AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1998
REGISTRATION NO. 333-12255
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-3/A
POST-EFFECTIVE AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
SINCLAIR BROADCAST GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 4833 52-1494660
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
-----------------
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211
(410) 467-5005
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
DAVID D. SMITH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SINCLAIR BROADCAST GROUP, INC.
2000 WEST 41ST STREET
BALTIMORE, MARYLAND 21211
(410) 467-5005
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------
With a copy to:
GEORGE P. STAMAS, ESQ. STEVEN A. THOMAS, ESQ.
WILMER, CUTLER & PICKERING THOMAS & LIBOWITZ, P.A.
2445 M STREET, N.W. 100 LIGHT STREET -- SUITE 1100
WASHINGTON, D.C. 20037 BALTIMORE, MD 21202
(202) 663-6000 (410) 752-2468
-----------------
Approximate date of commencement of proposed sale of the
securities to the public:
As soon as practicable after the effective date of this Registration Statement.
-----------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.[ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
================================================================================
<PAGE>
PROSPECTUS
3,373,410 SHARES
[GRAPHIC OMITTED]
CLASS A COMMON STOCK
Par value $.01 per share
------------------
All of the shares of Class A Common Stock, par value $.01 per share (the
"Class A Common Stock") offered hereby are being sold by the Selling
Stockholders, as defined herein. Sinclair Broadcast Group, Inc. (the "Company")
will not receive any of the proceeds from the sale of shares offered hereby. The
shares offered hereby may be sold by the Selling Stockholders in transactions on
the over-the-counter market, in privately negotiated transactions, or otherwise,
at prices prevailing at the time of sale or related to the then-current market
price, or as may be negotiated at the time of sale.
The Company's outstanding capital stock consists of the Class A Common
Stock, shares of Class B Common Stock, par value $.01 per share (the "Class B
Common Stock"), shares of Series B Convertible Preferred Stock, par value $.01
per share (the "Series B Preferred Stock"), shares of Series C Preferred Stock,
par value $.01 per share (the "Series C Preferred Stock") and shares of Series D
Convertible Exchangeable Preferred Stock, par value $.01 per share (the "Series
D Preferred Stock"). The rights of the Class A Common Stock and the Class B
Common Stock (collectively, the "Common Stock") are identical, except that each
share of Class A Common Stock entitles the holder thereof to one vote in respect
of matters submitted for the vote of holders of Common Stock, whereas each share
of Class B Common Stock entitles the holder thereof to one vote on "going
private" and certain other transactions and to ten votes on other matters. Each
share of Class B Common Stock converts automatically into one share of Class A
Common Stock upon sale or other transfer to a party other than a Permitted
Transferree. Each share of Series B Preferred Stock has a liquidation preference
of $100, is convertible into approximately 3.64 shares of Class A Common Stock
(subject to adjustment), and has 3.64 votes on all matters on which holders of
shares of Common Stock have a vote. Except as described in this Prospectus, the
Series C Preferred Stock and the Series D Preferred Stock do not have rights to
vote on matters on which holders of shares of Common Stock have a vote. See
"Description of Capital Stock."
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 29, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 75 Park Place, Room 1228, New York, New York 10007 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60621. Copies of such material may
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. at prescribed rates. Such reports and other
information can also be reviewed through the Commission's Electronic Data
Gathering, Analysis, and Retrieval System ("EDGAR") which is publicly available
though the Commission's Web site (http://www.sec.gov).
The Company has filed a Registration Statement on Form S-3 (together with
all amendments thereto, the "Registration Statement") with the Commission in
Washington, D.C., in accordance with the provision of the Securities Act of 1933
as amended (the "Securities Act"), with respect to the Class A Common Stock
offered hereby. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto. Statements
contained herein concerning the provisions of any document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of the
document so filed. Each such statement is qualified in its entirety by such
reference. The Registration Statement and the exhibits thereto may be inspected
without charge at the offices of the Commission or on EDGAR or copies thereof
may be obtained at prescribed rates from the Public Reference Section of the
Commission at the address set forth above.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF SECURITIES
OFFERED HEREBY TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
IN CONNECTION WITH THE OFFERING OF CLASS A COMMON STOCK PURSUANT TO THIS
PROSPECTUS, THE UNDERWRITERS AND SELLING GROUP MEMBERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE SECURITIES ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE EXCHANGE ACT. SEE "PLAN OF
DISTRIBUTION."
1
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to Sections 13(a) and 15(d) of the Exchange Act are incorporated hereby by
reference:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as amended (the "1997 Form 10-K"); and
(b) the Company's Current Reports on Form 8-K or 8-K/A filed March 17,
1998, March 27, 1998, April 8, 1998, April 10, 1998 and April 14, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to termination of the offering of the Class A Common Stock offered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
in this Prospectus or in a document incorporated or deemed to be incorporated by
reference in this Prospectus will be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document.
A copy of any and all of the documents incorporated herein by reference
(other than exhibits unless such exhibits are specifically incorporated by
reference into any such document) will be provided without charge to any person
to whom a copy of this Prospectus is delivered, upon written or oral request.
2
<PAGE>
THE COMPANY
The Company is a diversified broadcasting company that currently owns or
programs pursuant to Local Marketing Agreements ("LMAs") 35 television stations
and, upon consummation of all pending acquisitions and dispositions, will own or
program pursuant to LMAs 56 television stations. The Company owns or programs
pursuant to LMAs 52 radio stations, and upon consummation of all pending
acquisitions and dispositions, the Company will own or program pursuant to LMAs
51 radio stations. The Company believes that upon completion of all pending
acquisitions and dispositions it will be one of the top 10 radio groups in the
United States, when measured by the total number of radio stations owned or
programmed pursuant to LMAs.
The Company is a Maryland corporation formed in 1986. The Company's
principal offices are located at 2000 West 41st Street, Baltimore, Maryland
21211, and its telephone number is (410) 467-5005.
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should review carefully the following risks concerning the
Company and the broadcast industry before purchasing shares of Class A Common
Stock in the Company.
SUBSTANTIAL LEVERAGE AND PREFERRED STOCK OUTSTANDING
The Company has consolidated indebtedness that is substantial in relation
to its total stockholders' equity. As of March 31, 1998, the Company had
outstanding long-term indebtedness (including current installments) of
approximately $1.4 billion and Sinclair Capital, a subsidiary trust of the
Company (the "Trust"), had outstanding $200 million aggregate liquidation amount
of 11 5/8% High Yield Trust Offered Preferred Securities (the "HYTOPS"), which
are ultimately backed by $206.2 million liquidation amount of Series C Preferred
Stock, par value $.01 per share, of the Company (the "Series C Preferred Stock")
each of which must be redeemed in 2009. The Company may borrow additional
amounts under a bank credit facility governed by the Third Amended and Restated
Credit Agreement dated as of May 20, 1997 with The Chase Manhattan Bank, as
agent (as amended from time to time, the "Bank Credit Agreement"), under which
$659.8 million was outstanding as of March 31, 1998, and expects to do so to
finance its pending acquisitions, including, without limitation, the acquisition
of 100% of the stock of Lakeland Group Television, Inc., the acquisition (the
"Max Media Acquisition"), directly or indirectly, of all of the equity interests
of Max Media Properties, LLC and the acquisition (the "Sullivan Acquisition") of
100% of the stock of Sullivan Broadcasting Holdings, Inc. ("Sullivan"). The
Company also had outstanding 45,703 shares of its Series B Convertible Preferred
Stock, par value $.01 per share (the "Series B Preferred Stock"), with an
aggregate liquidation preference of $4.6 million as of April 23, 1998 and
3,450,000 shares of Series D Convertible Exchangeable Preferred Stock, par value
$.01 per share (the "Series D Convertible Exchangeable Preferred Stock"), with
an aggregate liquidation preference of approximately $172.5 million as of March
31, 1998, which is exchangeable at the option of the Company in certain
circumstances for subordinated debentures of the Company with an aggregate
principal amount of approximately $172.5 million as of March 31, 1998. The
Company also has significant program contracts payable and commitments for
future programming. Moreover, subject to the restrictions contained in its debt
instruments and preferred stock, the Company may incur additional debt and issue
additional preferred stock in the future.
The Company and its Subsidiaries have and will continue to have significant
payment obligations relating to the Bank Credit Agreement, the 10% Senior
Subordinated Notes due 2003 (the "1993 Notes"), the 10% Senior Subordinated
Notes due 2005 (the "1995 Notes"), the 9% Senior Subordinated Notes due 2007
(the "July 1997 Notes"), the 8 3/4% Senior Subordinated Notes due 2007 (the
"December 1997 Notes" and, together with the 1993 Notes, the 1995 Notes and the
July 1997 Notes, the "Existing Notes"), and the HYTOPS, and a significant amount
of the Company's cash flow will be required to service these obligations. In
addition, the Company will be required to pay dividends on the Series D
Convertible Exchangeable Preferred Stock, and may be required to pay dividends
on the Series B Convertible Preferred Stock in certain circumstances. See
"Description of Capital Stock -- Existing Preferred Stock." The Company, on a
3
<PAGE>
consolidated basis, reported interest expense of $117.0 million for the year
ended December 31, 1997. After giving pro forma effect to acquisitions completed
by the Company in 1997, the issuance of the HYTOPS, the issuance of the July
1997 Notes and the December 1997 Notes, the acquisition (the "Heritage
Acquisition") of certain assets of Heritage Media Group, Inc. ("Heritage"), the
Max Media Acquisition, the Sullivan Acquisition, and the Company's issuance in
September 1997 of 4,345,000 shares (the "1997 Common Stock Issuance") of Class A
Common Stock, and 3,450,000 shares of Series D Convertible Exchangeable
Preferred Stock (the "1997 Preferred Stock Issuance") and the offering of
6,000,000 shares of Class A Common Stock on April 8, 1998, as though each
occurred on January 1, 1997, and the use of the net proceeds therefrom, the
interest expense and subsidiary trust minority interest expense would have been
$195.6 million for the year ended December 31, 1997. The weighted average
interest rates on the Company's indebtedness under the Bank Credit Agreement
during the year ended December 31, 1997 was 7.43%.
The revolving credit facility available to the Company under the Bank
Credit Agreement is subject to quarterly reductions with total availability as
of March 31, 1998 of $180.4 million (subject to compliance with financial
covenants), and $472.0 million outstanding or subject to commitments under the
revolving credit facility as of March 31, 1998, and will mature on the last
business day of December 2004. Payment of portions of the $325 million term loan
under the Bank Credit Agreement began on September 30, 1997 and the term loan
must be fully repaid by December 31, 2004. In addition, the Bank Credit
Agreement provides for a Tranche C term loan in an amount up to $400 million
which can be utilized upon approval by the agent bank and upon raising
sufficient commitments to fund the additional loans. The 1993 Notes mature in
2003, the 1995 Notes mature in 2005 and the July 1997 Notes and the December
1997 Notes mature in 2007. The Series C Preferred Stock must be redeemed in
2009. Required repayment of indebtedness of the Company totaling approximately
$1.4 billion will occur at various dates through December 15, 2007.
The Company's current and future debt service obligations and obligations
to make distributions on and to redeem preferred stock could have adverse
consequences to holders of the Securities, including the following: (i) the
Company's ability to obtain financing for future working capital needs or
additional acquisitions or other purposes may be limited; (ii) a substantial
portion of the Company's cash flow from operations will be dedicated to the
payment of principal and interest on its indebtedness and payments related to
the HYTOPS, thereby reducing funds available for operations; (iii) the Company
may be vulnerable to changes in interest rates under its credit facilities; and
(iv) the Company may be more vulnerable to adverse economic conditions than less
leveraged competitors and, thus, may be limited in its ability to withstand
competitive pressures. If the Company is unable to service or refinance its
indebtedness or preferred stock, it may be required to sell one or more of its
stations to reduce debt service obligations.
