THIS EMPLOYMENT AGREEMENT (this "Agreement") is effective as of this 12th
day of June 1998 (the "Effective Date"), between Sinclair Broadcast Group, Inc.,
a Maryland corporation ("SBG"), and J. Duncan Smith ("Employee").
R E C I T A L S
A. SBG, through its wholly owned subsidiaries and affiliates, owns or
operates television and radio broadcast stations.
B. Employee is currently employed as a Vice President of SBG.
C. SBG desires to continue to employ Employee as a Vice President of
SBG, and Employee desires to accept such employment.
D. SBG and Employee desire to set forth the terms of employment of
Employee with SBG as a Vice President.
NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants herein contained,
the parties hereto agree as follows:
1.1. DUTIES UPON EMPLOYMENT. Upon the terms and subject to the other
provisions of this Agreement, commencing on the date hereof (the "Effective
Date"), Employee will continue to be employed by SBG in Baltimore, Maryland as
Secretary to SBG. As Secretary, Employee will:
(a) report to the SBG Board of Directors (the "Board"), and the
Chief Executive Officer of SBG (the "CEO"); and
(b) have such responsibilities and perform such duties as may
from time to time be established by the CEO, and/or the Board.
1.2 PERFORMANCE OF SERVICES. While an employee of SBG, Employee agrees
to contribute his best efforts and time to the business of SBG and shall render
the services to the best of his ability on behalf of SBG. The Employee shall
comply with all laws, statutes, rules and regulations relating to his services.
2.1. TERM. The term of Employee's employment as a Vice President of
SBG under this Agreement (the "Employment Term") will begin on the Effective
Date and continue until his employment is terminated in accordance with Section
4. As used in this Agreement, an "employment year" is a twelve (12) month
period, beginning on January 1 and ending on the next following December 31;
provided, however, that the first "employment year" shall begin on the Effective
Date and shall end on December 31,1998.
2.2. AT WILL EMPLOYMENT. Notwithstanding anything else in this
Agreement, including, without limitation, the provisions of Sections 2.1. and 3
regarding the employment term and compensation and benefits of Employee,
respectively, the employment of Employee is not for a specified period of time,
and SBG may terminate the employment of Employee with or without Cause (as
defined below) at any time. There is not, nor will there be, unless in a writing
signed by all of the parties to this Agreement, any express or implied agreement
as to the continued employment of Employee.
3. COMPENSATION AND BENEFITS.
3.1 COMPENSATION. During each employment year, Employee shall be
entitled to the compensation determined by the SBG Compensation Committee (the
"Committee") after consulting with the CEO, which compensation may include the
right to earn either discretionary cash or stock bonuses (the "Discretionary
Bonuses") or incentive bonuses (the "Incentive Bonuses") (see Section 3.3 below
with respect to Incentive Bonuses). Discretionary and Incentive Bonuses are
sometimes collectively referred to herein as "Bonuses". All Bonuses shall be
determined and payable after all financial data necessary for the determination
of such is available to the Company. During the first year of employment
pursuant to this Agreement, the Employee shall be paid based upon an annual base
salary (the "Base Salary") of One Hundred Ninety Thousand Dollars ($190,000.00).
3.2 VACATION AND BENEFITS. During each twelve (12) month period during
the Employment Term, the Employee shall be entitled to a paid vacation of four
(4) weeks. The Employee shall schedule his vacation at such time or times as
approved by SBG, which approval shall not be unreasonably withheld.
