by replacing "Not later than 90 days after the Restatement Effective Date,"
therein with "Not later than December 31, 1996,".
E. Section 9.30 of the Credit Agreement is hereby amended to
read as follows:
"9.30 FCC Filings. Not later than 30 days after the
Restatement Effective Date, the Borrower will cause to be filed with
the FCC in connection with the proposed transfer to the Borrower or any
of its Subsidiaries of the 'License Assets' referred to in the River
City Group I Option Agreement, applications for all material
authorizations, licenses and permits issued by the FCC that are
required or necessary for the conduct of business of the Borrower and
its Subsidiaries as proposed to be conducted with respect to each of
the Stations to which such 'License Assets' relate; provided that,
notwithstanding the foregoing, (a) with respect to (i) KDNL-TV, St.
Louis, Missouri, (ii) WVRV(FM), East St. Louis, Illinois, (iii)
KPNT(FM), Ste. Genevieve, Missouri, (iv) WLOS-TV, Asheville, North
Carolina and (v) KABB-TV, San Antonio, Texas, the Borrower will cause
such applications to be filed with the FCC by not later than October
31, 1996 and (b) with respect to (i) WTTV-TV, Bloomington, Indiana and
(ii) WTTK-TV, Kokomo, Indiana, the Borrower will cause such
applications to be filed with the FCC by not later than December 31,
1996."
Amendment No. 2
---------------
<PAGE>
- 3 -
Section 3. Representations and Warranties. The Borrower
represents and warrants to the Lenders that the representations and warranties
set forth in Section 8 of the Credit Agreement, and by each Credit Party and
Carolyn C. Smith in each of the other Basic Documents to which such Person is a
party, are true and complete on the date hereof as if made on and as of the date
hereof with the same force and effect as if made on and as of such date (or, if
any such representation and warranty is expressly stated to have been made as of
a specific date, as of such specific date) and as if each reference in said
Section 8 to "this Agreement" and each reference to the "Credit Agreement" in
the other Basic Documents included reference to this Amendment No. 2.
Section 4. Conditions Precedent. The amendments to the Credit
Agreement set forth in Section 2 hereof shall become effective, as of the date
hereof, upon the execution and delivery of this Amendment No. 2 by the Borrower,
the Subsidiary Guarantors, the Majority Lenders and the Agent.
Section 5. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. This
Amendment No. 2 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 2 by signing any such
counterpart. This Amendment No. 2 shall be governed by, and construed in
accordance with, the law of the State of New York.
[Remainder of Page Left Intentionally Blank]
Amendment No. 2
---------------
<PAGE>
- 4 -
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed and delivered as of the day and year first
above written.
SINCLAIR BROADCAST GROUP, INC.
By /s/ David D. Smith
---------------------------
Title: President
Amendment No. 2
<PAGE>
- 5 -
SUBSIDIARY GUARANTORS
CHESAPEAKE TELEVISION, INC.
KABB, INC.
KDNL, INC.
KDSM, INC.
KSMO, INC.
SCI - INDIANA, INC.
SCI - SACRAMENTO, INC.
SINCLAIR COMMUNICATIONS, INC.
SINCLAIR RADIO OF ALBUQUERQUE, INC.
SINCLAIR RADIO OF BUFFALO, INC.
SINCLAIR RADIO OF GREENVILLE, INC.
SINCLAIR RADIO OF LOS ANGELES, INC.
SINCLAIR RADIO OF MEMPHIS, INC.
SINCLAIR RADIO OF NASHVILLE, INC.
SINCLAIR RADIO OF NEW ORLEANS, INC.
SINCLAIR RADIO OF ST. LOUIS, INC.
SINCLAIR RADIO OF WILKES-BARRE,
INC.
TUSCALOOSA BROADCASTING, INC.
WCGV, INC.
WDBB, INC.
WLFL, INC.
WLOS, INC.
WPGH, INC.
WPGH LICENSEE, INC.
WSMH, INC.
WSTR, INC.
WSTR LICENSEE, INC.
WTTE, CHANNEL 28, INC.
WTTE, CHANNEL 28 LICENSEE, INC.
WTTO, INC.
WTVZ, INC.
WTVZ LICENSEE, INC.
WYZZ, INC.
SUPERIOR COMMUNICATIONS OF
OKLAHOMA, INC.
By /s/ David D. Smith
--------------------------------
Title: President
Amendment No. 2
---------------
<PAGE>
- 6 -
SUBSIDIARY GUARANTORS
CHESAPEAKE TELEVISION
LICENSEE, INC.
FSF TV, INC.
KABB LICENSEE, INC.
KDNL LICENSEE, INC.
KDSM LICENSEE, INC.
KSMO LICENSEE, INC.
SCI - INDIANA LICENSEE, INC.
SCI - SACRAMENTO LICENSEE, INC.
SINCLAIR RADIO OF ALBUQUERQUE
LICENSEE, INC.
SINCLAIR RADIO OF BUFFALO
LICENSEE, INC.
SINCLAIR RADIO OF GREENVILLE
LICENSEE, INC.
SINCLAIR RADIO OF LOS ANGELES
LICENSEE, INC.
SINCLAIR RADIO OF MEMPHIS
LICENSEE, INC.
SINCLAIR RADIO OF NASHVILLE
LICENSEE, INC.
SINCLAIR RADIO OF NEW ORLEANS
LICENSEE, INC.
SINCLAIR RADIO OF ST. LOUIS
LICENSEE, INC.
SINCLAIR RADIO OF WILKES-BARRE
LICENSEE, INC.
SUPERIOR COMMUNICATIONS GROUP,
INC.
SUPERIOR COMMUNICATIONS OF
KENTUCKY, INC.
SUPERIOR KY LICENSE CORP.
SUPERIOR OK LICENSE CORP.
WCGV LICENSEE, INC.
WLFL LICENSEE, INC.
WLOS LICENSEE, INC.
WSMH LICENSEE, INC.
WTTO LICENSEE, INC.
WYZZ LICENSEE, INC.
By /s/ David D. Smith
--------------------------------
Title: President
Amendment No. 2
---------------
<PAGE>
- 7 -
AGENT
THE CHASE MANHATTAN BANK,
as Agent
By /s/ Tracey A. Navin
--------------------------------
Title: Vice President
LENDERS
THE CHASE MANHATTAN BANK
By /s/ Tracey A. Navin
--------------------------------
Title: Vice President
ABN AMRO BANK N.V.
By /s/ Ann Schwalbenberg
--------------------------------
Title: Vice President
By /s/ James Dunleavy
--------------------------------
Title: Group Vice President
BANK OF AMERICA, ILLINOIS
By /s/ Carl F. Salas
--------------------------------
Title: Vice President
BANK OF HAWAII
By /s/ Elizabeth O. MacLean
--------------------------------
Title: Vice President
Amendment No. 2
---------------
<PAGE>
- 8 -
BANK OF IRELAND GRAND CAYMAN
By /s/ John G. Cusack
--------------------------------
Title: Assistant Vice President
THE BANK OF NEW YORK
By /s/ Edward F. Ryan, Jr.
--------------------------------
Title: Senior Vice President
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By /s/ John P. Judge
--------------------------------
Title: Vice President
BANKERS TRUST COMPANY
By /s/ Patricia Hogan
--------------------------------
Title: Vice President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By /s/ Brian J. Cumberland
--------------------------------
Title: Assistant Treasurer
By /s/ Frederick K. Kammler
--------------------------------
Title: Vice President
Amendment No. 2
---------------
<PAGE>
- 9 -
BANQUE NATIONALE DE PARIS
By /s/ Serge Desrayaud
--------------------------------
Title: Vice President/
Team Leader
By /s/ Mark A. Whitson
--------------------------------
Title: Vice President
BANQUE PARIBAS
By /s/ Philippe Vuarchex
--------------------------------
Title: Vice President
BARCLAYS BANK plc
By /s/ Frank J. Sisinni
--------------------------------
Title: Director
CERES FINANCE LTD.
By /s/ Elizabeth Kearns
--------------------------------
Title: Director
CHL HIGH YIELD LOAN PORTFOLIO (A
UNIT OF THE CHASE MANHATTAN BANK)
By /s/ Andrew D. Gordon
--------------------------------
Title: Managing Director
CIBC, INC.
By /s/ Lorain C. Granberg
--------------------------------
Title: Director, CIBC Wood Gundy
Securities Corp., as Agent
Amendment No. 2
---------------
<PAGE>
- 10 -
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By /s/ Marcus Edward
--------------------------------
Title: Vice President
By /s/ Sean Mounier
--------------------------------
Title: First Vice President
COOPERATIEVE CENTRALE RAIFFEISEN -
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND," NEW YORK BRANCH
By /s/ Douglas W. Zylstra
--------------------------------
Title: Vice President
By /s/ Ian Reese
--------------------------------
Title: Vice President & Manager
CORESTATES BANK, N.A.
By /s/ Edward L. Kittrell
--------------------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By /s/ Dean Murdock
--------------------------------
Title: Vice President
Amendment No. 2
---------------
<PAGE>
- 11 -
DRESDNER BANK AG NEW YORK &
GRAND CAYMAN BRANCHES
By /s/ Brian Haughney
--------------------------------
Title: Assistant Treasurer
By /s/ William E. Lambert
--------------------------------
Title: Assistant Vice President
FIRST HAWAIIAN BANK
By /s/ Donald C. Young
--------------------------------
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF BOSTON
By /s/ David B. Herter
--------------------------------
Title: Managing Director
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Michael P. King
--------------------------------
Title: Corporate Banking Officer
THE FIRST NATIONAL BANK OF
MARYLAND
By /s/ W. Blake Hampson
--------------------------------
Title: Vice President
Amendment No. 2
---------------
<PAGE>
- 12 -
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By /s/ Bruce W. Loftin
--------------------------------
Title: Senior Vice President
FLEET NATIONAL BANK
By /s/ Leonard Maddox
--------------------------------
Title: Senior Vice President
THE FUJI BANK, LTD., NEW YORK
BRANCH
By /s/ Teiji Teramoto
--------------------------------
Title:Vice President and Manager
KEYBANK NATIONAL ASSOCIATION
By /s/ Jason R. Weaver
--------------------------------
Title: Assistant Vice President
KEYPORT LIFE INSURANCE COMPANY
By: Chancellor Senior Secured
Management, Inc. as
Portfolio Advisor
By /s/ Stephen M. Alfieri
--------------------------------
Title: Managing Director
Amendment No. 2
---------------
<PAGE>
- 13 -
LTCB TRUST COMPANY
By /s/ John J. Sullivan
--------------------------------
Title: Executive Vice President
KZH HOLDING CORPORATION
By /s/ Charles Dooley
---------------------------------
Title: Vice President
LEHMAN COMMERCIAL PAPER INC.
By /s/ Michele Swanson
---------------------------------
Title: Authorized Signatory
MEDICAL LIABILITY MUTUAL INSURANCE
CO.
By: Chancellor Senior Secured
Management, Inc. as
Investment Manager
By /s/ Stephen M. Alfieri
---------------------------------
Title: Managing Director
MELLON BANK, N.A.
By /s/ John T. Kranefuss
---------------------------------
Title: Assistant Vice President
MERCANTILE BANK OF ST. LOUIS,
NATIONAL ASSOCIATION
By /s/ Ann C. Kelly
--------------------------------
Title: Vice President
Amendment No. 2
---------------
<PAGE>
- 14 -
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By /s/ John W. Fraser
-----------------------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By /s/ John W. Fraser
-----------------------------------------
Title: Authorized Signatory
MICHIGAN NATIONAL BANK
By /s/ Stephane E. Lubin
-----------------------------------------
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/ Hachiro Hosoda
-----------------------------------------
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By /s/ Colleen McCloskey
-----------------------------------------
Title: Associate
Amendment No. 2
---------------
<PAGE>
- 15 -
NATIONSBANK, N.A.
By /s/ Gregory I. Meador
--------------------------------
Title: Vice President
NEW YORK LIFE INSURANCE COMPANY
By /s/ Adam G. Clemens
--------------------------------
Title: Investment Vice President
THE NIPPON CREDIT BANK, LTD.
By /s/ David C. Carrington
--------------------------------
Title: Vice President & Manager
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ Richard A. Strait
--------------------------------
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Christopher H. Chaplin
--------------------------------
Title: Banking Officer
Amendment No. 2
---------------
<PAGE>
- 16 -
PROTECTIVE LIFE INSURANCE COMPANY
By /s/ Mark K. Okada
--------------------------------
Title: Executive Vice President
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
By: Chancellor Senior Secured
Management, Inc.
as Portfolio Advisor
By: /s/ Stephen M. Alfieri
--------------------------------
Title: Managing Director
THE SAKURA BANK, LTD.
By /s/ Yoshikazu Nagura
--------------------------------
Title: Vice President & Manager
THE SANWA BANK LTD.
By /s/ Christian Kambour
--------------------------------
Title: Assistant Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By /s/ Scott Page
--------------------------------
Title: Vice President
Amendment No. 2
---------------
<PAGE>
- 17 -
SENIOR HIGH INCOME PORTFOLIO, INC.
By /s/ John W. Fraser
-------------------------------------
Title: Authorized Signatory
SOUTHERN PACIFIC THRIFT & LOAN
ASSOCIATION
By /s/ Charles D. Martorano
-------------------------------------
Title: Senior Vice President
TORONTO DOMINION (NEW YORK), INC.
By /s/ Debbie A. Greene
-------------------------------------
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By /s/ Kristina M. Mouzakis
-------------------------------------
Title: Assistant Vice President
Amendment No. 2
---------------
<PAGE>
- 18 -
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
--------------------------------
Title: Senior Vice President-
Portfolio Manager
Amendment No. 2
---------------
[Conformed Copy]
AMENDMENT NO. 3
AMENDMENT NO. 3 dated as of December 18, 1996, between:
SINCLAIR BROADCAST GROUP, INC., a corporation duly organized
and validly existing under the laws of the State of Maryland (the
"Borrower");
each of the Subsidiaries of the Borrower identified under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto
(individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors" and, together with the Borrower, the
"Obligors");
each of the lenders that is a signatory hereto (individually,
a "Lender" and, collectively, the "Lenders"); and
THE CHASE MANHATTAN BANK (as successor by merger to The Chase
Manhattan Bank (National Association)), a New York state banking
corporation, as agent for the Lenders (in such capacity, together with
its successors in such capacity, the "Agent").
The Borrower, the Subsidiary Guarantors, the Lenders and the
Agent are parties to a Second Amended and Restated Credit Agreement dated as of
May 31, 1996 (as heretofore modified and supplemented and in effect on the date
hereof, the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for extensions of credit (by the making of loans and the issuance of
letters of credit) to be made by said Lenders to the Borrower in an aggregate
principal or face amount not exceeding $1,200,000,000. The Borrower, the
Subsidiary Guarantors, the Lenders and the Agent wish to amend the Credit
Agreement in certain respects, and accordingly, the parties hereto hereby agree
as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 3, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the
conditions precedent specified in Section 5 below, but effective as of the date
hereof, the Credit Agreement shall be amended as follows:
Amendment No. 3
---------------
<PAGE>
- 2 -
A. References in the Credit Agreement to "this Agreement" (and
indirect references such as "hereunder", "hereby", "herein" and "hereof") shall
be deemed to be references to the Credit Agreement as amended hereby.
B. The definition of "Film Cash Payments" in Section 1.01 of
the Credit Agreement is hereby amended by adding a new sentence at the end
thereof reading as follows:
"For the purposes of the definition of "EBITDA" in this Section 1.01
only, Film Cash Payments for any fiscal quarter shall be reduced by (a)
$630,000, if such fiscal quarter ends on March 31, 1996, (b) $764,000,
if such fiscal quarter ends on June 30, 1996, (c) $386,000, if such
fiscal quarter ends on September 30, 1996, and (d) $668,000, if such
fiscal quarter ends on December 31, 1996; provided that, if Film Cash
Payments are to be calculated for any portion of any such fiscal
quarter, the amount of the reduction specified in the foregoing clause
(a), (b), (c) or (d) as the case may be, for such fiscal quarter shall
be multiplied by a fraction, the numerator of which shall be the number
of days in the portion of such fiscal quarter for which Film Cash
Payments are to be calculated and the denominator of which shall be the
number of days in such fiscal quarter."
C. Section 9.05(d) of the Credit Agreement is hereby amended
by (i) deleting "and" at the end of clause (vii) thereof, (ii) replacing the
period at the end of clause (viii) thereof with "; and" and (iii) inserting a
new clause (ix) therein reading as follows:
"(ix) so long as no Default would result therefrom, (x) KDNL,
Inc. may merge into WPGH, Inc. in a transaction in which WPGH, Inc. is
the surviving corporation, (y) SCI - Indiana, Inc. may merge into WTTE,
Channel 28, Inc. in a transaction in which WTTE, Channel 28, Inc. is
the surviving corporation, and (z) KABB, Inc., SCI - Sacramento, Inc.
and WLOS, Inc. may merge into Chesapeake Television, Inc. in a
transaction in which Chesapeake Television, Inc. is the surviving
corporation."
D. Section 9.28(a) of the Credit Agreement is hereby amended
by replacing "December 31, 1996," therein with "January 31, 1997,".
Section 3. Authorization. Each Lender hereby authorizes the
Agent to enter into a Subordination, Non-Disturbance and Attornment Agreement
substantially in the form of Exhibit A hereto relating to certain real Property
owned by KIG and certain real Property owned by Cunningham.
Section 4. Representations and Warranties. The Borrower
represents and warrants to the Lenders that the representations and warranties
set forth in Section 8 of the Credit Agreement, and by each Credit Party and
Carolyn C. Smith in each of the other Basic Documents to which such Person is a
party, are true and complete on the date hereof as if
Amendment No. 3
---------------
<PAGE>
- 3 -
made on and as of the date hereof with the same force and effect as if made on
and as of such date (or, if any such representation and warranty is expressly
stated to have been made as of a specific date, as of such specific date) and as
if each reference in said Section 8 to "this Agreement" and each reference to
the "Credit Agreement" in the other Basic Documents included reference to this
Amendment No. 3.
Section 5. Conditions Precedent.
A. The amendments to the Credit Agreement set forth in Section
2 hereof shall become effective, as of the date hereof, upon the execution and
delivery of this Amendment No. 3 by the Borrower, the Subsidiary Guarantors, the
Majority Lenders and the Agent.
B. The authorization set forth in Section 3 hereof shall
become effective, as of the date hereof, upon the execution and delivery of this
Amendment No. 3 by each Lender.
Section 6. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. This
Amendment No. 3 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 3 by signing any such
counterpart. This Amendment No. 3 shall be governed by, and construed in
accordance with, the law of the State of New York.
[Remainder of Page Left Intentionally Blank]
Amendment No. 3
---------------
<PAGE>
- 4 -
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 3 to be duly executed and delivered as of the day and year first
above written.
SINCLAIR BROADCAST GROUP, INC.
By /s/ David D. Smith
---------------------------
Title: President
Amendment No. 3
---------------
<PAGE>
- 5 -
SUBSIDIARY GUARANTORS
CHESAPEAKE TELEVISION, INC.
KABB, INC.
KDNL, INC.
KDSM, INC.
KSMO, INC.
SCI - INDIANA, INC.
SCI - SACRAMENTO, INC.
SINCLAIR COMMUNICATIONS, INC.
SINCLAIR RADIO OF ALBUQUERQUE, INC.
SINCLAIR RADIO OF BUFFALO, INC.
SINCLAIR RADIO OF GREENVILLE, INC.
SINCLAIR RADIO OF LOS ANGELES, INC.
SINCLAIR RADIO OF MEMPHIS, INC.
SINCLAIR RADIO OF NASHVILLE, INC.
SINCLAIR RADIO OF NEW ORLEANS, INC.
SINCLAIR RADIO OF ST. LOUIS, INC.
SINCLAIR RADIO OF WILKES-BARRE,
INC.
SUPERIOR COMMUNICATIONS OF
OKLAHOMA, INC.
TUSCALOOSA BROADCASTING, INC.
WCGV, INC.
WDBB, INC.
WLFL, INC.
WLOS, INC.
WPGH, INC.
WPGH LICENSEE, INC.
WSMH, INC.
WSTR, INC.
WSTR LICENSEE, INC.
WTTE, CHANNEL 28, INC.
WTTE, CHANNEL 28 LICENSEE, INC.
WTTO, INC.
WTVZ, INC.
WTVZ LICENSEE, INC.
WYZZ, INC.
By /s/ David D. Smith
--------------------------------
Title: President
Amendment No. 3
---------------
<PAGE>
- 6 -
SUBSIDIARY GUARANTORS
CHESAPEAKE TELEVISION
LICENSEE, INC.
FSF TV, INC.
KABB LICENSEE, INC.
KDNL LICENSEE, INC.
KDSM LICENSEE, INC.
KSMO LICENSEE, INC.
SCI - INDIANA LICENSEE, INC.
SCI - SACRAMENTO LICENSEE, INC.
SINCLAIR RADIO OF ALBUQUERQUE
LICENSEE, INC.
SINCLAIR RADIO OF BUFFALO
LICENSEE, INC.
SINCLAIR RADIO OF GREENVILLE
LICENSEE, INC.
SINCLAIR RADIO OF LOS ANGELES
LICENSEE, INC.
SINCLAIR RADIO OF MEMPHIS
LICENSEE, INC.
SINCLAIR RADIO OF NASHVILLE
LICENSEE, INC.
SINCLAIR RADIO OF NEW ORLEANS
LICENSEE, INC.
SINCLAIR RADIO OF ST. LOUIS
LICENSEE, INC.
SINCLAIR RADIO OF WILKES-BARRE
LICENSEE, INC.
SUPERIOR COMMUNICATIONS GROUP,
INC.
SUPERIOR COMMUNICATIONS OF
KENTUCKY, INC.
SUPERIOR KY LICENSE CORP.
SUPERIOR OK LICENSE CORP.
WCGV LICENSEE, INC.
WLFL LICENSEE, INC.
WLOS LICENSEE, INC.
WSMH LICENSEE, INC.
WTTO LICENSEE, INC.
WYZZ LICENSEE, INC.
By /s/ David D. Smith
--------------------------------
Title: President
Amendment No. 3
---------------
<PAGE>
- 7 -
AGENT
THE CHASE MANHATTAN BANK,
as Agent
By /s/ Tracey A. Navin
---------------------------------
Title: Vice President
LENDERS
THE CHASE MANHATTAN BANK
By /s/ Tracey A. Navin
---------------------------------
Title: Vice President
ABN AMRO BANK N.V., NEW YORK
BRANCH
By /s/ David B. Martens
---------------------------------
Title: Vice President
By /s/ Mark S. Gronich
---------------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS
By /s/ Carl F. Salas
---------------------------------
Title: Vice President
BANK OF HAWAII
By /s/ Elizabeth O. MacLean
---------------------------------
Title: Vice President
Amendment No. 3
---------------
<PAGE>
- 8 -
BANK OF IRELAND GRAND CAYMAN
By /s/ Joan Mitchell
--------------------------------
Title: Account Manager
THE BANK OF NEW YORK
By /s/ Edward F. Ryan, Jr.
--------------------------------
Title: Senior Vice President
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By /s/ John P. Judge
--------------------------------
Title: Vice President
BANKERS TRUST COMPANY
By /s/ Patricia Hogan
--------------------------------
Title: Vice President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By /s/ Brian J. Cumberland
--------------------------------
Title: Assistant Treasurer
By /s/ Frederick K. Kammler
--------------------------------
Title: Vice President
Amendment No. 3
---------------
<PAGE>
- 9 -
BANQUE NATIONALE DE PARIS
By /s/ Serge Desrayaud
--------------------------------------
Title: Vice President/Team Leader
By /s/ Pamela Lucash
--------------------------------------
Title: Assistant Treasurer
BANQUE PARIBAS
By /s/ Eileen M. Burke
--------------------------------------
Title: Vice President
THE CANADA LIFE ASSURANCE COMPANY
By /s/ Brian J. Lynch
--------------------------------------
Title: Associate Treasurer
CERES FINANCE LTD.
By /s/ Darren P. Riley
--------------------------------------
Title: Director
CHL HIGH YIELD LOAN PORTFOLIO (A
UNIT OF THE CHASE MANHATTAN
BANK)
By /s/ Andrew D. Gordon
--------------------------------------
Title: Managing Director
Amendment No. 3
---------------
<PAGE>
- 10 -
CIBC, INC.
By /s/ Martin M. Friedman
--------------------------------------
Title: Managing Director, CIBC Wood
Gundy Securities Corp.
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
By /s/ Marcus Edward
--------------------------------------
Title: Vice President
By /s/ Brian P. O'Leary
--------------------------------------
Title: Vice President
COOPERATIEVE CENTRALE RAIFFEISEN -
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND," NEW YORK BRANCH
By /s/ Douglas W. Zylstra
--------------------------------------
Title: Vice President
By /s/ Robert S. Bucklin
--------------------------------------
Title: Deputy General Manager
CORESTATES BANK, N.A.
