SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
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Check the appropriate box:
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[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SINCLAIR BROADCAST GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
SINCLAIR BROADCAST GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)14) and 0-11.
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pursuant to Exchange Act Rule 0-11:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
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<PAGE>
[SINCLAIR BROADCAST GROUP, INC. LOGO OMITTED]
April 14, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Sinclair Broadcast Group, Inc. We will be holding the Annual Meeting on May 11,
1999 at the Sheraton Baltimore North, 903 Dulaney Valley Road, Towson, MD 21204
at 10:00 a.m., local time.
At the 1999 Annual Meeting, we will ask you to:
o Elect six members of the Board of Directors;
o Ratify the selection of Arthur Andersen LLP as independent accountants
for the fiscal year ending December 31, 1999; and
o Transact such other business as properly comes before the meeting.
Enclosed with this letter is a Notice of the Annual Meeting of
Stockholders, a Proxy Statement, a proxy card and a return envelope. Also
enclosed with this letter is Sinclair Broadcast Group, Inc.'s Annual Report to
Stockholders for the fiscal year ended December 31, 1998.
THE BOARD OF DIRECTORS OF SINCLAIR RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ELECTION OF THE BOARD'S NOMINEES FOR DIRECTOR AND FOR APPROVAL OF EACH OF THE
OTHER PROPOSALS.
Your vote on these matters is very important. We urge you to review
carefully the enclosed materials and to return your proxy promptly.
Whether or not you plan to attend the Annual Meeting, please sign and
promptly return your proxy card in the enclosed postage paid envelope. If you
attend the meeting, you may vote in person if you wish, even though you have
previously returned your proxy.
Sincerely,
David D. Smith
Chairman of the Board
and Chief Executive Officer
<PAGE>
YOUR VOTE IS IMPORTANT -- PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE
SINCLAIR BROADCAST GROUP, INC. ANNUAL MEETING.
SINCLAIR BROADCAST GROUP, INC.
2000 W. 41ST STREET
BALTIMORE, MARYLAND 21211
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------------------------------
DATE: TUESDAY, MAY 11, 1999
TIME: 10:00 A.M. LOCAL TIME
PLACE: THE SHERATON BALTIMORE NORTH
903 DULANEY VALLEY ROAD
TOWSON, MD 21204
-----------------------------------
YOUR VOTE AT THE ANNUAL MEETING IS VERY IMPORTANT TO US.
Dear Stockholders:
At the 1999 Annual Meeting, we will ask you to:
1. Elect six directors, each for a one-year term.
2. Ratify the appointment by the Board of Directors of the firm of Arthur
Andersen LLP as independent public accountants of Sinclair for the
fiscal year ending December 31, 1999.
3. Transact such other business as may properly come before the Annual
Meeting.
Accompanying this notice is a Proxy Statement and a Proxy Card. Whether or
not you expect to be present at the Annual Meeting, please sign and date the
Proxy Card and return it in the enclosed envelope before the date of the Annual
Meeting. You may revoke your proxy any time before it is voted at the Annual
Meeting. You will be able to vote your shares at the Annual Meeting if you were
a stockholder of record at the close of business on April 2, 1999.
You are cordially invited to attend the Annual Meeting, and you may vote in
person even though you have returned your card.
BY ORDER OF THE BOARD OF DIRECTORS
J. Duncan Smith, Secretary
Baltimore, Maryland
April 14, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
----
INFORMATION ABOUT THE 1999 ANNUAL MEETING AND VOTING ....................... 2
PROPOSAL 1: ELECTION OF DIRECTORS .......................................... 4
PROPOSAL 2: RATIFICATION OF INDEPENDENT AUDITORS ........................... 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............. 5
DIRECTORS AND EXECUTIVE OFFICERS ........................................... 7
STOCKHOLDER PROPOSALS ...................................................... 20
i
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
2000 W. 41ST STREET
BALTIMORE, MARYLAND 21211
--------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1999
--------------
This Proxy Statement provides information that you should read before you
vote on the proposals that will be presented to you at the 1999 Annual Meeting
of Sinclair Broadcast Group, Inc. ("Sinclair" or the "Company") . The 1999
Annual Meeting will be held on May 11, 1999 at the Sheraton Baltimore North, 903
Dulaney Valley Road, Towson, MD 21204.
This Proxy Statement provides detailed information about the Annual
Meeting, the proposals you will be asked to vote on at the Annual Meeting, and
other relevant information. The Board of Directors of Sinclair is soliciting
these proxies.
At the Annual Meeting, you will be asked to vote on the following
proposals:
1. Elect six directors, each for a one-year term;
2. Ratify the appointment by the Board of Directors of the firm of Arthur
Andersen LLP as independent public accountants of Sinclair for the
fiscal year ending December 31, 1999; and
3. Such other matters as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE TO ELECT THE
BOARD'S NOMINEES FOR DIRECTOR AND TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN
LLP.
On April 14, 1999, we began mailing information to people who, according to
our records, owned common shares or beneficial interests in Sinclair as of the
close of business on April 2, 1999. We have mailed with that information a copy
of Sinclair's Annual Report to Stockholders for the fiscal year ended December
31, 1998.
1
<PAGE>
INFORMATION ABOUT THE 1999 ANNUAL MEETING AND VOTING
THE ANNUAL MEETING
The Annual Meeting will be held on May 11, 1999 at the Sheraton Baltimore
North, 903 Dulaney Valley Road, Towson, Maryland, 21204 at 10:00 a.m. local
time.
THIS PROXY SOLICITATION
We are sending you this proxy statement because Sinclair's Board of
Directors is seeking a proxy to vote your shares at the Annual Meeting. This
proxy statement is intended to assist you in deciding how to vote your shares.
On April 14, 1999, we began mailing this proxy statement to all people who,
according to our stockholder records, owned shares at the close of business on
April 2, 1999.
Sinclair is paying the cost of requesting these proxies. Sinclair's
directors, officers and employees may request proxies in person or by telephone,
mail, telecopy or letter. Sinclair will reimburse brokers and other nominees
their reasonable out-of-pocket expenses for forwarding proxy materials to
beneficial owners of our common shares.
VOTING YOUR SHARES
You may vote your shares at the Annual Meeting either in person or by
proxy. To vote in person, you must attend the Annual Meeting and obtain and
submit a ballot. Ballots for voting in person will be available at the Annual
Meeting. To vote by proxy, you must complete and return the enclosed proxy card
in time to be received by us by the Annual Meeting. By completing and returning
the proxy card, you will be directing the persons designated on the proxy card
to vote your shares at the Annual Meeting in accordance with the instructions
you give on the proxy card.
If you hold your shares with a broker and you do not tell your broker how
to vote, your broker has the authority to vote on both proposals.
IF YOU DECIDE TO VOTE BY PROXY, YOUR PROXY CARD WILL BE VALID ONLY IF YOU
SIGN, DATE AND RETURN IT BEFORE THE ANNUAL MEETING SCHEDULED TO BE HELD ON MAY
11, 1999.
If you complete the proxy card, except for the voting instructions, then
your shares will be voted FOR each of the director nominees identified on the
proxy card, and FOR ratification of the selection of Arthur Andersen LLP as the
independent accountants of Sinclair for the 1999 fiscal year.
We have described in this proxy statement all the proposals that we expect
will be made at the Annual Meeting. If we or a stockholder properly present any
other proposal to the meeting, we will use your proxy to vote your shares on the
proposal in our best judgment.
REVOKING YOUR PROXY
If you decide to change your vote, you may revoke your proxy at any time
before it is voted. You may revoke your proxy one of three ways:
o You may notify the Secretary of Sinclair in writing that you wish to
revoke your proxy, at the following address: Sinclair Broadcast Group,
Inc., 2000 W. 41st Street, Baltimore, Maryland, Attention: J. Duncan
Smith, Vice President and Secretary. Your notice must be received by
us before the time of the Annual Meeting.
o You may submit a proxy dated later than your original proxy.
o You may attend the Annual Meeting and vote. Merely attending the
Annual Meeting will not by itself revoke a proxy; you must obtain a
ballot and vote your shares to revoke the proxy.