The Company expects to be able to satisfy its future debt service and
dividend and other payment obligations and other commitments with cash flow from
operations. However, there can be no assurance that the future cash flow of the
Company will be sufficient to meet such obligations and commitments. If the
Company is unable to generate sufficient cash flow from operations in the future
to service its indebtedness and to meet its other commitments, it may be
required to refinance all or a portion of its existing indebtedness or to obtain
additional financing. There can be no assurance that any such refinancing or
additional financing could be obtained on acceptable terms. If the Company is
unable to service or refinance its indebtedness, it may be required to sell one
or more of its stations to reduce debt service obligations.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Existing Indentures and the Articles Supplementary relating to the
Series C Preferred Stock restrict, among other things, the Company's and its
Subsidiaries' (as defined in the Existing Indentures) ability to (i) incur
additional indebtedness, (ii) pay dividends, make certain other restricted
payments or consummate certain asset sales, (iii) enter into certain
transactions with affiliates, (iv) incur indebtedness that is subordinate in
priority and in right of payment to any senior debt and senior in right of
payment to the Existing Notes, (v) merge or consolidate with any other person,
or (vi) sell, assign, transfer, lease, convey, or otherwise dispose of all or
substantially all of the assets of the Company. In addition, the Bank Credit
Agreement contains certain other and more restrictive covenants, including
restrictions on redemption of
4
<PAGE>
capital stock, a limitation on the aggregate size of future acquisitions
undertaken without lender consent, a requirement that certain conditions be
satisfied prior to consummation of future acquisitions, and a limitation on the
amount of capital expenditures permitted by the Company in future years without
lender consent. The Bank Credit Agreement also requires the Company to maintain
specific financial ratios and to satisfy certain financial condition tests. In
addition, any Debt Securities may have other and more restrictive covenants. The
Company's ability to meet these financial ratios and financial condition tests
can be affected by events beyond its control, and there can be no assurance that
the Company will meet those tests. The breach of any of these covenants could
result in a default under the Bank Credit Agreement, the Existing Indentures
and/or Debt Securities. In the event of a default under the Bank Credit
Agreement, the Existing Indentures or any Debt Securities, the lenders and the
noteholders could seek to declare all amounts outstanding under the Bank Credit
Agreement, the Existing Notes or any Debt Securities, together with accrued and
unpaid interest, to be immediately due and payable. If the Company were unable
to repay those amounts, the lenders under the Bank Credit Agreement could
proceed against the collateral granted to them to secure that indebtedness. If
the indebtedness under the Bank Credit Agreement or the Existing Notes were to
be accelerated, there can be no assurance that the assets of the Company would
be sufficient to repay in full that indebtedness and the other indebtedness of
the Company including Debt Securities. Substantially all of the assets of the
Company and its Subsidiaries (other than the assets of KDSM, Inc. which
ultimately back up the HYTOPS) are pledged as security under the Bank Credit
Agreement. The Subsidiaries (with the exception of Cresap Enterprises, Inc.,
KDSM, Inc., the Trust and KDSM Licensee, Inc.) also guarantee the indebtedness
under the Bank Credit Agreement and the Existing Indentures.
In addition to a pledge of substantially all of the assets of the Company
and its Subsidiaries, the Company's obligations under the Bank Credit Agreement
are secured by mortgages on certain real property assets of certain non-Company
entities (the "Stockholder Affiliates") owned and controlled by the Company's
current majority stockholders (David D. Smith, Frederick G. Smith, J. Duncan
Smith and Robert E. Smith, collectively, the "Controlling Stockholders"),
including Cunningham Communications, Inc. ("CCI"), Gerstell Development
Corporation ("Gerstell"), Gerstell Development Limited Partnership ("Gerstell
LP") and Keyser Investment Group, Inc. ("KIG"). If the Company were to seek to
replace the Bank Credit Agreement, there can be no assurance that the assets of
these Stockholder Affiliates would be available to provide additional security
under a new credit agreement, or that a new credit agreement could be arranged
on terms as favorable as the terms of the Bank Credit Agreement without a pledge
of such Stockholder Affiliates' assets.
CONFLICTS OF INTEREST
In addition to their respective interests in the Company, the Controlling
Stockholders have interests in various non-Company entities which are involved
in businesses related to the business of the Company, including, among others,
the operation of a television station in St. Petersburg, Florida since 1991 and
a television station in Bloomington, Indiana since 1990. In addition, the
Company leases certain real property and tower space from and engages in other
transactions with the Stockholder Affiliates, which are controlled by the
Controlling Stockholders. Although the Controlling Stockholders have agreed to
divest interests in the Bloomington station that are attributable to them under
applicable regulations of the Federal Communications Commission (the "FCC"), the
Controlling Stockholders and the Stockholder Affiliates may continue to engage
in the operation of the St. Petersburg, Florida station and other already
existing businesses. However, under Maryland law, generally a corporate insider
is precluded from acting on a business opportunity in his or her individual
capacity if that opportunity is one which the corporation is financially able to
undertake, is in the line of the corporation's business and of practical
advantage to the corporation, and is one in which the corporation has an
interest or reasonable expectancy. Accordingly, the Controlling Stockholders
generally are required to engage in new business opportunities of the Company
only through the Company unless a majority of the Company's disinterested
directors decide under the standards discussed above, that it is not in the best
interests of the Company to pursue such opportunities. Non-Company activities of
the Controlling Stockholders such as those described above could, however,
present conflicts of interest with the Company in the allocation of management
time and resources of the Controlling Stockholders, a substantial majority of
which is currently devoted to the business of the Company.
5
<PAGE>
In addition, there have been and will be transactions between the Company
and Glencairn, Ltd. (with its subsidiaries, "Glencairn"), a corporation in which
relatives of the Controlling Stockholders beneficially own a majority of the
equity interests. Glencairn is the owner-operator and licensee of television
stations WRDC in Raleigh/Durham, WVTV in Milwaukee, WNUV in Baltimore, WABM in
Birmingham, KRRT in San Antonio, and WFBC in Asheville, North
Carolina/Greenville/Spartanburg, South Carolina. The Company has also agreed to
sell the assets essential for broadcasting a television signal in compliance
with regulatory guidelines ("License Assets") relating to WTTE in Columbus, Ohio
to Glencairn and to enter into an LMA with Glencairn pursuant to which the
Company will provide programming services for this station after the acquisition
of the License Assets by Glencairn. See "Business of Sinclair -- Broadcasting
Acquisition Strategy" in the 1997 Form 10-K. The FCC has approved this
transaction. However, the Company does not expect this transfer to occur unless
the Company acquires the assets of WSYX in Columbus, Ohio. The Company also
expects to enter into LMA's with Glencairn with respect to five television
stations, the license assets of which Glencairn has the right to acquire through
merger with Sullivan Broadcasting Company II, Inc.
Two persons who are expected to become directors of the Company, Barry
Baker (who is also expected to become an executive officer of the Company) and
Roy F. Coppedge, III, have direct and indirect interests in River City
Broadcasting, L.P. ("River City"), from which the Company purchased certain
assets in 1996 (the "River City Acquisition"). In addition, in connection with
the River City Acquisition, the Company has entered into various ongoing
agreements with River City, including options to acquire assets that were not
acquired at the time of the initial closing of the River City Acquisition, and
an LMA relating to stations for which River City continues to own License
Assets. See "Business -- Broadcasting Acquisition Strategy" in the 1997 Form
10-K. Messrs. Baker and Coppedge were not officers or directors of the Company
at the time these agreements were entered into, but, upon their expected
election to the Board of Directors of the Company and upon Mr. Baker's expected
appointment as an executive officer of the Company, they may have conflicts of
interest with respect to issues that arise under any continuing agreements and
any other agreements with River City.
The Bank Credit Agreement, the Existing Indentures and the Articles
Supplementary relating to the Series C Preferred Stock provide (and the Debt
Securities may provide) that transactions between the Company and its affiliates
must be no less favorable to the Company than would be available in comparable
transactions in arm's-length dealings with an unrelated third party. Moreover,
the Existing Indentures provide (and the Debt Securities may provide) that any
such transactions involving aggregate payments in excess of $1.0 million must be
approved by a majority of the members of the Board of Directors of the Company
and the Company's independent directors (or, in the event there is only one
independent director, by such director), and, in the case of any such
transactions involving aggregate payments in excess of $5.0 million, the Company
is required to obtain an opinion as to the fairness of the transaction to the
Company from a financial point of view issued by an investment banking or
appraisal firm of national standing.
VOTING RIGHTS; CONTROL BY CONTROLLING STOCKHOLDERS;
POTENTIAL ANTI-TAKEOVER EFFECT OF DISPROPORTIONATE VOTING RIGHTS
The Company's Common Stock has been divided into two classes, each with
different voting rights. The Class A Common Stock entitles a holder to one vote
per share on all matters submitted to a vote of the stockholders, whereas the
Company's Class B Common Stock, par value $.01 per share (the "Class B Common
Stock" and together with the Class A Common Stock, the "Common Stock"), 100% of
which is beneficially owned by the Controlling Stockholders, entitles a holder
to ten votes per share, except for "going private" and certain other
transactions for which the holder is entitled to one vote per share. The Class A
Common Stock, the Class B Common Stock and the Series B Preferred Stock vote
together as a single class (except as otherwise may be required by Maryland law)
on all matters submitted to a vote of stockholders, with each share of Series B
Preferred Stock entitled to 3.64 votes on all such matters. Holders of Class B
Common Stock may at any time convert their shares into the same number of shares
of Class A Common Stock and holders of Series B Convertible Preferred Stock may
at any time convert each share of Series B Convertible Preferred Stock into
approximately 3.64 Shares of Class A Common Stock.
The Controlling Stockholders own in the aggregate approximately 60% of the
outstanding voting capital stock (including the Series B Preferred Stock) of the
Company and control over 90% of all
6
<PAGE>
voting rights associated with the Company's capital stock. As a result, any
three of the Controlling Stockholders will be able to elect a majority of the
members of the board of directors of Sinclair and, thus, will have the ability
to maintain control over the operations and business of the Company.
The Controlling Stockholders have entered into a stockholders' agreement
(the "Stockholders' Agreement") pursuant to which they have agreed, for a period
ending in 2005, to vote for each other as candidates for election to the board
of directors of Sinclair. In addition, in connection with the River City
Acquisition, the Controlling Stockholders and Barry Baker and Boston Ventures IV
Limited Partnership and Boston Ventures IVA Limited Partnership (collectively,
"Boston Ventures") have entered into a voting agreement (the "Voting Agreement")
pursuant to which the Controlling Stockholders have agreed to vote in favor of
certain specified matters including, but not limited to, the appointment of Mr.
Baker and Mr. Coppedge (or another designee of Boston Ventures) to the Company's
Board of Directors at such time as they are allowed to become directors pursuant
to FCC rules. Mr. Baker and Boston Ventures, in turn, have agreed to vote in
favor of the reappointment of each of the Controlling Stockholders to the
Company's board of directors. The Voting Agreement will remain in effect with
respect to Mr. Baker for as long as he is a director of the Company and will
remain in effect with respect to Mr. Coppedge (or another designee of Boston
Ventures) until the first to occur of (a) the later of (i) May 31, 2001 and (ii)
the expiration of the initial five-year term of Mr. Baker's employment agreement
and (b) such time as Boston Ventures no longer owns directly or indirectly
through its interest in River City at least 721,115 shares of Class A Common
Stock (including shares that may be obtained on conversion of the Series B
Preferred Stock). See "Management -- Employment Agreements" in the 1997 Form
10-K.
The disproportionate voting rights of the Class B Common Stock relative to
the Class A Common Stock and the Stockholders' Agreement and the Voting
Agreement may make the Company a less attractive target for a takeover than it
otherwise might be or render more difficult or discourage a merger proposal,
tender offer or other transaction involving an actual or potential change of
control of the Company. In addition, the Company has the right to issue
additional shares of preferred stock the terms of which could make it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company and accordingly may be used as an anti-takeover device.
DEPENDENCE UPON KEY PERSONNEL; EMPLOYMENT AGREEMENTS WITH KEY PERSONNEL
The Company believes that its success will continue to be dependent upon
its ability to attract and retain skilled managers and other personnel,
including its present officers, regional directors and general managers. The
loss of the services of any of the present officers, especially its President
and Chief Executive Officer, David D. Smith, or Barry Baker, who is currently a
consultant to the Company and is expected to become President and Chief
Executive Officer of Sinclair Communications, Inc. (a wholly owned subsidiary of
the Company that holds all of the broadcast operations of the Company, "SCI")
and Executive Vice President and a director of the Company as soon as
permissible under FCC rules, may have a material adverse effect on the
operations of the Company. Each of the Controlling Stockholders has entered into
an employment agreement with the Company, each of which terminates June 12,
1998, unless renewed for an additional one year period according to its terms,
and Barry Baker has entered into an employment agreement that terminates in
2001. See "Management--Employment Agreements" in the 1997 Form 10-K. The Company
has key-man life insurance for Mr. Baker, but does not currently maintain key
personnel life insurance on any of its executive officers.
Mr. Baker is Chief Executive Officer of River City and devotes a
substantial amount of his business time and energies to those services. Mr.
Baker cannot be appointed as an executive officer or director of the Company
until such time as (i) either the Controlling Stockholders dispose of their
attributable interests (as defined by applicable FCC rules) in a television
station in the Indianapolis designated market area ("DMA") or Mr. Baker no
longer has an attributable interest in WTTV or WTTK in Indianapolis; and (ii)
either the Company disposes of its attributable interest in WTTE in Columbus or
Mr. Baker no longer has an attributable interest in WSYX in Columbus. These
events have not occurred as of the date of this Prospectus and, accordingly, Mr.
Baker is able to terminate his employment agreement at any time. If Mr. Baker's
employment agreement is terminated under certain specified circumstances, Mr.
Baker will have the right to purchase from the Company at fair market value
either
7
<PAGE>
(i) the Company's broadcast operations in either the St. Louis market or the
Asheville, North Carolina and Greenville/Spartanburg/Anderson, South Carolina
market or (ii) all of the Company's radio operations, either of which may also
have a material adverse effect on the operations of the Company.