By /s/ Edward L. Kittrell
--------------------------------------
Title: Vice President
Amendment No. 3
---------------
<PAGE>
- 11 -
THE DAI-ICHI KANGYO BANK, LTD.
By /s/ Seiji Imai
--------------------------------------
Title: Vice President
DRESDNER BANK AG NEW YORK &
GRAND CAYMAN BRANCHES
By /s/ Robert Grella
--------------------------------------
Title: Vice President
By /s/ Jane A. Majeski
--------------------------------------
Title: Vice President
FIRST HAWAIIAN BANK
By /s/ Donald C. Young
--------------------------------------
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF BOSTON
By /s/ David B. Herter
--------------------------------------
Title: Managing Director
THE FIRST NATIONAL BANK OF
MARYLAND
By /s/ W. Blake Hampson
--------------------------------------
Title: Vice President
Amendment No. 3
---------------
<PAGE>
- 12 -
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By /s/ Jim F. Redman
--------------------------------------
Title: Senior Vice President
FLEET NATIONAL BANK
By /s/ Luyen Tran
--------------------------------------
Title: Assistant Vice President
THE FUJI BANK, LTD., NEW YORK
BRANCH
By /s/ Teiji Teramoto
--------------------------------------
Title: Vice President & Manager
GIROCREDIT BANK
By /s/ Anca Trifan
--------------------------------------
Title: Vice President
By /s/ Richard Stone
--------------------------------------
Title: Vice President
HIBERNIA NATIONAL BANK
By /s/ Troy J. Villafarra
--------------------------------------
Title: Vice President
Amendment No. 3
---------------
<PAGE>
- 13 -
KEYBANK NATIONAL ASSOCIATION
By /s/ Jason R. Weaver
--------------------------------------
Title: Assistant Vice President
KEYPORT LIFE INSURANCE COMPANY
By: Chancellor LGT Senior Secured
Management, Inc. as Portfolio Advisor
By /s/ Gregory L. Smith
--------------------------------------
Title: Vice President
LTCB TRUST COMPANY
By /s/ Satoru Otsubo
--------------------------------------
Title: Executive Vice President
KZH HOLDING CORPORATION
By /s/ Robert Goodwin
--------------------------------------
Title: Authorized Agent
LEHMAN COMMERCIAL PAPER INC.
By /s/ Michele Swanson
--------------------------------------
Title: Authorized Signatory
Amendment No. 3
---------------
<PAGE>
- 14 -
MEDICAL LIABILITY MUTUAL INSURANCE
CO.
By: Chancellor LGT Senior Secured
Management, Inc. as Investment Manager
By /s/ Gregory L. Smith
--------------------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ John T. Kranefuss
--------------------------------------
Title: Assistant Vice President
MERCANTILE BANK, NATIONAL
ASSOCIATION
By /s/ Ann C. Kelly
--------------------------------------
Title: Vice President
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By /s/ John W. Fraser
--------------------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By /s/ John W. Fraser
--------------------------------------
Title: Authorized Signatory
Amendment No. 3
---------------
<PAGE>
- 15 -
MICHIGAN NATIONAL BANK
By /s/ Stephane E. Lubin
--------------------------------------
Title: Relationship Manager
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/ Hachiro Hosoda
--------------------------------------
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Colleen McCloskey
--------------------------------------
Title: Associate
NATIONSBANK, N.A.
By /s/ Roselyn Reid
--------------------------------------
Title: Vice President
NEW YORK LIFE INSURANCE COMPANY
By /s/ Adam G. Clemens
--------------------------------------
Title: Investment Vice President
THE NIPPON CREDIT BANK, LTD.
By /s/ David C. Carrington
--------------------------------------
Title: Vice President & Manager
Amendment No. 3
---------------
<PAGE>
- 16 -
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ A. Kipp Koester
--------------------------------------
Title: Vice President
PARIBAS CAPITAL FUNDING LLC
By /s/ M. Steven Alexander
--------------------------------------
Title: Director
PNC BANK, NATIONAL ASSOCIATION
By /s/ Jeffrey E. Hauser
--------------------------------------
Title: Vice President
PROTECTIVE LIFE INSURANCE COMPANY
By /s/ James Dondero
--------------------------------------
Title: Authorized Signatory
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
By: Chancellor Senior Secured
Management, Inc.
as Portfolio Advisor
By /s/ Gregory L. Smith
--------------------------------------
Title: Vice President
Amendment No. 3
---------------
<PAGE>
- 17 -
THE ROYAL BANK OF SCOTLAND plc
By /s/ Grant F. Stoddart
--------------------------------------
Title: Senior Vice President & Manager
THE SAKURA BANK, LTD.
By /s/ Yoshikazu Nagura
--------------------------------------
Title: Vice President
THE SANWA BANK LTD.
By /s/ Christian Kambour
--------------------------------------
Title: Assistant Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By /s/ Payson F. Swaffield
--------------------------------------
Title: Vice President
SENIOR HIGH INCOME PORTFOLIO, INC.
By /s/ John W. Fraser
--------------------------------------
Title: Authorized Signatory
SOUTHERN PACIFIC THRIFT & LOAN
ASSOCIATION
By /s/ Charles D. Martorano
--------------------------------------
Title: Senior Vice President
Amendment No. 3
---------------
<PAGE>
- 18 -
SUNTRUST BANK, CENTRAL FLORIDA,
N.A.
By /s/ Christopher J. Aguilar
--------------------------------------
Title: First Vice President
TORONTO DOMINION (NEW YORK), INC.
By /s/ Debbie A. Greene
--------------------------------------
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By /s/ Bill D. Gooch
--------------------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
--------------------------------------
Title: Senior Vice President
Amendment No. 3
---------------
<PAGE>
Exhibit A
3900 Hooper Avenue
1200 North Rolling Road
2000-2008 W.41st St.
Baltimore, Maryland
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
This Subordination, Non-Disturbance and Attornment Agreement
(this "Agreement") is made as of the ___ day of December, 1996 by and among
Cunningham Communications, Inc., a Maryland corporation, having an office at
2000 West 41st Street, Baltimore, Maryland 21211 ("Cunningham"), Chesapeake
Television, Inc., a Maryland corporation, having an office at 2000 West 41st
Street, Baltimore, Maryland 21211 ("CTI"), Keyser Investment Group, Inc., a
Maryland corporation, having an office at 2000 West 41st Street, Baltimore,
Maryland 21211 ("Keyser"), Provident Bank of Maryland, a banking corporation
organized under the laws of the State of Maryland, having an office at 114 East
Lexington Street, Baltimore, MD 21202, Attention: Frederick G. Botti
("Provident") and The Chase Manhattan Bank, a New York banking corporation (as
successor by merger to The Chase Manhattan Bank, N.A., a national banking
corporation), having an office at 1 Chase Manhattan Plaza, New York, New York
10081, as Agent for certain lenders (together with its successors and assigns,
the "Agent").
W I T N E S S E T H:
WHEREAS, Sinclair Broadcast Group, Inc., a corporation duly
organized and validly existing under the laws of the State of Maryland (the
"Borrower"), certain subsidiaries of the Borrower, certain lenders (the
"Lenders") and the Agent are parties to a Second Amended and Restated Credit
Agreement dated as of May 31, 1996 (as heretofore amended, modified and
supplemented and as further amended, modified and supplemented and in effect
from time to time the "Credit Agreement") which Credit Agreement provides for
extensions of credit (by making loans and issuing letters of credit) to be made
by the Lenders to the Borrower in an aggregate principal or face amount not
exceeding $1,200,000,000 (the "Loans") evidenced by and repayable with interest
thereon in accordance with various promissory notes executed and delivered to
the respective order of the Lenders (as modified, amended, extended,
supplemented, restated, split into multiple notes, exchanged or replaced and in
effect from time to time, collectively, being herein called the "Notes");
WHEREAS, Cunningham and Keyser, pursuant to a certain Second
Amended and Restated Affiliate Guarantee and Security Agreement dated as of May
31, 1996 by and among Keyser, Cunningham, Gerstell Development Limited
Partnership, and Agent (as heretofore amended, modified and supplemented and as
further amended, modified and supplemented and in effect from time to time, the
"Guarantee"), have guaranteed, inter alia, the prompt payment in full when due
of the principal of and interest on the Loans;
<PAGE>
WHEREAS, to secure its obligations under the Guarantee,
Cunningham executed three Indemnity Deeds of Trust, Assignment of Rents,
Security Agreement and Fixture Filings, dated August 30, 1991 (collectively, the
"Indemnity Deeds of Trust"), in favor of the Agent and recorded among the Land
Records of Baltimore City and Baltimore County on January 13, 1992 in Liber
S.E.B. No. 3076, folio 488, Liber S.M. No. 9024, folio 735, and Liber S.M. No.
9024, folio 687, respectively, as amended by those certain Amendments No. 1 to
Indemnity Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing dated May 24, 1994 and recorded among the Land Records of Baltimore City
and Baltimore County on June 16, 1994 in Liber S.E.B. No. 4308, folio 030, Liber
S.M. No. 010591, folio 159 and Liber S.M. No. 010591, folio 176, respectively,
and those certain Amendments No. 2 to Indemnity Deed of Trust, Assignment of
Rents, Security Agreement and Fixture Filing dated January 9, 1995 and recorded
among the Land Records of Baltimore City and Baltimore County on January 26,
1995 in Liber 10920, folio 295, and Liber 10920, folio 304, and in Baltimore
City in Liber 4685, folio 316 and Liber 4685, folio 333 (the Indemnity Deeds of
Trust, as amended, modified and supplemented and in effect from time to time,
collectively, the "Cunningham Deeds of Trust") covering the properties more
particularly described in Schedule I attached hereto (individually a "Cunningham
Property", collectively, the "Cunningham Properties");
WHEREAS, to secure its obligations under the Guarantee, Keyser
executed an Indemnity Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing, dated August 30, 1991, in favor of the Agent and recorded in the
Land Records of Baltimore County on January 13, 1992 in Liber R.E.B. No. 3076,
folio 542, as amended by the Amendment No. 1 to Indemnity Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing, dated May 24, 1994,
and recorded among the Land Records of Baltimore City on June 16, 1994 in Liber
S.E.B. No. 4308, folio 52, as amended by Amendment No. 2 to Indemnity Deed of
Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated January
9, 1995, and recorded among the Land Records of Baltimore City on January 25,
1995 in Liber 4685 folio 316 and as amended by Amendment No. 3 to Indemnity Deed
of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated
August 26, 1996 and recorded among the Land Records of Baltimore City on August
30, 1996 in Liber 5799 folio 776 (as amended, modified and supplemented and in
effect from time to time, collectively, the "Keyser Deed of Trust") covering the
property more particularly described in Schedule II attached hereto (the "Keyser
Property"; the Cunningham Properties and the Keyser Property, collectively the
"Property"). The lien of the Cunningham Deed of Trust and the lien of the Keyser
Deed of Trust are referred to herein collectively as the "Agent Liens."
WHEREAS, on August 30, 1988 Provident made a loan in the
original principal amount of Two Million Eight Hundred Thousand Dollars
($2,800,000.00) to David D. Smith, Robert L. Simmons, Robert E. Smith, J. Duncan
Smith and Frederick Smith (collectively, the "Smiths") (the "Smith Loan"), as
evidenced by that certain Note dated August 30, 1988 (the "Smith Note").
Cunningham unconditionally guaranteed the Smith Loan pursuant to the terms and
conditions of that certain Guaranty dated August 30, 1988
2
<PAGE>
(the "Cunningham Guaranty"). The Cunningham Guaranty is secured by the two
Indemnity Deeds of Trust dated August 30, 1988, recorded among the Land Records
of Baltimore City in Liber 1822, folio 280, and among the Land Records of
Baltimore County in Liber 7961, folio 117 (collectively, the "Cunningham
Indemnity Deeds of Trust"), covering certain real property as more particularly
described therein;
WHEREAS, on August 30, 1993 Provident, the Smiths and
Cunningham modified certain terms and conditions of the Smith Note pursuant to
the terms and conditions of that certain First Amendment to Note dated August
30, 1993 (the "Smith Note Amendment"). The Cunningham Indemnity Deeds of Trust
were amended pursuant to the Deeds of Appointment of Substitute Trustees and
First Amendment to Indemnity Deed of Trust dated August 30, 1993 (the
"Cunningham Indemnity Deeds of Trust Amendments") recorded among the Land
Records of Baltimore City in Liber 3901, folio 254 and among the Land Records of
Baltimore County in Liber 10059, folio 76. The Cunningham Indemnity Deeds of
Trust, as amended by the Cunningham Indemnity Deeds of Trust Amendments are
collectively referred to herein as the "Provident/Cunningham Indemnity Deeds of
Trust"). The lien of the Provident/Cunningham Indemnity Deeds of Trust is
referred to herein as the "Provident/Cunningham Lien."
WHEREAS, pursuant to the Subordination Agreement, dated August
30, 1993, between the Agent and Provident, the Agent subordinated the liens of
the Cunningham Deeds of Trust to the Provident/Cunningham Lien with respect to
principal however to Two Million Eight Hundred Thousand Dollars ($2,800,000.00)
in the aggregate outstanding at any time, which Subordination Agreement is
recorded among the Land Records of Baltimore City in Liber ________, folio
_______ and the Land Records of Baltimore County in Liber ________, folio
_______ (the "Cunningham Subordination Agreement");
WHEREAS, Provident made loans to Keyser in the original
principal amount of Six Hundred Fifty Thousand Dollars ($650,000.00), as
evidenced by a Promissory Note dated March 9, 1990 (the "$650,000 Keyser Note")
and in the original principal amount of Two Hundred Twenty Thousand Dollars
($220,000.00), as evidenced by a Promissory Note dated December 30, 1988 (the
"$220,000 Keyser Note"). The $650,000 Keyser Note and the $220,000 Keyser Note
are secured by a Deed of Trust and Security Agreement dated March 9, 1990 (the
"1990 Provident/Keyser Deed of Trust") recorded among the Land Records of
Baltimore City Maryland in Liber S.E.B. 2424, folio 288, granting Provident a
lien on certain property known as 2000-2008 W. 41st Street, Baltimore, Maryland,
as more particularly described therein (the "Keyser Property");
WHEREAS, on April 12, 1991 Provident and Keyser consolidated,
amended and restated the $650,000 Keyser Note and the $220,000 Keyser Note,
together with new monies advanced by Provident to Keyser, as evidenced by a
Promissory Note dated April 12, 1991 in the original principal amount of
$959,000.00 (the "$959,000 Keyser Note"). The $959,000 Keyser Note is secured by
the 1990 Provident/Keyser Deed of Trust, as amended by that certain Amended and
Restated Deed of Trust and Security Agreement dated April 12,
3
<PAGE>
1991 (the "Provident/Keyser Deed of Trust Amendment") recorded among the Land
Records of Baltimore City, Maryland in Liber S.E.B. 2842, folio 161. The 1990
Provident/Keyser Deed of Trust and the Provident/Keyser Deed of Trust Amendment
are collectively referred to herein as the "Provident/Keyser Deed of Trust");
WHEREAS, on April 14, 1995, Provident made a loan to Keyser in
the original principal amount of One Million Five Hundred Thousand Dollars
($1,500,000.00), as evidenced by a Promissory Note dated April 14, 1995 in the
original principal amount of One Million Five Hundred Thousand Dollars
($1,500,000.00) (the "$1,500,000 Keyser Note"). The $1,500,000 Keyser Note is
secured by a Deed of Trust and Security Agreement dated April 14, 1995 (the
"Second Provident/Keyser Deed of Trust") recorded among the Land Records of
Baltimore City, Maryland, in Liber S.E.B. No. 4842, folio 466, granting
Provident a lien of the Keyser Property;
WHEREAS, Provident has agreed with Keyser to consolidate,
amend and restate the $959,000 Keyser Note and $1,500,000 Keyser Note, as
evidenced by a Consolidated, Amended and Restated Deed of Trust Note dated
___________, 1996 in the original principal amount of One Million Nine Hundred
Twelve Thousand Five Hundred Dollars ($1,912,500.00) (the "$1,912,500 Keyser
Note"). The $1,912,500 Keyser Note is secured by a Consolidated, Amended and
Restated Deed of Trust, Assignment and Security Agreement on the Keyser Property
(the "New Provident/Keyser Deed of Trust"). The issuance of the $1,912,500
Keyser Note is conditioned upon the Provident/Keyser Lien (as hereinafter
defined) being superior to the lien of the Keyser Deed of Trust. The lien of the
New Provident/Keyser Deed of Trust is referred to herein as the
"Provident/Keyser Lien"; the Provident/Keyser Lien and the Provident/Cunningham
Lien are collectively referred to herein as the "Provident Liens";
WHEREAS, at the request of Provident, the Agent has agreed to
subordinate the lien of the Keyser Deed of Trust to the Keyser/Provident Lien
upon the terms, covenants and conditions contained herein;
WHEREAS, Cunningham, as Lessor, and CTI, as Lessee, have
entered into certain lease agreements more particularly described on Exhibit A
attached hereto (each a "Cunningham Lease Agreement"; collectively, the
"Cunningham Lease Agreements");
WHEREAS, Keyser, as Lessor, and CTI, as Lessee, have entered
into certain lease agreements more particularly described on Exhibit B attached
hereto (each a "Keyser Lease Agreement", collectively, the "Keyser Lease
Agreements"; the Cunningham Lease Agreements and the Keyser Lease Agreements,
collectively, the "Leases");
WHEREAS, pursuant to the terms of the Leases, CTI has agreed
to subordinate its rights as Lessee to any bona fide mortgage or deed of trust;
and
4
<PAGE>
WHEREAS, upon the request of CTI, Provident has agreed to
forebear taking certain actions with respect to any Cunningham Lease Agreement
and any Keyser Lease Agreement as the case may be, so long as Keyser and the
Smiths are not in default of any obligations under the Provident Liens;
NOW, THEREFORE, in consideration of the premises and covenants
herein contained, and intending to be legally bound hereby, the parties hereto
covenant and agree as follows:
1. The Agent hereby subordinates the lien of the Keyser Deed
of Trust to the Provident/Keyser Lien with respect to principal, however, to One
Million Nine Hundred Twelve Thousand Five Hundred Dollars ($1,912,500.00) in the
aggregate outstanding at any time. The New Provident/Keyser Deed of Trust may be
extended, renewed or refinanced at any time or from time to time, provided that
no such extension, renewal or refinancing may increase the amount set forth in
this Paragraph 1 or extend the Provident/Keyser Lien to cover additional
property not theretofore covered by such lien.
2. The Agent hereby confirms the subordination of the of the
lien of the Cunningham Deeds of Trust to the Provident/Cunningham Lien with
respect to principal, however, to Two Million Eight Hundred Thousand Dollars
($2,800,000.00) in the aggregate outstanding at any time. The
Provident/Cunningham Indemnity Deeds of Trust may be extended, renewed or
refinanced at any time or from time to time, provided that no such extension,
renewal or refinancing may increase the amount set forth in the Cunningham
Subordination Agreement or extend the Provident/Cunningham Lien to cover
additional property not theretofore covered by such lien.
3. If a default shall at any time occur under any of the
Provident Liens, Provident shall, prior to exercising any of its remedies with
respect to the Provident Liens, give notice specifying the nature of such
default to the Agent. The Agent shall have forty-five (45) days after receipt of
such written notice to cure such default, and Provident shall forbear from
exercising any of its rights, powers or remedies under any such Provident Liens
available at law or in equity during such time.
4. CTI hereby subordinates its interests in the Leases to the
Provident Liens and the Agent Liens, respectively and to all renewals,
extensions, supplements, amendments, modifications, consolidations and
replacements thereof or thereto, substitution therefor, and advances made
thereunder from time to time. The provisions of this Paragraph 3 shall be
self-operative, and no further instrument of subordination shall be required to
make the interests of Provident and the Agent, or any successor in interest of
Provident and of the Agent, superior to the interest of CTI under the Leases.
CTI, Cunningham and Keyser agree that the Leases shall not be amended, modified,
restated, substituted or extended without Provident's and the Agent's prior
consent.
5
<PAGE>
5. Provident agrees that, provided no default has occurred and
is continuing under any Cunningham Lease Agreement, if there shall be a
foreclosure of the Provident/Cunningham Lien covering the related Cunningham
Property, no foreclosure or any other proceeding shall divest, impair, modify or
abrogate or otherwise adversely affect any rights whatsoever of CTI as Lessee
under any Cunningham Lease Agreement, and, in particular, Provident shall not
make CTI a party defendant to such foreclosure, evict CTI, disturb CTI's
possession under any Cunningham Lease Agreement or terminate or disturb CTI's
leasehold estate or rights under such Cunningham Lease Agreement.
6. Provident agrees that, provided no default has occurred and
is continuing under any Keyser Lease Agreement, if there shall be a foreclosure
of the Provident/Keyser Lien covering the related Keyser Property, no
foreclosure or any other proceeding shall divest, impair, modify or abrogate or
otherwise adversely affect any rights whatsoever of CTI as Lessee under any
Keyser Lease Agreement and, in particular, Provident shall not make CTI a party
defendant to such foreclosure, evict CTI, disturb CTI's possession under any
Keyser Lease Agreement or terminate or disturb CTI's leasehold estate or rights
under such Keyser Lease Agreement.
7. If any time prior to the expiration of the term of any of
the Leases, Provident or the Agent, as the case may be, or any successor in
interest of Provident and the Agent or any Successor Landlord (defined below)
comes into possession of any Cunningham Property or any Keyser Property by
receiver or otherwise, CTI shall, at the election and upon demand of Provident
and the Agent or such successor or such Successor Landlord, attorn, from time to
time, to Provident and the Agent or such successor or such Successor Landlord,
upon the then executory terms and conditions of the Leases for the remainder of
the terms of the Leases, provided that Provident, the Agent, any successor in
interest of Provident and the Agent or any Successor Landlord, as the case may
be, or receiver caused to be appointed by any of the foregoing, shall then be
entitled to possession of any of the Properties. The provisions of this
Paragraph 7 shall inure to the benefit of Provident and the Agent, any successor
in interest of Provident and the Agent or any Successor Landlord, and shall be
self-operative upon any such demand, and no further instrument shall be required
to give effect to the above provisions. CTI, however, upon demand of Provident
and the Agent, any successor in interest of Provident and the Agent or any
Successor Landlord, shall execute, from time to time, instruments in
confirmation of the foregoing provisions of this Paragraph 7, satisfactory to
Provident and the Agent, any successor in interest of Provident and the Agent or
any Successor Landlord, acknowledging such attornment and setting forth the
terms and conditions of its tenancy. Nothing contained in this Paragraph 7 shall
be construed to impair any right otherwise exercisable by Provident and the
Agent, any successor in interest of Provident and the Agent or any Successor
Landlord.
"Successor Landlord" means: (a) a receiver appointed in any
action or proceeding to foreclose the Provident Liens or the Agent Liens or to
preserve any of the Cunningham Property or Keyser Property, (b) any person
acquiring (by foreclosure of the Provident Liens or the Agent Liens or
otherwise) title to all or any part of the Cunningham
6
<PAGE>
Properties or the Keyser Properties or the interest of Cunningham or Keyser,
respectively, under the Leases, and (c) any successor or assign of any person
named in item (a) or (b) above.
8. Notwithstanding anything to the contrary contained in this
Agreement, neither Provident nor the Agent nor anyone claiming by, through or
under Provident and the Agent, as the case may be, including, without
limitation, a purchaser at a sale subsequent to foreclosure or other Successor
Landlord, shall be:
(a) liable for any act or omission of any prior landlord
(including, without limitation, the then defaulting landlord), or
(b) subject to any defenses or offsets which CTI may have
against any prior landlord (including, without limitation, the then
defaulting landlord), or
(c) bound by any payment of rental which CTI might have paid
for more than the current month (except for any installment of taxes
which covers a longer period) to any prior landlord (including, without
limitation, the then defaulting landlord), or
(d) bound by any obligation to make any payment to CTI which
was incurred prior to the time Provident or the Agent, as the case may
be, succeeded to any prior landlord's interest or to make payments on
account of CTI, or
(e) bound by any obligation to perform any work or to make
improvements to any of the Properties, including without limitation the
demised premises covered by the respective Leases;
(f) bound by any amendment or modification of any of the
Leases made without their respective consents, or
(g) bound to return CTI's security deposit, if any, until such
deposit has come into its actual possession, or
(h) bound to CTI beyond the date on which it shall transfer
its interest in the Cunningham Property or the Keyser Property to a
third party.