2
<PAGE>
VOTE REQUIRED BY APPROVAL
SHARES ENTITLED TO VOTE. On April 2, 1999 (also referred to as the "Record
Date"), the following shares were issued and outstanding and had the votes
indicated:
o Class A Common Stock. 48,036,430 shares of Class A Common Stock, each
of which is entitled to one vote on each of the proposals;
o Class B Common Stock. 48,630,231 shares of Class B Common Stock, each
of which is entitled to ten votes on each of the proposals;
o Series B Preferred Stock. 39,181 shares of Series B Preferred Stock,
each of which is entitled to 7.27 votes on each of the proposals.
QUORUM. A "quorum" must be present at the Annual Meeting in order to
transact business. A quorum will be present if 267,311,847 votes are represented
at the Annual Meeting, either in person (by the stockholders) or by proxy. If a
quorum is not present, a vote cannot occur. In deciding whether a quorum is
present, abstentions will be counted as shares that are represented at the
Annual Meeting.
VOTES REQUIRED. The votes required on each of the proposals are as
follows:
Proposal 1: Election of Six Directors The six
nominees for director who receive the
most votes will be elected. If you
indicate "withhold authority to vote"
for a particular nominee on your proxy
card, your vote will not count either
for or against the nominee.
Proposal 2: Ratification of Selection The affirmative vote of a majority of
of Independent Accountants the votes cast at the Annual Meeting
is required to ratify the selection of
independent accountants. If you
abstain from voting, your abstention
will not count as a vote cast for or
against the proposal.
ADDITIONAL INFORMATION
We are mailing our Annual Report to Stockholders for the fiscal year ended
December 31, 1998, including consolidated financial statements, to all
shareholders entitled to vote at the Annual Meeting together with this proxy
statement. The Annual Report does not constitute a part of the proxy
solicitation material. The Annual Report tells you how to get additional
information about Sinclair.
3
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees for election to the Board of Directors are:
David D. Smith
Frederick G. Smith
J. Duncan Smith
Robert E. Smith
Basil A. Thomas
Lawrence E. McCanna
Each director will be elected to serve for a one-year term, unless he
resigns or is removed before his term expires, or until his replacement is
elected and qualified. Each of the six nominees is currently a member of the
Board of Directors and has consented to serve as a director if re-elected. More
detailed information about each of the nominees is available in the section of
this proxy statement titled "Directors and Executive Officers," which begins on
page 7.
If any of the nominees cannot serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute nominee or
nominees. If a substitute is nominated, we will vote all valid proxies for the
election of the substitute nominee or nominees. Alternatively, the Board of
Directors may also decide to leave the board seat or seats open until a suitable
candidate or candidates are located, or it may decide to reduce the size of the
Board.
The Board of Directors of the Company has established the size of the board
at seven members. However, since a vacancy was created by the resignation of one
director in 1997, the Board has not appointed a replacement or nominated anyone
to be elected to this position. The Board may in the future appoint someone to
fill this vacancy, or may leave the position open, and therefore has not taken
action to eliminate the vacant directorship. Proxies for the Annual Meeting may
not be voted for more than the six nominees named.
Messrs. David, Frederick, Duncan and Robert Smith (collectively, the
"Controlling Stockholders") have entered into a stockholders' agreement pursuant
to which they have agreed to vote for each other as candidates for election to
the Board of Directors until June 12, 2005.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES TO THE
BOARD OF DIRECTORS.
PROPOSAL 2: RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, with the concurrence of the Audit Committee, has
selected Arthur Andersen LLP as its independent auditors for 1999. If the
stockholders do not ratify the appointment of Arthur Andersen LLP, the Board of
Directors will reevaluate the engagement of the independent auditors. Even if
the appointment is ratified, the Board of Directors in its discretion may
nevertheless appoint another firm of independent auditors at any time during the
year if the Board of Directors determines that such a change would be in the
best interests of the shareholders and the Company.
A representative of Arthur Andersen LLP is expected to attend the Annual
Meeting. The Arthur Andersen representative will have the opportunity to make a
statement if he or she desires to do so and will be able to respond to
appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There were 96,666,661 shares of common stock of Sinclair issued and
outstanding on April 2, 1999. The following table shows how many shares were
owned by the following categories of persons as of that date:
o persons who own more than 5% of the shares;
o each director and each officer described on the "Summary Compensation
Table" on page 11;
o all directors and officers as a group.
<TABLE>
<CAPTION>
SHARES OF CLASS B SHARES OF CLASS A
COMMON STOCK COMMON STOCK PERCENT OF
BENEFICIALLY OWNED BENEFICIALLY OWNED TOTAL
------------------------ ------------------------ VOTING
NAME NUMBER PERCENT NUMBER PERCENT POWER (A)
- ----------------------------------------- ------------ --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
David D. Smith (b) ...................... 13,025,926 26.5% 13,045,926 21.6% 24.2%
Frederick G. Smith (b) (c) .............. 11,356,171 23.1% 11,356,171 19.3% 21.1%
J. Duncan Smith (b) (d) ................. 12,839,321 26.2% 12,839,321 21.3% 23.8%
Robert E. Smith (b) (e) ................. 11,128,474 22.7% 11,128,474 19.0% 20.7%
Kerby Confer (f) ........................ 160,134 * *
Barry P. Drake(f) ....................... 83,486 * *
Basil A. Thomas ......................... 4,000 * *
Lawrence E. McCanna ..................... 600 * *
Barry Baker (g) (h)
1215 Cole Street
St. Louis, Missouri 63106 .............. 4,073,252 8.6% 1.0%
Putnam Investments, Inc. (i)
One Post Office Square
Boston, Massachusetts 02109 ............ 11,315,372 23.8% 2.1%
J&W Seligman & Co. (j)
100 Park Avenue -- 8th floor
New York, NY 10006 ..................... 3,241,500 6.8% *
Alliance Capital Management L.P. (k)
1290 Avenue of the Americas
New York, NY 10104 ..................... 2,680,000 5.6% *
All directors and executive officers as a
group (9 persons) (l) .................. 48,349,892 98.5% 48,738,166 50.7% 89.8%
</TABLE>
- ----------
* Less than 1%
(a) Holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to ten votes per share except
for votes relating to "going private" and certain other transactions. The
Class A Common Stock, the Class B Common Stock and the Series B Preferred
Stock vote altogether as a single class except as otherwise may be required
by Maryland law on all matters presented for a vote, with each share of
Series B Preferred Stock entitled to 7.27 votes on all such matters.
Holders of Class B Common Stock may at any time convert their shares into
the same number of shares of Class A Common Stock and holders of Series B
Preferred Stock may at any time convert each share of Series B Preferred
Stock into 7.27 shares of Class A Common Stock.
(b) Shares of Class A Common Stock beneficially owned includes shares of Class
B Common Stock beneficially owned, each of which is convertible into one
share of Class A Common Stock.
(c) Includes 839,290 shares held in irrevocable trusts established by Frederick
G. Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(d) Includes 881,390 shares held in irrevocable trusts established by J. Duncan
Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(e) Includes 1,465,710 shares held in irrevocable trusts established by Robert
E. Smith for the benefit of his children and as to which Mr. Smith has the
power to acquire by substitution of trust property. Absent such
substitution, Mr. Smith would have no power to vote or dispose of the
shares.
(f) Includes 60,000 shares of Class A Common Stock that may be acquired upon
exercise of options. Mr. Confer resigned from his position with Sinclair
effective April 5, 1999.
(g) Includes 2,764,870 shares of Class A Common Stock that may be acquired upon
exercise of options.
5
<PAGE>
(h) Number of shares owned is based on a report on Schedule 13D/A filed with
the Securities and Exchange Commission on February 8, 1999. The Schedule
13D/A reflects Mr. Baker as the beneficial owner of 2,036,626 shares of
Class A Common Stock of Sinclair, which corresponds to the total of
4,073,252 reflected on the table after accounting for a 2:1 stock split of
the Company's Class A Common Stock.
(i) Number of shares beneficially owned is based on a report on Schedule 13G/A
filed with the Securities and Exchange Commission on February 11, 1999.
According to the referenced Schedule 13G/A, total represents shares of
Class A Common Stock held by Putnam Investments, Inc. ("PI") and its
subsidiaries, Putnam Investment Management, Inc. ("PIM"), and The Putnam
Advisory Company, Inc. ("PAC"). PI is a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc. PIM beneficially owns 10,729,488 shares of Class A
Common Stock, and has no power to vote these shares, but shares the power
to dispose of them with PI and PAC. PAC beneficially owns 585,884 shares of
Class A Common Stock, and shares the power to vote or direct the vote of
266,801 of these shares with PI. PI, PIM and PAC together share the power
to dispose of the total of 11,315,372 shares beneficially owned by PI. The
principal business address of Marsh & McLennan Companies, Inc. is 1166
Avenue of the Americas, New York, NY 10036.
