UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 1996      Commission file number: 0-26076


                         SINCLAIR BROADCAST GROUP, INC.
             (Exact name of Registrant as specified in its charter)

                             ---------------------

                 Maryland                              52-1494660           
     (State or other jurisdiction of    (I.R.S. Employer Identification No.)
      incorporation or organization)    


                            2000 WEST 41ST STREET
                          BALTIMORE, MARYLAND 21211
                   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                                (410) 467-5005
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

        Securities registered pursuant to Section 12 (b) of the Act: None

          Securities registered pursuant to Section 12 (g) of the Act:

                 Class A Common Stock, par value $.01 per share


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  Registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of
Regulation S-K is not contained herein,  and will not be contained,  to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Based on the closing sale price of $25.25 per share as of February 24, 1997, the
aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
Registrant was approximately $174.0 million.

As of February 25, 1997,  there were  6,911,880  shares of Class A Common Stock,
$.01 par value,  27,850,581  shares of Class B Common Stock,  $.01 par value and
1,138,318 shares of Series B Preferred Stock,  $.01 par value, of the Registrant
issued and outstanding.





                                    PART I

   The matters discussed in this Form 10-K include  forward-looking  statements.
Such statements are subject to a number of risks and uncertainties,  such as the
impact of changes in national and regional economies,  successful integration of
acquired television and radio stations  (including  achievement of synergies and
cost  reductions),  pricing  fluctuations in local and national  advertising and
volatility in programming  costs.  Additional risk factors regarding the Company
are set forth in the Company's registration statement on Form S-3 filed with the
Securities and Exchange Commission on November 7, 1996 (as amended).

ITEM 1. BUSINESS

   The  Company is a  diversified  broadcasting  company  that owns or  provides
programming  services  to more  television  stations  than any other  commercial
broadcasting  group in the United States. The Company currently owns or provides
programming  services to 28  television  stations  and has agreed to acquire one
additional television station. The Company believes it is also one of the top 20
radio groups in the United  States,  when  measured by the total number of radio
stations owned,  programmed or with which the Company has Joint Sales Agreements
("JSAs").  (For a description of JSAs see - Federal Regulation of Television and
Radio  Broadcasting - Ownership  Matters - Radio - Local Marketing  Agreements.)
The Company  owns or provides  programming  services to 23 radio  stations,  has
pending acquisitions of two radio stations (with both of which it has JSAs), has
a JSA with one additional radio station and has options to acquire an additional
seven radio stations.

   The 28  television  stations the Company  owns or programs  pursuant to Local
Marketing Agreements ("LMAs") are located in 20 geographically  diverse markets,
with  23 of the  stations  in the  top 51  television  Designated  Market  Areas
("DMAs")  in the  United  States.  (For a  description  of  LMAs  see -  Federal
Regulation  of Television  and Radio  Broadcasting  - Ownership  Matters - Local
Marketing Agreements. A DMA is one of 211 generally-recognized television market
areas.) The Company's television station group is diverse in network affiliation
with ten  stations  affiliated  with Fox,  11 with UPN,  two with ABC,  two with
Warner Brothers and one with CBS. Two stations operate as Independents.

   The  Company's  radio  station  group is also  geographically  diverse with a
variety of  programming  formats  including  country,  urban,  news/talk/sports,
album/progressive  rock  and  adult  contemporary.  Of  the 26  stations  owned,
programmed  or with which the Company has a JSA, 12 broadcast on the AM band and
14 on the FM band.  The Company owns or programs  from two to seven  stations in
all but one of the radio markets it serves.

   The Company has undergone rapid and significant growth over the course of the
last six years.  Beginning  with the  acquisition of WPGH in Pittsburgh in 1991,
the Company has increased the number of television  stations it owns or programs
from three to 28. From 1991 to 1996,  net broadcast  revenues and operating cash
flow increased from $39.7 million to $346.5  million,  and from $15.5 million to
$180.3  million.  Pro  forma  for the  acquisitions  described  below,  1996 net
broadcasting  revenue and operating cash flow would have been $445.0 million and
$206.5 million, respectively.

                                        2




TELEVISION BROADCASTING

   The Company  owns and  operates,  provides  programming  services  to, or has
agreed to acquire the following television stations:




                                                                                    NUMBER OF
                                                                                   COMMERCIAL               EXPIRATION
                          MARKET                                                   STATIONS IN   STATION      DATE OF
         MARKET           RANK(A)  STATIONS   STATUS(B)   CHANNEL   AFFILIATION   THE MARKET(C)  RANK(D)    FCC LICENSE
- -----------------------  -------- ---------- ----------- --------- ------------- -------------- --------- --------------
                                                                                     
Pittsburgh, 
  Pennsylvania.........     19      WPGH       O&O          53        FOX              6           4          8/1/99
                                    WPTT       LMA          22        UPN                          5          8/1/99
St. Louis, Missouri ...     20      KDNL       LMA(e)       30        ABC              7           5          2/1/98
Sacramento,
  California...........     21      KOVR       LMA(e)       13        CBS              8           3          2/1/99
Baltimore, Maryland ...     23      WBFF       O&O          45        FOX              5           4         10/1/01
                                    WNUV       LMA          54        UPN                          5         10/1/01
Indianapolis, Indiana..     25      WTTV       LMA(e)        4        UPN              8           4          8/1/97
                                    WTTK       LMA(e)(f)    29        UPN                          4          8/1/97
Cincinnati, Ohio.......     29      WSTR       O&O          64        UPN              5           5         10/1/97
Raleigh-Durham,
  North Carolina.......     30      WLFL       O&O          22        FOX              7           3         12/1/01
                                    WRDC       LMA          28        UPN                          5         12/1/01
Milwaukee, Wisconsin ..     31      WCGV       O&O          24        UPN              6           4         12/1/97
                                    WVTV       LMA          18        WB                           5         12/1/97
Kansas City, Missouri .     32      KSMO       O&O          62        UPN              7           5          2/1/98
Columbus, Ohio.........     34      WTTE       O&O          28        FOX              5           4         10/1/97
Asheville, North
  Carolina and
  Greenville/
  Spartanburg/Anderson,
  South Carolina.......     35      WFBC       LMA(g)       40        IND(i)           6           5         12/1/01
                                    WLOS       LMA(e)       13        ABC              6           3         12/0/01
San Antonio, Texas ....     37      KABB       LMA(e)       29        FOX              7           4          8/1/98
                                    KRRT       LMA(h)       35        UPN                          6          8/1/98
Norfolk, Virginia......     40      WTVZ       O&O          33        FOX              6           4         10/1/01
Oklahoma City,
  Oklahoma.............     43      KOCB       O&O          34        UPN              7           5          6/1/98
Birmingham, Alabama ...     51      WTTO       O&O          21        WB               5           4          4/1/97
                                    WABM       LMA          68        UPN                          5          4/1/97
Flint/Saginaw/Bay
  City, Michigan.......     60      WSMH       O&O          66        FOX              5           4         10/1/97
Las Vegas, Nevada......     64      KUPN       Pending      21        UPN              8           5         10/1/98
Lexington, Kentucky ...     68      WDKY       O&O          56        FOX              5           4          8/1/97
Des Moines, Iowa.......     72      KDSM       LMA(e)       17        FOX              4           4          2/1/98
Peoria/Bloomington,
  Illinois.............    109      WYZZ       O&O          43        FOX              4           4         12/1/97
Tuscaloosa, Alabama ...    187      WDBB       LMA          17        IND(i)           2           2          4/1/97


- ----------
(a) Rankings  are based on the  relative  size of a station's  DMA among the 211
    generally recognized DMAs in the United States as estimated by Nielsen.

(b) "O&O" refers to stations owned and operated by the Company,  "LMA" refers to
    stations to which the Company provides  programming  services pursuant to an
    LMA and "Pending" refers to stations the Company has agreed to acquire.  

(c) Represents the number of television  stations designed by Nielsen as "local"
    to the DMA,  excluding public television  stations and stations which do not
    meet the minimum Nielsen reporting  standards (weekly cumulative audience of
    at least 2.5%) for the Sunday- Saturday, 6:00 a.m. to 2:00 a.m. time period.

                                       (Footnotes continued on following page)

                                        3




(d) The rank of each  station  in its  market is based  upon the  November  1996
    Nielsen  estimates of the percentage of persons tuned to each station in the
    market from 6:00 a.m. to 2:00 a.m., Sunday-Saturday.

(e) Non-License   Assets  (as   defined   herein)   acquired   from  River  City
    Broadcasting,  L.P.  and its  controlled  entities  and option  exercised to
    acquire License Assets (as defined  herein).  Will become owned and operated
    upon FCC approval of transfer of License  Assets and closing of  acquisition
    of License Assets.

(f) WTTK  currently  simulcasts  all of the  programming  aired  on WTTV and the
    station rank applies to the combined viewership of these stations.

(g) Non-License  Assets acquired from River City.  License Assets to be acquired
    by  Glencairn,  Ltd.,  subject to the  Company's  LMA,  upon FCC approval of
    transfer of License Assets.

(h) River City  provided  programming  to this  station  pursuant to an LMA. The
    Company  acquired  River City's rights under the LMA from River City and the
    Non-License  Assets from the owners of this station.  The License Assets are
    to be transferred to Glencairn upon FCC approval of transfer of assets.

(i) "IND" or  "Independent"  refers to a station that is not affiliated with any
    of ABC, CBS, NBC, Fox, UPN or Warner Brothers.


OPERATING STRATEGY

   The  Company's  television  operating  strategy  includes the  following  key
elements.

ATTRACTING VIEWERSHIP

   Popular  Programming.  The  Company  believes  that an  important  factor  in
attracting  viewership to its stations is their network  affiliations  with Fox,
UPN, ABC, CBS and WB. These  affiliations  enable the Company to attract viewers
by  virtue of the  quality  first-run  original  programming  provided  by these
networks and the networks' promotion of such programming. The Company also seeks
to  obtain,  at  attractive  prices,  popular  syndicated  programming  that  is
complementary  to  the  station's  network  affiliation.   Examples  of  popular
syndicated  programming obtained by the Company for broadcast on its Fox, WB and
UPN affiliates and  independent  stations are "Mad About You,"  "Frasier,"  "The
Simpsons,"   "Home   Improvement"   and   "Seinfeld."  In  addition  to  network
programming,  the Company's ABC and CBS affiliates broadcast news magazine, talk
show, and game show  programming such as "Hard Copy,"  "Entertainment  Tonight,"
"Regis and Kathie Lee," "Wheel of Fortune" and "Jeopardy."

   Children's  Programming.  The  Company  seeks  to be a leader  in  children's
programming in each of its respective DMAs. The Company's nationally  recognized
"Kids  Club" was the  forerunner  and model for the Fox  network-wide  marketing
efforts promoting  children's  programming.  Sinclair carries the Fox Children's
Network  ("FCN")  and  UPN's  childrens'  programming,  both  of  which  include
significant  amounts  of  animated  programming  throughout  the week.  In those
markets  where the Company owns or programs ABC or CBS  affiliates,  the Company
broadcasts those networks' animated programming during weekends.  In addition to
this  animated  programming,  the Company  broadcasts  other forms of children's
programming,  which may be produced by the Company or by an affiliated  network.


   Counter-Programming.  The Company's  programming strategy on its Fox, UPN and
Independent  stations also  includes  "counter-programming,"  which  consists of
broadcasting programs that are alternatives to the types of programs being shown
concurrently  on  competing  stations.  This  strategy  is  designed  to attract
additional  audience  share in  demographic  groups  not  served  by  concurrent
programming on competing  stations.  The Company believes that implementation of
this strategy enables its stations to achieve competitive rankings in households
in  the  18-49  and  25-54  demographics  and  to  offer  greater  diversity  of
programming in each of its DMAs.


   Local News.  The Company  believes that the production  and  broadcasting  of
local news can be an important link to the community and an aid to the station's
efforts to expand its  viewership.  In  addition,  local  news  programming  can
provide access to advertising  sources targeted  specifically to local news. The
Company carefully assesses the anticipated benefits and costs of producing local
news prior to introduction at a Company station because a significant investment
in capital equipment is required and substantial operating expenses are incurred
in  introducing,  developing and producing local news  programming.  The Company
currently  provides  local  news  programming  at  WBFF  in  Baltimore,  WLFL in
Raleigh/Durham, KDNL in St. Louis, KABB in San Antonio, KOVR in Sacramento, WPGH
in Pittsburgh and WLOS in Asheville.  The Company also  broadcasts news programs
on WDKY in  Lexington,  which are  produced  in part by the  Company and in part
through the purchase of production  services from an independent third party and
on 

                                        4



WTTV in  Indianapolis,  which are  produced by a third  party in exchange  for a
limited  number of  advertising  spots.  River City  Broadcasting,  L.P. and its
controlled  entities  (collectively,  "River  City")  provide the  Company  news
production  services with respect to the production of news  programming  and on
air  talent on WTTE.  Pursuant  to an  agreement,  River City  provides  certain
services to the Company in return for a fee equal to approximately  $416,000 per
year. The possible  introduction of local news at the other Company  stations is
reviewed  periodically.   The  Company's  policy  is  to  institute  local  news
programming  at a specific  station only if the expected  benefits of local news
programming at the station are believed to exceed the associated  costs after an
appropriate start-up period.

   Popular  Sporting  Events.  The  Company  attempts  to  capture a portion  of
advertising  dollars  designated to sports  programming  in selected  DMAs.  The
Company's   independent  and  UPN  affiliated   stations  generally  face  fewer
restrictions  on   broadcasting   live  local  sporting  events  than  do  their
competitors  that are affiliates of the major networks and Fox since  affiliates
of the major networks are subject to prohibitions against preemptions of network
programming. The Company has been able to acquire the local television broadcast
rights  for  certain  sporting  events,  such as NBA  basketball,  Major  League
Baseball,  NFL  football,  NHL hockey,  ACC  basketball,  Big Ten  football  and
basketball,   and  SEC  football.   The  Company  seeks  to  expand  its  sports
broadcasting  in  DMAs as  profitable  opportunities  arise.  In  addition,  the
Company's  stations that are affiliated with Fox broadcast  certain Major League
Baseball games, NFL football games and NHL hockey games.


INNOVATIVE LOCAL SALES AND MARKETING

   The  Company  believes  that it is able to  attract  new  advertisers  to its
stations and increase its share of existing  customers'  advertising  budgets by
creating a sense of partnership  with those  advertisers.  The Company  develops
such relationships by training its sales forces to offer new marketing ideas and
campaigns to  advertisers.  These  campaigns  often involve the  sponsorship  by
advertisers of local  promotional  events that capitalize on the station's local
identity  and  programming  franchises.  For example,  several of the  Company's
stations  stage local Kids Fairs which allow  station  advertisers  to reinforce
their on-air  advertising with their target  audience.  Through its strong local
sales and marketing  focus,  the Company seeks to capture an increasing share of
its revenues from local  sources,  which are generally more stable than national
advertising.

CONTROL OF OPERATING AND PROGRAMMING COSTS


   By employing a disciplined approach to managing  programming  acquisition and
other  costs,  the Company has been able to achieve  operating  margins that the
Company believes are among the highest in the television broadcast industry. The
Company  has sought in the past and will  continue  to seek to  acquire  quality
programming  for  prices at or below  prices  paid in the  past.  As an owner or
provider  of   programming   services  to  28  stations  in  20  DMAs   reaching
approximately 14% of U.S. television households, the Company believes that it is
able to negotiate favorable terms for the acquisition of programming.  Moreover,
the  Company  emphasizes  control  of  each  of its  stations'  programming  and
operating costs through  program-specific  profit analysis,  detailed budgeting,
tight control over staffing levels and detailed long-term planning models. 

ATTRACT AND RETAIN HIGH QUALITY MANAGEMENT

   The  Company  believes  that much of its  success  is due to its  ability  to
attract and retain highly skilled and motivated managers,  both at the corporate
and local  station  levels.  A portion of the  compensation  provided to general
managers,  sales managers and other station managers is based on their achieving
certain operating  results.  The Company also provides its corporate and station
managers with deferred  compensation  plans offering  options to acquire Class A
Common Stock.

COMMUNITY INVOLVEMENT

   Each of the Company's  stations  actively  participates in various  community
activities and offers many community services.  The Company's activities include
broadcasting  programming  of local  interest and  sponsorship  of community and
charitable  events.  The Company also encourages its station employees to become


                                        5


active members of their communities and to promote  involvement in community and
charitable  affairs.  The Company believes that active community  involvement by
its stations  provides its stations with increased  exposure in their respective
DMAs and ultimately increases viewership and advertising support.

ESTABLISH LMAS
- --------------


   The Company believes that it can attain  significant growth in operating cash
flow through the  utilization  of LMAs. By expanding its presence in a market in
which it owns a station,  the Company can improve its competitive  position with
respect to a demographic sector. In addition,  by providing programming services
to an additional station in a market, the Company is able to realize significant
economies of scale in marketing, programming, overhead and capital expenditures.
The Company provides  programming  services  pursuant to an LMA to an additional
station in seven of its 20 television markets. 

PROGRAMMING AND AFFILIATIONS

   The Company continually reviews its existing programming  inventory and seeks
to purchase the most profitable and cost-effective syndicated programs available
for each time period. In developing its selection of syndicated programming, the
Company balances the cost of available  syndicated programs with their potential
to increase  advertising revenue and the risk of their reduced popularity during
the term of the  program  contract.  The Company  seeks to  purchase  only those
programs with contractual periods that permit programming  flexibility and which
complement a station's  overall  programming  strategy  and  counter-programming
strategy.  Programs that can perform  successfully  in more than one time period
are  more  attractive  due to the long  lead  time  and  multi-year  commitments
inherent in program purchasing.

   Twenty-six  of the 28  television  stations  owned  or  provided  programming
services by the Company operate as affiliates of Fox (ten stations), UPN (eleven
stations),  ABC (two  stations),  WB (two stations) and CBS (one  station).  The
networks  produce and  distribute  programming  in exchange  for each  station's
commitment  to air  the  programming  at  specified  times  and  for  commercial
announcement time during the programming.  In addition,  networks other than Fox
and UPN pay each  affiliated  station a fee for each  network-sponsored  program
broadcast by the stations.

   On August 21, 1996, the Company  entered into an agreement with Fox (the "Fox
Agreement") which, among other things,  provides that the affiliation agreements
between Fox and eight  stations  owned or provided  programming  services by the
Company  (except as noted  below) would be amended to have new  five-year  terms
commencing  on the date of the Fox  Agreement.  Fox has the option to extend the
affiliation  agreements for an additional  five-year term and must extend all of
the  affiliation  agreements if it extends any (except that Fox may  selectively
renew  affiliation  agreements  if any  station  has  breached  its  affiliation
agreement). The Fox Agreement also provides that the Company will have the right
to  purchase,  for fair  market  value,  any  station  Fox  acquires in a market
currently  served by a Company owned Fox  affiliate  (other than the Norfolk and
Raleigh-Durham markets) if Fox determines to terminate the affiliation agreement
with the  Company's  station in that market and operate the station  acquired by
Fox as a Fox affiliate.  The agreement confirmed that the affiliation  agreement
for WTTO  (Birmingham,  Alabama) would  terminate on September 1, 1996, and that
affiliation  agreements  for WTVZ (Norfolk,  Virginia) and WLFL (Raleigh,  North
Carolina)  will  terminate  August 31, 1998.  The Fox  Agreement  also  includes
provisions limiting the ability of the Company to preempt Fox programming except
where it has existing  programming  conflicts  or where the Company  preempts to
serve a public purpose.

   The Company's affiliation agreement with ABC for WLOS in Asheville has a term
which  expires in  September  1998 but which  automatically  renews for two-year
periods  unless either party elects to terminate on six months  notice,  and its
affiliation  agreement  with  CBS for  KOVR in  Sacramento  has a  10-year  term
expiring in 2005. Each of the Company's UPN affiliation  agreements is for three
years, and expires in January 1998.

   Each of the  affiliation  agreements  relating  to  stations  involved in the
Company's  acquisition,  agreed to on April 10, 1996, of certain assets of River
City ( the "River City Acquisition") (other than River City's Fox affiliates) is
terminable  by the  network  upon  transfer  of the  License  Assets (as defined
herein) of the station.  In addition,  KDNL (St.  Louis) is being operated as an
ABC

                                       6


affiliate  pursuant to terms  negotiated with ABC, but no affiliation  agreement
has been signed and ABC is not paying  affiliation fees, and WLOS (Asheville) is
being  operated  pursuant  to terms  negotiated  with ABC to replace an existing
agreement, but the new agreement has not been signed and ABC is paying the lower
affiliation fees called for under the old agreement.

RADIO BROADCASTING

   The  following  table  sets forth  certain  information  regarding  the radio
stations (i)  programmed  by the Company,  (ii) with which the Company has JSAs,
(iii) or which the Company has an option to acquire.  Except as  indicated,  the
Company  owns the  Non-License  Assets  (as  defined  herein)  of the  following
stations,  and the Company programs these stations pursuant to an LMA with River
City.



                   RANKING OF                                            STATION RANK    EXPIRATION
   GEOGRAPHIC       STATION'S           STATION              PRIMARY      IN PRIMARY      DATE OF
     MARKET         MARKET BY         PROGRAMMING          DEMOGRAPHIC    DEMOGRAPHIC       FCC
    SERVED(A)      REVENUE(B)            FORMAT             TARGET(C)      TARGET(D)      LICENSE
- ----------------  ------------ ------------------------- -------------- -------------- -------------
                                                                        
Los Angeles        2
 KBLA-AM (e)                   Korean                    NA             N/A            12/1/97
St. Louis         17
 KPNT-FM                       Alternative Rock          Adults 18-34     4             2/1/04
 WVRV-FM                       Modern Adult 
                                Contemporary             Adults 18-34     7            12/1/03
New Orleans       38
 WLMG-FM                       Adult Contemporary        Women 25-54      2             6/1/03
 KMEZ-FM                       Urban Oldies              Women 25-54      6             6/1/03
 WWL-AM                        News/Talk/Sports          Adults 35-64     1             6/1/03
 WSMB-AM                       Talk/Sports               Adults 35-64    19             6/1/03
Buffalo           40
 WMJQ-FM                       Adult Contemporary        Women 25-54      2             6/1/98
 WKSE-FM                       Contemporary Hit Radio    Women 18-49      1             6/1/98
 WBEN-AM                       News/Talk/Sports          Adults 35-64     1             6/1/98
 WWKB-AM                       Country                   Adults 35-64    16             6/1/98
 WGR-AM(f)(g)                  Sports                    Adults 25-54    10             6/1/98
 WWWS-AM(f)(g)                 Urban Oldies              Women 25-54     12             6/1/98
Memphis           43
 WRVR-FM                       Soft Adult Contemporary   Women 25-54      3             8/1/03
 WJCE-AM                       Urban Oldies              Women 25-54     11             8/1/03
 WOGY-FM                       Country                   Adults 25-54    10             8/1/03
Nashville         44
 WLAC-FM                       Adult Contemporary        Women 25-54      6             8/1/03
 WJZC-FM                       Smooth Jazz               Women 25-54      9             8/1/03
 WLAC-AM                       News/Talk/Sports          Adults 35-64    11             8/1/03

Greenville/
 Spartanburg      59
 WFBC-FM (h)                   Contemporary Hit Radio    Women 18-49      6            12/1/02
 WORD-AM (h)                   News/Talk                 Adults 35-64     9            12/1/02
 WFBC-AM (h)                   News/Talk                 Adults 35-64     9            12/1/02
 WSPA-AM(h)                    Full Service/Talk         Adults 35-64    15            12/1/02
 WSPA-FM(h)                    Soft Adult Contemporary   Women 25-54      2            12/1/02
 WOLI-FM(h)(i)                 Oldies                    Adults 25-54     9            12/1/02
 WOLT-FM(h)(j)                 Oldies                    Adults 25-54    10            12/1/02

Wilkes-Barre/
 Scranton         61
 WKRZ-FM                       Contemporary Hit Radio    Adults 18-49     1             8/1/98
 WGGY-FM                       Country                   Adults 25-54     3             8/1/98
 WILK-AM (k)                   News/Talk/Sports          Adults 35-64     6             8/1/98
 WGBI-AM(k)                    News/Talk/Sports          Adults 35-64    31             8/1/98
 WWSH-FM(f                     Soft Hits                 Women 25-54      7             8/1/98
 WILP-AM(l)                    News/Talk/Sports          Adults 35-64    31             8/1/98
 WWFH-FM(m)                    Soft Hits                 Women 25-54     17             8/1/98

                                                   (Footnotes on following page)
                                        7



- ----------

(a) Actual city of license may differ from the geographic market served.

(b) Ranking of the  principal  radio market served by the station among all U.S.
    radio markets by 1995 aggregate gross radio broadcast  revenue  according to
    1996 Broadcasting & Cable Yearbook.

(c) Due to variations  that may exist within  programming  formats,  the primary
    demographic  target of  stations  with the same  programming  format  may be
    different.

(d) ll information  concerning  ratings  and audience  listening  information is
    derived from the Fall 1996  Arbitron  Metro Area  Ratings  Survey (the "Fall
    1996  Arbitron").  Arbitron is the generally  accepted  industry  source for
    statistical  information  concerning audience ratings.  Due to the nature of
    listener  surveys,   other  radio  ratings  services  may  report  different
    rankings;  however,  the  Company  does not believe  that any radio  ratings
    service  other than  Arbitron  is accorded  significant  weight in the radio
    broadcast  industry.  "Station  Rank in Primary  Demographic  Target" is the
    ranking of the  station  among all radio  stations  in its  market  that are
    ranked in its target demographic group and is based on the station's average
    persons  share in the primary  demographic  target in the  applicable  Metro
    Survey Area. Source: Average Quarter Hour Estimates,  Monday through Sunday,
    6:00 a.m. to midnight, Fall 1996 Arbitron.

(e) Programming is provided to this station by a third party pursuant to an LMA.

(f) The Company sells advertising time on these stations pursuant to a JSA.

(g) The Company has agreed to acquire these stations, subject to FCC approval of
    the transfer of the related licenses.

(h) The  Company has an option to acquire  Keymarket  of South  Carolina,  Inc.,
    which owns and  operates  WFBC-AM,  WORD-AM  and  WFBC-FM,  has an option to
    acquire and provides  programming services pursuant to an LMA to WSPA-AM and
    WSPA-FM,  and provides sales services pursuant to a JSA and has an option to
    acquire WOLI-FM and WOLT-FM.

(i) WOLI-FM was formerly WXWX-FM.

(j) WOLT-FM was formerly WXWZ-FM.

(k) WILK-AM and WGBI-AM simulcast their programming.

(l) WILP-AM was formerly WXPX-AM.

(m) WWFH-FM was formerly WQEQ-FM.









                                        8





Radio Operating Strategy

   The  Company's  radio  strategy is to operate a cluster of radio  stations in
each  of a  variety  of  geographic  markets  throughout  the  country.  In each
geographic market, the Company employs broadly  diversified  programming formats
to appeal to a variety of  demographic  groups  within the  market.  The Company
seeks to strengthen the identity of each of its stations through its programming
and  promotional  efforts,  and emphasizes that identity to a far greater degree
than the identity of any local radio personality.

   The Company  believes  that its strategy of appealing to diverse  demographic
groups in a variety of geographic  markets  allows it to reach a larger share of
the overall  advertising market while realizing  economies of scale and avoiding
dependence  on one  demographic  or  geographic  market.  The  Company  realizes
economies  of scale  by  combining  sales  and  marketing  forces,  back  office
operations and general  management in each geographic  market. At the same time,
the  geographic  diversity of its portfolio of radio  stations  helps lessen the
potential impact of economic  downturns in specific markets and the diversity of
target  audiences  served  helps  lessen  the  impact of  changes  in  listening
preferences.  In addition,  the geographic and demographic  diversity allows the
Company to avoid dependence on any one or any small group of advertisers.

   The Company's group of radio stations  includes the top billing station group
in two markets and one of the top three  billing  station  groups in each of its
markets other than Los Angeles,  St. Louis and Nashville.  Through  ownership or
LMAs,  the group also  includes  duopolies in six of its seven markets and, upon
exercise of options to acquire  stations in the  Greenville/Spartanburg  market,
the Company will have duopolies in seven of its eight markets.

   Depending  on the  programming  format of a particular  station,  there are a
predetermined  number  of  advertisements   broadcast  each  hour.  The  Company
determines the optimum number of  advertisements  available for sale during each
hour without jeopardizing listening levels (and the resulting ratings). Although
there may be shifts from time to time in the number of advertisements  available
for sale during a particular  time of day,  the total  number of  advertisements
available for sale on a particular station normally does not vary significantly.
Any  change in net  radio  broadcasting  revenue,  with the  exception  of those
instances  where  stations  are  acquired or sold,  is  generally  the result of
pricing adjustments made to ensure that the station effectively uses advertising
time  available  for sale,  an increase in the number of  commercials  sold or a
combination of these two factors.

   Large,  well-trained local sales forces are maintained by the Company in each
of its radio  markets.  The Company's  principal goal in its sales efforts is to
develop long-standing  customer  relationships through frequent direct contacts,
which  the  Company   believes   provides  it  with  a  competitive   advantage.
Additionally,  in some radio  markets,  duopolies  permit  the  Company to offer
creative advertising packages to local, regional and national advertisers.  Each
radio  station  programmed  by the Company also  engages a national  independent
sales  representative to assist it in obtaining national  advertising  revenues.
These  representatives  obtain advertising through national advertising agencies
and receive a commission  from the radio station based on its gross revenue from
the advertising obtained.

BROADCASTING ACQUISITION STRATEGY

   On February 8, 1996, the  Telecommunications Act of 1996 (the "1996 Act") was
signed  into law.  The 1996 Act  represents  the most  sweeping  overhaul of the
country's  telecommunications  laws  since  the  Communications  Act of 1934 (as
amended, the "Communicatons  Act"). The 1996 Act relaxes the broadcast ownership
rules and simplifies the process for renewal of broadcast station licenses.

   The Company  believes  that the  enactment  of the 1996 Act presents a unique
opportunity  to  build a  larger  and  more  diversified  broadcasting  company.
Additionally,  the Company  expects  that the  opportunity  to act as one of the
consolidators  of the  industry  will  enable  the  Company  to gain  additional
influence  with program  suppliers,  television  networks,  other  vendors,  and
alternative  delivery media. The Company also believes that the additions to its
management  team  as a  result  of the  River  City  Acquisition  will  give  it
additional resources to take advantage of these developments.

                                        9





   In implementing its acquisition  strategy,  the Company seeks to identify and
pursue favorable  station or group  acquisition  opportunities  primarily in the
15th to 75th  largest  DMAs and Metro  Survey  Areas as defined by the  audience
measuring service Arbitron ("MSAs").  In assessing potential  acquisitions,  the
Company examines  opportunities to improve revenue share,  audience share and/or
cost  control.  Additional  factors  considered  by the  Company in a  potential
acquisition  include  geographic  location,   demographic   characteristics  and
competitive dynamics of the market.

   In furtherance of its acquisition  strategy,  the Company routinely  reviews,
and  conducts   investigations  of,  potential   television  and  radio  station
acquisitions.  When the Company  believes a favorable  opportunity  exists,  the
Company  seeks to  enter  into  discussions  with the  owners  of such  stations
regarding the  possibility of an acquisition by the Company.  At any given time,
the Company may be in discussions with one or more such station owners.

   Since the 1996 Act became  effective,  the  Company  has  acquired,  obtained
options  to  acquire or has  acquired  the right to  program  or  provide  sales
services to 16 television and 33 radio  stations for an aggregate  consideration
of approximately $1.3 billion. Certain terms of these acquisitions are described
below.

   River City Acquisition. On May 31, 1996, pursuant to the Amended and Restated
Asset Purchase Agreement,  the Company acquired all of the Non-License Assets of
River  City  other  than the assets  relating  to  WSYX-TV  in  Columbus,  Ohio.
Simultaneously,  the  Company  entered  into a 10-year  LMA with River City with
respect to all of River City's License Assets (with the exception of the License
Assets  relating to WSYX) and was granted:  (i) a 10-year  option (the  "License
Assets  Option") to acquire River City's  License  Assets (with the exception of
the License Assets  relating to WSYX);  and (ii) a three-year  option to acquire
the assets  relating  to  WSYX-TV  (both the  License  and  Non-License  Assets,
collectively the "Columbus  Option").  The exercise price for the License Assets
Option is $20 million and the Company is required to pay an  extension  fee with
respect to the License  Assets Option as follows:  (1) 8% of $20 million for the
first year following the closing of the River City  Acquisition;  (2) 15% of $20
million for the second year following  such closing;  and (3) 25% of $20 million
for each following year. The Non-License  Assets acquired from River City relate
to eight  television  stations and 21 radio stations owned and operated by River
City.  In addition,  the Company  acquired  from another  party the  Non-License
Assets relating to one additional  television station (KRRT) to which River City
provided  programming  pursuant to an LMA.  The Company  assigned  its option to
acquire the License  Assets of one television  station (WFBC) to Glencairn,  and
Glencairn  also acquired the option to acquire the License  Assets of KRRT.  The
Company also  acquired  River City's  rights under LMAs with respect to KRRT and
four radio stations to which River City provided  programming or sales services.
The Company has exercised the License Assets Option and has acquired the License
Assets of all but the two radio stations in the St. Louis market. Acquisition of
the remaining  License Assets is now subject to FCC approval of transfer of such
License  Assets.  There can be no assurance that this approval will be obtained.
Applications  for  transfer of the License  Assets were filed in July and August
1996, except application for transfer of the License Assets relating to WTTV and
WTTK which was filed in November 1996. The applications  with respect to the two
radio stations in the St. Louis market are pending, and require a special waiver
because of the Company's pending  acquisition of a television  station (KDNL) in
the market. 

   The  Company  paid  an  aggregate  of  approximately  $1.0  billion  for  the
Non-License Assets and the License Assets Option consisting of $847.6 million in
cash and 1,150,000 shares of Series A Convertible Preferred Stock of the Company
and 1,382,435 stock options.  The Series A Convertible  Preferred Stock has been
exchanged for 1,150,000  shares of Series B Convertible  Preferred  Stock of the
Company,  which at issuance had an aggregate  liquidation value of $115 million,
and are convertible at any time, at the option of the holders, into an aggregate
of 4,181,818  shares of Class A Common Stock of the Company  (which had a market
value on May 31, 1996 of approximately  $125.1 million).  The exercise price for
the  Columbus  Option  is   approximately   $130  million  plus  the  amount  of
indebtedness  secured by the WSYX assets on the date of exercise  (not to exceed
the amount  outstanding  on the date of closing of $105 million) and the Company
is required  to pay an  extension  fee with  respect to the  Columbus  Option as
follows:  (1) 8% of $130 million for the first year following the closing of the
River City  Acquisition;  (2) 15% of $130 million for the second year  following
the closing;  and (3) 25% of $130 million for each 

                                       10


following year. The extension fee accrues beginning on the date of closing,  and
is payable  (beginning  December 31, 1996) at the end of each  calendar  quarter
until such time as the option is  exercised  or River City sells WSYX to a third
party. The Company paid the extension fee due December 31, 1996. Pursuant to the
LMAs with River City and the owner of KRRT,  the  Company is required to provide
at least 166 hours per week of programming to each  television and radio station
and,  subject  to  certain  exceptions,  River  City  and the  owner of KRRT are
required to broadcast all  programming  provided by the Company.  The Company is
required to pay River City and the owner of KRRT  monthly fees under the LMAs in
an amount  sufficient  to cover  specified  expenses of operating  the stations,
which  are  currently  approximately  $134,000  per  month  for all  River  City
television and radio stations the Company programs (including KRRT). The Company
has the  right  to  sell  advertising  time on the  stations  during  the  hours
programmed by the Company.

   The Company  and River City filed  notification  under the  Hart-Scott-Rodino
Antitrust  Improvements Act of 1976, as amended (the "HSR Act"), with respect to
the  Company's  acquisition  of all  River  City  assets  prior to  closing  the
acquisition.  After the United States Justice  Department ("DOJ") indicated that
it would request additional  information regarding the antitrust implications of
the  acquisition  of WSYX by the Company in light of the Company's  ownership of
WTTE, the Company and River City agreed to submit  separate  notifications  with
respect to the WSYX assets and the other River City assets. The DOJ then granted
early  termination  of the waiting  period with  respect to the  transfer of the
River City assets other than WSYX, permitting the acquisition of those assets to
proceed.  The  Company  and River City  agreed to notify the DOJ 30 days  before
entering into an LMA or similar agreement with respect to WSYX and agreed not to
enter into such an agreement  until 20 days after  substantially  complying with
any request for information from DOJ regarding the  transaction.  The Company is
in the process of preparing a submission to the DOJ  regarding  the  competitive
effects of entering into an LMA arrangement in Columbus.  The Company has agreed
to sell the License  Assets of WTTE to  Glencairn  and to enter into an LMA with
Glencairn  to provide  programming  services to WTTE,  but the Company  does not
believe  that this  transaction  will be completed  unless the Company  acquires
WSYX.