9. As long as the Provident Liens and the Agent Liens shall
exist, CTI shall not seek to terminate any of the Leases by reason of any act or
omission of landlord under the Leases until CTI shall have given written notice
of such act or omission to Provident and the Agent at their addresses set forth
herein, or at such other address as Provident or the Agent shall furnish to CTI,
and, if Provident or the Agent shall have notified CTI within ten (10) business
days following receipt of such notice of its intention to remedy such act or
omission, until a reasonable period of time shall have elapsed following
7
<PAGE>
the giving of such notice, during which period Provident or the Agent shall have
the right, but not the obligation, to remedy such act or omission (whether or
not the exercise of such right has commenced).
10. All notices, consents and other communications (a
"notice") hereunder shall be in writing and personally delivered or sent by
certified mail, return receipt requested, to the addresses of the parties
hereinabove set forth, and if to Agent, attention Stephen Mumblow, or to such
other persons and addresses as may be specified from time to time in writing. A
notice shall be deemed given on the date personally delivered or on the third
business day after being deposited with the United States Postal Service.
11. This Agreement may not be modified or terminated orally,
and constitutes the entire agreement between the parties with respect to the
subject matter hereof.
12. The covenants and agreements herein contained shall be
deemed to be covenants running with the Properties, and shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors, assigns and legal representatives.
13. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
[signature page follows]
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Subordination and Non-Disturbance Agreement on the day and year first above
written.
CUNNINGHAM COMMUNICATIONS, INC.
By: _______________________________
Name:
Title:
CHESAPEAKE TELEVISION, INC.
By: _______________________________
Name:
Title:
KEYSER INVESTMENT GROUP, INC.
By: _______________________________
Name:
Title:
PROVIDENT BANK OF MARYLAND
By: _______________________________
Name:
Title:
THE CHASE MANHATTAN BANK
By: _______________________________
Name:
Title:
9
<PAGE>
[Cunningham]
STATE OF MARYLAND )
) ss.:
COUNTY OF BALTIMORE )
On this ___ day of December, 1996, before me, the undersigned,
a Notary Public in and for the State of Maryland, duly commissioned and sworn,
personally appeared ____________________________, to me known who, being by me
duly sworn, did depose and say that he is the ____________________ of Cunningham
Communications, Inc., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto under authority of the
board of directors of said bank.
WITNESS my hand and seal hereto affixed the day and year first
above written.
-----------------------------
NOTARY PUBLIC in and for
the State of Maryland.
My Commission expires:
<PAGE>
[CTI]
STATE OF MARYLAND )
) ss.:
COUNTY OF BALTIMORE )
On this ___ day of December, 1996, before me, the undersigned,
a Notary Public in and for the State of Maryland, duly commissioned and sworn,
personally appeared ____________________________, to me known who, being by me
duly sworn, did depose and say that he is the ____________________ of Chesapeake
Television, Inc., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto under authority of the board of
directors of said bank.
WITNESS my hand and seal hereto affixed the day and year first
above written.
-----------------------------
NOTARY PUBLIC in and for
the State of Maryland.
My Commission expires:
<PAGE>
[Keyser]
STATE OF MARYLAND )
) ss.:
COUNTY OF BALTIMORE )
On this ___ day of December, 1996, before me, the undersigned,
a Notary Public in and for the State of Maryland, duly commissioned and sworn,
personally appeared ____________________________, to me known who, being by me
duly sworn, did depose and say that he is the ____________________ of Keyser
Investment Group, Inc., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto under authority of the
board of directors of said bank.
WITNESS my hand and seal hereto affixed the day and year first
above written.
-----------------------------
NOTARY PUBLIC in and for
the State of Maryland.
My Commission expires:
<PAGE>
[Provident]
STATE OF MARYLAND )
) ss.:
COUNTY OF BALTIMORE )
On this ___ day of December, 1996, before me, the undersigned,
a Notary Public in and for the State of Maryland, duly commissioned and sworn,
personally appeared ____________________________, to me known who, being by me
duly sworn, did depose and say that he is the ____________________ of Provident
Bank of Maryland, the bank described in and which executed the foregoing
instrument; and that he signed his name thereto under authority of the board of
directors of said bank.
WITNESS my hand and seal hereto affixed the day and year first
above written.
-----------------------------
NOTARY PUBLIC in and for
the State of Maryland.
My Commission expires:
<PAGE>
[Agent]
STATE OF NEW YORK )
ss:
COUNTY OF NEW YORK )
On this ___ day of December, 1996, before me, the undersigned,
a Notary Public in and for the State of New York, duly commissioned and sworn,
personally appeared ____________________________, to me known who, being by me
duly sworn, did depose and say that he is the ____________________ of The Chase
Manhattan Bank, a New York banking corporation (as successor by merger to The
Chase Manhattan Bank, National Association), the bank described in and which
executed the foregoing instrument; and that he signed his name thereto under
authority of the board of directors of said bank.
WITNESS my hand and seal hereto affixed the day and year first
above written.
-----------------------------
NOTARY PUBLIC
<PAGE>
SCHEDULE I
The Cunningham Property
<PAGE>
SCHEDULE II
The Keyser Property
<PAGE>
EXHIBIT A
Cunningham and CTI Lease Agreements
1. Lease Agreement, dated April 1, 1992, by and between Cunningham
Communications, Inc. ("Cunningham") and Chesapeake Television, Inc.
("CTI") for two transmission dishes on the Baltimore tower located at
3900 Hooper Avenue, Baltimore, Maryland, more particularly described on
Exhibit A-1.
2. Lease Agreement, dated June 1, 1991, by and between Cunningham and CTI
for two receivers on the Baltimore tower located at 3900 Hooper Avenue,
Baltimore, Maryland, more particularly described on Exhibit A-1.
3. Lease Agreement, dated March 16, 1988, by and between Cunningham and
CTI for space on the back-up Baltimore tower located at 1200 Rolling
Road, Baltimore, Maryland, more particularly described on Exhibit A-2.
4. Lease Agreement, dated April 2, 1987, by and between Cunningham and CTI
for space on primary Baltimore tower located at 3900 Hooper Avenue,
Baltimore, Maryland, more particularly described on Exhibit A-1.
5. Lease made June 1, 1991 by and between Cunningham and CTI for office
space located at 3500 Parkdale Avenue, Baltimore, Maryland, more
particularly described on Exhibit A-3.
<PAGE>
EXHIBIT B
Keyser and CTI Lease Agreements
1. Lease, dated January 1, 1991, between Keyser Investment Group, Inc.
("Keyser") and Chesapeake Television, Inc. ("CTI") for office space at
2000 W. 41st Street, Baltimore, Maryland, more particularly described
on Exhibit B-1.
2. Lease, dated June 6, 1991, between Keyser and CTI for a parking lot at
2010 W. 41st Street, Baltimore, Maryland, more particularly described
on Exhibit B-2.
[Conformed Copy]
AMENDMENT NO. 4
AMENDMENT NO. 4 dated as of February 20, 1997, between:
SINCLAIR BROADCAST GROUP, INC., a corporation duly organized
and validly existing under the laws of the State of Maryland (the
"Borrower");
each of the Subsidiaries of the Borrower identified under the
caption "SUBSIDIARY GUARANTORS" on the signature pages hereto
(individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors" and, together with the Borrower, the
"Obligors");
each of the lenders that is a signatory hereto
(individually, a "Lender" and, collectively, the "Lenders");
and
THE CHASE MANHATTAN BANK (as successor by merger to The Chase
Manhattan Bank (National Association)), a New York state banking
corporation, as agent for the Lenders (in such capacity, together with
its successors in such capacity, the "Agent").
The Borrower, the Subsidiary Guarantors, the Lenders and the
Agent are parties to a Second Amended and Restated Credit Agreement dated as of
May 31, 1996 (as heretofore modified and supplemented and in effect on the date
hereof, the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for extensions of credit (by the making of loans and the issuance of
letters of credit) to be made by said Lenders to the Borrower in an aggregate
principal or face amount not exceeding $1,200,000,000. The Borrower, the
Subsidiary Guarantors, the Lenders and the Agent wish to amend the Credit
Agreement in certain respects, and accordingly, the parties hereto hereby agree
as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 4, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the
conditions precedent specified in Section 5 below, but effective as of the date
hereof, the Credit Agreement shall be amended as follows:
Amendment No. 4
<PAGE>
- 2 -
A. References in the Credit Agreement to "this Agreement" (and
indirect references such as "hereunder", "hereby", "herein" and "hereof") shall
be deemed to be references to the Credit Agreement as amended hereby.
B. Section 1.01 of the Credit Agreement is hereby amended by
adding the following new definitions (to the extent not already included in said
Section 1.01) and inserting the same in the appropriate alphabetical locations
and amending in their entirety the following definitions (to the extent already
included in said Section 1.01), as follows:
"'Common Participation Interests' shall mean the common
equity ownership interests in the Trust."
"'Designated Company' shall mean KDSM, but only on and after
the date of the consummation of the PPI Transaction and only for so
long as KDSM owns no Property other than the Common Participation
Interests, the Preferred Stock, the capital stock of KDSM Licensee,
Property directly related to the operation of KDSM-TV, Indebtedness of
the Borrower permitted by Section 9.07(h) hereof and the profits and
proceeds generated by the aforementioned Property."
"'KDSM' shall mean KDSM, Inc., a Maryland corporation."
"'KDSM Licensee' shall mean KDSM Licensee, Inc., a Delaware
corporation that owns no Property other than the Broadcasting Licenses
relating to KDSM-TV."
"'KDSM Senior Debentures' shall mean Indebtedness of the
Designated Company incurred in connection with the PPI Transaction and
evidenced by senior debentures in an aggregate principal amount not
exceeding the PPI Transaction Amount, provided that
(i) such debentures shall bear interest at a
rate not exceeding 15% per annum,
(ii) such debentures shall mature no earlier
than the date falling twelve years after the date of issuance
thereof,
(iii) such debentures shall provide for
quarterly interest payments, but shall allow the Designated
Company, at its option, upon the deferral by the Borrower of
dividend payments on the Preferred Stock, to defer the payment
of such interest for up to three consecutive quarterly periods
(and shall allow the Designated Company, at its option,
whether or not
Amendment No. 4
<PAGE>
- 3 -
the Borrower defers dividend payments of the Preferred Stock,
to defer payment of such interest for one quarterly period),
so long as (x) such interest is paid in full at least once in
each period of four consecutive fiscal quarters, (y) such
interest is compounded during the periods for which the
payment thereof is deferred and (z) (except as expressly
provided above in this clause (iii)) such dividends payments
have been deferred by the Borrower for the same fiscal
quarterly periods,
(iv) neither the Borrower nor any of its
Subsidiaries may be required to repurchase or redeem or
provide collateral security for or make sinking fund payments
with respect to such debentures at any time or under any
circumstances prior to the maturity thereof,
(v) such debentures shall not be convertible
or exchangeable into Indebtedness of the Borrower or any of
its Subsidiaries (provided that this clause (v) shall not be
deemed to prohibit any Guarantee referred to in the following
clause (vi)),
(vi) the Borrower shall not be obligated to
Guarantee such debentures except on a junior subordinated
basis as provided in the PPI Offering Materials, and
(vii) such debentures shall not be Guaranteed
by any Subsidiary of the Borrower, and
(viii) the other terms and conditions of which
shall be substantially as set forth in the PPI Offering
Materials or as otherwise expressly agreed to by the Majority
Lenders."
"'KDSM-TV' shall mean KDSM-TV, a television broadcasting
station licensed to Des Moines, Iowa, and serving the Des Moines, Iowa
area."
"'PPI Offering Materials' shall mean the draft Offering
Memorandum dated February 19, 1997 for the Preferred Securities of
Sinclair Capital, provided, that (without limitation of any restriction
contained herein limiting any such redemption) the final version of
such PPI Offering Materials may (a) permit the Borrower to pay in
connection with an optional redemption by the Borrower of the Preferred
Stock with proceeds of an Equity Public Offering (and permit payments
in connection with corresponding redemptions by the Designated Company
of the KDSM Debentures and by the Trust
Amendment No. 4
<PAGE>
- 4 -
of the Preferred Participation Interests), a premium not exceeding 15%
of the liquidation preference or face value (as the case may be) of the
Preferred Stock (and of the KDSM Debentures and Preferred Participation
Interests) so redeemed and (b) permit the Borrower to pay in connection
with any other optional redemption of the Preferred Stock (and permit
payments in connection with corresponding optional redemptions by the
Designated Company of the KDSM Debentures and by the Trust of the
Preferred Participation Interests), a premium not exceeding 7.5% of the
liquidation preference or face value (as the case may be) of the
Preferred Stock (and of the KDSM Debentures or Preferred Participation
Interests) so redeemed."
"'PPI Transaction' shall mean the substantially simultaneous
consummation of the following transactions: (a) the issuance by the
Trust of Preferred Participation Interests to Persons that are not
Affiliates in exchange for cash in an aggregate amount not exceeding
$300,000,000, (b) the issuance by the Trust of Common Participation
Interests to the Designated Company in exchange for cash in an
aggregate amount not exceeding $9,500,000, (c) the transfer of cash in
an amount equal to the PPI Transaction Amount by the Trust to the
Designated Company in exchange for the KDSM Senior Debentures, (d) the
transfer of cash in an amount equal to the PPI Transaction Amount by
the Designated Company to the Borrower in exchange for the Preferred
Stock, (e) the Guarantee by the Borrower of payments by the Trust in
respect of the Preferred Participation Interests as permitted by
Section 9.08(j) hereof and (f) the other transactions contemplated by
the PPI Offering Materials to be consummated substantially
simultaneously with the transactions referred to in the foregoing
clauses (a) through (e), all substantially as set forth in the PPI
Offering Materials or as otherwise expressly agreed to by the Majority
Lenders."
"'PPI Transaction Amount' shall mean the amount of cash
received by the Trust for the issuance of the Preferred Participation
Interests and the Common Participation
Interests."
"'Preferred Stock' shall mean Preferred Stock issued by the
Borrower after the date hereof and on or before June 30, 1997 in
connection with the PPI Transaction
(i) that matures no earlier than the date
falling twelve years after the date of issuance
thereof,
Amendment No. 4
<PAGE>
- 5 -
(ii) having an aggregate liquidation
preference not exceeding the PPI Transaction Amount,
(iii) providing for a dividend for each share
thereof at a rate per annum not exceeding the lesser of (x) 1%
plus the rate of interest payable on the KDSM Senior
Debentures and (y) 15% of the liquidation preference of such
share,
(iv) providing for quarterly dividend payments,
but allowing the Borrower, at its option, to defer the payment
of such dividends from time to time for up to three
consecutive quarterly periods, so long as (x) such dividends
are paid in full at least once in each period of four
consecutive fiscal quarters and (y) such dividends are
compounded during the periods for which the payment thereof is
deferred,
(v) which neither the Borrower nor any of its
Subsidiaries may be required to repurchase or redeem or
provide collateral security for or make sinking fund payments
with respect to at any time or under any circumstances prior
to the maturity thereof, except that
(x) the Borrower may redeem the Preferred
Stock as permitted by Section 9.09(f) hereof, and
(y) the Borrower may be obligated to redeem
or repurchase the Preferred Stock in connection with
a "Change of Control" as defined in the PPI Offering
Materials if such obligation is subject to the
condition that either (A) all of the Loans and other
amounts owing hereunder have been paid or repaid in
full and all of the Commitments and Letters of Credit
have been terminated and all Interest Rate Protection
Agreements entered into between Borrower and any
Lender have been terminated or (B) the Lenders have
expressly agreed to such redemption or repurchase,
(vi) which is not convertible or exchangeable
into Indebtedness of the Borrower or any of its
Subsidiaries and
(vii) the other terms and conditions of which
are substantially as set forth in the PPI Offering Materials
or as otherwise expressly agreed to by the Majority Lenders."
Amendment No. 4
<PAGE>
- 6 -
"'Preferred Participation Interests' shall mean the preferred
equity ownership interests in the Trust."
"'Senior Subordinated Note Indentures' shall mean the 1995
Senior Subordinated Note Indenture, the 1993 Senior Subordinated Note
Indenture and, after the issuance of the Additional Senior Subordinated
Notes, the indenture under which the same are issued."
"'Senior Subordinated Notes' shall mean the 1993 Senior
Subordinated Notes, the 1995 Senior Subordinated Notes and, after the
issuance thereof, the Additional Senior Subordinated Notes."
"'Trust' shall mean a grantor trust that (a) is created by the
Designated Company after the date of this Agreement in connection with
the PPI Transaction and (b) owns no Property other than the KDSM Senior
Debentures and the proceeds thereof."
"'Unrestricted Companies' shall mean the Designated Company,
the Trust and, if and for so long as KDSM is the Designated Company,
KDSM Licensee."
C. The definition of "Converted Senior Subordinated
Notes" in Section 1.01 of the Credit Agreement is hereby deleted.
D. The proviso in the definition of "Indebtedness" in
Section 1.01 of the Credit Agreement is hereby amended to read as
follows:
"provided that in no event shall the term "Indebtedness" include (i)
Film Obligations of such Person, (ii) obligations of such Person under
any Program Services Agreement, (iii) the Preferred Stock, (iv)
obligations of such Person to make WSYX Option Extension Payments or
(v) the Guarantee by the Borrower of the KDSM Senior Debentures prior
to the effectiveness of such Guarantee; provided, further, that upon
the effectiveness of the Guarantee by the Borrower of the KDSM Senior
Debentures, such Guarantees shall constitute "Indebtedness" of the
Borrower for all purposes of this Agreement."
E. The definition of "In-Kind Preferred Stock" in Section 1.01
of the Credit Agreement is hereby deleted. In addition each reference to
"In-Kind Preferred Stock" in Sections 9.01(e), 9.09(b) and 9.26(b) of the Credit
Agreement is hereby deleted.
Amendment No. 4
<PAGE>
- 7 -
F. The definition of Interest Expense shall be amended by
inserting after the last sentence thereof:
"In addition, Interest Expense for any period shall be
reduced as provided in Section 1.02(e) hereof."
G. The last sentence of the definition of "Subsidiary" in
Section 1.01 of the Credit Agreement is hereby amended to read as follows:
"Notwithstanding anything contained herein to the contrary, (a) CRESAP
shall be deemed to be a Subsidiary of the Borrower or of a Subsidiary
of the Borrower for all purposes of this Agreement except that CRESAP
shall not be required to be a Subsidiary Guarantor or to grant a
security interest in any of its Property and (b) no Unrestricted
Company shall be deemed to be a Subsidiary of the Borrower or of a
Subsidiary of the Borrower for purposes of this Agreement."
H. Section 1.02 of the Credit Agreement is hereby amended by
inserting a new clause (e) therein reading as follows:
"(e) Except as otherwise expressly provided herein, all
financial statements and certificates and reports as to financial
matters required to be delivered to the Agent or the Lenders hereunder
shall be prepared, and all calculations made for purposes of
determining compliance with the terms hereof shall be made, as if the
Unrestricted Companies were carried as equity investments by the
Borrower or the relevant Subsidiary of the Borrower; provided that (i)
earnings and other increases in the value of Unrestricted Companies
shall not increase earnings of the Borrower and its Subsidiaries
whether or not received by the Borrower or one of its Subsidiaries and
(ii) losses and other decreases in the value of Unrestricted Companies
shall not decrease earnings of the Borrower and its Subsidiaries;
provided further that any amounts received by the Borrower or any of
its Subsidiaries from the Designated Company during any period shall be
deemed to reduce Interest Expense for such period."
I. Section 2.09(b)(i) of the Credit Agreement is hereby
amended to read as follows:
"(i) Within 90 days after any Equity Issuance by the Borrower
permitted hereunder (other than the issuance by the Borrower of the
Preferred Stock, the conversion of the Preferred Stock into the
Borrower's Class A Common Stock and any Equity Issuance made pursuant
to the Columbus Option Agreement), the Borrower shall prepay the Loans
(and/or
Amendment No. 4
<PAGE>
- 8 -
provide cover for Letter of Credit Liabilities as specified in clause
(f) below), and the Commitments shall be subject to automatic
reduction, in an aggregate amount equal to 80% of such portion of the
Net Available Proceeds thereof not applied as required by Section
9.26(c)(iii) hereof, such prepayment and reduction to be effected in
each case in the manner and to the extent specified in clause (e) of
this Section 2.09."
J. Section 9.01 of the Credit Agreement is hereby amended by
(i) replacing the period at the end of clause (k) thereof with "; and" and (ii)
inserting a new clause (l) therein reading as follows:
"(l) at the time it furnishes each set of financial statements
pursuant to clause (a) or (b) above, financial statements for the
Borrower, its Consolidated Subsidiaries and the Unrestricted Companies
having the same scope, detail and information, covering the same
periods of time, and accompanied by a corresponding certificate of a
senior financial officer of the Borrower or opinion of independent
certified public accountants of recognized national standing, as the
case may be, as said financial statements delivered pursuant to said
clause (a) or (b), as though each reference in said clause (a) or (b)
to "the Borrower and its Consolidated Subsidiaries" were a reference to
"the Borrower, its Consolidated Subsidiaries and the Unrestricted
Companies".
K. Section 9.05(b) of the Credit Agreement is hereby amended
to read as follows:
"(b) The Borrower will not, and will not permit any of its
Subsidiaries to, acquire any business or Property from, or capital
stock of, or be a party to any acquisition of, any Person, or acquire
any option to make any such acquisition, except for purchases of
inventory, programming rights and other Property to be sold or used in
the ordinary course of business, Investments permitted under Section
9.08 hereof, Dividend Payments permitted under Section 9.09(e) and (f)
hereof, Capital Expenditures permitted under Section 9.12 hereof and
the River City Non-License Acquisition."
L. Section 9.07(h) of the Credit Agreement is hereby amended
to read as follows:
"(h) Indebtedness of the Borrower owing to the
Designated Company that is subordinated on terms
satisfactory to the Majority Lenders to the obligations of
Amendment No. 4
<PAGE>
- 9 -
the Borrower hereunder, under the Notes and under any
Interest Rate Protection Agreements to which the Borrower
and any Lender are parties."
M. Section 9.08 of the Credit Agreement is hereby amended by
(i) relettering clause (j) thereof to be clause (o) and (ii) inserting new
clauses (j), (k), (l), (m) and (n) therein and a new sentence after the lettered
clauses thereof reading as follows:
"(j) a Guarantee by the Borrower, subordinated on terms set
forth in the PPI Offering Materials (or as otherwise expressly agreed
to by the Majority Lenders) to the obligations of the Borrower
hereunder, under the Notes and under any Interest Rate Protection
Agreements to which the Borrower and any Lender are parties, of the
payment by the Trust of (i) distributions on the Preferred
Participation Interests (but not the Common Participation Interests)
that have been theretofore properly declared by the Trust in accordance
with the terms of the trust agreement (the "Trust Agreement") pursuant
to which the Trust is created as such agreement is in effect on the
date of issuance of the Preferred Participation Interests (the "Issue
Date"), (ii) the redemption price payable with respect to the Preferred
Participation Interests called for redemption by the Trust out of funds
legally available therefor in accordance with the terms of the Trust
Agreement as in effect on the Issue Date and (iii) in the case of a
voluntary or involuntary dissolution, liquidation or winding-up of the
Trust, the lesser of (x) the aggregate liquidation value of the
Preferred Participation Interests plus accrued and unpaid dividends
thereon and (y) the fair market value of the assets of the Trust
available for distribution to the holders of the Preferred
Participation Interests upon liquidation of the Trust, except that no
such Guarantee shall be permitted unless the Trust Agreement provides
that distributions on the Preferred Participation Interests are not
properly declarable, and funds are not legally available for redemption
of the Preferred Participation Interests, unless the Trust has cash
sufficient to pay such distributions or make such redemption, as the
case may be;
"(k) a Guarantee by the Borrower, subordinated on terms set
forth in the PPI Offering Materials (or as otherwise expressly agreed
to by the Majority Lenders) to the obligations of the Borrower
hereunder, under the Notes and under any Interest Rate Protection
Agreements to which the Borrower and any Lender are parties, of the
KDSM Senior Debentures as described in the PPI Offering Materials,
Amendment No. 4
<PAGE>
- 10 -
except that no such Guarantee shall become effective unless and until
the Trust is dissolved by reason of a Tax Event (as defined in the PPI
Offering Materials);
"(l) a cash contribution by the Borrower to the capital of the
Designated Company in an aggregate amount not exceeding the lesser of
(i) $9,500,000 and (ii) 3% of the PPI Transaction Amount, which cash
contribution is made in connection with the consummation of the PPI
Transaction and used by the Designated Company solely to purchase
Common Participation Interests;
"(m) loans or capital contributions made by the Borrower to
the Designated Company after the date of the consummation of the PPI
Transaction in an amount up to but not exceeding $3,000,000 in the
aggregate at any one time outstanding; and
"(n) Investments by the Borrower and its Subsidiaries in
capital stock of the Designated Company to the extent outstanding on
the date of the consummation of the PPI Transaction (after giving
effect thereto), including, without limitation, any such capital stock
resulting from the conversion or exchange into such capital stock of
Indebtedness owing by the Designated Company to the Borrower or any of
its Subsidiaries.