(j) Number of shares beneficially owned is based on a report on Schedule 13G/A
filed with the Securities and Exchange Commission on February 9, 1999.
William C. Morris, as the owner of a majority of the outstanding voting
securities of J.&W. Seligman & Co. Incorporated, may be deemed to
beneficially own the shares reported on the referenced Schedule 13G/A.
According to the referenced Schedule 13 G/A, J. & W. Seligman & Co.
Incorporated shares the voting power for 3,225,300 shares of Class A Common
Stock with William C. Morris. J. & W. Seligman & Co. Incorporated shares
the dispositive power over 3,241,500 shares of Class A Common Stock with
William C. Morris.
(k) Number of shares beneficially owned is based on a report on Schedule 13G/A
filed with the Securities and Exchange Commission on February 16, 1999.
According to the referenced Schedule 13G/A, Alliance Capital Management
L.P. ("Alliance") acquired beneficial ownership of 2,680,000 shares of
Class A Common Stock solely for investment purposes on behalf of client
discretionary investment advisory accounts. Alliance holds sole power to
vote or direct the vote of 1,223,900 shares, shared power to vote or direct
the vote of 1,449,800 shares, and sole power to dispose or to direct the
disposition of 2,680,000 shares. Alliance is a subsidiary of The Equitable
Companies Incorporated, which in turn is controlled by AXA (formerly
AXA-UAP).
(l) Includes 120,000 shares of Class A Common Stock that may be acquired upon
exercise of options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers (as defined in regulations
promulgated by the SEC) and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of copies of such reports of ownership furnished
to the Company, or written representations that no forms were necessary, the
Company believes that during the past fiscal year all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
6
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information relating to the Company's executive
officers, directors, and certain key employees.
<TABLE>
<CAPTION>
NAME AGE TITLE
- -------------------------------- ----- ------------------------------------------------------
<S> <C> <C>
David D. Smith ................. 48 President, Chief Executive Officer, Director and
Chairman of the Board
Frederick G. Smith ............. 49 Vice President and Director
J. Duncan Smith ................ 45 Vice President, Secretary and Director
David B. Amy ................... 46 Chief Financial Officer
Patrick J. Talamantes .......... 34 Treasurer
Barry Drake .................... 47 Chief Executive Officer, Radio
Robert Gluck ................... 41 Regional Director, Television
Michael Granados ............... 44 Regional Director, Television
Steven M. Marks ................ 42 Regional Director, Television
Craig Millar ................... 50 Regional Director, Television
Stuart Powell .................. 57 Regional Director, Television
John T. Quigley ................ 55 Regional Director, Television
Frank W. Bell .................. 43 Vice President, Programming, Radio
M. William Butler .............. 46 Vice President/Group Program Director
Lynn A. Deppen ................. 41 Vice President, Engineering, Radio
Michael Draman ................. 50 Vice President/TV Sales and Marketing, Television
Stephen A. Eisenberg ........... 57 Vice President/Director of National Sales, Television
Nat Ostroff .................... 58 Vice President/New Technology
Delbert R. Parks III ........... 47 Director of Operations and Engineering, Television
Robert E. Quicksilver .......... 44 Vice President/General Counsel
Thomas E. Severson ............. 35 Corporate Controller
Michael E. Sileck .............. 38 Vice President/Finance
Robin A. Smith ................. 42 Chief Financial Officer, Radio
Lawrence E. McCanna ............ 55 Director
Basil A. Thomas ................ 83 Director
Robert E. Smith ................ 35 Director
</TABLE>
Members of the Board of Directors are elected for one-year terms and until
their successors are duly elected and qualified. Executive officers are
appointed by the Board of Directors annually to serve for one-year terms and
until their successors are duly appointed and qualified.
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES
The Board of Directors held a total of 5 meetings during 1998, and executed
12 unanimous consents in lieu of meetings. Each director attended at least 75%
of the aggregate number of meetings of the Board of Directors and all committees
of the Board of Directors on which he served.
The Board of Directors currently consists of six members. The committees of
the Board of Directors include an Audit Committee and a Compensation Committee.
o AUDIT COMMITTEE. The members of the Audit Committee are Messrs. Thomas
and McCanna. This committee is charged with the responsibility of
reviewing the Company's internal auditing procedures and accounting
controls and will consider the selection and independence of the
company's outside auditors. The Audit Committee met four times during
the year ended December 31, 1998.
o COMPENSATION COMMITTEE. The members of the Compensation Committee are
Messrs. Thomas and McCanna. This committee is charged with the
responsibility for setting executive compensation, reviewing certain
of the Company's compensation programs and making recommendations to
the Board of Directors in the interval between meetings. The
Compensation Committee met ten times during the year ended December
31, 1998.
7
<PAGE>
DIRECTOR AND OFFICER PROFILES
David D. Smith has served as President, Chief Executive Officer and
Chairman of the Board since September 1990. Prior to that, he served as General
Manager of WPTT, Pittsburgh, Pennsylvania, from 1984, and assumed the financial
and engineering responsibility for Sinclair, including the construction of WTTE,
Columbus, Ohio, in 1984. In 1980, Mr. Smith founded Comark Television, Inc.,
which applied for and was granted the permit for WPXT-TV in Portland, Maine and
which purchased WDSI-TV in Chattanooga, Tennessee. WPXT-TV was sold one year
after construction and WDSI-TV was sold two years after its acquisition. From
1978 to 1986, Mr. Smith co-founded and served as an officer and director of
Comark Communications, Inc., a company engaged in the manufacture of high power
transmitters for UHF television stations. His television career began with WBFF
in Baltimore, where he helped in the construction of the station and was in
charge of technical maintenance until 1978. David D. Smith, Frederick G. Smith,
J. Duncan Smith and Robert E. Smith are brothers. David Smith is currently a
member of the board of directors of Acrodyne Communications, Inc.
Frederick G. Smith has served as Vice President of Sinclair since 1990 and
as a Director since 1986. Prior to joining Sinclair in 1990, Mr. Smith was an
oral and maxillofacial surgeon engaged in private practice and was employed by
Frederick G. Smith, M.S., D.D.S., P.A., a professional corporation of which Mr.
Smith was the sole officer, director and stockholder.
J. Duncan Smith has served as Vice President, Secretary and a Director of
Sinclair since 1988. Prior to that, he worked for Comark Communications, Inc.
installing UHF transmitters. In addition, he also worked extensively on the
construction of WPTT in Pittsburgh, WTTE in Columbus, WIIB in Bloomington and
WTTA in St. Petersburg, as well as on the renovation of the new studio, offices
and news facility for WBFF in Baltimore.
David B. Amy has served as Chief Financial Officer ("CFO") since October of
1994, and as Vice President and CFO since September, 1998. In addition, he
serves as Secretary of Sinclair Communications, Inc., the Sinclair subsidiary
which owns and operates the broadcasting operations. Prior to his appointment as
Vice President and CFO, Mr. Amy served as the Corporate Controller of Sinclair
beginning in 1986 and has been Sinclair's Chief Accounting Officer since that
time. Mr. Amy has over fourteen years of broadcast experience, having joined
Sinclair as a business manager for WCWB in Pittsburgh. Mr. Amy received an MBA
degree from the University of Pittsburgh in 1981.
Patrick J. Talamantes has served as Treasurer of the Company since
September 1998. In addition, Mr. Talamantes served as Director of Corporate
Finance and Treasurer of SCI since 1996. Prior to that time and since April
1995, he served as Treasurer for River City Broadcasting, L.P. ("River City"),
a radio and television broadcasting company acquired by the Company in 1996.
From 1991 to 1995, he was a Vice President with Chemical Bank, where he
completed financings for clients in the cable, broadcasting, publishing and
entertainment industries. Mr. Talamantes holds a B.A. degree from Stanford
University and an M.B.A. from the Wharton School at the University of
Pennsylvania.
Barry Drake has served as Chief Operating Officer of SCI Radio since 1996.