   In the River City  Acquisition,  the Company also  acquired an option held by
River  City to  purchase  either  (i) all of the  assets of  Keymarket  of South
Carolina,  Inc.  ("KSC") for the  forgiveness  of debt held by the Company in an
aggregate  principal amount of approximately $7.4 million as of August 22, 1996,
plus payment of approximately $1,000,000 less certain adjustments or (ii) all of
the stock of KSC for $1,000,000 less certain adjustments.  KSC owns and operates
three radio stations in the Greenville/Spartanburg, South Carolina MSA (WFBC-FM,
WFBC-AM and WORD-AM).  The options to acquire the assets and stock of KSC expire
on  December  31,  1997.  KSC also  holds an  option  to  acquire  from  Spartan
Radiocasting,  Inc. certain assets relating to two additional  stations (WSPA-AM
and WSPA-FM) in the  Greenville/Spartanburg MSA and which KSC currently programs
pursuant to an LMA.  KSC's  option to acquire  these assets is  exercisable  for
$5.15  million and expires in January  2000,  subject to extension to the extent
the  applicable  LMA is  extended  beyond  that date.  KSC also has an option to
acquire assets of Palm  Broadcasting  Company,  L.P.,  which owns two additional
stations in the  Greenville/Spartanburg  MSA  (WOLI-FM and WOLT-FM) in an amount
equal to the outstanding debt of Palm Broadcasting Company, L.P. to the Company,
which was approximately $3.0 million as of June 30, 1996. This option expires in
April 2001.  KSC has a JSA with Palm  Broadcasting  Company,  L.P., but does not
provide programming for WOLI or WOLT.

   Superior   Acquisition.   On  May  8,  1996,  the  Company  acquired  WDKY-TV
(Lexington,  Kentucky) and KOCB-TV  (Oklahoma  City,  Oklahoma) by acquiring the
stock of Superior Communications, Inc. for approximately $63.5 million.

   Flint  Acquisition.  On February 27, 1996 the Company  acquired the assets of
WSMH-TV (Flint,  Michigan) for approximately $35.8 million by exercising options
granted in 1995.

   Cincinnati/Kansas  City  Acquisitions.  On July 1, 1996, the Company acquired
the assets of KSMO-TV (Kansas City, Missouri) and on August 1, 1996, it acquired
the assets of WSTR-TV (Cincinnati, Ohio) for approximately $34.2 million.

   Peoria/Bloomington  Acquisition.  On July 1, 1996,  the Company  acquired the
assets  of  WYZZ-TV  (Peoria/Bloomington,   Illinois)  for  approximately  $21.2
million.

                                       11




1997 ACQUISITIONS

   Since the end of 1996, the Company has entered into agreements to acquire one
television station and two radio stations,  and has completed the acquisition of
two radio  stations.  On January 30, 1997, the Company entered into an agreement
to acquire the assets of KUPN-TV,  the UPN affiliate in Las Vegas,  Nevada,  for
$87.0 million. The Company also entered into an agreement on January 29, 1997 to
acquire the assets of WGR-AM and WWWS-AM in Buffalo,  New York for $1.5 million.
The  Company's  acquisition  of these  stations  is subject to FCC  approval  of
applications  to assign the licenses of these  stations.  The Company  currently
sells the  commercial  air time of WGR-AM  and  WWWS-AM  pursuant  to a JSA.  On
January 31, 1997, the Company completed the acquisition of the assets of WWSH-FM
and WILP-AM, each in Wilkes-Barre,  Pennsylvania, for aggregate consideration of
approximately $773,000.


LOCAL MARKETING AGREEMENTS

   The Company generally enters into LMAs and similar arrangements with stations
located in markets in which the Company already owns and operates a station, and
in connection  with  acquisitions,  pending  regulatory  approval of transfer of
License Assets. Under the terms of the LMAs the Company makes specified periodic
payments to the  owner-operator  in exchange for the grant to the Company of the
right to program and sell  advertising  on a specified  portion of the station's
inventory of broadcast time. Nevertheless, as the holder of the FCC license, the
owner-operator  retains full control and responsibility for the operation of the
station, including control over all programming broadcast on the station.

   The Company  currently has LMA arrangements  with stations in five markets in
which it owns a television station: Pittsburgh,  Pennsylvania (WPTT), Baltimore,
Maryland (WNUV),  Raleigh/Durham,  North Carolina (WRDC),  Milwaukee,  Wisconsin
(WVTV) and Birmingham,  Alabama (WABM). The Company also has LMA arrangements in
two  markets  (San  Antonio and  Asheville/Greenville/Spartanburg)  in which the
Company will own a station upon  completion of the acquisition of License Assets
from River City. In addition,  the Company has an LMA arrangement with a station
in the Tuscaloosa,  Alabama market (WDBB),  which is adjacent to Birmingham.  In
each of these markets, other than Pittsburgh and Tuscaloosa, the LMA arrangement
is (or will be after  transfer of License Assets from River City) with Glencairn
and the Company owns the Non-License  Assets (as defined below) of the stations.
The Company owns the assets of one radio station  (KBLA-AM in Los Angeles) which
an independent third party programs pursuant to an LMA. 

   The Company believes that it is able to increase its revenues and improve its
margins by providing  programming services to stations in selected DMAs and MSAs
where the Company already owns a station.  In certain instances,  single station
operators  and  stations  operated by smaller  ownership  groups do not have the
management expertise or the operating efficiencies available to the Company as a
multi-station  broadcaster.  The  Company  seeks to  identify  such  stations in
selected markets and to provide such stations with programming services pursuant
to  LMAs.  In  addition  to  providing  the  Company  with  additional   revenue
opportunities,  the Company believes that these LMA  arrangements  have assisted
certain  stations  whose  operations  may have  been  marginally  profitable  to
continue to air popular  programming  and contribute to diversity of programming
in their respective DMAs and MSAs.

   In cases where the Company enters into LMA  arrangements in connection with a
station whose  acquisition  by the Company is pending FCC approval,  the Company
(i) obtains an option to acquire the station assets essential for broadcasting a
television or radio signal in compliance with regulatory  guidelines,  generally
consisting  of the  FCC  license,  transmitter,  transmission  lines,  technical
equipment,  call letters and  trademarks,  and certain  furniture,  fixtures and
equipment  (the "License  Assets") and (ii)  acquires the remaining  assets (the
"Non-License  Assets")  at  the  time  it  enters  into  the  option.  Following
acquisition of the Non-License  Assets,  the License Assets continue to be owned
by the  owner-operator  and holder of the FCC license,  which enters into an LMA
with the  Company.  After FCC  approval  for  transfer of the License  Assets is
obtained,  the Company  exercises  its option to acquire the License  Assets and
become the owner-operator of the station, and the LMA arrangement is terminated.

   In connection  with the River City  Acquisition,  the Company entered into an
LMA in the form of time  brokerage  agreements  ("TBAs") with River City and the
owner of KRRT with respect to each of the nine  television  (including  KDSM-TV)
and 21 radio stations with respect to which the Company 

                                       12



acquired Non-License Assets. The TBAs are for a ten-year term, which corresponds
with the term of the option the Company  holds to acquire the related River City
License  Assets.  Pursuant to the TBA, the Company pays River City and the owner
of KRRT fees in return for which the Company  acquires  all of the  inventory of
broadcast  time of the  stations  and the right to sell  100% of each  station's
inventory of advertising  time. The Company has filed  applications with respect
to the transfer of the License Assets of seven of the nine  television  stations
and the 21 radio stations with respect to which the Company acquired Non-License
Assets in the River City  Acquisition.  Such applications have been granted with
respect to 19 of the 21 radio stations, and the Company has acquired the license
assets  of each of the 19 radio  stations.  Upon  grant of FCC  approval  of the
transfer of License Assets with respect to the remaining  stations,  the Company
intends to acquire the License  Assets,  and  thereafter the LMAs will terminate
and the Company will operate the  stations.  With respect to the  remaining  two
television stations, Glencairn has applied for transfer of the License Assets of
these  stations,  and the Company  intends to program these  stations under LMAs
with  Glencairn  upon FCC  approval of the  transfer  of the  License  Assets to
Glencairn.  Petitions  to deny or informal  objections  have been filed  against
these applications by third parties. 

   In addition to its LMAs, the Company sells  commercial air time for (but does
not provide  programming  to) three radio  stations  pursuant to JSAs in MSAs in
which it has interests in other radio  stations.  Under the Company's  JSAs, the
Company has obtained the right,  for a fee paid to the owner and operator of the
station, to sell substantially all of the commercial advertising on the station.


FEDERAL REGULATION OF TELEVISION AND RADIO BROADCASTING

   The  ownership,  operation  and sale of  television  and radio  stations  are
subject to the  jurisdiction of the FCC, which acts under  authority  granted by
the Communications  Act. Among other things, the FCC assigns frequency bands for
broadcasting;  determines  the particular  frequencies,  locations and operating
power of  stations;  issues,  renews,  revokes and  modifies  station  licenses;
regulates  equipment  used by stations;  adopts and implements  regulations  and
policies  that  directly  or  indirectly  affect the  ownership,  operation  and
employment  practices of  stations;  and has the power to impose  penalties  for
violations of its rules or the Communications Act.

   The following is a brief summary of certain  provisions of the Communications
Act, the  recently-enacted  1996 Act and specific FCC  regulations and policies.
Reference  should be made to the  Communications  Act,  FCC rules and the public
notices and rulings of the FCC for further information concerning the nature and
extent of federal regulation of broadcast stations.

   License  Grant  and  Renewal.   Television   stations   operate  pursuant  to
broadcasting licenses that formerly were granted by the FCC for maximum terms of
five years, and radio stations  operate  pursuant to broadcasting  licenses that
formerly were granted by the FCC for maximum terms of seven years.  The 1996 Act
authorizes the FCC to grant all broadcast  licenses (both  television and radio)
for maximum terms of eight years,  and the FCC has issued an order directing its
staff to implement this statutory change.

   Television and radio station licenses are subject to renewal upon application
to the FCC.  During  certain  periods  when  renewal  applications  are pending,
competing  applicants may file for the radio or television  frequency being used
by the renewal  applicant.  During the same  periods,  petitions to deny license
renewal  applications may be filed by interested  parties,  including members of
the  public.  Prior to the 1996  Act,  the FCC was  generally  required  to hold
hearings on renewal  applications if a competing  application  against a renewal
application  was filed,  if the FCC was unable to  determine  that  renewal of a
license would serve the public  interest,  convenience  and  necessity,  or if a
petition  to deny raised a  "substantial  and  material  question of fact" as to
whether the grant of the  renewal  application  would be prima facie  consistent
with the public interest, convenience and necessity.

   The 1996 Act does not prohibit either the filing of petitions to deny license
renewals or the filing of competing applications. Under the 1996 Act, the FCC is
still  required  to hold  hearings  on renewal  applications  if it is unable to
determine that renewal of a license would serve the public interest, convenience
or  necessity,  or if a petition  to deny  raises a  "substantial  and  material
question of fact" as to whether the grant of the  renewal  application  would be
prima facie inconsistent with the public interest,

                                       13




convenience  and  necessity.  Pursuant  to the  1996  Act,  however,  the FCC is
prohibited from considering  competing  applications  for a renewal  applicant's
frequency,  and is required to grant the renewal  application,  if the FCC finds
(i) that the station has served the public interest,  convenience and necessity;
(ii)  that  there  have  been  no  serious  violations  by the  licensee  of the
Communications Act or the rules and regulations of the FCC; and (iii) there have
been no other violations by the licensee of the  Communications Act or the rules
and regulations of the FCC that, when taken together, would constitute a pattern
of abuse.

   All of the stations that the Company (i) owns and  operates;  (ii) intends to
acquire  pursuant to the River City  Acquisition and other  acquisitions;  (iii)
currently provides  programming services to pursuant to an LMA or (iv) currently
sells  commercial  air time  pursuant to a JSA, are  presently  operating  under
regular  licenses,  which expire as to each station on the dates set forth under
"Television  Broadcasting" and "Radio  Broadcasting," above. Although renewal of
license is granted in the vast majority of cases even when petitions to deny are
filed,  there can be no  assurance  that the licenses of such  stations  will be
renewed. 

OWNERSHIP MATTERS

General

   The Communications Act prohibits the assignment of a broadcast license or the
transfer of control of a broadcast  licensee  without the prior  approval of the
FCC. In determining  whether to permit the assignment or transfer,  or the grant
or  renewal  of, a  broadcast  license,  the FCC  considers  a number of factors
pertaining to the licensee,  including  compliance  with various rules  limiting
common ownership of media properties,  the "character" of the licensee and those
persons  holding  "attributable"  interests  therein,  and  compliance  with the
Communications Act's limitations on Alien (as defined herein) ownership.

   To obtain the FCC's prior consent to assign or transfer a broadcast  license,
appropriate applications must be filed with the FCC. If the application involves
the assignment of the license or a "substantial  change" in ownership or control
(i.e., the transfer of more than 50% of the voting stock),  the application must
be placed on public  notice for a period of  approximately  30 days during which
petitions to deny the application may be filed by interested parties,  including
members  of the  public.  If an  assignment  application  does not  involve  new
parties, or if a transfer application does not involve a "substantial change" in
ownership  or  control,  it  is a  "pro  forma"  application.  The  "pro  forma"
application is nevertheless  subject to having informal objections filed against
it. If the FCC grants an assignment or transfer application,  interested parties
have   approximately   30  days  from  public   notice  of  the  grant  to  seek
reconsideration  of that  grant.  Generally,  parties  that do not file  initial
petitions to deny or informal  objections  against the  application  face a high
hurdle  in  seeking   reconsideration   of  the  grant.  The  FCC  normally  has
approximately  an  additional 10 days to set aside such grant on its own motion.
When passing on an  assignment  or transfer  application,  the FCC is prohibited
from considering whether the public interest might be served by an assignment or
transfer to any party other than the  assignee or  transferee  specified  in the
application.

   The FCC generally  applies its ownership limits to  "attributable"  interests
held by an individual,  corporation,  partnership or other  association.  In the
case of corporations  holding, or through  subsidiaries  controlling,  broadcast
licenses,  the  interests  of  officers,  directors  and those who,  directly or
indirectly, have the right to vote 5% or more of the corporation's stock (or 10%
or more of such stock in the case of insurance  companies,  investment companies
and  bank  trust   departments   that  are  passive   investors)  are  generally
attributable, except that, in general, no minority voting stock interest will be
attributable  if there is a single  holder of more  than 50% of the  outstanding
voting power of the  corporation.  The FCC has a pending  rulemaking  proceeding
that,  among other  things,  seeks  comment on whether the FCC should modify its
attribution  rules by, among other  things,  (i) raising the  attribution  stock
benchmark  from 5% to 10%;  (ii) raising the  attribution  stock  benchmark  for
passive  investors from 10% to 20%; (iii)  restricting  the  availability of the
single majority  shareholder  exemption;  and (iv) attributing certain interests
such as  non-voting  stock,  debt and  certain  holdings  by  limited  liability
corporations  in certain  circumstances.  More  recently,  the FCC has solicited
comment on  proposed  rules that  would (i) treat an

                                       14






otherwise   nonattributable  equity  or  debt  interest  in  a  licensee  as  an
attributable  interest  where the interest  holder is a program  supplier or the
owner of a  broadcast  station in the same  market and the  equity  and/or  debt
holding is  greater  than a  specified  benchmark;  (ii)  treat a licensee  of a
television  station  which,  under an LMA,  brokers more than 15% of the time on
another  television  station serving the same market,  as having an attributable
interest in the brokered station; and (iii) in certain circumstances,  treat the
licensee of a broadcast  station that sells  advertising time on another station
in the same market pursuant to a JSA as having an  attributable  interest in the
station whose advertising is being sold.


   The  Controlling  Stockholders  hold  attributable  interests in two entities
owning media properties,  namely:  Channel 63, Inc.,  licensee of WIIB-TV, a UHF
television station in Bloomington,  Indiana, and Bay Television,  Inc., licensee
of WTTA-TV,  a UHF television  station in St.  Petersburg,  Florida.  All of the
issued and  outstanding  shares of Channel 63, Inc. are owned by the Controlling
Stockholders.  All the issued and outstanding shares of Bay Television, Inc. are
owned by the  Controlling  Stockholders  (75%) and Robert L.  Simmons  (25%),  a
former stockholder of the Company.  The Controlling  Stockholders have agreed to
divest their attributable interests in Channel 63, Inc. and the Company believes
that, after doing so, such holdings will not materially  restrict its ability to
acquire or program additional broadcast stations.


   Under its  "cross-interest"  policy,  the FCC considers certain  "meaningful"
relationships  among  competing  media  outlets in the same market,  even if the
ownership  rules do not  specifically  prohibit  the  relationship.  Under  this
policy,  the FCC may consider  significant  equity  interests  combined  with an
attributable interest in a media outlet in the same market, joint ventures,  and
common key  employees  among  competitors.  The  cross-interest  policy does not
necessarily prohibit all of these interests,  but requires that the FCC consider
whether,  in  a  particular  market,  the  "meaningful"   relationships  between
competitors  could have a significant  adverse effect upon economic  competition
and program  diversity.  Heretofore,  the FCC has not applied its cross-interest
policy to LMAs and JSAs between broadcast  stations.  In its ongoing  rulemaking
proceeding  concerning  the  attribution  rules,  the FCC has sought comment on,
among other things, (i) whether the cross-interest policy should be applied only
in smaller markets, and (ii) whether non-equity financial  relationships such as
debt, when combined with multiple business  interrelationships  such as LMAs and
JSAs,  raise concerns under the  cross-interest  policy.  Moreover,  in its most
recent proposals in its ongoing attribution rulemaking  proceeding,  the FCC has
proposed  treating  television  LMAs,  JSAs,  and debt or  equity  interests  as
attributable   interests  in  certain   circumstances   without  regard  to  the
cross-interest policy.

   The  Communications  Act prohibits the issuance of broadcast  licenses to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the  capital  stock is owned of record or voted by  non-U.S.  citizens  or their
representatives  or by a foreign government or a representative  thereof,  or by
any corporation  organized  under the laws of a foreign  country  (collectively,
"Aliens"). The Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast  license by, any corporation  directly
or indirectly  controlled by any other corporation of which more than 25% of the
capital  stock is owned of  record  or voted by  Aliens.  The  Company  has been
advised that the FCC staff has  interpreted  this provision to require a finding
that such grant or holding  would be in the public  interest  before a broadcast
license may be granted to or held by any such corporation and that the FCC staff
has made  such a  finding  only in  limited  circumstances.  The FCC has  issued
interpretations  of existing law under which these restrictions in modified form
apply to other forms of business  organizations,  including  partnerships.  As a
result of these provisions,  the licenses granted to subsidiaries of the Company
by the FCC could be rescinded if, among other  restrictions  imposed by the FCC,
more than 25% of the Company's stock were owned or voted by Aliens.  The Company
and the subsidiaries are domestic corporations, and the Controlling Stockholders
are  all  United  States  citizens.   The  Amended  and  Restated   Articles  of
Incorporation of the Company (the "Amended Certificate") contains limitations on
Alien ownership and control that are substantially similar to those contained in
the Communications Act. Pursuant to the Amended Certificate, the Company has the
right to repurchase  Alien-owned shares at their fair market value to the extent
necessary,  in the judgment of the Board of Directors,  to comply with the Alien
ownership restrictions. 


                                       15





TELEVISION
- ----------

   National  Ownership  Rule.  Prior  to  the  1996  Act,  FCC  rules  generally
prohibited an individual or entity from having an attributable  interest in more
than 12 television stations nationwide,  or in television stations reaching more
than 25% of the national television viewing audience.  Pursuant to the 1996 Act,
the FCC has  modified  its rules to eliminate  any  limitation  on the number of
television  stations an individual or entity may own nationwide,  subject to the
restriction  that no individual or entity may have an  attributable  interest in
television  stations reaching more than 35% of the national  television  viewing
audience.  Historically, VHF stations have shared a larger portion of the market
than UHF stations.  Therefore, only half of the households in the market area of
any UHF station are included  when  calculating  whether an entity or individual
owns  television  stations  reaching  more than 35% of the  national  television
viewing  audience.  All but  three of the  stations  owned and  operated  by the
Company, or to which the Company provides programming services, are UHF.


   Duopoly Rule.  On a local level,  the  television  "duopoly"  rule  generally
prohibits a single individual or entity from having an attributable  interest in
two or more television  stations with overlapping  Grade B service areas.  While
the 1996 Act has not  eliminated  the TV duopoly rule, it does direct the FCC to
initiate a rulemaking  proceeding  to determine  whether to retain,  modify,  or
eliminate the rule. The FCC has pending a rulemaking  proceeding in which it has
proposed to modify the television duopoly rule to permit the common ownership of
television stations in different DMAs, so long as the Grade A signal contours of
the stations do not overlap.  Pending  resolution of its rulemaking  proceeding,
the FCC has adopted an interim  waiver policy that permits the common  ownership
of  television  stations in different  DMAs with no  overlapping  Grade A signal
contours, conditioned on the final outcome of the rulemaking proceeding. The FCC
has also sought comment on whether common  ownership of two television  stations
in a market  should be  permitted  (i) where one or more of the  commonly  owned
stations is UHF, (ii) where one of the stations is in bankruptcy or has been off
the air for a  substantial  period of time and (iii)  where the  commonly  owned
stations have very small audience or advertising  shares,  are located in a very
large  market,  and/or a specified  number of  independently  owned media voices
would remain after the acquisition. 

   Local Marketing  Agreements.  Over the past few years, a number of television
stations,  including certain of the Company's  stations,  have entered into what
have commonly been referred to as LMAs.  While these agreements may take varying
forms,  pursuant to a typical  LMA,  separately  owned and  licensed  television
stations agree to enter into cooperative  arrangements of varying sorts, subject
to compliance  with the  requirements of antitrust laws and with the FCC's rules
and policies. Under these types of arrangements, separately-owned stations could
agree to function  cooperatively  in terms of  programming,  advertising  sales,
etc.,  subject  to the  requirement  that the  licensee  of each  station  shall
maintain  independent  control over the  programming  and  operations of its own
station.  One  typical  type  of  LMA is a  programming  agreement  between  two
separately-owned  television stations serving a common service area, whereby the
licensee of one station  programs  substantial  portions of the broadcast day on
the other licensee's  station,  subject to ultimate editorial and other controls
being exercised by the latter licensee,  and sells  advertising time during such
program  segments.  Such  arrangements  are an extension of the concept of "time
brokerage" agreements,  under which a licensee of a station sells blocks of time
on its  station to an entity or  entities  which  program the blocks of time and
which  sell  their own  commercial  advertising  announcements  during  the time
periods in question.  Over the past few years, the staff of the FCC's Mass Media
Bureau has held that LMAs are not contrary to the  Communications  Act, provided
that the  licensee of the station  which is being  substantially  programmed  by
another  entity  maintains   complete   responsibility   for  and  control  over
programming and operations of its broadcast station and assures  compliance with
applicable FCC rules and policies.

   At present,  FCC rules permit television  station LMAs, and the licensee of a
television   station  brokering  time  on  another  television  station  is  not
considered to have an attributable interest in the brokered station. However, in
connection  with its ongoing  rulemaking  proceeding  regarding  the  television
duopoly rule, the FCC has proposed to adopt rules providing that the licensee of
a  television  station  which  brokers  more  than  15% of the  time on  another
television  station  serving  the  same  market  would  be  deemed  to  have  an
attributable  interest in the brokered  station for purposes of the national and
local multiple ownership rules.

                                       16






   The 1996 Act provides  that nothing  therein  "shall be construed to prohibit
the  origination,  continuation,  or renewal of any television  local  marketing
agreement  that  is in  compliance  with  the  regulations  of the  [FCC]."  The
legislative history of the 1996 Act reflects that this provision was intended to
grandfather  television  LMAs that were in existence  upon enactment of the 1996
Act, and to allow  television LMAs consistent with the FCC's rules subsequent to
enactment of the 1996 Act. In its pending  rulemaking  proceeding  regarding the
television  duopoly rule, the FCC has proposed to adopt a grandfathering  policy
providing that, in the event that television LMAs become attributable interests,
LMAs that are in  compliance  with  existing  FCC rules  and  policies  and were
entered  into before  November 5, 1996,  would be permitted to continue in force
until the original term of the LMA expires. Under the FCC's proposal, television
LMAs that are entered  into or renewed  after  November 5, 1996 would have to be
terminated  if LMAs  are made  attributable  interests  and the LMA in  question
resulted  in a  violation  of  the  television  multiple  ownership  rules.  The
Company's LMAs with television stations WPTT in Pittsburgh,  Pennsylvania,  WNUV
in Baltimore,  Maryland, WVTV in Milwaukee,  Wisconsin,  WRDC in Raleigh/Durham,
North Carolina,  WABM in Birmingham,  Alabama, and WDBB in Tuscaloosa,  Alabama,
were in  existence on both the date of enactment of the 1996 Act and November 5,
1996. The Company's LMAs with television  stations KDNL in St. Louis,  Missouri,
KOVR in Sacramento, California, WTTV and WTTK in Indianapolis,  Indiana, WLOS in
Asheville, North Carolina, WFBC in Greenville-Spartanburg,  South Carolina, KABB
in San  Antonio,  Texas,  and  KDSM  in Des  Moines,  Iowa,  were  entered  into
subsequent  to the date of  enactment  of the 1996 Act but prior to  November 5,
1996. The Company's LMA with television station KRRT in Kerrville,  Texas was in
existence  on the date of  enactment  of the 1996 Act,  but was  assumed  by the
Company subsequent to that date but prior to November 5, 1996.

   The TV duopoly  rule  currently  prevents  the  Company  from  acquiring  the
licenses of  television  stations  with which it has LMAs in those markets where
the Company owns a television  station.  As a result,  if the FCC were to decide
that the  provider of  programming  services  under a  television  LMA should be
treated as having an attributable  interest in the brokered  station,  and if it
did not relax its  television  duopoly  rule,  the Company  could be required to
modify or terminate  those of its LMAs that were not in existence on the date of
enactment of the 1996 Act or on November 5, 1996. Furthermore, if the FCC adopts
its present proposal with respect to the  grandfathering of television LMAs, the
Company could be required to terminate even those LMAs that were in effect prior
to the date of enactment of the 1996 Act or prior to November 5, 1996, after the
initial  term of the LMA or upon  assignment  of the LMA. In such an event,  the
Company  could be required to pay  termination  penalties  under certain of such
LMAs.  Further, if the FCC were to find, in connection with any of the Company's
LMAs, that the  owners/licensees of the stations with which the Company has LMAs
failed to maintain  control over their  operations  as required by FCC rules and
policies,  the licensee of the LMA station  and/or the Company could be fined or
set for hearing,  the outcome of which could be a monetary  forfeiture or, under
certain circumstances, loss of the applicable FCC license. The Company is unable
to predict the ultimate  outcome of possible  changes to these FCC rules and the
impact such FCC rules may have on its broadcasting operations.

   On June 1, 1995,  the Chief of the FCC's Mass Media Bureau  released a Public
Notice   concerning  the  processing  of  television   assignment  and  transfer
applications  proposing  LMAs.  Due to the  pendency of the  ongoing  rulemaking
proceeding concerning attribution of ownership, the Mass Media Bureau has placed
certain  restrictions  on  the  types  of  television  assignment  and  transfer
applications  involving  LMAs that it will  approve  during the  pendency of the
rulemaking.  Specifically,  the Mass Media  Bureau  has stated  that it will not
approve  arrangements where a time broker seeks to finance a station acquisition
and hold an option to purchase the station in the future.  The Company  believes
that none of the  Company's  LMAs or TBAs fall  within the ambit of this  Public
Notice. 

RADIO

   National  Ownership  Rule.  Prior to the 1996 Act, the FCC's rules limited an
individual or entity from holding attributable  interests in more than 20 AM and
20 FM radio stations nationwide.  Pursuant to the 1996 Act, the FCC has modified
its rules to eliminate any  limitation on the number of radio  stations a single
individual or entity may own nationwide.

                                       17





   Local  Ownership  Rule.  Prior to the 1996  Act,  the FCC's  rules  generally
permitted an individual or entity to hold attributable interests in no more than
four radio stations in a local market (no more than two of which could be in the
same service (AM or FM)),  and then only if the aggregate  audience share of the
commonly  owned  stations  did not exceed  25%.  In  markets  with fewer than 15
commercial  radio  stations,  an individual or entity could hold an attributable
interest in no more than three radio stations in the market (no more than two of
which could be in the same service), and then only if the number of the commonly
owned  stations  did not  exceed  50% of the total  number of  commercial  radio
stations in the market.


   Pursuant  to the 1996 Act,  the  limits on the number of radio  stations  one
entity may own locally have been  increased as follows:  (i) in a market with 45
or more  commercial  radio  stations,  an entity may own up to eight  commercial
radio stations,  not more than five of which are in the same service (AM or FM);
(ii) in a market with between 30 and 44 (inclusive)  commercial  radio stations,
an entity may own up to seven commercial  radio stations,  not more than four of
which  are in the  same  service;  (iii)  in a  market  with  between  15 and 29
(inclusive)  commercial  radio stations,  an entity may own up to six commercial
radio stations, not more than four of which are in the same service; and (iv) in
a market with 14 or fewer  commercial  radio  stations,  an entity may own up to
five  commercial  radio  stations,  not more than three of which are in the same
service, except that an entity may not own more than 50% of the stations in such
market.  These numerical limits apply regardless of the aggregate audience share
of the stations  sought to be commonly  owned.  FCC ownership  rules continue to
permit an entity to own one FM and one AM station in a local  market  regardless
of market size.  Irrespective of FCC rules governing radio  ownership,  however,
the Department of Justice and the Federal Trade Commission have the authority to
determine,  and in certain recent radio  transactions  not involving the Company
have determined, that a particular transaction presents antitrust concerns. 

   Local Marketing Agreements. As in television, a number of radio stations have
entered into LMAs. The Company has entered into LMAs with certain radio stations
in connection with the River City Acquisition.

   The FCC's multiple ownership rules specifically  permit radio station LMAs to
be entered into and implemented, so long as the licensee of the station which is
being programmed under the LMA maintains complete responsibility for and control
over programming and operations of its broadcast station and assures  compliance
with  applicable  FCC rules  and  policies.  For the  purposes  of the  multiple
ownership rules, in general, a radio station being programmed pursuant to an LMA
by an entity is not considered an attributable ownership interest of that entity
unless that entity already owns a radio station in the same market.  However,  a
licensee that owns a radio station in a market, and brokers more than 15% of the
time on another  station  serving  the same  market,  is  considered  to have an
attributable  ownership  interest in the  brokered  station for  purposes of the
FCC's multiple  ownership  rules. As a result,  in a market in which the Company
owns a radio  station,  the Company  would not be permitted to enter into an LMA
with  another  local  radio  station  which it could  not own  under  the  local
ownership rules, unless the Company's programming constituted 15% or less of the
other local station's  programming  time on a weekly basis. The FCC's rules also
prohibit a broadcast licensee from simulcasting more than 25% of its programming
on another station in the same broadcast service (i.e.,  AM-AM or FM-FM) through
a time brokerage or LMA  arrangement  where the brokered and brokering  stations
serve substantially the same area.

   Joint  Sales  Agreements.  Over the past few  years,  a number of radio  (and
television) stations have entered into cooperative  arrangements  commonly known
as joint sales  agreements,  or JSAs.  While these  agreements  may take varying
forms,  under the typical JSA, a station licensee obtains,  for a fee, the right
to sell  substantially all of the commercial  advertising on a  separately-owned
and  licensed  station in the same  market.  The  typical  JSA also  customarily
involves the provision by the selling licensee of certain sales, accounting, and
"back  office"  services to the station  whose  advertising  is being sold.  The
typical JSA is distinct  from an LMA in that a JSA (unlike an LMA) normally does
not involve  programming.  In connection  with the River City  Acquisition,  the
Company has assumed River City's rights under JSAs with three radio stations.

                                       18






   The FCC has determined that issues of joint  advertising sales should be left
to  enforcement  by antitrust  authorities,  and  therefore  does not  generally
regulate joint sales practices between stations. Currently, stations for which a
licensee  sells time  under a JSA are not  deemed by the FCC to be  attributable
interests of that licensee.  However,  in connection with its ongoing rulemaking
proceeding concerning the attribution rules, the FCC is considering whether JSAs
should be  considered  attributable  interests  or within the scope of the FCC's
cross-interest policy,  particularly when JSAs contain provisions for the supply
of programming services and/or other elements typically associated with LMAs. If
JSAs become attributable  interests as a result of changes in the FCC rules, the
Company may be required to terminate  any JSA it might have with a radio station
which the Company could not own under the FCC's multiple ownership rules.


OTHER OWNERSHIP MATTERS
- -----------------------

   There   remain  in  place   after  the  1996  Act  a  number  of   additional
cross-ownership rules and prohibitions pertaining to licensees of television and
radio stations. FCC rules, the Communications Act, or both generally prohibit an
individual or entity from having an  attributable  interest in both a television
station and a radio station,  a daily newspaper,  or a cable  television  system
that is located in or serves the same market area.

   Antitrust  Regulation.The   Department  of  Justice  and  the  Federal  Trade
Commission  have recently  increased  their scrutiny of the television and radio
industry,  and have indicated  their  intention to review matters related to the
concentration  of ownership  within markets  (including LMAs and JSAs) even when
the ownership or LMA or JSA in question is permitted under the laws administered
by the FCC or by FCC rules and regulations.

   Radio/Television    Cross-Ownership   Rule.   The   FCC's    radio/television
cross-ownership  rule (the "one to a market" rule) generally  prohibits a single
individual  or entity  from  having an  attributable  interest  in a  television
station and a radio station serving the same market.  However, in each of the 25
largest local markets in the United States,  provided that there are at least 30
separately owned stations in the particular  market,  the FCC has  traditionally
employed a policy that presumptively  allows waivers of the one to a market rule
to permit  the  common  ownership  of one AM,  one FM and one TV  station in the
market. The 1996 Act directs the FCC to extend this policy to each of the top 50
markets.  Moreover,  the FCC has pending a rulemaking proceeding in which it has
solicited  comment  on whether  the one to a market  rule  should be  eliminated
altogether.

   However,  the FCC does not  apply  its  presumptive  waiver  policy  in cases
involving the common ownership of one television station,  and two or more radio
stations in the same service (AM or FM), in the same market. Pending its ongoing
rulemaking  proceeding to reexamine the one to a market rule, the FCC has stated
that it will consider  waivers of the rule in such  instances on a  case-by-case
basis,  considering  (i) the public  service  benefits  that will arise from the
joint operation of the facilities  such as economies of scale,  cost savings and
programming and service benefits;  (ii) the types of facilities involved;  (iii)
the number of media outlets owned by the applicant in the relevant market;  (iv)
the financial  difficulties of the stations involved;  and (v) the nature of the
relevant  market in light of the level of competition  and diversity after joint
operation  is  implemented.  The FCC has stated  that it  expects  that any such
waivers that are granted will be  conditioned  on the outcome of the  rulemaking
proceeding.  The Company has applied for such a waiver with respect to ownership
of a television  station and radio  stations in the St. Louis market,  and there
can  be  no   assurance   that  this   waiver   will  be   granted.

   In its ongoing  rulemaking  proceeding to reexamine the one to a market rule,
the FCC has proposed the  following  options for modifying the rule in the event
it is not  eliminated:  (i)  extending  the  presumptive  waiver  policy  to any
television  market in which a specified  number of  independently  owned  voices
would  remain after  common  ownership  of a television  station and one or more
radio stations is effectuated;  (ii) extending the presumptive  waiver policy to
entities  that seek to own more than one FM and/or one AM radio  station;  (iii)
reducing the minimum number of independently owned voices that must remain after
a transaction is effectuated;  and (iv) modifying the  five-factor  case-by-case
test for waivers. 

   Local Television/Cable  Cross-Ownership Rule. While the 1996 Act eliminates a
previous  statutory  prohibition  against the common  ownership  of a television
broadcast station and a cable system that

                                       19


serve the same local market,  the 1996 Act leaves the current FCC rule in place.
The  legislative  history of the Act indicates  that the repeal of the statutory
ban should not prejudge the outcome of any FCC review of the rule.

   Broadcast Network/Cable Cross-Ownership Rule. The 1996 Act directs the FCC to
eliminate  its  rules  which  formerly  prohibited  the  common  ownership  of a
broadcast  network and a cable  system,  subject to the  provision  that the FCC
revise its rules as  necessary  to ensure  carriage,  channel  positioning,  and
non-discriminatory  treatment  of  non-affiliated  broadcast  stations  by cable
systems  affiliated with a broadcast  network.  In March 1996, the FCC issued an
order implementing this legislative change.