"Notwithstanding anything contained herein to the contrary, the
Borrower will not, and will not permit any of its Subsidiaries to, make
any Investment in an Unrestricted Company other than the Investments
referred to in clauses (j) through (n) of this Section 9.08."
N. Section 9.09 of the Credit Agreement is hereby amended by
(i) replacing the period at the end of clause (e) thereof with "; and" and (ii)
restating clause (c) thereof and inserting a new clause (f) therein and a new
sentence after the lettered clauses thereof reading as follows:
"(c) [Intentionally omitted];"
* * *
"(f) the Borrower may apply the portion of the Net Available
Proceeds of any Equity Issuances not theretofore applied as required by
Section 9.26(c)(iii) hereof to redeem Preferred Stock for an aggregate
redemption price (including premium) not exceeding $100,000,000 in
connection with an optional redemption by the Designated Company of
KDSM Senior Debentures, so long as substantially simultaneously with
Amendment No. 4
<PAGE>
- 11 -
such redemption (i) all of the proceeds of such redemption shall be
used by the Designated Company to repay the KDSM Senior Debentures and
(ii) all of the proceeds of the repayment of the KDSM Senior Debentures
shall be used by the Trust to redeem Preferred Participation Interests
having an aggregate liquidation preference equal to the amount of such
proceeds.
"Notwithstanding anything herein to the contrary, the Borrower will
not, and will not permit any of its Subsidiaries to, purchase or redeem
any of the Preferred Stock except as expressly permitted by clause (f)
of this Section 9.09."
O. Section 9.20 of the Credit Agreement is hereby amended by
(i) replacing "and (ii)" therein with ", (ii)" and (ii) inserting the following
clauses before the period at the end thereof:
", (iii) the Borrower and KDSM may enter into and perform management
agreements, cost sharing agreements and tax sharing agreements having
terms satisfactory to the Majority Lenders and (iv) the Borrower may
pay transaction expenses in connection with the PPI Transaction".
P. Section 9.26(c) of the Credit Agreement is hereby amended
to read as follows:
"(c) make any other Equity Issuance so long as, in the case of this
clause (c) only, (i) such Equity Issuance is an Equity Public Offering,
(ii) after giving effect thereto, no Default shall have occurred and be
continuing and (iii) the Net Available Proceeds thereof shall be
applied within 90 days after receipt by the Borrower thereof to finance
(w) the purchase by the Borrower of the Seller Stock and transaction
expenses in connection therewith, (x) the consummation of any
Acquisition (other than the River City Non-License Acquisition) and
transaction expenses in connection with such Acquisition, (y) the
redemption of the Preferred Stock as permitted by Section 9.09(f)
hereof or (z) any combination of the foregoing clauses (w), (x) and
(y), provided that 80% of any portion of such Net Available Proceeds
not so applied shall be applied to the prepayment of Loans as provided
in Section 2.09(b)(i) hereof."
Q. Section 9 of the Credit Agreement is hereby amended by
inserting a new Section 9.33 therein reading as follows:
"Section 9.33 No Guarantee of KDSM Senior Debentures.
The Borrower will not, except as expressly permitted by
Amendment No. 4
<PAGE>
- 12 -
Section 9.08(k) hereof, nor will it permit any of its Subsidiaries to,
Guarantee all or any portion of the KDSM Senior Debentures. Without
limiting the generality of the foregoing, the Borrower will not, nor
will it permit any of its Subsidiaries or any of the Unrestricted
Companies to, take any action (including, without limitation, causing
the Trust to be dissolved) the effect of which would be to cause the
Guarantee referred to in Section 9.08(k) to become effective."
R. Section 10.01 of the Credit Agreement is hereby amended by
(i) deleting "or" at the end of clause (s) thereof, (ii) inserting "or" at the
end of clause (t) thereof and (iii) restating clause (p) thereof and inserting a
new clause (u) therein reading as follows:
"(p) the Borrower shall deliver any Change of Control Purchase
Notice under and as defined in any Senior Subordinated Note Indenture,
the Designated Company shall deliver any similar notice under the
indenture pursuant to which the KDSM Senior Debentures are issued, or
any event or circumstance shall occur that results in a change of
ownership or control over the board of directors of the Borrower and
that would permit the holders of the KDSM Senior Debentures (or any of
them) or any agent or trustee acting on their behalf to exercise
remedies in respect thereof; or"
* * *
"(u) the Preferred Participation Interests shall not
be redeemed by the Trust on or prior to the stated maturity
date thereof;"
Section 3. Authorization to Release Liens. Each of the Lenders
hereby authorizes the Agent (a) to release KDSM and KDSM Licensee from their
respective guarantee obligations under the Credit Agreement and (b) to release
from the Lien of the Security Agreement the Property owned by KDSM and KDSM
Licensee.
Section 4. Representations and Warranties. The Borrower
represents and warrants to the Lenders that the representations and warranties
set forth in Section 8 of the Credit Agreement, and by each Credit Party and
Carolyn C. Smith in each of the other Basic Documents to which such Person is a
party, are true and complete on the date hereof as if made on and as of the date
hereof with the same force and effect as if made on and as of such date (or, if
any such representation and warranty is expressly stated to have been made as of
a specific
Amendment No. 4
<PAGE>
- 13 -
date, as of such specific date) and as if each reference in said Section 8 to
"this Agreement" and each reference to the "Credit Agreement" in the other Basic
Documents included reference to this Amendment No. 4.
Section 5. Conditions Precedent. The amendments to the Credit
Agreement set forth in Section 2 hereof and the authorization set forth in
Section 3 hereof shall become effective, as of the date hereof, the satisfaction
of the following conditions precedent:
A. This Amendment No. 4 shall have been executed and
delivered by the Borrower, the Subsidiary Guarantors, each
of the Lenders and the Agent;
B. The Agent shall have received opinions of Thomas &
Libowitz, P.A. and of Wilmer, Cutler & Pickering, counsel to the
Obligors, satisfactory in form and substance, to the Agent as to the
characterization for purposes of the Senior Subordinated Note
Indentures of the Borrower's obligations in connection with the PPI
Transaction (and each Obligor hereby instructs such counsel to deliver
such opinion to the Lenders and the Agent); and
C. The Agent shall have received letters from Thomas &
Libowitz, P.A. and from Wilmer, Cutler & Pickering permitting the Agent
and the Lenders to rely on any opinions rendered by them in connection
with the PPI Transaction.
Section 6. Agreement of KDSM. By its signature below, KDSM
agrees not to take any action (including, without limitation, causing the Trust
to be dissolved) the effect of which would be to require the Borrower or any of
its Subsidiaries to Guarantee the KDSM Senior Debentures.
Section 7. Miscellaneous. Except as herein provided, the
Credit Agreement shall remain unchanged and in full force and effect. This
Amendment No. 4 may be executed in any number of counterparts, all of which
taken together shall constitute one and the same amendatory instrument and any
of the parties hereto may execute this Amendment No. 4 by signing any such
counterpart. This Amendment No. 4 shall be governed by, and construed in
accordance with, the law of the State of New York.
Amendment No. 4
<PAGE>
- 14 -
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 4 to be duly executed and delivered as of the day and year first
above written.
SINCLAIR BROADCAST GROUP, INC.
By /s/ David B. Amy
------------------------------
Title: Chief Financial Officer
Amendment No. 4
<PAGE>
- 15 -
SUBSIDIARY GUARANTORS
CHESAPEAKE TELEVISION, INC.
KDSM, INC.
KSMO, INC.
SINCLAIR COMMUNICATIONS, INC.
SINCLAIR RADIO OF ALBUQUERQUE, INC.
SINCLAIR RADIO OF BUFFALO, INC.
SINCLAIR RADIO OF GREENVILLE, INC.
SINCLAIR RADIO OF LOS ANGELES, INC.
SINCLAIR RADIO OF MEMPHIS, INC.
SINCLAIR RADIO OF NASHVILLE, INC.
SINCLAIR RADIO OF NEW ORLEANS, INC.
SINCLAIR RADIO OF ST. LOUIS, INC.
SINCLAIR RADIO OF
WILKES-BARRE,
INC.
SUPERIOR COMMUNICATIONS OF
OKLAHOMA, INC.
TUSCALOOSA BROADCASTING, INC.
WCGV, INC.
WDBB, INC.
WLFL, INC.
WPGH, INC.
WPGH LICENSEE, INC.
WSMH, INC.
WSTR, INC.
WSTR LICENSEE, INC.
WTTE, CHANNEL 28, INC.
WTTE, CHANNEL 28 LICENSEE, INC.
WTTO, INC.
WTVZ, INC.
WTVZ LICENSEE, INC.
WYZZ, INC.
By /s/ David B. Amy
-----------------
Title: Secretary
Amendment No. 4
<PAGE>
- 16 -
SUBSIDIARY GUARANTORS
CHESAPEAKE TELEVISION
LICENSEE, INC.
FSF TV, INC.
KABB LICENSEE, INC.
KDNL LICENSEE, INC.
KDSM LICENSEE, INC.
KSMO LICENSEE, INC.
SCI - INDIANA LICENSEE, INC.
SCI - SACRAMENTO LICENSEE, INC.
SINCLAIR RADIO OF ALBUQUERQUE
LICENSEE, INC.
SINCLAIR RADIO OF BUFFALO
LICENSEE, INC.
SINCLAIR RADIO OF GREENVILLE
LICENSEE, INC.
SINCLAIR RADIO OF LOS ANGELES
LICENSEE, INC.
SINCLAIR RADIO OF MEMPHIS
LICENSEE, INC.
SINCLAIR RADIO OF NASHVILLE
LICENSEE, INC.
SINCLAIR RADIO OF NEW ORLEANS
LICENSEE, INC.
SINCLAIR RADIO OF ST. LOUIS
LICENSEE, INC.
SINCLAIR RADIO OF WILKES-BARRE
LICENSEE, INC.
SUPERIOR COMMUNICATIONS GROUP, INC.
SUPERIOR COMMUNICATIONS OF
KENTUCKY, INC.
SUPERIOR KY LICENSE CORP.
SUPERIOR OK LICENSE CORP.
WCGV LICENSEE, INC.
WLFL LICENSEE, INC.
WLOS LICENSEE, INC.
WSMH LICENSEE, INC.
WTTO LICENSEE, INC.
WYZZ LICENSEE, INC.
By /s/ David D. Smith
-------------------
Title: President
Amendment No. 4
<PAGE>
- 17 -
AGENT
- ------
THE CHASE MANHATTAN BANK,
as Agent
By /s/ Tracey A. Navin
Title: Vice President
LENDERS
- --------
THE CHASE MANHATTAN BANK
By /s/ Tracey A. Navin
----------------------
Title: Vice President
ABN AMRO BANK N.V., NEW YORK BRANCH
By /s/ Ann K. Schwalbenberg
-------------------------
Title: Vice President
By /s/ David B. Martens
----------------------
Title: Vice President
ALLIED SIGNAL INC.
By /s/ Frank X. Whitley
-----------------------------
Title: Senior Vice President
Shenkman Capital Mgt.
as, Attorney-In-Fact
BANK OF AMERICA ILLINOIS
By /s/ Carl F. Salas
----------------------
Title: Vice President
BANK OF HAWAII
By /s/ Elizabeth O. MacLean
------------------------
Title: Vice President
Amendment No. 4
<PAGE>
- 18 -
BANK OF IRELAND GRAND CAYMAN
By /s/ Joan Mitchell
-----------------------
Title: Account Manager
THE BANK OF NEW YORK
By /s/ Joseph Matteo
----------------------
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By /s/ John P. Judge
----------------------
Title: Vice President
BANKERS TRUST COMPANY
By /s/ Patricia Hogan
----------------------
Title: Vice President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By /s/ Evan Kraus
---------------------------
Title: Associate Treasure
By /s/ Frederick K. Kammler
------------------------
Title: Vice President
BANQUE NATIONALE DE PARIS
By /s/ Mark Whitson
----------------------
Title: Vice President
By /s/ Pamela Lucash
---------------------------
Title: Assistant Treasurer
Amendment No. 4
<PAGE>
- 19 -
BANQUE PARIBAS
By /s/ Lynne S. Randall
----------------------
Title: Vice President
THE CANADA LIFE ASSURANCE COMPANY
By /s/ Brian J. Lynch
---------------------------
Title: Associate Treasurer
CERES FINANCE LTD.
By /s/ Derrie Boggess
-------------------
Title: Director
CIBC, INC.
By /s/ Lorain C. Granberg
------------------------------
Title: Director CIBC Wood
Gundy Securities Corp.
as Agent for CIBC Inc.
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
By /s/ Marcus Edward
----------------------
Title: Vice President
By /s/ Sean Mounier
----------------------------
Title: First Vice President
Amendment No. 4
<PAGE>
- 20 -
COOPERATIEVE CENTRALE RAIFFEISEN -
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND," NEW YORK BRANCH
By /s/ Douglas W. Zylstra
----------------------
Title: Vice President
By /s/ Michel de Konkoly Thege
------------------------------
Title: Deputy General Manager
CORESTATES BANK, N.A.
By /s/ Edward L. Kittrell
----------------------
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.
By /s/ Sieji Imai
----------------------
Title: Vice President
DRESDNER BANK AG NEW YORK &
GRAND CAYMAN BRANCHES
By /s/ Robert Grella
----------------------
Title: Vice President
By /s/ William E. Lambert
-------------------------------
Title: Assistant Vice President
FIRST HAWAIIAN BANK
By /s/ Donald C. Young
-------------------------------
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Lenny L. Mason
----------------------
Title: Vice President
Amendment No. 4
<PAGE>
- 21 -
THE FIRST NATIONAL BANK OF
MARYLAND
By /s/ W. Blake Hampson
----------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By /s/ Jim F. Redman
-----------------------------
Title: Senior Vice President
FLEET NATIONAL BANK
By /s/ Luyen Tran
-------------------------------
Title: Assistant Vice President
THE FUJI BANK, LTD., NEW YORK
BRANCH
By /s/ Teiji Teramoto
-------------------------------
Title: Vice President & Manager
GIROCREDIT BANK
By /s/ Richard F. Stone
----------------------------
Title: First Vice President
By /s/ Sharad Gupta
-----------------------------
Title: Senior Vice President
HIBERNIA NATIONAL BANK
By /s/ Troy J. Villafarra
----------------------
Title: Vice President
Amendment No. 4
<PAGE>
- 22 -
INDUSTRIAL BANK OF JAPAN
By /s/ Jeffrey Cole
-----------------------------
Title: Senior Vice President
KEYBANK NATIONAL ASSOCIATION
By /s/ Jason R. Weaver
-------------------------------
Title: Assistant Vice President
KEYPORT LIFE INSURANCE COMPANY
By: Chancellor LGT Senior Secured
Management, Inc. as Portfolio
Advisor
By /s/ Christopher Bondy
----------------------
Title: Vice President
KZH HOLDING CORPORATION
By /s/ Robert Goodwin
------------------------
Title: Authorized Agent
LTCB TRUST COMPANY
By /s/ John J. Sullivan
-------------------------------
Title: Executive Vice President
LEHMAN COMMERCIAL PAPER INC.
By /s/ Michele Swanson
----------------------------
Title: Authorized Signatory
Amendment No. 4
<PAGE>
- 23 -
MEDICAL LIABILITY MUTUAL INSURANCE
CO.
By: Chancellor LGT Senior Secured
Management, Inc.
as Investment Manager
By /s/ Christopher Bondy
----------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ John T. Kranefuss
-------------------------------
Title: Assistant Vice President
MERCANTILE BANK, NATIONAL
ASSOCIATION
By /s/ Ann C. Kelly
----------------------
Title: Vice President
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset
Management, L.P.,
as Investment Advisor
By /s/ Gilles Marchand
----------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By /s/ Gilles Marchand
----------------------------
Title: Authorized Signatory
Amendment No. 4
<PAGE>
- 24 -
MICHIGAN NATIONAL BANK
By /s/ Stephane Lubin
----------------------------
Title: Relationship Manager
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/ Genichiro Chiba
------------------------------
Title: Deputy General Manager
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Colleen McCloskey
---------------------
Title: Associate
NATIONSBANK, N.A.
By /s/ Roselyn Reid
----------------------
Title: Vice President
NEW YORK LIFE INSURANCE COMPANY
By /s/ Adam G. Clemens
--------------------------------
Title: Investment Vice President
THE NIPPON CREDIT BANK, LTD.
By /s/ Yoshihide Watanabe
-------------------------------
Title: Vice President & Manager
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ Richard A. Strait
----------------------
Title: Vice President
Amendment No. 4
<PAGE>
- 25 -
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (A UNIT OF CHASE
MANHATTAN BANK)
By /s/ Andrew D. Gordon
-------------------------
Title: Managing Director
PARIBAS CAPITAL FUNDING LLC
By /s/ M. Steven Alexander
----------------------
Title: Director
PNC BANK, NATIONAL ASSOCIATION
By /s/ Jeffrey E. Hauser
----------------------
Title: Vice President
PROTECTIVE LIFE INSURANCE COMPANY
By /s/ James Dondero
--------------------------
Title: Authorized Signator
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
By: Chancellor Senior Secured
Management, Inc.
as Portfolio Advisor
By /s/ Christopher Bondy
----------------------
Title: Vice President
THE ROYAL BANK OF SCOTLAND plc
By /s/ Grant F. Stoddart
-------------------------------
Title: Senior Vice President &
Manager
Amendment No. 4
<PAGE>
- 26 -
THE SAKURA BANK, LTD.
By /s/ Yoshikazu Nagura
----------------------
Title: Vice President
THE SANWA BANK LTD.
By /s/ Christopher Kambour
-------------------------------
Title: Assistant Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and
Research, as Investment
Advisor
By /s/ Scott H. Page
----------------------
Title: Vice President
SENIOR HIGH INCOME PORTFOLIO, INC.
By /s/ Gilles Marchand
----------------------------
Title: Authorized Sigantory
SOUTHERN PACIFIC THRIFT & LOAN
ASSOCIATION
By /s/ Charles D. Martorano
-----------------------------
Title: Senior Vice President
Amendment No. 4
<PAGE>
- 27 -
SUNTRUST BANK, CENTRAL FLORIDA,
N.A.
By /s/ Janet P. Sammons
----------------------
Title: Vice President
TORONTO DOMINION (NEW YORK), INC.
By /s/ Debbie A. Greene
----------------------
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By /s/ Christine P. Ball
----------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
---------------------------------
Title: Senior Vice President -
Portfolio Manager
Amendment No. 4
SINCLAIR BROADCAST GROUP, INC.
FIRST AMENDMENT
TO
INCENTIVE STOCK OPTION PLAN
THIS FIRST AMENDMENT TO INCENTIVE STOCK OPTION PLAN ("Amendment") is
hereby adopted on this 10th day of April, 1996 by the Board of Directors of
Sinclair Broadcast Group, Inc., a Maryland corporation (the "Corporation").
WHEREAS, the stockholders of the Corporation approved an Incentive
Stock Option Plan (the "Plan") on May 11, 1995 providing for the issuance by the
Incentive Stock Option Committee of the Board of Directors of options to
purchase up to 400,000 shares of the Corporation's Class A Common Stock; and
WHEREAS, the Plan provides that the Board of Directors may amend the
Plan; and
WHEREAS, by resolution date April 10th, 1996, the Incentive Stock
Option Committee of the Board of Directors recommended approval of the
Amendment; and
WHEREAS, the Board of Directors, pursuant to the Unanimous Consent of
Directors dated April 10th, 1996 have directed that this Amendment be adopted.
NOW, THEREFORE, pursuant to the foregoing recitals, the Plan is hereby
amended as follows:
1. Section 2 of the Plan is amended by adding the following
sentence to the end of that section:
"If the Company enters into an Asset Purchase Agreement ("Agreement")
with River City Broadcasting, L.P. ("River City") providing for the
purchase by the Company of substantially all of the assets of River
City, then, upon the first closing of the transactions contemplated in
the Agreement, the authority to determine which non-insider eligible
participants (meaning eligible participants who are not subject to the
provisions of either Sections 16(a) or 16(b) of the Securities Exchange
Act of 1934) may be granted options under the Plan will be vested in
Barry Baker."
<PAGE>
2. Section 7 of the Plan is deleted in its entirety and replaced
with the following:
"7. OTHER PROVISIONS.
(a) The options granted under this plan will vest and become
exercisable on the third anniversary of the grant date ("Vesting
Date").
(b) If the Optionee voluntarily terminates his employment with
the Company prior to the Vesting Date, all options held by the Optionee
will immediately terminate.
(c) If the Optionee is terminated from employment by the
Company for "cause," as defined in such Optionee's then effective
employment agreement, options held by the Optionee will immediately
terminate.
(d) If the Optionee's employment with the Company is
terminated by the Company without cause, or in the event the Optionee's
employment with the Company is terminated due to disability or death,
the vesting of the option will be accelerated as follows: (a) one-third
(1/3) if such termination occurs after the first anniversary (and
before the second anniversary) of the date of grant, and (b) two-thirds
(2/3) if such termination occurs after the second anniversary (and
before the third anniversary) of the date of grant, and the Optionee
may, within three (3) months thereafter, exercise that portion of the
option to the extent of such accelerated vesting; options not so
exercised will terminate upon the expiration of said three (3) month
period.
(e) If the Optionee dies while employed by the Company or
within three (3) months after termination of his employment by the
Company, then within six (6) months after the date of the Optionee's
death, subject to the provisions of Subsections 7(a) and 7(d) above,
the option may be exercised by his estate or by any person who has
acquired the Optionee's right to exercise the option by bequest or
inheritance to the extent the option was exercisable as of the date of
his death. Upon the expiration of said six (6) month period, all
unexercised options will terminate.
(f) Except as otherwise provided in Subsection 7(e) above, the
option and all rights granted hereunder may not be transferred by the
Optionee, and may not be assigned, pledged, or hypothecated in any way
and will not be subject to execution, attachment, or similar
2
<PAGE>
process. Upon any attempt by the Optionee to transfer the option, or to
assign, pledge, hypothecate, or otherwise dispose of such option or of
any rights granted hereunder, contrary to the provisions hereof, or
upon the levy or any attachment or similar process upon such option or
such rights, such option and such rights shall immediately become null
and void. The option will be exercisable, during the lifetime of the
Optionee, only by the Optionee."
2. The language used in any future grant of options under the
Plan shall be conformed to reflect the foregoing amendment.
3. No other provisions of the Plan shall be affected hereby, and
the remainder of the Plan shall remain in full force and effect.
3
SINCLAIR BROADCAST GROUP, INC.
SECOND AMENDMENT TO INCENTIVE STOCK OPTION PLAN
-----------------------------------------------
THIS SECOND AMENDMENT TO INCENTIVE STOCK OPTION PLAN ("Second Amendment")
is hereby adopted as of the 31 day of May, 1996 by the Compensation Committee
and the Incentive Stock Option Committee of the Board of Directors of Sinclair
Broadcast Group, Inc., a Maryland corporation (the "Corporation").
WHEREAS, the stockholders of the Corporation approved an Incentive Stock
Option Plan (the "Plan") on May 11, 1995 providing for the issuance by the
Incentive Stock Option Committee of Options to purchase up to four hundred
thousand (400,000) shares of the Corporation's Class A Common Stock; and
WHEREAS, the Plan provides that the Board of Directors may amend the Plan;
and
WHEREAS, the Board of Directors did so amend the Plan on April 10, 1996
(the "First Amendment"); and
WHEREAS, by Resolution dated May 31, 1996, the Incentive Stock Option
Committee of the Board of Directors recommended approval of this Second
Amendment; and
WHEREAS, the Board of Directors, pursuant to the Unanimous Consent of the
Directors dated May 31, 1996, have directed that this Second Amendment be
adopted.
NOW, THEREFORE, pursuant to the foregoing Recitals, the Plan is hereby
amended as follows:
<PAGE>
1. The final sentence of Section 2 of the Plan is deleted in its entirety
and replaced with the following:
"If and when Barry Baker becomes an officer of Sinclair
Communications, Inc., as contemplated under the Asset
Purchase Agreement with River City Broadcasting, L.P.
providing for the purchase by the Company of substantially
all of the assets of River City, the authority to determine
which non-insider eligible participants (meaning eligible
participants who are not subject to the provisions of
Section 16 of the Securities Exchange Act of 1934) may be
granted options under the Plan will be vested in Mr. Baker."
2. The following language shall be added to the end of Section (7) of the
Plan:
"If the Optionee voluntarily terminates his employment with
the Company subsequent to the Vesting Date, the Optionee
may, within three (3) months thereafter, subject to the
provisions of Subsection 7(a) above, exercise the Option to
the extent that the Option was exercisable as of the date of
termination of his employment; in such case, all unexercised
Options shall terminate, be forfeited, and shall lapse upon
the expiration of said three (3) month period."