Prior to that time, he was Chief Operating Officer -- Keymarket Radio Division
of River City since July 1995. Prior to that time, he was President and Chief
Operating Officer of Keymarket since 1988. From 1985 through 1988, Mr. Drake
performed the duties of the President of each of the Keymarket broadcasting
entities, with responsibility for three stations located in Houston, St. Louis
and Detroit.
Robert Gluck has served as Regional Director of Sinclair since August 1997.
As Regional Director, Mr. Gluck is responsible for the Baltimore, Minneapolis,
Greensboro/Winston-Salem, Milwaukee and Raleigh/Durham markets. Prior to joining
Sinclair, Mr. Gluck served as General Manager at WTIC-TV in the Hartford-New
Haven market. Prior to joining WTIC-TV in 1988, Mr. Gluck served as National
Sales Manager and Local Sales Manager of WLVI-TV in Boston. Before joining
WLVI-TV, Mr. Gluck served in various sales and management capacities with New
York national sales representative firms.
Michael Granados has served as a Regional Director of Sinclair since July
1996. As a Regional Director, Mr. Granados is responsible for the Sacramento,
Cape Girardeau, San Antonio, Des Moines, Peoria and Las Vegas markets. Prior to
July 1996, Mr. Granados has served as the General Manager of
8
<PAGE>
WTTV-TV. Before 1996 and while working for River City, Mr. Granados served as
the General Sales Manager of KABB from 1989 to 1993 and the Station Manager and
Director of Sales of WTTV from 1993 to 1994.
Steven M. Marks has served as Regional Director for Sinclair since October
1994. As Regional Director, Mr. Marks is responsible for the Columbus, Mobile,
Pensacola, Charleston, WV, Norfolk, Flint and Syracuse markets. Prior to his
appointment as Regional Director, Mr. Marks served as General Manager for WBFF
since July 1991. From 1986 until joining WBFF in 1991, Mr. Marks served as
General Sales Manager at WTTE. Prior to that time, he was national sales manager
for WFLX-TV in West Palm Beach, Florida.
Stuart Powell has served as a Regional Director since December 15, 1997.
As a Regional Director, Mr. Powell is responsible for the Pittsburgh, Kansas
City, St. Louis, Buffalo, Rochester, and Cincinnati markets. Prior to joining
Sinclair, Mr. Powell served as Vice President and General Manager at WXIX-TV in
the Cincinnati market. Prior to joining WXIX-TV in 1992, Mr. Powell served as
General Manager of WFLD in Chicago. Before joining WFLD, Mr. Powell served in
various sales and management capacities with Scripps Howard in Phoenix and
Kansas City.
John T. Quigley has served as a Regional Director of Sinclair since June
1996. As Regional Director, Mr. Quigley is responsible for the Oklahoma City,
Madison, Lexington, Richmond, Asheville/Greenville, Charleston, SC and
Tri-Cities markets. Prior to that time, Mr. Quigley served as general manager of
WTTE since July 1985. Prior to joining WTTE, Mr. Quigley served in broadcast
management positions at WCPO-TV in Cincinnati, Ohio and WPTV-TV in West Palm
Beach, Florida.
Craig Millar has served as a Regional Director since July 1998. As Regional
Director, Mr. Millar is responsible for the Nashville, Birmingham, Indianapolis
and Dayton markets. Prior to his appointment as Regional Director, Mr. Millar
served as President and General Manager of KTBC/KVC-TV in Austin, Texas since
April, 1995. Prior to that Mr. Millar was President and General Manager WBRC-TV
in Birmingham, Alabama since March 1992. Prior to that Mr. Millar was Vice
President of Sales for Great American Broadcasting from August 1989. Prior to
that Mr. Millar served in various sales management and sales positions in both
television and radio.
Frank W. Bell has served as Vice President/Radio Programming of SCI Radio
since Sinclair's acquisition of the assets of River City in 1996. Prior to that
time, he served in the same capacity in the Keymarket Radio Division of River
City since 1995, and for Keymarket Communications since 1987. From 1981 through
1987, Mr. Bell owned and operated several radio stations in Pennsylvania and
Kansas. Before that, he served two years as a Regional Manager for National
Association of Broadcasters.
M. William Butler has served as Vice President/Group Program Director, SCI
since 1997. From 1995 to 1997, Mr. Butler served as Director of Programming at
KCAL, the Walt Disney Company station in Los Angeles, California. From 1991 to
1995, he was Director of Marketing and Programming at WTXF in Philadelphia,
Pennsylvania and prior to that he held the same position at WLVI in Boston,
Massachusetts. Mr. Butler attended the Graduate Business School of the
University of Cincinnati from 1975 to 1976.
Lynn A. Deppen has served as Director of Engineering/Radio Division of SCI
Radio since Sinclair's acquisition of the assets of River City in 1996. Prior to
that time, he served in the same position for the Keymarket Radio Division of
River City Broadcasting since 1995, and for Keymarket Communications since 1985.
Mr. Deppen has owned and operated his own technical consulting firm as well as
radio stations in Pennsylvania, New York and Ohio.
Michael Draman has served as Vice President/TV Sales and Marketing, SCI
since 1997. From 1995 until joining Sinclair, Mr. Draman served as Vice
President of Revenue Development for New World Television. From 1983 to 1995,
he was Director of Sales and Marketing for WSVN in Miami, Florida. Mr. Draman
attended The American University and The Harvard Business School and served
with the U.S. Marine Corps in Vietnam.
Stephen A. Eisenberg has served as Director of National Sales, SCI since
November 1996. Prior to joining Sinclair, he worked since 1975 in various
capacities at Petry Television, including most recently as Vice
President/Director of Sales with total national sales responsibility for KTTV in
Los Angeles,
9
<PAGE>
California, KCPQ-TV in Seattle, Washington, WTNH-TV in New Haven, Connecticut,
WKYC-TV in Cleveland, Ohio, WBIR-TV in Knoxville, Tennessee, WKEF-TV in Dayton,
Ohio and WTMJ-TV in Milwaukee, Wisconsin. Mr. Eisenberg received an MS degree in
Journalism from Northwestern's Medill School and a BA degree from Brooklyn
College.
Nat Ostroff has served as Vice President for New Technology since joining
Sinclair in January of 1996. From 1984 until joining Sinclair, he was the
President and CEO of Comark Communication Inc., a leading manufacturer of UHF
transmission equipment. While at Comark, Mr. Ostroff was nominated and awarded a
Prime Time Emmy Award for outstanding engineering achievement for the
development of new UHF transmitter technologies in 1993. In 1968, Mr. Ostroff
founded Acrodyne Industries Inc., a manufacturer of TV transmitters and a public
company and served as its first President and CEO. Mr. Ostroff holds a BSEE
degree from Drexel University and an MEEE degree from New York University. He is
a member of several industry organizations, including, AFCCE, IEEE and SBE.
Delbert R. Parks III has served as Vice President of Operations and
Engineering since 1996. Prior to that time, he was Director of Operations and
Engineering for WBFF and Sinclair since 1985, and has been with Sinclair for 25
years. He is responsible for planning, organizing and implementing operational
and engineering policies and strategies as they relate to television and
computer systems. Currently, he is consolidating facilities for Sinclair's
television stations and has just completed a digital facility for Sinclair's
news and technical operation in Pittsburgh. Mr. Parks is also a Lieutenant
Colonel in the Maryland Army National Guard and commands the 1st Battalion,
175th Infantry (Light).
Robert E. Quicksilver has served as Vice President/General Counsel, SCI
since 1996. Prior to that time he served as General Counsel of River City since
September 1994. From 1988 to 1994, Mr. Quicksilver was a partner of the law
firm of Rosenblum, Goldenhersh, Silverstein and Zafft, P.C. in St. Louis. Mr.
Quicksilver holds a B.A. from Dartmouth College and a J.D. from the University
of Michigan.
Thomas E. Severson has served as Corporate Controller since January 1997.
Prior to that time, Mr. Severson served as Assistant Controller of Sinclair
since 1995. Prior to joining Sinclair, Mr. Severson held positions in the audit
departments of KPMG Peat Marwick LLP and Deloitte & Touche LLP from 1991 to
1995. Mr. Severson is a graduate of the University of Baltimore and is a member
of the American Institute of Certified Public Accountants and the Maryland
Association of Certified Public Accountants.
Michael E. Sileck has served as Vice President/Finance of SCI since 1996.