   Broadcast/Daily  Newspaper Cross-Ownership Rule. The FCC's rules prohibit the
common  ownership  of a  radio  or  television  broadcast  station  and a  daily
newspaper  in the same  market.  The 1996 Act does not  eliminate or modify this
prohibition. In October 1996, however, the FCC initiated a rulemaking proceeding
to  determine  whether it should  liberalize  its waiver  policy with respect to
cross-ownership  of a daily newspaper and one or more radio stations in the same
market. 

   Dual  Network  Rule.  The 1996 Act  directs  the FCC to repeal its rule which
formerly  prohibited an entity from operating more than one television  network.
In March 1996, the FCC issued an order  implementing  this  legislative  change.
Under the modified  rule, a network entity is permitted to operate more than one
television  network,  provided,  however,  that ABC,  CBS,  NBC,  and/or Fox are
prohibited  from  merging  with each other or with  another  network  television
entity such as UPN or Warner Brothers.

   Expansion of the Company's broadcast  operations on both a local and national
level will continue to be subject to the FCC's  ownership  rules and any changes
the FCC or Congress  may adopt.  Concomitantly,  any further  relaxation  of the
FCC's  ownership  rules may increase the level of  competition in one or more of
the markets in which the Company's  stations are located,  more  specifically to
the extent that any of the Company's  competitors may have greater resources and
thereby be in a superior position to take advantage of such changes.

MUST-CARRY/RETRANSMISSION CONSENT

   Pursuant to the Cable Act of 1992,  television  broadcasters  are required to
make   triennial   elections  to  exercise   either  certain   "must-carry"   or
"retransmission  consent"  rights in  connection  with their  carriage  by cable
systems in each broadcaster's local market. By electing the must-carry rights, a
broadcaster  demands carriage on a specified channel on cable systems within its
Area of  Dominant  Influence,  in general as  defined  by the  Arbitron  1991-92
Television  Market Guide.  These must-carry  rights are not absolute,  and their
exercise is dependent on variables such as (i) the number of activated  channels
on a cable system;  (ii) the location and size of a cable system;  and (iii) the
amount of programming on a broadcast  station that duplicates the programming of
another broadcast station carried by the cable system. Therefore,  under certain
circumstances,   a  cable   system  may  decline  to  carry  a  given   station.
Alternatively,  if a  broadcaster  chooses to  exercise  retransmission  consent
rights,  it can prohibit  cable  systems  from  carrying its signal or grant the
appropriate  cable system the authority to retransmit the broadcast signal for a
fee or other  consideration.  In October 1996, the Company elected must-carry or
retransmission  consent  with  respect  to  each  of its  markets  based  on its
evaluation of the respective  markets and the position of the Company's  station
within  the  market.  The  Company's  stations  continue  to be  carried  on all
pertinent cable systems,  and the Company does not believe that its election has
resulted  in the  shifting  of its  stations  to less  desirable  cable  channel
locations. Certain of the Company's stations affiliated with Fox are required to
elect retransmission consent,  because Fox's retransmission consent negotiations
on  behalf of the  Company  resulted  in  agreements  which  extend  into  1998.
Therefore,  the Company will need to negotiate retransmission consent agreements
for these  Fox-affiliated  stations to attain  carriage on those  relevant cable
systems for the balance of this  triennial  period (i.e.,  through  December 31,
1999).  For  subsequent  elections  beginning  with the  election  to be made by
October 1, 1999, the must-carry  market will be the station's DMA, in general as
defined by the Nielsen DMA Market and Demographic Rank Report of the prior year.

   The must-carry rules have been subject to judicial  scrutiny.  In April 1993,
the United States District Court for the District of Columbia  summarily  upheld
the  constitutionality  of the legislative  must-carry  provisions under a First
Amendment challenge.  However, in June 1994, the Supreme Court remanded the case
to the  lower  court  with  instructions  to test the  constitutionality  of the
must-carry rules under an

                                       20





"intermediate  scrutiny"  standard.  In a decision  issued in December  1995,  a
closely  divided  three-judge  District Court panel ruled that the record showed
that there was substantial evidence before Congress from which it could draw the
reasonable  inferences  that (1) the must-carry  rules were necessary to protect
the local broadcast industry;  and (2) the burdens on cable systems with rapidly
increasing  channel  capacity  would be quite small.  Accordingly,  the District
Court panel ruled that Congress had not violated the First Amendment in enacting
the  "must-carry"  provisions.  The case is once again on appeal to the  Supreme
Court,  which heard oral  arguments in October 1996.  The Company cannot predict
the final  outcome of the Supreme  Court case or how it may affect the Company's
cable contracts.

SYNDICATED EXCLUSIVITY/TERRITORIAL EXCLUSIVITY


   The FCC has  imposed  syndicated  exclusivity  rules  and  expanded  existing
network  nonduplication  rules.  The  syndicated  exclusivity  rules allow local
broadcast   television  stations  to  demand  that  cable  operators  black  out
syndicated  non-network  programming carried on "distant signals" (i.e., signals
of broadcast stations,  including so-called  "superstations,"  which serve areas
substantially  removed from the cable  system's  local  community).  The network
non-duplication  rules allow local broadcast  network  television  affiliates to
require that cable operators black out duplicating  network  programming carried
on distant signals. However, in a number of markets in which the Company owns or
programs stations  affiliated with a network,  a station that is affiliated with
the same network in a nearby market is carried on cable systems in the Company's
market.  This is not in violation  of the FCC's  syndicated  exclusivity  rules.
However,  the  carriage of two network  stations on the same cable  system could
result in a decline  of  viewership  adversely  affecting  the  revenues  of the
Company owned or programmed station.


RESTRICTIONS ON BROADCAST ADVERTISING

   Advertising  of cigarettes  and certain  other tobacco  products on broadcast
stations has been banned for many years. Various states restrict the advertising
of  alcoholic  beverages.   Congressional   committees  have  recently  examined
legislation  proposals which may eliminate or severely  restrict the advertising
of beer and wine. Although no prediction can be made as to whether any or all of
the present  proposals will be enacted into law, the elimination of all beer and
wine advertising would have an adverse effect upon the revenues of the Company's
stations,  as well as the revenues of other  stations  which carry beer and wine
advertising.


   The FCC has imposed  commercial  time  limitations  in children's  television
programming pursuant to legislation. In television programs designed for viewing
by  children  of 12 years of age and under,  commercial  matter is limited to 12
minutes per hour on weekdays and 10.5 minutes per hour on weekends.  In granting
renewal of the  license  for  WBFF-TV,  the FCC imposed a fine of $10,000 on the
Company alleging that the station had exceeded these limitations. 

   The  Communications  Act  and  FCC  rules  also  place  restrictions  on  the
broadcasting  of  advertisements  by legally  qualified  candidates for elective
office.  Among other things, (i) stations must provide  "reasonable  access" for
the purchase of time by legally  qualified  candidates for federal office;  (ii)
stations  must provide  "equal  opportunities"  for the  purchase of  equivalent
amounts  of  comparable  broadcast  time by  opposing  candidates  for the  same
elective  office;  and (iii)  during the 45 days  preceding a primary or primary
run-off election and during the 60 days preceding a general or special election,
legally qualified candidates for elective office may be charged no more than the
station's  "lowest unit charge" for the same class of  advertisement,  length of
advertisement, and daypart.

PROGRAMMING AND OPERATION

   General.  The Communications  Act requires  broadcasters to serve the "public
interest."  The FCC  gradually  has  relaxed  or  eliminated  many  of the  more
formalized  procedures  it had developed in the past to promote the broadcast of
certain types of programming responsive to the needs of a station's community of
license. FCC licensees continue to be required,  however, to present programming
that  is  responsive  to  community  issues,  and to  maintain  certain  records
demonstrating  such   responsiveness.   Complaints  from  viewers  concerning  a
station's  programming  often will be  considered  by the FCC when it  evaluates
renewal applications of a licensee, although such complaints may be filed at any
time and

                                       21





generally  may be  considered  by the FCC at any  time.  Stations  also must pay
regulatory and application  fees, and follow various rules promulgated under the
Communications  Act that regulate,  among other things,  political  advertising,
sponsorship  identifications,  the  advertisement  of  contests  and  lotteries,
obscene and indecent broadcasts,  and technical operations,  including limits on
radiofrequency  radiation.  In addition,  licensees  must develop and  implement
affirmative action programs designed to promote equal employment  opportunities,
and must submit  reports to the FCC with  respect to these  matters on an annual
basis and in connection with a renewal application.  Failure to observe these or
other rules and  policies  can result in the  imposition  of various  sanctions,
including monetary  forfeitures,  or the grant of a "short" (i.e., less than the
full) renewal term or, for particularly  egregious  violations,  the denial of a
license renewal application or the revocation of a license.


   Children's Television  Programming.  Pursuant to legislation enacted in 1991,
all  television  stations  have  been  required  to  broadcast  some  television
programming designed to meet the educational and informational needs of children
16 years of age and under.  In August  1996,  the FCC adopted new rules  setting
forth more stringent children's programming  requirements.  Specifically,  as of
September 1, 1997,  television  stations will be required to broadcast a minimum
of three hours per week of "core" children's educational programming,  which the
FCC  defines  as  programming   that  (i)  has  serving  the   educational   and
informational  needs of  children  16 years  of age and  under as a  significant
purpose;  (ii) is  regularly  scheduled,  weekly  and at  least  30  minutes  in
duration;  and (iii) is aired  between  the hours of 7:00  a.m.  and 10:00  p.m.
Furthermore,  since January 2, 1997, "core" children's  educational programs, in
order to qualify as such,  are  required to be  identified  as  educational  and
informational  programs  over the air at the time  they are  broadcast,  and are
required to be identified in the children's  programming  reports required to be
placed in stations'  public  inspection  files.  Additionally,  since January 2,
1997,  television  stations  are  required to identify  and provide  information
concerning  "core"  children's  programming  to publishers of program guides and
listings.

   Television Violence. The 1996 Act contains a number of provisions relating to
television  violence.  First,  pursuant to the 1996 Act, the television industry
has  developed  a ratings  system,  and the FCC has  recently  solicited  public
comment on that system.  Furthermore,  the 1996 Act provides that all television
sets larger than 13 inches that are manufactured one year after enactment of the
1996 Act must  include  the  so-called  "V-chip,"  a computer  chip that  allows
blocking of rated  programming.  In  addition,  the 1996 Act  requires  that all
television  license  renewal  applications  filed  after  May  1,  1995  contain
summaries of written  comments and suggestions  received by the station from the
public regarding violent programming.

   Closed  Captioning.  The 1996 Act directs  the FCC to adopt  rules  requiring
closed  captioning  of  all  broadcast  television  programming,   except  where
captioning would be "economically burdensome." The FCC has recently instituted a
rulemaking proceeding to implement such rules.


PROPOSED CHANGES


   The  Congress  and the FCC have  under  consideration,  and in the future may
consider and adopt, new laws,  regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly,  the operation,  ownership
and  profitability of the Company's  broadcast  stations,  result in the loss of
audience share and advertising  revenues for the Company's  broadcast  stations,
and affect the ability of the Company to acquire  additional  broadcast stations
or finance such  acquisitions.  In addition to the changes and proposed  changes
noted above,  such matters  include,  for example,  the license renewal process,
spectrum use fees, political  advertising rates,  potential  restrictions on the
advertising of certain products (beer, wine and hard liquor,  for example),  and
the rules and  policies to be applied in  enforcing  the FCC's equal  employment
opportunity regulations. Other matters that could affect the Company's broadcast
properties  include   technological   innovations  and  developments   generally
affecting competition in the mass communications  industry, such as direct radio
and television  broadcast  satellite  service,  the continued  establishment  of
wireless cable systems and low power television stations, digital television and
radio  technologies,  and the advent of telephone  company  participation in the
provision of video programming service.


                                       22





OTHER CONSIDERATIONS

   The  foregoing  summary does not purport to be a complete  discussion  of all
provisions  of the  Communications  Act or  other  congressional  acts or of the
regulations and policies of the FCC. For further  information,  reference should
be made to the Communications Act, other congressional acts, and regulations and
public  notices  promulgated  from time to time by the FCC. There are additional
regulations  and  policies  of the FCC and other  federal  agencies  that govern
political broadcasts, public affairs programming,  equal employment opportunity,
and other matters affecting the Company's business and operations.

ENVIRONMENTAL REGULATION


   Prior to the Company's  ownership or operation of its facilities,  substances
or  waste  that  are  or  might  be  considered   hazardous   under   applicable
environmental  laws may have been  generated,  used,  stored or  disposed  of at
certain of those facilities.  In addition,  environmental conditions relating to
the soil and groundwater at or under the Company's facilities may be affected by
the proximity of nearby properties that have generated, used, stored or disposed
of hazardous  substances.  As a result,  it is possible  that the Company  could
become subject to  environmental  liabilities  in the future in connection  with
these facilities under applicable  environmental laws and regulations.  Although
the  Company   believes  that  it  is  in  substantial   compliance   with  such
environmental  requirements,  and has not in the  past  been  required  to incur
significant  costs in connection  therewith,  there can be no assurance that the
Company's  costs to  comply  with such  requirements  will not  increase  in the
future.  The Company  presently  believes that none of its  properties  have any
condition  that is likely to have a  material  adverse  effect on the  Company's
financial condition or results of operations.

COMPETITION


   The Company's  television and radio  stations  compete for audience share and
advertising revenue with other television and radio stations in their respective
DMAs, as well as with other advertising  media,  such as newspapers,  magazines,
outdoor advertising,  transit advertising,  yellow page directories, direct mail
and local cable and wireless cable systems.  Some competitors are part of larger
organizations  with  substantially   greater  financial,   technical  and  other
resources than the Company.

   Television  Competition.  Competition in the television broadcasting industry
occurs  primarily in  individual  DMAs.  Generally,  a  television  broadcasting
station in one DMA does not compete with  stations in other DMAs.  The Company's
television stations are located in highly competitive DMAs. In addition, certain
of the Company's DMAs are overlapped by both  over-the-air and cable carriage of
stations in adjacent  DMAs,  which tends to spread  viewership  and  advertising
expenditures over a larger number of television stations.

   Broadcast television stations compete for advertising revenues primarily with
other broadcast television  stations,  radio stations and cable system operators
serving the same market.  Major Network  programming  generally  achieves higher
household  audience  levels  than Fox,  UPN and WB  programming  and  syndicated
programming  aired  by  independent  stations.  This  can  be  attributed  to  a
combination of factors, including the Major Networks' efforts to reach a broader
audience,  generally better signal carriage available when broadcasting over VHF
channels 2 through 13 versus  broadcasting  over UHF  channels 14 through 69 and
the higher number of hours of Major Network  programming being broadcast weekly.
However,  greater amounts of advertising time are available for sale during Fox,
UPN and WB programming and non-network syndicated  programming,  and as a result
the Company believes that the Company's  programming  typically achieves a share
of television market advertising revenues greater than its share of the market's
audience.

   Television  stations  compete for  audience  share  primarily on the basis of
program  popularity,  which has a direct effect on  advertising  rates.  A large
amount of the  Company's  prime time  programming  is  supplied  by Fox and to a
lesser extent UPN, WB, ABC and CBS. In those periods,  the Company's  affiliated
stations are totally dependent upon the performance of the networks'

                                       23





programs in attracting  viewers.  Non-network time periods are programmed by the
station primarily with syndicated  programs purchased for cash, cash and barter,
or barter-only,  and also through  self-produced  news, public affairs and other
entertainment programming.

   Television advertising rates are based upon factors which include the size of
the DMA in which the station operates,  a program's popularity among the viewers
that an advertiser  wishes to attract,  the number of advertisers  competing for
the available time, the demographic makeup of the DMA served by the station, the
availability of alternative  advertising  media in the DMA (including  radio and
cable),  the  aggressiveness  and  knowledge  of  sales  forces  in the  DMA and
development of projects,  features and programs that tie advertiser  messages to
programming.  The Company  believes  that its sales and  programming  strategies
allow it to compete effectively for advertising within its DMAs.


   Other  factors  that  are  material  to a  television  station's  competitive
position include signal coverage, local program acceptance, network affiliation,
audience  characteristics and assigned broadcast  frequency.  Historically,  the
Company's UHF broadcast  stations  have suffered a competitive  disadvantage  in
comparison   to  stations  with  VHF   broadcast   frequencies.   This  historic
disadvantage has gradually declined through (i) carriage on cable systems,  (ii)
improvement   in  television   receivers,   (iii)   improvement   in  television
transmitters, (iv) wider use of all channel antennae, (v) increased availability
of  programming,  and (vi) the  development of new networks such as Fox, UPN and
WB. 

   The broadcasting  industry is continuously  faced with technical  changes and
innovations, the popularity of competing entertainment and communications media,
changes in labor conditions, and governmental restrictions or actions of Federal
regulatory  bodies,  including  the FCC,  any of  which  could  possibly  have a
material  effect on a television  station's  operations  and profits.  There are
sources of video service other than conventional  television stations,  the most
common being cable  television,  which can increase  competition for a broadcast
television station by bringing into its market distant  broadcasting signals not
otherwise available to the station's audience,  serving as a distribution system
for national satellite-delivered programming and other non-broadcast programming
originated on a cable system and selling  advertising time to local advertisers.
Other  principal   sources  of  competition   include  home  video   exhibition,
direct-to-home broadcast satellite television ("DBS") entertainment services and
multichannel  multipoint  distribution services ("MMDS").  Moreover,  technology
advances and regulatory  changes  affecting  programming  delivery through fiber
optic telephone lines and video  compression  could lower entry barriers for new
video channels and encourage the development of increasingly specialized "niche"
programming.   The  1996  Act  permits  telephone  companies  to  provide  video
distribution  services via radio  communication,  on a common carrier basis,  as
"cable  systems"  or  as  "open  video  systems,"  each  pursuant  to  different
regulatory   schemes.   The  Company  is  unable  to  predict  the  effect  that
technological  and  regulatory  changes  will have on the  broadcast  television
industry and on the future  profitability  and value of a  particular  broadcast
television station.


   The FCC authorizes DBS services throughout the United States.  Currently, two
FCC  permitees,  DirecTV  and  United  States  Satellite  Broadcasting,  provide
subscription  DBS services via  high-power  communications  satellites and small
dish receivers,  and other companies provide  direct-to-home video service using
lower powered satellites and larger receivers. Additional companies are expected
to commence direct-to-home  operations in the near future. DBS and MMDS, as well
as other new technologies,  will further increase competition in the delivery of
video programming. 

   The Company  cannot  predict what other  matters  might be  considered in the
future,  nor can it judge in advance what impact, if any, the  implementation of
any of these proposals or changes might have on its business.


   The  Company  is  exploring  ways in  which it might  take  advantage  of new
technology,  including the delivery of  additional  content and services via the
broadcast spectrum.  There can be no assurance that any such efforts will result
in the development of technology or services that are  commercially  successful.


   The Company also competes for  programming,  which involves  negotiating with
national  program  distributors  or  syndicators  that sell  first-run and rerun
packages of programming.  The Company's stations compete for exclusive access to
those programs against in-market  broadcast  station  competitors for syndicated
products.  Cable  systems  generally  do not  compete  with local  stations  for
programming, al

                                       24





though various national cable networks from time to time have acquired  programs
that would have  otherwise  been offered to local  television  stations.  Public
broadcasting stations generally compete with commercial broadcasters for viewers
but not for advertising dollars.

   Historically, the cost of programming had increased because of an increase in
the number of new  Independent  stations and a shortage of quality  programming.
However,  the Company believes that over the past five years program prices have
stabilized and, in some instances, have declined as a result of recent increases
in the supply of programming and the failure of some Independent stations.

   The Company believes it competes favorably against other television  stations
because of its  management  skill and  experience,  the  ability of the  Company
historically  to generate  revenue  share greater than its audience  share,  the
network affiliations and its local program acceptance.  In addition, the Company
believes that it benefits from the operation of multiple  broadcast  properties,
affording  it  certain  nonquantifiable   economies  of  scale  and  competitive
advantages in the purchase of programming.

   Radio Competition.  Radio broadcasting is a highly competitive business,  and
each of the radio stations  operated by the Company  competes for audience share
and  advertising  revenue  directly with other radio  stations in its geographic
market,  as well as with other media,  including  television,  cable television,
newspapers,  magazines,  direct mail and  billboard  advertising.  The  audience
ratings and advertising  revenue of each of such stations are subject to change,
and any adverse  change in a  particular  market  could have a material  adverse
effect on the revenue of such radio stations  located in that market.  There can
be no assurance  that any one of the  Company's  radio  stations will be able to
maintain or increase its current audience ratings and radio advertising  revenue
market share.


   The Company will attempt to improve each radio station's competitive position
with promotional campaigns designed to enhance and reinforce its identities with
the  listening  public.  Extensive  market  research  is  conducted  in order to
identify specific  demographic  groups and design a programming format for those
groups.  The Company seeks to build a strong  listener base composed of specific
demographic  groups in each market, and thereby attract  advertisers  seeking to
reach  these  listeners.  Aside  from  building  its  stations'  identities  and
targeting its programming at specific  demographic  groups,  management believes
that the Company also obtains a competitive  advantage by operating duopolies or
multiple stations in the nation's larger mid-size markets.

   The radio broadcasting industry is also subject to competition from new media
technologies  that are being  developed or  introduced,  such as the delivery of
audio programming by cable television  systems and by digital audio broadcasting
("DAB").  DAB may provide a medium for the delivery by satellite or  terrestrial
means of multiple new audio programming formats to local and national audiences.
Historically,  the  radio  broadcasting  industry  has  grown  in terms of total
revenues  despite  the  introduction  of new  technologies  for the  delivery of
entertainment   and  information,   such  as  television   broadcasting,   cable
television,  audio tapes and compact disks. There can be no assurance,  however,
that the development or  introduction in the future of any new media  technology
will not have an adverse effect on the radio broadcast industry. 

EMPLOYEES


   As of December 31, 1996, the Company had approximately 2,359 employees.  With
the  exception  of certain of the  employees  of KOVR-TV,  KDNL-TV,  WBEN-AM and
WWL-AM,  none  of the  employees are  represented  by  labor  unions  under  any
collective  bargaining  agreement.  No  significant  labor  problems  have  been
experienced  by the  Company,  and  the  Company  considers  its  overall  labor
relations to be good.

ITEM 2. PROPERTIES

   Generally,  each of the  Company's  stations  has  facilities  consisting  of
offices,  studios and tower  sites.  Transmitter  and tower sites are located to
provide  maximum signal coverage of the stations'  markets.  The following table
generally  describes the Company's  principal  owned and leased real property in
each of its markets of operation:

                                       25









                                                                                                           APPROXIMATE
TELEVISION PROPERTIES                TYPE OF FACILITY AND USE                   OWNED OR LEASED(A)       SIZE (SQ. FEET)
- ----------------------  -------------------------------------------------- ---------------------------- ----------------
                                                                                               
Pittsburgh Market       Station Site for WPTT                              Owned                          30,000
                        Station Site for WPGH                              Leased (expires 10/01/2028)    25,500
                        Space on WPGH Tower Site                           Leased (expires 02/23/2039)    On site of station

Baltimore Market        Old WBFF Studio                                    Leased (month to month)         2,000
                        WBFF Studio and Company Offices                    Leased (expires 09/01/2011)    39,000
                        WBFF Parking Lot                                   Leased (month to month)           N/A
                        Space on Main WBFF Tower for Antenna               Leased (expires 04/01/2007)       N/A
                        Space on Main WBFF Tower for Transmission Disks    Leased (expires 04/01/2011)       N/A
                        Space on Main WBFF Tower for Receivers             Leased (expires 04/01/2012)       N/A
                        Space on Backup WBFF Tower for Antenna             Leased (expires 03/15/2000)       N/A

Milwaukee Market        WVTV Studio Site                                   Owned                          37,800
                        WVTV Transmitter Site Land                         Leased (expires 01/30/2030)       N/A
                        WVTV Transmitter Site Building                     Owned                           6,200
                        WCGV Studio Site                                   Owned                          22,296
                        WCGV Studio & Transmitter Site                     Leased (expires 12/31/2029)       N/A

Raleigh/Durham Mkt      WLFL/WRDC Studio Site                              Leased (expires 07/29/2021)    26,600
                        WLFL Tower Site Land                               Leased (expires 12/31/2018)     1,800

Columbus Market         WTTE Studio Site                                   Leased (expires 12/31/2002)    14,400
                        WTTE Office Space                                  Leased (expires 06/01/2003)     4,500
                        WTTE Tower Site                                    Leased (month to month)         1,000

Norfolk Market          WTVZ Studio Site                                   Leased (expires 07/31/2009)    15,000
                        Space on WHRD Tower                                Leased (expires 09/30/97)

Birmingham Market       WTTO Tower and Old WTTO Studio                     Owned                           9,500
                        WTTO Studio Site                                   Leased (expires 1/31/2016)      9,750
                        WABM Studio Site                                   Leased (expires 1/31/2016)      9,750

Flint/Saginaw/Bay
 City Market            WSMH Studio & Office Site                          Owned                          13,800
                        WSMH Sales Office Site                             Leased (month to month)           525
                        WSMH Transmitter Site                              Leased (expires 11/13/2004)

Tuscaloosa Market       WDBB Studio & Office Site                          Leased (month to month)         4,605
                        WDBB Transmitter Site                              Leased (month to month)           678

Kansas City Market      KSMO Studio & Office Site                          Leased (expires 02/28/2011)    10,867
                        KSMO Transmitter Site                              Leased (expires 07/12/2013)     1,250

Cincinnati Market       WSTR Studio & Office Site                          Owned                          14,800
                        WSTR Transmitter Site                              Owned                           6,600
                        W66AQ Translator                                   Leased (month to month)           N/A

Peoria Market           WYZZ Studio & Office Site                          Owned                           6,000
                        WYZZ Transmitter Site -- real property only        Leased (expires 12/01/2001)       600
                        WYZZ Transmitter Site -- tower, transmitter,       Owned                             N/A
                          building, & equipment                            
Oklahoma City
 Market                 KOCB Studio & Office Site                          Owned                          12,000
                        KOCB Transmitter Site                              Owned                        Included above

Lexington Market        WDKY Studio & Office Site                          Leased (expires 12/31/2010)    12,000
                        WDKY Transmitter Site                              Owned                           2,900

                                       26





                                                                                                           APPROXIMATE
TELEVISION PROPERTIES                TYPE OF FACILITY AND USE                   OWNED OR LEASED(A)       SIZE (SQ. FEET)
- ----------------------  -------------------------------------------------- ---------------------------- ----------------
                                                                                                   
Indianapolis Market     WTTV/WTTK Studio & Office Site (building)          Owned                            19,900
                        WTTV/WTTK Studio & Office Site (lot)               Owned                              18.5 acres
                        WTTV Transmitter Site                              Owned                             2,730
                        WTTK Transmitter Site                              Owned                               800
                        Bloomington microwave site                         Leased (expires 07/05/2077)         216

Sacramento Market       KOVR Studio & Office Site                          Owned                            42,600
                        KOVR Stockton Office Site                          Leased (expires 03/31/1999)       1,000
                        KOVR Transmitter Site                              50% Ownership                       N/A
                        KOVR Back-up Transmitter Site                      1/3 Ownership                       N/A
                        Mt. Oso Microwave Site                             Leased (month to month)             N/A
                        Volmer Peak Microwave Site                         Leased (expires 06/30/2000)         N/A
                        Downtown Sacramento Microwave Site                 Leased (expires 05/31/1999)         N/A
                        Elverta Microwave Site                             Leased (expires 07/31/1999)         N/A

San Antonio Market      KABB/KRRT Studio & Office Site                     Owned by KABB                    22,460
                        KABB/KRRT Transmitter building/tower               Owned                         1200/1200
                        KABB/KRRT Transmitter land                         Leased (expires 06/30/2007)      35.562 acres

Asheville/Spartanburg   WFBC/WLOS Studio & Office Site                     Owned by WLOS                    28,000
 Market                 WLOS Transmitter tower, building, land             Leased (expires 12/31/2001)         N/A
                        WFBC Transmitter Site                              Owned by WFBC                      45.6 acres
                        WFBC/WAXA studio                                   Owned                             6,000

St. Louis Market        KDNL Studio & Office (Lot)                         Owned                            53,550
                        KDNL Studio & Office (building)                    Owned                            41,372
                        KDNL Transmitter Site (2 buildings)                Owned                             1,600 & 1,330

Des Moines Market       KDSM Studio & Office Site                          Leased (expired)                 13,000
                        KDSM Transmitter building/tower                    Owned                             2,000
                        KDSM Transmitter land                              Leased (expires 11/08/2034)          40 Acres

                                                                                                  APPROXIMATE     
    RADIO PROPERTIES              TYPE OF FACILITY AND USE               OWNED OR LEASED(A)      SIZE (SQ. FEET)  
- -----------------------  ------------------------------------------ --------------------------- ----------------  
Buffalo Market          WWKB/WKSE Studio & Office Site                     Leased (expires 09/30/1998)       5,000
                        WWKB/WKSE Office Site                              Leased (expires 09/30/1998)       5,200
                        WBEN/WMJQ Studio & Office Site                     Leased (expires 12/31/1998)       7,750
                        WBEN Transmitter Site                              Owned                             1,024
                        WWKB Transmitter Site                              Owned                             2,600
                        WMJQ Transmitter Site                              Leased (expires 12/31/1998)         825
                        WKSE Transmitter Site                              Owned                             6,722

Memphis Market          WJCE/WRVR/WOGY Studio & Office Site                Leased (expires 12/02/98)        10,000
                        WJCE Transmitter Site                              Leased (expires 03/27/2035)       2,262
                        WRVR Transmitter Site                              Leased (expires 12/31/2003)         169
                        WOGY Transmitter Site (on 4.5 acres)               Owned                               340

New Orleans Market      WWL/WSMB/WLMG/KMEZ                                 Leased (expires 08/31/2002)      11,553
                        Studio & Office Site
                        WWL Transmitter Site                               Owned                             64.62 acres
                        WSMB Transmitter Site                              Owned                             3,600
                        WLMG Transmitter Site                              Leased (expires 10/27/2014)         N/A
                        KMEZ Transmitter Site                              Leased (expires 03/14/2001)         N/A

Nashville/Russellville  WLAC-AM/WLAC-FM/WJZC/Road Gang/IRN                 Leased (expires 06/30/1999)       18,800
  Market                Studio & Office Site
                        WLAC-AM Transmitter Site                           Owned                             27.69 acres
                        WLAC-FM Transmitter Site                           1/3 Owned (3-way ownership)       18.12 acres
                        WJZC Transmitter Site (land)                       Leased (expires 09/27/2019)         400
                        WJZC Transmitter Site (tower & building)           Owned                             1,324

                                       27




                                                                                                  APPROXIMATE
    RADIO PROPERTIES              TYPE OF FACILITY AND USE               OWNED OR LEASED(A)      SIZE (SQ. FEET)
- -----------------------  ------------------------------------------ --------------------------- ----------------
                                                                                              
Wilkes Barre/Scranton    WILK/WGBI/WGGY/WKRZ                        Leased (expires 12/31/1998)      14,000
 Market                  Studio & Office Site                       
                         WILK Transmitter Site                      Leased (expires 08/31/1999)       1,000
                         WGBI Transmitter Site                      Leased (expires 02/28/2000)       1,000
                         WGGY Transmitter Site                      Leased (expires 02/28/2000)         300
                         WKRZ Transmitter Site (bldg)               Owned                             4,052

St. Louis Market         KPNT/WVRV Studio & Office Site             Owned                             1,753
                         KPNT Transmitter Site                      Owned                              7450
                         WVRV Transmitter Site                      Owned                             7,278
                         WVRV back up building                      Owned                               240

Los Angeles Market       KBLA Studio & Office Site-building         Owned                             6,000
                         KBLA Transmitter Site - land               Owned                             3 acres



================

   (a) Lease expiration dates assume exercise of all renewal options of the
lessee.

   The Company believes that all of its properties,  both owned and leased,  are
generally in good operating condition,  subject to normal wear and tear, and are
suitable and adequate for the Company's current business operations.

ITEM 3. LEGAL PROCEEDINGS

   Lawsuits  and claims are filed  against the Company  from time to time in the
ordinary course of business.  Management,  after reviewing  developments to date
with legal counsel,  is of the opinion that the outcome of such matters will not
have a material adverse effect on the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   No matters were submitted to a vote of the Company's  stockholders during the
fourth quarter of 1996.


                                       28



                                   PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

   Effective  June 13,  1995,  the common  stock of the  Company  was listed for
trading on the Nasdaq stock market under the symbol SBGI.  The  following  table
sets forth for the periods indicated the high and low sales prices on the Nasdaq
stock market.


               1995                                  High      Low
               -----                               -------- ---------

              Second Quarter (from June 13).......  $29.00   $ 23.500
              Third Quarter.......................   31.00     27.375
              Fourth Quarter......................   27.75     16.250

               1996                                  High      Low
               ----                                -------- ---------

              First Quarter.......................  $26.50   $16.875
              Second Quarter......................   43.50    25.500
              Third Quarter.......................   46.50    36.125
              Fourth Quarter......................   43.75    23.000



   As of February 25, 1997,  there were  approximately 55 stockholders of record
of the common  stock of the  Company.  This number  does not include  beneficial
owners holding shares through nominee names.  Based on information  available to
it, the Company believes it has more than 1,500 beneficial owners of its Class A
Common Stock.


   The Company  generally  has not paid a dividend on its common  stock and does
not expect to pay dividends on its common stock in the foreseeable  future.  The
Bank Credit  Agreement and certain  subordinated  debt of the Company  generally
prohibit  the  Company  from paying  dividends  on its common  stock.  Under the
indentures  governing the Company's 10% Senior  Subordinated  Notes due 2003 and
the Company's 10% Senior  Subordinated  Notes due 2005 (the  "Indentures"),  the
Company is not  permitted to pay  dividends  on its common stock unless  certain
specified conditions are satisfied,  including that (i) no event of default then
exists under the Indentures or certain other  specified  agreements  relating to
indebtedness  of the Company and (ii) the Company,  after taking  account of the
dividend, is in compliance with certain net cash flow requirements  contained in
the Indentures. In addition, under certain senior unsecured debt of the Company,
the payment of dividends is not permissible during a default thereunder. 

ITEM 6. SELECTED FINANCIAL DATA

   The selected  consolidated  financial  data for the years ended  December 31,
1992,  1993,  1994,  1995 and 1996 have been derived from the Company's  audited
Consolidated Financial Statements. The Consolidated Financial Statements for the
years ended December 31, 1994, 1995 and 1996 are included elsewhere in this Form
10-K.

   The  information  below  should  be read in  conjunction  with  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
the Consolidated Financial Statements included elsewhere in this Form 10-K.


                                       29






                          STATEMENT OF OPERATIONS DATA
                  (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)




                                                                   YEARS ENDED DECEMBER 31,
                                                 -----------------------------------------------------------
                                                    1992        1993        1994        1995        1996
                                                 ---------- ----------- ------------ ---------- ------------

                                                                                 
Net broadcast revenues (a).....................  $ 61,081   $ 69,532    $118,611     $187,934   $  346,459
Barter revenues................................     8,805      6,892      10,743       18,200       32,029
                                                 ---------- ----------- ------------ ---------- ------------
Total revenues.................................    69,886     76,424     129,354      206,134      378,488
Operating expenses, excluding depreciation and
  amortization and special bonuses paid to
  executive officers...........................    32,993     32,295      50,545       80,446      167,765
Depreciation and amortization (b)..............    30,943     22,486      55,587       80,410      121,081
Amortization of deferred compensation .........        --         --          --           --          739
Special bonuses paid to executive officers ....        --     10,000       3,638           --           --
                                                 ---------- ----------- ------------ ---------- ------------
Broadcast operating income.....................     5,950     11,643      19,584       45,278       88,903
Interest  and  amortization  of  debt discount
  expense.....................................     12,997     12,852      25,418       39,253       84,314
Interest and other income......................     1,207      2,131       2,447        4,163        3,478
                                                 ---------- ----------- ------------ ---------- ------------
Income (loss) before provision (benefit) for
  income taxes and extraordinary items.........  $ (5,840)  $    922    $ (3,387)    $ 10,188   $    8,067
                                                 ========== =========== ============ ========== ============
Net income (loss)..............................  $ (4,651)  $ (7,945)   $ (2,740)    $     76   $    1,131
                                                 ========== =========== ============ ========== ============
Other Data:
 Broadcast cash flow (c).......................  $ 28,019   $ 37,498    $ 67,519     $111,124   $  189,216
 Broadcast cash flow margin (d)................     45.9%      53.9%       56.9%        59.1%        54.6%
 Operating cash flow (e).......................  $ 26,466   $ 35,406    $ 64,547     $105,750   $  180,272
 Operating cash flow margin (d)................     43.3%      50.9%       54.4%        56.3%        52.0%
 After tax cash flow (f).......................  $ 15,865   $ 23,725    $ 42,223     $ 65,460   $   92,500
 After tax cash flow margin (d)................     26.0%      34.1%       35.6%        34.8%        26.7%
 Program contract payments.....................  $ 10,427   $  8,723    $ 14,262     $ 19,938   $   30,451
 Capital expenditures..........................       426        528       2,352        1,702       12,609
 Corporate expense.............................     1,553      2,092       2,972        5,374        8,944

Per Share Data:
 After tax cash flow per share (g).............      0.55       0.82        1.46         2.03         2.47
 Net income (loss) per share before
  extraordinary items..........................     (0.16)        --       (0.09)        0.15         0.03
 Net income (loss) per common share............     (0.16)     (0.27)      (0.09)          --         0.03

Balance Sheet Data:
 Cash and cash equivalents.....................     1,823     18,036       2,446      112,450        2,341
 Total assets..................................   140,366    242,917     399,328      605,272    1,707,297
 Total debt (h) ...............................   110,659    224,646     346,270      418,171    1,288,147
 Total stockholders' equity (deficit)..........    (3,127)   (11,024)    (13,723)      96,374      237,253



(a) Net  broadcast  revenues  are defined as  broadcast  revenues  net of agency
    commissions.