3. Section 12 of the Amended Plan shall be deleted in its entirety and
replaced with the following:
"12. Option Agreement. The granting of an Option shall take
place and become effective on such date as the Incentive Stock
Option Committee so determines. The Company shall cause a written
Option Agreement substantially in the form of the Incentive Stock
Option Agreement, which is attached hereto and marked Exhibit 1
to be presented to the Optionee in a timely manner upon the grant
of such Options by the Incentive Stock Option Committee.
4. No other provisions of the Plan shall be affected hereby, and the
remainder of the Plan shall remain in full force and effect.
2
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
THIS INCENTIVE STOCK OPTION AGREEMENT (this "Agreement") is made this
____ day of _________, 1996, by and between Sinclair Broadcast Group, Inc. (the
"Company"), a Maryland corporation, and employee ________________________ an
employee of the Company or one of the Company's direct or indirect subsidiaries
(the "Optionee").
WHEREAS, the Board of Directors of the Company has adopted an Incentive
Stock Option Plan (the "Plan") administered by a committee of the Board of
Directors as provided in the Plan (the "Committee"); and
WHEREAS, by resolutions duly passed by both the Committee and the Board
of Directors, the plan has been twice amended with respect to the vesting
schedule of the options granted thereunder and other administrative matters; and
WHEREAS, the Company has entered into an Amended and Restated Asset
Purchase Agreement with River City Broadcasting, L.P. (the "APA"); and
WHEREAS, the Committee and the Board of Directors consider it desirable
and in the Company's best interests that the Optionee be given an opportunity to
purchase shares of the Company's Common Stock in furtherance of the Plan.
NOW, THEREFORE, in consideration of the premises, it is agreed as
follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee,
effective on the date of the first closing of the transactions contemplated in
the APA (the "Grant Date") and contingent upon the satisfaction of the
conditions contained in Paragraph 2 below, the right, privilege and option to
purchase amount ___ shares of the Class A Common Stock of the Company (the
"Stock"), at a purchase price equal to the average trading price per share of
the Stock as reported on the NASDAQ National Market on the Grant Date and in the
manner and subject to the conditions hereinafter provided. Said purchase price
is not less than One Hundred Percent (100%) of the fair market value of the
shares of Common Stock of the Company at the time this option is granted.
2. THE GRANT OF THE OPTION DESCRIBED IN THIS AGREEMENT IS EXPRESSLY
CONDITIONED ON THE OPTIONEE RETURNING TO THE COMPANY A FULLY EXECUTED EMPLOYMENT
AGREEMENT IN A FORM SATISFACTORY TO THE COMPANY NOT LATER THAN JUNE 30, 1996. IF
OPTIONEE FAILS TO RETURN SUCH EMPLOYMENT AGREEMENT AS SO PROVIDED, THIS
AGREEMENT SHALL BE NULL AND VOID.
<PAGE>
3. PERIOD OF EXERCISE OF OPTION.
(a) The option will be exercisable for a period of ten (10) years
from the Grant Date. The options granted hereunder may be exercised upon vesting
as set forth in the Plan, as amended.
(b) The options granted under this plan will vest and become
exercisable on the third anniversary of the Grant Date ("Vesting Date").
(c) If the Optionee voluntarily terminates his or her employment
with the Company prior to the Vesting Date, all options held by the Optionee
will immediately terminate. If the Optionee voluntarily terminates employment
with the Company, or any direct or indirect subsidiary thereof, subsequent to
the Vesting Date, the Optionee may, within three (3) months thereafter, subject
to the provisions of Subsection 3(b) above, exercise the Option to the extent
that the Option was exercisable as of the date of termination of his or her
employment; in such case, all unexercised Options shall terminate, be forfeited,
and shall lapse upon the expiration of said three (3) month period.
(d) If the Optionee is terminated from employment by the Company for
"cause," as defined in such Optionee's then effective employment agreement,
options held by the Optionee will immediately terminate.
(e) If the Optionee's employment with the Company is terminated by
the Company without cause, or in the event the Optionee's employment with the
Company is terminated due to disability or death, the vesting of the option will
be accelerated as follows: (a) one-third (1/3) if such termination occurs after
the first anniversary (and before the second anniversary) of the date of grant,
and (b) two-thirds (2/3) if such termination occurs after the second anniversary
(and before the third anniversary) of the date of grant, and the Optionee may,
within three (3) months thereafter, exercise that portion of the option to the
extent of such accelerated vesting; options not so exercised will terminate upon
the expiration of the said three (3) month period.
(f) If the Optionee dies while employed by the Company or within
three (3) months after termination of his or her employment by the Company, then
within six (6) months after the date of the Optionee's death, subject to the
provisions of Subsections 2(b) and 2(e) above, the option may be exercised by
his or her estate or by any person who has acquired the Optionee's right to
exercise the option by bequest or inheritance to the extent the option was
exercisable as of the date of his or her death. Upon the expiration of said six
(6) month period, all unexercised options will terminate.
- 2 -
<PAGE>
(g) Except as otherwise provided in Subsection 2(f) above, the
option and all rights granted hereunder may not be transferred by the Optionee,
and may not be assigned, pledged, or hypothecated in any way and will not be
subject to execution, attachment, or similar process. Upon any attempt by the
Optionee to transfer the option, or to assign, pledge, hypothecate, or otherwise
dispose of such option or of any rights granted hereunder, contrary to the
provisions hereof, or upon the levy or any attachment or similar process upon
such option or such rights, such option and such rights shall immediately become
null and void. The option will be exercisable, during the lifetime of the
Optionee, only by the Optionee.
4. METHOD OF EXERCISE. In order to exercise the option, the Optionee
must give written notice to the Secretary of the Company at the Company's
principal office in Maryland. Said notice shall be accompanied by full payment
for the shares being purchased, a written statement that the shares are
purchased for investment and not with a view to distribution. If the option is
exercised by the successor of the Optionee following his or her death, proof
shall also be submitted of the right of the successor to exercise the option.
The Company shall not be required to transfer or deliver any certificate or
certificates for shares purchased upon any such exercise of said option: (a)
until after compliance with all than applicable requirements of law; and (b)
prior to admission of such shares to listing on any stock exchange on which the
stock may then be listed. In no event shall the Company be required to issue
fractional shares to the Optionee.
5. LIMITATION UPON EXERCISE. The option is not transferable by the
Optionee otherwise than by will or the laws of descent and distribution and is
exercisable, during the lifetime of the Optionee, only by the Optionee.
6. LIMITATION UPON TRANSFER. Except as otherwise provided herein, the
option and all rights granted hereunder shall not be transferred by the
Optionee, and may not be assigned, pledged, or hypothecated in any way and shall
not be subject to execution, attachment or similar process. Upon any attempt to
transfer the option, or to assign, pledge, hypothecate or otherwise dispose of
such option or of any rights granted hereunder, contrary to the provisions
hereof, or upon the levy of any attachment or similar process upon such option
or such rights, such option and such rights shall immediately become null and
void.
7. STOCK ADJUSTMENT. In the event of any change in Common Stock of the
Company by reason of a stock split, stock dividend, recapitalization, exchange
of shares, or other transaction, the number of shares remaining subject to the
option and the option price per share shall be appropriately adjusted by the
Committee.
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<PAGE>
8. CORPORATION REORGANIZATION. If there shall be any capital
reorganization or consolidation or merger of the Company with another
corporation or corporations, or any sale of all or substantially all of the
Company's properties and assets to any other corporation or corporations, the
Company shall take such action as may be necessary to enable the Optionee to
receive upon any subsequent exercise of such option, in whole or in part, in
lieu of shares of Common Stock, securities or other assets as were issuable or
payable upon such reorganization, consolidation, merger or sale in respect of,
or in exchange for such shares of Common Stock.
9. RIGHTS OF STOCKHOLDER. Neither the Optionee, his or her legal
representative, nor other persons entitled to exercise the option shall be or
have any rights of a stockholder in the Company in respect of the shares
issuable upon exercise of the option granted hereunder, unless and until
certificates representing such shares shall have been delivered pursuant to the
terms hereof.
10. STOCK RESERVED. The Company shall at all times during the term of
this Agreement reserve and keep available such number of shares of its Common
Stock as will be sufficient to satisfy the terms of this Agreement and shall pay
any original issue taxes on the exercise of this option.
11. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of any successor or successors of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
SINCLAIR BROADCAST COMPANY, INC.
By: _____________________________________
Its: _____________________________________
_____________________________________
Optionee
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1996 LONG-TERM INCENTIVE PLAN
of
SINCLAIR BROADCAST GROUP, INC.
1. OBJECTIVES. This 1996 Long-Term Incentive Plan of Sinclair
Broadcast Group, Inc. (the "Plan") is adopted by Sinclair Broadcast Group, Inc.,
a Maryland corporation (the "Company"), to reward key individuals for making
major contributions to the success of the Company and its Subsidiaries (as
hereinafter defined). These objectives are to be accomplished by making Awards
(as hereinafter defined) under the Plan and thereby providing Participants (as
hereinafter defined) with a proprietary interest in the growth and performance
of the Company and its Subsidiaries.
2. DEFINITIONS. As used herein, the terms set forth below
shall have the following respective meanings:
"Authorized Officer" means the Chairman of the Board or the
Chief Executive Officer of the Company or a Subsidiary (or any other senior
officer of the Company or a Subsidiary to whom either of them shall delegate the
authority to execute any Award Agreement).
"Award" means the grant of any Option, SAR, Stock Award, Cash
Award or Performance Award, whether granted singly, in combination or in tandem,
to a Participant pursuant to such applicable terms, conditions and limitations
as the Committee may establish in order to fulfill the objectives of the Plan.
"Award Agreement" means a written agreement between the
Company and a Participant setting forth the terms, conditions and limitations
applicable to an Award.
"Board" means the Board of Directors of the Company.
"Cash Award" means an award denominated in cash.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Company" has the meaning specified in paragraph 1 hereof.
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<PAGE>
"Committee" means the Compensation Committee of the Board or
such ether committee of the Board as is designated by the Board to administer
the Plan.
"Common Stock" means the Class A Common Stock, par value $.01
per share, of the Company.
"Dividend Equivalents" means, with respect to shares of
Restricted Stock that are to be issued at the end of the Restriction Period, an
amount equal to all dividends and other distributions (or the economic
equivalent thereof) which are payable to stockholders of record during the
Restriction Period on a like number of shares of Common Stock.
"Effective Date" means the date upon which this Plan shall be
adopted and made effective in accordance with Section 17 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Fair Market Value" of a share of Common Stock means, as of a
particular date, (i) if shares of Common Stock are listed on a national
securities exchange, the mean between the highest and lowest sales price per
share of Common Stock on the consolidated transaction reporting system for the
principal national securities exchange on which shares of Common Stock are
listed on that date, or, if there shall have been no such sale so reported on
that date, on the last preceding date on which such a sale was so reported, (ii)
if shares of Common Stock are not so listed but are quoted on the NASDAQ
National Market, the mean between the highest and lowest sales price per share
of Common Stock reported by the NASDAQ National Market on that date, or, if
there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported or (iii) if the Common Stock
is not so listed or quoted, the mean between the closing bid and asked price on
that date, or, if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as reported by the
NASDAQ Stock Market, or, if not reported by the NASDAQ Stock Market, by the
National Quotation Bureau Incorporated.
"Incentive Option" means an Option that is intended to comply
with the requirements set forth in Section 422 of the Code.
"Nonqualified Stock Option" means an Option that is not an
Incentive Option.
"Option" means a right to purchase a specified number of
shares of Common Stock at a specified price.
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<PAGE>
"Participant" means an employee of or an individual otherwise
performing services for or on behalf of, the Company or any of its Subsidiaries,
and to whom an Award has been made under this Plan.
"Performance Award" means an award made pursuant to this Plan
to a Participant that is subject to the attainment of one or more Performance
Goals.
"Performance Goal" means a standard established by the
Committee to determine in whole or in part whether a Performance Award shall be
earned.
"Plan" has the meaning specified in Section 1 hereof.
"Restricted Stock" means any Common Stock that is restricted
or subject to forfeiture provisions.
"Restriction Period" means a period of time beginning as of
the date upon which an Award of Restricted Stock is made pursuant to this Plan
and ending as of the date upon which the Common Stock subject to such Award is
no longer restricted or subject to forfeiture provisions.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, or any successor rule.
"SAR" means a right to receive a payment, in cash or Common
Stock, equal to the excess of the Fair Market Value or other specified valuation
of a specified number of shares of Common Stock on the date the right is
exercised over a specified strike price (in each case, as determined by the
Committee).
"Stock Award" means an award in the form of shares of Common
Stock or units denominated in shares of Common Stock.
"Subsidiary" means (a) in the case of a corporation, any
corporation of which the Company directly or indirectly owns shares representing
more than 50% of the combined voting power of the shares of all classes or
series of capital stock of such corporation which have the right to vote
generally on matters submitted to a vote of the stockholders of such corporation
and (b) in the case of a partnership or other business entity not organized as a
corporation, any such business entity of which the Company directly or
indirectly owns more than 50% of the voting, capital or profits interests
(whether in the form of partnership interests, membership interests or
otherwise).
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<PAGE>
3. ELIGIBILITY. Individuals eligible for an Award under
this Plan are those whose performance, in the judgment of the Committee, can
have an effect on the success of the Company and its Subsidiaries.
4. COMMON STOCK AVAILABLE FOR AWARDS. Subject to the
provisions of Section 13 hereof, there shall be available for Awards under this
Plan granted wholly or partly in Common Stock (including rights or options which
may be exercised for or settled in Common Stock) an aggregate of 2,073,673
shares of Common Stock. The number of shares of Common Stock that are the
subject of Awards under this Plan that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of Common Stock or in a manner such
that all or some of the shares covered by an Award are not issued to a
Participant or are exchanged for Awards that do not involve Common Stock, shall
again immediately become available for Awards hereunder. The Committee may from
time to time adopt and observe such procedures concerning the counting of shares
against the Plan maximum as it may deem appropriate. The Board and the
appropriate officers of the Company shall from time to time take whatever
actions are necessary to file any required documents with governmental
authorities, stock exchanges and transaction reporting systems to ensure that
shares of Common Stock are available for issuance pursuant to Awards.
5. ADMINISTRATION.
(a) This Plan shall be administered by the Committee. The
Committee shall consist of at least two members of the Board who meet the
requirements of the definition of "disinterested person" in Rule 16b-
3(d)(3) promulgated under the Exchange Act, or any successor rule.
(b) Subject to the provisions hereof, the Committee shall
have full and exclusive power and authority to administer this Plan and to
take all actions which are specifically contemplated hereby or are
necessary or appropriate in connection with the administration hereof The
Committee shall also have full and exclusive power to interpret this Plan
and to adopt such rules, regulations and guidelines for carrying out this
Plan as it may deem necessary or proper, all of which powers shall be
exercised in the best interests of the Company and in keeping with the
objectives of this Plan. The Committee may, in its discretion, provide for
the extension of the exercisability of an Award, accelerate the vesting or
exercisability of an Award, eliminate or make less restrictive any
restrictions contained in an Award, waive any restriction or other
provision of this Plan or an Award or otherwise amend or modify an Award in
any manner that is either (i) not adverse to the Participant to whom such
Award was granted or (ii) consented to by such Participant. The Committee
may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or in any Award in the manner and to the extent
the
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<PAGE>
Committee deems necessary or desirable to carry it into effect. Any
decision of the Committee in the interpretation and administration of this
Plan shall lie within its sole and absolute discretion and shall be final
conclusive and binding on all parties concerned.
(c) No member of the Committee or officer of the Company to
whom the Committee has delegated authority in accordance with the
provisions of Section 6 of this Plan shall be liable for anything done or
omitted to be done by him or her, by any member of the Committee or by any
officer of the Company in connection with the performance of any duties
under this Plan, except for his or her own willful misconduct or as
expressly provided by statute.
6. DELEGATION OF AUTHORITY. The Committee may delegate its
duties under this Plan pursuant to such conditions or limitations as the
Committee may establish, except that the Committee may not delegate to any
person the authority to grant Awards to, or take other action with respect to,
Participants who are (a) subject to Section 16 of the Exchange Act or (b) not
employees of the Company or any of its Subsidiaries.
7. AWARDS.
(a) The Committee shall determine the type or types of
Awards to be made under this Plan and shall designate from time to time the
individuals who are to be the recipients of such Awards. Each Award shall
be embodied in an Award Agreement, which shall contain such terms,
conditions and limitations as shall be determined by the Committee in its
sole discretion and shall be signed by the Participant to whom the Award is
made and by an Authorized Officer (other than the Participant) for and on
behalf of the Company. Awards may consist of those listed in this Section
7(a) and may be granted singly, in combination or in tandem. Awards may
also be made in combination or in tandem with, in replacement of, or as
alternatives to, grants or rights under this Plan or any other plan of the
Company or any of its Subsidiaries, including the plan of any acquired
entity. An Award may provide for the grant or issuance of additional,
replacement or alternative Awards upon the occurrence of specified events,
including the exercise of the original Award granted to a Participant. All
or part of an Award may be subject to conditions established by the
Committee, which may include, but are not limited to, continuous service
with the Company and its Subsidiaries, achievement of specific business
objectives, increases in specified indices, attainment of specified growth
rates and other comparable measurements of performance.
(i) STOCK OPTION. An Award may be in the form of
an Option. An Option awarded pursuant to this Plan may consist of
an Incentive Option or a Nonqualified Option. The price at which
shares of Common
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<PAGE>
stock may be purchased upon the exercise of an Incentive Option
shall be not less than the Fair Market Value of the Common Stock
on the date of grant. The price at which shares of Common Stock
may be purchased upon the exercise of a Nonqualified Option shall
be not less than 50% of the Fair Market Value of the Common Stock
on the date of grant. Subject to the foregoing provisions, the
terms, conditions and limitations applicable to any Options
awarded pursuant to this Plan, including the term of any Options
and the date or dates upon which they become exercisable, shall
be determined by the Committee.
(ii) STOCK APPRECIATION RIGHT. An Award may be in
the form of an SAR. The terms, conditions and limitations
applicable to any SARs awarded pursuant to this Plan, including
the term of any SARs and the date or dates upon which they become
exercisable, shall be determined by the Committee.
(iii) STOCK AWARD. An Award may be in the form of a
Stock Award. The terms, conditions and limitations applicable to
any Stock Awards granted pursuant to this Plan shall be
determined by the Committee.
(iv) CASH AWARD. An Award may be in the form of a
Cash Award. The terms, conditions and limitations applicable to
any Cash Awards granted pursuant to this Plan shall be determined
by the Committee.
(v) PERFORMANCE AWARD. Without limiting the type
or number of Awards that may be made under the other provisions
of this Plan, an Award may be in the form of a Performance Award.
A Performance Award shall be paid, vested or otherwise
deliverable solely on account of the attainment of one or more
pre-established, objective Performance Goals established by the
Committee prior to the earlier to occur of (A) 90 days after the
commencement of the period of service to which the Performance
Goal relates and (B) the elapse of 25% of the period of service
(as scheduled in good faith at the time the goal is established),
and in any event while the outcome is substantially uncertain. A
Performance Goal is objective if a third party having knowledge
of the relevant facts could determine whether the goal is met.
Such a Performance Goal may be based on one or more business
criteria that apply to the individual, one or more business units
of the Company, or the Company as a whole, and may include one or
more of the following: revenue, cash flow, net income, stock
price, market share, earnings per share, return on equity, return
on assets or
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<PAGE>
decrease in costs. Unless otherwise stated such a Performance
Goal need not be based upon an increase or positive result under
a particular business criterion and could include, for example,
maintaining the status quo or limiting economic losses (measured,
in each case, by reference to specific business criteria). In
interpreting Plan provisions applicable to Performance Goals and
Performance Awards, it is the intent of the Plan to conform with
the standards of Section 162(m) of the Code and Treasury
Regulations ss. 1.162-27(e)(2)(i), and the Committee in
establishing such goals and interpreting the Plan shall be guided
by such provisions. Prior to the payment of any compensation
based on the achievement of Performance Goals, the Committee must
certify in writing to the Board that applicable Performance Goals
and any of the material terms thereof were, in fact, satisfied.
Subject to the foregoing provisions, the terms, conditions and
limitations applicable to any Performance Awards made pursuant to
this Plan shall be determined by the Committee.
(b) Notwithstanding anything to the contrary contained in
this Plan, the following limitations shall apply to any Awards made
hereunder:
(i) no Participant may be granted, during any
calendar year, Awards consisting of Options or SARs that are
exercisable for more than the remainder of 1,500,000 shares of
Common Stock less, if any, the number of shares of Common Stock
underlying existing Options or SARs granted to such Participant
under the Plan;
(ii) no Participant may be granted, during any
calendar year, Awards consisting of shares of Common Stock or
units denominated in such shares (other than any Awards
consisting of Options or SARs) covering or relating to more than
20,000 shares of Common Stock (the limitation set forth in this
clause (ii), together with the limitation set forth in clause (i)
above, being hereinafter collectively referred to as the "Stock
Based Awards Limitations"); and
(iii) no Participant may be granted Awards
consisting of cash or in any other form permitted under this Plan
(other than Awards consisting of Options or SARS or otherwise
consisting of shares of Common Stock or units denominated in such
shares) in respect of any calendar year having a value determined
on the date of grant in excess of $300,000.
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<PAGE>
8. PAYMENT OF AWARDS.
(a) GENERAL. Payment of Awards may be made in the form of
cash or Common Stock, or a combination thereof, and may include such
restrictions as the Committee shall determine, including, in the case of
Common Stock, restrictions on transfer and forfeiture provisions, if
payment of an Award is made in the form of Restricted Stock, the Award
Agreement relating to such shares shall specify whether they are to be
issued at the beginning or end of the Restriction Period. In the event that
shares of Restricted Stock are to be issued at the beginning of the
Restriction Period, the certificates evidencing such shares (to the extent
that such shares are so evidenced) shall contain appropriate legends and
restrictions that describe the terms and conditions of the restrictions
applicable thereto. In the event that shares of Restricted Stock are to be
issued at the end of the Restricted Period, the right to receive such
shares shall be evidenced by book entry registration or in such other
manner as the Committee may determine.
(b) DEFERRAL. With the approval of the Committee, payments
in respect of Awards may be deferred, either in the form of installments or
a future lump sum payment. The Committee may permit selected Participants
to elect to defer payments of some or all types of Awards in accordance
with procedures established by the Committee. Any deferred payment of an
Award, whether elected by the Participant or specified by the Award
Agreement or by the Committee, may be forfeited if and to the extent that
the Award Agreement so provides.
(c) DIVIDENDS AND INTEREST. Rights to dividends or Dividend
Equivalents may be extended to and made part of any Award consisting of
shares of Common Stock or units denominated in shares of Common Stock,
subject to such terms, conditions and restrictions as the Committee may
establish. The Committee may also establish rules and procedures for the
crediting of interest on deferred cash payments and Dividend Equivalents
for Awards consisting of shares of Common Stock or units denominated in
shares of Common Stock.
(d) SUBSTITUTION OF AWARDS. At the discretion of the
Committee, a Participant may be offered an election to substitute an Award
for another Award or Awards of the same or different type.
9. STOCK OPTION EXERCISE. The price at which shares of
Common Stock may be purchased under an Option shall be paid in full at the time
of exercise in cash or, if elected by the optionee, the optionee may purchase
such shares by means of tendering Common Stock or surrendering another Award,
including Restricted Stock, valued at Fair Market Value on the date of exercise,
or any combination thereof. The Committee shall determine acceptable methods for
Participants to tender Common Stock or other Awards.
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<PAGE>
If permitted by the Committee, payment may be made by successive exercises by a
Participant. The Committee may provide for loans from the Company to a
Participant to permit the exercise or purchase of Awards and may provide for
procedures to permit the exercise or purchase of such Awards by use of the
proceeds to be received from the sale of Common Stock issuable pursuant to an
Award. Unless otherwise provided in the applicable Award Agreement, in the event
shares of Restricted Stock are tendered as consideration for the exercise of an
Option, a number of the shares issued upon the exercise of the Option, equal to
the number of shares of Restricted Stock used as consideration therefor, shall
be subject to the same restrictions as the Restricted Stock so submitted as well
as any additional restrictions that may be imposed by the Committee.
10. TAX WITHHOLDING. The Company shall have the right to
deduct applicable taxes from any Award payment and withhold, at the time of
delivery or vesting of cash or shares of Common Stock under this Plan, an
appropriate amount of cash or number of shares of Common Stock or a combination
thereof for payment of taxes required by law or to take such other action as may
be necessary in the opinion of the Company to satisfy all obligations for
withholding of such taxes. The Committee may also permit withholding to be
satisfied by the transfer to the Company of shares of Common Stock theretofore
owned by the holder of the Award with respect to which withholding is required.