Prior to that time he served as the Director of Finance for River City since
1993. Mr. Sileck joined River City in July 1990 as Director of Finance and
Business Affairs for KDNL-TV. Mr. Sileck is an active member of the Broadcast
Cable Financial Management Association ("BCFM") and was a Director of BCFM from
1993 to 1996. Mr. Sileck, a Certified Public Accountant, received a B.S. degree
in Accounting from Wayne State University and an M.B.A. in Finance from
Oklahoma City University.
Robin A. Smith has served as Chief Financial Officer, SCI Radio since June
1996. From 1993 until joining Sinclair, Ms. Smith served as Vice President and
Chief Financial Officer of the Park Lane Group of Menlo Park, California, which
owned and operated small market radio stations. From 1982 to 1993, she served as
Vice President and Treasurer of Edens Broadcasting, Inc. in Phoenix, Arizona,
which owns and operates radio stations in major markets. Ms. Smith is a graduate
of the Arizona State University and is a Certified Public Accountant.
Lawrence E. McCanna has served as a Director of Sinclair since July 1995.
Mr. McCanna has been a partner of the accounting firm of Gross, Mendelsohn &
Associates, P.A., since 1972 and has served as its managing partner since 1982.
Mr. McCanna has served on various committees of the Maryland Association of
Certified Public Accountants and was chairman of the Management of the
Accounting Practice Committee. He is also a former member of the Management of
an Accounting Practice Committee of the American Institute of Certified Public
Accountants. Mr. McCanna is a member of the board of directors of Maryland
Special Olympics.
Basil A. Thomas has served as a Director of Sinclair since November 1993.
He is of counsel to the Baltimore law firm of Thomas & Libowitz, P.A. and has
been in the private practice of law since 1983. From 1961 to 1968, Judge Thomas
served as an Associate Judge on the Municipal Court of Baltimore
10
<PAGE>
City and, from 1968 to 1983, he served as an Associate Judge of the Supreme
Bench of Baltimore City. Judge Thomas is a trustee of the University of
Baltimore and a member of the American Bar Association and the Maryland State
Bar Association. Judge Thomas attended the College of William & Mary and
received his L.L.B. from the University of Baltimore. Judge Thomas is the father
of Steven A. Thomas, a senior attorney and founder of Thomas & Libowitz, counsel
to Sinclair.
Robert E. Smith has served as a Director of Sinclair since 1995. He served
as Vice President and Treasurer of Sinclair from 1988 to June 1998, at which
time he resigned from his position as Vice President and Treasurer. Prior to
that time, he assisted in the construction of WTTE and also worked for Comark
Communications, Inc. installing UHF transmitters.
EXECUTIVE COMPENSATION TABLE
The following table sets forth certain information regarding the annual and
long-term compensation by the Company for services rendered in all capacities
during the year ended December 31, 1998 by the Chief Executive Officer and the
four most highly compensated executive officers other than the Chief Executive
Officer (the Chief Executive Officer and the other officers named below are
referred to as the "Named Executive Officers" elsewhere in this proxy
statement).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (A) OPTIONS GRANTED (#) COMPENSATION (B)
- -------------------------------------------- ------ ------------- ----------- ----------------------- -----------------
<S> <C> <C> <C> <C> <C>
David D. Smith
President and Chief Executive Officer ..... 1998 $1,290,000 $502,526 -- $ 6,515
1997 1,354,490 98,224 -- 6,306
1996 767,308 317,913 -- 6,748
Frederick G. Smith
Vice President ............................ 1998 222,093 130,000 -- 6,142
1997 273,000 -- -- 5,912
1996 260,000 233,054 -- 6,704
J. Duncan Smith
Vice President and Secretary .............. 1998 226,671 135,000 -- 23,609
1997 283,500 -- -- 15,569
1996 270,000 243,485 -- 18,494
Kerby Confer
Chairman, Radio Division
SCI Radio (c) ............................. 1998 325,000 -- -- 2,167
1997 325,000 -- $60,000 --
1996 189,585 -- -- --
Barry P. Drake
Chief Operating Officer, SCI Radio ........ 1998 350,000 -- 80,000 5,522
1997 339,727 -- 60,000 5,302
1996 161,604 -- -- 2,600
</TABLE>
- ----------
(a) The bonuses reported in this column represent amounts awarded and paid
during the fiscal years noted but relate to the fiscal year immediately
prior to the year noted. In addition, David D. Smith will receive $575,615
in 1999 with respect to 1998.
(b) All other compensation consists of income deemed received for personal use
of Company-leased automobiles, the Company's 401 (k) contribution and life
insurance.
(c) The compensation paid to Mr. Confer in 1996 and 1997, and part of the
compensation paid in 1998, was for Mr. Confer's services as a consultant to
the Company. Mr. Confer became an executive officer of the Company in 1998,
but resigned his position with the Company effective April 5, 1999.
11
<PAGE>
STOCK OPTIONS
The following table shows the number of stock options granted during 1998
and the 1998 year-end value of the stock options held by the Named Executive
Officers:
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED TO EXERCISE
UNDERLYING OPTIONS EMPLOYEES IN FISCAL PRICE PER
NAME GRANTED YEAR SHARE
- ------------------------ ---------------------- --------------------- -----------
<S> <C> <C> <C>
David D. Smith ......... -- -- --
Frederick G. Smith ..... -- -- --
J. Duncan Smith ........ -- -- --
Kerby Confer ........... -- -- --
Barry P. Drake ......... 80,000 1.5% $ 24.20
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
MARKET ASSUMED ANNUAL RATES OF STOCK
PRICE ON PRICE APPRECIATION FOR OPTION TERM
DATE OF EXPIRATION ---------------------------------------
NAME GRANT DATE 0% 5% 10%
- ------------------------ ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
David D. Smith ......... -- -- -- -- --
Frederick G. Smith ..... -- -- -- -- --
J. Duncan Smith ........ -- -- -- -- --
Kerby Confer ........... -- -- -- -- --
Barry P. Drake ......... $ 26.125 2/16/08 $154,000 $1,468,390 $3,484,922
</TABLE>
The following table shows information regarding options exercised during
1998, the number of securities underlying, and the value of "in the money"
options outstanding on December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND DECEMBER 31, 1998 OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS "IN THE MONEY" OPTIONS
AT DECEMBER 31, 1998 AT DECEMBER 31, 1998(A)
SHARES ACQUIRED VALUE ------------------------------- ------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------------- --------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
David D. Smith ............. -- -- -- -- -- --
Frederick G. Smith ......... -- -- -- -- -- --
J. Duncan Smith ............ -- -- -- -- -- --
Kerby Confer ............... -- -- 45,000 15,000 $202,860 $67,620
Barry P. Drake ............. -- -- 45,000 95,000 202,860 67,620
</TABLE>
- ----------
(a) An "In-the-Money" option is an option for which the option price of the
underlying stock is less than the market price at December 31, 1998, and
all of the value shown reflects stock price appreciation since the granting
of the option.
DIRECTOR COMPENSATION
Directors of the Company who also are employees of the Company serve
without additional compensation. Independent directors receive $15,000 annually.
These independent directors also receive $1,000 for each meeting of the Board of
Directors attended and $500 for each committee meeting attended. In addition,
the independent directors are reimbursed for any expenses incurred in connection
with their attendance at such meetings.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with David D. Smith ,
President and Chief Executive Officer of the Company, on June 12, 1995, which
expired on June 12, 1998. The Company has not entered into a new agreement with
Mr. Smith and does not currently anticipate entering into a new agreement. The
Compensation Committee has set David Smith's base salary for 1999 at $1,000,000.
In June 1998, the Company entered into an employment agreement with
Frederick G. Smith, Vice President of the Company. The agreement does not have
any specified termination date, and the Company has the right to terminate the
employment of Frederick Smith at any time, with or without cause, subject to the
payment of severance payments for termination without cause. The severance
payment due upon termination without cause is equal to one month's base salary
in effect at the time of termination times the number of years of continuous
employment by the Company or its predecessor. Frederick Smith receives a base
salary of $190,000 and is entitled to annual incentive bonuses payable based on
the attainment of certain cash flow objectives by the Company, as well as
discretionary bonuses. The incentive bonus takes the form of stock options to
acquire shares of the Company's Class A Common Stock pursuant to the Company's
non-qualified stock option long-term incentive plan. The agreement also contains
non-competition and confidentiality restrictions on Frederick Smith.