(b) Depreciation  and  amortization  includes  amortization of program  contract
    costs and net realizable value adjustments, depreciation and amortization of
    property and equipment, and amortization of acquired intangible broadcasting
    assets and other assets including  amortization of deferred  financing costs
    and costs related to excess syndicated programming.

(c) "Broadcast  cash  flow"  is  defined  as  broadcast  operating  income  plus
    corporate expenses, special bonuses paid to executive officers, depreciation
    and amortization  (including film  amortization and amortization of deferred
    compensation  and excess  syndicated  programming),  less cash  payments for
    program  rights.  Cash program  payments  represent  cash  payments made for
    current programs payable and do not necessarily correspond to program usage.
    Special bonuses paid to executive officers are 

                                       30





    considered  non-recurring.  The Company has  presented  broadcast  cash flow
    data,  which the Company  believes are  comparable  to the data  provided by
    other  companies in the  industry,  because such data are commonly used as a
    measure of performance for broadcast companies. However, broadcast cash flow
    does not purport to  represent  cash  provided by  operating  activities  as
    reflected in the Company's  consolidated  statements of cash flows, is not a
    measure  of  financial   performance  under  generally  accepted  accounting
    principles  and should not be considered in isolation or as a substitute for
    measures of  performance  prepared in  accordance  with  generally  accepted
    accounting principles.

(d) "Broadcast  cash flow margin" is defined as  broadcast  cash flow divided by
    net broadcast revenues. "Operating cash flow margin" is defined as operating
    cash flow divided by net broadcast revenues. "After tax cash flow margin" is
    defined as after tax cash flow divided by net broadcast revenues.


(e) "Operating  cash  flow" is  defined as  broadcast  cash flow less  corporate
    expenses  and is a  commonly  used  measure  of  performance  for  broadcast
    companies.  Operating  cash flow does not purport to represent cash provided
    by  operating   activities  as  reflected  in  the  Company's   consolidated
    statements of cash flows,  is not a measure of financial  performance  under
    generally  accepted  accounting  principles  and should not be considered in
    isolation  or as a  substitute  for  measures  of  performance  prepared  in
    accordance with generally accepted accounting principles.


(f) "After tax cash flow" is defined as net income (loss)  before  extraordinary
    items plus  depreciation and amortization  (including film  amortization and
    amortization of deferred  compensation  and excess  syndicated  programming)
    plus  special  bonuses  paid to executive  officers,  less program  contract
    payments.  After  tax  cash  flow is  presented  here  not as a  measure  of
    operating  results  and does not  purport  to  represent  cash  provided  by
    operating  activities.  After  tax cash flow  should  not be  considered  in
    isolation  or as a  substitute  for  measures  of  performance  prepared  in
    accordance with generally accepted accounting principles.


(g) "After tax cash flow per share" is defined as after tax cash flow divided by
    weighted average common and common equivalent shares outstanding.


(h) "Total debt" is defined as long-term debt, net of unamortized discount,  and
    capital lease obligations,  including current portion thereof. In 1992 total
    debt included warrants outstanding which were redeemable outside the control
    of the Company. The warrants were purchased by the Company for $10.4 million
    in 1993.  Total debt as of December  31,  1993  included  $100.0  million in
    principal  amount of the  Company's 10% Senior  Subordinated  Notes due 2003
    (the "1993  Notes"),  the proceeds of which were held in escrow to provide a
    source of financing for acquisitions that were  subsequently  consummated in
    1994 utilizing  borrowings under the Bank Credit Agreement.  $100 million of
    the 1993 Notes was redeemed from the escrow in the first quarter of 1994.


                                       31





ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


INTRODUCTION
- ------------

   As of December 31, 1996,  the Company  owned and  operated or  programmed  28
television  stations  in  twenty  geographically  diverse  markets  and 21 radio
stations in seven geographically diverse markets in the United States.  Thirteen
of the television stations are owned and 15 are provided programming services by
the Company  through  LMAs.  The LMA  arrangements  for seven of these  stations
acquired in the River City acquisition will be terminated after FCC approval for
transfer of these  stations'  License  Assets is  obtained.  The Company owns 21
radio stations,  provides programming services to two radio stations pursuant to
LMAs, has pending  acquisitions of two radio stations (with both of which it has
JSAs), has a JSA with one additional radio station and has options to acquire an
additional  seven radio stations.  The LMA  arrangements for two remaining radio
stations  acquired  in the River City  Acquisition  will be  terminated  and the
License  Assets  will be  transferred  after FCC  approval  is  obtained,  which
approval  requires a waiver of FCC  cross-ownership  rules. In January 1997, the
Company entered into a purchase agreement to acquire the License and Non-License
Assets of KUPN,  a  television  station in Las Vegas,  Nevada for  approximately
$87.0 million.  The Company  anticipates the  consummation of the agreement upon
FCC approval in 1997.

   The  operating  revenues of the Company are derived  from local and  national
advertisers and, to a much lesser extent, from television network  compensation.
The  Company's  primary  operating  expenses  involved in owning,  operating  or
programming  the television  and radio  stations are  syndicated  program rights
fees, commissions on revenues, employee salaries,  news-gathering and promotion.
Amortization  and  depreciation of costs  associated with the acquisition of the
stations and interest  carrying  charges are significant  factors in determining
the Company's overall profitability.

   Set forth below are the principal types of broadcast revenues received by the
Company's stations for the periods indicated and the percentage  contribution of
each type to the Company's total gross broadcast revenues:

                               BROADCAST REVENUES
                               ------------------
                             (DOLLARS IN THOUSANDS)
                             ----------------------




                                              YEARS ENDED DECEMBER 31,
                            -----------------------------------------------------------
                                    1994                1995                1996
                            ------------------- ------------------- -------------------
                                                             
Local/regional
  advertising.............  $ 67,881    48.6%   $104,299    47.5%   $199,029    49.4%
National advertising .....    69,374    49.6%    113,678    51.7%    191,449    47.6%
Network compensation .....       302     0.2%        442     0.2%      3,907     1.0%
Political advertising ....     1,593     1.1%        197     0.1%      6,972     1.7%
Production................       696     0.5%      1,115     0.5%      1,142     0.3%
                            ---------- -------- ---------- -------- ---------- --------
Broadcast revenues........   139,846   100.0%    219,731   100.0%    402,499   100.0%
                                       ======              ======              ======  
Less: agency commissions .   (21,235)            (31,797)            (56,040)
                            ----------          ----------          ----------             
Broadcast revenues, net ..   118,611             187,934             346,459
Barter revenues...........    10,743              18,200              32,029
                            ----------          ----------          ----------          
Total revenues............  $129,354            $206,134            $378,488
                            ==========          ==========          ==========



   The Company's primary types of programming and their approximate  percentages
of 1996 net broadcast  revenues  were network  programming  (14.1%),  children's
programming  (7.4%) and other syndicated  programming  (56.7%).  Similarly,  the
Company's  three  largest   categories  of  advertising  and  their  approximate
percentages of 1996 net broadcast  revenues were automotive  (17.4%),  fast food
advertising  (9.2%) and movies (5.5%). No other advertising  category  accounted
for more than 5% of the Company's net broadcast  revenues in 1996. No individual
advertiser  accounted  for  more  than  5% of any of  the  Company's  individual
station's net broadcast revenues in 1996.

                                       32







   The following table sets forth certain  operating data of the Company for the
years ended December 31, 1994, 1995 and 1996:

                                 OPERATING DATA
                                 --------------
                             (DOLLARS IN THOUSANDS)
                             ----------------------




                                                                     YEARS ENDED DECEMBER 31,
                                                                 --------------------------------
                                                                    1994       1995       1996
                                                                 ---------- ---------- ----------
                                                                              
Net broadcast revenues.........................................  $118,611   $187,934   $346,459
Barter revenues................................................    10,743     18,200     32,029
                                                                 ---------- ---------- ----------
Total revenues.................................................   129,354    206,134    378,488
                                                                 ---------- ---------- ----------
Operating expenses, excluding depreciation and amortization
and special bonuses paid to executive officers.................    50,545     80,446    167,765
Depreciation and amortization..................................    55,587     80,410    118,038
Amortization of deferred compensation..........................        --         --        739
Amortization of excess syndicated programming..................        --         --      3,043
Special bonuses to executive officers..........................     3,638         --         --
                                                                 ---------- ---------- ----------
Broadcast operating income.....................................  $  19,584  $ 45,278   $ 88,903
                                                                 ========== ========== ==========

BROADCAST CASH FLOW (BCF) DATA:
Television BCF (a).............................................  $ 67,519   $111,124   $175,212
Radio BCF (a)..................................................        --         --     14,004
                                                                 ---------- ---------- ----------
Consolidated BCF (a)...........................................  $ 67,519   $111,124   $189,216
                                                                 ========== ========== ==========

Television BCF margin..........................................     56.9%      59.1%      56.7%
Radio BCF margin...............................................        --         --      37.3%
Consolidated BCF margin........................................     56.9%      59.1%      54.6%

OTHER DATA:
Operating cash flow (b)........................................  $ 64,547   $105,750   $180,272
Operating cash flow margin.....................................     54.4%      56.3%      52.0%
After tax cash flow (c)........................................  $ 42,223   $ 65,460   $ 92,500
After tax cash flow per share (d)..............................  $   1.46   $   2.03   $   2.47
Program contract payments......................................  $ 14,262   $ 19,938   $ 30,451
Corporate expense..............................................  $  2,972   $  5,374   $  8,944


- ----------
(a) "Broadcast  cash  flow"  is  defined  as  broadcast  operating  income  plus
    corporate expenses, special bonuses paid to executive officers, depreciation
    and amortization  (including film  amortization and amortization of deferred
    compensation  and excess  syndicated  programming),  less cash  payments for
    program contract rights.  Cash program payments represent cash payments made
    for current program  payables and do not  necessarily  correspond to program
    usage.  Special bonuses to executive  officers are considered  non-recurring
    expenses.  The company has  presented  broadcast  cash flow data,  which the
    Company  believes are comparable to the data provided by other  companies in
    the  industry,  because  such  data  are  commonly  used  as  a  measure  of
    performance for broadcast companies.  However,  broadcast cash flow does not
    purport to represent  cash provided by operating  activities as reflected in
    the Company's  consolidated  statements  of cash flows,  is not a measure of
    financial  performance under generally  accepted  accounting  principles and
    should not be  considered  in isolation  or as a substitute  for measures of
    performance  prepared  in  accordance  with  generally  accepted  accounting
    principles.

(b) "Operating  cash  flow" is  defined as  broadcast  cash flow less  corporate
    expenses  and is a  commonly  used  measure  of  performance  for  broadcast
    companies.  Operating  cash flow does not purport to represent cash provided
    by  operating   activities  as  reflected  in  the  Company's   consolidated
    statements of cash flows,  is not a measure of financial  performance  under
    generally  accepted  accounting  principles  and should not be considered in
    isolation  or as a  substitute  for  measures  of  performance  prepared  in
    accordance with generally accepted accounting principles.

(c) "After tax cash flow" is defined as net income (loss)  before  extraordinary
    items plus  depreciation and amortization  (including film  amortization and
    amortization of deferred  compensation and excess  syndicated  programming),
    plus  special  bonuses  paid to executive  officers  less  program  contract
    payments.  After  tax  cash  flow is  presented  here  not as a  measure  of
    operating  results  and does not  purport  to  represent  cash  provided  by
    operating  activities.  After  tax cash flow  should  not be  considered  in
    isolation  or as a  substitute  for  measures  of  performance  prepared  in
    accordance with generally accepted accounting principles.


(d) "After tax cash flow per share" is defined as after tax cash flow divided by
    weighted average common and common equivalent shares outstanding.

                                       33







RESULTS OF OPERATIONS
- ---------------------

YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------

   Total  revenues  increased to $378.5  million for the year ended December 31,
1996 from  $206.1  million  for the year  ended  December  31,  1995,  or 83.6%.
Excluding the effects of non-cash barter  transactions,  net broadcast  revenues
for the year ended  December  31,  1996  increased  by 84.4% over the year ended
December 31, 1995.  The increase in broadcast  revenues was primarily the result
of acquisitions and LMA transactions consummated by the Company in 1995 and 1996
(collectively,  the "Acquisitions").  For stations owned, operated or programmed
throughout 1995 and 1996,  television  broadcast  revenue grew 2.1% for the year
ended  December 31, 1996 when compared to the year ended  December 31, 1995. For
stations  owned,  operated or programmed  throughout  1994 and 1995,  television
broadcast  revenue grew 12.8% for the year ended December 31, 1995 when compared
to the year ended  December  31, 1994.  The  decrease in 1996 revenue  growth as
compared to 1995 revenue growth primarily  resulted from the loss in 1996 of the
Fox  affiliation  at  WTTO  in the  Birmingham  market,  the  loss  of  the  NBC
affiliation  at WRDC in the Raleigh  market and decreases in ratings at WCGV and
WNUV in the Milwaukee and Baltimore markets, respectively.

   Operating expenses excluding depreciation,  amortization of intangible assets
and  amortization of deferred  compensation  and excess  syndicated  programming
costs  increased  to $167.8  million for the year ended  December  31, 1996 from
$80.4  million for the year ended  December 31, 1995 or 108.7%.  The increase in
expenses  for the year ended  December  31,  1996 as  compared to the year ended
December 31, 1995 was largely  attributable to operating  costs  associated with
the Acquisitions, an increase in LMA fees resulting from LMA transactions and an
increase in corporate overhead expenses.

   Broadcast  operating  income  increased  to $88.9  million for the year ended
December 31, 1996,  from $45.3 million for the year ended  December 31, 1995, or
96.2%.  The increase in broadcast  operating  income for the year ended December
31,  1996 as  compared  to the  year  ended  December  31,  1995  was  primarily
attributable to the Acquisitions.

   Interest  expense  increased to $84.3 million for the year ended December 31,
1996 from $39.3  million for the year ended  December 31, 1995,  or 114.5%.  The
increase in interest  expense for the year ended December 31, 1996 was primarily
related to senior bank indebtedness incurred by the Company to finance the River
City Acquisition and other acquisitions.

   Interest  and other  income  decreased  to $3.5  million  for the year  ended
December  31, 1996 from $4.2 million for the year ended  December  31, 1995,  or
16.7%.  The decrease for the year ended  December 31, 1996 was  primarily due to
lower cash balances and related  interest  income  resulting  from cash payments
made in February 1996 when the Company made a $34.4 million payment  relating to
the WSMH  acquisition  and April 1996 when the company  made a $60 million  down
payment relating to the River City acquisition.  The decrease in interest income
was offset by an increase in other income resulting from the Acquisitions.

   For the reasons  described  above, net income for the year ended December 31,
1996 was $1.1 million or $0.03 per share  compared to net income of $5.0 million
or $0.15 per share for the year ended December 31, 1995 before the extraordinary
loss on early extinguishment of debt.

   Broadcast  cash flow  increased to $189.2 million for the year ended December
31, 1996 from $111.1 million for the year ended December 31, 1995, or 70.3%. The
increase in broadcast cash flow for the year ended December 31, 1996 as compared
to the year ended  December 31, 1995 primarily  resulted from the  Acquisitions.
For stations owned,  operated or programmed  throughout 1995 and 1996, broadcast
cash flow grew 1.3% for the year ended  December  31, 1996 when  compared to the
year ended  December  31,  1995.  For  stations  owned,  operated or  programmed
throughout  1994 and 1995,  broadcast  cash flow grew  23.7% for the year  ended
December  31,  1995 when  compared  to the year ended  December  31,  1994.  The
decrease in 1996  broadcast  cash flow growth as compared to 1995 broadcast cash
flow growth  primarily  resulted from the loss in 1996 of the Fox affiliation at
WTTO in the Birmingham  market,  the loss of the NBC  affiliation at WRDC in the
Raleigh  market and  decreases in ratings at WCGV and WNUV in the  Milwaukee and
Baltimore markets, respectively. The Company's broadcast

                                       34







cash flow margin  decreased  to 54.6% for the year ended  December 31, 1996 from
59.1% for the year  ended  December  31,  1995.  Excluding  the  effect of radio
station  broadcast  cash flow,  television  station  broadcast  cash flow margin
decreased to 56.7% for the year ended December 31, 1996 as compared to 59.1% for
the year ended  December 31, 1995.  The decrease in broadcast  cash flow margins
for the year ended  December 31, 1996 as compared to the year ended December 31,
1995   primarily   resulted  from  the  lower  margins  of  the  acquired  radio
broadcasting  assets and lower  margins of  certain of the  acquired  television
stations.  For stations owned,  operated or programmed throughout 1996 and 1995,
broadcast  cash flow  margins  were  unchanged  when  comparing  the years ended
December 31, 1996 and 1995. The Company  believes that margins of certain of the
acquired  stations  will  improve as operating  and  programming  synergies  are
implemented.

   Operating  cash flow  increased to $180.3 million for the year ended December
31, 1996 from $105.8 million for the year ended December 31, 1995, or 70.4%. The
increase in operating cash flow for the year ended December 31, 1996 as compared
to the  year  ended  December  31,  1995  resulted  from the  Acquisitions.  The
Company's  operating  cash flow  margin  decreased  to 52.0% for the year  ended
December 31, 1996 from 56.3% for the year ended  December 31, 1995. The decrease
in operating  cash flow margins for the year ended December 31, 1996 as compared
to the year ended  December 31, 1995  primarily  resulted from higher  operating
costs at certain of the  acquired  stations.  The Company has begun to implement
and will continue to implement  operating and programming  synergies  throughout
the  businesses  acquired in and prior to 1996.  The Company  believes  that the
benefits of the  implementation  of these methods will result in  improvement in
broadcast cash flow and operating cash flow margins in future periods.

   After tax cash flow  increased to $92.5  million for the year ended  December
31, 1996 from $65.5 million for the year ended December 31, 1995, or 41.2%.  The
increase in after tax cash flow for the year ended December 31, 1996 as compared
to the year ended  December 31, 1995  primarily  resulted from the  Acquisitions
offset by interest expense on the debt incurred to consummate the  Acquisitions.
After tax cash flow per share increased to $2.47 for the year ended December 31,
1996 from $2.03 for the year ended December 31, 1995.

YEARS ENDED DECEMBER 31, 1995 AND 1994

   Total  revenues  increased to $206.1  million for the year ended December 31,
1995,  from $129.4 million for the year ended December 31, 1994, or 59.3%.  This
increase  includes  revenues  from  the  acquisitions  of WTVZ  and WLFL and the
entering into LMA agreements with WABM and WDBB (the "1995 Acquisitions").  This
increase also includes the first full year of revenues from the  acquisition  of
WCGV and WTTO and the entering into LMA agreements with WNUV, WVTV and FSFA (the
"1994 Acquisitions").  Excluding the effect of non-cash barter transactions, net
broadcast  revenues  increased to $187.9 million for the year ended December 31,
1995 from $118.6 million for the year ended December 31, 1994, or 58.4%.

   These increases in net broadcast revenues were primarily a result of the 1994
and 1995 Acquisitions and LMA transactions  consummated by the Company,  as well
as television  broadcast revenue growth in each of the Company's markets.  WPGH,
the Pittsburgh Fox  affiliate,  achieved in excess of 14% net broadcast  revenue
growth  for the year  ended  December  31,  1995 as  compared  to the year ended
December 31, 1994.  This  increase was primarily  attributable  to a new metered
rating service that began in May 1995 which significantly improved WPGH's market
rating. WBFF, the Fox affiliate in Baltimore and WCGV, the former Fox affiliate,
now UPN  affiliate in  Milwaukee,  both  achieved in excess of 10% net broadcast
revenue  growth as these  stations  began to realize the advantages of having an
LMA in these markets.

   Operating  expenses  excluding  depreciation  and  amortization  and  special
bonuses paid to executive officers increased to $80.4 million for the year ended
December 31, 1995 from $50.5 million for the year ended December 31, 1994. These
increases  in expenses  were  primarily  attributable  to increases in operating
expenses  relating to the 1994 and 1995  Acquisitions,  including the payment of
LMA fees  which  increased  to  approximately  $5.6  million  for the year ended
December  31, 1995 as compared to $1.1  million for the year ended  December 31,
1994. Corporate overhead expenses increased 80.8% for the

                                       35







year ended  December  31, 1995 as compared to the year ended  December 31, 1994.
This  increase  was  primarily  due to expenses  associated  with being a public
company (i.e. directors and officers insurance, travel expenses and professional
fees) and  executive  bonus  accruals  for  bonuses  which  were  paid  based on
achieving in excess of 20% growth  percentages in pro forma  broadcast cash flow
for the year 1995 compared to 1994.

   Broadcast  operating  income  increased  to $45.3  million for the year ended
December 31, 1995 from $19.6  million for the year ended  December 31, 1994,  or
131.1%.  This increase in broadcast  operating  income was primarily a result of
the 1994 and 1995 Acquisitions and an increase in television  broadcast revenues
in each of the Company's  markets,  partially  offset by increased  amortization
expenses related to the Acquisitions.

   Interest  expense  increased to $39.3 million for the year ended December 31,
1995 from $25.4  million for the year ended  December  31, 1994,  or 54.7%.  The
major  component of this increase in interest  expense was increased  borrowings
under the  Company's  existiong  bank credit  facility,  which is governed by an
agreement with Chase Manhattan  Bank, as Agent (the "Bank Credit  Agreement") to
finance the 1994 and 1995  Acquisitions.  During August 1995, the Company issued
$300 million of senior subordinated notes and used a portion of the net proceeds
to repay  outstanding  indebtedness  under  the Bank  Credit  Agreement  and the
remainder  provided an increase to the Company's cash balances of  approximately
$91.4 million.  The interest  expense  related to these notes was  approximately
$10.0 million in 1995. This increase was partially  offset by the application of
the net  proceeds of an offering of Class A Common  Stock to reduce a portion of
the  indebtedness  under the Bank Credit  Agreement  during June 1995.  Interest
expense was also  reduced as a result of the  application  of net cash flow from
operating  activities  to  further  decrease  borrowings  under the Bank  Credit
Agreement.

   Interest  and other  income  increased  to $4.2  million  for the year  ended
December  31, 1995 from $2.4 million for the year ended  December  31, 1994,  or
75.0%.  This increase in interest income primarily  resulted from an increase in
cash  balances  that  remained  from the proceeds of Senior  Subordinated  Notes
issued in August 1995. Income (loss) before benefit (provision) for income taxes
and  extraordinary  item increased to income of $10.2 million for the year ended
December  31, 1995 from a loss of $3.4  million for the year ended  December 31,
1994.

   Net income available to common shareholders improved to income of $76,000 for
the year ended  December 31, 1995 from a loss of $2.7 million for the year ended
December 31,  1994.  In August 1995,  the Company  consummated  the sale of $300
million of Senior  Subordinated  Notes generating net proceeds to the Company of
$293.2  million.  The net  proceeds  of this  offering  were  utilized  to repay
outstanding  indebtedness under the Bank Credit Agreement of $201.8 million with
the remainder being retained for general corporate purposes including  potential
future   acquisitions.   In  conjunction   with  the  early  retirement  of  the
indebtedness   under  the  Bank  Credit  Agreement,   the  Company  recorded  an
extraordinary loss of $4.9 million net of a tax benefit of $3.4 million, related
to the write off of deferred financing costs under the Bank Credit Agreement.

   Broadcast  cash flow  increased to $111.1 million for the year ended December
31, 1995 from $67.5 million for the year ended December 31, 1994, or 64.6%. This
increase  in  broadcast  cash  flow  was  primarily  due to the  1994  and  1995
Acquisitions, growth in market revenues and a reduction in program payments as a
percentage  of net broadcast  revenues to 10.6% for the year ended  December 31,
1995 from 12.0% for the year ended December 31, 1994.

   Operating  cash flow  increased to $105.8 million for the year ended December
31, 1995 from $64.6  million for the year ended  December  31,  1994,  or 63.8%,
consistent with the growth in broadcast cash flow. After tax cash flow increased
to $65.5 million for the year ended December 31, 1995 from $42.2 million for the
year ended December 31, 1994, or 55.2%.

LIQUIDITY AND CAPITAL RESOURCES

   As of December 31, 1996, the Company had $2.3 million in cash  balances,  and
current  liabilities  were in excess of  current  assets by  approximately  $5.9
million.  The  Company's  decrease in cash to $2.3  million at December 31, 1996
from $112.5 million at December 31, 1995  primarily  resulted from cash payments
made  relating  to the 1996  Acquisitions  and  repayments  of bank debt.  As of
February 25, 1997,

                                       36







approximately  $27.5 million was  available for borrowing  under the Bank Credit
Agreement.  The  Company is  obligated  to pay  approximately  $82.0  million to
complete  the  acquisition  of KUPN  and  expects  to  make  this  payment  from
borrowings  under the Bank Credit  Agreement and/or from proceeds of an offering
of securities. See "Item l. Business -- 1997 Acquisitions."

   Net cash flows from operating  activities  increased to $69.0 million for the
year ended  December 31, 1996 from $55.9 million for the year ended December 31,
1995.  The Company  made income tax  payments of $6.8 million for the year ended
December  31, 1996 as compared to $7.9  million for the year ended  December 31,
1995.  This decrease was due to anticipated  tax benefits  generated by the 1996
Acquisitions.  The Company made interest payments on outstanding indebtedness of
$82.8  million  during the year ended  December  31,  1996 as  compared to $24.8
million for the year ended December 31, 1995.  Additional  interest payments for
the year ended December 31, 1996 as compared to the year ended December 31, 1995
primarily  related to additional  interest costs  associated  with the Company's
public debt  offering in August  1995 and  indebtedness  incurred to finance the
1996  Acquisitions.  Program rights payments  increased to $30.5 million for the
year ended  December 31, 1996 from $19.9 million for the year ended December 31,
1995, primarily as a result of the 1996 Acquisitions.

   Net cash flows used in investing activities increased to $1.0 billion for the
year ended December 31, 1996 from $119.2 million for the year ended December 31,
1995.  During  February 1996, the Company  purchased the License and Non-License
Assets of WSMH for $35.4  million at which time the balance due to the seller of
$34.4 million was paid from existing cash balances. In January 1996, the Company
made a cash payment of $1.0 million  relating to the  acquisition of the License
and  Non-License  Assets of WYZZ.  In July 1996,  the  Company  consummated  the
acquisition for a purchase price of  approximately  $21.1 million.  In May 1996,
the Company  purchased the outstanding  stock of Superior and made cash payments
totaling  $63.5  million  relating  to the  transaction.  Also in May 1996,  the
Company  acquired  certain  Non-License  assets of River  City and KRRT and made
related cash payments  totaling $818.1 million and $29.5 million,  respectively.
In September  1996,  the Company  exercised  its options to acquire  certain FCC
licenses  relating  to the River  City  Acquisition  for a cash  payment of $6.9
million.  In July 1996, the Company purchased the License and Non-License Assets
of KSMO and made net cash payments  totaling $10.0 million.  In August 1996, the
Company  purchased the License and Non-License  Assets of WSTR and made net cash
payments  totaling $8.7  million.  In December  1996,  the Company made purchase
option  extension  payments of $7.0 million  relating to WSYX.  The Company made
payments for property and equipment of $12.6 million for the year ended December
31, 1996.  Approximately  $7.0 million of these payments related to the purchase
of property and equipment for the development of local news  programming at WPGH
in Pittsburgh, Pennsylvania.

   Net cash flows from financing  activities increased to $832.8 million for the
year ended December 31, 1996 from $173.3 million for the year ended December 31,
1995. In May 1996, the Company utilized available  indebtedness of $63.0 million
for the acquisition of Superior and simultaneously  repaid indebtedness of $25.0
million. Also in May 1996, the Company utilized available indebtedness of $835.0
for the  acquisition  of the  Non-License  Assets  of  River  City  and KRRT and
simultaneously  repaid  indebtedness  of $36.0 million.  In September  1996, the
Company  exercised its options to acquire  certain FCC licenses  relating to the
River  City  Acquisition  for a  cash  payment  of  $6.9  million  by  utilizing
indebtedness under the Bank Credit Agreement. In July 1996, the Company utilized
available  indebtedness  under its Bank Credit Agreement  totaling $30.6 million
for the  acquisitions  of WYZZ and KSMO.  In August 1996,  the Company  utilized
available  indebtedness  totaling $9.9 million for the  acquisition  of WSTR. In
December  1996,  the Company made  purchase  option  extension  payments of $7.0
million relating to WSYX utilizing indebtedness under the Bank Credit Agreement.
The Company also made a $20.0 million payment of debt acquisition costs relating
to the financing required to consummate the River City and KRRT acquisitions. In
the fourth quarter of 1996, the Company  negotiated the prepayment of syndicated
program contract  liabilities  relating to excess syndicated  programming assets
and made cash payments of $15.1 million  utilizing  indebtedness  under its Bank
Credit  Agreement of $10.0 million with the  remainder  being paid from existing
cash balances.

   The Company  anticipates that funds from  operations,  existing cash balances
and  availability  of the  revolving  credit  facility  under  the  Bank  Credit
Agreement will be sufficient to meet its working capital,  capital  expenditures
and debt service requirements for the foreseeable future. However, to the extent

                                       37







such  funds  are not  sufficient,  the  Company  may  need to  incur  additional
indebtedness,  refinance  existing  indebtedness or raise funds from the sale of
additional  equity.  The Bank Credit Agreement and the indentures (the "Existing
Indentures")  relating to the  Company's 10% Senior  Subordinated  Notes and 10%
Senior  Subordniated  Notes  due 2003  (the  "1995  Notes)  would  restrict  the
incurrence  of  additional  indebtedness  and the use of  proceeds  of an equity
issuance.  In  1996,  the  Company  filed  a  registration  statement  with  the
Securities  and Exchange  Commission  with respect to the sale by the Company of
5,750,000  shares of Class A Common Stock.  The Company has not yet made such an
offering  but  continues  to intend to make such an  offering at such time as it
believes  market  conditions  warrant,  but there can be no  assurance as to the
timing of such an offering or whether such an offering will in fact occur.

INCOME TAXES
- ------------

   The  Company's  income tax  provision  increased to $6.9 million for the year
ended  December 31, 1996 from $5.2 million for the year ended December 31, 1995.
The Company's  effective tax rate  increased to 86% for the year ended  December
31, 1996 from 51% for the year ended  December  31,  1995.  The increase for the
year ended  December  31, 1996 as compared to the year ended  December  31, 1995
primarily  related to certain  financial  reporting  and income tax  differences
attributable  to certain 1995 and 1996  Acquisitions,  and state franchise taxes
which are  independent of pre-tax  income.  Management  believes that as pre-tax
income  increases  in  future  years,  the  Company's  effective  tax rate  will
decrease. See Note 9 to the Company's Consolidated Financial Statements.

   The net deferred tax asset decreased to $782,000 as of December 31, 1996 from
$21.0  million at December 31, 1995.  The decrease in the Company's net deferred
tax asset as of December  31, 1996 as compared to December 31, 1995 is primarily
due to the Company recording  deferred tax liabilities of $18.1 million relating
to the acquisition of all of the outstanding  stock of Superior  Communications,
Inc.  (Superior) in May 1996,  adjustments related to certain 1995 acquisitions,
and  resulting  differences  between  the book and tax  basis of the  underlying
assets.

   A $1.8 million net tax  provision  and a $647,000 tax benefit was  recognized
for the years ended December 31, 1995 and December 31, 1994,  respectively.  The
provision  for the year ended  December  31, 1995 was  comprised of $5.2 million
provision relating to the Company's income before provision for income taxes and
extraordinary  item offset by a $3.4 million income tax benefit  relating to the
extraordinary  loss on early  extinguishment  of  debt.  The  $5.2  million  tax
provision  reflects a 51%  effective  tax rate for the year ended  December  31,
1995,   which  is  higher  than  the  statutory   rate   primarily  due  to  the
non-deductibility  of goodwill  relating to the  repurchase  of Common  Stock in
1990.  The income tax benefit for the year ended  December 31, 1994 was 19.1% of
the  Company's  loss  before  income  taxes,  which  is lower  than the  benefit
calculated  at  statutory  rates  primarily  due  to   non-deductible   goodwill
amortization.  After giving effect to these changes the Company had net deferred
tax assets of $21.0  million at December 31, 1995 and $12.5  million at December
31, 1994, respectively.

SEASONALITY
- -----------

   The Company's  results  usually are subject to seasonal  fluctuations,  which
result in fourth quarter  broadcast  operating income usually being greater than
first,  second and third quarter broadcast operating income. This seasonality is
primarily  attributable to increased expenditures by advertisers in anticipation
of holiday  season  spending and an increase in  viewership  during this period.


                                       38






                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Set forth below is certain  information  relating to the Company's  executive
officers,  directors,  certain  key  employees  and  persons  expected to become
executive officers, directors or key employees.

         NAME           AGE                       TITLE
- ---------------------  ----- ---------------------------------------------------
                             
                             
                             
David D. Smith.......  46    President, Chief Executive Officer, Director and   
                             Chairman of the Board 
Frederick G. Smith ..  47    Vice President and Director                        
J. Duncan Smith......  43    Vice President, Secretary and Director             
Robert E. Smith......  33    Vice President, Treasurer and Director             
David B. Amy.........  44    Chief Financial Officer
Barry Drake..........  45    Chief Operating Officer, SCI Radio                 
Alan B. Frank........  46    Regional Director, SCI                             
Michael Granados ....  42    Regional Director, SCI                             
Steven M. Marks......  40    Regional Director, SCI                             
John T. Quigley......  53    Regional Director, SCI                             
Frank Quitoni........  52    Regional Director, SCI                             
M. William Butler ...  44    Vice President/Group Program Director, SCI         
Michael Draman.......  48    Vice President/TV Sales and Marketing, SCI         
Stephen A. Eisenberg.  55    Vice President/Director of National Sales, SCI     
Delbert R. Parks,III.  44    Director of Operations and Engineering, SCI        
Robert E. Quicksilver  41    General Counsel, SCI                               
Thomas E. Severson ..  33    Corporate Controller                               
Michael E. Sileck ...  36    Vice President/Finance, SCI                        
Robin A. Smith.......  40    Chief Financial Officer, SCI Radio                 
Patrick J. Talamantes  32    Director of Corporate Finance                      
William E. Brock ....  66    Director                                           
Lawrence E. McCanna .  53    Director                                           
Basil A. Thomas......  81    Director                                           

   In addition to the foregoing,  the following  persons have agreed to serve as
executive  officers and/or directors of the Company as soon as permissible under
the rules of the FCC and applicable laws. 

        NAME           AGE                      TITLE
- --------------------  ----- ---------------------------------------------
Barry Baker.........   44   Executive Vice President of the Company,
                            Chief Executive Officer of SCI and Director
Kerby Confer........   56   Chief Executive Officer, SCI Radio
Roy F. Coppedge, III   48   Director

   In connection with the River City Acquisition, the Company agreed to increase
the size of the Board of Directors from seven members to nine to accommodate the
prospective  appointment of each of Barry Baker and Roy F. Coppedge, III or such
other designee as Boston Ventures may select. Mr. Baker and Mr. Confer currently
serve as consultants to the Company.

                                       39






   Members of the Board of Directors  are elected for  one-year  terms and until
their  successors  are  duly  elected  and  qualified.  Executive  officers  are
appointed by the Board of  Directors  annually to serve for one  year-terms  and
until their successors are duly appointed and qualified.

   David D. Smith has served as President,  Chief Executive Officer and Chairman
of the Board since September  1990.  Prior to that, he served as General Manager
of WPTT from 1984, and assumed the financial and engineering  responsibility for
the Company,  including the  construction  of WTTE in 1984.  In 1980,  Mr. Smith
founded Comark  Television,  Inc.,  which applied for and was granted the permit
for  WPXT-TV in  Portland,  Maine and which  purchased  WDSI-TV in  Chattanooga,
Tennessee. WPXT-TV was sold one year after construction and WDSI-TV was sold two
years after its acquisition.  From 1978 to 1986, Mr. Smith co-founded and served
as an officer and director of Comark Communications,  Inc., a company engaged in
the  manufacture of high power  transmitters  for UHF television  stations.  His
television  career  began  with  WBFF  in  Baltimore,  where  he  helped  in the
construction  of the station and was in charge of  technical  maintenance  until
1978.  David D. Smith,  Frederick G. Smith,  J. Duncan Smith and Robert E. Smith
are brothers.