RECENT RAPID GROWTH; ABILITY TO MANAGE GROWTH; FUTURE ACCESS TO CAPITAL
The Company has undergone rapid and significant growth over the course of
the last seven years primarily through acquisitions and the development of LMA
arrangements. Since 1991, the Company has increased the number of stations it
owns or provides programming services to from three television stations to 35
television stations and 52 radio stations. As the Company has grown, the size of
acquisitions that the Company seeks to pursue has grown and the number of
potentially attractive acquisitions has decreased, which may make it more
difficult for the Company to locate attractive acquisitions. There can be no
assurance that the Company will be able to continue to locate and complete
acquisitions on the scale of past acquisitions or larger, or in general. In
addition, acquisitions in the television and radio industry have come under
increased scrutiny from the Department of Justice, the Federal Trade Commission
and the FCC. See "Business of Sinclair--Federal Regulation of Television and
Radio Broadcasting" in the 1997 Form 10-K. Accordingly, there is no assurance
that the Company will be able to maintain its rate of growth or that the Company
will continue to be able to integrate and successfully manage such expanded
operations. Inherent in any acquisitions are certain risks such as increasing
leverage and debt service requirements and combining company cultures and
facilities which could have a material adverse effect on the Company's operating
results, particularly during the period immediately following such acquisitions.
Additional debt or capital may be required in order to complete future
acquisitions, and there can be no assurance the Company will be able to obtain
such financing or raise the required capital.
DEPENDENCE ON ADVERTISING REVENUES; EFFECT OF LOCAL, REGIONAL AND NATIONAL
ECONOMIC CONDITIONS
The Company's operating results are primarily dependent on advertising
revenues which, in turn, depend on national and local economic conditions, the
relative popularity of the Company's programming, the demographic
characteristics of the Company's markets, the activities of competitors and
other factors which are outside the Company's control. Both the television and
radio industries are cyclical in nature, and the Company's revenues could be
adversely affected by a future local, regional or national recessionary
environment.
RELIANCE ON TELEVISION PROGRAMMING
One of the Company's most significant operating cost components is
television programming. There can be no assurance that the Company will not be
exposed in the future to increased programming costs which may materially
adversely affect the Company's operating results. Acquisitions of program rights
are usually made two or three years in advance and may require multi-year
commitments, making it difficult to accurately predict how a program will
perform. In some instances, programs must be replaced before their costs have
been fully amortized, resulting in write-offs that increase station operating
costs.
CERTAIN NETWORK AFFILIATION AGREEMENTS
All but one of the television stations owned or provided programming
services by the Company are affiliated with a network. Under the affiliation
agreements, the networks possess, under certain circumstances, the right to
terminate the agreement on prior written notice generally ranging between 15 and
45 days, depending on the agreement.
Eleven of the stations currently owned or programmed by the Company are
affiliated with Fox and 36.0% of the Company's revenue in 1997 on a pro forma
basis for all acquisitions completed in 1997 was from Fox-affiliated stations.
WVTV, a station to which the Company provides programming services in Milwaukee,
Wisconsin pursuant to an LMA, WTTO, a station owned by the Company in
Birmingham, Alabama, and WDBB, a station to which the Company provides
programming services in Tuscaloosa, Alabama pursuant to an LMA, each of which
was previously affiliated with Fox, had their affiliation agreements with Fox
terminated by Fox in December 1994, September 1996 and September 1996,
respectively. WVTV,
8
<PAGE>
WTTO, WDBB, KLGT, WCWB, WNUV, WSTR, KRRT, KOCB, KUPN and WFGX are affiliates of
The WB Television Network ("WB"). In addition, the Company has been notified by
Fox of Fox's intention to terminate WLFL's affiliation with Fox in the
Raleigh/Durham market and WTVZ's affiliation with Fox in the Norfolk market,
effective August 31, 1998, and the Company has entered into an agreement with WB
for those stations to become affiliated with WB at that time. On August 20,
1996, the Company entered into an agreement with Fox limiting Fox's rights to
terminate the Company's affiliation agreements with Fox in other markets, but
there can be no assurance that the Fox affiliation agreements will remain in
place or that Fox will continue to provide programming to affiliates on the same
basis that currently exists. See "Business of Sinclair--Television Broadcasting"
in the 1997 Form 10-K. Two of the Company's UPN affiliation agreements expire in
January 1999. The non-renewal or termination of affiliations with Fox or any
other network could have a material adverse effect on the Company's operations.
The affiliation agreements relating to television stations that have been
acquired by the Company are terminable by the network upon transfer of the
License Assets of the stations. The Company does not seek consents of the
affected network to the transfer of License Assets in connection with its
acquisitions. As of the date of this Prospectus, no network has terminated an
affiliation agreement following transfer of License Assets to the Company. These
stations are continuing to operate as network affiliates, but there can be no
assurance that the affiliation agreements will be continued, or that they will
be continued on terms favorable to the Company. If any affiliation agreements
are terminated, the affected station could lose market share, may have
difficulty obtaining alternative programming at an acceptable cost, and may
otherwise be adversely affected.
Two stations owned or programmed by the Company are affiliated with UPN, a
network that began broadcasting in January 1995. Thirteen stations owned or
programmed by the Company are operated as affiliates of WB, a network that began
broadcasting in January 1995, and, pursuant to an agreement between the Company
and WB, two of the Company's stations affiliated with UPN will become affiliated
with WB when their current affiliations expire in January 1999. There can be no
assurance as to the future success of UPN or WB programming or as to the
continued operation of the UPN or WB networks. In connection with the change of
affiliation of certain of the Company's stations from UPN to WB, in August 1997,
UPN filed an action (the "California Action") in Los Angeles Superior Court
against the Company, seeking declaratory relief and specific performance or, in
the alternative, unspecified damages and alleging that neither the Company nor
its affiliates provided proper notice of their intention not to extend the
current UPN affiliations beyond January 15, 1998. The Company filed a cross
complaint in the California Action seeking declaratory relief that the notice
was effective to terminate the affiliations on January 15, 1998. UPN sought a
preliminary injunction to prevent the termination of the affiliations on January
15, 1998. Also in August 1997, certain subsidiaries of the Company filed an
action (the "Baltimore Action") in the Circuit Court for Baltimore City seeking
declaratory relief that their notice was effective to terminate the affiliations
on January 15, 1998. UPN responded to the Baltimore Action, and filed a
counterclaim against the Company seeking the same remedies sought by UPN in the
California Action. Both the Company and UPN filed motions for summary judgment
in the Baltimore Action, and the court granted the Company's motion for summary
judgment and denied UPN's motion, holding that the Company effectively
terminated the affiliations as of January 15, 1998. Based on the decision in the
Baltimore Action, the court in the California Action has stayed all proceedings
in the California Action. Following an appeal by UPN, the court of Special
Appeals of Maryland upheld the ruling in the Baltimore Action and UPN is seeking
further appellate review by the Maryland Court of Appeals. If the court's
decision is overturned on appeal and if judgment is ultimately awarded in favor
of UPN, certain of the Company's current UPN affiliation agreements could be
extended for an additional term of three years until January 15, 2001. If these
affiliation agreements were extended, such stations would be unable to negotiate
affiliations and compensation agreements with any network for three years. In
addition, the Company could lose all or a portion of the cash consideration to
be received by the Company under the WB Agreement and WB may assert that the
Company is in breach of the WB Agreement and seek compensation for damages
resulting from such breach. The UPN affiliation agreements currently do not, and
if extended will not, require UPN to pay cash consideration to the Company in
connection with the UPN affiliation of such stations. See "Business of Sinclair
- - -- Legal Proceedings" in the 1997 Form 10-K. There can be no assurance that the
Company and its subsidiaries will prevail in these proceedings or that the
outcome of these proceedings, if adverse to the Company and its subsidiaries,
will not have a material adverse effect on the Company.
9
<PAGE>
COMPETITION
The television and radio industries are highly competitive. Some of the
stations and other businesses with which the Company's stations compete are
subsidiaries of large, national or regional companies that may have greater
resources than the Company. Technological innovation and the resulting
proliferation of programming alternatives, such as cable television, wireless
cable, in home satellite-to-home distribution services, pay-per-view and home
video and entertainment systems have fractionalized television viewing audiences
and have subjected free over-the-air television broadcast stations to new types
of competition. The radio broadcasting industry is also subject to competition
from new media technologies that are being developed or introduced, such as the
delivery of audio programming by cable television systems and by digital audio
radio service ("DARS"). In October 1997, the FCC awarded two licenses for
satellite DARS. DARS may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and
national audiences.
The Company's stations face strong competition for market share and
advertising revenues in their respective markets from other local free
over-the-air radio and television broadcast stations, cable television and
over-the-air wireless cable television as well as newspapers, periodicals and
other entertainment media. Some competitors are part of larger companies with
greater resources than the Company. In addition, the FCC has adopted rules which
permit telephone companies to provide video services to homes on a
common-carrier basis without owning or controlling the product being
distributed, and proposed legislation could relax or repeal the telephone-cable
cross-ownership prohibition for all systems. See "Business of
Sinclair--Competition" in the 1997 Form 10-K.
In February 1996, the Telecommunications Act of 1996 (the "1996 Act") was
adopted by the Congress of the United States and signed into law by President
Clinton. The 1996 Act contains a number of sweeping reforms that are having an
impact on broadcasters, including the Company. While creating substantial
opportunities for the Company, the increased regulatory flexibility afforded by
the 1996 Act and the removal of previous station ownership limitations have
sharply increased the competition for and prices of stations. The 1996 Act also
frees telephone companies, cable companies and others from some of the
restrictions which have previously precluded them from involvement in the
provision of video services. The 1996 Act may also have other effects on the
competition the Company faces, either in individual markets or in making
acquisitions.
IMPACT OF NEW TECHNOLOGIES
The FCC has taken a number of steps to implement digital television ("DTV")
broadcasting service in the United States. In December 1996, the FCC adopted a
DTV broadcast standard and, in April 1997, made decisions in several pending
rulemaking proceedings that establish service rules and a plan for implementing
DTV. The FCC adopted a DTV table of allotments that provides all authorized
television stations with a second channel on which to broadcast a DTV signal. In
February 1998, the FCC made slight revisions to the DTV rules and table of
allotments in acting upon a number of appeals in the DTV proceeding. The FCC has
attempted to provide DTV coverage areas that are comparable to stations'
existing service areas. The FCC has ruled that television broadcast licensees
may use their digital channels for a wide variety of services such as
high-definition television ("HDTV"), multiple standard definition television
programming, audio, data, and other types of communications, subject to the
requirement that each broadcaster provide at least one free video channel equal
in quality to the current technical standard.
DTV channels will generally be located in the range of channels from
channel 2 through channel 51. The FCC is requiring that affiliates of ABC, CBS,
Fox and NBC in the top ten television markets begin digital broadcasting by May
1, 1999 (the stations affiliated with these networks in the top ten markets have
voluntarily committed to begin digital broadcasting within 18 months), and that
affiliates of these networks in markets 11 through 30 begin digital broadcasting
by November 1999. The FCC's plan calls for the DTV transition period to end in
the year 2006, at which time the FCC expects that television broadcasters will
cease non-digital broadcasting and return one of their two channels to the
government, allowing that spectrum to be recovered by the government for other
uses. Under the Balanced Budget Act of 1997, however, the FCC is authorized to
extend the December 31, 2006 deadline for reclamation of a television station's
non-digital channel if, in any given case: (i) one or more television stations
affiliated with one of ABC, CBS,
10
<PAGE>
NBC or Fox in a market is not broadcasting digitally, and the FCC determines
that such stations have "exercised due diligence" in attempting to convert to
digital broadcasting; or (ii) less than 85% of the television households in the
market subscribe to a multichannel video service (cable, wireless cable or
direct-to-home broadcast satellite television) that carries at least one digital
channel from each of the local stations in that market, and less than 85% of the
television households in the market can receive digital signals off the air
using either a set-top converter box for an analog television set or a new
digital television set. The Balanced Budget Act also directs the FCC to auction
the non-digital channels by September 30, 2002 even though they are not to be
reclaimed by the government until at least December 31, 2006. The Balanced
Budget Act also permits broadcasters to bid on the non-digital channels in
cities with populations greater than 400,000, provided the channels are used for
DTV. Thus, it is possible a broadcaster could own two channels in a market. The
FCC has concluded a separate proceeding in which it reallocated television
channels 60 through 69 to other services while protecting existing television
stations on those channels from interference during the DTV transition period.
Additionally, the FCC will open a separate proceeding to consider to what extent
the cable must-carry requirements will apply to DTV signals.
Implementation of digital television will improve the technical quality of
television signals received by viewers. Under certain circumstances, however,
conversion to digital operation may reduce a station's geographic coverage area
or result in increased interference. The FCC's DTV allotment plan allows present
UHF stations that move to DTV channels considerably less signal power than
present VHF stations that move to UHF DTV channels. Additionally, the DTV
transmission standard adopted by the FCC may not allow certain stations to
provide a DTV signal of adequate strength to be reliably received by certain
viewers using inside television set antennas. Implementation of digital
television will also impose substantial additional costs on television stations
because of the need to replace equipment and because some stations will need to
operate at higher utility costs and there can be no assurance that the Company's
television stations will be able to increase revenue to offset such costs. The
FCC is also considering imposing new public interest requirements on television
licensees in exchange for their receipt of DTV channels. The Company is
currently considering plans to provide HDTV, to provide multiple channels of
television, including the provision of additional broadcast programming and
transmitted data on a subscription basis, and to continue its current TV program
channels on its allocated DTV channels. The 1996 Act allows the FCC to charge a
spectrum fee to broadcasters who use the digital spectrum to offer
subscription-based services. The FCC has opened a rulemaking to consider the
spectrum fees to be charged to broadcasters for such use. In addition, Congress
has held hearings on broadcasters' plans for the use of their digital spectrum.