12
<PAGE>
In June 1998, the Company entered into an employment agreement with J.
Duncan Smith, Vice President and Secretary of the Company. The agreement does
not have any specified termination date, and the Company has the right to
terminate the employment of Duncan Smith at any time, with or without cause,
subject to the payment of severance payments for termination without cause. The
severance payment due upon termination without cause is equal to one month's
base salary in effect at the time of termination times the number of years of
continuous employment by the Company or its predecessor. Duncan Smith receives a
base salary of $190,000 and is entitled to annual incentive bonuses payable
based on the attainment of certain cash flow objectives by the Company, as well
as discretionary bonuses. The incentive bonus takes the form of stock options to
acquire shares of the Company's Class A Common Stock pursuant to the Company's
non-qualified stock option long-term incentive plan. The agreement also contains
non-competition and confidentiality restrictions on Duncan Smith.
In February 1997, SCI entered into an employment agreement with Barry
Drake, Chief Executive Officer/Radio. The agreement does not have any specified
termination date, and SCI has the right to terminate the employment of Mr. Drake
at any time, with or without cause, subject to the payment of severance payments
for termination without cause. The severance payment due upon termination
without cause is equal to one month's base salary in effect at the time of
termination times the number of years of continuous employment by the Company or
its predecessor. Mr. Drake receives a base salary of no less than $325,000,
provided that SCI continues to have at least the same level of broadcast cash
flow as in February 1997. Mr. Drake is also entitled to receive options to
acquire shares of the Company's Class A Common Stock pursuant to the Company's
non-qualified stock option long-term incentive plan. Mr. Drake's compensation
may include a bonus in the sole discretion of the Executive Committee. The
agreement also contains non-competition and confidentiality restrictions on Mr.
Drake.
In connection with the acquisition of certain assets from River City in
1996, the Company entered into employment and consulting agreements with Barry
Baker. At the time, it was contemplated that Mr. Baker would become President
and Chief Executive Officer of SCI and Executive Vice President of the Company,
upon satisfaction of certain conditions precedent. If those conditions were not
satisfied by May 31, 1998 (subsequently extended to December 31, 1998), Mr.
Baker had the right to terminate his employment and consulting agreements with
the Company.
As of December 31, 1998, the conditions to Mr. Baker becoming an officer of
the Company had not been satisfied, and on February 8, 1999, Mr. Baker and the
Company entered into a Termination Agreement (the "Termination Agreement")
pursuant to which the employment and consulting agreements were terminated. Mr.
Baker has no right to any further consulting fees from the Company after March
8, 1999. Mr. Baker has been paid $5,802,303 including a bonus for 1998 of
$575,615, in satisfaction of the Company's obligations to him for salary and
bonus payments due upon termination under his employment agreement. Mr. Baker
received consulting fees during the year ended December 31, 1998 of $1,203,552.
Mr. Baker holds options to acquire 2,764,870 shares of the Class A Common
Stock of the Company. These options are fully vested and immediately exercisable
following his termination, and the Company gave Mr. Baker the right to assign
the options to or for the benefit of certain members of his immediate family.
The exercise price for the options is approximately $15.06 per share and they
expire May 31, 2006.
In addition to his stock options, Mr. Baker has other material continuing
rights following the termination of his employment and consulting agreements.
First, Mr. Baker has the right, upon giving notice to the Company within 180
days following his termination, to purchase from the Company for fair market
value (i) either all radio and television broadcast operations of Sinclair in
the St. Louis, Missouri DMA or (at the option of Mr. Baker) the
Greenville-Spartanburg, S.C.-Asheville, N.C.-Anderson, S.C. DMA, and (ii) all
rights of Sinclair to provide programming services in the selected DMA. Mr.
Baker may purchase these assets himself, or may designate any one or more
persons to whom Sinclair must sell and assign the assets.
Second, the Company must pay Mr. Baker quarterly payments (which may be
paid in cash or, at the Company's option, in shares of Class A Common Stock)
equal to 5.00% of the fair market value (on the date of each payment) of all
stock options and common stock issued pursuant to the exercise of such
13
<PAGE>
stock options or pursuant to payments of this obligation in shares of Class A
Common Stock held by him at the time of such payment (except that the first such
payment shall be 3.75% of such value). The fair market value of unexercised
options for such purpose is the market price of the underlying shares minus the
exercise price of the options. Sinclair may purchase the shares and options held
by Mr. Baker that are subject to the foregoing payments at their fair market
value. If Mr. Baker refuses to sell the shares and options, he forfeits his
right to future quarterly payments.
Finally, Mr. Baker has the right to convert any remaining shares of Class A
Common Stock that he received in conversion of his Series B Preferred Stock back
into Series B Preferred Stock. The Termination Agreement provides that Mr. Baker
must exercise his right to convert his Class A Common Stock into Series B
Preferred Stock within 160 days from the termination of his employment and
consulting agreements.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists entirely of
non-employee directors. The Committee determines all compensation paid or
awarded to the Company's key executive officers.
Philosophy. The Committee's goal is to attract, motivate, and retain an
executive management team that can take full advantage of the Company's
opportunities and achieve long-term success in an increasingly competitive
business environment, thereby increasing stockholder value. In deciding on
initial compensation for an individual, the Committee considers determinants of
the individual's market value, including experience, education, accomplishments,
and reputation, as well as the level of responsibility to be assumed. Retention
and compensation decisions are sometimes made in the context of an acquisition,
and the Committee considers the overall terms of the acquisition and the
individual's relationship to the acquired business in those cases. In deciding
whether to increase the compensation of an individual or whether to award
bonuses or stock options initially or upon subsequent performance reviews, the
Committee considers the contributions of the individual to the Company's
progress on its business plan and against its competitors, to growth of the
Company and its opportunities and to achievement of other aims the Committee
deems valuable to stockholders. Applying these factors to each individual's case
is a judgment process, exercised by the Committee with the advice of management.
There is no intent to relate compensation to the Company's stock price
performance, either absolute or relative to peer groups, except as that
relationship is implicit in the stock-based compensation plans.
The Committee's annual performance evaluation of each executive officer is
typically based on a formula, set forth in an employment agreement or otherwise,
which sets forth a range of factors to be considered by the Committee in
determining each executive officer's ultimate annual compensation.
Executive officers' compensation consists primarily of three components:
(i) base salary, (ii) cash bonus, and (iii) stock options.
Base Salary. The Committee establishes base salaries after considering a
variety of factors that make up value and usefulness to the Company, including
the individual's knowledge, experience, and accomplishments, level of
responsibility, role in an acquired business, and the typical compensation
levels for individuals with similar credentials. In the past, executive officers
of the Company have typically entered into employment agreements with the
Company. However, the Company has not entered into an employment agreement with
David Smith, the Chief Executive Officer, since the termination of his earlier
agreement in June 1998, and does not currently anticipate entering into a new
agreement. The Committee may increase the salary of an individual on the basis
of its judgment for any reason, including the performance of the individual or
the Company and changes in the market for an executive with similar credentials.
Cash Bonus. The Committee determined each individual's cash bonus for the
fiscal year ended December 31, 1998. Bonuses are based upon the attainment of
performance targets established by the Committee. Performance targets were
based on percentage increases in "equalized broadcast cash flow."
Stock Options. The Committee believes achievement of the Company's goals
may be fostered by a stock option program that is tailored to employees who
significantly enhance the value of the Company. In that regard, during the
fiscal year ended December 31, 1998, the Committee granted employees
14
<PAGE>
options to purchase 5,352,500 shares of Class A Common Stock. Named Executive
Officers received options with respect to 80,000 shares of Class A Common Stock.
The Committee granted options in 1998 with an exercise price below the market
price for Class A Common Stock. These options will potentially be subject to the
compensation deduction limit as described below upon exercise.