   Frederick G. Smith has served as Vice President of the Company since 1990 and
as a Director since 1986. Prior to joining the Company in 1990, Mr. Smith was an
oral and  maxillofacial  surgeon engaged in private practice and was employed by
Frederick G. Smith, M.S., D.D.S., P.A., a professional  corporation of which Mr.
Smith was the sole officer, director and stockholder.

   J. Duncan Smith has served as Vice President, Secretary and a Director of the
Company  since 1988.  Prior to that, he worked for Comark  Communications,  Inc.
installing  UHF  transmitters.  In addition,  he also worked  extensively on the
construction  of WPTT in Pittsburgh,  WTTE in Columbus,  WIIB in Bloomington and
WTTA in St. Petersburg,  as well as on the renovation of the new studio, offices
and news facility for WBFF in Baltimore.

   Robert E. Smith has served as Vice President, Secretary and a Director of the
Company since 1988.  Prior to that,  he served as Program  Director at WBFF from
1986 to 1988.  Prior to that, he assisted in the  construction  of WTTE and also
worked for Comark Communications, Inc. installing UHF transmitters.

   David B. Amy has served as Chief  Financial  Officer ("CFO") since October of
1994 and prior to his appointment as CFO served as the Controller of the Company
beginning  in 1986.  Before that,  he served as the  Business  Manager for WPTT.
Prior to joining the Company in 1984, Mr. Amy was an accounting  manager of Penn
Athletic Products Company in Pittsburgh,  Pennsylvania.  Mr. Amy received an MBA
degree from the University of Pittsburgh in 1981.

   Barry  Drake  has  served  as Chief  Operating  Officer  of SCI  Radio  since
completion  of the River  City  Acquisition.  Prior to that  time,  he was Chief
Operating Officer--Keymarket Radio Division of River City since July 1995. Prior
to that time, he was President and Chief  Operating  Officer of Keymarket  since
1988. From 1985 through 1988, Mr. Drake performed the duties of the President of
each of the  Keymarket  broadcasting  entities,  with  responsibility  for three
stations located in Houston, St. Louis and Detroit.

   Alan B. Frank has served as Regional Director for the Company since May 1994.
As Regional  Director,  Mr. Frank is responsible for the Pittsburgh,  Milwaukee,
Kansas City and  Raleigh-Durham  markets.  Prior to his  appointment to Regional
Director,  Mr.  Frank served as General  Manager of WPGH  beginning in September
1991.

   Michael Granados has served as a Regional  Director of the Company since July
1996. As a Regional  Director,  Mr. Granados is responsible for the San Antonio,
Des Moines,  Peoria and,  upon  completion  of the KUPN  acquisition,  Las Vegas
markets. Prior to July 1996, Mr. Granados has served in various positions with

the Company and, before the River City  Acquisition,  with River City. He served
as the General Sales Manager of KABB from 1989 to 1993, the Station  Manager and
Director  of Sales of WTTV from  1993 to 1994 and the  General  Manager  of WTTV
prior to his appointment as Regional Director in 1996.

   Steven M. Marks has served as Regional Director for the Company since October
1994. As Regional Director, Mr. Marks is responsible for the Baltimore, Norfolk,
Flint and Birmingham markets. Prior to his appointment as Regional Director, Mr.
Marks  served as General  Manager  for WBFF  since  July  1991.  From 1986 until
joining WBFF in 1991, Mr. Marks served as General Manager at WTTE. Prior to that
time, he was national sales manager for WFLX-TV in West Palm Beach, Florida.

                                       40

   John T. Quigley has served as a Regional  Director of the Company  since June
1996.  As  Regional  Director,  Mr.  Quigley is  responsible  for the  Columbus,
Cincinnati, and Oklahoma City markets. Prior to that time, Mr. Quigley served as
general  manager of WTTE since July 1985.  Prior to joining  WTTE,  Mr.  Quigley
served in  broadcast  management  positions at WCPO-TV in  Cincinnati,  Ohio and
WPTV-TV in West Palm Beach, Florida.

   Frank Quitoni has served as a Regional Director since completion of the River
City Acquisition.  As Regional Director,  Mr. Quitoni is responsible for the St.
Louis, Sacramento,  Indianapolis and  Asheville/Greenville/Spartanburg  markets.
Prior to joining the Company, he was Vice President of Operations for River City
since 1995. Mr. Quitoni had served as the Director of Operations and Engineering
for River City since 1994.  Prior thereto Mr.  Quitoni served as a consultant to
CBS beginning in 1989.  Mr.  Quitoni was the Director of Olympic  Operations for
CBS Sports for the 1992 Winter Olympic Games and consulted with CBS for the 1994
Winter Olympic Games. Mr. Quitoni was awarded the Technical Achievement Emmy for
the 1992 and 1994 CBS Olympic broadcasts.

   M. William Butler has served as Vice  President/Group  Program Director,  SCI
since 1997.  Prior to joining the Company,  he served as Director of Programming
at KCAL,  the Walt Disney  Company  station in Los Angeles,  California.  Before
that,  he was Director of Marketing  and  Programming  at WTXF in  Philadelphia,
Pennsylvania and WLVI in Boston, Massachusetts. Mr. Butler attended the Graduate
Business School of the University of Cincinnati from 1975 to 1976.

   Michael Draman has served as Vice President/TV Sales and Marketing, SCI since
1997.  Prior to joining  the  Company,  he served as Vice  President  of Revenue
Development for New World Television.  Before that, he was Director of Sales and
Marketing  for  WSVN  in  Miami,  Florida.  Mr.  Draman  attended  The  American
University and The Harvard Business School and served with the U.S.
Marine Corps in Vietnam.

   Stephen A.  Eisenberg  has served as Director of  National  Sales,  SCI since
November   1996.   Prior  to   joining   the   Company,   he   served   as  Vice
President/Director  of Sales for Petry  Television,  with total  national  sales
responsibility  for  KTTV  in  Los  Angeles,  California,  KCPQ-TV  in  Seattle,
Washington,  WTNH-TV in New Haven,  Connecticut,  WKYC-TV  in  Cleveland,  Ohio,
WBIR-TV  in  Knoxville,  Tennessee,  WKEF-TV  in  Dayton,  Ohio and  WTMJ-TV  in
Milwaukee,  Wisconsin.  His career at Petry  Television  spanned  21 years.  Mr.
Eisenberg received an MS degree in Journalism from Northwestern's  Medill School
and a BA degree from Brooklyn College.

   Delbert  R.  Parks  III  has  served  as Vice  President  of  Operations  and
Engineering  since the completion of the River City  Acquisition.  Prior to that
time, he was Director of Operations and  Engineering for WBFF and Sinclair since
1985,  and has  been  with the  Company  for 25  years.  He is  responsible  for
planning,  organizing and implementing  operational and engineering policies and
strategies as they relate to television and computer systems.  Currently,  he is
consolidating  facilities  for  Sinclair's  television  stations  and  has  just
completed a digital  facility for  Sinclair's  news and  technical  operation in
Pittsburgh. Mr. Parks is also a Lieutenant Colonel in the Maryland Army National
Guard and commands the 1st Battalion, 175th Infantry (Light).

   Robert E. Quicksilver has served as General Counsel,  SCI since completion of
the River City  Acquisition.  Prior to that time he served as General Counsel of
River City since  September 1994.  Prior to joining River City, Mr.  Quicksilver
was with the law firm of Rosenblum, Goldenhersh,  Silverstein and Zafft, P.C. in
St. Louis,  where he was a partner for six years. Mr.  Quicksilver  holds a B.A.
from Dartmouth College and a J.D. from the University of Michigan.

   Thomas E.  Severson has served as  Corporate  Controller  since 1997.  Before
that,  Mr.  Severson  served as Assistant  Controller of the Company since 1995.
Prior  to  joining  the  Company,  Mr.  Severson  held  positions  in the  audit
departments  of KPMG Peat  Marwick  LLP and  Deloitte  & Touche LLP from 1991 to
1995.  Mr.  Severson  is a graduate  of the  University  of  Baltimore  and is a
Certified Public Accountant.

   Michael  E.  Sileck  has  served  as  Vice  President/Finance  of  SCI  since
completion  of the River City  Acquisition.  Prior to that time he served as the
Director of Finance for River City since 1993.  Mr.  Sileck joined River City in
July 1990 as Director of Finance and Business Affairs for KDNL-TV. Mr. Sileck is

                                       41

an  active  member  of the  Broadcast  Cable  Financial  Management  Association
("BCFM") and was a Director of BCFM from 1993 to 1996. Mr.  Sileck,  a Certified
Public  Accountant,  received  a B.S.  degree in  Accounting  from  Wayne  State
University and an M.B.A. in Finance from Oklahoma City University.

   Robin A. Smith has served as Chief  Financial  Officer,  SCI Radio since June
1996.  Prior to joining  the  Company,  she served as Vice  President  and Chief
Financial Officer of the Park Lane Group of Menlo Park, California,  which owned
and  operated  small  market radio  stations.  Before  that,  she served as Vice
President and Treasurer of Edens Broadcasting,  Inc. in Phoenix,  Arizona, which
owns and operates radio  stations in major  markets.  Ms. Smith is a graduate of
Arizona State University and is a Certified Public Accountant.

   Patrick  Talamantes  has  served  as  Director  of  Corporate  Finance  since
completion  of the  River  City  Acquisition.  Prior to that  time he  served as
Treasurer  for River City since  April  1995.  From 1991 to 1995,  he was a Vice
President with Chemical Bank,  where he completed  financings for clients in the
cable,  broadcasting,  publishing and entertainment  industries.  Mr. Talamantes
holds a B.A.  degree from  Stanford  University  and an M.B.A.  from the Wharton
School at the University of Pennsylvania.

   William E. Brock has served as a Director of the Company since July 1995. Mr.
Brock served as chairman of The Brock Group from 1989 until January 1994, and as
chairman  emeritus from 1994 to 1996. Mr. Brock currently  serves as chairman of
Intellectual  Development  Systems.  Mr. Brock served as a United States Senator
from  Tennessee  from  1971  to  1977  and as a  member  of the  U.S.  House  of
Representatives  from 1962 to 1970.  Mr.  Brock  served as a member of President
Reagan's  cabinet from 1981 to 1987, as U.S. Trade  Representative  from 1981 to
1985 and as  Secretary  of Labor  from  1985 to 1987.  Mr.  Brock  was  National
Chairman of the Republican Party from 1977 to 1981.

   Lawrence E. McCanna has served as a Director of the Company  since July 1995.
Mr.  McCanna has been a partner of the  accounting  firm of Gross,  Mendelsohn &
Associates,  P.A., since 1972 and has served as its managing partner since 1982.
Mr.  McCanna has served on various  committees  of the Maryland  Association  of
Certified  Public  Accountants  and  was  chairman  of  the  Management  of  the
Accounting Practice  Committee.  He is also a former member of the Management of
an Accounting  Practice  Committee of the American Institute of Certified Public
Accountants.  Mr.  McCanna  is a member of the board of  directors  of  Maryland
Special Olympics.

   Basil A. Thomas has served as a Director of the Company since  November 1993.
He is of counsel to the  Baltimore  law firm of Thomas & Libowitz,  P.A. and has
been in the private  practice of law since 1983. From 1961 to 1968, Judge Thomas
served as an Associate  Judge on the Municipal Court of Baltimore City and, from
1968 to 1983, he served as an Associate  Judge of the Supreme Bench of Baltimore
City.  Judge Thomas is a trustee of the  University of Baltimore and a member of
the  American Bar  Association  and the Maryland  State Bar  Association.  Judge
Thomas  attended the College of William & Mary and received his L.L.B.  from the
University  of  Baltimore.  Judge  Thomas is the father of Steven A.  Thomas,  a
senior attorney and founder of Thomas & Libowitz, counsel to the Company.

   Barry  Baker has been the Chief  Executive  Officer of River City since 1989,
and is the  President of the  corporate  general  partner of River City,  Better
Communications,  Inc. ("BCI"). The principal business of both River City and BCI
is  television  and  radio  broadcasting.  In  connection  with the  River  City
Acquisition, the Company agreed to appoint Mr. Baker Executive Vice President of
the  Company  and to elect him as a Director  at such time as he is  eligible to
hold those positions under applicable FCC regulations.  He currently serves as a
consultant to the Company.

   Kerby  Confer  served as a member of the Board of  Representatives  and Chief
Executive  Officer--  Keymarket  Radio  Division  of River City since July 1995.
Prior  thereto,  Mr. Confer served as Chairman of the Board and Chief  Executive
Officer of Keymarket  since its founding in December 1981.  Prior to engaging in
the  acquisition  of various radio stations in 1975, Mr. Confer held a number of
jobs in the broadcast business, including serving as Managing Partner of a radio
station in Annapolis, Maryland from 1969 to 1975. From 1966 to 1969, he hosted a
pop music television show on WBAL-TV (Baltimore) and WDCA-TV (Washington, D.C.).
Prior thereto,  Mr. Confer served as program director or  producer/director  for
radio and  television  stations  owned by  Susquehanna  Broadcasting  and Plough
Broadcasting Company, Inc. Mr. Confer currently provides services to the Company
and is expected to become Chief  Executive  Officer of SCI Radio at such time as
he is eligible to hold this position under applicable FCC regulations.

                                       42

   Roy F. Coppedge,  III is a general  partner of the general partner of each of
the Boston Ventures partnerships, limited partnerships primarily involved in the
business of investments.  Mr. Coppedge is a director of Continental Cablevision,
Inc., and American Media, Inc. and a member of the Board of  Representatives  of
Falcon Holding Group,  L.P. In connection with the River City  Acquisition,  the
Company  agreed  to elect  Mr.  Coppedge  as a  Director  at such  time as he is
eligible to hold that position under applicable FCC regulations.

ITEM 11. EXECUTIVE COMPENSATION

   The following table sets forth certain  information  regarding the annual and
long-term  compensation  by the Company for services  rendered in all capacities
during the years ended December 31, 1994,  1995 and 1996 by the Chief  Executive
Officer  and the four other  executive  officers  of the  Company as to whom the
total annual salary and bonus exceeded $100,000 (the "Named Executive Officers")
in 1996:

SUMMARY COMPENSATION TABLE




                                                                           LONG-TERM
                                            ANNUAL COMPENSATION          COMPENSATION
                                                                          SECURITIES         ALL OTHER
               NAME AND                                                   UNDERLYING        COMPENSATION
          PRINCIPAL POSITION            YEAR    SALARY      BONUS     OPTIONS GRANTED (#)       (A)
                                       ------ ---------- ----------- -------------------- ---------------
                                                                            
David D. Smith,
President and Chief Executive
Officer..............................  1996   $767,308   $  317,913         --             $ 6,748
                                       1995    450,000      343,213         --               4,592
                                       1994    317,913    1,300,000         --               3,841
Frederick G. Smith,
Vice President.......................  1996    260,000      233,054         --               6,704
                                       1995    260,000      258,354         --              20,361
                                       1994    233,054      900,000         --              18,960
J. Duncan Smith,
Secretary............................  1996    270,000      243,485         --              18,494
                                       1995    270,000      268,354         --              21,467
                                       1994    243,485      900,000         --              16,418
Robert E. Smith,
Treasurer............................  1996    250,000      233,054         --               6,300
                                       1995    250,000      258,354         --               4,592
                                       1994    233,054      900,000         --              13,238
David B. Amy,
Chief Financial Officer..............  1996    173,582       20,000     25,000               7,766
                                       1995    132,310       31,000      7,500               7,868
                                       1994    122,400       20,000         --               5,011



(a) All other  compensation  consists of income deemed received for personal use
    of  Company-leased  automobiles,  the Company's 401 (k)  contribution,  life
    insurance and long-term disability coverage.

   In addition to the  foregoing,  Mr.  Barry  Baker and Mr.  Kerby  Confer have
agreed to serve as executive officers and/or directors of the Company as soon as
permissible  under  the  rules  of the  FCC and  applicable  laws  and  received
consulting  fees  during  the year  ended  December  31,  1996 of  $527,976  and
$162,500, respectively.

                                       43






STOCK OPTIONS

   The following  table sets forth  information  concerning  each grant of stock
options made during 1996 to each of the Named Executive Officers:




                                                                             VALUE OF
                                                                              OPTIONS
                     NUMBER OF     PERCENT OF                               AT DATE OF
                    SECURITIES   TOTAL OPTIONS                                 GRANT
                    UNDERLYING     GRANTED TO     EXERCISE                BASED ON BLACK-
                      OPTIONS     EMPLOYEES IN     PRICE     EXPIRATION   SCHOLES OPTION
       NAME         GRANTED(#)    FISCAL YEAR    PER SHARE      DATE       PRICING MODEL
- -----------------  ------------ --------------- ----------- ------------ ----------------
                                                              
David D. Smith ..         --      --%           $      --             -- $        --
Frederick G.
  Smith............       --      --                   --             --          --
J. Duncan Smith .         --      --                   --             --          --
Robert E. Smith .         --      --                   --             --          --
David B. Amy.....     10,000       *                37.75      5/31/2006     160,419
                      15,000       *                30.11      5/31/2006     287,319



   * Less than one percent.

   The following table shows the number of stock options  exercised  during 1996
and the 1996  year-end  value of the stock  options held by the Named  Executive
Officers: 



                                    NUMBER OF
                                                    SECURITIES UNDERLYING          VALUE OF UNEXERCISED
                         SHARES                      UNEXERCISED OPTIONS          "IN-THE-MONEY" OPTIONS
                        ACQUIRED       VALUE        AT DECEMBER 31, 1996          AT DECEMBER 31, 1996(A)
                                                   ----------------------        -------------------------
       NAME           ON EXERCISE    REALIZED     EXERCISABLE  UNEXERCISABLE    EXERCISABLE  UNEXERCISABLE
     -------        --------------- ----------   ------------- --------------   -----------  -------------
                                                                          
David D. Smith  ..    --            $  --            --             --        $  --         $       --
Frederick G.
Smith ............    --               --            --             --           --                 --
J. Duncan Smith  .    --               --            --             --           --                 --
Robert E. Smith  .    --               --            --             --           --                 --
David B. Amy .....    --               --         3,750         28,750           --             37,500



   (a) An  "In-the-Money"  option is an option for which the option price of the
underlying  stock is less than the market price at December 31, 1996, and all of
the value shown  reflects  stock price  appreciation  since the  granting of the
option. 

DIRECTOR COMPENSATION

   Directors of the Company who also are  employees of the Company serve without
additional  compensation.  Independent directors receive $15,000 annually. These
independent  directors  also  receive  $1,000  for each  meeting of the Board of
Directors  attended and $500 for each committee meeting  attended.  In addition,
the independent directors are reimbursed for any expenses incurred in connection
with their attendance at such meetings.


EMPLOYMENT AGREEMENTS

   The Company has entered  into an  employment  agreement  with David D. Smith,
President and Chief Executive Officer of the Company.  David Smith's  employment
agreement  has an initial  term of three years and is renewable  for  additional
one-year terms, unless either party gives notice of termination not less than 60
days  prior  to  the   expiration  of  the  then  current  term.  The  Company's
Compensation   Committee   has  approved  an  increase  in  Mr.   Smith's  total
compensation  to  $1,200,000.  Mr. Smith is also entitled to  participate in the
Company's  Executive Bonus Plan based upon the performance of the Company during
the year. The employment  agreement  provides that the Company may terminate Mr.
Smith's  employment  prior to expiration of the agreement's  term as a result of
(i) a breach  by Mr.  Smith  of any  material  covenant,  promise  or  agreement
contained in the employment  agreement;  (ii) a dissolution or winding up of the
Company;  (iii) the disability of Mr. Smith for more than 210 days in any twelve
month period (as determined under the employment agreement);  or (iv) for cause,
which includes  conviction of certain crimes,  breach of a fiduciary duty to the
Company or the  stockholders,  or repeated  failure to exercise or undertake his
duties as an officer of the Company (each, a "Termination Event"). 

                                       44




   In June 1995, the Company entered into an employment agreement with Frederick
G. Smith, Vice President of the Company.  Frederick Smith's employment agreement
has an initial  term of three years and is  renewable  for  additional  one-year
terms,  unless  either party gives notice of  termination  not less than 60 days
prior to the expiration of the then current term. Under the agreement, Mr. Smith
receives a base salary of $260,000 and is also  entitled to  participate  in the
Company's Executive Bonus Plan based upon the performance of the Company and Mr.
Smith during the year.  The employment  agreement  provides that the Company may
terminate Mr. Smith's  employment prior to expiration of the agreement's term as
a result of a Termination Event.

   In June 1995, the Company entered into an employment agreement with J. Duncan
Smith, Vice President and Secretary of the Company. J. Duncan Smith's employment
agreement  has an initial  term of three years and is renewable  for  additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. Under the agreement,  Mr.
Smith  receives a base salary of $270,000 and is also entitled to participate in
the Company's Executive Bonus Plan based upon the performance of the Company and
Mr. Smith during the year.  The employment  agreement  provides that the Company
may terminate Mr. Smith's employment prior to expiration of the agreement's term
as a result of a Termination Event.

   In June 1995, the Company entered into an employment agreement with Robert E.
Smith, Vice President and Treasurer of the Company. Robert E. Smith's employment
agreement  has an initial  term of three years and is renewable  for  additional
one-year terms, unless either party gives notice of termination not less than 60
days prior to the expiration of the then current term. Under the agreement,  Mr.
Smith  receives a base salary of $250,000 and is also entitled to participate in
the Company's Executive Bonus Plan based upon the performance of the Company and
Mr. Smith during the year.  The employment  agreement  provides that the Company
may terminate Mr. Smith's employment prior to expiration of the agreement's term
as a result of a Termination Event.

   In connection  with the River City  Acquisition,  the Company entered into an
employment  agreement  (the  "Baker  Employment  Agreement")  with  Barry  Baker
pursuant to which Mr. Baker will become President and Chief Executive Officer of
SCI and  Executive  Vice  President  of the Company at such time as Mr. Baker is
able to hold those positions  consistent with applicable FCC regulations.  Until
such time as Mr. Baker is able to become an officer of the Company, he serves as
a  consultant  to the Company  pursuant to a consulting  agreement  and receives
compensation  that he  would  be  entitled  to as an  officer  under  the  Baker
Employment Agreement.  While Mr. Baker acts as consultant to the Company he will
not direct employees of Sinclair in the operation of its television stations and
will not  perform  services  relating  to any  shareholder,  bank  financing  or
regulatory  compliance  matters with respect to the  Company.  In addition,  Mr.
Baker will  remain the Chief  Executive  Officer of River City and will devote a
substantial amount of his business time and energies to those services. Pursuant
to  the  Baker  Employment  Agreement,  Mr.  Baker  receives  a base  salary  of
approximately $1,056,000 per year, subject to annual increases of 7-1/2% January
1 each year  beginning  January 1, 1997. Mr. Baker is also entitled to receive a
bonus equal to 2% of the amount by which the Broadcast  Cash Flow (as defined in
the Baker  Employment  Agreement) of SCI for a year exceeds the  Broadcast  Cash
Flow for the  immediately  preceding  year.  Pursuant  to the  Baker  Employment
Agreement,  Mr. Baker has received  options to acquire  1,382,435  shares of the
Class A Common Stock (or 3.33% of the common equity of Sinclair  determined on a
fully diluted basis).  The option became  exercisable with respect to 50% of the
shares upon closing of the River City Acquisition,  and becomes exercisable with
respect  to 25% of the  shares on the first  anniversary  of the  closing of the
River  City  Acquisition,  and 25% on the second  anniversary  of the River City
Acquisition. The exercise price of the option is approximately $30.11 per share.
The term of the Baker  Employment  Agreement  extends until May 31, 2001, and is
automatically  extended  to the third  anniversary  of any Change of Control (as
defined in the Baker Employment Agreement). If the Baker Employment Agreement is
terminated as a result of a Series B Trigger Event (as defined below),  then Mr.
Baker shall be entitled to a termination  payment equal to the amount that would
have been paid in base  salary for the  remainder  of the term of the  agreement
plus bonuses that would be paid for such period based on the average  bonus paid
to Mr.  Baker  for  the  previous  three  years,  and  all  options  shall  vest
immediately upon such  termination.  In addition,  upon such a termination,  Mr.
Baker  shall have the option to  purchase  from the  Company for the fair market
value thereof either (i) all broadcast  operations of Sinclair in the St. Louis,
Missouri DMA or (at the option of Mr. Baker) the Asheville-Greenville-

                                       45

Spartanburg,  South  Carolina DMA or (ii) all of the Company's  radio  broadcast
operations.  Mr. Baker shall also have the right following such a termination to
receive  quarterly  payments  (which  may be  paid  either  in cash  or,  at the
Company's  option,  in additional shares of Class A Common Stock) equal to 5.00%
of the fair market value (on the date of each  payment) of all stock options and
common  stock issued  pursuant to exercise of such stock  options or pursuant to
payments  of this  obligation  in  shares  and  held by him at the  time of such
payment  (except that the first such payment shall be 3.75% of such value).  The
fair market value of unexercised  options for such purpose shall be equal to the
market  price of  underlying  shares  less the  exercise  price of the  options.
Following  termination of Mr. Baker's  employment  agreement,  the Company shall
have the option to  purchase  the  options  and shares  from Mr.  Baker at their
market value. A "Series B Trigger Event" means the  termination of Barry Baker's
employment  with the Company prior to the  expiration  of the initial  five-year
term of his  employment  agreement  (i) by the Company for any reason other than
"for  cause" (as  defined in the Baker  Employment  Agreement)  or (ii) by Barry
Baker under  certain  circumstances,  including  (a) on 60 days'  prior  written
notice  given at any time  within 180 days  following  a Change of  Control  (as
defined in the Baker Employment Agreement;  (b) if Mr. Baker is not elected (and
continued)  as a director of Sinclair or SCI, as President  and Chief  Executive
Officer of SCI or as Executive Vice President of Sinclair, or Mr. Baker shall be
removed from any such board or office; (c) upon a material breach by Sinclair or
SCI of the Baker Employment  Agreement which is not cured; (d) if there shall be
a material diminution in Mr. Baker's authority or responsibility,  or certain of
his economic benefits are materially  reduced, or Mr. Baker shall be required to
work  outside  Baltimore;  or  (e)  the  effective  date  of his  employment  as
contemplated by clause (b) shall not have occurred by August 31, 1997. Mr. Baker
cannot be appointed to such  positions with the Company or SCI until the Company
or SCI takes certain  actions with respect to WTTV and WTTK in  Indianapolis  or
WTTE or WSYX in Columbus.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

   Other  than as  follows,  no  Named  Executive  Officer  is a  director  of a
corporation  that has a director or executive  officer who is also a director of
the Company.  Each of David D. Smith,  Frederick  G. Smith,  J. Duncan Smith and
Robert E. Smith (the "Controlling  Stockholders",  (all of whom are directors of
the Company and Named Executive Officers) is a director and/or executive officer
of  each  of  various  other   corporations   controlled   by  the   Controlling
Stockholders.

   During  1996,  none  of the  Named  Executive  Officers  participated  in any
deliberations of the Company's Board of Directors or the Compensation  Committee
relating to compensation of the Named Executive Officers.

   The  members of the  Compensation  Committee  are Messrs.  Thomas,  Brock and
McCanna.  Mr. Thomas is of counsel to the law firm of Thomas & Libowitz,  and is
the  father of Steven A.  Thomas,  a senior  attorney  and  founder  of Thomas &
Libowitz,  P.A.  During  1996,  Thomas &  Libowitz,  P.A.,  billed  the  Company
approximately $900,000 in fees and expenses for legal services.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


   The  following  table  sets  forth  as of the  date  hereof  the  number  and
percentage  of  outstanding  shares of the Company's  Common Stock  beneficially
owned by (i) all persons known by the Company to  beneficially  own more than 5%
of the  Company's  Common  Stock,  (ii) each  director and each Named  Executive
Officer who is a stockholder,  and (iii) all directors and executive officers as
a group.  Unless noted otherwise,  the business address of each of the following
is 2000 West 41st Street, Baltimore, MD 21211:




                                     SHARES OF CLASS B     SHARES OF SERIES B     SHARES OF CLASS A    PERCENT OF
                                        COMMON STOCK         PREFERRED STOCK         COMMON STOCK        TOTAL
                                     BENEFICIALLY OWNED    BENEFICIALLY OWNED     BENEFICIALLY OWNED     VOTING
                                     ------------------   -------------------     ------------------
              NAME                 NUMBER      PERCENT     NUMBER   PERCENT     NUMBER       PERCENT    POWER (A)
           ---------              --------     --------   --------  -------    --------     --------   ----------
                                                                                  
David D. Smith (b)..............   7,249,999    26.0%                           7,259,999   51.2%      25.0%
Frederick G. Smith (b)(c) ......   6,864,944    24.6%                           6,868,944   49.8%      23.7%
J. Duncan Smith (b)(d)..........   6,999,994    25.1%                           6,999,994   50.3%      24.2%
Robert E. Smith (b)(e)..........   6,735,644    24.2%                           6,735,644   49.4%      23.3%

                                       46




                                     SHARES OF CLASS B     SHARES OF SERIES B     SHARES OF CLASS A    PERCENT OF 
                                        COMMON STOCK         PREFERRED STOCK         COMMON STOCK        TOTAL    
                                     BENEFICIALLY OWNED    BENEFICIALLY OWNED     BENEFICIALLY OWNED     VOTING   
                                     ------------------   -------------------     ------------------              
              NAME                 NUMBER      PERCENT     NUMBER   PERCENT     NUMBER       PERCENT    POWER (A) 
           ---------              --------     --------   --------  -------    --------     --------   ---------- 
                                                                                          
David B. Amy (f)................                                                   34,700     *          *
Basil A. Thomas.................                                                    2,000     *          *
Lawrence E. McCanna.............                                                      300     *          *
William E. Brock................                                                    2,500     *          *
Barry Baker (g)(h)..............                           72,016       6.3%    1,644,311   19.2%        *
Putnam Investments, Inc.........                                                2,175,000   31.5%        *
 One Post Office Square
 Boston, Massachusetts 02109
T. Rowe Price Associates, 
 Inc. (i)......................                                                   425,000    6.1%        *
 100 East Pratt Street                                                                 
 Baltimore, Maryland 21202.....                                                   
Better Communications, Inc.(h).                           134,858      11.8%      490,883    6.6%        *
 1215 Cole Street
 St. Louis, Missouri 63106 
BancBoston Investments (h)....                            150,335      13.2%      547,219    7.3%        *
 150 Royal Street
 Canton, Massachusetts 02021
Pyramid Ventures, Inc. (h)....                            152,995      13.4%      556,902    7.4%        *
 1215 Cole Street
 St. Louis, Missouri 63106
Boston Ventures Limited
 Partnership IV (h)..............                         253,800      22.3%      923,832   11.8%        *
 21 Custom House Street
 10th Floor
 Boston, Massachusetts 02110
Boston Ventures Limited
 Partnership IVA (h) ............                         142,745      12.5%      519,592    7.0%        *
 21 Custom House Street
 10th Floor
 Boston, Massachusetts 02110
All directors and executive
 officers as a group (8
 persons)........................  27,850,581   100.0%         --      --      27,904,081   80.2%      96.2%


                                       47




   * Less than 1%

   (a)  Holders of Class A Common  Stock are  entitled to one vote per share and
holders of Class B Common  Stock are  entitled to ten votes per share except for
votes relating to "going  private" and certain other  transactions.  The Class A
Common  Stock,  the Class B Common  Stock and the Series B Preferred  Stock vote
together as a single class  except as otherwise  may be required by Maryland law
on all matters presented for a vote, with each share of Series B Preferred Stock
entitled to 3.64 votes on all such matters.  Holders of Class B Common Stock may
at any time  convert  their  shares  into the same  number  of shares of Class A
Common  Stock and  holders of Series B Preferred  Stock may at any time  convert
each share of Series B Preferred Stock into 3.64 shares of Class A Common Stock.

   (b) Shares of Class A Common  Stock  beneficially  owned  includes  shares of
Class B Common Stock  beneficially  owned, each of which is convertible into one
share of Class A Common Stock.

   (c)  Includes  532,645  shares  held in  irrevocable  trusts  established  by
Frederick G. Smith for the benefit of his children and as to which Mr. Smith has
the  power  to  acquire  by  substitution   of  trust   property.   Absent  such
substitution, Mr. Smith would have no power to vote or dispose of the shares.

   (d) Includes  521,695  shares held in  irrevocable  trusts  established by J.
Duncan  Smith for the benefit of his  children and as to which Mr. Smith has the
power to acquire by substitution of trust  property.  Absent such  substitution,
Mr. Smith would have no power to vote or dispose of the shares.

   (e) Includes  1,009,745  shares held in  irrevocable  trusts  established  by
Robert E. Smith for the benefit of his  children  and as to which Mr.  Smith has
the  power  to  acquire  by  substitution   of  trust   property.   Absent  such
substitution, Mr. Smith would have no power to vote or dispose of the shares.

   (f) Includes  32,500 shares of Class A Common Stock that may be acquired upon
exercise of options  granted in 1995 and 1996  pursuant to the  Incentive  Stock
Option Plan and Long Term Incentive Plan.

   (g) Consists of 1,382,435 shares of Class A Common Stock that may be acquired
upon  exercise of options  granted in 1996  pursuant to the Long Term  Incentive
Plan.

   (h) Shares of Class A Common Stock  beneficially  owned  includes 3.64 shares
for each share of Series B Preferred Stock  beneficially  owned as each share of
Series B Preferred  Stock is immediately  convertible  into  approximately  3.64
shares of Class A Common Stock.

   (i)  These  securities  are owned by  various  individual  and  institutional
investors to which T. Rowe Price Associates, Inc. ("Price Associates") serves as
investment  advisor with power to direct investments and/or sole voting power to
vote  the  securities.  For  purposes  of  the  reporting  requirements  of  the
Securities  Exchange Act of 1934,  Price Associates is deemed to be a beneficial
owner of such securities;  however, Price Associates expressly disclaims that it
is, in fact, beneficial owner of such securities.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   Since   December  31,  1995,   the  Company  has  engaged  in  the  following
transactions  with persons who are, or are members of the  immediate  family of,
directors,  persons expected to become a director, officers or beneficial owners
of 5% or more of the issued and  outstanding  Common Stock,  or with entities in
which such persons or certain of their relatives have interests.

WPTT NOTE

   In  connection  with the sale of WPTT in  Pittsburgh  by the Company to WPTT,
Inc.,  WPTT,  Inc.,  issued to the Company a 15-year senior secured term note of
$6.0 million (the "WPTT Note").  The Company  subsequently sold the WPTT Note to
the late Julian S. Smith and Carolyn C.  Smith,  the parents of the  Controlling
Stockholders  and both former  stockholders of the Company,  in exchange for the
payment of $50,000 and the issuance of a $6.6 million note, which bears interest
at 7.21% per annum and  requires  payments of interest  only  through  September
2001.  Monthly  principal  payments of $109,317  plus  interest are payable with
respect to this note  commencing in November 2001 and ending in September  2006,
at which time the remaining principal balance plus accrued interest,  if any, is
due. During the year ended December 31, 1996, the Company  received  $473,000 in
interest  payments on this note. At December 31, 1996,  the balance on this note
was $6,559,000.

WIIB NOTE

   In September  1990,  the Company sold all the stock of Channel 63, Inc.,  the
owner of WIIB in Bloomington,  Indiana, to the Controlling Stockholders for $1.5
million.  The purchase  price was  delivered in the form of a note issued to the
Company which was refinanced in June 1992 (the "WIIB Note"). The WIIB Note bears
interest  at 6.88% per  annum,  is payable in  monthly  principal  and  interest
payments of $16,000  until  September 30, 2000, at which time a final payment of
approximately  $431,000 is due.  Principal and interest paid in 1996 on the WIIB
Note was $174,000. At December 31, 1996, $1.0 million in principal amount of the
WIIB Note remained outstanding.

                                       48





BAY CREDIT FACILITY

   In connection with the  capitalization  of Bay Television,  Inc., the Company
agreed on May 17, 1990 to loan the  Controlling  Stockholders up to $3.0 million
(the "Bay Credit Facility").  Each of the loans to the Controlling  Stockholders
pursuant to the Bay Credit  Facility  is  evidenced  by an amended and  restated
secured note totaling $2.6 million due December 31, 1999 accruing  interest at a
fixed rate equal to 6.88%.  Principal  and  interest  are payable over six years
commencing  on March 31,  1994,  and are  required  to be repaid  quarterly  and
$480,000 was paid in 1996.  $600,000 is payable in 1997,  $660,000 is payable in
1998 and $718,000 is payable in 1999.  As of December  31,  1996,  approximately
$1.8 million in principal amount was outstanding under this note.