The Company cannot predict what future actions the FCC might take with respect
to DTV, nor can it predict the effect of the FCC's present DTV implementation
plan or such future actions on the Company's business.
Further advances in technology may also increase competition for household
audiences and advertisers. The video compression techniques now under
development for use with current cable television channels or direct broadcast
satellites which do not carry local television signals (some of which commenced
operation in 1994) are expected to reduce the bandwidth which is required for
television signal transmission. These compression techniques, as well as other
technological developments, are applicable to all video delivery systems,
including over-the-air broadcasting, and have the potential to provide vastly
expanded programming to highly targeted audiences. Reduction in the cost of
creating additional channel capacity could lower entry barriers for new channels
and encourage the development of increasingly specialized "niche" programming.
This ability to reach a very defined audience may alter the competitive dynamics
for advertising expenditures. The Company is unable to predict the effect that
technological changes will have on the broadcast television industry or the
future results of the Company's operations. The radio broadcasting industry is
also subject to competition from new media technologies that are being developed
or introduced, such as the delivery of audio programming by cable television
systems and by DARS. DARS may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and
national audiences. The FCC has issued licenses for two satellite DARS systems.
See "Business of Sinclair--Competition" in the 1997 Form 10-K.
11
<PAGE>
GOVERNMENTAL REGULATIONS; NECESSITY OF MAINTAINING FCC LICENSES
The broadcasting industry is subject to regulation by the FCC pursuant to
the Communications Act. Approval by the FCC is required for the issuance,
renewal and assignment of station operating licenses and the transfer of control
of station licensees. In particular, the Company's business will be dependent
upon its continuing to hold broadcast licenses from the FCC. While in the vast
majority of cases such licenses are renewed by the FCC, there can be no
assurance that the Company's licenses or the licenses owned by the
owner-operators of the stations with which the Company has LMAs will be renewed
at their expiration dates. A number of federal rules governing broadcasting have
changed significantly in recent years and additional changes may occur,
particularly with respect to the rules governing digital television, multiple
ownership and attribution. The Company cannot predict the effect that these
regulatory changes may ultimately have on the Company's operations. Additional
information regarding governmental regulation is set forth under "Business of
Sinclair--Federal Regulation of Television and Radio Broadcasting" in the 1997
Form 10-K.
MULTIPLE OWNERSHIP RULES AND EFFECT ON LMAS
On a national level, FCC rules and regulations generally prevent an entity
or individual from having attributable interests in television stations that
reach in excess of 35% of all U.S. television households (for purposes of this
calculation, UHF stations are credited with only 50% of the television
households in their markets). Upon completion of all pending acquisitions and
dispositions, the Company will reach approximately 14% of U.S. television
households using the FCC's method of calculation. On a local level, the
"duopoly" rule generally prohibits attributable interests in two or more
television stations with overlapping service areas. There are no national limits
on ownership of radio stations, but on a local level no entity or individual can
have attributable interests in more than five to eight stations (depending on
the total number of stations in the market), with no more than three to five
stations (depending on the total allowed) broadcasting in the same band (AM or
FM). There are limitations on the extent to which radio programming can be
simulcast through LMA arrangements, and LMA arrangements in radio are counted in
determining the number of stations that a single entity may control if the
provider of programming under an LMA owns one or more radio stations in the same
market. FCC rules also impose limitations on the ownership of a television and
one or more radio stations in the same market, though such cross-ownership is
presumptively permitted on a limited basis in larger markets.
The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other entity. In the case of
corporations holding broadcast licenses, the interests of officers, directors
and those who, directly or indirectly, have the right to vote 5% or more of the
corporation's voting stock (or 10% or more of such stock in the case of
insurance companies, certain regulated investment companies and bank trust
departments that are passive investors) are generally deemed to be attributable,
as are positions as an officer or director of a corporate parent of a broadcast
licensee. The FCC has proposed changes to these attribution rules. See "Business
of Sinclair--Federal Regulation of Television and Radio Broadcasting" in the
1997 Form 10-K.
The FCC has initiated rulemaking proceedings to consider proposals to
modify its television ownership restrictions, including proposals that may
permit the ownership, in some circumstances, of two television stations with
overlapping service areas. The FCC is also considering in these proceedings
whether to adopt restrictions on television LMAs. The "duopoly" rule currently
prevents the Company from acquiring the FCC licenses of television stations with
which it has LMAs in those markets where the Company owns a television station.
In addition, if the FCC were to decide that the provider of programming services
under a television LMA should be treated as the owner of the television station
and if it did not relax the duopoly rule, or if the FCC were to adopt
restrictions on LMAs without grandfathering existing arrangements, the Company
could be required to modify or terminate certain of its LMAs. In such an event,
the Company could be required to pay termination penalties under certain of its
LMAs. The 1996 Act provides that nothing therein "shall be construed to prohibit
the origination, continuation, or renewal of any television local marketing
agreement that is in compliance with the regulations of the [FCC]." The
legislative history of the 1996 Act reflects that this provision was intended to
grandfather television LMAs that were in existence upon enactment of the 1996
Act, and to allow television LMAs consistent with the FCC's rules subsequent
12
<PAGE>
to enactment of the 1996 Act. In its pending rulemaking proceeding regarding the
television duopoly rule, the FCC has proposed to adopt a grandfathering policy
providing that, in the event that television LMAs become attributable interests,
LMAs that are in compliance with existing FCC rules and policies and were
entered into before November 5, 1996, would be permitted to continue in force
until the original term of the LMA expires. Under the FCC's proposal, television
LMAs that are entered into, renewed or assigned after November 5, 1996 would
have to be terminated if LMAs are made attributable interests and the LMA in
question resulted in a violation of the television multiple ownership rules. All
but two of the Company's television LMAs were entered into prior to the 1996
Act: one was entered into after enactment of the 1996 Act but prior to November
5, 1996 (which LMA has a term expiring on May 31, 2006), and one (which will
take effect upon termination of the HSR waiting period and will have a term
expiring ten years after termination of such waiting period) was entered into
subsequent to November 5, 1996. Moreover, rights under certain of the Company's
LMAs were acquired by other parties either subsequent to enactment of the 1996
Act but prior to November 5, 1996, or subsequent to November 5, 1996. The
Company cannot predict whether any or all of its LMAs will be grandfathered. See
"Business of Sinclair--Federal Regulation of Television and Radio Broadcasting"
in the 1997 Form 10-K. In connection with its pending acquisitions, the Company
intends to enter into new LMAs with Sullivan. These LMAs would not be
grandfathered under the FCC's pending proposal. Further, if the FCC were to find
that the owners/licensees of the stations with which the Company has LMAs failed
to maintain control over their operations as required by FCC rules and policies,
the licensee of the LMA station and/or the Company could be fined or could be
set for hearing, the outcome of which could be a fine or, under certain
circumstances, loss of the applicable FCC license.
A petition has been filed to deny the application to assign WTTV and WTTK
in the Indianapolis DMA from River City to the Company. Although the petition to
deny does not challenge the assignments of WTTV and WTTK to the Company, it
alleges that station WIIB in the Indianapolis DMA should be deemed an
attributable interest of the Controlling Stockholders (resulting in a violation
of the FCC's local television ownership restrictions when coupled with the
Company's acquisition of WTTV and WTTK) even though the Controlling Stockholders
have agreed to transfer their voting stock in WIIB to a third party. The FCC, at
the Company's request, has withheld action on the applications for the Company
to acquire WTTV and WTTK, and for the Controlling Stockholders to transfer their
voting stock in WIIB, pending the outcome of the FCC's rulemaking proceeding
concerning the cross-interest policy. The petitioner has appealed the
withholding of action on these applications. In addition, comments have been
filed with the FCC by a competitor of the Company with respect to transfer of
the license for WEMT-TV in Tri-Cities, Tennessee/ Virginia claiming that the
Company's acquisition of WEMT-TV will create undue concentration in that market.
In addition, the FCC granted the assignment applications for the Company to
acquire the License Assets of WLOS-TV and KABB-TV in the Asheville, North
Carolina/Greenville/Spartanburg, South Carolina and San Antonio, Texas markets,
respectively, and for Glencairn to acquire the License Assets of WFBC-TV and
KRRT-TV in these two markets, respectively, subject to the outcome of the FCC's
cross-interest policy rulemaking proceeding and certain other conditions
relating to certain trusts that have non-voting ownership interests in
Glencairn. The Company has acquired the License Assets of KABB-TV and WLOS-TV.
Glencairn has acquired the License Assets of KRRT-TV and WFBC-TV and the Company
provides programming services to KRRT-TV and WFBC-TV pursuant to LMAs.
Applications for review have been filed by third parties which appeal the FCC's
grants of: (i) the Company's application to acquire WLOS-TV in the Asheville,
North Carolina/Greenville/Spartanburg, South Carolina market and Glencairn's
application to acquire WFBC-TV in that market; and (ii) the Company's
application to acquire KABB-TV in the San Antonio market. The Company has filed
oppositions to both applications for review. The Company also has pending
several requests for waivers of the FCC's radio-television cross-ownership, or
"one to a market," rule, in connection with its applications to acquire radio
stations in the Max Media Acquisition and other acquisitions in markets where
the Company owns or proposes to own a television station. Certain waivers of the
one to a market rule acquired by the Company in connection with the Heritage
Acquisition are temporary and conditioned on the FCC's pending rulemaking
proceeding to reexamine the one to a market rule. In addition, certain of the
television stations to be acquired in the Max Media Acquisition and the Sullivan
Acquisition have overlapping service areas with the Company's television
stations and, therefore, the Company intends to request waivers from the FCC to
complete the Max Media Acquisition and the
13
<PAGE>
Sullivan Acquisition. There can be no assurance that any or all of such waiver
requests will be granted. Additionally, the Company's acquisition of the
Heritage radio stations in the New Orleans market and the Company's acquisition
of the Max Media radio stations in the Norfolk, Virginia market would violate
FCC and DOJ restrictions on ownership of radio stations in those markets.
Accordingly, the Company intends to divest one or more stations in these
markets.
The Company is unable to predict (i) the ultimate outcome of possible
changes to the FCC's LMA and multiple ownership rules or the resolution of the
above-described matters or (ii) the impact such factors may have upon the
Company's broadcast operations. As a result of regulatory changes, the Company
could be required to modify or terminate some or all of its LMAs, resulting in
termination penalties and/or divestitures of broadcast properties. In addition,
the Company's competitive position in certain markets could be materially
adversely affected. Thus, no assurance can be given that changes to the FCC
rules or the resolution of the above-described matters will not have a material
adverse effect upon the Company.
LMAS--RIGHTS OF PREEMPTION AND TERMINATION
All of the Company's LMAs allow, in accordance with FCC rules, regulations
and policies, preemptions of the Company's programming by the owner-operator and
FCC licensee of each station with which the Company has an LMA. In addition,
each LMA provides that under certain limited circumstances the arrangement may
be terminated by the FCC licensee. Accordingly, the Company cannot be assured
that it will be able to air all of the programming expected to be aired on those
stations with which it has an LMA or that the Company will receive the
anticipated advertising revenue from the sale of advertising spots in such
programming. Although the Company believes that the terms and conditions of each
of its LMAs should enable the Company to air its programming and utilize the
programming and other non-broadcast license assets acquired for use on the LMA
stations, there can be no assurance that early terminations of the arrangements
or unanticipated preemptions of all or a significant portion of the programming
by the owner-operator and FCC licensee of such stations will not occur. An early
termination of one of the Company's LMAs, or repeated and material preemptions
of programming thereunder, could adversely affect the Company's operations. In
addition, the Company's LMAs expire on various dates from the years 1999 to
2010, unless extended or earlier terminated. There can be no assurance that the
Company will be able to negotiate extensions of its arrangements on terms
satisfactory to the Company.
In certain of its LMAs, the Company has agreed to indemnify the FCC
licensee against certain claims (including trademark and copyright infringement,
libel or slander and claims relating to certain FCC proceedings or
investigations) that may arise against the FCC licensee as a result of the
arrangement.