3.3 INCENTIVE BONUSES.
3.3.1 INCENTIVE BONUS. In addition to the Base Salary and
Discretionary Bonus, if any, the Employee shall be entitled to receive with
respect to each calendar year (or portion thereof) during the Employment Term,
an Incentive Bonus in the event that the Broadcast Cash Flow (the "BCF"), as
defined below, of SBG for such year exceeds the BCF of SBG for the immediately
preceding year. The Incentive Bonus shall be paid by granting the Employee stock
options (the "Stock Options") to acquire a certain number of Class A Common
Shares of SBG (the "Option Shares") pursuant to the SBG Long Term Incentive Plan
currently in effect and in accordance with the FORM OF SINCLAIR BROADCAST GROUP,
INC. 1996 LONG-TERM INCENTIVE PLAN NON-QUALIFIED STOCK OPTION AGREEMENT SPECIAL
PERFORMANCE OPTION (the "Stock Option Agreement") attached hereto as Schedule
3.3.1. BCF is defined below in Section 3.3.3. The percentage increase (the
"Percentage Increase") in BCF which is necessary for the Employee to earn an
Incentive Bonus, the number of Option Shares to be granted based upon the
Percentage Increase, and the exercise price (the "Exercise Price") of the Option
Shares appear in Exhibit A attached hereto.
3.3.2 AFTER ACQUIRED OR DISPOSED OF BROADCAST PROPERTIES.
If during any year after the Effective Date (including the year of during
which the Effective Date occurs), SBG, or any of its direct or indirect
subsidiaries or affiliates, shall acquire, program, or commence program services
for, one or more television or radio stations [including pursuant to any Local
Marketing Agreement Time Brokerage Agreement (as those terms are customarily
used or defined by the FCC or in the broadcast industry in general) or any
similar type services agreements], for the purposes of calculating the Incentive
Bonus for the year in which the acquisition has occurred, the BCF for the
immediately preceding year shall be increased to reflect such acquisition, or if
in any year SBG, of any of it direct or indirect subsidiaries or affiliates,
directly or indirectly disposes of, or shall cease to provide programming
services with respect to one or more television or radio stations, for the
purposes of calculating the Incentive Bonus with respect to the year in which
such disposition has occurred, the BCF of the immediately preceding year shall
be decreased to reflect such disposition, by an amount equal to the Average
Broadcast Flow (the "ABCF"), calculated as of the date of the acquisition or
disposition, of the television or radio station (or stations) so acquired or
disposed of, multiplied by a fraction, (a) the numerator of which is the number
of days remaining in such year following such acquisition or disposition and (b)
of which is 365. ABCF is defined in Section 3.3.3 below.
3.3.3 DEFINITION OF BCF AND ABCF. As used in this Section 3.3,
the term BCF shall mean, for any period, operating income (from the ownership
of, or the providing of program services to, television or radio stations) plus
(a) non-cash expenses, including depreciation and amortization expense,
programming amortization expense, barter expense and deferred compensation
expense, plus (b) corporate expense (including any special bonuses paid to other
executive officers of SBG), less (c) film contract payments, cash payments on
deferred compensation and non-cash broadcast revenue, in each case as such items
shall be determined in accordance with generally accepted accounting principals
("GAAP"); and ABCF shall mean the average annual BCF of a television or radio
station for the three (3) full calendar years of such station prior to its
acquisition by SBG or one of its direct or indirect subsidiaries or affiliates.
3.3.4 PAYMENT. The Incentive Bonus shall be paid to the Employee
as soon as practicable, but in no event later than March 31 following the end of
each calendar year. The amount of Option Shares due under the Incentive Bonus
with respect to any period of less than an entire year shall be determined by
multiplying the Option Shares that would have been payable with respect to the
whole of such year (using actual results for such year and assuming that the
Agreement had been in effect the entire year) by a fraction, the numerator of
which is the number of days of such year and the denominator of which is 365.