Chief Executive Officer's Compensation. As one of the Company's largest
stockholders, David D. Smith's financial well-being is directly tied to the
overall performance of the Company as reflected in the price per share of Common
Stock. For his services as the Company's president and chief executive officer,
David D. Smith's compensation for 1998 was determined in accordance with the
compensation policies established by the Compensation Committee. The Committee
awarded Mr. Smith a bonus of $575,615 for the fiscal year ended December 31,
1998 (pursuant to the compensation formula established for 1998). For the year
ending December 31, 1999, his base compensation has been set at $1,000,000. In
addition, he will be paid performance-based bonuses as follows: 1) For each
quarter beginning January 1, 1999, if that quarter equals or exceeds the (Pro
Forma) Broadcast Cash Flow of SCI of the corresponding quarter of the prior
year, he shall be paid a bonus of $100,000, calculated and paid on a quarterly
basis, and, 2) in addition, he will be entitled to receive a bonus of 2% of the
amount by which the (Pro Forma) Broadcast Cash Flow of SCI for calendar year
1999 exceeds the (Pro Forma) Broadcast Cash Flow for the immediately preceding
year.
Compensation Deduction Limit. The Committee has considered the $1 million
limit on deductible executive compensation that is not performance-based. The
Committee believes that substantially all executive compensation expenses paid
in 1998, except for certain compensation paid to David Smith in excess of $1
million, will be deductible by the Company. The Committee believes, however,
that compensation exceeding this limit should not be ruled out where such
compensation is justified on the basis of the executive's value to the Company
and its shareholders. In any event, there appears to be little evidence that tax
deductibility is having much impact on the market for managerial talent, in
which the Company must remain competitive.
Compensation Committee
Basil A. Thomas
Lawrence E. McCanna
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Other than as follows, no Named Executive Officer is a director of a
corporation that has a director or executive officer who is also a director of
the Company. Each of David D. Smith, Frederick G. Smith and J. Duncan Smith, all
of whom are executive officers and directors of the Company, is a director
and/or executive officer of each of various other corporations controlled by
them. David D. Smith is a director and executive officer of Acrodyne
Communications Inc. and a director and executive officer of the Company, and
David B. Amy, an executive officer of the Company, is a director of Acrodyne
Communications, Inc.
During 1998, none of the Named Executive Officers participated in any
deliberations of the Company's Compensation Committee relating to compensation
of the Named Executive Officers.
The members of the Compensation Committee are Messrs. Thomas and McCanna.
Mr. Thomas is of counsel to the law firm of Thomas & Libowitz, and is the father
of Steven A. Thomas, a senior attorney and founder of Thomas & Libowitz, P.A.
During 1998, the Company paid Thomas & Libowitz, P.A., approximately $1,835,235
in fees and expenses for legal services.
COMPARATIVE STOCK PERFORMANCE
The following line graph compares the yearly percentage change in the
cumulative total stockholder return on the Company's Class A Common Stock with
the cumulative total return of the Nasdaq Stock Market Index and the cumulative
total return of the Nasdaq Telecommunications Stock Market Index (an index
containing performance data of radio, telephone, telegraph, television, and
cable television companies) from June 7, 1995, the effective date of the
Company's initial public offering, through December 31, 1998. The performance
graph assumes that an investment of $100 was made in the Class A Common Stock
and in each Index on June 7, 1995, and that all dividends were reinvested. Total
stockholder return is measured by dividing total dividends (assuming dividend
reinvestment) plus share price change for a period by the share price at the
beginning of the measurement period.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
7 JUN 95 29 DEC 95 31 DEC 96 31 DEC 97 31 DEC 98
<S> <C> <C> <C> <C> <C>
Nasdaq Stock Market Index ................ 100 120.28 146.96 181.64 254.90
Nasdaq Telecommunications Index .......... 100 124.09 126.85 187.50 306.71
Sinclair ................................. 100 71.5 107.77 193.26 172.01
</TABLE>
16
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended December 31, 1998, the Company engaged in the
following transactions with the following persons:
o directors, nominees for election as directors, or executive officers;
o beneficial owners of 5% or more of the Company's common stock;
o immediate family members of any of the above, and
o entities in which the above persons have substantial interests.
As noted above, the "Controlling Stockholders" refers to Messrs. David,
Frederick, Duncan and Robert Smith.
WPTT Note. In connection with the sale of WPTT in Pittsburgh by the Company
to WPTT, Inc., WPTT, Inc., issued to the Company a 15-year senior secured term
note of $6.0 million (the "WPTT Note"). The Company subsequently sold the WPTT
Note to the late Julian S. Smith and Carolyn C. Smith, the parents of the
Controlling Stockholders and both former stockholders of the Company, in
exchange for the payment of $50,000 and the issuance of a $6.6 million note,
which bears interest at 7.21% per annum and requires payments of interest only
through September 2001. Monthly principal payments of $109,317 plus interest are
payable with respect to this note commencing in November 2001 and ending in
September 2006, at which time the remaining principal balance plus accrued
interest, if any, is due. During the year ended December 31, 1998, the Company
received $.5 million in interest payments on this note. At December 31, 1998,
the balance on this note was $6.6 million.
WIIB Note. In September 1990, the Company sold all the stock of Channel 63,
Inc., the owner of WIIB in Bloomington, Indiana, to the Controlling Stockholders
for $1.5 million. The purchase price was delivered in the form of a note issued
to the Company which was refinanced in June 1992 (the "WIIB Note"). The WIIB
Note bears interest at 6.88% per annum, is payable in monthly principal and
interest payments of $16,000 until September 30, 2000, at which time a final
payment of approximately $431,000 is due. Principal and interest paid in 1998 on
the WIIB Note was $.2 million. As of December 31, 1998, $.7 million in principal
amount of the WIIB Note remained outstanding.
Bay Credit Facility. In connection with the capitalization of Bay
Television, Inc., the Company agreed on May 17, 1990 to loan the Controlling
Stockholders up to $3.0 million (the "Bay Credit Facility"). Each of the loans
to the Controlling Stockholders pursuant to the Bay Credit Facility is evidenced
by an amended and restated secured note totaling $2.6 million due December 31,
1999 accruing interest at a fixed rate equal to 6.88%. Principal and interest
are payable over six years commencing on March 31, 1994, and are required to be
repaid quarterly and $.7 million was paid in 1998. $718,000 is payable in 1999.
As of December 31, 1998, approximately $.7 million in principal amount was
outstanding under this note.
Affiliated Leases. From 1987 to 1992, the Company entered into five lease
transactions with Cunningham Communications, Inc., a corporation wholly owned by
the Controlling Stockholders, to lease certain facilities from CCI. Three of
these leases (four of which are still are in effect) are 10-year leases for
rental space on broadcast towers, one of which is a capital lease having a
renewable term of 10 years. The other lease is a month-to-month lease for a
portion of studio and office space at which certain satellite dishes are
located. Aggregate annual rental payments related to these leases were $.5
million in 1998. The aggregate annual rental payments related to these leases
are scheduled to be $.5 million in 1999 and 2000.
In January 1991, the Company entered into a 10-year capital lease with
Keyser Investment Group ("KIG"), a corporation wholly owned by the Controlling
Stockholders, pursuant to which the Company leases both an administrative
facility and studios for station WBFF and the Company's present corporate
offices. Additionally, in June 1991, the Company entered into a one-year
renewable lease with KIG pursuant to which the Company leases parking facilities
at the administrative facility. Payments under these leases with KIG were $.5
million in 1998. The aggregate annual rental payments related to the
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administrative facility are scheduled to be $.5 million in 1999 and $.6 million
in 2000. During 1998, the Company chartered airplanes owned by certain companies
controlled by the Controlling Stockholders and incurred expenses of
approximately $.6 million related to these charters.
Transactions with Gerstell. Gerstell LP, an entity wholly owned by the
Controlling Stockholders, was formed in April 1993 to acquire certain personal
and real property interests of the Company in Pennsylvania. In a transaction
that was completed in September 1993, Gerstell LP acquired the WPGH
office/studio, transmitter and tower site for an aggregate purchase price of
$2.2 million. The purchase price was financed in part by a $2.1 million note
from Gerstell LP bearing interest at 6.18% with principal payments beginning on
November 1, 1994 and a final maturity date of October 1, 2013. Principal and
interest paid in 1998 on the note was $.2 million. At December 31, 1998, $1.8
million in principal amount of the note remained outstanding. Following the
acquisition, Gerstell LP leased the office/studio, transmitter and tower site to
WPGH, Inc. (a subsidiary of the Company). The leases have terms of seven years,
with four seven-year renewal periods. Aggregate annual rental payment related to
these leases was $.6 million in 1998.
Stock Redemptions. On September 30, 1990, the Company issued certain notes
(the "Founders' Notes") maturing on May 31, 2005, payable to the late Julian S.