If shares of Common Stock are used to Satisfy tax withholding, such shares shall
be valued based on the Fair Market Value when the tax withholding is required to
be made.
11. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The
Board may amend, modify, suspend or terminate this Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other purpose
permitted by law, except that (a) no amendment or alteration that would impair
the rights of any Participant under any Award previously granted to such
Participant shall be made without the consent of such Participant and (b) no
amendment or alteration shall be effective prior to approval by the stockholders
of the Company to the extent such approval is then required pursuant to Rule
16b-3 in order to preserve the applicability of any exemption provided by such
rule to any Award then outstanding (unless the holder of such Award consents) or
to the extent stockholder approval is otherwise required by applicable legal
requirements.
12. ASSIGNABILITY. Unless otherwise determined by the
Committee and provided in the Award Agreement, no Award or any other benefit
under this Plan constituting a derivative security within the meaning of Rule
16a-1(c) under the Exchange Act shall be assignable or otherwise transferable
except by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. The Committee
may prescribe and include in applicable Award Agreements other restrictions on
transfer. Any attempted assignment of an Award or any other benefit under this
Plan in violation of this paragraph 12 shall be null and void.
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<PAGE>
13. ADJUSTMENTS.
(a) The existence of outstanding Awards shall not affect in
any manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the capital stock of the Company or its business or any
merger or consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock (whether or not such issue is prior to,
on a parity with or junior to the Common Stock) or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding of any
kind, whether or not of a character similar to that of the acts or
proceedings enumerated above.
(b) In the event of any subdivision or consolidation of
outstanding shares of Common Stock, declaration of a dividend payable in
shares of Common Stock or other stock split, then (i) the number of shares
of Common Stock reserved under this Plan, (ii) the number of shares of
Common Stock covered by outstanding Awards in the form of Common Stock or
units denominated in Common Stock, (iii) the exercise or other price in
respect of such Awards and (iv) the appropriate Fair Market Value and other
price determinations for such Awards shall each be proportionately adjusted
by the Board to reflect such transaction. In the event of any other
recapitalization or capital reorganization of the Company, any
consolidation or merger of the Company with another corporation or entity,
the adoption by the Company of any plan of exchange affecting the Common
Stock or any distribution to holders of Common Stock of securities or
property (other than normal cash dividends or dividends payable in Common
Stock), the Board shall make appropriate adjustments to (i) the number of
shares of Common Stock covered by Awards in the form of Common Stock or
units denominated in Common Stock, (ii) the exercise or other price in
respect of such Awards and (iii) the appropriate Fair Market Value and
other price determinations for such Awards to give effect to such
transaction; provided that such adjustments shall only be such as are
necessary to maintain the proportionate interest of the holders of the
Awards and preserve, without exceeding, the value of such Awards. In the
event of a corporate merger, consolidation, acquisition of property or
stock separation, reorganization or liquidation, the Board shall be
authorized to issue or assume Awards by means of substitution of new
Awards, as appropriate, for previously issued Awards or an assumption of
previously issued Awards as part of such adjustment.
14. RESTRICTIONS. Unless otherwise agreed to by the Company,
no Common Stock or other form of payment shall be issued with respect to any
Award unless
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<PAGE>
the Company shall be satisfied based on the advice of its counsel that such
issuance will be in compliance with applicable federal and state securities
laws. It is the intent of the Company that this Plan comply with Rule 16b-3 with
respect to persons subject to Section 16 of the Exchange Act unless otherwise
provided herein or in an Award Agreement, that any ambiguities or
inconsistencies in the construction of this Plan be interpreted to give effect
to such intention, and that if any provision of this Plan is found not to be in
compliance with Rule 16b-3, such provision shall be null and void to the extent
required to permit this Plan to comply with Rule 16b-3. Certificates evidencing
shares of Common Stock certificates delivered under this Plan (to the extent
that such shares are so evidenced) may be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any securities exchange or transaction reporting system upon which the Common
Stock is then listed or to which it is admitted for quotation and any applicable
federal and state securities law. The Committee may cause a legend or legends to
be placed upon such certificates (if any) to make appropriate reference to such
restrictions.
15. UNFUNDED PLAN. Insofar as it provides for Awards of cash,
Common Stock or rights thereto, this Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Participants who are
entitled to cash, Common Stock or rights thereto under this Plan, any such
accounts shall be used merely as a bookkeeping convenience. The Company shall
not be required to segregate any assets that may at any time be represented by
cash, Common Stock or rights thereto, nor shall this Plan be construed as
providing for such segregation, nor shall the Company, the Board or the
Committee be deemed to be a trustee of any cash, Common Stock or rights thereto
to be granted under this Plan. Any liability or obligation of the Company to any
Participant with respect to an Award of cash, Common Stock or rights thereto
under this Plan shall be based solely upon any contractual obligations that may
be created by this Plan and any Award Agreement, and no such liability or
obligation of the Company shall be deemed to be secured by any pledge or other
encumbrance on any property of the Company. Neither the Company nor the Board
nor the Committee shall be required to give any security or bond for the
performance of any obligation that may be created by this Plan.
16. GOVERNING LAW. This Plan and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of the State of Maryland.
17. EFFECTIVENESS. This Plan shall become effective as of the
date set forth in the resolutions of the Board approving and adopting this Plan;
provided, however, that the effectiveness of this Plan is expressly conditioned
upon (a) the approval of this Plan by the Board and the Compensation Committee
of the Company and (b) the approval
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<PAGE>
of this Plan by the holders of common stock of the Company of all classes,
voting together as a single class.
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<PAGE>
SINCLAIR BROADCAST GROUP, INC.
FORM OF STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
as of this _____ day of ________________, 1996, (the "Option Date"), between
Sinclair Broadcast Group, Inc., a Maryland corporation (the "Company"), and
__________________ (the "Optionee").
RECITALS
WHEREAS, the Company has adopted the 1996 Long-Term Incentive Plan of
Sinclair Broadcast Group, Inc. (the "Plan") to reward certain key individuals
for making major contributions to the Company and its subsidiaries by enabling
them to acquire shares of Class A Common Stock, par value $.01 per share
("Common Stock"), of the Company;
WHEREAS, the Company and River City Broadcasting, L.P., a Delaware
limited partnership ("RCB") have entered into an Asset Purchase Agreement (the
"Purchase Agreement") dated as of even date herewith, pursuant to which RCB has
agreed to sell, and the Company has agreed to purchase, certain assets used or
held for use by RCB in connection with the operation of substantially all of
RCB's owned and operated radio and television stations (the "River City
Acquisition");
WHEREAS, in connection with the River City Acquisition, the Company
desires Optionee to become an employee of Sinclair Communications, Inc., a
Maryland corporation and wholly owned subsidiary of the Company ("SCI") and the
Optionee and SCI will, on or prior to the Closing (as defined in the Purchase
Agreement and hereinafter referred to as the "First Closing"), execute an
Employment Agreement (the "Employment Agreement"), and
WHEREAS, as part of its inducement to the Optionee to enter into the
Employment Agreement, the Company desires to grant the Optionee an option to
purchase shares of Common Stock pursuant to the Plan and upon the terms and
subject to the conditions hereinafter set forth;
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing premises, the parties
to this Agreement agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth in
this Agreement, the Company hereby grants to the Optionee an option (the
"Option") to purchase from the Company up to but not exceeding in the aggregate
______ shares of Common Stock at a price per share ("Exercise Price") equal to
the average of the closing share prices of the Common Stock as reported on the
NASDAQ National Market for the 21 trading days consisting of the
<PAGE>
Option Date and each of the ten trading days immediately prior to such date and
each of the ten trading days immediately following such date, but in no event
less than $21.00 per share, such number of shares and such price per share being
subject to adjustment as provided in Section 13 of the Plan.
2. RELATIONSHIP TO PLAN. The Option is issued in accordance with and
subject to all of the terms, conditions and provisions of the Plan, as amended
from time to time, and administrative interpretations thereunder, if any, which
have been adopted by the Committee thereunder and are in effect on the date
hereof. Except as defined herein or otherwise stated, capitalized terms shall
have the same meanings ascribed to them under the Plan.
3. EXERCISE SCHEDULES. The Option shall become exercisable with respect
to 25% of the aggregate number of shares of Common Stock subject to the Option
immediately upon the occurrence of the First Closing. On the first anniversary
of the First Closing, the Option shall become exercisable with respect to an
additional 25% of the aggregate number of shares of Common Stock subject to the
Option. On the second anniversary of the First Closing, the Option shall become
exercisable with respect to the remaining balance of the aggregate number of
shares subject to the Option.
4. TERMINATION OF OPTION. The Option hereby granted shall terminate and
be of no force and effect with respect to any shares of Common Stock not
previously purchased by the Optionee upon the first to occur of:
(a) the tenth anniversary of the First Closing;
(b) with respect to the exercisable portion of the Option,
the expiration of (i) 90 days following the termination of Optionee's employment
under the Employment Agreement for reasons other than death, Disability (as
defined in the Employment Agreement) or "for cause" (as defined in the
Employment Agreement), or (ii) the first anniversary of termination of
Optionee's employment under the Employment Agreement by reason of death or
Disability; or
(c) with respect to both the exercisable and the
unexercisable portion of the Option, the date of the Optionee's termination of
Optionee's employment under the Employment Agreement for cause.
5. EXERCISE OF OPTION. Subject to the limitations herein and in the
Plan, the Option may be exercised with respect to the shares of Common Stock
then exercisable, in whole or in part, at any time on or prior to the tenth
anniversary of the First Closing, regardless of the Optionee's service status,
by written notice to the Company at its principal executive office, which notice
shall (a) specify the number of shares with respect to which the Option is being
exercised and the purchase price to be paid therefor; (b) if the person
exercising this Option is not the Optionee himself, contain or be accompanied by
satisfactory evidence of such person's
2
<PAGE>
right to exercise this Option; and (c) be accompanied by payment in full of the
purchase price in cash or by a certified or cashier's check to the order of the
Company.
6. TRANSFERABILITY. The Option shall not be transferable except by will
or by the laws of descent and distribution. During the Optionee's lifetime, the
Option may be exercised only by the Optionee. No assignment or transfer of the
Option, whether voluntary or involuntary, by operation of law or otherwise,
except a transfer by will or by the laws of descent or distribution, shall vest
in the assignee or transferee any interest or right whatsoever in the Option.
7. NO RIGHTS AS STOCKHOLDER. The Optionee shall not have any rights as
a stockholder of the Company with respect to any of the shares subject to the
Option, except to the extent that such shares shall have been purchased and
transferred to him.
8. NO RIGHT TO EMPLOYMENT. The Option shall not confer on the Optionee
any right to continue in the service of the Company or any of its subsidiaries
or affect the right of the Company or any subsidiary to terminate Optionee's
employment at any time; and nothing contained in this Agreement shall be deemed
a waiver or modification of any provision contained in any agreement between the
Optionee and the Company or any parent or subsidiary thereof. This Option shall
not affect the right of the Company or any parent or subsidiary thereof to
reclassify, recapitalize, or otherwise change its capital or debt structure or
to merge, consolidate, convey any or all of its assets, dissolve, liquidate,
wind up, or otherwise reorganize.
9. DISSOLUTION OR MERGER. Upon the dissolution or liquidation of the
Company, a merger or consolidation in which the Company is not the surviving
corporation, or a transaction in which another individual or entity becomes the
owner of 50% or more of the total combined voting power of all classes of stock
of the Company, the unexercised portion of this Option shall terminate, but the
Optionee shall have the right to exercise the unexpired and unexercised portion
of this Option, whether exercisable or unexercisable, immediately prior to such
event.
10. WITHHOLDING FOR TAX PURPOSES. Any amount of Common Stock that is
payable or transferable to the Optionee hereunder may be reduced by any amount
or amounts which the Company is required to withhold under the then applicable
provisions of the Internal Revenue Code of 1986, as amended, or its successors,
or any other federal, state or local tax withholding requirement. If the
Optionee does not elect to satisfy withholding requirements in this fashion, the
issuance of the shares of Common Stock payable or transferable to the Optionee
hereunder shall be contingent upon the Optionee's satisfaction of any
withholding obligations that may apply and the Optionee's presentation of
evidence satisfactory to the Board that such withholding obligations have been
satisfied.
11. NOTICE. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder will be deemed to be
delivered on the date that it is personally delivered, or, whether actually
received or not, on the third business day after it is deposited in
3
<PAGE>
the United States mail, certified or registered, postage prepaid, addressed to
the person who is to receive it at the address that such person has heretofore
specified by written notice delivered in accordance herewith. The Company or
Optionee may change, at any time and from time to time, by written notice to the
other, the address that it or he had therefore specified for receiving notices.
Until changed in accordance herewith, the Company and the Optionee specify their
respective addresses as set forth below:
Company:
Sinclair Broadcast Group, Inc.
2000 West 41st Street
Baltimore, Maryland 21211
Attention: Chief Executive Officer
with copy to:
Thomas & Libowitz, P.A.
The USF&G Tower
100 Light Street
Suite 1100
Baltimore, Maryland 21202-1053
Attention: Steven A. Thomas, Esq.
Optionee:
----------
Optionee's address as listed in the personnel records of the
Company or SCI as of the First Closing, unless the Company or SCI shall have
received written notification of Optionee's change of address.
12. AMENDMENT. Notwithstanding any other provision hereof, this
Agreement may not be supplemented or amended from time to time without the
consent of the Optionee.
13. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Maryland applicable to
agreements made and to be performed entirely in Maryland.
14. COUNTERPARTS. This Agreement may be executed in multiple
counterparts. The Company and the Optionee may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
4
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have caused this
Agreement to be executed as of the date first above written.
SINCLAIR BROADCAST GROUP, INC.
By:_______________________________
OPTIONEE:
__________________________________
5
EMPLOYMENT AGREEMENT
SINCLAIR BROADCASTING GROUP, INC.
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made this 12th
day of June, 1995, by and between Sinclair Broadcast Group, Inc.(the "Company"),
a Maryland corporation, and Robert E. Smith (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of television
broadcasting; and
WHEREAS, the Employee has specialized expertise in various
aspects of the management of television broadcast operations and related
functions; and
WHEREAS, the Company desires to employ the Employee as Vice
President and Treasurer, to render such services as are enumerated in the
By-laws of the Company for and on behalf of the Company and such other and
further services as shall be assigned reasonably, from time-to-time, to the
Employee by the Board of Directors of the Company, and the Employee is willing
to accept such employment, upon the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing Recitals,
which shall be deemed to be a substantive part of this Agreement, and the mutual
covenants, promises, agreements, representations and warranties hereinafter set
forth, the parties hereto do hereby covenant, promise, agree, represent and
warrant as follows:
1. EMPLOYMENT. The Company hereby employs the Employee as Vice
President and Treasurer, to render such services as are enumerated in the
By-laws of the Company for and on behalf of the Company, and the Employee shall
render such other and further services for and on behalf of the Company as may
be assigned reasonably, from time-to-time, to the Employee by the Board of
Directors of the Company (the "Services"). The Employee hereby accepts such
employment with the Company and agrees to render the Services for and on behalf
of the Company on the terms and conditions set forth in this Agreement. The
power to direct, control and supervise the Services to be performed, the means
and manner of performing the Services and the time for performing the Services
shall be exercised by the Board of Directors of the Company; provided, however,
that the Board of Directors shall not impose employment duties or constraints of
any kind which would require the Employee to violate any law, statute,
ordinance, rule or regulation now or hereinafter in effect.
2. TERM. The term (the "Initial Term") of this Agreement shall
commence on the date hereof and, subject to the further provisions of this
Agreement, shall end on the date which
<PAGE>
is three (3) years from the date of this Agreement, provided, however, this
Agreement shall be automatically renewed for successive one (1) year periods (a
"Renewal Term") unless, at least sixty (60) days prior to the expiration of the
Initial Term or any Renewal Term, either party gives written notice to the other
party specifically electing to terminate this Agreement at the end of the
Initial Term or any such Renewal Term.
3. PERFORMANCE OF SERVICES. The Employee shall devote all of
his professional time exclusively to the Company's business and shall render the
Services to the best of his ability for and on behalf of the Company. The
Employee shall comply with all laws, statutes, ordinances, rules and regulations
relating to the Services.
4. COMPENSATION. In consideration of and as full and total
compensation for all Services rendered or agreed to be rendered by the Employee
hereunder, the Company shall pay to the Employee an annual base salary of two
hundred and fifty thousand dollars ($250,000) (the "Salary"), payable in equal,
consecutive bi-weekly installments; provided, however, that no Salary shall be
paid to the Employee under this Agreement for any period subsequent to the
termination of employment of the Employee for any reason whatsoever. In addition
to the Salary, the Board of Directors will review the Employee's compensation
arrangement annually and dependent upon the performance of the Company and/or
the Employee during said year will award a bonus to the Employee (the "Bonus")
in an amount such that the total compensation to the Employee is within or
greater than the average range of compensation to persons holding similar
positions in the television broadcasting industry. Payment of the Salary and
Bonus shall be subject to the customary withholding tax and other employment
taxes as required with respect to compensation paid by a corporation to an
employee.
5. VACATIONS AND BENEFITS.
5.1. During each twelve (12) month period during the
Initial Term and any Renewal Term of this Agreement, the Employee shall be
entitled to vacation time of not less than four (4) weeks, during which time the
Employee's Salary shall be paid in full. The Employee shall take his vacation at
such time or times as shall be approved by the Company, which approval shall not
be unreasonably withheld.
5.2. The Employee shall be entitled to such other
benefits as the Board of Directors shall lawfully adopt and approve.
- 2 -
<PAGE>
6. DISABILITY.
6.1. As used herein, the Employee shall be
"disabled" or have a "disability" for purposes of this Agreement if the Employee
has an illness, injury, or other physical or mental condition which results in
the Employee's inability to perform substantially the duties he performed in his
employment capacity under this Agreement to the extent he was performing such
duties immediately prior to the commencement of such condition.
6.2. In the event that the Employee is disabled for
not more than sixty (60) days during any twelve (12) month period, then the
Employee, during the continuance of such disability, shall remain employed by
the Company hereunder and shall continue to receive his Salary pursuant to
Section 4 of this Agreement and otherwise have all of the rights and be subject
to all of the Employee's obligations and duties under this Agreement, other than
the obligation and duty to render the Services during such period of disability.
6.3. In the event that the Employee shall be
disabled for more than sixty (60) days during any twelve (12) month period, but
not more than One hundred twenty (120) days during any twelve (12) month period,
then from and after the expiration of the one hundred twentieth (120th) day and
during the continuance of such disability up to and including the day
immediately preceding the sixty first (61st) day, the Employee shall be deemed
to have taken a leave of absence from the Company commencing on the sixty first
(61st) day of such disability and, during the continuance of such disability,
the following provisions shall apply:
6.3.1. The Employee's Salary shall be
apportioned up to and including the sixtieth (60th) day of such disability and
from and after the sixtieth (60th) day of such disability and up to and
including the day immediately preceding the two hundred tenth (210th) day, the
Company shall pay no Salary to the Employee and the Employee shall receive no
Salary from the Company.
6.3.2. The Company, in the sole discretion
of its Board of Directors, shall have the right and power to remove the Employee
from the position as an officer of the Company or to delegate all or any portion
of the Employee's duties as an officer of the Company to one or more other
employees of the Company, provided, however, that removal of the Employee from
the position as an officer may only be for cause. Cause is defined as: (i)
conviction of a crime affecting the Company's reputation or which precludes the
Employee from performing his duties and resposibilities as an officer of the
Company; (ii) a breach of fiduciary duty to the Company or its stockholders; or
(ii) repeated failure to exercise and/or undertake his duties as an officer.
- 3 -
<PAGE>
6.3.3. The Employee shall otherwise have
all of the rights and be subject to all of the Employee's obligations and duties
under this Agreement, except that the Employee shall have no obligation or duty
to render the Services otherwise in accordance with this Agreement; provided,
however, that the Company shall be excused from providing any insurance
coverages or benefits which, by reason of the Employee's disability, the Company
shall not be able to obtain, continue or maintain at substantially the same cost
and expense or on substantially the same terms and conditions that the Company
was able to obtain, continue or maintain immediately prior to the commencement
of the Employee's disability.
6.4. In the event that the Employee shall be
disabled for more than two hundred ten (210) days in any twelve (12) month
period, there shall exist a presumptive conclusion that the Employee is no
longer able to perform the Services, and this Agreement may be terminated by the
Company without further notice to the Employee.
6.5. If the Company and the Employee are unable to
agree whether the Employee is disabled within the meaning of this Section 6,
then this limited issue shall be submitted to and settled by binding arbitration
under and pursuant to the Maryland Uniform Arbitration Act and the rules and
regulations of the American Arbitration Association, and the decision in such
arbitration shall be final, conclusive and binding upon each of the parties and
judgment may be entered thereon in any court of competent jurisdiction. No other
issue shall be submitted to or settled by binding arbitration under this
Agreement.
7. Confidential Information.
7.1. The Employee acknowledges that in the
Employee's employment hereunder, the Employee will be making use of, acquiring
and adding to the Company's trade secrets and its confidential and proprietary
information of a special and unique nature and value relating to such matters
as, but not limited to, the Company's business operations, internal structure,
financial affairs, systems, procedures, manuals, confidential reports, lists of
clients and prospective clients and sales and marketing methods, as well as the
amount, nature and type of services, equipment and methods used and preferred by
the Company's clients and the fees paid by such clients, all of which shall be
deemed to be confidential information. The Employee acknowledges that such
confidential information has been and will continue to be of central importance
to the business of the Company and that disclosure of it to or its use by others
could cause substantial loss to the Company. In consideration of employment by
the Company, the Employee agrees that during the Initial Term and any Renewal
Term of this Agreement and upon and after leaving the
- 4 -
<PAGE>
employ of the Company for any reason whatsoever, the Employee shall not, for any
purpose whatsoever, directly or indirectly, divulge or disclose to any person or
entity any of such confidential information which was obtained by the Employee
as a result of the Employee's employment with the Company or any trade secrets
of the Company, but shall hold all of the same confidential and inviolate.
7.2. All contracts, agreements, financial books,
records, instruments and documents, client lists, memoranda, data, reports,
tapes, rolodexes, telephone and address books, letters, research, card decks,
listings, and any other instruments, records or documents relating or pertaining
to clients serviced by the Company or the Employee, the Services rendered by the
Employee, or the business of the Company (collectively, the "Records") shall at
all times be and remain the property of the Company. Upon termination of this
Agreement and the Employee's employment under this Agreement for any reason
whatsoever, the Employee shall return to the Company all Records (whether
furnished by the Company or prepared by the Employee), and the Employee shall
neither make nor retain any copies of any of such Records after such
termination.
7.3. The Employee shall assign permanently to the
Company exclusive rights to any and all patents and copyrights awarded or
accruing to him on the basis of ideas developed by him for the Company and ideas
developed by him within one year following the termination of his employment
with the Company if such ideas are related to such employment.
8. Indemnity. The Employee shall indemnify the Company, its
officers, directors and stockholders (other than the Employee), and hold the
Company, its officers, directors and stockholders (other than the Employee)
harmless, from and against any and all actions, suits, proceedings, liabilities,
damages, losses, costs and expenses (including attorneys' and experts' fees)
arising out of or in connection with any breach or threatened breach by the
Employee of any one or more provisions of this Agreement.
9. Termination of Employment.
9.1. Subject to Section 9.2 of this Agreement, The
Company shall have the right to terminate the Employee's employment hereunder at
any time and without prior written notice to the Employee upon the occurrence of
any one or more of the following events: (i) the breach by the Employee of any
material covenant, promise or agreement of this Agreement; (ii) the voluntary or
involuntary dissolution of the Company; (iii) the voluntary or involuntary
liquidation or winding up of the Company; (iv) the disability of the Employee
for more than two hundred ten (210) days in any twelve (12) month period
pursuant to Section 6.4 of this Agreement; or (v) for cause as defined in
Section 6.3.2 of this
- 5 -
<PAGE>
Agreement. Upon termination of the Employee's employment under this Agreement
pursuant to this Section 10, neither party shall thereafter have any further
rights, duties or obligations under this Agreement (except that Employee shall
have the obligations and duties set forth in Sections 7 and 8) but each party
shall remain liable and responsible to the other for all prior obligations and
duties hereunder and for all acts and omissions of such party, its agents,
servants and employees, prior to such termination.
9.2. Anything contained in Section 10.1 to the
contrary notwithstanding, the Company shall not terminate this Agreement and the
Employee's employment under this Agreement pursuant to Section 10.1(i) or (v)
unless the Company shall have first given to the Employee thirty (30) days'
prior written notice of such termination which sets forth the grounds of such
termination, and the Employee shall have failed to cure such grounds for
termination within said thirty (30) day period; provided, however, that the
foregoing opportunity to cure shall be limited to no more than two opportunities
during each twelve (12) month period hereunder, commencing upon the date hereof.