4. EMPLOYMENT TERMINATION.
4.1. TERMINATION OF EMPLOYMENT.
(a) The Employment Term will end, and the parties will not have
any rights or obligations under this Agreement (except for the rights and
obligations under those Sections of this Agreement which are continuing and will
survive the end of the Employment Term, as specified in Section 8.10 of this
Agreement) on the earliest to occur of the following events (the "Termination
(1) the death of Employee;
(2) the Disability (as defined in Section 4.1(b) below) of
(3) the termination of Employee's employment by Employee;
(4) the termination of Employee's employment by SBG for
Cause (as defined in Section 4.1(c) below); or
(5) the termination of Employee's employment by SBG without
(b) For the purposes of this Agreement, "Disability" means
Employee's inability, whether mental or physical, to perform the normal duties
of Employee's position for ninety (90) days (which need not be consecutive)
during any twelve (12) consecutive month period, and the effective date of such
Disability shall be the day next following such ninetieth (90th) day. If SBG and
Employee are unable to agree as to whether Employee is disabled, the question
will be decided by a physician to be paid by SBG and designated by SBG, subject
to the approval of Employee (which approval may not be unreasonably withheld)
whose determination will be final and binding on the parties.
(c) For the purposes of this Agreement, "Cause" means any of the
following: (i) the wrongful appropriation for Employee's own use or benefit of
property or money entrusted to Employee by SBG, (ii) the commission of any act
involving moral turpitude, (iii) Employee's continued willful disregard of
Employee's duties and responsibilities hereunder after written notice of such
disregard and the reasonable opportunity to correct such disregard, (iv)
Employee's continued violation of SBG policy after written notice of such
violations (such policy may include policies as to drug or alcohol abuse) and
the reasonable opportunity to cure such violations, (v) any action by Employee
which is reasonably likely to jeopardize a Federal Communications Commission
license of any broadcast station owned directly or indirectly by SBG or
programmed by SBG, (vi) the continued insubordination of Employee and/or
Employee's repeated failure to follow the reasonable directives of the CEO or
the Board after written notice of such insubordination or the failure to follow
such reasonable directives, or (vii) the repeated unsatisfactory performance by
Employee of Employee's job or duties hereunder as determined by the CEO or the
Board in his or their sole discretion after written notice thereof.
4.2. TERMINATION PAYMENTS.
(a) If Employee's employment with SBG terminates pursuant to
Sections 4.1(a)(1), 4.1(a)(2), 4.1(a)(3), or 4.1(a)(5), Employee (or in the
event of the death
of Employee, the person or persons designated by Employee in a written
instrument delivered to SBG prior to Employee's death or, if no such written
designation has been made, Employee's estate) will be entitled to receive, and
SBG will pay to the same, all of the following:
(1) the salary payable to Employee through the Termination Date;
(2) the benefits, if any, set forth in the Long Term Incentive
Plan, upon the terms and conditions set forth therein, but only to the extent
that Employee is entitled to such benefits pursuant to the provisions of the
Long Term Incentive Plan.
(b) If Employee's employment with SBG terminates pursuant to Section
4.1(a)(4), Employee will be entitled to receive, and SBG will pay to Employee,
only the salary payable to Employee through the Termination Date (and Employee
shall not be entitled to any benefits under the Long Term Incentive Plan);
provided, however, that if Employee's employment terminates pursuant to
Subsection (vii) of Section 4.1(c), Employee shall be entitled to the benefits,
if any, set forth in the Long Term Incentive Plan in accordance with the terms
of Subsection (3) of this Section 4.2.
(c) If the Employee's employment with SBG terminates pursuant to
Section 4.1(a)(5), the Employee, in addition to the benefits he is entitled to
receive pursuant to Section 4.2(a), shall be entitled to receive, and SBG shall
pay to the Employee, one (1) month's base salary in effect at the time of
termination (not including bonuses) for each full year of his continuous
employment with SBG or its predecessor regardless of whether the employment has
been pursuant to this Agreement or has been prior to this Agreement.
(d) The termination payments (the "Termination Payments") described in
this Section 4 will be in lieu of any other termination or severance payments
required by any other SBG policy (whether existing previously or currently or
adopted in the future) or, to the fullest extent permissible thereunder, or
under applicable law (including unemployment compensation) and the Termination
Payments will constitute Employee's exclusive rights and remedies with respect
to termination of Employee's employment.