Smith and Carolyn C. Smith, former majority owners of the Company and the
parents of the Controlling Stockholders. The Founders' Notes, which were issued
in consideration for stock redemptions equal to 72.65% of the then outstanding
stock of the Company, have principal amounts of $7.5 million and $6.7 million,
respectively. The Founders' Notes include stated interest rates of 8.75%, which
were payable annually from October 1990 until October 1992, then payable monthly
commencing April 1993 to December 1996, and then semiannually thereafter until
maturity. The effective interest rate approximates 9.4%. The Founders' Notes are
secured by security interests in substantially all of the assets of the Company
and its Subsidiaries, and are personally guaranteed by the Controlling
Stockholders.
Principal and interest payments on the Founders' Note issued to the estate
of Julian S. Smith are payable, in various amounts, each April and October,
beginning October 1991 until October 2004, with a balloon payment due at
maturity in the amount of $5.0 million. Additionally, monthly interest payments
commenced on April 1993 and continued until December 1996. Principal and
interest paid in 1998 on this Founders' Note was $.6 million at December 31,
1998, $5.7 million in principal amount of this Founders' Note remained
outstanding.
Principal payments on the Founders' Note issued to Carolyn C. Smith are
payable, in various amounts, each April and October, beginning October 1991
until October 2002. Principal and interest paid in 1998 on this Founders' Note
was $1.1 million. At December 31, 1998, $2.9 million in principal amount of this
Founders' Note remained outstanding.
Relationship with Glencairn. Glencairn is a corporation owned by (i) Edwin
L. Edwards, Sr. (3%), (ii) Carolyn C. Smith, the mother of the Controlling
Stockholders (7%), and (iii) certain trusts established by Carolyn C. Smith for
the benefit of her grandchildren (the "Glencairn Trusts") (90%). The 90% equity
interest in Glencairn owned by the Glencairn Trusts is held through the
ownership of non-voting common stock. The 7% equity interest in Glencairn owned
by Carolyn C. Smith is held through the ownership of common stock that is
generally non-voting, except with respect to certain specified extraordinary
corporate matters as to which this 7% equity interest has the controlling vote.
Edwin L. Edwards, Sr. owns a 3% equity interest in Glencairn through ownership
of all of the issued and outstanding voting stock of Glencairn and is Chairman
of the Board, President and Chief Executive Officer of Glencairn.
There have been, and the Company expects that in the future there will be,
transactions between the Company and Glencairn. Glencairn is the owner-operator
and FCC licensee of WNUV in Baltimore, WVTV in Milwaukee, WRDC in
Raleigh/Durham, WABM in Birmingham, KRRT in Kerrville and WFBC in
Asheville/Greenville/Spartanburg. The Company has entered into LMAs with
Glencairn pursuant to which the Company provides programming to Glencairn for
airing on WNUV, WVTV, WRDC, WABM, KRRT, WFBC and WTTE in exchange for the
payment by the Company to Glencairn of a monthly fee totaling $.7 million.
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In June 1995, the Company acquired options from certain stockholders of
Glencairn (the "Glencairn Options") which grant to the Company the right to
acquire, subject to applicable FCC rules and regulations, stock comprising up to
a 97% equity interest in Glencairn. Of the stock subject to the Glencairn
Options, a 90% equity interest is non-voting and the remaining 7% equity
interest is non-voting, except with respect to certain extraordinary matters as
to which this 7% equity interest has the controlling vote. Each Glencairn Option
was purchased by the Company for $1,000 ($5,000 in the aggregate) and is
exercisable only upon the Company's payment of an option exercise price
generally equal to the optionor's proportionate share of the aggregate
acquisition cost of all stations owned by Glencairn on the date of exercise
(plus interest at a rate of 10% from the respective acquisition date). The
Company estimates that the aggregate option exercise price for the Glencairn
Options, if currently exercised, would be approximately $18.4 million.
Glencairn has entered into an agreement to merge with a corporation that
owns the License Assets of KOKH-TV, WRGT-TV, WVAH-TV and WTAT-TV. Upon merger
with this entity, Glencairn will enter into an LMA with the Company pursuant to
which the Company will supply programming to these stations, obtain the right to
sell advertising during the periods covered by the supplied programming and make
payments to Glencairn in amounts to be negotiated.
Keymarket of South Carolina. Kerby Confer, the Chairman of the Radio
Division of SCI, is the owner of 100% of the common stock of Keymarket of South
Carolina, Inc. ("KSC"). The Company has exercised its option to acquire all of
the assets of KSC for forgiveness of debt in an aggregate principal amount of
approximately $7.4 million, plus payment of approximately $1.0 million, less
certain adjustments.
Heritage Automotive Group. In January, 1997, David D. Smith, the Company's
President and Chief Executive Officer and one of the Controlling Stockholders,
made a substantial investment in, and became a member of the board of directors
of, Summa Holdings, Ltd. which, through wholly owned subsidiaries, owns the
Heritage Automotive Group ("Heritage") and Allstate Leasing ("Allstate"). Mr.
Smith is not an officer, nor does he actively participate in the management, of
Summa Holdings, Ltd., Heritage, or Allstate. Heritage owns and operates new and
used car dealerships in the Baltimore metropolitan area. Allstate owns and
operates an automobile and equipment leasing business with offices in the
Baltimore, Richmond, Houston, and Atlanta metropolitan areas. The Company sells
Heritage and Allstate advertising time on WBFF and WNUV, the television stations
operated by the Company serving the Baltimore DMA and received payments from
these companies in 1998 of $.4 million.
Bay Television, Inc. In January 1999, SCI entered into a Time Brokerage
Agreement with Bay Television, Inc., which owns the television station WTTA-TV
in Tampa, Florida. The Controlling Stockholders own a substantial portion of the
equity of Bay Television, Inc. The Time Brokerage Agreement provides that SCI is
to deliver television programming to Bay Television, Inc., which broadcasts the
programming in return for a monthly fee to Bay of $143,500. SCI must also make
an annual payment equal to 50% of the annual broadcast cash flow of the station
which is in excess of $1.7 million.
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STOCKHOLDER PROPOSALS
If you intend to propose any matter for action at our 2000 Annual Meeting
of Stockholders, you must submit your proposal to the Secretary of Sinclair at
2000 West 41st Street, Baltimore, Maryland 21211 not later than December 10,
1999 at 5:00 p.m. Eastern Standard Time. Only then can we consider your proposal
for inclusion in our proxy statement and proxy relating to the 2000 Annual
Meeting. We will be able to use proxies you give us for the next year's meeting
to vote for or against any shareholder proposal that is not included in the
proxy statement at our discretion unless the proposal is submitted to us on or
before February 23, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
J. Duncan Smith, Secretary
Baltimore, Maryland
April 14, 1999
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2
1. Election of six directors for a term expiring in 1999 as set forth in the
Proxy Statement
Nominees: David D. Smith, Frederick G. Smith, J. Duncan Smith, Robert E.
Smith, Basil A. Thomas, Lawrence E. McCanna
For: [ ] Withheld: [ ] For all except: [ ]
---------------
2. Ratification of the Appointment of Arthur
Andersen LLP as independent auditors This proxy when properly
executed will be voted in the
For: [ ] Against: [ ] Abstain: [ ] manner directed herein by the
undersigned stockholder. If no
direction is made, this proxy
will be voted FOR the nominees
for directors and FOR each of
the other proposals.
Please mark, sign and date, and
return the proxy card promptly
using the enclosed envelope.
Dated:
-------------------------
Signature(s):
------------------
-------------------------------
Please sign exactly as name
appears to the left. When
shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
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PROXY
SINCLAIR BROADCAST GROUP, INC.
PROXY FOR ANNUAL MEETING OF MAY 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints David D. Smith and Frederick G. Smith, or
either of them, as attorneys-in-fact, with full power of substitution, to vote
in the manner indicated on the reverse side, and with discretionary authority as
to any other matters that may properly come before the meeting, all shares of
common stock of Sinclair Broadcast Group, Inc. which the undersigned is entitled
to vote at the annual meeting of stockholders of Sinclair Broadcast Group, Inc.
to be held on May 11, 1999 at the Sheraton Baltimore North, 903 Dulaney Valley
Road, Towson, MD 21204 at 10:00 a.m. or any adjournment thereof.
NOT VALID UNLESS DATED AND SIGNED ON THE REVERSE SIDE
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