10. Notices. All notices and other communications required or
permitted to be given by this Agreement shall be in writing and shall be given
and shall be deemed received if and when either hand-delivered and a signed
receipt is given therefor or mailed by registered or certified U.S. mail, return
receipt requested, postage prepaid, and if to the Company to:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
with a copy to: Steven A. Thomas, Esquire
Thomas & Libowitz, P.A.
USF&G Tower, Suite 1100
100 Light Street
Baltimore, Maryland 21202-1053
and if to the Employee to:
------------------------------
------------------------------
------------------------------
or at such other address as either party hereto shall notify the other of in
writing.
11. Miscellaneous.
11.1. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns.
- 6 -
<PAGE>
This Agreement shall be binding upon the Employee and his heirs, personal and
legal representatives, and guardians, and shall inure to the benefit of the
Employee. Neither this Agreement nor any part hereof or interest herein shall be
assigned by the Employee.
11.2. The terms and provisions of this Agreement may
not be modified except by written instrument duly executed by each party hereto.
11.3. This Agreement shall be governed by and
enforced and construed in accordance with the laws of the State of Maryland.
11.4. This Agreement sets forth the entire,
integrated understanding and agreement of the parties hereto with respect to the
subject matter hereof.
11.5. The headings in this Agreement are included
for the convenience of reference and shall be given no effect in the
construction of this Agreement.
11.6. In the event of a breach of this Agreement,
the non-breaching party hereto may maintain an action for specific performance
against the party hereto who is alleged to have breached any of the terms,
conditions, representations, warranties or agreements, herein contained.
Anything contained herein to the contrary notwithstanding, this Section shall
not be construed to limit in any manner whatsoever any other rights or remedies
an aggrieved party may have by virtue of any breach of this Agreement. Each of
parties hereto shall have the right to waive compliance with or the fulfillment,
satisfaction or enforcement of any warranty, representation, covenant, promise,
agreement or condition herein set forth, but the waiver by any party of such
right shall not be deemed a waiver of compliance with or fulfillment,
satisfaction or enforcement of any other warranty, representation, covenant,
promise, agreement or condition herein set forth or to seek redress for any
breach thereof on any subsequent occasion, nor shall any such waiver be deemed
effective unless in writing and signed by the party so waiving.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed, acknowledged,
sealed and delivered this Agreement the day and year first hereinabove set
forth.
ATTEST: COMPANY:
/s/ J. Duncan Smith By: /s/ David Smith
- ------------------- -------------------
WITNESS: EMPLOYEE:
/s/ C. Wayne Davis /s/ Robert E. Smith
- ------------------- -------------------
- 8 -
EMPLOYMENT AGREEMENT
SINCLAIR BROADCASTING GROUP, INC.
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made this 12th
day of June, 1995, by and between Sinclair Broadcast Group, Inc.(the "Company"),
a Maryland corporation, and J. Duncan Smith (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of television
broadcasting; and
WHEREAS, the Employee has specialized expertise in various
aspects of the management of television broadcast operations and related
functions; and
WHEREAS, the Company desires to employ the Employee as Vice
President and Secretary, to render such services as are enumerated in the
By-laws of the Company for and on behalf of the Company and such other and
further services as shall be assigned reasonably, from time-to-time, to the
Employee by the Board of Directors of the Company, and the Employee is willing
to accept such employment, upon the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing Recitals,
which shall be deemed to be a substantive part of this Agreement, and the mutual
covenants, promises, agreements, representations and warranties hereinafter set
forth, the parties hereto do hereby covenant, promise, agree, represent and
warrant as follows:
1. EMPLOYMENT. The Company hereby employs the Employee as Vice
President and Secretary, to render such services as are enumerated in the
By-laws of the Company for and on behalf of the Company, and the Employee shall
render such other and further services for and on behalf of the Company as may
be assigned reasonably, from time-to-time, to the Employee by the Board of
Directors of the Company (the "Services"). The Employee hereby accepts such
employment with the Company and agrees to render the Services for and on behalf
of the Company on the terms and conditions set forth in this Agreement. The
power to direct, control and supervise the Services to be performed, the means
and manner of performing the Services and the time for performing the Services
shall be exercised by the Board of Directors of the Company; provided, however,
that the Board of Directors shall not impose employment duties or constraints of
any kind which would require the Employee to violate any law, statute,
ordinance, rule or regulation now or hereinafter in effect.
2. TERM. The term (the "Initial Term") of this Agreement shall
commence on the date hereof and, subject to the further provisions of this
Agreement, shall end on the date which
<PAGE>
is three (3) years from the date of this Agreement, provided, however, this
Agreement shall be automatically renewed for successive one (1) year periods (a
"Renewal Term") unless, at least sixty (60) days prior to the expiration of the
Initial Term or any Renewal Term, either party gives written notice to the other
party specifically electing to terminate this Agreement at the end of the
Initial Term or any such Renewal Term.
3. PERFORMANCE OF SERVICES. The Employee shall devote all of
his professional time exclusively to the Company's business and shall render the
Services to the best of his ability for and on behalf of the Company. The
Employee shall comply with all laws, statutes, ordinances, rules and regulations
relating to the Services.
4. COMPENSATION. In consideration of and as full and total
compensation for all Services rendered or agreed to be rendered by the Employee
hereunder, the Company shall pay to the Employee an annual base salary of two
hundred and seventy thousand dollars ($270,000) (the "Salary"), payable in
equal, consecutive bi-weekly installments; provided, however, that no Salary
shall be paid to the Employee under this Agreement for any period subsequent to
the termination of employment of the Employee for any reason whatsoever. In
addition to the Salary, the Board of Directors will review the Employee's
compensation arrangement annually and dependent upon the performance of the
Company and/or the Employee during said year will award a bonus to the Employee
(the "Bonus") in an amount such that the total compensation to the Employee is
within or greater than the average range of compensation to persons holding
similar positions in the television broadcasting industry. Payment of the Salary
and Bonus shall be subject to the customary withholding tax and other employment
taxes as required with respect to compensation paid by a corporation to an
employee.
5. VACATIONS AND BENEFITS.
5.1. During each twelve (12) month period during the
Initial Term and any Renewal Term of this Agreement, the Employee shall be
entitled to vacation time of not less than four (4) weeks, during which time the
Employee's Salary shall be paid in full. The Employee shall take his vacation at
such time or times as shall be approved by the Company, which approval shall not
be unreasonably withheld.
5.2. The Employee shall be entitled to such other
benefits as the Board of Directors shall lawfully adopt and approve.
- 2 -
<PAGE>
6. DISABILITY.
6.1. As used herein, the Employee shall be
"disabled" or have a "disability" for purposes of this Agreement if the Employee
has an illness, injury, or other physical or mental condition which results in
the Employee's inability to perform substantially the duties he performed in his
employment capacity under this Agreement to the extent he was performing such
duties immediately prior to the commencement of such condition.
6.2. In the event that the Employee is disabled for
not more than sixty (60) days during any twelve (12) month period, then the
Employee, during the continuance of such disability, shall remain employed by
the Company hereunder and shall continue to receive his Salary pursuant to
Section 4 of this Agreement and otherwise have all of the rights and be subject
to all of the Employee's obligations and duties under this Agreement, other than
the obligation and duty to render the Services during such period of disability.
6.3. In the event that the Employee shall be
disabled for more than sixty (60) days during any twelve (12) month period, but
not more than One hundred twenty (120) days during any twelve (12) month period,
then from and after the expiration of the one hundred twentieth (120th) day and
during the continuance of such disability up to and including the day
immediately preceding the sixty first (61st) day, the Employee shall be deemed
to have taken a leave of absence from the Company commencing on the sixty first
(61st) day of such disability and, during the continuance of such disability,
the following provisions shall apply:
6.3.1. The Employee's Salary shall be
apportioned up to and including the sixtieth (60th) day of such disability and
from and after the sixtieth (60th) day of such disability and up to and
including the day immediately preceding the two hundred tenth (210th) day, the
Company shall pay no Salary to the Employee and the Employee shall receive no
Salary from the Company.
6.3.2. The Company, in the sole discretion
of its Board of Directors, shall have the right and power to remove the Employee
from the position as an officer of the Company or to delegate all or any portion
of the Employee's duties as an officer of the Company to one or more other
employees of the Company, provided, however, that removal of the Employee from
the position as an officer may only be for cause. Cause is defined as: (i)
conviction of a crime affecting the Company's reputation or which precludes the
Employee from performing his duties and resposibilities as an officer of the
Company; (ii) a breach of fiduciary duty to the Company or its stockholders; or
(ii) repeated failure to exercise and/or undertake his duties as an officer.
- 3 -
<PAGE>
6.3.3. The Employee shall otherwise have
all of the rights and be subject to all of the Employee's obligations and duties
under this Agreement, except that the Employee shall have no obligation or duty
to render the Services otherwise in accordance with this Agreement; provided,
however, that the Company shall be excused from providing any insurance
coverages or benefits which, by reason of the Employee's disability, the Company
shall not be able to obtain, continue or maintain at substantially the same cost
and expense or on substantially the same terms and conditions that the Company
was able to obtain, continue or maintain immediately prior to the commencement
of the Employee's disability.
6.4. In the event that the Employee shall be
disabled for more than two hundred ten (210) days in any twelve (12) month
period, there shall exist a presumptive conclusion that the Employee is no
longer able to perform the Services, and this Agreement may be terminated by the
Company without further notice to the Employee.
6.5. If the Company and the Employee are unable to
agree whether the Employee is disabled within the meaning of this Section 6,
then this limited issue shall be submitted to and settled by binding arbitration
under and pursuant to the Maryland Uniform Arbitration Act and the rules and
regulations of the American Arbitration Association, and the decision in such
arbitration shall be final, conclusive and binding upon each of the parties and
judgment may be entered thereon in any court of competent jurisdiction. No other
issue shall be submitted to or settled by binding arbitration under this
Agreement.
7. Confidential Information.
7.1. The Employee acknowledges that in the
Employee's employment hereunder, the Employee will be making use of, acquiring
and adding to the Company's trade secrets and its confidential and proprietary
information of a special and unique nature and value relating to such matters
as, but not limited to, the Company's business operations, internal structure,
financial affairs, systems, procedures, manuals, confidential reports, lists of
clients and prospective clients and sales and marketing methods, as well as the
amount, nature and type of services, equipment and methods used and preferred by
the Company's clients and the fees paid by such clients, all of which shall be
deemed to be confidential information. The Employee acknowledges that such
confidential information has been and will continue to be of central importance
to the business of the Company and that disclosure of it to or its use by others
could cause substantial loss to the Company. In consideration of employment by
the Company, the Employee agrees that during the Initial Term and any Renewal
Term of this Agreement and upon and after leaving the
- 4 -
<PAGE>
employ of the Company for any reason whatsoever, the Employee shall not, for any
purpose whatsoever, directly or indirectly, divulge or disclose to any person or
entity any of such confidential information which was obtained by the Employee
as a result of the Employee's employment with the Company or any trade secrets
of the Company, but shall hold all of the same confidential and inviolate.
7.2. All contracts, agreements, financial books,
records, instruments and documents, client lists, memoranda, data, reports,
tapes, rolodexes, telephone and address books, letters, research, card decks,
listings, and any other instruments, records or documents relating or pertaining
to clients serviced by the Company or the Employee, the Services rendered by the
Employee, or the business of the Company (collectively, the "Records") shall at
all times be and remain the property of the Company. Upon termination of this
Agreement and the Employee's employment under this Agreement for any reason
whatsoever, the Employee shall return to the Company all Records (whether
furnished by the Company or prepared by the Employee), and the Employee shall
neither make nor retain any copies of any of such Records after such
termination.
7.3. The Employee shall assign permanently to the
Company exclusive rights to any and all patents and copyrights awarded or
accruing to him on the basis of ideas developed by him for the Company and ideas
developed by him within one year following the termination of his employment
with the Company if such ideas are related to such employment.
8. Indemnity. The Employee shall indemnify the Company, its
officers, directors and stockholders (other than the Employee), and hold the
Company, its officers, directors and stockholders (other than the Employee)
harmless, from and against any and all actions, suits, proceedings, liabilities,
damages, losses, costs and expenses (including attorneys' and experts' fees)
arising out of or in connection with any breach or threatened breach by the
Employee of any one or more provisions of this Agreement.
9. Termination of Employment.
9.1. Subject to Section 9.2 of this Agreement, The
Company shall have the right to terminate the Employee's employment hereunder at
any time and without prior written notice to the Employee upon the occurrence of
any one or more of the following events: (i) the breach by the Employee of any
material covenant, promise or agreement of this Agreement; (ii) the voluntary or
involuntary dissolution of the Company; (iii) the voluntary or involuntary
liquidation or winding up of the Company; (iv) the disability of the Employee
for more than two hundred ten (210) days in any twelve (12) month period
pursuant to Section 6.4 of this Agreement; or (v) for cause as defined in
Section 6.3.2 of this
- 5 -
<PAGE>
Agreement. Upon termination of the Employee's employment under this Agreement
pursuant to this Section 10, neither party shall thereafter have any further
rights, duties or obligations under this Agreement (except that Employee shall
have the obligations and duties set forth in Sections 7 and 8) but each party
shall remain liable and responsible to the other for all prior obligations and
duties hereunder and for all acts and omissions of such party, its agents,
servants and employees, prior to such termination.
9.2. Anything contained in Section 10.1 to the
contrary notwithstanding, the Company shall not terminate this Agreement and the
Employee's employment under this Agreement pursuant to Section 10.1(i) or (v)
unless the Company shall have first given to the Employee thirty (30) days'
prior written notice of such termination which sets forth the grounds of such
termination, and the Employee shall have failed to cure such grounds for
termination within said thirty (30) day period; provided, however, that the
foregoing opportunity to cure shall be limited to no more than two opportunities
during each twelve (12) month period hereunder, commencing upon the date hereof.
10. Notices. All notices and other communications required or
permitted to be given by this Agreement shall be in writing and shall be given
and shall be deemed received if and when either hand-delivered and a signed
receipt is given therefor or mailed by registered or certified U.S. mail, return
receipt requested, postage prepaid, and if to the Company to:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
with a copy to: Steven A. Thomas, Esquire
Thomas & Libowitz, P.A.
USF&G Tower, Suite 1100
100 Light Street
Baltimore, Maryland 21202-1053
and if to the Employee to:
------------------------------
------------------------------
------------------------------
or at such other address as either party hereto shall notify the other of in
writing.
11. Miscellaneous.
11.1. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns.
- 6 -
<PAGE>
This Agreement shall be binding upon the Employee and his heirs, personal and
legal representatives, and guardians, and shall inure to the benefit of the
Employee. Neither this Agreement nor any part hereof or interest herein shall be
assigned by the Employee.
11.2. The terms and provisions of this Agreement may
not be modified except by written instrument duly executed by each party hereto.
11.3. This Agreement shall be governed by and
enforced and construed in accordance with the laws of the State of Maryland.
11.4. This Agreement sets forth the entire,
integrated understanding and agreement of the parties hereto with respect to the
subject matter hereof.
11.5. The headings in this Agreement are included
for the convenience of reference and shall be given no effect in the
construction of this Agreement.
11.6. In the event of a breach of this Agreement,
the non-breaching party hereto may maintain an action for specific performance
against the party hereto who is alleged to have breached any of the terms,
conditions, representations, warranties or agreements, herein contained.
Anything contained herein to the contrary notwithstanding, this Section shall
not be construed to limit in any manner whatsoever any other rights or remedies
an aggrieved party may have by virtue of any breach of this Agreement. Each of
parties hereto shall have the right to waive compliance with or the fulfillment,
satisfaction or enforcement of any warranty, representation, covenant, promise,
agreement or condition herein set forth, but the waiver by any party of such
right shall not be deemed a waiver of compliance with or fulfillment,
satisfaction or enforcement of any other warranty, representation, covenant,
promise, agreement or condition herein set forth or to seek redress for any
breach thereof on any subsequent occasion, nor shall any such waiver be deemed
effective unless in writing and signed by the party so waiving.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed, acknowledged,
sealed and delivered this Agreement the day and year first hereinabove set
forth.
ATTEST: COMPANY:
/s/ J. Duncan Smith By: /s/ David Smith
- -------------------- --------------------
WITNESS: EMPLOYEE:
/s/ C. Wayne Davis /s/ J. Duncan Smith
- -------------------- --------------------
EMPLOYMENT AGREEMENT
SINCLAIR BROADCASTING GROUP, INC.
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made this 12th
day of June, 1995, by and between Sinclair Broadcast Group, Inc.(the "Company"),
a Maryland corporation, and Frederick G. Smith (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of television
broadcasting; and
WHEREAS, the Employee has specialized expertise in various
aspects of the management of television broadcast operations and related
functions; and
WHEREAS, the Company desires to employ the Employee as Vice
President, to render such services as are enumerated in the By-laws of the
Company for and on behalf of the Company and such other and further services as
shall be assigned reasonably, from time-to-time, to the Employee by the Board of
Directors of the Company, and the Employee is willing to accept such employment,
upon the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing Recitals,
which shall be deemed to be a substantive part of this Agreement, and the mutual
covenants, promises, agreements, representations and warranties hereinafter set
forth, the parties hereto do hereby covenant, promise, agree, represent and
warrant as follows:
1. EMPLOYMENT. The Company hereby employs the Employee as Vice
President, to render such services as are enumerated in the By-laws of the
Company for and on behalf of the Company, and the Employee shall render such
other and further services for and on behalf of the Company as may be assigned
reasonably, from time-to-time, to the Employee by the Board of Directors of the
Company (the "Services"). The Employee hereby accepts such employment with the
Company and agrees to render the Services for and on behalf of the Company on
the terms and conditions set forth in this Agreement. The power to direct,
control and supervise the Services to be performed, the means and manner of
performing the Services and the time for performing the Services shall be
exercised by the Board of Directors of the Company; provided, however, that the
Board of Directors shall not impose employment duties or constraints of any kind
which would require the Employee to violate any law, statute, ordinance, rule or
regulation now or hereinafter in effect.
2. TERM. The term (the "Initial Term") of this Agreement shall
commence on the date hereof and, subject to the further provisions of this
Agreement, shall end on the date which is three (3) years from the date of this
Agreement, provided,
<PAGE>
however, this Agreement shall be automatically renewed for successive one (1)
year periods (a "Renewal Term") unless, at least sixty (60) days prior to the
expiration of the Initial Term or any Renewal Term, either party gives written
notice to the other party specifically electing to terminate this Agreement at
the end of the Initial Term or any such Renewal Term.
3. PERFORMANCE OF SERVICES. The Employee shall devote all of
his professional time exclusively to the Company's business and shall render the
Services to the best of his ability for and on behalf of the Company. The
Employee shall comply with all laws, statutes, ordinances, rules and regulations
relating to the Services.
4. COMPENSATION. In consideration of and as full and total
compensation for all Services rendered or agreed to be rendered by the Employee
hereunder, the Company shall pay to the Employee an annual base salary of two
hundred and sixty thousand dollars ($260,000) (the "Salary"), payable in equal,
consecutive bi-weekly installments; provided, however, that no Salary shall be
paid to the Employee under this Agreement for any period subsequent to the
termination of employment of the Employee for any reason whatsoever. In addition
to the Salary, the Board of Directors will review the Employee's compensation
arrangement annually and dependent upon the performance of the Company and/or
the Employee during said year will award a bonus to the Employee (the "Bonus")
in an amount such that the total compensation to the Employee is within or
greater than the average range of compensation to persons holding similar
positions in the television broadcasting industry. Payment of the Salary and
Bonus shall be subject to the customary withholding tax and other employment
taxes as required with respect to compensation paid by a corporation to an
employee.
5. VACATIONS AND BENEFITS.
5.1. During each twelve (12) month period during the
Initial Term and any Renewal Term of this Agreement, the Employee shall be
entitled to vacation time of not less than four (4) weeks, during which time the
Employee's Salary shall be paid in full. The Employee shall take his vacation at
such time or times as shall be approved by the Company, which approval shall not
be unreasonably withheld.
5.2. The Employee shall be entitled to such other
benefits as the Board of Directors shall lawfully adopt and approve.
- 2 -
<PAGE>
6. DISABILITY.
6.1. As used herein, the Employee shall be
"disabled" or have a "disability" for purposes of this Agreement if the Employee
has an illness, injury, or other physical or mental condition which results in
the Employee's inability to perform substantially the duties he performed in his
employment capacity under this Agreement to the extent he was performing such
duties immediately prior to the commencement of such condition.
6.2. In the event that the Employee is disabled for
not more than sixty (60) days during any twelve (12) month period, then the
Employee, during the continuance of such disability, shall remain employed by
the Company hereunder and shall continue to receive his Salary pursuant to
Section 4 of this Agreement and otherwise have all of the rights and be subject
to all of the Employee's obligations and duties under this Agreement, other than
the obligation and duty to render the Services during such period of disability.
6.3. In the event that the Employee shall be
disabled for more than sixty (60) days during any twelve (12) month period, but
not more than One hundred twenty (120) days during any twelve (12) month period,
then from and after the expiration of the one hundred twentieth (120th) day and
during the continuance of such disability up to and including the day
immediately preceding the sixty first (61st) day, the Employee shall be deemed
to have taken a leave of absence from the Company commencing on the sixty first
(61st) day of such disability and, during the continuance of such disability,
the following provisions shall apply:
6.3.1. The Employee's Salary shall be
apportioned up to and including the sixtieth (60th) day of such disability and
from and after the sixtieth (60th) day of such disability and up to and
including the day immediately preceding the two hundred tenth (210th) day, the
Company shall pay no Salary to the Employee and the Employee shall receive no
Salary from the Company.
6.3.2. The Company, in the sole discretion
of its Board of Directors, shall have the right and power to remove the Employee
from the position as an officer of the Company or to delegate all or any portion
of the Employee's duties as an officer of the Company to one or more other
employees of the Company, provided, however, that removal of the Employee from
the position as an officer may only be for cause. Cause is defined as: (i)
conviction of a crime affecting the Company's reputation or which precludes the
Employee from performing his duties and resposibilities as an officer of the
Company; (ii) a breach of fiduciary duty to the Company or its stockholders; or
(ii) repeated failure to exercise and/or undertake his duties as an officer
- 3 -
<PAGE>
6.3.3. The Employee shall otherwise have
all of the rights and be subject to all of the Employee's obligations and duties
under this Agreement, except that the Employee shall have no obligation or duty
to render the Services otherwise in accordance with this Agreement; provided,
however, that the Company shall be excused from providing any insurance
coverages or benefits which, by reason of the Employee's disability, the Company
shall not be able to obtain, continue or maintain at substantially the same cost
and expense or on substantially the same terms and conditions that the Company
was able to obtain, continue or maintain immediately prior to the commencement
of the Employee's disability.
6.4. In the event that the Employee shall be
disabled for more than two hundred ten (210) days in any twelve (12) month
period, there shall exist a presumptive conclusion that the Employee is no
longer able to perform the Services, and this Agreement may be terminated by the
Company without further notice to the Employee.
6.5. If the Company and the Employee are unable to
agree whether the Employee is disabled within the meaning of this Section 6,
then this limited issue shall be submitted to and settled by binding arbitration
under and pursuant to the Maryland Uniform Arbitration Act and the rules and
regulations of the American Arbitration Association, and the decision in such
arbitration shall be final, conclusive and binding upon each of the parties and
judgment may be entered thereon in any court of competent jurisdiction. No other
issue shall be submitted to or settled by binding arbitration under this
Agreement.
7. Confidential Information.
7.1. The Employee acknowledges that in the
Employee's employment hereunder, the Employee will be making use of, acquiring
and adding to the Company's trade secrets and its confidential and proprietary
information of a special and unique nature and value relating to such matters
as, but not limited to, the Company's business operations, internal structure,
financial affairs, systems, procedures, manuals, confidential reports, lists of
clients and prospective clients and sales and marketing methods, as well as the
amount, nature and type of services, equipment and methods used and preferred by
the Company's clients and the fees paid by such clients, all of which shall be
deemed to be confidential information. The Employee acknowledges that such
confidential information has been and will continue to be of central importance
to the business of the Company and that disclosure of it to or its use by others
could cause substantial loss to the Company. In consideration of employment by
the Company, the Employee agrees that during the Initial Term and any Renewal
Term of this Agreement and upon and after leaving the
- 4 -
<PAGE>
employ of the Company for any reason whatsoever, the Employee shall not, for any
purpose whatsoever, directly or indirectly, divulge or disclose to any person or
entity any of such confidential information which was obtained by the Employee
as a result of the Employee's employment with the Company or any trade secrets
of the Company, but shall hold all of the same confidential and inviolate.