POTENTIAL EFFECT ON THE MARKET PRICE RESULTING FROM SHARES ELIGIBLE FOR FUTURE
SALE
Any shares of Class A Common Stock offered pursuant to this Prospectus will
be freely tradeable in the United States without restriction or further
registration unless purchased by affiliates of the Company. Shares of Class B
Common Stock are convertible into Class A Common Stock on a share-for-share
basis at any time at the option of the holder and are automatically converted
into Class A Common Stock upon transfer, except for transfers to certain
permitted transferees. The 25,166,432 shares of Class B Common Stock outstanding
as of March 31, 1998 (and shares of Class A Common Stock into which they are
convertible), all of which are beneficially owned by the Controlling
Stockholders, are held by persons who may be deemed to be affiliates of the
Company and are eligible for resale under Rule 144 under the Securities Act,
subject to the volume limitations thereunder. As of the date of this Prospectus,
options to acquire 5,171,536 shares of Class A Common Stock have been granted
and reserved for issuance to certain officers or employees of the Company under
the Company's various stock option plans. Of the options granted, 1,261,743 have
vested as of the date of this Prospectus. In addition, the Company issued
1,150,000 shares of Series B Preferred Stock to River City in connection with
the River City Acquisition, of which 45,703 shares (which are convertible at any
time at the option of the holders, into an aggregate of 166,209 shares of Class
A Common Stock subject to certain adjustments) were issued and outstanding as of
April 23, 1998. All such shares are registered under the Securities Act pursuant
to a shelf registration statement and may be sold into the public market at any
time. The Company has also registered under the Securities Act 1,382,435 shares
of Class A Common Stock
14
<PAGE>
issuable upon exercise of stock options held by Barry Baker, and has registered
an additional 2,155,238 shares issuable upon exercise of options issued or
issuable pursuant to the Company's employee plans. Sale of substantial amounts
of shares of Class A Common Stock, or the perception that such sales could
occur, may materially adversely affect the market price of the Class A Common
Stock.
NET LOSSES
The Company has experienced a net loss in two of the last four years,
including a net loss of $10.6 million in 1997. The losses include significant
interest expense as well as substantial non-cash expenses such as depreciation,
amortization and deferred compensation. Notwithstanding slight net income in
1995 and 1996, the Company expects to experience net losses in the future,
principally as a result of interest expense, amortization of programming and
intangibles and depreciation.
DIVIDEND RESTRICTIONS
The terms of the Company's Bank Credit Agreement, the Existing Indentures
and the other indebtedness of the Company restrict the Company from paying
dividends on its Common Stock. The Company does not expect to pay dividends on
its Common Stock in the foreseeable future.
FORWARD-LOOKING STATEMENTS
This Prospectus (including the documents or portions thereof incorporated
herein by reference and any Prospectus Supplement) contains forward-looking
statements. In addition, when used in this Prospectus, the words "intends to,"
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to a number of
risks and uncertainties. Actual results in the future could differ materially
and adversely from those described in the forward-looking statements as a result
of various important factors, including the impact of changes in national and
regional economies, successful integration of acquired television and radio
stations (including achievement of synergies and cost reductions), pricing
fluctuations in local and national advertising, volatility in programming costs,
the availability of suitable acquisitions on acceptable terms and the other risk
factors set forth above and the matters set forth in this Prospectus generally.
The Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
15
<PAGE>
USE OF PROCEEDS
All of the shares of Class A Common Stock offered by this Prospectus are
being offered by and for the account of the Selling Stockholders. The Selling
Stockholders will receive all of the net proceeds from the sale of the shares
offered by this Prospectus and the Company will not receive any proceeds from
the sale of such shares.
MARKET PRICE OF CLASS A COMMON STOCK
Effective June 13, 1995, the Class A 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.
<TABLE>
<S> <C> <C>
1995 HIGH LOW
---- ---- ---
Second Quarter (from June 13) .......... $ 29.0000 $ 23.2500
Third Quarter .......................... 31.0000 27.3750
Fourth Quarter ......................... 28.0000 16.0000
1996 HIGH LOW
---- ---- ---
First Quarter .......................... $ 26.5000 $ 16.7500
Second Quarter ......................... 43.5000 25.5000
Third Quarter .......................... 48.2500 36.0000
Fourth Quarter ......................... 44.0000 22.2500
1997 HIGH LOW
---- ---- ---
First Quarter .......................... $ 32.0000 $ 22.7500
Second Quarter ......................... 31.7500 22.7500
Third Quarter .......................... 41.5000 27.5000
Fourth Quarter ......................... 47.0000 32.6875
1997 HIGH LOW
---- ---- ---
First Quarter .......................... $ 58.1250 $ 42.8750
</TABLE>
16
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company currently has two classes of Common Stock, each having a par
value of $.01 per share, and three classes of issued and outstanding Preferred
Stock, also with a par value of $.01 per share. The Controlling Stockholders, by
virtue of their beneficial ownership of 100% of the shares of the Class B Common
Stock, with its super voting rights as described below, retain control over the
Company's business and operations.
The following summary of the Company's capital stock does not purport to be
complete and is subject to detailed provisions of, and is qualified in its
entirety by reference to, the Company's Amended and Restated Articles of
Incorporation (the "Amended Certificate"). The Amended Certificate is an exhibit
to the Registration Statement of which this Prospectus is a part and is
available as set forth under "Available Information."
The Amended Certificate authorizes the Company to issue up to 100,000,000
shares of Class A Common Stock, par value $.01 per share, 35,000,000 shares of
Class B Common Stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, par value $.01 per share. As of April 23, 1998, 48,946,446
shares of Common Stock, consisting of 23,780,014 shares of Class A Common Stock
and 25,166,432 shares of Class B Common Stock, were issued and outstanding,
45,703 shares of Series B Preferred Stock were issued and outstanding, 2,062,000
shares of Series C Preferred Stock were issued and outstanding and 3,450,000
shares of Series D Convertible Exchangeable Preferred Stock were issued and
outstanding.
COMMON STOCK
The rights of the holders of the Class A Common Stock and Class B Common
Stock are substantially identical in all respects, except for voting rights and
the right of Class B Common Stock to convert into Class A Common Stock. The
holders of the Class A Common Stock are entitled to one vote per share. The
holders of the Class B Common Stock are entitled to ten votes per share except
as described below. The holders of all classes of Common Stock entitled to vote
will vote together as a single class on all matters presented to the
stockholders for their vote or approval except as otherwise required by the
general corporation laws of the State of Maryland ("Maryland General Corporation
Law"). Except for transfers to a "Permitted Transferee" (generally, related
parties of a Controlling Stockholder), any transfer of shares of Class B Common
Stock held by any of the Controlling Stockholders will cause such shares to be
automatically converted to Class A Common Stock. In addition, if the total
number of shares of Common Stock held by the Controlling Stockholders falls to
below 10% of the total number of shares of Common Stock outstanding, all of the
outstanding shares of Class B Common Stock automatically will be classified as
Class A Common Stock. In any merger, consolidation or business combination, the
consideration to be received per share by the holders of the Class A Common
Stock must be identical to that received by the holders of the Class B Common
Stock, except that in any such transaction in which shares of a third party's
common stock are distributed in exchange for the Company's Common Stock, such
shares may differ as to voting rights to the extent that such voting rights now
differ among the classes of Common Stock.
The holders of Class A Common Stock and Class B Common Stock will vote as a
single class, with each share of each class entitled to one vote per share, with
respect to any proposed (a) "Going Private" transaction; (b) sale or other
disposition of all or substantially all of the Company's assets; (c) sale or
transfer which would cause a fundamental change in the nature of the Company's
business; or (d) merger or consolidation of the Company in which the holders of
the Company's Common Stock will own less than 50% of the Common Stock following
such transaction. A "Going Private" transaction is defined as any "Rule 13e-3
transaction," as such term is defined in Rule 13e-3 promulgated under the
Exchange Act between the Company and (i) the Controlling Stockholders, (ii) any
affiliate of the Controlling Stockholders, or (iii) any group of which the
Controlling Stockholders are an affiliate or of which the Controlling
Stockholders are a member. An "affiliate" is defined as (i) any individual or
entity who or that, directly or indirectly, controls, is controlled by, or is
under the common control of the
17
<PAGE>
Controlling Stockholders; (ii) any corporation or organization (other than the
Company or a majority-owned subsidiary of the Company) of which any of the
Controlling Stockholders is an officer or partner or is, directly or indirectly,
the beneficial owner of 10% or more of any class of voting securities or in
which any of the Controlling Stockholders has a substantial beneficial interest;
(iii) a voting trust or similar arrangement pursuant to which the Controlling
Stockholders generally control the vote of the shares of Common Stock held by or
subject to any such trust or arrangement; (iv) any other trust or estate in
which any of the Controlling Stockholders has a substantial beneficial interest
or as to which any of the Controlling Stockholders serves as a trustee or in a
similar fiduciary capacity; or (v) any relative or spouse of the Controlling
Stockholders or any relative of such spouse who has the same residence as any of
the Controlling Stockholders.
Under Maryland General Corporation Law, the holders of Common Stock are
entitled to vote as a separate class with respect to any amendment of the
Amended Certificate that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or modify or change the powers, preferences or special
rights of the shares of such class so as to affect such class adversely.
For a discussion of the effects of disproportionate voting rights upon the
holders of the Class A Common Stock, see "Risk Factors -- Voting Rights; Control
by Controlling Stockholders; Potential Anti-Takeover Effect of Disproportionate
Voting Rights."
Stockholders of the Company have no preemptive rights or other rights to
subscribe for additional shares, except that the Class B Common Stock is
convertible into Class A Common Stock by the holders thereof. Except as
described in the prior sentence, no shares of any class of Common Stock have
conversion rights or are subject to redemption. Subject to the rights of any
outstanding preferred stock which may be hereafter classified and issued,
holders of Common Stock are entitled to receive dividends, if any, as may be
declared by the Company's Board of Directors out of funds legally available
therefor and to share, regardless of class, equally on a share-for-share basis
in any assets available for distribution to stockholders on liquidation,
dissolution or winding up of the Company. Under the Bank Credit Agreement, the
Existing Indentures, the terms of the Series C Preferred Stock and certain other
debt of the Company, the Company's ability to declare Common Stock dividends is
restricted.
EXISTING PREFERRED STOCK
Series B Preferred Stock. As partial consideration for the acquisition of
assets from River City, the Company issued 1,150,000 shares of Series A
Preferred Stock to River City which has since been converted into 1,150,000
shares of Series B Preferred Stock. As of April 23, 1998, 45,703 shares of
Series B Preferred Stock were outstanding. Each share of Series B Preferred
Stock has a liquidation preference of $100 and, after payment of this
preference, is entitled to share in distributions made to holders of shares of
(plus all accrued and unpaid dividends through the determination date) Common
Stock. Each holder of a share of Series B Preferred Stock is entitled to receive
the amount of liquidating distributions received with respect to approximately
3.64 shares of Common Stock (subject to adjustment) less the amount of the
liquidation preference. The liquidation preference of Series B Preferred Stock
is payable in preference to Common Stock of the Company, but may rank equal to
or below other classes of capital stock of the Company. After a "Trigger Event"
(as defined below), the Series B Preferred Stock ranks senior to all classes of
capital stock of the Company as to liquidation preference, except that the
Company may issue up to $400 million of capital stock ("Senior Securities"), as
to which the Series B Preferred Stock will have the same rank. The Series C
Preferred Stock are Senior Securities. A Trigger Event means the termination of
Barry Baker's employment with the Company prior to the expiration of the initial
five-year term of his employment agreement (1) by the Company for any reason
other than for Cause (as defined in the employment agreement) or (2) by Barry
Baker upon the occurrence of certain events described in the employment
agreement.
The holders of Series B Preferred Stock do not initially receive dividends,
except to the extent that dividends are paid to the holders of Common Stock. A
holder of shares of Series B Preferred Stock is entitled to share in any
dividends paid to holders of Common Stock, with each share of Series B Preferred
Stock allocated the amount of dividends allocated to approximately 3.64 shares
of Common
18
<PAGE>
Stock (subject to adjustment). In addition, after the occurrence of a Trigger
Event, holders of shares of Series B Preferred Stock are entitled to quarterly
dividends in the amount of $3.75 per share per quarter for the first year, and
in the amount of $5.00 per share per quarter after the first year. Dividends are
payable either in cash or in additional shares of Series B Preferred Stock at
the rate of $100 per share. Dividends on Series B Preferred Stock are payable in
preference to the holders of any other class of capital stock of the Company,
except for Senior Securities, which will rank senior to the Series B Preferred
Stock as to dividends until a Trigger Event, after which Senior Securities will
have the same rank as Series B Preferred Stock as to dividends.
The Company may redeem shares of Series B Preferred Stock for an amount
equal to $100 per share plus any accrued and unpaid dividends at any time
beginning 180 days after a Trigger Event, but holders have the right to retain
their shares in which case the shares will automatically be converted into
shares of Class A Common Stock on the proposed redemption date.
Each share of Series B Preferred Stock is entitled to 3.64 votes (subject
to adjustment) on all matters with respect to which Class A Common Stock has a
vote, and the Series B Preferred Stock votes together with the Class A Common
Stock as a single class, except that the Series B Preferred Stock is entitled to
vote as a separate class (and approval of a majority of such votes is required)
on certain matters, including changes in the authorized amount of Series B
Preferred Stock and actions affecting the rights of holders of Series B
Preferred Stock.