AFFILIATED LEASES

   From 1987 to 1992, the Company entered into five lease transactions with CCI,
a corporation  wholly owned by the  Controlling  Stockholders,  to lease certain
facilities from CCI. Four of these leases are 10-year leases for rental space on
broadcast  towers,  two of which are capital leases having renewable terms of 10
years.  The other  lease is a  month-to-month  lease for a portion of studio and
office space at which certain  satellite  dishes are located.  Aggregate  annual
rental  payments  related to these leases were  $498,000 in 1996.  The aggregate
annual rental  payments  related to these leases are scheduled to be $454,000 in
1997 and $474,000 in 1998.

   In  January  1991,  CTI  entered  into a 10-year  capital  lease  with KIG, a
corporation wholly owned by the Controlling Stockholders,  pursuant to which CTI
leases both an  administrative  facility  and  studios for station  WBFF and the
Company's present  corporate  offices.  Additionally,  in June 1991, CTI entered
into a one-year  renewable  lease with KIG pursuant to which CTI leases  parking
facilities at the administrative facility.  Payments under these leases with KIG
were $559,300 in 1996.  The  aggregate  annual  rental  payments  related to the
administrative  facility  are  scheduled  to be $616,400 in 1997 and $636,400 in
1998.  During 1996, the Company  chartered  airplanes owned by certain companies
controlled   by  the   Controlling   Stockholders   and  incurred   expenses  of
approximately $336,000 related to these charters.

TRANSACTIONS WITH GERSTELL

   Gerstell LP, an entity  wholly  owned by the  Controlling  Stockholders,  was
formed in April 1993 to acquire certain personal and real property  interests of
the Company in  Pennsylvania.  In a transaction  that was completed in September
1993,  Gerstell LP acquired the WPGH  office/studio,  transmitter and tower site
for an aggregate purchase price of $2.2 million. The purchase price was financed
in part by a $2.1 million note from  Gerstell LP bearing  interest at 6.18% with
principal  payments  beginning on November 1, 1994 and a final  maturity date of
October 1, 2013.  Principal  and interest paid in 1996 on the note was $188,000.
At December 31, 1996,  $2.0  million in  principal  amount of the note  remained
outstanding.  Following the acquisition,  Gerstell LP leased the  office/studio,
transmitter  and tower site to WPGH,  Inc. (a  subsidiary  of the  Company)  for
$14,875 per month and $25,000 per month, respectively.  The leases have terms of
seven years,  with four  seven-year  renewal  periods.  Aggregate  annual rental
payment  related to these leases was $534,000 in 1996.  Gerstell LP has arranged
for a $2.0 million loan (the "Gerstell  Loan") from a bank lender to provide for
construction  at the  studio/transmitter  site of an  expansion  to the existing
office  building/television  studio located there and for  construction of a new
tower  having an  aggregate  estimated  cost of $1.5  million.  The  Company has
guaranteed the Gerstell Loan. As of December 31, 1996,  $885,000 was outstanding
under the Gerstell Loan. The completed office building/television studio and the
new tower is leased from Gerstell LP by WPGH, Inc., a subsidiary of the Company.
The  Company  believes  that  the  leases  with  Gerstell  LP are on  terms  and
conditions customary in similar leases with independent third parties.

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 

                                       49





consideration  for stock  redemptions  equal to  72.65% of the then  outstanding
stock of the Company,  have principal  amounts of $7.5 million and $6.7 million,
respectively.  The Founders' Notes include stated interest rates of 8.75%, which
were payable annually from October 1990 until October 1992, then payable monthly
commencing April 1993 to December 1996, and then  semiannually  thereafter until
maturity. The effective interest rate approximates 9.4%. The Founders' Notes are
secured by security  interests in substantially all of the assets of the Company
and  its  Subsidiaries,   and  are  personally  guaranteed  by  the  Controlling
Stockholders.

   Principal and interest payments on the Founders' Note issued to the estate of
Julian S.  Smith are  payable,  in  various  amounts,  each  April and  October,
beginning  October  1991  until  October  2004,  with a balloon  payment  due at
maturity in the amount of $5.0 million. Additionally,  monthly interest payments
commenced  on April  1993 and  continued  until  December  1996.  Principal  and
interest paid in 1996 on this  Founders' Note was $860,000 At December 31, 1996,
$6.0 million in principal amount of this Founders' Note remained outstanding.

   Principal  payments  on the  Founders'  Note  issued to  Carolyn C. Smith are
payable,  in various  amounts,  each April and October,  beginning  October 1991
until October 2002.  Principal and interest paid in 1996 on this  Founders' Note
was $1.1 million. At December 31, 1996, $4.5 million in principal amount of this
Founders' Note remained outstanding.

RELATIONSHIP WITH GLENCAIRN

   Glencairn is a  corporation  owned by (i) Edwin L.  Edwards,  Sr. (3%),  (ii)
Carolyn C. Smith,  the mother of the  Controlling  Stockholders  (7%), and (iii)
certain  trusts  established  by  Carolyn  C.  Smith  for  the  benefit  of  her
grandchildren  (the  "Glencairn  Trusts")  (90%).  The 90%  equity  interest  in
Glencairn  owned by the  Glencairn  Trusts  is held  through  the  ownership  of
non-voting common stock. The 7% equity interest in Glencairn owned by Carolyn C.
Smith  is  held  through  the  ownership  of  common  stock  that  is  generally
non-voting,  except with respect to certain  specified  extraordinary  corporate
matters as to which this 7% equity interest has the controlling  vote.  Edwin L.
Edwards,  Sr. owns a 3% equity interest in Glencairn through ownership of all of
the issued and  outstanding  voting  stock of  Glencairn  and is Chairman of the
Board, President and Chief Executive Officer of Glencairn.

   There have been,  and the Company  expects  that in the future there will be,
transactions between the Company and Glencairn.  Glencairn is the owner-operator
and FCC licensee of WNUV in Baltimore, WVTV in Milwaukee, WRDC in Raleigh/Durham
and WABM in  Birmingham.  The  Company  has  entered  into LMAs  with  Glencairn
relating to WNUV,  WVTV,  WRDC and WABM  pursuant to which the Company  provides
programming to Glencairn for airing on WNUV, WVTV, WRDC and WABM,  respectively,
during  the hours of 6:00 a.m.  to 2:00 a.m.  each day and has the right to sell
advertising  during this period,  all in exchange for the payment by the Company
to  Glencairn  of  monthly fees totaling $446,000. 

   In June 1995,  the Company  acquired  options  from certain  stockholders  of
Glencairn  (the  "Glencairn  Options")  which  grant to the Company the right to
acquire, subject to applicable FCC rules and regulations, stock comprising up to
a 97% equity  interest  in  Glencairn.  Of the stock  subject  to the  Glencairn
Options,  a 90%  equity  interest  is  non-voting  and the  remaining  7% equity
interest is non-voting,  except with respect to certain extraordinary matters as
to which this 7% equity interest has the controlling vote. Each Glencairn Option
was  purchased  by the  Company  for  $1,000  ($5,000 in the  aggregate)  and is
exercisable  only  upon  the  Company's  payment  of an  option  exercise  price
generally  equal  to  the  optionor's   proportionate  share  of  the  aggregate
acquisition  cost of all  stations  owned by  Glencairn  on the date of exercise
(plus  interest  at a rate of 10% from the  respective  acquisition  date).  The
Company  estimates  that the aggregate  option  exercise price for the Glencairn
Options, if currently exercised, would be approximately $9.7 million.

   In  connection  with the River City  Acquisition,  the  Company  assigned  to
Glencairn  its option to purchase  certain  assets  relating to WFBC,  Anderson,
South  Carolina,  one of the River City stations.  In addition,  the Company has
agreed (subject to FCC approval) to sell to Glencairn for $2,000,000 the License
Assets of WTTE in Columbus, Ohio, which the Company currently owns.  The Company


                                       50

has applied with the FCC to acquire the License  Assets of a television  station
from River City located in the same market as WFBC. In addition, the Company has
an option to acquire  from  River City the assets of WSYX,  which is in the same
market as WTTE. See  "Business--Broadcasting  Acquisition Strategy." The Company
intends to enter into LMAs with Glencairn  relating to WFBC and WTTE pursuant to
which the Company will supply programming to Glencairn, obtain the right to sell
advertising  during the periods  covered by the  supplied  programming  and make
payments to Glencairn in amounts to be negotiated.

   Also in  connection  with the  River  City  Acquisition,  Glencairn  has been
granted an option to acquire  from the current  owner of the  License  Assets of
KRRT,  Kerrville,  Texas,  which is in the same  market as a station the Company
will acquire from River City. The Company will acquire the Non-License Assets of
KRRT,  and is expected to enter into an LMA with  Glencairn with respect to KRRT
pursuant to which the Company will supply  programming to Glencairn,  obtain the
right to sell advertising during the periods covered by the supplied programming
and make payments to Glencairn in amounts to be negotiated.

RIVER CITY TRANSACTIONS

   Roy F. Coppedge,  who will become a director of the Company upon satisfaction
of certain conditions, and Barry Baker, who will become a director and executive
officer  of the  Company as soon as  permissible  under the rules of the FCC and
applicable  laws,  each have a direct or indirect  equity interest in River City
Partners,  L.P.  Therefore,  Messrs.  Coppedge and Baker have an interest in the
River City  Acquisition,  which is described  above in "Business  --Broadcasting
Acquisition  Strategy."  During  1996,  the  Company  made LMA  payments of $1.4
million to River City. In September  1996, the Company  entered into a five-year
agreement  with  River City  pursuant  to which  River City will  provide to the
Company certain production services. Pursuant to this agreement, River City will
provide certain services to the Company in return for an annual fee of $416,000,
subject to certain adjustments on each anniversary date.

KEYMARKET OF SOUTH CAROLINA

   Kerby Confer,  who is expected to become an executive  officer of the Company
as soon as permissible  under the rules of the FCC and  applicable  laws, is the
owner of 100% of the common stock of Keymarket of South Carolina,  Inc. ("KSC"),
and the Company has an option to acquire either (i) all of the assets of KSC for
forgiveness  of debt in an  aggregate  principal  amount of  approximately  $7.4
million, plus payment of approximately $1.0 million, less certain adjustments or
(ii) all of the stock of KSC for $1.0  million,  less  certain  adjustments.  In
addition,  the Company leases two properties from Mr. Confer,  pursuant to which
the  Company  paid Mr.  Confer  $144,000  in 1996.  The  Company is  required to
purchase each of the properties  during the term of the applicable  lease for an
aggregate purchase price of approximately $1.75 million.

BEAVER DAM LIMITED LIABILITY COMPANY

   In May 1996, the Company,  along with the  Controlling  Stockholders,  formed
Beaver Dam Limited Liability Company ("BDLLC"),  of which the Company owns a 45%
interest. BDLLC was formed for the purpose of constructing and owning a building
which may be the site for the Company's corporate headquarters. The Company made
capital contributions to BDLLC in 1996 of approximately $380,000.

HERITAGE AUTOMATIVE GROUP

   In January, 1997, David D. Smith, the Company's President and Chief Executive
Officer and one of the Controlling  Shareholders,  made a substantial investment
in, and  became a member of the board of  directors  of,  Summa  Holdings,  Ltd.
which,  through wholly owned  subsidiaries,  owns the Heritage  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


                                       51





and operates new and used car  dealerships in the Baltimore  metropolitan  area.
Allstate owns and operates an automobile  and  equipment  leasing  business with
offices in the Baltimore, Richmond, Houston, and Atlanta metropolitan areas. The
Company  sells  Heritage and  Allstate  advertising  time on WBFF and WNUV,  the
television  stations  operated by the Company  serving the  Baltimore  DMA.  The
Company  believes  that the terms of the  transactions  between  the Company and
Heritage  and the  Company  and  Allstate  are and will be  comparable  to those
prevailing in similar transactions with or involving unaffiliated parties.



                                       52




                                   PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

   (a) (1) Index to Financial Statements

   The  financial  statements  required by this item are submitted in a separate
section beginning on page F-1 of this report.

Index to Financial Statements
                                                                      PAGE
                                                                     -------
Index to Financial Statements......................................    F-1
Report of Arthur Andersen LLP, Independent Public Accountants .....    F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 ......    F-3
Consolidated Statements of Operations for the Years Ended December
31, 1994, 1995 and 1996............................................    F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1994, 1995 and 1996.............................    F-5
Consolidated Statements of Cash Flows for the Years Ended December
31, 1994, 1995 and 1996............................................  F-6,7
Notes to Consolidated Financial Statements.........................    F-8


   (a) (2) Index to Financial Statement Schedules


   The  financial  statement  schedules  required by this item are  submitted on
pages S-1 through S-3 of this Report.

                                                                PAGE
                                                               ------
Index to Schedules...........................................  S-1
Report of Arthur Andersen LLP, Independent Public
Accountants..................................................  S-2
Schedule II - Valuation and Qualifying Account...............  S-3

   All other schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements of the notes
thereto.


                                       53





   (a) (3) Index to Exhibits



   EXHIBIT
   NUMBER                                               DESCRIPTION
   ------                                               ------------
           
3.1...........Amended and Restated Certificate of Incorporation (1)

3.2...........By-laws (2)

4.2...........Indenture, dated as of December 9, 1993, among  Sinclair  Broadcast Group, Inc., its wholly-owned 
              subsideries and First Union National Banks of North Carolina, as trustee. (2)

4.2...........Indenture, dated as of August 28,  1995, among  Sinclair  Broadcast Group, Inc., its wholly-owned  
              subsidiaries  and the United States Trust Company of New York as trustee. (2

10.1..........Asset Purchase Agreement dated as of April 10, 1996 by and between River City Broadcasting, L.P. as 
              seller and  Sinclair Broadcast Group, Inc. as buyer dated as of April 10, 1996. (3)

10.2..........Option Agreement, dated as of April 10, 1996, by and among River City Broadcasting, L.P., as sellers 
              and Sinclair Broadcast Group, Inc. dated as of April 10, 1996. (3)

10.3..........Modification Agreement , dated as of April 10, 1996,by and between River City Broadcast Group, L.P. 
              as seller, and Sinclair Broadcast Group, Inc. as buyer, with reference to Asset Purchase Agreement (3)

10.4..........Second Amended and Restated Credit Agreement, dated as of May 31, 1996, by and among Sinclair
              Broadcast Group, Inc., Subsidiary Guarantors and The Chase Manhattan Bank (National
              Association) as Agent. (1)

10.5..........Employment Agreement, dated as of April 10, 1996, with Barry Baker. (1)

10.6..........Indemnification Agreement, dated as of April 10, 1996, with Barry Baker. (1)

10.7..........Time Brokerage Agreement, dated as of May 31, 1996, by and among Sinclair Communications, Inc.,
              River City Broadcasting, L.P. and River City License Partnership and Sinclair Broadcast Group, Inc. (1)

10.8..........Registration Rights Agreement, dated as of May 31, 1996, by and between Sinclair Broadcast
              Group, Inc. and River City Broadcasting, L.P. (1)

10.9..........Time Brokerage Agreement, dated as of August 3, 1995, by and between River City Broadcasting,
              L.P. and KRRT, Inc. and Assignment and Assumption Agreement dated as of May 31, 1996 by and
              among KRRT, Inc., River City Broadcasting, L.P. and KABB, Inc. (as Assignee of Sinclair
              Broadcast Group, Inc.). (1)

10.10.........Loan Agreement, dated as of July 7, 1995, by and between Keymarket of South Carolina, Inc. and
              River City Broadcasting, L.P. and First Amendment to Loan Agreement dated as of May 24, 1996. (1)

10.11.........Option Agreement, dated as of July 7, 1995, by and among Keymarket of South Carolina, Kerby E.
              Confer and River City Broadcasting, L.P. (1)

10.12.........Letter Agreement, dated August 20, 1996, between Sinclair Broadcast Group, Inc., River City
              Broadcasting, L.P. and Fox Broadcasting Company. (4)

10.13.........Asset Purchase Agreement, dated January 31, 1997, by and between Channel 21, L.P. and KUPN, Inc.

10.14.........Promissory Note, dated as of May 17, 1990, in the principal amount of $3,000,000 among David D.
              Smith, Frederick G. Smith, J. Duncan Smith and Robert E. Smith (as makers) and Sinclair
              Broadcast Group, Inc., Channel 63, Inc., Commercial Radio Institute, Inc., WTTE, Channel 28,
              Inc. and Chesapeake Television, Inc. (as holders). (5)

10.15.........Term Note, dated as of September 30, 1990, in the principal amount of $7,515,000 between
              Sinclair Broadcast Group, Inc. (as borrower) and Julian S. Smith (as lender). (6)

                                       54




   EXHIBIT
   NUMBER                                               DESCRIPTION
   ------                                              -----------
10.16.........Replacement Term Note dated as of September 30, 1990 in the principal amount of $6,700,000
              between Sinclair Broadcast Group, Inc. (as borrower) and Carolyn C. Smith (as lender) (2)

10.17.........Note dated as of September 30, 1990 in the principal amount of $1,500,000 between Frederick G.
              Smith, David D. Smith, J. Duncan Smith and Robert E. Smith (as borrowers and Sinclair
              Broadcast Group, Inc. (as lender) (5)

10.18.........Amended and Restated Note dated as of June 30, 1992 in the principal amount of $1,458,489
              between Frederick G. Smith, David D. Smith, J. Duncan Smith and Robert E. Smith (as borrowers)
              and Sinclair Broadcast Group, Inc. (as lender) (5)

10.19.........Term Note dated August 1, 1992 in the principal amount of $900,000 between Frederick G. Smith,
              David D. Smith, J. Duncan Smith and Robert E. Smith (as borrowers) and Commercial Radio
              Institute, Inc. (as lender) (5)

10.20.........Management Agreement dated as of January 6, 1992 between Keyser Communications, Inc. and WPGH,Inc. (5)

10.21.........Promissory Note dated as of December 28, 1986 in the principal amount of $6,421,483.53 between
              Sinclair Broadcast Group, Inc. (as maker) and Frederick H. Himes, B. Stanley Resnick and
              Edward A. Johnston (as representatives for the holders) (5)

10.22.........Term Note dated as of March 1, 1993 in the principal amount of $6,559,000 between Julian S.
              Smith and Carolyn C. Smith (as makers-borrowers) and Commercial Radio Institute, Inc. (as
              holder-lender) (5)

10.23.........Restatement of Stock Redemption Agreement by and among Sinclair Broadcast Group, Inc. and
              Chesapeake Television, Inc., et al. dated June 19, 1990 (5)

10.24.........Corporate Guaranty Agreement dated as of September 30, 1990 by Chesapeake Television, Inc.,
              Commercial Radio, Inc., Channel 63, Inc. and WTTE, Channel 28, Inc. (as guarantors) to Julian
              S. Smith and Carolyn C. Smith (as lenders) (5)

10.25.........Security Agreement dated as of September 30, 1990 among Sinclair Broadcast Group, Inc.,
              Chesapeake Television, Inc., Commercial Radio Institute, Inc., WTTE, Channel 28, Inc. and
              Channel 63, Inc. (as borrowers and subsidiaries of the borrower) and Julian S. Smith and
              Carolyn C. Smith (as lenders) (5)

10.26.........Assignment of Leases dated as of September 22, 1993 between WPGH, Inc. (as assignee) and
              Commercial Radio Institute, Inc. (as assignor) (5)

10.27.........Assignment of Leases dated as of September 22, 1993 between Commercial Radio Institute, Inc.
              (as assignor) and Gerstell Development Limited Partnership (as assignee) (5)

10.28.........Assignment of Leases dated as of September 22, 1993 between Commercial Radio Institute, Inc.
              (as assignor) and Gerstell Development Limited Partnership (as assignee) (5)

10.29.........Term Note dated as of September 22, 1993, in the principal  amount of $1,900,000 between Gerstell 
              Development Limited Partnership (as maker-borrower) and Sinclair Broadcast Group, Inc. (as holder-lender) (5)

10.30.........Lease dated as of September 23, 1993, between Gerstell Development Limited Partnership and
              WPGH, Inc. (2)

10.31.........Lease Agreement dated as of September 23, 1993 between Gerstell Development Limited
              Partnership and WPGH, Inc. (2)

10.32.........Lease dated January 1, 1991 between Keyser Investment Group, Inc. and Chesapeake Television, Inc. (5)

10.33.........Lease Agreement dated as of April 2, 1987 between Cunningham Communications, Inc. and
              Chesapeake Television, Inc. as amended on September 23, 1993 (5)

                                       55




   EXHIBIT
   NUMBER                                               DESCRIPTION
   ------                                               ------------
10.34.........Lease Agreement dated as of April 1, 1992 between Cunningham Communications, Inc. and
              Chesapeake Television, Inc. as amended on September 23, 1993 (5)

10.35.........Lease Agreement dated as of June 1, 1991 between Cunningham Communications, Inc. and
              Chesapeake Television, Inc. as amended on September 23, 1993 (5)

10.36.........Lease Agreement dated March 8, 1979 between 525 Properties Limited
              and B&F  Broadcasting,  Inc.,  as  amended  on April 30,  1979 and
              September 18, 1986, and as assigned on September 22, 1986 by
              B&F Broadcasting, Inc. to HR Broadcasting Corporation of Milwaukee, Inc. (2)

10.37.........Incentive Stock Option Plan for Designated Participants (2)

11............Computation of Earnings Per Share

12............Computation of Ratio of Earnings to Fixed Charges

21............Subsidiaries of the Company

23............Consent of Independent Public Accountants

27............Financial Data Schedule


===========================
   (1)  Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended June 30, 1996

   (2) Incorporated by reference from Registration Statement on Form S-1, No.
33-90682

   (3)  Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended March 31, 1996

   (4)  Incorporated by reference from the Company's Report on Form 10-Q for the
quarterly period ended September 30, 1996.

   (5) Incorporated by reference from the Company's Registration Statement on
Form S-1, No. 33-69482

          (b) Reports on Form 8-K


   There were no reports on Form 8-K filed by the  Registrant  during the fourth
quarter of the fiscal year ended December 31, 1996.


                                       56





                                  SIGNATURES

   Pursuant  to the  requirements  of  Section  14 or  15(d)  of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned,  thereto duly authorized on February
25, 1997.

                                        SINCLAIR BROADCAST GROUP, INC.
                                        By: /s/ David B. Amy
                                            ----------------------------------
                                                David B. Amy
                                                Chief Financial Officer
                                                Principal Accounting Officer

   Pursuant to the  requirements  of the Securities Act of 1934, this report has
been signed below by the  following  persons on behalf of the  Registrant in the
capacities indicated on February 25, 1997. 



         SIGNATURE                                   TITLE
         ---------                                   -----
                          
     /s/ David D. Smith      President, Chief Executive Officer, Director,
- -------------------------    Chairman and Principal Executive Officer
     David D. Smith


  /s/ Frederick G. Smith     Vice President, Assistant Secretary and Director
- -------------------------
  Frederick G. Smith

    /s/ J. Duncan Smith      Vice President, Secretary and Director
- -------------------------
    J. Duncan Smith

    /s/ Robert E. Smith      Vice President, Treasurer and Director
- -------------------------
    Robert E. Smith

    /s/ Basil A. Thomas      Director
- -------------------------
    Basil A. Thomas

  /s/ Lawrence E. McCanna    Director
- -------------------------
  Lawrence E. McCanna

   /s/ William E. Brock      Director
- -------------------------
   William E. Brock




                                       57





               SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES

                        INDEX TO FINANCIAL STATEMENTS




                                                                                                PAGE
                                                                                                -----
                                                                                             
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
 Report of Independent Public Accountants.............................................           F-2
 Consolidated Balance Sheets as of December 31, 1995 and 1996.........................           F-3
 Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and
  1996................................................................................           F-4
 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994
  1995 and 1996.......................................................................           F-5
 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
  1996................................................................................           F-6, F-7
 Notes to Consolidated Financial Statements ..........................................           F-8















                                       F-1











                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                    ----------------------------------------


To the Stockholders of
Sinclair Broadcast Group, Inc.:

   We have  audited the  accompanying  consolidated  balance  sheets of Sinclair
Broadcast Group,  Inc. (a Maryland  corporation) and Subsidiaries as of December
31,  1995 and 1996,  and the  related  consolidated  statements  of  operations,
stockholders'  equity and cash flows for the years ended December 31, 1994, 1995
and 1996.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

   We  conducted  our audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly, in
all material respects,  the financial position of Sinclair Broadcast Group, Inc.
and  Subsidiaries  as of December  31,  1995 and 1996,  and the results of their
operations and their cash flows for the years ended December 31, 1994,  1995 and
1996, in conformity with generally accepted accounting principles.



                                                           ARTHUR ANDERSEN LLP
Baltimore, Maryland,
February 7, 1997


                                       F-2






                 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)




                                                                                            AS OF DECEMBER 31,
                                                                                            ------------------
                                                                                            1995        1996
                                                                                         ---------  ------------
                                                                                              
                                     ASSETS
CURRENT ASSETS:
 Cash, including cash equivalents of $108,720 and $-0-, respectively...................  $112,450   $    2,341
 Accounts receivable, net of allowance for doubtful accounts of $1,066 and $2,472,
  respectively.........................................................................    50,022      112,313
 Current portion of program contract costs.............................................    18,036       44,526
 Prepaid expenses and other current assets.............................................     1,972        3,704
 Deferred barter costs.................................................................     1,268        3,641
 Deferred tax assets ..................................................................     4,565        1,245
                                                                                         ---------- ------------
  Total current assets.................................................................   188,313      167,770
PROGRAM CONTRACT COSTS, less current portion...........................................    19,277       43,037
LOANS TO OFFICERS AND AFFILIATES.......................................................    11,900       11,426
PROPERTY AND EQUIPMENT, net............................................................    42,797      154,333
NON-COMPETE AND CONSULTING AGREEMENTS, net of accumulated amortization of $34,000 and
 $54,236, respectively.................................................................    30,379       10,193
DEFERRED TAX ASSET.....................................................................    16,462          --
OTHER ASSETS...........................................................................    27,355       64,235
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net of accumulated amortization of $49,746
 and $85,155, respectively.............................................................   268,789    1,256,303
                                                                                         ---------- ------------
 Total Assets..........................................................................  $605,272   $1,707,297
                                                                                         ========== ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT LIABILITIES:
 Accounts payable......................................................................  $  2,187   $   11,886
 Income taxes payable..................................................................     3,944          730
 Accrued liabilities...................................................................    20,720       35,030
 Current portion of long-term liabilities-
  Notes payable and commercial bank financing..........................................     1,133       62,144
  Capital leases payable...............................................................       524           44
  Notes and capital leases payable to affiliates.......................................     1,867        1,774
  Program contracts payable............................................................    26,395       58,461
 Deferred barter revenues..............................................................     1,752        3,576
                                                                                         ---------- ------------
  Total current liabilities............................................................    58,522      173,645
LONG-TERM LIABILITIES:
 Notes payable and commercial bank financing...........................................   400,644    1,212,000
 Capital leases payable................................................................        44          --
 Notes and capital leases payable to affiliates........................................    13,959       12,185
 Program contracts payable.............................................................    30,942       56,194
 Deferred tax liability................................................................       --           463
 Other long-term liabilities...........................................................     2,442        2,739
                                                                                         ---------- ------------
  Total liabilities....................................................................   506,553    1,457,226
                                                                                         ---------- ------------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES.........................................     2,345        3,880
                                                                                         ---------- ------------
COMMITMENTS AND CONTINGENCIES
EQUITY PUT OPTIONS.....................................................................        --        8,938
                                                                                         ---------- ------------
STOCKHOLDERS' EQUITY:
 Preferred stock, $.01 par value, 5,000,000 and 10,000,000 shares authorized and -0-
  and 1,138,318 issued and outstanding.................................................        --           11
 Class A Common stock, $.01 par value, 35,000,000 and 100,000,000 shares authorized and
  5,750,000 and 6,911,880 shares issued and outstanding, respectively..................        58           70
 Class B Common stock, $.01 par value, 35,000,000 shares authorized and 29,000,000 and
  27,850,581 shares issued and outstanding.............................................       290          279
 Additional paid-in capital............................................................   116,089      231,170
 Accumulated deficit...................................................................   (20,063)     (18,932)
 Additional paid-in capital -- stock options...........................................        --       25,784
 Deferred compensation.................................................................        --       (1,129)
                                                                                         ---------- ------------
  Total stockholders' equity...........................................................    96,374      237,253
                                                                                         ---------- ------------
  Total Liabilities and Stockholders' Equity...........................................  $605,272   $1,707,297
                                                                                         ========== ============

            The  accompanying  notes  are an  integral  part of these  consolidated  balance sheets.

                                       F-3


                 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)




                                                                    1994       1995       1996
                                                                 ---------- ---------- ----------
                                                                              
REVENUES:
 Station broadcast revenues, net of agency commissions of
  $21,235, $31,797 and $56,040, respectively...................  $118,611   $187,934   $346,459
 Revenues realized from station barter arrangements............    10,743     18,200     32,029
                                                                 ---------- ---------- ----------
  Total revenues...............................................   129,354    206,134    378,488
                                                                 ---------- ---------- ----------
OPERATING EXPENSES:
 Program and production........................................    15,760     28,152     66,652
 Selling, general and administrative...........................    25,578     36,174     75,924
 Expenses realized from station barter arrangements............     9,207     16,120     25,189
 Amortization of program contract costs and net realizable
  value adjustments............................................    22,360     29,021     47,797
 Amortization of deferred compensation.........................        --         --        739
 Depreciation and amortization of property and equipment.......     3,841      5,400     11,711
 Amortization of acquired intangible broadcasting assets,
  non-compete and consulting agreements and other assets.......    29,386     45,989     58,530
 Special bonuses to executive officers.........................     3,638         --         --
 Amortization of excess syndicated programming.................        --         --      3,043
                                                                 ---------- ---------- ----------
  Total operating expenses.....................................   109,770    160,856    289,585
                                                                 ---------- ---------- ----------
  Broadcast operating income...................................    19,584     45,278     88,903
                                                                 ---------- ---------- ----------

OTHER INCOME (EXPENSE):
 Interest and amortization of debt discount expense............   (25,418)   (39,253)   (84,314)
 Interest income...............................................     2,033      3,942      3,136
 Other income .................................................       414        221        342
                                                                 ---------- ---------- ----------
  Income (loss) before provision (benefit) for income taxes and
   extraordinary item..........................................    (3,387)    10,188      8,067
PROVISION (BENEFIT) FOR INCOME TAXES...........................      (647)     5,200      6,936
                                                                 ---------- ---------- ----------
 Net income (loss) before extraordinary item...................    (2,740)     4,988      1,131
EXTRAORDINARY ITEM:
 Loss on early extinguishment of debt, net of related income
  tax benefit of $3,357........................................        --     (4,912)        --
                                                                 ---------- ---------- ----------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS ............  $ (2,740)  $     76   $  1,131
                                                                 ========== ========== ==========
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE  .......
 Net income (loss) before extraordinary items..................  $   (.09)  $    .15   $    .03
 Extraordinary item ...........................................        --       (.15)        --
                                                                 ---------- ---------- ----------
 Net income (loss) per common and common equivalent share .....  $   (.09)  $     --   $    .03
                                                                 ========== ========== ==========
WEIGHTED AVERAGE COMMON AND COMMON
 EQUIVALENT SHARES OUTSTANDING ................................    29,000     32,205     37,381
                                                                 ========== ========== ==========




The accompanying notes are an integral part of these consolidated statements.

                                       F-4


               SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                (IN THOUSANDS)


                                                                                                              ADDITIONAL 
                                                                                                   RETAINED    PAID-IN   
                                                 SERIES A  SERIES B   CLASS A CLASS B  ADDITIONAL  EARNINGS    CAPITAL-  
                                                 PREFERRED PREFERRED  COMMON  COMMON    PAID-IN  (ACCUMULATED   STOCK    
                                                   STOCK     STOCK    STOCK   STOCK     CAPITAL    DEFICIT)    OPTIONS   
                                                                                                                         
                                                --------- ---------  ------- ------- ---------- ----------- ----------
                                                                                              
       
BALANCE, December 31, 1993.....................  $   --    $   --    $   --  $  290  $  4,733   $(16,047)   $    --   
 Realization of deferred gain..................      --        --        --      --        41         --         --   
 Net loss......................................      --        --        --      --        --     (2,740)        --   
                                                 --------- --------- ------- ------- ---------- ----------- ----------
BALANCE, December 31, 1994.....................      --        --        --     290     4,774    (18,787)        --   
 Issuance of common shares, net of related
  expenses of $9,288...........................      --        --        58     --    111,403         --         --   
 Non-cash distribution prior to KCI merger.....      --        --        --     --       (109)    (1,352)        --   
 Realization of deferred gain..................      --        --        --     --         21         --         --   
 Net income....................................      --        --        --     --         --         76         --   
                                                 --------- --------- ------- ------- ---------- ----------- ----------
BALANCE, December 31, 1995.....................      --        --        58    290    116,089    (20,063)        --   
 Class B Common Stock converted into Class A
  Common Stock.................................      --        --        11    (11)        --         --         --   
 Issuance of Series A Preferred Stock..........      12        --        --     --    125,067         --         --   
 Series A Preferred Stock converted into Series
  B Preferred Stock............................     (12)       12        --     --         --         --         --   
 Series B Preferred Stock converted into Class
  A Common Stock...............................      --        (1)        1     --         --         --         --   
 Repurchase of 30,000 shares of Class A Common
  Stock........................................      --        --        --     --       (748)        --         --   
 Stock option grants...........................      --        --        --     --         --         --     25,784   
 Income tax provision for deferred
  compensation.................................      --        --        --     --       (300)        --         --   
 Equity put options............................      --        --        --     --     (8,938)        --         --   
 Amortization of deferred compensation.........      --        --        --     --         --         --         --   
 Net income....................................      --        --        --     --         --      1,131         --   
                                                 --------- --------- ------- ------- ---------- ----------- ----------
BALANCE, December 31, 1996.....................  $   --    $   11    $   70  $ 279  $ 231,170   $(18,932)   $25,784   
                                                 ========= ========= ======= ======= ========== =========== ==========



                                                                   TOTAL 
                                                  DEFERRED      STOCKHOLDERS'
                                                COMPENSATION       EQUITY
                                                ------------   ---------------
                                                
BALANCE, December 31, 1993.....................   $    --        $(11,024)
 Realization of deferred gain..................        --              41 
 Net loss......................................        --          (2,740)
                                                  ------------ -------------
BALANCE, December 31, 1994.....................        --         (13,723)
 Issuance of common shares, net of related
  expenses of $9,288...........................        --         111,461
 Non-cash distribution prior to KCI merger.....        --          (1,461)
 Realization of deferred gain..................        --              21
 Net income....................................        --              76
                                                  ------------ -------------
BALANCE, December 31, 1995.....................        --          96,374
 Class B Common Stock converted into Class A
  Common Stock.................................        --              --
 Issuance of Series A Preferred Stock..........        --         125,079
 Series A Preferred Stock converted into Series
  B Preferred Stock............................        --              --
 Series B Preferred Stock converted into Class
  A Common Stock...............................        --              --
 Repurchase of 30,000 shares of Class A Common
  Stock........................................        --            (748)
 Stock option grants...........................    (1,868)         23,916
 Income tax provision for deferred
  compensation.................................        --            (300)
 Equity put options............................        --          (8,938)
 Amortization of deferred compensation.........       739             739
 Net income....................................        --           1,131
                                                  ------------ -------------
BALANCE, December 31, 1996.....................   $(1,129)       $237,253
                                                  ============ =============

The accompanying notes are an integral part of these consolidated statements.

                                       F-5


               SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES      PAGE 1 OF 2

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                 (IN THOUSANDS)
                                                                   




                                                                          1994       1995       1996
                                                                       ---------- ---------- ----------
                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)...................................................  $ (2,740)  $     76   $  1,131
 Adjustments to reconcile net income (loss) to net cash flows from
  operating activities-
  Extraordinary loss.................................................       --       8,269        --
  Amortization of excess syndicated programming......................       --         --       3,043
  Gain on sales of assets............................................       --        (221)       --
  Depreciation and amortization of property and equipment............     3,841      5,400     11,711
  Amortization of acquired intangible broadcasting assets,
   non-compete and consulting agreements and other assets ...........    29,386     45,989     58,530
  Amortization of program contract costs and net realizable value
   adjustments.......................................................    22,360     29,021     47,797
  Amortization of deferred compensation..............................       --         --         739
  Deferred tax benefit...............................................    (9,177)    (5,089)     2,330
  Realization of deferred gain.......................................      (152)       (42)       --
 Changes in assets and liabilities, net of effects of acquisitions
  and dispositions-
  Increase in accounts receivable, net...............................   (19,726)   (12,245)   (41,310)
  Increase in prepaid expenses and other current assets..............    (1,057)      (273)      (217)
  (Increase) decrease in other assets and acquired intangible
   broadcasting assets...............................................       910        (77)      (328)
  Increase in accounts payable and accrued liabilities...............     6,556      7,274     19,941
  Increase (decrease) in income taxes payable........................     5,481     (2,427)    (3,214)
  Net effect of change in deferred barter revenues and deferred
   barter costs......................................................       103        230       (908)
  Increase in other long-term liabilities............................       --         --         297
  Decrease in minority interest......................................       --         (38)      (121)
 Payments on program contracts payable...............................   (14,262)   (19,938)   (30,451)
 Payments for consulting agreements..................................      (742)       --         --
                                                                       ---------- ---------- ----------
   Net cash flows from operating activities..........................  $ 20,781   $ 55,909   $ 68,970
                                                                       ---------- ---------- ----------




The accompanying notes are an integral part of these consolidated statements.