7.2. All contracts, agreements, financial books,
records, instruments and documents, client lists, memoranda, data, reports,
tapes, rolodexes, telephone and address books, letters, research, card decks,
listings, and any other instruments, records or documents relating or pertaining
to clients serviced by the Company or the Employee, the Services rendered by the
Employee, or the business of the Company (collectively, the "Records") shall at
all times be and remain the property of the Company. Upon termination of this
Agreement and the Employee's employment under this Agreement for any reason
whatsoever, the Employee shall return to the Company all Records (whether
furnished by the Company or prepared by the Employee), and the Employee shall
neither make nor retain any copies of any of such Records after such
termination.
7.3. The Employee shall assign permanently to the
Company exclusive rights to any and all patents and copyrights awarded or
accruing to him on the basis of ideas developed by him for the Company and ideas
developed by him within one year following the termination of his employment
with the Company if such ideas are related to such employment.
8. Indemnity. The Employee shall indemnify the Company, its
officers, directors and stockholders (other than the Employee), and hold the
Company, its officers, directors and stockholders (other than the Employee)
harmless, from and against any and all actions, suits, proceedings, liabilities,
damages, losses, costs and expenses (including attorneys' and experts' fees)
arising out of or in connection with any breach or threatened breach by the
Employee of any one or more provisions of this Agreement.
9. Termination of Employment.
9.1. Subject to Section 9.2 of this Agreement, The
Company shall have the right to terminate the Employee's employment hereunder at
any time and without prior written notice to the Employee upon the occurrence of
any one or more of the following events: (i) the breach by the Employee of any
material covenant, promise or agreement of this Agreement; (ii) the voluntary or
involuntary dissolution of the Company; (iii) the voluntary or involuntary
liquidation or winding up of the Company; (iv) the disability of the Employee
for more than two hundred ten (210) days in any twelve (12) month period
pursuant to Section 6.4 of this Agreement; or (v) for cause as defined in
Section 6.3.2 of this
- 5 -
<PAGE>
Agreement. Upon termination of the Employee's employment under this Agreement
pursuant to this Section 10, neither party shall thereafter have any further
rights, duties or obligations under this Agreement (except that Employee shall
have the obligations and duties set forth in Sections 7 and 8) but each party
shall remain liable and responsible to the other for all prior obligations and
duties hereunder and for all acts and omissions of such party, its agents,
servants and employees, prior to such termination.
9.2. Anything contained in Section 10.1 to the
contrary notwithstanding, the Company shall not terminate this Agreement and the
Employee's employment under this Agreement pursuant to Section 10.1(i) or (v)
unless the Company shall have first given to the Employee thirty (30) days'
prior written notice of such termination which sets forth the grounds of such
termination, and the Employee shall have failed to cure such grounds for
termination within said thirty (30) day period; provided, however, that the
foregoing opportunity to cure shall be limited to no more than two opportunities
during each twelve (12) month period hereunder, commencing upon the date hereof.
10. Notices. All notices and other communications required
or permitted to be given by this Agreement shall be in writing and shall be
given and shall be deemed received if and when either hand-delivered and a
signed receipt is given therefor or mailed by registered or certified U.S. mail,
return receipt requested, postage prepaid, and if to the Company to:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
with a copy to: Steven A. Thomas, Esquire
Thomas & Libowitz, P.A.
USF&G Tower, Suite 1100
100 Light Street
Baltimore, Maryland 21202-1053
and if to the Employee to:
------------------------------
------------------------------
------------------------------
or at such other address as either party hereto shall notify the other of in
writing.
11. Miscellaneous.
11.1. This Agreement shall be binding upon and inure
to the benefit of the Company, its successors and assigns.
- 6 -
<PAGE>
This Agreement shall be binding upon the Employee and his heirs, personal and
legal representatives, and guardians, and shall inure to the benefit of the
Employee. Neither this Agreement nor any part hereof or interest herein shall be
assigned by the Employee.
11.2. The terms and provisions of this Agreement may
not be modified except by written instrument duly executed by each party hereto.
11.3. This Agreement shall be governed by and
enforced and construed in accordance with the laws of the State of Maryland.
11.4. This Agreement sets forth the entire,
integrated understanding and agreement of the parties hereto with respect to the
subject matter hereof.
11.5. The headings in this Agreement are included
for the convenience of reference and shall be given no effect in the
construction of this Agreement.
11.6. In the event of a breach of this Agreement,
the non-breaching party hereto may maintain an action for specific performance
against the party hereto who is alleged to have breached any of the terms,
conditions, representations, warranties or agreements, herein contained.
Anything contained herein to the contrary notwithstanding, this Section shall
not be construed to limit in any manner whatsoever any other rights or remedies
an aggrieved party may have by virtue of any breach of this Agreement. Each of
parties hereto shall have the right to waive compliance with or the fulfillment,
satisfaction or enforcement of any warranty, representation, covenant, promise,
agreement or condition herein set forth, but the waiver by any party of such
right shall not be deemed a waiver of compliance with or fulfillment,
satisfaction or enforcement of any other warranty, representation, covenant,
promise, agreement or condition herein set forth or to seek redress for any
breach thereof on any subsequent occasion, nor shall any such waiver be deemed
effective unless in writing and signed by the party so waiving.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed, acknowledged,
sealed and delivered this Agreement the day and year first hereinabove set
forth.
ATTEST: COMPANY:
/s/ J. Duncan Smith By: /s/ David Smith
- ------------------- -------------------
WITNESS: EMPLOYEE:
/s/ C. Wayne Davis /s/ Frederick G. Smith
- ------------------- ----------------------
- 8 -
EMPLOYMENT AGREEMENT
SINCLAIR BROADCASTING GROUP, INC.
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made this 12th
day of June, 1995, by and between Sinclair Broadcast Group, Inc.(the "Company"),
a Maryland corporation, and David D. Smith (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of television
broadcasting; and
WHEREAS, the Employee has specialized expertise in various
aspects of the management of television broadcast operations and related
functions; and
WHEREAS, the Company desires to employ the Employee as
President and Chief Executive officer, to render such services as are enumerated
in the By-laws of the Company for and on behalf of the Company and such other
and further services as shall be assigned reasonably, from time-to-time, to the
Employee by the Board of Directors of the Company, and the Employee is willing
to accept such employment, upon the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing Recitals,
which shall be deemed to be a substantive part of this Agreement, and the mutual
covenants, promises, agreements, representations and warranties hereinafter set
forth, the parties hereto do hereby covenant, promise, agree, represent and
warrant as follows:
1. EMPLOYMENT. The Company hereby employs the Employee as
President and Chief Executive officer, to render such services as are enumerated
in the By-laws of the Company for and on behalf of the Company, and the Employee
shall render such other and further services for and on behalf of the Company as
may be assigned reasonably, from time-to-time, to the Employee by the Board of
Directors of the Company (the "Services"). The Employee hereby accepts such
employment with the Company and agrees to render the Services for and on behalf
of the Company on the terms and conditions set forth in this Agreement. The
power to direct, control and supervise the Services to be performed, the means
and manner of performing the Services and the time for performing the Services
shall be exercised by the Board of Directors of the Company; provided, however,
that the Board of Directors shall not impose employment duties or constraints of
any kind which would require the Employee to violate any law, statute,
ordinance, rule or regulation now or hereinafter in effect.
2. TERM. The term (the "Initial Term") of this Agreement
shall commence on the date hereof and, subject to the further provisions of this
Agreement, shall end on the date which
- 1 -
<PAGE>
is three (3) years from the date of this Agreement, provided, however, this
Agreement shall be automatically renewed for successive one (1) year periods (a
"Renewal Term") unless, at least sixty (60) days prior to the expiration of the
Initial Term or any Renewal Term, either party gives written notice to the other
party specifically electing to terminate this Agreement at the end of the
Initial Term or any such Renewal Term.
3. PERFORMANCE OF SERVICES. The Employee shall devote all of
his professional time exclusively to the Company's business and shall render the
Services to the best of his ability for and on behalf of the Company. The
Employee shall comply with all laws, statutes, ordinances, rules and regulations
relating to the Services.
4. COMPENSATION. In consideration of and as full and total
compensation for all Services rendered or agreed to be rendered by the Employee
hereunder, the Company shall pay to the Employee an annual base salary of four
hundred and fifty thousand dollars ($450,000) (the "Salary"), payable in equal,
consecutive bi-weekly installments; provided, however, that no Salary shall be
paid to the Employee under this Agreement for any period subsequent to the
termination of employment of the Employee for any reason whatsoever. In addition
to the Salary, the Board of Directors will review the Employee's compensation
arrangement annually and dependent upon the performance of the Company and/or
the Employee during said year will award a bonus to the Employee (the "Bonus")
in an amount such that the total compensation to the Employee is within or
greater than the average range of compensation to persons holding similar
positions in the television broadcasting industry. Payment of the Salary and
Bonus shall be subject to the customary withholding tax and other employment
taxes as required with respect to compensation paid by a corporation to an
employee.
5. VACATIONS AND BENEFITS.
5.1. During each twelve (12) month period during the
Initial Term and any Renewal Term of this Agreement, the Employee shall be
entitled to vacation time of not less than four (4) weeks, during which time the
Employee's Salary shall be paid in full. The Employee shall take his vacation at
such time or times as shall be approved by the Company, which approval shall not
be unreasonably withheld.
5.2. The Employee shall be entitled to such other
benefits as the Board of Directors shall lawfully adopt and approve.
- 2 -
<PAGE>
6. DISABILITY.
6.1. As used herein, the Employee shall be "disabled" or
have a "disability" for purposes of this Agreement if the Employee has an
illness, injury, or other physical or mental condition which results in the
Employee's inability to perform substantially the duties he performed in his
employment capacity under this Agreement to the extent he was performing such
duties immediately prior to the commencement of such condition.
6.2. In the event that the Employee is disabled for not
more than sixty (60) days during any twelve (12) month period, then the
Employee, during the continuance of such disability, shall remain employed by
the Company hereunder and shall continue to receive his Salary pursuant to
Section 4 of this Agreement and otherwise have all of the rights and be subject
to all of the Employee's obligations and duties under this Agreement, other than
the obligation and duty to render the Services during such period of disability.
6.3. In the event that the Employee shall be disabled for
more than sixty (60) days during any twelve (12) month period, but not more than
One hundred twenty (120) days during any twelve (12) month period, then from and
after the expiration of the one hundred twentieth (120th) day and during the
continuance of such disability up to and including the day immediately preceding
the sixty first (61st) day, the Employee shall be deemed to have taken a leave
of absence from the Company commencing on the sixty first (61st) day of such
disability and, during the continuance of such disability, the following
provisions shall apply:
6.3.1. The Employee's Salary shall be apportioned up
to and including the sixtieth (60th) day of such disability and from and after
the sixtieth (60th) day of such disability and up to and including the day
immediately preceding the two hundred tenth (210th) day, the Company shall pay
no Salary to the Employee and the Employee shall receive no Salary from the
Company.
6.3.2. The Company, in the sole discretion of its
Board of Directors, shall have the right and power to remove the Employee from
the position as an officer of the Company or to delegate all or any portion of
the Employee's duties as an officer of the Company to one or more other
employees of the Company, provided, however, that removal of the Employee from
the position as an officer may only be for cause. Cause is defined as: (i)
conviction of a crime affecting the Company's reputation or which precludes the
Employee from performing his duties and resposibilities as an officer of the
Company; (ii) a breach of fiduciary duty to the Company or its stockholders; or
(ii) repeated failure to exercise and/or undertake his duties as an officer.
- 3 -
<PAGE>
6.3.3. The Employee shall otherwise have all of the
rights and be subject to all of the Employee's obligations and duties under this
Agreement, except that the Employee shall have no obligation or duty to render
the Services otherwise in accordance with this Agreement; provided, however,
that the Company shall be excused from providing any insurance coverages or
benefits which, by reason of the Employee's disability, the Company shall not be
able to obtain, continue or maintain at substantially the same cost and expense
or on substantially the same terms and conditions that the Company was able to
obtain, continue or maintain immediately prior to the commencement of the
Employee's disability.
6.4. In the event that the Employee shall be disabled for
more than two hundred ten (210) days in any twelve (12) month period, there
shall exist a presumptive conclusion that the Employee is no longer able to
perform the Services, and this Agreement may be terminated by the Company
without further notice to the Employee.
6.5. If the Company and the Employee are unable to agree
whether the Employee is disabled within the meaning of this Section 6, then this
limited issue shall be submitted to and settled by binding arbitration under and
pursuant to the Maryland Uniform Arbitration Act and the rules and regulations
of the American Arbitration Association, and the decision in such arbitration
shall be final, conclusive and binding upon each of the parties and judgment may
be entered thereon in any court of competent jurisdiction. No other issue shall
be submitted to or settled by binding arbitration under this Agreement.
7. CONFIDENTIAL INFORMATION.
7.1. The Employee acknowledges that in the Employee's
employment hereunder, the Employee will be making use of, acquiring and adding
to the Company's trade secrets and its confidential and proprietary information
of a special and unique nature and value relating to such matters as, but not
limited to, the Company's business operations, internal structure, financial
affairs, systems, procedures, manuals, confidential reports, lists of clients
and prospective clients and sales and marketing methods, as well as the amount,
nature and type of services, equipment and methods used and preferred by the
Company's clients and the fees paid by such clients, all of which shall be
deemed to be confidential information. The Employee acknowledges that such
confidential information has been and will continue to be of central importance
to the business of the Company and that disclosure of it to or its use by others
could cause substantial loss to the Company. In consideration of employment by
the Company, the Employee agrees that during the Initial Term and any Renewal
Term of this Agreement and upon and after leaving the
- 4 -
<PAGE>
employ of the Company for any reason whatsoever, the Employee shall not, for any
purpose whatsoever, directly or indirectly, divulge or disclose to any person or
entity any of such confidential information which was obtained by the Employee
as a result of the Employee's employment with the Company or any trade secrets
of the Company, but shall hold all of the same confidential and inviolate.
7.2. All contracts, agreements, financial books, records,
instruments and documents, client lists, memoranda, data, reports, tapes,
rolodexes, telephone and address books, letters, research, card decks, listings,
and any other instruments, records or documents relating or pertaining to
clients serviced by the Company or the Employee, the Services rendered by the
Employee, or the business of the Company (collectively, the "Records") shall at
all times be and remain the property of the Company. Upon termination of this
Agreement and the Employee's employment under this Agreement for any reason
whatsoever, the Employee shall return to the Company all Records (whether
furnished by the Company or prepared by the Employee), and the Employee shall
neither make nor retain any copies of any of such Records after such
termination.
7.3. The Employee shall assign permanently to the Company
exclusive rights to any and all patents and copyrights awarded or accruing to
him on the basis of ideas developed by him for the Company and ideas developed
by him within one year following the termination of his employment with the
Company if such ideas are related to such employment.
8. INDEMNITY. The Employee shall indemnify the Company, its
officers, directors and stockholders (other than the Employee), and hold the
Company, its officers, directors and stockholders (other than the Employee)
harmless, from and against any and all actions, suits, proceedings, liabilities,
damages, losses, costs and expenses (including attorneys' and experts' fees)
arising out of or in connection with any breach or threatened breach by the
Employee of any one or more provisions of this Agreement.
9. TERMINATION OF EMPLOYMENT.
9.1. Subject to Section 9.2 of this Agreement, The Company
shall have the right to terminate the Employee's employment hereunder at any
time and without prior written notice to the Employee upon the occurrence of any
one or more of the following events: (i) the breach by the Employee of any
material covenant, promise or agreement of this Agreement; (ii) the voluntary or
involuntary dissolution of the Company; (iii) the voluntary or involuntary
liquidation or winding up of the Company; (iv) the disability of the Employee
for more than two hundred ten (210) days in any twelve (12) month period
pursuant to Section 6.4 of this Agreement; or (v) for cause as defined in
Section 6.3.2 of this
- 5 -
<PAGE>
Agreement. Upon termination of the Employee's employment under this Agreement
pursuant to this Section 10, neither party shall thereafter have any further
rights, duties or obligations under this Agreement (except that Employee shall
have the obligations and duties set forth in Sections 7 and 8) but each party
shall remain liable and responsible to the other for all prior obligations and
duties hereunder and for all acts and omissions of such party, its agents,
servants and employees, prior to such termination.
9.2. Anything contained in Section 10.1 to the contrary
notwithstanding, the Company shall not terminate this Agreement and the
Employee's employment under this Agreement pursuant to Section 10.1(i) or (v)
unless the Company shall have first given to the Employee thirty (30) days'
prior written notice of such termination which sets forth the grounds of such
termination, and the Employee shall have failed to cure such grounds for
termination within said thirty (30) day period; provided, however, that the
foregoing opportunity to cure shall be limited to no more than two opportunities
during each twelve (12) month period hereunder, commencing upon the date hereof.
10. NOTICES. All notices and other communications required or
permitted to be given by this Agreement shall be in writing and shall be given
and shall be deemed received if and when either hand-delivered and a signed
receipt is given therefor or mailed by registered or certified U.S. mail, return
receipt requested, postage prepaid, and if to the Company to:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
with a copy to: Steven A. Thomas, Esquire
Thomas & Libowitz, P.A.
USF&G Tower, Suite 1100
100 Light Street
Baltimore, Maryland 21202-1053
and if to the Employee to:
------------------------------
------------------------------
------------------------------
or at such other address as either party hereto shall notify the other of in
writing.
11. MISCELLANEOUS.
11.1. This Agreement shall be binding upon and inure to
the benefit of the Company, its successors and assigns.
- 6 -
<PAGE>
This Agreement shall be binding upon the Employee and his heirs, personal and
legal representatives, and guardians, and shall inure to the benefit of the
Employee. Neither this Agreement nor any part hereof or interest herein shall be
assigned by the Employee.
11.2. The terms and provisions of this Agreement may not
be modified except by written instrument duly executed by each party hereto.
11.3. This Agreement shall be governed by and enforced and
construed in accordance with the laws of the State of Maryland.
11.4. This Agreement sets forth the entire, integrated
understanding and agreement of the parties hereto with respect to the subject
matter hereof.
11.5. The headings in this Agreement are included for the
convenience of reference and shall be given no effect in the construction of
this Agreement.
11.6. In the event of a breach of this Agreement, the
non-breaching party hereto may maintain an action for specific performance
against the party hereto who is alleged to have breached any of the terms,
conditions, representations, warranties or agreements, herein contained.
Anything contained herein to the contrary notwithstanding, this Section shall
not be construed to limit in any manner whatsoever any other rights or remedies
an aggrieved party may have by virtue of any breach of this Agreement. Each of
parties hereto shall have the right to waive compliance with or the fulfillment,
satisfaction or enforcement of any warranty, representation, covenant, promise,
agreement or condition herein set forth, but the waiver by any party of such
right shall not be deemed a waiver of compliance with or fulfillment,
satisfaction or enforcement of any other warranty, representation, covenant,
promise, agreement or condition herein set forth or to seek redress for any
breach thereof on any subsequent occasion, nor shall any such waiver be deemed
effective unless in writing and signed by the party so waiving.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed, acknowledged,
sealed and delivered this Agreement the day and year first hereinabove set
forth.
ATTEST: COMPANY:
/s/ J. Duncan Smith By: /s/ Robert E. Smith
- -------------------- -------------------
WITNESS: EMPLOYEE:
/s/ J. Duncan Smith /s/ David Smith
- -------------------- -------------------
- 8 -
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1995 1996
-------- ------- --------
<S> <C> <C> <C>
Weighted-average number of common shares ... 29,000 32,198 34,748
Dilutive effect of outstanding stock options -- 7 170
Dilutive effect of conversion of preferred
shares ..................................... -- -- 2,463
------- ------- ----------
Weighted-average number of common and common
equivalent shares outstanding .............. 29,000 32,205 37,381
======= ======= ==========
Net income (loss) before extraordinary item $(2,740) $ 4,988 $ 1,131
======= ======= ==========
Net income (loss) per common and common
equivalent share before extraordinary item . $ (0.09) $ 0.15 $ 0.03
======= ======= ==========
Net income (loss) .......................... $(2,740) $ 76 $ 1,131
======= ======= ==========
Net income (loss) per common and common
equivalent share ........................... $ (0.09) $ -- $ 0.03
======= ======= ==========
</TABLE>
EXHIBIT 12
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Income (loss) before provision
(benefit) for income taxes and
extraordinary items................. $(5,840) $ 922 $(3,387) $10,188 $ 8,067
Fixed charges(a).................... 12,997 12,852 25,418 39,253 84,314
---------- -------- ---------- --------- --------
Earnings available for fixed
charges............................. 7,157 13,774 22,031 49,441 92,381
Fixed charges....................... 12,997 12,852 25,418 39,253 84,314
---------- -------- ---------- --------- --------
Ratio of earnings to fixed charges . -- 1.1 x -- 1.3 x 1.1 x
</TABLE>
(a) Fixed charges consist of interest expense, which includes interest on all
debt and amortization of debt discount, and deferred financing costs.
EXHIBIT 21
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
NAME OF SUBSIDIARY STATE OF INCORPORATION
- ------------------------------------------------- ---------------------------
Sinclair Communications, Inc. Maryland
Cresap Enterprises, Inc. Maryland
Chesapeake Television, Inc. Maryland
Chesapeake Television Licensee, Inc. Delaware
WTTE Channel 28, Inc. Maryland
WTTE Channel 28 Licensee, Inc. Maryland
WPGH, Inc. Maryland
WPGH Licensee, Inc. Maryland
WCGV, Inc. Maryland
WCGV Licensee, Inc. Delaware
WLFL, Inc. Maryland
WLFL Licensee, Inc. Delaware
FSF-TV, Inc. North Carolina
WTVZ, Inc. Maryland
WTVZ Licensee, Inc. Maryland
WTTO, Inc. Maryland
WTTO Licensee, Inc. Delaware
WDBB, Inc. Maryland
Tuscaloosa Broadcasting, Inc. Maryland
WSMH, Inc. Maryland
WSMH Licensee, Inc. Delaware
KSMO, Inc. Maryland
KSMO Licensee, Inc. Delaware
WSTR, Inc. Maryland
WSTR Licensee, Inc. Maryland
Superior Communications of Oklahoma, Inc. Oklahoma
Superior OK License Corp. Delaware
Superior Communications of Kentucky, Inc. Delaware
Superior KY License Corp. Delaware
WYZZ, Inc. Maryland
WYZZ Licensee, Inc. Delaware
SCI-Sacramento Licensee, Inc. Delaware
SCI-Indiana Licensee, Inc. Delaware
KDSM, Inc. Maryland
KDSM Licensee, Inc. Delaware
KDNL Licensee, Inc. Delaware
WLOS Licensee, Inc. Delaware
KABB Licensee, Inc. Delaware
Sinclair Radio of Buffalo, Inc. Maryland
Sinclair Radio of Buffalo Licensee, Inc. Delaware
Sinclair Radio of Wilkes Barre, Inc. Maryland
Sinclair Radio of Wilkes Barre Licensee, Inc. Delaware
Sinclair Radio of Nashville, Inc. Maryland
Sinclair Radio of Nashville Licensee, Inc. Delaware
Sinclair Radio of Memphis, Inc. Maryland
Sinclair Radio of Memphis Licensee, Inc. Delaware
<PAGE>
NAME OF SUBSIDIARY STATE OF INCORPORATION
- ------------------------------------------------- ---------------------------
Sinclair Radio of New Orleans, Inc. Maryland
Sinclair Radio of New Orleans Licensee, Inc. Delaware
Sinclair Radio of Los Angeles, Inc. Maryland
Sinclair Radio of Los Angeles Licensee, Inc. Delaware
Sinclair Radio of St. Louis, Inc. Maryland
Sinclair Radio of St. Louis Licensee, Inc. Delaware
The Company has additional subsidiaries, which considered in the aggregate as a
single subsidiary, do not constitute a significant subsidiary.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this form 10-K/A, into the Company's previously
filed Registration Statements (File No. 33-69482, File No. 33-94982 and File
No. 333-12255).
ARTHUR ANDERSEN LLP
Baltimore, Maryland
April 2, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS OF SINCLAIR
BROADCAST GROUP, INC. FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,341
<SECURITIES> 0
<RECEIVABLES> 112,313
<ALLOWANCES> 2,472
<INVENTORY> 0
<CURRENT-ASSETS> 167,770
<PP&E> 154,333
<DEPRECIATION> 11,711
<TOTAL-ASSETS> 1,707,297
<CURRENT-LIABILITIES> 173,645
<BONDS> 400,000
0
11
<COMMON> 349
<OTHER-SE> 236,893
<TOTAL-LIABILITY-AND-EQUITY> 1,707,297
<SALES> 0
<TOTAL-REVENUES> 378,488
<CGS> 0
<TOTAL-COSTS> 289,585
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,314
<INCOME-PRETAX> 8,067
<INCOME-TAX> 6,936
<INCOME-CONTINUING> 1,131
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,131
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