5. CONFIDENTIALITY AND NON-COMPETITION.
5.1. CONFIDENTIAL INFORMATION.
(a) Employee will:
(1) keep all Confidential Information in trust for the use
and benefit of SBG and any affiliate or subsidiary (collectively, the "Company
Entities") and broadcast stations owned or operated directly or indirectly by
any of the Company Entities;
(2) not, except as required by Employee's duties under this
Agreement, authorized in writing by SBG or as required by law or any order,
rule, or regulation of any court or governmental agency (but only after notice
to SBG of such requirement), at any time during or after the termination of
Employee's employment with SBG, directly or indirectly, use, publish,
disseminate, distribute, or otherwise disclose any Confidential Information (as
(3) take all reasonable steps necessary, or reasonably
requested by any of the Company Entities, to ensure that all Confidential
Information is kept confidential for the use and benefit of the Company
(4) upon termination of Employee's employment or at any
other time any of the Company's Entities in writing so request, promptly deliver
to such Company Entity all materials constituting Confidential Information
relating to such Company Entity (including all copies) that are in Employee's
possession or under Employee's control. If requested by any of the Company
Entities to return any Confidential Information, Employee will not make or
retain any copy of or extract from such materials.
(b) For purposes of this Section 5.1, Confidential Information
means any proprietary or confidential information of or relating to any of the
Company Entities that is not generally available to the public. Confidential
Information includes all information developed by or for any of the Company
Entities concerning marketing used by any of the Company Entities, suppliers,
any customers (including advertisers) with which any of the Company Entities has
dealt prior to the Termination Date, plans for development of new services and
expansion into new areas or markets, internal operations, financial information,
operations, budgets, and any trade secrets or proprietary information of any
type owned by any of the Company Entities, together with all written, graphic,
other materials relating to all or any of the same, and any trade secrets as
defined in the Maryland
Uniform Trade Secrets Act, as amended from time to time.
(a) During the Employment Term and for twelve (12) months
thereafter, if Employee's employment is terminated for any reason other than
pursuant to Section 4.1(a)(5), Employee will not, directly or indirectly, engage
in the following conduct within any Designated Market Area (as defined below) or
any Metro Survey Area (as defined below) in which any of the Company Entities
owns or operates a broadcast station immediately prior to such termination:
(i) participate in any activity involved in the ownership or
operation of a broadcast station (other than, during the term, broadcast
stations owned or operated by any of the Company Entities);
(ii) hire, attempt to hire, or to assist any other person or
entity in hiring or attempting to hire any employee of any of the Company
Entities or any person who was an employee of any of the Company Entities within
the prior one (1) year period; or
(iii) solicit, in competition with any of the Company
Entities, the business of any customer of any of the Company Entities or any
entity whose business any of the Company Entities solicited during the one (1)
year period prior to Employee's termination.
(b) Notwithstanding anything else contained in this Section 5.2,
Employee may own, for investment purposes only, up to five percent (5%) of the
stock of any publicly-held corporation whose stock is either listed on a
national stock exchange or on the NASDAQ National Market System if Employee is
not otherwise affiliated with such corporation.
(c) As used herein, "participate" means lending one's name to,
acting as consultant or advisor to, being employed by or acquiring any direct or
indirect interest in any business or enterprise, whether as a stockholder,
partner, officer, director, employee, consultant, or otherwise.
(d) In the event that (i) SBG places all or substantially all of
its broadcast stations up for sale within one (1) year after termination of
Employee's employment hereunder, or (ii) Employee's employment is terminated in
connection with the
disposition of all or substantially all of such stations (whether by sale of
assets, equity, or otherwise), Employee agrees to be bound by, and to execute
such additional instruments as may be necessary or desirable to evidence
Employee's agreement to be bound by, the terms and conditions of any
non-competition provisions relating to the purchase and sale agreement for such
stations, without any consideration beyond that expressed in this Agreement,
provided that the purchase and sale agreement is negotiated in good faith with
customary terms and provisions, and the transaction contemplated thereby is
consummated. Notwithstanding the foregoing, in no event shall Employee be bound
by, or obligated to enter into, any non-competition provisions referred to in
this Section 5.2(d) which extend beyond Twelve (12) months (including in the
case of terminations pursuant to Section 4.1(a)(5)), in each case from the date
of termination of Employee's employment hereunder or whose scope extends the
scope of the non-competition provisions set forth in Section 5.2(a) (as limited
by Sections 5.2(b) and (c) above).