Shares of Series B Preferred Stock are convertible at any time into shares
of Class A Common Stock, with each share of Series B Preferred Stock convertible
into approximately 3.64 shares of Class A Common Stock. The conversion rate is
subject to adjustment if the Company undertakes a stock split, combination or
stock dividend or distribution or if the Company issues Common Stock or
securities convertible into Common Stock at a price less than $27.50 per share.
Shares of Series B Preferred Stock issued as payment of dividends are not
convertible into Class A Common Stock and become void at the time of conversion
of a shareholder's other shares of Series B Preferred Stock. All shares of
Series B Preferred Stock remaining outstanding on May 31, 2001 (other than
shares issued as a dividend) automatically convert into Class A Common Stock on
that date.
Series C Preferred Stock. As of March 31, 1998, the Company has issued and
outstanding 2,062,000 shares of Series C Preferred Stock, all of which shares
are held by KDSM, Inc., a wholly-owned subsidiary of the Company. Each share of
Series C Preferred Stock has a liquidation preference (the "Liquidation Amount")
of $100 plus an amount equal to any accumulated and unpaid dividends (whether or
not earned or declared) to the date of payment. KDSM, Inc. purchased the Series
C Preferred Stock from the proceeds of $206,200,000 aggregate principal amount
of KDSM Senior Debentures, all of which are held by the Trust, a trust all of
the common securities of which are held by KDSM, Inc. The obligations of KDSM,
Inc. under the KDSM Senior Debentures are secured by the Series C Preferred
Stock. The Trust purchased the KDSM Senior Debentures from the proceeds of $200
million aggregate liquidation value of HYTOPS plus the proceeds of the issuance
to KDSM, Inc. of $6.2 million of common securities of the Trust. Sinclair has
guaranteed the obligations under the HYTOPS, on a junior subordinated basis in
an amount equal to the lesser of (a) the full liquidation preference plus
accumulated and unpaid dividends to which the holders of the HYTOPS are lawfully
entitled, and (b) the amount of the Trust's legally available assets remaining
after the satisfaction of all claims of other parties which, as a matter of law,
are prior to those of the holders of the HYTOPS. Sinclair has also agreed to
fully and unconditionally guarantee the payment of the KDSM Senior Debentures on
a junior subordinated basis if and effective as of the time the KDSM Senior
Debentures are distributed to holders of the HYTOPS in certain circumstances.
The Series C Preferred Stock has a maturity date of March 15, 2009, and
will be mandatorily redeemable on its maturity date. With respect to dividend
rights and rights upon liquidation, winding-up and dissolution of Sinclair, the
Series C Preferred Stock ranks senior to the Common Stock and the Series B
Preferred Stock except that upon a Trigger Event the Series C Preferred Stock
will rank pari passu with the Series B Preferred Stock in respect of dividend
rights and rights upon liquidation, dissolution and winding-up of Sinclair.
Dividends on the Series C Preferred Stock are payable quarterly at a rate
per annum of 12 5/8% of the stated Liquidation Amount of $100 per share and
cumulate from March 12, 1997. Dividends are
19
<PAGE>
payable quarterly in arrears on March 15, June 15, September 15 and December 15
of each year (each a "Dividend Payment Date") to the holders of record on the
March 1, June 1, September 1 and December 1 next preceding each Dividend Payment
Date. Sinclair has the right, at any time and from time to time, to defer
dividend payments for up to three consecutive quarters; provided that Sinclair
will be required to pay all dividends due and owing on the Series C Preferred
Stock at least once every four quarters and must pay all dividends due and owing
on the Series C Preferred Stock on March 25, 2009. The remedy for the holders of
the Series C Preferred Stock upon a failure by Sinclair to pay all dividends due
and owing thereon at least once every four quarters (or for any other breaches
under the Series C Preferred Stock) is the right to elect two directors to
Sinclair's board of directors.
Holders of the Series C Preferred Stock do not have any voting rights in
ordinary circumstances. However, the vote of the holders of a majority in
aggregate Liquidation Amount of outstanding Series C Preferred Stock (100% in
certain circumstances) is required to approve any amendment to the Amended
Certificate or the Articles Supplementary to the Amended Certificate that govern
the Series C Preferred Stock (the "Series C Articles Supplementary") that would
adversely affect the powers, preferences or special rights of the holders of the
Series C Preferred Stock or cause the liquidation, dissolution or winding-up of
Sinclair. In addition, the approval of the holders of a majority in aggregate
Liquidation Amount of outstanding Series C Preferred Stock is required to
approve the issuance of any preferred stock by Sinclair which is senior to the
Series C Preferred Stock in right of payment. In addition, upon a Voting Rights
Triggering Event (which is defined to include a failure to pay dividends as
described above, a failure to make a Change of Control Offer (as defined), a
failure to redeem the Series C Preferred Stock upon maturity and a breach of the
covenants described below), the holders of a majority in aggregate Liquidation
Amount of the outstanding Series C Preferred Stock have the right to elect two
directors to the board of directors of Sinclair. KDSM, Inc., as the holder of
the Series C Preferred Stock, has agreed not to take or consent to any actions
or waive any rights under the Series C Preferred Stock or elect any directors
without the approval of the holders of the majority in principal amount of the
KDSM Senior Debentures. The Trust, as the holder of the KDSM Senior Debentures,
has in turn agreed that it will not provide such approval without the approval
of the holders of a majority in aggregate Liquidation Value of the outstanding
Preferred Securities (100% in certain circumstances).
The Series C Articles Supplementary contain certain covenants, including,
but not limited to, covenants with respect to the following matters: (i)
limitation on indebtedness; (ii) limitation on restricted payments; (iii)
limitation on transactions with affiliates; (iv) limitation on sale of assets;
(v) limitation on unrestricted subsidiaries; (vi) restrictions on mergers,
consolidations and the transfer of all or substantially all of the assets of the
Company to another person; (vii) provision of financial statements; and (viii)
limitation on the issuance of senior preferred stock. Violation of any of these
covenants (after a grace period in certain circumstances) will be a Voting
Rights Triggering Event.
Upon a Change of Control of Sinclair (as defined), Sinclair is required to
make an offer (a "Change of Control Offer") to redeem all or a portion of the
shares of Series C Preferred Stock at 101% of such shares' aggregate Liquidation
Amount, plus accrued and unpaid dividends, if any, to the date of redemption
unless and for so long as such redemption is prohibited by the terms of the Bank
Credit Agreement or the Existing Indentures. If Sinclair does not make and
consummate a Change of Control Offer upon a Change of Control, the holders of
the Series C Preferred Stock will have the right to elect two directors to the
board of directors of Sinclair.
The Company has the option (a) at any time on or after March 15, 2002 to
redeem the Series C Preferred Stock, in whole or in part, in cash at redemption
prices declining from 105.813% to 100% (in 2006) of the Liquidation Amount, and
(b) at any time on or prior to March 15, 2000 to redeem, in whole or in part, up
to 33 1/3% of the aggregate Liquidation Amount of the Series C Preferred Stock,
with the proceeds of one or more Public Equity Offerings (as defined), at a cash
redemption price of 111.625% of the principal amount thereof, plus accrued
dividends to the date of redemption; provided that after any such redemption at
least 66 2/3% of the aggregate Liquidation Amount of the Series C Preferred
Stock originally issued remain outstanding and that such redemption be made
within 180 days of each such Public Equity Offering.
20
<PAGE>
Series D Convertible Exchangeable Preferred Stock. As of March 31, 1998,
the Company had issued and outstanding 3,450,000 shares of Series D Convertible
Exchangeable Preferred Stock. Each share of Series D Convertible Exchangeable
Preferred Stock has a liquidation preference of $50 plus an amount equal to any
accrued and unpaid dividends.
With respect to dividends and amounts payable upon the liquidation,
dissolution or winding up of the Company, the Series D Convertible Exchangeable
Preferred Stock will rank (i) junior in right of payment to all indebtedness of
the Company and its Subsidiaries, (ii) senior to the Class A Common Stock and
the Class B Common Stock, (iii) pari passu with the Series C Preferred Stock and
(iv) senior to the Company's Series B Preferred Stock except that upon a Trigger
Event the Series D Convertible Exchangeable Preferred Stock will rank pari passu
with the Series B Preferred Stock in respect of dividends and distributions upon
liquidation, dissolution and winding-up of the Company.
Dividends on the Series D Convertible Exchangeable Preferred Stock are
cumulative and accrue from September 23, 1997, the date of issuance, and are
payable quarterly commencing on December 15, 1997, in the amount of $3.00 per
share annually, when, as and if declared by the Board of Directors out of
legally available funds.
Holders of Convertible Exchangeable Preferred Stock do not have any voting
rights in ordinary circumstances. In exercising any voting rights, each
outstanding share of Series D Convertible Exchangeable Preferred Stock will be
entitled to one vote. Whenever dividends on the Series D Convertible
Exchangeable Preferred Stock are in arrears in an aggregate amount equal to at
least six quarterly dividends (whether or not consecutive), the size of the
Company's board of directors will be increased by two (or, if the size of the
board of directors cannot be so increased, the Company shall cause the removal
or resignation of a sufficient number of directors), and the holders of a
majority of the Series D Convertible Exchangeable Preferred Stock, voting
separately as a class, will be entitled to select two directors to the board of
directors at (i) any annual meeting of stockholders at which directors are to be
elected held during the period when the dividends remain in arrears or (ii) a
special meeting of stockholders called by the Company at the request of the
holders of the Series D Convertible Exchangeable Preferred Stock. These voting
rights will terminate when all dividends in arrears and for the current
quarterly period have been paid in full or declared and set apart for payment.
The term of office of the additional directors so elected will terminate
immediately upon that payment or provision for payment. Under certain
circumstances, the Company may be required to pay additional dividends if it
fails to provide for the board seats referred to above.
In addition, so long as any Series D Convertible Exchangeable Preferred
Stock is outstanding, the Company will not, without the affirmative vote or
consent of the holders of at least 66 2/3% of all outstanding shares of Series D
Convertible Exchangeable Preferred Stock (i) amend, alter or repeal (by merger
or otherwise) any provision of the Amended Certificate, or the By-Laws of the
Company so as to affect adversely the relative rights, preferences,
qualifications, limitations or restrictions of the Series D Convertible
Exchangeable Preferred Stock, (ii) authorize any new class of Senior Dividend
Stock (as defined), any Senior Liquidation Stock (as defined) or any security
convertible into Senior Dividend Stock or Senior Liquidation Stock, or (iii)
effect any reclassification of the Series D Convertible Exchangeable Preferred
Stock.
The shares of Series D Convertible Exchangeable Preferred Stock are
convertible at the option of the holder at any time, unless previously redeemed
or exchanged, into Class A Common Stock of the Company, at a conversion price of
$45.625 per share of Class A Common Stock (equivalent to a conversion rate of
1.0959 shares of Class A Common Stock per share of Series D Convertible
Exchangeable Preferred Stock), subject to adjustment in certain events.
Upon the occurrence of a Change of Control (as defined), each share of
Series D Convertible Exchangeable Preferred Stock will be convertible at the
option of its holder for a limited period into the number of shares of Class A
Common Stock determined by dividing the $50 liquidation preference of such
share, plus accrued and unpaid dividends, by the greater of (i) the average of
the last reported sales price per share of the Class A Common Stock for the last
five trading days before the Change of Control or (ii) $26.42, as adjusted for
stock splits or combinations. Upon a Change of Control, the Company may
21
<PAGE>
elect to pay holders of the Series D Convertible Exchangeable Preferred Stock
exercising their special conversion rights an amount in cash equal to the $50
liquidation preference of the Series D Convertible Exchangeable Preferred Stock
plus any accrued and unpaid dividends, in which event no conversion pursuant to
the exercise of the special conversion rights will occur, unless the Company
defaults in payments of such amounts. A Change of Control will result in an
event of default under the Bank Credit Agreement and could result in the
acceleration of all indebtedness under the Bank Credit Agreement. Moreover, the
Bank Credit Agreement prohibits the repurchase of the Series D Convertible
Exchangeable Preferred Stock by the Company. A Change of Control will also
require the Company to offer to redeem the Existing Notes and the Series C
Preferred Stock.
The Series D Convertible Exchangeable Preferred Stock is redeemable at the
Company's option, in whole or from time to time in part, for cash at any time on
or after September 20, 2000, initially at a price per share equal to 104.20% of
the liquidation preference thereof, declining ratably on or after September 15
of each year thereafter to a redemption price equal to 100% of such liquidation
preference per share on or after September 15, 2007 plus, in each case, accrued
and unpaid dividends.