                                       F-6







                 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES    PAGE 2 OF 2

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                 (IN THOUSANDS)
                                                                   




                                                                      1994        1995         1996
                                                                  ----------- ----------- -------------
                                                                                 
NET CASH FLOWS FROM OPERATING ACTIVITIES........................  $  20,781   $  55,909   $    68,970
                                                                  ----------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property and equipment.........................     (2,352)     (1,702)      (12,609)
  Payments for acquisition of television stations...............   (160,795)   (101,000)      (74,593)
  Payments related to the acquisition of the non-license assets
   of River City Broadcasting...................................        --          --       (818,083)
  Prepaid local marketing agreement fee.........................     (1,500)        --            --
  Payments for acquisition of certain other non-license assets..        --      (14,283)      (29,532)
  Payments for the purchase of outstanding stock of Superior
   Communications Group, Inc....................................        --          --        (63,504)
  Payments to exercise options to acquire certain FCC licenses..        --          --         (6,894)
  Purchase option extension payments relating to WSYX...........        --          --         (6,960)
  Payments for purchase of investments..........................       (502)        --            --
  Payment for WSTR subordinated note............................     (4,800)        --            --
  Payments for consulting and non-compete agreements............    (59,970)     (1,000)          (50)
  Payments for purchase options ................................    (17,500)     (9,000)          --
  Payment to exercise purchase option...........................        --       (1,000)          --
  Distributions (investments) in joint ventures.................        --          240          (380)
  Proceeds from disposal of property and equipment..............        --        3,330           --
  Proceeds from assignment of license purchase options..........        --        4,200           --
  Payment for WPTT subordinated convertible debenture...........        --       (1,000)          --
  Loans to officers and affiliates..............................        (50)       (205)         (854)
  Repayments of loans to officers and affiliates................        386       2,177         1,562
  Payments for organization of new subsidiaries.................       (198)        --            --
  Fees paid relating to subsequent acquisitions.................     (2,500)        --            --
                                                                  ----------- ----------- -------------
   Net cash flows used in investing activities..................   (249,781)   (119,243)   (1,011,897)
                                                                  ----------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from notes payable and commercial bank financing.....    224,985     138,000       982,500
  Repayments of notes payable, commercial bank financing and
   capital leases...............................................   (102,069)   (362,928)     (110,657)
  Payments of costs related to debt offering....................        --         (824)          --
  Payments of costs related to financing........................     (7,083)     (3,200)      (20,009)
  Payments for interest rate derivative agreements..............     (1,137)        --           (851)
  Repurchases of the Company's Class A Common Stock.............        --          --           (748)
  Prepayments of excess syndicated program contract liabilities.        --          --        (15,116)
  Payments for costs related to preferred stock offering not yet
   consummated..................................................        --          --           (434)
  Release of cash in escrow.....................................    100,000         --            --
  Proceeds from debt offering, net of $6,000 underwriters'
   discount.....................................................        --      294,000           --
  Repayments of notes and capital leases to affiliates..........     (1,286)     (3,171)       (1,867)
  Net proceeds from issuance of common shares...................        --      111,461           --
                                                                  ----------- ----------- -------------
   Net cash flows from financing activities.....................    213,410     173,338       832,818
                                                                  ----------- ----------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...........    (15,590)    110,004      (110,109)
CASH AND CASH EQUIVALENTS, beginning of period .................     18,036       2,446       112,450
                                                                  ----------- ----------- -------------
CASH AND CASH EQUIVALENTS, end of period........................  $   2,446   $ 112,450   $     2,341
                                                                  =========== =========== =============
SUPPLEMENTAL DISCLOSURES:
 Interest paid..................................................  $  27,102   $  24,770   $    82,814
                                                                  =========== =========== =============
 Income taxes paid..............................................  $   4,921   $   7,941   $     6,837
                                                                  =========== =========== =============




The accompanying notes are an integral part of these consolidated statements.


                                       F-7





                 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1994, 1995 AND 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The  accompanying  consolidated  financial  statements  include the  accounts of
Sinclair  Broadcast Group,  Inc.,  Sinclair  Communications,  Inc. and all other
consolidated subsidiaries,  which are collectively referred to hereafter as "the
Company,  Companies or SBG." The Company owns and operates  television and radio
stations   throughout   the  United  States.   Additionally,   included  in  the
accompanying  consolidated financial statements are the results of operations of
certain  television  stations pursuant to local marketing  agreements (LMAs) and
radio stations pursuant to joint sales agreements (JSAs).

PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements  include the accounts of the Company and
all  its  wholly-owned  and  majority-owned   subsidiaries.   Minority  interest
represents a minority  owner's  proportionate  share of the equity in two of the
Company's  subsidiaries.  In  addition,  the Company  uses the equity  method of
accounting for 20% to 50% ownership  investments.  All significant  intercompany
transactions and account balances have been eliminated.

USE OF ESTIMATES

The preparation of financial  statements in accordance  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses in the
financial   statements  and  in  the   disclosures  of  contingent   assets  and
liabilities. While actual results could differ from those estimates,  management
believes  that actual  results  will not be  materially  different  from amounts
provided in the accompanying consolidated financial statements.

CASH EQUIVALENTS

Cash equivalents are stated at cost plus accrued  interest,  which  approximates
fair value. Cash equivalents are highly liquid investment grade debt instruments
with an original  maturity of three months or less and consist of time  deposits
with a number of consumer banks with high credit ratings.

PROGRAMMING

The Companies have  agreements  with  distributors  for the rights to television
programming  over contract  periods which generally run from one to seven years.
Contract payments are made in installments over terms that are generally shorter
than the contract period.  Each contract is recorded as an asset and a liability
when the  license  period  begins  and the  program is  available  for its first
showing.  The  portion  of the  program  contracts  payable  within  one year is
reflected  as a  current  liability  in the  accompanying  consolidated  balance
sheets.

The rights to program  materials are reflected in the accompanying  consolidated
balance  sheets at the lower of  unamortized  cost or estimated  net  realizable
value.  Estimated net realizable values are based upon management's  expectation
of future  advertising  revenues net of sales commissions to be generated by the
program material.  Amortization of program contract costs is generally  computed
under either a four year accelerated method or based on usage,  whichever yields
the greater amortization for each program.  Program contract costs, estimated by
management to be amortized in the  succeeding  year,  are  classified as current
assets.  Payments  of  program  contract  liabilities  are  typically  paid on a
scheduled  basis  and  are not  affected  by  adjustments  for  amortization  or
estimated net realizable value.

On August 21, 1996, the Company entered into an agreement (the "Fox  Agreement")
with Fox Broadcasting Company, Inc. ("Fox") which, among other things,  provides
that affiliation  agreements  between Fox would be amended to have new five-year
terms commencing on the date of the Fox Agreement.


                                       F-8





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Fox  Agreement  also  provides  that the  Company  will  have  the  right to
purchase,  for fair market value, any station Fox acquires in a market currently
served by a Company  owned Fox  affiliate if Fox  determines  to  terminate  the
affiliation  agreement with the Company's station in that market and operate the
station acquired by Fox as a Fox affiliate.


In October 1996, WTTO did not renew its Fox affiliation and is now operated as a
WB  affiliate.  In  addition,  the  Company  has been  notified  by Fox of Fox's
intention to terminate WLFL's affiliation with Fox in the Raleigh-Durham  market
and WTVZ's  affiliation  with Fox in the Norfolk  market,  effective  August 31,
1998.

BARTER ARRANGEMENTS

Certain  program  contracts  provide for the exchange of advertising air time in
lieu of cash payments for the rights to such  programming.  These  contracts are
recorded  as  the  programs  are  aired  at  the  estimated  fair  value  of the
advertising  air  time  given  in  exchange  for  the  program  rights.  Network
programming is excluded from these calculations.

The Company broadcasts certain customers' advertising in exchange for equipment,
merchandise and services. The estimated fair value of the equipment, merchandise
or services  received is recorded as deferred barter costs and the corresponding
obligation to broadcast advertising is recorded as deferred barter revenues. The
deferred barter costs are expensed or capitalized as they are used,  consumed or
received.  Deferred barter revenues are recognized as the related advertising is
aired.

OTHER ASSETS

Other  assets as of December  31,  1995 and 1996  consist of the  following  (in
thousands):


                                                   1995      1996
                                                --------- ---------

      Unamortized debt acquisition costs.      $ 9,049   $26,453
      Investments in limited
        partnerships.....................        2,435     3,039 
      Notes receivable...................        4,775    10,773
      Purchase options...................       10,000    22,902
      Offering costs.....................           --       434
      Other..............................        1,096       634
                                              --------- ---------
                                               $27,355   $64,235
                                              ========= =========




NON-COMPETE AND CONSULTING AGREEMENTS

The Company has entered into non-compete and consulting  agreements with various
parties.  These  agreements  range from two to three  years.  Amounts paid under
these agreements are amortized over the life of the agreement.

ACQUIRED INTANGIBLE BROADCASTING ASSETS

Acquired intangible broadcasting assets are being amortized over periods of 1 to
40 years.  These amounts result from the  acquisition of certain  television and
radio station license and non-license assets (see Note 12). The Company monitors
the individual  financial  performance  of each of the stations and  continually
evaluates the  realizability of intangible and tangible assets and the existence
of any impairment to its recoverability based on the projected undiscounted cash
flows of the respective stations. 

                                       F-9





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible  assets,  at cost,  as of December 31, 1995 and 1996,  consist of the
following (in thousands):

                                  AMORTIZATION
                                     PERIOD        1995        1996
                                --------------- ---------- ------------
Goodwill......................  40 years        $109,772   $  676,219
Intangibles related to LMAs ..  15 years         103,437      120,787
Decaying advertiser base .....  1 -- 15 years     38,424       93,896
FCC licenses..................  25 years          44,564      370,533
Network affiliations..........  1 -- 25 years     17,482       55,966
Other.........................  1 -- 40 years      4,856       24,057
                                                ---------- ------------
                                                 318,535    1,341,458
Less- Accumulated
  amortization................                   (49,746)     (85,155)
                                                ---------- ------------
                                                $268,789   $1,256,303
                                                ========== ============




ACCRUED LIABILITIES

Accrued  liabilities  consist of the  following as of December 31, 1995 and 1996
(in thousands):


                                                   1995      1996
                                                --------- ---------

Compensation .................                   $ 4,847   $10,850
Interest......................                    11,104    11,915
Other.........................                     4,769    12,265
                                                --------- ---------
                                                 $20,720   $35,030
                                                ========= =========

NON-CASH TRANSACTIONS

During  1994,  1995 and 1996 the Company  entered  into the  following  non-cash
transactions (in thousands):

                                                   1994      1995      1996
                                                --------- --------- ---------
Purchase accounting adjustments related 
  to deferred taxes (Note 9)..................  $    --   $ 3,400   $17,615
                                                ========= ========= =========
Program contract costs acquired...............  $20,750   $26,918   $51,296
                                                ========= ========= =========
Distribution prior to KCI merger (Note 12)....  $    --   $ 1,461   $    --
                                                ========= ========= =========


LOCAL MARKETING AGREEMENTS

The Company  generally  enters into LMAs,  JSAs and  similar  arrangements  with
stations  located in markets in which the Company  already  owns and  operates a
station,  and in connection with acquisitions,  pending  regulatory  approval of
transfer of License  Assets.  Under the terms of these  agreements,  the Company
makes  specified  periodic  payments to the  owner-operator  in exchange for the
grant to the Company of the right to program and sell advertising on a specified
portion of the  station's  inventory of  broadcast  time.  Nevertheless,  as the
holder  of  the  FCC  license,  the  owner-operator  retains  full  control  and
responsibility  for the  operation  of the station,  including  control over all
programming broadcast on the station.

Included in the accompanying consolidated statements of operations for the years
ended December 31, 1994, 1995 and 1996, are net revenues of $25.0 million, $49.5
million and $153.0 million  (including  $103.3 million  relating to River City),
respectively, that relate to LMAs, JSAs and time brokerage agreements ("TBAs").

                                      F-10






                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In connection with the River City  Acquisition,  the Company entered into an LMA
in the form of TBAs with River  City and the owner of KRRT with  respect to each
of the nine  television  and 21 radio stations with respect to which the Company
acquired Non-License Assets. The TBAs are for a ten-year term, which corresponds
with the term of the option the Company  holds to acquire the related River City
License Assets.  The Company has filed applications with respect to the transfer
of the License Assets of seven of the nine television  stations and the 21 radio
stations  for which the Company  acquired  Non-License  Assets in the River City
Acquisition. Such applications have been granted and the transfer of the License
Assets has been  consummated  with respect to 19 of the 21 radio  stations.  The
approval  of the  transfer  of the two  remaining  radio  licenses is subject to
waiver of FCC cross-ownership  rules. Upon grant of FCC approval of the transfer
of License Assets with respect to these stations, the Company intends to acquire
the License Assets,  and thereafter the LMAs will terminate and the Company will
own and operate the  stations.  With  respect to the  remaining  two  television
stations,  Glencairn  has  applied for  transfer of the License  Assets of these
stations,  and the  Company  intends  to enter  into  LMAs with  Glencairn  Ltd.
("Glencairn",  see Note 8) with respect to these  stations  upon FCC approval of
the transfer of the License  Assets to Glencairn.  Petitions to deny or informal
objections  have been  filed  against  certain  of these  applications  by third
parties.  Management  believes  the  Company  will  ultimately  prevail on these
petitions.


RECLASSIFICATIONS

Certain   reclassifications  have  been  made  to  the  prior  years'  financial
statements to conform with the current year presentation.

2. PROPERTY AND EQUIPMENT:

Property  and  equipment  are  stated at cost,  less  accumulated  depreciation.
Depreciation  is computed  under the  straight-line  method  over the  following
estimated useful lives:


   Buildings and improvements..............................      10 -- 35 years
   Station equipment.......................................       5 -- 10 years
   Office furniture and equipment..........................       5 -- 10 years
   Leasehold improvements..................................      10 -- 31 years
   Automotive equipment....................................       3 --  5 years
   Property and equipment and autos under capital leases .. Shorter of 10 years
                                                              or the lease term

Property and  equipment  consisted of the  following as of December 31, 1995 and
1996 (in thousands):


                                                    1995       1996
                                                 ---------- ----------
Land and improvements..........................  $  1,768   $  9,795
Buildings and improvements.....................    17,515     39,008
Station equipment..............................    36,949    112,994
Office furniture and equipment.................     3,451     10,140
Leasehold improvements.........................     2,564      3,377
Automotive equipment...........................       677      3,280
Construction in progress.......................       --       6,923
                                                 ---------- ----------
                                                   62,924    185,517
Less- Accumulated depreciation and
 amortization..................................   (20,127)   (31,184)
                                                 ---------- ----------
                                                 $ 42,797   $154,333
                                                 ========== ==========



                                      F-11





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INTEREST RATE DERIVATIVE AGREEMENTS:


The Company  entered into  interest  rate  derivative  agreements  to reduce the
impact of changing interest rates on its floating rate debt,  primarily relating
to the Bank Credit  Agreement.  In May 1996, the Company amended its Bank Credit
Agreement.  The  agreement  requires  the  Company to enter into  Interest  Rate
Protection  Agreements  at rates not to exceed  9.5% per annum as to a  notional
principal  amount  at  least  equal  to 66 2/3 % of  the  Tranche  A term  loans
scheduled  to be  outstanding  from  time to time and  9.75%  per  annum as to a
notional  principal amount of 66 2/3 % of the aggregate amount of Tranche B term
loans scheduled to be outstanding from time to time.

At December  31, 1996,  the Company had several  interest  rate swap  agreements
relating to the Bank Credit  Agreement  which expire from March 31, 1997 to June
30,  2000.  The swap  agreements  set rates in the range of 5.84% to 7.00%.  The
notional amounts related to these agreements were $955.0 million at December 31,
1996, and decrease to $50.0 million  through the expiration  dates.  The Company
has no intentions of terminating  these  instruments  prior to their  expiration
dates unless it were to prepay a portion of its bank debt.

The  floating  interest  rates are based upon the three month  London  Interbank
Offered Rate (LIBOR)  rate,  and the  measurement  and  settlement  is performed
quarterly.  Settlements  of these  agreements  are  recorded as  adjustments  to
interest expense in the relevant  periods.  Premiums paid under these agreements
were  approximately  $1.1 million in 1994 and $851,000 in 1996 and are amortized
over the life of the  agreements.  The  counterparties  to these  agreements are
major national financial institutions.  The Company estimates the aggregate cost
to retire these instruments at December 31, 1996 to be $2.3 million.

4. NOTES PAYABLE AND COMMERCIAL BANK FINANCING:

BANK CREDIT AGREEMENT

In connection with the 1994 Acquisitions (see Note 12), the Company entered into
a Bank Credit Agreement.  The Bank Credit Agreement  consisted of three classes:
Facility A Revolving Credit and Term Loan, Facility B Credit Loan and Facility C
Term Loan. In August 1995, the Company utilized the net proceeds from the Public
Debt Offering mentioned below to repay amounts outstanding under the Bank Credit
Agreement.

The weighted average interest rates during 1994 and as of December 31, 1994 were
7.48% and 8.56%,  respectively,  and during 1995 while amounts were  outstanding
and as of August 28, 1995, when outstanding indebtedness relating to Bank Credit
Agreement  were repaid,  were 8.44% and 7.63%,  respectively.  Interest  expense
relating to the Bank Credit  Agreement was $9.4 million,  $15.6 million and $-0-
for  the  years  ended   December  31,  1994,   1995  and  1996,   respectively.
Simultaneously with the acquisition of the non-license assets of River City, the
aforementioned  Bank Credit Agreement was amended and replaced with new terms as
outlined below.

BANK CREDIT AGREEMENT AS AMENDED

In order to finance the acquisition of the non-license  assets of River City and
potential future acquisitions,  the Company amended its Bank Credit Agreement on
May 31, 1996. The Bank Credit  Agreement  consists of three  classes:  Tranche A
Term Loan, Tranche B Term Loan and a Revolving Credit Commitment.

The Tranche A Term Loan is a term loan in a principal  amount not to exceed $550
million and is scheduled to be paid in quarterly installments beginning December
31, 1996 through  December 31, 2002. The Tranche B Term Loan is a term loan in a
principal  amount not to exceed  $200  million  and is  scheduled  to be paid in
quarterly  installments  beginning  December 31, 1996 through November 2003. The
Revolving Credit Commitment is a revolving credit facility in a principal amount
not to  exceed  $250  million  and is  scheduled  to have  reduced  availability
quarterly beginning March 31, 1999 through 

                                      F-12





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

November 30, 2003. As of December 31, 1996,  outstanding  indebtedness under the
Tranche A Term Loan,  Tranche B Term Loan and the  Revolving  Credit  Commitment
were $520 million,  $198.5 million and $155 million,  respectively.  The Company
incurred debt  acquisition  costs of approximately  $20 million  associated with
this indebtedness which are being amortized over the life of the debt.


The  applicable  interest  rate for the  Tranche A Term  Loan and the  Revolving
Credit  Tranche is either LIBOR plus 1.25% to 2.5% or the base rate plus zero to
1.25%.  The  applicable  interest  rate  for the  Tranche  A Term  Loan  and the
Revolving  Credit  Tranche is adjusted  based on the ratio of total debt to four
quarters   trailing   earnings  before   interest,   taxes,   depreciation   and
amortization.  The  applicable  interest rate for Tranche B is either LIBOR plus
2.75% or the base rate plus  1.75%.  The  weighted  average  interest  rates for
outstanding  indebtedness  relating to the current Bank Credit  Agreement during
1996 and as of December 31, 1996, were 8.08% and 8.12%,  respectively.  Interest
expense  relating to the Bank Credit  Agreement  was $40.4  million for the year
ended December 31, 1996.

The fair value of the Company's  outstanding  indebtedness under the Bank Credit
Agreement approximated its carrying value at December 31, 1996.

The Company is required to maintain  certain debt  covenants in connection  with
the Bank Credit Agreement. As of December 31, 1996, the Company is in compliance
with all debt covenants.

PUBLIC DEBT OFFERING

In August 1995, the Company consummated the sale of $300.0 million of 10% Senior
Subordinated Notes (the Notes), due 2005, generating net proceeds to the Company
of $293.2  million.  The net proceeds of this  offering  were  utilized to repay
outstanding indebtedness under the then existing Bank Credit Agreement of $201.8
million  with the  remainder  being  retained  and  eventually  utilized to make
payments related to certain acquisitions consummated during 1996. In conjunction
with the repayment of outstanding  indebtedness under the Bank Credit Agreement,
the Company recorded an extraordinary loss of $4.9 million, net of a tax benefit
of $3.4 million.

Interest on the Notes is payable  semiannually  on March 30 and  September 30 of
each  year,  commencing  March 30,  1996.  Interest  expense  for the year ended
December 31, 1995 and 1996, was $10.4 million and $30.0  million,  respectively.
The notes are  issued  under an  indenture  among  SBG,  its  subsidiaries  (the
guarantors) and the trustee.  Costs  associated  with the offering  totaled $6.8
million,  including  an  underwriting  discount  of $6.0  million  and are being
amortized over the life of the debt.

The Company has the option to redeem the notes at any time on or after September
30, 2000. Redemption prices are as follows:



                                                 REDEMPTION PRICE
                 REDEMPTION DATE             (AS A % OF PRINCIPAL AMOUNT) 
            ------------------------------    --------------------------
            On or after September 30, 2000...            105%
                                      2001...            103%
                                      2002...            102%


Furthermore,  at any time on or prior to  September  30,  1998,  the Company may
redeem up to 25% of the  original  principal  amount  of the Notes  with the net
proceeds of a public equity offering at 110% of the principal amount.  The Notes
also  may be  redeemed  by the  holder  at 101%  of the  principal  amount  upon
occurrence of a change of control, as defined in the Indenture.

Based upon the quoted market  price,  the fair value of the Notes as of December
31, 1996 is $306 million.


                                      F-13





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Under the terms of the  Indenture,  the Notes are  guaranteed by the Company and
substantially  all of its  subsidiaries  (the  guarantors).  The  guarantors are
wholly-owned,   any  non-guarantors  are  inconsequential  to  the  consolidated
financial statements and the guarantees are full,  unconditional,  and joint and
several.


The  Indenture  contains  covenants  limiting  indebtedness,  transactions  with
affiliates, liens, sales of assets, issuances of guarantees of, and pledges for,
indebtedness, transfer of assets, dividends, mergers and consolidations.

SENIOR SUBORDINATED NOTES

In December 1993, the Company raised $200.0 million  through the issuance of 10%
senior subordinated notes (the 1993 Notes), due 2003. Subsequently,  the Company
determined that a redemption of $100.0 million was required. This redemption and
a refund of $1.0 million of fees from the  underwriters  took place in the first
quarter of 1994.  The  remaining  portion of the  proceeds of the 1993 Notes was
used to repay a secured debt facility and for general corporate purposes.

Interest on the 1993 Notes is payable semiannually on June 15 and December 15 of
each year.  Interest  expense for the years ended  December 31,  1994,  1995 and
1996, was $12.6 million, $10.0 million and $10.0 million, respectively. The 1993
Notes are issued under an Indenture among SBG, its subsidiaries (the guarantors)
and the  trustee.  Costs  associated  with the offering  totaled  $5.1  million,
including an underwriting  discount of $4.0 million.  These costs, less the $1.0
million  refund  related  to the  redemption,  were  capitalized  and are  being
amortized over the life of the debt.

The 1993 Notes may be  redeemed  by the holder at 101% of the  principal  amount
upon occurrence of a change of control, as defined in the Indenture. The Company
has the  option to redeem  the 1993  Notes any time  after  December  15,  1998.
Redemption prices are as follows: 

                                                      REDEMPTION PRICE
             REDEMPTION DATE                    (AS A % OF PRINCIPAL  AMOUNT)
      -----------------------------             -----------------------------
    On or after December 15, 1998.........                   105%
                             1999.........                   104%
                             2000.........                   103%
                             2001.........                   100%


Based  upon the  quoted  market  price,  the fair  value of the 1993 Notes as of
December 31, 1996, is $102 million.

Under the terms of the  Indenture,  the 1993 Notes are guaranteed by the Company
and substantially each of its subsidiaries (the guarantors).  The guarantors are
wholly-owned,   any  non-guarantors  are  inconsequential  to  the  consolidated
financial statements and the guarantees are full,  unconditional,  and joint and
several.

The  Indenture  contains  covenants  limiting  indebtedness,  transactions  with
affiliates, liens, sales of assets, issuances of guarantees of, and pledges for,
indebtedness, transfer of assets, dividends, mergers and consolidations.


                                      F-14






                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SUMMARY


Notes payable and  commercial  bank  financing  consisted of the following as of
December 31, 1995 and 1996 (in thousands):




                                                                           1995        1996
                                                                        ---------- ------------
                                                                             
Bank Credit Agreement, Tranche A Term Loan............................  $     --   $  520,000
Bank Credit Agreement, Tranche B Term Loan............................        --      198,500
Bank Credit Agreement, Revolving Credit Commitment....................        --      155,000
Senior subordinated notes due 2003, interest at 10%...................   100,000      100,000
Senior subordinated notes due 2005, interest at 10%...................   300,000      300,000
Unsecured installment notes to former minority stockholders of CRI
 and WBFF, interest at 18%............................................     1,777          644
                                                                        ---------- ------------
                                                                         401,777    1,274,144
Less: Current portion.................................................    (1,133)     (62,144)
                                                                        ---------- ------------

                                                                        $400,644   $1,212,000
                                                                        ========== ============




The Revolving  Credit  Commitment is a revolving  credit facility in a principal
amount not to exceed $250 million and is scheduled to have reduced  availability
quarterly beginning March 31, 1999 through November 30, 2003. Indebtedness under
Tranche A and Tranche B of the Bank  Credit  Agreement  and notes  payable as of
December 31, 1996, mature as follows (in thousands):


                    1997........................  $    62,144
                    1998........................       71,500
                    1999........................       91,500
                    2000........................      101,500
                    2001........................      101,500
                    2002 and thereafter.........      691,000
                                                   ------------
                                                  $ 1,119,144
                                                   ============


Substantially  all of the  Company's  assets have been  pledged as security  for
notes  payable  and  commercial  bank  financing.   In  addition,  the  Class  B
stockholders  have pledged  their stock in SBG to the  commercial  bank and have
delivered mortgages and security agreements as additional  collateral.  Further,
Cunningham  Communications,  Inc.  (Cunningham),  Keyser  Investment Group, Inc.
(KIG) and Gerstell  Development Limited Partnership  (Gerstell),  all businesses
that are owned and  controlled by these Class B  stockholders,  were required to
guarantee obligations to the commercial bank.

In January  1997,  the Company made the final  payment of $644,000  repaying the
remaining indebtedness to the former minority stockholders.


                                      F-15





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. NOTES AND CAPITAL LEASES PAYABLE TO AFFILIATES:


Notes and capital leases payable to affiliates  consisted of the following as of
December 31, 1995 and 1996 (in thousands):





                                                                                  1995      1996
                                                                               --------- ---------
                                                                                   
Subordinated installment notes payable to former majority owners, interest
at 8.75%, principal payments in varying amounts due annually beginning
October 1991, with a balloon payment due at maturity in May 2005 ............  $11,442   $10,448
Capital lease for building, interest at 17.5%................................    1,500     1,372
Capital leases for broadcasting tower facilities, interest rates averaging
10%..........................................................................      632       249
Capital leases for building and tower, interest at 8.25%.....................    2,252     1,890
                                                                               --------- ---------
                                                                                15,826    13,959
Less: Current portion........................................................   (1,867)   (1,774)
                                                                               --------- ---------
                                                                               $13,959   $12,185
                                                                               ========= =========




Notes and capital leases payable to affiliates,  as of December 31, 1996, mature
as follows (in thousands):


     1997....................................................  $ 2,856
     1998....................................................    2,654
     1999....................................................    2,666
     2000....................................................    2,540
     2001....................................................    1,920
     2002 and thereafter.....................................    7,872
                                                               ---------
     Total minimum payments due..............................   20,508
     Less: Amount representing interest......................   (6,549)
                                                               ---------
     Present value of future notes and capital lease
     payments................................................  $13,959
                                                               =========


6. PROGRAM CONTRACTS PAYABLE:

Future  payments  required  under program  contracts  payable as of December 31,
1996, are as follows (in thousands):




     1997.......................................    $ 58,461
     1998.......................................      33,216
     1999.......................................      18,331
     2000.......................................       3,665
     2001.......................................         430
     2002 and thereafter........................         552
                                                  ----------
                                                     114,655
     Less: Current portion......................     (58,461)
                                                  ----------
     Long-term portion of program contracts
     payable....................................    $ 56,194
                                                  ==========



                                      F-16





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Included in the current  portion  amounts are  payments  due in arrears of $10.9
million. In addition, the Companies have entered into noncancelable  commitments
for future program rights aggregating $60.5 million as of December 31, 1996.


The Company has  estimated the fair value of its program  contract  payables and
noncancelable  commitments  at  approximately  $51.3 million and $29.0  million,
respectively,  as of December 31, 1995,  and $102.7  million and $43.1  million,
respectively, at December 31, 1996, based on future cash flows discounted at the
Company's current borrowing rate.

7. PREPAYMENT OF SYNDICATED PROGRAM CONTRACT LIABILITIES:

In  connection  with the 1996  Acquisitions  (see Note 12), the Company  assumed
certain  syndicated  program contracts payable for which the underlying value of
the associated syndicated program assets was determined, by management, to be of
little or no value. The Company  negotiated the prepayment of syndicated program
contracts payable for certain of the 1996 Acquisitions, as well as certain other
of the Company's  subsidiaries.  The Company made cash payments  totaling  $15.1
million relating to these syndicated program contracts payable. For subsidiaries
owned  prior to 1996,  the Company  recognized  related  amortization  of excess
syndicated programming of $3.0 million.

8. RELATED PARTY TRANSACTIONS:

During 1990, WBFF sold certain  station  equipment to an affiliate for $512,000.
The sale is accounted for on an installment  basis since the affiliate is in the
start-up phase. The note is to be paid over five years and earns annual interest
at 11%. In connection with the start-up of this  affiliate,  certain SBG Class B
Stockholders  issued a note  allowing them to borrow up to $3.0 million from the
Company. This note was amended and restated June 1, 1994, to a term loan bearing
interest of 6.88% with quarterly  principal  payments  beginning  March 31, 1996
through  December  31,  1999.  As of  December  31,  1995 and 1996,  the balance
outstanding was approximately $2.0 and $1.8 million, respectively.

During 1990, SBG lent $1.5 million to certain Class B Stockholders pursuant to a
note.  The note  bears  interest  at 6.88% per annum and is  payable  in monthly
principal and interest payments through September 2000 with a balloon payment in
September  2000. As of December 31, 1995 and 1996, the balance  outstanding  was
approximately $1.1 million and $1.0 million respectively.

During the year ended December 31, 1993, the Company loaned Gerstell Development
Limited  Partnership (a partnership owned by Class B Stockholders) $2.1 million.
The note bears interest at 6.18%, with principal  payments beginning on November
1, 1994,  and a final  maturity date of October 1, 2013. As of December 31, 1995
and 1996, the balance  outstanding was approximately $2.0 million.  In addition,
Gerstell has arranged for a $2.0 million loan from a commercial  bank,  which is
guaranteed by the Company.

During 1993,  SBG lent $6.6  million to a former  majority  owner  pursuant to a
note.  The note  bears  interest  at 7.21% per annum and  requires  payments  of
interest only through  September 2001.  Monthly  principal and interest payments
with respect to this note commence in November 2001 and end in September 2006.

During 1994, the Company  assigned its options to purchase the license assets of
WNUV and WVTV to Glencairn for $4.2 million which was paid in 1995, and sold the
license  assets of WRDC to Glencairn for $2.0 million.  Subsequently,  Glencairn
exercised its options to purchase the licenses of WNUV and WVTV.  Glencairn is a
corporation of which a former  shareholder of SBG, who is also the holder of the
$6.6 million note described  above,  and trusts  established by this shareholder
hold the majority of the equity interests in Glencairn.  The Company has entered
into five-year LMA agreements  (with five-year  renewal  options) with Glencairn
for the right to program and sell advertising. During 1995 and 1996, the Company
made payments of $5.6 million and $5.4 million, respectively, to Glencairn under
these LMA agreements.


                                      F-17





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Concurrently  with the  initial  public  offering  (see  Note 13),  the  Company
acquired  options from  certain  stockholders  of Glencairn  that will grant the
Company the right to acquire,  subject to applicable FCC rules and  regulations,
up to 97% of  the  capital  stock  of  Glencairn.  The  Glencairn  options  were
purchased by the Company for nominal  consideration and will be exercisable only
upon payment of an aggregate price equal to Glencairn's  cost for the underlying
stations, plus a 10% annual return.


During  1995 and 1996,  the  Company  from  time to time  entered  into  charter
arrangements to lease  airplanes  owned by certain Class B Stockholders.  During
1995 and 1996,  the Company  incurred  expenses of  approximately  $489,000  and
$336,000 related to these arrangements, respectively.

In May 1996,  the Company  acquired  certain  assets  from River City,  obtained
options to acquire  other  assets  from  River City and  entered  into an LMA to
provide programming services to certain television and radio stations,  of which
River City is the owner of the  License  Assets.  Certain  individuals  who have
direct or  indirect  beneficial  owners of equity  interests  in River  City are
affiliates  of the Company.  During 1996,  the Company made LMA payments of $1.4
million to River City.

In September  1996,  the Company  entered into a five-year  agreement with River
City pursuant to which River City will provide to the Company certain production
services.  Pursuant to this agreement,  River City will provide certain services
to the  Company  in return  for an annual  fee of  $416,000,  subject to certain
adjustments on each anniversary date.

An  individual  who is an  affiliate  of the Company is the owner of 100% of the
common stock of Keymarket of South Carolina,  Inc. ("KSC"),  and the Company has
an option to acquire either (i) all of the assets of KSC for forgiveness of debt
in an aggregate principal amount of approximately $7.4 million,  plus payment of
approximately $1.0 million, less certain adjustments or (ii) all of the stock of
KSC for $1.0  million,  less  certain  adjustments.  The  Company is required to
purchase each of the properties  during the term of the applicable  lease for an
aggregate purchase price of approximately $1.75 million.

In May 1996, the Company, along with the Class B Stockholders, formed Beaver Dam
Limited  Liability  Company  (BDLLC),  of which the Company owns a 45% interest.
BDLLC was formed for the purpose of constructing and owning a building which may
be the site for the Company's corporate  headquarters.  The Company made capital
contributions of approximately $380,000.

Certain  assets used by the  Company's  operating  subsidiaries  are leased from
Cunningham, KIG and Gerstell (entities owned by the Class B Stockholders). Lease
payments  made to these  entities  were $1.2  million,  $1.3  million,  and $1.3
million for the years ended December 31, 1994, 1995 and 1996, respectively.

9. INCOME TAXES:

The Company files a consolidated  federal income tax return and separate company
state tax returns.  The  provision  (benefit)  for income taxes  consists of the
following as of December 31, 1994, 1995 and 1996 (in thousands):




                                                                  1994      1995     1996
                                                               --------- --------- --------
                                                                          
Provision (benefit) for income taxes before extraordinary
 item........................................................  $  (647)  $ 5,200   $6,936
Income tax effect of extraordinary item......................      --     (3,357)     --
                                                               --------- --------- --------
                                                               $  (647)  $ 1,843   $6,936
                                                               ========= ========= ========
Current:
 Federal.....................................................  $ 7,090   $ 5,374   $  127
 State.......................................................    1,440     1,558    4,479
                                                               --------- --------- --------
                                                                 8,530     6,932    4,606
                                                               --------- --------- --------
Deferred:
 Federal ....................................................   (7,650)   (4,119)   2,065
 State.......................................................   (1,527)     (970)     265
                                                               --------- --------- --------
                                                                (9,177)   (5,089)   2,330
                                                               --------- --------- --------
                                                               $  (647)  $ 1,843   $6,936
                                                               ========= ========= ========



                                      F-18





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The  following is a  reconciliation  of federal  income taxes at the  applicable
statutory rate to the recorded provision (benefit):



                                                 1994     1995    1996
                                              --------- ------- -------
                                                       
Statutory federal income taxes..............  (34.0)%      34.0%   34.0%
Adjustments-
 State income taxes, net of federal effect..    1.8         1.7     8.1
 State franchise taxes, net of federal
  effect....................................    0.8         1.1    10.8
 Non-deductible goodwill amortization.......   14.1        11.9    25.2
 Non-deductible expense items ..............    6.3         3.0     6.4
 Income of pooled S corporation (Note 12) ..   (7.6)      --      --
 Other......................................   (0.5)       (0.7)    1.5
                                              --------- ------- -------
 Provision (benefit) for income taxes.......  (19.1)%      51.0%   86.0%
                                              ========= ======= =======




Temporary  differences  between the financial reporting carrying amounts and the
tax basis of assets and liabilities give rise to deferred taxes. The Company had
a net deferred  tax asset of $21.0  million and $782,000 as of December 31, 1995
and 1996,  respectively.  The  realization  of deferred tax assets is contingent
upon the  Company's  ability to generate  sufficient  future  taxable  income to
realize the future tax  benefits  associated  with the net  deferred  tax asset.
Management  believes  that  deferred  assets  will be  realized  through  future
operating  results.  This  belief is based on taxable  income for the year ended
December 31, 1996 and its projection of future years' results.