(e) The twelve (12) month time period referred to above shall be
tolled on a day-for-day basis for each day during which Employee participates in
any activity in violation of this Section 5.2 of this Agreement so that Employee
is restricted from engaging in the conduct referred to in this Section 5.2 for a
full twelve (12) months.
(f) For purposes of this Section 5.2, designated market area
shall mean the Designated Market Area ("DMA") as defined by The A.C. Nielsen
Company (or such other similar term as is used from time to time in the
television broadcast community).
(g) For purposes of this Section 5.2, Metro Survey Area shall
mean the Metro Survey Area ("MSA"), as defined from time to time by the Arbitron
Company (or such other similar term as is used from time to time in the radio
5.3. ACKNOWLEDGMENT. Employee acknowledges and agrees that this
Agreement (including, without limitation, the provisions of Sections 5 and 6) is
a condition of Employee's continued employment by SBG, Employee's continued
access to Confidential Information, Employee's continued eligibility to receive
the items referred to in Sections 3 (including, without limitation, Employee's
eligibility to participate in the Long Term Incentive Plan), Employee's
continued advancement at SBG, and Employee being eligible to receive other
special benefits at SBG; and further, that this Agreement is entered into, and
is reasonably necessary, to protect the Company Entities' previous and future
investment in Employee's training and development, and to protect the goodwill
and other business interests of the Company Entities.
6.1. INJUNCTIVE RELIEF. The covenants and obligations contained in
Section 5 relate to matters which are of a special, unique, and extraordinary
character and a violation of any of the terms of such Section will cause
irreparable injury to the Company Entities, the amount of which will be
impossible to estimate or determine and which cannot be adequately compensated.
Therefore, the Company Entities will be entitled to an injunction, restraining
order or other equitable relief from any court of competent jurisdiction
(subject to such terms and conditions that the court determines appropriate),
restraining any violation or threatened violation of any of such terms by
Employee and such other persons as the court orders. The parties acknowledge and
agree that judicial action, rather than arbitration, is appropriate with respect
to the enforcement of the provisions of Section 5. The forum for any litigation
hereunder shall be the Circuit Court of Baltimore County or the United States
District Court (Northern Division) sitting in Baltimore, Maryland.
6.2. CUMULATIVE RIGHTS AND REMEDIES. Rights and remedies provided by
Sections 5 and 6 are cumulative and are in addition to any other rights and
remedies any of the Company Entities may have at law or equity.
7. ABSENCE OF RESTRICTIONS. Employee warrants and represents that Employee
is not a party to or bound by any agreement, contract, or understanding, whether
of employment or otherwise, with any third person or entity which would in any
way restrict or prohibit Employee from undertaking or performing employment with
SBG in accordance with the terms and conditions of this Agreement.
8.1. ATTORNEYS' FEES. In any action, litigation, or proceeding
(collectively, "Action") between the parties arising out of or in relation to
this Agreement, the prevailing party in the Action will be awarded, in addition
to any damages, injunctions, or other relief, and without regard to whether such
Action is prosecuted to final appeal, such party's costs and expenses, including
reasonable attorneys' fees.
8.2. HEADINGS. The descriptive headings of the Sections of this
Agreement are inserted for convenience only, and do not constitute a part of
8.3. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given upon (a) oral or written confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery of a standard
overnight courier or when delivered by hand, or (c) the expiration of five (5)
business days after the date mailed, postage prepaid, to the parties at the
If to SBG to: Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: Chief Executive Officer
Copy to: Thomas & Libowitz, P.A.