Subject to certain conditions, the Company may, at its option, on any
scheduled date for the payment of dividends on the Series D Convertible
Exchangeable Preferred Stock commencing on December 15, 2000, exchange the
Series D Convertible Exchangeable Preferred Stock, in whole but not in part, for
the Company's 6% Convertible Subordinated Debentures due 2012 (the "Exchange
Debentures"). Holders of Series D Convertible Exchangeable Preferred Stock so
exchanged will be entitled to $1,000 principal amount of Exchange Debentures for
each $1,000 of liquidation preference of Series D Convertible Exchangeable
Preferred Stock held by such holders at the time of exchange plus an amount per
share in cash equal to all accrued but unpaid dividends (whether or not
declared) thereon to the date of exchange. The Exchange Debentures will bear
interest payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year, commencing on the first such payment date following
the date of exchange. Beginning on December 15, 2000, at the Company's option,
the Exchange Debentures will be redeemable, in whole or in part, at redemption
prices beginning at 104.20% of the principal amount of the Exchange Debentures
and decreasing to 100% of such principal amount on September 15, 2007, plus
accrued and unpaid interest. Under certain circumstances involving a Change of
Control, holders will have the right to require the Company to purchase their
Exchange Debentures at a price equal to 100% of the principal amount thereof
plus accrued interest. The Exchange Debentures will be convertible into Class A
Common Stock on substantially the same terms as the Series D Convertible
Exchangeable Preferred Stock is convertible into Class A Common Stock. The
Exchange Debentures will be subordinated to all Senior Indebtedness.
CERTAIN STATUTORY AND CHARTER PROVISIONS
The following paragraphs summarize certain provisions of the Maryland
General Corporation Law and the Company's Amended Certificate and By-Laws. The
summary does not purport to be complete and reference is made to Maryland
General Corporation Law and the Company's Amended Certificate and By-Laws for
complete information.
Business Combinations. Under the Maryland General Corporation Law, certain
"business combinations" (including a merger, consolidation, share exchange, or,
in certain circumstances, an asset transfer or issuance of equity securities)
between a Maryland corporation and any person who beneficially owns 10% or more
of the corporation's stock (an "Interested Stockholder") must be (a) recommended
by the corporation's board of directors; and (b) approved by the affirmative
vote of at least (i) 80% of the corporation's outstanding shares entitled to
vote and (ii) two-thirds of the outstanding shares entitled to vote which are
not held by the Interested Stockholder with whom the business combination is to
be effected, unless, among other things, the corporation's common stockholders
receive a minimum price (as defined in the statute) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for his shares. In addition, an Interested Stockholder or
any affiliate thereof may not engage in a "business combination" with the
corporation for a period of five (5) years following the date he becomes an
Interested Stockholder. These provisions of Maryland law do not apply, however,
to business combinations that are approved or exempted by the
22
<PAGE>
board of directors of a Maryland corporation. It is anticipated that the
Company's Board of Directors will exempt from the Maryland statute any business
combination with the Controlling Stockholders, any present or future affiliate
or associate of any of them, or any other person acting in concert or as a group
with any of the foregoing persons.
Control Share Acquisitions. The Maryland General Corporation Law provides
that "control shares" of a Maryland corporation acquired in a "control share
acquisition" may not be voted except to the extent approved by a vote of
two-thirds of the votes entitled to be cast by stockholders excluding shares
owned by the acquirer, officers of the corporation and directors who are
employees of the corporation. "Control shares" are shares which, if aggregated
with all other shares previously acquired which the person is entitled to vote,
would entitle the acquirer to vote (i) 20% or more but less than one-third of
such shares, (ii) one-third or more but less than a majority of such shares, or
(iii) a majority of the outstanding shares. Control shares do not include shares
the acquiring person is entitled to vote because stockholder approval has
previously been obtained. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition and
who has obtained a definitive financing agreement with a responsible financial
institution providing for any amount of financing not to be provided by the
acquiring person may compel the corporation's board of directors to call a
special meeting of stockholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders meeting.
Subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or of any meeting
of stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquirer is entitled to vote a majority of the shares entitled
to vote, all other stockholders may exercise appraisal rights. The fair value of
the shares as determined for purposes of such appraisal rights may not be less
than the highest price per share paid in the control share acquisition, and
certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or excepted by or pursuant to the
articles of incorporation or by-laws of the corporation.
Effect of Business Combination and Control Share Acquisition Statutes. The
business combination and control share acquisition statutes could have the
effect of discouraging offers to acquire any such offer.
Limitation on Liability of Directors and Officers. The Company's Amended
Certificate provides that, to the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Company shall have any liability
to the Company or its stockholders for monetary damages. The Maryland General
Corporation Law provides that a corporation's charter may include a provision
which restricts or limits the liability of its directors or officers to the
corporation or its stockholders for money damages except (1) to the extent that
it is proved that the person actually received an improper benefit or profit in
money, property or services, for the amount of the benefit or profit in money,
property or services actually received or (2) to the extent that a judgment or
other final adjudication adverse to the person is entered in a proceeding based
on a finding in the proceeding that the person's action, or failure to act, was
the result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. In situations to which the Amended
Certificate provision applies, the remedies available to the Company or a
stockholder are limited to equitable remedies such as injunction or rescission.
This provision would not, in the opinion of the Commission, eliminate or limit
the liability of directors and officers under the federal securities laws.
Indemnification. The Company's Amended Certificate and By-Laws provide that
the Company may advance expenses to its currently acting and its former
directors to the fullest extent permitted by Maryland General Corporation Law,
and that the Company shall indemnify and advance expenses to its
23
<PAGE>
officers to the same extent as its directors and to such further extent as is
consistent with law. The Maryland General Corporation Law provides that a
corporation may indemnify any director made a party to any proceeding by reason
of service in that capacity unless it is established that (1) the act or
omission of the director was material to the matter giving rise to the
proceeding and (a) was committed in bad faith or (b) was the result of active
and deliberate dishonesty, or (2) the director actually received an improper
personal benefit in money, property or services, or (3) in the case of an
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. The statute permits Maryland corporations to indemnify
its officers, employees or agents to the same extent as its directors and to
such further extent as is consistent with law.
The Company has also entered into indemnification agreements with certain
officers and directors which provide that the Company shall indemnify and
advance expenses to such officers and directors to the fullest extent permitted
by applicable law in effect on the date of the agreement, and to such greater
extent as applicable law may thereafter from time to time permit. Such
agreements provide for the advancement of expenses (subject to reimbursement if
it is ultimately determined that the officer or director is not entitled to
indemnification) prior to the final disposition of any claim or proceeding.
FOREIGN OWNERSHIP
Under the Amended Certificate and to comply with FCC rules and regulations,
the Company is not permitted to issue or transfer on its books any of its
capital stock to or for the account of any Alien (as defined) if after giving
effect to such issuance or transfer, the capital stock held by or for the
account of any alien or Aliens would exceed, individually or in the aggregate,
25% of the Company's capital stock at any time outstanding. Pursuant to the
Amended Certificate, the Company will have the right to repurchase alien-owned
shares at their fair market value to the extent necessary, in the judgment of
the Board of Directors, to comply with the alien ownership restrictions. Any
issuance or transfer of capital stock in violation of such prohibition will be
void and of no force and effect. The Amended Certificate also provides that no
Alien or Aliens shall be entitled to vote, direct or control the vote of more
than 25% of the total voting power of all the shares of capital stock of the
Company outstanding and entitled to vote at any time and from time to time. Such
percentage, however, is 20% in the case of the Company's subsidiaries which are
direct holders of FCC licenses. In addition, the Amended Certificate provides
that no Alien shall be qualified to act as an officer of the Company and no more
than 25% of the total number of directors of the Company at any time may be
Aliens. The Amended Certificate further gives the Board of Directors of the
Company all power necessary to administer the above provisions.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Class A Common Stock is
BankBoston, N.A.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Company's voting securities beneficially owned as of April 29, 1998. Except for
shares of Class A Common Stock issuable to Barry Baker upon conversion of
options, each of the shares offered by the Selling Stockholders pursuant to this
Prospectus is to be issued upon conversion of shares of Series B Preferred Stock
of the Company issued to River City in connection with the River City
Acquisition and subsequently distributed to the Selling Stockholders. The
information set forth below is to the best of the Company's knowledge and is
based on the number of shares distributed to each of the Selling Stockholders.
The Company is not aware of any other acquisitions by the Selling Stockholders
or dispositions by the Selling Stockholders.
<TABLE>
<CAPTION>
NAME OF RELATIONSHIP SHARES
BENEFICIAL WITH AS OF
OWNER COMPANY APRIL 29, 1998
- - ---------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Stockholder
Baker, Barry ....................................... and Consultant 2,036,625(a)
Partners of River City Broadcasting, L.P.:
BankBoston Investments ............................. Stockholder 71,305
Pyramid Ventures ................................... Stockholder 72,567
CEA Investors VI, Inc. ............................. Stockholder 10,822
Leeway & Co. ....................................... Stockholder 37,657
Westpool Investment Trust PLC ...................... Stockholder 27,458
The Church Pension Fund ............................ Stockholder 25,104
Harvard Private Capital Holdings, Inc. ............. Stockholder 25,104
The CIT Group ...................................... Stockholder 12,552
Emerson U. and Erika J. Glazer 1976 Trusts ......... Stockholder 7,531
C.L.B. Family Limited Partnership .................. Stockholder 7,061
The Guilford Glazer Trust of 1984 .................. Stockholder 5,021
David and Helen Brown .............................. Stockholder 3,138
C. Charles Marran Trust ............................ Stockholder 2,824
B&C Investment Limited Partnership II .............. Stockholder 2,510
William F. Thompson ................................ Stockholder 10,352
William F. Thompson Irrevocable Trust .............. Stockholder 11,092
William F.and Juliana W. Thompson
Grandchildren's Trust .......................... Stockholder 11,092
Richard C. Wallace ................................. Stockholder 23,340
The Wallace Family Foundation ...................... Stockholder 4,000
Richard C. Wallace Irrevocable Trust ............... Stockholder 5,591
Susan E. Gordon .................................... Stockholder 13,670
Roy F. Coppedge, III ............................... Stockholder 13,670
The 1995 Coppedge Family Trust ..................... Stockholder 5,591
Anthony J. Bolland ................................. Stockholder 28,630
The Camthea Investment Trust ....................... Stockholder 4,300
James M. Wilson .................................... Stockholder 28,630
The Wilson Family Foundation ....................... Stockholder 4,300
Martha H.W. Crowninshield .......................... Stockholder 32,930
Barbara M. Ginader ................................. Stockholder 11,020
Sherri D. Floros ................................... Stockholder 1,109
John Hunt .......................................... Stockholder 1,055
Michaels, John P., Jr. Family Trust ................ Stockholder 32,062
Johnson, Mr. Robert W., IV ......................... Stockholder 106,204
Suelthaus, Mr. Kenneth H. .......................... Stockholder 8,545
Scordo, Mr. Pasquale R. and Mrs. Judith ............ Stockholder 5,309
555 Genesee/Beta Partners .......................... Stockholder 32,414
Powell, Mrs. Diane Linen ........................... Stockholder 10,622
Perry, John H., III Revocable Trust ................ Stockholder 106,204
Paredon Ridge, L.P. ................................ Stockholder 21,240
Perry, Mrs. Chris .................................. Stockholder 10,622
Willner, Mr. Michael S. ............................ Stockholder 2,655
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
NAME OF RELATIONSHIP SHARES
BENEFICIAL WITH AS OF
OWNER COMPANY APRIL 29, 1998
- - ---------------------------------------------------- ---------------- ------------------
<S> <C> <C>
Long, Mr. John H. ................................. Stockholder 5,309
Brooks, Dr. Norman H. ............................. Stockholder 5,309
Thomson, Mr. Richard E. ........................... Stockholder 22,262
Thomson, Mrs. Patricia M. ......................... Stockholder 10,622
Russell, Mr. Donald ............................... Stockholder 54,222
Devereaux, Mr. W.A. ............................... Stockholder 42,480
Lang, Mr. Monte ................................... Stockholder 10,622
Sobol, Steven M., M.D. ............................ Stockholder 21,240
Harms, Ms. Loretta M. ............................. Stockholder 10,622
Harms, Beverly A., Revocable Family Trust ......... Stockholder 64,825
Gawthrop, Mr. H. Gene ............................. Stockholder 10,622
Dugan, Mr. William J., Jr. ........................ Stockholder 2,655
Ewen, Mr. Harold D. ............................... Stockholder 30,698
McCloskey, Mr. Tom ................................ Stockholder 42,480
Howell, Mr. Donald C. and Mrs. Gloria J. .......... Stockholder 5,309
Cardy, Thomas W., Family Trust .................... Stockholder 2,539
MacCrory, Mr. Thomas .............................. Stockholder 12,018
Kim Enterprises, L.P. ............................. Stockholder 5,564
ERB 1994 Trust .................................... Stockholder 727
AEB 1994 Trust .................................... Stockholder 727
Baxt, Joy ......................................... Stockholder 2,516
Byrnes, Kathleen .................................. Stockholder 1,455
Reed, Colleen ..................................... Stockholder 2,516
Lackazerne, Inc. .................................. Stockholder 83,447
O'Brien, Kevin .................................... Stockholder 21,542
Marcus, Mr. Larry D. .............................. Stockholder 7,500
</TABLE>
- - ----------
(a) Includes 1,382,435 shares that will be obtained by Mr. Baker upon exercise
of options which he currently holds. Options for 1,036,826 shares are
currently exercisable and options for 345,609 shares will become
exercisable on May 31, 1998.
PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that from time to time
they may offer and sell the shares offered by this Prospectus in an underwritten
offering, on the over-the-counter market, in privately negotiated transactions,
or otherwise, at prices prevailing at the time of sale or related to the
then-current market price, or as may be negotiated at the time of sale. The
shares may be sold through securities brokers, dealers or banks, and such
brokers, dealers or banks may receive commissions or discounts from the Selling
Stockholders in amounts to be negotiated. With respect to any particular sale of
shares or as otherwise determined by the Company, the Company may prepare a
supplement to this Prospectus, which will supplement, supersede or replace, in
whole or in part, the information set forth in this Prospectus. This Prospectus
is not the sole means by which the shares of Class A Common Stock offered by the
Selling Stockholders may be offered or sold. Such shares may also be offered or
sold on the Nasdaq Stock Market in transactions exempt from registration
pursuant to Rule 144 under the Securities Act, in privately negotiated
transactions or in other transactions exempt from registration.
REGISTRATION RIGHTS AGREEMENT
The shares offered by this Prospectus are subject to a Registration Rights
Agreement dated as of May 31, 1996, as amended (the "Registration Rights
Agreement") by and among the Company, River City and certain other Registration
Rights Holders as are added from to time (together with River City, the
"Holders"). The Registration Rights Agreement obligates the Company, at its own
expense, to effect a Securities Act registration for shares of the Company's
Class A Common Stock (the "Registra-
26
<PAGE>
ble Securities") issued pursuant to the River City Acquisition and related
agreements as soon as practicable following the closing of the River City
Acquisition. To the extent that the Holders seek to offer at least 1,000,000
shares of Registrable Securities, the Company is required to retain an
underwriter selected by such Holders.
Pursuant to the Registration Rights Agreement, each of the Company and the
Holders also has certain piggy-back registration rights to include shares of
Class A Common Stock in an underwritten public offering proposed by the other.
If any managing underwriter of such an offering advises the Company and the
Holders that the number of Registrable Securities being offered creates a
significant risk that the price per share will be adversely affected or that the
number of shares is too large to be reasonably sold, then the number of shares
offered by the Company or the Holder, whichever is exercising its piggy-back
registration rights, will be reduced pro rata in proportion to the number of
shares sought to be offered.
The Registration Rights Agreement also provides that upon the occurrence of
a Trigger Event (as defined above in "Description of Capital Stock -- Existing
Preferred Stock"), each holder of Class A Common Stock issued upon conversion of
such holder's Series B Preferred Stock prior to a Trigger Event shall have the
right the exchange its shares of Class A Common Stock back into that number of
shares of Series B Preferred Stock for which the Class A Common Stock was
exchanged.
LEGAL MATTERS
The validity of the shares of Class A Common Stock being offered hereby and
certain other legal matters regarding the shares of Class A Common Stock have
been passed upon for the Company by Thomas & Libowitz, P.A., Baltimore,
Maryland, counsel to the Company, and by Wilmer, Cutler & Pickering, Baltimore,
Maryland, special securities counsel to the Company. Certain legal matters under
the Communications Act and the rules and regulations promulgated thereunder by
the FCC will be passed upon for the Company by Fisher Wayland Cooper Leader &
Zaragoza L.L.P., Washington. D.C. Basil A. Thomas, a director of the Company, is
of counsel to Thomas & Libowitz, P.A.
EXPERTS
The Consolidated Financial Statements and schedules of the Company as of
December 31, 1996 and 1997 and for each of the years ended December 31, 1995,
1996 and 1997, incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
giving said reports.
The financial statements of Heritage Media Services, Inc. -- Broadcasting
Segment as of December 31, 1997 and 1996 and for each of the periods in the two
year period ended December 31, 1997 incorporated by reference herein have been
audited by Arthur Andersen, LLP, independent public accountants, as stated in
their reports with respect thereto, and are incorporated herein in reliance on
the authority of said firm as experts in giving said reports.
The consolidated financial statements of Max Media Properties LLC as of
December 31, 1997 and 1996 and for each of the years in the two year period
ended December 31, 1997 have been incorporated by reference herein in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The financial statements of Sullivan Broadcast Holdings, Inc. and
Subsidiaries as of December 31, 1997 and 1996 and for the years ended December
31, 1997 and 1996 and for the period from inception (June 2, 1995) through
December 31, 1995 and the financial statements of Sullivan Broadcasting Company,
Inc. and Subsidiaries for the year ended December 31, 1995, incorporated in this
Prospectus by reference to the Current Report on Form 8-K/A of Sinclair
Broadcast Group, Inc., dated December 2, 1997 (filed April 8, 1998), have been
so incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
27
<PAGE>
======================================== =======================================
NO DEALER, SALESPERSON OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS OR ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT IN
CONNECTION WITH THE OFFER CONTAINED
HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT 3,373,410 SHARES
BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS AND ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT DO
NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH
THEY RELATE OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THOSE
TO WHICH THEY RELATE IN ANY STATE TO ANY SINCLAIR BROADCAST
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE GROUP, INC.
SUCH OFFER IN SUCH STATE. THE DELIVERY
OF THIS PROSPECTUS AND ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT AT ANY TIME DO NOT
IMPLY THAT THE INFORMATION HEREIN IS Class A Common Stock
CORRECT AS OF ANY TIME SUBSEQUENT TO
THEIR RESPECTIVE DATES.
-------------------------- [GRAPHIC OMITTED]
TABLE OF CONTENTS
PAGE --------------------------
---- P R O S P E C T U S
Available Information ............... 1
Incorporation of Certain Documents
by Reference....................... 2
The Company ......................... 3
Risk Factors ........................ 3 APRIL 29, 1998
Use of Proceeds ..................... 16
Market Price of Class A Common Stock. 16
Description of Capital Stock ........ 17
Selling Stockholders ................ 25
Plan of Distribution ................ 26 --------------------------
Legal Matters ....................... 27
Experts ............................. 27
======================================== =======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Amendment and Restatement and By-Laws of the Company state
that the Company shall indemnify, and advance expenses to, its directors and
officers whether serving the Company or at the request of another entity to the
fullest extent permitted by and in accordance with Section 2-418 of the Maryland
General Corporation Law. Section 2-418 contains certain provisions which
establish that a Maryland corporation may indemnify any director or officer made
party to any proceeding by reason of service in that capacity, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by the director or officer in connection with such proceeding unless it
is established that the director's or officer's act or omission was material to
the matter giving rise to the proceeding and the director or officer (i) acted
in bad faith or with active and deliberate dishonesty; (ii) actually received an
improper personal benefit in money, property or services; or (iii) in the case
of a criminal proceeding, had reasonable cause to believe that his act was
unlawful. However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made if the director or officer is
adjudged to be liable to the corporation. The statute also provides for
indemnification of directors and officers by court order.
Section 12 of Article II of the Amended By-Laws of the Company provides as
follows:
A director shall perform his duties as a director, including his duties as
a member of any Committee of the Board upon which he may serve, in good faith,
in a manner he reasonably believes to be in the best interests of the
Corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances. In performing his duties, a
director shall be entitled to rely on information, opinions, reports, or
statements, including financial statements and other financial data, in each
case prepared or presented by:
(a) one or more officers or employees of the Corporation whom the
director reasonably believes to be reliable and competent in the
matters presented;
(b) counsel, certified public accountants, or other persons as to matters
which the director reasonably believes to be within such person's
professional or expert competence; or
(c) a Committee of the Board upon which he does not serve, duly
designated in accordance with a provision of the Articles of
Incorporation or the By-Laws, as to matters within its designated
authority, which Committee the director reasonably believes to merit
confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted. A person who performs his duties in
compliance with this Section shall have no liability by reason of being or
having been a director of the Corporation.
The Company has also entered into indemnification agreements with certain
officers and directors which provide that the Company shall indemnify and
advance expenses to such officers and directors to the fullest extent
permitted by applicable law in effect on the date of the agreement, and to
such greater extent as applicable law may thereafter from time to time
permit. Such agreements provide for the advancement of expenses (subject to
reimbursement if it is ultimately determined that the officer or director is
not entitled to indemnification) prior to the disposition of any claim or
proceeding.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
5.1* Opinion of Wilmer, Cutler & Pickering as to the legality of the securities
offered
5.2* Opinion of Thomas & Libowitz as to the legality of the securities
offered
23.1 Consent of Arthur Andersen LLP, independent certified public accountants
23.2 Consent of Price Waterhouse LLP, independent certified public accountants, relating to finan-
cial statements of Sullivan Broadcast Holdings, Inc. and Subsidiaries
23.3 Consent of Price Waterhouse LLP, independent accountants, relating to financial statements
of Sullivan Broadcasting Company, Inc. and Subsidiaries
23.4 Consent of KPMG Peat Marwick LLP, independent certified public accountants, relating to
financial statements of Max Media Properties LLC
24* Powers of Attorney (Included in the signature pages to the Registration
Statement)
</TABLE>
- - ----------
* Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the provisions described in this Registration
Statement or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
persons of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
II-2
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Baltimore, Maryland on the 29th day of April,
1998.
SINCLAIR BROADCAST GROUP, INC.
By:/s/ David D. Smith
-----------------------------
David D. Smith
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David D. Smith Chairman of The Board, April 29, 1998
- - --------------------------- Chief Executive Officer, President and
David D. Smith Director (Principal Executive Officer)
/s/ David B. Amy
- - --------------------------- Chief Financial Officer (Principal Financial April 29, 1998
David B. Amy and Accounting Officer)
* Director April 29, 1998
- - ---------------------------
Frederick G. Smith
* Director April 29, 1998
- - ---------------------------
J. Duncan Smith
* Director April 29, 1998
- - ---------------------------
Robert E. Smith
* Director April 29, 1998
- - ---------------------------
Basil A. Thomas
* Director April 29, 1998
- - ---------------------------
Lawrence E. McCanna
</TABLE>
*By:/s/ David B. Amy
-----------------------
David B. Amy
Attorney-in-fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
5.1* Opinion of Wilmer, Cutler & Pickering as to the legality of the securities
offered
5.2* Opinion of Thomas & Libowitz as to the legality of the securities
offered
23.1 Consent of Arthur Andersen LLP, independent certified public accountants
23.2 Consent of Price Waterhouse LLP, independent certified public accountants, relating to finan-
cial statements of Sullivan Broadcast Holdings, Inc. and Subsidiaries
23.3 Consent of Price Waterhouse LLP, independent accountants, relating to financial statements
of Sullivan Broadcasting Company, Inc.
23.4 Consent of KPMG Peat Marwick LLP, independent certified public accountants, relating to
financial statements of Max Media Properties LLC
24* Powers of Attorney (Included in the signature pages to the Registration
Statement)
</TABLE>
- - ----------
* Previously filed.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference into the amended Registration Statement No. 333-12255 on form S-3/A
or our report dated February 9, 1998, except for Note 24, as to which the date
is February 23, 1998, included in Form 10-K/A filed March 27, 1998, of Sinclair
Broadcast Group, Inc. and of our report dated February 17, 1998, included in
Form 8-K/A filed April 8, 1998, of Heritage Media Services, Inc. It should be
noted that we have not audited any financial statements of the Company
subsequent to December 31, 1997, or performed any audit procedures subsequent to
the date of our report.
/s/ Arthur Andersen LLP
Baltimore, Maryland
April 27, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3/A, Amendment No. 1,
( No. 333-12255) of Sinclair Broadcast Group, Inc. (the "Company") of our report
dated March 10, 1998 relating to the financial statements of Sullivan Broadcast
Holdings, Inc. and Subsidiaries as of December 31, 1996 and 1997 and for the
period from inception (June 2, 1995) through December 31, 1995 and for the years
ended December 31, 1996 and 1997, which appears in the Company's Current Report
on Form 8-K/A dated December 2, 1997 (filed April 8, 1998). We also consent to
the reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Boston, Massachusetts
April 24, 1998
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3/A, Amendment No. 1,
( No. 333-12255) of Sinclair Broadcast Group, Inc. (the "Company") of our report
dated March 25, 1996 relating to the financial statements of Sullivan
Broadcasting Company, Inc. and Subsidiaries for the year ended December 31,
1995, which appears in the Company's Current Report on Form 8-K/A dated December
2, 1997 (filed April 8, 1998). We also consent to the reference to us under the
heading "Experts" in such Prospectus.
Price Waterhouse LLP
Boston, Massachusetts
April 24, 1998
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Managers and Members
Max Media Properties LLC:
We consent to the incorporation by reference in the registration statement
on Form S-3/A (No. 333-12255) of Sinclair Broadcast Group, Inc. of our report
dated February 18, 1998, with respect to the consolidated balance sheets of Max
Media Properties LLC and its limited partnerships as of December 31, 1997 and
1996, and the related consolidated statement of operations, members' capital and
cash flows for the years then ended, which report appears in the Form 8-K/A of
Sinclair Broadcast Group, Inc. dated December 2, 1997, filed on April 8, 1998
and incorporated by reference in the registration statement. We also consent to
the reference to our firm under the heading "Experts" in the registration
statement on Form S-3/A.
KPMG Peat Marwick LLP
Norfolk, Virginia
April 24, 1998