The Company has total available federal NOL's of approximately  $15.0 million as
of December  31,  1996,  which expire  during  various  years from 2004 to 2011.
Certain NOL's are limited to use within a specific entity, and certain NOL's are
subject to annual  limitations  under  Internal  Revenue  Code  Section  382 and
similar state provisions.

Total  deferred tax assets and deferred tax  liabilities as of December 31, 1995
and 1996, including the effects of businesses  acquired,  and the sources of the
difference  between  financial  accounting and tax bases of the Company's assets
and  liabilities  which give rise to the  deferred  tax assets and  deferred tax
liabilities and the tax effects of each are as follows (in thousands): 



                                                  1995      1996
                                                --------- ---------
Deferred Tax Assets:
 Accruals and reserves..........                  $ 1,110   $ 2,195
 Loss on disposal of fixed    
  assets........................                      619       --
 Net operating losses...........                    2,676     4,829
 Program contracts..............                    4,575     2,734
 Fixed assets and intangibles ..                   14,500       --
 Other..........................                      373       713
                                                 --------- ---------
                                                  $23,853   $10,471
                                                 ========= =========
Deferred Tax Liabilities:
 FCC license....................                  $ 1,656   $ 2,613
 Hedging instruments ...........                      --        188
 Fixed assets and intangibles...                      --      4,430
 Capital lease accounting.......                      988     1,304
 Affiliation agreement .........                      --        691
 Investment in partnerships ....                      --        209
 Other..........................                     182        254
                                                 --------- ---------
                                                 $ 2,826   $ 9,689
                                                 ========= =========



                                      F-19





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


During 1995, the Company made a $3.4 million deferred tax adjustment to decrease
its  deferred  tax asset and increase  goodwill  under the  purchase  accounting
guidelines  of APB 16 and in  accordance  with SFAS 109  related to the  opening
deferred tax asset  balances of certain  1994  acquisitions.  During  1996,  the
Company made a $1.1 million deferred tax adjustment to decrease its deferred tax
asset and increase goodwill under the purchase  accounting  guidelines of APB 16
and in  accordance  with SFAS 109  related  to the  opening  deferred  tax asset
balances of certain 1995 acquisitions.

10. EMPLOYEE BENEFIT PLAN:

The Sinclair Broadcast Group, Inc. 401(k) profit sharing plan and trust (the SBG
Plan) covers eligible  employees of the Company.  Contributions  made to the SBG
Plan include an employee  elected  salary  reduction  amount,  company  matching
contributions  and a discretionary  amount  determined each year by the Board of
Directors.  The Company's  401(k) expense for the years ended December 31, 1994,
1995 and 1996, was $274,000, $271,000 and $657,000,  respectively. There were no
discretionary contributions during these periods.

11. CONTINGENCIES AND OTHER COMMITMENTS:

LITIGATION

Lawsuits  and  claims are filed  against  the  Company  from time to time in the
ordinary course of business.  These actions are in various  preliminary  stages,
and no judgments or decisions  have been  rendered by hearing  boards or courts.
Management,  after reviewing  developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on the Company's financial position or results of operations.

OPERATING LEASES

The Company has entered into operating leases for certain property and equipment
under  terms  ranging  from three to ten years.  The rent  expense  under  these
leases,  as well as certain leases under  month-to-month  arrangements,  for the
years ended December 31, 1994, 1995 and 1996, aggregated approximately $625,000,
$1.1 million and $3.1 million, respectively.

Future minimum payments under the leases are as follows (in thousands):


               1997...............  $ 3,672
               1998...............    3,055
               1999...............    2,244
               2000...............    1,789
               2001...............    1,206
               2002 and
                thereafter.........   5,430
                                   ---------
                                    $17,396
                                   =========



CERTAIN AFFILIATION AGREEMENTS

The  Company  generally  operates  its  television  stations  under  affiliation
agreements with Fox, ABC, UPN, WB and CBS. These  agreements range in terms from
one to five years and in  certain  circumstances  have  renewable  options.  The
Company has the option to acquire the FCC  licenses  of certain  stations  being
operated as LMAs. The networks  affiliated with these stations,  other than Fox,
have the right to terminate the  affiliations  upon transfer of the license.  In
addition,  KDNL (St.  Louis) is being  operated as an ABC affiliate  pursuant to
terms negotiated with ABC, but no affiliation  agreement has been signed and ABC
is not paying  affiliation fees, and WLOS (Asheville) is being operated pursuant
to

                                      F-20




                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

terms  negotiated  with  ABC to  replace  an  existing  agreement,  but  the new
agreement  has not been  signed  and ABC is paying  the lower  affiliation  fees
called for under the old agreement. The Company has accrued ABC affiliation fees
for KDNL and WLOS based on the anticipated settlement.

12. ACQUISITIONS:

1994 ACQUISITIONS

In May 1994, the Company acquired WCGV and WTTO for an aggregate  purchase price
of $60.0 million. The acquisition was accounted for under the purchase method of
accounting  whereby the purchase price was allocated to the fair market value of
the assets  purchased and the  liabilities  assumed.  Based upon an  independent
appraisal,  $11.7  million was allocated to property and  programming  costs and
$29.9 million was allocated to acquired  broadcasting  assets. The excess of the
purchase price over the acquired  assets of $18.4 million was allocated to other
intangible  assets,  and is being  amortized over 40 years.  The Company made an
additional  investment  of  $56.0  million  for  covenants   not-to-compete  and
consulting  agreements in these and the  Company's  current  markets,  which are
being amortized over the lives of the respective agreements.

Simultaneous  with the  acquisition of WCGV and WTTO,  the Company  acquired the
non-license assets of WNUV and WVTV for approximately  $66.8 million and entered
into LMAs with the owner of the licenses of WNUV and WVTV. The  acquisition  was
accounted for under the purchase  method of accounting  whereby $14.8 million of
the purchase price was allocated to property and programming  costs and $700,000
of the  purchase  price was  allocated  to deferred  tax  liabilities,  with the
remainder being allocated to other intangible  assets. The intangible assets are
being amortized over 15 years.

Simultaneous  with the acquisitions of the non-license  assets of WNUV and WVTV,
the  Company  acquired  the  options to  purchase  the  license  assets of these
stations for $8.0  million and  intangible  assets  related to the LMAs for $9.5
million,  for a total purchase price of $17.5 million.  The Company subsequently
assigned the options to Glencairn  for $4.2  million.  The Company is amortizing
the difference  between the total amount paid for the options by the Company and
the amount  allocated to the value of the options over the estimated life of the
LMA, which is 15 years.

In August 1994, the Company acquired 100% of the non-voting stock representing a
98% ownership interest in F.S.F.  Acquisition  Corporation (FSFA), the corporate
parent of WRDC,  for $34.0 million.  The investment  also includes a controlling
interest  in a joint  venture  which owns the studio and office  building  and a
minority  interest in a partnership  that owns the TV broadcast tower. The joint
venture has been consolidated, with the other owners' share of equity shown as a
minority  interest,  while the  partnership  interest  has been  presented as an
investment and is included in other assets. The purchase was accounted for under
the purchase  method of accounting  whereby the purchase  price was allocated to
property and programming  assets,  acquired  intangible  broadcasting assets and
other  intangible  assets for $10.0  million,  $7.0  million and $17.0  million,
respectively,  based upon an independent appraisal.  Intangible assets are being
amortized over periods of 10 to 15 years.  Simultaneous with the purchase of the
nonvoting  stock of FSFA,  the Company  acquired an option to acquire the voting
common stock of FSFA. Additionally, the Company entered into two year consulting
and  non-compete  agreements with the former owner of the voting common stock of
FSFA for $4.0 million.

1995 ACQUISITIONS AND DISPOSITIONS

In January  and May 1995,  the  Company  acquired  the  non-license  and license
assets, respectively, of WTVZ in Norfolk, Virginia for a purchase price of $49.0
million.  The  acquisition  was  accounted  for  under  the  purchase  method of
accounting  whereby the purchase price was allocated to property and programming
assets,  acquired intangible broadcasting assets and other intangible assets for
$1.4  million,  $12.6  million and $35.0  million,  respectively,  based upon an
independent appraisal. Intangible assets are being amortized over 1 to 40 years.


                                      F-21





                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In January 1995, the Company acquired the license and non-license  assets of the
Paramount Station Group of Raleigh/Durham, Inc. which owned and operated WLFL in
Raleigh-Durham,  North Carolina for $55.5  million,  plus the assumption of $3.7
million in  liabilities.  The  acquisition  was accounted for under the purchase
method of  accounting  whereby the purchase  price was allocated to property and
programming assets, acquired intangible broadcasting assets and other intangible
assets for $8.6 million,  $15.9 million and $34.7 million,  respectively,  based
upon an  independent  appraisal.  Intangible  assets  are being  amortized  over
periods of 1 to 40 years.


On March 31,  1995,  the  Company  exercised  its option to acquire  100% of the
voting stock of FSFA for the exercise price of $100.  FSFA was merged into WLFL,
Inc. and became a wholly-owned  subsidiary of the Company.  Simultaneously,  the
Company  sold the license  assets of FSFA to  Glencairn  for $2.0  million,  and
entered into a five-year LMA (with a five-year  renewal  option) with  Glencairn
(see Note 8).

On  May 5,  1995,  Keyser  Communications,  Inc.  (KCI),  an  affiliated  entity
wholly-owned by the stockholders of the Company, was merged into the Company for
common stock.  Certain  assets and  liabilities  of KCI (other than  programming
items, an LMA agreement and consulting agreements),  were distributed to the KCI
shareholders immediately prior to the merger. The merger of KCI is being treated
as a  reorganization  and has  been  accounted  for as a  pooling  of  interests
transaction.  Accordingly, the consolidated financial statements for all periods
presented have been restated to include the accounts of KCI.

Combined  and  separate  results of the  Company and KCI  (through  May 5, 1995,
merger date) during the period presented are as follows (in thousands):




                                                   COMPANY     KCI      COMBINED
                                                 ---------- --------- -----------
                                                             
Twelve months ended December 31, 1994:
 Net broadcast revenues........................  $113,728   $4,883    $118,611
 Income (loss) before provision for income
  taxes........................................    (4,147)     760      (3,387)
 Net income (loss).............................    (3,500)     760      (2,740)
Twelve months ended December 31, 1995:
 Net broadcast revenues........................  $186,031   $1,903    $187,934
 Income (loss) before provision for income
  taxes........................................    10,592     (404)     10,188
 Net income (loss).............................       480     (404)         76




In July 1995, the Company acquired the non-license assets of WABM in Birmingham,
Alabama for a purchase price of $2.5 million.  The acquisition was accounted for
under the  purchase  method of  accounting  whereby $1.1 million of the purchase
price was allocated to property and program  assets,  based upon an  independent
appraisal.  The  excess  of the  purchase  price  over the  acquired  assets  of
approximately $1.4 million was allocated to other intangible assets and is being
amortized over 15 years.  Simultaneously with the purchase,  the Company entered
into a five-year LMA agreement (with a five-year renewal option) with Glencairn.

In  November  1995,  the  Company  acquired  the  non-license  assets of WDBB in
Tuscaloosa,  Alabama for a purchase price of $400,000. In addition,  the Company
made "Option Grant  Payments" of $11.3 million to certain parties for options to
purchase the issued and outstanding stock of WDBB, Inc., which holds the license
assets of WDBB. The option agreement  further provides for the payment of option
grant  installments  of $2.6 million over five years and a final option exercise
price of $100,000.  The  acquisition was accounted for under the purchase method
of  accounting  whereby $1.3  million was  allocated to the property and program
assets based upon an independent  appraisal.  The total of Option Grant Payments
paid and grant  installments  accrued of $13.1  million was  allocated  to other
intangible assets and is being amortized over 15 years.

                                      F-22





                 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1996 ACQUISITIONS


RIVER CITY ACQUISITION

In April 1996,  the  Company  entered  into an  agreement  to  purchase  certain
non-license  assets  of  River  City.  In  May  1996,  the  Company  closed  the
transaction for a purchase price of $967.1 million,  providing as  consideration
1,150,000  shares of Series A  Convertible  Preferred  Stock with a fair  market
value of $125.1  million,  1,382,435  stock  options with a fair market value of
$23.9 million and cash payments  totaling $818.1 million.  The Company  utilized
indebtedness  under its Bank Credit  Agreement to finance the  transaction.  The
acquisition  was accounted for under the purchase  method of accounting  whereby
the purchase price was allocated to property and  programming  assets,  acquired
intangible  broadcasting  assets and other intangible  assets for $82.8 million,
$375.6  million  and $508.7  million,  respectively,  based upon an  independent
appraisal. Intangible assets are being amortized over 1 to 40 years.

Simultaneously,  the Company entered into option  agreements to purchase certain
license  assets  for an  aggregate  option  exercise  price of $20  million.  In
September 1996, after receiving FCC approval for license  transfer,  the Company
made a cash payment of $6.9 million to acquire  certain of the radio station FCC
licenses.

Also,  simultaneously  with the acquisition,  the Company entered into an option
agreement  to purchase the license and  non-license  assets of WSYX in Columbus,
Ohio,  for the option  purchase  price of $130  million plus the amount of River
City indebtedness secured by the WSYX assets on the exercise date (not to exceed
the amount at the date of closing of $105 million).  Pursuant to the WSYX option
agreement,  the Company is required to make certain "Option  Extension Fees", as
defined.  These fees are required to begin quarterly beginning with December 31,
1996,  through the earlier of the "Option Grant Date" or the expiration  date of
June 30, 1999.  The Option  Extension Fees are calculated as 8% per annum of the
option  purchase  price through the first  anniversary of the Option Grant Date,
15% per annum of the option purchase price through the second anniversary of the
Option  Grant Date and 25% per annum of the option  purchase  price  through the
expiration of the WSYX option agreement.  On December 31, 1996, the Company made
an Option  Extension Fee payment of $7.0 million which was recorded within Other
Assets in the accompanying balance sheets.

In  conjunction  with the River City  acquisition,  the Company  entered into an
agreement to purchase the non-license assets of KRRT, Inc., a television station
in San Antonio,  Texas,  for a purchase price of $29.5 million.  The acquisition
was accounted for under the purchase  method of accounting  whereby the purchase
price was  allocated to property and  programming  assets,  acquired  intangible
broadcasting  assets and other intangible assets for $3.8 million,  $0.4 million
and $25.3 million, respectively, based upon an independent appraisal. Intangible
assets are being amortized over 1 to 15 years.

In  connection  with the River City  acquisition,  the Company  consummated  the
following transactions concurrent with or subsequent to the closing:

    1.In June  1996,  the  Board  of  Directors  of the  Company  adopted,  upon
      approval of the  stockholders  by proxy,  an  amendment  to the  Company's
      amended and restated charter. This amendment increased the number of Class
      A  Common  Stock  shares  authorized  to be  issued  by the  Company  from
      35,000,000 shares to 100,000,000  shares. The amendment also increased the
      number of shares of preferred stock  authorized  from 5,000,000  shares to
      10,000,000 shares.

    2.Series A Preferred Stock -- As partial  consideration  for the acquisition
      of the  non-license  assets of River City,  the Company  issued  1,150,000
      shares of Series A Preferred  Stock.  In June 1996, the Board of Directors
      of the Company  adopted,  upon approval of the  stockholders  by proxy, an
      amendment  to the  Company's  amended and  restated  charter at which time
      Series A Preferred  Stock was exchanged  for and  converted  into Series B
      Preferred Stock. The Company

                                      F-23




                 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      recorded the issuance of Series A Preferred Stock based on the fair market
      value at the date the River City acquisition was announced at the exchange
      rate of 3.64  shares of Class A Common  Stock  for each  share of Series A
      Preferred Stock.

    3.Series B  Preferred  Stock --  Shares  of  Series B  Preferred  Stock  are
      convertible  at any time into  shares of Class A Common  Stock,  with each
      share of Series B Preferred  Stock  convertible  into  approximately  3.64
      shares of Series A Common Stock. The Company may redeem shares of Series B
      Preferred  Stock  only after the  occurrence  of  certain  events.  If the
      Company  seeks to  redeem  shares  of  Series B  Preferred  Stock  and the
      stockholder  elects to retain the shares, the shares will automatically be
      converted into common stock on the proposed redemption date. All shares of
      Series B Preferred  stock  remaining  outstanding as of May 31, 2001, will
      automatically  convert into Class A Common Stock. Series B Preferred Stock
      is  entitled to 3.64 votes on all  matters  with  respect to which Class A
      Common Stock has a vote.

    4. Stock Options and Awards:

    Long-Term Incentive Plan-

      In June 1996,  the  Board  of  Directors  adopted,  upon  approval  of the
      stockholders  by proxy,  the 1996 Long-Term  Incentive Plan of the Company
      (the  "LTIP").  The purpose of the LTIP is to reward key  individuals  for
      making  major  contributions  to  the  success  of  the  Company  and  its
      subsidiaries  and to attract  and retain the  services  of  qualified  and
      capable employees.  A total of 2,073,673 shares of Class A Common Stock is
      reserved and available  for awards under the plan. In connection  with the
      River City acquisition,  244,500 options were granted to certain employees
      and  1,382,435  were  granted  to Barry  Baker (see  Executive  Employment
      Agreement  below)  under  this plan with an  exercise  price of $30.11 per
      share.

      The Company recorded  deferred  compensation of $1.9 million as additional
      paid-in  capital at the stock  option  grant  date.  During the year ended
      December 31, 1996,  compensation expense of $739,000 was recorded relating
      to the options issued under the LTIP. The remaining deferred  compensation
      of  approximately  $1.2  million  will  be  recognized  as  expense  on  a
      straight-line basis over the vesting period.

      Incentive Stock Option Plan-

      In June  1996,  the  Board of  Directors  adopted,  upon  approval  of the
      stockholders by proxy, certain amendments to the Company's Incentive Stock
      Option Plan.  The purpose of the amendments was (i) to increase the number
      of shares of Class A Common Stock  approved  for  issuance  under the plan
      from 400,000 to 500,000,  (ii) to delegate to Barry Baker the authority to
      grant  certain  options,  (iii) to  lengthen  from two  years to three the
      period after date of grant before options become exercisable,  (iv) and to
      provide immediate termination and three-year ratable vesting of options in
      certain circumstances.  In connection with the River City acquisition, the
      Company granted 287,000 options to key management employees at an exercise
      price of $37.75, the fair market value at the date of grant.

   5. Executive Employment Agreement

      In connection with the acquisition of River City, the Company entered into
      a five-year employment  agreement (the "Baker Employment  Agreement") with
      Barry Baker,  pursuant to which Mr. Baker will become  President and Chief
      Executive  Officer of SCI and Executive Vice President of the Company,  at
      such time as Mr.  Baker is able to hold those  positions  consistent  with
      applicable FCC regulations. Until such time as Mr. Baker is able to become
      an  officer  of the  Company,  he serves as a  consultant  to the  Company
      pursuant to a consulting agreement and received compensation that he would
      be entitled to as an officer under the Baker Employment Agreement.  If the
      Baker Employment Agreement is terminated by the Company other than for

                                      F-24




                 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      Cause (as  defined) or by Mr. Baker for good cause  (constituting  certain
      occurrences  specified in the  agreement),  Mr. Baker shall be entitled to
      certain termination payments entitling him to his salary and bonuses which
      would have been paid under the agreement,  to purchase certain  television
      or radio  assets  acquired by the  Company  from River City at fair market
      value, and all stock options held by Mr. Baker shall vest immediately.


OTHER ACQUISITIONS

In May 1995,  the Company  entered into option  agreements to acquire all of the
license and non-license  assets of WSMH-TV in Flint,  Michigan  (WSMH).  In July
1995,  the Company paid the $1.0 million  option  exercise price to exercise its
option and in February  1996,  the Company  consummated  the  acquisition  for a
purchase price of $35.4  million.  The  acquisition  was accounted for under the
purchase  method of  accounting  whereby the  purchase  price was  allocated  to
property and programming  assets,  acquired  intangible  broadcasting assets and
other  intangible  assets for $1.9  million,  $6.0  million  and $27.5  million,
respectively,  based upon an independent appraisal.  Intangible assets are being
amortized over 1 to 40 years.

In March 1996, the Company  entered into an agreement to acquire the outstanding
stock of Superior  Communications  Group, Inc. (Superior) which owns the license
and non-license  assets of television  stations KOCB in Oklahoma City,  Oklahoma
and WDKY in  Lexington,  Kentucky.  In May 1996,  the  Company  consummated  the
acquisition for a purchase price of $63.5 million. The acquisition was accounted
for under the  purchase  method of  accounting  whereby the  purchase  price was
allocated to property and programming assets,  acquired intangible  broadcasting
assets and other  intangible  assets for $7.3  million,  $20.4 million and $35.8
million,  respectively,  based upon an independent appraisal.  Intangible assets
are being amortized over 1 to 40 years.

In January 1996,  the Company  entered into an agreement to acquire  license and
non-license assets of television station WYZZ in Peoria, Illinois. In July 1996,
the Company  consummated  the acquisition for a purchase price of $21.1 million.
The  acquisition  was  accounted  for under the  purchase  method of  accounting
whereby the purchase  price was  allocated to property and  programming  assets,
acquired  intangible  broadcasting  assets and other intangible  assets for $2.2
million, $4.3 million and $14.6 million, respectively, based upon an independent
appraisal. Intangible assets are being amortized over 1 to 40 years.

In July 1996,  the Company  entered  into an  agreement  to acquire  license and
non-license assets of television  station KSMO in Kansas City,  Missouri through
the exercise of its options  described in Note 13 for a total  purchase price of
$10.0 million.  The  acquisition  was accounted for under the purchase method of
accounting  whereby the purchase price was allocated to property and programming
assets and  acquired  intangible  broadcasting  assets for $4.6 million and $5.4
million,  respectively,  based upon an independent appraisal.  Intangible assets
are being amortized over 1 to 25 years.

In August  1996,  the Company  acquired  the license and  non-license  assets of
television  station WSTR in Cincinnati,  Ohio for a total purchase price of $8.7
million.  The  acquisition  was  accounted  for  under  the  purchase  method of
accounting  whereby the purchase price was allocated to property and programming
assets and  acquired  intangible  broadcasting  assets for $6.2 million and $2.5
million,  respectively,  based upon an independent appraisal.  Intangible assets
are being amortized over 1 to 25 years.


                                      F-25



                SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. INITIAL PUBLIC OFFERING:


In June 1995, the Company  consummated  an initial public  offering of 5,750,000
shares of Class A Common Stock at an initial public offering price of $21.00 per
share realizing net proceeds of approximately  $111.5 million.  The net proceeds
to the Company from this offering were used to reduce long-term indebtedness.

The Company consummated the following  transactions  concurrent with or prior to
the offering:

    1.The Company purchased the options to acquire the partnership  interests of
      KSMO in  Kansas  City,  Missouri  and WSTR in  Cincinnati,  Ohio  ("Option
      Stations") from the stockholders for an aggregate  purchase price was $9.0
      million.  The  stockholders  also assigned to the Company their rights and
      obligations  under  an  option  agreement  among  the  stockholders  and a
      commercial bank which held secured debt of KSMO and WSTR.

    2.The stockholders assigned the subordinated  convertible debenture relating
      to the sale of WPTT to the Company in exchange for $1.0 million, a portion
      of which was used to retire the outstanding balance of a note due from the
      controlling stockholders.

    3.The Company acquired  options from certain  stockholders of Glencairn that
      will grant the  Company the right to acquire,  subject to  applicable  FCC
      rules and regulations, up to 97% of the capital stock of Glencairn.

    4.The  Board of  Directors  of the  Company  adopted  Amended  and  Restated
      Articles of Incorporation to authorize up to 35,000,000  shares of Class A
      Common  Stock,  par value  $.01 per  share,  35,000,000  shares of Class B
      Common Stock,  par value $.01 per share and 5,000,000  shares of Preferred
      Stock,  par  value  $.01  per  share;  completed  a  reclassification  and
      conversion of its  outstanding  common stock into shares of Class B Common
      Stock;  and  effected  an  approximately  49.1  for 1 stock  split  of the
      Company's common stock  (resulting in 29,000,000  shares of Class B Common
      Stock outstanding). The reclassification,  conversion and stock split have
      been  retroactively  reflected in the  accompanying  consolidated  balance
      sheets and statements of stockholders'  equity.  In June 1996, the Company
      amended  its  charter,  increasing  the number of shares of Class A Common
      Stock  authorized to be issued from  35,000,000 to  100,000,000  (see Note
      12).

    5.The Board of  Directors of the Company  adopted an Incentive  Stock Option
      Plan for Designated Participants (the Designated Participants Stock Option
      Plan) pursuant to which options for shares of Class A Common Stock will be
      granted to certain designated employees of the Company upon adoption.

    6.On March 27,  1995,  the Board of  Directors  of the  Company  adopted  an
      Incentive  Stock  Option Plan (the Stock  Option  Plan)  pursuant to which
      options  for  shares of Class A Common  Stock may be  granted  to  certain
      designated  classes of  employees  of the  Company.  The Stock Option Plan
      provides  that the  maximum  number  of  shares  of  Class A Common  Stock
      reserved for issuance under the Stock Option Plan is 500,000,  as amended,
      and that options to purchase Class A Common Stock may be granted under the
      plan until the tenth anniversary of its adoption.


                                      F-26




                 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Conti
nued)

14. STOCK-BASED COMPENSATION PLANS:


As permitted  under SFAS 123,  "Accounting for  Stock-Based  Compensation,"  the
Company measures  compensation expense for its stock-based employee compensation
plans using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25,  "Accounting  for Stock Issued to  Employees,"  and provides pro
forma  disclosures  of  net  income  and  earnings  per  share  as if  the  fair
value-based  method  prescribed  by  SFAS  123 had  been  applied  in  measuring
compensation expense.

A summary of changes in outstanding stock options follows:




                                                                        WEIGHTED-
                                           WEIGHTED-                     AVERAGE
                                            AVERAGE                      EXERCISE
                              OPTIONS    EXERCISE PRICE   EXERCISABLE     PRICE
                            ----------- --------------- -------------- -----------
                                                           
Outstanding at end of
 1994.....................         --   $   --               --         $     --
1995 Activity:
  Granted.................     68,000    21.00               --         $     --
                            ----------- --------------- -------------- -----------
Outstanding at end of
 1995.....................     68,000    21.00               --               --
1996 Activity:
  Granted.................  1,904,785    31.50          736,218               --
  Exercised...............         --       --               --               --
  Forfeited...............     (3,750)   21.00               --               --
                            ----------- --------------- -------------- -----------
Outstanding at end of
 1996.....................  1,969,035   $31.16          736,218        $30.11
                            =========== =============== ============== ===========




Additional information regarding stock options outstanding at December 31, 1996,
follows:




                                               WEIGHTED-     WEIGHTED-
                                                AVERAGE       AVERAGE
                                               REMAINING     REMAINING                    WEIGHTED-
                                                VESTING     CONTRACTUAL                    AVERAGE
    RANGE OF                       EXERCISE     PERIOD         LIFE                       EXERCISE
EXERCISE PRICES     OUTSTANDING     PRICE     (IN YEARS)    (IN YEARS)     EXERCISABLE      PRICE
- ----------------  -------------- ----------- ------------ -------------- -------------- ------------
                                                                        
   $21.00..........     64,250      $21.00      0.71            8.43               --      $      --
    30.11..........  1,562,435       30.11      1.53            9.41          736,218          30.11
    37.75..........    342,350       37.85      2.41            9.41               --             --
                  -------------- ----------- ------------ --------------  -------------- ------------
$21.00 to 37.75....  1,969,035      $31.16      1.66         9.38           736,218         $   30.11
                  ============== =========== ============ ============== ============== ============




Had  compensation  cost for the Company's  1995 and 1996 grants for  stock-based
compensation  plans been determined  consistent with SFAS 123, the Company's net
income,  net income applicable to common share before  extraordinary  items, and
net income per common  share for 1995 and 1996 would  approximate  the pro forma
amounts below (in thousands except per share data):




                                                                  1995                      1996
                                                       ------------------------- --------------------------
                                                        AS REPORTED   PRO FORMA   AS REPORTED    PRO FORMA
                                                       ------------- ----------- ------------- ------------
                                                                                   
Net income (loss) before extraordinary item .........  $4,988        $4,799      $1,131        $(1,639)
                                                       ============= =========== ============= ============
Net income (loss) available to common shareholders ..  $   76        $ (113)     $1,131        $(1,639)
                                                       ============= =========== ============= ============
Net income (loss) per share before extraordinary
  item...............................................  $  .15        $  .15      $  .03        $  (.04)
                                                       ============= =========== ============= ============
Net income (loss) per share..........................  $   --        $   --      $  .03        $  (.04)
                                                       ============= =========== ============= ============



                              F-27




              SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. EQUITY PUT AND CALL OPTIONS:


During December 1996, the Company  entered into physically  settled Put and Call
Options related to the Company's common stock.  These option  arrangements  were
entered  into for the purpose of hedging the  dilution of the  Company's  common
stock upon the  exercise of stock  options  granted.  The Company  entered  into
250,000 call options for common stock and 320,600 put options for common  stock,
with a strike price of $37.75 and $27.61 per common  share,  respectively.  Upon
the exercise of Put and Call Options,  sales and purchases will be recorded as a
component of stockholders'  equity.  Subsequent changes in the fair value of the
option contracts are not recognized. To the extent that the Company entered into
Put  Options,   the  additional  paid-in  capital  amounts  have  been  adjusted
accordingly and amounts are reflected as Equity Put Options in the  accompanying
balance sheets. All Equity Put and Call Options expire May 31, 1999.

16. REGISTRATION STATEMENTS:

In September 1996, the Company filed and in November 1996 obtained effectiveness
of a  registration  statement  on Form  S-3  with the  Securities  and  Exchange
Commission with respect to the sale by certain selling stockholders of 5,564,253
shares of Class A Common Stock. These shares represent 4,181,818 shares of Class
A Common  Stock  issuable  upon  conversion  of  Series B  Preferred  Stock  and
1,382,435  shares of Class A Common Stock issuable upon exercise of options held
by Barry Baker.

In September  1996, the Company filed a registration  statement on Form S-3 with
the  Securities  and  Exchange  Commission  with  respect  to the  sale of up to
5,750,000  shares  of Class A  Common  Stock by the  Company,  and  subsequently
amended the registration  statement to increase the number of shares that may be
sold by the  Company  to  5,937,500  shares  and to cover the sale of  1,250,000
shares by  certain  selling  stockholders.  On  November  1, 1996,  the  Company
announced  that  it was  withdrawing  the  offering  and  that  it  intended  to
reconsider an offering in the future when market  conditions are more favorable.
The Company also announced that it was considering purchasing outstanding shares
of its Class A Common Stock pursuant to previous  authorization  by the Board of
Directors.

17. FINANCIAL INFORMATION BY SEGMENT:

Prior to the River City  Acquisition  in May 1996,  the  Company  did not own or
operate  radio  stations.  As of December 31, 1996 the Company  consisted of two
principal business segments -- television  broadcasting and radio  broadcasting.
The television segment included 13 television  stations for which the Company is
the  licensee  and  15  stations  which  are  operated  under  local   marketing
agreements. These 28 stations operate in 20 different markets in the continental
United States.

The radio segment included 19 stations for which the Company is the licensee and
two  stations  operated  under  local  marketing  agreements.  These 21 stations
operate in seven different markets.  Substantially all revenues represent income
from unaffiliated companies. 



                                                                           1996
                                                                      (IN THOUSANDS)
                                                          TELEVISION     RADIO     CONSOLIDATED
                                                         ------------ ---------- ---------------
                                                                        
Total revenues.........................................  $  338,467   $ 40,021   $  378,488
Station operating expenses.............................     142,231     25,534      167,765
Depreciation, program amortization and deferred
 compensation..........................................      56,420      3,827       60,247
Amortization of intangibles and other assets ..........      55,063      3,467       58,530
Amortization of excess syndicated programming .........       3,043         --        3,043
                                                         ------------ ---------- ---------------
Station broadcast operating income.....................  $   81,710   $  7,193   $   88,903
                                                         ============ ========== ===============
Total assets...........................................  $1,400,521   $306,776   $1,707,297
                                                         ============ ========== ===============
Capital expenditures...................................  $   12,335   $    274   $   12,609
                                                         ============ ========== ===============



                              F-28




              SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES -
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. UNAUDITED PRO FORMA SUMMARY RESULTS OF OPERATIONS:


The unaudited pro forma summary consolidated results of operations for the years
ended December 31, 1995 and 1996,  assuming the 1995 and 1996  acquisitions  had
been  consummated on January 1, 1995,  are as follows (in thousands,  except per
share data): 



                                               (UNAUDITED)  (UNAUDITED)
                                                  1995         1996
                                              ------------ ------------
                                                     
Revenues, net...............................  $430,762     $481,073
                                              ============ ============
Net loss before extraordinary item..........  $(34,345)    $(10,719)
                                              ============ ============
Net loss available to common shareholders ..  $(39,257)    $(10,719)
                                              ============ ============
Net loss per share before extraordinary
 item.......................................  $  (0.94)    $  (0.27)
                                              ============ ============
Net loss per share..........................  $  (1.08)    $  (0.27)
                                              ============ ============




19. SUBSEQUENT EVENT:

In January 1997,  the Company  entered into a purchase  agreement to acquire the
license and  non-license  assets of  KUPN-TV,  the UPN  affiliate  in Las Vegas,
Nevada, for a purchase price of $87 million.  Upon entering into this agreement,
the Company  made a cash  deposit  payment of $5 million.  The Company  plans to
consummate the transaction following FCC approval.


                              F-29





               SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
                              INDEX TO SCHEDULES

Schedule II -- Valuation and Qualifying Accounts ...  S-3


All  schedules  except those listed above are omitted as not  applicable  or not
required or the required  information is included in the consolidated  financial
statements or in the notes thereto.

                               S-1





                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Stockholders of
Sinclair Broadcast Group, Inc.:

We have audited in accordance with generally  accepted auditing  standards,  the
consolidated balance sheets, statements of operations,  changes in stockholders'
equity  and cash  flows of  Sinclair  Broadcast  Group,  Inc.  and  Subsidiaries
included in this Form 10K and have issued our report  thereon dated  February 7,
1997.  Our audit was made for the  purpose  of  forming  an opinion on the basic
financial  statements  taken as a whole. The schedule listed in the accompanying
index is the  responsibility  of the Company's  management  and is presented for
purposes of complying with the Securities and Exchange  Commissions rules and is
not part of the basic financial statements.  This schedule has been subjected to
the auditing  procedures applied in the audit of the basic financial  statements
and, in our opinion,  fairly states in all material  respects the financial data
required to be set forth therein in relation to the basic  financial  statements
taken as a whole.

                                                             ARTHUR ANDERSEN LLP

Baltimore, Maryland,
February 7, 1997

                                       S-2







                                                                   SCHEDULE II

               SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
                      VALUATION AND QUALIFYING ACCOUNTS
             FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                (IN THOUSANDS)



                                   BALANCE AT    CHARGED TO    CHARGED                    BALANCE
                                   BEGINNING     COSTS AND     TO OTHER                   AT END
          DESCRIPTION              OF PERIOD      EXPENSES     ACCOUNTS    DEDUCTIONS    OF PERIOD
- -------------------------------  ------------- ------------- ----------- ------------- ------------
                                                                        
1994
 Allowance for doubtful
  accounts.....................  $  505        $  445        $   --      $ 95          $  855
1995
 Allowance for doubtful
  accounts.....................     855           978            --       767           1,066
1996
 Allowance for doubtful
  accounts.....................   1,066         1,563         575((1))    732           2,472



- ----------
(1) Amount  represents  allowance  for doubtful  account  balances  purchased in
connection with the acquisition of certain television stations during 1996.

                                       S-3