100 Light Street
Baltimore, Maryland 21202-1053
Attn: Steven A. Thomas
If to Employee to: J. Duncan Smith
2000 W. 41st Street
Baltimore, Maryland 21211
or to such other address as will be furnished in writing by any party. Any such
notice or communication will be deemed to have been given as of the date so
8.4. ASSIGNMENT. SBG may assign this Agreement to any company which
acquires all or substantially all of its assets or into which it merges
regardless of whether it survives as the successor, and in such an event and so
long as his employment continues hereunder, Employee hereby consents and agrees
to be bound by any such assignment by SBG. Employee may not assign, transfer, or
delegate Employee's rights or obligations under this Agreement and any attempt
to do so is void. This Agreement is binding on and inures to the benefit of the
parties, their permitted successors and assigns, and the executors,
administrators, and other legal representatives of Employee. No other third
parties, other than Company Entities, shall have, or are intended to have, any
rights under this Agreement.
8.5. COUNTERPARTS. This Agreement may be signed in one or more
8.6. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF MARYLAND (REGARDLESS OF THE LAWS THAT MIGHT
BE APPLICABLE UNDER PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS (INCLUDING
VALIDITY, CONSTRUCTION, EFFECT, AND PERFORMANCE.)
8.7. SEVERABILITY. If the scope of any provision contained in this
Agreement is too broad to permit enforcement of such provision to its full
extent, then such provision shall be enforced to the maximum extent permitted by
law, and Employee hereby consents that such scope may be reformed or modified
accordingly, and enforced as reformed or modified, in any proceeding brought to
enforce such provision. Subject to the immediately preceding sentence, whenever
possible, each provision of this Agreement will be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable law, such
provision, to the extent of such prohibition or invalidity, shall not be deemed
to be a part of this Agreement, and shall not invalidate the remainder of such
provision or the remaining provisions of this Agreement.
8.8. ENTIRE AGREEMENT.This Agreement, the Non-Qualified Stock Option
Agreement, and the Long Term Incentive Plan constitute the entire agreement, and
supersede all prior agreements and understandings, written or oral, among the
parties with respect to the subject matter of this Agreement and the Long Term
Incentive Plan. This Agreement may not be amended or modified except by
agreement in writing, signed by the party against whom enforcement of any
waiver, amendment, modification, or discharge is sought.
8.9. INTERPRETATION. This Agreement is being entered into among
competent and experienced business professionals (who have had an opportunity to
consult with counsel), and any ambiguous language in this Agreement will not
necessarily be construed against any particular party as the drafter of such
8.10. CONTINUING OBLIGATIONS. The following provisions of this
Agreement will continue and survive the termination of this Agreement: 4.2, 5,
6, 7 and 8.
8.11. TAXES. SBG may withhold from any payments under this Agreement
all applicable federal, state, city, or other taxes required by applicable law
to be so withheld.
8.12. ARBITRATION AND EXTENSION OF TIME. Except as specifically
provided in Section 6, any dispute or controversy arising out of or relating to
Agreement shall be determined and settled by arbitration in Baltimore, Maryland
in accordance with the Commercial Rules of the American Arbitration Association
then in effect, the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq., and the
Maryland Uniform Arbitration Act, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction. The
expenses of the arbitration shall be borne by the non-prevailing party to the
arbitration, including, but not limited to, the cost of experts, evidence, and
legal counsel. Whenever any action is required to be taken under this Agreement
within a specified period of time and the taking of such action is materially
affected by a matter submitted to arbitration, such period shall automatically
be extended by the number of days, plus ten (10) that are taken for the
determination of that matter by the arbitrator(s). Notwithstanding the
foregoing, the parties agree to use their best reasonable efforts to minimize
the costs and frequency of arbitration hereunder.
THIS AGREEMENT CONTAINS A WAIVER OF YOUR RIGHT TO A TRIAL BY COURT OR JURY
IN EMPLOYMENT DISPUTES.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.
SINCLAIR BROADCAST GROUP, INC.
DAVID D. SMITH, PRESIDENT
J. DUNCAN SMITH